- Tax Liability in respect of MAT has been increased from 10% to 15% of book profit. Further It shall be
increased by surcharge of 10% of tax in case Total Income under provisions of MAT exceeds Rs. 1.00 crore.
| Tax | Total Income under MAT Upto Rs. 1.00 crore | Total Income under MAT exceeds Rs. 1.00 crore |
| Rate of Tax | 15.45% | 16.99% |
- However the credit for Tax paid under MAT regime shall be allowed to be carried forward for subsequent tenth
assessment years. Further the assessee has to add provision for diminution in value of assets debited to P & L account in computation of book profit. Hence assessee has to pay more MAT in case it makes
provisions for bad debts since this is to be added in book profit and tax is to be paid thereon. This
amendment was brought to reverse the decision of Apex Court pronounced recently in favour of
assessee. - Fringe Benefit Tax has been abolished from the A.Y.2010-2011.
- Rate of taxation in respect of Companies / firms remain unchanged.
Tax Benefit
- Definition of Manufacturing has been provided to include that new and distinct product should come in to
existence with a different chemical composition or integral structure . This definition will restrict the
deduction available under different provisions with regard to manufacturing of goods since many courts
held that manufacturing includes processing . Now this definition will restrict the deduction to manufacturing
test being satisfied. - It has been decided to extend the benefit of deduction u/s10A /10B in respect of profit derived from
undertaking set up under free trade zone/ 100% export oriented undertaking up to A.Y. 2011-2012.
Earlier it was to be allowed upto A.Y.2010-2011. - Tax benefit for units set up in SEZ area will be enhanced marginally in view of fact that turnover of
units will be considered instead of turnover of assesee while working out deduction under proportionate
method. - Tax benefit for electricity companies when unit is set up upto 31/03/2010 was available u/s80IA of the Act.
Now the date for setting up unit has been extended to 31/03/2011. - Scope of deduction u/s 80IB (10) of the Act with reference to profits of builders are restricted since
builders can not allot the more than one residential unit to individual or his relative as specified in this section.
Deduction
- It has been proposed to allow a deduction of entire capital expenditure except land, goodwill or financial
instruments in respect of cold chain facility, warehousing facility for storage of agricultural produce
and laying and operation of gas pipe line business activity. - Simile of transfer of such capital assets or being demolished, any sum received/ receivable thereon
shall be chargeable to tax since entire expenditure is proposed to be allowed. - Further the cost of such capital assets in case of slump sale shall be taken to be nil in computation of net
worth of undertaking in case of sale of such business. Loss suffered from such eligible business shall not be
set off from any profit of other business activity and it will be allowed to be carried forward to set off against
the eligible business as aforesaid. - Benefit of weighted deduction of 150% of expenditure, in case incurred for Research & Development has
been extended to all business engaged in manufacturing or production of articles except those
specified in eleventh schedule. - CTT has been abolished . As a natural corollary , it has been decided to withdraw CTT as business
expenditure. - It has been decided to do away with different limit for allowability of partners' remuneration in case of
working partner for professional firm and other firm. Now uniform limit for all partnership firm has been
provided as under. It is therefore necessary to amend the deed of partnership with reference to clause of
remuneration to partner in order to align with new rate as aforesaid.
| On the first Rs. 3.00 lacs book profit or in case of loss | Rs. 1.50 lacs or at the rate of 90% of book profit which ever is more |
| On the balance of the book profit | 60% of balance book profit |
- It has been decided to increase the limit of cash expenditure up to Rs. 35,000/- in a day w,e,f .
01/10/2009. Accordingly the cash expenses in excess of Rs. 35000/ after 01/10/2009 shall be disallowed in
the computation of income under the head of business. - Now it is proposed to deny the deduction to the assessee under section 10A, 10AA, 10B, or 10BA or
chapter VIA if the assessee fails to make claim in the return of Income. - It has been decided to allow deduction to companies in case they make donation to electoral trust.
Presumptive Taxation
- New presumptive based taxation scheme is proposed to be introduced for individual/ HUF and partnership
firm except LLP when turnover does not exceed Rs.40.00 lacs w.e.f A.Y. 2011-2012 . - In this scheme, the eligible assesee is required to declare 8 % of turnover as income from business and
no deduction shall be allowed except the remuneration from partners as permitted under the law. - If assessee does not offer 8% of turnover as income , he is is required to maintain books of accounts and get
his account audited under section 44AB popularly know as tax audit from chartered accountants. - It has been decided to increase the presumptive income being Rs. 5000/- per month in case of heavy
goods vehicle and Rs. 4500/- per month in case of other than heavy goods vehicle in case the assessee is
engaged into plying /hiring of vehicle and he does not own more than vehicle. This amendment shall be
effective w.e.f. 2011-2012.
Capital Gain
- At present, if assessee sells immoveable property being capital assets, the consideration as adopted or
assessed by the stamp authority or consideration as per agreement which ever is higher is taken as total
sale value . Now it is decided to include the term as assessable value of property for stamp duty purpose
shall also be taken . This was done since some decision from tribunal has gone in favour of assessee that if
agreement is not registered the value as per stamp authority can not be substituted as consideration. In
order to negate the fallout of such decisions, this amendment is proposed to be made.
Gift
- It has been decided to bring within the tax net gift of moveable and immoveable property which is received
without consideration or inadequate consideration in excess of Rs. 50,000/- from any person except
relative as defined in the explanation to section 56 (2) (vi) of the Act w.e.f 01/10/2009.
Taxation of Limited Liability Partnership ( LLP)
- It is decided to have taxation system for LLP as prevalent for partnership firm. It is therefore desirable
to have LLP in place of companies in case of small and medium business house since LLP taxation regime is
more efficient in view of the fact that MAT and Dividend distribution tax is not chargeable for LLP
and entire profit distributed among partners are tax free in the hands of partners.
Assessment/ Re assessment
- It has been decided to include safe harbour rule in the assessment of Transfer pricing. It is also proposed that
if two ALP is determined by the most appropriate method, the arithmetical mean of such price shall be
taken to be ALP. Further if variation between the transaction declared by the assessee and value
adopted by the A.O. does not exceed 5% , then price declared by the assessee shall be taken to be ALP in
case of transfer pricing assessment. - It is proposed to start new mechanism in the assessment in case of transfer pricing assessment and
assessment relating to foreign companies in which Dispute Resolution panel will look into cases in case
A.O. did not agree with the contention of the eligible assessee . A.O. has to follow the proposed steps as
envisaged in the new section 144C of the Act. The appeal against the order passed by the Dispute
Resolution panel lies with the Tribunal. - It is proposed to expand the scope of re assessment in case assessment is reopened on the ground that
income has escaped assessment. The A.O. can make addition on any issue which comes to his notice during
the course of re assessment even it they are not related to the reasons recorded earlier for re assessment. - It is proposed to serve the notice by courier or email. Such service of notice shall be valid.
Penalty
- It is decided to levy concealment penalty for search case initiated after 01/06/2007 in case the assessee
declares any income for the earlier assessment years for which he has already filed return or time for filing
return has lapsed, the income declared for such years shall be deemed to be income for which he has
furnished inaccurate particulars of income and penalty ranging 100% to 300% on tax sought to be evaded
shall be leviable.
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