From the Professional Desk of Gulab A. Singh

March 1, 2010

Indian Budget for Financial Year 2010-2011 (Asst. Year 2011-2012)

1. Introduction of Direct Tax Code (DTC) proposed from 01st April 2011;

2. Introduction of Goods & Service Tax (GST) proposed from 01st April 2011;

3. Income Tax Rates for Individuals

     (i) Tax rates for Individuals:

    1. Upto Rs. 160,000/-                      -       Nil
    2. Rs. 1.60 lacs to Rs. 5.00 lacs        -       10%
    3. Rs. 5.00 lacs to Rs. 8.00 lacs        -       20%
    4. Rs. 8.00 lacs and above               -       30%

     (ii) In respect of women resident in India below the age of 65 years, the basic exemption limit would continue to be Rs. 190,000/-;

     (iii) In respect of Senior citizens resident in India (male or female), the basic exemption limit would continue to be Rs. 240,000/-;

     (iv) Education Cess would continue to be levied @ 2% of Income Tax & surcharge;

     (v) Secondary & Higher Education Cess would continue to be levied @ 1% of Income Tax & surcharge (not including Education Cess);

     (vi) No surcharge on individual assessees; and

     (vii) Saral II form to be re-introduced for individual salaried tax returns;;

     (viii) Additional benefit of Rs. 20,000/- for investments made in long-term infrastructure bonds as notified by the Central Government (U/s. 80CCF)

4. Company / Body Corporate Related

     (i) Income tax on short term capital gains U/s. 111A and 115AD – 15%;

     (ii) Corporate Dividend Tax – 15% plus surcharge;

     (iii) No change in Corporate tax rates. Domestic companies are subject to tax at the rate of 30%;

     (iv) Surcharge for domestic companies reduced from 10% to 7.5% for taxable income exceeding Rs. 1.00 crore. No surcharge on taxable income less than Rs. 1.00 crore;

     (v) Minimum Alternate Tax (MAT) increased from 15% to 18% of the book profit from FY 2010-2011. Surcharge wherever applicable;

     (vi) Weighted deduction for Scientific research and development:- Under the existing provisions, a company is allowed weighted deduction of 150% of the expenditure incurred on scientific research on an approved in-house research and development facility. The said deduction has now been raised to 200%;

     (vii) Presently a weighted deduction of 125% is allowed for any sum paid to certain specified institutions. It is proposed to enhance such weighted deduction to 175%;

 

5. Other Entities (including LLP)

     (i) Partnership firm would continue to be taxed @ 30%;

     (ii) No change in tax rate structure incase of co-operative society and local authority;

     (iii) Foreign companies would continue to be taxed at the rate of 40%;

     (iv) Presently, the Limited Liability Partnership (LLP) is subject to tax @ 30%. There will be no change in the tax rate;

     (v) Transfer of assets pursuant to conversion of a company into an LLP will not be regarded as transfer for the purpose of capital gains, subject to satisfaction of certain conditions; and

     (vi) However, the MAT credit in respect of tax paid by the company will not be allowed to the successor LLP

 

6. TDS and Non-Residents related

     (i) Income of a non-resident by way of interest, royalties or fees for technical services shall be deemed to accrue or arise in India, and hence liable to tax in India, whether or not the non-resident has rendered services in India;

     (ii) Where tax has been deducted (TDS) on payments made at any time during the year and deposited with the exchequer on or before the due date of filing the tax return, such payment shall be allowed;

     (iii) Interest chargeable on tax deducted but not deposited within the specified due date to be increased from the present 1% to 1.5% per month; and

     (iv) Threshold limits for Tax Deduction at Source (TDS) enhanced which would take effect from 01st July 2010, which includes raising Insurance Commission from Rs. 5,000/- to Rs. 20,000/-, Insurance from Rs. 2,500/- to Rs. 5,000/-, Rent from Rs. 1.20 lacs to Rs. 1.80 lacs, professional fees from Rs. 20,000/- to Rs. 30,000/-;

 

7. Turnover Limits

     (i) Threshold turnover limit in relation to presumptive taxation for small businesses increased from Rs. 40.00 lacs to Rs. 60.00 lacs;

     (ii) Threshold turnover / gross receipts limits for compulsory audit (Sec 44AB) of accounts increased from Rs. 40.00 lacs to Rs. 60.00 lacs and from Rs. 10.00 lacs to Rs. 15.00 lacs for profession; and

     (iii) Penalty on failure to get the accounts audited would be increased from the present Rs. 1.00 lacs to Rs. 1.50 lacs

8. Indirect Taxation & Others

     (i) High Court empowered to condone delay in filing appeals for sufficient causes;

     (ii) Service Tax rates continues to be 10%;

     (iii) Central Sales Tax rate against prescribed declaration form continues to be 2%; and

     (iv) The Service sector is disappointed with the fact that there was no mention of extending existing tax benefits under Section 10(A) and 10(B) – particularly in the light that this sector has been struggling to fight the global slump causing exports from this sector to remain sluggish

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40 Comments »

  1. sir/madam

    1.can you please tell me that whether education cess -3% has to be deducted for the fy 2010-2011 on tds payments

    2.do we have to deduct tds on transport payment for the year 2010-2011

    with Regrads

    suresh

    Comment by suresh — April 1, 2010 @ 14:24

  2. 1. TDS deductions wef 01.10.2009 is without surcharge and education cess. ;
    2. No TDS deduction on transport payments (to the Transporters)

    Comment by gulabsingh — April 1, 2010 @ 14:27

  3. sir/madam,
    ihave got a doubt in service tax.if freight charges are included in the invoice,& shown seperately, who has to pay service tax -seller or buyer
    with regards

    suresh

    Comment by suresh — April 13, 2010 @ 14:09

  4. Dear Suresh,

    Regarding freight payments, the same must have borne service tax at the end of freight forwarder who would have acted on the instructions of the seller.

    Such service tax would have been included in the total freight and since the freight is again included in the bill, the seller would have to pay the same after taking set-off under CENVAT. Buyer has no role. Hope this clarifies the matter.

    Regards

    Comment by gulabsingh — April 13, 2010 @ 14:20

  5. Tax benefits seem to be a waste in front of the price hike in fuels.

    Comment by Rani — July 22, 2010 @ 18:17

  6. Balancing of various acts are required. Both are very different.

    Comment by gulabsingh — July 25, 2010 @ 21:40

  7. Sir,

    I want a clarification that whether u/s 194C in case of payments made to transporters after 01.10.2009 in case of PAN no. Not provided by the transporter whether TDS is to be deducted @1 or e percent on all payments irrespective of amount or whether the basic exemption limit of 20000 or 50000 will be available for not dedjucting TDS.

    Comment by Nipun Mittal — September 5, 2010 @ 11:41

  8. Sir,

    I want a clarification that whether u/s 194C in case of payments made to transporters after 01.10.2009 in case of PAN no. Not provided by the transporter whether TDS is to be deducted @1 or 2 percent on all payments irrespective of amount or whether the basic exemption limit of 20000 or 50000 will be available for not dedjucting TDS.

    Comment by Nipun Mittal — September 5, 2010 @ 11:42

  9. Basic exemption limit needs to be followed. For people covered under the exemption the rule does not itself applies.

    Comment by CA Gulab A. Singh — September 29, 2010 @ 13:39

  10. The PAN has been made mandatory for payments liable for TDS deduction and not otherwise hence basic exemption limit needs to be followed in your case as stated earlier

    Comment by CA Gulab A. Singh — September 29, 2010 @ 13:39

  11. 7.Sir,

    I want a clarification that whether u/s 194C in case of payments made to transporters after 01.10.2009 in case of PAN no. Not provided by the transporter whether TDS is to be deducted @1 or e percent on all payments irrespective of amount or whether the basic exemption limit of 20000 or 50000 will be available for not dedjucting TDS.

    Comment by mukesh — January 13, 2011 @ 15:04

  12. dear sir

    i heard from my colligue for turnover limit in partnership firm for f.y.2010-2011 increase from 40 lac to 60 lac

    so this is true or not kindly reply me

    regards
    pramod joshi

    Comment by pramod joshi — January 19, 2011 @ 11:06

  13. Yes Mr. Pramod Joshi.

    From the current financial year, the turnover limit for the purpose of tax audit U/s. 44AB of the Income Tax Act, 1961 has been raised to Rs. 60.00 lacs from the previous limit of Rs. 40.00 lacs. This is not only for partnership firm but for all entities, including Proprietorship, Private Limited …

    Comment by CA Gulab A. Singh — January 19, 2011 @ 17:18

  14. Could you please CONFIRM clarify again. Please do not say current year etc; say in months & numbers please :)

    Q1. What is the audit limit for sole Proprietorship firm for April 2010 – March 2011 turnover?

    (I think it is 10L, as the notification said, that the change from 10L to 15L to be effected from April 2011, that means 15L limit for April 2011 – March 12 turnover.)

    Q2. On Feb 28, 2011, FM says, #191 ‘..propose to free all individual and sole proprietor taxpayers with a turnover upto Rs 60 lakh from the formalities of audit.’ – This is for which April to March turnover?

    Q3. The ‘sole proprietor’ above means those are doing a trade by taking a trade license from local municipality?

    Sorry it sometimes gets too confusing:)

    Comment by Audit Limit — March 5, 2011 @ 02:14

  15. 1. You are getting confused between a business and a profession. The TAX AUDIT limit for sole proprietorship in business is 60 lacs whereas for professional (like practising doctor, CA, lawyer, CS, etc) it is 15 lacs. This hike is being effective from 01.04.2010 and has remained the same in the current budget as well.

    2. The answer is same as that in 1 above. FM means to say that those who are not covered under TAX AUDIT are not liable for getting their books audited if they dont cross the magic figure of 60 lacs and 15 lacs as above.

    3. Sole Proprietor means any individual who is carrying on ANY TRADE, BUSINESS OR PROFESSION in his individual capacity. Trade License like Gumasta License (also called as Shop and Establishment License) are mandatory for any entity but exempt for practising Chartered Accountants as per the ruling of the Court. So sole proprietor can be in TRADE, SERVICE, MANUFACTURING, ADVISORY OR PROFESSION.

    I hope and trust that you would find the above in order … finally !!! Regards

    Comment by CA Gulab A. Singh — March 5, 2011 @ 11:50

  16. Hi Thanks for the clarification; but there are still some…

    Well there is a root to my confusion, let me explain. I just had a long call with an accountant after reading your reply.

    He agrees with what you said for 1 & 2. But argued very hard on this -

    He said ‘software development’, ‘web development’ etc. are not treated as business but as profession if so someone having a trade license (Shop and Establishment License) for the above, their audit limit is 15L and not 60L. He gave more examples like, catering, interior decoration etc. having a trade license, are treated as professional income.

    I tried hard to get him to say yes to which I wanted hear :) but he bounced back saying, software/web development or other examples I said, are they selling goods, are they manufacturing something? no? so they are NOT businesses.

    Bottom line is, he strongly differs on what you said for 3 – ‘..So sole proprietor can be in TRADE, SERVICE, MANUFACTURING, ADVISORY OR PROFESSION’

    I could argue again with him if you make me look knowledgeable :) else he dislodges me saying – ‘kisne kahan’

    Comment by The aduit limit confusion — March 5, 2011 @ 12:53

  17. I am correct and he is correct too. Its the question of interpretation from your end. I can carry on catering which would fall in business UNTIL I TAKE A PROFESSIONAL DEGREE of catering in which case it would be profession. Pl read my comments again. I have differentiated between a business and a profession in (1). Any services rendered in the capacity of professional … then limit is 15 lacs or 60 lacs if covered under business. I can be a dentist, which is a professional and I can carry on art of dentistry for making dental related products which falls under business.

    And as far as your third last para (line) is concerned, I MUST STRESS that he is wrong. Even Vodafone or Loop mobile does not supply any thing but they are business and NOT PROFESSION. Ask him to get the facts correct.

    Lastly you have reiterated my correct version in your second last line. I do not know if you misunderstood.

    I can do software development but if I am not a degree holder then its not a profession, its a business. You NEED TO HOLD A PROFESSIONAL DEGREE to classify yourself under the category of profession. Merely service providers cannot be categorised as professionals by any stretch of imagination. Looking forward for your more controversial disconnect … Rgds

    Comment by CA Gulab A. Singh — March 5, 2011 @ 16:02

  18. Hi I’ll try to get him tonight again.

    What I read around about 44AB etc. By Indian IT Act, there are ‘Specified professions’ and ‘Non-Specified professions’; if your activity doesn’t fall under these two, than you are a business. But I can’t find where is the u/s 2(3) document.

    Could please clarify this –
    A person with a masters degree in IT (information technology); having a trade license carrying out software development for customers; he also does marketing of his service etc.

    If you had to –
    In what context/what way or with what other additional activities, his activity can be treated as a business so that his (‘company’ on trade license) audit limit could be at 60L.

    By the way, here is an interesting thread on ‘definition of profession’ – you might also like to read the doc – 12_commissioner_of_income_tax_vs.doc
    caclubindia.com/forum/definition-of-profession–53358.asp

    And stop smiling at my questions! I know I know :)

    Comment by The audit limit confusion — March 5, 2011 @ 20:40

  19. sir ,
    will u plz refer me a site where i can get a full information on taxation on sole proprietorship,partnership,
    limited liability company,trusts,foundations,professional association and co-operative societies thier different exemption and deductions too….plz refer me as soon as possible.

    Comment by ankush verma — April 16, 2011 @ 00:52

  20. Please tell me sir, my company sale some testing item to china company.
    should we deduct the TDS. If yes please tell me the rate of TDS.

    Comment by VINAY PANDEY — April 25, 2011 @ 10:31

  21. TDS is on services and not sale of products. TDS are called Withholding Tax when the transactions took place between two different countries.

    Comment by CA Gulab A. Singh — May 7, 2011 @ 17:20

  22. Dear Ankush, Its a very general question. To get all the said issues under one book would be difficult. You can purchase the CDs online or probably volumes of books to get acquainted with the information that you seek.

    Comment by CA Gulab A. Singh — May 7, 2011 @ 17:21

  23. sir, i want to know that till which limit i dont have to submit service tax to U.P. Gov.

    Comment by abhishek — July 30, 2011 @ 11:59

  24. I am a doctor and have a Nursing home in my proprietorship…My annual turnover is around 25 Lakhs in the Nursing home which includes the bed charges,nursing charges,doctor visit charges etc..etc… Can you please clarify if I am required to get my books audited?

    Comment by Rakesh — July 31, 2011 @ 20:11

  25. Less than Rs. 10.00 Lacs taxable services – you are exempt

    Comment by CA Gulab A. Singh — August 3, 2011 @ 16:34

  26. Professional services taxable limits are Rs. 15.00 Lacs . Beyond this it needs to be audited.

    Comment by CA Gulab A. Singh — August 3, 2011 @ 16:34

  27. It is learnt that accounts will be subject to compulsory audit, in case of profit declared falls less than a specified percentage on turnover declared. please confirm

    Comment by Rudrappa — August 30, 2011 @ 16:17

  28. if the total turnover for financial year 2011-2012 is 50 lakhs is the firm is to get audited or not

    Comment by ASHWANI KOCHAR — September 4, 2011 @ 00:26

  29. I am a M.E in computer science withM.B.A in IT management if I wish to do software development services for overseas customers in Us or UK, is it governed by the rules of profession or business and Do I need a shop act license or gumasta license

    Comment by S.Kumar — September 22, 2011 @ 11:23

  30. dividend provided private ltd co. in india how much % applicable for the year 2010-201

    Comment by kumar — September 23, 2011 @ 17:33

  31. Dear Narendra,
    Ensure you put your queries very clearly so that we can respond. Incase you are talking about Dividend Distribution Tax then you can refer to Sec 115 O of the Income Tax Act, 1961. The basic tax rate for dividend is 15% alongwith Education cess @ 3%. Surcharge may be levied wherever applicable. Regards

    Comment by CA Gulab A. Singh — October 10, 2011 @ 12:08

  32. You do not need a Gumasta License incase you are operating from home. Software development services are in the form of profession looking at your degrees since you are not trading but providing services hence you would be covered under the ambit of Profession. You surely do not need Shop Act or Gumasta.

    Comment by CA Gulab A. Singh — October 10, 2011 @ 12:09

  33. The limit for tax audit from FY 2010-2011 stands at Rs. 60.00 lacs hence you would not be covered under the provisions of Tax Audit.

    Comment by CA Gulab A. Singh — October 10, 2011 @ 12:09

  34. No there are scrutiny norms announced by the CBDT each year. You can be selected for manual scrutiny if the expenses does not justify the nature of business or profession you are currently in. There is nothing called compulsory audit as stated by you.

    Comment by CA Gulab A. Singh — October 10, 2011 @ 12:11

  35. for the assessment year 2011-2012, partnership business T. O. Of Rs. 23,50,000/-, in this case profit margin 8% is require to show in the books of accounts. previous year the margin is below 5%.

    Comment by G N Jagtap — November 24, 2011 @ 18:48

  36. You can certainly keep books of accounts in which case profit margin as per prescribed law is not mandatory

    Comment by CA Gulab A. Singh — November 30, 2011 @ 18:10

  37. Hi Gulab,
    I am a Free Lance Training Consultant looking to set a Training Consultancy for Graduates and Mid Level Professionals.
    My Question to you is
    “Can I get a “Service Tax Number” and then Open a Current A/C without getting Gumasta for my Business.
    If not then what procedure should I adopt as I am staying with my Parents in a Residential Flat
    I have got many confusing answers and am keen for a right solution

    Comment by Harish Dhawan — December 8, 2011 @ 23:39

  38. Hi Harish,

    Since you are operating from Residence, you do not require a Gumasta License for your business.
    You can open a Current Account with Bank after obtaining Service Tax Registration. If other documents of KYC are fulfilled, you can easily get a Current Account opened either in your personal name or in the name of your firm.

    Regards

    Comment by CA Gulab A. Singh — December 11, 2011 @ 12:25

  39. Hello Sir, I’m a dentist. I’ve taken a shop on rent for my clinic. Is it necessary to get Gumasta license?

    Comment by Dipen — October 18, 2012 @ 14:13

  40. Yes Doctor Sahab,
    As a practising Dentist (Doctor), you must have Gumasta (Shop & Establishment) License. Its mandatory! By not availing this license, you are exposing yourself to legal trouble. Since the fees to avail such licenses are too small, its better to comply rather than to be on the wrong side of the law.
    Congratulations for starting your own set-up! I wish you a good luck!

    Comment by Gulab A. Singh — October 18, 2012 @ 14:45


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