AmendmentsbyFinanceAct,2009

RatesofTax,SurchargeandEducationCess Exemptionlimitandratesoftaxes:

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TheexemptionlimitforIndividuals,HUF,AOPandBOIhasbeenincreasedw.e.f.A.Y.201011. ThislimitisnowincreasedforseniorcitizensfromRs.2,25,000toRs.2,40,000,forwomen(below 65years)fromRs.1,80,000toRs.1,90,000,andforothersfromRs.1,50,000toRs.1,60,000.The slabsforlevyoftaxhavealsobeenrecastasunder: Slab(Rs.in lacs) 1.50to3.00 3.00to5.00 Above5.00 10% 20% 30% A.Y.200910 Slab(Rs. inlacs) 1.60to3.00 3.00to5.00 Above5.00 10% 20% 30% A.Y.201011

RatesinA.Y.201011(AccountYearending3132010) Incomeslab(Rs.in Ratesforsenior Ratesforwomenbelow Ratesforothers lacs) citizens 65years Upto1.60 1.60to1.90 1.90to2.40 2.40to3.00 3.00to5.00 Above5.00 Nil Nil Nil 10% 20% 30% Nil Nil 10% 10% 20% 30% Nil 10% 10% 10% 20% 30%

Surchargeonincometax:

AmendmentsbyFinanceAct,2009

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InA.Y.200910,surchargeat10%oftheincometaxwaspayablebyanoncorporateaswellas corporatebodyiftheirtotalincomeexceededcertainlimits.InA.Y.201011,nosurchargeis leviableonnoncorporateassessees.Surchargewillonlybepayablebycompaniesiftheirtotal incomeexceedsspecifiedlimits.Thefollowingcomparativepositionwillexplaintheeffectofthis change: Assessee Individual, HUF, AOP, BOI If total income exceedsRs.10lacs. ArtificialJuridicalPerson CooperativeSocietyorLocalAuthority FirmIftotalincomeexceedsRs.1crore(Note: From:A.Y.201011FirmwillincludeLLP) Company having total income exceeding Rs.1 crore Domesticcompany ForeignCompany 10% 2.5% 10% 2.5% 10% Nil 10% Nil Nil Nil A.Y.200910 A.Y.201011 10% Nil

EducationCess:

AsinA.Y.200910,EducationCessof3%(including1%secondaryandhighereducationcess)on I.T.andsurcharge(whereapplicable)ispayablebyallassesseesinA.Y.201011. DividendDistributionTax AsinA.Y.200910,therateofDDTu/s.1150continuestobeat15%.Thisamountistobeincreasedby surchargeat10%oftaxandEducationCessat3%oftaxandsurcharge.Itmaybenotedthatw.e.f.14 2009,noDDTispayableontheamountofdividenddistributedtoNewPensionSchemeTrustasdefinedin S.10(44). DeductionofTaxatSource(TDS) 2

AmendmentsbyFinanceAct,2009

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NosurchargeandEducationCessonTDS: WhiledeductingTDSw.e.f.142009,thetaxdeductorhasnottoaddsurchargeandEducationCessto thetaxdeductedundervariousprovisionsoftheIncometaxAct.Similarly,whilecollectingtaxat sourceu/s.206fromcertainincome,nosurchargeoreducationcessistobecollected.Thereareonly twoexceptionsasunder: i) TDSfrompaymenttoa foreigncompany u/s.195orcollectionoftaxfromforeigncompany u/s.206C.Insuchcases,surchargeat2.5%oftaxandeducationcessat3%oftaxandsurcharge istobeaddedtotheamountoftax. ii) TDSfrompaymenttoaNonresidentu/s.195,collectionoftaxfromaNonResidentu/s.206C andsalarypaymenttoanemployeeu/s.192.InsuchcasesonlyEducationcessat3%oftaxisto beaddedtotheamountoftax.

TDSrates:

PartIIoftheFirstScheduletotheFinanceAct(No.2)Act,2009prescribesdifferentratesoftaxesfor TDSfromcertainpaymentsu/s.193,194,194A,194B,194BB,194Dand195oftheIncometaxAct.It maybenotedtheseratesarethesameasinA.Y.200910exceptforthefollowing: (i) Inthecaseofadomesticcompany,therateofTDSfromInterestIncomeandOtherIncomewhich was20%isnowreducedto10%w.e.f.142009. (ii) Inthecaseofotherresidents,therateofTDSfromotherincomewhichwas20%hasbeenreduced to10%w.e.f.14O9.

S.206AA:

ThisisanewSectionwhichwillcomeintoforcew.e.f.142010.Itisnowprovidedthatwherevertax istobedeductedatsourceunderChapterXVIIB(S.192toS.196D),thedeductorshouldobtainPAN 3

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ofthedeductee.Ifthededucteedoesnoprovidehis/itsPAN,thetaxdeductorwillhavetodeducttaxat sourceatthehigherofthefollowingrates: (i) (ii) (iii) RatespecifiedintherelevantSectioninChapterXVIIB. Rateorratesapplicabletothedeductee. 20%.

ItisalsoprovidedinthisSectionthatintheapplicationu/s.197forlowerdeductionoftaxandinthe declarationu/s.197A(Forms15Gand15H),thePANofthededucteeshouldbestated,otherwisethis application /declaration will be invalid. Further, in all correspondence, bills, vouchers and other documentswhichareexchangedbetweenthetaxdeductoranddeductee,thisPANshouldbemen tioned. If the PAN provided by the deductee is invalid for any reason, the tax deductor will be consideredashavingdeductedtaxatlowerrateifhehasdeductedtaxataratelowerthan20%. S.194A:TDSfromInterest

W.e.f.142009,thisSectionshallnotapplytointerestpaidbyascheduledbankinrelationtoZero CouponBondsissuedonorafter162005bysuchbank.

S.194C:

(i) ThisSectiondealswithTDSfrompaymentstocontractorsforwork.TheexistingS.194Chasbeen replacedbyanewS.194Cw.e.f.1102009.UndertheexistingS.194C,TDSattherate2%to bedeductedonpaymentforacontracttoacontractor.However,inthecaseofsubcontractor, theTDSrateis1%oftheamountpaidorpayable.Further,inthecaseofpaymentforanadver tisingcontract,TDSrateis1%. (ii) Inordertoreducethescopefordisputes,thenewS.194Cnowremovesthedistinctionbetweenthe contractorandsubcontractor.UniformratesforTDSarenowprovidedinthisnewSectionfor contractorsandsubcontractorsasunder: (a) 1%wherepaymentforacontractistoanindividualorHUF.

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(b) 2%wherepaymentforacontractistoanyotherentity(e.g.,Firm.LLP,AOP,Company, CooperativeSociety,etc.) (c) 'Nil'ratewherepaymentistoacontractorforplying,hiringorleasinggoodscarriage,as definedinExplanationtoS.44AE(7),ifthecontractorfurnisheshisPAN.IfPANisnot giventherateforTDSwillbe1%ifthecontractorisanindividual/HUFand2%inother casesupto3132010. (d) NewS.206AAnowprovidesthatw.e.f.142010,therateforTDSwillbe20%inall cases if the deductee does not provide his PAN. Hence, in the case of a transport contractor,therateofTDSwillbe20%ifthecontractordoesnotprovidehis/itsPAN. (iii) ItisalsoprovidedintheSectionthattaxistobedeductedoninvoicevalue,excludingvalueofthe materialusedbythecontractorifsuchvalueisseparatelystatedintheinvoice.Otherwise,TDS willbeontheentireinvoicevalue. (iv) ThisSectionappliestoacontractforany'work'.Thedefinitionofthistermisnowwidenedto includeManufacturingorsupplyingaproductaccordingtotherequirementorspecificationof acustomerbyusingmaterialpurchasedbysuchcustomer,butdoesnotincludesuchcontract wherethematerialusedispurchasedfromapersonotherthansuchcustomer.

S.194I: ThisSectiondealswithTDSfrompaymentofrent.TheratesforTDSarereducedw.e.f.1102009as under.

Typeofpayment 5

Existingrateup Revisedw.e.f.

AmendmentsbyFinanceAct,2009
to30.0.09 (i)Rentforhireofmachinery,plantorequipment (ii)Rentforland,building(includingfactorybuilding)or furniture/fitting (a)IfpayeeisIndividual/HUF (b)Ifpayeeisanyotherperson 15% 20% 10%

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1102009 2%

10% 10%

IfthepayeedoesnotfurnishPAN,theratewillbe20%inallcasesw.e.f.142010. S.197A:

ThisSectionprovidesthatTDSprovisionsdonotapplytoIndividualswhofiledeclarations(Form15G/ 15H)withthetaxdeductorandtocertainspecifiedpersons.ByamendmentofthisSectionw.e.f.14 2009,itisnowprovidedthatthetaxisnottobedeductedfrompaymenttoNewPensionSystemTrust asdefinedinS.10(44).

S.200:

AtpresentthetaxdeductorhastofilequarterlyreturnsofTDS.Itisnowprovidedthatthetaxdeductor shallpreparesuchstatementsforsuchperiodasmaybeprescribedbytheCBDT.Thusnewprocedure willbeeffectivefrom1102009.SimilaramendmentsaremadeinS.201(1A),203A,206A,206C,etc.

S.200A:

ThisisanewSectionwhichcomesintoeffectfrom142010.TheSectionprovidesthatTDSreturns filedu/s.200shallbeprocessedandTDSamountworkedoutbytheassesseeunderChapterXVIIB

AmendmentsbyFinanceAct,2009

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shallbecomputedaftermakingadjustmentsofarithmeticalerrorsorapparentincorrectclaimsmadeby thetaxdeductor.ThemethodofprocessingofTDSreturnsisnowprovidedinthisnewSection.

S.201:

This Sectiondeals withlevy of penaltyand interestfor defaultsinnot deducting TDSor having deductedthetaxthereisdefaultinnotdepositingthesamewiththeGovernment.Thereisnotimelimit forpassingorderforlevyofpenalty,orinterest.ThisSectionisamendedw.e.f.142010toprovide thatnoorderu/s.201(1),deemingthetaxdeductorwhoisResidentasanassesseeindefault,shallbe madeaftertheexpiryof:

(i)2yearsfromtheendofthefinancialyearinwhichtheTDSreturnisfiled. (ii)4yearsfromtheendofthefinancialyearinwhichthepaymentismadeorcreditisgiven,inany othercase. Exemptionsanddeductions: S.10(10C):

Under this Section it is provided that lumpsum amount receivedfor VRS or on retirement ofan employeeisnotliabletotaxuptothespecifiedamount.TheSectionisamendedeffectivefromA.Y. 201011toprovidethatifthereliefu/s.89isallowed,noreliefinrateoftaxwillbeallowedtosuch employeeunderthisSection.CorrespondingamendmentismadeinS.89.

S.10(23C):

UnderthisSectionapplicationforexemptionorrenewalofexemptionistobemadetotheprescribed authoritybyauniversity,educationalinstitution,hospital,etc.beforetheendoftheaccountingyear.It 7

AmendmentsbyFinanceAct,2009

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isnowprovidedw.e.f.142009thatsuchapplicationcannowbemadebefore30thSeptemberofthe followingyear.

S.10(44):

Thisisanewclauseinsertedw.e.f.142009toprovidethattheincomeoftheNewPensionSystem Trustestablishedon2722008shallbeexemptfromA.Y.200910onwards.

S.1OAandS.1OB:

BoththeseSectionsareamendedw.e.f.142009anditisnowprovidedthatsuchdeductionswillbe availableinA.Y.201112also.

S.10AA:

ThisSectiongrantsexemptiontoincomeofaunitestablishedintheSEZ.Uptonow,theformulafor workingoutproportionoftheprofitexemptunderthisSectionwasasunder: Profits of the business of the unit x Export turnover of the unit Totalturnoverofthebusinesscarriedonbytheassessee ItisnowclarifiedbyamendmentofthisSection,effectivefromA.Y.201011thatthiswillbeworked outwithreferencetoTotalturnoveroftheSEZunitonly.Thus,thedenominatorintheaboveexample willbe'TotalturnoverofSEZunit'. Recently,ithasbeenproposedbyFinanceMinisterinFinanceBill,2010thatthisamendmentshallbe appliedretrospectivelyfromassessmentyearbeginningonthe1stdayofApril,2006 Donationsto'ElectoralTrust:

AmendmentsbyFinanceAct,2009

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(i) NewS.13BhasbeeninsertedeffectivefromA.Y.201011.Itmaybenotedthatu/s.13A,the incomeofrecognisedpoliticalpartyisexempt.S.13Bnowprovidesthatvoluntarycontributions receivedby'ElectoralTrust'shallnotbeincludedinthetotalincomeofthetrustifthefollowing conditionsarecompliedwith: a) Suchtrustdistributes95%oftheaggregatedonationsreceivedbyitduringtheaccounting year,alongwithsurplusbroughtforwardfromearlieryears,torecognisedpoliticalparties. Thisdistributionistobemadeinthesameaccountingyear. b) SuchtrustfunctionsinaccordancewiththerulesmadebytheCentralGovernment.

(ii) Theexpression'ElectoralTrust'isdefinedinS.2(22AAA)tomeanatrustapprovedbytheCBDT inaccordancewiththeschememadebytheCentralGovernment. (iii) S.80GGBandS.80GGCprovidethatanydonationbyanassessee(includingacompany)toa recognisedpoliticalpartyisallowableasdeductionincomputingtotalincome.ThesetwoSections arealsoamendedeffectivefromA.Y.201011toprovidethatsuchdeductionwillbeallowedin respectofdonationstosuchan'ElectoralTrust'.

Charitabletrusts: S.2(15):ThisSectiondefinestheexpressionCharitablePurposeas(i)reliefofthepoor,(ii)education, (iii)medicalreliefand(iv)advancementofanyotherobjectsofgeneralpublicutility.Thelastobject No(iv)willnotbeconsideredascharitableifitinvolvesthecarryingonofanyactivityinthenatureof trade, commerce or business, etc. This Section is nowamended, effective from A.Y. 200910, to providethatthetrustengagedinthe preservationofenvironment(includingwatersheds,forestsand wildlife)andpreservationofmonu mentsorplacesorobjectsofartisticorhistoricinterestwillnotfall inobjectNo.(iv).Therefore,ifsuchtrustiscarryingonactivityoftrade,commerce,businessetc.it willstillbeconsideredascharitable,trustu/s.2(15). FinanceMinisterhasproposedtointroduceanotherprovisow.e.f1.4.09asfollowsundertheFinance Bill,2010: Providedfurtherthatthefirstprovisoshallnotapplyiftheaggregatevalueofthereceiptsfromthe activitiesreferredtothereinistenlakhrupeesorlessinthepreviousyear;;

AmendmentsbyFinanceAct,2009

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Thatmeansthatifprofitfromtheactivitiesofcarryingonanyactivityinthenatureoftrade,commerce orbusinessdoesnotexceedRs.10lacs,thenthesamewillbeeligiblefordeductionasbeingfor charitablepurpose. S.115BBC:

This Section was inserted by the Finance Act, 2006, w.e.f. 142007 to provide that anonymous donations received by a public trust claiming exemption u/s 10(23C)University, educational institutions,hospital,etc.andu/s11PublicCharitableTrustswillbetaxableattherateof30%of suchdonations.TheSectionisnowamendedeffectivefromA.Y.201011toprovideasunder: (i)Taxat30%willbepayableontheaggregateofanonymousdonationsreceivedinexcessofthe higherofthefollowing: (a)5%oftotaldonationsreceivedbythetrustorinstitution,or (b)Rs.1,00,000 (ii)Theamountonwhichtheabovetaxispayablewillbeexcludedfromthetotalincomeofthetrust. S.80G:

This Section deals with approval of charitable trusts to enable the donors to claim deduction for donationsmadebythem.Thefollowingamendmentsaremade:

(i) Sincemanytrustsmayhavelosttheirexemptionu/s.11byvirtueofamendmenttothedefinitionof 'CharitablePurpose'u/s.2(15)effectivefromA.Y.200910,inorderthatdonorsdonotlosethe benefitofdeduction,inthefirstyearoflossofexemption,suchtrustsaswereeligiblefor benefitu/s.80GforA.Y.200708willbedeemedtohavecontinuedtobeeligibleu/s.80Gfor theF.Y.200809. (ii) W.e.f.1102009,therequirementofperiodicrenewalofapprovalu/s.80Ghasbeendoneaway with.Alltrustswhoseapprovalu/s.80Gexpiresonorafter1102009,willnothavetoapply forsuchapprovalorrenewalagain.Theirapprovalwillcontinuetobevalidperpetuityunless

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withdrawn.Thosetrustswhoseapprovalu/s.80Gexpirepriorto1102009,willhavetoapply onceforrenewaltheirapproval. Businessincome Definitionoftheword'Manufacture':

S. 2(29BA) has been inserted effective from A.Y. 200910 to define the term Manufacture. Accordingly,theword'Manufacture'meansachangeinanonlivingphysicalobjectorarticleorthing (i)resultingintransformationoftheobjectorarticleorthingintoanewanddistinctobjectorarticleor thinghavingadifferentname,characteranduse,or(ii)bringingintoexistenceofanewanddistinct objectorarticleorthingwithadifferentchemicalcompositionorintegralstructure.

S.35:

Atpresentu/s.35(2AB)weighteddeductionof150%oftheexpenditureoninhousescientificresearch incurredbyacompanyengagedinthebusinessofbiotechnologyorinmanufactureorproductionof drugs,pharmaceuticals,electronicequipments,computers,telecommunicationequipments,chemicals oranyarticleorthingnotifiedbytheCBDTisallowed.TheSectionisnowamendedeffectivefrom A.Y.201011toprovidethattheweighteddeductionwillbeavailabletoanycompanyengagedinany businessofmanufactureorproductionofanyarticleorthing,otherthanthearticleorthingspecifiedin theEleventhSchedule.

NewS.35AD:

ThisSectioncomesintoeffectfromA.Y.201011andprovidesfordeductioninrespectofexpenditure onspecifiedbusiness.

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ThedeductionunderthisSectionisavailabletoanassesseecarryingonanyspecifiedbusinessviz,one ormoreofthefollowingbusinesses: (a) Settingupandoperatingacoldchainfacility, (b) Settingupandoperatingawarehousingfacilityforstorageofagriculturalproduce, (c) Layingandoperatingacrosscountrynaturalgasorcrudeorpetroleumoilpipelinenetworkfor distribution,includingstoragefacilitiesbeing,anintegralpartofsuchnetwork.

Someoftheimportantconditionsare: (a) Thebusinessshouldbenewandnotsetup,bysplittingup,orreconstructionofexistingbusiness. (b) Thebusiness,statedinitems(a)and(b)of(ii)above,shouldhavebeenstartedonorafter14 2009. (c) AsregardsbusinessoflayingandoperatingoilpipelinesasstatedinPara(ii)(c)above: Itshouldhavestartedonorafter142007, Itshouldhavebeenstartedbyacompanyorbyaconsortiumofcompaniesorbya publicsectorundertaking, Itshouldhavebeenapprovedbytheprescribedauthority, ItshouldcomplywiththeconditionsprescribedbytheCBDT.

(d) Theassesseeswillhavetosubmitthereturnofincomecertificatefromacharteredaccountantin theprescribedform.

ThedeductionallowableunderthisSectionasunder:

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(a) Wholeoftheexpenditureof capitalnature incurred, whollyandexclusively,forthepurposesof abovespecifiedbusiness,excludingexpenditureincurredonacquisitionofanyland,goodwillor financialinstrument. (b) If any expenditure is incurred during any year prior to commencement of operations of the specified business, if the expenditure is capitalized in the books on commencement of the operations. (c) NodeductionforsuchexpenseswillbeallowedunderanyotherSectionsoftheIncometaxAct. (d) NodeductionfortheincomeofthisbusinesswillbeallowedunderChapterVIA.Consequential amendmentismadeinS.80IA.

S.28,S.43,andS.50BarealsoamendedandnewS.73AisinsertedeffectivefromA.Y.201011.By theseamendmentsitisprovidedasunder: (a)Anysumreceivedorreceivableonaccountofcapitalasset,inrespectofwhichtheabove100% deductionisallowed,whensuchassetisdemolished,destroyed,discardedortransferredshallbe treatedasincomeoftheassesseeandchargeabletoincometaxasbusinessincome. (b)Anylosscomputedinrespectofthespecifiedbusinessshallbesetoffonlyagainstprofitsandgains ofanyotherspecifiedbusiness.Unabsorbedlossofanyyearshallbecarriedforwardandsetoff againstprofitsandgainsofanyotherspecifiedbusinessinsubsequentyear.Notimelimitisfixed forcarryforwardofsuchloss.

S.36(1)(viii):

UnderthisSectiondeductioninrespectofanyspecifiedreserveupto20%oftheprofitsiscreatedand maintainedbyspecifiedentitiescarryingoneligiblebusinessisallowed.Atpresent,eligiblebusiness includes,amongstothers,provisionoflongtermfinanceforConstructionorPurchaseofhousesin India for residential purposes. This is now replaced by provision of longterm finance for DevelopmentofhousinginIndia.ThisamendmentiseffectivefromA.Y.201011.Thisamendment ismadewithaviewtogivethebenefitofthisSectiontotheNationalHousingBank.

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AmendmentsbyFinanceAct,2009
S.40(b):

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ThisSectionprovidesforlimitofdeductionfromincomefrombusinessorprofessionforremuneration paidtoworkingpartnersofafirm(includingLLP).ThislimitisrevisedupwardseffectivefromA.Y. 201011(accountingyear200910)asunder: Limitforremunerationtoallworking partners Rs.1,50,000orattherateof90%ofbook profitwhicheverismore Attherateof60%ofbookprofit

Bookprofitofbusinessorprofession (i)OnthefirstRs.3lacsorincaseof loss (ii)Onthebalanceofbookprofit

S.40A(3A):

S.40A(3)andS.40A(3A)providefordisallowanceofexpenditureifthepaymentforRs.20,000is madebyanymodeotherthananA/cpayeecheque.ByamendmentofS.40A(3A)w.e.f.1102009,it isnowprovidedthatthislimitinS.40A(3)and(3A)shallbeincreasedtoRs.35,000inthecaseof paymentmadeforplying,hiringorleasinggoodscarriages.Therefore,goodstransportoperatorscan nowbepaiduptoRs.35,000incash.

S.43(6):

ThisSectionprovidesfordeterminationofWDVofblockofassets.Anewexplanation(7)isnow addedeffectivefromA.Y.201011toprovidethatwheretheincomeofanassesseeisderivedinpart from agriculture and part from the taxable business (e.g., tea company, sugar company etc.) for computingtheWDVoftheassetsacquiredbeforetheaccountingyear,thetotalamountofdepreciation shallbecomputedasiftheentireincomeistaxableandthesaiddepreciationshallbedeductedfromthe WDVofblockofassetsasifithasbeenactuallyallowed.Thisisinspiteofthefactthatonlya
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proportionate part of the entire income is taxable. The balance of the income is considered as agriculturalincome.

Presumptivetaxationofbusinessprofits:

S.44AA,S.44AB,S.44AFandS.44AEhavebeenamendedandS.44ADissubstitutedbynew Section. These amendments are effective from A.Y. 201112. Scope of presumptive taxation of businessprofitsisextendedtoallbusinesseswhereturnoverorgrossreceiptsdonotexceedRs.40lacs.

Thesalientfeaturesoftheseamendmentsareasunder: (i) ThepresumptivetaxationschemeappliestoaneligibleresidentassesseebeinganIndividual,HUF oraFirmotherthanlimitedliabilitypartnership. (ii) The presumptive scheme shall not apply to eligible assessees claiming deduction u/s.10A (undertakinginFreeTradeZone),10AA(UnitinSpecialEconomicZone),10B(100% ExportOriented Undertaking) and 10BA (Export of handmade articles or things) and deductionsinrespectofincomecoveredunderPartCofChapterVIAsuchasS.80IA,S.80 IB,etc. (iii) Presumptiveincomeshallbe8%ofthetotalturnoverorgrossreceiptsortheincomeclaimedto havebeenearnedfromsuchbusiness,whicheverishigher. (iv) Eligible assessee will not be required to pay advance tax on presumptive income from such business,and,thereforetaxispayableonlyonselfassessment. (v) Eligiblepartnershipfirmcanclaimdeductionofsalaryandinteresttopartnerswithintheceiling prescribedu/s.40(b)oftheAct. (vi) Eligibleassesseeisnotrequiredtomaintainbooksofaccountasrequiredu/s.44AA. (vii) Eligibleassesseeisrequiredtomaintainbooksofaccountandalsogetthemauditedifhe declaresincomebelow8%ofgrossturnover/receiptsandifhistotalincomeexceedsthebasic exemptionlimit.

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AmendmentsbyFinanceAct,2009
S.44AE:

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ThisSectionprovidesforpresumptiveincomefortruckowners.TheSectionappliestoanassesseewho ownsnotmorethantengoodscarriagesandwhoisengagedinthebusinessofplying,hiringorleasing ofsuchgoodscarriages.Atpresent,Rs.3,500p.m.(foreachheavyvehicle)andRs.3,150p.m.(foreach othervehicle)orsuchhigheramountasshownbytheassesseeisconsideredashisbusinessincome.By amendmentofthisSection,effectivefromA.Y.201112,theabovelimitsareincreasedtoRs.5,000 p.m.(foreachheavyvehicle)andRs.4,500p.m.(foreachothervehicle)orsuchhigheramountas shownbytheassessee.

Transferpricing S.92C:

ThisSectiondealswithdeterminationofarmslengthprice(ALP)incasesofinternationaltransactions withassociatedenterprises(AE).TheprovisotoS.92C(2)hasbeenamended.Theexistingproviso providesthatwherethemostappropriatemethodresultsinmorethanoneprice,thearithmeticalmean ofsuchpriceor,attheoptionoftheassessee,thepricewhichdiffersfromthearithmeticalmeanbyan amountnotexceeding5%ofsuchmeanmaybetakentobethearmslengthpriceinrelationtothe internationaltransaction.

Thereweredifferentinterpretationsofthisproviso.Therefore,theprovisoismodifiedw.e.f.1102009. Thisamendmentcanbeexplainedbythefollowingillustration:

Assessees interpretationofold proviso (i)ArithmeticalmeanofALPs

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Provisioninthe amendedproviso Rs.1000

Rs.1000

AmendmentsbyFinanceAct,2009
(ii) If the assessee pays Rs.1050 (within5%) (iii)IftheassesseehaspaidRs.1200 Adjustmentwillbe12001050 Adjustmentasperamendment(1200 1000)

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Noadjustment 150

Noadjustment 200

S.92CB:SafeHarbourRules

ThisisanewSectioninsertedw.e.f.142009.Transferpricingisaverysubjectiveexercise.Therecan bemanybonafidereasonsforthedifferencebetweenALPandactualprice.Toreducetheadjustments leadingtoavoidabledisputes,itisnowprovidedinthisSectionthatthecomputationofALPwillbe subjecttosafeharbourrules.TheseruleswillnowbemadebytheCBDT.SafeHarbourRulesmean thecircumstancesunderwhichthepricesatwhichassociatedenterprisescanenterintointernational transactionswhichwillbeconsideredasacceptable.

NewS.144C:DisputeResolutionPanel

ThisisanewSectionwhichprovidesforreferencetoDisputeResolutionPanel(DRP).TheSection comesintoforceon1102009.Atpresent,taxdisputesrelatingtointernationaltransactionstakealong timetoresolve.Toavoidsuchtimeconsumingprocess,anattemptismadetoresolvesuchdisputes through the dispute resolution mechanism provided in this Section. The salient features of this provisionareasunder: DraftorderofAssessment:Sec.144C(1) NotwithstandinganythingtothecontrarycontainedinthisAct,theAssessingOfficershall,inthefirst instance,forwardadraftoftheproposedorderofassessment(hereafterinthissectionreferredtoasthe 17

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draftorder)totheeligibleassesseeifheproposestomake,onorafterthe1stdayofOctober,2009,any variationintheincomeorlossreturnedwhichisprejudicialtotheinterestofsuchassessee. AlternativesforAssessee:Sec.144C(2) Onreceiptofthedraftorder,theeligibleassesseeshall,withinthirtydaysofthereceiptbyhimofthe draftorder, (a) (b) filehisacceptanceofthevariationstotheAssessingOfficer;or filehisobjections,ifany,tosuchvariationwith, (i) (ii) theDisputeResolutionPanel;and theAssessingOfficer.

CompletionofAssessmentbyAO:Sec.144C(3) TheAssessingOfficershallcompletetheassessmentonthebasisofthedraftorder,if (a) (b) theassesseeintimatestotheAssessingOfficertheacceptanceofthevariation;or noobjectionsarereceivedwithintheperiodspecifiedinsubsection(2).

TimeLimit:Sec.144C(4) Notwithstandinganythingcontainedin section153 theAssessingOfficershall pass theassessment orderundersubsection(3)withinonemonthfromtheendofthemonthinwhich, (a) (b) theacceptanceisreceived;or theperiodoffilingofobjectionsundersubsection(2)expires.

IssueofDirectionsbyDRP Inacasewhereanyobjectionisreceivedundersubsection(2),theDisputeResolutionPanelshallissue suchdirections,asitthinksfit,fortheguidanceoftheAssessingOfficertoenablehimtocompletethe assessment. TheDisputeResolutionPanelshallissuethedirectionsafterconsideringthefollowing,namely: (a) (b) (c)

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draftorder; objectionsfiledbytheassessee; evidencefurnishedbytheassessee;

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(d) (e) (f) (g)

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report,ifany,oftheAssessingOfficer,ValuationOfficerorTransferPricingOfficeror anyotherauthority; recordsrelatingtothedraftorder; evidencecollectedby,orcausedtobecollectedby,it;and resultofanyenquirymadeby,orcausedtobemadeby,it.

TheDisputeResolutionPanelmay,beforeissuinganydirections (a) (b) makesuchfurtherenquiry,asitthinksfit;or causeanyfurtherenquirytobemadebyanyincometaxauthorityandreporttheresultof thesametoit. EverydirectionissuedbytheDisputeResolutionPanelshallbebindingontheAssessingOfficer. Nosuchdirectionshallbeissuedunlessanopportunityofbeingheardisgiventotheassesseeandthe AssessingOfficeronsuchdirectionswhichareprejudicialtotheinterestoftheassesseeortheinterest oftherevenue,respectively. Nosuchdirectionshallbeissuedafterninemonthsfromtheendofthemonthinwhichthedraftorder isforwardedtotheeligibleassessee. Uponreceiptofthedirectionsissued,theAssessingOfficershall,inconformitywiththedirections, complete,notwithstandinganythingtothecontrarycontainedin section153,theassessmentwithout providinganyfurtheropportunityofbeingheardtotheassessee,withinonemonthfromtheendofthe monthinwhichsuchdirectionisreceived. ActionbyDRPSec.144C(8) TheDisputeResolutionPanelmay confirm,reduceor enhance thevariationsproposedinthedraft orderso,however,thatitshallnotsetasideanyproposedvariationorissueanydirectionforfurther enquiryandpassingoftheassessmentorder. DecisionbyMajoritySec.144C(9) 19

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IfthemembersoftheDisputeResolutionPaneldifferinopiniononanypoint,thepointshallbe decidedaccordingtotheopinionofthemajorityofthemembers. PowerofBoardtomakerules TheBoardmaymakerulesforthepurposesoftheefficientfunctioningoftheDisputeResolutionPanel andexpeditiousdisposaloftheobjectionsfiledundersubsection(2)bytheeligibleassessee. Forthepurposesofthissection, (a) DisputeResolutionPanelmeansacollegiumcomprisingofthreeCommissionersofIncometax constitutedbytheBoardforthispurpose; (b) eligibleassesseemeans, (i) any person in whose case the variation referred to in subsection (1) arises as a consequenceoftheorderoftheTransferPricingOfficerpassedundersubsection(3)of section92CA;and (ii) anyforeigncompany.

ClarificationregardingfilingofObjectionsbeforeDisputeResolutionPanel(DRP) AqueryhasbeenraisedastowhetheritiscompulsoryforanassesseetofileanobjectionbeforetheDRP orwhetherhecanchoosetofileanappealthroughthenormalappellatechannelofCIT(Appeals). Theprovisionsofsubsection(2)tosubsection(5)ofsection144Carequiteclearthatachoicehasbeen giventotheassesseeeithertogobeforetheDRPortopreferthenormalappellatechannel.Itisagain clarifiedthatitisthechoiceoftheassesseewhethertofileanobjectionbeforetheDisputeResolutionpanel against the draft assessment order or not to exercise this option and file an appeal later before CIT (Appeals)againsttheassessmentorderpassedbytheAssessingOfficer. IncomeTax(DisputeResolutionPanel)Rules,2009 NotificationNo.84/2009dated20112009 Inexerciseofthepowersconferredbysubsection(14)ofsection144CoftheIncometaxAct,1961(43of 1961),theCentralBoardofDirectTaxesmakesthefollowingrulestoregulatetheprocedureoftheDispute ResolutionPanel,namely: 1.Shorttitleandcommencement.
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(1)TheserulesmaybecalledtheIncometax(DisputeResolutionPanel)Rules,2009. (2)TheyshallcomeintoforceonthedateoftheirpublicationintheOfficialGazette 2.Definitions. Intheserules,unlessthecontextotherwiserequires, (i)ActmeanstheIncometaxAct,1961(43of1961); (ii)panelmeanstheDisputeResolutionPanel; (iii)Formmeansaformappendedtotheserules; (iv)Secretariat,inrelationtopanel,meansthedesignatedofficeforfilingofobjectionsbytheeligible assesseeundersection144C; (v)sectionmeansasectionoftheAct. (vi)wordsandexpressionsusedhereinbutnotdefinedanddefinedintheActshallhavethemeanings respectivelyassignedtothemintheAct. 3.ConstitutionofthePanel. (1)TheBoardmay,onthebasisofworkloadandforefficientfunctioning,constitutepanel. (2)TheBoardshallassignbynamethreeCommissionersofIncometaxtoeachpanelasMemberswho,in additiontotheirregulardutiesasCommissioners,shallalsocarryonthefunctionsofthepanel. (3)WhereanyMemberofthepanelistransferred,theBoardshallassign,byname,anotherCommissioner ofIncometaxintheplaceoftheoutgoingMemberofthepaneltocarryoutthefunctionsofthepanel. (4)Eachpanelshallhaveasecretariatforreceivingobjections,correspondenceandotherdocumentstobe filedbytheeligibleassesseeandshallalsoberesponsibleforissuingnotices,correspondenceanddirection ifany,onbehalfofthepanel. (5)TheChiefCommissionerofIncometax(CCA)shall,forthepurposesofsubrule(4),constitutethe secretariatforthepanel. 4.Procedureforfilingobjections. (1)Theobjectionsifany,oftheeligibleassesseetothedraftordermaybefiledinpersonorthroughhis agentwithinthespecifiedperiodinFormNo.35A. (2)Theobjectionsreferredtoinsubrule(1)shallbeinEnglishandpresentedtotheSecretariatofthe panel. (3)Theobjectionsshallbefiledinpaperbookforminquadruplicatedulyaccompaniedby 21

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(a)fourcopiesofthedraftorderdulyauthenticatedbytheeligibleassesseeorhisauthorisedrepresentative: Providedthatinthecaseofdraftassessmentundersubsection(3)ofsection143readwithsection144A, theobjectionsshallalsobeaccompaniedbyfourcopiesofthedirectionsissuedbytheJointCommissioner orAdditionalCommissionerundersection144Aandinthecaseofdraftassessmentundersubsection(3) ofsection143readwithsection147,theobjectionsshallalsobeaccompaniedbyfourcopiesoftheoriginal assessmentorder,ifany; Provided further that the Panel may, in its discretion, either accept the objections which are not accompaniedbyalloranyofthedocumentsreferredtoaboveorrejectit. (b)theevidence,ifany,theeligibleassesseeintendstorelyuponincludinganydocumentorstatementor papersubmittedtotheassessingofficer: Provided thatwheretheeligibleassesseeintendstorelyuponany additionalevidence otherthanthose submittedtotheassessingofficer,suchadditionalevidenceshallnotformpartofthepaperbookbutmaybe filedalongwithaseparateapplicationstatingthereasonsforfilingsuchadditionalevidence. 5.Noticeforhearing Thepanelshallissuenoticetotheeligibleassesseeandtheconcernedassessingofficerspecifyingthedate andplaceofhearingoftheobjection. 6.Callforrecords. Thepanelshallalsocallforrecordsrelatingthedraftorderandpermittheassessingofficertofilereport,if any,totheobjectionsfiledbyeligibleassessee. 7.Hearingofobjections. (1)Forthepurposeofhearingofobjections,thepanelmayholditssittingsatitsheadquartersoratsuch otherplaceorplacesasitmaydeemproper. (2)Onthedatefixedforhearing,ifanauthorisedrepresentativeappearsonbehalfofeligibleassessee,he shallfiletheauthorisationletterbeforethecommencementofthehearing. (3) The panel may consider the application for filing additional affidavit and may either allow such applicationorrejectit. (4)Theeligibleassesseemay,withthepermissionofthepanel,urgeanyadditionalgroundwhichhasnot beensetforthintheobjections. 8.Noabatementofproceedings.
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Afterfilingobjections,iftheeligibleassessee,beinganindividual,diesorisadjudicatedinsolvent,orbeing acompany,iswoundup,theproceedingsbeforethepanelshallnotabateandshallbecontinuedbythe executor,administratororotherlegalrepresentativeofsuchindividualassesseeorbytheassignee,receiver orliquidatorofsuchassesseebeingacompany,asthecasemaybe. 9.Powertocallfororpermitadditionalevidence Wherethepaneldeemsitnecessary,itmaycalluponor,asthecasemaybe,permittheeligibleassesseeto produceanydocumentorexamineanywitnessorfileanyaffidavittoenableittoissueproperdirections: Provided that the panel shall, while so permitting the eligible assessee record its reasons for such permission. 10.Issueofdirections. (1)Onthedatefixedforhearingoronanyotherdatetowhichthehearingmaybeadjourned,iftheeligible assesseeorhisauthorizedrepresentativedonotappear,orwhentheyappear,uponhearingtheobjections, thepanelmay,withinthespecifiedtime,issuesuchdirectionsasitdeemsproper. (2) While hearing the objections, the panel shall not be confined to the grounds set forth in the objections but shall have power to consider any matter or grounds arisingoutoftheproceedings. (3)Onconclusionofhearing,thepanelshallissuedirectionswithinthespecifiedperiod. 11.Directionstobecommunicatedtoparties. Thepanelshall,afterthedirectionsareissued,communicatethesametotheeligibleassesseeandtothe assessingofficer. 12.PassingofAssessmentOrder. Upon receipt of directions from the panel, the Assessing Officer shall pass the Assessment Order in accordancewiththeprocedureprescribedinsubsection(13)ofsection144C. 13.Rectificationofmistakeorerror. Aftertheissueofdirectionsunderrule10,ifnaymistakeorerrorisapparentinsuchdirection,thepanel may,suomotu,oronanapplicationfromtheeligibleassesseeortheassessingofficer,rectifysuchmistake orerror,andalsodirecttheassessingofficertomodifytheassessmentorderaccordingly. 23

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AnyappealagainsttheAssessmentOrderpassedinpursuanceofthedirectionsofthepanelshallbefiled beforetheAppellateTribunalinFormNo.36B. Capitalgains S.50Cdealingwithprocedurefordeterminationoffullvalueofconsiderationincasesoftransferof immovablepropertieshasbeenamendedw.e.f.1102009.Atpresent,forthepurposeofcomputingcapital gainsontransferoflandorbuildingorboth,theamountadoptedorassessedbythestampdutyauthorityis consideredasfullvalueofconsideration.Ifsuchtransferisnotregisteredandnostampdutyauthorityhas adoptedorassessedanyvaluationforthetransfer,theprovisionsofS.50Cwerenotapplicableasheldin some judicial pronouncements. By this amendment, it is provided that if an immovable property is transferredwithoutregistration,theamountassessableasperstampdutyvaluationwillbeconsideredasthe full value of the consideration. The term Assessable is defined to mean the price which the stamp valuationauthoritywouldhaveadoptedorassessed,ifitwerereferredtosuchauthorityforpaymentof stampduty.Example:ContributionofLandascapitalcontributionintoFirm. Incomefromothersources: S.56(2)(vii):

Atpresent,onlythesumofmoneyreceivedbyanindividualorHUF,ifaggregateamountexceeds Rs.50,000 from nonrelatives is taxable as income from other sources u/s.56(2)(vi) with certain exceptions.ThisprovisionisnowreplacedbyS.56(2)(vii)w.e.f.1102009tocovercasesofgifts receivedbyanindividualorHUFfromnonrelativesincashorkind.

Inbrief,thepositionafter1102009willbeasunder:

(i) The following properties received by an assessee, without consideration, from a person (non relative)willbeconsideredasincomefromothersources: (a)Asumofmoneyreceivedfromanonrelative,iftheaggregateamountexceedsRs.50,000.
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(b) Anyimmovableproperty(landorbuildingorboth)received,withoutconsideration,ifthe stampdutyvalueofthepropertyexceedsRs.50,000.Iftheassesseehaspaidconsiderationfor thesame,butthedifferencebetweenthestampdutyvaluationandactualconsiderationpaid,is morethanRs.50,000,theentiredifferencewillbeliabletotaxunderthisSection. (c) Any movable property viz. (i) Shares and securities, (ii) Jewellery, (iii) Archaeological collections, (iv) Drawings, paintings, sculptures or any work of art, received, without consideration,ifthefairvalueofthepropertyexceedsRs.50,000.Iftheassesseehaspaid consideration for the same, but the difference between the fair value and the actual considerationpaidismorethanRs.50,000,suchdifferencewillbeconsideredasincomeunder thisSection. (ii)Forthispurpose,stampdutyvaluationoftheimmovablepropertywillbeconsideredasprovidedin S.50C.Forthedeterminationofthefairvalueofmovableproperty,theCBDTwillprescriberules. (iii)S.49(4)nowprovidesthatwhentheassesseeischargedtotaxu/s.56(2)(vii)onthedifference between the stamp duty valuation/fair value of a property and the actual consideration, this differencewillbeaddedtothecostofacquisitionofthatpropertyforcomputingcapitalgains u/s.48.

(iv)ItmaybenotedthattheSectiondoesnotapplytogiftsreceived,asstatedabove,fromrelativesand giftsreceivedontheoccasionofmarriage,underawill,giftsincontemplationofdeath,fromlocal authorityorfrompubliccharitabletrusts.Thetermrelativesisdefined,asinS.56(2)(vi).Inother words,theseexceptionsarethesameasprovidedinS.56(2)(vi).

Howeverrecently,FinanceMinisterhasproposedtoamendthisprovisionwitheffectfromthe datewhenitcameintooperation.Ithasbeenproposedthatw.e.f.1.10.09,theprovisionofsub clause(b)ofclause(vii)shallbeapplicableonlyifanyimmovablepropertyhasbeenreceived without consideration, stamp duty value of which exceeds Rs. 50,000. Besides, it has been proposedthatthedefinitionofpropertyistoberestrictedtoCapitalAssetonly.Thereforeitshall notbeapplicabletostockintrade.

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ByamendmentofS.145A,effectivefromA.Y.201011,itisnowprovidedthatinterestreceivedbyan assesseeoncompensationoronenhancementofcompensationshallbe deemedtobeincomeofthe yearinwhichitisreceived.AmendmentinS.56(2)(vii)statesthatthisinterestistaxableunderthe headIncomefromOtherSourcesw.e.f.A.Y.201011.

ByamendmentofS.57,w.e.f.A.Y.201011,itisnowprovidedthatdeductionof50%ofsuchinterest willbeallowed.Therefore,effectively,only50%ofsuchinterestwillbetaxedasincome. TaxationofLimitedLiabilityPartnerships TheLimitedLiabilityPartnershipAct,2008(LLPAct)waspassedbytheParliamentinDecember,2008.In theIncometaxAct,S.2(23)andS.140havebeenamendedw.e.f.A.Y.201011.NewS.167Cisalso addedeffectivefromA.Y.201011.TheeffectoftheseamendmentsisthattheLLPwillbetaxedinthe samemannerasapartnershipfirm. InthedefinitionofthetermFirmandPartnershipinS.2(23)oftheIncometaxAct,itisstatedthatthe termFirmorPartnershipwillincludeanyLLPw.e.f.142009.Further,thedefinitionofaPartnerwill includeapartnerofLLP.Therefore,alltheprovisionsfortaxationofFirmanditspartnerswillapplyto LLPanditspartners.TaxwillbepayablebytheLLPat30%plusEducationCess.Nosurchargewillbe payablebytheLLPfromA.Y.201011. Salaryincome S.17(2)(vi)&(vii):

WiththeabolitionofFringeBenefitTax(FBT),fromA.Y.201011(A/c.year142009to3132010) certainperquisites,onwhichFBTwaspayablebytheemployer,willnowbeconsideredaspartof salaryincomeoftheemployee.Forthispurpose,S.17(2)(vi)and(vii)havebeenamendedeffective fromA.Y.201011.Thisamendmentprovidesthat perquisitewillincludethevalueofanyspecified securityorsweatequitysharesallottedortransferred,directlyorindirectly,bytheemployer,orformer employer,freeofcostoratconcessionalratetotheassessee.Thevalueofthespecifiedsecurityor sweatequitysharesshallbethefairmarketvalueonthedateonwhichtheoptionisexercisedbythe assesseeasreducedbytheamountactuallypaidbytheassessee.Forthispurpose,thefairmarketvalue willbedeterminedinaccordancewiththemethodprescribedbytheCBDT.Similarly,perquisitewill
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includetheamountofanycontributiontoanapprovedsuperannuationfundbytheemployerinrespect ofassessees,totheextentitexceedsRs.1,00,000.Further,perquisitewillalsoincludeanyotherfringe benefitoramenityasmaybeprescribed.

S.49(2AA):

ThisSectionisalsoamendedeffectivefromA.Y.201011toprovidethatwhencapitalgainariseson thetransferoftheabovespecifiedsecurityorsweatequitysharesallottedu/s.17(2)(vi),thecostof acquisitionofsuchsecurityorsharesshallbethefairmarketvaluewhichhasbeentakenintoaccount forthepurposeoflevyoftaxunderthatSection. ChapterVIAdeductions S.80A: ThisSectiondealswithdeductionstobemadeincomputingtotalincome.Twosubsections(4)and (5)havebeeninsertedinthisSectionwithretrospectiveeffectfrom142003(A.Y.200304)probably withaviewtopreventabuseoftaxincentives.Ss.(6)hasbeenaddedw.e.f.142009(A.Y.200910). Brieflystatedthesesubsectionsprovideasunder: (i) Ss.(4)effectivefrom142003,providesthatifanassesseehasclaimedandhasbeenallowed deduction of any amount of profit u/s.10Aor u/s.10AA or u/s.10B or u/s.10BA or under ChapterVIA,theassesseeshallnotbealloweddeductionunderanyotherSectionoftheActin respectof,andtotheextentof,suchprofitsandthetotaldeductionshallnotexceedtheprofits oftheundertaking. (ii) Ss.(5),effectivefrom142003,providesthatiftheassesseedoesnotclaimdeductionu/s.10Aoru/ s.10AAoru/s.10Boru/s.10BAorunderChapterVIAinthereturnofincome,heshallnotbe alloweddeductionunderthoseSections. (iii) Ss.(6), effective from 142009,provides that in the case of an undertaking, unit, business or enterprise(forsakeofbrevity,unit),theprofitsofwhichareeligiblefordeductionu/s.10Aor u/s.10AAoru/s.10Boru/s.10BAorunderChapterVIA,wheretheunittransfersanygoodsor servicestootherbusinessoftheassesseeortheunitacquiresgoodsorservicesfromother businessoftheassessee,thenthedeductionwillbecomputedbytakingthemarketvalueofthe goodsorservicestransferredoracquiredbytheunitfromtheotherbusinessoftheassessee. 27

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Marketvaluehasbeendefinedtobethepriceatwhichtheunitwouldhavetransferredinthe openmarketoracquiredfromtheopenmarket,thegoodsandservices,subjecttostatutoryor regulatoryrestrictions,ifany.

S.80CCD:

(i) S.80CCDprovidesfordeductionforcontributiontocertainnotifiedpensionschemesbysalaried assessees.TheamendmenttoSs.(1)extendsthebenefitofdeductiontoallindividuals,whether employedorotherwise.Thiswillbeeffectivefrom1stApril,2009(A.Y.200910).However, thelimitof10%ofsalaryoncontributiontotheschemecontinuesinthissubsection.Inthe caseofselfemployedassessee,thelimitwillbe10%ofhisgrosstotalincome. (ii) Amountreceivedonclosureofaccountoronoptingoutofthepensionschemeorpensionreceived fromannuitypurchasedischargeabletotax.Ss.(5)hasbeenintroducedtoprovidethatthe amountreceivedshallnotbeconsideredasreceivedandwillnotbechargeabletotaxifitis utilisedforpurchaseofannuityplaninthesameyear.Thisistoavoidunintendeddouble taxation.

S.80DD:

S. 80DD presentlyprovides for deduction of Rs.50,000 for expenditure incurred for maintenance, medicaltreatment,etc.ofadependanthavingdisabilityasdefinedintheSection.Thedeductionis Rs.75,000wherethedisabilityissevere.ThislimitofRs.75,000isincreasedtoRs.1,00,000andthe otherlimitremainsunchanged.TheamendmentiseffectivefromA.Y.201011.

S.80E:

S.80Eprovidesfordeductionofinterestonloantakenforpursuinghighereducation.Presently,higher educationisdefinedtoincludeprofessionalcourseslikemedicine,engineeringorpostgraduatecourse
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inappliedorpuresciences.TheSectionhasbeenamendedeffectivefromA.Y.201011toincludeany coursepursuedafterpassingSeniorSecondary Examinationor recognisedequivalent examination. Further,thetermrelativewillnowincludespouseandchildrenoftheindividualorthestudentfor whomtheindividualisthelegalguardian. S.80IA:

ThisSectionprovidesfordeductioninrespectofundertakingsincertaininfrastructureactivities.The Sectionwillnotnowapplytoundertakingwhichlaysandbeginstooperateacrosscountrynaturalgas distributionnetworkeffectivefromA.Y.201011inviewofinsertionofnewS.35AD.TheSection coversundertakingssetupforgenerationand/ortransmissionordistributionofpowerorrenovation andmodernisationoftransmissionnetworkordistributionlines.Inallthesecases,thedatebefore whichtheundertakingwillhavetostartoperatingtobeeligiblefordeductionhasbeenextendedto31st March,2011.

Further,ExplanationbelowSs.(13)issubstitutedretrospectivelywitheffectfrom1stApril,2000(A.Y. 200001)toclarifythatthisSectionshallnotapplytobusinessinthenatureofworkscontract,awarded byanypersonincludingtheCentralorStateGovernments,executedbytheundertakingorenterprise.

S.80IB(9):

ThisSectionrelatestodeductioninrespectofprofitsandgainsfromcertainindustrialundertakings. Thedeductiongivenis100%ofprofitsoftheundertakingfor7assessmentyears.NewSs.(9)replaces oldSs.(9)effectivefromA.Y.200001.Thebenefitwillnowbeavailabletoundertakingengagedin refiningofmineraloilwhichbeginssuchrefiningonorafter1101998andnotlaterthan3132012. Thisbenefitwillbeavailableifthefinancialundertakingisengagedincommercialproductionof naturalgasinblockslicensedundertheVIIIRoundofbiddingforawardofexplorationcontractsunder NELP announced by the Government on 1021999. This benefit will also be available if the undertakingisengagedincommercialproductionofnaturalgaslicensedundertheIVRoundofbidding forawardofexplorationcontractsforcoalbedMethaneblocksandbeginssuchproductiononorafter 142009.Itisfurtherclarifiedthatthetermundertakingwillmeanallblockslicensedunderasingle 29

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contractunderNELP.Thus,eachwellintheblockcannotbeconsideredasaseparateundertakingfor thepurposeofclaimingdeductionunderthisSection.

S.80IB(10):

ThisSectionprovidesfordeductionofprofitsderivedfromdevelopingandbuildinghousingprojects. The first condition that the housing project should be approved before 3132007 has now been amendedanditisprovidedw.e.f.142009(A.Y.200910)thateveniftheprojectisapprovedbefore 3132008bylocalauthority,thebenefitoftheSectionwillbeavailable.Further,theSectionhasbeen amendedbyinsertingadditionalconditionforentitlementtodeduction.Thenewlyinsertedcondition requiresthatwherethebuyeroftheresidentialunitisnotanindividual,notmorethanoneunitinthe projectshallbeallottedtosuchbuyer;andwherethebuyerisanindividual,nounitintheprojectshall beallottedtothespouse,minorchildrenorHUFofwhichtheindividualiskartaortoanyperson representingsuchindividual,spouse,minorchildrenorHUF.ThisisapplicablefromA.Y.201011.

AnexplanationhasbeenaddedinthisSectionw.e.f.142001toclarifythatdeductionunderthis Sectionshallnotbeavailabletoapersonexecutingsuchhousingprojectasworkscontract.

S.80IB(11A):

Thissubsectionprovidesfordeductionofspecifiedprofitsofanundertakingforaperiodof10years fromthebusinessofprocessing,preservationandpackagingoffruitsandvegetables,etc.Effective fromA.Y.201011,thisbenefitisextendedtoproductionofmeatandmeatproductsorpoultry,marine ordairyproducts,providedthattheundertakingforthispurposeisstartedonorafter142009.

S.80U:

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ThisSectionallowsdeductioninthecomputationoftotalincomeofanindividualwithdisability.This deductionisRs.50,000.Iftheassesseeissufferingfromseveredisability,asdefinedintheSection,the deductionallowableatpresentisofRs.75,000.FromA.Y.201011thisdeductionofRs.75,000is increasedtoRs.1,00,000. MinimumAlternateTax(MAT) S.115JB: ThisSection,dealingwithMinimumAlternateTaxhasbeenamendedasunder: (i) ItisnowprovidedthatforcomputingBookProfitforlevyofMAT,thenetprofitasperbooks willbeincreasedbytheprovisionfordiminutioninthevalueofanyassetdebitedtotheProfit &LossA/c.Thisprovisionismadewithretrospectiveeffectfrom142001(A.Y.200102). (ii) Therateoftaxpayableonbookprofitisincreasedfrom10%to15%plusapplicablesurchargeand educationcessfromA.Y.201011.

S.115JAA:

UnderthisSectiontaxcredit(MATcredit)isallowedtobecarriedforwardfor7assessmentyears immediatelysucceedingtheassessmentyearinwhichMATispaidu/s.115JB.Thiscanbesetoffinthe assessmentyearinwhichtaxispayableunderthenormalprovisionsoftheAct.Thisperiodisnow extendedfrom7yearsto10yearsandthiswillapplytoMATcreditcarriedforwardfromearlieryears also.

Assessmentprocedure S.147:

Thereareseveraljudicialpronouncementsthatreassessmentproceedingsshallberestrictedtoonly suchissueswhichhavebeenspecificallyrecordedbytheAObeforeissuingthenoticeforreopeningof 31

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theassessment.Anexplanationisnowinsertedwithretrospectiveeffectfrom1stApril,1989toprovide thattheAOcanassessorreassessincomeinrespectofanyissuewhichhasescapedassessmentevenif thesamecomestohisnoticesubsequentlyinthecourseofthereassessmentproceedingsandthesame wasnotrecordedbyhimearlieratthetimeofissuingthenoticeforreopeningtheassessment.

S.281B:

TheAssessingOfficerispresentlyempoweredtomakeprovisionalattachmenttoprotecttheinterestof theRevenue.Thisprovisionalattachmentisvalidforaperiodofsixmonthsfromthedateoftheorder anditsvaliditycanbeextendeduptoamaximumperiodoftwoyearswiththepermissionoftheChief Commissioner.

Now,itisprovidedthattheperiodforwhichstayonassessmentorreassessmentproceedingisgranted bytheHighCourtortheSupremeCourtshallbeexcludedwhilecalculatingthemaximumperiod availableforprovisionalattachment.

Thisamendmentiseffectiveretrospectivelyfrom1stApril,1988.

S.282:

Presently,anoticeorsummonorrequisitionundertheActmaybeservedeitherbypostorinamanner bywhichsummonsareissuedbyaCourt.

Now,serviceofanoticeorsummonorrequisitionoranyothercommunicationorordercanalsobe made by courier services or in the form of electronic record or by any other means as may be prescribedbytheCBDT.

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ItisalsoprovidedthattheCBDTmaymakerulesprovidingfortheaddresses,includingtheaddressfor electronicmail,towhichsuchcommunicationmaybedelivered.Thisamendmentiseffectivefrom1st October2009.

S.282B:

EveryIncometaxauthorityshallallotacomputergeneratedDocumentIdentificationNumber(DIN)in respectofeverynotice,order,letteroranycorrespondenceissuedbyhimtoanyotherIncometax authorityortoassesseesortoanyotherpersonandsuchnumbershallbequotedthereon.Ifsuchnotice, order,etc.doesnotbearaDIN,suchnotice,order,etc.shallbetreatedasinvalidandshallbedeemed nevertohavebeenissued.

Itisfurtherprovidedthateverydocument,letteroranycorrespondencereceivedbyanIncometax authorityoronbehalfofsuchauthority,shallbeacceptedonlyafterallottingandquotingcomputer generatedDIN.Ifsuchdocument,etc.doesnotbearDIN,thesameshallbetreatedasinvalidandshall bedeemednevertohavebeenreceived.Thisiseffectivefrom1stOctober,2010.

Otheramendments FringeBenefitTax:

ChapterXIIHcontainingS.115WtoS.115WLprovidingforlevyofFringeBenefitTaxwasinserted bytheFinanceAct,2005w.e.f.142006.Thisprovisionwasmostcontroversial.ByinsertionofS. 115WMitisprovidedthatnoFBTwillbepayablefromA.Y.201011(A/cyear142009to313 2010)onwards.Thistaxwaspayableinadvanceonaquarterlybasis.

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DuringthecurrentFinancialYear200910someassesseeshavepaidadvancetaxinrespectoffringe benefitsforAssessmentYear201011.InsuchcasestheBoardhasdecidedthatanyinstallmentof advancetaxpaidinrespectoffringebenefitsforA.Y.201011shallbetreatedasAdvanceTaxpaid byassesseeconcernedforA.Y.201011.Theassesseecanadjustsuchsumagainstitsadvancetax obligationinrespectofincomeforA.Y.201011orincaseoflossetcclaimsuchpaymentasrefundas advancetaxpaidinA.Y.201011.

S.208:

ThisSectionspecifiesthatadvancetaxshallbepayableineverycasewheretheamountofsuchtaxfor thefinancialyearisRs.5,000ormore.ThislimitisnowincreasedtoRs.10,000w.e.f.142009.

S.271(1)NewExplanation5A:

Inthecourseofsearchinitiatedonorafter1stJune,2007,iftheassesseeisfoundtobetheownerof (i) anymoney,bullion,jewelleryorothervaluablearticleorthingacquiredoutofincomeofany previousyearendedbeforethedateofsearch,or (ii) anyincomebasedonanyentryinanybooksorotherdocumentsortransactionswhichrepresent incomeofanypreviousyearendedbeforethedateofsearch; heshallbedeemedtohaveconcealedparticularsofincomeorfurnishedinaccurateparticularsof incomeif: (i) returnofincomesubmittedbeforethedateofsearchdoesnotreflectthisincome,or (ii) returnofincomehasnotbeensubmittedwheretheduedateoffilinghasexpired. Theamendedprovisionwillnowcovercaseswherereturnofincomesubmittedpriortosearchdoesnot includesuchincome.Thisamendmentiseffectivefrom162007.

S.13ofUnitTrustofIndia(TransferofUndertakingandRepeal)Act,2002:
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IncometaxexemptiontoerstwhileUTIwhichwastoexpireon3132009hasbeenextendedupto31 32014.

SecuritiesTransactionTax:

Itisnowprovidedw.e.f.1102009thatSTTwillnotbepayableforanytransactionthroughrecognised StockExchangeenteredintobytheNewPensionSystemTrust.

CommoditiesTransactionTax:

TheFinanceAct,2008,hadprovidedforlevyofCTTw.e.f.142009.Thisprovisionisnowamended andthistaxiswithdrawnw.e.f.142009.

Wealthtax:

PresentlywealthtaxispayableonspecifiedassetswithathresholdlimitofRs.15lacsattherateof1%. ByamendmentofS.3oftheWealthtaxAct,thisthresholdlimitisincreasedtoRs.30lacseffective fromA.Y.201011. INCOMETAX(THIRTEENTHAMENDMENT)RULES,2009SUBSTITUTIONOFRULE3 ANDINSERTIONOFRULE40F Inexerciseofthepowersconferredbysection295readwithsubsection(2)ofsection17oftheIncometax Act,TheCentralBoardofDirectTaxesherebymakesthefollowingrulesfurthertoamendtheIncometax Rules,1962,namely: Rule3.ForthepurposeofcomputingtheincomechargeableundertheheadSalaries,thevalueof perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as 35

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employee) or to any member of his household by reason of his employment shall be determined in accordancewiththefollowingsubrules,namely: (1)Thevalueofresidentialaccommodationprovidedbytheemployerduringthepreviousyearshallbe determinedonthebasisprovidedintheTablebelow: Sl. NO. Circumstances Whereaccommodation is Unfurnished (3) License fee determined by the Central Government or any State Government in respectofaccommodationin accordance with the rules framedbysuchGovernment as reduced by the rent actually paid by the employee. Whereaccommodation is Furnished

(1) (1)

(2) Wheretheaccommodationis provided by the Central Government or any State Government to the employees either holding office or post in connection withtheaffairsoftheUnion orofsuchState.

(2)

(4) Determinedundercolumn(3)and increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, airconditioning plant orequipment)orifsuchfurniture is hired from a third party, the actualhirechargespayableforthe same as reduced by any charges Wheretheaccommodationis (i) 15% of salary in cities paidorpayableforthesamebythe provided by any other havingpopulationexceeding employee during the previous employerand 25lakhsasper2001census; year. (a)wheretheaccommodation (ii)10%ofsalaryincities isownedbytheemployer, havingpopulationexceeding 10lakhsbutnotexceeding 25lakhsasper2001census; (iii)7.5%ofsalaryinother areas, inrespectoftheperiod duringwhichthesaid accommodationwas occupiedbytheemployee duringthepreviousyearas reducedbytherent,ifany, actuallypaidbythe employee. (b) where the Actualamountofleaserental accommodation is taken on paid or payable by the

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leaseorrentbytheemployer. employer or 15% of salary whichever is lower as reduced by the rent, if any, actually paid by the employee. (3) Wheretheaccommodationis Notapplicable provided by the employer specifiedinserialnumber(1) or (2) in a hotel (except where the employee is provided such accommodationforaperiod not Exceeding in aggregate fifteen days on his transfer fromoneplacetoanother)

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24%ofsalarypaidorpayablefor the previous year or the actual charges paid or payable to such hotel, which is lower, for the period during which such accommodation is provided as reduced by the rent, if any, actually paid or payable by the employee.

Provided thatnothingcontainedinthissubruleshallapplytoanyaccommodationprovidedtoan employeeworkingataminingsiteoranonshoreoilexplorationsiteoraprojectexecutionsite,ora damsiteorapowergenerationsiteoranoffshoresite (i) which,beingofatemporarynatureandhavingplinthareanotexceeding800squarefeet,islocated notlessthaneightkilometersawayfromthelocallimitsofanymunicipalityoracantonment board;or (ii) whichislocatedinaremotearea.

Providedfurther thatwhereonaccountofhistransferfromoneplacetoanother,theemployeeis providedwithaccommodationatthenewplaceofpostingwhileretainingtheaccommodationatthe otherplace,thevalueofperquisiteshallbedeterminedwithreferencetoonlyonesuchaccommodation whichhasthelowervaluewithreferencetotheTableaboveforaperiodnotexceeding90daysand thereafterthevalueofperquisiteshallbechargedforbothsuchaccommodationsinaccordancewiththe Table.

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Explanation.Forthepurposesofthissubrule,wheretheaccommodationisprovidedbytheCentral GovernmentoranyStateGovernmenttoanemployeewhoisservingondeputationwithanybodyor undertakingunderthecontrolofsuchGovernment,

(i) theemployerofsuchanemployeeshallbedeemedtobethatbodyorundertakingwherethe

employeeisservingondeputation;and
(ii) thevalueofperquisiteofsuchanaccommodationshallbetheamountcalculatedinaccordance

withSl.No.(2)(a)ofTableI,asiftheaccommodationisownedbytheemployer.

(2)(A)Thevalueofperquisitebywayof useofmotorcar toanemployeebyanemployershallbe determinedinaccordancewiththefollowingTable,namely: Sl.N o. Circumstance Wherecubiccapacityof enginedoesnotexceed 1.6liters (3) Wherecubiccapacityof engineexceeds1.6liters

(1) (1)

(2) Wherethemotorcarisowned orhiredbytheemployerand (a) is used wholly and exclusively in the performance of his official duties;

(4)

(b)isusedexclusivelyforthe private or personal purposes of the employee or any memberofhishouseholdand the running and maintenance expenses are met or reimbursedbytheemployer; (c) is used partly in the performance of duties and
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Novalue: Novalue: Provided that the Provided that the documents documents specified in specified in clause (B) of this clause(B)ofthissubrule subrule are maintained by the are maintained by the employer. employer. Actualamountofexpenditureincurredbytheemployeronthe running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reducedbyanyamountchargedformtheemployeeforsuch use.

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partlyforprivateorpersonal purposes of his own or any memberofhishouseholdand

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(i) the expenses on Rs.1,800(plusRs.900,if Rs. 2,400 (plus Rs. 900, if maintenance and running are chauffeur is also provided chauffeurisalsoprovidedtorun met or reimbursed by the torunthemotorcar) themotorcar) employer; (ii) the expenses on running andmaintenanceforprivateor personalusearefullymetby theassessee. (2) Where the employee owns a motor car but the actual runningand Maintenance charges (includingremunerationofthe chauffeur, ifany)aremetor reimbursed to him by the employerand (i)suchreimbursementisfor theuseofthevehiclewholly Novalue: and exclusively for official purposes; Providedthatthedocumentsspecifiedinclause(B)ofthissub rulearemaintainedbytheemployer. (ii)suchreimbursementisfor the use of the vehicle partly for official purposes and Subject to the provisions of clause (B) of this subrule, the partlyforpersonalorprivate actual amount of expenditure incurred by the employer as purposes of the employee or reducedbytheamountspecifiedinSl.No.(1)(c)(i)above. anymemberofhishousehold. (3) Wheretheemployeeownsany other automotive conveyance buttheactualrunning and maintenance charges are metorreimbursedtohimby Notapplicable Rs. 600 (plus Rs.900, if chauffeur is also provided Rs. 900 (plus Rs. 900, if bytheemployertorunthe chauffeurisalsoprovidedtorun motorcar) themotorcar)

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AmendmentsbyFinanceAct,2009
theemployerand (i).suchreimbursementisfor theuseofthevehiclewholly and exclusively for official NoValue: purposes; Provided that the documents specified in clause(B)ofthissubrule are maintained by the (ii)suchreimbursementisfor employer. the use of vehicle partly for official purposes and partly Subjecttotheprovisionsof forpersonalorprivate clause(B)ofthissubrule, purposesoftheemployee. the actual amount of expenditureincurredbythe employerasreducedbythe amountofRs.900.

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Providedthatwhereoneormoremotorcarsareownedorhiredbytheemployerandtheemployeeor anymemberofhishouseholdareallowedtheuseofsuchmotorcarorallofanyofsuchmotorcars (otherwisethanwhollyandexclusivelyintheperformanceofhisduties),thevalueofperquisiteshall betheamountcalculatedinrespectofonecarinaccordancewithSl.No.(1)(c)(i)ofTableIIasifthe employeehadbeenprovidedonemotorcarforusepartlyintheperformanceofhisdutiesandpartlyfor his private or personal purposes and the amount calculated in respect of the other car or cars in accordancewithSl.No.(1)(b)ofTableIIasifhehadbeenprovidedwithsuchcarexclusivelyforhis privateorpersonalpurposes.

(B)Wheretheemployerortheemployeeclaimsthatthemotorcarisusedwhollyandexclusivelyin theperformanceofofficialdutyorthattheactualexpensesontherunningandmaintenanceofthe motorcarownedbytheemployeeforofficialpurposesismorethantheamountsdeductibleinSl.No. 2(ii)or3(ii)ofTableII,hemayclaimahigheramountattributabletosuchofficialuseandthevalueof perquisiteinsuchacaseshallbetheactualamountattributabletoofficialuseofthevehicleprovided thatthefollowingconditionsarefulfilled:

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(a)theemployerhasmaintainedcompletedetailsofjourneyundertakenforofficial purpose which may include date of journey, destination, mileage and the amount of expenditure incurredthereon; (b) the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusivelyfortheperformanceofofficialduties.

Explanation.Forthepurposesofthissubrule,thenormalwearandtearofamotorcarshallbetaken at10%perannumoftheactualcostofthemotorcarorcars.

(3)Thevalueofbenefittotheemployeeoranymemberofhishouseholdresultingfromtheprovisionby theemployerorservicesofasweeper,agardener,awatchmanorapersonalattendant,shallbetheactual costtotheemployer.Theactualcostinsuchacaseshallbethetotalamountofsalarypaidorpayableby theemployeroranyotherpersononhisbehalfforsuchservicesasreducedbyanyamountpaidbythe employeeforsuchservices. (4)Thevalueofthebenefittotheemployeeresultingfromthesupplyofgas,electricenergyorwaterfor hishouseholdconsumptionshallbedeterminedasthesumequaltotheamountpaidonthataccountbythe employertotheagencysupplyingthegas,electricenergyorwater.Wheresuchsupplyismadefrom resourcesownedbytheemployer,withoutpurchasingthemfromanyotheroutsideagency,thevalueof perquisitewouldbethemanufacturingcostperunitincurredbytheemployer.Wheretheemployeeis payinganyamountinrespectofsuchservices,theamountsopaidshallbedeductedfromthevalueso arrivedat. (5)Thevalueofbenefittotheemployeeresultingfromtheprovisionoffreeorconcessionaleducational facilities for any member of his household shall be determined as the sum equal to the amount of expenditureincurredbytheemployerinthatbehalforwheretheeducationalinstitutionisitselfmaintained andownedbytheemployerorwherefreeeducationalfacilitiesforsuchmemberofemployeeshousehold areallowedinanyothereducationalinstitutionbyreasonofhisbeinginemploymentofthatemployer,the valueoftheperquisitetotheemployeeshallbedeterminedwithreferencetothecostofsucheducationina similarinstitutioninornearthelocality.Whereanyamountispaidorrecoveredfromtheemployeeonthat account,thevalueofbenefitshallbereducedbytheamountsopaidorrecovered: Provided thatwheretheeducationalinstitutionitselfismaintainedandownedbytheemployerandfree educationalfacilitiesareprovidedtothechildrenoftheemployeeorwheresuchfreeeducationalfacilities 41

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areprovidedinanyinstitutionbyreasonofhisbeinginemploymentofthatemployer,nothingcontainedin thissubruleshallapplyifthecostofsucheducationorthevalueofsuchbenefitperchilddoesnotexceed onethousandrupeespermonth. (6)Thevalueofanybenefitoramenityresultingfromtheprovisionbyanemployerwhoisengagedinthe carriageofpassengersorgoods,toanyemployeeortoanymemberofhishouseholdforpersonalorprivate journeyfreeofcostoratconcessionalfare,inanyconveyanceowned,leasedormadeavailablebyany otherarrangementbysuchemployerforthepurposeoftransportofpassengersorgoodsshallbetakentobe thevalueatwhichsuchbenefitoramenityisofferedbysuchemployertothepublicasreducedbythe amount,ifany,paidbyorrecoveredfromtheemployeeforsuchbenefitoramenity: Providedthatnothingcontainedinthissubruleshallapplytotheemployeesofanairlineortherailways. (7)Intermsofprovisionscontainedinclause(viii)ofsubsection(2)ofsection17,thefollowingother benefitsoramenitiesandvaluethereofshallbedeterminedinthemannerprovidedhereunder: (i)Thevalueofthebenefittotheassesseeresultingfromtheprovisionofinterestfreeorconcessionalloan foranypurposemadeavailabletotheemployeeoranymemberofhishouseholdduringtherelevant previousyearbytheemployeroranypersononhisbehalfshallbedeterminedasthesumequaltothe interestcomputedattheratechargedperannumbytheStateBankofIndia,constitutedundertheState BankofIndiaAct,1955,asonthe1stdayoftherelevantpreviousyearinrespectofloansforthesame purposeadvancedbyitonthemaximumoutstandingmonthlybalanceasreducedbytheinterest,ifany, actuallypaidbyhimoranysuchmemberofhishousehold: Providedthatnovaluewouldbechargedifsuchloansaremadeavailableformedicaltreatmentinrespect ofdiseasesspecifiedinrule3AoftheseRulesorwheretheamountofloansarepettynotexceedinginthe aggregatetwentythousandrupees: Providedfurtherthatwherethebenefitrelatestotheloansmadeavailableformedicaltreatmentreferred toabove,theexemptionsoprovidedshallnotapplytosomuchoftheloanashasbeenreimbursedtothe employeeunderanymedicalinsurancescheme. (ii)Thevalueoftravelling,touring,accommodationandanyotherexpensespaidfororborneorreimbursed bytheemployerforanyholidayavailedofbytheemployeeoranymemberofhishousehold,otherthan concessionorassistancereferredtoinrule2Boftheserules,shallbedeterminedasthesumequaltothe amountoftheexpenditureincurredbysuchemployerinthatbehalf.Wheresuchfacilityismaintainedby theemployer,andisnotavailableuniformlytoallemployees,thevalueofbenefitshallbetakentobethe valueatwhichsuchfacilitiesareofferedbyotheragenciestothepublic.
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Wheretheemployeeisonofficialtourandtheexpensesareincurredinrespectofanymemberofhis householdaccompanyinghim,theamountofexpendituresoincurredshallalsobeafringebenefitor amenity: Providedthatwhereanyofficialtourisextendedasavacation,thevalueofsuchfringebenefitshallbe limitedtotheexpensesincurredinrelationtosuchextendedperiodofstayorvacation.Theamountso determinedshallbereducedbytheamount,ifany,paidorrecoveredfromtheemployeeforsuchbenefitor amenity. (iii)Thevalueoffreefoodandnonalcoholicbeveragesprovidedbytheemployertoanemployeeshallbe theamountofexpenditureincurredbysuchemployer.Theamountsodeterminedshallbereducedbythe amount,ifany,paidorrecoveredfromtheemployeeforsuchbenefitoramenity: Providedthatnothingcontainedinthisclauseshallapplytofreefoodandnonalcoholicbeveragesprovided bysuchemployerduringworkinghoursatofficeorbusinesspremisesorthroughpaidvoucherswhichare nottransferableandusableonlyateatingjoints,totheextentthevaluethereofeithercasedoesnotexceed fiftyrupeespermealortoteaorsnacksprovidedduringworkinghoursortofreefoodandnonalcoholic beveragesduringworkinghoursprovidedinaremoteareaoranoffshoreinstallation. (iv)Thevalueofanygift,orvoucher,ortokeninlieuofwhichsuchgiftmaybereceivedbytheemployee or by member of his household on ceremonial occasions or otherwise from the employer shall be determinedasthesumequaltotheamountofsuchgift: Providedthatwherethevalueofsuchgift,voucherortoken,asthecasemaybe,isbelowfivethousand rupeesintheaggregateduringthepreviousyear,thevalueofperquisiteshallbetakenasnil. (v)Theamountofexpensesincludingmembershipfeesandannualfeesincurredbytheemployeeorany memberofhishousehold,whichischargedtoacreditcare(includinganyaddoncard)providedbythe employer,orotherwise,paidfororreimbursedbysuchemployershallbetakentobethevalueofperquisite chargeabletotaxasreducedbytheamount,ifanypaidorrecoveredfromtheemployeeforsuchbenefitor amenity: Providedthatthereshallbenovalueofsuchbenefitwhereexpensesareincurredwhollyandexclusively forofficialpurposesandthefollowingconditionsarefulfilled: (a)completedetailsinrespectofsuchexpenditurearemaintainedbytheemployerwhichmay,interalia, includethedateofexpenditureandthenatureofexpenditure; (b)theemployergivesacertificateforsuchexpendituretotheeffectthatthesamewasincurredwhollyand exclusivelyfortheperformanceofofficialduties. 43

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(vi)(A)Thevalueofbenefittotheemployeeresultingfromthepaymentorreimbursementbytheemployer ofanyexpenditureincurred(includingtheamountofannualorperiodicalfee)inaclubbyhimorbya memberofhishouseholdshallbedeterminedtobetheactualamountofexpenditureincurredorreimbursed bysuchemployeronthataccount.Theamountsodeterminedshallbereducedbytheamount,ifanypaidor recoveredfromtheemployeeforsuchbenefitoramenity: Provided that where the employer has obtained corporate membership of the club and the facility is enjoyedbytheemployeeoranymemberofhishousehold,thevalueofperquisiteshallnotincludethe initialfeepaidforacquiringsuchcorporatemembership. (B)Nothingcontainedinthisclauseshallapplyifsuchexpenditureisincurredwhollyandexclusivelyfor businesspurposesandthefollowingconditionsarefulfilled: (a)completedetailsinrespectofsuchexpenditurearemaintainedbytheemployerwhichmayinteralia, includethedateofexpenditure,thenatureofexpenditureanditsbusinessexpediency; (b)theemployergivesacertificateforsuchexpendituretotheeffectthatthesamewasincurredwhollyand exclusivelyfortheperformanceofofficialduties. (C)Nothingcontainedinthisclauseshallapplyforuseofhealthclub,sportsandsimilarfacilitiesprovided uniformlytoallemployeesbytheemployer. (vii)Thevalueofbenefittotheemployeeresultingfromtheusebytheemployeeoranymemberofhis householdofanymovableasset(otherthanassetsalreadyspecifiedinthisruleandotherthanlaptopsand computers)belongingtotheemployerorhiredbyhimshallbedeterminedat10%perannumoftheactual costofsuchassetortheamountofrentorchargepaidorpayablebytheemployer,asthecasemaybe,as reducedbytheamount,ifany,paidorrecoveredfromtheemployeeforsuchuse. (viii)Thevalueofbenefittotheemployeearisingfromthetransferofanymovableassetbelongingtothe employerdirectlyorindirectlytotheemployeeoranymemberofhishouseholdshallbedeterminedtobe theamountrepresentingtheactualcostofsuchassetstotheemployerasreducedbythecostofnormalwear andtearcalculatedattherateof10%ofsuchcostforeachcompletedyearduringwhichsuchassetwasput tousebytheemployerandasfurtherreducedbytheamount,ifany,paidorrecoveredfromtheemployee beingtheconsiderationforsuchtransfer: Providedthatinthecaseofcomputersandelectronicitems,thenormalwearandtearwouldbecalculated attherateof50%andinthecaseofmotorcarsattherateof20%bythereducingbalancemethod.

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(ix)Thevalueofanyotherbenefitoramenity,service,rightorprivilegeprovidedbytheemployershallbe determined onthebasisof cost totheemployer underanarms length transaction as reducedby the employeescontribution,ifany: Providedthatnothingcontainedinthisclauseshallapplytotheexpensesontelephonesincludingamobile phoneactuallyincurredonbehalfoftheemployeebytheemployer. (8)(i)Forthepurposesofclause(vi)ofsubsection(2)ofsection17,thefairmarketvalueofanyspecified securityorsweatequityshare,beinganequityshareinacompany,onthedateonwhichtheoptionis exercisedbytheemployee,shallbedeterminedinaccordancewiththeprovisionsofclause(ii)orclause (iii). (ii)Inacasewhere,onthedateoftheexercisingoftheoption,theshareinthecompanyislistedona recognizedstockexchange,thefairmarketvalueshallbetheaverageoftheopeningpriceandclosingprice oftheshareonthatdateonthesaidstockexchange: Providedthatwhere,onthedateofexercisingoftheoption,theshareislistedonmorethanonerecognized stockexchanges,thefairmarketvalueshallbetheaverageofopeningpriceandclosingpriceoftheshare ontherecognisedstockexchangewhichrecordsthehighestvolumeoftradingintheshare: Providedfurtherthatwhere,onthedateofexercisingoftheoption,thereisnotradingintheshareonany recognizedstockexchange,thefairmarketvalueshallbe (a)theclosingpriceoftheshareonanyrecognisedstockexchangeonadateclosesttothedateof exercisingoftheoptionandimmediatelyprecedingsuchdate;or (b)theclosingpriceoftheshareonarecognisedstockexchange,whichrecordsthe highestvolumeoftradinginsuchshare,iftheclosingprice,asonthedateclosesttothedateof exercisingoftheoptionandimmediatelyprecedingsuchdate,isrecordedonmorethanonerecognized stockexchange. (iii)Inacasewhere,onthedateofexercisingoftheoption,theshareinthecompanyisnotlistedona recognised stock exchange,thefair market valueshall be such value of theshareinthe companyas determinedbyamerchantbankeronthespecifieddate. (iv)Forthepurposeofthissubrule, (a)closingpriceofashareonarecognisedstockexchangeonadateshallbethepriceofthelast settlementonsuchdateonsuchstockexchange: 45

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Providedthatwherethestockexchangequotesbothbuyandsellprices,theclosingpriceshallbethe sellpriceofthelastsettlement; (c)openingpriceofashareonarecognisedstockexchangeonadateshallbethepriceofthefirst settlementonsuchdateonsuchstockexchange: Providedthatwherethestockexchangequotesbothbuyandsellprices,theopeningpriceshallbethe sellpriceofthefirstsettlement; (e)specifieddatemeans, (i)thedateofexercisingoftheoption;or (ii)anydateearlierthanthedateoftheexercisingoftheoption,notbeingadatewhichismorethan 180daysearlierthanthedateoftheexercising. (9)Forthepurposesofclause(vi)ofsubsection(2)ofsection17,thefairmarketvalueofanyspecified security,notbeinganequityshareinacompany,onthedateonwhichtheoptionisexercisedbythe employee,shallbesuchvalueasdeterminedbyamerchantbankeronthespecifieddate. (10)Thisruleshallcomeintoforcewitheffectfromthe1stdayofApril,2009. Explanation.Forthepurposesofthisrule (i)accommodationincludesahouse,flat,farmhouseorpartthereof,oraccommodationinahotel,motel, serviceapartment,guesthouse,caravan,mobilehome,shiporotherfloatingstructure; (ii)entertainmentincludeshospitalityofanykindandalso,expenditureonbusinessgiftsotherthanfree samplesoftheemployersownproductwiththeaimofadvertisingtothegeneralpublic; (iii)hotelincludeslicensedaccommodationinthenatureofmotel,serviceapartmentorguesthouse; (iv)memberofhouseholdshallinclude (a)spouse(s), (b)childrenandtheirspouses, (c)parents,and (d)servantsanddependents;

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(v) remote area, for purposes of proviso to this subrule means an area that is located at least 40 kilometresawayfromatownhavingapopulationnotexceeding20,000basedonlatestpublishedallIndia census; (vi)salaryincludesthepay,allowances,bonusorcommissionpayablemonthlyorotherwiseorany monetarypayment,bywhatevernamecalledfromoneormoreemployers,asthecasemaybe,butdoesnot includethefollowing,namely: (a)dearnessallowanceordearnesspayunlessitentersintothecomputationofsuperannuationor retirementbenefitsoftheemployeeconcerned; (b)employerscontributiontotheprovidentfundaccountoftheemployee; (c)allowanceswhichareexemptedfrompaymentoftax; (d)thevalueofperquisitesspecifiedinclause(2)ofsection17oftheIncometaxAct; (e)anypaymentorexpenditurespecificallyexcludedunderprovisotosubclause(iii)ofclause(2)or provisotoclause(2)ofsection17; (f)lumpsumpaymentsreceivedatthetimeofterminationofserviceorsuperannuationorvoluntary retirement, like gratuity, severance pay leave encashment, voluntary retrenchment benefits, commutationofpensionandsimilarpayments; (vii)maximumoutstandingmonthlybalancemeanstheaggregateoutstandingbalanceforeachloanason thelastdayofeachmonth.

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