CA Final DT Amendments for AY 20-21 relevant for May 2020 exam
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CA FINAL – MAY 2020
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Amendments (DT)
AY 20-20
Amendments for CA Final
Assessment Year 20-20 (May / Nov 2020)
Finance Act 2019 (Interim Budget)
Tax Rates / Salaries / House Property
Rates of taxes | Refer supplement of rates of taxes issued separately. |
Rebate of 87A | Tax Rebate for those whose taxable income is less than Rs 5 lakh Relief to the individual taxpayers by increasing the maximum amount of tax rebate to Rs 12,500 from existing Rs 2,500. The tax rebate shall now be admissible to taxpayers having total income up to Rs 5,00,000, instead of existing Rs. 3,50,000. |
Salaries | Standard deduction increased to Rs 50,000 from Rs 40,000 for salaried class. |
Salaries | Gratuity Exemption limit revised to 20,00,000. |
House Property | Relief to the taxpayer by allowing him an option to claim nil annual value in respect of any 2 houses, declared as self-occupied, instead of one such house as currently provided. The monetary limit of deduction on account of interest payable on borrowed capital shall continue to apply to the aggregate of the amounts of deduction in case of more than one self-occupied houses. Builders or developers Relief to the taxpayers that notional rent in respect of unsold inventory shall not be charged to tax up to 2 years, instead of existing one year, from the end of the financial year in which the certificate of completion is obtained from the competent authority. |
* Question based on amendments for AY 20-20 *
Problem (Salary - ID 05)
V retires on 1st Feb., after serving for 30 years and 5 months. He gets 10,70,000 as gratuity. His salary details are as under:
Current FY salary 1,00,000 p.m. D.A. 50% of salary. 50% thereof taken for retirement benefits.
Preceding FY Salary 90,000 p.m. D.A. 50% of salary. 50% thereof forms part of retirement benefits.
Compute the taxable amount of gratuity in his hands in the following situations:
(i) She retires from government service;
(ii) She retires from a private sector company to which the Payment of Gratuity Act does not apply;
(iii) She retires from seasonal factory in a private sector, covered under Payment of Gratuity Act, 1972.
Problem (Salary - ID 05A)
Mr Ravi retired on 15.6. after completion of 26 years 8 months of service and received gratuity of 6,00,000. At the time of retirement, his salary was:
Basic Salary : 5,000 p.m.
Dearness Allowance : 3,000 p.m. (60% of which is for retirement benefits)
Commission : 1% of turnover (turnover in the last 12 months was 12,00,000)
Bonus : 12,000p.a.
Compute his taxable gratuity assuming:
(a) He is non-government employee and covered by the Payment of GratuityAct 1972.
(b) He is non-government employee and not covered by Payment of GratuityAct 1972.
(c) He is a Government employee.
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Book - A | Chapter – A04 | Salary | Video ID - 03 |
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* Question based on amendments for AY 20-20 *
Question (House Property ID - 33)
N owns two houses, both of which are occupied by him for residential purpose.
The details are given below, amount in thousands
| House 1 | House 2 |
Fair rent | 720 | 630 |
Municipal value | 500 | 500 |
Standard rent | 600 | 600 |
Date of completion | 01.01.2002 | 01.07.2008 |
Municipal tax | 10 % | 12 % |
Date of loan | 01.07.1998 | 01.05.2005 |
Interest on loan for year | 110 | 180 |
Compute his income from house property and advise which house should be opted by him as self occupied.
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Book - A | Chapter – A05 | HP | Video ID - 23 |
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* Question based on amendments for AY 20-20 *
Question (House Property ID - 37)
Mrs. Rohini Ravi, a citizen of the U.S.A., is a resident and ordinarily resident in India. She owns a house property at Los Angeles, U.S.A., which is used as her residence. The annual value of the house is $5,000. The value of one USD ($) may be taken as 60. Interest paid in respect of the bank loan for acquisition this property is 1,60,000.
She owns another house property in Mumbai which is used for the purpose of her residence. The annual value of the house is 2,00,000. Interest paid in respect of the bank loan for this property is 20,000.
She took ownership and possession of a flat in Chennai on 1st July of previous year, which is used for self-occupation, while she is in India. Her parents stay in India in this flat. The flat was used by her for 7 months only during the year. The municipal valuation is 32,000 p.m. and the fair rent is 4,20,000 p.a. She paid the following to Corporation of Chennai
Property Tax 16,200
Sewerage Tax 1,800
She had taken a loan from Standard Chartered Bank for purchasing this flat at Chennai. Interest on loan was as under:
Period prior to 1.4.PY - 49,200
1.4.PY to 30.6.PY - 50,800
1.7.PY to 31.3.PY - 1,31,300
She had a house property (as stock in trade with intention to re-sell it.) in Bangalore, which was sold in March, 2014. In respect of this house, she received arrears of rent of 60,000 in March. This amount has not been charged to tax earlier. Sale proceeds of this house was invested in another 3 houses at Delhi on 01-08-PY and she intends to re-sell these houses with profits. House is not let due to slump in market. Fair Rent of Delhi house may be taken as 60,000 for each identical houses. Interest on loan for acquisition for each of the house is 40,000.
She is desirous of claiming USA property and Chennai property as house used for her residence u/s 23(2) as SOP.
Compute the income chargeable from house property of Mrs. Rohini Ravi.
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Book - A | Chapter – A05 | HP | Video ID - 32 |
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Note : House property
As per section 23(2) a property is treated as self-occupied house property if it meets any one of the following two conditions:
If it is occupied by the owner for his own residence; or
If it can't actually be occupied by him owing to employment or business at any other place, he resides at that other place in a rented house/house not belonging to him.
Let's understand this with an example assuming that new provision is in force. Mr Ajay Kapoor is from Delhi, and he works in Bengaluru. He owns houses in both these cities, Delhi and the Bengaluru. He stays in his own house at Bengaluru, and his parents occupy his Delhi house. In such a situation, his house at Bengaluru shall be treated as self-occupied as he occupies it for his own residence. However, his house at Delhi shall not be treated as self-occupied due to condition no. 2 mentioned above.
“ If you have youtubed yourself and done oral study, remember you are doing a big mistake. ”
CA Kalpesh Sanghavi
Capital Gains
54 Exemptions | Relief to the taxpayers having long-term capital gains up to Rs. 2 crore , arising from transfer of a residential house, by affording the assessee a one time opportunity, at his option, to utilise the said amount for the purchase or construction of 2 residential houses in India instead of one residential house as currently provided. |
The Budget has now allowed residential property sellers to get the capital gains benefit when they invest the proceed from the sale of one house into two residences. The only caveat is that the total capital gains have to be up to Rs 2 crore. Also, the benefit can be claimed only once. The changes in the tax laws benefit families who want to sell one big property and buy two separate houses to settle children or during the partition of the family assets. It also helps individuals who live in metros such as Mumbai and Delhi where properties prices are much higher compared to the rest of the country.
* Question based on amendment for AY 20-20 *
Question 1 (exemptions) (CG ID 60)
Mr. Adhisesha sells his house property, acquired in 1975 for Rs. 2.5 lacs, for a consideration of Rs. 85 lacs in September PY. Cost of improvement incurred for this property in June 2000 was Rs. 3 lacs and in July 2006 Rs. 2.8 lacs. Expenses incurred for effecting sale is Rs. 1 lac. He acquired a new house property during January PY for a consideration of Rs. 9 lacs at Mumbai and for 12 lakhs at Kanpur. Compute the taxable capital gains by assuming that the fair market value as on 1.4.2001 at Rs. 10 lakhs.
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Book - F | Chapter – F14 | Capital Gains | Video ID - BA-01 |
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* Question based on amendment for AY 20-20 *
Question 2 (exemptions) (CG ID 61)
Compute the net taxable capital gains of Smt. Megha on the basis of the following information:
A house was purchased on 1.05.1999 for Rs. 4,50,000 and was used as residence by the owner. The owner had contracted to sell this property in June, 2009 for Rs. 10 lacs and had received an advance of Rs. 70,000 towards sale. The intending purchaser did not proceed with the transaction and the advance was forfeited by the owner. The property was sold in April, for Rs. 15,00,000. The owner, out of the sale proceeds, invested Rs. 4 lacs in a new residential at Mumbai and Rs. 6 Lakhs in a residential house at Delhi in 9 months of sale.
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Book - F | Chapter – F14 | Capital Gains | Video ID - BA-02 |
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“Students appearing in English medium are advised to listen in English and talk in English for better exam performance and Job prospect.”
CA Kalpesh Sanghavi
Deductions under chapter VIA
80-IBA | By amending section 80-IBA of the Income-tax Act to augment the supply of affordable houses by extending the time limit from 31st March, 2019 to 31st March, 2020 for obtaining approval of the housing project for availing deduction. |
TDS
TDS – 194A | TDS on Interest Income – Limit Revised to 40,000 By amending section 194A of the Income-tax Act to ease the burden of compliance by way of increasing the threshold limit from Rs 10,000/- to Rs 40,000, (50,000 for senior citizen age 60 or more) for deduction of TDS on interest income, other than interest on securities, paid by a banking company, co-operative society or a post office. |
TDS – 194I | TDS on rent – Limit Revised to 2,40,000 By amending section 194-I of the Income-tax Act to rationalise the threshold limit from Rs 1,80,000 to Rs. 2,40,000 for deduction of TDS on rental income. |
* Question based on amendment for AY 20-20 *
Question: 51
Examine the TDS implications under section 194A in the cases mentioned hereunder —
(i) On 1.10, Mr Harish made a six-month fixed deposit of 10 lakh @ 9% p.a. with ABC Co-operative Bank. The fixed deposit matures on 31.3.
(ii) On 1.6. Mr Ganesh made three nine month fixed deposits of 1 lakh each carrying interest @ 9 % with Dwarka Branch, Janakpuri Branch and Rohini Branch of XYZ Bank, a bank which has adopted CBS. The fixed deposits mature on 28.2.
(iii) On 1.4, Mr Rajesh started a 1 year recurring deposit of 20,000 per month @ 8% p.a. with PQR Bank. The recurring deposit matures on 31.3.
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Book - A | Chapter – A13 | TDS / TCS | Video ID - 01 |
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* Question based on amendment for AY 20-20 *
Question: 05
X Ltd. took on sub-lease a building from J an individual, with effect from September 1, on a rent of Rs. 30,000 per month. It also took on hire machinery from J with effect from October 1, on hire charges of Rs. 9,000 per month. X Ltd. entered into two separate agreements with J for sub-lease of building and hiring of machinery. The rent of building and hire charges of machinery for the year were credited by X Ltd. to the account of J in its books of account on March 31. Examine the obligation of X Ltd. to deduct tax at source in respect of the rent and hire charges.
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Book - A | Chapter – A13 | TDS / TCS | Video ID - 02 |
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Amendments for CA Final
Assessment Year 20-20 (May / Nov 2020)
Finance Act 2019 (Full Budget on 05th July 2019)
And Ordinance passed dated 20th September 2019
Tax Rates / Salaries / House Property
Rates of Taxes | Individual, HUF, AOP or BOI, Artificial Judicial Person No change in tax slabs, basic tax rates. Surcharge @10% is applicable where income exceeds ₹50 lakhs, @15% where income exceeds ₹1 crore, @ 25% where income exceeds ₹2 crores and @ 37% where income exceeds ₹5 crores |
Rates of Taxes (amended by ordinance) | These higher slabs of surcharge does not apply to
@ 15 % instead of 25% where income exceeds ₹2 crores and @ 15 % instead of 37% where income exceeds ₹5 crores
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Rates of Taxes | Concessional rate of Short-Term Capital Gains (STCG) tax to certain equity-oriented fund of funds
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Exemptions 10(4C) | Exemption of Interest Income of Non-resident on issue of Rupee Denominated Bonds from Indian Company or Business Trust referred to in section 194LC (w.e.f. 01-Apr-2019)
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Exemptions – 10(15) | any income by way of interest payable to a non-resident by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after the 1st day of September, 2019. |
Exemptions | Increase in exemption limit on payment by NPS to assessee – Section 10(12A)
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* Question based on amendment for AY 20-20 *
Question (Tax Liability) (ID 53)
Mr. Mithun resident in India purchased 100 shares of Good money Co. Ltd. on 01-04-2005 at rate of 1,000 per share (FMV as on 31-01-2018 is 600 per share) in public issue of the company by paying securities transaction tax. Company allotted bonus shares in the ratio of 1:1 on 4 years back. He has also received dividend of 10 per share on 01.05.PY. He has sold all the shares on 01.10.PY at the rate of 4,000 per share through a recognized stock exchange and paid brokerage of 1% and securities transaction tax of 0.02% to celebrate his birthday. His interest income under IFOS is 2,50,00,000.
Compute Tax Liability.
Will your answer be different if the interest income is 5,01,00,000 instead of 2,50,00,000.
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Book - F | Chapter – F51B | International Tax | Video ID - 01-D |
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* Question based on amendment for AY 20-20 *
Question (ID 21-A) (FII / foreign institutional investors)
SOL Inc. an AOP a notified Foreign Institutional Investor (FII) derived the following incomes from various sources for the year:-
Income from securities
Income in respect of securities : Rs. 3,00,00,000
Expenses incurred in respect thereof : Rs. 50,000
(The above income includes an interest of Rs. 16,00,000 received from an Indian Company on the investment of rupee denomination bonds and dividend income of Rs. 3,50,000 from a domestic company referred to in section 115-O).
Capital Gains :
(1) | Long Term : | Rs. |
| Sale proceeds on sale of securities on 15.01.PY : | 5,20,00,000 |
| Purchase cost of securities on 25.05.2014 : | 28,00,000 |
| Cost Inflation Index : 2014-15 : 240; 2017-18 : 272 |
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(2) | Short Term : |
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| Sale proceeds of equity shares of Company A (Jan.,PY) : | 13,50,000 |
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| Cost of acquisition (Aug., last year) : | 5,50,000 |
| Sale proceeds of equity shares of Company B (Dec., PY) | 9,25,000 |
| Cost of acquisition (April, last year) : (STT not paid on Company B shares) | 4,85,000
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Compute the taxable income of SOL Inc and tax liability for the year as per applicable provisions of the Income Tax Act, 1961, assuming that no other income is derived by SOL Inc (FII).
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Book - F | Chapter – F53A | Special Rates of Tax | Video ID - 05 |
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Business Income
Business Income | Taxability measures for promoting less cash economy
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43B 43D |
Consequentially section 43B to provide that any sum payable by an assessee as interest on any loan or advances taken from the above categories of NBFCs shall be allowed as deduction only if it is actually paid on or before the due date u/s. 139(1) |
201 / 40(a) |
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Measures of cash transaction
Business Income (Measure of Cash Transactions) |
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Business Income (Measure of Cash Transactions) |
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Business Income (Measure of Cash Transactions) |
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* Question based on amendment for AY 20-20 *
Question (ID 06) (withholding tax)
Indo Krishna Limited an Indian Company has profit as per profit and loss account 80 lakhs after considering the following debits and credits to its profit and loss account.
In order to create an advertisement campaign it appointed a sports person Mr. Tim Paine an Australian cricket team captain to endorse the company’s brand and paid Rs. 400,000. Mr. Tim Paine had come to India for playing the world cup matches in the month of October for 14 days. The amount was paid to Mr. Tim Paine in India.
It has paid to Zombbie Ltd a foreign company on account of transfer of rights of video tapes for use in connection with television and other tapes for use in connection with radio broadcasting Rs. 600,000. The agreement for transfer for right was entered in to Malaysia. This tapes will be used for advertisement broadcasting of the company’s product.
It has taken a premises on hire at Mumbai BKC from Swastik Limited an Indian Company, for which the rent is Rs. 10,00,000 per annum. The rent was remitted to London in HSBC bank account of swastika Limited.
It has appointed an Indian Company Classic Printers Limited as its premier supplier for printed material like letter heads, visiting cards, printed brochures etc. Aggregate payment to classic Printers limited for the printed material during the year is 10,00,000.
It has paid salary to its CEO 18,00,000 per annum, however CEO has paid the advance tax accordingly on his own and filed the return of return of income and tax there on has already been paid adequately.
It has paid to google for online advertisement INR 15 Lakhs and equalisation levy have not been paid.
Tax has not been deducted on the above transactions. You are required to compute the total income of Indo Krishna Limited.
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Book - F | Chapter – F59 | Witholding Tax | Video ID - 02 |
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Capital Gains
47 | Refer in heading of IFSC |
Exemption of 54GB | Capital gain arising from transfer of a long-term capital asset, being a residential property owned by the eligible assessee utilised for subscription in equity shares of an eligible Start-up – Section 54GB
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Capital Gains |
As per the existing provisions, one of the conditions for tax-neutral demergers is that the resulting company should record the property and liabilities of the undertaking at value appearing in the books of accounts of the demerged company
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50CA 56 |
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* Question based on amendment for AY 20-20 *
Question 1 (exemptions) (CG ID 64)
X purchased a residential house in June 2001 for Rs. 22 lakh. He transfers the house on December 1, PY for Rs 100 lakh. He pays brokerage a 2 percent on sale price. He invests Rs. 80 lakh in 01-April of AY in equity shares of X (Pvt.) Ltd, a newly formed company which qualifies to be technology driven start-up so certified by the Inter-Ministerial Board of Certification notified by the Central Government in the Official Gazette. X is a shareholder in the company and holds 30 per cent of share capital.
The company utilises the sum of Rs. 80 lakh in the following manner:
Purchase of new computer and software 12-April AY: Rs. 60 lakh
Purchase of cars Rs. 10 lakh on 20-April AY
Deposit in specified bank on September 25, AY : Rs. 10 lakh.
The due date for filing return of income for X for assessment year September 30,. Assume that he files the return on September 28, on time. Compute the taxable capital gain. X (Pvt.) Ltd has transferred the software after 4 years of its use.
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Book - F | Chapter – F14-BC | Capital Gains | Video ID - 03 |
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* Question based on amendment for AY 20-20 *
Question 2 (exemptions) (CG ID 83)
X, an individual, has income from salary and house property. Besides, he owns a business whose annual turnover is not more than Rs. 25 lakh. On May 14, he transfers a residential house property (or a residential plot of land) for Rs. 1,15,00,000 (expenses on transfer incurred by X : Rs. 3,00,000, indexed cost of acquisition : Rs. 14,60,000, year of acquisition : 1992-93, indexed cost of improvement : Rs. 8,15,000). Stamp duty value is Rs. 1,24,00,000 on which the purchaser pays stamp duty.
X Ltd. is incorporated on December 1, for manufacture or production of chemicals in Andhra Pradesh. There are 10 shareholders in X Ltd. X is one of the shareholders. He holds 31 per cent shares (date of subscription of shares in X Ltd: December 10, total investment by X in shares of X Ltd. : Rs.85,00,000). Out of Rs.85,00,000, the company makes the following investments-
Date | Investment | Amount |
March 1, | New plant and machinery | 40,00,000 |
July 1, AY | New plant and machinery | 6,00,000 |
July 10, AY | Old plant and machinery | 10,00,000 |
July 31, AY | Amount deposited in capital gain deposit account (CGDA 1) | 25,00,000 |
August 1, AY | Amount deposited in capital gain deposit account (CGDA 2) | 4,00,000 |
December 8, AY | New plant and machinery (purchased by withdrawing from CGDA 1) | 22,50,000 |
December 12, AY | New plant and machinery (purchased by withdrawing from CGDA2) | 2,50,000 |
Find out the amount of exemption under section 54GB.
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Book - F | Chapter – F14-BC | Capital Gains | Video ID - 03 |
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IFOS
56 IFOS | Strict compliance with the notification of exemption issued u/s. 56(2)(viib) – shares issued at premium (over valuation will be taxable)
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56 IFOS | The existing provisions of the said section 56 of the Income-tax Act, inter alia, provide that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be charged to tax. However, exemption from this provision has been provided for the consideration for issue of shares received by a venture capital undertaking from a venture capital company or a venture capital fund or by a company from a class or classes of persons as may be notified by the Central Government in this behalf.Currently the benefit of exemption is available to Category I AIF. With a view to facilitate venture capital undertakings to receive funds from Category II AIF, it is amended the said section to extend this exemption to fund received by venture capital undertakings from Category II AIF as well. |
* Question based on amendment for AY 20-20 *
Question (corporate taxation) (ID 05-B)
A Private Limited company provides the following information for the computation of total income. Provisions of MAT shall be ignored.
It had acquired 5,000 un-quoted shares of Bharat Private Limited for price of 20 per share about 9 months back.
It has sold 1000 un-quoted shares of Bharat Private Limited at price of 200 per shares to Mr. A on 15-07.
It has sold 1500 un-quoted shares of Bharat Private Limited at price of 300 per shares to Mr. B on 18-08.
It has received 5000 quoted shares of Alpha Limited from Mr. Diwan (one of directors of A private Ltd) without consideration on 21-09, the share was trading in the NSE with High low of the day as 90-86.
It has received 7500 shares of H Ltd for the shares of HUG limited because HUG ltd amalgamated with H Ltd. Its investment in HUG limited was Rs. 300,000 however fair market value of shares of H Ltd is Rs. 3,50,000.
It had issued 10,000 of its own shares of Face Value 10 (paid up value 3 /- per share) at Rs. 200 per share (including share premium of 190) to one of the investor Mr. Mehta.
Summary balance sheet of Bharat Private Limited (unquoted equity shares)
| BV | MV / SDV |
Assets | 10,00,000 |
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Immovable property (stamp duty value) | 25,00,000 | 23,00,000 |
Jewelry (market value) | 35,00,000 | 45,00,000 |
Artistic Items (market value) | 35,00,000 | 55,00,000 |
profit and loss account debit balance | 2,50,000 |
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Un-amortised expense not representing assets | 2,00,000 |
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Total Assets | 1,09,50,000 |
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Liabilities | 80,00,000 |
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Reserves | 28,50,000 |
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Paid up capital (20000 shares of Rs. 5 paid up, FV 10) | 1,00,000 |
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Total Liabilities | 1,09,50,000 |
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Summary balance sheet A private Ltd (unquoted equity shares)
A private Ltd (unquoted equity shares) | BV | MV / SDV |
Assets | 25,00,000 |
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Immovable property (stamp duty value) | 48,00,000 | 23,00,000 |
Jewelry (market value) | 3,00,000 | 30,00,000 |
Artistic Items (market value) | 8,00,000 | 1,20,000 |
profit and loss account debit balance | 2,40,000 |
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Un-amortised expense not representing assets | 1,90,000 |
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Total Assets | 88,30,000 |
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Liabilities | 78,00,000 |
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Reserves | 10,00,000 |
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Paid up capital (10000 shares of Rs. 3 paid up, FV 10) | 30,000 |
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Total Liabilities | 88,30,000 |
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Book - F | Chapter – F07-A | MAT | Video ID - 22 |
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Deductions of chapter VIA
80C | New eligible investment (xxv) being an employee of the Central Government, as a contribution to a specified account of the pension scheme referred to in section 80CCD–– (a) for a fixed period of not less than three years ; and (b) which is in accordance with the scheme as may be notified by the Central Government in the Official Gazette for the purposes of this clause. Explanation.—For the purposes of this clause, “specified account” means an additional account referred to in sub-section (3) of section 20 of the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013).’. |
80CCD | Employers contribution limit revised for central government employees (a) fourteen per cent., where such contribution is made by the Central Government ; (b) ten per cent., where such contribution is made by any other employer, of his salary in the previous year |
80EEA | Deduction in respect of interest on loan taken for affordable housing – Section 80EEANew section 80EEA to provide deduction up to ₹1.5 Lakh in a year in respect of interest on loan taken for purchase of affordable residential house property from any financial institution to an assessee being an individual, subject to the following conditions –
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80EEB | Deduction in respect of interest on loan taken for purchase of Electric Vehicle – Section 80EEBNew section 80EEB to provide deduction up to ₹1.5 Lakh in a year in respect of interest on loan taken for purchase of an electric vehicle from any financial institution to an assessee being an individual, where loan has been sanctioned during the period from01- Apr-2019 to 31-Mar-2023 No deduction shall be allowed for the interest claimed under this section; under any other provisions of the Act for the same or any other AY |
80IBA |
Time limit for obtaining approval of housing project extended to 31-Mar-2020 (as per Interim Budget) To align the definition of affordable housing with GST Act, it is proposed to amend the following conditions for projects approved on or after 01-Sep-2019: Carpet area of a unit in the housing project should not exceed 60 sq. mts in metropolitan cities or 90 sq. mts in any other place Stamp duty valuation of the residential unit should not exceed ₹45 lakhs o Metropolitan cities referred to in the conditions have been widened to include Bengaluru and Hyderabad in addition to already existing cities viz. Chennai, Delhi, Kolkata and Mumbai The remaining conditions continue to be the same |
* Question based on amendment for AY 20-20 *
Problem (Deductions and Exemptions) ID - 01
Mr A, aged about 61 years has earned a Lottery income of 1,20,000 (gross) during the year. He also has interest income of 2,50,000. He invested an amount of 10,000 in Public Provident Fund account and 24,000 in National Saving Certificates.
He has paid interest on loan borrowed for acquisition of house A (stamp duty value 30,00,000) Rs. 1,10,000. Loan was sanctioned on 16-July-2019. This house A is used for the purpose of his own residence. He does not own any other house.
He has paid interest on loan borrowed for acquisition of electric vehicle Rs. 1,20,000. Loan was sanctioned on 22-July-2019.
What is the total income.
Problem (Deductions and Exemptions) ID - 03
The basic salary of Mr. A is 1,00,000 p.m. He is entitled to dearness allowance, which is 40% of basic salary. 50% of dearness allowance forms part of pay for retirement benefits. His gross total income is 20,50,000. Both Mr. A and his employer contribute 15% of basic salary to the pension scheme referred to in section 80CCD.
You are required to
Explain the tax treatment in respect of such contribution in the hands of Mr A.
Will your answer be different if he was employed by central government.
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Book - A | Chapter – A11 | Deductions | Video ID - 02 |
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Assessment of Entities – Corporate Taxation
Rates of MAT (ordinance) | MAT rate reduced from 18.5 % to 15 % |
Corporate tax rate | Turnover < 400 cr in PY 17-18 then tax rate will be 25 % |
Corporate tax rate (ordinance) – 115BAA | 115BAA – 22 % (existing domestic companies without deductions, exemptions, set off, specified incentives and additional depreciation.) (No minimum alternate tax) (flat surcharge of 10%)
Compute income without
The ordinance further provides that domestic companies availing such reduced rate will not be required to pay Minimum Alternate Tax under section 115JB of the IT Act.
The Ordinance further clarifies that companies who do not wish to avail this concessional rate immediately, can opt for the same after expiry of their exemptions/incentives. However, once a company opts to be governed by section 115BAA of the IT Act, it cannot be subsequently withdrawn. |
Corporate tax rate (ordinance) – 115BAB 92BA | 115BAB – 15 % (new domestic manufacturing companies formed on or after 01-october-2019 with new plant and machinery and other conditions and without deductions, exemptions, set off, specified incentives and additional depreciation.) (No minimum alternate tax) (flat surcharge of 10%)
Corporate tax rate reduced to 15 percent for new manufacturing Companies The Ordinance has inserted another new section – section 115BAB in the IT Act. As per this section, reduced tax rate of 15 percent (plus applicable surcharge and cess) shall be applicable to manufacturing companies fulfilling following conditions:
Surcharge at the rate 10 percent shall be levied. Hence, the effective tax rate for Companies opting to pay tax under section 115BAB of the IT Act shall be 17.16 percent.
Companies opting for reduced rate under section 115BAB of the IT Act shall be exempted from MAT.
Transfer Pricing provisions to apply to Manufacturing Companies opting for reduced tax rate The definition of the Specified Domestic Transaction (SDT) contained in Section 92BA of the IT Act is amended to bring the Companies opting to be covered by section 115BAB within the ambit of Transfer Pricing. Thus, any transactions entered into by newly set up manufacturing company, opting for reduced rate of 15%, with any of its related parties (domestic or otherwise) are to be at Arm’s Length. This amendment shall be effective from fiscal year 2019-20. |
MAT | It has been provided in newly substituted section 79 that the provision of this section shall not apply to those companies, and their subsidiary and the subsidiary of such subsidiary, where-
(i) the National Company Law Tribunal (NCLT) on a petition moved by the Central Government under section 241 of the Companies Act, 2013 has suspended the Board of Directors of such company and has appointed new directors, who are nominated by the Central Government, under section 242 of the Companies Act, 2013: and
(ii) a change in shareholding of such company, and its subsidiaries and the subsidiary of such subsidiary, has taken place in a previous year pursuant to a resolution plan approved by NCLT under section 242 of the Companies Act, 2013, after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner.
Further, it is also provided that under section 115JB of the Act for calculating book profit, the aggregate amount of unabsorbed depreciation and loss (excluding depreciation) brought forward shall also be allowed to be reduced in cases of the above mentioned companies. |
* Question based on amendment for AY 20-20 *
Question 03 (corporate taxation) (ID 07)
The accounts of a public company have been prepared in accordance with provisions of Companies Act and its Profit and Loss Account laid before the Annual General Meeting for the previous year shows a net profit of Rs. 15 lakhs. The following information relevant for the purpose of computing its assessable income has been extracted from a scrutiny of the Profit and Loss Account:
| Credits in Profit and Loss Account |
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(1) | Profit from a new industrial undertaking qualifying for deduction under section 80-IA (Net) | 17,00,000 |
(2) | Profits from a new industrial undertaking qualifying for deduction under section 10AA (Gross) | 10,00,000 |
(3) | Long-term capital gains | 3,00,000 |
| Debits in Profit and Loss Account |
|
(1) | Expenditure relating to industrial undertaking qualifying for deduction under section 10AA |
7,00,000 |
(2) | Depreciation brought forward (2 years back) | 10,00,000 |
(3) | Business loss brought forward (2 years back) | 12,00,000 |
(4) | Current year’s depreciation | 10,00,000 |
(5) | Penalty for infraction of law | 1,00,000 |
(6) | Provision of GST | 3,00,000 |
(7) | Dividend proposed | 2,00,000 |
Depreciation admissible under the Income-tax Act and Rules for the previous year is Rs. 19,50,000. The capital gain has been invested in specified assets under section 54EC. GST provided in the accounts has been remitted before the due date. There is no loss or unabsorbed depreciation to be carried forward and adjusted as per income-tax assessment.
You are required to compute the total tax liability of the company.
Will your answer be different if for this company, on an application moved by the Central Government under section 241 of the Companies Act, 2013 (18 of 2013) has suspended the board of directors of such company and has appointed new directors who are nominated by the Central Government under section 242 of the said Act ;
Will your answer be different if company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)
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Book - F | Chapter – F07 | MAT | Video ID - 04 |
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“ If you have youtubed yourself and done oral study, remember you are doing a big mistake. ”
CA Kalpesh Sanghavi
* Question based on amendment for AY 20-20 *
Question (ID 23) (corporate taxation)
Anustup Chandra Ltd., a domestic company engaged in manufacture, furnishes the following information pertaining to the year:
Net profit as per the statement of Profit and Loss is Rs. 77 lakhs, after considering the items listed in (2) to (4) below.
The company is a member of Vishnu Foods & Co., an AOP in which the members’ shares are determinate and their shares in profit/loss are clearly known. The entire income of AOP is from business activities. During the year, the company has derived share income of Rs.9 lakhs from the AOP. The company has spent a sum of Rs. 90,000 towards earning such income.
The company has provided for income-tax (including interest under sections 234B and 234C of Rs. 62,000) for Rs. 3 lakhs, and Rs. 5 lakhs towards share in loss of foreign subsidiary.
Amount debited to the statement Profit and Loss towards interest to a public financial institution is Rs. 12 lakhs. Of this, Rs. 4 lakhs was paid on 12-12-PY only.
The company committed breach of building norms while extending the factory building. The City Corporation initiated proceedings against the company and the company settled the issue by paying compounding fee of Rs. 1 lakh. This amount forms part of general expenses, which has been debited to the statement Profit and Loss.
In the administrative expenses, the company has debited a sum of Rs. 70,000 towards fee for delayed filing of statement of TDS under section 234E of the Income-tax Act, 1961.
The company has credited revaluation surplus of Rs. 10 lakhs on fair valuation of assets under Ind AS 16 and Ind AS 38 to other equity.
The company has credited Rs. 5 lakhs to other comprehensive income on fair valuation of equity instruments in which the company has Investment.
The company is found to be eligible for deduction of Rs. 5,00,000 u/s 10AA.
The company is an Indian Accounting standard compliant company.
During the current year, the depreciation charged as per books of account of the company is the same as allowable under the IT Act, 1961 [before considering the provisions of section 32 (2)]. The company proposes to adopt this practice consistently in the future years.
You are required to
Compute the income-tax payable by the company.
Will your answer be different if the Turnover of company for the preceding 3 years was Rs. 50,52,55 crore respectively.
What would be your answer if the company has exercised the option u/s 115BAA.
What would be your answer if the company incorporated on 15-12-2019 and commenced the manufacturing operations in the same year has exercised the option u/s 115BAB.
| Solution |
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Book - F | Chapter – F07 | MAT | Video ID - 11 |
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* Question based on amendment for AY 20-20 *
Question (ID 24) (corporate taxation)
Zenith Formulations Ltd., an Indian Company engaged in pharmaceutical formulations in Tamilnadu, started adoption of Ind AS compliance with effect from 1st April, two years back. The following particulars are furnished for the year:-
The book profits after adjustments of all items specified in section 115JB(2) amounted to Rs. 52.26 lakhs (except the adjustment for brought forward losses), for the year.
Brought forward losses as per books are as under : (Rs. In lakhs)
Financial year | Business loss | Depreciation |
B2 | 4.60 | 4.90 |
B1 | 1.75 | 2.20 |
The business loss of Rs. 4.60 lakhs and Rs. 1.75 lakhs have been deducted while computing book profits under section 115JB for the preceding 2 assessment years.
The particulars of Other Comprehensive Income for the year (Rs. In lakhs)
A : Other Comprehensive Income (OCI) that may be re-classified to profit and loss : | Debit | Credit |
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| 5.50 |
| 1.00 |
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| 4.20 |
| 2.30 |
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Total | 3.30 | 9.70 |
B : Other Comprehensive Income (OCI) that will not be re-classified to profit and loss : | Debit | Credit |
| 10.00 |
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| 7.25 |
| 4.10 |
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| 3.20 |
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| 4.45 |
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| 7.50 |
Total | 14.10 | 22.40 |
The transition amount as on convergence date (01-04- of 2 years back) stood at Rs. 52.50 lakhs (credit balance) including capital reserve of Rs. 8 lakhs and adjustment of Rs. 4.50 lakhs relating to transition difference in foreign operation.
The National Company Law Tribunal (NCLT), Chennai Bench has admitted an application under section 7 of Insolvency and Bankruptcy Code, 2016 (IBC) made by financial creditor against the company for initiation of Corporate Insolvency Resolution Process on 30th march, PY.
You are required to :
Compute the MAT liability for the year, applying the provisions relating to Ind AS compliant companies.
Assuming that the Income tax under normal provisions of Income Tax Act, 1961 for the year works out to Rs.9.20 lakhs, compute the tax credit, if any, to be carried forward by the company including the period up to which it will be available to be carried forward.
| Solution |
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Book - F | Chapter – F07 | MAT | Video ID - 12 |
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Assessment of Entities – Corporate Taxation
Dividend Tax – 115QA (buy back) | Tax on distributed income to shareholders in case of listed companies (w.e.f. 05-Jul-2019)In order to strengthen anti abuse measures, it is proposed to impose additional income tax @20% in case of buyback of shares by company listed on recognized stock exchange under the provisions of section 115QA Consequently, the said income shall be exempt in the hands of the shareholders u/s. 10(34A) |
Dividend Tax – 115QA (buy back) (ordinance) | Buy back announce by listed companies before 5th July 2019 will not have distribution tax instead it will have capital gains treatment in the hands of the shareholder.i.e. for listed companies buy back announce after the date will only have to pay the distribution tax. |
115O / 115R | Refer it in IFSC |
* Question based on amendment for AY 20-20 *
Question 1 (Buy Back) (CG ID 84)
On June 6, 1984, X purchases 1,000 shares (face value Rs. 10 per share) in A Ltd. for Rs. 12,000. Under a scheme of buy-back of its own shares, A Ltd. purchases these shares on October 10 PY, for a consideration of Rs. 4,60,000. On October 10, PY, A Ltd. has an accumulated profit of Rs. 50,00,000. Find out the income chargeable to tax. Is there any dividend income under section 2(22) ?
| Solution |
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Book - F | Chapter – F14 AH | Capital Gains | Video ID - 01 |
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Question (Buy Back) (Buy Back ID 01)
On June 6, 1984, X purchases 1,000 shares (face value Rs. 10 per share) in A Ltd an Indian company listed on BSE and NSE for Rs. 12,000. Under a scheme of buy-back of its own shares, A Ltd. purchases these shares on October 10 PY, for a consideration of Rs. 4,60,000. On October 10, PY, A Ltd. has an accumulated profit of Rs. 500,00,000. Find out the income chargeable to tax in hands of Mr. X and dividend distribution tax in hands of A Ltd.
Will your answer be different if the shares were purchased by A Ltd for 18,00,000 instead of 4,60,000.
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Book - F | Chapter – F07 | Dividend Tax | Video ID - 11 |
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Question (Mutual fund) (MF ID 02)
Zombie is a specified Mutual Fund, derived from transactions made on a recognised stock exchange located in any International Financial Services Centre. It has submitted the following information and you are required to compute dividend tax payable.
Income of the MNO fund during PY | US $ 6,00,000 |
Amount distributed to unit holders – Being |
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Individual | US $ 3,00,000 |
LLPs | US $ 1,00,000 |
Companies | US $ 1,00,000 |
You are required to compute the dividend tax payable by Zombie specified mutual fund on the assumption that it is liquid fund / equity oriented fund / fixed income fund.
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Book - F | Chapter – F07 | Dividend Tax | Video ID - 12 |
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Assessment of Entities – Charitable Trust
Charitable Trust |
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“Students appearing in English medium are advised to listen in English and talk in English for better exam performance and Job prospect.”
CA Kalpesh Sanghavi
Carry Forward and set off
Carry Forward and Set off | Carry forward and Set-off of Losses in case of Start-ups
Shares of the company carrying not less than 51% of voting power were beneficially held by persons who beneficially had held shares of the company carrying not less than 51% of voting power on the last day of the year or years in which the loss was incurred; or All the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated |
* Question based on amendment for AY 20-20 *
Question 1 (Special treatment for companies) (SLID 010)
X (P.) Ltd. has share capital in the form of equity share capital. Company was incorporated in year 1 and the equity shares were held by four members A, B, C, & D equally i.e. 250,000 shares of Rs. 10 FV by each of them. The company made losses/ profits for the years as follows:
Assessment year | Business loss | Unabsorbed depreciation | Total |
Year 1 | Nil | 15,00,000 | 15,00,000 |
Year 2 | Nil | 12,00,000 | 12,00,000 |
Year 3 | 19,00,000 | 9,00,000 | 28,00,000 |
Total | 19,00,000 | 36,00,000 | 55,00,000 |
The above figures have been accepted by the tax department.
During the year 4, further 600,000 shares were allotted to Y and during the year 5, further 15,00,000 shares were allotted to Z.
The profits for previous year are as follows:
For the year 4 : Rs.18,00,000 (before charging depreciation Rs.9,00,000)
For the year 5: Rs.75,00,000 (before charging depreciation Rs.7,50,000)
You are required to
Compute the taxable income for year 4 and year 5.
Would your answer be different if the company was eligible start up covered by 80-IAC.
Would your answer be different if the company’s change in the shareholding takes place pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) in the year 5.
Workings must form part of your answer.
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Book - F | Chapter – F25C | Set Off | Video ID - C-01 |
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TDS
TDS – 194M | TDS on payment by Individual/HUF to contractors and professionals - New Section 194M (w.e.f. 01-Sep-2019)
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TDS – 194IA |
“consideration for immovable property”, for the purposes of TDS @ 1%, shall include all charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property |
TDS – 194N | TDS on cash withdrawals - New Section 194N of the Act (w.e.f. 01-Sep-2019)
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TDS – 194DA | TDS on payment made in respect of Life Insurance Policy – Section 194DA (w.e.f. 01 Sep-2019)TDS @ 5% on the income component of the sum paid to a resident under a life insurance policy which is not exempt u/s. 10(10D) shall be deducted instead of 1% on the gross amount paid. |
TDS for NR |
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Statement of TDS | Electronic filing of statement of transactions on which TDS has not been deducted [w.e.f 01-Sep-2019]
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* Question based on amendment for AY 20-20 *
Question: 52
Examine the applicability of the provisions for tax deduction at source under section 194DA in the following cases -
Mr. X, a resident, is due to receive 14.50 lakhs on 31.3, towards maturity proceeds of LIC policy taken on 1.4.2015, for which the sum assured is 4 lakhs and the annual premium is 1,25,000. Total premium paid up to the date of maturity is 7,50,000.
Mr a resident, is due to receive 2.75 lakhs on 31.3 on LIC policy taken on 31.3.2012, for which the sum assured is 2.50 lakhs and the annual premium 35,000.
Mr. Z a resident, is due to receive 95,000 on 1.10. towards maturity proceeds of LIC policy taken on 1.10.2012 for which the sum assured is 90000 and the annual premium was 15,000.
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Book - A | Chapter – A13 | TDS / TCS | Video ID - 01 |
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* Question based on amendment for AY 20-20 *
Question: 16-A
Mr. X is having Gross turnover of 60 lakhs in preceding financial year. During the financial year he makes the following payments, you are required to advise him on TDS matter.
Paid to | Amount |
Mr. A on account of professional fees | 51,00,000 |
Mr. B on account of professional fees | 25,00,000 |
Mr. C on account of Commission | 35,000 |
Mr. D on account of Commission | 52,00,000 |
Mr. F on account of Work Contract | 6,50,000 |
Mr. G on account of Work Contract | 60,00,000 |
Mr. H on account of Royalty | 75,00,000 |
Question: 16-B
Mr. A has made the following cash withdrawal from HDFC bank Ltd during the financial year. Mr. A has two account with the bank namely account 01 and account 02. You are required to advise bank on amount of tax to be deducted. The cash withdrawn has been used for his personal purposes.
Date | Amount |
16-July from account 01 | 50,00,000 |
25-August from account 02 | 25,00,000 |
21-March from account 01 | 35,00,000 |
| Solution |
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Book - A | Chapter – A13 | TDS / TCS | Video ID - 02 |
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Procedural Aspects
Mandatory Return filing based on criteria |
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Faceless assessment |
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“ Key to success is only writing practice. ”
CA Kalpesh Sanghavi
* Question based on amendment for AY 20-20 *
Question (ID 12) (Returns of Income – economic indicator)
Discuss whether the following persons are required to submit return of income.
Assessee | Particulars |
Mr. A | Deposited in his current bank account Rs. 10,00,000 every month on account of his cash sales to various customers. |
Mr. B | Deposited in his Savings bank account Rs. 12,00,000 every month on account of his cash sales to various customers. |
Mr. C | Travelled with his family (wife and two sons) to Singapore where expense per head is 51,000 and total expense is debited to his capital account representing personal drawings. |
Mr. D | Foreign travel for his business purpose, expense 80,000. |
Mr. E | Foreign travel for his business purpose, expense 5,60,000. |
Mr. F | House electricity bill is 12,000 per month. |
Mr. G | Capital Gains on sale of his Residential house is 36,00,000 and he has re-invested the monies in another house 40,00,000 and claimed exemption u/s 54. Assessing officer in the course of the assessment has allowed the exemption fully and thus no capital gains was chargeable to tax. He has IFOS of 12,000. |
| Solution |
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Book - A | Chapter – A12 | Returns | Video ID - 01 |
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Penalty and others
Penalty for non furnishing of return |
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Prosecution | Clarifying the prosecution provisions for failure to furnish the return of income – Section 276CC
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PAN and AADHAR interchangeable |
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“Students appearing in English medium are advised to listen in English and talk in English for better exam performance and Job prospect.”
CA Kalpesh Sanghavi
Submission of statement of 285BA
Submission of statement of financial transactions |
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Penalty for failure of 285BA |
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Reduced STT
Reduced STT |
STT on sale of options in securities shall be levied on the difference between the strike price and the settlement price, instead of the settlement price |
Relief of section 89 to be considered for Interest
234A / 234B / 234C / 140A / 143 | Provision of credit of relief provided u/s. 89
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Special Rates of Taxes
111A |
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115A | Amendment in section 115A of the IT Act to provide that the conditions contained in sub-section (4) of section 115A (which relates to prohibition of any deduction under chapter VIA of the Act) shall not apply to a unit of an IFSC.Thus unit in IFSC can claim full deduction of 80LA even if covered by 115A |
“ Key to success is only writing practice. ”
CA Kalpesh Sanghavi
International taxation
Deemed to accrue or arise in India | Deemed accrual of income in case of person outside India
Existing provision for exempting gifts as provided in proviso to Sec 56(2)(x) will continue to apply for such gifts deemed to accrue or arise in India.
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Transfer Pricing – APA
Advance pricing arrangement |
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Transfer Pricing – Secondary Adjustment
Transfer Pricing Secondary adjustment |
Under section 92CE clarified as under:
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* Question based on amendment for AY 20-20 *
Question (ID SA - 01)
Z Ltd (Indian Company) has imported certain goods from its foreign AE at Rs 20 crores. It determined arm’s length price of such transaction at Rs 15 crores. It made transfer pricing addition of Rs 5 crores in its income-tax return filed on November 30, AY. Determine the time-limit for repatriation of excess money to India ?
Question (ID SA - 02)
Y Ltd (Indian Company) has sold goods to its foreign subsidiary at Rs 10 crores during the financial year. The TPO determined the arm’s length price of such transaction at Rs 12 crores. Accordingly, the Assessing Officer made additions of Rs 2 crores in its order dated August 1, 2022. The company accepts the order of Assessing Officer. Determine the time-limit for repatriation of excess money to India ?
| Solution |
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Book - F | Chapter – F55-J | Returns | Video ID - 01 |
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Transfer Pricing – Others
Accounting year clarification | Clarification regarding definition of the term “accounting year” in section 286 (w.r.e.f. 01-Apr- 2017)
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Document to be maintained in case of transfer pricing |
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Investment Trust
115UB |
(i) the business loss of the investment fund, if any, shall be allowed to be carried forward and it shall be set-off by it in accordance with the provisions of Chapter VI and it shall not be passed onto the unit holder;(ii) the loss other than business loss, if any, shall also be ignored for the purposes of pass through to its unit holders, if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast twelve months;(iii) the loss other than business loss, if any, accumulated at the level of investment fund as on 31st March, 2019, shall be deemed to be the loss of a unit holder who held the unit on 31st March, 2019 in respect of the investments made by him in the investment fund and allowed to be carried forward by him for the remaining period calculated from the year in which the loss had occurred for the first time taking that year as the first year and it shall be set-off by him in accordance with the provisions of Chapter VI;(iv) the loss so deemed in the hands of unit holders shall not be available to the investment fund for the purposes of chapter VI. |
* Question based on amendment for AY 20-20 *
Problem (REIT’s / Invt) (R - 02)
The following are the particulars of income of three investment funds
Particulars | A | B | C |
Business Income | - | 2 | (20) |
Capital Gains | 16 | 14 | (6) |
Income from other sources | 4 | 4 | 8 |
Compute the total income of the investment funds and unit-holders, assuming that:
(i) each investment fund has 20 unit holders each having one unit; and
(ii) income from investment in the investment fund is the only income of the unit-holder.
If Investment Fund C has the following income components in the next year, what would be the total income of the fund and the unit holder for that year?
Business Income 2 lakh
Capital Gains 9 lakh
Income from other source 8 lakh
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Book - F | Chapter – F58D | Inv Trust | Video ID - 01 |
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IFSC (International financial service center)
115-O 80LA 115A | No dividend distribution tax for unit in IFSDC – 115O The existing provisions of the section 115-O of the Act, provide that no tax on distributed profits shall be chargeable in respect of the total income of a company, being a unit of an IFSC, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2017, out of its current income, either in the hands of the company or the person receiving such dividend.
To facilitate distribution of dividend by companies operating in IFSC, it is proposed to amend the provision of the said section to provide that any dividend paid out of accumulated income derived from operations in IFSC, after 1st April 2017 shall also not be liable for tax on distributed profits.
Special deduction for income for unit in IFSC – 80LA With a view to further incentivize operation of units in IFSC, it is provided that the deduction shall be increased to one hundred per cent for any ten consecutive years. The assessee, at his option, may claim the said deduction for any ten consecutive assessment years out of fifteen years beginning with the year in which the necessary permission was obtained.
IFSC income covered by 115A will be eligible for full deduction of 80LA Section 115A of the Act provides the method of calculation of income-tax payable by a non-resident (not being a company) or by a foreign company where the total income includes any income by way of dividend (other than referred in section 115-O), interest, royalty and fees for technical services; etc. Section 80LA, provides for deduction in respect of certain incomes to a unit located in an IFSC. However, sub-section (4) of section 115A prohibits any deduction under chapter VIA which includes section 80LA.
In order to ensure that units located in IFSC claim full deduction, section 115A of the Act so as to provide that the conditions contained in sub-section (4) of section 115A shall not apply to a unit of an IFSC for under section 80LA is allowed. |
47 115R | No capital gains for AIF - 47With a view to provide tax-neutral transfer of certain securities by Category III Alternative Investment Fund (AIF) in IFSC, it is amended section 47 so as to provide that any transfer of a capital asset, specified in the said clause by such AIF, of which all the unit holders are non-resident, are not regarded as transfer subject to fulfilment of specified conditions.No Dividend distribution tax for Specified Mutual fund in IFSC – 115RIn order to incentivize relocation of Mutual Fund in IFSC, section 115R is amended so as to provide that no additional income-tax shall be chargeable in respect of any amount of income distributed, on or after the 1st day of September, 2019, by a Mutual Fund of which all the unit holders are non-residents and which fulfills certain other specified conditions. |
10 | Interest income of Non residents from IFSC unit exempt - 10 With a view to facilitate external borrowing by the units located in IFSC, section 10 provide that any income by way of interest payable to a non-resident by a unit located in IFSC in respect of monies borrowed by it on or after 1st day of September, 2019, shall be exempt. |
* Question based on amendment for AY 20-20 *
Question (ID 01) (IFSC)
Company Zora Ltd is a unit in “International Financial Services Centre” which has been approved by the Central Government under of section 18 of Special Economic Zone act on 15 may of PY. It is deriving income solely in convertible foreign exchange. During the year it has derived net income of US $ 10,10,500. Out of the current year income it has distributed profits (dividend) of US $ 7,00,000 to its shareholders in the month of October. One of the shareholder Mr. X is holding 40 % share in company Zora Ltd. You are required to discuss the tax treatment in the hand of Company and its shareholders. Conversion rate of 1 US $ to be taken as 70 INR. (4 mark type for Nov 2018 CA Final Exam)
Question (ID 02) (IFSC)
MNC mutual fund operating in IFSC have derived income of US$ 60,000 and it has distributed US $ 40,000 as dividend to its unit holders. It has 1000 unit holders and all of them are non resident. You are also required to discuss the tax treatment in the hand of unit holders.
| Solution |
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Book - F | Chapter – F58E | IFSC | Video ID - 01 |
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Black Money Act
Black money act. | Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
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