INCOME TAX

Recovery of tax from Directors even if private company is not in liquidation (Sec 179)

Now provisions which enable Income tax authorities to recover tax due from a private company from its directors, under certain circumstances where such tax cannot be recovered from the company itself.

Changes in TDS Provisions

1. Rationalization of provisions of section 206AB and 206CCA (Deduction / Collection of tax at higher rates) -

Reduced return filing requirement from two years to one year for the identification of “specified person”  who has not filed its return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is to be deducted or collected.

1. Deduction of TDS at higher rate for  non filers of Income Tax return (Sec 206AB) is not applicable on TDS on rent payment by Individuals or HUF where rent payment is more than 50,000 per month. [Section 194IB and 206AB].
2. TDS at 10% need to be deducted on payment of any perquisite/Gift or benefits arising out of Business or Profession made to any resident if such payment is more than Rs. 20,000/- whether it is paid in cash or kind. [Section 194R].
3. TDS at 1% need to be deducted on Consideration for transfer of a virtual digital asset if the consideration is more than 50,000 in case of specified persons or Rs. 10,000/- for other payees. [Section 194S]

Person giving loan or borrowing shall explain source of Income (Section 68)

Amendment to the provisions of section 68 of the Act so as to provide that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. 

Disallowance under section 14A  can be made even in absence of exempted income:

Expenditure incurred  for earning exempted income shall be disallowed even if there is no exempted income earned or received during that previous year.

Expenditure by way of offense incurred by the assessee in India or Outside India – Disallowed 

Any expenditure including expenditure for compounding of any offense incurred by the assessee which is prohibited by any law in India or Outside India shall be disallowed. [Section 37]

       (This amendment will take effect retrospectively from 1st April, 2005 and will accordingly apply in relation to the assessment year 
        2005-06 and subsequent assessment years)

No Set of loss against undisclosed income discovered during search (section 79A)         

The total income of any previous year of an assessee includes any undisclosed income, no set off, against such undisclosed income, of any loss, whether brought forward or otherwise, or unabsorbed depreciation under sub-section (2) of section 32 shall be allowed to the assessee under any provision of this Act in computing his total income for such previous year. Due to this Assessee has to discharge tax liabilities in cash.

Withdrawal of Special Rate of Taxation on Dividend Income (Sec 115BBD)

Concessional rate of 15% tax on dividend from foreign investments where holding is more than 26% is now withdrawn.

Filing of Updated Return on Payment of Additional Income Tax [Sec 139(8A)]

Any person may furnish the updated return within 24 months from the end of the related assessment year, however updated return cannot be filed for additional disclosure of losses,

reduction in tax liability or claim of refund or increase in refund. This return cannot be filed by person on whom search or survey or any notice is issued.

New rules on EPF interest

With effect from 1st April 2022, if the employee’s contribution to Provident Fund account exceeds Rs 2.5 lakh during the financial year, the interest earned on the excess contribution is taxable in the hands of the employee year after year. Currently, interest on any amount of contribution to an EPF account is tax-free.