CA Intermediate Direct Tax Amendments PDF May/Nov 2024

CA INTERMEDIATE Direct Tax Amendments For May/Nov 2024 EXAM CMA VIPUL SHAH MBA / M.Com / EXIM CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR May/Nov 2024 DIRECT TAX INDEX Chapter...

CA INTERMEDIATE Direct Tax Amendments For May/Nov 2024 EXAM CMA VIPUL SHAH MBA / M.Com / EXIM CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR May/Nov 2024 DIRECT TAX INDEX Chapter Chapter Name Page No. No. 1 INTRODUCTION TO INCOME TAX ACT 1-7 2 RESIDENTIAL STATUS 8 3 INCOME EXEMPT FROM TAX 9 - 12 4 INCOME FROM SALARY 13 – 14 5 PROFIT AND GAINS OFF BUSINESS OR PROFESSION 15 – 16 6 CAPITAL GAIN 17 – 21 7 INCOME FROM OTHER SOURCE 22 8 SET OFF AND CARRY FORWARD OF LOSSES 23 9 PERMISSIBLE DEDUCTION FROM TOTAL INCOME 24 10 TAX DEDUCTED AT SOURCE & TAX COLLECTED AT SOURCE 25 – 32 11 RETURN AND ASSESSMENT PROCEDURE 33 www.vipulshah.org 7559173787 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 1 – INTRODUCTION TO INCOME TAX ACT ALTERNATIVE TAX REGIME FOR INDIVIDUALS / HUFS AOP/ BOI/ AJP UNDER SECTION 115BAC 1. Income of individuals and Hindu Undivided Family For the assessment years 2021-22 to 2023-24, an individual/HUF can opt for the alternative tax regime under section 115BAC(1). If such option is exercised, the assessee is governed by the alternative tax regime under section 115BAC. From the assessment year 2024-25, the alternative tax regime under section 115BAC is the default tax regime for an individual/HUF/AOP/BOI/artificial juridical person. However, these assessees can avail the benefit of regular tax regime by exercising the option under section 115BAC(6). 2. Rate of income tax under the alternative tax regime (Section 115BAC(1)) under the alternative tax regime income tax shall be computed as per the rates given in the following table: Sec. 115BAC(1) – For the assessment Sec. 115BAC(1A) – From the years 2021 – 22 to 2023 - 24 assessment year 2024 – 25 Total income Rate of Tax Total income Rate of Tax Up to Rs. 2,50,000 Nil Up to Rs. 3,00,000 Nil From Rs. 2,50,001 to Rs. 5 per cent From Rs. 3,00,001 to Rs. 5 per cent 5,00,000 6,00,000 From Rs. 5,00,001 to Rs. 10 per cent From Rs. 6,00,001 to Rs. 10 per cent 7,50,000 9,00,000 From Rs. 7,50,001 to Rs. 15 per cent From Rs. 9,00,001 to Rs. 15 per cent 10,00,000 12,00,000 From 10,00,001 to Rs. 20 per cent From Rs. 12,00,001 to Rs. 20 per cent 12,50,000 15,00,000 From Rs. 12,50,001 to Rs. 25 per cent Above Rs. 15,00,000 30 per cent 15,00,000 Above Rs. 15,00,000 30 per cent 3. Exemption limit Exemption limit is Rs. 2,50,000. (Rs. 3,00,000 for the assessment year 2024 – 25). It is applicable even in the case of senior citizen and super senior citizen 4. Rebate under section 87A Rebate under section 87A is available. A resident individual (paying tax under the alternative tax regime) can claim rebate u/s 87A as follows - Different assessment Total income should Amount of rebate u/s 87A years not exceed the amount given below 2021 – 22 to 2023 – 24 Rs. 5,00,000 100% of income tax or Rs. 12,500, www.vipulshah.org 7559173787 1 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 whichever is less 2024 – 25 onwards Rs. 7,00,000 100% of income tax or Rs. 25,000, whichever is less 1. Illustration X (30 years) is a resident individual. His income for the assessment year 2024 – 25 is Rs. 7,00,000 (situation 1) or Rs. 7,27,000 (situation 2) or Rs. 7,30,000 (situation 3) or Rs. 7,50,000 (situation 4). He does not want to opt for the regular tax regime. Solution Rebate u/s 87A is subject to marginal relief from the assessment year 2024 – 25. If net income exceed Rs. 7,00,000 but does not exceed Rs. 7,27,770, income tax on such income cannot exceed the amount by which the net income exceed Rs. 7,00,000. Tax liability in different situations will be calculated as follows – Situation 1 Situation 2 Situation 3 Situation 4 Rs. Rs. Rs. Rs. Net income a 7,00,000 7,27,000 7,30,000 7,50,000 Tax on net income under b 25,000 27,700 28,000 30,000 alternative tax regime Less: Rebate u/s 87A c 25,000 Nil Nil Nil (under normal provisions) [i.e., proviso (a) to section 87A, applicable when net income is Rs. 7,00,000 or less, amount of rebate is 100% of income tax or Rs. 25,000, whichever is less - Excess of (a) over Rs. d N.A 27,000 30,000 50,000 7,00,000 - Rebate u/s 87A (as per e N.A 700 Nil Nil marginal relief of provisions) [i.e., it is exceed of (b) over (d) (there is no such excess tax in situation 3 or solution 4) Income tax after rebate Nil 27,000 28,700 Nil u/s 87A [i.e., (b) - (c) or (e)] Add: H & EC Nil 1,080 1,120 Nil Tax liability Nil 28,080 29,120 Nil www.vipulshah.org 7559173787 2 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 5. Marginal Relief Marginal relief-Rebate under section 87A is subject to marginal relief from the assessment year 2024- 25. If net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770, income-tax on such income cannot exceed the amount by which the net income exceeds Rs. 7,00,000. 6. Tax on other incomes If an individual / HUF (who has opted for the alternative tax regime) has other incomes which are taxable under other provisions of Chapter XII (i.e. sections 110 to 115BBG but other than section 115BAC), then tax on such other incomes will be calculated as per the rate(s) specified by these sections and balance amount of income will be taxable under section 115BAC as per the rate given in above table. 7. Surcharge & Education Cess Surcharge applicable under regular tax regime is also applicable in new scheme except from AY 24 – 25 for income above 5 crore surcharge rate is 25% instead of 37% 8. Restrictions on deductions/ exemptions (Section 115BAC(2)) The following conditions should be satisfied in order to avail the benefit of lower rate under the alternative tax regime of section 115BAC: House rent allowance (section 10(13A)) [Refer chapter 4] Special allowance(s) (other than those as may be prescribed) (Section 10(14)) [Refer chapter 4] Allowance to MPs / MLAs (Section 10(17)) [Refer chapter 4] Exemption up to Rs.1,500 available in the case of clubbed income of a minor child (section 10(32)) [Refer chapter 3] Special economic zone (section 10AA) [Refer chapter 3] Standard deduction (section 16(ia)) [Refer chapter 4] [F. Act 23] Entertainment allowance deduction (section 16(ii)) [Refer chapter 4] Professional tax deduction (section 16(iii)) [Refer chapter 4] Interest on housing loan in the case of one or two self – occupied properties (section 24(b)) [Refer chapter 5] Additional depreciation (section 32(1)(iia)) [Refer chapter 6] Tea / coffee / rubber development account (section 33AB) [Refer chapter 6] Site restoration fund (section 33ABA) [Refer chapter 6] Deduction for scientific research (section 35(1)(iia)/(iii), 35(2AA)) [Refer chapter 6] Capital expenditure pertaining to specified business (section 35AD) [Refer chapter 6] Agriculture extension project (section 35CCC) [Refer chapter 6] Standard deduction in the case of family pension (section 57(iia)) [Refer chapter 8] [F. Act 23] www.vipulshah.org 7559173787 3 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Deduction under sections 80C to 80U (except employer’s contribution towards NPS under section 80CCD(2), deduction under section 80JJAA and deduction under section 80LA(1A)) [Refer chapter 11] Available exemption [Refer chapter 3] Interest on public provident fund (as well as final payment at the time of maturity) will remain exempt under section 10(11) even if a person opts for the alternative tax regime under section 115BAC. Interest on Sukanya Samriddhi Account (as well as withdrawal or final payment from such account) will enjoy exemption under section 10(11A) even of the concerned person has opted for the lower tax regime of section 115BAC). Exemption under section 10(10) pertaining to gratuity Exemption under section 10(10A) pertaining to commutation of pension Exemption under section 10(10AA) pertaining to leave encashment Exemption under section 10(10B) pertaining to retrenchment compensation Exemption under section 10(10C) pertaining to compensation on voluntary retirement separation Exemption under section 10(10CC) pertaining to tax on non-monetary perquisites paid by employer Exemption under section 10(D) pertaining to sum received under a life insurance policy Exemption under section 10(12) pertaining to interest and withdrawal from recognized provident fund Exemption under section 10(12A) / (12B) pertaining to payment (including withdrawal) from NPS Exemption under section 10(13) pertaining to payment from approved superannuation fund. 9. Adjustment of losses The total income of the individual / HUF is calculated without adjusting brought forward loss (and / or additional depreciation) from any earlier year (if such loss / additional depreciation pertains to any deduction under the aforesaid sections). Moreover, any loss under the head “Income from house property” cannot be set off with any other income under any other head of income. 10. Adjustment of depreciated value of block of assets Brought forward loss / depreciation as mentioned above, shall be deemed to have been given full effect to and no further deduction for such loss / depreciation shall be allowed for any subsequent year. However, where unadjusted depreciation in respect of a block of assets has not been given full effect to prior to the assessment year 2021 – 2022 corresponding adjustment shall be made to the written down value of such block as on April 1, 2020 in the prescribed manner (if option is exercised for the lower tax regime www.vipulshah.org 7559173787 4 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 under section 115BAC for the assessment year 2021 – 22). Further, corresponding adjustment shall be made to the written down value of the block as on April 1, 2023 in the case of an assessee who satisfies the following conditions – 1 The assessee has not exercised the option under section 115BAC(5) for the alternative tax regime for the assessment year 2023-24 (or earlier). 2 He has opted for the alternative tax regime to pay tax under section 115BAC(IA). 3 There is unadjusted depreciation in respect of a block of asset which has not been given full effect prior to the assessment year 2024-25. 11. Depreciation on prescribed mode Total income of the individual / HUF is calculated after claiming depreciation (other than additional depreciation) in such manner as may be prescribed. 12. Alternative minimum tax not applicable Alternate minimum tax (AMT) under section 115JC is not applicable if the assessee opts for the alternative tax regime under section 115BAC. Consequently, AMT tax credit of earlier years cannot be adjusted against the tax liability which is computed under section 115BAC. 13. Option (section 115BAC(5)) An individual / HUF (who wants to avail the benefit of lower rate under the alternative tax regime of section 115BAC) is required to upload an option in prescribed mode on or before the due date of submission of return of income as follows: A. Assessee does not have business / profession income If the assessee does not have business / profession income, the option must be exercised along with the return of income for every previous year. Provisions illustrated: X is an individual and does not have any business / profession income for the assessment year 2021 – 2022. He exercises the option for the alternative tax regime for the assessment year 2021 – 2022. In this case, option is valid only for the assessment year 2021 – 2022. For the next assessment year, he may (or may not) avail of the alternative tax regime under section 115BAC. If he wants to avail the benefit of lower tax taxation for the assessment year 2022 – 2023, he will have to exercise a fresh option by uploading the relevant form on or before the due date of submission of return of income for the assessment year 2022 – 2023. B. Assessee has business / profession income If the assessee has business/profession income, this option can be exercised for any previous year relevant to the assessment year 2021-22 (or 2022-23 or 2023-24) by uploading Form No. 10-IE on or before the due date of submission of return of income under section 139(1). Once the individual/HUF has exercised the option for the alternative tax regime under section 115BAC, it will remain valid for subsequent years as well (up to the assessment year 2023- 24). However, the option can be withdrawn only once for a previous year (other than the year in which it was exercised) and www.vipulshah.org 7559173787 5 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 thereafter, the person shall never be eligible to exercise option of alternative tax regime (for the assessment years 2021-22 to 2023-24) under section 115BAC (except where such person ceases to have any income from business or profession). C. Option by an employee under section 115BAC for lower tax regime CBDT vide Circular no. C1/2020, dated April 13, 2020 has clarified that an employee (not having income from business / profession) can opt for the lower tax regime under section 115BAC by intimating the same to the employer (i.e. deductor) of such intention for each previous year. Upon such intimation, the deductor shall compute the amount of tax deductible (under section 192) according to the provisions of section 115BAC. The following points should be noted: The above intimation to the employer shall be only for the purpose of the TDS and cannot be modified during that year. Such intimation to the employer does not amount to exercise of option by the concerned employee under section 115BAC(5). The concerned employee is required to exercise the option under section 115BAC(5) at the time of submission of his return of income (such option could be different from the intimation made to the employer). If the above intimation is not made by the employee, the employer (or deductor) shall deduct tax at source ignoring the provisions of section 115BAC. 14. From the assessment year 2024 – 25 [option u/s 115BAC(6) to avail the benefit of regular tax regime] From the assessment year 2024 – 25 the alternative tax regime u/s 115BAC is the default tax regime for an individual HUF/ AOP/ BOI artificial juridical person. However, these assessment can avail the benefit of regular tax regime by exercising the option u/s 115BAC(6). Assessee does not have business/ profession income If the assessee does not have business/ profession income, the option u/s 115BAC(6) (i.e., to opt for regular tax regime) must be exercised along with the return of income u/s 139(1) for every previous year. 2. Illustration X is an individual and does not have any business/profession income for the assessment year 2024-25. If he does not exercise any option, he will have to pay tax under the parameters of alternative Tax regime. If, however, he exercises the option for the regular tax regime for the assessment year 2024-25 along with the return of income under section 139(1), the option will be valid only for the assessment year 2024-25. For the next assessment year, he may (or may not) choose to pay tax under regular tax regime. If he does not exercise any option for the assessment year 2025-26, he will be governed by the alternative tax regime. Conversely, if he wants to pay tax under the regular tax regime for the assessment year 2025-26, he will have to exercise a fresh option along with the return of income under section 139(1) for the assessment year 2025- 26. www.vipulshah.org 7559173787 6 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Assessee having business/profession income - If the assessee (i.e., individual/HUF/AOP, etc.) has business/profession income and no option is exercised, he will be governed by the alternative tax regime. The assessee can avail the benefit of regular tax regime by exercising the option under section 115BAC(6). Such option can be exercised on or before the due date of submission of return of income under section 139(1) and such option once exercised shall apply to subsequent assessment year as well. However, the option once exercised for any previous year can be withdrawn only once for a previous year (other than the year in which it was exercised) and thereafter the person shall never be eligible to exercise the option of availing the benefit of regular tax regime (except where such person ceases to have any income from business or profession). www.vipulshah.org 7559173787 7 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 2 – RESIDENTIAL STATUS SEC 9(1)(VIII) HAS BEEN AMENDED (WITH EFFECT FROM THE ASSESSMENT YEAR 2024-25) To extend this deeming provision to sum of money (exceeding Rs. 50,000) received by a not ordinarily resident without consideration from a person resident in India. After this amendment, gift of money (exceeding Rs. 50,000 in a financial year) by a person resident in India to an individual/HUF (who is resident but not ordinarily resident in India) will be taxable in India if such gift is made on or after April 1, 2023. However, section 9(1)(viii) does not cover gift of any other property (movable or immovable). Consequently, the following are not covered by the deeming provisions of section 9(1)(viii) even if transferor is a person resident in India - Transfer of immovable property without consideration to a non-resident/not ordinarily resident. Transfer of immovable property for inadequate consideration to a non-resident/not ordinarily resident. Transfer of movable property without consideration to a non-resident/ not ordinary resident. Transfer of movable property for a inadequate consideration to a non-resident/ not ordinarily www.vipulshah.org 7559173787 8 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 3 – INCOME EXEMPT FROM TAX SECTION 10(10D) ANY SUM RECEIVED UNDER THE LIFE INSURANCE POLICY, INCLUDING BONUS ON SUCH POLICY. HOWEVER THE FOLLOWING SUMS ARE NOT EXEMPT: AMENDMENT - After the amendment, exemption will not be available in respect of sum received under a life insurance policy (other than a unit linked insurance policy) issued on or after April 1, 2023, if the amount of premium payable for any of the previous year during the term of such policy exceeds Rs. 5 lakh. If the premium is payable, by a person, for more than one life insurance policy (other than unit linked insurance policy) issued on or after April 1, 2023, the exemption under section 10(10D) will be available only in respect of those life insurance policies (other than unit linked insurance policies), where the aggregate amount of premium does not exceed Rs. 5 lakh in any of the previous years during the term of any of such policies. However, the aforesaid restriction will not apply (and exemption will be available) when payment is received under a life insurance policy on the death of a person. Accordingly, the CBDT has, with the approval of the Central Government, vide this circular, issued the following guidelines in respect of LIPs (other than ULIPs)– Situation 1: No sum of any nature including bonus (such sum hereinafter referred as “consideration”) is received by the assessee on any LIPs which are issued on or after 1.4.2023 (such LIPs hereinafter referred as “eligible LIPs”) during any previous year preceding the current previous year (being the P.Y. in which consideration is received and its taxability is being examined) or consideration has been received on such eligible LIPs in an earlier previous year but has not been claimed exempt. In such a situation, the exemption u/s 10(10D) would be determined as under: I. Where the assessee has received consideration, during the current P.Y., under one eligible LIP only Circumstance Eligibility for exemption u/s 10(10D) If the amount of premium payable on such eligible LIP Such consideration would be eligible for does not exceed ` 5,00,000 for any of the PYs during exemption u/s 10(10D). the term of such eligible LIP and annual premium does [Refer Example 1 and 2 given below] not exceed 10% of actual capital sum assured If the amount of premium payable on such eligible LIP Such considerationwould not be > ₹ 5,00,000 for any of the PYs during the term of eligible for exemption u/s 10(10D). such eligible LIP [Refer Example 3 given below] www.vipulshah.org 7559173787 9 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Example 1: LIP A Date of issue 1.4.2013 Annual premium 6,00,000 Sum assured 60,00,000 Consideration received as on 01.11.2023 on maturity 70,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2023-24. Eligibility for exemption u/s 10(10D) - The consideration received under LIP “A” would be exempt u/s 10(10D) in A.Y. 2024-25 since annual premium does not exceed 10% of the actual capital sum assured. Moreover, as the policy has been issued before 1.4.2023, limit of ` 5,00,000 of amount of premium payable is not applicable, since it is not an eligible ULIP. Example 2: LIP A Date of issue 1.4.2023 Annual premium 5,00,000 Sum assured 50,00,000 Consideration received as on 01.11.2033 on maturity 52,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2033-34. Eligibility for exemption u/s 10(10D) - The consideration received would be exempt u/s 10(10D) in A.Y. 2034-35, since the annual premium payable on the policy does not exceed ` 5,00,000 and also does not exceed 10% of actual capital sum assured. Example 3: LIP A Date of issue 1.4.2023 Annual premium 6,00,000 Sum assured 60,00,000 Consideration received as on 01.11.2033 on maturity 70,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2033-34. Eligibility for exemption u/s 10(10D) - The consideration received would not be exempt u/s 10(10D) in A.Y. 2034-35 since the annual premium payable on the eligible LIP exceeds ₹ 5,00,000. www.vipulshah.org 7559173787 10 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 II. Where the assessee has received consideration, during the current P.Y., under more than one eligible LIP Circumstance Eligibility for exemption u/s 10(10D) If the aggregate of the amount of Such consideration would be eligible for exemption premium payable on such eligible LIPs does under u/s 10(10D). not exceed ₹ 5,00,000 for any of the PYs [Refer Example 4 given below] during the term of such eligible LIPs and the annual premium ≤ 10% of actual capital sum assured If the aggregate of the amount of Consideration in respect of any of those eligible LIPs premium payable on such eligible LIPs whose aggregate amount of premium payable does > ₹ 5,00,000 for any of the PYs during the not exceed ₹ 5,00,000 for any of the PYs during term of such eligible LIP their term would be eligible for exemption u/s 10(10D), provided their annual premium ≤ 10% of actual capital sum assured. [Refer Examples 5, 6 and 7 given below] Example 4: LIP A B Date of issue 1.4.2023 1.4.2023 Annual premium 3,00,000 2,00,000 Sum assured 30,00,000 20,00,000 Consideration received as on 01.11.2033 on maturity 32,00,000 21,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2033-34. Eligibility for exemption u/s 10(10D) – In this case, the aggregate of the annual premium payable for LIP “A” and LIP “B” does not exceed ₹ 5,00,000 during the term of these policies. Further, annual premium payable in respect of LIP “A” and LIP “B” does not exceed 10% of actual capital sum assured. Therefore, the consideration received under LIP “A” and “B” would be exempt u/s 10(10D) in A.Y. 2034-35 Example 5: LIP A B Date of issue 1.4.2023 1.4.2023 Annual premium 4,50,000 5,50,000 Sum assured 45,00,000 55,00,000 Consideration received as on 01.11.2033 on maturity 52,00,000 60,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2033-34. www.vipulshah.org 7559173787 11 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Eligibility for exemption u/s 10(10D) – In this case, the aggregate of the annual premium payable for LIP “A” and LIP “B” exceeds ₹ 5,00,000 during the term of these policies. However, the consideration received under LIP “A” would be exempt u/s 10(10D) in A.Y. 2034 - 35, since its annual premium payable does not exceed ₹ 5,00,000 for any previous year during the term of the policy and also does not exceed 10% of actual capital sum assured. Consequently, the consideration received under LIP “B” alone would not be exempt u/s 10(10D) in A.Y. 2034-35. Example 6: LIP A B C Date of issue 1.4.2023 1.4.2023 1.4.2023 Annual premium 1,00,000 3,50,000 6,00,000 Sum assured 10,00,000 35,00,000 60,00,000 Consideration received as on 01.11.2033 on maturity 12,00,000 40,00,000 70,00,000 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y. preceding the P.Y.2033-34. Eligibility for exemption u/s 10(10D) - The aggregate of annual premium payable for LIP “A”, LIP “B” and LIP “C” exceeds ₹ 5,00,000 during the term of these policies. However, the consideration received under LIPs “A” and “B” would be exempt u/s 10(10D) in A.Y. 2034-35, since aggregate of annual premium payable for these two policies does not exceed ₹ 5,00,000 for any previous year during the term of these two policies and annual premium payable in respect of these policies does not exceed 10% of actual capital sum assured. Consequently, the consideration received under LIP “C” alone would not be exempt u/s 10(10D) in A.Y. 2034-35. Clarification on premium of Term life insurance policy: It is further clarified by the CBDT that the limit of ₹ 5,00,000 of amount of premium payable would not be applicable in case of a term life insurance policy i.e. where sum under a life insurance policy is only paid to the nominee in case of the death of the person insured during the term of the policy and no amount is paid to anyone if the insured person survives the policy tenure. Hence, any sum received under a term insurance policy shall continue to be exempt under section 10(10D), irrespective of the amount of the premium payable in respect of such policy. Further the premium paid f or such policies would not be counted for checking the limit of ₹ 5,00,000 of amount of premium payable. www.vipulshah.org 7559173787 12 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 4 – INCOME FROM SALARY GOVT CONTRIBUTION TO AGNIVEER CORPUS FUND Government contribution to Agniveer Corpus Fund account of an individual shall be included in the income of the assessee under the head Salaries. However, deduction u/s 80CCH(2) shall be available to the assessee. VALUATION RULE FOR RENT FREE ACCOMMODATION W.e.f. 01-09-2023, revised rule of valuation shall be applicable. The amended position is mentioned here-inbelow: City in which Accommodation is owned by the Accommodation is not accommodation is provided employer owned by the employer Having population exceeding 10% of salary for the period during 40 lacs as per 2011 census which the employee occupied the said accommodation. Rent paid or payable by Having population exceeding 7.5% of salary for the period during the employer or 10% of 15 lacs but not exceeding 40 which the employee occupied the said salary, whichever is lacs as per 2011 census accommodation. lower. Any other city 5% of salary for the period during which the employee occupied the said accommodation. Taxpoint: A. Cap on Valuation in subsequent year(s) W.e.f. 01-09-2023, where the same accommodation is continued to be provided to the same employee for more than one previous year, the aforesaid calculation shall be restricted to the amount calculated as per following formula: 𝐶𝐼𝐼 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑃. 𝑌. 𝑓𝑜𝑟 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑎𝑚𝑜𝑢𝑛𝑡 𝑖𝑠 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑 𝐴𝑚𝑜𝑢𝑛𝑡 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑖𝑟𝑠𝑡 𝑃. 𝑌. 𝑥 𝐶𝐼𝐼 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑃. 𝑌. 𝑖𝑛 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑎𝑐𝑐𝑜𝑚𝑚𝑜𝑑𝑎𝑡𝑖𝑜𝑛 𝑤𝑎𝑠 𝑖𝑛𝑖𝑡𝑖𝑎𝑙 CII – Cost Inflation Index as notified for the purpose of sec. 48 First previous year means the previous year 2023-24, or the previous year in which the accommodation was provided to the employee, whichever is later. Provision Illustrated Particulars P.Y.2023-24 P.Y.2024-25 Cost Inflation Index (CII) 348 370 (assumed) Salary ₹ 20,00,000 ₹ 28,00,000 Valuation of RFA, say 10% of salary [a] ₹ 2,00,000 ₹ 2,80,000 www.vipulshah.org 7559173787 13 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Valuation after applying inflation linked ₹ 2,00,000 As it is first ₹ 2,12,644 i.e., ₹ 2,00,000 capping [b] P.Y. x 370 / 348 Valuation to be taken [Lower of (a) and ₹ 2,00,000 ₹ 2,12,644 (b)] B. The valuation rule is not applicable where any accommodation is provided to an employee working at a mining site; or an on-shore oil exploration site; or a project execution site; or a dam site; or a power generation site; or an off-shore site, which a. being of a temporary nature and having plinth area not exceeding 800 sq.ft. (w.e.f. 01- 09-2023 - 1000 sq. ft) is located not less than 8 kms away from the local limits of any municipality or a cantonment board; or b. is located in a remote area. W.e.f. 01-09-2023, "remote area", means any area other than an area which is located: i. within the local limits of; or ii. within a distance, measured aerially, of 30 kilometers from the local limits of, any municipality or a cantonment board having a population of 1,00,000 or more based on the 2011 census www.vipulshah.org 7559173787 14 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 5 – PROFIT AND GAINS OFF BUSINESS OR PROFESSION TIME LIMIT PRESCRIBED FOR FURNISHING STATEMENT OF EXPENDITURE ELIGIBLE FOR AMORTISATION UNDER SECTION 35D [NOTIFICATION NO. 54/2023 DATED 01.8.2023] Section 35D provides for the amortisation of preliminary expenses incurred by an Indian company or a person other than a company, resident in India for the establishment of business concerns or the expansion of the business of existing concerns. As per the proviso to section 35D(2)(a), the assessee has to furnish a statement containing the particulars of expenditure in connection with - a) The preparation of feasibility report b) The preparation of project report c) Conducting market survey or any other survey necessary for the business of the assessee d) Engineering services relating to the assessee’s business. eligible for amortisation within prescribed period to the prescribed income tax authority in the prescribed form and manner. Accordingly, the CBDT has, vide this notification, inserted Rule 6ABBB to prescribe that the statement containing particulars of above specified expenditure is required to be furnished one month prior to the due date for furnishing the return of income as specified under section 139(1). CERTAIN EXPENDITURES ALLOWED ONLY IF PAYMENT IS MADE BY DUE DATE OF FILLING OF RETURN [SEC.43B] 1. Type of expenditure Following expenditures are allowed only if payment is made by due date of filling of return a. Tax, Duty, cess, etc, by whatever name called, payable to Government. b. Employer contribution to any provident fund, superannuation fund, gratuity fund or any other fund for the welfare of employees c. Bonus or commission to employees. d. Interest on loan to public financial institutions (i.e. ICICI, IFCI, IDBI, LIC and UTI) or a State financial corporation; or State industrial investment corporation. e. Any sum payable as interest or any loan or borrowing from a deposit – taking non -= banking finance company (NBFC) and systematically important non deposit – taking NBFC f. Interest on loan to a scheduled bank g. Leave encashment payable to employee. h. Any sum payable by Assessee to the Indian Railways for use of Railway Assets. i. Any sum payable by the assessee to a micro or small enterprise beyond the time-limit specified in section 15 of the micro, small & medium enterprises development Act. www.vipulshah.org 7559173787 15 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 (Amendments Fin Act 2023) Micro enterprise - Investment in (a) plant and machinery does not exceed Rs. 25 lakh (in the case of industrial undertaking) or (b) equipment does not exceed Rs. 10 lakh (in the case of enterprise engaged in providing services)4. Small enterprise - Investment in (a) plant and machinery exceeds Rs. 25 lakh but does not exceed Rs 5 crore (in the case of industrial undertaking) or (b) equipment exceeds Rs. 10 lakh but does not exceed Rs. 2 crore (in the case of enterprise engaged in providing services)'. In calculating the aforesaid investment ceilings, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, shall be excluded. 2. Due date of filling or return Where audit is compulsory 31st Oct of the A.Y. In any other case 31st July of the A.Y. Where assessee has entered into an international transaction 30th Nov of the AY 3. What if late payment or return Deduction can be claimed in the year of payment 4. Advance payment Advance payment shall not be allowed 5. What if assessee maintain accounts on cash basis Sec. 43B shall have no relevance. If an assessee follows cash basis of accounting, deduction shall be allowed only in the year in which payment is made. If outstanding interest of a bank is converted into loan then such conversion shall not be treated as payment and such outstanding interest shall not be allowed as deduction. KEY NOTES With effect from the assessment year 2023-24] to provide that conversion of interest payable into debenture [or any other instrument by which liability to pay is deferred to a future date], shall not be deemed to have been actually paid. Sec. 43B is applicable only on allowed expenditure e.g. Sec. 43B has no impact on Income tax because is at already disallowed u/s 40(a) www.vipulshah.org 7559173787 16 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 6 – CAPITAL GAIN CII for previous year 23-24: 348 ALIGNMENT OF PROVISIONS OF SEC. 45(5A) WITH THE TDS PROVISIONS OF SEC. 194-IC The existing provisions of sec. 45(5A), inter alia, provide that on the capital gain arising to an assessee (individual and HUF), from the transfer of a capital asset, being land or building or both, under a Joint Development agreement (JDA), the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. Further, for computing the capital gains amount on this transaction, the full value of consideration shall be taken as the stamp duty value of his share, as increased by the consideration received in ‘cash’. It has been noticed that the taxpayers are inferring that any amount of consideration which is received in a mode other than cash, i.e., cheque or electronic payment modes would not be included in the consideration for the purpose of computing capital gains chargeable to tax u/s 45(5A). This was not in accordance with the intention of law as is evident from the provisions of sec. 194-IC which, inter alia, provides that tax shall be deducted on any sum by way of consideration (other than in kind), under the agreement referred to in sec. 45(5A), paid to the deductee in cash or by way of issue of a cheque or draft or any other mode. Accordingly, it is amended to provide that the full value of consideration shall be taken as the stamp duty value of his share as increased by any consideration received in cash or by a cheque or draft or by any other mode. SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAIN IN THE CASE OF A UNIT OF SPECIFIED MUTUAL FUND OR MARKET LINKED DEBENTURE [SEC. 50AA] Section 50AA has been inserted with effect from the assessment year 2024-25. It covers computation of capital gain on transfer of a unit of specified mutual fund and market linked debentures. 1 Specified mutual fund "Specified mutual fund" means a mutual fund which satisfies the following two conditions - Condition 1 The mutual fund has invested not more than 35 per cent of its total proceeds in the equity shares of domestic companies. The percentage of equity shareholding held in respect of the specified mutual fund shall be computed with reference to the annual average of the daily closing figures. Condition 2 The assessee has acquired units of the aforesaid specified fund on or after April 1, 2023. 2 Market linked debenture Market linked debentures are non-convertible debentures. Returns on such debentures are not fixed but linked to the performance of a certain market index or underlying index (the market index could be indexes like NSE Nifty, Sensex, Government securities, etc.). These www.vipulshah.org 7559173787 17 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 are structured fixed-income securities with no periodic pay-outs except at maturity. The returns are determined on the basis of the performance of the underlying index and, consequently, these are known as market-linked debentures. There is no fixed tenure (however, tenure generally ranges from 12 to 60 months). 3 Case study On January 1, 2024, X Ltd. issues market linked debentures for a tenure of 30 months. The rate of return is 8 per cent (compound interest or XIRR). However, 8 per cent interest is subject to the condition that the value of Nifty 50 at the end of 30 months does not fall below 85 per cent of the value at the time of issue of debentures. To put it differently, if Nifty 50 is 18,000 at the time of issue of debentures on January 1, 2024 and if it does not fall below 85 per cent at the time of maturity on June 30, 2026 (suppose, Nifty 50 on June 30, 2026 is above 85 per cent, ie, 15,300), X Ltd. will pay to the debenture holders, the principal amount and interest at 8 per cent (XIRR). If, however, Nifty 50 on June 30, 2026 is below 15,300, debenture holders will get only the principal amount (and no interest). In this case, X Ltd. will return at least the principal amount to debenture holders irrespective of the performance of Nifty 50. This type of market linked debentures (MLD) are also known as principal-protected MLD. SEBI permits in India only principal-protected MLDs. 4 Definition of market linked debenture in section 50AA It means a security (by whatever name called) which has an underlying principal component in the form of a debt security and where the returns are linked to the market returns on other underlying securities or indices. It includes any security classified or regulated as a market linked debenture by SEBI. 5 Mode of computation of income Mode of computation of capital gains arising from the transfer or redemption or maturity of a unit of specified mutual fund or market linked debenture, is as follows – Full value of consideration received or accruing because of the transfer or redemption xxx or maturity of market linked debentures or unit of specified mutual fund Less: Cost of acquisition of debentures/ unit of specified mutual fund xxx Less: Expenditure incurred wholly & exclusively in connection with such transfer or xxx redemption or maturity Short-term capital gain xxx 6 Deeming provision – Section 50AA makes the following deeming provision pertaining to market linked debentures/ units of specified mutual fund a In the hands of investors, market linked debentures/ units of specified mutual funds will always be treated as short-term capital assets (irrespective of period of holding). b Any gain (or loss) on transfer of such debentures/ units will always be treated as short term capital gain (or loss). c Securities transaction ta is not deductible while computing capital gain on transfer of such debentures/ units. www.vipulshah.org 7559173787 18 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 1. Illustration X, Y, Z, A, B and C are resident individuals. They transfer the following mutual fund units/ debentures – X Y Z A B C Rs. Rs. Rs. Rs. Rs. Rs. Name of mutual SBI MF SBI MF SBI MF SBI MF SBI MF fund Name of equity - - - - - Debentures linked debentures of P Ltd. Subscription period May 1, 2021 to May 10, 2021 Date of acquisition January 1, January 1, April 10, April 10, June 30, June 30, of mutual fund 2023 2023 2023 2023 2021 2021 units/ debentures by the assessee Amount invested 11,00,000 14,00,000 17,00,000 12,00,000 21,00,000 23,00,000 How much proceed 30% 50% 30% 50% 70% NA of mutual fund is invested in equity shares in domestic company by the fund manager Date of transfer May 15, May 15, May 15, May 15, May 15, May 15, 2026 2026 2026 2026 2026 2026 Sale proceeds 26,00,000 28,00,000 24,00,000 43,00,000 69,00,000 28,00,000 The aforesaid taxpayers want to know tax consequences pertaining to the aforesaid transactions. The newly inserted section 50AA is applicable if the asset which is transferred is "specified mutual fund unit" or "unit linked debentures". Specified mutual fund means a fund where not more than 35% of the total proceeds is invested in equity shares in domestic companies and the assessee has acquired these units on or after April 1, 2023. In the case of units held by X and Z, less than 35% is invested equity shares by the fund manager. While X has acquired these mutual fund units prior to April 1, 2023, Z has invested in these units after March 31, 2023. Consequently, only units held by Z are "specified mutual fund units" for the purpose of section 50AA. Date of primary subscription period is not relevant. In the case of transfer of unit linked debentures, section 50AA is applicable irrespective of the date of investment. Solution Capital gain will be computed as follows (CII of 2022-23 is 331 and it is assumed that CII of 2023-24 and 2026-27 is 345 and 395 respectively) - X Y Z A B C Rs. Rs. Rs. Rs. Rs. Rs. www.vipulshah.org 7559173787 19 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Whether section No No Yes No No Yes 50AA is applicable Whether section Yes Yes No Yes No No 112 is applicable Whether section No No No No Yes No 112A is applicable Full value of 26,00,000 28,00,000 24,00,000 43,00,000 69,00,000 28,00,000 consideration Less: Cost of - - 17,00,000 - 21,00,000 23,00,000 acquisition Less: Indexed cost 13,12,689 16,70,695 - 13,73,913 - - of acquisition Short term capital - - 7,00,000 - - 5,00,000 gain Long term capital 12,87,311 11,29,305 - 29,26,087 48,00,000 - gain LIMITING THE ROLL OVER BENEFIT CLAIMED U/S 54 AND 54F The existing provisions of sec. 54 and 54F allows deduction on the Capital gains arising from the transfer of longterm capital asset if an assessee, within a period of one year before or two years after the date on which the transfer took place purchased any residential property in India, or within a period of three years after that date constructed any residential property in India. For sec. 54, the deduction is available on the long-term capital gain arising from transfer of a residential house if the capital gain is reinvested in a residential house. On the other hand, in sec. 54F, the deduction is available on the long term capital gain arising from transfer of any long term capital asset except a residential house, if the net consideration is reinvested in a residential house. The primary objective of the sections 54 and section 54F of the Act was to mitigate the acute shortage of housing, and to give impetus to house building activity. However, it has been observed that claims of huge deductions by high-net-worth assessees are being made under these provisions, by purchasing very expensive residential houses. It is defeating the very purpose of these sections. In order to prevent this, it is amended to impose a limit on the maximum deduction that can be claimed by the assessee u/s 54 and 54F to ₹ 10 crore. It has been provided that if the cost of the new asset purchased is more than ₹ 10 crore, the cost of such asset shall be deemed to be ₹ 10 crores. This will limit the deduction under the two sections. Consequentially, the provisions of sec. 54 and 54F relating to deposit in the Capital Gains Account Scheme have also been amended to provide that the provision, for the purpose of www.vipulshah.org 7559173787 20 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 deposit in the Capital Gains Account Scheme, shall apply only to capital gains or net consideration, as the case may be, upto ₹ 10 Crores. www.vipulshah.org 7559173787 21 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 7 – INCOME FROM OTHER SOURCE MANNER OF COMPUTATION OF TAXABLE INCOME FROM LIP UNDER SECTION 56(2)(XIII) [NOTIFICATION NO. 61/2023 DATED 16.08.2023] Where any sum is received (including the amount allocated by way of bonus) at any time during a previous year, under a life insurance policy, other than the sum (i) Received under a ULIP (ii) Received under a Keyman insurance policy which is not exempt under section 10(10D), the sum so received as exceeds the aggregate of the premium paid during the term of such life insurance policy, and not claimed as deduction under any other provision of the Act, computed in the prescribed manner, would be chargeable to tax under the head “Income from other sources” under section 56(2)(xiii). Accordingly, the CBDT has, vide this notification, inserted Rule 11UACA to compute the income chargeable to tax under section 56(2)(xiii). Where any person receives at any time during any previous year any sum under such LIP, then, the income chargeable to tax under section 56(2)(xiii) during the previous year in which such sum is received has to be computed in the following manner – Situation Income chargeable to tax during the previous year in which such sum is received (i) Where the sum is A-B, where received for the first A = the sum or aggregate of sum received under the LIP during time under the LIP the first previous year; and during the previous B = the aggregate of the premium paid during the term of the year (first previous LIP till the date of receipt of the sum in the first previous year year) that has not been claimed as deduction under any other provision of the Act. (ii) Where the sum is C-D, where received under the C = the sum or aggregate of sum received under the LIP during LIP during the the subsequent previous year; and previous year D = the aggregate of the premium paid during the term of the subsequent to the LIP till the date of receipt of the sum in the subsequent first previous year previous year not being premium which – (subsequent previous a) Has been claimed as deduction under any other provision of year the Act; or b) Is included in “B” or “D” in any of the previous year(s). “Sum received under a LIP” means any amount, by whatever name called, received under such policy which is not exempt under section 10(10D), other than the sum – a) Received under a ULIP; or b) Received under a Keyman insurance policy c) www.vipulshah.org 7559173787 22 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 8 – SET OFF AND CARRY FORWARD OF LOSSES CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF ELGIBLE START UP [SEC. 79B] Section 79(b) is applicable if the following conditions are satisfied – 1 The assesse is a company if the following conditions are satisfied – 2 It is an eligible start – up as referred to section 80-IAC. 3 Loss incurred by the assesse company during the period of 10 years (beginning from the year in which the company is incorporated) [Finance Act 23] www.vipulshah.org 7559173787 23 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 9 – PERMISSIBLE DEDUCTION FROM TOTAL INCOME SECTION 80CCH: DEDUCTION IN RESPECT OF CONTRIBUTION TO AGNIPATH SCHEME Section 80CCH has been inserted (with effect from the assessment year 2023-24). Deduction under section 80CCH will be applicable if the following conditions are satisfied – 1 The assessee is an individual enrolled in the Agnipath Scheme. 2 He subscribes to the Agniveer Corpus Fund on or after November 1, 2022. Deduction pertaining to contribution by the assessee [Sec. 80CCH(1)]-Contribution by the assessee to the aforesaid fund is deductible under section 80CCH(1) in the year in which the amount is paid or deposited. However, deduction under section 80CCH(1) is not available to an assessee who pays tax under the alter- native tax regime under section 115BAC Deduction pertaining to contribution by the Central Government [Sec. 80CCH(2)]- Contribution by the Central Government to the Agniveer Corpus Fund shall be first included in the income of the assessee under the head "Salaries". The whole of such contribution shall be deducted under section 80CCH(2). Deduction under section 80CCH(2) is available irrespective of the fact whether (or not) the assessee has opted for regular tax regime by exercising the option under section 115BAC(6). REMOVAL OF CERTAIN FUNDS FROM SEC. 80G Section 80G, inter alia, provides for the procedure for granting approval to certain institutions and funds receiving donation and the allowable deductions in respect of such donations to the assessee making such donations. The section provides the list of these funds to which any sum paid by the assessee in the previous year as donations is allowed as a deduction to an extent of 50%/100% of the amount so donated. From the said list, name of the following funds has been removed Jawaharlal Nehru Memorial Fund Indira Gandhi Memorial Trust Rajiv Gandhi Foundation www.vipulshah.org 7559173787 24 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 10 – TAX DEDUCTED AT SOURCE & TAX COLLECTED AT SOURCE INTEREST ON DEPOSIT WITH POST OFFICE UNDER A SCHEME ELIGIBLE FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194A NOTIFIED BY THE CENTRAL GOVERNMENT [NOTIFICATION NO. 27/2023 DATED 16.05.2023] Section 194A provides for deduction of tax @10% by any person (other than an individual or a HUF whose total sales, gross receipts or turnover from the business or profession carried on by him/it does not exceed ₹ 1 crore in case of business and ₹ 50 lakhs in case of profession during the immediately preceding financial year) on interest, other than “interest on securities” credited or paid to residents. No deduction of tax under section 194A would be made, inter alia, if the aggregate amount of interest paid or credited by post office during the financial year does not exceed ₹ 40,000/ ₹ 50,000 (in case of a senior citizen), on any deposit made with it under any scheme framed and notified by the Central Government. Accordingly, the Central Government has, vide this notification, specified the Scheme “Mahila Samman Savings Certificate, 2023”. “Mahila Samman Savings Certificate, 2023” is a one-time scheme available for two years i.e., from 1st April, 2023 to 31st March, 2025. It offers a maximum deposit facility of upto ₹ 2 lakh in the name of women or a girl for 2 years at a fixed interest rate of 7.5% p.a., compounded quarterly. Consequently, no tax under section 194A would be deductible by the post office on interest paid or credited under this scheme since the amount of interest would not exceed ₹ 40,000. SEC. 194BA: DEDUCTION OF TAX AT SOURCE FROM WINNINGS FROM ONLINE GAMES Section 194BA has been inserted with effect from April 1, 2023. 1. Who is responsible for tax deduction Any person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings in his user account, computed in the manner as may be prescribed. "Online game" means a game that is offered on the internet and is accessible by a user through a computer resource including any telecommunication device. 2. At what time tax should be deducted Tax should be deducted at the end of the financial year. If, however, there is a withdrawal from the user account during the financial year, tax shall be deducted at the time of such withdrawal on the net winnings comprised in such withdrawal. Moreover, tax will be deducted on the remaining amount of net winnings in the user account (computed in the mode to be prescribed) at the end of the financial year. 3. TDS rate Tax is required to be deducted at the rate of 30 per cent (no threshold limit) (it will be www.vipulshah.org 7559173787 25 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 increased by applicable surcharge and HEC if recipient of winnings is non-resident). If, however, the net winnings are wholly in kind (or partly in cash and partly in kind but the part in cash is not sufficient to meet the TDS liability of the whole of the net winnings), the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings 4. Removing difficulty If any difficulty arises in giving effect to the provisions of this section, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty. These guidelines shall be laid before each House of Parliament and shall be binding on the income-tax authorities and on the e-commerce operator. Question 1 There are a large number of gamers who play with very insignificant amount and withdraw also very small amount. Deducting tax at source under section 194BA for each insignificant withdrawal would increase compliance for tax deductor. Can there be relaxation to ease compliance? Answer Tax may not be deducted on withdrawal on satisfaction of all of the following conditions, namely: - (i) Net winnings comprised in the amount withdrawn does not exceed ₹ 100 in a month; (ii) Tax not deducted on account of this concession is deducted at a time when the net winnings comprised in withdrawal exceeds ₹ 100 in the same month or subsequent month or if there is no such withdrawal, at the end of the financial year; and the deductor undertakes responsibility of paying the difference if the balance in the user account at the time of tax deduction under section 194BA is not sufficient to discharge the tax deduction liability. Question 2 When the net winnings is in kind how will tax deduction under section 194BA operate? Answer At the outset, it may be clarified that where money in user account is used to buy an item in kind and given to user then it is net winnings in cash only and the deductor is required to deduct tax at source under section 194BA accordingly. However, there could be a situation where the winning of the game is a prize in kind. In that situation provision of section 194BA(2) will operate. According to this where the net winnings are wholly in kind or partly in cash, and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings. In these situations, the person responsible for paying, shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings. In the above situation, the deductor will release the net winnings in kind after the deductee provides proof of payment of such tax (e.g., Challan details etc.). In the alternative, as an option to remove difficulty if any, the deductor may deduct the tax under section 194BA and pay to the Government. www.vipulshah.org 7559173787 26  CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 Question 3 How will the valuation of winnings in kind required to be carried out? Answer The valuation would be based on fair market value of the winnings in kind except in following cases: - (i) The online game intermediary has purchased the winnings before providing it to the user. In that case the purchase price shall be the value for winnings. (ii) The online game intermediary manufactures such items given as winnings. In that case, the price that it charges to its customers for such items shall be the value for such winnings. It is further clarified that GST will not be included for the purposes of valuation of winnings for TDS under section 194BA. APPLICABILITY OF SECTION 206C Every seller1, shall collect tax from the buyer2 of any specified goods3, at specified rates. Meaning of important terms 1 “Seller” means – a The Central Government; or b State Government; or c Local authority; or d Statutory corporation; or e Authority established by or under a Central, State or Provincial Act; or f Company; or g Firm; or h Co – operative society; or i Individual & HUF 1) If his books of account are required to be audited under section 44AB during the financial year immediately preceding the financial year in which such goods are sold. (Applicable up to September 30, 2020). 2) his total sale, turnover or gross recipients from the business or profession carried on by him exceed Rs. 1 crore in the case of business (or Rs. 50 Lakh in the case of profession) during the financial year immediately preceding the financial year in which goods are sold applicable from October 1, 2020) 2 “Buyer” means a person who obtains in any sale (by way of auction, tender or any other mode) specified goods or the right to receive any such goods but does not include,: a A public sector company, the Central Government, a State Government and an embassy, a High Commission, legation, Commission, consulate and the trade representation, of a foreign state and a club; or b A buyer in the retail sale of such goods purchased by him for personal consumption. www.vipulshah.org 7559173787 27 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 3 “Specified goods” includes: Particulars Rate as a % of the amount payable by the buyer or licensee or lessee* A1 Alcoholic liquor for human consumption 1% A2 Tendu leaves 5% A3 Timber obtained under a forest lease 2.5% A4 Timber obtained by any mode other than under a forest 2.5% lease A5 Any other forest produce (not being timber or tend leaves) 2.5% A6 Scrap 1% A7 Specified minerals 1% B1 Parking lot, toll plaza, mining and quarrying 2% D1 Motor car of value exceeding 10 Lakhs 1% E foreign remittance through LRS and overseas tour package) (applicable from October 1, 2020)- E1 Foreign remittance through liberalised remittance Refer table given below scheme (LRS) of Rs. 7 lakh or more in a financial year. E2 selling of overseas tour package Refer table given below F Sale of any other goods) (applicable from October 1, 2020 0.1% F1- sale of any other goods of the value (or aggregate of such value) exceeding Rs. 50 lakh in a previous year by a person whose total sale / gross receipts/ turnover from business exceeds Rs. 10 crores during the immediately preceding financial year (tax to be collected on sale consideration of exceeding Rs. 50 lakh) However, where the purchase or licensee or lessee is a non – resident non-corporate assessee or a non – domestic company, then surcharge (if any applicable), education cess and SHEC is also required to be deducted along with aforesaid rates. Amendments: TCS rates u/s 206C(1G) have been modified with effect from July 1, 2023. The table given below highlights these rates before & after the amendment - Different situations On or after July 1, 2023 During October 1, 2020 and June 30, 2023 TCS rate (and threshold TCS rate (and threshold limit) limit) Remittance for education, if 0.5% of the total amount 0.5% of the total amount the amount being remitted out remitted during a remitted during a is a loan obtained from any financial year in excess of financial year in excess www.vipulshah.org 7559173787 28 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 financial institution as defined Rs. 7 lakh of Rs. 7 lakh in section 80E Non-Pan/ non-filer cases: Non-Pan/ non-filer cases: TCS rate is 5% TCS rate is 5% Remittance for education 5% of the total amount 5% of the total amount (other than given above) remitted during a remitted during a financial year in excess of financial year in excess Rs. 7 lakh of Rs. 7 lakh Remittance for medical Non-Pan/ non-filer cases: Non-Pan/ non-filer cases: treatment TCS rate is 10% TCS rate is 10% Overseas tour package 20% of the total amount 5% of the total amount remitted (without any remitted (without any threshold limit) threshold limit) Non-Pan/ non-filer cases: Non-Pan/ non-filer cases: TCS rate is 20% TCS rate is 10% Any other case 20% of the total amount 5% of the total amount remitted (without any remitted during a threshold limit) financial year in excess of Rs. 7 lakh Non-Pan/ non-filer cases: TCS rate is 10% Question 1 Whether payment through overseas credit card would be counted in LRS? Answer No TCS shall be applicable on expenditure through international credit card while being overseas till further order. Question 2 Whether the threshold of ₹ 7 lakh, for TCS to become applicable on LRS, applies separately for various purposes like education, health treatment and others? For example, if remittance of ₹ 7 lakh under LRS is made in a financial year for education purpose and other remittances in the same financial year of ₹ 7 lakh is made for medical treatment and ₹ 7 lakh for other purposes, whether the exemption limit of ₹ 7 lakh shall be given to each of the three separately? Answer lt is clarified that the threshold of ₹ 7 lakh for LRS is combined threshold for applicability of the TCS on LRS irrespective of the purpose of the remittance. Thus, in the given example, upto ₹ 7 lakh remittance under LRS during a financial year shall not be liable for TCS. However, subsequent ₹ 14 lakh remittance under LRS shall be liable for TCS in www.vipulshah.org 7559173787 29 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 accordance with the TCS rates applicable for such remittance. ln the example, if the remittances under LRS are made in the current financial year at different point of time, TCS rates for the remaining ₹ 14 lakh remittances under LRS would depend on the time of remittance as TCS rates changes from 1st October 2023. TCS rates would be applicable as under: - Remittances Rate of TCS First ₹ 7 lakh remittance under LRS during the No TCS financial year 2023-24 for education purpose (or for that matter any purpose) Remittances beyond ₹ 7 lakh under LRS during TCS at 5% (irrespective of the purpose the financial year 2023-24, if on or before unless it is for education purpose financed 30th September 2023 by loan from a financial institution when the rate is 0.5%) Remittances beyond ₹ 7 lakh under LRS during TCS at 0.5% (if it is for education purpose the financial year 2023-24, if on or after 1st financed by loan from a financial October 2023. institution), 5% (if it is for education or medical treatment) and 20% (if it is for other purposes) Question 3 Since there are different TCS rates on LRS for the first six months and next six months of the financial year 2023-24, whether the threshold of ₹ 7 lakh, for the TCS to become applicable on LRS, applies separately for each six months? Answer No. The threshold of ₹ 7 lakh, for the TCS to become applicable on LRS, applies for the full financial year. lf this threshold has already been exhausted; all subsequent remittances under LRS, whether in the first half or in the second half, would be liable for TCS at applicable rate. Question 4 Whether the threshold of ₹ 7 lakh, for TCS to become applicable on LRS, applies separately for each remittance through different authorised dealers? lf not, how will authorised dealer know about the earlier remittances by that remitter through some other authorised dealer? Answer lt is clarified that the threshold of ₹ 7 lakh for LRS is qua remitter and not qua authorised dealer. Since the facility to provide real time update of remittance under LRS by remitter is still under development by the RBl, it is clarified that the details of earlier remittances under LRS by the remitter during the financial year may be taken by the authorised dealer through an undertaking www.vipulshah.org 7559173787 30 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 at the time of remittance. lf the authorised dealer correctly collects the tax at source based on information given in this undertaking, he will not be treated as "assessee in default". However, for any false information in the undertaking, appropriate action may be taken against the remitter under the Act. It is further clarified that same methodology of taking undertaking from the buyer of overseas tour program package may be followed by the seller of such package. Question 5 There is threshold of ₹ 7 lakh for remittance under LRS for TCS to become applicable while there is another threshold of ₹ 7 lakh for purchase of overseas tour program package where reduced rate of 5% of TCS applies. Whether these two thresholds apply independently? Answer Yes, these two thresholds apply independently. For LRS, the threshold of ₹ 7 lakh applies to make TCS applicable. For purchase of overseas tour program package, the threshold of ₹ 7 lakh applies to determine the applicable TCS rate as 5% or 20%. Question 6 A resident individual spends ₹ 3 lakh for purchase of overseas tour program package from a foreign tour operator and remits money which is classified under LRS. There is no other remittance under LRS or purchase of overseas tour program during the financial year. Whether TCS is applicable? Answer ln case of purchase of overseas tour program package which is classified under LRS, TCS provision for purchase of overseas tour program package shall apply and not TCS provisions for remittance under LRS. Since for purchase of overseas tour program package, the threshold of ₹ 7 lakh for applicability of TCS does not apply, TCS is applicable and tax is required to be collected by the seller. ln this case the tax shall be required to be collected at 5% since the total amount spent on purchase of overseas tour program package during the financial year is less than ₹ 7 lakh. The TCS should be made by the seller. Question 7 There are different rates for remittance under LRS for medical treatment/education purposes and for other purposes. What is the scope of remittance under LRS for medical treatment/education purposes? Answer As per the clarification by the RBl, remittance for the purposes of medical treatment shall include, - www.vipulshah.org 7559173787 31 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 (i) Remittance for purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between lndia and the overseas destination; (ii) His medical expense; and (iii) Other day to day expenses required for such purpose. Education Remittance for purpose of education shall include, - (i) remittance for purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination; (ii) the tuition and other fees to be paid to educational institute; and (iii) other day to day expenses required for undertaking such study. Question 8 Whether purchase of international travel ticket or hotel accommodation on standalone basis is purchase of overseas tour program package? Answer The term 'overseas tour program package' is defined as to mean any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. It is clarified that purchase of only international travel ticket or purchase of only hotel accommodation, by in itself is not covered within the definition of 'overseas tour program package'. To qualify as 'overseas tour program package', the package should include at least two of the followings: - (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relation thereto. www.vipulshah.org 7559173787 32 CMA VIPUL SHAH CA INTER DT AMENDMENTS FOR MAY/NOV 2024 CHAPTER 11 – RETURN AND ASSESSMENT PROCEDURE CLARIFICATION REGARDING ADVANCE TAX WHILE FILING UPDATED RETURN [SEC. 140B] The Finance Act, 2022 inserted sub-section (8A) in section 139 enabling the furnishing of an updated return by taxpayers up to 2 years from the end of the relevant assessment year subject to fulfilment of certain conditions as well as payment of additional tax. For the determination of the amount of additional tax on such updated u/s 140B was inserted in the Act. Section 140B(4) provides for the computation of interest u/s 234B on the tax on updated return. The said subsection provides that interest payable u/s 234B shall be computed on an amount equal to the assessed tax or the amount by which the advance tax paid falls short of the assessed tax. This implied that interest was payable only on the difference of the assessed tax and advance tax. Further, it also provides advance tax which has been claimed in earlier return of income shall be taken into account for computing the amount on which the interest was to be paid. Therefore, in order to clarify the provisions of sec. 140B(4), an amendment has been made so as to provide that interest payable u/s 234B shall be computed on an amount equal to the assessed tax as reduced by the amount of advance tax, the credit for which has been claimed in the earlier return, if any. www.vipulshah.org 7559173787 33