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Special provision related to

Sec 10 A provides a deduction of such


FTZ
profits and gains as are derived by an
undertaking from the export of the articles
or things or computer software for certain
consecutive assessment years.
Form of organization:
Deduction u/s 10A is available to an
undertaking from export of articles etc. this
section does not provide any particular form
of organization for undertaking. Thus
undertaking can be operated as sole
proprietorship, partnership firm, company
etc.

Essential conditions to be
fulfilled
What

to manufacture or produce? [Sec 10 A


(2)(i)]
The undertaking must manufacture or produce
articles or things or computer software etc.

Location

of undertaking
any zones notified by central government of India
as FTZs.

Export

out of India
Undertaking must export out of India, the articles
or things or computer software manufactured or
produce.

Cont
Undertaking

not to be formed
by the splitting up or the
reconstruction [Sec 10A (2) (ii)]
undertaking shall not be formed by
the splitting up or the reconstruction
of a business already in existence.
Undertaking not to be formed
by transfer of old machinery
[Sec 10A (2) (iii)]

Cont.
Receipt

in India/ Repatriation to
India of convertible foreign
exchange [Sec 10A (3)]
the sale proceeds of the articles or
things or computer software etc
exported out of India must be received
in India and if not received in India,
then must be bought into India, in
convertible foreign exchange within 6
months from the end of relevant
previous year. This period can be
extended by competent authority.

Cont.
Report

of charted accountant [Sec


10 A (5) ]
Assessee claiming this deduction must
furnish, in the prescribed form No. 56F,
along with the return of Income.
Amount of Deduction:
Setup in FTZ or SEZ which begins
operation on or after 01-04-01 but
before 01-04-02
100% of profit and gains from export is
allowed as deduction for 10 consecutive
years.

Cont.
Undertakings

which begin operations on or


after 01-04-02 but before 01-04-05 in any
SEZ or FTZ
-100% of profit and gains from export is
allowed as deduction for 5 consecutive
years.
- 50% of profit and gains from export is
allowed as deduction for next 2
consecutive years.
-50% of profit and gains from export is
allowed as deduction for next 3
consecutive years, if certain special
conditions are fulfilled.

Cont.
Furnishing

of the return on or before


due date [u/s 139 (1)]

Calculation

of the profit from exports


[Sec 10A (4)]
Deduction =100% of [Profit of the * Exp
Turn Over ]

u/s 10 A
Total Turn Over

under taking

Example

Sancha Ltd. Located in Kandla Free Trade Zone


is eligible to claim deduction u/s 10A. The
company started claiming this deduction from
A.Y. 2005-06. the company provides following
information:
Export sales
= Rs 92,00,000
Domestic sales
= Rs 20,00,000
Profit of the business of the undertaking
= Rs 24,00,000
Calculate deduction u/s 10 A.

Other Important provisions


Carry

forward and setoff certain Unabsorbed


expenses related to Tax holiday period [Sec
10A (6) (i)]
-Depreciation
-Expenditure on scientific research
-Expenditure in relation to family
planning
Carry forward and setoff of losses relating
to Tax holiday period [Sec 10 A (6) (ii)]
-Non speculation business loss
-Loss under the head of capital gain
Duplication of deduction not allowed [Sec
10A (6) (iii)]
undertaking claiming deduction u/s 10A shall not
be allowed to claim any other deduction in
relation to such profits.

Cont.
Transfer

of Goods and

Services
where any goods or services held
for purposes of the eligible
business are transferred to any
other business of assessee or
vice-versa. the consideration
shall be recorded in the books of
eligible business at market value
of such goods or services.

Tax Provisions to Export


oriented undertakings
SEC

10 B provides a deduction of such


profits and gains as are derived by a
100% export undertakings from the
export of the articles or things or
computer software for a period of certain
consecutive years.
This section was introduced with effect
from A.Y. 1989-90. prior to the
introduction of this section, the deduction
was available only to those undertakings
which were situated in certain specified
areas such as free trade zones etc.

Thus

to give boost to export, govt.


Of India introduced the scheme of
100% export oriented units and at
the same time provided the 10
years Tax holiday u/s 10B to such
undertakings. These EOUs have also
been given many other incentives
as follows:
Custom duty free on Raw material and
other capital equipment.
Refund of excise duty.
Refund of central sales tax.
Assured regular supply of power, water
etc.

Essential condition to be
fulfilled for EOUs
1.

2.

3.
4.
5.

Form of organization: Deduction u/s 10 B


is available to all form of organization to a
100% EOU from export of articles.
What to manufacture: the undertakings
must manufacture or produce articles or
things or computer software.
Undertakings not to be formed by the
splitting up/or the reconstruction.
Undertakings not to be formed by the old
machinery.
Report by charted accountant: Assessee
claiming this deduction must furnish, in
the prescribed form No. 56F, along with
the return of Income.

Cont.
6. Receipt in India/ Repatriation to India of
convertible foreign exchange [Sec 10A (3)]
the sale proceeds of the articles or things or
computer software etc exported out of India must be
received in India and if not received in India, then
must be bought into India, in convertible foreign
exchange within 6 months from the end of relevant
previous year. This period can be extended by
competent authority.
7. Amount of Deduction:
100% of profit and gains from export is allowed as
deduction for 10 consecutive years.
8. Calculation of the profit from exports [Sec 10A
(4)]
Deduction =100% of [Profit of the * Exp Turn Over ]
u/s 10 A
under taking
Total Turn Over

Other Important provisions


Carry

forward and setoff certain


Unabsorbed expenses related to
Tax holiday period [Sec 10B (6)
(i)]
-Depreciation
-Expenditure on scientific research
-Expenditure in relation to family
planning
Carry forward and setoff of losses
relating to Tax holiday period [Sec
10B(6) (ii)]
-Non speculation business loss
-Loss under the head of capital gain

Cont.
Duplication

of deduction not
allowed [Sec 10B (6) (iii)]
undertaking claiming deduction u/s
10B shall not be allowed to claim
any other deduction in relation to
such profits.
Transfer of undertaking in
amalgamation or demerger [Sec
10B (7A)]
No deduction shall be admissible
under this section.

Cont.
Transfer

of Goods and

Services
where any goods or services held
for purposes of the eligible
business are transferred to any
other business of assessee or
vice-versa. the consideration
shall be recorded in the books of
eligible business at market value
of such goods or services.

Example
ABC Ltd Located in is eligible to claim
deduction u/s 10B. The company started
claiming this deduction from A.Y. 2005-06.
the company provides following information:
Export sales = Rs 20,00,000
Domestic sales= Rs 05,00,000
Profit of the business of the undertaking
= Rs 2,00,000
Additional information:
Out of total export sales of Rs 20,00,000, the
co. has bought convertible foreign exchange
of Rs 80,000 within stipulated time.

Provisions for the


undertakings setup in
This deduction is in respect of
Backward
areas

profits and gains from industrial


undertakings etc. in certain
areas, where the gross total
income of an assessee includes
any profits and gains derived
from any business in the
specified backward areas.

Eligibility:

1.Industrial undertakings:
It should be established in the
notified backward area
It is not formed by splitting up or
the reconstruction
It is not formed by the transfer of
the old machinery or plant
Industrial undertakings are setup in
north eastern region during 01-041991 to 31-03-2002.
Industrial undertakings setup in J&K
during 1-4-1995 to 31-3-2007

Amount

of deduction: 100% of
the profits and gains of such
business.
Period of deduction: the
deduction is available for a period
of 10 consecutive years.

Different provisions for types


of industries in Backward
Shipping [80IB (6)]
area
This deduction is claimed if any ship is
acquired provided following conditions are
fulfilled:
It is owned by the Indian co. and is wholly
used for the purposes of business carried on
by it;
Hotel

[80IB (7)]

The business of hotel is owned is owned by


and carried on by a company registered in
India with a paid up capital of not less than
Rs 5 Lakhs.

Cont.
Multiplex

theatre [Sec 80IB (7A)]

Such multiplex theatre is constructed at any time


during the period beginning on the 1 st day of
April, 2002 and ending on the 31 st of march 2005.
50% profit is allowed for deduction.
The deduction is available for 5 consecutive
years.

Convention centers [Sec 80IB (7B)]

Constructed during 1st April 2002 to 31st Mar


2005.
50% is allowed as a deduction.
The deduction is available for 5 consecutive
years.

Cont.
Company

engaged in scientific and


industrial research and
development [Sec 80IB (8A)]
Only companies are eligible to claim
this deduction

Undertakings

engaged in
production or refining of mineral oil
or natural gas from blocks [Sec
80IB (9)]
100% of profit is allowed for the
period of 7 consecutive years.

Cont.
Profits

of an undertakings from the


business of operating and maintaining
a hospital [Sec 80IB (11B)]
The hospital is constructed at any
time during 01-Oct-2004 to 31-Mar2008.
The hospital has at least 100 beds for
patients.
100% deduction is allowed for the
period of 5 consecutive years.

Other Important provisions


Carry

forward and setoff certain


Unabsorbed expenses related to
Tax holiday period [Sec 80IB (6)
(i)]
-Depreciation
-Expenditure on scientific research
-Expenditure in relation to family
planning
Carry forward and setoff of losses
relating to Tax holiday period [Sec
80IB (6) (ii)]
-Non speculation business loss
-Loss under the head of capital gain

Cont.
Duplication

of deduction not
allowed [Sec 80IB (6) (iii)]
undertaking claiming deduction u/s
80IB shall not be allowed to claim
any other deduction in relation to
such profits.
Transfer of undertaking in
amalgamation or demerger [Sec
80IB (7A)]
No deduction shall be admissible
under this section.

Cont.
Transfer

of Goods and

Services
where any goods or services held
for purposes of the eligible
business are transferred to any
other business of assessee or
vice-versa. the consideration
shall be recorded in the books of
eligible business at market value
of such goods or services.

Tax provisions relating to


Infrastructure Sectors
Rationale

& Purpose of deduction:


Infrastructure facilities are the backbone of
any economy. The existence of these
facilities is very essential for industrial
growth and economic development of
economy.
Section 80IA of the Income Tax Act,
provides tax holiday for certain period to
an industrial undertaking or enterprises
carrying on the business of developing,
maintaining & operating any infrastructure
facility.

Cont.
Eligible

business:
-Carrying on the business of
(a) developing;
(b) operating & maintaining, or
(c) developing, operating & maintaining,
any infrastructure facility.
-Providing telecommunication services
- developing, operating or maintaining
an Industrial park
-Generation or/and distribution of power
-Natural gas distribution.

Tax
Deducted at Source
TDS or best known Tax Deducted at Source is one of the modes of collecting

Income-tax from the assesses in India.


This is governed under Indian Income Tax Act, 1961, by the Central Board for
Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian
Revenue Service (IRS), Ministry of Finance, Govt. of India.
Deductor: Under the process of TDS, Deductor is a
person/company who is liable to deduct the Tax at source, from
the payment being made to the party. Deductor is also termed as
Employer in cases where the payments are under Salaries.
Deductee: Deductee is the person, from whom the tax is being
deducted or accrued for deduction. Depending on the nature of
the deduction being made, deductees and respective submission
forms are categorized to 3 types:
1. Salaries: In case of salaries, the deductee is termed as an
Employee. All the information of deductions and payments in this
category should be submitted in Form 24Q to the government.
2. Non-Salaries - Resident: In case of non-salaries and the
payment is made to a resident in India, the deductee is termed as
a Deductee or a Party. All the information of deductions and
payments in this category should be submitted in Form 26Q to
the government.
3. Non-Salaries Nonresident: In case of non-salaries and the
payment is made to a non-resident of India, the deductee is
termed as a Deductee or a Party. All the information of deductions
and payments in this category should be submitted in Form 27Q
to the government

Provisions for TDS

Salaries [Sec. 192]: u/s 192 (1) any person responsible for paying any
income chargeable under the head salaries (Sec. 15) shall at the time of
payment, deduct income-tax on the amount payable at the average rate of
income tax computed on the basis of rates in force for the financial year.
Employment under more than one employer during relevant previous year.
Relief u/s 89 (1): In case any arrears are paid to an employee working in
any government organization or company, co-operative society, local
authority, university, institutions, association, and he is entitled to relief u/s
89 (1).
Income from other head: a salaried employee can furnish details of his
other income to his employer and employer can deduct tax at source for
such income also.
The employer can allow deduction under different sections according to the
provisions in Income Tax Act.
Every person deducting tax at source must submit returns as prescribed
under the rules by a prescribed date, which is 31st of May of the assessment
year.
In case the employer fails to deduct tax at source or tax is not deducted
according to provisions or after deducting tax it is not deposited it with the
government, such person shall be personally liable for such amount of tax.
[206 C (6)]

Cont.
Surcharge

and Education Cess is not to be considered

for TDS.
Sec.193 deals with the deduction of tax at source from
income chargeable be way of Interest on Security .
The person responsible for paying interest on
securities is liable to deduct income tax at the time of
paying the interest.
Interest payable of some securities like government
bonds, gold bonds, insurance schemes, NSC and other
schemes on which interest income is exempted from
income tax, TDS shall not be deducted for these
securities.
Sec.194 deals with the deduction of Tax at source
from dividends paid by an Indian company or a
company which has made prescribed arrangement to
declare and payment of dividends.

Cont.
If

interest is paid on the Bank deposits, Tax at source shall not


be deducted upto Rs 10,000 interest in a year.
Section 194B says that income tax will have to be deducted at
source from any income by way of winning from any lottery
or crossword puzzle or card game and other game of any sort
in case the amount exceeds Rs 5,000. (30%)
Section 194BB says that income tax will have to be deducted
at source from any income by way of winning from any
Horse Race an amount exceeding Rs 2,500 at the time of the
payment.(30%)
Sec.194C says that any person responsible for paying any
amount to a Contractor for carrying out the work is required
to deduct 2% of the amount payable.
Sec.194D says that any person responsible for paying any
amount to Agent or Broker by way of rewards (commissions)
an amount exceeding Rs 5,000 is required to deduct Tax at
source.

Advance Payment of Tax

Tax is paid in advance when the liability of advance tax is Rs.10,


000 or more. The provisions of advance tax are applicable on all
types of persons irrespective of the residential status of the person.
The advance tax is paid in the previous year itself.
Thus, the tax is paid in the year of earning of income, in other words
the earning of income and payment of tax goes simultaneously.
Thus, the tax is paid as income is earned. This scheme of advance
payment of tax is also called pay as you earn scheme, i.e., pay tax as
you earn income.
Taxpayers are required to pay tax during the year on the basis of
their own computation of income. The advance tax is payable on
total income of the year from all sources i.e. salary, business,
profession etc. (including capital gain, interest, rental income or
lottery/prize money).
In the case of an individual, advance tax needs to be deposited as
below:
30% of advance tax payable on or before 15th September
60% of advance tax payable on or before 15th December
100% of advance tax payable on or before 15th March

Cont.
For

Companies
By 15th June
- 15% of Advance Tax
By 15th September- 45%of Advance Tax
By 15th December- 75% of Advance Tax
By 15th March- 100%of Advance Tax
By 31st March - Tax on Capital Gains or Casual Incomes
arising after 15Th March, if any.
For Non-Companies
By 15th June - NIL
By 15th September- 30%of Advance Tax
By 15th December- 60% of Advance Tax
By 15th March- 100%of Advance Tax
By 31st March - Tax on Capital Gains or Casual Incomes
arising after 15Th March, if any.

Income-Tax Authorities
(a) the Central Board of Direct Taxes constituted under the Central
Boards of Revenue Act, 1963 (54 of 1963),
(b) Directors-General of Income-tax or Chief Commissioners of Incometax,
(c) Directors of Income-tax or Commissioners of Income-tax or
Commissioners of Income-tax (Appeals),
(cc) Additional Directors of Income-tax or Additional Commissioners of
Income-tax or Additional Commissioners of Income-tax (Appeals),
(cca) Joint Directors of Income-tax or Joint Commissioners of Income-tax.
(d) Deputy Directors of Income-tax or Deputy Commissioners of Incometax or Deputy Commissioners of Income-tax (Appeals),
(e) Assistant Directors of Income-tax or Assistant Commissioners of
Income-tax,
(f) Income-tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors of Income-tax.

Powers of Income Tax Authorities


1)Power relating to Discovery, Production
of evidence, etc:
The Assessing Officer, The Joint Commissioner,
the Chief Commissioner or the Commissioner has
the powers as are provided in a court under the
code of Civil Procedure, 1908, when trying to suit
for the following matters:
(a)discovery and inspection;
(b)to enforce any person for attendance, and
examining him on oath
(c)issuing commissions; and
(d)compelling the production of books of
account and other document.

Cont.

2)Power of Search and Seizure:


Today it is not hidden from income tax authorities that people evade tax
and keep unaccounted assets. When the prosecution fails to prevent tax
evasion, the department has the to take actions like search and seizure.

3)Power to Call for Information:The Commissioner ,The Assessing


Officer or the Joint Commissioner may for the purpose of this Act:
(a)can call any firm to provide him with a return of the addresses and
names of partners of the firm and their shares;
(b)can ask any Hindu Undivided Family to provide him with return of
the addresses and names of members of the family and the manager;
(c)can ask any person who is a trustee, guardian or an agent to deliver
him with return of the names of persons for or of whom he is an agent,
trustee or guardian and their addresses;
(d)can ask any person, dealer, agent or broker concerned in the
management of stock or any commodity exchange to provide a
statement of the addresses and names of all the persons to whom the
Exchange or he has paid any sum related with the transfer of assets or
the exchange has received any such sum with the particulars of all such
payments and receipts;

Cont.

4) Power of Survey:
An Income Tax authority can have a survey for the purpose of
this Act.
The objectives of conducting Income Tax surveys are:
To discover new assessee (s);
To collect useful information for the purpose of assessment;
To verify that the assessee who claims not to maintain any
books of accounts is in-fact maintaining the books;
To check whether the books are maintained, reflect the
correct state of affairs.

5)Collection of Information:For the purpose of collection


of information which may be useful for any purpose, the
Income tax authority can enter any building or place within
the limits of the area assigned to such authority, or any place
or building occupied by any person in respect of whom he
exercises jurisdiction.

Cont.

6.)Power to Inspect registers of companies.--The Deputy


Commissioner of Taxes, the Joint Commissioner of Taxes or any
person authorized in writing in this behalf by either of them, may
inspect and, if necessary, take copies, or cause copies to be taken,
of any register of the members, debenture-holders or mortgagees
of any company or any entry in such register.
7.) The authorized officer may requisition the services of any
police officer or other officer of the Government to assist him for
all or any of the purposes specified in sub-section (2); and it shall
be the duty of every such officer to comply with such requisition.
8.) After completing the proceedings (under inspection/survey) ,
the Deputy Commissioner of Taxes shall, with the approval of the
Commissioner, make an order requiring the person concerned to
pay the aggregate of the amounts, if such person pays, or makes
satisfactory arrangement for the payment of, such amounts or any
part thereof, release the assets seized under section 117 or such
part thereof as he may deem fit in the circumstances of the case.
9.) Where the person concerned fails to pay, or to make
satisfactory arrangements for the payment of, any amount
required to be paid in pursuance of the order, the Deputy
Commissioner of Taxes may retain in his custody the assets seized
under section 117 on any part thereof as are in his opinion
sufficient for the realization of the said amount or, as the case
may be, of such part thereof as has not been paid.

Penalties and Prosecution

For the non-compliance of any provisions of the Act,


various sections have been introduced in the act to
impose penalties on and prosecution of the assessee.
In this regards the following must be understood:
a) Penalty is punishment in monetary terms
b) Prosecution is punishment in terms of suit followed by
jail

TO IMPOSE PENALTY IS NOT COMPULSORY BUT IT IS


OPTIONAL:
To impose penalty under the law is not the statutory
obligation of the law but it is a discretionary power
given under the law to be followed by assessing
officer with some specific reason and not arbitrarily.
QUANTUM OF PENALTY:
If the penalty is to be imposed then it should not be
lower than the amount prescribed by the law. Further
it should be noted that penalty is to be imposed which
exists in the law as on the date of default.

Cont.
WHO

CAN IMPOSE THE PENALTY:


Penalty can be levied by:
(I) The Assessing officer
(II) The CIT (Appeals)
(III) The Commissioner of Income
Tax

PENALTIES

Section No.
Default
penalty
140A (3)
Failure to pay any self assessment
assessing officer may
tax or interest or both
exceed amount
of tax.
on each such

Amount of

failure.

As
but not
Rs.10000

271(1) (b)

Failure to comply with the notice under


section 142(1) or failure to get the accounts
audited under section 142(2A)

271(1) (c)
Concealment of income or furnishing Amount between
100% to 300%
incorrect particulars of income
of the
amount of tax evaded.
Or Rs.25000.

271A

Failure to maintain, retain books of accounts


and other documents under section 44AA

Cont.

271B Failure to get accounts audited under section

271C
deducted

Failure to do TDS

Amount of tax not so

271F

Failure to file ROI

Rs.5000

272A(1)
failure

Refusal to answer any question put to him


or refusal to sign any statement made in
course of proceedings

whichever is less.

Rs.10000 on each

Cont.

271B
Rs.10000,

Failure to get accounts audited under section


44AB

0.5% of the sales or

whichever is less.

271C

Failure to do TDS

Amount of tax not so deducted

271F

Failure to file ROI

Rs.5000

272A(1)

Refusal to answer any question put to him


or refusal to sign any statement made in
course of proceedings

Rs.10000 on each failure