ISSUE # 4 FEBRUARY
2014
FOR PRIVATE CIRCULATION ONLY
VAVNCO focus
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Contents:
Page No.
Statutory Due Dates for February 2014
- 1
Taxation of Agricultural Income
- 2
Taxation on Dividends
- 4
TDS on Sale of Immovable Property
- 6
Who is he? – Satya Nadella
- 8
Commerce Insight – Financial Awareness – Legal Compliances – Economic Advancements
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Due Dates for February 2014
Taxation of Agriculture Income as per Income Tax Act, 1961 -
N S M Anjana
buildings owned and occupied by both cultivators of agricultural land and
A
griculture income is exempt under the Indian Income Tax Act. This means that income earned from agricultural operations is not taxed. However, while computing tax on nonagricultural income agricultural income is also taken into consideration.
assessee who receive rent or revenue from agricultural land. The sole purpose of such farmhouses should be for use as dwellings for the cultivators or use as store houses. Normally, the annual value of a building is taxable as `income from house property’. However, in the case of a farm house, the annual value would be deemed agricultural income and would, thus, be exempt from tax.
What does the term Agricultural Income mean? As per Income Tax Act income earned from any of the under given three sources meant Agricultural Income;
d. Income earned from carrying nursery operations is also considered as agricultural income and hence exempt from income tax. In order to consider an income as agricultural income certain points have to be kept in mind: i. There must me a land. ii. The land is being used for agricultural operations:- Agricultural operation means that efforts have been induced for the crop to sprout out of the land. The ambit of agricultural income also covers income from agricultural operations, which includes processing of agricultural produce to make it fit for sale. iii. Land cultivation is must - Some measure of cultivation is necessary for land to have been used for agricultural purposes. The ambit of agriculture covers all land produce like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands. However, the breeding of livestock, aqua culture, dairy farming, and poultry farming on agricultural land cannot be construed as agricultural operations.
a. Any rent received from land which is used for agricultural purpose: Assessees do not have to pay tax on rent or revenue from agricultural land. Such land should, of course, be assessed to land revenue in the country or be subject to a local rate. Further, there must be a direct link between the agricultural land and the receipt of income by way of rent or other revenue (for instance, a landlord could receive revenue from a tenant). b. Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce. c. Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc. Income from such farm houses is considered agricultural income. The definition of `farm houses’ covers
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iv. If any rent is being received from the land then in order to assess that rental income as agricultural income there must be agricultural activities on the land. v. In order to assess income of farm house as agricultural income the farm house building must be situated on the land itself only and is used as a store house/dwelling house. vi. Ownership is not essential. In the case of rent or revenue, it is essential that the Assessee have an interest in the land (as an owner or mortgagee) to be eligible for taxfree income. However, in the case of agricultural operations it isn’t necessary that the person conducting the operations be the owner of the land. He could be just a tenant or a subtenant. In other words, all tillers of land are agriculturists and enjoy exemption from tax. In some cases, further processes may be necessary to make a marketable commodity out of agricultural produce. The sales proceeds in such cases are considered agricultural income even though the producer’s final objective is to sell his products. Certain income which Agriculture Income;
is
treated
as
a. Rent received for agricultural land. b. Income from growing flowers and creepers. c. Share of profit of a partner from a firm engaged in agricultural operations. d. Interest on capital received by a partner from a firm engaged in agricultural operations. e. Income derived from sale of seeds.
Certain income which is not treated as Agricultural Income; a. Income from poultry farming. b. Income from bee hiving. c. Income from sale of spontaneously grown trees. d. Income from dairy farming. e. Purchase of standing crop. f. Dividend paid by a company out of its agriculture income. g. Income of salt produced by flooding the land with sea water. h. Income from butter and cheese making. i. Receipts from TV serial shooting in farm house is not agriculture income. Losses from agricultural operations could be carried forward and set off with agricultural income of next eight assessment years. Tax after including agricultural income in total income – Although agricultural income is fully exempt from tax, the Finance Act, 1973, introduced a scheme whereby agricultural income is included with non-agricultural income in the case of non-corporate assessees who are liable to pay tax at specified slab rates. The process of computation is as follows: a. Income tax is first calculated on the net agricultural income plus the assessee’s total income from non-agricultural sources. b. Income tax is then calculated on the basic exemption slab increased by the assessee’s net agricultural income. c. The difference between (a) and (b) is the amount of tax payable by the assessee. This process of computation is, however, followed only if the assessee’s nonagricultural income is in excess of the basic exemption slab.
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Taxation of Dividend as per Income Tax Act, 1961 -
D a. b. c.
ividend taxation where there is:
gets
attracted
sections
are
Dividend includes: a. 2(22)(a) Distribution of assets to the shareholders by the company
Company Shareholders Accumulated Profit
Following dividends:
R S Lavanya
related
to
b. 2(22)(b) To any Shareholder – distribution of debentures or debenture stock certificate. OR To preference share holder – distribution of bonus shares.
1. Section 2(22) – Definition of Dividend 2. Section 8 – Chargeability 3. Chapter XII D – CDT – a. Sec. 115-O CDT b. Sec. 115 -P Interest for delayed payment of CDT @ 1% PM c. Sec. 115-Q Default by company and principal officer- Assessee in default
c. 2(22)(c) Distribution by company in liquidation, immediately before liquidation d. 2(22)(d) Distribution to shareholders leading to reduction of capital. e. Applicable in case of company in which public are not substantially interested (let be A company)* Accumulated profits mean:
4. Sec 10(34) – Exemption in respect of dividend referred to in 115-O(for shareholders) 5. Sec 194 – TDS on dividend as of now on section 2(22)(e) – paid to resident 6. Sec 195 – TDS on dividend paid to nonresident. Even though section 2(22) defined the term dividend; the items included in the definition are deemed dividends. Normally capitalized profit means bonus issue. Dividend distribution tax is attracted for final dividend, interim dividend, 2(22) (a) to 2(22) (d).
a. In case of company in liquidation - due to compulsory acquisition by government, corporation etc – Profits earned due upto 3 years immediately preceding the year of acquisition should be excluded. b. In case of company in liquidation not due to the reason mentioned in point a above – Profits upto the date of liquidation. c. In case company is not in liquidation – Profit earned till the date of distribution, declaration or payment as the case may be.
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TDS on Sale of Immovable Property -
T
he Finance Minister in his budget speech for 2013-14 introduced TDS on Sale of Immovable Property transactions of over Rs. 50 lakhs. He stated that "Transactions in immovable properties are usually under-valued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds 50 lakhs. However, agricultural land will be exempt." Income Tax Provisions The provisions relating to TDS on sale of Immovable Property are contained in Section 194(1A) of the Income Tax Act. As per the provisions, w.e.f. 01.06.2013 TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the consideration paid or payable is more than Rs 50,00,000/- irrespective of the mode of payment (i.e. by cash, cheque, draft etc.). TDS Rates TDS is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller to the buyer, the TDS rate would go up to 20% as per the provisions of section 206 AA.
Sumukh K S
TAN Requirement The provisions of Section 203A relating mandatory requirement of TAN for deduction of TDS shall not be attracted. i.e., Purchaser of immovable property is not required to obtain TAN for deduction of TDS. Payment and return of TDS Tax is required to be deducted at the time of payment or at the time of giving credit to the seller(s) of immovable property, whichever is earlier. In case of advance payment, TDS is required to be deducted at the time of making advance payment itself. Similarly, in case payment is made by installments, the TDS is required to be deducted at time of paying each such installment. In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all i.e. if there are more than one buyer or seller and the individual sale or purchase price is less than Rs. 50 lacs but the aggregate value is more 50 lacs, the provisions of Section 194(1A) shall be applicable and TDS would be required to be deducted by buyer(s) at the time of making payment to seller(s) by filling separate form 26QB for each such payment. The TDS deducted u/s 194-IA is required to be paid electronically (online) on Challancum-Statement Form No.26QB to the credit of Central Government within a period of seven days from the end of the month of
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deduction. The payment of TDS u/s 194-1A can be made on website of NSDL https://onlineservices.tin.egovnsdl.com/etaxnew/tdsnontds.jsp. Further, the purchase is required to furnish certificate of deduction of tax at source in Form No.16B to the seller within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QB. Procedure to download Form 16B 1. Login to: www.tdscpc.gov.in/en/deductor-home.html
2. Click on Register as New User and you will be asked to provide basic details such as your PAN, Date of Birth, Last Name, Middle Name and First Name and would also be required to further validate details of either tax deducted (option 1) or tax paid by you (option 2). Fill details under Option 2. 3. On Validation of details, your account will be created. User ID by default would be your PAN. You would have the option of providing password of your choice. 4. An email would be automatically generated sent to your email address providing you an activation link with a second message will be sent on your mobile.
click of available and download and save it your computer. Please note that Form 16B is available for download after 2-3 working days from the date of deposing TDS. Provisions for Non Resident Indians If payment is made to a Non-Resident then provisions of section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20% + Education Cess (2% of TDS) + Secondary & Higher Education Cess (1% of TDS) on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI(s). Non Compliance In case of failure to comply with the provisions, interest and penalty would be imposed on the purchaser of immovable property. Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.
5. After activating your account, you can view 26AS statement and download Form 16B in case you are the purchaser of immovable Properties. 6. To download form 16B, go to download. Click on request for form 16B. Validate details and submit your request. After some time the same shall be available under download menu. Click on download,
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Who is He?
Born in 1969 in Hyderabad, India, Satya Nadella finished his schooling at the Hyderabad Public School, and earned his Bachelor of Engineering degree in Electronics and Communication from the Manipal Institute of Technology. He, like so many of the engineers at the time, then completed his engineering education abroad, with a Master of Science degree in Computer Science from the University of Wisconsin-Milwaukee. Finally, he rounded off his education with a Master of Business Administration degree from the University of Chicago. Nadella started his career at Sun Microsystems, before moving to Microsoft in 1992, where he joined as a Program Manager in the Windows Developer Relations group. Nadella quickly rose up the ranks, becoming the Senior Vice President of Research & Development for the Online Services division, the Vice President of the Microsoft Business Solutions group (MBS), and notably, the President of the $19 billion Microsoft Server and Tools Business. During his meteoric rise, the Indian-American also founded and led the 'Microsoft bCentral' small business online services group, was general manager for the company's Commerce Platforms group, and is considered responsible for spearheading the development of the Microsoft Commerce Server, Microsoft BizTalk Server, Microsoft Office Small Business, and Microsoft Dynamics ERP and CRM products. Nadella is also considered to have played a significant part in Microsoft's foray into advanced technologies like digital rights management (DRM) and interactive television (ITV). As the head of the company's Server and Tools Business, Nadella spearheaded the 'transformation of the business and technology from client-server software to cloud infrastructure and services,' according to Microsoft.
-NDTV.com
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