New tax norms to simplify assessment

In a step towards further simplifying the tax procedures, the Central Board of Direct Taxes (CBDT) has amended the assessment norms under Form 3CD of the Income Tax rules for businesses and professionals by introducing sector and sub-sector codes for business activities.

Further, the nine categories of businesses for which codes have been provided would also be required to provide data on 16 parameters for both the current and the preceding year. The modifications are effective from December 1.

The amended rules would be called the Income-tax (Fourteenth Amendment) Rules 2004.

Finance ministry officials said the norms had been amended to make it simpler for the assessment officers to select cases which required further scrutiny.

"Given the computerisation, the proposed categorisation of tax payers as per the stipulated sub-sectors will make it possible for the department to scrutinise tax payers' returns on the basis of industry," Pranav Sayta, Partner, Ernst & Young Tax Practice.

The amendments, which include parameters such as paid-up share capital, secured loans, unsecured loans, interest received and paid, depreciation, and commission received and paid.

Businesses and professionals would be required to provide data on all the 16 parameters for both the current and the preceding year.

The amendments, introduced as an appendix, would be in addition to the current norms under Form 3CD.

The form covers all businesses which have a turnover of Rs 40 lakh in a year and all professionals who have gross receipts of over Rs 10 lakh.

The CBDT has introduced codes for nine sectors -- manufacturing, trading, commission agents, builders, contractors, professionals, service sector, financial service sector and entertainment industry.

Each sector has a number of sub-sectors, all of which have been allocated specific codes.