Wednesday, April 23, 2014

All about Tax on Long term Capital Gain and Short term Capital Gain


Definition capital Assets :

Under Section 2 (14) of the Income Tax Act, 1961, “Capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include the following

  1. Stock-in-trade, raw materials or consumable stores held for the purposes of business or profession.
  2. Agricultural land in India which is not situated in any specified area
  3. Personal effects of movable nature, such as furniture, utensils and vehicles held for personal use by the assessee or any dependent member of his family.
    1. “Personal effects of movable nature” do not include
      1. Jewellery,
      2. Archaelogical collections,
      3. Drawings, Painting, Sculptures or any work of Art.


Taxable Year :Capital gain shall be payable in the year in which  transfer of capital asset takes place.

Short Term Capital Asset

A capital asset held by an assessee for not more than 36 months before the date of its transfer is a “Short Term Capital Asset”. However,

  1. a share held in a company, or
  2. any other security listed in a recognised stock exchange in India,
  3. units of UTI and a mutual fund or
  4. a zero coupon bond

will be treated as short term capital asset if it is held for not more than 12 months before the date of its transfer.

Only debentures have to be necessarily listed in order to qualify for the 12 month period for determination of long term capital asset

Long Term Capital Asset

If the capital asset is not a short term capital asset as defined then it is a long term capital asset 

Set Off
Short term capital loss can be set-off against short term or long term capital gains of that year & balance remaining can be set off against income from any other head except salary.

Long term capital loss can be set-off only against long term capital gain.

Carry Forward 

Short term capital loss can be carried forward for 8 assessment years u/s 74 to be set off against short term or long term capital gains only.

Long term capital loss can be carried forward for 8 assessment years u/s 74 to be set-off only against long term capital gain

Deduction under Chapter VIA

Available for short term capital gain (other than stcg on securities taxable u/s 111A).
Not available against long term capital gains

Tax Rates 


Particulars
Long Term Capital Gains
   ShortTerm Capital Gains
Individual / HUF
Domestic Company
NRI
Individual / HUF
Domestic Company
NRI
Listed Equity shares & Equity Oriented Schemes
Nil
15%
15%
15%
Debt Schemes, zero coupon bonds, offshore funds, Off Market Buyback of equity shares
10% without indexation or 20% with indexation whichever is lower
Normal slab rates
Listed Cumulative bond / NCD / debentures
10% without indexation
Normal slab rates
Unlisted stocks
20% with indexation
10% without indexation
Normal slab rates
Unlisted bonds /debentures
20% without indexation
 10% without indexation
Normal slab rates
Gold / Bullion / Jewellery
20% with indexation
Normal slab rates
Real Estate
20% with indexation
Normal slab rates


Note: 
  • Debentures have to be listed to qualify for the 12 month holding period criteria of Long Term Capital gains. 
  • Unlisted debentures require a holding period of 36 months for being a long term capital asset. 

Notes
  • Surcharge @ 5% is to be levied in the case of domestic companies, if their income exceeds Rs. 1 crore but less than Rs. 10 crore & @ 10% if income exceeds Rs. 1 crore
  • Surcharge @ 10% is to be levied in the case of individual / HUF, if their income exceeds Rs. 1 crore
  • Education cess @ 3% will be applied on tax + surcharge

Dividend Stripping: 

The loss due to sale of units in equity mutual funds will not be available for set off to the extent of the taxfree dividend declared, if units are 
  • i) bought within 3 months prior to the record date fixed for dividend declaration; and
  • ii) sold within 9 months after the record date fixed for dividend declaration


Bonus Stripping: 

The loss due to sale of original units in mutual fund schemes, where bonus units are issued, will not be available for set off to, if original units are 
  • i) bought within 3 months prior to the record date fixed for allotment of bonus units; and
  • ii) sold within 9 months after the record date fixed for allotment of bonus units.


However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.

Deduction Summary

Long Term Capital Gain - Exemption
a.
Who can claim exemption
Ind/HUF
Individual /HUF added by Finance Bill 2012 wef fy 12-13
Any person
Ind/HUF
b.
Eligible assets sold
A residential
House property
(minimum holding period 3 year)
Agriculture land which  has been   used   by   assessee himself or by his parents for agriculture purposes during last 2 yrs of transfer
Any   long-term capital assets (minimum holding period 3 years) 
Any long term asset (other  than  a residential  house  property ) provided on the date of transfer the taxpayer does not own more than one residential house property from  the assessment year 2001-02 (except the new house)
c.
Assets to be acquired for exemption
Residential house property
Another agriculture land
(urban or rural)
Bond of NHAI or
REC
Residential house property
d.
Time limit for acquiring the new assets
Purchase :1 year back or
2    y e a r   f o r w a r d , Construction:   3   year forward
2 yrs forward
6 months forward
Purchase :1 year back or 2 year forward, Construction:
3 year forward
e.
Exemption Amount
Investment in the new assets or capital gain, which ever is lower
Investment in
the agriculture land or capital gain, which ever is lower
Investment   in   the new assets or capital gain,  which  ever  is lower (Max. Rs.  50
Lacs in Fin. Yr.)
Investment in the new assets / Net
Sale consideration X capital gain
f.
Yes
Yes
not applicable
Yes


Capital Gain account Scheme 

Under Sections 54, 54B and 54F, the capital gains is exempt if such gains are reinvested in new assets, within the time allowed for the purpose. If such reinvestment is not made before the date of furnishing the return of income then the amount of the capital gain or the net consideration, is required to be deposited in an account under Capital gains Accounts Scheme.

  1. The deposit shall be made before furnishing the return of income or within the due date for furnishing the return of income u/s. 139 (1), whichever is earlier.
  2. The deposit shall be made in a bank account or institution in a scheme notified by the Central government.
  3. Amount deposited can be withdrawn for utilization in accordance with the scheme, for the specified purpose
  4. If the amount deposited is not utilized for acquiring the new asset within the required period, the capital gain related to the unutilized amount shall be treated as capital gain of the year in which period specified in the above provisions expires.

Cost Inflation Index form 1981 to fy 2013-14 is given below

Financial Year
Cost Inflation Index
1981-1982
100
1982-1983
109
1983-1984
116
1984-1985
125
1985-1986
133
1986-1987
140
1987-1988
150
1988-1989
161
1989-1990
172
1990-1991
182
1991-1992
199
1992-1993
223
1993-1994
244
1994-1995
259
1995-1996
281
1996-1997
305
1997-1998
331
1998-1999
351
1999-2000
389
2000-2001
406
2001-2002
426
2002-2003
447
2003-2004
463
2004-2005
480
2005-2006
497
2006-2007
519
2007-2008
551
2008-2009
582
2009-2010
632
2010-2011
711
2011-2012
785
2012-2013
852
2013-2014
939

Tuesday, April 22, 2014

Online Correction in E TDS returns at TDSCPC without digital signature


CPC (TDS) is glad to provide you with enhanced features, to further add to the convenience of online facility of filing corrections to the TDS Statements. With this feature, you will be able to submit Online Corrections at TRACES without even having a Digital Signature. Currently over 20,000 deductors are already using the online facility for corrections.

To avail the facility, it is requested to Login to TRACES and navigate to “Defaults” tab to locate "Request for Correction” from the drop-down list. Click to “Proceed” in absence of Digital Signature.

Pre-requisites for filing online Corrections:

  • Digital Signature is not mandatory to be registered on TRACES for raising online corrections.
  • Only Challan Correction is permissible in absence of Digital Signature. Digital Signature enables you to carry out PAN Corrections as well.
  • Correct KYC information needs to be submitted for the purpose of validation.
  • Online request can be submitted, only if there is a regular statement already filed and processed.
  • All previous corrections pertaining to the statement should have been processed and the processing status can be verified from the Dashboard.


Functionalities available without Digital Signature:

· Challan/BIN Correction
  • A list of all Matched and Unmatched challans can be viewed by clicking the appropriate tab.
  • Matched challans can be corrected for “Amount Claimed as Interest and Others”. Please note that Matched challans cannot be tagged.
  • Unmatched challans can be corrected and tagged to Deductee rows in the statement.
  • In addition, NO CHALLAN, which has been used for other purposes outside the system, should be tagged.
  • The corrections to above challans can be reset by clicking the Reset tab, if this requires to be further corrected.


· PAN Correction
  • Invalid to Valid PAN: The correct name of the Valid PAN will be displayed in “Name as per changed PAN”.
  • Valid to Valid PAN: If the new PAN entered is Invalid, a message is displayed in the “Action Status”. Please note that there is only one opportunity for a Valid to Valid PAN correction.
  • All the corrected rows can be viewed by clicking on “Show Edited Rows” on the screen

Action Summary:
  • After carrying out all the corrections, Action Summary can be referred for all changes carried out.
  •  Please click “Confirm” for all intended changes and the statement is ready for submission.

Actions to complete Submission:
  • Please navigate to “Defaults” tab to locate “Corrections Ready for Submission”
  • Click on “Submit for Processing”, which will prompt to digitally sign the submission.
  • Once the correction is submitted successfully, a Token Number for the same will be available

Sunday, April 20, 2014

Exemption Notification cannot be forced upon assessee – No legal bar on paying duty & availing benefit of Modvat scheme


We are sharing with you an important judgement of the Hon’ble High Court of Delhi, in the case of Commissioner of Central Excise Vs. Grand Card Industries & Ors [2014-TIOL-496-HC-DEL-CX] on following issue:

Issue:

Whether the option is available to the assessee either to avail the exemption notification or to pay duty on the final products by taking Modvat credit on inputs in terms of Rule 57A of the erstwhile Central Excise Rules, 1944 (“the Excise Rules”)?

Facts & Background:

Grand Card Industries & Ors (“the Respondent” or “the assessee”) were small scale industrial unit (“SSI Unit”) and at the relevant point of time eligible for benefit of the exemption on clearances upto aggregate value of Rs. 30 Lakhs in terms of the Notification No. 1/93-CE dated February 28, 1993 (“the Notification”). The said Notification provides exemption to first clearances of specified goods upto the value of Rs. 30 lakhs and concessional duty thereafter in case of SSI units having clearances not exceeding Rs. 2 crores in preceding year.

The assessee, instead of claiming benefit under the Notification, sought to take benefit of the Modvat credit under Rule 57A of the Excise Rules and paid full duty on final products to avail Modvat Credit.

The Department denied the Modvat credit on the premise that the assessee being covered under the Notification had no option and the Modvat credit was not admissible under Rule 57C of the Excise Rules. The same was upheld by the Commissioner of Central Excise (Appeals). Thereafter, the aggrieved assessee preferred an appeal before the Customs Excise and Gold (Control) Appellate Tribunal (“the Tribunal”) wherein the case was decided in favour of the assessee holding that the assessee cannot be denied the benefit of Modvat credit of duty paid on inputs used in the manufacture of final products on which duty was paid, though the final product would be exempt from duty under an exemption notification, since it was for the assessee to claim the concession. Hence, the Revenue filed the reference petition before the Hon’ble High Court of Delhi.

Held:
It is held by the Hon’ble High Court of Delhi that the assessee would have the option either to avail the exemption under the exemption notification or to pay duty on the final product by taking Modvat credit on inputs in terms of Rule 57A of the Excise Rules.
It was further held that if the right to choose is not granted then it would be disadvantageous for a manufacturer to get itself registered as a SSI unit. This would thus be to the detriment of the manufacturer to register as a SSI unit. This consequence is clearly not intended by the legislature.
Therefore, the Hon’ble High Court of Delhi rejected the contention of the Department and decided the case in favour of the assessee/ Respondent.
Important to Note:
It is also to be kept in mind that sub-section (1A) was inserted w.e.f May 13, 2005 under Section 5A of the Central Excise Act 1944, which states that where an exemption in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, then the manufacturer of such excisable goods shall not pay the duty of excise on such goods.
Hence, manufacturer has no choice but to avail exemption notification in case of exemption granted absolutely with no condition. 

Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Flat No. 34B, Ground Floor, Pocket - 1,
Mayur Vihar, Phase - I,
Delhi – 110091, India
Desktel: +91-11-22757595/ 42427056
Mobile: +91 9810604563

Saturday, April 19, 2014

How to File Rectification request on receipt of Demand Notice Due to Mis matching of Income Tax


CBDT has released a Press note(given at end) on 18.04.2014 and desires to taxpayer file correct data of tax deduction and payment in Income Tax return.The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. 

Such mistakes include 
  • quoting of invalid/incorrect TAN; 
  • quoting of only one TAN against more than one TAN tax credit; 
  • furnishing information in wrong TDS Schedules in the Return Form; 
  • furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. 
As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. 

How to file online rectification request ,procedure is given hereunder for your ready reference. 

Rectification Request

Rectification request can be filed u/s 154 of the Income Tax Act by the taxpayer in case of any mistake apparent from the record.

Prerequisite to file Rectification request

  1. The Income Tax Return for the Assessment Year should have been processed in CPC, Bangalore.
  2. An Intimation under Section 143(1) OR an order under Section 154 passed by CPC, Bangalore for the e-Filed Income Tax return should be available with the taxpayer.
  3. For Electronic returns filed and processed at CPC, only online rectifications will be considered.
  4. If the refund arising out of return processed at CPC is adjusted against the demand of other Assessment Years and then the assessee is challenging the demand itself, in that case
    • Rectification application has to be filed for the demand year, if the demand was raised by CPC then online application has to be filed
    • for the demand raised by the Field Assessing Officer, the application has to be filed before him.
  5. No rectification has to be filed for giving credit to taxes paid after raising the demand.To file your Rectification, you should be a registered user in e-Filing application.

Step By Step Guide How to file rectification at Income Tax e filing Site 

To file your Rectification, you should be a registered user in e-Filing application. Below listed are the steps to file Rectification:

Step 1 - LOGIN to e-Filing application and GO TO --> My Account --> Rectification request.

Step 2 - Select the Assessment Year for which Rectification is to be e-Filed, enter Latest Communication Reference Number (as mentioned in the CPC Order  )

Step 3 - Click 'Submit'.



Step 4 - Select the 'Rectification Request type'

Step 5-− On selecting the option 'Taxpayer Correcting Data for Tax Credit mismatch only', three check boxes, TCS, TDS, IT, are displayed. You may select the check-box for which data needs to be corrected. User can add a maximum of 10 entries for each of the selections.No upload of any ITR is required.



Step 6- On selecting the option 'Taxpayer is correcting the Data in Rectification' − select the reason for seeking rectification, Schedules being changed, Donation and Capital gain details (if  applicable), upload XML and Digital Signature Certificate (DSC), if available and applicable. You can select a maximum of 4 reasons 




7 - On selecting the option,'No further Data Correction required. Reprocess the case' − check-boxes to select- Tax Credit mismatch, Gender mismatch( Only for Individuals), Tax/ Interest mismatch are displayed. User can select the check-box for which re-processing is required. No upload of an ITR is required.

Step 8 - Click the 'Submit' button.

Step 9 - On successful submission, following message is displayed.


Step-10 You can check status of rectification request online through your account login .Further you can withdraw rectification  request ,if you have filed it incorrectly or if it is no more required.

--------------------------------------------------------------------------
CBDT optimist on Standard Operating Procedure; Urges taxpayers to file rectification request for TDS mismatches April 18, 2014


SECTION 139D OF THE INCOME-TAX ACT, 1961 - FILING OF RETURN IN ELECTRONIC FORM - EXTENSION OF FACILITY TO TAXPAYERS TO VERIFY IF DEMAND IN THEIR CASE IS DUE TO TAX CREDIT MISMATCH ON ACCOUNT OF INCORRECT FURNISHING OF SPECIFIED PARTICULARS AND SUBMIT RECTIFICATION REQUESTS WITH CORRECT PARTICULARS OF TDS/TAX CLAIMS FOR CORRECTION OF THESE DEMANDS

PRESS NOTE NO.402/92/2006-MC, DATED 17-4-2014

Detailed instructions have been issued by the CBDT to all the assessing officers laying down a Standard Operating Procedure (SOP) for verification and correction of demand by the AOs. As per this SOP, the taxpayers can get their outstanding tax demand reduced/deleted by applying for rectification along with the requisite documentary evidence of tax/demand already paid. The SOP also makes special provisions for dealing with the tax demand upto Rs. 1,00,000/- in the case of Individuals and HUFs in order to accommodate certain extraordinary situations. The SOP is expected to mitigate the long standing grievances of taxpayers by way of reduction/deletion of tax demands.

The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. Such mistakes include quoting of invalid/incorrect TAN; quoting of only one TAN against more than one TAN tax credit; furnishing information in wrong TDS Schedules in the Return Form; furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. The rectification requests have to be submitted to the jurisdictional assessing officer in case the return was processed by such officer, or the taxpayer is informed by CPC, Bangalore that such rectification is to be carried out by Jurisdictional assessing officer. In all other cases of processing by CPC, Bangalore, an online rectification request can be made by logging into e-filing website http://incometaxindiaefiling.gov.in as per the procedure given in detail in its Help Menu.