Amendments in the income-tax act proposed to notify a new scheme for assessment in electronic mode

Press Information Bureau
Government of India
Ministry of Finance

01-February-2018 13:20 IST

Amendments in the income-tax act proposed to notify a new scheme for assessment in electronic mode.

E-assessment to be rolled-out across the country to transform age-old assessment procedure

In the General Budget 2018-19 presented in Parliament today, the Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley proposed to amend the Income-tax Act to notify a new scheme for assessment. Shri Jaitley said the assessment will be done in electronic mode which will almost eliminate person to person contact leading to greater efficiency and transparency. The Finance Minister added that the e-assessment system was introduced in 2016 on a pilot basis. In 2017, it was extended to 102 cities with the objective of reducing the interface between the department and the taxpayers. "With the experience gained so far, we are now ready to roll out the E-assessment across the country, which will transform the age-old assessment procedure of the income tax department and the manner in which they interact with taxpayers and other stakeholders" Shri Jaitley said.

Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961-Exemption thereof

Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961-Exemption thereof

CIRCULAR No. 18/2017

F. No. 385/01/2015-IT (B)

Government of India/भारत सरकार
Ministry of Finance/वित्‍त मंत्रालय
Department of Revenue(राजस्‍व व‍िभाग)
Central Board of Direct Taxes(केन्‍द्रीय प्रत्‍यक्ष कर बोर्ड)

North Block, New Delhi
29th May, 2017

Subject: Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961 - Exemption thereof.

The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 which laid down that in case of such entities, whose income is unconditionally exempt under Section 10 of the Income-tax Act (the Act) and who are also statutorily not required to tile return of income as per Section 139 of the Act, there would be no requirement for tax deduction at source (TDS) from the payments made to them since their income is anyway exempted from tax under the Act. The issue of whether exemption from TDS can be extended to more entities on these principles and whether the exemption is needed to be withdrawn in respect of some of the exempted entities was examined by the Board.


2. Examination of the eligibility of entities for exemption from TDS on the principle of unconditional exemption and no requirement to file return revealed that Circulars No. 4/2002 and 7/2015 are required to be updated to make the following changes:

Entities that meet both the above mentioned conditions but are not mentioned in the aforesaid Circulars need to be included in the list of exempted entities.
Entities that are mentioned in Circular No. 4/2002 but their exemption from income tax has since been withdrawn need to be removed from the list of exempted entities.
Entities that are mentioned in Circular No. 4/2002 but because of subsequent amendment they are now required to mandatorily the their returns of income u/s 139 need to be removed from the list of exempted entities.

3. In view of the above, a revised list of entities exempted from TDS has been drawn by adding entities in the first category listed above to the entities mentioned in Circular No. 4/2002 and Circular No. 7/2015 and removing entities in second and third categories from the list of existing entities eligible for exemption from TDS.

4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Boards or bodies, by whatever name called, referred to in section 10 of the Income-tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to tile return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source, since their income is anyway exempt under the Income-tax Act -

(i) "local authority", as referred to in the Explanation to clause (20);

(ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA);

(iii) Fund. by whatever name called, set up by the Life Insurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB);

(iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB);

(v) Body or authority referred to in clause (23BBA);

(vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC);

(vii) Insurance Regulatory and Development Authority referred to in clause (23BBE):

(viii) Central Electricity Regulatory Commission referred to in clause (23BBG);

(ix) Prasar Bharati referred to in clause (23BBH);

(x) Prime Minister's National Relief Fund referred to in sub-clause (i), Prime Minister’s Fund (Promotion of Folk Art) referred to in sub-clause (it), Prime Minister’s Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (ilia), Swachh Bharat Kosh referred to in sub-clause (iiiaa), Clean Ganga Fund referred to in sub-clause (iiiaaa) of clause (23C);

(xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognized provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of Clause (25);

(xii) Employees' State Insurance Fund referred to in clause (25A);

(xiii) Agricultural Produce Marketing Committee referred to in clause (26AAB);

(xiv) Corporation. body, institution or association established for promoting interests of members of Scheduled Castes or Scheduled Tribes or backward classes referred to in clause (26B);

(xv) Corporation established for promoting interests of members of a minority community referred to in clause (26BB);

(xvi) Corporation established for welfare and economic upliftment of ex-servicemen referred to in clause (26BBB);

(xvii) New Pension System Trust referred to in clause (44).

4. This circular supersedes earlier Circulars on this issue e.g. Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 with effect from the date of issue of this Circular.

5. Hindi version shall follow.

(Sandeep Singh)
Under Secretary to the Govt. of India

Source: CBDT Circular

7th Pay Commission Pay Out – Best Tax Saving Investment Options

There are a large variety of tax-saving options available under Section 80C of the Income-Tax Act. However, the key issues are the safety, returns and tax status while investing.

7th Pay Commission Pay Out – Best Tax Saving Investment Options – The increased pay packet by the 7th pay commission will come with its own set of concerns on managing the money.

The 7th Pay Commission payout is all set to begin with central government employees to get higher salaries and arrear payments soon.

The increased pay packet by the 7th pay commission will come with its own set of concerns on managing the money. While there will be a portion for expenditure that has been pending, you need to have a definite plan of setting aside a decent amount as long-term savings and invest it in appropriate instruments. One portion of investment would be for tax-saving purposes.

You will have nearly eight months till March 31, 2017 to make your investment for tax-saving purposes but it is always good to start investing early. So, what are the options before you and what should you look for while investing for saving tax?

“There are a large variety of tax-saving options available under Section 80C of the Income-Tax Act. However, the key issues are the safety, returns and tax status while investing. You also have to consider the periodic returns and at the time of maturity or redemption,” Sanjeev Govila, CEO, Hum Fauji Initiative, told FeMoney.

Govila suggests Public Provident Fund (PPF) figures among the top of the list. “PPF is the best tax- saving avenue for the risk averse as it gives decent interest of 8.1 per cent as on date and enjoys the E-E-E (Exempt ExemptExempt) status. If someone finds the returns low and are prepared to accept some volatility of returns, tax saving mutual funds (called ELSS – Equity Linked Savings Scheme) are very good. They also have E-E-E status. If chosen carefully ELSS are likely to provide higher returns than PPF,” Govila said.

Though ELSS have the shortest lock-in period of all tax-saving investments of just three years, you can continue investing for as long as you want. Also contributions can be made regularly through automatic ECS from bank account. Govila, however, warns that ELSS returns are market linked.

“Apart from these, five year tax-saving bank FDs, insurance policies and NSC also are 80C investments. But low returns take their sheen off. NSC are E-E-E provided the interest received is shown re-invested in the I-T Returns each year (except the last year when it matures) and bank FDs are in the E-T-T bracket,” says Govila.

FeMoney spoke to leading personal finance advisor, Anil Rego, CEO and Founder, Rights Horizons to bring to you snapshot of the most-favoured tax-savings options under Section 80C as a ready reckoner.

Equity-linked Savings Scheme – Has lock-in of 3 years; can be invested up to be a maximum of Rs.1.5 lakhs under 80C and others.

Public Provident Fund – Has lock-in of 7 years, investments are eligible for tax exemption u/s 80C.

Sukanya Samridhi Scheme (If the investor has a girl child) – Investments can be withdrawn only after girl turns 21 or 50 per cent of the corpus when girl turns 18 or gets married.

National savings certificates – NSC-VIII has a lock in period for 5 years and NSC-IX has lock in for 10 years. There is no maximum limit of investment in NSC, but you can claim a tax deduction for Rs 1.5 lakhs under section 80C.

Tax free bonds – These bonds are not eligible for deduction under section 80C. It means that the interest earned on tax-free bonds is exempted from taxation. However, the bonds are subject to capital gains tax. Usually these bonds have a lock in period of 5 years.

Insurance policies – Though these can be used for tax savings under Section 80C, Rego advises that the principal aim of insurance should be to cover life risk rather than as an investment instrument.

Source: FE

Bonus/Mutual Fund/ Dividend: Additional income-tax on distributed Income under section 115R of the Income-tax Act

Bonus/Mutual Fund/ Dividend: Additional income-tax on distributed Income under section 115R of the Income-tax Act

Clarification regarding scope of additional income-tax on distributed Income under section 115R of the Income-tax Act -regarding.

Circular No. 6 /2014

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi
Dated the 11th of February, 2014.

Subject: - Clarification regarding scope of additional income-tax on distributed Income under section 115R of the Income-tax Act -regarding.

Section 115R of the Income-tax Act, 1961 ('Act') provides for levy of additional income-tax on distributed income to unit holders (hereinafter referred to as 'additional income-tax').

2. It has been reported that some field authorities are taking a view that mutual funds/specified companies are required to pay additional income tax under sub-section (2) to section 115R of he Act not only on income distributed by way of dividend but also on payments made at the time of redemption/repurchase of units as well as at the time of allotment of bonus units to existing investors.

3. The matter has been examined by the Board. Section 115R is placed under Chapter XII-E of the Act, which is titled as "SPECIFIC PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME" and prescribes special provisions for taxing 'distributed income', which is not taxed under any other provisions of the Act.


4. Sub-section (2) of section 115R of the Act provides that any amount of income distributed by (i) a specified company, or (ii) a mutual fund to its unit holders shall be chargeable to tax and such entities shall be liable to pay additional income tax on such distributed income at the rates prescribed therein. The income so distributed by such entities is the dividend paid to the unit holders and is liable to tax under this section. However, redemption of units or repurchase of milks would not attract levy of tax under sub-section (2) to section 115R of the Act as such income is not of the nature of income ''distributed" to the unit holders and hence lies outside the purview of this section.

5. Further, the income so distributed by the mutual fund or specified company in the hands of the recipient unit holder is specifically exempt from tax under section 10(35) of the Act. Proviso to section 10(35) of the Act stipulates that exemption of income under this section is not applicable to those cases where transfer of units takes place. The recipient of such income is liable to pay capital gains tax, if applicable, on transfer of such units as per relevant provisions of the Act and shall not be subject to additional income tax under section 115R of the Act.

6. Similarly, bonus units at the time of issue would not be subjected to additional income tax under section 115R of the Act since issue of bonus units is not akin to distribution of income by way of dividend. This may be inferred from provisions of section 55 of the Act which prescribes that 'cost of acquisition' of bonus units shall be treated as nil for purposes of computation of capital gains tax.

7. In view of above position, Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act hereby clarifies that additional income-tax under sub-section (2) of section 115R of the Act is to be levied on income distributed by way of dividend to unit-holders of mutual funds or specified companies and receipts from redemption/repurchase of units or allotment of additional units by way of bonus units would not be subjected to levy of additional income tax under that section.

8. This may be brought to the notice of all concerned.

9. Hindi version to follow.

sd/-
(Rohit Garg)
Deputy Secretary to the Government of India

Source: http://law.incometaxindia.gov.in/DIT/Circulars.aspx