With regard to tax on profits from business, the position was clear in the Income Tax Act. However, it was not clear whether the cess or surcharge paid on it is eligible for deduction.
New Delhi. Rule 132 has come into force from 1st October, 2022. It was introduced by the Central Board of Direct Taxes (CBDT). It relates to application for re-computation of income under section 155(18). Explain that Form 69 can be used for re-calculation of income. This rule was brought to clarify the situation regarding the cess or surcharge on the tax to be paid by the traders.
In fact, the situation was clear in the Income Tax Act regarding tax on profits from business. However, it was not clear whether the cess or surcharge paid on it is eligible for deduction. Prior to the amendment in section 155, payment made towards cess or surcharge was treated as expenditure. People used to claim deduction on this. But this claim was completely rejected by adding sub section 18 in 155. The CBDT issued a notification on September 29, 2022, stating that the assessee is not allowed to claim deduction on surcharge.
What will be the impact on taxpayers?
After this new rule, it has become clear that deduction of surcharge is not allowed at the time of computation of income. This means that whoever declared the income as a deduction would have more income at the time of re-calculation. According to experts, the assessee will have to pay tax on this and also half of the due tax on low income will have to be paid as penalty.
A matter of relief
However, there is also a relief for the assessee. As per rule 132, he can apply for re-calculation of the previous year’s total by canceling the claim of deduction on cess or surcharge. There will be no penalty for this. Form No. 69 should be submitted on or before March 31, 2023 for recalculation. After this the income will be recalculated and you will have to deposit the due amount in a stipulated time. After payment of tax, within 30 days, the assessee has to furnish the details of payment in Form No. 70 to the Assessing Officer.
