QUESTIONS & ANSWERS
Schedular system will continue
Is there any change in the schedular system in the new Code?
The schedular system continues with different names with two main classes described as ordinary sources and special sources. Ordinary sources will be income from employment (renaming Salaries), income from house property, income from business, capital gains and income from residuary sources (renaming Other Sources). Since the same source of income computed under different heads will often be different, controversies regarding classification of heads of income will persist.
Income from residuary sources would include dividend, interest, horse racing and all benefits which arise from business, where it is not assessable as business and various miscellaneous receipts and voluntary contributions received from non-relatives as before. Receipt from insurance policies other than those policies solely with reference to life will now be made taxable.
The limit under Sec. 40A(3) disallowing expenditure exceeding Rs. 20,000 enhanced the limit to Rs. 35,000 for payments of carriage of goods by road but the enhanced limit for this class of payment will be reduced to Rs. 30,000 in the Code. Unexplained credits, investments and expenditure now under Sec. 68, 69, 69A, 69B and 69C will be treated as income under this residuary head. This will mean that even where they are relatable business, treatment under residuary head will curtail the right to set off of carried forward business losses.
The amount received as loan or deposit exceeding Rs. 20,000 received or repaid by means other than account payee cheques will now be treated as income under this head under Sec. 56 (p) and (q) replacing penalty under Sec. 271D and 271E. On repayment, money goes out of the disclosed funds so that the provision treating it as income defies logic.
Withdrawal in respect of incentive savings (now under Sec. 80C) would attract tax under this head.
S. RAJARATNAM
Printer friendly
page
Send this article to Friends by
E-Mail
Business
