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Income Tax Rate, Surcharge and Marginal Relief for AY 2014-15

Income Tax Rate, Surcharge and Marginal Relief for Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), every Artificial Juridical Person, co-operative society, local authority, firms/LLP and company.

Income Tax Rate, Surcharge and Marginal Relief
As we know that once the Finance Bill for the year is approved by the parliament and gets the assent of the president, it becomes the Finance Act for that particular year. The Finance Act, 2013 has been enacted by Parliament in the Sixty-fourth Year of the Republic of India to give effect to the financial proposals of the Central Government for the financial year 2013-2014.

The First Schedule of every Annual Finance Act gives the rates of income-tax in four parts:

PART-I: 

Part I of the First Schedule of Finance Act provides income-tax rates for the current Assessment Year (AY). Accordingly, for the assessment year commencing on the 1st day of April, 2013 (AY 2013-14), income-tax shall be charged at the rates specified in section 2 of the Finance Act, 2013 read with Part I of the First Schedule to the Finance Act, 2013.

PART-II:

Part II of the First Schedule of Finance Act lays down the rates at which tax is to be deducted at source (TDS) from the income earned in the current Financial Year (FY).

Thus, the Finance Act, 2013 has given the rates of TDS on the income earned during the financial year ending on 31st day of March, 2014 (FY 2013-14) i.e. A.Y. 2014-15. Finance Act, 2014 shall give the rates of TDS on the income earned during the FY 2014-15.

The rate of Tax Deduction at Source (TDS) has now been increased to 25% in respect of royalties and fees for technical services payable by the Government or an Indian concern in pursuance of an agreement made on or after 1.4.1976, to a non-corporate non-resident or a foreign company.

PART-III:

Part III of the First Schedule of Finance Act provides the income-tax rates for charging income-tax in certain cases and rates for deducting income-tax from income chargeable under the head "salaries". The same rates are also applicable for computing Advance Tax to be paid for the current financial year, e.g. Finance Act, 2013 has given the rates for the computation of advance tax for the assessment year 2014-15.

Part III of the First Schedule of every Annual Finance Act becomes Part I of the First Schedule to the next Finance Act. Accordingly, Part III of the First Schedule to the Finance Act, 2013 will become Part I of the First Schedule to the Finance Act, 2014 and so on. Therefore, the finance Act, 2014 shall give the rates of advance tax for the assessment year 2015-16.

PART-IV:

The Part IV of the First Schedule of the Finance Act gives the rules for computing the Net Agricultural Income. Hence, Section 2(13)(c) of the Finance Act, 2013 read with Part IV of the First Schedule to the Finance Act, 2013 specifies the Rules for computation of Agricultural Income in the previous year relevant to the assessment year commencing on the 1st day of April, 2013.

Let us discuss the slab rates applicable for the assessment year 2014-15 related to the previous year 2013-14 i.e. PART-III of Finance Act, 2013 or PART-I of Finance Act, 2014:

Paragraph A: (I) In the case of Individual or Hindu Undivided Family (HUF) or Association of Persons (AOP) or Body of Individuals (BOI) or every Artificial Juridical Person referred to in section 2(31) (vii) of the Income-tax Act, 1961,-



Rates of income-tax
1.
where the total income does not exceed Rs. 2,00,000
NIL
2.
where the total income exceeds Rs. 2,00,000 but does not exceed Rs. 5,00,000
10 per cent of the amount by which the total income exceeds Rs. 2,00,000
3.
where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000
Rs. 30,000 plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000
4.
where the total income exceeds Rs. 10,00,000
Rs. 1,30,000 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000.

Alternatively, you may say that
1)
Upto Rs. 2,00,000
NIL
2)
Rs. 2,00,000 to Rs. 5,00,000
10% of (total income minus Rs. 2,00,000)
3)
Rs. 5,00,000 to Rs. 10,00,000
Rs. 30,000 + 20% of (total income minus Rs. 5,00,000)
4)
Above Rs. 10,00,000
Rs. 1,30,000 + 30% of (total income minus Rs. 10,00,000)


(II) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,-

Rates of income-tax (Age 60-79 years)
1.
where the total income does not exceed Rs. 2,50,000
NIL
2.
where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000
10 per cent of the amount by which the total income exceeds Rs. 2,50,000
3.
where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000
Rs. 25,000 plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000
4.
where the total income exceeds Rs. 10,00,000
Rs. 1,25,000 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000.

Alternatively, you may say that
1)
Upto Rs. 2,50,000
NIL
2)
Rs. 2,50,000 to Rs. 5,00,000
10%
3)
Rs. 5,00,000 to Rs. 10,00,000
20%
4)
Above Rs. 10,00,000
30%


(III) In the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year,-

Rates of income-tax (Age 80 years or more)
1.
where the total income does not exceed Rs. 5,00,000
NIL
2.
where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000
20 per cent of the amount by which the total income exceeds Rs. 5,00,000
3.
where the total income exceeds Rs. 10,00,000
Rs. 1,00,000 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000.

Alternatively, you may say that
1)
Upto Rs. 5,00,000
NIL
2)
Rs. 5,00,000 to Rs. 10,00,000
20%
3)
Above Rs. 10,00,000
30%


Paragraph B: In the case of every co-operative society,-

Rates of income-tax
1.
where the total income does not exceed Rs. 10,000
10 per cent of the total income
2.
where the total income exceeds Rs. 10,000 but does not exceed Rs. 20,000
Rs. 1,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,000
3.
where the total income exceeds Rs. 20,000
Rs. 3,000 plus 30 per cent of the amount by which the total income exceeds Rs. 20,000.

Alternatively, you may say that
1)
Upto Rs. 10,000
NIL
2)
Rs. 10,000 to Rs. 20,000
20%
3)
Above Rs. 20,000
30%


Paragraph C: In the case of every firm or Limited Liability Partnership (LLP), the tax rate is 30 per cent on the whole of the total income for A.Y. 2014-15.

Paragraph D: The rate of tax for a local authority for A.Y.2014-15 is also the same as that for A.Y.2013-14 i.e. 30% on the whole of the total income of the local authority.

Paragraph E: In the case of a company, the rates of tax for A.Y.2014-15 would be:-

I) In the case of a domestic company, the tax rate is 30 per cent on the whole of the total income.
II) In the case of a company other than a domestic company, the tax rate is 40 per cent on the whole of the total income.

In case of Royalties and Fees for rendering Technical Services: The tax rate is 50 per cent on so much of the total income as consists of royalties and fees for rendering technical services (FTS) received from Government or an Indian concern in pursuance of an approved agreement made by the company with the Government or Indian concern,-

- In case of Royalties: after the 31st day of March, 1961 but before the 1st day of April, 1976 i.e. between 1.4.1961 and 31.3.1976; AND
- In case of FTS: after the 29th day of February, 1964 but before the 1st day of April, 1976 i.e. between 1.3.1964 and 31.3.1976.

In case of Long Term Capital Gains (LTCG):

As per section 112 of the Income-tax Act, 1961 long term capital gains would be chargeable to tax @20%. However, in case of non-resident (not being a company) and foreign companies, long-term capital gains arising from transfer of unlisted securities would be subject to tax@10% without giving effect to the first and second proviso to section 48 i.e. indexation provision and currency fluctuation.

In case of Short Term Capital Gains (STCG):

In accordance with section 111A of the Income-tax Act, 1961 the short-term capital gains would be chargeable at a concessional rate of tax @15% on transfer of-
(i) An equity share in a company or
(ii) A unit of an equity oriented fund.

Provided the transaction of sale of such equity share or unit should be -
(i) Entered into on or after 1st October, 2004 i.e. the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and
(ii) Chargeable to securities transaction tax.

In case of winnings from Lotteries, Puzzles etc.:

Section 115BB prescribes the rate of tax @30% for winnings from-
(i) any lottery; or
(ii) crossword puzzle; or
(iii) races including horse races; or
(iv) card games and other games of any sort; or
(v) gambling or betting of any form or nature whatsoever.

Surcharge: 

The rates of surcharge applicable for A.Y.2014-15 are as follows –

A) In case of all Individual, HUF, AOP, BOI, Co-operative societies, Local Authorities, Artificial juridical person, Firms and LLPs:

Where the total income exceeds Rs. 1 crore, surcharge is payable at the rate of 10% of income-tax computed in accordance with the provisions prescribed above or section 111A or section 112.

B) In case of every company, the amount of income-tax computed in accordance with the above mentioned tax rates shall be increased by a surcharge calculated at the rates as prescribed here under,-

Rates of Surcharge
where the total income does not exceed Rs. 1 Crore
In the case of domestic as well as foreign companies
No Surcharge
where the total income exceeds Rs. 1 Crore but does not exceed Rs. 10 crore
In the case of every Domestic Companies
Surcharge is 5 per cent
In the case of every Foreign Companies
Surcharge is 2 per cent
Where the total income exceeds Rs. 10 crore
In case of a Domestic company
Surcharge is 10 per cent
In the case of every Foreign Companies
Surcharge is 5 per cent


Marginal Relief:

The concept of marginal relief is applicable on every such person whose total income exceeding Rs. 1 Crore i.e. all assessees who are liable to pay surcharge would get the marginal relief.
Marginal relief is that the total amount payable as income-tax plus surcharge shall not exceed the total amount payable as income-tax on a total income of Rs. 1 Crore by more than the amount of income that exceeds Rs. 1Crore.

In other words, the additional amount of income-tax payable (together with surcharge) on the excess of income over one crore rupees should not be more than the amount of income exceeding one crore rupees.

Further, Marginal relief is available in case of companies whose total income exceeds Rs. 10 crore i.e. the additional amount of income-tax payable (together with surcharge) on the excess of income over Rs. 10 crore should not be more than the amount of income exceeding Rs. 10 crore.

Note that the marginal relief would also be available to those companies which are subject to minimum alternate tax under section 115JB, in cases where the book profit (i.e. deemed total income) exceeds Rs. 1 crore and Rs. 10 crore, respectively.

Therefore, the marginal relief is applicable only to those persons whose total income falls between the following ranges in relation to the applicability of surcharge to them.

NOTE: The Above amendments are relevant for May/June 2014 and November/December 2014 examinations to be conducted by the Institute of Chartered Accountants of India (CA CPT/ IPC/ Final), The Institute of Company Secretaries of India (Foundation/ Executive/ Professional Programme) and The Institute of Cost Accountants of India (Foundation/ Intermediate/ Final Course).


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