Income Tax Circular No: 01/ 2009 (27-Mar-09) Finance Act, 2008 - Explanatory Notes on provisions relating to Direct Taxes
| Section/Schedule | Particulars/ Paragraph number |
| Finance Act. | |
| 2/First Schedule. | Rate structure. 3.1-3.3.12 |
| Income-tax Act. | |
| 2(1A), Explanation 3. | Widening the scope of "agricultural income". 4.1-4.3 |
| 2(15). | Streamlining the definition of "charitable purpose". 5.1-5.3 |
| 10(26AAA). | Exemption to a "Sikkimese" individual. 6.1-6.3 |
| 10(26AAB). | Exemption of income of Agricultural Produce Marketing Committee or Board. 7.1-7.2 |
| 10 (29A), sub-clause (h). | Exemption of income of Coir Board. 8.1-8.2 |
| 10A (1) proviso, 10B (1) proviso. | Extension of time limit for availing deduction under section 10A and 10B. 9.1-9.4 |
| 35(1)(iia). | Weighted deduction for sum paid to a company to be used by such company for scientific research. 10.1-10.2 |
| 35D (1)(ii). | Extending the provision of section 35D relating to amortization of preliminary expenses to all undertakings. 11.1-11.2 |
| 40(a)(ia). | Amendment to the provisions of section 40(a)(ia) of the Income-tax Act. 12.1-12.3 |
| 40A(3), 40A (3A). | Amendment to the provisions of section 40A(3) of the Income-tax Act. 13.1-13.4 |
| 43(6), Explanation 6. | Clarification regarding definition of 'written down value' under section 43(6). 14.1-14.3 |
| 10(43), 47(xvi). | Amendment to give effect to reverse mortgage scheme. 15.1-15.6 |
| 49(2A). | Capital gains on transfer in the context of foreign currency exchangeable bonds. 16.1-16.3 |
| 80C (xxiii) & (xxiv). | Enlargement of the scope of eligible saving instruments under section 80C. 17.1-17.6 |
| 80D. | Additional deduction for health insurance premium paid for parents. 18.1-18.7 |
| 80IB(9), proviso. | Sunset provision for deduction for refining of mineral oil under section 80-IB(9). 19.1-19.5 |
| 80IB(11C). | Five year tax holiday to hospitals located in certain areas. 20.1-20.4 |
| 80ID (2)(iii). | Five year tax holiday for hotels located in specified districts having a World Heritage Site.21.1-21.3 |
| 115JB, Explanation 1 clause (h) and clause (viii), Explanation 2. | Clarification regarding add back of 'deferred tax', 'dividend distribution tax', etc. for calculating book profit under section 115JB. 22.1-22.4 |
| 115O(1A). | Relief in respect of tax on distributed profits of domestic companies. 23.1-23.3 |
| 115WB(2)(B)(iii), 115WB(2)(E) Explanation, 115WB(2)(K), 115WC(1)(C), 115WC(1)(d). | Rationalisation of the provision of the Fringe Benefit Tax. 24.1-24.4 |
| 115WKB. | Deemed payment of tax by the employee where FBT on securities allotted to him is recovered by the employer. 25.1-25.4 |
| 139(1), Explanation 2 (a), 44AB, 115WD Explanation 1(a). | Advancement of due date from 31st October to 30th September in respect of certain categories of assessees.26.1-26.6 |
| 142(2C), proviso. | Granting of power to the assessing officer to extend the time for completion of special audit under sub-section (2A) of section 142. 27.1-27.4 |
| 143(1), 115WE. | Correction of arithmetical mistakes and adjustment of incorrect claim under section 143(1) through Centralised Processing of Returns. 28.1-28.6 |
| 147, 2nd proviso, 151. | Amendments in respect of reassessment proceedings to clarify correct legislative intention. 29.1-29.5 |
| 153A(2), 153B, Expl (vii). | Provision for assessment in the case of annulment of the proceeding under section 153A/153C. 30.1-30.7 |
| 156. | Intimation u/s 143(1) deemed to be notice of demand u/s 156. 31.1-31.2. |
| 193(ix). | Removal of TDS on Corporate Bonds. 32.1-32.2 |
| 194C (1), clause (k). | Enlargement of scope of TDS under section 194C to cover association of persons and body of individuals. 33.1-33.3 |
| 195(6), 295. | Provision for furnishing of information regarding deduction of tax at source under section 195. 34.1-34.3 |
| 199, 203, 206C(4). | Amendments to the provisions of Dematerialisation of TDS and TCS certificates. 35.1-35.4 |
| 201(1), 191. | Consequences of non-deduction of tax at source. 36.1-36.6 |
| 153(4), 251, 273AA, 278AB. | Rationalisation of revised settlement scheme. 37.1-37.10 |
| 254 (2A), 3rd proviso. | Clarification regarding stay of demand by Income-tax Appellate Tribunal. 38.1-38.7 |
| 268A. | Consequence of non-filing of appeal in respect of cases where the tax effect is less than the prescribed monetary limit. 39.1-39.4 |
| 271(1B). | Clarification regarding requirement of satisfaction for initiation of penalty under section 271(1)(c). 40.1-40.8 |
| 282A. | Authentication of documents/notices/letters. 41.1-41.4 |
| 292BB, 143(2), proviso, clause (ii). | Service of notice and the time limit for issuance of notice under section 143 (2) of the Income-tax Act. 42.1-42.9 |
| 292C (2). | Presumption as to books of accounts, other documents, etc. 43.1-43.5 |
| 36, 40, 88E, and 98, 99 of Finance Act, 2004. | Rationalization of provision of Securities Transaction Tax. 44.1-44.10 |
| 36 and 102 to 121, Chapter VII of Finance Act, 2008. | Commodities Transaction Tax. 45.1-45.7 |
| 95 (3) of Finance Act, 2005. | Discontinuation of Banking Cash Transaction Tax. 46.1-46.4 |
| 4th Schedule, Part A, rule 3 (1), proviso. | Extension of time limit set out in Rule 3 for complying with the condition laid down in Clause (ea) of rule 4 of Part A of the Fourth Schedule to the Income-tax Act. 47.1-47.5 |
| Wealth tax Act. | |
| 17(1), 3rd Proviso and Explanation to 17(1B). | Amendments in respect of reassessment proceedings to clarify correct legislative intention. 29.1-29.5 |
| 17A(4), 2nd Proviso, 18BA, 23A(9A), 35GA. | Rationalisation of revised settlement scheme. 37.1-37.10 |
| 18(1A). | Clarification for requirement of satisfaction for initiation of penalty. 40.1-40.8 |
| section 42. | Service of notice deemed to valid in certain circumstances. 42.1-42.5 and 42.7 |
| section 42D(2). | Presumption as to books of accounts, other documents, etc. 43.1-43.5 |
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Introduction
1.1 The Finance Act, 2008 (hereafter referred to as "the Act") as passed by the Parliament, received the assent of the President on the 10th day of May, 2008 and has been enacted as Act No. 18 of 2008. This circular explains the substance of the provisions of the Act relating to direct taxes.
2. Changes made by the Act.
2.1 The Act has,-
(i) specified the rates of income-tax for the assessment year 2008-09 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial Year 2008-09;
(ii) amended sections 2, 10,10A, 10B, 35, 35D, 36, 40, 40A, 43, 44AB, 47, 49, 80C, 80D, 80IB, 80ID, 88E, 111A, 115AD, 115JB, 115O, 115WB, 115WC, 115WE, 139, 142, 143, 147, 151, 153, 153A, 153B, 153C, 153D,156, 191, 193, 194C, 195, 199, 201, 203, 206C, 251, 254, 271, 292C and 295 of the Income-tax Act, 1961;
(iii) inserted new sections 115WKB, 268A, 273AA, 278AB, 282A and 292BB in the Income-tax Act, 1961;
(iv) amended rule 3 of the Part A of the fourth Schedule to the Income-tax Act, 1961;
(v) amended section 17, 17A, 18, 23A and 42D of the Wealth-tax Act, 1957;
(vi) inserted new section 18BA, 35GA and 42 in the Wealth-tax Act, 1957;
(vii) inserted sections 102 to 121 in Chapter-VII of the Act;
(viii) amended section 98 and 99 of Finance (No.2) Act, 2004;
(ix) amended section 95(3) of the Finance Act, 2005.
3. Rate structure
3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2008-09
3.1-1 In respect of income of all categories of taxpayers liable to tax for the assessment year 2008-09, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These rates are the same as those laid down in Part III of the First Schedule to the Finance Act, 2007 for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging of tax payable in certain cases during the financial year 2007-08.
3.1-2 The major features of the rates specified in the said Part I are as follows:
3.1-3 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person.
Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a cooperative society, firm, local authority and company) as under:
| Income chargeable to tax | Rate of income-tax | ||
| Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person | Individual woman, resident in India and below the age of sixty- five years | Individual senior citizen, resident in India, who is of the age of sixty-five years or more | |
| Up to Rs. 1,10,000 | Nil | Nil | Nil |
| Rs. 1,10,001 - Rs. 1,45,000 | 10% | Nil | Nil |
| Rs. 1,45,001 - Rs. 1,50,000 | 10% | 10% | Nil |
| Rs. 1,50,001 - Rs. 1,95,000 | 20% | 20% | Nil |
| Rs. 1,95,001 - Rs. 2,50,000 | 20% | 20% | 20% |
| Exceeding Rs. 2,50,000 | 30% | 30% | 30% |
3.1-4 Surcharge - In the case of every individual, Hindu undivided family, association of persons or body of individuals, surcharge shall be levied only where the total income exceeds ten lakh rupees. For this purpose, the income-tax on such income shall be reduced by the amount of rebate of income-tax computed under Chapter VIII-A of the Income-tax Act, 1961. The income-tax so reduced shall thereafter be enhanced by a surcharge for the purposes of the Union at the rate of ten per cent. of such income-tax. Marginal relief shall be provided to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over Rs. 10,00,000/- is limited to the amount by which the income is more than Rs. 10,00,000/-. For instance, the amount of income-tax and surcharge on a total income of Rs. 10,20,000/- calculated at the rates specified would have been Rs. 2,81,600/- i.e. income-tax of Rs. 2,56,000/- and surcharge of Rs. 25,600/-. The additional tax liability incurred thereon as compared to a person having a total income of Rs. 10,00,000/- is Rs. 31,600/-. However, additional income as compared to a person...
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