Rule 132 was recently added under the Income Tax Act by the Central Board of Direct Taxes (CBDT). Rule 132, which was adopted on October 1, 2022, deals with the re-computation of income under sub-Section 18 of Section 155 of the Income Tax Act, 1961, in the Income Tax Rules, 1962. The new rule mainly deals with the matter whether cess or surcharges paid by businesses on income tax should be counted as a deduction.
The new rule stated that Form 69 can be used to apply for the re-computation of total income under Section 155(18). The matter has been in news for some time as there was no clarity before whether a surcharge or cess can be added as expenditure or deduction as contradictory legal clauses are also available on the matter.
What does Rule 132 say?
Earlier, before Rule 132 was introduced, the amount businesses paid towards cess or surcharge was considered expenditure and assessees claimed it as a deduction.
The Finance Act 2022 states that a deduction for such cess and surcharge on income tax is not an allowable deduction from the taxable profit. With this Rule 132, taxpayers, who claimed a deduction of cess or surcharge, can share details of their taxable income, tax paid, and amount of cess or surcharged to be paid. The information has to be submitted electronically through Form 69.
In a notification issued in this regard on September 29, 2022, CBDT had said that assessees can now apply for re-computation of their total income of previous years without allowing the claim of deduction of surcharge or cess.
From now on, under Rule 132, the taxpayers, who have claimed this deduction earlier, will be allowed to file an online application in form 69 for recomputation of income for those years and pay the resultant tax.
Who should file a revised return?
Those who have wrongly claimed a deduction of surcharge/cess during a previous assessment year should file for re-computation of total income.
Under the new rule, an assessee can file for re-computation of income from FY 2004-05 (AY 2005–06) up to March 31 of next year.
A revised return should be filed to rectify an error made at the time of filing the original income tax return. For this year, the revised return can only be filed till December 31 for ITR filed for FY 2021-22 (AY 2022-23). It can be filed even if someone has received a tax refund.
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