Affidavit must for gift in kind, over Rs. 50,000, from kin

It must affirm that donor is related to donee

New Delhi: From now on, when you get a gift in kind, valued at more than Rs. 50,000, from your parents or other relatives, make sure you have a sworn affidavit declaring the donor your kin.

The Central Board of Direct Taxes has ruled that any such gift will be taxable for the donee unless it is from relatives or given during occasions such as marriage or by way of inheritance.

On-the-spot verification

"The donee has to get an affidavit affirming the donor to be his mother, father, brother, sister or any other relative so that at the time of claiming exemption under the new arrangement, the income tax assessment officer can have an on-the-spot verification," a senior IT official said.

An individual could preferably get one affidavit listing all gifts taken in the entire assessment year from different relatives or the same kin. The affidavit would save IT assessees the hassle of proving that the gifts, movable and immovable, were received or inherited from a relative residing in any part of the world. It would also establish the donee's relationship with the donor, the official said.

The CBDT on September 30 notified that "with effect from October 1.... any gift in kind, being an immovable property or any other property, the value of which exceeds Rs. 50,000, will become taxable in the hands of the donee, being an individual or a Hindu Undivided Family (HUF), as income from other sources..."

The department will not tax gifts received from a relative on the occasion of marriage of the donee, under a will or by way of inheritance, in contemplation of the death of the donor, from any local authority as defined in Section 10(20) of the Act, from any fund or trust established under Section 10(23C) and from any trust or institution registered under Section 12AA.

Assesses will have to file income tax dues on the value of the gift and disclose its taxable value in the returns for the assessment year 2010-11.

Under the IT Act 1961, a relative is defined as a spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant and spouse of any of the relatives. — PTI

 

http://www.thehindu.com/2009/10/09/stories/2009100952061100.htm

Gifts of property (gifts-in-kind) above value of rs.50,000 become taxable from 1st October 2009

The Income Tax Act 1961 (the Act) has been amended with effect from 1st October 2009 to provide that any gift-in-kind, being an immovable property or any other property, the value of which exceeds Rs.50,000 (rupees fifty thousand), will become taxable in the hands of the donee, being an individual or a Hindu Undivided Family (HUF), as income from other sources under clause (vii) of sub-section 2 of section 56 of the Act. Therefore, any such person who receives a gift of any such property on or after 1st October 2009 must pay the income tax due on the value of the gift and disclose the taxable value of such property in the return of income for assessment year 2010-11 and subsequent years.

The following types of gifts will, however, not be subject to tax, i.e. gifts (a) from a person who is a relative; (b) on the occasion of marriage of the individual; (c) under a will or by way of inheritance; (d) in contemplation of death of the donor; (e) from any local authority as defined in the Explanation to section 10(20) of the Act; (f) from any fund or trust established under section 10(23C) of the Act; (g) from any trust or institution registered under section 12AA of the Act. 

Relative is defined in the Act as (i) spouse; (ii) brother or sister; (iii) brother or sister of the spouse; (iv) brother or sister of either of the parents; (v) any lineal ascendant or descendant; (vi) spouse of any of the relative at clauses (ii) to (v); of the individual. Gifts received from these relatives will not be subject to tax. 

Earlier cash gifts exceeding Rs.25,000 were subject to tax with effect from 1st April 2004. Later the Act was amended with effect from 1st April 2006 to tax all cash gifts having aggregate value exceeding Rs.50,000. Cash gifts also enjoy exemptions as is available for gifts-in-kind.

Source:

PRESS RELEASE  No.402/92/2006-MC (21 of 2009) Dated: September 30, 2009

Government cautions taxpayers against fake refund email

 

New Delhi, Oct 6

 

Five days after a fake email notice that purports to come from the Income Tax Department started making the rounds among taxpayers, the government Tuesday cautioned them, saying it had not sent any such emails.

Millions of net users received the fake email in the last six days that asked the taxpayers to submit refund form along with their credit card details.

"Please submit the tax refund form and allow us three-five business days in order to process it. The refund can be delayed for variety of reasons," said the email that started circulating among net users Oct 1.

The finance ministry Tuesday said the Income Tax Department had not sent any such emails for tax refunds.

"Information has been received from several quarters that people are receiving electronic mails informing them of their income-tax refunds and seeking their credit card details."

"Taxpayers are cautioned that they should not respond to such mails. and if they do so it would be at their risk and responsibility," a ministry statement said.

 

http://www.prokerala.com/news/articles/a84006.html

gratuity-act-is-applicable

gratuity-act-is-applicable-tos-covered-by-factories-act Notwithstanding non-applicability of Payment of Gratuity Act, 1972 to units having less than 10 workmen, units covered by the Factories Act, 1948, were to apply the gratuity law to their workers, the Madurai Bench of the Madras High Court has held. Agreeing with the decision of the Joint Commissioner of Labour, Madurai (Appellate Authority under the Gratuity Act), that Section 1(3)(a) of the Gratuity Act was applicable even to establishments having less than 10 workers, under notification dated September 9, 1967 of the Department of Industries, Labour and Housing, Tamil Nadu, extending the Factories Act to all tailoring units in the State, Mr Justice K. Chandru ruled that the contention of writ petitioner (Star Tailoring, Tirunelveli) that Gratuity law would not apply to his units had to be rejected. It was an admitted fact, the Judge said, that the State Government had issued notification under the Section 85(1) of the Factories Act covering tailoring units. Notwithstanding the fact that the petitioner had less than 10 workers, the Payment of Gratuity Act would apply to them in all respects. According to the petitioner, inasmuch as 2nd respondent (Asst Commissioner of Labour, Tirunelveli – controlling authority under the PG Act) had held that the PG Act did not apply as it was not covered by the Section 1(3)(b) of Act, order of Appellate Authority was wrong. The Judge said that it was only for coverage under the Section 1(3)(b) of the PG Act, minimum number of workmen were required. In respect of Section 1(3)(a), the Act is applied to all establishments including a factory. Tailoring establishment was also a factory as per the State Government's notification. In view of the above, the writ petition failed, and the same was dismissed. SOURCE: http://www.taxguru.in/government-policy/gratuity-act-is-applicable-to-establishments-covered-by-factories-act%e2%80%99.html#ixzz0ZMOdcFUk

PROFESSIONAL TAX RATE IN SOME STATES

Tax Slabs in India

The set of professional tax slabs in India are different for all the 28 states in India and some of the states have formulated different professional tax slabs for men, women, and the senior citizens of the respective states.

Maharashtra's Tax Slabs:

The professional tax slabs in India are applicable to those citizens of India who are either involved in any profession or trade. The state government of each state is empowered with the responsibility of structuring as well as formulating the respective professional tax criteria and they are also required to collect funds through professional tax. The professional taxes are charged on the incomes of individuals, profits of business or gains in vocations. The professional tax is charged as per the List II of the Indian Constitution. The professional taxes are classified under various tax slabs in India. Maharashtra, the commercial capital of India follows the following professional tax slab:

Income Monthly Professional Tax

Less than Rs. 2500 Nil
Between Rs. 2500-3500 Rs.60
Between Rs. 3500-5000 Rs.120
Between Rs. 5000-10000 Rs.175
Beyond Rs.10000 Rs.200


Tamil Nadu's Tax Slabs:

The professional tax slab structure followed in Tamil Nadu on a half yearly basis is formulated as follows:

Income Monthly Professional Tax
Less than Rs.21000 Nil
Between Rs.21001-Rs.30000 Rs.75
Between Rs.30001-Rs.45000 Rs.188
Between Rs.45001- Rs.60000 Rs.390
Between Rs.60001- Rs.75000 Rs.585
Beyond Rs.75001 Rs.810

West Bengal's Tax Slabs:

West Bengal has created its respective professional tax slab structure to keep the residents informed about the exact deductions from their incomes. The professional tax slab in West Bengal has been categorized as per the following criteria:

Income Monthly Professional Tax
Less than 1,500 Nil
Between Rs. 1501- Rs. 2001 Rs. 18
Between Rs. 2001 - Rs. 3001 Rs. 25
Between Rs. 3001- 5001 Rs 30
Rs. 5001 Rs. 40
Between Rs. 6001 -7001 Rs.45
Rs.7001 Rs.50
Rs.8001 Rs.90
Rs.9001 Rs.110
Rs.15001 Rs.130
Rs. 25001 Rs.150
Beyond Rs.40001 Rs.200

Delhi's Tax Slabs:

The Indian capital has its own professional tax structure has been categorized under various heads like professional tax for corporate professionals, non-corporate professionals, corporate contractors, non-corporate contractor. The professional tax rate of the corporate professionals has been declared as 11.33% whereas the corporate contractors are required are levied 2.26% of their income towards their professional tax. The deductions for the non-corporate professionals have been adjusted at 10.30% of their incomes but that of the non-corporate contractors have been decided at 2.06% of their incomes. The professional tax slabs in terms of various income groups in Delhi, have been structured as follows:

Income Percentage of Professional Tax
Less than Rs.1,10,000 Nil
Between Rs.1,10,000-Rs.1,45,000 Nil
Between Rs.1,45,000-Rs.1,50,000 10 %
Between Rs.1,50,000-Rs.1,95,000 20 %
Between Rs.1,95,000-Rs.2,50,000 20 %
Beyond Rs.2,50,000 30 %


Delhi has also formulated a different professional tax slab for people with income beyond Rs. 10,00,000. Such income groups are required to pay10 % of their income as surcharge also. The professional tax structure in Delhi has been formulated to include an education cess also. The education cess is calculated by aggregating the amount of tax as well as the amount of surcharge and then 2% of the aggregate is deducted as the education cess. The professional tax structure for partnership companies includes surcharge at the rate of 10% of the profits. Partnership companies are required to pay 2% of their profits as education cess. The calculation of education cess for the companies also requires the aggregation of the income tax and the surcharge initially and then deducting 2% of the aggregate for education cess. The professional tax rate for the partnership firms has been decided at 30% of the profit and the effective rate of tax of these firms is 33.66 %.
http://www.citehr.com/

Services received from goods & transport agents exempted from service tax

Services received from goods & transport agents exempted from service tax

 

RETURNS CAN BE FILED ONCE A YEAR

As the exporters have to focus more on export promotion during this time of downturn, they should be freed from these cumbersome procedures for claiming refund of service tax. Therefore, following changes are proposed in the scheme, with the basic ideas of placing more trust in the exporters. The announcement to this effect was made in the General Budget 2009-10

 

a) Services received by exporters from goods transport agents and commission agents, where the liability to pay service tax is ab initio on the exporters, will be exempted from the service tax. Thus, exporters will not pay any tax in advance relating to these services. b)

 

c) For other services received by exporters, exemption of service tax can be claimed through the existing mechanism through self certification of documents where value of refund is below 0.25 per cent of the FOB value. For higher values, it can be claimed on the basis of documents certified by a Chartered Accountant. d)

 

It is an international practice to zero rate exports i.e. 'taxes' are not to be exported. To achieve this objective, a scheme of refund of service tax on certain taxable services used after the clearance of export goods from the factory was announced in 2007. However, exporters faced difficulties in obtaining such refunds.

 

Service tax returns can be filed after one year instead of being filed quarterly which will considerably reduce paper work.

 http://www.caclubindia.com/news/2009/7/returns_can_be_filed_once_a_year.asp

TDS on expenditure for domain registration and server charges for hosting websites

• In Millennium Infocom Technologies Ltd v. Asstt. CIT (2009) 309 ITR (AT) 18 (Del.) the assessee incurred expenditure by way of payment of Rs.5.01 lakhs towards domain registration and website launch expenses. The payments were expenses through credit cards to a foreign company without deduction of tax at source. The assessee claimed Rs.3.26 lakh as revenue expenditure and capitalized the balance of Rs.1.75 lakh. The AO disallowed the expenditure for the reason that the assessee had not deducted at source on payment to non-resident company by applying section 40(a)(i) of the Act read with section 195. The AO applied the tribunal decision in the case of Cheminor Drugs Ltd v. ITO (2001) 76 ITD 37 for disallowing the expenditure. The tribunal held that the payment does not fall within expression ‘fees for technical services’ defined in Explanation 2 to section 9(1)(vii). However, the tribunal found that it falls within definition of the term ‘royalty’ as per clause (iva) to Explanation 2 to section 9(1) which is ‘the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB’.

• The tribunal held that the clause (iva) to Explanation 2 defining the term ‘royalty’ was inserted by the Finance Act, 2001 w.e.f. 01.04.2002 and is applicable hence from the assessment year 2002-03 onwards. Therefore the payment did not fit into the definition of the term ‘royalty’.

• Section 40(a)(i) was amended by Finance (No.2) Act, 2004 w.e.f. 01.04.2005 and it applies to payments by an assessee outside India to a non-resident only. The term ‘rent’ and ‘royalty’ were inserted in section 40(a)(ia) by the Taxation Laws (Amendment) Act, 2006 w.e.f. 01.04.2006. Since subject matter of appeal related to assessment year 2001-02 these changes could not be applied to uphold the disallowance. The tribunal then went on to analyse the provisions of article 26(3) of DTAA between India and US which neutralized the rigour of section 40(a)(i) and the decision was rendered in favour of the assessee.

• Readers may note that Article 26(3) of the DTAA between India and USA however will not be insulating the taxpayers against disallowance as the law has been changed to keep both residents and non-residents on equal footing by prescribing section 40(a)(i) applicable for non-residents and section 40(a)(ia) applicable for residents. http://practiceproblems.blogspot.com/2009/04/tds-on-expenditure-for-domain.html