The Reader

The finance ministry is likely to drop the proposal to tax religious trusts. The proposal formed part of the direct taxes code and had raised eyebrows both within and outside the finance ministry.

                       The issue has been raised in the finance ministry's internal discussions. They are discussing whether the exemption was removed with intent or by mistake. Under Section 10 (23C) of the Income Tax Act, any trust or institution that works wholly for public religious and charitable purposes and is approved by the chief commissioner or director general, is tax exempt. The tax code, however, has removed the term "religious purpose" from the exemption eligibility and instead said income of only those bodies that are registered under any Act of the Centre or the state and administer religious trusts, endowments or societies will be exempt. Taxation experts have also opposed the proposal. In the existing system, all religious monuments registered with the commissioner of income tax get exemption, provided they are able to spend 85 per cent of the funds for religious purposes. In the direct taxes code, only government institutions such as the Wakf Board controlling religious trust are exempt.

 

In the same way, the income of authorities managing religious shrines such as Tirumala Tirupati Devasthanams and Vaishno Devi would be fully exempt from tax under the direct taxes code since they are established under a government Act. Currently, institutions can be registered with the tax department to claim deduction. Under the new code, they can register only with the Centre or the state government to claim deduction. But this could be a problem since only three states have provision for registration — Maharashtra, Gujarat and Orissa. Moreover, Section 80G of the existing Income Tax Act gives 50 per cent exemption on donations made to religious trusts. The new code has proposed such exemption only for renovation or repair of a temple, mosque, gurdwara, church or other place that has been notified in the official gazette to be of historic, archaeological or artistic importance or a place of public worship of renown throughout any state or states.

 

Experts said this proposal in the code would significantly reduce donations since any contribution meant for spending on religious activities of a shrine such as bhajans and kirtans, or charitable activity, like feeding or teaching the poor, would be fully taxed. Religious places that will be eligible for tax exemptions on donations will be notified later. Any religious monument may not qualify to be of artistic or historic importance. This will impact donations in a country where religion takes precedence over lots of issues. Experts agreed, "Religious trusts are not taxed in most countries because they receive donations from the people. The authorities must have forgotten to put them in the exemption list.

 - K.Balaji

New TDS rates applicable from 1^st October, 2010

 

Section                        :           192

Head                             :           Income from Salaries

Threshold Limit              :           -nil-

For individual /HUF         :           average rate

Other Entity                   :           not applicable

 

Section                        :           194A

Head                             :           Interest from a banking company

Threshold Limit              :           Rs. 10,000/-

For individual /HUF         :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           20 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194A

Head                             :           Interest other than a banking company

Threshold Limit              :           Rs. 5,000/-

For individual /HUF         :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           20 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194C

Head                             :           Payments to Contractors

Threshold Limit              :           Rs. 20,000/- per contract or Rs. 50,000/- p.a.

For individual /HUF         :           1 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           2 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194C

Head                             :           Payments to Contractors / Sub-contractor in transport business

Threshold Limit              :           Rs. 20,000/- per contract or Rs. 50,000/- p.a.

For individual /HUF         :           nil (if PAN quoted), 1 % (if PAN not quoted)

Other Entity                   :           nil if PAN quoted), 2 % (if PAN not quoted)

 

Section                        :           194C

Head                             :           Payments to Sub-contractors / Advertising contractors

Threshold Limit              :           Rs. 20,000/- per contract or Rs. 50,000/- p.a.

For individual /HUF         :           1 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           2 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194I

Head                             :           Rent on Plant & Machinery

Threshold Limit              :           Rs. 1, 20,000/- p.a.

For individual /HUF         :           2 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           2 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194I

Head                             :           Rent other than Plant & Machinery

Threshold Limit              :           Rs. 1, 20,000/- p.a.

For individual /HUF         :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

 

Section                        :           194IJ

Head                             :           Fees for Professional / technical services

Threshold Limit              :           Rs. 20,000/- p.a.

For individual /HUF         :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

Other Entity                   :           10 % (if PAN quoted), Sec 206AA will apply (if PAN not quoted)

***

Section 206 AA:           If deductee fails to furnish PAN to deductor, the deductor shall apply highest of the following rates for deducting TDS:-

-          at the rate specified in the relevant provision of this Act; or

-          at the rate or rates in force; or

-          at the rate of 20%.

Dear Taxpayer,

Subject: Report on the Quality of Data and Matching of TDS / TCS Claims in your E-Return - Reg

1.       Income Tax Department congratulates you for filing your Income Tax return electronically. As a pro-active measure, a Data Quality and Matching Report for TDS and TCS claims in I-T Return is being sent as an attachment to this email.

2.       The objective of issuing the Data Quality and Matching Report for TDS and TCS claims in I-T Return is:

a.       To enable you to ascertain the extent of matching of your TDS / TCS claims in the Income Tax Return filed by you with the TDS / TCS reported by the tax Deductors /Collectors. In case the matching is 100%, you may be assured of accurate credit and quicker processing of the I-T Return.

b.       To enable you to take up the matter pertaining to any deficiencies or mismatches in the TDS / TCS reported with your Deductor / Collector so that the corrective action can be taken by them by filing an updated E-TDS return with NSDL with your correct PAN or TDS amount.

c.        To enable you to identify claims made by you using invalid TAN. In all cases where TAN is invalid the "Name of the Deductor" is mentioned as "INVALID TAN" and in all such cases no match is possible. The TAN in these cases would have to rectified by you by filing a revised Return of Income with correct TAN.

3.       The TDS / TCS credit information available are based on the valid PAN details submitted by the Deductors up to the date mentioned in the Data Quality and Matching Report for TDS and TCS claims in I-T Return. Please note that all TDS /TCS from the same Deductor / Collector is added and consolidated as a single entry, both on the claims side as well as on the data reported to Department side.

4.       To open the statement, please enter the PAN and date of birth in case of individualtax payers and the date of incorporation for non-individual tax payers as password in theformat of AAAAA1234ADDMMYYYY in lowercase. The date of birth / incorporation should be same as furnished to the Department and available in the Income Tax Department PAN master (as printed on the PAN card).

For example, if your PAN is AZZPZ2398K and date of birth / incorporation is January 21, 1985 then the password will be azzpz2398k21011985

5.       The Data Quality and Matching Report is in the attached ZIP file with your PAN as the file name. To open the file all you need is any Unzip software and MS Excel or Open Office Excel compatible software.

6.       Please note that this email does not convey any confirmation of acceptance or rejection of any TDS or TCS claim and neither does this indicate that processing has been completed or will be completed in any manner.The Report merely conveys a factual position of the extent of match between your claims and data reported to the Department as on the date specified.The details given herein may be altered upon receipt of updated E-TDS / TCS returns filed by Deductors / Collectors subsequent to the specified date.

7.       This is a special service for the benefit of taxpayers who have chosen to file their I-T returns electronically and is being sent to you at the email address mentioned by you in the Income Tax Return.

Indirect tax body CBEC launched electronic payment system for accounts offices of excise and service tax. It also introduced a new software to make the accounting system within the Central Board of Excise and Customs (CBEC) fully automated. Revenue Secretary P V Bhide inaugurated the e-pay system, software and a website for Chief Controller of Accounts, CBEC.


After automation, information for accounting headwise, reports on collection of duty and other items will be easily available. The government wants to replicate the same system on the customs side as well, the Controller General of Accounts, CBEC, C R Sundaramurti, said. The system assumes importance at a time when the Goods and Services Tax is expected to be rolled out. "Our initial brainstorming indicates that the accounting system may have to follow the existing broad framework being inaugurated today with such changes as may become necessary on the basis of the decisions of the Empowered Committee(on GST)," Sundaramurti said.

Employees enjoying perks such as chauffeur-driven cars, rent-free accommodation, club memberships, credit cards and meal vouchers could find the next four months a little too harsh on their wallets as they may have to cough up the entire annual tax on such benefits during this period.

The government is set to announce the norms for taxation of fringe benefits that have become taxable in the hands of employees after a change effected in the 2009-10 Budget, a finance ministry official told ET. The norms will detail how the perks will be taxed and what benefits will come under the tax net. In the absence of guidelines, most companies are yet to start deducting tax on fringe benefits. Therefore, the tax burden for the entire financial year from April 1, 2009 will be distributed over the remaining four months, that too, if apex tax agency Central Board of Direct Taxes (CBDT) allows companies to do so. This would mean lower net salaries in the remaining months of the current financial year for employees enjoying such benefits. If the apex direct tax body fails to make such a provision, employers will have to deduct the amount in the month the rules become effective. The July 2009 Budget dropped FBT and returned the earlier system of taxing perks in the hands of the employee. Now, the value of the perk specified by CBDT will be added to an employee's income and taxed accordingly. For example, as per the earlier perquisite taxation rules that were in effect before FBT was introduced, the value assigned to an 800-cc car was Rs 1,200.

This value of Rs 1,200 was added to a taxpayer's total income in the year and taxed accordingly. Since perks are fully consumed and have no savings element, any tax burden on them will have to come out of disposable income. Any major departure from the pre-FBT rules would create an enormous burden for the salaried class. Employees of those companies that had already started deducting tax on these benefits as per the old rules, which were in effect before the controversial FBT was introduced in 2005, would not be hit so hard as they would have paid some tax. However, as the overall liability is likely to be more due to the government's plan of bringing more benefits under the tax net, they too will have to shell out additional amounts.

Many companies have been deferring the decision on taxation of the perquisites. Now, as the financial year-end is approaching, companies are proposing to use the existing rules that were applicable prior to the withdrawal of FBT and finalise tax computations.

In the perks taxation regime before FBT, perquisites that were taxed included rent-free accommodation, car, chauffeur, services of personal attendants, concessional education, concessional journeys, credit card, interest-free loans, gift vouchers, hotel stay exceeding 15 days and medical facilities. The value of these services was the actual cost to the employer.

He said that the government has made this modification on its own. Salaries of the CEOs should be decided by shareholders, he added Khursheed, who inaugurated the 37th national convention of the Institute of Company Secretaries of India, said the new Bill, which was tabled in the Lok Sabha in August, was being examined by a parliamentary standing committee. He, however, hinted that executives should think as responsible citizens before deciding on huge salaries.

Khursheed also said that the Serious Fraud Investigation Office (SFIO) will continue its probe into alleged corporate law violations by Satyam founder B. Ramalinga Raju, but other agencies would probe alleged violations in foreign exchange rules. He added that foreign exchange violations would be probed by the Enforcement Directorate, revenue manipulations would be looked into by the income-tax department and other cases would be investigated by the Central Bureau of Investigation. The ministry had devised a system where the government would be able to detect corporate frauds at an early stage, he said. There will be 15 warning parameters that would be applied to firms that are under scanner, he said-Officials will periodically check on revenues, profits and other issues such as employees strength. The system will sound an alert if there is any abnormality in the records, he said.