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Friday, September 12, 2014

Exemptions available on Long term capital gains

All of us are aware that income in any form usually attracts tax. Capital assets are wealth created over a lifetime and the choice of selling these assets is made with an intention to increase existing wealth in the form of gains. Tax on capital gains directly affects investment decisions. However, there are various options available under the law to counter the tax arising at the time of sale, some of which have been articulated below to help you pick options of your liking.

Capital asset is defined to include property of any kind excluding stock-in-trade, personal effects, agricultural land and certain specified bonds. However, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art although may be for personal use are also covered under the definition of 'capital asset'. Capital gain is computed by deducting the cost of acquisition, cost of improvement and any expenditure incurred in connection with transfer from the sale consideration. Capital gains can be classified into long-term (LTCG) and short-term (STCG) depending on the period for which the capital asset has been held by the transferor before the date of suchtransfer. It is important to remember the category in which the capital gain falls because it will eventually impact the rate at which it is taxed and the tax benefits which can be enjoyed on re-investment of such gains/consideration.

STCG is earned on sale of a capital asset which has been held for not more than 36 months immediately preceding the date of its transfer. In case of any security listed on a recognised stock exchange in India or a unit of the Unit Trust of India or a unit of equity-oriented mutual fund or a zero-coupon bond, the period of holding for the gain to qualify as STCG is twleve months. The Income tax law has recently been amended to provide that the unlisted securities and a unit of mutual fund (other than an equity-oriented mutual fund) shall be a short-term capital asset, if it is held for not more than 36 months (which was 12 months in the erstwhile provisions). Any "capital asset" held for more than 36 months before its transfer (more than 12 months in case of listed securities, units of UTI or equity-oriented mutual fund) will qualify as a long-term capital asset and gains realised on its sale will qualify as a LTCG.

LTCG is taxed at a beneficial rate of 20%, plus a cess of 3%, subject to fulfilment of certain conditions. Besides the concessional rate of taxes available on sale of capital assets, there are also certain exemptions provided under the Income tax law for capital gains arising from sale of long-term capital asset.

LTCG is exempt for an individual or HUF on sale of a residential house property, if such gains (not the whole consideration) is utilised to purchase or construct another residential house. It should be noted that the new house should be purchased within one year before or two years after the date of transfer. In case of construction, the new house should be constructed within three years from the date of transfer. Exemption will be limited to the capital gains or the cost of the new house, whichever is lower

LTCG is exempt for an individual or HUF where it is realised on sale of any capital asset, not being a residential house, if the net consideration (not merely the gains) is invested in purchase or construction of a residential house. The timeline for purchase or construction is the same as mentioned above. However, to avail this benefit, the assessee should not own more than one house other than the new asset on the date of transfer. As per the recent clarifications made in Finance Act, 2014, the purchase of house property to claim such exemption has been restricted to one residential house property situated in India. Exemption in this case will be proportionate to the amount invested in relation to the net sale consideration.

The exempt amount is calculated by multiplying the capital gain with the number arrived by dividing the amount invested with the net sale consideration. Although LTCG is required to be invested as per the timelines mentioned in Income Tax law (i.e. two/ three years from the date of transfer), it is possible that such investment may not be made before the due date of filing of return.

Accordingly, the unutilised amount of capital gain or net consideration can be deposited in a separate account maintained with a nationalised bank under the Capital Gain Account Scheme (CGAS). Such investment needs to be made before the due date of filing of return of income in order to claim exemption and should be utilised only for specified purposes within the stipulated time period. In case the amount deposited in CGAS is not utilised within the specified period, it shall be charged as LTCG of the year in which the time limit for making the requisite investment expires.

LTCG can be claimed as exempt in case the gains are invested in bonds of National Highways Authority of India and Rural Electrification Corporation within six months from the date of transfer. However, the exemption is limited to Rs 50 lakh in such a case. It has been recently clarified in the Finance Act 2014 that the limit of Rs 50 lakh is in aggregate and applies to total investment. The exemption up to Rs 50 lakh can be claimed only in one financial year, even if the specified period of six months covers two financial years

It is important to remember that staying well informed of beneficial tax provisions always helps in saving substantial tax liability. All that is required is to make prudent investments at the right time. This will help in enjoying the fruits of one's labour without taking a cut on the pocket in the form of tax.

Thursday, September 11, 2014

TRACES advice for one challan for TDS payments

As per the records of the Centralized Processing Cell (TDS), it has been observed that you have used multiple challans in a month, for payment of Tax Deducted.

For Deductor's convenience, CPC(TDS) has established processing logic in the system that can accept a Single Challan for reporting of Tax Deposited in following circumstances :

Payment of Tax Deducted under different sections of the Income Tax Act, 1961:

 • The CPC(TDS) system gives credit of TDS against different sections of the Act, even though a specific section has been quoted in the challan.
 • Example: The challan used for payment of TDS relevant to Section 192 of the Act can also be used for the purpose of reporting tax deposited under Section 194 of the Act also
CPC (TDS) is committed to provide best possible services to you.
Situation prior to Financial Year 2012-13
Consumption of Challan in TDS Statement on the basis of Section quoted in the Challan details
Situation after Financial Year 2012-13
Section quoted in Challan, at the time of depositing Tax deducted/ collected is irrelevant for the purpose of consumption in TDS Statements.
 Payment of Tax Deducted for different Assessment Years:

 • In case tax has been deposited more than the required tax deducted at source for a particular Assessment Year, the excess amount of tax can be claimed in the following quarters of the relevant year. The balance amount if any, can be carried forward to the next year for claim in the TDS statement. 

 • Example: If excess payment of Tax has been made in Quarter 1 of financial year 2013-14, the same can be used for Quarter 2,3&4 of F.Y. 2013-14 as well as for Q1 to Q4 of F.Y.2014-15. The excess amount of tax paid in Q1 of F.Y.2013-14 can also be used for payment of tax default of Q1 to Q4 of F.Y.2012-13.

Different challans used for the purpose of reporting multiple Deductees associated with different branches with same TAN:

 • The deductor may have used multiple challans for reporting multiple deductees associated with different branches, in the TDS Statement.

 • A single challan can be used for the purpose of reporting Tax Deducted for such deductees.

 • Example: If a Bank has multiple branches with same TAN, payment of Tax Deducted can be made by a single challan and all the deductees can be tagged using the same.

Based on the above information, you may use a single challan in a month towards payment of Tax Deposited. For any assistance, you can also write to or call our toll-free number 1800 103 0344.
CPC (TDS) is committed to provide best possible services to you.

Wednesday, September 10, 2014

RBI clarification on defaulters guarantor lender and unit

Please refer to the Master Circular on Wilful Defaulters DBOD.No. CID.BC.3/ 20.16.003/2014-15 dated July 1, 2014.

2. Paragraph 2.1 of the circular lists out various events when a “wilful default” would be deemed to have occurred. In view of references received from a few banks regarding scope/definition of “wilful default”, it is clarified as follows:

The term ‘lender’ appearing in the circular covers all banks/FIs to which any amount is due, provided it is arising on account of any banking transaction, including off balance sheet transactions such as derivatives, guarantee and Letter of Credit.

The term ‘unit’ appearing therein has to be taken to include individuals, juristic persons and all other forms of business enterprises, whether incorporated or not. In case of business enterprises (other than companies), banks/FIs may also report (in the Director column) the names of those persons who are in charge and responsible for the management of the affairs of the business enterprise.

3. Paragraph 2.6 of the circular is amended to read as follows:

“While dealing with wilful default of a single borrowing company in a Group, the banks /FIs should consider the track record of the individual company, with reference to its repayment performance to its lenders. However, in cases where guarantees furnished by the companies within the Group on behalf of the wilfully defaulting units are not honoured when invoked by the banks /FIs, such Group companies should also be reckoned as wilful defaulters”.

4. In connection with the guarantors, banks have raised queries regarding inclusion of names of guarantors who are either individuals (not being directors of the company) or non-group corporates in the list of wilful defaulters. It is advised that in terms of Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Therefore, when a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor. As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter. It is clarified that this would apply only prospectively and not to cases where guarantees were taken prior to this circular. Banks/FIs may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees.

5. Banks/FIs may take due care to follow the provisions set out in paragraph 3 of the Master Circular on Wilful Defaulters dated July 1, 2014 in identifying and reporting instances of wilful default in respect of guarantors also. While reporting such names to RBI, banks/FIs may include “Guar” in brackets i.e. (Guar) against the name of the guarantor and report the same in the Director column.

6. This circular is issued in exercise of the powers conferred upon Reserve Bank of India under Section 35A of the Banking Regulation Act, 1949.

India signS DTAA with Bhutan

Government of India notifies DTAA(Double tax avoidance agreement) with Bhutan. Income tax department issued notification no. 42 dated 5 September 2014 regarding DTAA with Bhutan. Full notification and agreement can be downloaded from this link.

Thursday, September 4, 2014

Manual selection is compulsory for cases of scrutiny for FY 2014-15

CBDT made instruction as which cases will come into scrutiny for financial year 2014-15. Manual section of cases will be mandatory for scrutiny for financial year 2014-15. Full instruction is as under.

In supersession of earlier Instructions on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/cases for scrutiny d ing the financial-year 2014-2015:-

(a) Cases involving addition in an earlier assessment year in excess of Rs. 10 lakhs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before an appellate authority.

(b) Cases involving addition in an earlier assessment year on the Issue of transfer pricing in excess of Rs. 10 crore or more on a substantial and recurring question of Jaw or fact which is confirmed in appeal or is pending before an appellate authority.

(c) All assessments pertaining to Survey under section 133A of the Act excluding the cases where there are no impounded books of accounts/documents and returned income excluding any disclosure made during the Survey is not less than returned income of preceding assessment year. However, where assessee retra u the
disclosure made during the Survey will not be covered by this exclusion.

(d) Assessments in search and seizure cases to be made under section 1588, 1588C, 1588D, 153A & 153C read with section 143(3) of the Act and also for the turns filed for the assessment year relevant to the previous year in which authorization for search and seizure was executed u/s 132 or 132A of the Act.

(e) Returns filed in response to notice under section 148 of the Act.

(f) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assessee has been found I to beclaiming tax-exemption under section 11 of the Act. However, Where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

(g) Cases where order denying the approval u/s 10(23C) of the Act or withdrawing the approval already granted has been passed by the Competent Authority, yet the assessee has been found claiming tax-exemption under the aforesaid provision of the Act.

(h) Cases in respect of which specific and verifiable information pointing out tax-evasion Is given by Government Departments/Authorities. The Assessing Officer shall record reasons and take prior approval from jurisdictional Pr. CCIT CCIT/Pr. DGIT/DGIT concerned before selecting such a case for scrutiny.

2. Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS on the basis of broad based selection filters. list of such cases shall be separately Intimated In due course by the
DGIT(Systems) to the jurisdictional authorities concerned.

3. It Is reiterated that the targets for completion of scrutiny assessments and strategy framing assessments as contained in Central Action Plan document for Financial-Year 2014-2015 has to be complied with and it must be ensured that all scrutiny assessment orders including the cases selected under the manual criterion are completed through the AST system software only Further, in order to ensure the quality of assessments being framed, Pr. CCsIT/C.CsIT/Pr. DsGIT/DsGIT should evolve a suitable monitoring mechanism and by 30' April, 2015, such authorities shall send a report to the respective Zonal Member with a Copy to Member (IT) containing details of at least 50 quality assessment orders from their respective charges. In this regard, IT Authorities concerned must ensure that cases selected for publication in let us Share' are picked up only from tide quality assessments as reported.

4. These instructions may be brought to the notice of all concerned. If considered neccessary, supplementary guideline would be issued subsequently.

5. Hindi version to follow.

Monday, September 1, 2014

SBI signing 2986 probationary officers

State Bank of India has notified recruitment of 2,986 probationary officers to work in its group of banks across the country.
The online registration can be done during September 1 – 18, 2014. The written examination would be conducted tentatively in November 2014.
Graduates who are in the age group of 21-30 years are eligible to apply and age relaxation would be extended as per the Government norms.
The total emoluments vary depending upon the place of posting and the perquisites by individual banks. Those posted in Mumbai, for instance, would get an average monthly salary of Rs. 65,000, SBI said in its notification.
Meanwhile, SBI had also declared results of the written examination for the recruitment of probationary officers held in June/July this year. The group discussions and interviews for the same will commence from October 8, 2014.

DDA housing scheme open today for 25034 flats

The DDA announced the opening of its Housing Scheme 2014 on Monday. The authority is offering 25,034 flats in Delhi, New Delhi and Delhi Cantt area to people who don't have a flat in Delhi.

 The forms for the scheme were put on sale from 9:30 am at DDA office (Vikas Sadan) and also at 13 empanelled banks and will close on October 9.  The draw of the lot is expected to be held within 20 days of the scheme's closure.

The 13 banks are Punjab National Bank, State Bank of India, Central Bank of India, Corporation Bank, Syndicate Bank, Union Bank of India, Indusland Bank, Kotak Mahindra Bank, IDBI Bank, ICICI Bank Ltd, Yes Bank, HDFC Bank and Axis Bank. The forms are to be submitted at these banks.

"We are offering 25,034 flats in the 2014 scheme out of which 22,627 would be one-bed room apartments. Among others, 896 flats are constructed after 2010, with green technology," said Balvinder Kumar, Vice-chairman, DDA.

The new scheme offers flats ranging from Rs 7 lakh to Rs 1.2 crore across categories, viz - EWS, LIG, MIG, HIG, Janta flats and one-room apartments and would be rolled out from September 1.

The registration fee for all other categories is Rs 1 lakh, and Rs 10,000 for EWS (Economically Weaker Section) category, the official said, adding a ceiling of Rs 1 lakh of annual income has been prescribed for those applying under the EWS category.

The one-bedroom apartment flats are in Dwarka, Rohini, Narela and Siraspur areas, priced above 14 lakh onwards, depending on the location and plinth area, the DDA said.

Out of 896 newly-built flats, 512 are MIG flats and 384 Janta flats, located in Mukherjee Nagar, Narela, Rohini and Kalyan Vihar areas. The MIG flats would range from Rs 41.30 lakh and Rs 69.90 lakh and the Janta flats - one room tenement with a kitchentte - would cost a little over Rs 10 lakh, it said.

DDA is offering 700 flats for EWS category, which are part of the housing complex at Swatantra Bharat Mills premises at Rohtak Road. The flats have been developed by a private builder as part of a Memorandum of Understanding (MoU) signed between the DDA and the builder.

The EWS flats priced from Rs 7 lakh to Rs 11 lakh, the urban body said.

Over 800 old flats located under different categories are also being offered, on account of them being cancelled or surrendered.

These flats (older) consists of 21 HIG flats, 49 MIG, 451 LIG, 129 expendable and 161 Janta flats. The cost ranges from Rs 1.2 crore for HIG flats to Rs 5.4 lakh for Janta flats, the DDA said.

The DDA had earlier said that the total number of flats on offer was over 26,000 but on Friday said the figure has been revised to over 25,000.

For the first time, DDA has also decided to do away with attachments along with the application forms and now only a photocopy of PAN card would be needed for the process, she said.

There is no income limits on one-bedroom apartments and any eligible candidate can apply. For EWS category, there will also be an option to pay the cost of the flats in instalments, she added.

For unsuccessful applicants, the DDA would return the registration amount within 90 days of the draw of lots and for delays beyond 90 days, interest would be paid to the applicants.

In case of successful applicants, who decide to surrender their allotments, refund amount has been rationalised wherein the maximum amount recovered has been restricted to Rs 50,000.

Any Indian citizen, 18 years of age and above on the date of filing of the application for the flats is eligible for the scheme.

The applicants must not own any residential flats or plot in full or in part on leasehold or freehold in Delhi or New Delhi or Delhi Cantonment either in his/her own name or in the name of his/her minor or dependent children, the DDA said.

One person can submit one application only, it said, adding, both husband and wife can apply for flats subject to fulfilment of eligibility conditions with a stipulation that if both are found to be successful, only one of them shall retain the allotment of a flat.