A New Institution Created - S.139B

A new institution of Tax Return Preparers (TRP) has been provided in the Finance bill. They are authorized to prepare and file returns for the non-corporate assessees whose accounts are not statutorily auditable. Chartered accountants should not complain now.

Anonymous Donations

Donations, in the first place cannot be classified as ‘income’ of a person. However, this is now treated as income for charitable and religious institutions, unless it is a ‘corpus’ donation.

Now, all non-specific anonymous donations, where name and address are not properly mentioned will not only be treated as income but will also be taxed at the highest rate of 30%.

Of course, purely religious institutions will not be affected. For example; Tirupati, Churches, Mosques et al.

Payment of Interest not recognised unless actually paid

Where interest is converted as loan, by the lender, such conversions will not be treated as payment u/s 43B for allowance of interest.

I fail to see the logic behind it. If assessee borrows from other lender to ACTUALLY pay the interest, the Revenue would not mind, I suppose, and should allow the deduction.

Fixed Deposits qualify for Deductions u/s 80C (xxi)

Provided such term deposit is not less than 5 years and is in a scheduled bank.

What if somebody prematurely encashes the term deposit. No provision for this exigency!

Associations, if specified u/s 90A, will transgress national sovereignty but with approval

This is a significant change ushering the tax regime to a truly multinational environment, where two transnational corporations can enter into a double taxation avoidance or relief treaty with approval of the Indian Government and get a preferential treatment of lower taxes under the IT Act of India.

What if a foreign specified entity is not empowered to enter into such agreement under the law of the country where it is resident! Or there is a dispute about taxability in the other country!

I would like to know whether such agreements will override tax treaties.

Long –Term Capital gains from transfer of Securities now subject to MAT u/s 115JB

Such Capital gains shall be treated as taxable income for the purpose of Section 115JB. Rate of tax u/s 115JB also has been increased from 7.5% to 10%.

Banks and Financial Institutions may be affected adversely by this provision.

IPOs now less Attractive

Investments in the eligible issues of equity shares was a good avenue for those assesses who earned long-term capital gains but could get away with the investment in eligible IPOs u/s 54ED. Now such investment opportunity will no more be available after March 31st, 2006.