Decoding rule 132 of income tax and how it impacts you

 

Rule 132 of the tax on income What exactly is it and the reason it was added? What benefits will taxpayers get? Find out in this article how you can get answers

The Central Board of Direct Taxes (CBDT) has just introduced rule 132 in the Income Tax Act, that addresses the question of whether surcharges imposed by corporations on tax can be considered deductions. The rule explains that the form 69 may be used to request the re-computation of income total in accordance with Section 155(18 ).

In the words of Sandeep Sehgal, Partner- Tax at AKM Global, rule 132 was added due to the divergent rulings regarding whether cess or surcharge should be considered deductions in calculating the tax-deductible income.

"The Finance Act 2022 clarified the matter, and stated that it cannot be permitted. Rule 132 offers the possibility for taxpayers who already claimed the deduction in the past to make an online application on form 69 to recomputation of income from these years and to pay the tax resulting from it," he said.

This is a retroactive amendment that will take effect from. Relief is now available to taxpayers who claimed the tax deduction for cess or other surcharges in the early years in order to calculate their taxable income minus such cess or surcharges and then pay the tax on this earnings according to Rule 132.

Method for recomputing income in accordance with Rule 132

CA Ruchika Bhagat, MD at Neeraj Bhagat & Co., explains how to go about the recomputing of income from previous years in accordance with Rule 132:

(a) (a) The person who is the assessor has to submit an application on Form No. 69, seeking AO to calculate the all income earned in the preceding year, but not being able to claim the deduction of surcharges or the cess.

(b) Assessee has to submit an electronic application by 31-03-2023 or earlier to either PDGIT (Systems) (Systems) or DGIT(Systems)

(c) The prescribed authorities have the power to set the rules and procedures to provide and verify Form No. 69. If the application is confirmed the application will be sent to the officer who is assessing it.

(d) AO will then compute the total amount and issue a notice pursuant to section 156.

(e)Assessing Officer must specify the deadline within which the tax in order to complete the recompilation of income.

(f)Acknowledgement of tax payment has to be provided by the assessee on Form No. 70 to the AO within 30 days from the date of payment.

(g) (g) No penalty will be due on such payment provided that the application is made by the assessee before March 31, 2023.

The default

If the person who is assessed is not willing to file the form 69 and submits it, the assessee will be responsible for paying taxes on this income as well as penalties and interest for underreporting income.