F.A.Q on Indian Income Tax Laws

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CBDT Issues Circular On FBT on ESOP With 25 FAQs .
2007-12-22 05:33:00
The Central Board Of Direct Taxes has released a circular Circular No 9/2007 dated 20/9/2007 which contains 25 frequently asked questions on ESOP. The excerpt of the circular is given below for the benefit of readers Frequently Asked Questions A number of issues have been raised by trade and industry at different fora after the presentation of the Finance Bill, 2007, after its enactment and also after the notification of Rule 40C. The questions and answers in the following section seek to clarify these issues: 1. Whether a foreign company is liable to pay FBT on shares allotted or transferred to the employees of its Indian subsidiary? Answer In terms of the provisions of Chapter XII-H of the Act, an employer, being a company, is liable to pay FBT in respect of the fringe benefits provided or deemed to have been provided by it to its employees, directly or indirectly, during the previous year. Since the shares are allotted or transferred to employees of the Indian subsid...
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Should You Deduct Tax At Source On Interest Paid To Bank?
2007-12-20 02:41:00
Taken Vechicle Loan from ICICI Bank , HDFC Bank , Kotak Bank & OD on Axis Bank , Monthly we are paying Principal & Interest .Whether we have to Deducted TDS for the Interest paid to the above bank. Siva Sankar , Pennadam Interest paid on loan is covered u/s 194A . Subsection 3 of section 194A provides cases where the provision of TDS u/s 194A do not apply. Clause (iii) of sub section 194(3) provides that tax is not required to be deducted in case interest is paid or credited to banking or financial institutions.The said provision u/s 194A(3)(ii) is as under :(3) The provisions of sub-section (1) shall not apply (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life I...
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Will You Get Exemption U/s 54 On Sale Of House ,If You Own More Than One Ho
2007-12-11 05:16:00
The assesse owns three residential properties. out of which he sells one residential property and invests the profit on sale of property in another residential property within two months of date of sale. Is the assessee liable to pay the long term capital gain? Jamuna ,Chennai Yes, you will get the exemption u/s 54 t the extent the capital gains is utilised. The provision u/s 54 is as under 54. (1)Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset , being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after tha...
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Is Compensation Awarded By Court Taxable?
2007-12-09 05:19:00
Like to know if compensation amount decreed by the court on account of very delayed release of benefits by employer attract income tax. It is only an amount not exchanged against any value. Also, what must be deducted as TDS? The facts of the case was that the person was paid his pension with all arrears by his employer after a long delay of some 7 years. After receiving his pension along with arrears,he filed a civil suit for compensating him for the unjust enrichment received by his employer, a public sector undertaking during the delay period of 7 years. His suit is decreed in toto and he is also awarded interest from date of filing the suit till date of payment. ( It may be noted that the amount he is to receive is not related to pension/arrears. Those amounts he already has received. Now the income in question is a compensation for unjust enrichment received by the employer during the long and unjustified delay).Now the question is whether this amount decreed by court is taxabl...
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How To Choose The Right Provision -194C or 194I ?
2007-12-09 04:14:00
I recently attended seminar on FBT & TDS . In this seminar Lakhotiaji told that vehicle hiring also comes under the purview of tds _rent and 10% tds shall be deducted from the party .as per his advice we are deducting TDS on vehicle hiring @ 10% + 3% Cess. Now the party is objecting . They are claiming that only 2.06% TDS should be deducted. Shikha ,Noida The confusion regarding the deduction of tax u/s 194 C and 194 I has arisen on account of insertion of new definition of rent u/s 194I .The expanded meaning of Rent now includes even plant and machinery's rental.Thus ,work involving plant and machinery for which TDS was being done u/s 194C now demands that consideration for section 194I should also be given.Deductor get confused regarding the selection of correct provision.Because the rate of TDS also very different, wrong application alos hurts deductees.Simplest example of such confusion is regarding rental of car which was previously being subject to TDS u/s 194 C ...
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When Is TDS Required On Payment To Non Resident?
2007-12-07 03:11:00
I am an exporter from India. I have a agent in Malaysia & need to pay him his commission for the exports done through him. How can I pay him & what are the tax barriers. Manish Shah, MumbaiYou have not elaborated the nature of job ,your agent in Malaysia has done for you. The nature of job is very important factor. It is to be examined for the purpose of ascertaining whether the income of the non resident whom a payment is required to be made , falls under section 9 which has been amended by Finance Act 2007.Recent amendment in section 9 . Section 9 pertains to the income deemed to arise or accrues in India. A non resident?s income which is deemed to accrue or arise in India is taxable in India .But one of the important factor for such taxability in case of non resident was to see if the non resident had business connection in India or any fixed base or any residence in India. Recently , Finance Act 2007 inserted an Explanation to section 9 of the I T Act which has aboli...
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Why Business or Capital Loss Can Not Be Carried Forward?
2007-11-29 18:17:00
I have been called for scrutiny of AY 2006-07 returns by ITO Hyderabad. I had set off ST capital gains (shares)of the previous year 2005-06 with that of ST capital loss of AY 2002-03. ITO has raised an objection that since the returns of the AY 2002-03 were submitted late after the due date (i.e submitted on 05.08.02) of 31.07.02, I am not eligible for carry forward of the ST loss amount. Is that true that late submission of the returns by 5 days will carry the penalty of cancellation of carry forward amount? if so, what is the solution to get the eligibility to carry forward. J V Mohan You are fortunate ! How? For that you will have to read till last.The A.O's reasoning is correct as far as law is concerned. The A.O has raised an objection on the basis of provision u/s 139(3) which says that if someone wants to carry forward business loss or capital loss , he may file the return within due date . The section 139(3) is is under (3) If any person who has sustained a loss in an...
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I Am An Actor. What Should Be TDS Rate In My Case?
2007-11-29 14:19:00
I am an actor and my income is over 10 lakh per annum- earlier we were made payments with 5.6% tds deducted. now it has become double- 10.3% however I am told if your billing with one particular company is over 10 lakh then we are liable to pay 11.3% tds- is that true- also there is one particular co which insists on deducting tds of 11.3% even though my earning from them in one yr is only 5 lac-AditaActing is a professional service liable to TDS u/s 194J of the I T Act . Section 194J prescribes rate of tax at 10 % of the amount paid or credited for professional or technical services. The said provision is as under :194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of (a) fees for professional services, or (b) fees for technical services, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the t...
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Is Money Receipt From NRI Friend Taxable In India?
2007-11-23 17:01:00
One of my friend is working in some other country and used to send some money from there in my salaried account in India on which he is already paying tax there.So will it going to be taxable for me as well. SarikaIf you receive any sum of money exceeding Rs 25,000 without any consideration after 1/4/2004 but before 1/4/2006 [After 1/4/2006, if the aggregate sum of money received exceeds Rs 50,000, such sum will be taxable] whether from resident or non-resident friends , is certainly taxable in your hands under section 56(2)(v) of the I T Act. Some of the important point regarding section 56(2)(v) are :The sums of money received at the time your marriage is non taxable even if received from no-relatives including friends.From 1/4/2006, if you receive gifts from many persons or friends without any occasion and aggregate of such gifts exceeds Rs 50,000 the whole of gift shall be taxable. For example , you received Rs 10,000 from eight friends on 1/9/2006, then for FY 2006-07, you w...
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Can Indians Invest Abroad Without RBI Approval?
2007-11-20 05:26:00
One of the American company is offering me some shares under ESOP. This company is not listed in India. It is listed New York Stock Exchange.My worry is how this transaction will took Place? If I want to sale these shares how I will Sale It. ? Please reply at the earliest.Parag You have nothing to worry about. RBI had already allowed purchase of shares of foreign companies listed abroad under ESOP without any kind of restriction. The remittance of foreign exchange required for purchase of these shares by employees of the company which was issuing shares under ESOP was without any limit.But the real good news for all Indian residents has come recently when the RBI under Liberalized Remittance Scheme allowed all resident Indians to invest abroad in whatever things like except prohibited items upto US Dollar 2,00,000 (increased from 1lakh Dollar to 2 Lakh Dollar recently ) in one financial year. So now an Indian resident can approach its bank for remitting US Dollar 2,00,000 ...
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Who Are the Relatives For Whom Educational Loan Can Get You Tax Relief?
2007-11-19 16:00:00
I think during budget of financial year 2007-08, there was new Tax benefit entered for - If Individual takes education loan for children of relatives, he can get tax benefit on interest of Loan taken. To be specific about my query, I want to take Education Loan for my sisters children ( Nephew ). As they need it and I can afford the same. The idea is to help those who are in need.Will it be possible to get TAX benefit as they are not my children. Nikesh Jani An individual was eligible for deduction of interest on educational loan only for his higher studies till FY 2006-07 . So, a father who was taking educational loan for his children, could not claim deduction u/s 80E . Budget 2007 brought the pleasant change in section 80E to insert the term 'relative' . The provision u/s 80E is as under; 80E. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him i...
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What Can Be Consequences For Filing Late Return?
2007-11-18 03:42:00
What are the penalties for filling late I.T. Return i.e. after 31 Oct. 07 in case of HUF firm with turnover of 4 crores. Raj Sharma Actually , a person who has no tax liability as on the last day of an assessment year can file return up to 31st March of the assessment year concerned without any kind of penalty proceedings. As in your case, there is no penalty upto 31/3/2008 for filing return for Asst Yr 2007-08.But late filing of return may create following problems depending upon situation The interest u/s 234A @ 1 may be imposed if there remains tax outstanding at the time of processing u/s 143(1). The provision us/ 234A is as under "234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a mon...
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What Is Taxation Rule of Contribution to PF?
2007-11-17 08:48:00
Employee Contribution to Provident Fund and Employer's Contribution to PF..Are both included in Income while preparing Form-16 and in return as well and deduction under 80c is available for both contribution or for employee's only ....Anshul SinghalThe basic rules of income tax regarding provident fund are as under:The contribution to provident fund by employee is eligible for deduction u/s 80C. Employers contribution is not taken for deduction purpose.All payments by provident fund is tax free in case of Central/state provident fund.The contribution by employers in excess of 12 % recognised PF is taxable salary of the employee. The interest paid by recognised provident fund in excess of 9.5 % is also taxable income of the employee.In case an employee is member of unrecognised PF and when it is recognised by Commissioner of Income Tax , the accumulated balance is transferred to reocgnised PF. That amount which has been transferred from unrecognised to recognised is also taxable i...
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How Can ESOP Shares Become Taxable Perquisite ?
2007-11-14 17:33:00
1. I am in employment with a company since Jan 2002. 2. the company included me in an ESOP scheme where in shares were to vest in installments between 2004 and 2008 in Septmber each year 3. In March 2007 early vesting of ESOPs was undertaken and ESOPs due in Sep 07 and Sep 08 were fully vested and exercised in March itself.4. In lieu of an early exercise the Employees were required to sign a voluntary undertaking to pay a sum of Rs 14 lacs calculated with reference to ESOPS vesting in Sep 08 in case the employee exited the company prior to Sep 08, which I signed. 5. On Oct 5 2007 I resigned with due notice of 2 months. The question is 1. will the payment of Rs 14 lacs to my Employer by me be treated as Salary income for TDS computation. This payment is not being reimbursed to me by anyone so this question. Are there any case laws supporting the argument that it should be treated as Salary income. Alternately can I claim this as salary income and claim refund later if the...
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Are Capital Gains On Sale Of ESOP Shares Listed Abroad Exempt?
2007-11-14 16:42:00
I am an Indian resident, and had some ESOPs which I had exercised and paid in January 2004. These were paid in USD and money on sale will also come in USD, the company went public in October 2006. What is the capital gains tax rate that will apply to me on sale of shares (listed on NYSE), if I sell after October 2007 or before October 2007? Virender Puri Shares whether quoted or unquoted becomes long term asset after being held for more than one year. You exercised your option in January 2004, therefore after January 2005, shares became long term asset in your hand. Its sale will give rise to long term gains. Since you are resident and the shares are listed outside India , the tax rate applied in this case will be 20% as per section 112 of the I T Act . The NIL tax rate for long term gains is for shares which are sold through stock exchanges registered in India.However, you can claim indexation on the cost of the share. For more on indexation , read here. For computation of capi...
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Is Consultancy Fee To A Non Resident Canadian Liable To TDS?
2007-11-13 14:57:00
I am a Indian Passport Holder but residing in Canada since last 6 years as Permanent Resident . I am being offered a consulting assignment in Delhi on rotational basis ( ie. one month in Delhi followed by one month leave ( unpaid) in Canada. Company is saying that they can pay me my fees in US $ & any service tax ( 12%) will be on their account.I am responsible for my personnel tax. I file my tax in Canada. Are they going to withheld some withholding tax as per Indian IT act. ( I will be staying less the 183 days in each Financial Year). What is the position of DT Treaty between India & Canada. Ramesh Sharma Section 5(2) of the Income Tax Act'61 provides the scope of total income in following words:(2) the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which(a) is received or is deemed to be received in India in such year by or on behalf of such person ; or(b) accrues or arises or is deemed to accrue o...
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Can You Explain Dividend & Bonus Stripping ?
2007-11-10 11:34:00
Can you please explain the concept of tax planning by dividend stripping? G.V.Krishna Mohan The dividend stripping is nothing but getting tax free income in the form of dividend and creating capital loss at the same time.The total effect of such device on your income is handsome saving of tax .The dividend is tax free whereas the capital loss incurred on sale of shares or units is utilised for reducing the profit under short term capital gains or income under any other head Let us take an example. XYZ mutual fund advertises for dividend on a particular fund as follows : Amount of dividend : Rs 10 per unit Price of Unit : Rs 30 Record date : 1/7/2001 If you purchased 1,00,000 units by 1/7/2001, the mutual fund, you will get following on 2/7/2001Dividend from mutual fund company : Rs 10,00,000Payment made for acquiring units : Rs 30,00,000 Price of units on 2/7/2003 (ex dividend) : Rs 19.50Capital Loss on sale of units : (30 -19.50) x 1,00,000 = 11...
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Should We Withhold Tax on Payment To NRI For Consultancy?
2007-11-07 06:29:00
We are a software company in INDIA .We need to appoint a consultant on commission basis in US .He is a NRI settled for last 20 years.He is facilitating orders from a US company .These orders are serviced by us at our office in NEW DELHI.Since he is doing his activities in US , NOT IN INDIA .We need to know if we have to deduct any withholding tax or any other tax while sending him commission .KULDIP KUMAR MEHTA Section 9 of the I T Act defines income which are deemed to accrue and arise in India. Subsection (vii) of section 9 is for technical services. The said subsection is as under : (vii) income by way of fees for technical services payable by (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in...
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Is Retrenchment Compensation Awarded by Court Taxable?
2007-11-04 14:57:00
Do we need to deduct TDS from retrenchment compensation awarded by the labour court.Prasanta Kumar Sahu Retrenchment compensation is defined as "Profits in Lieu of Salary " u/s 17 of the I t Act .Hence ,it taxable under the head "salary' . However, retrenchment compensations is exempt u/s 10(10B ) of the I T Act up to Rs 5,00,000 [vide notification No 10969, dated 25-6-1999] if following conditions are fulfilled Compensation is received by a "workman". his retrenchment was as per Industrial Disputes Act 1947; or Any other Act or rules or any order or notification issued there under; or Any standing order; or any award,contract of service or otherwise So, there is no doubt that retrenchment compensation is taxable above the amount it is exempt. As you can see ,award by a court is also a way of getting "retrenchment compensation'. But even in that case , maximum exempt amount is Rs 5 lakh. Important point to check is : if the person who received the award from the court ...
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Return Filing Date Extended!
2007-11-01 05:05:00
The CBDT has extended the due date of filing of return for Asst Yr 2007-08. The extension is effective for electronic filing as well as manual. Date of filing FBT return as well as date for obtaining tax audit report are extended too. Read the press releaseNo. 402/92/2006-MC (46 of 2007)Government of India/ Ministry of FinanceDepartment of RevenueCentral Board of Direct TaxesNew Delhi, the 31 st October 2007PRESS RELEASEThe Central Board of Direct taxes have extended the last date of filing of income tax /fringe benefit tax returns due by 31 st October 2007 as follows:-For electronic returns (companies, and firms requiring tax audit u/s 44AB) to 15 th November 2007; andFor paper returns (other than those required to file electronic returns) to 2 nd November 2007.It is further clarified that the dates for obtaining tax audit report under section 44AB of the Income Tax Act have also been extended accordingly.
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Whether Life Time Pension Arrear Taxable In The hands of Legal heir?
2007-10-29 05:06:00
Whether Life Time Pension Arrears (LTPA) payable to a deceased employee is taxable in the hands of nominee. In a other way ,whether such amount should be included to the total income of the nominee and taxed. Please explain in detail to enable to guide one of friends in his tax planning.nominee's own annual income is around Rs.3.2 lakhs and if he/she receives around Rs. 0.87 lakh as LTPA as a nominee of his/her deceased father, then whether this 0.87 lakh should be shown as 'income from other sources' and added to Rs.3.2 lakh to work out total income and taxed. If not then how this Rs.0.87 lakh to be shown in the income tax return of the nominee. SalmaPension is defined as salary under section 17 of the I T Act. The life time pension arrears actually accrues to the pensioner who died but could not receive. Under the pension rule, a pensioner has to nominate a person who will receive arrears of pension till the day of death. In case , nomination is not there ,legal heir can cl...
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Is there Any Relief to Author Under Indian Income Tax Laws?
2007-10-25 05:41:00
I am an Associate Professor in an University. I have co-authored two text books for Board of secondary education. The books are in Hindi. Do I have to pay tax on the income? I am getting confused even after going through section 80 QQB of I T Act. Please Help.Dr. Praveen Mathur Section 80QQB of the I T Act provides deduction up to Rs 3,00,000 to authors. The silent point of provisions are summarized below: The deduction is available to an Author who is resident of India.Author includes Joint Author. The book should be work of literary ,artistic or scientific in nature. But the book should notbe"brochures,commentaries, guides,diaries,magazines,journals,newspap er,pamphlets,text books for schools,tracts or other publication of similar nature , by whatever name called" The income should be earned in exercise of his profession. The income should be either royalty or copyright fee or advance lump sum payment of royalties or copy right which is non returnable or lump sum consideration fo...
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Are the Gratuity & Leave Salary received by legal heir Exempt?
2007-10-21 21:07:00
Whether gratuity and leave salary becoming due on the death of an employee are taxable in the hands of nominee/legal heir? Please explain in detail.M K L Chand First of all , it should be known that definition of Salary specifically mentions "Gratuity " .Therefore, gratuity is taxable whether being received by employee or his/her legal heir .However ,the leave salary received by the legal heir of an employee is totally exempt. . The detailed answer is as under: Gratuity The gratuity received by an employee is taxable as salary. But if it is received by a legal heir of an employee on his death, it is taxable under "income from other sources' . I T Act provides exemption of certain amount from death-cum -retirement gratuity u/s 10(10) . The basic rule of exemption in case death -cum retirement gratuity is as as under Government & local Authority Employee Employee Under gratuity Act Any other Employee Gratuity is fully exempt. Least of the following:1. Actual Gratuity...
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Are 100 % Tax Exempt Companies Liable to Pay FBT?
2007-10-19 20:24:00
We are having a Software Outsourcing IT enabled Company. This is approved by the Software Technical Park of India (STPI), Govt. of India and it is a STPI Unit. We are completely exempted from income tax since all our income is on foreign currency and no income in Indian currency as per rule.Now will you please let me know whether the Fringe Benefit Tax will apply to our Company since we are completely exempted from tax. P. Natarajan In my opinion , fringe benefit tax provision is applicable on you .This is on account of section 115WA(2) of the I T Act which makes it clear that employers though not liable to pay any tax on his total income , are still liable to pay tax on the fringe benefits .The said section 115WA is given as under: Charge of fringe benefit tax. 115WA. (1) In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after the 1st day of April, 2006, additional income-tax (in this Act referred to as...
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Are You taxable for Research Remuneration Received In UK?
2007-10-15 18:34:00
I am working in Cambridge university as a researcher. I will be here from August 5, 2007, up to 2 years. I am in the service of Government of India and presently I am on leave. I get a salary of... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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Can You Claim STT As Cost of Share Purchase?
2007-10-14 21:51:00
We are a company doing investments in shares i.e. we buy shares, take delivery and sell after few/many months. Our Assessing Officer says that we should add the Securities Transaction Tax paid on... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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How Can You Prevent TDS on Rental Receipts?
2007-10-13 19:44:00
I have rented out a property in Gurgaon and the lessee is asking me for a letter from the Income Tax Dept. stating that he does not need to deduct the tax at source. Is this correct? If so how and... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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Are You Liable to Tax Even If Your Total Income Is Below Exemption Limit?
2007-10-09 17:07:00
For the Assessment year 2005-06, I was a full-time PG student with zero income. I had won a prize of Rs 30K in a quiz competition on which a TDS of Rs 9180 was collected. After filing for TDS refund,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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Is it compulsory to disclose exempted income in the income tax return?
2007-10-07 15:13:00
Is it compulsory to disclose exempted income in the Indian income tax return? Can NRI ignore the direction given in the tax return to declare exempted incomes such as his foreign income? As there is... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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When Should You Get Tax Audit Done In Case Of Day Trading of Shares?
2007-10-07 08:34:00
I do only day trading. When am I required to get my accounts tax audited ? Renesh Jain The day trading is definitely speculative in nature. The delivery is never taken or given.Therefore, confusion... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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