TAX RELIEF
Any program or incentive that reduces the amount of tax owed by an individual or business entity.
Examples of tax relief include the allowable deduction for pension contributions, and temporary incentives such as tax credits for the purchase of new high-efficiency heating and cooling equipment.
Tax relief is intended to reduce the tax liability of an individual or business entity. Often, the tax relief is targeted at providing aid for a certain event or cause. For example, hurricane victims may be allotted some form of tax relief when a hard-hit area is declared a disaster area. Tax relief is also available periodically to support environmental causes, as seen with tax credits for the purchase of energy-efficient appliances or the installation of energy-efficient windows.
The different sections under tax exemption in India
- Sec 10(1) for exemption on income from agriculture.
- Sec 10(2) for exemption on income received from a Hindu undivided family(HUF) as a part of the family income or income from a family estate.
- Sec 10(2A) for exemption on income of a partner of a firm who has separately filed his tax returns.
- Sec 10(3) for exemption on income received in the non recurring or casual form but not exceeding Rs. 5,000 and in case of winnings from a horse race it should not exceed Rs. 2,500.
- Sec 10(4)(i) for exemption on income from interests on bonds and securities which includes premium on repurchase of bonds.
- Sec 10(4B) for exemption on income from interest on specific savings certificate issued by the central government.
- Sec 10(5) for exemption on the value of the Leave Travel Concession (LTC) not more than actual amount spent.
- Sec 10(5A) for exemption on specific payment to a non-resident person or a foreigner for the purpose of shooting a film in India.
- Sec 10(5B) for exemption on income tax which is paid by the employer on behalf of the salary of certain employees from outside the country, indulged in scientific research.
- Sec 10(6)(ii) for exemption on income received by the diplomats, ambassador, etc.
- Sec 10(6)(vi) for exemption on income received by the employees of the foreign companies.
- Sec 10(6)(vi a) for exemption on income received from any international philanthropic organizations.
- Sec 10(11) for exemption on income received from Statutory Provident Fund and Public Provident Fund.
- Sec 10(13) for exemption on income received from Superannuation Fund within a specific limit.
- Sec 10(13A) for exemption on specific allowance to employees such as house rent allowance.
- Sec 10(30) for exemption on income received in form of subsidy from the Tea board.
- Sec 10(31) for exemption on income received in form of subsidy from the specific boards of the coffee, rubber, cardamom, and other commercial crops.
Types of Tax Relief
1. Capital Allowances
These are effectively depreciation for tax purposes. They allow tax payers to set off the cost of qualifying assets against their business projects to reduce the tax payable.
Available in many forms, Capital Allowances are available to UK tax payers.
- Plant & Machinery Allowances
- Plant & Machinery – the most common form of capital tax relief.
- Integral features – a new relief from April 2008 at a 8% rate.
- Enhanced Capital Allowances – relief for investment in energy efficient assets.
- Long Life Assets – for assets with a useful economic life of 25 years or more.
- Short Life Assets – for assets disposed of within 8 years.
- Research & Development Allowances
- Relief for investment into qualifying research and development technologies.
- Industrial Building Allowances
- For expenditure incurred on an “industrial” building, structure or hotel. This relief has however now been phased out.
- Business Premises Renovation Allowances
- To encourage the regeneration of commercial property in deprived areas.
- Annual Investment Allowance
- A valuable incentive to encourage capital investment.
2. Land Remediation Tax Relief
This is a “green” environmental tax relief aimed at encouraging investment in brown-field or derelict sites which contain contaminants or obstructions. It has been available for some years, but remains an under-used tool for developing brown-field land.
3. Revenue Tax Relief
A long-standing instrument, this provides relief for capitalised expenditure incurred on repairs to assets or the maintenance of assets.
UNILATERAL TAX RELIEF
- A corrective measure taken by a country to minimize the effect of double taxation in a situation where similar relief is unavailable through a tax treaty. Relief is typically provided in the form of an adjustment on tax liability using a tax credit.
- Unilateral Relief is the granting of relief from the effects of international double taxation on the basis of domestic legislation rather than the provisions of a tax treaty.
- Unilateral Relief is available when a person or company receives income from a country not covered under a double taxation agreement or relief of Commonwealth income tax. Relief is allowed as a credit of the foreign tax against the income tax chargeable in Malta. The credit is limited to the tax chargeable in Malta on the same income.
DOUBLE TAXATION RELIEF
- It is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes).
- Thisdouble liability is often mitigated by tax treaties between countries.
Unilateral Relief from Double Taxation
Under Section 91, the Indian government can relieve an individual from double taxation irrespective of whether there is a DTAA between India and the other country concerned. Unilateral relief may be offered to a tax payer if:
- The person or company has been a resident of India in the previous year.
- The same income must be accrued to and received by the tax payer outside India in the previous year.
- The income should have been taxed in India and in another country with which there is no tax treaty.
- The person or company has paid tax under the laws of the foreign country in question.
Bilateral Relief from Double Taxation
Under Section 90, the Indian government offers protection against double taxation by entering into a DTAA with another country, based on mutually acceptable terms. Such relief may be offered under two methods:
- Exemption method – This ensures complete avoidance of tax overlapping.
- Tax credit method – This provides relief by giving the tax payer a deduction from the tax payable in India.India has entered into DTAA with 65 countries including countries like U.S.A., U.K., Japan, France, Germany, etc. These agreements provides for relief from the double taxation in respect of incomes by providing exemption.
