TAX TALK-20.07.2015-THE HITAVADA
TAX TALK
CA. NARESH JAKHOTIA
Chartered Accountant
No tax audit required even if receipts by truck owner exceeds Rs. 1 Cr
Query 1]
Our query is below. I am Proprietor of 2 businesses as under:
- Transport Co. with owner of 9 Truck
- Coal Trading
I want to declare our business income as per audited of our coal business whereas I want to declare our transport income as per sales amount @ 8 % or @ 7,500/- per vehicle whichever is less. Is it possible as per Income tax rules? [Ujjwal Kumar Jha-ujjwalbjha@gmail.com]
Opinion:
Person who owns not more than 10 truck & are into the business of transportation have a unique scheme wherein they don’t have to maintain the books of accounts and can offer income on presumptive basis u/s 44AE of the Income Tax Act-1961. Irrespective of the amount of receipt from such business, they are not required to maintain the details of expenditure towards, petrol, repairs & maintenance, driver/conductor allowances etc. For small & medium enterprise, presumptive taxation is one of the novel & unique concept in the Income Tax Act whereby taxpayer are relieved from the burden of unwanted paper work. Businessmen can concentrate more on constructive activity instead of compliance work.
The prominent features of schemes of presumptive taxation for truck operator u/s 44AE are as under:
- Scheme is applicable to all class of taxpayer be it Individual/HUF, firm, Company or any other person. It is applicable irrespective of residential status- be it resident or a non resident.
- It is applicable if taxpayer is in to the business of plying, hiring or leasing goods carriage. (JCB is not considered as goods carriage for the purpose of section 44AE & so its income cannot be offered for taxation u/s 44AE).
- Taxpayer should not own more than 10 goods carriage at any time during the relevant year. While purchasing any new truck, taxpayer desirous to opt for presumptive taxation should take care of this provision.
- Even if the receipt from transport business in such case exceeds Rs. 1 Cr, still income could be offered for taxation on presumptive basis and tax audit would not be mandatory at all.
In respect of transport business, to opt for the scheme of presumptive taxation, you have to offer the income @ Rs. 7,500/- per truck per month only. If you wish to offer income lower than Rs. 7,500/-, it would be subject to regular accounting & auditing compliance procedure. You don’t have option, as mentioned in the query, to show the lower of 8% of turnover or Rs. 7,500/- per month as income. Further, in your specific case you can offer
a] income from coal trading business on the basis of audited financials &
b] income from transportation business on presumptive basis @ Rs. 7,500/- per month per truck.
Query 2]
A house is purchased in joint name by taking home loan in joint name with 50% share of each. Can only one person can take exemption of full interest & principle amount. Whether exemption of Rs. 10,000/- on interest on S.B. A/c is per branch of bank or on interest of all S.B a/c taken together? Please clarify. [Mrs. Kamal C-kamalchandrashekhar@gmail.com]
Opinion:
The first part of the question is a very unique & often asked by the taxpayers on various occasion. Taxpayer need to understand that ownership in a house property is one of the first & foremost vital pre-condition for being eligible to claim deduction towards housing loan interest & principal repayment. Without ownership in the house property, no right would emanate for deduction. The second pre-condition is the availment of loan towards the house property. In case of joint ownership, deduction is available on the basis of ratio in the loan (distinguish it from “ownership ratio” in the house property). Above lines may precisely convey the legal provision that deduction cannot be claimed so as to suit the Individual requirements. The claim is to be compulsorily backed by documentary evidences so as to justify its deduction eligibility. The option to claim entire deduction by one person for the reason that other co-owner(s) is not claiming it is not an open choice with the taxpayer.
In your specific case,
1. Tax planning could be done at the initial stage of either buying the property & availing the loan itself. At a later date, tax planning scope is restrictive and taxpayers have to claim the benefit of deduction on the basis of pre-documented & pre-planned ratio. You cannot claim the deduction for the simple reason that other co-owner is not claiming it. Similarly, even if you are making the entire payment towards the loan, then also deduction could not exceed the amount of your share in the loan.
2. Section 80 TTA offers deduction of interest on deposits in saving account up to a maximum of Rs. 10,000/- and explicitly provide for exclusion of interest on "time deposits" from this deduction. Deduction u/s 80TTA is available to a person on total interest of all saving bank accounts taken together. To be more precise, the deduction is not available separately for each and every branch and total deduction u/s 80TTA cannot exceed Rs. 10,000/-
Query 3]
Contribution towards LIC premium, PPF etc. is covered under 80C. If one contributes to the A/c’s of wife and children, can one gets exemption? Is it necessary that children should be unemployed and/or unmarried to whose a/c such contributions are made by parents? [Arvind Deshpande- arvisneha2000@gmail.com]
Opinion
Deduction u/s 80C towards PPF, Life Insurance premium payment is available to the person who makes the payment & is available towards PPF A/c & insurance policies issued in favor of spouse, or children. The deduction is available whether the children is dependant or not, whether married or unmarried, whether living jointly or separately. Even the premium paid by father against the policy of a married girl would be eligible for deduction u/s 80C.
Query 4]
You have brought out in the Tax Talk dated 13.07.2015 that if money that is transferred by a person to his wife or minor child or Daughter--law through a Joint Account is invested by the recipient, interest income derived therefrom will be taxed at the hands of the person to whom the fund belongs, and not the recipient. What about monies that a person may transfer to his son or daughter as gift (which is allowed under the Income Tax Act) through a Joint Account of which he is the first holder? Will interest income derived on such monies be taxed at his hands or at the hands of the recipient? Kindly advice. [S. Nagarajan, Nagpur-lasomani@hotmail.com]
Opinion
Clubbing provision is applicable in respect of income from amount transferred for inadequate consideration between the husband & wife or by Mother-in-law/ Father in Law to Daughter-in-law. Similarly, income of a minor child is required to be clubbed with the income of the parents. Income from amount gifted to major son or daughter would not be subject to clubbing provision and income would be taxable as his/her individual income only.
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at SSRPN & Co, 10, Laxmi Vyankatesh Apartment, C.A. Road, Telephone Exch. Square, Nagpur-440008 or email it at nareshjakhotia@ssrpn.com]
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