Concessional rate of tax in respect of certain Domestic Companies

Insertion of new sections 115BAA and 115BAB providing for concessional rate of tax in respect of certain domestic companies

New section 115BAA and 115BAB have been inserted by the Taxation Laws (Amendment) Act, 2019 providing for concessional rates of tax and exemption from Minimum Alternate Tax (MAT) in respect of certain domestic companies with effect from AY 2020-21. The provisions of these new sections are tabulated hereunder-

  Particulars Section 115BAA Section 115BAB
1. Applicability Any Domestic Company Domestic Manufacturing Company
2. Rate of Tax 22% 15%
3. Rate of surcharge 10% 10%
4. Effective rate of tax (including surcharges and HEC i.e health & education cess) 25.168%

(Tax@ 22%+surcharges 10% + Health & Education cess 4%)

17.16%

(Tax@ 15%+surcharges 10% + Health & Education cess 4%)

5. Applicability of MAT Not Applicable Not Applicable
6. Manner of computation of tax liability
Particulars Section 115BAA Section 115BAB
Rate of tax

The rate of tax (i.e 25.168%) is notwithstanding anything contained in the Income Tax Act, 1961 but subject to provision of Chapter XII

The rate of tax (i.e 17.168%) is notwithstanding anything contained in the Income Tax Act, 1961 but subject to provision of Chapter XII

Rate of tax on income covered under  chapter XII (for example long term capital gain u/s 112 & 112A, short term capital gain u/s 111A)

Such income would be subject to tax at the rates mentioned in the said section in Chapter XII. Surcharge at the rate of 10% and HEC @4% would be levied.

Such income would be subject to tax at the rates mentioned in the said section in Chapter XII. Surcharge at the rate of 10% and HEC @4% would be levied.

Rate of tax on other income in respect of which no specific rate of tax is provided in Chapter XII (For example Income from House Property and other source etc)

25.168%

However no restriction regarding claim of any deduction permissible under the relevant provisions of the Act

25.168%

If such income has neither been derived from nor incidental to manufacture or production of an article or thing.

In respect of such income, no deduction for any expenditure shall be allowed in computing such income.

Rate of tax on STCG from transfer of capital asset on which no depreciation is allowable under the Act

25.168%

However no restriction regarding claim of any deduction of any expenditure permissible under the relevant provisions of the Act

25.168%

However no restriction regarding claim of any deduction of any expenditure permissible under the relevant provisions of the Act

7. Conditions to be fulfilled for availing concessional rate of tax and exemption from MAT
Particulars Section 115BAA Section 115BAB
Conditions to be fulfilled for availing concessional rate of tax and exemption from MAT. No time limit specified. Both existing and new companies can avail benefit.

The company has been set up and registered on or after 1st October 2019 and has commenced manufacturing on or before 31st March 2023.

No similar condition has been prescribed

It should not be formed by the splitting up and reconstruction of a business already in existence.

 

No similar condition has been prescribed

It does not use any plant or machinery previously used for any purpose. However, the company can use plant and machinery used outside India by any other person which was subsequently used in India for the first time. Also, the company can use old plant and machinery, the value of which does not exceed 20% of the total value of the plant and machinery used by the company

No similar condition has been prescribed In does not use any building previously used as a hotel or a convention centre in respect of which deduction u/s 80-ID has been claimed and allowed. (2 star, 3 star or 4 star category as classified by the central government)
No similar condition has been prescribed The company should be engaged in the business of manufacture or production of any article or thing, and research in relation to such article or thing. The company can also be engaged in the distribution of such article or thing manufactured or produced by it.

Note: Business of Manufacture or production of any article or thing does not include business of

·         Development of computer software in any form or in any media.

·         Mining

·         Conversion of marble blocks or similar items into slabs

·         Bottling of gas into cylinders

·         Printing of books or production of cinematograph films

Availability of set-off of MAT credit brought forward from earlier years. Brought forward MAT credit cannot be set-off against income u/s 115BAA.

Since it is new company, there would be no brought forward MAT credit.

8. Common conditions for both sections The total income should be computed

1.       Without providing for deductions under any of the following provisions

·         100AA – SEZ unit

·         32(1)(iia)  – Additional depreciation

·     32AD – Deduction for manufacturing located in backward areas of Andhra Pradesh, Telangana, Bihar and West Bengal.

·         33AB – Tea, coffee and rubber manufacturing companies

·         33ABA – deposit in site restoration fund by companies engaged in extraction or production of petroleum or natural gas or both.

·         35(1)(ii)/(iia)/(iii) –  Expenditure made for scientific research.

·         35(2AA) – Payment to a National Laboratory or University or IIT or approved specified person for scientific research

·         35 (2AB) – Scientific research expenditure by a company engaged in the business or bio technology or in the business of manufacture of any article or thing.

·         35AD – Investment linked tax deduction for specified business

·         35CCC – Expenditure incurred on notified agricultural extension projects.

·         35CCD – Expenditure incurred by company in a notified skill development project.

·         80IA to 80RRB – Deduction in respect of certain incomes other than 80JJAA.

2.       Without set off of any loss or allowance for unabsorbed depreciation u/s 72A, where such loss or depreciation is attributable to any of the deduction listed above.

3.       Where there is a depreciation allowance in respect of block of asset which has not been given full effect to prior to AY 2020-21, corresponding adjustment shall be made to the WDV of such block of asset as on 01.04.2019 in the prescribed manner, if option for section 115 BAA is exercised for previous year 2019-20.

  Particulars Section 115BAA Section 115BAB
9.

Exercise of option by the company to avail the benefit.

On or before the due date u/s 139(1) for furnishing return of income for any previous year relevant to the assessment year. Further, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.

 

Note: The option can be exercised even in a later year, but once exercised, cannot be withdrawn subsequently.

On or before the due date u/s 139(1) for furnishing the first of the return of income for any previous year relevant to the assessment year 2020-21 or subsequent assessment year.

Further, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.

Note: The option has to be exercised at the time of furnishing the first of the returns of income for any previous year. If a person fails to exercise such option, it cannot be exercised thereafter for any subsequent previous year.

 

In case of amalgamation, the option exercised u/s 115BAB shall remain valid in the case of the amalgamated company only and if the conditions mentioned in point no (7) and (8) are continued to be satisfied by such company.

10 Form for exercise of option

Form 10-IC shall be furnished on or before the due date u/s 139(1) for furnishing return of income, either under digital signature or electronic verification code.

Form 10-ID shall be furnished on or before the due date u/s 139(1) for furnishing the first of the return of income for any previous year either under digital signature or electronic verification code.

 

Compiled By CA Sunitha R Furtado

Date : 09.03.2020

DISCLOSURE IN RESPECT OF MICRO, SMALL & MEDIUM ENTERPRISES IN ANNUAL FINANCIAL STATEMENT

DISCLOSURE IN RESPECT OF MICRO, SMALL & MEDIUM ENTERPRISES IN ANNUAL FINANCIAL STATEMENT

Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 strengthens provisions relating to delayed payments to MSME’s by specifying a maximum credit period and higher penal interest if payment is delayed beyond that period. If there is a delay in payment, companies will have to mention the reason for such delay in the statement of accounts. The provisions relating to disclosure requirement are discussed below

Relevant definitions under Micro, Small and Medium Enterprises Development Act 2006 

Section 2(b) “appointed day” means the day following immediately after the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

Explanation.—For the purposes of this clause,—

(i) “the day of acceptance” means,—

(a) the day of the actual delivery of goods or the rendering of services; or

(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;

(ii) “the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;

 Section 2(d) “buyer” means whoever buys any goods or receives any services from a supplier for consideration;

Section 2(e) “enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services;

Section 2(n) “supplier” means a micro or small enterprise, which has filed a memorandum with the authority referred to in clause (a) of sub-section (1) of section 8, and includes, –

– the National Small Industries Corporation, being a company, registered under the Companies Act, 1956;

– the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956;

– any company, cooperative society, society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises;

 Classification of MSME: 

Section 7 of the Act provides for the following classification in respect of industries engaged in production or manufacture of goods or rendering service enterprises:

Category (a) Enterprises engaged in the manufacture or production, processing or preservation of goods and whose investment in plant and machinery are as specified below: (b) Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) are specified below.
micro enterprise does not exceed Rs. 25 lakh; does not exceed Rs. 10 lakh;
small enterprise is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and is more than Rs.10 lakh but does not exceed Rs. 2 crore; and
medium enterprise is more than Rs.5 crore but does not exceed Rs.10 crore. is more than Rs. 2 crore but does not exceed Rs. 5 crore.

 

Notification No. S.O.1722 (E) dated October 5, 2006: In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries.

 In terms of Ministry of MSME, GoI, Office Memorandum (OM) F. No. 12(4)/2017-SME dated March 8, 2017, it is clarified that for ascertaining the investment in plant and machinery for classification of an enterprise as Micro, Small and Medium, the following documents could be relied upon:

(i) A copy of the invoice of the purchase of plant and machinery; or

(ii) Gross block for investment in plant and machinery as shown in the audited accounts; or

(iii) A certificate issued by a Chartered Accountant regarding purchase price of plant and machinery.

Further, the Ministry has clarified that for the investment in plant and machinery for the purpose of classification of an enterprise as Micro, Small or Medium, the purchase value of the plant and machinery is to be reckoned and not the book value (purchase value minus depreciation).

 Provisions relating to DELAYED PAYMENT

Section 15: Liability of buyer to make payment.-

Where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

Section 16: Date from which and rate at which interest is payable

Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed uponat three times of the bank rate notified by the Reserve Bank.

Section 17: Recovery of amount of due

 For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.

Section 18: Reference to Micro and Small Enterprises Facilitation Council

Notwithstanding anything contained in any other law for time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.

Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.

MSME disclosure requirements in Annual statement of accounts

 Section 22: Requirement to specify unpaid amount with interest in the annual statement of accounts.

Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:—

– the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year;

– the amount of interest paid by the buyer in terms of section 16, along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year;

– the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act;

– the amount of interest accrued and remaining unpaid at the end of each accounting year; and

– the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of dis allowance as a deductible expenditure under section 23.

Dis-allowance under Income Tax Act, 1961

Section 23: Interest not to be allowed as deduction from income 

Notwithstanding anything contained in the Income-tax Act, 1961, the amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income-tax Act, 1961, be allowed as deduction.

Section 24: Overriding effect.

The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

Clarification regarding return to be filed for MSME’s by all specified companies

Ministry of Corporate Affairs issued a recent notification dated 22nd January, 2019 in continuation of notification issued by Ministry of Micro, Small and Medium Enterprises dated 2nd November, 2018 for filling of half yearly return by specified companies.

Every Specified company shall file a return as per MSME Form I annexed to this order, by 31st October for the period from April to September and by 30th April for the period from October to March.

“Specified Companies” All the Companies who get supplies of goods or services from Micro or small enterprises and the payment not made with-in 45 days from the date of acceptance or the date of deemed acceptance of goods or services.

“Date of acceptance” means,

(a) the day of the actual delivery of goods or the rendering of services; or

(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;

“Date of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;

For companies in addition to the disclosures mentioned in the schedule III of the Companies Act, 2013, the following disclosures to be given in the notes to the financial statements of company.

Sl. No Particulars As on
March 31,2019 March 31, 2020
1 Principal amount due to suppliers registered under the MSMED Act and remaining unpaid as at year end
2 Interest due to suppliers registered under the MSMED Act and remaining unpaid as at year end
3 Principal amounts paid to suppliers registered under the MSMED Act, beyond the appointed day during the year
4 Interest paid, other than under Section 16 of MSMED Act, to suppliers registered under the MSMED Act, beyond the appointed day during the year
5 Interest paid, under Section 16 of MSMED Act, to suppliers registered under the MSMED Act, beyond the appointed day during the year
6 Interest due and payable towards suppliers registered under MSMED Act, for payments already made
7 Further interest remaining due and payable for earlier years

 

Compiled By

CA. Dhanush D Bolar

Date : 31.01.2020

INCOME TAX BENEFITS FOR SENIOR CITIZEN

INCOME TAX BENEFITS FOR SENIOR CITIZEN

  1. At what age a person will qualify as a senior citizen and very senior citizen under the Income tax law?

​​Before understanding the age criteria, it is very important to know that the tax benefits offered under the Income-tax Law to a senior citizen/very senior citizen are available only to resident senior citizen and resident very senior citizens. In other words, these benefits are not available to a non-resident even though he may be of higher age. The age and other criteria to qualify as a senior citizen and very senior citizen under the Income-tax Law are as follows:

Criteria for senior citizen     Criteria for very senior citizen
Must be of the age of 60 years or above but less than 80 year at any time during the respective year. Must be of the age of 80 years or above at any time during the respective year
Must be resident Must be resident

 

  1. What are the Benefits available to a senior citizen and very senior citizen in respect of tax rates?

​​​Senior citizens and a very senior citizen are granted a higher exemption limit as compared to normal tax payers. Exemption limit is the quantum of income up to which a person is not liable to pay tax. The exemption limit granted to senior citizen and very senior citizen for the financial year 2019-20 is as follows

Senior Citizen Very Senior Citizen
A senior citizen is granted a higher exemption limit compared to non-senior citizens. The exemption limit for the financial year 2019-20 available to a resident senior citizen is ₹. 3,00,000. The exemption limit for non-senior citizen is ₹. 2,50,000. Thus, it can be observed that an additional benefit of ₹. 50,000 in the form of higher exemption limit is available to a resident senior citizen as compared to normal tax payers. A very senior citizen is granted a higher exemption limit compared to others. The exemption limit for the financial year 2019-20 available to a resident very senior citizen is ₹.5,00,000. The exemption limit for non-senior citizen is ₹.2,50,000. Thus, it can be observed that an additional benefit of ₹.2,50,000 in the form of higher exemption limit is available to a resident very senior citizen as compared to normal tax payers.

 

  1. Is there any special benefit available under the Income tax law to senior citizens?

From Assessment year 2019-20 onwards, a very senior citizen filing his return of income in Form ITR 1/4 can file his return of income in paper mode, i.e., for him e filing of ITR 1/4 (as the case may be) is not mandatory. However, he may go for e-filing if he wishes.

  1. Is a Resident senior citizen granted exemption from payment of advance tax?

​​​​​​​As per section 208, every person whose estimated tax liability for the year is ₹.10,000 or more, shall pay his tax in advance, in the form of “advance tax”. However, section 207 gives relief from payment of advance tax to a resident senior citizen. As per section 207, resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.

  1. What are the benefits available in respect of interest on deposits in case of senior citizens?

​​​​​​ Section 80TTB ​of the Income Tax law gives provisions relating to tax benefits available on account of interest income from deposits with banks or post office or co-operative banks of an amount upto ₹.50,000 earned by the senior citizen (i.e., an individual of the age of 60 years or above). Interest earned on saving deposits and fixed deposit, both shall be eligible for deduction under this provision.

Section 194A of the Income Tax law gives corresponding provisions that no tax shall be deducted at source from payment of interest to a senior citizen up to ₹.50,000.

  1. What are the benefits available in respect of expenditure incurred on account of medical treatment of specified diseases on treatment of a senior citizen?

​​​​​​Section 80D​DB of the Income-tax Law gives various provisions relating to tax benefits available on account of expenditure on medical treatment of specified diseases or ailment  (prescribed by the Board, see rule 11DD of Income Tax Rules, 1962). In case of an individual, the aforesaid expenditure should be incurred on medical treatment of an individual or wholly/mainly dependent spouse, children, parents, brothers and sisters of the individual.

The tax payer has to obtain the prescription for the medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed

Amount of Deduction:

(a) amount actually paid on medical treatment specified above; or

(b) ₹.40,000.

However, the limit of Rs. 40,000 will be increased to ₹.1,00,000, if the expenditure is incurred on medical treatment of a senior citizen.

The taxpayer should obtain a copy of certificate (Form No. 10-I) issued by a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed, working in a Government hospital.

  1. What are the benefits available in respect of expenditure incurred on account of medical insurance premium/ medical expenditure to a senior citizen and on account of?

​​​​​​​​ Section 80D of the Income-tax Law gives various provisions relating to tax benefits available on account of payment of medical insurance premium and other related items. In case of an individual, deduction is available in respect of medical insurance policy taken in his own name, or in the name his/her spouse, his/her parents and his/her dependent children.

Deduction on account of medical expenditure shall be allowed only when it is incurred on the health of the aforementioned persons who are senior citizens

The below table captures the quantum of deduction available to an individual/HUF taxpayer under various scenarios:

Scenario Premium Paid Deduction under 80D
  Self, Spouse, children Parents
Individual and parents below 60 years 25,000 25,000 50,000
Individual and family below 60 years but parents above 60 years 25,000 50,000 75,000
Both individual, family and parents above 60 years 50,000 50,000 1,00,000
Members of HUF 25,000 25,000 25,000
Non-resident individual 25,000 25,000 25,000

Compiled By Joel A. D”Souza

Date : 08.01.2020

WHO IS REQUIRED TO FILE INCOME TAX RETURNS AS PER RECENT AMENDMENT IN SECTION 139 OF INCOME TAX ACT?

WHO IS REQUIRED TO FILE INCOME TAX RETURNS AS PER RECENT AMENDMENT IN SECTION 139 OF INCOME TAX ACT?

In case of a person (other than company or firm) – Filing of Income Tax Returns is mandatory only if gross total income is more than the basic exemption limit. Therefore, a person entering into certain high value transactions is not necessarily required to furnish his return of income. In order to ensure that persons who enter into certain high value transactions do furnish their return of income, Finance Act (No 2) 2019 proposed to amend section 139 of the Income Tax Act so as to provide that a person shall be mandatorily required to file his return of income, if during the previous year, he

(i) Has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current account maintained with a banking company or a co-operative bank; or

(ii) Has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) Has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv) Further, currently, a person claiming rollover benefit of exemption from capital gains tax on investment in specified assets like house, bonds etc., is not required to furnish a return of income, if after claim of such rollover benefits, his total income is not more than the maximum amount not chargeable to tax. In order to make furnishing of return compulsory for such persons, it is proposed to amend the sixth proviso to section 139 of the Act to provide that a person who is claiming such rollover benefits on investment in a house or a bond or other assets, under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act, shall necessarily be required to furnish a return, if before claim of the rollover benefits, his total income is more than the maximum amount not chargeable to tax.

(v) Fulfils such other prescribed conditions, as may be prescribed.

These amendments will take effect from 1st April, 2020 and will, accordingly apply in relation to assessment year 2020-2021 and subsequent assessment years.

Other Cases where filing of Income Tax Returns is mandatory

Apart from the amendments introduced in Finance Act (No 2) 2019, for compulsory filing of Income Tax Returns, there are some other cases as well where filing of Income Tax Returns is mandatory. These cases are

  1. In case of Company or Firm irrespective of whether there is a Profit or a Loss.
  2. In case the assessee intends to claim Income Tax Refund.
  3. In case of Carry Forward of Losses under the head “Profits and gains of business or profession” or under the head “Capital Gains” or under the certain specified sources falling under the head “Income from other sources”.
  4. In case of resident having assets or financial interest in an entity outside India. (Not applicable to NRI’s or Resident but not ordinarily resident’s)
  5. In case resident having signing authority in any account located outside India. (Not applicable to NRI’s or Resident but not ordinarily resident’s)
  6. In case a person is in receipt of income derived from a property held under a trust for charitable or religious purposes or a political or research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.
  7. In case of a person (other than company or firm) if the gross total income exceeds basic exemption limit.
  8. In case of a foreign company taking treaty benefits in India.

PENALTY FOR LATE FILING OF INCOME TAX RETURNS

Apart from levy of interest for late payment of income tax, penalty under section 234F would also be levied in case of delay in filing of ITR.

The penalty levied for late filing of Income Tax Return is as follows

Particulars Penalty
If ITR filed before the due date NIL
If ITR filed after Due Date but before 31st December ₹.5,000/-
If ITR filed after 31st Dec but before 31st March ₹.10,000

There is a relief given to small taxpayers whose gross total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be ₹.1,000/-.

This penalty as mentioned above would be required to be paid before the filing of the Income Tax Return.

Further person can be proceeded against for wilful failure to furnish a ROI under section 276CC of the Act. Such proceedings can result in punishment by way of imprisonment and fine as follows.

  1. In a case where the tax is less than ₹.25 Lakhs –with imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.
  2. In a case where the tax exceeds ₹.25 Lakhs – with imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine.

However a person cannot be proceeded against for failure to furnish a Return of Income within the due time under section 139(1) in either of the following two situations:

  1. a) If such a person has furnished a Return of Income before the end of the AY; or
  2. b) If the tax payable by such person other than a company, on the total income determined on regular assessment, as reduced by the advance tax or self-assessment tax, if any, paid before the expiry of the assessment year and any tax deducted at source, does not exceed ten thousand rupees.

 

Compiled By Mahesh Kumar

Date : 27.12.2019

TAX INCENTIVE FOR EMPLOYMENT GENERATION – SECTION 80JJAA OF INCOME TAX ACT, 1961

TAX INCENTIVE FOR EMPLOYMENT GENERATION – SECTION 80JJAA OF INCOME TAX ACT, 1961

Section 80JJAA one of the deductions under the Income-tax Act, 1961 which is provided to incentivise industries to generate additional employment. The deduction provided under the said section, is aimed at encouraging the industry to generate employment across all sectors.

This article lays down the the conditions required to be satisfied to avail of the deduction.

PROVISIONS OF SECTION 80JJAA:

Who can claim the deduction– Any entity whose gross total income includes profit or gains derived from business and is subject to tax audit under section 44AB of the Act can claim the deduction under section 80JJAA of the Act. In case of taxpayers carrying on business, Section 44AB of the Act is applicable where the sales, turnover or gross receipts in business, exceed ₹. 1 Crore in the financial year.

Assessee not covered- Entity whose business is formed by splitting-up/reconstruction of existing business or when the business is acquired by way of transfer or under a business reorganisation.

What is allowed as the deduction – An amount equal to 30% of additional employee cost incurred in the course of business in the financial year is allowed as a deduction, for three consequent years including the year in which such employment is provided. This implies that in each of the three years the entity avails of a total deduction of 130% of the employee cost paid to the new employees.

Prerequisites for availing of the deduction – There must be an increase in the total number of employees on the last day of the financial year, when compared to the total number of employees employed as on the last day of the preceding financial year.

Meaning of additional employeeAn employee who has been employed during the year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the financial year. But does not include

  1. An employee whose total emoluments are more than ₹. 25,000.
  2. An employee for whom the entire contribution is paid by the Government under the Employee’s Pension Scheme notified in accordance with the provisions of the Employee’s Provident Funds and Miscellaneous Provision Act 1932.
  3. An employee who has been employed for a period of less than 240 days in the previous year. In case the assessee is engaged in the business of manufacturing of apparel then the minimum employment period is 150 days. However As per Finance Act 2018, following additional changes will be applicable for the financial year 2018-19: –
  • The limit of 150 days also applied to assessee engaged in the business of manufacturing of footwear or leather products.
  • Where an employee is employed during the previous year for a period of less than 240 days (or 150 days) but is employed for a period of 240 days (or 150 days) in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly.
  1. An employee who does not participate in the recognized provident fund.

To explain in layman terms, the emoluments paid to an “additional employee” shall be considered for computing the deduction, when

  • The individual is employed during the year, say during the financial year 2019-20.
  • The individual is on the payroll of the company on the last day of the financial year, i.e., on 31 March, 2020 and
  • There is an overall increase in the number of employees from the total number of employees employed as on the last day of the preceding year.

Emoluments  on which the deduction is computed  – Emoluments mean any sum paid or payable to an employee in lieu of his employment by whatever name called but does not include: –

  • any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee under any law for the time being in force
  • any lump-sum payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and the like.

Provided that emoluments are paid through banking channels only.

Meaning of Additional Employee Cost: Additional employee cost means total emoluments paid or payable to additional employees employed during the previous year.

In the case of an existing business, the additional employee cost shall be NIL in the following cases: –

  • There is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year;
  • Emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account:

Note: – In the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost.

RESTRICTIVE CONDITION: An organisation may have both kinds of employees i.e. ‘Additional Employees’ and ‘Other Employees’. One of the conditions for granting deduction under this section is that an increase in the number of ‘Additional employees’ should have the effect of increasing the number of employees employed by the employer as on the last day of the preceding year. It appears that any decrease in the number of “Other employees” would be considered while determining the increase in the number of “Additional employees”.

An assessee may believe that by increasing the number of “Additional Employees”, he would be entitled to the deduction u/s 80JJAA of the Act. But such belief would not be tenable if such increase is off-set by reduction in number of “Other employees” because section requires increase in ‘number of employees’ independent of the increase in ‘total number of employees’.

Therefore, it can be concluded that it is the net increase in number of “Additional Employees’ (after offsetting any decrease in the number of “Other employees”) which entitle an assessee to claim deduction under this section. Let us take following example

XYZ Pvt. Ltd. is incorporated on 25th April 2017 and engaged in the business of manufacturing cement. Company has 200 employees as on 31st March 2019.

The company employed 50 new employees during the financial year 2019-20 and 15 employees resigned before 31st March 2020.

Details                                                                                     Number of Employees

(a) Number of the employee as on 31.03.2020.                                             235

(b) Number of the employee as on the 31.03.2019.                                      200

(c) Increase in the number of the employee                                                     35

(d) Number of additional employees employed during the year                 50

(e) Number of the additional employee entitled for deduction                   35

i.e. not exceeding the number of increase in the number of employees as computed in (c).

Compliance requirement Rule 19AB of the Income-tax Rules, 1962 requires the employer to obtain Form 10DA from a practicing accountant reporting the said deduction and other information as mentioned therein. The form is required to be obtained before filing of the income-tax return for the said year.

The provisions of the Act clearly mention that no deduction shall be provided to the employer in case of non-compliance with filing of the said Form 10DA.

Compiled By CA Nitin J Shetty

Date : 20.12.2019

E-ASSESSMENT SCHEME 2019

E-ASSESSMENT SCHEME 2019

CBDT has notified an ‘E-Assessment Scheme, 2019’ vide Notification no. 61/2019 & 62/2019, dated 12-09-2019 as corrected by Notification No. S.O. 3968 (E ) [NO.86/2019 (F.NO. 370149/154/2019-TPL)], DATED 1-11-2019, for the purpose of conducting e-assessments. The scheme shall be come into force with effect from September 12, 2019. Thus, any scrutiny assessment carried out on or after 12-09-2019 shall be governed by this ‘E-assessment Scheme, 2019’.

The key highlights of ‘E-Assessment’ Scheme, 2019 are enumerated below:

Assessment to be carried out through e-assessment

‘Assessment’ for the purpose of this scheme shall means assessment of total income or loss of the assessee under section 143(2) of the Income-tax Act, 1961. Thus, the following assessments shall be outside the purview of this scheme:

  1. a) Income escaping assessment (section 147)
  2. b) Best judgment assessment (section 144)
  3. c) Search assessment (section 153A)

Difference between old e-Assessment schemes and e-Assessment Scheme, 2019

For the purpose of conducting e-assessment, the Income-tax Department had developed an integrated platform, i.e., Income Tax Business Application (ITBA). This was integrated with the ‘E-filing’ portal which was used by the assessee to electronically communicate with the Income-tax Department. During the course of e-assessment, the Assessing Officer was required to send communications through the ‘Assessment Module’ of ITBA which was delivered in the ‘E-filing’ account of concerned assessee.

Now, as per the ‘E-assessment Scheme, 2019’, e-assessment shall be carried through ‘e-assessment Centres’. A ‘National e-assessment Centre’, ‘Regional e-assessment Centres’ and four units (assessment unit, verification unit, technical unit and review unit) shall be set-up by the board to facilitate the conduct of e-assessment proceedings.

It must be noted that earlier, the e-assessment was carried by the Assessing Officer but now the role of Assessing Officer shall be limited to only imposition of penalty, collection and recovery of demand, rectification of mistake, etc. and e-assessment shall be purely carried out only by the ‘e-assessment centres’.

Procedure for e-assessment

The e-assessment shall be carried out in the following manners:

1) ‘National e-assessment Centre’ shall serve a notice on the assessee under section 143(2) specifying the issues for selection of his case for e-assessment.

2) The assessee is required to file his response to the ‘National e-assessment Centre’ within 15 days from the date of receipt of such notice.

3) The National e-assessment Centre shall assign the case selected for the purposes of assessment under this Scheme to a specific assessment unit in any one Regional e-assessment Centre through an automated allocation system.

4) Where a case is assigned to the assessment unit, it may make a request to the National e-assessment Centre for—

  1. obtaining such further information, documents or evidence from the assessee or any other person, as it may specify.
  2. conducting of certain enquiry or verification by verification unit and
  3. seeking technical assistance from the technical unit.

5)  ‘National e-assessment Centre’ may issue appropriate notice to assessee for obtaining information, documents or evidence as required by the assigned assessment unit for the purpose of conducting e-assessment.

6) After taking into account all the relevant material available on the record, the assessment unit shall make a draft assessment order and a copy of such order shall be sent to National e-assessment Centre.

7) The Assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any

8) National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board and it may decide to.

  1. i) Finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee along with the demand notice or refund of any amount due to him.
  2. ii) Provide an opportunity to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order or

iii) Assign the draft assessment order to a review unit in any one Regional e-Assessment Centre, through an automated allocation system, for conducting review of such order.

9) In a case where no response to the show-cause notice is received, the National e-Assessment Centre shall finalize the assessment as per the draft assessment order. If a response is received by the National e-Assessment centre, the same shall be forwarded to assessment unit;

10) The Assessment Unit shall make a revised draft assessment order after taking into account the response furnished by the assessee send it to the National e-assessment Centre

11) The National e-assessment Centre shall, upon receiving the revised draft assessment order, —

  1. a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalise the assessment as per the procedure laid down or
  2. b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee.

9) The National e-assessment Centre shall transfer all the electronic records of the case to the jurisdictional Assessing Officer after the completion of assessment for the purpose of:

  1.   i) Imposition of penalty
  2. ii) Collection and recover of demand

iii) Rectification of mistake

  1. iv) Giving effect to appellate orders
  2. v) Submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the case may be
  3. vi) Proposal seeking sanction for launch of prosecution and filing of complaint before the Court

The National e-assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case.

Personal appearance through video conferencing only

As per the e-assessment scheme, a person shall not be required to appear either personally or through authorised representative in connection with e-assessment before the income-tax authority at the National e-assessment Centre or Regional e-assessment Centre or in any unit set-up under this Scheme.

In a case where a modification is proposed in the draft assessment order and an opportunity is provided to the assessee by serving a notice calling upon him to show cause, an assessee shall be entitled to seek personal hearing so as to make his oral submissions or present his case against the draft assessment order. In such cases, hearing shall be conducted exclusively through video conferencing, including use of any telecommunication application software which supports video telephony.

The CBDT shall establish suitable facilities for video conferencing including telecommunication application software which supports video telephony at such locations as may be necessary.

Appeal against an assessment made by the National E-assessment centre

An appeal against an assessment made by the National e-assessment Centre under the Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer and any reference to the Commissioner (Appeals) in any communication from the National e-assessment Centre shall mean such jurisdictional Commissioner (Appeals).

Penalty proceedings for non-compliance of e-assessment

Any unit under this scheme may send recommendation to the National e-assessment Centre for initiation of any penalty proceedings against assessee or any other person, for non-compliance of any notice, direction or order issued to assessee or any other person.

The National e-assessment Centre shall, on receipt of such recommendation, serve a notice on the assessee or any other person, as the case may be, calling upon him to show cause as to why penalty should not be imposed on him under the relevant provisions of the Act.

Assessment unit shall make a draft order of penalty or drop the penalty proceedings, after recording the reason, by considering the response furnished by assessee against the show-cause notice issued by National e-assessment Centre on receipt of such recommendation.

Delivery of Electronic Records

All notices, orders or any other communication shall be delivered to the assessee as a real time alert, by way of:

  1. a) Placing an authenticated copy in assessee’s registered account;
  2. b) Sending an authenticated copy to registered email address of assessee or authorised representative; or
  3. c) Uploading an authenticated copy on assessee’s mobile app.

Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered email address of such person, followed by a real time alert.

The Assessee shall file his response to any notice or order or any other electronic communication, under this Scheme, through his registered account, and once an acknowledgement is sent by the National e-assessment Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated.

Impact of the above provisions on the assessee

None of the Assessees might have thought that a ‘registered account’ on the portal of the Income Tax Department’s website opened for the purpose of furnishing his Return of Income electronically would be used for service of scrutiny notice or order or any other communication by electronic mode by the Income Tax Department and that such service of electronic records would be complete as soon as the same is uploaded thereon. Valid dispatch of notice under section 143(2) of the Act by the assessing authority to the assessee takes place when such notice enters the ”registered e-filing account’ of the assessee outside the control of the assessing authority  and the valid receipt of the same by the assessee also occurs at the time when the notice enters the ‘registered e-filing account of the assessee.

Impact of the above provisions on any other person

The NeAC (National e-Assessment Centre) may have to communicate with persons other than the Assessee or his authorised representative or inter se between its various Centres and Units. For example, it may serve a notice u/s. 133(6) of the Income Tax Act on a person other than the assessee, calling for certain information/documents from the former.

So, such other person would have to check his emails on regular basis.

Impact of the above provisions on authorised representative of an assessee

At the time of furnishing his Return of Income electronically, an assessee is required by the Department to furnish the e-mail address of his Authorised Representative, if he has any.

Due to above reasons, in respect of all his clients, an Authorised Representative may receive electronic communications from the Department and he would have to check his email regularly so that he does not miss any such communication.

Compiled By CA Sriram V Rao

Date : 18.12.2019

NRE ACCOUNT vs. FCNR(B) ACCOUNT vs. NRO ACCOUNT

NRE ACCOUNT vs. FCNR(B) ACCOUNT vs. NRO ACCOUNT

Particulars NRE Account FCNR (B) Account NRO Account
Who can open an account • NRIs and PIOs

(Individual of Pakistan & Bangladesh require prior approval of RBI)

• NRIs and PIOs

(Individual of Pakistan & Bangladesh require prior approval of RBI)

• Any person resident outside India (including NRI/PIO)

(Individual/Entities of Pakistan & Bangladesh require prior approval of RBI)

A Citizen of Bangladesh/Pakistan belonging to minority communities in those countries i.e. Hindus, Sikhs, Buddhists, Jains, Parsis and Christians residing in India and who has been granted LTV or whose application for LTV is under consideration, can open only one NRO account with an AD bank subject to the conditions mentioned in Notification No. FEMA 5(R)/2016-RB dated April 01, 2016, as updated from time to time.

Who is authorized to open • Authorised Dealer

• Authorised Banks (including co-op bank other than AD)

• Authorised Dealer • Authorised Dealer

• Authorised Banks (including co-op bank other than AD)

Currency • Indian Rupees • Any permitted currency (Any foreign currency which is freely convertible) •Indian Rupees
Type of Account • Savings, Current, Recurring, Fixed Deposit. • Term Deposit only • Savings, Current, Recurring, Fixed Deposit.
Period for fixed deposits • From one to three years, However, banks are allowed to accept NRE deposits above three years from their Asset-Liability point of view. Between 1 to 5 years As applicable to resident accounts.
Rate of Interest As per guidelines issued by the Department of Banking Regulations
Repatriability • Repatriable • Repatriable Not repatriable except for all current income.

Balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million per financial year (April-March) along with their other eligible assets.

Taxability Income earned in the accounts is exempt from income tax. Income earned in the accounts is exempt from income tax. Taxable
Joint Account May be held jointly in the names of two or more NRIs/ PIOs.

NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’ basis (relative as defined in Companies Act, 2013). The resident relative can operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account holder.

May be held jointly in the names of two or more NRIs/ PIOs.

 

May be held jointly with residents on ‘former or survivor’ basis.

Operations by resident POA holder Permitted

• Withdrawal for local payments

• Make investments in India (only if the account holder eligible to make investment in India)

• Remittance to account holder himself through banking channels

 

Prohibited

• Remittance outside India to other than account holder himself

• Make payment by gift to resident

•Transfer funds to other NRE account

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments in rupees, remittance of current income to the account holder outside India or remittance to the account holder himself through normal banking channels. While making remittances, the limits and conditions of repatriability will apply.
Change in residential status from Non-resident to resident NRE accounts should be designated as resident accounts

or

• Funds held in these accounts may be transferred to the RFC accounts

immediately upon change of residential status.

• FCNR (B) deposits allowed to continue till maturity at the contracted rate of interest

 

• AD should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account

• From Person Resident Outside India (PROI) to Person Resident in India (PRI): Immediately designated as resident accounts.

 

 

 

• From PRI to PROI: Immediately designated as NRO account.

Loans in India AD can sanction loans in India to the account holder/ third parties without any limit, subject to usual margin requirements. These loans cannot be repatriated outside India and can be used in India only for the purposes specified in the regulations.

In case of loans sanctioned to a third party, there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/ firm/ company to obtain such facilities.

In case of the loan sanctioned to the account holder, it can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder.

The facility for premature withdrawal of deposits will not be available where loans against such deposits are availed of.

The term “loan” shall include all types of fund based/ non-fund based facilities

Loans against the deposits can be granted in India to the account holder or third party subject to usual norms and margin requirement. The loan amount cannot be used for relending, carrying on agricultural/ plantation activities or investment in real estate.

 

The term “loan” shall include all types of fund based/ non-fund based facilities.

Loans outside India Authorised Dealers may allow their branches/ correspondents outside India to grant loans to or in favour of non-resident depositor or to third parties at the request of depositor for bona fide purpose against the security of funds held in the NRE/ FCNR (B) accounts in India, subject to usual margin requirements.

 

The term “loan” shall include all types of fund based/ non-fund based facilities.

Not permitted
Permissible Credits Credits permitted to this account are inward remittance from outside India, interest accruing on the account, interest on investment, transfer from other NRE/ FCNR(B) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance).

Current income like rent, dividend, pension, interest etc. will be construed as a permissible credit to the NRE account.

Personal cheques of FCA outside India/travellers cheques/bank drafts deposited by the account holder in person during his temporary visit to India.

Tender of foreign currency/banknotes during his temporary visit to India.

Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if subscription amount was paid from NRE/FCNR(B) a/c or out of inward remittances from outside India through banking channels.

Refund of application / earnest money / purchase consideration made by the house building agencies/seller on account of non-allotment of flat / plot / cancellation of bookings / deals for purchase of residential / commercial property, together with interest, if any (net of income tax payable thereon), provided original payment was paid from NRE/FCNR(B) a/c or out of inward remittances from outside India through banking channels and AD is satisfied about the genuineness of the transaction

Inward remittances from outside India, legitimate dues in India and transfers from other NRO accounts are permissible credits to NRO account.

 

Rupee gift / loan made by a resident to a NRI/ PIO relative within the limits prescribed under the Liberalised Remittance Scheme may be credited to the latter’s NRO account.

Permissible Debits Permissible debits are local disbursements, remittance outside India, transfer to other NRE/ FCNR(B) accounts  of the account holder or any other person eligible to maintain such account and investments in India.

Investment in shares / securities / commercial paper of an Indian company or for purchase of immovable property in India provided such investment / purchase is covered by the regulations made, or the general / special permission granted by RBI

The account can be debited for the purpose of local payments, transfers to other NRO accounts or remittance of current income abroad.

Apart from these, balances in the NRO account cannot be repatriated abroad except by NRIs and PIOs up to USD 1 million, subject to conditions specified in Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

Funds can be transferred to NRE account within this USD 1 Million facility.

 

 

Compiled By CA Sunitha R. Furtado

Date : 12.12.2019

AFFORDABLE HOUSING

AFFORDABLE HOUSING

Budget 2019 has brought some relief and hopes for the home buyers and the developers as it was anticipated. After a long low spell, finally some silver linings could be seen as a good number of direct and indirect measures were proposed for the revival of the real estate industry.

Section 80-IBA of INCOME TAX ACT, 1961:

What is Section 80IBA of the Income Tax Act?

Section 80 IBA allows for income tax deduction for assessees who have any gains or profits from the business of building and developing housing projects in the affordable housing segment. The key reason for insertion of Section 80 IBA in the Income Tax Act is to incentive the development of affordable housing for the builders and promoters of these projects. The amount of deduction is equal to hundred per cent (100%) of the profits and gains derived from such business.

Conditions to be satisfied by such housing projects:

(i). Assessee must have the profits and gains derived from the business of building and developing housing projects.

(ii). The concerned authority has approved the housing project after 1st June 2016 but on or before 31st March 2019.

(iii). The assessee must complete the project within 5 years from the date of receiving approval from the competent authority.

(iv). The particular housing project will only be considered as complete when the certificate of project completion as a whole is received in writing from the concerned authorities.

(v). The carpet area of the commercial establishments such as shops within the housing projects should not exceed three per cent of the aggregate carpet area.

(vi). Following are the qualifying criteria regarding size of the plot, residential units and minimum utilization of the Floor Area Ratio (FAR) for a project to qualify for tax benefits u/s 80 IBA.

 

Project Location Area of Land on Which the Project is Located Carpet Area of the Residential Units   Utilisation of Permissible FAR
Delhi, Mumbai, Kolkata and Chennai Not less than 1,000 square metres Not more than 30 square metres Not less than 90%
Project located in locations than the cities listed above Not less than 2,000 square metres Not more than 60 square metres Not less than 80%

 

(vii) No residential unit in the housing project will be allotted to an individual, their spouse or minor children if they already have an allotted residential unit in the project.

(viii) The assessee has to maintain a separate book of accounts for the housing project.

 

  Project Eligible  u/s 80-IBA Other Project Total Income
Gross Total Income 100 100 200
Less: Deduction u/s 80-IBA 100 0 100
Net Profit 0 0 100

 

(ix)  The project is the only housing project on the plot of land as specified in clause (vi)

  • If the project is not completed within 5 years from the date of approval, the profits which were allowed as deduction under this section shall be deemed to profits of the year in which such time limit of completion expires and chargeable to tax under the head “Profits and gains of business or profession”.
  • This deduction is not applicable to an assessee who completes the project as a work contract who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).
  • The provisions of Minimum Alternate Tax us.115JB or Alternate Minimum Tax us.115JC, depending on the status of the assesse, will be applicable on the profits of the housing project which is eligible for deduction under section 80-IBA are available.

Where the projects approved on or after the 1st day of September, 2019, the condition specified in point (vi) above shall be substituted by the following condition

Project Location Area of Land on Which the Project is Located Carpet Area of the Residential Units            Utilisation of Permissible FAR
Metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); Not less than 1,000 square metres Not more than 60 square metres Not less than 90%
Project located in locations than the cities listed above Not less than 2,000 square metres            Not more than 90 square metres Not less than 80%

 

The stamp duty value of a residential unit in the housing project does not exceed forty-five lakh rupees in respect of the projects approved on or after the 1st day of September, 2019.

Deduction eligible even if Developer not “owner” of land under Joint Development Agreement:

Section 80IBA allows deduction to an assessee engaged in the business of building and developing housing projects in the affordable housing segment. There is no requirement that the land must be owned by the assessee seeking the deduction. Under the development agreement, the assessee had undertaken the development of housing project at its own risk and cost. However land owner (under Joint Development Agreement) cannot avail deduction under this section.

 

Section 80EEA of INCOME TAX ACT, 1961:

In order to provide an impetus to the “Housing for all”, the government has now extended the interest deduction allowed for low-cost housing loans taken during the period between 1 April 2019 and 31 March 2020. Accordingly, a new Section 80EEA has been inserted to allow for an interest deduction from AY 2020-21 (FY 2019-20).

This deduction of Rs. 1.5 Lakhs would be applicable from Financial Year 2019-20 onwards and would be over and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.

There are certain conditions for claiming this deduction under the newly inserted Section 80EEA and only a person who satisfies all these conditions would be eligible to claim deduction under this section. These conditions are:-

  • Deduction is available to individual taxpayers only. (Both resident and non-resident)
  • Loan has been sanctioned by a financial institution during the period beginning on 1-4-2019 to 31-3-2020.
  • The stamp duty value of house property does not exceed 45 lakhs.
  • Assesse does not own any residential house property on the date of sanction of loan.

Also, that where a deduction under this section is allowed for any interest, deduction shall not be permitted of such interest under any other provisions of the act for the same or any other assessment year.

 

Compiled By  CA SRIRAM V. RAO.

DATE:  31st October 2019.