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

EQUITY VERSUS TAXATION !

Though equity and taxation are often held as strangers,

Courts have ensured that they do not always remain so!

             Courts have been liberal in their judicial interpretations, while dealing with issues relating to exemption provisions, holding that “a beneficial section has to be construed liberally, having due regard to the object which it intends to serve.”

            In a recent matter that came up before the Punjab & Haryana High Court in the case of ‘CIT vs. Jagtar Singh Chawla’ [2013] 33 taxmann.com 38, the taxpayer had sold his property on 20.06.2006 for a consideration of Rs. 2.24 crores. The said amount was not invested in the capital gains account scheme by the due date of filing the return under Section 139(1) (i.e., 31.07.2007) and was instead used to purchase a new residential house on 31.3.2008. The taxpayer claimed exemption under Section 54F which was denied by the Assessing Officer & Commissioner (Appeals) on the ground that under Section 54F(4), the amount of the consideration which is not appropriated for purchase of the new asset before the date of furnishing the return of income had to be deposited in the “capital gains account scheme” before the due date for filing the return of income under Section 139(1). 

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TAX PLANNING FOR THE SALARIED!

You can enjoy a maximum take home pay by including these tax free allowances & perks in your annual pay package!

The Income-tax Act provides for a number of allowances and perquisites which have been notified as tax free and every salaried taxpayer must endeavour to negotiate his pay package in a manner that the same can include such tax free allowances and perquisites. This would ensure that he is able to take maximum take-home pay per month with the minimum deduction of tax. 

Some of the important tax free allowances and perquisites are listed here under: 

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HINDUISM NO RELIGION, ONLY A WAY OF LIFE!

ITAT holds expenses for worshipping Shiva & Hanuman or organizing Ganesh festival is not for any religious purposes!

              “Expenses incurred for worshipping of Lord Shiva, Hanuman, and Goddess Durga and for celebration of festivals like Shivratri, Hanuman Jayanti, Ganesh Utsav and Makar Sankranti cannot be regarded to be for ‘religious purpose.’ Upholding this contention in a landmark decision, which is bound to shake up a lot of conventional thinking on the subject, the Nagpur Bench of the Income-tax Appellate Tribunal (ITAT) has very recently held that, “Hinduism is not a religion, but a way of life of a civilized society.” The ITAT, thus directed the Commissioner of Income-tax (CIT) to grant approval u/s. 80G of the Income-tax Act in respect of the donations received by the appellant trust ‘Shiv Mandir Devsthan Panch Committee Sansthan, Nagpur.’ (more…)

TAX EXEMPT REIMBURSEMENTS!

Salaried employees should plan to enjoy conveyance, telephone, entertainment & medical reimbursements!

Under Section 17(2) of the Income-tax Act read with Rule 3 of the Income-tax Rules, any reimbursement granted by an employer to his employee for telephone expenses (including a mobile phone), actually incurred by an employee is treated as an exempt perquisite (perk). It is pertinent to note that there is no monetary ceiling prescribed in regard to this reimbursement.

 TAX FREE MEDICAL REIMBURSEMENTS

            Under Section 17(2) of the Income-tax Act, reimbursement made by an employer of upto Rs.15,000 of medical expenses in a year, actually incurred by an employee on his medical treatment or the treatment of any member of his family, is treated as an exempt perk.  (more…)

TAX FREE SAYONARA!

Receive a bouquet of tax benefits when you say good bye

to your employer on retirement or termination of service!

Under the provisions of Section 10(10) of the Income-tax Act, gratuity received by an employee from his employer, on retirement, or becoming incapacitated before retirement, or expiring, or whose services are terminated, is exempt as under: (more…)

TAX & REPAT BONANZA FOR NRIs!

With RBI allowing free transfer of funds from NRE to NRO Accounts, NRIs can plan tax exemption & easy repatriation!

                         In the past decade, the Reserve Bank of India (RBI) has granted liberal facilities to Non-Resident Indians (NRIs), not only for repatriation of their current income earned in Indian Rupees, but also for remittances for specified purposes and substantial repatriation out of their Non-Resident Ordinary bank accounts. 

                         For the above purposes, an NRI would in fact mean not only an Indian National Resident outside India, but also a Foreign National of Indian origin who is a Non Resident i.e. Persons of Indian Origin (PIOs).

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SMART BOND FOR EXEMPTION!

Enjoy exemption from long term capital gains by planning investment in specified bonds!

               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.50,00,000 during any financial year. (more…)

KBC – NO FREEDOM FROM TAX!

All winnings from Lottery or Games are taxed at flat rate of 30% & TDS is mandatory before Prize is handed over!

Though the popular TV Game Show KBC (Kaun Banega Crorepati) will launch its 5th Avataar on India’s 64th Independence Day 15th August, 2011, it will indeed be ironical that its prize winnings will enjoy ‘no freedom from tax.’ 

Participants receiving cheques signed by Big B for the full prize money as shown on your TV screen is mere hype, since no one really gets to take anything home before the taxman gets his pound of flesh (read tax) at a flat 30.9% from the same! (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…)

Minus Social Security : EET=Inequity

Hard Hit Small Salaried Deserve Lower Starting Tax Rates!

Both Employment & Retirement Made More Taxing!

  • Allowances & Perks – no longer exempt: House rent allowance (HRA), leave travel concession (LTC), medical reimbursement, value of free or concessional medical treatment and children’s education & hostel allowance.
  • Puny deductions that will still continue: Professional tax paid, transport allowance to the extent prescribed and prescribed special allowances to meet expenses incurred for official duties.
  • Retirement may not be as relaxing: Leave encashment on retirement, to be fully taxable.
  • VRS compensation, death or retirement gratuity and commutation of pension to be exempt, only if deposited in a Retirement Benefit Account (RBA).
  • However, any amount drawn from RBA (including PF contributions and accretions after 1st April, 2011) under any circumstances to be treated as taxable in the year withdrawal. (more…)
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