Senior Citizen : No Advance Tax if No Business Income

Finance Bill 2012-13 has really good news for senior citizen. First the age anomaly was corrected by reducing the age from 65 years to 60 years for section 80D , 80DDB and section 197A and then an amendment in section 207 of the Income Tax Act now provides that if the senior citizen has no income from business or profession, he need not pay advance tax. He should pay the tax by self assessment tax only.

Benefits to Senior Citizen on advance tax

This will not only create some less hassle for senior citizens , it will also save money as they will not be charged interest u/s 234B & 234C which is applicable only when a fixed percentage of the advance tax liability is not paid by a tax payer.Thus , Finance Bill 2012-13 has certainly good things for senior citizen

The amended provision u/s 207 of the Income Tax Shall be as under ( Mark the inserted provision in purple colour)

207. (1)Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the budgetSeniorCitizentotal income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as “current income

(2) “(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who—
(a) does not have any income chargeable under the head “Profits and gains of business or
profession”; and
(b) is of the age of sixty years or more at any time during the previous year”

Senior citizen now can have some less problem with Income Tax  !

Special Tax Rates For Addition u/s 68 to Section 69D

Finance Bill 2011-12 has inserted a new section 115BBD to check the black money . Previously , readers were made aware about the new provision to treat share premium as deemed income ,  tcs on cash purchase of bullion , onus of proving share capital on on private companies were explained to readers. Now , the the new provision u/s 115BBD provides a tax rate for any income added under section section 68, section 69, section 69A, section 69B, section 69C or section 69D of the Income Tax Act

Rationale of Tax Rates

The rationale behind providing special tax rates for addition under aforesaid sections are explained in the Memorandum to Finance Bill 2012-13 as under :

Under the existing provisions of the Income-tax Act, certain unexplained amounts budgetBalckMoneyare deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate  applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these  cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic  exemption limit and even if it is higher, it is levied at the lower slab rate.

In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed  to tax the unexplained credits, money, investment, expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections.

So here is the new tax rates under section 115BBD

“115BBE. (1) Where the total income of an assessee includes any income referred to in section
68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of—
(a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent.; and
(b) the amount of income-tax with which the assessee would have been chargeable had his
total income been reduced by the amount of income referred to in clause (a).
(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or  allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).”.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013- 14 and subsequent assessment years.

Onus to Prove Source of Capital is on Private Company

As a measure to fight black money , the value of unjustified share premium is proposed to be treated as deemed income u/s 56(2) in hands fo private company as per Finance Bill 2012-13 . Yet another amendment proposed by finance bill which is related to rasing share capital by private companies is amendment of section  68 of Income Tax Act .

Under section 68 a person is required to explain  the identification, genuineness and creditworthiness of the person  any sum credited in its books of account . Now the provision u/s 68 has been made harsher for private companies raising share capital by providing that onus to  prove the sources of money in hand of shareholder  will lie on it .

Rationale of amending section 68 for share capital .

Finance Bill 2012 –13 has brought in this amendment to nullify the result of certain judicial pronouncements which have created doubts about the onus of proof and the requirements of this section, particularly, in cases where the sum which is credited as share capital, share premium etc.

The memorandum to Finance Bill 2012-13 notes that the judicial pronouncements, while recognizing that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company. The Courts have drawn a distinction and emphasized that in case of private  placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large.

Accordingly, Finance Bill 2012-13 proposed to amend section 68 of the Act to provide that the nature and source of any sum credited, as share capital, share premium etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder.

When a private company need not prove source of share capital?

The Finance Bill has  proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if the shareholder is a well regulated entity, i.e. a Venture Capital Fund, Venture Capital Company registered with the Securities Exchange Board of India (SEBI).

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent years.

Presumptive Income Scheme u/s 44AD Debars 3 Businesses

It was clarified in blog posting that presumptive income scheme under section 44AD does not cover profession as referred in section 44AAof the Income Tax Act. Now , Finance Bill 2012-13 has proposed amendment retrospectively by which it is not  only clarified that persons carrying profession as per section 44AA can not avail presumptive scheme u/s 44AD , but further certain kinds of  earners have been kept out of the scheme.

Presumptive income scheme u/s 44AD

Finance (No.2) Act, 2009 substituted Section 44AD in the Income-tax Act to provide for a presumptive income scheme for small businesses with effect from 1st April, 2011. Under this scheme a sum equal to 8% of the total turnover or gross receipts  is deemed to be the profits and gains from business. This presumptive scheme is applicable only to a person carrying on any  business, except business of plying, hiring or leasing goods carriage, having turnover or gross receipt of less than 60 lakh rupees.

Who are barred to avail presumptive scheme u/s 44AD?

It is proposed to amend section 44AD to clarify that this presumptive scheme is not applicable to

    • (i) a person carrying on profession as referred to in sub-section (1) of section 44AA;
    • (ii) persons earning income in the nature of commission or brokerage income; or
    • (iii) a or a person carrying on any agency business.

These amendments also seems to plug the loophole in the presumptive income scheme for checking black money .

Senior Citizen Age for 80D ,80DDB & 197A Reduced !

Only few days ago , the anomaly in age factors of senior citizens was highlighted on this blog. Finance Bill 2012-13 has  now proposed to rectify the anomaly .The fact is that The Finance Act, 2011 amended the effective age of a senior citizen being an Indian resident from sixty-five years of age to sixty years for the purposes of application of various tax slabs and rates of tax under the Income Tax Act, 1961 for income earned  during the financial year 2011-12 . There are certain other provisions of the Act in which the age for qualifying as a senior citizen was not amended and only 65 years was still the age for treating an individuals as senior citizen.

Amendment in Age of Senior Citizens

In all the provisions under sections 80D, 80DDB and 197A the effective age for a “senior citizen”  who can avail of the benefit is mentioned as sixty-five years or more at any time during the relevant previous year.senior citizenNow Finance Bill 2012-13 has proposed  to make the effective age of senior citizens uniform across all the provisions of the Income Tax Act, it is proposed to reduce the age for availing of the benefits by a senior citizen under the aforesaid sections (sections 80D, 80DDB and 197A) from sixty-five years to sixty years.

Date of Change in Age of Senior Citizen

The amendments to section 80D and section 80DDB will take effective from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. The amendment to section 197A will take effect from 1st July, 2012.

TDS on Property Sale From 1st October 2012

TDS on property sale is another bad news out of Budget 2012 proposals . The earlier bad news  from Budget 2012 was about imposition of  Alternate Minimum Tax on almost  everyone.Now , the fine print of Finance Bill 2012 shows that government has provided by inserting section 194LLA effective  from 1st October 2012  that  every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1%  of such sum, if the consideration paid or payable for the transfer of such property exceeds –budgetTDS
(a) fifty lakh rupees in case such property is situated in a specified urban agglomeration; or
(b) twenty lakh rupees in case such property is situated in any other area.

TDS on stamp duty valuation

It is further proposed to provide that where the consideration paid or payable for the transfer of such property is less than the value adopted or assessed or assessable by any authority of a State Government for the purposes of payment of stamp duty, the value so adopted or assessed or assessable shall be deemed as consideration paid or payable for the transfer of such immovable property.

No registration of property if TDS proof is not attached

For better compliance, it is also proposed to provide that a registering officer appointed under the Indian Registration Act, 1908 (Registrar) shall not register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS.

TAN not required

The transferee would not be required to obtain any Tax Deduction and Collection Account Number (TAN) or to furnish any TDS statement as this would be mostly a one time transaction. The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS.

Simple TDS payment challan

For reducing the compliance burden on the transferee, it is also proposed that a simple one page challan for payment  of TDS would be prescribed containing details (including PAN) of transferor and transferee and also certain details of the property.

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