The Central Board of Direct Taxes (CBDT) has recently introduced rule 132 under the income tax act, which deals with the issue of whether surcharges paid by businesses on income tax should be counted as a deduction. The rule notifies that form 69 can be used to apply for re-computation of total income under Section 155(18).
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The introduction
According to Sandeep Sehgal, Partner- Tax at AKM Global, rule 132 was added in light of the conflicting judgments on whether cess and surcharge should be allowed as deductions while calculating the taxable income.
“The Finance Act 2022 clarified the same, stating that it shall not be allowed. Rule 132 provides the opportunity to the taxpayers who have claimed this deduction earlier to file an online application in form 69 for recomputation of income for those years and pay the resultant tax,” he said.
This is a retrospective amendment effective from 2005. Relief has been given to taxpayers who had claimed the deduction of cess or surcharges in early years so that they can recompute their taxable profits excluding such cess or surcharge and deposit the tax on such income under Rule 132.
Method of recomputing income under Rule 132
CA Ruchika Bhagat, MD at Neeraj Bhagat & Co., explains the process of recomputing income of earlier years under Rule 132:
(a) The assessee shall make an application, in Form No. 69, requesting AO for recompilation of total income of the previous year without allowing the claim for deduction of surcharge or cess.
(b) Assessee has to file an application electronically on or before 31-03-2023 to PDGIT (Systems) or DGIT(Systems)
(c) Prescribed authorities have the power to lay down the procedures and standards for furnishing and verification of Form No. 69. Once this application is verified, it will be forwarded to the assessing officer.
(d) AO will then recompute the total income and will issue a notice under section 156.
(e)Assessing Officer has to specify the date within which the amount of tax payable is to be paid due to recompilation of income.
(f)Acknowledgement of tax paid has to be submitted by the assessee in Form No. 70 to AO within 30 days from the payment date.
(g) No penalty would be leviable on such payment provided that such application has to be submitted by an assessee on or before March 31, 2023.
Default
If the assessee does not voluntarily file the application in form 69, then he/she will be liable to pay taxes on such income along with a penalty and interest due to underreporting of income.
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First Published: Nov 1, 2022 1:46 PM IST
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