Tacts 4 Tax

Tax - Be it direct or its counterpart, as a subject makes things for CA aspirants difficult more often than not. The sheer volume of the Text book one buys for Direct Tax itself is life threatening. You need strong hands to hold it. The plethora of Sections, sub-sections & clauses followed my equal number of amendments, some logical, some otherwise don’t make things easy. And finally there is a risk of redundancy once DTC goes live.

While I was preparing for PE II, everyone whom I spoke to emphasised quoting of sections in answer sheets along with a caveat that if a section is wrongly quoted, you lose all the marks. That was quite risky. I had huge troubles in remembering sections of Business Law, DT and IDT (in finals), forget the subsections. I somehow managed feed my mind with some section numbers which I thought were important and didn’t even make an effort to remember the others. I considered (at that time) the exercise of remembering sections a sheer waste of time.

I would have hardly quoted any section in Taxation paper of PE II. I quoted a couple of Section Numbers in DT of final and did not quote any in the IDT paper. Also there were 6 case laws asked in the examination and I did not quote a single Case Law name in my answer sheet. I wrote the concepts, logic, gave proper reasoning and conclusion. I did not fare that bad in all these papers. The scores were decently good.

This is not to discourage students from remembering sections. If someone can conveniently remember section numbers, please do. These will earn you brownie points and would be really relevant for your score. Everything you write counts. But if you just cant remember them, you need not break head on them.

Good Luck

Are we being taught the art of disaster management?

August 5th 2010: Examination forms were available for November 2010 attempt. This was when PCC students who were completing their articles in April 2011 came to know that they were eligible for writing their exams in November 2010 instead of May 2011. A notification in this regard was issued a couple of days later. Four months is considered ideal for preparation for Final examinations.

This scheme of events left the candidates (due to complete articles in Apr 2011) with just 3 months of time to prepare, if at all they chose to write the exams in November. Not just the time factor, most of the students would not have had their mental framework ready to start the preparation. Many had not even enrolled for their tuitions. In short you get a first hand experience of managing unexpected events. (May be helpful to manage a disater in future)

Sep 30th 2009 : A notification making all questions mandatory for November 2009 examination was issued. We all have heard of One Month notice that an employee gives to his/her company when he resigns. Most of us would appreciate the fact that being a professional course, a student is not expected to prepare selective topics. Some may still go ahead and argue that, the institute thought of having a check on quality.

All that apart, there is no denying that it did have an effect on students who were into their last leg of preparation. One month is quite short notice for students to adjust their preparation. This is a period when most students would be into their last leg of revision. To make last minute changes was asking a little too much from the students. Another experience in managing unexpected events.

Highlights of 2010 budget

Ø · 30% tax on income above Rs 8 lacs
Ø · 20% tax on income between Rs 5 lacs to 8 lacs
Ø · 10% tax on income between Rs 1.6 lacs to 5 lacs
Ø · Uproar in Parliament over hike in fuel prices
Ø · Excise on all non smoking tobacco raised
Ø · 7.5% duty on petrol and diesel restored
Ø · 5% duty on crude petroleum restored
Ø · Fuel prices likely to go up
Ø · Excise duty on petrol and diesel raised to Rs 1/litre
Ø · Cigarettes to be costlier
Ø · Excise on large cars, SUVs, MUV raised to 22%
Ø · Partial rollback in Excise Duty from 10% to 8%
Ø · Excise on large cars, SUVs, MUV raised to 22%
Ø · Presumptive tax limit raised to Rs 60 lacs
Ø · Investment linked deduction benefit for 2 Star hotels
Ø · Deduction of Rs 20000 on investment in infra bonds
Ø · Weighted deduction on R&D raised to 200% from 150%
Ø · No tax on Income up to Rs 1.6 lacs
Ø · Current surcharge on companies reduced to 7.5%
Ø · Minimum Alternate tax hiked to 18%
Ø · IT tax slabs broadened
Ø · IT dept to notify Saral 2 form for individual tax payers
Ø · IT exemption limit enhanced, surcharge withdrawn
Ø · FY11 net market borrowings pegged at Rs 3.45 lac Crs
Ø · 20 Kms of highway to be constructed everyday
Ø · FY10 budget deficit seen at 6.9% of GDP
Ø · FY12 fiscal deficit target at 4.8%
Ø · FY13 fiscal deficit target at 4.1%
Ø · More than 50% increase in funds for minority welfare
Ø · Fiscal deficit target of 5.5% in FY11
Ø · 15% rise in planned expenditure
Ø · Govt to set up National Mission for delivery of justice
Ø · Gross tax receipts Rs 7.46 lac Crs
Ø · Defence capex raised to Rs 60000 Crs
Ø · Allocation to defense raised to Rs 1.47 lac Crs
Ø · Pvt sector to meet food grain storage deficit
Ø · Rs 100 Cr woman farmer fund scheme
Ø · Rs 1900 Crs allocated for UID project
Ø · Skill development programme for textile sector
Ø · Home loans up to Rs 20 lacs to get interest subvention of 1% up to March 11
Ø · Government to contribute Rs 1000 per month for pension security
Ø · Rs 5400 Crs allocated for urban development
Ø · Rs 66100 Crs allocated for rural development
Ø · Rs 2400 Crs allocated for MSMEs
Ø · Social Security Fund to have corpus of over Rs 1000 Crs
Ø · National Social Security fund for unorganized workers
Ø · Interest subvention for housing loans up to 1 lacs
Ø · Rs 10,000 Crs allocated for Indira Awas Yojna
Ø · Rs 1200 Crs assistance for drought in Bundelkhand
Ø · Rs 48000 Crs for Bharat Nirman
Ø · NREGA scheme allocation raised to Rs 41000 Crs
Ø · Allocation to health Rs 22,300 Crs
Ø · 25% of plan allocation for rural infrastructure
Ø · Social sector spending seen at Rs 1.38 lakh Crs
Ø · Allocation for school education up from Rs 26800 Crs to Rs 31036 Crs
Ø · Allocation to power sector at Rs 5130 Crs
Ø · Rs 200 Crs for Tamilnadu textile sector
Ø · One time grant for Tirupur exports
Ø · Draft food security Bill ready
Ø · Clean energy fund to be established
Ø · Allotment for renewable energy hiked by 61%
Ø · Coal regulatory authority to be set up
Ø · Road development hiked to Rs 19894 Crs
Ø · Rs 1.73 lakh Crs, which is 46% of total plan outlay, reserved for infrastructure development
Ø · 2% loan subsidy to farmers
Ø · Farm credit targets to be increased to Rs 3.75 lakh Crs
Ø · Farm loan payments to be extended for six months
Ø · Interest subvention of 2% to be extended for handicrafts and SMEs
Ø · Rs 300 Crs for agricultural impetus
Ø · Additional Rs 1,65,000 Crs for bank re-capitalisation
Ø · Interest subvention for exports to extended for one year
Ø · RBI may give banking licenses to Pvt cos and NBFCs
Ø · FDI policy to be made more user-friendly
Ø · To discuss Kirit Parikh report in due course
Ø · Fertiliser subsidy to be reduced
Ø · Divestment target of Rs 25,000 Crs
Ø · GST to be implemented from 2011
Ø · Hope to implement Direct Tax Code from April 2011
Ø · Calibrated exit strategy for fiscal stimulus
Ø · Need to review stimulus, go back to fiscal prudence
Ø · Significant private investment inflow expected to boost GDP
Ø · Economy can achieve GDP growth of 10%
Ø · India faces a challenge of reverting to double digit growth
Ø · FY 2009-10 was a challenging year
Ø · Need to improve food security and healthcare systems

Advantages of LLP (Limited Liability Partnership)

Limited Liability Partnership will be assessed as a Firm w.e.f Assessment year 2010-11. The definition of Firm has been amended as under,
“Firm shall have the meaning assigned to it in the Indian Partnership Act, 1932 and shall include a Limited Liability Partnership as defined in the Limited Liability Partnership Act 2008.”

LLP enjoy the following advantages on taxation matters:

1. Distributions of profits by the LLP are exempt from tax in the hands of the partners
2. LLP are not liable for payment of Dividend Distribution Tax on profits distributed to the partners. The existing rate of DDT is 16.995% on dividends distributed by companies.
3. LLP are kept out of the purview of Minimum Alternate Tax.
4. The provisions of deemed dividend (defined u/s 2(22)(e)) read with section 56(2) are not applicable to LLP. Any advance made by a Company to specified members is considered as deemed dividend to the extent of distributable profits thereby rendering the amount advanced as taxable income.

LLP also enjoys the following benefits:
1. Flexibility of Capital: There are no restrictions for withdrawal of Capital unlike in case of companies.
2. The cost of registration, compliance of law, audit, management and other paper work is relatively less in case of LLP when compared to such expenses in Company form of organization.

Important Announcement - November 2009 Examination

Important Announcement - November 2009 Examination

The Examination Committee has taken the following important decisions for the November, 2009 examinations. Students are advised to note them carefully.

A. CA course being a professional course, practical training is an essential part of it and accordingly all papers of Professional Competence Examination as well as Final should be practical oriented questions as also of the level of knowledge should be expert and not working knowledge. All questions should be compulsory at both Professional Competence Examination / Integrated Professional Competence Examination and Final examinations.

B. Students appearing for the Professional Competence Examination (PCE) for November, 2009 are advised to carefully note the following important decisions taken in relation to the syllabus and pattern of questions to be set in the examinations.

1. Paper 2 – Auditing and Assurance

Students may note that a detailed announcement regarding applicable Standards on Auditing and the publications of the ICAI relevant for the examination has already been published in the September, 2009 issue of the Newsletter. They may further note that since the fringe benefit tax has been abolished w.e.f. April 1, 2010 no question would be asked on tax audit relating to FBT. Further the provisions of CARO, 2003 would be applicable.

2. Paper 5 – Taxation

The question paper would be of practical nature. Students may note that the coverage of sections for the PCE syllabus is as follows:

PART – I: INCOME–TAX (75 MARKS)

Contents:

* Important definitions in the Income-tax Act, 1961 [Section 2].
* Basis of charge; Rates of taxes applicable for different types of assessees [Sections 4, 111A, 112 & 115BB].
* Concepts of previous year and assessment year [Sections 2, 3, 68 to 69D, 172 to 176].
* Residential status and scope of total income; Income deemed to be received/deemed to accrue or arise in India [Sections 5 to 9].
* Incomes which do not form part of total income [Sections 10 to 13A, 14A, 115BBC].
* Heads of income and the provisions governing computation of income under different heads [Sections 14 to 59, Sections 89, 111A, 112, 115BB, 145].
* Income of other persons included in assessee’s total income [Sections 60 to 65].
* Aggregation of income; Set-off or carry forward and Set-off losses [Sections 70 to 80].
* Deductions from gross total income [Sections 80A to 80U].
* Computation of total income and tax payable; Rebates and relief’s (Comprehensively covers all sections mentioned above).
* Provisions concerning advance tax and tax deducted at source [Sections 190 to 219, 234B & 234C].
* Provisions for filing of return of income [Sections 139 to 140, 234A].

PART – II: SERVICE TAX AND VAT (25 MARKS)

Contents:

* Service tax – Concepts and general principles [Section 64].
* Charge of service tax and taxable services [Sections 65 and 66].
* Valuation of taxable service [Section 67].
* Payment of service tax and filing of returns [Sections 68, 70,71,73A, 73B and 75].
* VAT – Concepts and general principles.

Note: If new legislations are enacted in place of the existing legislations the syllabus will accordingly include the corresponding provisions of such new legislations in the place of the existing legislations with effect from the date to be notified by the Institute. Students shall not be examined with reference to any particular State VAT Law.

3. Further students should clearly note that working notes should form part of the answers.

Note: Students may note that the first paragraph of this announcement is in addition to the announcement already published in the October, 2009 issue of the students’ newsletter – The Chartered Accountant Student.

Changes in Taxation in Union Budget 2009

1. Tax slab raised
2. MAT hiked to 15 per cent of book profit
3. Commodity transaction tax abolished
4. New pension scheme
5. Tax holiday for exporters extended untill 2012
6. Personal income tax exemption hiked by Rs 10,000
7. Abolish fringe benefit tax
8. Goods and services tax from April 1, 2010
9. Share of direct taxes has increased to 56 per cent in 2008-09
10. Federal Tax/GDP ratio is 11.5 per cent
11. No surcharge of 10 per cent on personal income tax
12. Increase in exemption slab for senior citizen
13. No change in corporate taxes
14. Hike in IT exemption for women to Rs 1,90,000
15. Govt committed to tax reforms
16. Increase automation in direct tax collection
17. New tax code in 45 days
18. Centralised processing center at Bengalooru to streamline taxation
19. Income tax forms should be user friendly
20. Tax system should be such that it shold encourage voluntary compliance
21. Saral form 2 will be introduced

Highlights of Union Budget!!!

1. Fringe Benefit Tax and Commodity Transaction Tax abolished.
2. Personal income tax exemption hiked by Rs 10,000. No surcharge of 10% on personal income tax.
3. Centralised processing center at Bengalooru to streamline taxation.
4. No change in corporate tax.
5. Increase in exemption slab for senior citizens by Rs 15,000.
6. Fiscal deficit at 6.8% of GDP.
7. Proposes Rs 500 cr for rehabilation of displaced persons of northern and eastern areas of Sri Lanka.
8. Aila Relief proposed at Rs 1,000 crore.
9. Increased allocation for higher education. New IITs to be set up. Rs 2,113 cr for IITs and NITs.
10. Rs 25 cr each for AMU campuses in Murshidabad and Mallapuram.
11. Defence outlay goes up. One lakh dwelling units for paramilitary forces personnel to be constructed.
12. Allowances to para-military forces at par with defence forces. One rank, one pension for ex-servicemen.
13. One rank, one pension for ex-servicemen.
14. Allocation for Commonwealth Games to be raised to Rs 3472 crore
15. Online job exchange to be started with private partnership.
16. Unique ID plan to roll out in 12-18 months.
17. Top people from private sector to be given responsibility of vital national projects.
18. Interest subsidy for home loans up to Rs 1 lakh.
19. All BPL families to be bought under one smart card program.
20. 50% of all rural women to be brought into self-help group programmes.
21. Rural mega clusters in Bengal and Rajasthan.
22. To add handloom clusters in West Bengal and Tamil Nadu.
23. 75% hike in irrigation projects.
24. Rural Housing: Allocation to Indira Awaas Yojna hiked by 63% to Rs 8,883 cr. Rs 7000 crores for rural electrification scheme.
25. Rs 31,100 crore allocation for NREGA. NREGA gave employment opportunities to more than 4.479 cr households.
26. Rs 100 cr one-time grant to expand banks in non-banking areas.
27. Banks, insurance to stay with Govt. Banking network to be expanded.
28. Expert panel to look into petroleum product pricing. Domestic oil prices must be in sync with global prices.
29. 'Aam Admi' is the focus of all our programmes and schemes: Pranab
30. Tax system should be such that it shold encourage voluntary compliance.
31. Income Tax forms to be made user-friendly. Saral-II forms to simplify taxation process.
32. Export Credit Guarantee scheme extended till March 2010.
33. Stimulus package to print media extended till December 31.
34. Farmers loan interest to come down to 6%. Interest subvention scheme for farm loans to be manitained.
35. Additional budget allocation for farmers.
36. IIFCL will refinance 60% of commercial bank loans in PPP. IIFCL to look at infrastructure needs.
37. Mumbai flood management allocation hiked to Rs 500 cr.
38. 87% rise in urban renewal mission. Housing allocation hiked.
39. Fiscal stimulus at 3.5% of GDP
40. Allocation for NHAI up 23%
41. Trade in goods and services doubled in 2008
42. Job creation hit due to economic slowdown: Pranab
43. Govt took 3 stimulus packages so far. Two worst quarters of the global economic crisis is now behind us: Pranab
44. One budget can not solve all problems: Pranab
45. Foreign capital inflow is important
46. Increased focus on growth and encourage nation's development
47. Sustain growth rate of 9% for a longer period. Farm sector growth at 4%
48. Union Finance Minsiter begins his speech. This is Pranab Mukherjee's 4th budget.
49. Cabinet approves Union Budget.