New Delhi, March 4: Finance Minister Yashwant Sinha, in this year's Budget, has plugged a major loophole, which was utilised by investors to evade tax through the dividend stripping route. Henceforth, in case any person purchases units of mutual funds within a period of three months prior to the record date and sells or transfers such units within a period of three months after the record date, then the loss suffered on sale of such units will be allowed to be set-off only to the extent of dividend received from units.On the other hand, life has been made a little easier for companies and individuals on whom the I-T department conducts searches or raids. In case of search operations, the assessees will now have to provide details and records of the previous years' incomes - only up to six years - against the current requirement of 10 years.
The finance minister has also clarified some doubts related to treatment of income of venture capital funds (VCFs). "For the removal of doubts, it is hereby declared that the income of a venture capital company (VCC) or VCF shall continue to be exempted if the shares of the venture capital undertaking, in which the VCC or VCF has made the initial investment, are subsequently listed in a recognised stock exchange in India," stated a new explanation that is to be inserted in the Act.
A new section 35-DDA has been added to the Act which lays out the accounting treatment of money spend by companies on voluntary retirement schemes (VRS). Companies will be permitted to deduct one-fifth of the amount paid to employees under VRS in computing profit and gains of the business. The balance shall be deducted in equal installments for each of the four immediately succeeding the previous year.
Financial affairs of charitable organisations, including those of universities and other educational institutions, have been made more transparent by proposing an amendment to the Income Tax Act.
Such organisations will have to make public their accounts in a newspaper through an advertisement, with effect from assessment 2002-03 if their total income for an year exceeds Rs 10 lakh. This means that the accounts of such organisations for the financial year beginning April 1, 2001 will have to be made public.
In Section 12-A of the Act, a new clause (c) has been inserted which states, "where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Sections 11 and 12 exceeds ten lakh rupees in any previous year, the trust of institutions (i) publishes its accounts in a local newspaper, before the due date for furnishing the return of income under sub-Section (4A) of Section 139; and (ii) furnishes a copy of such a newspaper along with such return."
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
