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PRESUMPTIVE INCOME SCHEME!

Freedom from accounting, audit, scrutiny & advance tax for small businesses declaring 8% or higher profits

Business entities having an annual turnover or gross receipts of less than Rs. 1 crore need to be familiar with the special provisions of Section 44AD of the Income-tax Act in regard to computing profits and gains of business on presumptive basis. The major highlights of the ‘Presumptive Income Scheme’ are as under:

  • It applies to any ‘eligible taxpayer’ being an individual, HUF or partnership firm (not claiming any exemption or deduction in respect of special undertakings or incomes under the Section 10 or 80 family), who has income from ‘eligible business.’

  • An ‘eligible business’ means any business, other than business of a transport operator (since the same is covered under Section 44E), whose annual total turnover or gross receipts does not exceed Rs.1 crore. (more…)

PAVING FOR DOUBLE TAX SAVING!

ITAT Ahmedabad holds capital gains of Rs.1 crore exempt u/s.54EC, where investment is split in two financial years

             Section 54EC of the Income-tax Act provides for exemption of taxable long term capital gains (LTCG) arising from the transfer of an asset, to the extent the amount of such gains are invested in notified bonds within a period of six months from the date of transfer. Notified for this purpose are the three year bonds issued by National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC).

            Until FY 2006-07, there was no monetary ceiling prescribed in regard to investment in such capital gains bonds and hence a taxpayer could virtually invest his entire taxable gain, even running into crores of rupees, in these bonds and avail the benefit of 100% exemption under Section 54EC.

            However, the Finance Act, 2007 amended Section 54EC so as to provide that this exemption would be available subject to the condition that the investment in the notified capital gains bonds made on or after 1st day of April, 2007 does not exceed Rs.50 lakhs during any financial year. (more…)

SIMPLE PRE-BUDGET PRESCRIPTION!

Via meaningful reforms in tax administration FM can earn immense tax-payer goodwill without losing any tax revenue!

              There was a time until the mid-1980s when our direct tax rates were so high, that Indian taxpayers used to pray to the FM, “Take away all our income, just return us our taxes!” However, the past 25 years have witnessed a considerable rationalization in the direct tax rate structure. And, after the peak income tax rate was brought down to 30% in 1997, India’s finance ministers have been justifiably boasting of the country having world class tax rates. (more…)

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