Penalties under the Income Tax Act

There are different penalties leviable under the Indian Income Tax Act for defaults under the various provisions of the act committed by an assessee. There are many provisions under which the penalties are leviable under the act. There are some penalties that are mandatory in nature while in most of the cases penalty is leviable at the discretion of the Assessing Officer (AO). The major penalties that are imposed under the act along with their nature of defaults are given as under:

1.  Default: Concealment of Income or furnishing inaccurate particulars of income.

     Minimum Penalty: 100% of tax sought to be evaded.

     Maximum Penalty: 300% of tax sought to be evaded.

 2. Default: Failure to keep or maintain books as required u/s 44AA.

      Minimum Penalty: Rs. 25,000/-

 3. Default: Failure to get accounts audited or furnish report u/s 44AB.

      Minimum Penalty: ½% of the total sales, turnover or gross receipts.

      Maximum Penalty: Rs. 100,000/-

 4.  Default: Taking/Repaying or accepting any loan or deposit in contravention of the provisions of section  269SS /269T  (Loan taken or repaid above Rs. 20,000 in cash).

      Minimum Penalty: Amount of loan/deposit so taken or accepted or repaid. 

5. Default: Failure to furnish Return of Income.

     Minimum Penalty: Rs. 5000/-

 

How to pay taxes online?

E-payment of taxes (Income Tax and TDS) is mandatory for the following types of assesses: All Companies and firms All persons other than companies or firm who are liable to get their accounts audited u/s 44AB of the Income Tax Act. Income tax can be paid easily from your workplace or from any place online by taking the following steps: Open the website www.tin-nsdl.com and select “Pay taxes online” . OR                Click on the following link:                  https://onlineservices.tin.nsdl.com/etaxnew/Index.html Select the relevant challan from the NSDL site and enter your PAN/TAN as applicable. Enter the challan details, and select your relevant bank and “Submit”. Select whether you are a Retail Internet Banking user or Corporate Internet Banking user. Log in to your Bank Internet Banking portal with your user ID and password. Enter the details of the tax amount and authorize the payment. Download the acknowledgement of your tax payment. For more information on e-payment of taxes click on the following link: http://www.incometaxindia.gov.in/ePayment.asp?abc=1

Agricultural Income

Agriculture income is exempt under the Indian Income Tax Act. This means that income earned from agricultural operations is not taxed. The reason for exemption of agriculture income from Central Taxation is that the Constitution gives exclusive power to make laws with respect to taxes on agricultural income to the State Legislature. However while computing tax on non-agricultural income agricultural income is also taken into consideration.

What does the term Agricultural Income mean?

As per Income Tax Act income earned from any of the  under given three sources meant Agricultural Income;

(i)     Any rent received from land which is used for agricultural purpose.

(ii)   Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce.

(iii)   Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc.

 

Now income earned from carrying nursery operations is also considered as agricultural income and hence exempt from income tax.

In order to consider an income as agricultural income certain points have to be kept in mind:

(i)  There must me a land.

(ii)  The land is being used for agricultural operations.

(iii)   Agricultural operation means that efforts have been induced for the crop to sprout out of the land .

(iv)  If any rent is being received from the land then in order to assess that rental income as agricultural income there must be agricultural activities on the land.

(v)   In order to assess income of farm house as agricultural income the farm house building must be situated on the land itself only and is used as a store house/dwelling house.

 

Certain income which is treated as Agriculture Income;

(a)    Income from sale of replanted trees.

(b)   Rent received for agricultural land.

(c)    Income from growing flowers and creepers.

(d)   Share of profit of a partner from a firm engaged in agricultural operations.

(e)    Interest on capital received by a partner from a firm engaged in agricultural operations.

(f)    Income derived from sale of seeds.

 

Certain income which is not treated as Agricultural Income;

(a)    Income from poultery farming.

(b)   Income from bee hiving.

(c)    Income from sale of  spontaneously grown trees.

(d)   Income from dairy farming.

(e)    Purchase of standing crop.

(f)    Dividend paid by a company out of its agriculture income.

(g)   Income of salt produced by flooding the land with sea water.

(h)   Royalty income from mines.

(i)     Income from butter and cheese making.

(j)     Receipts from TV serial shooting in farm house is not agriculture income.

 

Certain points to be remembered;

(a)    Agricultural income is considered for rate purpose while computing tax of Individual/HUF/AOP/BOI/Artificial Judicial Person.

(b)   Losses from agricultural operations could be carried forward and set off with agricultural income of next eight assessment years.

(c)    Agriculture income is computed same as business income.

Wealth Tax

Wealth tax is charged for every assessment year in respect of net wealth. Wealth tax is also a direct tax just like income tax computed on net wealth of an assessee. But it is charged on the amount of net wealth exceeding Rs. 15 Lacs.

Rate of wealth tax is 1%.

Wealth tax is charged on the net wealth of an assessee valued as on valuation date. The valuation date for chargeability of wealth tax is 31st March of the financial year.

Net wealth means taxable wealth. Broadly speaking it represents the excess of assets over debts.
The term assets means ;
(i) Guest house, residential house or commercial building.
(ii) Motor Cars.
(iii) Jewellery, bullion, utensils of gold silver, etc.
(iv) Yachts , boats and aircraft.
(v) Urban land, and
(vi) Cash in hand

Public Provident Fund Account

Public Provident Fund account is a tax saving instrument . Many people use this account to save their taxes. There are many benefits of this account other than it is used as a tax saving instrument. Any person whether he be man or women, married or bachelor salaried or self employed must have a PPF account. A PPF A/c is opened for a term of 15 years and is used for investing for a long term. This term of 15 year does not include the year in which it is opened. During a financial year a maximum of Rs. 70,000/- can be invested into the account.

A PPF a/c has many of its advantages:
(i) A PPF a/c is opened for period of 15 years.
(ii) Interest received on amount invested is also tax free.
(iii) A PPF a/c can be operated with a minimum investment of Rs. 500/- per year also.
(iv) A loan can also be obtained on PPF A/c.

If a person has defaulted in investing the minimum in his PPF a/c he can reactivate his account by investing the minimum amount required and paying a nominal penalty of Rs. 50/-.

Year Ending Profits

With this another Financial Year coming to an end here are some important steps to be taken in the form of links :

1. List priorities while choosing tax-saving scheme

http://www.cainindia.org/news/3_2009/list_priorities_while_choosing_taxsaving_scheme.html

2.  Personal Tax: 10 things to do before March 31

http://www.cainindia.org/news/3_2009/personal_tax_10_things_to_do_before_march_31.html

3. Be careful while filing your tax return

http://www.cainindia.org/news/2_2009/be_careful_while_filing_your_tax_return.html

Read all the links carefully to make tax returns easier.

Income Tax rates applicable for A.Y. 2009-10

Tax Rates as applicable for different persons for the A.Y. 2009-10 are as under:

 

For resident woman (who is below 65 years of age at any time during the previous year:

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 1,80,000       Nil                                            Nil                    Nil

Rs. 1,80,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 1,80,000)

Rs. 3,00,000- Rs          Rs. 12,000 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 52,000 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

Note : Surcharge @ 10% is applicable if Net Income Exceeds Rs. 10 lacs

 

For resident senior citizen (who is 65 years or more of age at any time during the previous year:

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 2,25,000       Nil                                            Nil                    Nil

Rs. 2,25,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 2,25,000)

Rs. 3,00,000- Rs          Rs. 7,500 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 47,500 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

Note : Surcharge @ 10% is applicable if Net Income Exceeds Rs. 10 lacs

 

 

For any other individual, every HUF/AOP/BOI/artificial judicial person-

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 1,50,000       Nil                                            Nil                    Nil

Rs. 1,50,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 1,50,000)

Rs. 3,00,000- Rs          Rs. 15,000 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 55,000 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

 

Firms:-

A firm is taxable at the rate of 30% for the Assessment Year 2009-10.

Surcharge: 10% of Income Tax if net income exceeds Rs. 1 Crore.

                   Nil if income does not exceed Rs. 1 Crore.

Education Cess: 3% of Income Tax + Surcharge( if applicable).

 

Companies:-

A domestic company is taxable at the rate of 30% for the Assessment Year 2009-10.

Surcharge: 10% of Income Tax if net income exceeds Rs. 1 crore.

                   Nil if income does not exceed Rs. 1 Crore.

Education Cess: 3% of Income Tax + Surcharge( if applicable).

Diwali Greetings

WISHING ALL OF YOU A VERY HAPPY AND PROSPEROUS DIWALI. MAY THE GODESS LAXMI EMPOWER YOU AND YOUR FAMILY WITH HER NINE BLESSINGS* NAME* FAME* WEALTH* HAPPINESS* HUMANITY* GYAN* BHAKTI* SHAKTI*

HAPPY DIWALI

Tax saving Instruments

As per the Indian Income Tax Law in computing the total income of an assessee being an individual or HUF benefit of deduction to the aggregate of Rs. One lakh rupees is given.  The deduction is available provided the amount is invested /deposited or paid by the assessee in any of the items listed in section 80C of the Act. The most common type of investments/payments for which deduction is available are:

1.  
   1. Payment of Life Insurance Premium for himself, spouse and children and in case of an HUF payment of Life insurance Premium for any of member thereof.
   2. Contribution to Public Provident Fund. (max. upto Rs. 70,000/-)
   3. Contribution by employee to Recognised Provident Fund.
   4. Contribution by employee to Appproved Superannuation Fund.
   5. Any security specified by Central Government for this purpose.
   6. Contribution to Unit Linked Insurance Plan.
   7. Payment of tution fees for children for full time education in India (available for two children only)
   8. Repayment of Housing Loan taken from Central Govt, State Govt or Bank and other specified institutions.
   9. Term Deposit for not less than 5 yrs from scheduled bank and which is in accordance of scheme.
   10. Five year deposit in Post Office Time Deposit Scheme.
   11. Subscription of Units of Mutual Fund Specified for this purpose.
   12. Subscription for National Saving Certificate VIII issue.

 

 

Full Text of this section on available on the below mentioned link.

http://law.incometaxindia.gov.in/TaxmannDit/Displaypage/dpage1.aspx?md=2&typ=cn&yr=2008&chp=194

Other Profits

Some special points to remember:

 

1. If an individual makes a gift in cash or by cheque to his spouse and that money is utilized by the spouse for purchase of an asset . The income earned by the spouse from that asset will not be clubbed in the income of the individual.
2. In order to invoke clubbing provisions there must be relation of  husband and wife. That means if a person transfers asset to his would be spouse before marriage income arising from such asset will not be included in the income of  transferor.
3. Negative income is also income. Under the Income Tax Act income does not means positive income only. The term income includes negative income or loss also.
4. Income from accretion to asset is not taxable in the hands of the transferor.
5. Income from saving out of pin money  is not included in the income of husband.
6. Income of minor child is clubbed with the income of the parent whose income after excluding the share of minor’s income is greater.
7. If trust is created for the benefit of minor child and income during minority of child is being accumulated and added to corpus of trust and income from increased corpus is given to the child after attaining majority, clubbing provisions are not applicable.
8. A loan is not transfer for the purpose of this chapter.