Planning your taxes

• Dividends income is now fully exempt. All dividends received by all categories of assessees from domestic companies are exempt from tax, irrespective of the amount. This is a major tax concession from the current year.

• Long term capital gains of NRI's is now to be taxed at reduced rates. Earlier income from foreign exchange assets and long term capital gains arising on transfer of such assets constitutes a separate block, and were charged to tax @ 20% in the hands of NRI's. As per the amended Act, the long term capital gains arising from the sale of foreign exchange assets will now be taxed at a reduced rate of 10%. However, the investment income will continue to be taxed @ 20%.

• Monetary ceiling of Standard Deduction allowable on Salaries has now been increased to Rs.20000.

• A new section has been inserted which provides for amortisation of Telecom Licence Fee paid by the assessees for acquiring any right to operate telecommunication services, over the period of licence. The amortisation is allowed in the year in which the amount is paid and in subsequent years during which the licence is in force.

• Earlier ceilings were imposed on the deductibility of expenditure incurred by the assessees on entertainment, advertisements, travelling & maintenance of a guest house. These ceilings have now been withdrawn. Now these expenses will be allowed without any ceiling, subject of course, to their genuineness and business expediency .

• New Presumptive Taxation Scheme has been introduced for retail traders. The salient features of the scheme are as under:

  1. The scheme is optional and is applicable to an assessee engaged in retail trade whose turnover does not exceed Rs. 40 lakhs.

  2. The profits of the assessee from such business shall be deemed to be 5% of the total turnover, or higher if the assessee declares higher income.

  3. All expenses pertaining to the business, including the depreciation shall be deemed to hane been allowed while calculating this profit, and so no further deduction in respect of these sums shall be allowed.

  4. The assessee opting for this scheme is not required to maintain any books of accounts.

  5. If the assessee does not opt for this scheme, then the assessee is required to maintain the books of accounts and get them audited, irrespective of the amount of his turnover.

• Tax rebates to senior citizens have now been made more attractive. Under the amended provisions, a resident individual who has attained the age of 65 is entitled to a rebate of Rs. 10000 from the amount of tax payable by him. This is in addition to the rebates available to an assessee under other provisions of the Act.

• The scope of provisions requiring assessees to file the return of income has been enlarged to include people who fulfil any two of the following four conditions:

  1. He is the owner, tenant or occupier of a house property, exceeding specified floor area to be notified by the Central Board of Direct Taxes.

  2. He is the owner or lessee of a motor vehicle.

  3. He is subscriber to a telephone.

  4. He has incurred any expenditure on himself or any other person for foreign tour during the year.

     If any two of these conditions are satisfied, and the person resides in a place notified by the Board, then it is obligatory for him to file his return of income, irrespective of the amount of income.