The Hindu Business Line : Punished are the meek for they shall inherit EET?

One can't be sure. It would be difficult for the Government to steamroll the move given its acute dependence on the supporting parties. EET may be a rational idea whose time hasn't come in India. That it is already in vogue in several developed countries is not a sound argument for its introduction in India.

Those countries have already achieved a high rate of tax complianceand can, therefore, tax the contributions made to savings schemes when they mature for repayment, having exempted them when the contributions were made. But in our country where the tax compliance rate is abysmally low, the first priority should be to widen the tax base and not flog dead horses.

At any rate even as a revenue-raising measure, the move to usher in EET may not be something to write home about.

The Government ought to focus on hard-to-tax categories which have been defying taxation with impunity and then come to correcting the irrationalities in treating savings schemes.

Business vs profession

AS PER Section 176 of the Income-Tax Act, any amount received after discontinuance of business or profession is taxable in the year of receipt.

However, if it is a profession, it is not taxable under the head `profits and gains' or `income from other sources'. Why is it so?

Can you explain with relevant provisions of the I-T Act?

S. Kartik, email

I am afraid this is not true. There is absolutely no discrimination between a business and profession in this regard except that while the former is covered by sub-section (3A) the latter is covered by sub-section (4) of Section 176.

Spouse's education

I UNDERSTAND that Section 80C gives certain deductions for educational expenses of children.

But my query is whether there is any clause that allows for deductions for educational expenses of the spouse?

If yes, then does that include donation and other related fees?

Or, is it that the benefit can only be drawn by taking (educational) loan for this purpose? Any info in this regard will be helpful.

K. Rajan, email

Section 80C takes care of the investment one makes in the education of one's child. And Section 80E takes care of investment in one's own higher education.

Curiously, neither of them takes care of investment in spouse's education. Section 80E incidentally covers only interest on loans taken for pursuing higher studies.

The new Section 80E has been drafted keeping in mind the education loan schemes launched by banks which give a moratorium up to the completion of education.

The idea is to encourage youngsters to stand on their own feet and start repaying the education loan once they start earning.

Much as you desire to finance the higher education of your spouse, you may have to settle for a loan by your spouse from the tax point of view. At any rate the tax benefit will accrue to her and not to you once she completes the education.

A banker's query

I AM a bank employee. Are we (as an employer — bank) supposed to deduct 70 per cent of tax liability as advance tax before December 2005 from the salary of our employees?

If so, is there any penalty clause for non-failure to deduct 70 per cent of advance tax before December 2005.

How do we calculate advance tax (notional) for salaried bank employees?

R. Shanker, Chennai

There is nothing notional about tax deducted at source from salary. It is on the estimated salary income for the financial year and is expected to be deducted uniformly throughout the year so much so that by December, normally, not 70 per cent but 75 per cent of the tax on salary should have been deducted given the fact that three-fourths of the year would have run out by December.

Tax is to be calculated practically in the same manner as the assessing officer would do. This is what makes tax deduction at source (TDS) on salary unique. There is nothing ad hoc about TDS on salary which is the case with TDS on other sources of income.

Under Section 201(1A), interest at the rate of 12 per cent per annum is payable for default in deducting tax at source.

LLPs

I UNDERSTAND the Government is all set to usher in limited liability partnerships (LLPs) in this country.

How will LLP be different from partnership and company form of organisation?

Mukta Srivatsav, Allahabad

The Department of Company Affairs has floated a concept paper, outlining the basic features of the law on the anvil, for public comment.

The law of partnership will not apply to LLPs. Nor will the provisions of the Companies Act, except those the government may choose to use to regulate the LLPs.

In short, an LLP would be a via media between partnership and company. There have to be at least two partners. There would be no upper limit though. They would all enjoy limited liability.

Unlimited liability is what scared many away from entering into partnerships. Both individuals and companies can be members of an LLP.

An LLP will not be allowed to access public funds. In the event, the extant Companies Act would cater to all listed companies, with all others, including unlisted public companies, taking the safe sanctuary of LLP.

One wonders what would happen to the harried creditors if the LLP itself is stretched to its limits. Obviously, they cannot pin down the individual partners as they have been under the law of partnership which makes the liability of partners unlimited.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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