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K The Direct Tax Code (ºDTC ) 2009 is to come into force on 1 April,
2011, if enacted

K The concept of previous year has been replaced with a new concept
of financial year which inter alia means a period of 12 months
commencing from the 1st day of April

K Every person is liable to pay income-tax in respect of his total income

for the financial year at the rates / conditions specified in the
Schedules to the DTC after allowing credit for pre-paid taxes
(including foreign tax credits)

K Income has been proposed to be classified into two broad groups:

Income from Ordinary Sources and income from Special Sources

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K Income from Ordinary Sources refers to:

- Income from employment

- Income from house property
- Income from business
- Capital Gains
- Income from Residuary Sources
K Income from Special Sources to include specified income of non-
residents, winning from lotteries, horse races, etc.
K Losses arising from Ordinary sources to be eligible for set off or
carry forward and set-off against income only from ordinary sources
without any time limit.
K Similar treatment for set off and carry forward of losses from Special
sources.
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K Total income of the tax payer to be the aggregate of Income from
Ordinary Sources and Income from Special sources.
K Loss under the head 'Capital gains' and loss from speculative
business will not be allowed to be set off against income under other
heads.
K Losses to be allowed to be carried forward indefinitely for set-off in
the subsequent financial years.
K Certain expenses such as expenditure attributable to tax free
income, expenditure incurred for any purpose prohibited by law,
provision for unascertained liability, etc. not to be allowed as
deduction in computing the total income.
K Payments in respect of which tax has not been deducted at source
to be disallowed; however, deduction to be allowed in the year of
payment, subject to certain exceptions. Where the payment is made
after two years from the end of the financial year in which the tax
was deductible at source, no deduction to be allowed
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K Gross salary, including the value of perquisites and profits in lieu of salary,
to be taxed on due or receipt basis, whichever is earlier and to be reduced
by permissible deductions.
K Permissible deductions to include professional tax, transport allowance,
prescribed special allowance, compensation under voluntary retirement
scheme, gratuity, commutation of pension, amongst others.


 
 
 

K Income from house property to be the gross rent less specified deductions.
K Gross rent to be higher of contractual rent or presumptive rent calculated at
6% per annum of the rateable value fixed by local authority / 6% of cost of
construction or acquisition of property (in the absence of rateable value).
K Advance rent to be taxed in the financial year to which it relates to.

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The following deductions will be admissible against the gross rent:
K Amount of taxes levied by a local authority and tax on services, if
actually paid
K 20% of the gross rent towards repairs and maintenance
K The amount of any interest payable on:
Capital borrowed for the purposes of acquiring, constructing,
repairing, renewing or reconstructing the property (÷


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Amount of any interest on capital borrowed for the purpose of
repayment of the capital borrowed for the purposes of acquiring,
constructing, repairing, renewing or reconstructing the property
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K Every business to constitute a separate source for the purpose of
computation of income provided there is no interdependence
between the two businesses.
K Key features of the provisions relating to computation of business
income are:
All assets to be classified into business and investment assets,
wherein business assets to be further classified into business
trading assets and business capital assets.
Only income from transactions in business assets to form part of
business income.
Profit on sale of business capital assets, profit on sale of an
undertaking under a slump sale, transfer of any self generated
business asset, etc. to be treated as business income.
K Business expenditure to be classified into (i) operating expenditure
(ii) permitted financial charges and (iii) capital allowances as
defined. O
 



 



 
 


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K Loss on sale of business capital assets (which was hitherto treated
as a capital loss) to be treated as an intangible asset on which
depreciation to be allowed. Effectively, a taxpayer will be allowed to
set-off only a fraction of loss every year.
K Presumptive basis of taxation to apply for certain businesses.
K Separate income determination regimes provided for certain
specified businesses such as business of insurance, operating a
qualifying ship, mineral oil or natural gas, generation, transmission
or distribution of power, developing a special economic zone, etc.
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K Definition of capital assets have been modified and replaced with
the term investment asset. Investment asset does not include
business assets like self generated assets, right to manufacture and
other capital asset connected with the business
K All gains from sale of investment asset would be considered as
capital gains 
 
 


 

   
 


  and is to be taxable. Further, the indexation facility would be
available to all investment assets held for more than one year
K Gains and losses to be included in the total income of the financial
year in which the investment    
   irrespective of the
year of receipt of consideration, except in the case of compulsory
acquisition of an asset.
K Capital gains arising from transfer of personal effects and
agricultural land excluded from the ambit of taxation.
K Base date for determining cost of acquisition for the purpose of
computing capital gains shifted from ÿ   ÿ
ÿ 
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K Securities Transaction Tax to be abolished.
K Benefit of indexation available in computing capital gains on transfer
of capital assets held for more than one year.
K If the cost of acquisition/ cost of improvement of an asset is not
determinable by the tax payer, for example in the case of self-
generated assets, then such cost shall be taken as nil and capital
gains to be computed˜


 
   

K Residuary income to comprise any income which does not form part
of any other head of income.
K The scope of gross residuary income widened to include income
having incidental nexus with some other head of income.
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Person Slab of Income Rate of Tax
Individual & Up to Rs. 160000* NIL
HUF Rs. 160000 ± Rs. 1000000 10%
Rs. 1000000 ± Rs. 2500000 20%
Rs. 2500000 and above 30%
Co-operative Up to Rs. Nil ± Rs. 10000 10%
Society Income Rs. 10000 ± Rs. 20000 20%
Income Rs. 20000 and above 30%
Companies Any Income 25%

Unincorporated Bodies, Local Authority &

Income derive from lottery or crossword 30%
Puzzle, Race, including horse race, Card game
or any other game or gambling or betting

* Women Up to Rs. 190000 & Senior Citizen Up to Rs. 240000

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K All long-term retrial savings schemes are proposed to be moved to the EET
regime
K Contributions (both by employee and employer) of  
 % " to any
account with permitted savings intermediaries is proposed to be deductible
K Accretion of income till withdrawal is exempt
K 
   
  
 
    .
K Savings from one eligible savings scheme to another, is not to be treated as
a withdrawal
K Permitted savings intermediaries to include approved provident and
superannuation funds, life insurer and New Pension System Trust.
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K Aggregate deductions for above long term eligible savings along with tuition
fees paid proposed to be increased from 
   
K No further investments eligible.

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K Section 83 under New Tax Code provides for Maintenance of records.
K Currently section 44AA under Income Tax Act,1961 deals with maintenance
of records which is mandatory for specified professionals such as persons
carrying on legal, medical, engineering , architectural profession or
profession of accountancy, technical consultancy and interior decorator.
K In addition of the above, in section 83 of the New Tax Code it shall be



  





 




"



  ;
His income from the business exceeds  "  ;
His total turnover or gross receipts, in the business exceeds 
"
  in any one of the three financial year immediately preceding the
relevant financial year; or
If business is newly set up in any financial year, income from business is
"  
  
"   or his total turnover or gross receipts, as
the case may be, in the business is likely to exceed 
"  , during
such financial year.

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K Under New Tax Code following books of accounts are prescribed:
Cash book;
Journal, if the accounts are maintained according to the mercantile
system of accounting;
A ledger;
Register of daily inventory of business trading asset;
Carbon copies of serially numbered bills issued by the person, if the
value of the bill exceeds fifty rupees;
Carbon copies or counterfoils of serially numbered receipts issued
by the person, if the value of the bill exceeds fifty rupees;
Original bills or receipts issued to the person in respect of
expenditure incurred by him, if the amount of the expenditure
exceeds fifty rupees;
Payment vouchers prepared and signed by the person in respect of
expenditure not exceeding fifty rupees, if there are no bills or
receipts for such expenditure.
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K Currently under section 115JB of the Income Tax Act,1962 a
company is required to pay a Minimum Alternate Tax of 15% of the
book profits if the actual tax liability is less than such MAT. Such
excess tax paid in a particular year is available as a credit in future
years
K In many countries minimum tax is payable on the 

  
 
 

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 . Under the New Tax
Code it has been proposed that minimum Alternate Tax should be
calculated on the basis of ³Value of gross assets´.
K Section 97 of the New Tax Code defines term ³ Value of gross
assets´ according to which ³Value of gross assets´ will be value of
gross block of fixed assets of the company , the value of capital
work in progress of the company, the book value of all the other
assets of company, as on the last day of the relevant financial year
as reduced by the accumulated depreciation on the value of the
gross block of the fixed assets and the debit balance of the profit
and loss account if includedO in the book value of other assets.

 



 

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K 
 '() 
 * & 

 2 are liable to
wealth tax

K Wealth to be taxable at !+ 
 of net wealth

K Basic exemption limit has been enhanced to ! + ,

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K New concept of wealth includes    except exempt specially.

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K The due date for filing the return of income for non-corporate
taxpayers is to be % -
of the year following the financial year
and for other assesses is to be %ÿ ˜
K Belated / Revised return can be filed within ÿ 

 from the end
of the financial year as stipulated
K An electronic acknowledgement to be issued on receipt of each
return of tax bases and initial processing to be completed 
ÿ


 from the month in which the return is filed
K Selection of cases
 
 will be made 

 


from the end of the year in which the return is furnished in
accordance with a risk management strategy framed by Central
Board of Direct Taxes,  

      

   

 
K The time limit for rectification of mistake in the order / intimation is to
be 
  from the end of the year in which the order / intimation
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K Assessment to be generally completed within 21 months from the
end of the financial year in which the return is furnished
K Assessment of taxes after search and seizure operations to be
treated as tax base escaped assessment and would be subject to
re-opening.

*
 . *
 


K Maximum amount of penalty that can be levied is    

  from the existing 3 times of the tax sought to be evaded
K In the case of individuals and cooperative societies, penalty will be
calculated at the maximum marginal rate of tax
K No income tax authority to have the power to waive the penalty
imposed
K Provisions made for compounding of an offence
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Chartered Accountants
³Sevasadan´, New Mondha,
Maganpura, Nanded ± 431602
E-mail : cavijaykalani@gmail.com
Mobile : 94232 13129, Phone : 02462 ± 222775