Taxpayers breathe easy after clarifications
Some serious concerns on various issues relating to TDS, capital gains, taxing of insurance proceeds, NRIs and sunset provisions, which were raised by TOI’s Taxing Times columnist Mukesh Patel in the series under ‘Cracking the Code’ were deliberated at an interactive session on Saturday. Taxpayers heaved a sigh of relief after clarifications came from Joint secretary, Tax Policy and Legislation, Union Ministry of Finance, Arbind Modi. Here is how ambiguities were sorted out...
Concern: Current area and sector based tax incentives under Section 80 of the I-T Act will be continued under DTC only if the unit is operational by 31-3-2010.
Clarification: The benefit under the new Code will be allowed to all units operational by 31-3-2011.
Concern: Profit-linked incentives may not be available to current units to the same extent under the new Code for the unexpired period under the I-T Act.
Clarification: Deduction of profits, if available at 100% or the appropriate percentage, will be granted as such, under the principle of grandfathering for such unexpired period.
Concern: DTC drafting s
uggests that the benefit of Double Tax Avoidance Agreement (DTAA) would not be available at the time of TDS.
Clarification: There should be no apprehension in this regard. Such benefit will be duly allowed.
Concern: Under the scheme for presumptive taxation, there is no provision to allow deduction for partner’s interest or remuneration.
Clarification: This deduction will be duly provided for.
Concern: Valuation of assets under Wealth-tax may lead to litigation.
Clarification: Wealth-tax will be levied on assets, valuation of which will be done only at cost and not at market value.
Concern: The provision to tax ‘any sum received under a life insurance policy’ would mean that even the principal amount of premiums paid will become liable to Income-tax.
Clarification: DTC draft will be suitably amended, since the intent is to tax only the bonus received on maturity. Concern: No provision under DTC for filing declaration for no TDS in case of interest income, if the taxpayer does not have taxable income.
Clarification: Point well taken. Necessary provision will be made for such declarations as currently prevailing in form 15G and 15H.
Concern: No threshold limit (currently Rs.20,000) provided in regard to TDS from payment of professional fees.
Clarification: Suitable threshold limit will be duly provided under DTC.
Concern: Harsh consequences to arise on account of the new provision prescribing 10% TDS in respect of payments of ‘any other income.’ Clarification: This provision will be dropped.
Concern: Gains Tax on capital market gains will have a dampening effect. Clarification: If the sale consideration of any capital asset is rolled over by way of deposit in the new ‘Capital Gains Savings Scheme’ (CGSS) within 60 days, there will be no tax liability. Such deposit balance in CGSS can be invested in any fresh investment in debt or equity instruments as will be announced under the Scheme. Thus, as long as the gains are continued to be rolled over, there will be no effective tax liability. On the basis of the EET model, tax will get attracted only on withdrawal of any amount from the CGSS.
Concern: Drafting of the Code suggests that NRIs will not enjoy the benefit of even the minimum exemption limit of Rs.1,60,000 in respect of interest income and capital gains proposed to be taxed at the flat rate of 20% and 30%.
Clarification: this is not our intent. Hence, suitable amendment will be made to provide that NRIs will be taxed in the same tax slabs and as applicable to resident Indians.
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