TAX TREATMENT IN THE ORIGINATORS’ HANDS -
October 1st, 2010
TAX TREATMENT IN THE ORIGINATORS’ HANDS:
Tax laws may, either on basis of specific rules or general precedents, accept the securitization as either a sale of the receivables, or may disregard the sale and proceed to tax it as a financing on the security of the receivables.
SALE TRATMENT FINANCING TREATMENT
The entire income form the transaction over its period is accelerated
The income from the underlying transaction is taxed over time as before
The gain/loss is taxed immediately
The gain/loss is taxed over the term of the transaction
According to Sec 60 of I.T.Act, 1961, whoever might receive an income, whether with or without the right to receive it, the onus of paying tax will vest in the person who owns the asset from which the income arises.
Therefore, the change in the Act indicating the circumstances under which the transfer takes place has to be made clear.
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