March 4, 2010
INDIA—CHANGES IN FISCAL ENVIRONMENT IN PROPOSED BUDGET
According to an email received from Noshir Dadrawala (email@example.com), “The amendments proposed in the new Budget under the Income Tax Act concerning charitable organizations are soft and at places even encouraging.” Here are the Highlights:
· Implementation of the Direct Tax Code (DTC) has been postponed by a year and may be introduced only from April 1, 2011;
· A Goods & Services Tax (GST) may also be introduced from April 2011;
· The Finance Act 2008 had changed the definition of “charitable purpose” such that “Advancement of any other object of general public utility” would not be considered as “charitable purpose” if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for any fees or other consideration. The Finance Bill 2010 has attempted to provide some relief with retrospective effect from the 1st day of April, 2009 by exempting the aggregate value of the receipts from such activities up to ten lakh rupees;
· A small amendment has been proposed in sub-section (3) of section 12AA of the Income Tax Act such that the Commissioner, if satisfied that the activities of a trust or institution “which has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996]” are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing canceling the registration of such trust or institution.
· In section 35(1) it is proposed that the words “scientific research association” be changed to just “research association” and that the tax deduction allowed under this section be enhanced from “one and one-fourth” to “one and three-fourth”
· The service tax continues to be retained at 10 per cent to pave the way for GST. However, certain services, hitherto untaxed, are expected to be brought within the purview of the service tax levy. These new services will be notified separately.
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