Tax Amendments, Tax Rate, Circulars, and much moreRelevant for CA Inter May 2019 Exams & CA Inter Nov 2019 Exams

Tax Amendments

Dear Students, Professionals & Teachers;

We have complied all the amendments relevant for CA Intermediate May 2019 and CA Intermediate Nov 2019 keeping Finance Act 2018 as base. The main purpose of this document is to help CA students, in clearing their CA Intermediate examinations. Also all changes of Finance Act 2018 have not been discussed here, only the changes which are a part of CA Intermediate syllabus as per CA course updated on ICAI are discussed here.

For best reference and understanding we suggest our konceptca students to watch parallel videos available in the taxation subject videos in your study account.

We have added few tax amendments sums which we developed, these would immensely help you in deeper understanding of the provision. If you find any typing error or mistakes in the document please contact and let us know at 9228446565 or yash@konceptca.com

Happy Reading…… and remember amendments have weightage of about 30%-40% in your exam. The following document will help you to gain these crucial 30 - 40 marks.

tax Amendments

Relevant Finance Act for May 2019 and Nov 2019 Examinations - Finance Act 2018

Finance Act 2018 received assent of the president on 29th March 2018. Hence all income earned in the Previous Year 2018-19 will be assessed as per Finance Act 2018 in the Assessment Year 2019-2020. As May 2019 exams and Nov 2019 exams fall within the Assessment Year 2019-2020, relevant finance act applicable will be Finance Act 2018.

tax Amendments financial year and annual year

Relevant Finance Act for May 2019 and Nov 2019 Examinations - Finance Act 2018
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7:2311:02

Health & Education Cess - 4%

The Income-tax, as increased by the surcharge or as reduced by the rebate under section 87A, if applicable, is to be further increased by an additional surcharge called “HEALTH & EDUCATION CESS @ 4%”

Earlier

The Income-tax, as increased by the surcharge or as reduced by the rebate under section 87A, if applicable, is to be further increased by an additional surcharge called education cess @ 2% and secondary and higher education cess @ 1%

tax amendments idea, careful
HEALTH & EDUCATION CESS @ 4% is a Tax-on-Tax, meaning 4% is not charged on income earned its charged on the taxes computed, after considering surcharge and rebate, if applicable on the income earned.

So,
Step 1 = Calculate Total Income
Step 2 = Calculate Total Tax
Step 3 = Calculate Surcharge, if applicable
Step 4 = Calculate Rebate, if applicable
Step 5 = Step 2 + Step 3 - Step 4
Step 6 = Calculate 4% on Step 5

Step 6 value = Cess

CASE 1CASE 2CASE 3
TOTAL INCOME - XXXXXTOTAL INCOME - XXXXXTOTAL INCOME - XXXXX
Tax Computed - ₹ 25,000Tax Computed - ₹ 10,25,000Tax Computed - ₹ 9,000
Surcharge - NILSurcharge - ₹ 15,000Surcharge - NIL
Rebate - NILRebate - NILRebate - ₹ 2,000
Cess =Cess =Cess =

Health & Education Cess - 4%
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12:0715:59

Circular No. 28/2016, dated 27-07-2016, B'day 1st April -> 31st.March

Circular - The CBDT has, vide this Circular, clarified that a person born on 1st April would be considered to have attained a particular age on 31st March, a day preceding their actual birthday. Hence the question of attainment of age for being considered a senior or very senior citizen would be decided on the basis of this above criteria

ANALYSIS - An individual who is resident in INDIA and of the age of 60 years or more (Senior Citizen) and 80 years or more (Very Senior Citizen) is eligible for a higher basic exemption limit ₹ 3,00,000 and ₹ 5,00,000 respectively.

Earlier

IF 60th B’day or 80th B’day on 1st April 2019, then it was considered that they attained Seniority or Super Seniority in the PY 2019 - 2020, hence in AY 2020 - 2021 they would be given the benefit of higher basic exemption limit

Now

IF 60th B’day or 80th B’day on 1st April 2019, then it will be considered that they attained Seniority or Super Seniority on 31st March 2019. Hence in the PY 2018 - 2019 only they would be considered senior or super senior, and in AY 2019 - 2020 they would be given the benefit of higher basic exemption limit

ca inter tax amendments
  • Please note that the benefit of higher basic exemption limit is only available a “RESIDENT INDIVIDUAL”, so if the assessee is a Non Resident Individual no point in computing age, hence no point of this circular.
  • Be careful if the assessee in the question is a resident individual with B’day on 1.4.1959, he would be having his 60th B’day on 1.4.2019 but as per this notification his B’day would be considered on 31.3.2019 and hence he would attain the benefit of higher exemption limit from the AY 2019-2020
  • Be careful if the assessee in the question is a resident individual with B’day on 1.4.1939, he would be having his 80th B’day on 1.4.2019 but as per this notification his B’day would be considered on 31.3.2019 and hence he would attain the benefit of higher exemption limit from the AY 2019-2020

Case 1. Compute the tax liability of Mr. A (Birthday on 1.4.1989) for the AY 2019-20, Mr. A visits India for 150 days in every financial. This has been his practice for past 6 financial years. He has earned the following income pertaining to the year ending on 31.3.2019

Particulars
Short Team Capital Gain other than 111A received in India6,00,000
Dividend from a Japanese company received in Japan1,00,000
Rent income from property situated in London deposited in London, later on remitted to India75,000
Dividend income from Rx Ltd., an Indian company15,000
Agricultural income from land in Gujarat25,000

Case 2. Compute the tax liability of Mr. A (Birthday on 1.4.1959) for the AY 2019-20, Mr. A visits India for 150 days in every financial. This has been his practice for past 6 financial years. He has earned the following income pertaining to the year ending on 31.3.2019

Particulars
Short Team Capital Gain other than 111A received in India6,00,000
Dividend from a Japanese company received in Japan1,00,000
Rent income from property situated in London deposited in London, later on remitted to India75,000
Dividend income from Rx Ltd., an Indian company15,000
Agricultural income from land in Gujarat25,000

Case 3. Compute the tax liability of Mr. A (Birthday on 1.4.1939) for the AY 2019-20, Mr. A visits India for 105 days in every financial. This has been his practice for past 6 financial years. He has earned the following income pertaining to the year ending on 31.3.2019

Particulars
Short Team Capital Gain other than 111A received in India6,00,000
Dividend from a Japanese company received in Japan1,00,000
Rent income from property situated in London deposited in London, later on remitted to India75,000
Dividend income from Rx Ltd., an Indian company15,000
Agricultural income from land in Gujarat25,000

Circular No. 28/2016, dated 27-07-2016, B'day 1st April -> 31st.March
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16:0229:22

Tax Rate of Domestic Company - Relaxed Turnover Limit

In case of Domestic Company

  • If the total turnover or gross receipt in the “PY - 2016-2017” ≤ ₹ 250 crore : 25% of total income
  • In other case : 30% of total income

Earlier

In case of Domestic Company

  • if the total turnover or gross receipt in the “PY - 2015-2016” ≤ ₹ 50 crore : 25% of total income
  • In other case : 30% of total income

Tax Rate of Domestic Company - Relaxed Turnover Limit
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29:4432:12

Rebate under section 87A is not available in respect of tax payable @ 10% on long-term capital gains taxable under section 112A

Much detailed explanation about section 112A and all its aspects - Later…..!!


Rebate under section 87A is not available in respect of tax payable @ 10% on long-term capital gains taxable under section 112A
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32:5139:49

Circular No. 13/2017, dated 11.04.2017 and Circular No. 17/2017, dated 26.04.2017

Circular - Income by way of salary, received by non-resident seafarers, for services rendered outside India on a foreign going ship (with Indian flag or foreign flag) and received into the NRE bank account maintained with an Indian bank shall not be included in the total income

ANALYSIS - Non Residents are only taxed in India on INDIAN INCOME. To be an Indian Income, either the Income has to be,

  • Received in India
  • Accrued in India
  • Deemed Received in India
  • Deemed Accrued in India

Earlier

Non Resident seafarers earning income by way of salary for services rendered outside India for a foreign going ship (with Indian flag or foreign flag) and received into the NRE bank account maintained with an Indian bank was considered Indian Income because it was deemed received in India.

With the effect of Circular 13/2017 and 17/2017 it is clarified that it will not be deemed received in India, hence Income by way of salary, received by non-resident seafarers, for services rendered outside India on a foreign going ship (with Indian flag or foreign flag) and received into the NRE bank account maintained with an Indian bank will be foreign income, and foreign income is not taxable to non residents

Now


Circular No. 13/2017, dated 11.04.2017 and Circular No. 17/2017, dated 26.04.2017
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41:1148:00

Scope of Business Connection in India WIDENED - Amendment in Explanation 2 + New explanation added, Explanation 2A

Why is it necessary to find whether an income accruing or arising outside India has a business connection with India or not?

It is very important to find whether the income earned is Indian income or Foreign Income to understand its tax effect. Foreign Incomes are incomes which are

  • Neither Received in India
  • Nor Accrued in India
  • Nor Deemed Received in India
  • Nor Deemed Accrued in India

An income accruing or arising outside India would be deemed received in India if the income had any business connection in India by virtue of section 9(1). Business connection is not defined, its to be interpreted from case to case. However to remove doubts, two scenarios have been explained under explanation 2 and explanation 2A of section 9(1). Scenarios mentioned in explanation 2 and explanation 2A of section 9(1) will be considered to have business connection with India.

Explanation 2

ACT - Explanation 2.—For the removal of doubts, it is hereby declared that "business connection" shall include any business activity carried out through a person who, acting on behalf of the non-resident,—

(a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident or habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by that non-resident and the contracts are -

  1. in the name of the non-resident; or
  2. for the transfer of the ownership of, or for the granting of the right to use, property owned by that non-resident or that non-resident has the right to use; or
  3. for the provision of services by the non-resident; or

(b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or

(c) habitually secures orders in India, mainly or wholly for the non-resident or for that nonresident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident:

Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business :

Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal nonresident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status.

Analysis -

Explanation 2A

ACT - Explanation 2A.—For the removal of doubts, it is hereby clarified that the significant economic presence of a non-resident in India shall constitute "business connection" in India and "significant economic presence" for this purpose, shall mean—

(a) transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or

(b) systematic and continuous soliciting of business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means:

Provided that the transactions or activities shall constitute significant economic presence in India, whether or not,—

  • the agreement for such transactions or activities is entered in India; or
  • the non-resident has a residence or place of business in India; or
  • the non-resident renders services in India:

Provided further that only so much of income as is attributable to the transactions or activities referred to in clause (a) or clause (b) shall be deemed to accrue or arise in India.

ANALYSIS - significant economic presence of a non-resident in India shall constitute "business connection"

tax amendments in ca intermediate

Scope of Business Connection in India WIDENED - Amendment in Explanation 2 + New explanation added, Explanation 2A
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49:5701:08:25

Royalty income or fees for technical services received from National Technical Research Organisation (NTRO) - Section 10(6D) - New Exemption

ACT - In computing the total income of a previous year of any person, any income falling within any of the following clause shall not be included,

any income arising to a non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the National Technical Research Organisation

Analysis -

PERSONINCOMETREATMENT
1. Non Corporate Non Resident,
or
2. Foreign Company
Royalty or Fees for technical services
rendered in or outside India
rendered to NTRO
EXEMPT

Royalty income or fees for technical services received from National Technical Research Organisation (NTRO) - Section 10(6D) - New Exemption
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01:09:4001:12:59

Section 10AA read with Section 33B + Meaning of Export Turnover for Section 10AA

Actually there is no Amendment, Section 33B was inserted way before Finance Act 2018 and also the meaning of export turnover was always mentioned in Section 10AA. The reason why I am including this in my notes of amendments is because in the ICAI study module edition July 2017 there was no mention of section 33B and Explanation of Export Turnover whiles in the ICAI study module edition July 2018 these were included.

Section 10AA provided Tax Holidays for units established in Special Economic Zones, but one of the underlying condition to attain the tax benefit was that the unit should not be formed by splitting up or reconstruction of a business already in existence. However Section 33B lists exception to this

ACT - Section 33B - Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of —

(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature ; or
(ii) riot or civil disturbance ; or
(iii) accidental fire or explosion ; or
(iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war),
and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee

ANALYSIS -

DAMAGE REASONTIME LIMITTREATMENT
1. Natural Disasters, or
2. Riot or Civil disturbances, or
3. Accidental Fire or Explosion,
or
4. Action by an enemy or Action taking in combating an enemy
Businessisre - established before the expiry of three years from the end of such previous year in which damage happensSuch re-established business entity should not be considered to be formed as a reason of splitting up or reconstruction of a business already in existence

Explanation of Export Turnover and total turnover

Export Turnover means the consideration received in India or brought into India by the assessee in respect of export by the undertaking being the unit of articles or things or services.

However, Export Turnover and total turnover does not include

  • Freight
  • Telecommunication charges
  • Insurance

attributable to the delivery of the articles or things outside India or expenses incurred in foreign exchange in rendering of services (including computer software) outside India.


Transport Allowance to employees other than blind/ deaf and dumb/ orthopedically handicapped employee - FULLY TAXABLE

Earlier

Any transport allowance granted to an employee other than blind/ deaf and dumb/ orthopedically handicapped employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty was exempt to the extent of ₹ 1,600 p.m.

Now

Any transport allowance granted to an employee other than blind/ deaf and dumb/ orthopedically handicapped employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty is FULLY TAXABLE.

tax amendments in ca inter
  • Transport Allowance are allowance specifically provided to meet the cost of commuting between place of residence and place of office
  • Transport Allowance and Travelling Allowance are not the same, the later is provided to meet up the cost of travel on tour or on transfer
  • Transport Allowance and Conveyance Allowance are not the same, the later is provided to meet the expenditure incurred on conveyance in performance of duties of an office
  • There is no change in Transport Allowance exemption limit provided to employees who is blind/ deaf and dumb/ orthopedically handicapped, hence they would still get exemption upto the extent of ₹ 3,200 p.m.

Transport Allowance to employees other than blind/ deaf and dumb/ orthopedically handicapped employee - FULLY TAXABLE
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01:17:0601:26:35

Allowance prescribed for the purpose of section 10(14)(ii) - New exempt allowances added

S.No.Name of AllowanceExtent to which allowance is exempt
1Any special allowance in the nature of High
Altitude Allowance
granted to the member
of the armed forces operating in high
altitude areas
For altitude of 9,000 to 15,000 feet₹ 1,060 p.m.
For above 15,000 feet₹ 1,600 p.m.
2Any special allowance in the nature of
Special Compensatory Highly Active Field Area Allowance
granted to the member of the armed forces
₹ 4,200 p.m.
3Any special allowance in the nature of Island (duty) Allowance granted to the member of the armed forces in Andaman & Nicobar and Lakshadweep Group of Islands₹ 3,250 p.m.

Allowance prescribed for the purpose of section 10(14)(ii) - New exempt allowances added
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01:26:5201:30:25

Exemption in respect of Gratuity - Section 10(10)(ii) - Limit increased for employees covered by the payment of Gratuity Act, 1972

Limit for Exemption - Least of the following

limit for exemption in ca inter

Allowance prescribed for the purpose of section 10(14)(ii) - New exempt allowances added
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01:31:2001:34:09

Proviso to Section 17(2) - Medical Facility Perquisite Omitted - Reimbursement of expenditure actually incurred on medical treatment to the extent of ₹ 15,000

S. No.Type of Medical Facility in IndiaProvided toEarlierNOW
1Fixed Medical AllowanceFully TaxableFully Taxable
2Medical Facility in Hospital maintained by employerEmployee or Member of his FamilyNo PerkNo Perk
3Treatment in Government HospitalsEmployee or Member of his FamilyNo PerkNo Perk
4Treatment of prescribed Diseases in any approved hospitalEmployee or Member of his FamilyNo PerkNo Perk
5Premium paid/ reimbursed under scheme approved by CG or IRDAEmployee or Member of his FamilyNo PerkNo Perk
6Payment / Reimbursement of expenditure actually incurred on medical treatment (It may be noted that this was expenditure which was not incurred in Gov. hospitals or for Prescribed diseases or Premiums under scheme of CG or IRDA)Employee or Member of his FamilyPerk =
Actual exp - ₹ 15,000
Perk =
Actual exp

Proviso to Section 17(2) - Medical Facility Perquisite Omitted - Reimbursement of expenditure actually incurred on medical treatment to the extent of ₹ 15,000
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01:34:1701:38:34

Standard Deduction upto ₹ 40,000 to be provided to all employees - New DEDUCTION Introduced Section 16(ia)

So now on instead of 2 we will have 3 deductions. The income chargeable under the head “Salaries” is computed after making the following deducts
  • Standard Deduction - Section 16(ia) - a deduction of forty thousand rupees or the amount of the salary, whichever is less;
  • Entertainment Allowance - Section 16(ii)
  • Professional tax - Section 16(iii)

Standard Deduction upto ₹ 40,000 to be provided to all employees - New DEDUCTION Introduced Section 16(ia)
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01:38:3501:42:50

Section 28 widened, now two new types of income shall also be chargeable to income tax under the head “Profits and gains of business or profession”

  1. Any compensation received or receivable, whether revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract relating to its business shall be taxable as business income. Section 28(ii)(e)
  2. Fair market value of inventory on its conversion as capital asset: Fair market value of inventory on the date of its conversion or treatment as capital asset, determined in the prescribed manner, would be chargeable to tax as business income. Section 28(via)

Section 28(via) and Section 45(2) are brother sister sections.
Section 28(via) and Section 45(2) are brother sister sections

Practice Questions

  1. A building has been aquired by the assessee on 1.06.2000 for ₹ 1,00,000. The assessee converts the building into stock in trade of his property dealing business on 1.01.2012 when the fair market value of the buliding is ₹ 9,00,000. The stock in trade is sold by the assessee on 1.01.2019 for ₹ 13,00,000.(FMV as on 1.04.2001 was ₹ 1,80,000). Index for the year 2018-19 280 & Index for the year 2011-12 184.
  2. Assessee aquired securities as stock-in-trade on 1.1.2012 for ₹ 200 crores. On 1.1.2016 the assessee converts stock-in-trade into capital assets at ₹ 225 crores. Fair market value as on that date was ₹ 250 crores. On 1.1.2019 the assessee sold those securities which were converted into capital asset for ₹ 500 crores. Index for the year 2015-16 254 & Index for the year 2018-19 280 & Index for the year 2011-2012 184

Section 28 widened, now two new types of income shall also be chargeable to income tax under the head “Profits and gains of business or profession”
Start TimeEnd Time
02:2535:31

Trading in Agricultural Commodity Derivatives will NOT be deemed speculative even though they were not charged of Commodities Transaction Tax

An eligible transaction in respect of trading in commodity derivatives carried out in a recognised association, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 will not be Deemed Speculative Transaction.

Now, the requirement of chargeability of commodities transaction tax is not applicable in respect of trading in agricultural commodity derivatives from A.Y. 2019-20.

Hence Trading in Agricultural Commodity Derivatives will NOT be deemed speculative even though they were not charged of Commodities Transaction Tax.


Trading in Agricultural Commodity Derivatives will NOT be deemed speculative even though they were not charged of Commodities Transaction Tax
Start TimeEnd Time
35:4040:12

Finding Full value of Consideration while comparing Consideration Received and Stamp Duty Value

In section 50C and 43CA we have to compare Consideration Received with Stamp Duty Value to find Full value of Consideration.

Earlier

ACT - If the Consideration Received was less than Stamp Duty Value, then Stamp Duty Value should be considered as Full value of Consideration for the purpose of computing income.

Now

ACT - If the Consideration Received was less than Stamp Duty Value, then Stamp Duty Value should be considered as Full value of Consideration for the purpose of computing income.However, if the stamp duty value does not exceed 105% of the consideration received or accruing then, such consideration shall be deemed to be the full value of consideration for the purpose of computing profits and gains from transfer of such asset.

Analysis -


Consideration Received and Stamp Duty Value

Finding Full value of Consideration while comparing Consideration Received and Stamp Duty Value
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40:1546:39

Section 44AE SPECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES

Eligible Business - This section provides for estimating business income of an owner of goods carriages from the plying, hire or leasing of such goods carriages;

Eligible Assessee - The scheme applies to persons owning not more than 10 goods vehicles at any time during the previous year;

Presumptive Income - The estimated income from each goods vehicle, being a heavy goods vehicle or other than heavy goods vehicle would be

Goods CarriagePresumptive Income
Heavy Goods Vehicle₹ 1,000 per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a monthduring which such vehicle is owned by the assessee for the previous year.
Other than heavy goods vehicle₹ 7,500 for every month or part of a month

Heavy Goods Vehicle - Any goods carriage, the gross vehicle weight of which exceeds 12,000 kilograms.

Gross vehicle weight - Total weight of the vehicle and load certified and registered by the registering authority as permissible for that vehicle.

Unladen weight - the weight of a vehicle or trailer including all equipment ordinarily used with the vehicle or trailer when working but excluding the weight of driver or attendant and where alternative parts or bodies are used the unladen weight of the vehicle means the weight of the vehicle with the heaviest such alternative body or part

The assessee can also declare a higher amount in his return of income. In such case, the latter will be considered to be his income

The assessee will be deemed to have been allowed all the deductions under sections 30 to 38

Where the assesse is a firm, the salary and interest paid to its partner are allowed to be deducted subject to the conditions and limit specified under section 40(b)

The assessee joining the scheme will not be required to maintain books of account under section 44AA and get the accounts audited under section 44AB in respect of such income.

An assessee may claim lower profits and gains than the deemed profits and gains specified in sub-section (1) of that section subject to the condition that the books of account and other documents are kept and maintained as required under sub-section (2) of section 44AA and the assessee gets his accounts audited and furnishes a report of such audit as required under section 44AB.

tax amendments idea, careful

In all calculations and conditions only date of purchase of vehicles is important, so even if in question the ever try to provide details of “date of put to use” simply ignore it.

Module Sum - Mr. X commenced the business of operating goods vehicles on 1.4.2018. He purchased the following vehicles during the P.Y.2018-19. Compute his income under section 44AE for A.Y.2019-20.

#Gross Vehicle Weight (In Kilograms)NumberDate of purchase
(1)7,000210.04.2018
(2)6,500115.03.2019
(3)10,000316.07.2018
(4)11,000102.01.2019
(5)15,000220.08.2018
(6)15,000123.02.2019

Would your answer change if the goods vehicles purchased in April, 2018 were put to use only in July, 2018?


Section 44AE SPECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES
Start TimeEnd Time
46:4358:14

Cost of Inflation Index

Financial yearCost inflation Index
2001-02100
2002-03105
2003-04109
2004-05113
2005-06117
2006-07122
2007-08129
2008-09137
2009-10148
2010-11167
2011-12184
2012-13200
2013-14220
2014-15240
2015-16254
2016-17264
2017-18272
2018-19280

Cost of Inflation Index
Start TimeEnd Time
59:1559:30

Restriction in Exemption of Capital Gains under section 54EC

S. No.ParticularsSection 54EC
1Eligible AssesseeAny Assessee
2Asset TransferredLand or Building or Bothearlier it was Any Asset.
3Nature of Asset TransferredLong Term
4Qualifying Investment AssetBonds of NHAI or RECL or any other bond notified by C.G. ( Redeemable after 5 years )
5Time Limit for PurchaseWithin 6 months from the date of transfer
6Amount of ExemptionCapital Gain or amount invested in specified bonds, whichever is lower. Maximum exemption possible : 50,00,000
7Transfer or Convert or Avail loan or Advances on the security of such bondsNot for a period of 5 Years from the date of acquisition of such bonds
8if point 7 violatedThe capital Gain exempted earlier shall be taxed as LTCG in the year of violation

Restriction in Exemption of Capital Gains under section 54EC
Start TimeEnd Time
01:00:0801:04:05

Circular No. 19/2017, dated 12.06.2017

The CBDT has, vide this circular, clarified that trade advances, which are in the nature of commercial transactions, would not fall within the ambit of the word 'advance' in section 2(22)(e) and therefore, the same would not to be treated as deemed dividend.


Circular No. 19/2017, dated 12.06.2017
Start TimeEnd Time
01:04:0701:06:02

Sec 115-O now to include even dividend distributed under Sec 2(22)(e) - Rate 30%

Earlier

Deemed Dividend u/s 2(22)(e) were taxable in the hands of the receiver and not covered in 115-O, hence not taxable to the domestic company distributing the deemed dividend as per section 2(22)(e).

Now

Now with Finance Act 2018, Deemed Dividend as per section 2(22)(e) shall be included in 115-O and that too at a rate of 30%. Also with a view to avoid double taxation 10(34) now includes 2(22)(e) making it exempt in the hands of the receiver.

ca inter tax amendments
  • Please note that 115BBDA still overrides 115-O and 10(34)
  • The concept of Grossing up will not be applicable on dividend distributed as per 2(22)(e)
Types of DividendActual Dividend + Deemed Dividend as per Sec. 2(22)(a), 2(22)(b), 2(22)(c) & 2(22)(d)Deemed Dividend 2(22)(e)
Chargeable toDomestic Company on any amount declared, distributed or paid as Actual Dividend or Deemed Dividend as per Sec. 2(22)(a), 2(22)(b), 2(22)(c) & 2(22)(d)Domestic Company on any amount declared, distributed or paid as Deemed Dividend as per Sec. 2(22)(e)
Charging Section115-O115-O
Rate of Tax15%30%
Grossing upApplicableNot Applicable
Tax treatment for ReceiverExempt u/s 10(34) subject to Sec. 115BBDAExempt u/s 10(34)
Can Sec. 115BBDA apply ?Can apply if conditions are fulfilled -
Conditions1. Received by Specified Assessee
+
2. Resident in India
+
3. Aggregate Income by way of dividends from domestic company or companies exceeds ₹ 10,00,000
Sec. 115BBDA Tax Rate & LimitTaxable at 10% on Dividends exceeding ₹ 10,00,000
Special point 1 - Specified Assessee meansPerson other than domestic company or a fund/ institution/ trust/ university/ educational institution/ hospital/ medical institution referred to in subclause (iv)/ (v)/ (vi)/ (via) of clause (23C) of section 10. or trust or institution registered under section 12A or section 12AA
Special point 2Dividends u/s 115BBDA shall not include dividends u/s 2(22) (e)

Grossing up and Effective Tax Rate on Actual Dividend and Deemed Dividends as per Sec. 2(22)(a), 2(22)(b), 2(22)(c) & 2(22)(d)
Suppose company wants to distribute ₹ 300 as dividend, then
Step 1 -

Step1 Koncept Eduction

Step 2 - Charge Surcharge.
Remember surcharge is only chargeable on Tax amount. Hence 12% Surcharge will be charged on the Tax element. Tax element = 352.941 Less 300 = 52.941, Hence surcharge will be 52.941*12% = 6.3529

Step 3 - Charge Cess.
Remember Cess is chargeable on the Tax + Surcharge value. Hence 4% cess on ( 52.941 + 6.3529 ) = 2.3717

Hence to Pay dividend of ₹ 300 to the shareholders, companies will have to pay the following payments

₹ 300 to Shareholder + ₹ 52.941 Dividend Distribution Tax + 6.3529 Surcharge on Dividend Distribution Tax + ₹ 2.3717 Cess. Total of ₹ 361.6656

Hence Effective rate u/s 115-O is 20.555% i.e { ( ₹ 361.6656 - ₹ 300 )* 100 / ₹ 300 }


while as effective Tax rate on deemed dividend 2(22)(e) will be 34.944 %, as no grossing up is applicable we directly increase tax rate i.e. 30% by surcharge of 12% and cess of 4%.

Question for Practice

Mr. Adil in the PY 2018-2019 issues you the following information.

  1. He holds 25% in HR Technosoft Pvt. Ltd.
  2. Received dividend from HR Technosoft ₹ 2,50,000
  3. Received dividend from Patel Ltd. ₹ 2,50,000 ( Adil holds 5% in Patel Ltd.)
  4. Received dividend from Modi Ltd. ₹ 3,50,000 ( Adil holds 35% in Modi Ltd.)
  5. Received dividend from Rahul Ltd. ₹ 15,000 ( Adil holds 5% in Rahul Ltd.)
  6. Took Loan from HR Technosoft Pvt. Ltd. for ₹ 5,00,000
Based on the above information please compute
Tax Liability in the hands of Mr. Adil, HR Technosoft, Patel Ltd and Modi Ltd. Would your answer be different if in point 2. Received dividend from HR Technosoft ₹ 5,50,000 ?


Sec 115-O now to include even dividend distributed under Sec 2(22)(e) - Rate 30%
Start TimeEnd Time
01:06:0301:31:12

Sec 56(2)(x) - New limit of Inadequate consideration for Immovable property

Sum of Money
Immovable property [Land or building or both]
Movable Property

Nature of assetTaxable value
Without ConsiderationInadequate Consideration
Movable PropertyTaxable EventAggregate FMV > ₹ 50,000Aggregate FMV - C > ₹ 50,000
Taxable ValueWhole Aggregate FMVAggregate FMV - C
Immovable PropertyTaxable EventStampDutyValue > ₹ 50,000StampDutyValue - C > Step 1 Amount
Step 1: Find Higher of ₹ 50,000 or 5% of Consideration
Taxable ValueStampDutyValueStampDutyValue - C
CASHTaxable EventAggregate value > ₹ 50,000
Taxable ValueWhole Aggregate value

Sec 56(2)(x) - New limit of Inadequate consideration for Immovable property
Start TimeEnd Time
01:31:3301:36:50

Sec 56(2)(xi) - Compensation or any other payment received in connection with termination of his employment - New Section

Any compensation or any other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto shall be chargeable to tax under this head.

Sec 56(2)(xi) - Compensation or any other payment received in connection with termination of his employment - New Section
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01:37:0501:39:21

Sec 80D - on the basis of Seniority instead of ₹ 30,000 now ₹ 50,000 also Super Seniors and Seniors treated equally now for the purpose of this section.

Deduction for individualsDeduction for HUF
Nature of amount spentFamily members (Individual, Spouse & Dependent Children)ParentsFor any member
Age below 60 yearsAge above 60 yearsAge below 60 yearsAge above 60 yearsAge below 60 yearsAge above 60 years
Max Deduction Allowed IndividuallyMax Deduction Allowed IndividuallyMax Deduction Allowed IndividuallyMax Deduction Allowed IndividuallyMax Deduction Allowed IndividuallyMax Deduction Allowed Individually
A. Medical Insurance₹ 25,000₹ 50,000₹ 25,000₹ 50,000₹ 25,000₹ 50,000
B. CGHS₹ 25,000₹ 25,000 - - - -
C. Health Check-up₹ 5,000₹ 5,000₹ 5,000₹ 5,000 - -
D. Medical Expenditure ** - ₹ 50,000 - ₹ 50,000 - ₹ 50,000
Maximum Deduction Allowed Collectively₹ 25,000₹ 50,000₹ 25,000₹ 50,000₹ 25,000₹ 50,000

**Medical Expenditure is allowed only to a Senior Citizen & if no amount has been towards health insurance of such person.
Note: Deduction is available if payments are made other than by cash. However, for health check up payment can be made in cash.

tax amendments idea, careful
  • As soon as you see Medical Expenditure be very alert and ask yourself 2 questions.
    -Question 1 - Is the medical expenditure paid in respect of a person who is senior citizen?
    -Question 2 - Is there any Medical Insurance paid on behalf of such person?
    Only when the answer to Question 1 is “YES” and answer to Question 2 is “NO” then and only then think about deduction for Medical Expenditure
  • The increased limit of ₹ 50,000 for Medical Insurance in case of Family members, Parents, HUF will be available even if 1 member is senior

Logical Questions for Practice

Q1. An Individual Provides you the following information please compute the amount of deduction as per section 80D available

  1. Medical Insurance of Individual age 42 ₹ 3,000. Paid in mode other than cash
  2. Medical Insurance of Spouse age 45 ₹ 2,000. Paid in cash
  3. Medical Insurance of Son 1 (not dependent) age 20 ₹ 4,000. Paid in mode other than cash
  4. CGHS of Son 2 (dependent) age 18 ₹ 12,000. Paid in mode other than cash
  5. Preventive Health Check up of Spouse ₹ 3,000. Paid in cash
  6. Preventive Health Check up of Son 2 ₹ 2,000. Paid in mode other than cash
  7. Preventive Health Check up of Son 3 (dependent) age 14 ₹ 3,000. Paid in mode other than cash
  8. Medical Expenditure incurred on individual ₹ 4,000. Paid in mode other than cash

A1. ₹ 20,000.

Q2. An Individual Provides you the following information please compute the amount of deduction as per section 80D available

  1. Medical Insurance of Individual age 62 ₹ 5,000. Paid in mode other than cash
  2. CGHS of Spouse age 42 ₹ 16,000. Paid in mode other than cash
  3. Medical Expenditure incurred on spouse ₹ 4,000. Paid in cash
  4. Medical Expenditure incurred on spouse ₹ 8,000. Paid in mode other than cash
  5. Medical Expenditure incurred on Individual ₹ 3,000. Paid in cash
  6. Medical Expenditure incurred on Individual ₹ 3,000. Paid in mode other than cash
  7. CGHS of Dependent son 1 age 24 ₹ 14,000. Paid in mode other than cash

A2. ₹ 30,000.

Q3. An Individual Provides you the following information please compute the amount of deduction as per section 80D available

  1. Medical Insurance of Parent 1 age 72 ₹ 26,000. Paid in mode other than cash
  2. Medical Insurance of Parent 2 age 59 ₹ 6,000. Paid in mode other than cash
  3. CGHS of Parent 1 ₹ 16,000. Paid in mode other than cash
  4. Preventive Health Check up of Parent 2 ₹ 2,000. Paid in mode other than cash

A3. ₹ 34,000.

Q4. An HUF Provides you the following information please compute the amount of deduction as per section 80D available

  1. Medical Insurance of Member 1 age 72 ₹ 26,000. Paid in mode other than cash
  2. Medical Insurance of Member 2 age 42 ₹ 6,000. Paid in mode other than cash
  3. CGHS incurred for Member 3 age 21 ₹ 2,000. Paid in mode other than cash
  4. Preventive Health Check up of 3 members paid ₹ 2,000 for each member. Paid in cash
  5. Medical Expenditure of Member 8 age 70 for ₹ 12,000. Paid in mode other than cash

A4. ₹ 44,000.


Sec 80D - on the basis of Seniority instead of ₹ 30,000 now ₹ 50,000 also Super Seniors and Seniors treated equally now for the purpose of this section.
Start TimeEnd Time
47:0148:25

Sub Sec(4A) added to Sec 80D - Medical Insurance Premium paid in Lump Sum

New Sub Sec (4A) inserted by financial Act, 2018
Where the amount of medical insurance premium is paid in lump sum in the previous year to effect or to keep in force an insurance on the health of any person specified in the section for more than a year, there shall be allowed for each of the relevant previous year, a deduction equal to the appropriate fraction of the amount.
Note:

  1. “appropriate fraction” means the fraction, the numerator of which is one and the denominator of which is the total number of relevant previous year;
  2. “relevant previous year” means the previous year beginning with the previous year in which such amount is paid and the subsequent previous year or years during which the insurance shall have effect or be in force.’

Illustration :

Mr. X aged about 45 years, paid health insurance premium in lump sum of ₹ 90,000 for three years on 1-5-2019. He can claim the deduction as under:


A. Relevant previous year2019-20, 2020-21 & 2021-22
B. Total number of relevant previous years3 (three)
C. Appropriate fraction [1/(b)]0.3333
D. Total insurance premium paid₹ 90,000
E. Deduction equal to appropriate fraction [(c)x(d)]₹ 30,000
F. Maximum allowance deduction₹ 25,000

Suppose, Mr.X is senior citizen, then entire amount of ₹ 30,000 will be allowed as deduction.


Sub Sec(4A) added to Sec 80D - Medical Insurance Premium paid in Lump Sum
Start TimeEnd Time
48:2648:36

Sec 80DDB - Deduction in Respect of Medical Treatment, Etc. - on the basis of Seniority & Super Seniority instead of ₹ 60,000/ ₹ 80,000 now new limit of ₹ 100,000 Super Seniors and Seniors treated equally now for the purpose of this section.

Eligible AssesseeAny assess Resident in India
Eligible ExpenditureAmount Actually paid for Medical Treatment of specified diseases
  • Individual - Ownself or Dependent (Spouse, children, parents, brothers and sisters of the individual or any of them)
  • HUF - any member of HUF
Extent of DeductionAge below 60Actually Paid or ₹ 40,000, whichever is less
Age above 60Actually Paid or ₹ 100,000, whichever is less
earlier - on age above 60 ₹ 60,000 and on age above 80 ₹ 80,000
Other Conditions
  • No such deduction shall be allowed unless the assessee obtains the prescription for such medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed.
  • The deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer, or reimbursed by an employer, for the medical treatment of the person

Sec 80DDB - Deduction in Respect of Medical Treatment, Etc. - on the basis of Seniority & Super Seniority instead of ₹ 60,000/ ₹ 80,000 now new limit of ₹ 100,000 Super Seniors and Seniors treated equally now for the purpose of this section.
Start TimeEnd Time
48:3748:47

Instead of Sec 80TTA now Senior Citizens claim deduction Under Sec 80TTB at an enhanced rate of ₹ 50,000

ParticularsSec 80TTASec 80TTB
Eligible AssesseeIndividual (below the age of 60) or HUFResident Senior Citizen
Eligible IncomeInterest on deposits (other than time deposits) in a saving account with
  • a banking company
  • a co-operative society (engaged in banking business)
  • a post office
Interest on deposits with
  • a banking company
  • a co-operative society (engaged in banking business)
  • a post office
Maximum Deduction Amount₹ 10,000₹ 50,000
ParticularsDeduction can only be claimed in respect of income not being time depositsDeduction can be claimed in respect of
income not being time deposits as well as income being time deposits

Instead of Sec 80TTA now Senior Citizens claim deduction Under Sec 80TTB at an enhanced rate of ₹ 50,000
Start TimeEnd Time
49:0349:30

No TDS is required to be deducted at source on interest payable on "Power Finance Corporation Limited 54EC Capital Gains Bond" and "Indian Railway Finance Corporation Limited 54EC Capital Gains Bond" – [Notification No. 27 & 28/2018, dated 18-06-2018]


Under Section 193 TDS is to be deducted on Interest on Securities. However NO tax is required to be deducted at source on interest payable on Securities of section 54EC i.e. “Power Finance Corporation Limited 54EC Capital Gains Bond” and “Indian Railway Finance Corporation Limited 54EC Capital Gains Bond


TDS on Dividends u/s 194 - Now no more as 2(22)(e) also covered in 115-O


TDS on Dividends u/s 194 - Now no more as 2(22)(e) also covered in 115-O
Start TimeEnd Time
49:3149:36

Respective change in 194A due to introduction of 80TTB

Exceptions to section 194A limit enhanced to stay parallel with 80TTB


IncomeLimit for Resident Senior CitizensLimit for others
Time deposits where payer is banking company₹ 50,000₹ 10,000
Time deposits where payer is Cooperative bank company₹ 50,000₹ 10,000
Time deposits where payer is post office₹ 50,000₹ 10,000
any other case₹ 5,000₹ 5,000

Respective change in 194A due to introduction of 80TTB
Start TimeEnd Time
48:5049:03

Circular No. 21/2017, dates 12.06.2017 - No requirement to deduct TDS u/s 194-I on remittance of Passenger Service Fees by an Airline to an Airport Operator


Circular No. 21/2017, dates 12.06.2017 - No requirement to deduct TDS u/s 194-I on remittance of Passenger Service Fees by an Airline to an Airport Operator
Start TimeEnd Time
49:3149:47

Sec 139A - 2 new clauses added.

Every Person, -

(iv) being a resident, other than an individual, which enters into a financial transaction of an amount aggregating to ₹ 2,50,000 or more in a financial year; or

(v) who is the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the person referred to in clause (iv) or any person competent to act on behalf of the person referred to in clause (iv)


Sec 112A - Most Imporant

For best understanding watch the Youtube video in which we have explaied it. Also on Monday we will provide you with a lot of practice sums on this topic. There is a lot of confusion about correctly intrepretting, summarising and making a comprehensive learning of the section 112A. Dont worry, I have done all the hard work for that. The trick is dont think you are learing 112A, rather we have to think about 3 Capital Assets and learning their Tax treatment, while doing that we will automatically learn 112A. Those 3 Capital Assets are - Listed Equity Shares, Units of Equity Oriented Fund & Units of Business Trust.

Now Step 1. is to learn which section applies when, as Listed Equity Shares, Units of Equity Oriented Fund & Units of Business Trust - they can attract Sec 111A, 112 or 112A depending upon different senarios. The symbol 111A, 112A, 112 implies that it does not matter paid or not. Also STT - A implies Securities Transaction Tax paid on Aquisition and STT - T implies Securities Transaction Tax paid on Transfer


when section 112A applies

Now that we know when does which section applies

Step 2 - Lets find how to compute gain and tax under various sections

computation of tax under section 112A

Now that we how to compute gain & tax

Practice Questions:

Question 1
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
100 Equity SharesABC Ltd. (Listed Co.)12/6/201710/6/20182,00,0001,56,000

These Equity Shares of ABC Ltd were not bought on stock exchange. However, the same were sold on the recognized stock exchange.


Question 2
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
50 UnitsABC Equity MF19/10/201821/02/201930,00045,000

No STT was paid on the transfer of Units of ABC Equity MF


Question 3
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
120 Preference SharesABC Ltd. (Listed Co.)2/6/201213/08/201845,00069,000

STT was paid on the preference shares both on acquisition & sale of shares of ABC Ltd.


Question 4
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
120 Equity SharesABC Ltd. (Unlisted)13/03/20175/6/201895,0001,44,000

Question 5
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
150 Equity SharesABC Ltd. (Listed Co.)14/05/201719/10/201889,0001,02,000

STT has been paid on both Acquisition & Transfer of ABC Ltd.


Question 6
Mr. X sold following securities in the FY 18-19. Calculate the amount of Capital Gains.

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
75 Equity SharesABC Ltd (Listed Co.)3/2/201712/3/201934,50050,000

Equity Shares of ABC Ltd. were received by way of Rights Issue & no STT was paid. However, STT was paid on the transfer.


Question 7
Y sold following securities in FY 18-19. Calculate The Capital Gains Amount -

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
100 Equity SharesABC Ltd. (Foreign Company)13/3/20175/6/201895,0001,44,000

The shares of ABC Ltd. were sold on international financial services centre and thus no STT was paid on either acquisition or transfer of shares. Further, the consideration was received in US Dollars. The sum mentioned above is the converted amount in India rupee.


Question 8
Y sold following securities in FY 17-18. Calculate The Capital Gains Amount -

No. of SecuritiesSecurityPurchase DateSale DateCost of Acquisition under the Income Tax Act ProvisionsSale Price
100 Equity SharesABC Ltd. (Listed Company)13/2/20175/3/201895,0001,44,000

STT was paid on both acquisition & transfer of these equity shares.


Sec 112A - Most Imporant
#Start TimeEnd Time
101:2101:31:01
204:2521:12


Step 3 - Lets learn Sec. 55(2)(ac) i.e. Computing Cost of Acqusition for 112A

cost of acqisition under section 55(2)(ac)

Now that we how to compute COA, we realise we need to learn how to calculate FMV on 31.1.18

Practice Questions:

Question 1
Mr X. had the following securities (Please assume all of them fulfilled all the conditions of 112A) Find the COA as per sec 55(2)(ac)

SecutitiesABCD
Date of Acquisition21/2/20181/4/20161/3/20151/1/2003
Date of Transfer-31/12/201830/6/2018-
PURCHASE PRICE5,00,0003,00,0002,00,0002,50,000
FMV on 31.1.184,95,0004,50,0003,00,0006,50,000
SALE CONSIDERATION-4,25,0004,50,000-


Step 3 - Lets learn Sec. 55(2)(ac) i.e. Computing Cost of Acqusition for 112A
#Start TimeEnd Time
121:1628:15
229:4933:15


Step 4 - FMV on 31.1.18

cost of acqisition under section 55(2)(ac) FMV

Practice Questions:

  1. Script A – Listed on 31.1.18 at BSE. Day High Rs. 300 | Day Low Rs. 288
  2. Script B – Listed on 31.1.18 at BSE. Was not traded on 31.1.18, but was traded on 29.1.18 with Day High of Rs. 400 and on 28.1.18 with Day High of Rs. 450
  3. Units of MF not listed on 31.1.18, NAV on 31.1.18 was Rs. 500
  4. Equity Shares purchased on 1.1.2003 not listed on 31.1.18 but were listed on date of transfer. Cost of Acquisition 300. CII of FY 17-18 272. CII of FY 02-03 105.

Step 4 - FMV on 31.1.18
Start TimeEnd Time
33:1847:00

End of All Tax Amendments


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