THERE'S NO PART-TIME COMFORT FOR
SALARIED
NEW DELHI doing some part-time business to make that extra
buck. If amendments in the Finance Bill are passed by the
Parliament, these tax payers will not have the cushion of
setting off business losses against income from salary.
Right
now, several taxpayers rendering part-time services like consultancy
and freelancing make good their expenses on telephone bills,
depreciation on cars, computers etc by showing them as a business
loss. This loss is set off against their salary incomes to
lower tax liability. Clearly, taxpayers are taking advantage
of a loophole in the income tax law which has not gone down
well with the revenue authorities
The
existing income tax provisions allow taxpayers to set off
the loss computed under one head of income against income
computed from other source. Though losses under the head capital
gains can't be set off against income under any other head.The
Budget provisions seek to prevent the abuse of this benefit.
It proposes an amendment to the existing law by disallowing
an assessee to set off losses under the head 'profits and
gains from business or profession' against salary income.
The
finance minister who has targeted a 26% rise in income tax
has announced a slew of measures to plug revenue leakage and
another such proposal relates to deduction of tax at source
from payments to contractors and sub-contractors.
Amendments
to the Finance Bill seek to restrict the tax benefit on splitting
of contracts. Tax is required to be deducted at source only
on contracts that are valued above Rs 20,000, at present.
Keeping this provision in mind, composite contracts are split
into smaller ones valued under Rs 20,000 to avoid TDS.
Under
the proposed amendment, tax would also have to be deducted
in cases where the aggregate payments to contractors is Rs
50,000 during a financial year even if a single payment is
less than Rs 20,000. As before, tax is still to be deducted
at source for single payments exceeding Rs 20,000.
