Sunday, October 17, 2021

Here are the key income tax expectations from Budget 2021

The countdown for the Union Price range 2021 has began with all eyes on the Union Finance Minister Nirmala Sitharaman’s third funds, which she will probably be presenting on February 1, 2021.

Listed here are the important thing expectations associated to the earnings tax from Price range 2021 (Compiled by Naveen Wadhwa, DGM, Taxmann):

Capital acquire provisions shouldn’t include the reference of any specific yr in respect of sovereign gold bonds (SGBs) scheme

There are a number of advantages of investing in SGBs. In line with part 47 of the Revenue-tax Act any switch of SGB by the RBI underneath the Sovereign Gold Bond Scheme, 2015, by means of redemption, by an assessee being a person shall not be handled as a switch for the aim of capital acquire.

This refers to solely SGB issued underneath the Sovereign Gold Bond Scheme, 2015. Nevertheless, the federal government points a brand new SGB scheme yearly. Thus, part 47 ought to be suitably amended to take away reference of any specific yr from the Sovereign Gold Bond Scheme.

Tax deducted within the overseas nation to be handled as earnings of assessee

Part 198 of the Revenue-tax Act, 1961 offers that the tax deducted at supply ought to be included within the gross complete earnings of the assessee. Nevertheless, the computation of earnings is usually disputed if taxes have been withheld exterior India and the corresponding earnings is obtainable to tax in India. In absence of an specific provision on this regard, the assessee consists of the online earnings to his/her gross complete earnings. Whereas the assessing officer assesses the gross quantity.

This battle arises because of the absence of a reference in Part 198 of taxes withheld exterior India.

Because the taxes paid exterior India are eligible for the overseas tax credit score underneath Part 90/90A learn with Rule 128, it is strongly recommended that the mandatory amendments ought to be made to Part 198 to deliver the earnings earned exterior India at par with the earnings earned in India.

Consequential modification wanted after the abolition of Dividend Distribution Tax (DDT)

Part 234C offers for levy of curiosity in case an assessee has the legal responsibility to pay the advance tax however he/she fails to pay the identical or the quantity paid in every instalment is lower than the quantity he/she ought to have paid in such instalments. Nevertheless, it’s offered underneath the stated part that if the shortfall in cost of tax occurs on account of underestimating or failure to estimate the accrual of earnings referred underneath Part 115BBDA(1), then such shortfall shall be ignored whereas figuring out the chargeability of curiosity.

As much as the evaluation yr 2020-21, a shareholder receiving a dividend from a home firm was exempt from paying tax on such dividend because the tax was recovered from the corporate in type of dividend distribution tax (DDT). Nevertheless, the place the quantity of dividend acquired by a specified resident shareholder exceeds Rs 10 lakh then the surplus quantity was chargeable to tax at a particular price of 10 p.c underneath Part 115BBDA.

With impact from the evaluation yr 2021-22, the Finance Act, 2020 has moved to the standard system of taxation of dividend whereby the home firm would not be required to pay DDT on the dividend declared, distributed or paid to the shareholder on or after April 1 and, consequently, the shareholders shall be liable to pay tax on such dividend.

Thus, Part 115BBDA can be of no relevance as all the quantity of dividend shall now be taxable within the palms of the shareholder as per the traditional provisions of the Act.

Thus, it is strongly recommended that Part 234C ought to be amended to offer leisure from the levy of curiosity if the shortfall in cost of advance tax is attributable to fallacious estimation or under-estimation of the dividend earnings.

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