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Residential taxability of an individual

Residential status and taxability of an individual

The residential status under Income Tax law plays a vital role while considering taxation of certain incomes of an Individual. It is not related to citizenship of a country.

The residential status of a person is required to be determined for each assessment year in order to ascertain the scope of his total income. The residential status of a taxpayer is worked out on the basis of tenure of his physical stay in India during the Financial Year.

For tax purpose all tax payers are classified into two broad categories based on their period for which they were physically present in the country:

1. Resident
2. Non-resident(NR)

Residents are further classified into:

1. Resident and ordinarily resident (ROR)
2. Resident but not ordinarily resident (NOR)

An individual is said to be Resident in India in any previous year, if he satisfies any one the following conditions:

A) He has been in India for a period or periods amounting in all to a minimum of 182 days during the previous year, or

B) He has been in India for a total of 365 days or more during the 4 years immediately preceding the previous year and for at least 60 days during the previous year.

If any individual satisfies any of the one conditions mentioned above, he is a Resident of India. If none of the above mentioned criteria is fulfilled by an individual then he is categorized as Non-resident.

*The 60-day period mentioned above (in point b) will be substituted for 182 days in case of the following persons:-

  • A citizen of India who leaves the country as a crew member of an Indian ship or for the purposes of employment outside India.
  • A Citizen of India or Person of Indian Origin who visits India in any previous year.

A resident individual will be treated as ROR in India during the year if he satisfies both the following conditions:

a) He is resident in India for at least 2 years out of 10 years immediately preceding the relevant financial year.
b) His stay in India is for 730 days or more during 7 years immediately preceding the relevant financial year.

A resident individual who does not satisfy any of the aforesaid conditions or satisfies only one of the aforesaid conditions will be treated as NOR.

Key points to consider while ascertaining residential status of an individual

  • Receipt of Income: If an amount is 1st received outside India and then subsequently remitted to India, it will be considered as Income received outside India just remittance of such income would not make it an income received in India.
  • Citizenship of a country and residential status: Residential status of an Individual is not nexus to his citizenship. An Indian citizen may be a resident of India or not. On other hand a person may not be citizen of India /foreign citizen but resident of India.
  • Calculation of period of stay: In calculation of period of stay for purpose of determining residential status, it is not compulsory that person had a continuous stay. Total number of days of stay in India during that financial year are to be considered.
  • Residential status for a particular year: Every year the residential status of the taxpayer is to be determined by applying the provisions of the Income-tax Law laid in this regard. So, it may happen that in one year the individual would be a resident and ordinarily resident and in the next year he may become non-resident or resident but not ordinarily resident and again in the next year his status may change or may remain same.

The following table highlights the tax incidence as per residential status:

Nature of income ROR NOR NR
Income which accrues or arises in India Taxable Taxable Taxable
Income which is deemed to accrue or arise in India Taxable Taxable Taxable
Income accrue or arise outside India but received in India Taxable Taxable Taxable
Income which is deemed to be received in India Taxable Taxable Taxable
Income accruing outside India from a business controlled from India or from a profession set up in India Taxable Taxable Not taxable
Income other than above (i.e., income which has no relation with India) Taxable Not taxable Not taxable

 

For assistance in determination of your residential status and computation of tax liability based on it, please contact AJSH & Co LLP. You can click here and reach our taxation experts for further queries.

SEZ in India

Establishing a unit in SEZ in India

India is among the foremost Asian countries who have considered the idea of setting up an Export Processing Zone (EPZ) model to promote country’s exports. To attract more foreign investment and provide an internationally competitive and hassle free environment for export promotion in India, Special Economic Zone (SEZ) was introduced. In the year 2000, with an inception of SEZ policy, India had begun to walk on the path of success.

Initially, the SEZ policy was included under foreign trade policy 2000. The policy was implemented through piecemeal and ad hoc amendments to different laws, besides executive orders. In order to overcome these drawbacks and to give a stable long term policy framework with minimum regulation, the Special Economic Zone Act, 2005 was introduced. The Act provided broad legal framework, covering all important legal and regulatory aspects of SEZ development as well as for units operating in SEZs.

SEZ is a specific duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. In other word, SEZ is a geographical region that has economic laws different from the country’s economic laws. SEZs have been established in several countries, including China, India, Jordan, Poland, Kazakhstan, Philippines and Russia.

Main objectives of establishing a SEZ

  • Generating additional economic activity
  • Promoting exports of goods and services
  • Promoting investments from domestic and foreign sources
  • Creation of employment opportunities
  • Development of infrastructure facilities
  • Exposure to technology and global market

Benefits and incentives of setting up a business unit in a SEZ

  • Tax benefits (tax holidays, income tax exemptions, etc.)
  • Liberal labor regulations
  • Exemption from excise and customs duty on procurement of capital assets, consumable stores, raw-materials from domestic market
  • Streamlined procedures for getting approvals (online / single window)
  • Liberal approach in foreign direct investments
  • Increased capital account convertibility
  • Relaxed export regulation
  • Full repatriation of profits
  • Non-applicability of related environmental laws

Setting up a unit in SEZ

A company planning to setup unit in a specific SEZ needs to apply with the respective Development Commissioner’s (DC) office of SEZ zone. To file an application, company needs to fill the Form-F, stipulated by SEZ rules. The applicants filing the form, needs to submit this form online through SEZ online system using module New Unit Application (NUA).

The steps for NUA are as summarized below:

1. Creating user ID: This is the initial stage for setting up a SEZ unit. For setting up a new unit in SEZ, the user, for the purpose of registration, shall login to SEZ online system and create a new user ID.

2. Raising NUA request: After registration, users are required to fill a “new user application” providing the necessary details which includes general details of company, details of directors, item / products, in which the company deals in, and other details like investments, equity, for-ex, applicant and marketing collaborations of the company.

3. Submitting Form- F and other documents: Further in this procedure, applicants need to upload the below listed documents with a filled Form – F, as mentioned in “Add Documents” field. These enlisted documents have to be submitted physically in DC’s office:

  • Copy of incorporation certificate, Articles and Memorandum of Association of the company
  • Demand draft of INR 5000/- in favor of “The Pay & Accounts Officer,< payable location>”
  • Copy of company’s profile, directors’ profile and project report
  • Copy of board resolution
  • List of imported and indigenous capital goods
  • Form 18 and 32 filed with ROC
  • Copy of residential proof and identity proof of directors
  • Income tax returns of last 3 years
  • Copy of audited financials
  • Copy of IEC of the company
  • Copy of PAN of the company
  • Copy of term sheet for incubation premises
  • Copy of term sheet for main premises
  • Letter for marketing / buyback plan
  • List of directors with their details
  • Letter mentioning website and e-mail address
  • Undertaking for pollution control
  • Affidavit

Along with these documents, applicant needs to submit Form – F containing the details of NUA.

4. Rectification of deficiencies: If the DC does not get satisfied with the submitted documents, he may raise a demand for additional documents. In case, the request is sent back by DC office and the demand is raised from DC office, applicant shall submit the documents within the stipulated

5. Approval of request: After verification of all the documents submitted and other requirements fulfilled by applicant, DC is authorized to approve the request of NUA. Further the approval, an e-mail will be sent to applicant on the registered e-mail describing the supplementary

6. Payment of registration fee: After approval from DC office, a link for payment of registration fee will be enabled; enquiring a few details for payment. On payment of fee, NSDL Database Management Ltd. (NDML) representative will verify receipt of payment and will authorize the payment upon verification of valid payment entry in SEZ online system. Upon authorization of payment, applicant can create administrator and operational users IDs.

7. Submission of lease deed details to DC’s office for approval: After acceptance of letter of approval, the unit is expected to enter into a lease agreement with the developer of the SEZ in which it is commencing business. After entering into the agreement, the unit will have to enter the lease deed details in the SEZ online system and submit it online to the DC’s office. The unit shall also have to submit a copy of the lease deed to the DC’s office in physical form.

8. Intimation of date of commencement: As soon as the unit commences production, the date of commencement of production has to be intimated to the DC’s office. The unit shall online intimate the date of incorporation through SEZ system. In addition, the DC may also require the unit to submit supporting documents in physical form.

For the Fact: As of March 2018, 223 SEZs are in operation and a massive 419 SEZs have been approved.

Deciding on which SEZ is best for your business, it can be a difficult and stress-inducing process. We at AJSH & Co LLP can guide you in setting up a SEZ unit in India as per your business requirements. To know more about this, click here.

tax

Filing tax return for a deceased person

It is a misconception that person’s tax liabilities end with his life. Filing an income tax return (ITR) is mandatory if your income is taxable. But, it’s not only the living who are required to pay their taxes. ITR for deceased person also needs to be filed in case where a person dies and had taxable income. It is common that after the death of the taxpayer, family members often concentrate only on the debts, investments, savings accounts, insurance and transfer of estates of the deceased and ignore the taxation aspect.

On the death of the assesse, the income from his / her assets and the tax liability is transferred to his / her legal heirs. So, it becomes liability of legal heirs / representative to file the return on his behalf and such heirs can pay taxes in their representative capacity. The return needs to be filed for the income earned by person passed away during that financial year up to the time of his/her death.

Procedure of filing ITR as representative of deceased assessee

Get the legal heir certificate: To register as legal heir, any of the following documents are accepted as legal heir certificates:

  • Legal heir certificate issued by a court.
  • Legal heir certificate issued by local revenue authorities.
  • Surviving family member certificate issued by local revenue authorities.
  • The registered WILL.
  • The family pension certificate, issued by State/Central Govt.

Register on income tax website as legal heir: According to section 159 of Income Tax Act 1961, the legal heir or representative is deemed the assessee. Registration as a legal heir is must for e-filing of return on behalf of deceased person. Legal heir needs to register online by submitting his details with the details of deceased. He is required to upload legal heir certificate along with other documents like copy of Death Certificate, copy of the PAN Card of the deceased, self-attested PAN copy of the Legal heir.

Computation of income of the deceased: The total earnings of the deceased during the year have to be bifurcated into two parts – Income earned while he was alive and income earned after the date of his death. Income earned during the period of April 1 to the date of death shall be considered as deceased person’s own and legal heir is supposed to file return for this income in name of deceased assessee. Income earned after the date of death till the end of the financial from the inherited asset shall be considered as legal heir’s income and he would be liable to pay tax on this income.

Filing ITR of the decease: After successful registration, the legal heir has to file the return on behalf of the deceased for income earned from the 1st April of the financial year till the date of death. The legal heir needs to log in to E-filing portal for online filing of the tax return using his own. Then the legal representative should furnish the details of the deceased like his name, PAN, date of birth, Date of death etc. Also, he need to provide the scanned copy his PAN, the death certificate, PAN copy of deceased.

Key points to consider while filing ITR of a deceased assessee

  • The ITR of the deceased should be filed in the same format and time as for all other tax payers.
  • The tax must be payable on income earned from starting of the financial year (April 1) till the date of death.
  • The legal representative gets the benefits of all the rebates and deductions that the deceased would have been eligible for.
  • Any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
  • Property of the deceased person inherited to his legal heir shall not be reported in the Income-tax return of the deceased person, because this transaction is not carried out as transfer for the capital gain purpose.
  • Money or property received by legal heirs by way of inheritance shall not be reported in income-tax return because Section 56(2)(x) does not apply to money or property received by way of inheritance.
  • Income earned after the date of death, from any inherited property shall be considered as legal heir’s own income and is to be reported in his tax returns.
  • If the total income of a legal heir, including the income of deceased person from the date of death, exceeds INR 50 lakhs, the heir shall be required to provide details of all Assets and Liabilities held by him at the end of the financial year in Schedule AL. These details shall include all assets and liabilities including the assets acquired by way of inheritance.
  • Proceeds from the sale of property by legal heir he received by the way of inheritance  shall be taxable as capital gain in hands of a legal heir and is required to be reported under scheduled capital gains in ITR forms.

Extent of liability of a legal representative: The liability of the legal heir would be limited to the extent of assets of the deceased which are or might come into his possession.  The money to recompense the taxes does not go out of the legal heir’s pocket.

Claiming refund on behalf of deceased assessee: Where there is any refund of a tax has to be claimed in the Income-tax return a deceased assessee, the refund can be received by the legal heir just like he/she can file ITR on behalf of the deceased assessee. Usually, the refund is directly credited to the bank account. If the deceased tax payer holds a joint account with the legal heir, then it becomes convenient to receive the amount. In case of absence of a joint account, the account can be operated by the nominee who is appointed by the deceased. In the absence of a nominee, the legal heir can operate the account.

Tax compliances that legal representative need to be adhere to while filing his own ITR

Carry forward and Set off of Deceased Person’s Business loss: When a legal heir takes over in the business of his predecessor by inheritance, he is entitled to carry forward the loss incurred by the previous owner. However, the total period of carrying forward cannot exceed 8 assessment years immediately succeeding the assessment year for which the loss was first computed.

Tax on inherited property: The tax on inheritance, called ‘Estate Duty’ was abolished in 1985 and so, there is no tax on inheritance in India. Transfer of capital asset under inheritance will is not taxable in hands of deceased as well.

Though no tax shall arise either in hands of a legal heir or deceased at the time of inheritance, yet capital gain tax liability arises in hands of a legal heir in case of subsequent sale of the inherited property. For calculation of capital gain on proceeds from sale of inherited property, the actual cost of acquisition is taken as the same at which the property was acquired by the previous owner. While determining the period of holding of, the period of holding of inherited assets by the deceased shall also to be taken into consideration.

Surrender of the PAN card: Legal heir is advisable to surrender the PAN card of the person who is no more, after submission of his last income-tax return and payment of tax dues or receipt of a refund if any.

We cannot compensate for the loss of your loved ones, but can definitely help you in the complex process of filing his / her tax returns .For further assistance click here.

 

llp registration in Delhi India

A hybrid corporate entity-Limited Lability Partnership

Limited Liability Partnership (LLP) is a new corporate structure introduced in India in April 2009, through the LLP Act of 2008. Aimed at small and medium sized businesses; a LLP is hybrid form
which integrates many of the benefits of limited corporations and the traditional partnership firms. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, and also allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as a partnership firm. Low registration fee and easy maintenance make LLP a preferred category of entity for many of the small and medium businesses in India.

Features
Most enticing features of a LLP are:

  • Simplicity and ease of formation and registration
  • No prescribed minimum capital requirement for each partner
  • Liability of each partner is limited to the contribution mention in agreement
  • Cost of formation is limited
  • Least regulatory compliances
  • Separate legal entity

The minimum number of partners required to incorporate an LLP is two. There is no constraint on the maximum number of partners in LLP in India. Among the partners, there should be minimum two designated partners with proper Designated Partner Identification Numbers (DPINs), and at least one of them should be resident in India. The rights and duties of designated partners are governed by the LLP agreement.

Documents Required
To register a LLP in India, the following documents are required:

  • PAN of the partners
  • Address proof of the partners
  • Utility bill of the proposed registered office of the LLP
  • No-Objection certificate from the landlord
  • A copy of rent agreement between the LLP and the landlord

PAN of the partners and their address proof are required to start the LLP formation procedure. The documents pertaining to the registered office of the LLP can be submitted after obtaining name approval for the LLP from the Registrar of Companies (ROC).

Following is step wise registration process for incorporation of Limited Liability Partnership (LLP):

Director Identification Number (DIN): Every individual intending to be appointed as designated partner of proposed limited liability partnership has to apply for allotment of DIN. Earlier partners had to apply for DPIN. Ministry of Corporate Affairs (MCA) has vide its notification amended the limited liability partnership rules, 2009. Now instead of DPIN, every partner who will be appointed as a designated partner has to apply for DIN. The application for allotment of DIN has to be made in Form DIR- 3. You have to attach the scanned copy of documents (usually Aadhaar and PAN) to the form. The form must be signed by a Chartered Accountant, Company Secretary, Cost Accountant or Advocate.

Digital Signature Certificate (DSC): Designated partner of proposed LLP, whose signatures are to be affixed on the e-forms has to obtain Digital Signature Certificate (DSC) from any authorized certifying agency. Also, they should obtain either class 2 or class 3 category of DSC. This is because all the documents for LLP are filed online and are required to be digitally signed.

You can click here & let our expert help you procure DIN.

Reservation of Name: Once two DINs are available, fill Form 1 for the reservation of name of proposed LLP. But before quoting the name in the form, it is recommended that you use the free name search facility available on MCA portal. The system will provide the list of closely resembling names of existing companies/LLPs based on the search criteria filled up. This will help you in choosing names not similar to already existing names. You need to provide six names in the order of preference in Form 1.

Once, the application for reservation of name is submitted to the MCA, it will be processed by the ROC in the State of Incorporation. The registrar will approve the name only if the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark.

Incorporation of LLP: Once the name approval application is accepted by the MCA and name approval letter is issued to the proposed Partners you have to apply for incorporation of the LLP through Form-2. All the details in the form must be filled correctly like – total number of partners and designated partners, amount of partner’s contribution, etc. You have to pay the prescribed registration fee based on the contribution of partners in the proposed LLP.

The form must be digitally signed by a person named in the incorporation document as a designated partner having DIN. Also, it has to be digitally signed by an advocate / Company Secretary / Chartered Accountant / Cost Accountant in practice. On the submission of the form, if the registrar is satisfied, they will register the proposed LLP. It takes 15-20 days for the registration of LLP subject to government processing time and submission of necessary documents.

File Limited Liability Partnership Agreement: LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners. It has to be carefully drafted as per the rules and provisions given in the Indian LLP Act of 2008. LLP agreement must be filed in form 3 online on MCA Portal. Agreement may be conveniently submitted online to the MCA, within thirty days from the date of registration of the proposed LLP. The LLP Agreement has to be printed on stamp paper. The value of stamp paper is different for every state.

To get your business registered as a Limited Liability Partnership, please get in touch with us. Also, for assistance in setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. Click here.

tax2-3

File ITR- get perks

July 31st is the last day for filing an Income Tax Return (ITR). Most people regard this task as a burden, but filing an ITR filing of Return – on time is an extremely important tool to create your financial history. When you file your tax returns every year, you manage to maintain your financial record with the tax department. This financial / tax history is positively viewed and auspiciously utilized by most agencies with whom you may need to interact at times. It will help you to be in the good books of the financial institutions such as banks, Insurance companies, NBFCs etc. and also serves as a proof of income earned by an individual and total taxes paid.

It is always advisable to file one’s tax return even if the taxable income falls below the basic exemption threshold. Currently the limits are INR 2.5 lakhs for ordinary individuals, INR 3 lakhs for senior citizens and INR 5 lakhs for super senior citizens.

You can enjoy the following benefits if you file tax returns:

  • ITR Receipt is an important document: Having an ITR receipt is important because it is more detailed than Form 16, entailing your income and taxation along with revenue from other sources.
  • Use as address proof: If you have been filing your returns regularly, then the assessment order can act as a proof of residence.
  • Easy loan or card processing: Being a diligent income tax filer makes it easier for banks to assess your financial position when you apply for loans like an auto loan, home loan etc. Providing a copy of ITRs receipts with your loan application make it easier for you to get approved it quickly.
  • Compensate losses in the next financial year: Unless you file the ITR you will not be able to carry forward capital losses (short-term or long-term), if any, in a financial year to be adjusted against capital gains made in the following years. As per the income-tax provisions, if tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to subsequent years. A long-term capital loss in one year is allowed to be carried forward for eight consecutive years immediately succeeding the year in which the loss is incurred. Long-term capital loss can only be adjusted against a long-term capital gain in the following years. But short-term capital loss can be adjusted against long- as well as short-term capital gains.
  • Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed within the due date (31st July) of the assessment year.
  • Avoid paying additional interest: If you owe some taxes and still do not file your tax return, then you may be liable to pay additional interest u/s 234A at 1% per month on remaining tax payable by you. For instance, banks would deduct tax from interest on fixed deposits exceeding a certain limit.
  • Avoid penalties or scrutiny from the tax department: From FY 2017-18, INR 10,000 would be imposed for not filing ITR. Also there could be prescribed penalties ranging from 50 to 200% in certain cases. This black mark on your financial history will remain for years to come.
  • Credit card processing: Credit card companies also insist on having proof of return prior to issuing a card, so they can reject to issue you a credit card if you haven’t filed your ITR.
  • For a hassle-free visa application procedure: If you are planning to immigrate to another country or exploring a high-paying overseas job opportunity, then prepare yourself well in advance.At times visa authorities ask for copies of past tax returns, therefore to apply for a visa a tax return would essential to be filed. Embassies, especially those of US, UK, Canada etc., require you to furnish the copies of your tax returns for the last couple of years at the time of the visa interview.
  • To buy an insurance policy with a higher cover: Taking in consideration high cost of living, buying life cover of INR 50 lakh or INR 1 crore has become very usual from past few years. However, these covers are available against your ITR documents that verify annual income. “Life insurance companies ask to furnish ITR receipts if you opt to buy a term policy with sum insured of INR 50 lakh or more. If insurance providers have reasons (non-compliance) to believe that you are a tax-evader, they will not give you policies with more cover.
  • Government tender: If one plans to start his business that require him to apply for a government tender or two, he will be need to present his tax return receipts of the previous five years. This again, is to show your financial position and whether you can meet the payment obligation or not. However, this is no strict rule. It may vary depending on the internal rules of the government department. Even the number of ITRs required can vary.
  • Makes life easier for freelancers and independent professionals: Businessmen, consultants, partners of firm, freelancer or self-employed people don’t get Form16. This is the only document to prove that they have filed the ITR. Without this, they can face funding issues and transactional problems.
  • High-value transactions: If you regularly file your ITR, then it will create a strong financial history and credibility. When you do any high-value transactions such as purchase or sale of property, buying a car, cash deposits in bank, investment in mutual funds, credit card bill payments, etc., by filing ITRs, one can report these transactions & substantiate the same as per one’s income.

If you require any assistance in filing your personal income tax returns, corporate tax returns, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Click Here.

ESOP-1

How ESOPs are taxed in India

ESOP refers to an option given to employees of a company to purchase shares of the company, in return of his dedicated services to the company, at a future date at a pre-determined price. Employees have to wait for a certain duration before they can exercise the right to purchase the shares. This duration is termed as vesting period.

It is a frequently used incentive system practiced by many organizations. It has been majorly used by start-up Firms. It is a common practice among organizations to reward employees excelling at their work by giving ESOPs as a part of the salary and ensure their long-term commitment towards the company.

ESOPs are normally given at a price which is less than the market price of the share of firm. Since most organizations have now made ESOP an integral component of the total CTC for an employee, it is essential to understand how ESOPs in India are going to be taxed. Majority of the employees assume that they don’t need to pay any tax when the ESOP shares are sold, since tax has already been deducted and deposited by their organization.

Taxability of ESOPs

According to the amended provisions of Sections 17 (2) (vi) and 49 (2AA) of the Income Tax Act of India, taxation of ESOPs is done twice.

  • First, when an employee exercises his right for shares it is treated as a perquisite. When an employee exercises his option i.e. he wants to buy shares, the same are credited to his demat account. The Exercise Price (EP) at which an employee purchase the shares is lesser than their Fair Market Value (FMV) on the allotment date, sothe difference between fair market value and exercised price is treated as perquisite and taxed. This is reflected in Form 16 and Form12 B and treated as income from salary in the tax return.
  • Second, when an employee sells shares, the proceeds from this sale are treated as capital gain. If the company is listed on an Indian stock exchange and shares are held for more than 12 months by the employee it will be considered as long-term capital gain and as per the latest tax regulations it will be taxed at 10%. If shares are held for less than 12 months, it will be considered as short-term capital gain and profit will be taxed at 15%.

These days start-ups and unlisted companies, the shares of which are not listed on the stock exchanges are also allotting ESOPs to their employees. These shares will be considered short-term assets if held for less than 24 months from the exercise date. If the shares are held for more than 24 months, and sold after this period, these are considered as long-term assets.

If the employee is selling shares in less than 24 months, income will be added to his taxable salary and tax levied would be according to the respective tax slab. If shares are sold after 24 months, then it would be considered as long-term capital gain taxed at 20% after indexation of cost.

 

It is good to own the shares and its better to also know what would be your net receivable in hand after taking into account the tax implications. In this our tax advisors having expertize in ESOPs taxation can guide you. For assistance click here.

 

CRA-Income-Tax-Penalty

Common Income tax penalties in India

Introduction
Under the Income-tax Act, penalties are levied for various defaults committed by the taxpayer. Some of the penalties are mandatory and a few are at the discretion of the tax authorities. In this part, you can gain knowledge about the provisions relating to various penalties leviable under the Income-tax Act.

As per the Union List in the Constitution of India, the Central Government has the power to levy a tax on any income other than agricultural income, which is defined in Section 10(1) of the Income Tax Act, 1961, which is the charging statute of income tax in India. Income tax is the annual tax levies on the income of businesses and individuals, wherein businessmen and other individuals are required to file their income returns to the central government every year to determine the amount of tax they owe to the government. It is the key source of funding available to the government. As per the Income Tax laws in India, income tax is imposed by the government on,

  • Individuals
  • Hindu United Families (HUF)
  • Companies and firms
  • Limited Liability Partnership (LLP)
  • Association of persons, a body of individuals
  • Local authority and any other artificial juridical person

 

Tax evasion in India is a serious affair and for any defaulters or fraudsters, the Income-Tax act provides for adequate repercussions.

  • Not Filing Income Tax Returns
  • Failure to Pay Tax as Self-Assessment
  • Failure to Comply with Demand Notice
  • Failure to Get Accounts Audited
  • Concealment of Income
  • Failure to comply with Income Tax notice

 

The Income Tax Act exists to ensure tax defaulters and offenders are brought to light. Do not join this list, pay the correct tax on time.

If you have any query regarding this Click Here

 

OPC-Registration-Procedure

Guide for incorporation of One Person Company

Here is step-by-step guide for starting your company individually — the understanding of an OPC, the benefits of incorporating it and the legal formalities in its formation.

As per the Companies Act,1956, a Public Ltd Company requires at least 7 members or shareholders wherein a Pvt Ltd Co requires to have at least 2 members. Hence, a One Person Company was never allowed to be formed in our country earlier. However, under the provisions of the Companies Act 2013, Sec 2(62), One Person Company (OPC) is being allowed to form.

One Person Company means a company which has only one member. It is important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. All the provisions related to the private company are applicable to an OPC, unless otherwise expressly excluded. In case of OPC, though it is true that the One Person appears to be like sole proprietor his liability to the debtors of the Company is limited to the shareholding of the company and his personal assets are never attached for payment of the company’s liability, which in case of Proprietorship never happens.

Things you should keep in mind before forming an OPC:

Only a natural person who was a resident of India in the previous year (i.e. he has stayed in India for more than 182 days in that year) shall be eligible to form an OPC. This means that any association of persons or body of individuals or company or any other entity cannot form OPC. A minor is also not eligible to be a member or nominee in an OPC.
You cannot incorporate more than one OPC at a time.
An OPC can either be a company limited by share or limited by guarantee or an unlimited company.
Once an OPC is formed, you will still have to follow the minimum requirement i.e. the company must have an average annual turnover of Rs. 2 crore in the immediately preceding three financial years, failing which the company will lose its status.
An OPC cannot carry out Non- Banking Financial Investment activities including investment in securities of any body corporate.

Steps to be followed to Incorporate One Person Company (OPC)

  • The director is firstly required to obtain a Digital Signature Certificate [DSC] for the proposed Director(s).
  • He is then required to obtain a Director Identification Number [DIN] for the proposed director(s).
  • Thirdly, they are supposed to select a suitable Company Name and then make an application to the Ministry of Corporate Office for the availability of name.
  • The fourth step is to Draft a Memorandum of Association and the Articles of Association [MOA & AOA].
  • The fifth requirement is to sign and file various documents of the OPC including MOA & AOA with the Registrar of Companies electronically.
  • The director is required to pay the Requisite fee to Ministry of Corporate Affairs and also as Stamp Duty.
    The seventh step is to scrutinize the documents at Registrar of Companies [ROC].
  • Lastly, he is required to obtain the receipt of Certificate of Registration/Incorporation from ROC.

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New-ITR-forms-17-18_Full

New requirements in ITR forms for AY 2018-19

New requirements in ITR

1. Additional disclosure requirements for Ind AS Compliant Companies.
2. Fees for late filing of return [Section 234F].
3. There is a requirement to furnish a break-up of salary. Require more details of house property income.
4. Additional details to be furnished by taxpayers opting for presumptive scheme such as amount of secured/unsecured loans, advances, fixed assets, capital account etc.
Further, new ITR 4 seeks GSTR no. of the assessee and turnover as per GST return filed by him.
5. Transfer of TDS Credit to Other Person.
6. Capital Gains in case of transfer of unquoted shares.
7. Reporting of sum taxable as Gift.
8. Now Partners cannot use ITR 2.
9. Revised Depreciation Schedule i.e. the highest rate of depreciation for any block of asset is restricted to 40%
10. Details of business transactions with registered and unregistered suppliers under GST.
11. Assessee claiming DTAA relief is required to report more details.
12. Info relating to capital gains exemption to be furnished in detail.
13. Disallowance of expenses in case of TDS default (for residuary income).
14. Taxability on remission of trading liability in case of ‘Income from other source’.
15. Income from transfer of Carbon Credits.
16. Impact on profit or loss due to ICDS deviation.
17. Details of GST paid and refunded.
18. Removal of ‘Gender’ from personal information.
19. Details of foreign bank account of non-residents.
20. Reporting of CSR appropriations.
21. Break-up of payments/receipts in foreign currency.
22. Ownership information in case of unlisted company.
23. Trusts to disclose more information in ITR.
24. Details of fresh registration upon change of objects [Section 12A].
25. Taxability of Dividend in excess of Rs. 10 lakhs [Section 115BBDA].
26. No deduction for corpus donations made to other institutions [Section 11].
27. Political Parties to confirm if cash donations are received [Section 13A].

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tax-changes-for-landlords

Tax changes effective from 1 April 2018 (FY 2018-19)

Tax Changes effective from 1 April 2018 (FY 2018-19)

  • Penalty on late filing of ITR upto Rs.10,000
  • Reduction in time limit to revise ITR, to be done in same assessment year
  • No ITR can be filed after the assessment year
  • Transport allowance and medical reimbursement to employees are taxable
  • Standard deduction of Rs. 40,000 to salaried assesses
  • Hike in cess from 3% to 4%
  • Levy of Long Term Capital Gain Tax (LTCG) on shares and equity mutual funds
  • Senior citizens (above 60 years) interest income exempted to Rs.50,000. TDS on interest for senior citizen will be deducted only if interest income is more than Rs.50,000
  • Tax benefit on premium on medical insurance for senior citizen upto Rs.50,000

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