Committee of State finance ministers recently met with the Union Finance Minister P Chidambaram to discuss the implications of terms under the phased reduction of central sales tax (CST).
Government approved the phased reduction of CST in 2006. By April 2008 the CST will be cut down from 3 to 2 percent.
The total collection from CST comes to about Rs25,000 crore. Experts believe, with this cutback states will lose about Rs12,000-13,000 crore in revenue.
Now, to cope the loss, Centre has proposed a one percent hike in the value added tax (VAT) on several products including LPG, ready-made garments and intermediate goods.
The Centre has asked States to raise the VAT from 4 to 5 percent, effective from April this year.
However, the states are not completely in favour of this hike. Insiders informed that States were presenting their doubts and concerns as well as holding talks with the Centre, so as to reach a mutual stand.
Mumbai (PTI): The Income Tax Department here has put on its website the list of income tax refunds of all salary tax payers which could not be sent to the concerned persons for want of correct address.
Salary taxpayers who have not received refunds for assessment years 2003\04 to 2006\07 can long on to the website (www.incometaxindia.gov.in (mumbai region) and query using the PAN number and assessment year whether any refund due to them has been returned undelivered from the menu `undelivered salary refund management system', an official release said on Monday.
If any refund has been returned undelivered due to change in address, then the taxpayer can enter the present address and the refund will be sent to the taxpayer at the new address, the release added.
Individual tax payers may be able to avail of higher standard deduction on taxable income from the next financial year with the finance minister considering raising the standard deduction limit to Rs 1,20,000, from the present Rs 100,000, under Section 80C of the Income Tax Act, 1961.
This 20 per cent increase will allow a taxpayer to save up to Rs 2,000 in taxes every year, a senior government official said.
An announcement may be made in the Budget on February 29, which is likely to be the last before the next general election.
Under Section 80C, 80CCC and 80CCD of the Income Tax Act, individuals can claim total deduction up to Rs 1,00,000 a year towards life insurance premia, five-year bank deposits, provident fund, superannuation fund, national saving certificates, tuition fees and many other investments like in mutual funds.
The list of savings and investments that qualifies for deduction under Section 80C was expanded in December, 2007 to include five-year post office time deposits and the senior citizens savings scheme.
The deduction of Rs 1,00,000 for such a large number of savings and investment items is grossly inadequate, tax experts said.
"To accelerate capital formation in the economy, the government should think of increasing the deductions under Section 80C to Rs 1,50,000. This will definitely fuel savings growth," said Gaurav Taneja, partner, Ernst & Young.
However, it is anticipated that the increased investment limit under Section 80C may be allowed only for specified savings instruments like a pension scheme aimed at promoting old-age security.
The insurance industry has been demanding a separate exemption limit of up to Rs 1,00,000 for very long-term investments like pensions and annuity schemes.
If the assessing officer is going to make good an omission on the part of the assessee, he must be expressly authorised by law to do so lest he is hauled over coals for cosying up to the assessee.
The recent Supreme Court verdict in Goetz (India) Ltd vs CIT (284 ITR 323), tersely dismissing the appeal of the assessee against the order of the assessing officer (AO) not allowing a deduction which it was admittedly entitled to under Chapter VI-A of the Income-tax Act, 1961 but which it had not claimed by even filing the revised return, is unexceptionable though it has come in for criticism from some quarters.
Revised return
Section 139(5) allows one to file a revised return to make good any honest omission in the original return within a year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
This is a fair regime and should be made use of in appropriate cases. The assessee, in the instant case, admittedly did not utilise it but nevertheless expected the AO to grant the deduction anyway on the ground that in the course of the assessment proceedings, the omission was brought to his notice. But this contention missed the point: How can the AO suo motu offer a relief not claimed by the assessee himself in his return? Citing the CBDT Circular 35 dated April 11, 1955 — which exhorts the AOs to be helpful to the assessees and not take advantage of their ignorance — to bolster the claim that a benefit should be granted even without a claim being made in the return, is stretching things a bit too far.
In the first place, the circular travels beyond the mandate of law which is that the assessment must be done on the basis of the returns submitted. Be that as it may.
Maybe the CBDT did not want to be harsh on green-horn or rookie assessees. But then a company which gets its accounts audited twice over, one under the company law and again under the income-tax law cannot be heard to proffer this apology for its slackness.
The role of AO
The Supreme Court in this case was not impressed by the parallel sought to be established between the powers of the Appellate Tribunal and the AO. In the NTPC Ltd (1998 229 ITR 383) case, the apex court had held that additional grounds not mentioned in the grounds of appeal can be raised before the tribunal. The Supreme Court rightly pointed out that the two situations are not on all fours. It is one thing to condone an omission to raise a matter that is on record and allow it to be entertained by the Appellate Tribunal but quite another to expect the AO to fill in the void left by the assessee out of sheer apathy or negligence or may be even oversight.
Under the income-tax law, self-assessment is normally accepted as correct in vast majority of cases with scrutiny assessment being resorted to in select cases, which include no doubt company assessments. It may be possible to contend that when scrutiny is done, the AO would stumble upon the omission and there is no reason why he cannot correct it. It may further be contended that when the omission to claim a deduction is pointed out in the course of the assessment, shouldn’t the AO in all fairness grant the same? The point is if the AO is going to make good an omission on the part of the assessee, he must be expressly authorised by law to do so lest he is hauled over coals by the departmental and C&AG audit for cosying up to the assessee.
The CBDT circular of 1955 pressed in by the appellant in this case by itself should not be considered to be sufficient for supplying the requisite thaw to the rigid requirement requiring filing of revised return as a prerequisite for granting the benefit not claimed in the original return.
It is always better that extra-statutory concessions are sanctified by the makers of the substantive law rather than by the makers of subordinate legislation. And while expressly providing for this thaw, Parliament would do well not to prescribe a one-size-fits-all norm in this regard — men must be separated from the boys. Those required to get their accounts tax-audited do not deserve the assessing officer’s indulgence.
With increased awareness and availability of varied investment options, parents are choosing to make investments in the name of child, to ensure quality education and secure the child’s future.
However, just like in case of any other investments, such investments trigger tax implications. Consider this. Rahul has made the following investments in the name of his minor son, Master Rohan: A residential flat; fixed deposit with Modern Bank of Rs 50,000; life insurance policy, whereby he pays a premium of Rs 36,000 per annum for 20 years and a PPF of Rs 20,000
Master Rohan has earned the following income from above investments: Annual rent from flat of Rs 120,000; interest on fixed deposit of Rs 4,000 and interest on PPF of Rs 1,600. Rahul wonders whether the above income would be taxable, and how? The taxman does not provide for any blanket exemption in respect of income earned on investments made in the name of minor children. Such income will be taxed in the hands of either Rahul, or, his wife, if her income is higher. However, once it is included in the income of either parent (who has the higher taxable income), it generally continues to be so included in the income of that parent each year.
The parent, with whom the child’s income is clubbed, will be eligible for an exemption to the extent of Rs 1,500 per child in respect of income which is so included. Further, if the income is otherwise exempt from tax, such as, interest on PPF, LIC maturity proceeds, such income would continue to be exempt and would not be clubbed and subject to tax in the hands of the said parent of the minor child.
In Rahul’s case, his wife’s income is higher, and hence, Master Rohan’s income from rent and interest on fixed deposit, will be included in the income of Rahul’s wife. However, Rahul’s wife will be eligible for an exemption of Rs 1,500. As and when the child becomes a major, the income from such investments is taxed in the child’s hands and not in the hands of the parent.
Tax break for the investment
Now, Rahul wonders, whether he can get tax break on investments made in name of Master Rohan, given that Rohan’s income is included in the income of Rahul’s wife? Irrespective, of whether Master Rohan’s income is included in his income or not, Rahul should get a tax break on specified investments made in the name of his child. Section 80C of the Income Tax Act provides for deduction from taxable income, even where the investment is made in child’s name, in Life Insurance Policy premium, PPF, unit-linked insurance plan offered by Unit Trust of India, etc. This benefit is currently available up to a maximum limit of Rs 1 lakh in aggregate.
Thus, Rahul, should thus get a tax break on his following investments made in name of Master Rohan: Life insurance policy premium of Rs 36,000 and PPF of Rs 20,000. To sum up, parents are advised to consider the tax implications, including tax breaks available, in respect of making investments in the name of the minor child.
“The CBDT must be reorganised and reengineered into a modern, efficient and well-equipped organisation.” – Mr P. Chidambaram
The Finance Minister, Mr P Chidambaram, on Tuesday promised a more taxpayer friendly income tax department in the coming years on the back of expectations that the newly created directorate on human resource development (HRD) in CBDT would within the next two years “significantly transform” the department from the point of view of the taxpayer.
“The department will become more taxpayer friendly, more customer oriented and geared to collect direct taxes causing the least amount of inconvenience or hardship to the taxpayer. The department will increasingly focus on voluntary compliance and take steps to improve such compliance. Compliance has already improved remarkably in the last two years,” Mr Chidambaram told reporters at North Block here today.
He announced that a new directorate on HRD has been created in the Central Board of Direct Taxes (CBDT) to develop, train and reorient the human resources in the tax department and accordingly help improve taxpayer services.
Mr Chidambaram said that the new directorate would be headed by a Director General of Income Tax (HRD) who will be an officer of the level of chief commissioner of Income Tax and will be located in New Delhi.
“Direct taxes are taxes of the future. The CBDT must be reorganised and reengineered into a modern, efficient and well-equipped organisation. Its most important resource will be human resource and that resource must be carefully developed, trained and reoriented to meet the challenges of a growing economy,” Mr Chidambaram said.
He highlighted that recent measures like tax return preparer scheme (launched to help small taxpayers comply with tax laws), facility of electronic payment of direct taxes, electronic filing of returns had a beneficial impact on revenue collections.
The Finance Minister said that the directorate would have three divisions of cadre management, performance management and training and capacity building.
The HRD directorate would develop and design strategic human resource plans, policies and processes aligned to the goal and vision of the income tax department for ensuring optimal resource mobilisation and delivery of taxpayer services.
It would assess and determine the job requirements, job profiles and skills needed for various jobs in the income tax department and make projections of human resource requirements. The directorate would also assist the Board in developing and implementing proper human resources development policies including those relating to recruitment, promotions, performance appraisals, transfers and succession plans.
A scientific scheme for linking of rewards to performance would also be designed. The Directorate would identify training needs, formulate training policies and facilitate skill enhancement. It would also foster international cooperation for incorporating administrative best practices in the field of tax administration, revenue department officials said.
