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Drumbeat: Ad Buzzaar
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Wednesday, June 10, 1998
Finance Bill 1998: The key amendments
R N Lakhotia
The Finance (no 2) Bill, 1998 provides that there will not be any change in the rates of income tax for individuals, companies and other income tax payers, for the financial year 1998-99 relevant to the AY 1999-2000. However, the personal income tax exemption limit will be raised from Rs 40,000 to Rs 50,000. Thus, all assesses having income over Rs 50,000 will have an income tax saving of Rs 1,000. Likewise, senior citizens will not be required to pay any income tax upto Rs 1,05,000 because of the increased exemption limit. Besides a ‘Karvivad Samadhan’ scheme is being introduced for a quick and voluntary settlement of income tax dues as also the dues regarding direct tax and indirect tax enactments by offering waiver of part of direct tax and indirect tax enactments by offering waiver of part of the various taxes and interest, and providing immunity against institution of prosecution and imposition of penalty The scheme would be in force from 1.9.98 till 31.12.1998. Of course, the assessee shall berequired to withdraw the appeals pending before the various appellate authorities and courts. The scheme has various detailed provisions. The essence of one important provision is that the declarant will be required to pay income tax at 30 per cent (35 per cent for firms and companies) on the amount of income in dispute (other than search and seizure cases). There are certain amendments in relation to wealth-tax, expenditure tax and interest tax The gift-tax is proposed to be abolished from 1.10.98. The important proposed amendments to IT Act, 1961, have been analysed below in two parts as per the period of their operation. The sections referred in this article relate to the IT Act, 1961. Amendments effective from the AY 1999-2000 are given below:
Depreciation to be allowed on intangible assets -- Secs 2(11), 32, 35A and 35AB: The scope of depreciation is widened so as to provide that depreciation will also be allowed where intangible assets are owned wholly or partly by the assessee and are used bysuch assessee for the purpose of his business or profession. The intangible assets such as know-how, patent-rights, copy rights, trade marks, licenses, franchises or any other business or commercial rights of the provisions for amortisation of expenditure on the acquisition of all patent-rights or copyrights would be operative only upto the AY 1998-99 Gift to be taxed as income in the hands of donee -- Secs 2(24)(xii), 10(3) and 56: With the withdrawal of the gift-tax under the GT Act, 1958, from 1.1.1998, it is proposed that any amount received by a person without adequate consideration, that is by way of gift, would be charged to income tax as his “income from other sources'. This would also include receipts from certain transactions with inadequate consideration. That would also be deemed to be the income from other sources. The amount received by a person without consideration would not be considered as casual and non-recurring receipt, within the exemption limit of Rs 5,000 under sec 10(3).However, certain exemptions have been provided so as to exclude receipts at the time of marriage (upto a limit of Rs 2 lakhs), receipts from non-residents and NRIs through banking channels, inheritance and amount received from relatives for meeting educational and medical expenditure. In addition to this, an aggregate of receipts of gifts upto Rs 30,000 every year would also be exempt Omission of “not ordinarily resident' status -- Secs 2X30, 5 and 6: The status of “not ordinarily resident' would be omitted so that in the case of a person who is a resident in India, the income in India as well as outside India would become taxable Full exemption to educational and medical institutions withdrawn -- Secs 10(22), (22A) & (23C): The educational and medical institutions which have so far enjoyed complete exemption would now become eligible to claim income tax exemption under secs 11 and 12 of the IT Act, subject to fulfilment institutions would, however, be exempted under section 10 (23C)(iiib) Modifications regarding standard deduction of salaried tax payers -- Sec 16(i): The limit of standard deduction for all assesses having salary income upto Rs 1 lakh has been hiked from Rs 20,000 to Rs 25,000. However, this will remain unchanged at Rs 20,000 for salaried employees with salary between Rs 1 lakh and Rs 5 lakhs so that standard deduction will not be available to salaried tax payers having salary income over Rs 5 lakhs Exemption for medical reimbursement -- Sec 17(2): The amount paid by the employer in respect of any expenditure actually incurred by the assessee on his medical treatment or treatment of any member of his family will be exempt upto Rs 15,000 as against the present sum of Rs 10,000 Increased deduction from income from house property -- Sec 24: The deduction in respect of let-out properties in respect of repairs and collection of rent, whether incurred or not has been enhanced from 1/5th to 1/4th of the annual value. Further, as an incentive forself-occupied house, the deduction for interest paid on capital borrowed for construction, repairs, renewal, etc of the house property has been raised from Rs 15,000 to Rs 30,000(The author is an advocate and tax consultant) Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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