Amendments for Nov’12, May’13 & Nov’13
Exams
PAPER
- 4 : TAXATION
1.
Following are the
amendments applicable for November 2012 exams issued in RTP of ICAI. Students are not required to learn
notification no., therefore notification no. have been removed and presentation
is done in simple and short language.
·
No other changes are required to be done.
·
Previous year 2011-12(A/Y 2012-13) shall be applicable.
·
Slab rate of 1,80,000 for man, 1,90,000 for woman,
2,50,000 for senior citizen and 5,00,000 for
very senior citizen shall remain applicable.
2.
Significant Notifications
& Circulars Issued upto 30.04.2012
3.
The Examination Committee
has decided that students appearing in November 2012 examinations will not be
examined with respect to specific services in the area of income tax &
service tax laws in Part-II Income tax & service tax and VAT of Paper 4:
Taxation (IPCE).
Therefore, it is clarified that ALL
the taxable services (including the eight (8) services notified earlier by the
Board Of Studies) will not be relevant for Nov’ 2012 exams.
INCOME TAX
|
1. Limits for exemption of interest on Post Office Savings
Bank Account
(Page No.
238)*
* Page numbers given are from
the text book of Confident batch, i.e. the Red colour small size book.
Under section 10(15), income by way of interest on
notified securities, bonds, savings
certificates issued by the
Central Government.
However, as per the amendment, the interest on Post Office
Savings Bank Account which was fully exempt would be exempt from
tax only upto:
(i) ` 3,500 in case of an
individual account.
(ii) ` 7,000 in case of a joint
account.
Therefore in case of
individual if interest of post office bank account is 4,000 then 500 shall be taxable.
2. Specification of bonds
for interest exemption under section 10(15)
(Page No.
238)
the Central Government has specified the issue of tax free
bonds of
(i) Rural Electrification Corporation
Limited (RECL),
(ii) National Highways
Authority of India (NHAI),
(iii) Indian Railways Finance Corporation
Ltd. (IRFCL),
(iv) Housing and Urban
Development Corporation Ltd.(HUDCL) and
(v) Power Finance Corporation
(PFC)
to be issued during the
financial year 2011-12, the interest on which would be exempt.
3. Cost Inflation Index for
F.Y.2011-12 is 785, already
in books.
(Page No. 206)
4. The Finance Act, 2011 has inserted new clause (45) in
section 10 to exempt specified allowances and perquisites received by Chairman
or any other member, including retired Chairman or member of the Union Public
Service Commission (UPSC).
Accordingly, the Central
Government has notified
the following allowances
and perquisites for serving Chairman and members of UPSC, for the
purpose of exemption under section 10(45) –
(i)
the value of rent free official residence,
(ii)
the value of conveyance facilities including transport
allowance,
(iii)
the value of leave travel concession.
5. Increase in limit for
subscription to public provident fund
(Page No.
256)
the maximum limit of investment by an individual, on his
behalf or on behalf of a minor of whom he is the guardian, has been
increased from ` 70,000 to ` 1,00,000 for deduction under section 80C. Already in books.
6. Notification of Long-term
infrastructure bonds for section 80CCF
(Page No.
258)
Section 80CCF exempts any amount paid or deposited by an
individual or HUF as subscription to long-term infrastructure bonds notified by
the Central Government, subject to a limit of ` 20,000.
Accordingly, the Central Government has specified the long
term infrastructure bonds to be issued in the financial year 2011-12 by
(i)
The Industrial Finance Corporation of India (IFCI),
(ii)
The Life Insurance Corporation of India (LIC),
(iii)
The Infrastructure Development and Finance Company Ltd.
(IDFCL),
(iv)
The India Infrastructure Finance Company Ltd. (IIFCL) and
(v)
A Non-Banking Finance Company classified as an
Infrastructure Finance
Company by Reserve Bank of India,
Company by Reserve Bank of India,
as long term
infrastructure bonds for the purpose of the deduction u/s 80CCF.
7. To Prepare and submit
TDS returns/statements.
(Page No.
307)
The time limit for furnishing such quarterly statements
shall be 15th of the month following each quarter in respect of the first three
quarters and 15th May for the last quarter ending on 31st March. The due dates would
therefore be 15th July, 15th October, 15th January and 15th May for the
quarters ending 30th June, 30th September, 31st December and 31st March,
respectively.
8. Specified persons
exempted from filing return of income under section 139(1) for A.Y. 2012-13:- Already in books in chapter assessment
procedure. (Page No. 285)
I.
Rate of Income tax & service tax: [Charging Section – Sec 66] (Pg. No. 35)
W.e.f. 1.4.2012,
the rate of income tax & service tax has again been restored to 12%.
Now, income tax
& service tax shall be levied @12%
of the value of taxable services. + education cess of 3%.
II.
Adjustment of excess income tax & service
tax paid: [Rule 6, STR 1994] (Pg No. 46)
Shall be possible :-
(a)
Without any Limit;
and
(b)
Without any
Conditions.
III.
Compulsory electronic filing of return- Already in books (Pg No. 59)
IV.
Changes in special provisions for calculation
of tax (Notional rates) : (Pg No. 47)
1.
In case of Air travel Agent the notional rate has not been changed. It shall remain 0.618% in domestic booking
and 1.236% in case of international booking, if their commission is not shown
separately. But if air travel agent
doesn't follow notional rates then income tax & service tax shall be
payable at 12.36% only.
2.
In case of insurer carrying on Life Insurance
Business: (Pg.
No. 47)
Rate of Income tax & service tax
Prior to amendment
(Till
31.03.2012)
|
Rate of income tax & service tax
After amendment
(W.e.f.
01.04.2012)
|
|
First
|
1.545% of the
gross amount of premium charged
|
3.09% of the
gross amount of premium charged
|
Subsequent years
|
1.545% of the
gross amount of premium charged
|
1.545% of the
gross amount of premium charged
|
1.
In case of sale/purchase of foreign currency
& money changing: (Pg. No. 48)
Amount of
currency exchanged
|
Rate of Income tax & service tax
Prior to amendment
(Till
31.03.2012)
|
Rate of income tax & service tax
After amendment
(W.e.f.
01.04.2012)
|
|
1.
|
Upto ` 1,00,000
|
0.1, minimum `25
|
0.12%,minimum ` 30
|
2.
|
Exceeding ` 1,00,000 upto
10 Lakhs
|
`100 + 0.05%
|
` 120 + 0.06%
|
3.
|
Exceeding `10 Lakhs
|
`550 + 0.01%,
Maximum ` 5,000
|
` 660 + 0.012%
Maximum `6,000
|
Note:
Further, Education Cess @ 2% & SHEC @ 1% shall be added to the amounts
given above.
2.
In case of Distributor/ Selling agents of
Lotteries: (Pg. No. 48)
Guaranteed lottery prize payout
|
Amt. of income tax &
service tax payable on every ` 10 lakh (or part of ` 10 lakh) of aggregate face value of lottery tickets printed by the
organizing State for a draw.
|
|
Prior to amendment
(Till
31.03.2012)
|
After amendment
(W.e.f.
01.04.2012)
|
|
More than 80%
|
6,180
|
` 7,210.
|
Less than 80%
|
9,270
|
` 11,330.
|
I.
Changes in PTR 2011
1.
Change in time- limit for issuance of
Invoice:
[Rule 3, PTR] (Pg No- 42)
Determination
of Point of taxation (service treated to be provided when)
(i)
If Invoice is issued in 14 30 days from completion of service:-
Date of Payment or date
of invoice
whichever is earlier.
(ii)
If invoice is not issued in 14 30 days of completion of service:-
Date of Payment or date
of completion
whichever is earlier.
Note: The limit is 45 days in case
of banks and financial institutions providing
banking and other financial
services.
2. Date of payment : [Rule
2A of Point of Taxation Rules]
Rule 2A
has been inserted to define the date of payment.
For the
purposes of these rules, “date of payment” shall be:-
(a) date on which
the payment is entered in the books of accounts
or
or
(b) date on which
payment is credited to the bank account
whichever is earlier.
®
But Credit in the bank account shall be taken as the date of payment
®
if credit in bank is after 4 working days
®
from the date when there is change in effective rate of tax or service is taxed for the first time.
Illustration:
(i) If payment is made in the
books of accounts on 30.03.2012 and payment is credited in bank A/c i.e.
received (cheque is deposited) on 4.04.2012 – then date of payment is
30.03.2012 - means 10.3% rate applicable.
(ii) If
payment is made in the books of accounts on 30.03.2012 and payment is credited
in bank A/c i.e. received (cheque is deposited) on 13.04.2012 (after 4 days) –
then date of payment is 13.04.2012 - means 12.36% rate applicable.
3.
New provision added in
Rule 3:-Point of taxation in case where payment upto ` 1,000 received in excess of the invoiced amount
Wherever
the provider of taxable service receives a payment up to ` 1,000 in excess of the amount
indicated in the invoice, the point of taxation to the extent of such excess amount, at
the option of the provider of taxable service, shall be determined on the basis
of invoice or completion of service, whichever is earlier, rather than payment.
Purpose
of the aforesaid provision:-
In this regard CBEC
clarifies as follows:-
As a measure of added facilitation, an option has been
provided to determine the point of taxation in respect of small advances up to ` 1000, in excess of the
amount indicated in the invoice, on the basis of invoice or
completion of service rather than payment.
Such provision is expected to address the accounting
problems faced by service
providers in telecommunications, credit card businesses
who regularly receive minor excess payments from their customers.
Background :-
In some industries, specifically Telecommunication
companies, generally receives some small amounts in excess of billed amount. In
such case, rule 4A of Income tax & service tax Rules, 1994 required them to
issue an invoice in respect of such excess amount and rule 3 of Point of
Taxation Rules, 2011 required them to make payment of such excess amount on
receipt basis.
Therefore, it was an accounting problem to pay the income
tax & service tax on such excess amount on receipt basis and issue invoice
thereof.
Amendment:-
Now, proviso has been
inserted to rule 4A of Income tax & service tax Rules, 2012 to provide that
assessee is not required to issue an invoice if an amount, not exceeding `1,000/- in excess of the
amount indicated on invoice, is received. Further proviso has also been
inserted to rule 3 of Point of Taxation Rules, 2011 to provide that point of
taxation in respect of such excess amount received shall be the date on which
invoice in respect of this amount is issued. However, if invoice is not issued
within 30 days from the date of completion of provision of service, then, in
such case, date of completion of provision of service (against such excess
amount) shall be the point of taxation.
Thus, in respect of an amount
received, not exceeding `1,000/- in excess of the amount indicated on invoice, income
tax & service tax is not required to be paid at the time of receipt of such
payment.
Illustration:-
Telecommunication Company ‘ABC’ issued an invoice
for `7,537/- on
‘B’ on 07.05.2012 for the month of April’12. Thereafter, ABC receives payment
amounting to ` 8000/-
from B on 20.05.2011, i.e. `463/-
received in excess of amount indicated on invoice. ABC is required to pay income
tax & service tax in respect of invoice issued for 7537/- while discharging
the liability for the month of May’12. (ABC is not required to pay income tax
& service tax receipt of excess amount). On 07.06.2012, ABC issues an
invoice for `8787/- on
B for the month of May’12. Now, on 21.06.2012, B makes payment of 8,324/- after
adjustment of `463
already paid in excess. ABC shall pay income tax & service tax in respect
of `8,787
while discharging income tax & service tax liability for the month of
June’12 on invoice basis.
3.
New income tax & service taxable for first time: [Rule 5,
PTR] (Pg No- 43)
New
Service:- A
service is taxed for the first time then:-
(a)
Before becoming taxable invoice issued and
payment received
No Tax payable.
(b)
Payment received before tax and invoice
issued in 14 days of
the date when service is taxed for the first time. (
as per rule 4A of STR)
In (b) point as
per Rule 4A of STR has to be removed.
Therefore in such case the time limit of issue of invoice is 14 days of the
date when service is taxed for the first time.
3.
Determination of point of taxation: [Rule 8A inserted in Point of Taxation
Rules]
®
Where the point of
taxation cannot be determined
®
as the date of invoice or the date of payment are not available,
®
the Central Excise
officer may require to produce accounts,
documents etc. and
®
shall determine the point of taxation to the best of his judgment.
Rule 6 of Point of Taxation
Rules-continuous supply of services deleted and merged in rule 3.
I.
Cash system:- In Rule 6 of Income tax & service tax
Rules, 1994 new point added:- (Pg No- 44)
®
In
case of individuals and partnership firm
®
whose
total taxable services provided during the previous year is upto 50 lakhs,
®
shall
have the option
®
to
pay tax on cash basis
®
on
the taxable services provided or agreed to be provided upto 50 lakhs.
Consequential amendment in Rule 7 of Point Of
Taxation Rules, 2011
In Rule 7 of POT Rules (ii) & (iii) point relating to
specific services has been deleted.
Therefore Rule 7 shall remain applicable in case of
reverse charge u/s 68(2).
In case of services referred in 7(iii) if invoices were
issued before 31.3.2012 then income tax & service tax shall be payable when
the amount is received @ 12.36%.
VAT
|
No amendments have been made in VAT section.
CLARIFICATIONS ON CHANGES MADE WITH EFFFECT
FROM 1-4-2012 IN
POINT OF TAXATION RULES
RELEVANT EXTRACTS OF MINISTRY’S D.O.F. NO.
334/1/2012 - TRU, DATED 16-3-2012
D.
Point of Taxation Rules, 2011
1.
The time period for issuance of invoice is
being increased to 30 days ordinarily and 45 days for banks and financial
institutions (to reconcile with the business practice of issuing monthly
statement). These changes are being provided in Rule 4A of Income tax &
service tax Rules and the time period so defined is being incorporated in POT
Rules.
2.
The benefit available to individuals and
firms to determine POT on the basis of date of payment for eight specified
services is being extended to all services in a slightly modified form. The
facility will be now available to individuals and partnership firms (including
limited liability partnership) up to a turnover of ` 50 lakh in a financial year provided the
taxable turnover did not exceed this limit in the previous financial year. For
computing the above limits, the turnover of the whole entity is required to be
summed up and not any single registration.
3.
Since the essence of the rule in case of
continuous supply of service is the same as the main Rule, the separate rule
for continuous supply of service [Rule 6] is being merged with the main rule.
4.
In case of a new levy, no tax is chargeable
on services where payment has been received and invoice issued within a period
of 14 days. To provide certainty, clause (b)
is being amended to specify that invoice should be issued within 14 days of
the date of the new levy.
5.
The “date of payment” could be a subject of
litigation particularly when effective rate changes. A new rule has been
created: Rule 2A keeping in view the impending change in rate effective April
1,2012 and introduction of Negative List at a later date. In normal
circumstances this date shall be the earlier of the dates of entry into books
of account or actual credit in the bank account (when applicable). However,
when there is change in effective rate of tax or a new levy between the said
two dates, the date of payment shall be the date of actual credit in the bank
account, if the amount is credited through a banking instrument more than four
working days after the date of such change.
6.
As a measure of added facilitation, an option
has been provided to determine the point of taxation in respect of small
advances up to `1,000 in excess of the
amount indicated in the invoice, on the basis of invoice or completion of
service rather than payment. Such provision is expected to address the
accounting problems faced by service provider in telecommunications, credit
card businesses who regularly receive minor excess payments from their
customers.
7.
A residual rule has been made by way of best
judgment to handle situations where the taxpayer is unable to furnish one or
more of the details needed i.e. date
of payment or date of invoice or both to determine POT.
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