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GES Tax Alert

GES Tax Alert

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Published by shakilaraju
Indianincome tax-personalassesment year 2010 impact
Indianincome tax-personalassesment year 2010 impact

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Published by: shakilaraju on Aug 21, 2009
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IndiaTaxFor Private Circulation OnlyMumbai
264-265, Vaswani Chambers,Dr. Annie Besant Road,Worli,Mumbai 400 030.Tel: + 91 (0) 22 6619 8400Fax: + 91 (0) 22 6619 8401
MCT House, One OkhlaCentre, Block A, OkhlaInstitutional Area,New Delhi, 110 025.Tel : +91 (0) 11 6627 6000Fax : + 91 (0) 11 6627 6011
Deloitte Centre, Anchorage II,100/2, Richmond Road,Bangalore 560 025.Tel: +91 (0) 80 6627 6000Fax: +91 (0) 80 6627 6409
No.52, VenkatanarayanaRoad,7th Floor, ASV N RamanaTower,T-Nagar,Chennai 600 017.Tel: +91 (0) 44 6688 5000Fax: +91 (0) 44 6688 5019
Bengal Intelligent ParkBuilding, Alpha, 1st floor,Plot No
A2, M2 & N2,Block
EP & GP Sector
V,Salt Lake ElectronicsComplex,Kolkata - 700 091.Tel : + 91 (0) 33 6612 1000Fax : + 91 (0) 33 6612 1001
GES Tax Alert
20 August 2009Volume : GES/04/2009 
The Direct Taxes Code (DTC) Bill 2009 - Focus onPersonal Tax implications
As a first step towards simplifying and bringing about structural changes indirect taxes, the new Direct Taxes Code (DTC) Bill 2009 has been released forpublic debate. This is expected to be presented in the winter session 2009 ofthe Parliament. The Code, once enacted, is proposed to be effective from 1stof April 2011.The Code attempts to simplify the language to enable better comprehensionand remove ambiguity. It is expected that this would specially meet theaspirations of the young and professionally mobile population. The Code has
been drafted considering the “principles that have gained internationalacceptance”.
Key Highlights of the DTC
The due date of filing tax return has been advanced to 30 June from 31July for individuals who do not have business income.
While the tax rates remain the same, major changes are proposed in theincome slabs. Surcharge and Education Cess have been removed.
The concept of “Resident but not ordinarily Resident” has been omitted.
Introduction of Exempt Exempt Tax (EET) method for taxation of savingsintroduced as against the current Exempt-Exempt -Exempt (EEE) method.
A certificate of Residency to be produced for claiming treaty benefits.
India not to provide credit for taxes paid overseas in respect of Indiasourced income, where there is no treaty in place.
Automatic treaty override, where the treaty provisions are more beneficial,done away with. The DTC provides that the later of the Code or the treatywould prevail.
Concept of previous year and assessment year done away with.
“Heritage” 3
Floor,Near Gujarat Vidyapith,Off Ashram Road,Ahmedabad
380 014.Tel: + 91 (0) 79 2758 2542Fax: + 91 (0) 79 2758 2551
7th Floor, Lingapur House,Amrutha Estates,HimayathnagarHyderabad
500 029Tel: + 91 (0) 40 2322 2098Fax: + 91 (0) 40 2322 2098
Chandralok,31, Nutan Bharat Society,Alkapuri, Vadodara
390 007Tel: + 91 (0265) 2233 3776Fax: +91 (0265) 2233 9729
Snap shot of the current and proposed income slabs
Amounts in INR
Tax Rate As proposed byFinance Bill, 2009Proposed as perDTC
BasicExemption160,000 *** 160,000***10% 160,001
300,000 160,001
 1,000,00020% 300,001
500,000 1,000,001
 2,500,00030% > 500,000 > 2,500,000*** INR 190,000 for Resident Female individuals, and INR 240,000 for seniorcitizens.Currently, an education cess of 3% is applicable on the taxes, and hence themaximum marginal rate is 30.90%. The proposed maximum marginal rate is30%.
Residential Status and Scope of Income
Individuals are categorized into Residents and Non-Residents. The definitionsfor Residents and Non-Residents as per existing tax laws are retained.,The current provisions categorise residents into Residents and OrdinarilyResidents (ROR) and Residents but not ordinarily residents (RBNOR). Thisbifurcation has been omitted in the DTC.Residence-
based taxation is applicable to “Residents”
and accordinglyworldwide income is liable to be taxed. Source-based taxation to be applied forNon-Residents.However, Residents would not be taxed on income accrued / received outsideIndia if the income relates to:
the financial year in which the individual ceases to be a non-resident, or
the financial year immediately succeeding such financial year, provided theindividual was a non-resident for nine years immediately preceding thefinancial year in which he ceased to be a non-resident.
Rules for computation of total income
The incomes have broadly been categorized into “Income from ordinarysources” and “Income from special sources”.
Ordinary Sources Special Sourcesincludes
Coverage Employment incomeIncome from house propertyIncome from businessCapital gainsIncome from residuary sources
Interest, dividends, capitalgains etc received by a nonresident on investmentincome,Winnings from lottery,crossword puzzle,gambling received by anyassessee etc.
Incentives Deduction of incentivespermissibleDeduction of incentives notpermissibleSet off &Carryforward oflossesPossible within the headOrdinary Sources. However,losses under the head CapitalGains and from speculativebusiness are ring fenced andcannot be set off from incomeunder any other headSet off of loss from onesource with profits fromanother source notpermissible.Tax Rates At normal rates after basicexemption, as per slab ratesprovided forAt rates specified, basicexemption not available.Return filingobligationMandatory where the taxableincome exceeds the maximumamount not chargeable to taxMandatoryThe various heads of income under Ordinary Sources have been elaboratedbelow
Income from employment
, which includes Gross salary as reduced by thesum of permissible deductions and the value of perquisites and profits in lieu ofsalary.The permissible deductions are
Professional tax paid
Transport allowance to the extent prescribed
Special allowance or benefit to meet expenses incurred wholly andexclusively in the performance of duties to the extent actually incurred.
Compensation under Voluntary retirement / Gratuity received on retirementor death / amounts received on commutation of pension - as prescribed
Pension received by gallantry awardees.Permitted deductions with respect to gratuity / voluntary retirement / commutation of pension etc would be available to the extent the same isdeposited in a prescribed account. On withdrawal from such accounts, thesewould be subject to taxes.Salary would inter-alia include perquisites in nature of:
Rent free or concessional accommodation provided by the employer.
Value of any sweat equity share, including employee stock options allottedor transferred, on the date of exercise.
Value of any amenity, facility, privilege or service, computed as prescribed.It would also include the following for which currently exemptions are available:
Leave Travel concessions - for travel within India.
Leave salary
Medical reimbursements
House Rent Allowance.

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