ISSUE # 4 2014 FEBRUARY

VAVNCO focusLearn > Equip > Enable > Shine > Prosper

All efforts are made to keep the content of this newsletter correct and up-to-date. But, this newsletter does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this newsletter cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this newsletter or any

part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this newsletter/author will not be liable in any manner whatsoever for such loss or damage.

Contents: Page No.

Statutory Due Dates for February 2014 - 1

Taxation of Agricultural Income - 2

Taxation on Dividends - 4

TDS on Sale of Immovable Property - 6

Who is he? – Satya Nadella - 8

FOR PRIVATE CIRCULATION ONLY

Commerce Insight – Financial Awareness – Legal Compliances – Economic Advancements

Commerce Insight Financial Awareness Legal Compliances Economic AdvancementsCommerce Insight Financial Awareness Legal Compliances Economic Advancements

Due Dates for February 2014

4

Taxation of Agriculture Income as per Income Tax Act, 1961

- N S M Anjana

griculture income is exempt under the Indian Income Tax Act. This means that income earned from

agricultural operations is not taxed. 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;

a. Any rent received from land which isused for agricultural purpose: Assessees do not have to pay tax on rent or revenue from agricultural land. Such land should, of course, be assessed to land revenue in the country or be subject to a local rate. Further, there must be a direct link between the agricultural land and the receipt of income by way of rent or other revenue (for instance, a landlord could receive revenue from a tenant).

b. Any income derived from such land byagricultural 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.

c. Income attributable to a farm housesubject 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. Income from such farm houses is considered agricultural income. The definition of `farm houses’ covers

buildings owned and occupied by both cultivators of agricultural land and

assessee who receive rent or revenue from agricultural land. The sole purpose of such farmhouses should be for use as dwellings for the cultivators or use as store houses. Normally, the annual value of a building is taxable as `income from house property’. However, in the case of a farm house, the annual value would be deemed agricultural income and would, thus, be exempt from tax.

d. Income earned from carrying nurseryoperations 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 agriculturaloperations:- Agricultural operation means that efforts have been induced for the crop to sprout out of the land. The ambit of agricultural income also covers income from agricultural operations, which includes processing of agricultural produce to make it fit for sale. iii. Land cultivation is must - Somemeasure of cultivation is necessary for land to have been used for agricultural purposes. The ambit of agriculture covers all land produce like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands. However, the breeding of livestock, aqua culture, dairy farming, and poultry farming on agricultural land cannot be construed as agricultural operations.

A

2

iv. If any rent is being received from theland 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 houseas agricultural income the farm house building must be situated on the land itself only and is used as a store house/dwelling house.

vi. Ownership is not essential. In the caseof rent or revenue, it is essential that the Assessee have an interest in the land (as an owner or mortgagee) to be eligible for tax-free income. However, in the case of agricultural operations it isn’t necessary that the person conducting the operations be the owner of the land. He could be just a tenant or a subtenant. In other words, all tillers of land are agriculturists and enjoy exemption from tax. In some cases, further processes may be necessary to make a marketable commodity out of agricultural produce. The sales proceeds in such cases are considered agricultural income even though the producer’s final objective is to sell his products.

Certain income which is treated as Agriculture Income;

a. Rent received for agricultural land.

b. Income from growing flowers andcreepers.

c. Share of profit of a partner from a firmengaged in agricultural operations.

d. Interest on capital received by a partnerfrom a firm engaged in agricultural operations.

e. Income derived from sale of seeds.

Certain income which is not treated as Agricultural Income;

a. Income from poultry farming.b. Income from bee hiving.c. Income from sale of spontaneouslygrown trees. d. Income from dairy farming.e. Purchase of standing crop.f. Dividend paid by a company out of itsagriculture income. g. Income of salt produced by flooding theland with sea water. h. Income from butter and cheese making.i. Receipts from TV serial shooting in farmhouse is not agriculture income.

Losses from agricultural operations could be carried forward and set off with agricultural income of next eight assessment years. Tax after including agricultural income in total income – Although agricultural income is fully exempt from tax, the Finance Act, 1973, introduced a scheme whereby agricultural income is included with non-agricultural income in the case of non-corporate assessees who are liable to pay tax at specified slab rates. The process of computation is as follows:

a. Income tax is first calculated on the netagricultural income plus the assessee’s total income from non-agricultural sources.

b. Income tax is then calculated on thebasic exemption slab increased by the assessee’s net agricultural income.

c. The difference between (a) and (b) isthe amount of tax payable by the assessee. This process of computation is, however, followed only if the assessee’s non-agricultural income is in excess of the basic exemption slab.

3

Taxation of Dividend as per Income Tax Act, 1961 - R S Lavanya

ividend taxation gets attracted where there is:

a. Companyb. Shareholdersc. Accumulated Profit

Following sections are related to dividends:

1. Section 2(22) – Definition of Dividend

2. Section 8 – Chargeability

3. Chapter XII D – CDT –a. Sec. 115-O CDTb. Sec. 115 -P Interest for delayedpayment of CDT @ 1% PM c. Sec. 115-Q Default by companyand principal officer- Assessee in default

4. Sec 10(34) – Exemption in respect ofdividend referred to in 115-O(for shareholders)

5. Sec 194 – TDS on dividend as of now onsection 2(22)(e) – paid to resident

6. Sec 195 – TDS on dividend paid to non-resident. Even though section 2(22) defined the term dividend; the items included in the definition are deemed dividends. Normally capitalized profit means bonus issue. Dividend distribution tax is attracted for final dividend, interim dividend, 2(22) (a) to 2(22) (d).

Dividend includes:

a. 2(22)(a) Distribution of assets to theshareholders by the company

b. 2(22)(b) To any Shareholder –distribution of debentures or debenture stock certificate.

OR To preference share holder – distribution of bonus shares.

c. 2(22)(c) Distribution by company inliquidation, immediately before liquidation

d. 2(22)(d) Distribution to shareholdersleading to reduction of capital.

e. Applicable in case of company in whichpublic are not substantially interested (let be A company)*

Accumulated profits mean:

a. In case of company in liquidation - dueto compulsory acquisition by government, corporation etc – Profits earned due upto 3 years immediately preceding the year of acquisition should be excluded.

b. In case of company in liquidation notdue to the reason mentioned in point a above – Profits upto the date of liquidation.

c. In case company is not in liquidation –Profit earned till the date of distribution, declaration or payment as the case may be.

D

4

5

TDS on Sale of Immovable Property - Sumukh K S

he Finance Minister in his budgetspeech for 2013-14 introduced TDS onSale of Immovable Property

transactions of over Rs. 50 lakhs. He stated that "Transactions in immovable properties are usually under-valued and under-reported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds 50 lakhs. However, agricultural land will be exempt."

Income Tax Provisions

The provisions relating to TDS on sale of Immovable Property are contained in Section 194(1A) of the Income Tax Act. As per the provisions, w.e.f. 01.06.2013 TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the consideration paid or payable is more than Rs 50,00,000/- irrespective of the mode of payment (i.e. by cash, cheque, draft etc.).

TDS Rates

TDS is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller to the buyer, the TDS rate would go up to 20% as per the provisions of section 206 AA.

TAN Requirement

The provisions of Section 203A relating mandatory requirement of TAN for deduction of TDS shall not be attracted. i.e., Purchaser of immovable property isnot required to obtain TAN for deduction of TDS.

Payment and return of TDS

Tax is required to be deducted at the time of payment or at the time of giving credit to the seller(s) of immovable property, whichever is earlier. In case of advance payment, TDS is required to be deducted at the time of making advance payment itself. Similarly, in case payment is made by installments, the TDS is required to be deducted at time of paying each such installment.

In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all i.e. if there are more than one buyer or seller and the individual sale or purchase price is less than Rs. 50 lacs but the aggregate value is more 50 lacs, the provisions of Section 194(1A) shall be applicable and TDS would be required to be deducted by buyer(s) at the time of making payment to seller(s) by filling separate form 26QB for each such payment.

The TDS deducted u/s 194-IA is required to be paid electronically (online) on Challan-cum-Statement Form No.26QB to the credit of Central Government within a period of seven days from the end of the month of

T

6

deduction. The payment of TDS u/s 194-1A can be made on website of NSDL https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp.

Further, the purchase is required to furnish certificate of deduction of tax at source in Form No.16B to the seller within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QB.

Procedure to download Form 16B

1. Login to:

www.tdscpc.gov.in/en/deductor-home.html

2. Click on Register as New User and youwill be asked to provide basic details such as your PAN, Date of Birth, Last Name, Middle Name and First Name and would also be required to further validate details of either tax deducted (option 1) or tax paid by you (option 2). Fill details under Option 2.

3. On Validation of details, your accountwill be created. User ID by default would be your PAN. You would have the option of providing password of your choice.

4. An email would be automaticallygenerated sent to your email address providing you an activation link with a second message will be sent on your mobile.

5. After activating your account, you canview 26AS statement and download Form 16B in case you are the purchaser of immovable Properties.

6. To download form 16B, go to download.Click on request for form 16B. Validate details and submit your request. After some time the same shall be available under download menu. Click on download,

click of available and download and save it your computer.

Please note that Form 16B is available for download after 2-3 working days from the date of deposing TDS.

Provisions for Non Resident Indians

If payment is made to a Non-Resident then provisions of section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20% + Education Cess (2% of TDS) + Secondary & Higher Education Cess (1% of TDS) on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI(s).

Non Compliance

In case of failure to comply with the provisions, interest and penalty would be imposed on the purchaser of immovable property. Interest will be charged @ 1% p.m or part of the month for failure todeduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

7

Who is He?

Born in 1969 in Hyderabad, India, Satya Nadella finished his schooling at the Hyderabad Public School, and

earned his Bachelor of Engineering degree in Electronics and Communication from the Manipal Institute of

Technology. He, like so many of the engineers at the time, then completed his engineering education abroad,

with a Master of Science degree in Computer Science from the University of Wisconsin-Milwaukee. Finally, he

rounded off his education with a Master of Business Administration degree from the University of Chicago.

Nadella started his career at Sun Microsystems, before moving to Microsoft in 1992, where he joined as a

Program Manager in the Windows Developer Relations group. Nadella quickly rose up the ranks, becoming the

Senior Vice President of Research & Development for the Online Services division, the Vice President of the

Microsoft Business Solutions group (MBS), and notably, the President of the $19 billion Microsoft Server and

Tools Business.

During his meteoric rise, the Indian-American also founded and led the 'Microsoft bCentral' small business

online services group, was general manager for the company's Commerce Platforms group, and is considered

responsible for spearheading the development of the Microsoft Commerce Server, Microsoft BizTalk Server,

Microsoft Office Small Business, and Microsoft Dynamics ERP and CRM products.

Nadella is also considered to have played a significant part in Microsoft's foray into advanced technologies like

digital rights management (DRM) and interactive television (ITV).

As the head of the company's Server and Tools Business, Nadella spearheaded the 'transformation of the

business and technology from client-server software to cloud infrastructure and services,' according to

Microsoft.

-NDTV.com

8