Section 87A – Income Tax Rebate

A new section 87A by Finance bill 2013 has been introduced for Income Tax Deduction of Rs. 2000/- for Assessment Year 2014-15.  This rebate can be availed Tax payer/Assessee under section 87A.

The proposed new section 87A seeks to provide that an assessee, being an individual resident in India, whose total income does not exceed Rs. 5,00,000/- , shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under Chapter VIII of the Income-tax Act) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of Rs. 2,000/- whichever is less.

Points:

1.   These amendments will take effect from 1st April, 2014 and will, apply in relation to the assessment year 2014-15 and subsequent assessment years.

2.   Rebate is available  only to individuals

3.   No rebate to Non Resident.

4.   If the total tax payable is less than Rs. 2000/-, rebate is restricted to “total tax payable”.

5.   Rebate benefit is not applicable to a super senior citizen, since he is already fully exempted up to Rs. 5 lakh.

Service Tax Amnesty Scheme (VCES – 2013)

Service tax amnesty scheme (VCES 2013) was introduced in Finance Act, 2013 and is effective from 10th may 2013. Tax payers can pay tax dues from October 1, 2007 to December 31, 2012 without interest and penalty.

Why VCES?

At present about 17 lakh taxpayers are registered under Service Tax. Of these only 7 lakh have been paying the levy; VCES is aimed at encouraging those who haven’t yet started paying service tax promptly.

Features of VCES

Based on Notification no 10 dated 13th May, 2013, circular no 169 dated 13th May, 2013 and circular no 170 dated 8th August, 2013, salient feature of are given below:

Eligibility

A person who was required to pay Service Tax under the Service Tax provisions for the period 1st October 2007 to 31st December, 2012, but remains outstanding as on 1st March, 2013 is eligible to get benefit of the scheme provided the same was not detected by Service Tax Department as on 1st March, 2013.
Scheme is available to people who have already registered under service tax. Those who are not registered can first get themselves registered under Service tax and then apply for amnesty scheme.

Benefits of the Scheme

• No interest to paid for delay in payment. Interest is normally levied up to 18% on delayed payments.
• No penalty will be levied, which normally may go up to 50% of the service tax.
• No matter shall be reopened thereafter in any proceedings under the Act before any authority or court relating to the period covered by such declaration

Payment of Tax Dues declared by the scheme

• 50 % of total dues declared in the declaration filed must be paid on or before 31st December, 2013. Amount paid under the scheme will not be refunded.
• If 50 % amount declared is not paid on or before 31st December, 2013, the declarant cannot get benefit of the scheme, and the amount may be adjusted against his service tax liability.
• Balance 50% is to be paid on or before 30th June, 2014.
• Balance amount, if any, as on 1st July, 2014 is to be paid on or before 31st December, 2014 with 18% interest.
• Balance amount, if any, as on 1st January, 2015 can be recovered by the dept as if it is Service Tax  due but not paid.

Rejection of the Declaration

• The dept may reject the declaration if it feels that the declaration is “substantially false”. In such case, the declarant may be required to revise upward  “Tax Dues” amount stated in the declaration filed by him.
• Otherwise, he may be required to pay Service Tax with Interest and Penalty.

Should you apply for VCES

Given the benefits of no interest and penalty, it is advisable to take the benefit of this scheme. Application should be made at the earliest with complete details in the prescribed format to avoid possibilities of rejection.

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