FM’s BUDGET ON A ROCK & ROLL!

One year deferment of GAAR, equity savings scheme & some TCS concession likely to be announced in Finance Bill today!

              Taxpayers are bound to keenly watch the Lok Sabha proceedings today, as the FM rises to move some amendments in the Finance Bill, 2012, which is slotted for discussion and approval of the House on May 7 & 8.

ANY ROLLBACK ON GAAR?

              Will there be any rollback on the highly controversial and hotly debated GAAR is the big question doing the rounds. One thing is sure and that is, the FM has indeed realized the serious implications of GAAR as proposed. Even the Parliament’s Standing Committee on Finance, in its report on the Direct Taxes Code (DTC) has seriously urged the Finance Ministry to deal with a whole package of its recommendations on GAAR. Whereas the FM is unlikely to announce any blanket withdrawal, it is very likely that he may announce atleast a one year deferment in the implementation of GAAR, so that many grave concerns and several important aspects in this regard can be examined. It is also expected that the highly iniquitous provision in relation to the burden of proof placed on the taxpayer may be knocked off and the constitution of the Approving Panel for GAAR may be designed in a more objective manner, with a view to dispel the critical reservations regarding the fairness of its implementation. (more…)

INCOME TAX, NO LONGER AS TAXING!

You can plan to pay tax of Rs.4,01,700 on family income of Rs.33 lakhs, at an average tax rate of just 12.17%!

        Just consider some tax facts of the past eight years as highlighted hereunder:

• In FY 2004-05, the basic Income-tax exemption limit was Rs.50,000 and taxable income exceeding Rs.1,50,000 attracted the maximum tax rate of 30%.

• Today in FY 2012-13, the basic Income-tax exemption limit is Rs.2,00,000 and the maximum tax rate of 30% is attracted only if the taxable income exceeds Rs.10,00,000.

• In FY 2004-05, the Income-tax payable on taxable income of Rs.10,00,000 was  Rs.3,07,428, on the basis of which the average rate of tax worked out to 30.74%.

• Today in FY 2012-13, the Income-tax payable on the same taxable income of Rs.10,00,000 is Rs.1,33,900, resulting in an average tax rate of just 13.39%.  

• Thus, during the past eight years, taxpayers earning taxable income of Rs.10,00,000 or more, have effectively enjoyed a tax relief of Rs.1,73,528. (more…)

MAD MONSTER OF TAX AMENDMENTS!

Low arousal Indians endure injustice & unfairness with feudalistic servility & fatalistic resignation said Palkhiwala

             The record number of 113 clauses of the Finance Bill, 2012, proposing a plethora of amendments in Direct Taxes and so many of them even with retrospective effect, reminds me of the unforgettable words of my Budget Guru and India’s legendary jurist and tax expert the Late Nani Palkhiwala, through which he had aptly analyzed the maddening malady of legislative amendments that has grappled our nation.  

             “The tragedy of India is the tragedy of waste – waste of national time, energy and manpower. Tens of millions of man-hours, crammed with intelligence and knowledge of tax gatherers, tax-payers and tax advisers are squandered every year in grappling with the torrential spate of mindless amendments. The cardinal error of our times is to mistake amendment for improvement and change for progress. The Finance Ministry has become almost pathological in its ‘change mania.’ A stable fiscal policy is to a nation what a stable family life is to an individual. But stability is anathema to the North Block,” Nani sadly lamented. (more…)

MAJOR TAX SAVING FOR MINOR’S INCOME

Using the medium of a discretionary trust, you can plan to save a decent tax of Rs.2,06,000 on income of Rs.10,00,000!

              Section 64(1A) of the Income-tax Act provides that “in computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child.” With a view to ensure building up income for minors without attracting the above provisions relating to clubbing of income, one of the effective tools is a Private Discretionary Trust.

WHAT IS A DISCRETIONARY TRUST?

              A private discretionary trust is a trust wherein the beneficiaries and/or their shares in the income and assets of the trust are not specified in the trust deed. The trustees of such a trust are given full discretion in deciding these matters. The provisions of Section 164 of the Income-tax Act which govern the taxability of a private discretionary trust specify that income-tax shall be charged on the income of the trust at the ‘maximum marginal rate’ (currently 30.9%). (more…)

CALL FOR CRUSADE AGAINST GAAR!

Even as Parliamentary Panel frowns on the notorious DTC provisions, Budget gives it a mischievous back-door entry!

             While presenting his Budget 2012, the Union Finance Minister referred to the ‘Report on the Direct Taxes Code (DTC) Proposals’ received from the Parliament’s Standing Committee on Finance and observed that, “we will examine the Report expeditiously and take steps for the enactment of DTC at the earliest.”

             However, it has come as a huge shock that grossly ignoring the critical concerns of the Committee in regard to the ‘General Anti Avoidance Rules’ (GAAR) and its strong recommendations for thoroughly amending GAAR, the original GAAR proposals as packaged in the DTC Bill have been most mischievously given a back-door entry in the Income-tax Act through clause 40 of the Finance Bill, 2012. (more…)

COERCIVE RECOVERY NOT JUSTIFIED!

HC holds that ITO should not act as a mere tax gatherer but as a quasi judicial authority vested with public duty!

“Administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expense of foreclosing remedies which are available to assessees for challenging the correctness of a demand. The sanctity of the rule of law must be preserved.” With these observations, the Bombay High Court has come down heavily hammer and tongs, sharply criticizing the attitude of the tax officials in making coercive recoveries from taxpayers through attachment of their bank accounts. (more…)

ILLUSIONS LARGER THAN CONCESSIONS!

Tax reliefs granted by the FM in Budget 2012 are not only inadequate but also deceptive!

                   While the Finance Minister has been predictable, in announcing the much expected Rs.2,00,000 personal income-tax exemption limit (from the current limit of Rs.1,80,000), he has disappointed the lady taxpayer and the senior citizen by not making any significant increase in their respective exemption limits of Rs.1,90,000 and Rs.2,50,000.

                    Thus, while  all income-tax payers upto the taxable income of Rs.8,00,000 will get a tax benefit of Rs.2,060, a lady taxpayer has been handed only Rs.1,030 and the senior citizen (including Super Seniors above 80) virtually nothing by way of tax relief!

                     Taxpayers in the income range of Rs.8,00,000 to Rs.10,00,000 and Rs.10,00,000 and above shall have a definite reason to cheer, with tax saving of 10.3% and Rs.22,660 respectively. (more…)

DTC PANEL MOOTS MAJOR REFORMS!

Seeks more rational exemptions, liberal tax rates, greater accountability in administration & taxpayer friendly regime!

                   “We want taxpayers to celebrate DTC. I can assure you that our committee will make sure that the Direct Tax Code (DTC) is made as taxpayer friendly, as judicious and as equitable as possible,” assured Yashwant Sinha, former FM and Chairman of the 31 member Parliamentary Standing Committee on Finance, while responding to the presentation made by your columnist on the occasion of the interactive session on the ‘Challenges of Direct Tax Code’ held at Ahmedabad in May, 2011. It is indeed heartening for the taxpayers at large that the spirit of this positive assurance stands reflected in ample measure in the 364 page Report of the Parliamentary Panel on DTC presented to the Speaker on March 9, 2012. (more…)

I.T. WEAVES WONDERS FOR I.T.!

E-processing of tax returns at CPC ushers faster refunds for tax payers & considerable saving in interest cost of IT Dept.

                   Information Technology (IT) has indeed weaved wonders for Income Tax (IT)! Your columnist had an occasion to get a feel of this unique feat of the Centralized Processing Centre (CPC) of the IT Department, while participating at the interactions of the strategic All India CPC Workshop, organized at the sprawling state of the art academic campus of Infosys at Mysore. (more…)

LATE NIGHT INTERROGATION IS HUMAN RIGHT VIOLATION!

Patna High Court holds tax officials guilty for sleep deprivation of taxpayer during Income-tax search!

                 One Rajendra Singh made a complaint before the Bihar State Human Rights Commission that during the Income-tax search and seizure operation, the raiding party committed various acts of omission and commission including violation of his human rights. He alleged that the officials of the Income Tax Department confined his family in the house for two days in course of the search and seizure operations at their business and residential premises almost uninterruptedly and did not allow cooking food, thereby compelling them to purchase the same from outside. He also alleged that the members of the search team misbehaved, abused and tortured the taxpayer and his family members and used methods of coercion for recording statements and obtaining signatures forcibly. (more…)