New criteria for identifying New Assessees :-

With a view to bring larger number of persons in the tax net, now any person who satisfies even one of the following six indicators is required to file a tax return: -

1) Owns/leases a motor vehicle;or,
2) Occupies specified floor area of an immovable property whether by way of ownership, tenancy or otherwise;or,
3) Incurs expenditure for himself or any other person on travel to any foreign country during the previous year;or,
4) Subscribes to a telephone;
5) Holds a Credit card not being an add on Card;
6) Is a Member of a club where entrance fee charged is Rs.25,000 or more.

The new one-by-six scheme takes effect from 1st day of August, 1998.

Yes. Floor area of the immovable property for urban agglomeration of different cities has been specified. Complete details and specification(s) of some cities are given in the table on the next page.

Has the one-by-six scheme been extended to more cities?

Yes, the one by six scheme has been extended from 133 cities to 4) 989 cites now.

Is there any exemption for senior-citizens?

Yes. If an individual, aged 65 years or more, not earning income from business or profession, will not be required to file a return under this scheme, if he has a telephone connection or immovable property in his name. But, if they fulfil any of the other four criteria, then they have to file their return under this scheme.

Are there any special exemptions for travel to neighbouring countries?

Yes. Travel to any foreign country shall not include travel to the neighbouring countries and places of pilgrimage viz. Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka as notified by Central Board of Direct Taxes in the Official Gazette on 20th August, 1998 through Notification No. 10676. Mecca has also been so notified.

Is there any penalty for non-filing of return under this scheme?

Yes. In case the return of income is not furnished, although required on the basis of above indicators, the assessee could be fined Rs.5000.

Rebate of Income Tax

How is the rebate of Income Tax calculated?

A tax rebate @ 20% of the specified payments is allowable u/s 88 of I.T. Act. From A.Y.2001-02 the maximum limit of rebate is Rs. 16,000. For authors, artists & sportsmen, it is 25%, but the limit is Rs. 17,500.

Who can claim Rebate u/s 88?

An individual or an H.U.F. can claim this rebate. ON WHICH PAYMENTS IS TAX REBATE AVAILABLE?

It is available on the following payments:-

(a) Life Insurance premium.

(b) Provident Fund including Public Provident Fund.

(c) C.T.D. of Post Office (10 or 15 years)

(d) ULIP

(e) N.S.C.

(f) Repayment of housing loans for construction or acquisition of a residential house. The maximum amount qualifying for rebate is increased to Rs.20,000 w.e.f. A.Y.2001-02.

(g) As subscription, upto Rs. 10,000, to any units of any notified Mutual Fund.

(h) Investments made in the equity shares of new eligible companies, and Mutual Funds specified U/S10(23D) of are eligible for tax rebate @20% of the investments.

Is there a special Rebate of Income Tax avaliable to persons who have attained the age of 65 years?

Yes. Now, w.e.f. A.Y. 2001-02, an individual who is of the age of 65 years or more at any time during the previous year, would be entitled to a rebate U/S 88B from the amount of Income-tax chargeable on his total income equal to hundred per cent of such income-tax or an amount of Rs. 15,000, whichever is less.

Is there a special Tax Rebate for lady assessees below the age of 65 years?

Yes. A new section 88C has been introduced w.e.f. 1.4.01 applicable from the A.Y.2001-02. Now a lady assessee would be entitled to a rebate from the amount of Income-tax chargeable on her total income equal to hundred per cent of such income-tax or an amount of Rs. 5,000, whichever is less, before allowing any rebate / relief under Chapter-VIII of the IT Act, 1961.

To claim this rebate the lady has to be resident in India in the year in which the rebate is claimed.

If a lady crosses age 65 years during the financial year, would benefit of sec. 88b be available to her?

Yes. She has to be below the age of 65 years, at any time during the previous year.

Is it true that a special rebate of Income Tax, on subscription to shares and debentures, is available to Tax payers?

Yes. effective from A.Y. 97-98 and subsequent years, a tax rebate of a sum equal to twenty per cent is available, of the amounts invested in debentures of and equity shares in a public company engaged in development, of infrastructure sector, including power, telecommunication etc..

The following are the salient features of these provisions:-

1) The eligible shares or debentures should form part of a public issue, which is approved by the government.

2) The proceeds of the issue should be wholly and exclusively utilised for the purpose of developing, maintaining and operating a new infrastructure facility as defined under the Income-tax Act, or for generating or for generating and distributing power.

3) A lock-in-period of three years is to be provided in respect of such equity shares or debentures. In case of any transfer of shares or debentures before three years of acquisition, the entire amount of rebate of tax allowed, earlier in any previous year, shall be treated as tax payable in the hands of the subscriber, in the year in which it is transferred.

4) Where a deduction is claimed and allowed under this clause, the cost of such shares or debentures shall not be taken into account for the purposes of section 54EA.

5) In respect of the eligible shares or debentures, a higher limit of qualifying investment of seventy thousand rupees would be available, as against sixty thousand rupees in case of other qualifying investments.

Has a special rebate been given for low paid salaried employees?

Yes. With a view to provide greater incentive for the marginal savings,. with effect from 1st April, 2002, ie. in relation to the assessment year 2002-2003 and subsequent years, in the case of a taxpayer having a gross salary income which does not exceed rupees one lakh (before allowing deduction under section 16 ) and which is not less than 90% of his gross total income from all sources, the amount of rebate on savings would be 30% instead of normal rebate of 20%.

What are the precautions to be taken when allowing Rebate(s) under chapter-viii?

Firstly, rebate(s) are allowed from the amount of Income- tax computed before allowing such rebate(s).Secondly, the rebate(s) should not exceed the amount of income-tax computed before allowing such rebate(s).

In case Tax Rebate is allowed in an assessment year, can it be withdrawn in a subsequent assessment year?

Yes. The tax rebate once allowed can be withdrawn subsequently in the following cases:-

1) If the tax payer fails to pay any Life Insurance Premium or terminates the contract of insurance before premia have been paid for 2 years.

2) If the tax payer fails to pay premium for ULIP before contributions have been paid for 5 years.

3) If the tax payer transfers his house property (in respect of which tax rebate has been availed) before the expiry of 5 years from the end of financial year in which possession of such property was obtained or receives back the amount.

In above cases, the aggregate amount of the deductions/rebate so allowed shall be deemed to be tax payable for the A.Y. in which the contract of insurance is terminated/ceased or the property is sold or the amount is received back, as the case may be.

Can you claim Tax Rebate in respect of long term capital gains?

No. As per section 112(3) tax rebate u/s. 88 cannot be claimed in respect of tax on long term capital gains. However, senior citizens are entitled to tax rebate u/s. 88B even in respect of tax on long term capital gains provided their Gross Total Income, including Long Term Capital Gains, does not exceed Rs. 1,20,000.

Is tax rebate allowable even if lic premium is in excess of 10% of sum assured?

Now, w.e.f. 1996-97 and subsequent years, rebate of premium paid on LIC policies will still be available even when the premium paid is in excess of 10% of the actual sum assured.However, if the policy is surrendered within two years of the date of insurance the amount of rebate allowed earlier, would be treated as income tax payable in the year of such surrender.

What should be the source of such payment or deposit?

The source must be income chargeable to tax during the relevant previous year [ Para 7.4 of circular No. 15/2001 F.No.275/192/2001 - IT(B)] dated 12.12.2001

What is the duty of the DDO before allowing claims of Tax Rebates?

The DDO Officer is duty bound to be satisfied about the actual deposits/ payments made by the employees, by calling for such information as they deem necessary before allowing the rebate(s). In case the DDO is not satisfied about the genuineness of the employee's claim regarding any deposit/payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such claims by filing his return of income and furnishing the necessary proof etc.before the Assessing Officer.

New procedure of assessment in brief:-

Previously, there was a procedure for processing the return, making prima facie adjustments and raising additional tax, wherever necessary and sending intimation to the assessee in all cases. With effect from June 1, 1999, section 143 has been amended to provide that if any tax or interest is found due on the basis of return filed under section 139 or in response to a notice under section 142(1), after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of 142 (2), an intimation is now sent to the assessee specifying the sum so payable, and such intimation is deemed to be a notice of demand.

If any refund is due on the basis of such return, it is granted to the assessee.

Now the new provisos provide that the acknowledgement of the return is deemed to be the intimation under 143(1) where either no sum is payable or no refund is due.

Now the law is that except for issuing intimations where any sum is payable by the assessee or refund is due to him, the acknowledgement is deemed to be an intimation and the final proof of assessment in cases where notices u/s 143(2) .have not been issued.

In a case where the assessee has paid the full tax and interest on the basis of income returned by him will the assessee be given an assessment order?

No. The acknowledgement receipt for filing the Income Tax Return would itself be the proof of completion of all proceedings under the Act, in case no notice is received by the assessee indicating that his case has been selected for scrutiny.

What would be the status of the returns filed prior to 1st june 1999 and which were pending on that date?

The law stands amended w.e.f 1.6.99, so the amended provisions will apply not only in respect of all returns filed on or after 1st June, 1999 but also will apply to all such returns filed prior to 1st June, 1999 and which were pending processing as on that date.

What happens in a case where tax or interest is found to be due on the basis of Income declared?

In such cases intimation is sent to the assessee requiring him to pay the amount of tax or interest due from him.

In a case where a Refund is due will the assessee get the assessment order?

In such cases the Assessing Officer will grant the refund to the assessee along with the intimation u/s 143(1).

What is the present position of Rectification of mistake in an intimation sent to an assessee?

With effect from 1st June, 1999 the Law provides that an Income-tax Authority may rectify any intimation under section 143(1) under section 154 of the IT Act' 61.

Penalties & prosecutions

Penalties

Under the new scheme of taxation, the thrust on penalties has been greatly reduced and the emphasis has been shifted to recovering penal interest for defaults. Very briefly, some of the provisions for imposing penalties in the case of salary tax payers are given herein below :-

1. Penalty for concealment:- A penalty in addition to any tax payable by him, which is not less than but which does not exceed three times the amount of tax sought to be evaded by reason of concealment is imposable.

2. Penalty for failure to comply with a notice u/s 143(2) or 142(1):- A penalty of Rs. 10,000 may be imposed.

If an assessee does not file his return of Income, is any penalty imposable upon him?

Yes. Penalty of Rs. 5000 is imposable for non-filing of return which is to be filed under one-by-six scheme. In other cases, the penally for late filing is Rs.5,000. Interest is also chargeable for non-filing or late filing.It is seen that a large number of persons having salary income which are subject to TDS do not file their return. Now, as loss from house property is be allowed to be adjusted against salary income at the source itself, so, T.D.S. will not be deducted on the amount of loss so adjusted. Therefore, filing of returns is absolutely necessary to check the correctness of such claims. So, w.e.f. 1-4-99 i.e. from A.Y. 1999-2000, a penalty of Rs.1000 for not filing of return by due date was imposable. Now this is Rs. 5,000 w.e.f. A.Y. 2001-02. No penalty was provided for failure to file return of income from A.Y. 1989-90 to A.Y. 1998-99. But the penal provisions have been found to be necessary to ensure that persons having taxable income file their returns of income.

Prescribing maximum penalty for defaults committed with reference to sections 197a and 203:-

Penalty under sub-section (2) of section 272A is imposable for failure to deliver in due time a copy of the declaration under section 197A or for failure by the person deducting tax to furnish a certificate of deduction to the person to whom such payment is made or credit given within the prescribed period. These defaults are continuous in nature and attracted penalty at the rate of Rs. 100-200 per day without any maximum limit. This maximum limit shall now, w.e.f. 1-4-99, not exceed the amount of tax deductible or collectible, as the case may be.

Prosecutions :-

Apart from the penalties mentioned above, wilful attempt to evade taxes, wilful failure to furnish returns of income and making a false statement in any verification are punishable offences for which prosecution(s) can be launched under IT Act, 1961 and / or under the Indian Penal Code.

Appeals and Revisions

Tax authorities under Direct Tax Laws have powers to make tax payers comply with their obligations under Tax Acts and to investigate those who do not. Exercise of such powers and discretion by tax authorities may generate adverse situations for the taxpayer which may need to be agitated in an appeal.

Rectification of an order by an Income Tax authority

In case of obvious or prima facie mistakes, the taxpayer can approach the concerned authority for RECTIFICATION of the order. Such mistakes may be as to facts as well as of law.

Is there a time limit for disposal of application for Rectification u/s 154?

Yes. With effect from 1.6.01, sub-section (8) in section 154 provides that where an application for amendment under this sub-section is made by an assessee on or after 1.6.01 to an income-tax authority referred to in the said section, the authority shall pass an order within six months from the end of the month in which the application is received by it, either making the amendment or refusing to allow the claim.

Revision Petition before the commissioner

The tax payer can also approach the Commissioner of Income-tax for REVISION of the orders of the authorities administratively subordinate to him where the assessee does not file appeal against the order. The Commissioner shall within a period of 1 year from the end of the financial year in which the application is made for revision decide the said application.

Is there a fee for filing revision application before the commissioner of Income Tax?

Sub-section (5) of the said section provides that a fee of twenty-five rupees shall accompany every application by an assessee for revision under this section. Now, from 1st June, 2001 every application by an assessee for revision under this section shall be accompanied by a fee Rs. 500.

First appeal to commissioner (appeals)

Any assessee aggrieved by the intimation sent to him or by the order of assessment, penalty of rectification made by an Assessing Officer can file first appeal before Commissioner (Appeals) within 30 days from the date of receipt of the relevant order.

There is a prescribed form for filing the appeal which is Form No. 35. The grounds of appeal and the statement of facts are also required to be filed along with it.

The appeal is admitted for hearing only if at the time of filing of appeal the tax due on income returned has been paid.

In cases where the appellate authority wants to admit additional evidence, an opportunity to examine that is given by the authority to the A.O. The CIT(Appeals) has also powers of enhancing the assessed income or penalty. He can also remand a case to an Assessing Officer to enquire and furnish a report on specified matters.

Has there been any change in powers of the commissioner (appeals)?

Yes. Under the existing provision contained in sub­section (1) of section 251 of the Income-tax Act, in an appeal filed before a CIT (Appeals) against an order of assessment, the CIT(Appeals) may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by him, after making such further enquiry as may be necessary.

With a view to help bringing about an early finalisation to the assessment and to avoid prolonging the process of litigation, section 251 now provides that, in an appeal filed before the CIT(Appeals) against an order of assessment, the CIT(Appeals) shall not set aside the assessment or refer the case back to the Assessing Officer for making fresh assessment. This will be applicable to appellate orders passed by CIT(Appeals) on or after 1.6.2001.

Second appeal to appellate tribunal

An assessee aggrieved by the orders of the CIT(Appeals) or by the orders of revision or rectification prejudicial to him made by Commissioner of Income-tax, can file further appeal to the Appellate Tribunal.

The appeal is to be filed in Form No. 36 within 60 days from the date of receiving the relevant order.

The Assessing Officer, not satisfied with the order of the first Appellate Authority, may also file an appeal with the Tribunal. No fee is required to be paid.

Stay granted by appellate tribunal for recovery of demand is operative for what period?

Under the existing provision of section 254, an advisory time-limit of four years has been prescribed for disposed of appeals by the Tribunal. However, in many cases, a Stay granted by the Tribunal on recovery of demand till the disposal of appeal, makes the demand irrecoverable for several months or even years.

Therefore, with effect from 1st June, 2001, where in an appeal filed by the assessee, the Appellate Tribunal passes an order granting stay, the Tribunal shall hear and decide such appeal within a period of one hundred and eighty days from the date of passing such stay order, failing which the stay granted shall stand vacated on the expiry of the aforesaid period. The amendment will apply w.e.f. 1.6.01.

Appeal to the high court

Now, w. e. f. 1-10-98, an appeal can be filed within 120 days, against the orders of the Tribunal dire