Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

Three More Days Before Your Gifts Get Taxed As Income!

Purchases Below Fair Market Value Also

Trapped In Tax Net From 1st October’09

If your friend had promised you to gift a diamond studded gold watch worth Rs.3 lakhs, encash that promise in three days. Delay may cost you dear, since the receipt of this gift after 30th September, 2009 will be treated as your taxable income, attracting a straight income-tax of Rs.92,700, if you fall in the top tax-bracket of 30.9%.

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Drive Home Amazing Tax Saving!

Purchase New Car Before September, ‘09

And Recover 25% Of Your Car Cost By March, ‘11

Note the figure ‘632,’ being the Cost Inflation Index just announced for FY 2009-10. This would be helpful in computing any taxable long term capital gains earned by you in the current financial year.

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Looking at London, Talking to Tokyo!

The Code boasts of incorporating simplicity, well accepted principles  & best international practices.’

Does it achieve or deceive on this count?

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Tax Axe To Chop Charities Too!

Religion & Politics Sheltered As Taxman’s Holy Cow!

Complex Provisions To Perplex Charities

New Jargon – Fresh Norms

  •  Charitable trust to bear the new identity of ‘Non-Profit Organisation (NPO).’  
  • Charitable purpose replaced by the new phrase ‘permitted welfare activity (PWA).’ 
  • Fresh procedure for NPO registration to be undertaken by all charities. 
  • Different & elaborate norms for computing gross receipts and outgoings. 
  • Current benefits of accumulation of income, upto 15% for an indefinite period, and upto any amount for five years, not available under DTC. 
  • Deduction at specified rates (mostly 50%) to be allowed to donors of eligible NPOs. 

15% Tax on eligible NPOs – 30% Tax on other Charities

  • No more tax exemption for income of charities. Even current basic exemption upto Rs.1,60,000 not applicable under DTC. 
  • Taxable surplus of all eligible NPOs (fulfilling as many as 14 prescribed conditions) to be taxed at flat 15%.  
  • All other trusts, though doing charitable work, to attract flat 30% tax on their income as an AOP. 

Several Current Charities may not qualify as eligible NPOs

  • Specific community trusts and associations for benefit of their members, though currently eligible for exemptions as charities, not eligible to be registered as NPOs under DTC. 
  • Where any business (not incidental to PWA) is held under the charity, even though its business income is applied only for PWA.

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Minimum Tax brings Maximum Woes!

MAT At 2% On Value Of Gross Assets Can Spell Corporate Doom!

Companies floored on MAT by hard tax punch!

  • Minimum Alternate Tax (MAT), to be paid at 2% on the gross value of assets of a company, presumes 8% average rate of return on assets, an impractical economic assumption in several cases. 
  • While Code aims at encouraging investment-linked tax incentives, the proposed MAT will be a huge disincentive for capital investment. 
  • Capital intensive projects, infrastructure ventures, undertakings in gestation period, loss making concerns, sick units, investment companies and even companies under liquidation, to be hit hard by levy of MAT. 
  • No scheme for grant of MAT credit, both harsh and iniquitous. 
  • No developed country in the world today (last being Mexico, who also scrapped it in 2007) levies such a naughty tax. 
  • No room for MAT in the new tax regime abolishing all profit-linked incentives.

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NRIs treated as Not Required Indians

Harsh, Illogical & Discriminatory Taxing Provisions For NRIs!

Proposals That Will Hurt The Global Indian Sentiment

Flat Rate of Tax

  • 20% flat tax on interest & other investment income.
  • 30% flat tax on all capital gains.
  • Apart from 20% & 30% TDS on above, TDS at a baffling rate of 35% prescribed on all residual income.

No Personal Exemption

  • No personal exemption or deduction allowed in computing the above income treated as ‘income from special sources.’

Weird Interpretation

  • Poor drafting leads to such a weird interpretation that transfer of a capital asset may attract 30% tax on gross sale consideration.

What a Discrimination?

  • Ironical but true! Non-Indian sports-persons, say Ricky Ponting or Shoaib Akhtar, required to pay a concessional tax of 10% on their game, advertisement and column earnings in India, thus enjoying a more privileged tax status than our own sons of the soil living abroad.

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50% Depreciation on Car can drive amazing Tax Saving!

Recover 25% Of Your Car Cost In 2 Years

Through New Purchase By 30th September, 2009!

Planning to purchase a new motor car for your business or professional use sometime in 2009? Are you aware of the fact that buying your car by 30th September, as compared to any time on or after 1st October can have a huge impact on your resultant tax saving? (more…)

Now no Capital Gain without Tax Pain!

End Of Tax Honeymoon For Market Investors!

Understanding The New Capital Gains Regime

New Rules for Computation

  • Present distinction between long term and short term gains to be eliminated.
  • Current exemption for capital gains arising from transfer of personal effects and agricultural land beyond specified urban limits to continue.
  • Base date for computing cost of acquisition shifted from 1st April, 1981 to  1st April, 2000. 
  • Indexation benefits can be availed for all assets held for atleast one year.  

No More Tax Concessions

  •  Zero tax on STT paid long term capital market gains and 15% concessional rate for short term market gains to end on 31st March, 2011. 
  • No more concessional rates of 10%/20% for taxing specified long term gains. 
  • All capital gains to be taxed at the taxpayer’s applicable marginal rate. Securities Transaction Tax (STT) to be simultaneously eliminated.

 Exemptions Abolished & Redesigned

  • Present exemption u/s. 54EC via investment in specified bonds abolished. 
  • Current exemptions u/s. 54, 54B and 54F attempted to be redesigned under a new scheme of relief for roll over on the basis of a given formula.  (more…)
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