Direct Tax Code 2010

Topics: Taxation, Tax, Capital asset Pages: 57 (13649 words) Published: March 14, 2013

Direct Taxes Code 2010 - Analysis


Table of Contents
? Income Business ? Alternate Tax Minimum ? Distribution Tax Dividend ?Profit Tax Branch ? International Taxation ? Residence Rules ? Treaty Override ? Controlled Foreign Company ? Anti-Avoidance Rules General ? Tax Incentives & Special Economic Zones ?Gains Capital ? Pricing & Advanced Pricing Agreement Transfer ? Taxation Personal ? Capital Funds, Mutual Funds & Insurance Venture

02 04 05 06 07 10 11 12 14 16 18 21 24 29-31

?Tax Wealth ? Glossary

32 33

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.


Business Income
Computation of income
Under the Act The income under the head “Business and Profession” is computed as “business profits with specified adjustments” which , can be described as “Income expense model” . DTC 2009 Income from each business is to be computed separately and each unit deemed to be distinct and separate from another unit, unless there is interlacing, inter-dependence or unit embarrassing the two business/units. The Income expense model proposed by DTC 2009 is as under:

Gross earnings Less: Specified Business Expenditure Operating Expenditure Permitted Finance Charges Capital Allowances Taxable Income from business Xxxxx

Xxxxxx Xxxxx


DTC 2010
? in rates of presumptive taxation for businesses relating Increase

Since each unit is deemed as a separate business, all the ? provisions of computation of profits will apply separately to each such unit ? The proposed section will cast a more burdensome duty on the

to oil exploration, shipping operation, air transport, etc. The actual profits would be taxable if higher than presumptive profits ? in depreciation rates Changes

tax payer to comply with the extra documentation requirement ? Additional tax outgo for tax payers falling under the presumptive

tax regime
? the tax payer contends that the income is lower than the In case

prescribed rates, the same has to be substantiated by maintaining the books of accounts for the operations.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.


Scope widened
Under the Act Profits and gains from any business and profession combined with some specified income is chargeable under the head 'Business and profession' DTC 2009 Proposed to introduce inclusive definition of the term 'gross earnings' for the purpose of computing 'Income from business'.

DTC 2010
The following is proposed to be included in the gross earnings: ? Remission, cessation of any liability by way of loan, deposit,

The issue as to whether the waiver of a loan is capital or revenue ? receipt has been a subject matter of litigation. The amount would now be taxable as business profits ? The scope of business income further widened to include non

advance or credit
? Non moving creditors beyond three years are to be treated as

business income
? Consideration accrued or received on the transfer of carbon

moving creditors beyond a specified period
?was no clarity under the Act regarding the taxability of There

? from letting of house property to be included under the Income

head income from house property.

income from carbon credits and tax payers were contending it to be capital receipt not liable to tax. The proposal would end uncertainty over the issue and receipts would now be taxable as business income. However, the issue as to whether the income would be eligible for profit linked incentives is still open for debate ? An attempt is made to resolve the controversy with regard to

characterisation of income from letting...
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