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Budget: More on self-assessment and interest- Part II

Written by: Staff
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PROPOSED AMENDMENT IN PROVISION PERTAINING TO SELF ASSESSMENT AND INTEREST

The Existing Provisions

The existing provisions of section 140A provides that where any tax is payable on the basis of any return required to be furnished under section 115WD or section 115WH or section 139 or section 142 or section 148 or section 153A or as the case may be section 158B after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.

Sub section (1A) of section 140A provides that for the purpose of sub section (1), interest payable under section 234A shall be computed on the amount of the tax on the total income as declared in the return as reduced by the advance tax, if any, paid and any tax deducted or collected at source.

THE PROPOSED AMENDMENT

The Finance Bill 2006 seeks to provide a relief to the assessee in the form of credit for MAT and Tax paid in a country or specified territory outside India for the purpose of calculating interest under section 140A. It seeks to amend sub section (1) as under after taking into account:

1. The amount of tax, if any, already paid under any provision of this Act.

2. Any tax deducted or collected as source;

3. Any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India;

4. Any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and

5. Any tax credit claimed to be set off in accordance with the provisions of section 115JAA;

Similarly in sub section (1A), the following clause is proposed to be substituted under section 234, to be computed on the amount of the tax on the total income as declared in the return as reduced by the amount of:

1. Advance tax, if any, paid;

2. Any tax deducted or collected at source;

3. Any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India;

4. Any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and

5. Any tax credit claimed to be set off in accordance with the provisions of section 115JAA;

The Explanation to section 140A is also proposed to be amended to define 'Assessed Tax' as tax on total income as reduced by the amount of TDS, TCS, relief of Tax or deduction claimed under section 90, 91 or 90A and MAT and section 115JAA.

INTERPRETATION

This proposed amendment comes as a major relief to the assessee paying MAT or taxes of a foreign country. The proposal recognises that such taxes are no different from taxes deducted at source, collected at source or paid in advance and hence should receive similar treatment for the purpose of levy of interest. The Finance Minister seems to have adopted a pragmatic approach while proposing this concession.

CREDIT FOR MAT AND FOREIGN TAXES FOR THE PURPOSE OF INTEREST U/Ss 234A, 234B&234C

Similar amendments have been proposed in sections 234A, 234B&234C, to provide for reduction of tax credit allowed to be set off under section 115JAA from the tax on total income and reducing the amount of relief of tax allowed under sections 90&90A and deductions from Indian Income Tax allowed under section 91, from the tax on total income, for the purpose of levy of interest for defaults in furnishing return of income (section 234A), interest for defaults in payment of advance tax (234B) and interest for deferment of advance tax(234C).

As said in the case of proposed amendment in section 140A, the inclusion of MAT and foreign taxes for the purpose of sections 234A, 234B and 234C would also come as a major relief to the taxpayers.

These amendments will take effect from April 1, 2007 and will accordingly apply in relation to the assessment year 2007-08 and subsequent years.

Related Stories

Part I - A Budget to maintain growing economy

Part III - Budget: Amendments pertaining to TDS and TCS

Part IV - Budget: Know more on quoting PAN and TAN

Part V - Proposing S.115BBB and the Budget

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