direct tax - vipulshah

CS PROFESSIONAL AMENDMENTS

(FOR JUNE/ DEC – 21)

DIRECT TAX

INDEX (OLD SYLLABUS)

S N CHAPTER NAME

1 Introduction To Income Tax Act Final

2 Corporate Tax Planning And Tax Management

3 Assessment Of Companies And AMT

4 GAAR

5 Basics Of International Taxation

6 Tax Treaties

7 Income Tax Implication On Specified Transaction

8 Permissible Deduction

INDEX (NEW SYLLABUS)

S N CHAPTER NAME

2 Corporate Tax Planning And Tax Management

3 Assessment Of Companies And AMT

4 GAAR

5 Basics Of International Taxation

6 Tax Treaties

7 Income Tax Implication On Specified Transaction

CMA VIPUL SHAH CS PROFESSIONAL – JUNE 21 INTRODUCTION TO INCOME TAX ACT 1961

Page 1.1

TAX RATES FOR PY 20-21 AND AY 21-22

Tax rate Resident Individual age < 60 (Male & Female), HUF, AOP, BOI & AJP

Resident Individual

(Age >= 60 during PY)

Senior citizen( Male& Female)

Resident Individual (Age >=80 during PY)

Super senior citizen( Male & Female)

NIL 2,50,000 3,00,000 5,00,000

5% 2,50,001 to 5,00,000 3,00,001 to 5,00,000 NA

20% 5,00,001 to 10,00,000 5,00,001 to 10,00,000 5,00,001 to 10,00,000

30% Above 10,00,000 Above 10,00,000 Above 10,00,000

Add: Surcharge Income Rate

50,00,000 to 1,00,00,000 10%

1,00,00,000 to 2,00,00,000 15%

200,00,000 to 5,00,00,000 25%

Above 5,00,00,000 37%

Health & Education Cess

4% on Tax plus Surcharge

Surcharge for the assessment year 2021 – 2022

Amendment finance act 2020

Different situations

Nature and quantum of income of the assesse (i.e. individual, HUF, AOP, BOI or an artificial juridical person)

Surcharge on amount of income tax computed on dividend income

and income which is taxable under section 111A and

112A

Surcharge an

amount of income

tax computed on other incomes

Situation 1 Total income (including dividend income and income under section 111A and 112A)

Nil Nil

INTRODUCTION TO INCOME TAX ACT 1961


Page 1.2

does not exceed Rs.50 lakh

Situation 2 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.50 lakh but does not exceed Rs.1 crore

10% 10%

Situation 3 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.1 crore but does not exceed Rs.2 crore

15% 15%

Situation 4 Total income (excluding dividend income and income under sections 111A and 112A) exceeds Rs.2 crore but does not exceed Rs.5 crore

15% 25%

Situation 5 Total income (excluding dividend income and income under sections 111A and 112A) exceeds Rs.5 crore

15% 37%

Situation 6 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.2 crore (but it is not covered by Situation 4 and Situation 5)

15% 15%

Amendment finance act 2020

Alternative tax regime for individual / HUF – From the assessment year 2021 – 2022, an individual / HUF can opt for the alternative tax regime within the parameters of section 115BAC. (To be discuss later on)


Page 1.3

REBATE U/ 87A

1 Conditions

1 A resident individual whose net income does not exceed Rs. 5,00,000 can avail rebate u/s. 87A.

2 The amount of rebate is 100% of income tax or Rs. 12,500 whichever is less.

2 Key notes

a Net income = GTI – Deduction u/s 80C to 80U

b It is to be deducted before H & EC.

FOR DOMESTIC COMPANIES

Surcharge

Particulars AY 20-21 Income between 1 cr to 10 cr

Above 10 cr cess

If turnover of or gross receipt during PY 16-17 dose not exceeds 250 cr

25% 7% 12% 4%


25% 7% 12% 4%

Otherwise 30% 7% 12% 4%

Key Note A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB.


Page 1.4

FOR OTHER ASSESSEES / PERSONS

Surcharge

Assesse Rate of tax

TI <Rs. 1 Crore

TI > Rs.1 Crore, but TI ≤ Rs.10 Crores

TI > Rs.10 crores

Rate of EC + H & EC

Foreign Companies 40% 2% 5% 4%

Firms and LLP 30% 12% 12% 4%

Local Authorities 30% 12% 12% 4%

Co – operative Societies

For First Rs.10,000

For Next Rs.10,000

For the Balance

10%

20%

30%

-

-

12%

-

-

12%

4%

Amendment finance act 2020 From the assessment year 2021 – 2022, a resident co – operative society can opt for the alternative tax regime provided under section 115BAD.

Amendment finance act 2020 ALTERNATIVE TAX REGIME FOR INDIVIDUALS / HUFS UNDER SECTION 115BAC Income of individuals and Hindu Undivided Family

Currently, individuals / HUFs are taxable as per progressive tax slabs and the highest tax slab rate is 30 per cent which is applicable if income exceeds Rs.10 lakh. Section 115BAC has been inserted with effect from the assessment year 2021 – 2022 to provide new optional tax regime to individuals / HUFs.

Rate of income tax under the alternative tax regime (Section 115BAC(1))

under the alternative tax regime income tax shall be computed at the option of the assesse as per the rate given in the following table:

Total income Rate of tax Up to Rs.2,50,000 Nil From Rs.2,50,001 to Rs.5,00,000 5 per cent From Rs.5,00,001 to Rs.7,50,000 10 per cent From Rs.7,50,001 to Rs.10,00,000 15 per cent From 10,00,001 to Rs.12,50,000 20 per cent From Rs.12,50,001 to Rs.15,00,000 25 per cent


Page 1.5

Above Rs.15,00,000 30 per cent

Exemption limit

Exemption limit is Rs.2,50,000. It is applicable even in the case of senior citizen and super citizen. To put it differently, under normal provisions exemption limit for senior citizen is Rs.3,00,000 and for super senior it is Rs.5,00,000. But in the case of alternative tax regime, it is Rs.2,50,000 for any individual

Rebate under section 87A Rebate under section 87A is available.

Tax on other incomes

If an individual / HUF (who has opted for the alternative tax regime) has other incomes which are taxable under other provisions of Chapter XII (i.e. sections 110 to 115BBG but other than section 115BAC), then tax on such other incomes will be calculated as per the rate(s) specified by these sections and balance amount of income will be taxable under section 115BAC as per the rate given in above table.

Restrictions on deductions/ exemptions (Section 115BAC(2))

The following conditions should be satisfied in order to avail the benefit of lower rate under the alternative tax regime of section 115BAC: It is optional Individual / HUF may be resident or non resident. Individual may be a salaried / retired employee (having salary income) or a self employed person (having business income) or any other person (having any other income). House rent allowance (section 10(13A))

Special allowance(s) (other than those as may be prescribed) (Section 10(14))

Allowance to MPs / MLAs (Section 10(17))

Exemption up to Rs.1,500 available in the case of clubbed income of a minor child (section 10(32))

Special economic zone (section 10AA) Standard deduction (section 16(ia)) Entertainment allowance deduction (section 16(ii)) Professional tax deduction (section 16(iii))

Interest on housing loan in the case of one or two self – occupied properties (section 24(b))

Additional depreciation (section 32(1)(iia)) Investment allowance in the case of backward area (section 32AD) Tea / coffee / rubber development account (section 33AB) Site restoration fund (section 33ABA) Deduction for scientific research (section 35(1)(iia)/(iii), 35(2AA))


Page 1.6

Capital expenditure pertaining to specified business (section 35AD) Agriculture extension project (section 35CCC) Standard deduction in the case of family pension (section 57(iia))

Deduction under sections 80C to 80U (except employer’s contribution towards NPS under section 80CCD(2), deduction under section 80JJAA and deduction under section 80LA(1A))

Interest on public provident fund (as well as final payment at the time of maturity) will remain exempt under section 10(11) even if a person opts for the alternative tax regime under section 115BAC. Likewise, interest on Sukanya Samriddhi Account (as well as withdrawal or final payment from such account) will enjoy exemption under section 10(11A) even of the concerned person has opted for the lower tax regime of section 115BAC). Moreover, the following exemptions will be available even under the alternative tax regime of section 115BAC:

Exemption under section 10(10) pertaining to gratuity Exemption under section 10(10A) pertaining to commutation of pension Exemption under section 10(10AA) pertaining to leave encashment Exemption under section 10(10B) pertaining to retrenchment compensation

Exemption under section 10(10C) pertaining to compensation on voluntary retirement separation

Exemption under section 10(10CC) pertaining to tax on non monetary perquisites paid by employer

Exemption under section 10(D) pertaining to sum received under a life insurance policy

Exemption under section 10(12) pertaining to interest and withdrawal from recognized provident fund

Exemption under section 10(12A) / (12B) pertaining to payment (including withdrawal) from NPS

Exemption under section 10(13) pertaining to payment from approved superannuation fund.

Adjustment of losses

The total income of the individual / HUF is calculated without adjusting brought forward loss (and / or additional depreciation) from any earlier year (if such loss / additional depreciation pertains to any deduction under the aforesaid sections). Moreover, any loss under the head “Income from house property” cannot be set off with any other income under any other head of income.


Page 1.7

Adjustment of depreciated value of block of assets

Brought forward loss / depreciation as mentioned above, shall be deemed to have been given full effect to and no further deduction for such loss / depreciation shall be allowed for any subsequent year. However, where unadjusted depreciation in respect of a block of assets has not been given full effect to prior to the assessment year 2021 – 2022 corresponding adjustment shall be made to the written down value of such block as on April 1, 2020 in the prescribed manner (if option is exercised for the lower tax regime under section 115BAC for the assessment year 2021 – 22).

Depreciation on prescribed mode

Total income of the individual / HUF is calculated after claiming depreciation (other than additional depreciation) in such manner as may be prescribed.

Alternative minimum tax not applicable

Alternate minimum tax (AMT) under section 115JC is not applicable if the assesse opts for the alternative tax regime under section 115BAC. Consequently, AMT tax credit of earlier years cannot be adjusted against the tax liability which is computed under section 115BAC.

Option (section 115BAC(5))

An individual / HUF (who wants to avail the benefit of lower rate under the alternative tax regime of section 115BAC) is required to upload an option in prescribed mode on or before the due date of submission of return of income as follows:

1

Assesse does not have business / profession income

If the assesse does not have business / profession income, the option must be exercised along with the return of income for every previous year. Provisions illustrated: X is an individual and does not have any business / profession income for the assessment year 2021 – 2022. He exercises the option for the alternative tax regime for the assessment year 2021 – 2022. In this case, option is valid only for the assessment year 2021 – 2022. For the next assessment year, he may (or may not) avail of the alternative tax regime under section 115BAC. If he wants to avail the benefit of lower tax taxation for the assessment year 2022 – 2023, he will have to exercise a fresh option by uploading the relevant form on or before the due date of submission of return of income for the assessment year 2022 – 2023.


Page 1.8

2

Assesse has business / profession income

If the assesse has business / profession income, this option can be exercised for any previous year relevant to the assessment year 2021 – 2022 (or any subsequent year). Once the individual / HUF has exercised the option of lower tax regime under section 115BAC for any previous year, it remains valid for subsequent years (the assesse is not required to upload a fresh option in the next year or subsequent years). However, the option cannot be withdrawn (except when he ceases to have business / profession income in which case, option under (1) will be available). If an individual / HUF (after opting for the alternative tax regime of section 115BAC), fails to satisfy the above conditions in a subsequent year, the option becomes invalid in respect of the year in which default is committed and subsequent years. Consequently, in such a case, it will be assumed that the assesse has not exercised the option of lower tax regime under section 115BAC in the year in which default is committed and subsequent years.

3

Option by an employee under section 115BAC for lower tax regime

CBDT vide Circular no. C1/2020, dated April 13, 2020 has clarified that an employee (not having income from business / profession) can opt for the lower tax regime under section 115BAC by intimating the same to the employer (i.e. deductor) of such intention for each previous year. Upon such intimation, the deductor shall compute the amount of tax deductible (under section 192) according to the provisions of section 115BAC. The following points should be noted: a

The above intimation to the employer shall be only for the purpose of the TDS and cannot be modified during that year.

b

Such intimation to the employer does not amount to exercise of option by the concerned employee under section 115BAC(5). The


Page 1.9

concerned employee is required to exercise the option under section 115BAC(5) at the time of submission of his return of income (such option could be different from the intimation made to the employer).

c

If the above intimation is not made by the employee, the employer (or deductor) shall deduct tax at source ignoring the provisions of section 115BAC.

Illustration X (37 years) is a businessman. His income for the previous year 2020 – 2021 from business is Rs.14,00,000. Besides, he has interest on savings bank account of Rs.21,000. He annually contributes Rs.1,50,000 towards public provident fund. X wants to know whether he should opt for alternative tax regime from the assessment year 2021 – 2022. Solution Computation of income of X Existing tax

regime Rs.

Alternative tax regime

Rs. Business income 14,00,000 14,00,000 Income from other sources (interest on saving bank account) 21,000 21,000 Gross total income 14,21,000 14,21,000 Less: Deductions Under section 80C (PPF contribution) 1,50,000 Blocked Under section 80TTA (interest on saving bank account) 10,000 Blocked Net income 12,61,000 14,21,000 Tax on net income Income tax 1,90,800 1,67,750 Less: Rebate under section 87A (not available, net income is more than Rs.5,00,000)

Nil Nil

Tax after rebate under section 87A 1,90,800 1,67,750 Add: Surcharge Nil Nil Income tax and surcharge 1,90,800 1,67,750


Page 1.10

Add: Health and education cess 7,632 6,710 Tax liability 1,98,432 1,74,460

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 CORPORATE TAX PLANNING

NO AMENDMENTS

CHAPTER 2: CORPORATE TAX PLANNING & TAX MANAGEMENT

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 ASSESSMENT OF COMPANIES

Page 3.1

TAXATION OF COMPANIES INCLUDING FOREIGN COMPANY RATES OF INCOME TAX FOR THE ASSESSMENT YEAR 2021-22

FOR DOMESTIC COMPANIES

Surcharge

Particulars AY 21-22 Income between 1 cr to 10 cr

Above 10 cr cess


25% 7% 12% 4%


25% 7% 12% 4%

Otherwise 30% 7% 12% 4% Key Note A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB.

SPECIAL RATES OF INCOME TAX

Section Nature of Income Rate of Tax

111A Short-term capital gains from transfer of securities on which Securities Transaction Tax has been charged

15%

112 Long term capital gain 20% /10% 112A On Long-term Capital Gain (Listed Share/Unit)

Exempt upto Rs. 1 lakh. Excess taxable @10%

115BB Casual Income 30% 115BBE Unexplained amounts treated as income under

sections 68, 69, 69A, 69B, 69C and 69D of the Act 60%

CHAPTER 3: ASSESSMENT OF COMPANIES, LLP & NON - RESIDENT

STATUS


Page 3.2

SPECIAL PROVISIONS OF TAX ON CERTAIN INCOME OF DOMESTIC

MANUFACTURING COMPANY AND OTHER DOMESTIC COMPANY AS PER

PROVISIONS OF SECTION 155BAB AND SECTION 115BBA OF THE INCOME-TAX

ACT, 1961.

(1) (2) (3) (4) Particulars Section 115BAB Section 115BAA 1 Applicability Domestic manufacturing

company Any domestic company

2 Rate of tax 15% 22% 3 Rate of surcharge 10% 10% 4 Effective rate of

tax [including surcharge & cess]

17.16% 25.168%

5 Applicability of concessional rate of tax on total income of company.

The rate of tax [i.e., 17.16%] is notwithstanding anything contained in the Income-tax Act, 1961 but subject to the provisions of Chapter XII, other than section 115BA and 115BAA.

The rate of tax [i.e. 25.168%] is notwithstanding anything contained in the Income-tax Act, 1961 but subject to the provisions of Chapter XII, other than section 115BAand 115BAB.

Note: The implies that this rate [i.e., 17.16% / 25.168%] would prevail in respect of all income, other than income subject to special rates of tax under Chapter XII, for which the special rates would continue to apply. For example, in case of such companies opting for section 115BAA or 115BAB, long-term capital against chargeable to tax under section 112 and 112A and short-term capital gains chargeable to tax under section 111A would be subject to tax at the rates mentioned in the said sections. However, other income, like short term capital gains [other than those covered under section 111A], income from house property and income from other sources would be taxable at the rate of 17.16% / 25.168%, as the case may be.

6 Conditions to be fulfilled for availing the concessional rate of tax and

(i) The company should be set-up and registered on or after 1-10-2019.

No time limit specified. Both existing companies and new companies can avail benefit.

(ii) It should commence Need not be a manufacturing company.

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Page 3.3

exemption from MAT.

manufacturing on or before 31-3-2023.

(iii) It should not be formed by splitting up or the reconstruction of a business already in existence [except in case of an undertaking formed by reconstruction or revival of a person of the business of any undertaking referred to in section 33B in the circumstances and within the period specified therein]

No similar condition has been prescribed.

(iv) It does not use any machinery or plant previously used for any purpose [Refer Note at the end]


(v) It does not use any building previously used as a hotel or a convention Centre [meanings assigned in section 80-ID(6)]


(vi) It should not be engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced


STATUS


Page 3.4

by it. 7 Common condition

for both sections for availing the concessional rate of tax and exemption from MAT.

The total income should be computed – (i)

Without providing for deduction under any of the following provisions: Section Provision

10AA

Exemption of profits and gains derived from export of articles or things or from services by an assessee, being an entrepreneur from his Unit in SEZ.

32(1)(iia) Additional depreciation @ 20% or 35%, as the case may be, of actual cost of new plant and machinery acquired and installed by manufacturing and power sector undertakings.

32AD Deduction @ 15% of actual cost of new plant and machinery acquired and installed by an assessee in a manufacturing undertaking located in the notified backward areas of Andhra Pradesh, Telengana, Bihar and West Bengal.

33AB Deduction @ 40% of profits and gains of business of growing and manufacturing tea, coffee or rubber in India, to the extent deposited with NABARD in accordance with scheme approved by the Tea/Coffee/Rubber Board.

33ABA Deduction @ 20% of the profits of a business of prospecting for, or extraction or production of, petroleum or natural gas or both in India, to the extent deposited with SBI in an approved scheme or deposited in Site Restoration Account.

35(1)(ii)/ (iia)/(iii)

Deduction / weighted deduction for payment to any research association, company, university etc. for undertaking scientific research or social science or statistical research.

35(2AA) Weighted deduction @ 100% of payment to a National Laboratory or University or IIT or approved specified person for scientific research.

35(2AB) Weighted deduction @ 100% of in-house scientific research expenditure incurred by a company engaged in

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Page 3.5

the business of bio-technology or in the business of manufacture or production of an article or thing.

35AD Investment-linked tax deduction for specified businesses.

35CCC Weighted deduction @ 150% of expenditure incurred on notified agricultural extension project.

35CCD Weighted deduction @ 150% of expenditure incurred by a company on notified skill development project.

80-IA to 80RRB

Deductions from gross total income under Chapter VI-A under the heading “C – Deductions in respect of certain incomes” other than the provisions of section 80JJAA.

(ii) Without set-off of any loss carried forward from any earlier assessment year, if such loss is attributable to any of the deductions listed in (i) above [Such loss would be deemed to have been already given effect to and no further deduction for such loss shall be allowed for any subsequent year].

(iii) By claiming depreciation u/s. 32 determined in the prescribed manner. However, additional depreciation u/s. 32(1)(iia) cannot be claimed.

Note: A domestic company exercising option for availing benefit of lower tax rate under section 115BAA shall not be allowed to claim set off of any brought forward loss on account of additional depreciation for an Assessment Year for which the option has been exercised and for any subsequent Assessment Year. Since there is no time line without which option under section 115BAA can be exercised, a domestic company having brought forward losses on account of additional depreciation may, if it so desires, exercise the option after set of the lossess so accumulated.

8 Applicability of MAT

Not applicable Not applicable

9 Availability of set-off of MAT credit brought forward from earlier years.

Since it is a new company, there would be not brought forward MAT credit

Brought forward MAT credit cannot be set-off against income u/s. 115BAA.

STATUS


Page 3.6

10 Adjustments for transactions with persons having close connection.

If the Assessing Officer opines that the course of business between the company and any other person having close connection therewith is so arranged that the business transacted between them produces more than the ordinary profits to the company, he is empowered to take into account the amount of profits as may be reasonably deemed to have been derived there from, while computing profits and gains of such company. In case the arrangement referred to above involves a specified domestic transaction referred to in section 92BA, then, the amount of profits from such transaction would be determined by considering the arm’s length price [ALP] Note: The scope of “specified domestic transaction” referred to in section 92BA has been expanded to include within its ambit, any business transacted between such persons with close connection, where one such person is a company claiming benefit under section 115BAB.

No such requirement to make any adjustment.

11 Exercise of option by the company

The beneficial provisions of this section would apply only if

The beneficial provisions of this section would apply if option is exercised in the

STATUS


Page 3.7

within the prescribed time.

option is exercised in the prescribed manner on or before the due date u/s. 139(1) for furnishing the first of the returns of income for any previous year relevant to A.Y. 2020-21 or any subsequent assessment year. Such option, once exercised, would apply to subsequent assessment years. Further, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. Note: The option has to be exercised at the time of furnishing the first of the returns of income for any previous year. If a person fails to so exercise such option, he cannot exercise the option for any subsequent previous year.

prescribed manner on or before the due date u/s. 139(1) for furnishing the return of income for any previous year relevant to A.Y. 2020-21 or any subsequent assessment year. Such option, once exercised, would apply to subsequent assessment years. Further, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. Note: The option can be exercised even in a later year, but once exercised, cannot be withdrawn subsequently. Further, where the person exercises option under section 115BAA,the option under section 115BA may be withdrawn.

Note: For the purpose of point no. 7(iv) in column (3) of the above table, any machinery or plant which was used outside India by any other person shall not be regarded as machinery or plant previously used for any purpose, if all the following conditions are fulfilled, namely:

(a) Such machinery or plant was not, at any time previous to the date of the installation by the person, used in India;

(b) Such machinery or plant is imported into India from any country outside India; (c) No deduction on account of depreciation in respect of such machinery or plant has been allowed or is

allowable under the provisions of the Income-tax Act, 1961 in computing the total income of any person for any period prior to the date of installation of the machinery or plant by the person.

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Page 3.8

Further, where in the case of a person, any machinery or plant or any part thereof previously used for any purpose is put to use by the company and the total value of the machinery or plant or part so transferred does not exceed 20% of the total value of the machinery or plant used by the company, then, the condition specified that the company does not use any machinery or plant previously used for any purpose would be deemed to have been complied with.

STATUS


Page 3.9

MINIMUM ALTERNATE TAX

NO AMENDMENTS

STATUS


Page 3.10

DIVIDEND

What is dividend: Dividend in its ordinary connotation means the sum paid to or received by a shareholder proportionate to his shareholding in a company out of the total sum distributed. However, section 2(22) of the Income-tax Act, 1961 has devised a special inclusive definition of dividend. As per the definition given in section 2(22), ‘dividend’ includes deemed divided which is discussed below. DEEMED DIVIDEND 2(22)

Deemed dividend

Sec 2(22)

Sec 2(22)(a) Sec 2(22)(b)

Sec 2(22)(c)

Sec 2(22)(d)

Sec 2(22)(e)

Any

distribution

entailing the

release of

company

assets

Any distribution

of debentures,

debenture-stock,

deposit

certificates and

bonus to

preference

shareholders

Distribution

on

liquidation

of company

Distributio

n or

reduction

of capital

Taxable in the hands of shareholder w-e-f 1-4-20 as per rates applicable to shareholder

Any payment by

way of loan or

advance by a

closely-held

company to a

shareholder, holding

substantial interest,

provided the loan

should not have

been made in the

ordinary course of

business and money-

lending should not

be substantial part

of the company’s

business

In the hands of shareholders taxable

@30%.

STATUS


Page 3.11

2(22)(a) a) Any distribution of accumulated profits, whether capitalized or not, by a company to its

shareholders is deemed to be dividend if it entails the release of company’s assets. b) Two conditions are essential for this clause. The should be distribution from accumulated profits and Such distribution must result in the release of the assets of the company. c) In case of issue of bonus shares there is no release of assets hence issue bonus shares

are not deemed as dividend. 2(22)(b) a) Any distribution by a company

debenture stock or deposit certificate to any shareholder or Bonus shares to preference shareholders

b) Is deemed as dividend to the extent of ACCUMULATED PROFIT, whether capitalised or not (release of assets not necessary).

2(22)(c) Any distribution made by a company to its shareholders on its liquidation is treated as dividend to the extent to which such distribution is attributable to the accumulated profits capitalised or not). Exception: 1. Redemption of preference shares issued for full consideration is not deemed to be

dividend. 2. Buy back of shares

2(22)(d) a) Any distribution to its shareholders by a company on the reduction of its capital to the extent to which the company possess accumulated profits is deemed to be dividend. [Same exception as in clause (c)].

2(22)(e) Any loan or advance (whether in cash or in kind) given by a closely held company, to the extent of accumulated profit,- i) To its specified member (i.e. shareholder who legally as well as beneficially holds not

less than 10% voting power in the company); or ii) To any concern (whether HUF, Firm, AOP, BOI or a company) in which such specified

member holds substantial interest; or Substantial interest: A person shall be deemed to have substantial interest in any concern if he beneficially holds not less than 20% of share of profit in such concern (or 20% of voting power in case of any company) at any time during the previous year. iii) To any other person on behalf of specified member DDT rate for deemed dividend is 30%.

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Page 3.12

Loan advanced by a banking company: If a banking company has advanced any loan in the ordinary course of business to specified member then such loan shall not be treated as dividend.

Examine whether the following forms part of accumulated profits or not: (a) General Reserve Yes (b) Credit balance of profit and loss account Yes (c) Reserve created out of agricultural income Yes (d) Capital Redemption Reserve Yes (e) Share premium No (f) Dividend Equalization Reserve Yes (g) Workmen Compensation Reserve Yes (h) Debenture Redemption reserve Yes (i) Revaluation Reserve No (j) Excess provisions Yes (k) Depreciation Reserve No (l) Capital reserve created out of profits on sale of assets Yes (m) Capital reserve created out of capital subsidy received from Government No (n) Shipping reserve Yes (o) Sinking fund Yes (p) Reserve for contingency Yes

TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES [SECTION 115-0]

Not Applicable W.e.f 1-4-20 SECTION 115BBD: TAX ON CERTAIN DIVIDEND RECEIVED FROM FOREIGN

COMPANIES

1) Where the total income of an assessee, being an Indian company, includes any income by way of dividends declared, distribute or paid by a specified foreign company, the income-tax payable shall be the aggregate of-

(a) The amount of income-tax calculated on the income by way of such dividends, at the rate of 15%; and

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 its income by way of dividends referred to in sub-section (1).

3) In this section-

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Page 3.13

(i) “Specified foreign company” means a foreign company in which the Indian company holds 26% or more in nominal value of the equity share capital of the company.

ANALYSIS

Prior to insertion of section 115BBD dividend received from foreign companies were taxable in the hands of Indian Company is exempted from income tax under section 10(34). Section 115BBD has been introduced to provide that where total income of an Indian Company includes any income way of dividends received from a foreign subsidiary company, then such dividends shall be taxable @ 15% (plus applicable surcharge and cess) on the amount of dividends. No expenditure in respect of such dividends shall be allowed under the Act. Foreign subsidiary company means a foreign company in which Indian company holds 26% or more equity share capital. Following conditions must be fulfilled for application of section 115BBD: 1. Benefit of section 115BBD is available only to the Indian Company. 2. Indian Company must hold at least 26% in nominal value of the equity share capital of the foreign

company. 3. No other expense shall be claimed by the Indian Company in respect of dividend received.

TAX ON CERTAIN DIVIDEND RECEIVED FROM DOMESTIC COMPANIES [Section

115BBDA]

Not applicable w-e-f 1-4-20 DEDUCTION IN RESPECT OF INTER CORPORATE INVESTMENT [SEC. 80M]

[Newly inserted as per finance act 2020]

With effect from the assessment year 21-22, dividend received by a shareholder from a domestic company is taxable in the hands of the shareholder. To avoid cascading affect section 80M has been inserted with affect from the assessment year 2021-22.

Conditions The following conditions should be satisfied

1 Assesse is a domestic company (i.e. investor company)

2 Income of the assesse includes dividend from domestic companies, foreign companies or business trusts.

3 Dividend is distributed by the investor company to its own shareholders before the due date the date one month prior to the date for furnishing return of income

STATUS


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under section 139(1)]

Deduction Deduction under section 80M is-

a aggregate dividend income (as per section 8) of the investor company during the previous year from domestic or foreign company/companies or business trust(s) [it includes final dividend interim dividend and even deemed dividend under section 2(22)(a)/(b)/(c)/(d)/(e)];

b dividend distributed by the investor company to its own shareholders before the due date the date one month prior to the date for furnishing return of income under section 139(1) for the previous year for which dividend income is taxable in the hands of investor company], whichever is less.

Mere declaration of dividend is not sufficient - For the purpose of (b) (supra), dividend distributed on or before the "due date" is taken into consideration. Mere declaration of dividend is not sufficient

Double deduction not possible - Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under section 80M in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

STATUS


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ALTERNATE MINIMUM TAX SEC 115JC

NO AMENDMENS

TAXATION OF FIRMS

NO AMENDMENTS

TAXATION OF NON-RESIDENT ENTITIES

NO AMEMDENTS

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 GAAR

Page 4.1

NO AMENDMENTS

CHAPTER 4: GENERAL ANTI AVOIDANCE RULES ‘GAAR’

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 BASIC OF INTERNATIONAL TAXATION

Page 5.1

NO AMENDMENTS

CHAPTER 5 – BASICS OF INTERNATIONAL TAXATION

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 TAX TREATIES

Page 6.1

NO AMENDMENTS

CHAPTER 6: TAX TREATIES

STATUS

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 INCOME TAX APPLICATION ON ST

Page 7.1

GIFT [SEC. 56(2) (vii)

Conditions Receipts by any assessee.

It is received after 1st October 2009.

It does not fall in exempted category.

property includes –

a Immovable property being land or building or both;

b Share and securities

c Jewellery

d Archaeological collections;

e Drawings

f Paintings

g Sculptures;

h Any work of art; or

i Bullion

Category Nature of Receipt

Conditions to be satisfied for considering Income

Extent of Income Remarks

A Any sum of money

a During the previous year, assessee has received any sum of money (cash, cheque, draft, etc.) from one or more persons.

b Such sum is received without consideration.

c The aggregate value of such receipt during the previous year exceeds Rs 50,000

The whole of the aggregate value of such sum shall be considered as income of that previous year.

Aggregate amount of cash gift received during the period shall be considered.

B Any immovable property

a During the previous year, Assessee has received immovable property.

b Such immovable property is

The stamp duty value of such property shall be considered as

The limit of Rs. 50000/- is applicable per incidence.

CHAPTER 7: INCOME TAX IMPLICATION ON SPECIFIED TRANSACTION

STATUS


Page 7.2

received without consideration.

c The stamp duty value of such property exceeds Rs. 50000.

d Such asset is a capital asset in hands of recipient.

income of that previous year.

C Any immovable property

a During the previous year, Assessee has received immovable property.

b Such immovable property is received for inadequate consideration.

c Stamp duty value exceeds 110% of consideration.

d Difference between stamp duty value and consideration exceeds Rs 50,000

Then difference between stamp duty value and considerations is chargeable to tax.

The limit of Rs. 50000/- is applicable per incidence.

D Any movable property

a During the previous year, Assessee has received movable property from one or more persons.

b Such movable property is received without consideration.

c The aggregate fair market value of such receipts during the previous year exceeds Rs. 50000.

d Such asset is a capital asset in hands of recipient.

The whole of the aggregate fair market value of such property shall be considered as Income of the previous year.

Aggregate amount of gift received during the period shall be considered.

STATUS


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E Any movable property

a During the previous year Assessee has received movable property from one or more persons.

b Such movable property is received for a consideration.

c Such consideration is less than the aggregate fair market value of the property by an amount exceeding Rs. 50000.

The aggregate fair market value of such property Less consideration paid shall be considered as income of the previous year.

Aggregate amount of gift received during the period shall be considered.

Note:

The limit of Rs. 50000/- is also for per category. In other words, one may receive cash gift of Rs. 35000 and gift in kind of Rs. 36000 without attracting any tax.

Note: The limit of Rs. 50000/- is also for per category. In other words, one may receive cash gift of Rs. 35000 and gift in kind of Rs. 36000 without attracting any tax. Exceptions: This section shall not apply to any sum of money or any property received: 1 From any relative#

# Relative here means. a Spouse of the individual. b Brother or sister of the individual. c Brother or sister of the spouse of the individual; d Brother or sister of either of the parents of the individual. e Any lineal ascendant or descendant of the individual; f Any lineal ascendant or descendant of the spouse of the individual; g Spouse of the person referred to in clauses (ii) to (vi).

2 On the occasion of the marriage of the individual (whether gift is received from relative or outsiders).

3 Under a will or by way of inheritance. 4 From local authority. 5 From any fund or foundation or university or other educational institutions or hospital or other

medical institutions or any trust or institution referred u/s. 10(23C). 6 W.e.f. 01/04/2017 Any gift received by way of transaction not regarded as transfer u/s 47(vicb)

STATUS


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or (vid) or (vii)

CMA VIPUL SHAH CS PROFESSIONAL – JUNE/ DEC 21 PERMISSIBLE DEDUCTION

Page 8.1

CHAPTER 8: PERMISSIBLE DEDUCTION FROM TOTAL

INCOME

SECTION 80C

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section

80C is not available from the assessment year 2021-22 DEDUCTION IN RESPECT OF CONTRIBUTION TO ANNUITY PENSION PLAN [SEC.80

CCC]

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80CCC is not available from the assessment year 2021-22. SECTION 80CCD CONTRIBUTION TO NATIONAL PENSION SCHEME

SECTION 80D: IN RESPECT OF MEDICAL INSURANCE PREMIUM

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80D is not available from the assessment year 2021-22

SECTION 80DD IN RESPECT OF MAINTENANCE OF DEPENDANT RELATIVE WITH

DISABILITY

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80DD is not available from the assessment year 2021-22. SECTION 80DDB IN RESPECT OF MEDICAL TREATMENT

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80DDB is not available from the assessment year 2021-22.

SECTION 80E: REPAYMENT OF LOAN TAKEN FOR HIGHER STUDIES

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80E is not available from the assessment year 2021-22.


Page 8.2

INTEREST ON LOAN FOR SPECIFIED HOUSE PROPERTY SEC. 80EE

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80EE is not available from the assessment year 2021-22. DEDUCTION IN RESPECT OF INTEREST PAYABLE ON LOAN TAKEN FOR

ACQUISITION OF RESIDENTIAL HOUSE PROPERTY [SECTION 80EEA]

i Eligible assessee An individual who has taken a loan for acquisition of residential house property

from any financial institution. Interest payable on such loan would qualify for deduction under this section.

ii Conditions The conditions to be satisfied for availing this deduction are as follows Conditions 1 The loan is sanction by a financial institution (i.e. a bank or banking

institution or a housing finance company) during April 1, 2019 and march 31, 2020 [Amendment Finance Act 2020] In order to continue promoting purchase of affordable housing, the period of sanctioning of loan by the financial institution has been extended to March 31, 2021. If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80EEA is not available from the assessment year 2021-22.

2 The stamp duty value of the residential house property does not exceed Rs. 45 Lakh. The expression “Stamp Duty Value” means value adopted (or assessed or assesable) by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

3 The assesse does not own any residential house property on the date of sanction of loan.

iii Period of benefit The benefit of deduction under this section would be available from A. Y. 2020-21 and subsequent assessment years till the repayment of loan continues.


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iv Quantum of deduction

The maximum deduction allowable is Rs. 1,50,000. The deduction of upto Rs. 1,50,000 under section 80EEA is over and above the deduction available under section 24(b) in respect of interest payable on loan borrowed for acquisition of a residential house property. In respect of self-occupied house property, interest deduction under section 24(b) is restricted to Rs. 2,00,000. In case of let out or deemed to be let out property, even though there is no limit under section 24(b), section 71(3A) restricts the amount of loss from house property to be set-off against any other head of income to Rs. 2,00,000. Accordingly, if interest payable in respect of acquisition of eligible house property is more than Rs. 2,00,000, the excess can be claimed as deduction under section 80EEA, subject to fulfilment of conditions.

v No deduction under any other provisions

The interest allowed as deduction under section 80EEA will not be allowed as deduction under any other provision of the Act for the same or any other assessment year.

vi Meaning of certain terms:

Term Meaning a Financial

Institution A banking company to which the Banking

Regulation Act, 1949 applies; or Any bank or banking institution referred to

in section 51 of the Banking Regulation Act, 1949; or

A housing finance company. b Housing Finance

Company A public company formed or registered in India with the main object of carrying on the business of providing long term finance for construction or purchase of houses in India for residential purposes.

DEDUCTION IN RESPECT OF INTEREST PAYABLE ON LOAN TAKEN FOR PURCHASE

OF ELECTRIC VEHICLE [SECTION 80EEB]

Deduction under section 80EEB is not available if the option is, exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec. 115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD]. However, a domestic company (which has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim deduction under section 80G for the assessment year 2020-21.


Page 8.4

SECTION 80G DEDUCTION IN RESPECT OF DONATION TO CERTAIN FUNDS,

CHARITABLE INSTITUTIONS

Deduction under section 80G is not available if the option is, exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec. 115BAA / 115 BAB] or a resident co-operative society [Sec.115 BAD]. However, a domestic company (which has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim deduction under section 80G for the assessment year 2020-21. SECTION 80GG: IN RESPECT OF HOUSE RENT PAID

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80GG is not available from the assessment year 2021-22. SECTION 80GGA: DONATIONS FOR SCIENTIFIC RESEARCH OR RURAL

DEVELOPMENT

1 Assessee Any not having income under the head PGBP. 2 Qualifying

sums paid to A Scientific Research Association, or to an Approved University, or College or

other institutions to be used for Scientific Research or Research in Social Science or Statistical Research.

An Approved Association, Institution, Public Sector Company which has as its object the training of persons for implementing program of rural development.

Sum paid to the National Fund for rural development set up and notified by the Central Government for the purpose of carrying out rural development programmers.

Sum paid to National Urban Poverty Eradication fund set up and notified by Central Government.

3 Amount of Deduction

100% of Qualifying Sum [Amendment finance act 2020] The following amendment have been made to the scheme of section 80GGA with effect from October 1, 2020 a) No deduction shall be allowed under this section in respect of any sum

exceeding Rs. 2,000 unless such sum is paid by any mode other than cash. b) Claim of an assesse for a deduction in respect of any sum referred to in section


Page 8.5

80GGA(2), in the return of income for any assessment year field by him, shall be allowed on the basis of information relating to such sum furnished by the payee to the prescribed income tax authority (or the person authorised by such authority), subject to verification in accordance with the risk management strategy formulated by the board from time to time.

[Amendment finance act 2020] Deduction under section 80GGA is not available if the option is, exercised for the alternative tax regime by an individual / HUF [Sec. 115 BAC] or domestic company [sec. 115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD]. However, a domestic company (which has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim deduction under section 80GGA for the assessment year 2020-21

4 Conditions Gross total income should not include income chargeable under the head ‘Profits and Gains of Business or Profession’.

Where deduction under this section is claimed and allowed for any Assessment Year, no deduction shall be allowed in respect of such payments under any other provisions of the Act. For the same or in any other assessment year.

SECTION 80GGB & 80 GGC: DEDUCTION FOR CONTRIBUTION TO POLITICAL

PARTIES OR ELECTORAL TRUST

Particular Sec. 80GGB 80GGC Applicable to

An Indian company All assessee except Local authority and Every artificial juridical person wholly or partly funded nu the

Government Condition Assessee made contribution to any political party or electoral trust during the previous year

Donation must not be in cash [Amendment finance act 2020] Deduction under section 80GGB & 80GGC is not available if the option is, exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec.


Page 8.6

115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD]. However, a domestic company (which has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim deduction under section 80GGB for the assessment year 2020-21.

Deduction 100% of contribution so made SECTION 80JJA: PROFITS AND GAINS FROM THE BUSINESS OF COLLECTING AND

PROCESSING OF BIO DEGRADABLE WASTE

Condition Applicable to all assessee

Gross total income of an assessee includes any profits and gains derived from the business of collecting, processing and treating bio – degradable waste for-

a generating power b bio-fertilizers, c bio-pesticides, or other biological agents d producing bio – gas and e Making pellets, briquettes for fuel and organic manure.

Amount of Deduction

An amount equal to whole of such income for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences. [Amendment finance act 2020] Deduction under section 80JJA is not available if the option is, exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec. 115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD].

DEDUCTION IN RESPECT OF INTER CORPORATE INVESTMENT [SEC. 80M]

[Newly inserted as per finance act 2020] With effect from the assessment year 21-22, dividend received by a shareholder from a domestic company is taxable in the hands of the shareholder. To avoid cascading affect section 80M has been inserted with affect from the assessment year 2021-22. Conditions The following conditions should be satisfied

1 Assesse is a domestic company (i.e. investor company) 2 Income of the assesse includes dividend from domestic companies, foreign


Page 8.7

companies or business trusts. 3 Dividend is distributed by the investor company to its own shareholders before

the due date the date one month prior to the date for furnishing return of income under section 139(1)]

Deduction Deduction under section 80M is- a aggregate dividend income (as per section 8) of the investor company during the

previous year from domestic or foreign company/companies or business trust(s) [it includes final dividend interim dividend and even deemed dividend under section 2(22)(a)/(b)/(c)/(d)/(e)];

b dividend distributed by the investor company to its own shareholders before the due date the date one month prior to the date for furnishing return of income under section 139(1) for the previous year for which dividend income is taxable in the hands of investor company], whichever is less.

Mere declaration of dividend is not sufficient - For the purpose of (b) (supra), dividend distributed on or before the "due date" is taken into consideration. Mere declaration of dividend is not sufficient Double deduction not possible - Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under section 80M in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

DEDUCTION IN RESPECT OF CERTAIN INCOME OF PRODUCER COMPANIES [SEC.

80PA]

If a domestic company opts for the alternative tax regime under section 115 BA / 115BAA/ 115BAB, deduction under section 80PA is not available. SECTION 80QQB: DEDUCTION IN RESPECT OF ROYALTY INCOME OF AUTHORS

If an individual opts for the alternative tax regime under section 115 BAC, deduction under section 80QQB is not available from the assessment year 2021-22. SECTION 80RRB: DEDUCTION IN RESPECT OF ROYALTY ON PATENTS

If an individual opts for the alternative tax regime under section 115 BAC, deduction under section 80RRB is not available from the assessment year 2021-22.


Page 8.8

SECTION 80TTA: INTEREST ON DEPOSITS IN SAVING ACCOUNT

If an individual opts for the alternative tax regime under section 115 BAC, deduction under section 80TTA is not available from the assessment year 2021-22. SECTION 80 TTB: DEDUCTION IN RESPECT OF INTEREST ON DEPOSITS IN CASE OF

SENIOR CITIZENS

If an individual opts for the alternative tax regime under section 115 BAC, deduction under section 80TTB is not available from the assessment year 2021-22. SECTION 80-IA: DEDUCTION IN RESPECT OF PROFIT & GAINS FROM INDUSTRIAL

UNDERTAKING OR ENTERPRISE ENGAGED IN INFRASTRUCTURAL DEVELOPMENT

Deduction under section 80-IA is not available if the option is exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC], a domestic company [sec. 115 BA / 115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD]. SECTION 80-IAB: DEDUCTION IN RESPECT OF PROFITS AND GAINS BY AN

UNDERTAKING OR ENTERPRISE ENGAGED IN DEVELOPMENT OF SPECIAL

ECONOMIC ZONE

Deduction under section 80-IAB is not available if the option is exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC], a domestic company [sec.115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD]. 80IAC: SPECIAL PROVISION IN RESPECT OF SPECIFIED BUSINESS (W.e.f. AY 17-18)

Deduction under section 80-IAC is not available if the option is exercised for the alternative tax regime by a domestic company US 115 BA/ 115BAA/ 115BAB. SECTION 80IBA: DEDUCTIONS FOR PROFITS & GAINS FROM HOUSING PROJECTS

Deduction under section 80-IBA is not available if the option is exercised for the alternative tax regime by an individual / HUF [sec. 115 BAC], a domestic company [sec. 115 BA / 115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD].

direct tax - vipulshah

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