Finance Act, 1969
Rates of income-tax for the assessment year 1969-70
2. The rates of income-tax for the assessment year 1969-70 in the case of all categories of taxpayers (corporate as well as non-corporate) are specified in Part I of the First Schedule to the Finance Act. These rates (summarised in Annexure I to this circular) are the same as those specified in Part III of the First Schedule to the Finance Act, 1968, for the purpose of deduction of tax at source during the financial year 1968-69 from ��salaries�� and for computation of ��advance tax�� payable during that financial year. Accordingly, where the total income of a taxpayer consists only of income under the head ��Salaries�� from which tax has been correctly deducted at source during the financial year 1968-69 (and there is no variation in the taxable income on assessment), it will not be necessary to raise any additional demand or grant any refund on completion of the assessment for the assessment year 1969-70.
Finance Act, 1969
Rates for deduction of tax at source from ��salaries�� and for computation of ��advance tax��, during the financial year 1969-70
3. The Finance Act, 1969 follows the principle adopted in the Finance Acts of the two earlier years that, in prescribing the rates of tax and in making new provisions in the taxation laws, measures which have the effect of bringing about a change in the tax liability or which provide a tax incentive or disincentive in any sphere should apply, prospectively, to current incomes due for assessment in the next following assessment year, and not retrospectively to incomes earned in the past, except where there are special circumstances justifying the retrospective operation of any particular provision. In conformity with this principle, changes in the rate schedule of tax which were considered necessary or desirable, have been made operative, prospectively, in relation to income falling due for assessment in the next following assessment year 1970-71. The rate schedule of tax incorporating these changes is set forth in Part III of the First Schedule to the Finance Act and is summarised in Annexure II to this circular. These rates apply for the purposes of deduction of tax at source from ��salaries�� in the case of individuals and from retirement annuities payable to partners of registered firms engaged in certain professions (chartered accountants, solicitors, lawyers, etc.), during the financial year 1969-70; computation of advance tax payable in that year in the case of all categories of taxpayers; and the charge or calculation of income-tax in special cases. These special cases are : section 132(5), first proviso [calculating income-tax on undisclosed income represented by seized assets in certain cases]; section 172(4) [levy of tax on provisional basis on the income of non-residents from shipping of cargo or passengers from Indian ports] section 174(2) [assessment of persons leaving India]; section 175 [assessment of persons likely to transfer property to avoid tax]; and section 176(2) [assessment of profit of a discontinued business]. The points of difference between the rate structure of tax specified in Part III of the First Schedule (for the financial year 1969-70), on the one hand, and that specified in Part I of the First Schedule (for the assessment year 1969-70), on the other, are explained in the following paragraphs 4 to 10.
Finance Act, 1969
4. Individuals, HUFs, unregistered firms, association of persons, etc. - Increase in the rates of basic income-tax on incomes over Rs. 10,000 - At present, the rates of basic income-tax on the incomes of these categories of taxpayers rise, progressively, from 5 per cent on income in the slab : Re. 1��Rs. 5,000 to 75 per cent on incomes above Rs. 2,50,000. A Union surcharge at 10 per cent of the basic income-tax is also chargeable in all cases. On income in the slab Rs. 10,001��Rs. 15,000, the rate of basic income-tax at present is 15 per cent, on income in the slab Rs. 15,001��Rs. 20,000, 20 per cent, in the slab Rs. 20,001��Rs. 25,000, 30 per cent; and in the slab Rs. 25,001��Rs. 30,000, the rate is 40 per cent. In order to bring about a smoother progression in the tax rate on personal incomes, the rates of basic income-tax on income in the slabs Rs. 10,001�� Rs. 15,000 and Rs. 15,001��Rs. 20,000 have been increased, respectively, by 2 per cent and 3 per cent. The increased rate is thus 17 per cent as against 15 per cent in the slab Rs. 10,001��Rs. 15,000 and 23 per cent as against 20 per cent in the slab Rs. 15,001��Rs. 20,000. The full effect of these increases will fall on taxpayers having income of Rs. 20,000 or more, and taken together with the Union surcharge of 10 per cent of the basic income-tax (which continues to be leviable at all levels of income), the additional tax will amount in each such case to Rs. 275 per year.
[Paragraph A of Part III of the First Schedule to the Finance Act]
Finance Act, 1969
5. Co-operative societies - Prescription of a simplified rate schedule of tax - Co-operative societies are at present entitled to several concessions under the Income-tax Act in the computation of their taxable income and they also enjoy the benefit of concessional rates of tax on their chargeable income under the annual Finance Acts. The present rate structure of tax in the case of co-operative societies is historically linked to the rate structure of tax in the case of individuals, subject to certain variations. Under the provisions of section 80P, co-operative societies are entitled to deduct from their taxable income the whole of their income from specified business activities, namely, banking, cottage industry; marketing of agricultural produce of their members; supply of agricultural implements, seeds, etc., to their members; processing, without the aid of power, of the agricultural produce of the members; and in the case of a primary co-operative society, the income from supplying milk raised by its members to a federal milk co-operative society. Co-operative societies, in general, are also entitled to deduct, from their taxable income, the first Rs. 15,000 of their income from business activities other than those specified above (but not of income from insurance business). A co-operative society is also entitled to deduct from its taxable income, the whole of the amount of interest and dividends received by it from any other co-operative society and also the income from letting of godowns and warehouses for storage, or for processing or facilitating the marketing of commodities. A co-operative society having a gross total income not exceeding Rs. 20,000 and which is not a housing society or an urban consumers�� society or a society carrying on transport business or manufacturing operations with the aid of power, is also entitled to deduct from its taxable income, the whole of its income from house property and interest on securities. Where a co-operative housing society allots or leases its buildings to its members under a co-operative house-building scheme, the income from such house property is assessable directly in the hands of the members and not in the hands of the society.
Finance Act, 1969
6. At present, a co-operative society whose chargeable income (as computed after deducting incomes exempt from tax, as stated above, including the first Rs. 15,000 of business income, in the generality of cases) does not exceed Rs. 4,000, is not liable to pay any tax. A co-operative society having a chargeable income exceeding Rs. 4,000 is liable to tax thereon at progressive rates rising from 5 per cent on the initial slab of Re. 1��Rs. 5,000, to 40 per cent on income in the slab over Rs. 25,000. A Union surcharge at 10 per cent of the basic income-tax is also levied in all cases. Up to Rs. 20,000 of the chargeable income, the rates of tax in the case of a co-operative society are the same as in the case of an individual. On the chargeable income of a co-operative society in the slab Rs. 20,001��Rs. 25,000, the rate of basic income-tax is 25 per cent as against 30 per cent in the case of an individual. The chargeable income of a co-operative society above Rs. 25,000 bears income-tax at a flat rate of 40 per cent as against rates rising progressively from 40 per cent to 75 per cent in the case of an individual.
Finance Act, 1969
7. With a view to rationalising and simplifying the scheme of taxation of the income of co-operative societies, the Finance Act, 1969 has made the following changes :
1. The amount of business income exempt from tax in the generality of cases of co-operative societies has been increased by Rs. 5,000 from Rs. 15,000 to Rs. 20,000. This has been brought about by amendment of sub-section (2) of section 80P. Further, the benefit of this exemption up to Rs. 20,000 has been extended also in respect of incomes derived by co-operative societies from insurance business. This result is brought about by the omission of sub-section (4) of section 80P.
The above-mentioned changes will be operative with effect from 1-4-1970, i.e., for the assessment year 1970-71 and subsequent years.
2. A new simplified rate structure of tax, different from that in the case of individuals, has been prescribed in the case of co-operative societies for the purpose of computation of advance tax payable by them during the financial year 1969-70.
Under the new rate structure of tax, the rate of basic income-tax on the chargeable income of a co-operative society (as computed after deducting the incomes exempt from tax) in the slab Re. 1��Rs. 10,000 is 15 per cent; on the chargeable income in the slab Rs. 10,001��Rs. 20,000, 25 per cent; and on chargeable income above Rs. 20,000, it is 40 per cent. A Union surcharge at 10 per cent of the basic income-tax will be leviable in all cases as at present.
Unlike the position under the existing rate schedule, under which a co-operative society having a chargeable income not exceeding Rs. 4,000 is not liable to pay tax, the new rate schedule does not contain any such exemption. This is consequential to the increase, from Rs. 15,000 to Rs. 20,000, in the amount up to which business income will be deductible in computing the taxable income of a co-operative society, in the generality of cases as stated at (1) above.
Finance Act, 1969
8. The combined effect of the amendment to section 80P and the prescription of the simplified rate schedule of tax in the case of co-operative societies will be that on a gross total income up to Rs. 30,000, the incidence of tax on co-operative societies on the revised basis will be either the same as, or marginally less than, under the earlier provisions. On a gross total income above Rs. 30,000, the incidence of tax on the proposed basis will be marginally higher than formerly, the additional tax payable being not more than Rs. 275 in any case. This increase is in line with the similar increase in the incidence of tax on personal incomes as stated in paragraph 4 above.
[Section 10 of, and Paragraph B of Part III of the First Schedule to, the Finance Act]
Finance Act, 1969
9. Registered firms - At present, registered firms are chargeable to tax on their total income separately but the tax payable by them is allowed as a deduction in computing the individual shares of the partners in the income of the firm. Under the rate schedule of tax in the case of registered firms for the assessment year 1969-70, the first Rs. 25,000 of their total income does not bear any tax, but, on the balance, tax is chargeable at rates of basic income-tax rising progressively from 6 per cent on income in the slab Rs. 25,001��Rs. 50,000, to 20 per cent on income above Rs. 1,00,000. Registered firms are also liable to pay ordinary surcharge at 20 per cent of the basic income-tax (10 per cent in the case of a registered firm deriving income mainly from a profession) and a special surcharge of 10 per cent of the aggregate amount of the basic income-tax and the ordinary surcharge. The Finance Act, 1969 enlarges the area of taxation of the current income of registered firms by reducing the amount of the initial slab of income exempt from tax from Rs. 25,000 to Rs. 10,000. the rate of tax on income in the slab Rs. 10,001��Rs. 25,000 is prescribed at 4 per cent. The rates of basic income-tax in the income slabs above Rs. 25,000, as also the rates of ordinary surcharge and special surcharge continue unchanged.
Finance Act, 1969
10. In consequence of the levy of basic income-tax on incomes of registered firms in the slab Rs. 10,001��Rs. 25,000 at 4 per cent, a firm with a total income of Rs. 25,000 and above, will be liable to pay, in each case, an additional amount of tax (including surcharges) of Rs. 792 (Rs. 726 where the firm derives income mainly from a profession). The partners of the firm will, of course, recoup a part of this additional tax as it is allowed as a deduction in computing their individual shares in the income of the firm.
[Paragraph C of Part III of the First Schedule to the Finance Act]
Finance Act, 1969
11. Other categories of taxpayers - In the case of local authorities, the Life Insurance Corporation of India and companies (other than the life Insurance Corporation), the rates of income-tax specified respectively in Paragraphs D, E and F of Part III of the First Schedule to the Finance Act, 1969, for the purpose of the computation of the ��advance tax�� payable by them during the financial year 1969-70, are the same as the rates of income-tax specified, respectively, in Paragraphs D, E and F of Part I of the said First Schedule for incomes assessable for the assessment year 1969-70.
Finance Act, 1969
12. General - As already stated in paragraph 3 above, the changes in the rates of income-tax set forth in paragraphs 4 to 10 are operative only for the purpose of deduction of tax at source from ��salaries�� and retirement annuities payable to partners of registered firms engaged in specified professions, during the financial year 1969-70; computing ��advance tax�� payable during the said financial year; and for charging or calculating income-tax in special cases.
Finance Act, 1969
Rates for deduction of tax at source from incomes other than ��salaries�� and retirement annuities payable to partners of registered firms engaged in specified professions
13. Part II of the First Schedule to the Finance Act specifies the rates at which tax is to be deducted at source from income other than ��salaries�� and retirement annuities payable to partners of registered firms engaged in specified professions. These rates are the same as those specified in Part II of the First Schedule to the Finance Act, 1968.