Finance Minister P Chidambaram has introduced the Taxation Laws (Amendment) Bill, 2005, which provides Customs and Excise defaulters with the facility to pay only 25 per cent penalty if they clear the disputed amount within 30 days of receipt of a notice.

The new Bill envisages that on receipt of the disputed amount, the interest on it and the penalty the government will terminate the proceedings against the companies and their executives to whom notices were issued for irregularities such as duty evasion, suppression of facts and willful mis-statement.

The Bill, which seeks to simplify the rules and tighten enforcement, also provides for doubling the exemption limit of the money received by individuals and Hindu undivided families without any consideration to Rs 50,000.

The exemption available to such amounts received at the time of marriage or as inheritance or from a relative will continue. The government has included money received from local authorities, charitable institutions and hospitals in the exempted category.

The Bill also provides for provisional attachment of properties of entities and persons on whom notices have been served under the central excise and Customs laws. The government hopes to check fly-by-night operators through the move as only excisable property can be attached at present.

New sections in the Customs and the Central Excise laws are also proposed to empower the government to  publish details of prosecution proceedings including the names of directors, treasurers, managers or partners of firms after the expiry of the appeal period.

In addition, a number of provisions allowing for arrest, summoning of Customs offenders and enhancement of the maximum punishment to two years from six months for false or incorrect declaration have been proposed.

On income tax, the Bill provides that accounts of educational institutions, hospitals and charitable funds or trusts, whose income exceeds the maximum amount not chargeable to tax--which instead of the present Rs 50,000 a year will now be subjected to audit--will have to file accounts with their tax returns. It also proposes mandatory filing of tax returns by charitable institutions.

The Bill has proposed to empower the Central Board of Direct Taxes to specify norms for approving universities, hospitals and charitable funds or trusts for availing tax deduction on research and development expenses under Section 35 of the Income-Tax Act.

It has also provided that in case tax has not been deducted at source for royalty and rent, it will be added to the taxable income.

In a move that can help the government establish a better cash trail, the Bill also seeks to curb the use of crossed cheques and encourage people to issue account-payee cheques. Disallowance of expenses up to 20 per cent has been proposed if a payment exceeding Rs 20,000 is made through means other than an account-payee cheque.

While a crossed cheque can be endorsed to a third party, an account payee cheque can only be credited into the account of the intended recipient.

The Bill has proposed to amend the definition of rent to provide that the law will be applicable irrespective of whether the items are rented separately or together. It also seeks to expand the list to include machinery, plant and equipment.

Assessing officers are also proposed to be empowered to amend the assessment order to allow deductions under Sections 10A, 10B and 10BA in respect of export income that has been brought into India within the prescribed time.

Universities, hospitals and charitable funds or trusts seeking exemption for exclusion of certain revenues in the taxable income are now proposed to be given an exemption within a year of filing applications.

Duty reprieve Customs, excise defaulters can clear their case by paying the disputed amount and the penalty within 30 days of receipt of notice Mandatory filing of tax returns by charities Provisional attachment of property for excise, Customs offenders Payments over Rs 25,000 not to get tax benefit if not paid through account-payee cheques