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Income tax adviser in India

Income Tax: Skepticism eliminated

What is Income Tax?
A tax imposed on taxable income or profits of persons (whether individual, firm, company, Artificial Juridical Person, Association of Persons, Body of Individuals or Local Authority). Taxation rates may vary by type or characteristics of tax payers.

Tax trend followed in India:
In India, two types of tax trends are followed:

  • Progressive Rates: When the tax rate increases as the taxable income increases.
  • Proportional Rates: When the tax rates are uniform, irrespective of the person or their incomes.

Income tax in itself is a vast concept and cannot be understood in entirety by a layman, so here are few answers to drive away all ifs’ and buts’ that usually arise:

  • Are gifts from relatives always tax free?
    The provisions of Section 56 of Income Tax Act, 1956, state that the section provides for a cap of INR 50,000 on gifts received from non-relatives and if gifts exceeded the amount, the same would be taxable under the head “income from other sources.” But there was no such cap on gifts received from a relative.
  • What is the meaning of Presumptive taxable scheme?
    As per section 44AA of the Income-tax Act, 1961, a person engaged in business is required to maintain regular books of account under certain circumstances. In order to provide relief to small taxpayers, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, 44ADA and 44AE. A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the job of maintenance of books of account. ​
  • Is occasion a necessary condition for receiving any sum from a relative as a gift?
    The need to provide an explanation on the occasion for which gift was received is not mandatory, as per the provisions of Section 56 of Income Tax Act, 1956.
  • How is long-term capital gain from NABARD bonds taxed?
    Long-term capital gains (LTCG), after indexation, from zero-coupon bonds of NABARD are taxable at 20.8% and without indexation they are taxable at 10.40%, after taking into account basic exemption limit.
  • Is deduction allowed on money invested in Senior Citizens’ Saving Scheme (SCSS)?
    Amount deposited in SCSS is eligible for deduction under section 80C of the Income Tax Act, subject to the maximum limit of Rs 1.5 lakh.
  • What are Equity Oriented Mutual funds?
    Mutual Funds that apply 65% or more of their corpus to equity or equity related securities at all times.
  • How Equity Oriented Mutual Funds are taxed?
    1. Gains on equity oriented mutual funds held for less than a year are treated as short-term capital gains and taxed at 15%.
    2. Gains on equity oriented mutual funds held for a year or more are treated as long-term capital gains and taxed at 10% for gains exceeding Rs 1 lakh in a year.
    3. For equity oriented mutual funds invested on or before 31 January 2018, gains till that date will be considered as grandfathered and will be exempt from tax.
  • Is maintaining proof or records of earnings necessary? ​​
    For every source of income one should maintain proof of earning and the records specified under the Income-tax Act. In case no such records are prescribed, reasonable records with which one can support the claim of execution of income should be maintained.
  • Is relief available from double taxation, if income is earned in both India as well as abroad?
    A person can claim relief in respect of income which is charged to tax both in India as well as abroad. Relief is granted either, as per the provisions of double taxation avoidance agreement entered into with that country (foreign country) by the Government of India or by allowing relief as per section 91 of Income Tax Act in respect of tax paid in the foreign country.
  • When are incomes deemed to be received in India?
    Following incomes are treated as incomes deemed to be received in India: ​

    1. Interest credited to recognised provident fund account of an employee in excess of 9.5% per annum.
    2. Employer’s contribution to recognised provident fund in excess of 12% of the salary of the employee.
    3. Transferred balance in case of re-org​anization of unrecognised provident fund.
    4. Contribution by the Central Government or other employer to the account of the employee in case of notified pension scheme referred to in section 80CCD​.​
  • What is the eligibility for being taxable under Presumptive taxable Scheme under section 44AD?
    The scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm). Further, a person who has made any claim towards deductions under section 10A / 10AA / 10B / 10BA or under  sections 80HH to ​80RRB in the relevant year, cannot come under the purview of this scheme.We believe that income tax cannot be illustrated and explained with few questions because of its vast dominion. Still confused and have questions regarding your income tax filing, you can reach our team of experts.

If you require any assistance in filing income tax returns, corporate returns, tax assessments, tax planning, structuring, transaction advisory, please click here.

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Avoid these common mistakes in income tax, keep tax notice at bay

In recent months, the tax department has stepped up efforts to ensure tax compliance. New rules have been introduced to plug tax leaks and officials are cracking down on evasion. Tax records are being put under the scanner and notices are being sent to individuals if the computer-aided selection system notices a discrepancy. Thousands of taxpayers have already received tax notices.

A notice from income tax department is a reason for taxpayer’s worry. There are few common mistakes which invites a call from income tax department. Thus, knowing these mistakes could help you avoid income tax notices.

  1. Not reporting interest incomes

One should report all the interest incomes received or accrued due to him in the previous financial year (for which the return is being filed) while filing his tax returns. Not reporting of interest income from bank and other sources is one of the most prominent reasons resulting in issue of income tax notice. Income tax department gets information of interest, commission & other income of the depositor from multiple sources. Non- reporting results in automatic issue of notices by the income tax system.

Smart tip: Calculate how much interest you will get on your FDs, RDs and other fixed income investments and add that to your income.

  1. Not filing income tax returns

Individual are required to file the income tax return only if income exceeds the basic exemption limit. Lot many taxpayers don’t file the return presuming that return is mandatory only if they have the tax liability. For instance, a person with a salary income of INR 4 Lakh and 80C deduction of INR 1.50 Lakh is required to file the return of income as income is above basic exemption limit even though the tax liability is Nil. Non- filing of return results in notice. It is advisable to file the income tax return even if the income is below basic exemption limit if they have carried out any high value transactions, as it will enable them to avoid income tax notice.

Further, many people don’t file their income tax returns because they have long term capital gains which are tax-exempt and without this their gross total income is below the tax-exempt income level. However, as per recent amendments in section 139 (1) of the Act, if your exempted long term capital gains along with gross total income exceeds the minimum exemption level, you are required to file your income tax return.

Smart tip: Do not miss filing your return even if your tax is zero or all your taxes are paid. File online to avoid mistakes.

  1. Non reporting of tax free incomes

As a taxpayer, you are duty bound to report all your income even if some is tax-free. One of the reasons for income tax notice is that the investment by taxpayer is not in accordance with the income profile of the taxpayer. There are lot many taxpayers who don’t discloses exempt income on the pretext that it don’t have any tax implications. Exempt income includes income such as LIC money back, PPF withdrawals, ELSS withdrawals etc. Often the amount of exempt income is in lump sum and invested back by the taxpayers in other investment avenues. By disclosing exempt income, taxmen are automatically able to link the source of new investment from exempt income. Disclosure of exempt income in ITR forms also could be treated as
self-explanatory for the spending of the taxpayers towards foreign travel, credit card & other spending. Thus, these exempt incomes are to be reported in the ‘Exempt Income’ schedule of the ITR and you can claim exemption on these under various sections of the Income Tax Act.

Smart tip: Mention all tax-free income in your ITR but claim exemption for it under various sections.

  1. Verify 26AS before filing tax return

26AS is a taxpayer’s statement showing the data of the assessee available with the income tax department. Taxpayer should verify that their return incorporates the data available in 26AS. Taxpayer should take efforts to rectify 26AS in case it contains entry not related to him. Taxpayer can avoid notices by verifying 26AS before filing income tax return.

Smart tip: Verify 26AS before filing income tax return.

  1. Non reporting of transaction in Income Tax Return

Non reporting of transactions in income tax return form is one of the most prominent reasons for inviting income tax notices. Even though the transaction has resulted in loss, it is better to disclose the loss figure in income tax return to avoid notices. These types of incidents are often there in shares, mutual funds & property. Be careful, disclose & avoid unwanted notice from income tax department.

Smart tip: Report all transactions including the transactions resulting in losses in income tax return.

  1. Misusing forms 15G / 15H to avoid TDS

Many investors try to avoid TDS by splitting their investments across different banks. Many others submit Form 15G or 15H so that their bank does not deduct TDS. These forms are declarations that the individual’s income for the year is below the taxable limit and therefore no TDS should be deducted from the interest. These are now required to be e-filed by the banks & other recipient. As a result, the income tax systems have handy information of all the taxpayers who have wrongly filed the declaration form. Taxpayers submitting this form in a casual way started receiving notice from the income tax department. Further, misuse of these forms is a serious offence. A false declaration not only attracts penalty but also prosecution.

Smart tip: File Forms 15G only if you fulfil both the conditions i.e. your taxable income for the year does not exceed the basic exemption of INR 2.5 Lakh and the total interest received during the financial year does not exceed the basic exemption slab of INR 2.5 Lakh. TDS is an interim tax and you can claim a refund if you have paid more than due.

  1. Non deduction of TDS

TDS net is widening to include individual taxpayers who are not in any kind of business or profession. Now, purchase of property above INR 50 Lakh attracts TDS. The rule is applicable even if you pay in instalments. In such cases, the TDS needs to be deducted from each payment and the money deposited with the government within seven days. While TDS deduction happens automatically when you buy a new property from a builder, in case of transactions between individuals, it is often ignored.

In addition, payment of rent exceeding INR 50,000 p.a. also attracts TDS. Non-deduction or non-filing of the TDS return after deduction / payment invites notice from the revenue office.

Smart tip: Make it clear to the seller of property / property owner that you will be deducting TDS from the payment. Make sure you have his correct PAN details.

  1. Non reporting of Cash deposit

Change in income tax return forms is an annual feature. This year, income tax return form required taxpayer to disclose the amount of cash deposited in a bank account. Also, if your expenses or cash withdrawals exceed certain limits, your credit card company and your bank are supposed to report that to the tax department. Thus, income tax systems have already received the information from the banks of all the taxpayers regarding their cash deposits. Taxpayers with heavy cash deposits or unmatched data are catching an eye of income tax and the income tax department may send a notice or pick up such cases for scrutiny.

Smart tip: Avoid cash transactions as far as possible. If depositing cash in bank account, keep record of source of cash.

Thus, precisely don’t forget to incorporate all the income details in income tax return. Don’t fail to file the income tax return. Disclose all the transactions, mainly of shares & property. Don’t be casual in submission of Form No. 15G / 15H. Be updated about the changing tax laws, more particularly about the TDS provision on property & rent & deduct proper TDS. Report all income. Disclose all the bank accounts correctly with cash deposits figure. Verify 26AS before filing income tax return & be a happy taxpayer.

For a more detailed discussion on income tax issues, or to obtain further assistance in personal income tax filings, corporate tax filings, tax planning, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Click Here.

Tax adviser in India

Income tax Rectification

There has been a change in the way Income Tax Department (ITD) is processing the income tax returns (ITR) for financial year 2016-17.

This has led to Intimation u/s 143(1)(a) being issued to a lot of taxpayers with even the slightest discrepancy in their return.

How returns were processed till 2016:
Only tax details declared in your ITR were matched with the tax details available in your Form 26AS.

How returns are being processed in 2017:
Now all details declared in your ITR w.r.t. Income (gross total income, taxable income, other income like interest income, etc.) / Deductions / TDS, are being matched with the details available in your Form 16 as well. If there is any variance in details given in ITR and Form 26AS / Form 16 / Form 16A, you would get an intimation u/s 143(1)(a) of the Income Tax Act.

What to do when you get such intimation:
You are required to login to your account at ITD website and submit a response online explaining such difference within the stipulated time. In case timely response is not received, ITR will be processed without providing any further opportunities in this regard. This can lead to:
1.    Delay in refund processing
2.    Demand notice to pay tax, interest and penalty
3.    Delay in loan/visa application processing

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Document required for gst registration

What is GST Registration?

Every business carrying out a taxable supply of goods or services under GST regime and whose turnover exceeds the threshold limit of Rs. 20 lakh/ 10 Lakh as applicable will be required to register as a normal taxable person. This process is of registration is referred as GST registration.

GST is the beggest tax reform in India. By abolishing and subsuming multiple taxes into a single system, tax complexities would be reduced while tax base is increased substantially. Under the new GST regime, all entities involved in buying or selling goods or providing services or both are required to obtain GST registration.

Documents Required For GST Registration

  For Individual:

  • PAN card
  • ID proof and address proof of Individual
  • Photo (JPG – 100 KB)
  • Bank Details – Copy of canceled cheque or first page of Pass Book  or first page of recent bank statement
  • Registered Office Documents- Copy of electricity bill/landline bill, water Bill etc.  also in case the premises is rented, Rent Agreement will be required.

  For One Person Company/ Private Limited Company/ Public Company:

  • Company PAN Card
  • Memorandum of Association (MOA) /Articles of Association (AOA)
  • Registration Certificate/ Incorporation Certificate of the company
  • Bank Details – Copy of canceled cheque or first page of Pass Book  or first page of recent bank statement
  • A copy of the resolution passed by BOD / Managing Committee
  • Registered Office Documents- Copy of electricity bill/landline bill, water Bill etc. also in case the premises is rented, Rent Agreement will be required.
  • Director Related Documents- PAN and ID proof of directors& Photo
  • Proof of Authorized Signatory
  • DIN No of Partners & Digital Signature

For Partnership & Limited Liability Partnership (LLP)

  • Partnership / LLP PAN Card (as the case may be)
  • Partnership Deed/ LLP Agreement
  • DIN No of Partners & Digital Signature (in case of LLP)
  • Bank Details – Copy of canceled cheque or first page of Pass Book or first page of recent bank statement
  • Registered Office Documents- Copy of electricity bill/landline bill, water Bill etc.  also in case the premises is rented, Rent Agreement will be required.
  • Partner’s related Documents- PAN and ID proof of designated partners& Photo
  • Proof of Authorized Signatory

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Tax adviser in India

GST and its Impact on Indian Economy

Goods and service tax (GST)

The GST is a new concept that simplifies the giant tax structure by supporting and enhancing the economic growth of a country. It is a comprehensive term levy on manufacturing, sale and consumption of goods and service at a national level.

Goods and service tax bill or GST also referred to as the constitution (one hundred and twenty-second Amendment) bill 2014 initiate a value added tax to be implemented on national level. In India, GST will be an indirect tax at all the stages of production to bring about uniformity in the system.

Positive impact of GST on India’s GDP

A comprehensive and robust tax structure that will bring the current set of indirect taxes like VAT, sales tax, excise duty etc. under one umbrella and will be instrumental in creating a seamless experience across all states. By bringing the varied tax structures under one net, it is also expected to reduce the cost of transaction for various business entities that had to comply with multiple taxes. We are well aware of the fact that transport and logistics industry is pivotal to the growth of Indian economy as there are lot of products that are delivered from one part of the country to another on a daily basis. So, it is assumed that implementation of a decent GST structure will eliminate other taxes and the export of goods and services will become economical.

Negative impacts of GST

There can be no gain without pain and that may be especially true when it comes to GST. As about 160 countries overhauled their indirect tax systems, they confronted numerous challenges. Latecomer India is unlikely to escape some havoc.

  • Service tax rate 15% is presenting charged on the services, so, if GST is introduced at a higher rate which is likely to be seen in near future, the cost of services will rise. In simple words, all the services like telecom,, banking, airlines, etc will become expensive.
  • Increased cost of services means an add to your monthly expenses.
  • You will have to reschedule your budget to bear additional tax
  • Increase in inflation might be seen initially
  • Being a new tax, it will take some time for the people to understand it completely, its actual implications can be seen only when the rate of tax is determined.
  • If the actual benefit is not passed to consumer hand then the seller increase his profit margin, the prices of goods can also see a rising trend.

Related Posts:

Goods & Services Tax

Basics that Every One Should Know about GST

How GST Works in India

If you have any query regarding this Click Here

Tax adviser in India

GST on digital advertising companies

Assessment of impact on digital advertising companies

Present Scenario

  • For services rendered by a digital advertising company, it charges a service tax @15%
  • For input services availed by a company, it claims an input tax credit (“ITC”)
  • However, a digital advertising company is not eligible to claim ITC on any products used in producing digital content or capital goods purchased by it
  • The company file its service tax return on half yearly basis
  • Two returns annually which can be revised within a period of 90 days from date of filing

Goods & Service Tax (“GST”)

Registration : Registration is mandatorily required as threshold exemption is not available to E-commerce operators*

Rate under GST :GST will be charged @18% on all invoices

Input Tax Credit : ITC can be availed on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business
Read More

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GST-ROll-Out-COnfirmation

GST rollout: Retailers working overtime to be prepared, deny impact on sales

Organised retailers do not expect the Goods and Services Tax (GST) to impact their sales despite general fears that it could disrupt businesses, and hope to be fully ready for the uniform tax regime in the next few weeks. “As GST will be rolled out from July 1, we have to be prepared. It will lead to better compliance and an organised way of doing things,”

“We are not anticipating any sales disruptions. Nobody has expressed concerns on that…For retailers, benefits will come as and when manufacturer change the prices, which we, in turn, will pass it on to consumers,” he added. July onwards, large retail companies, including Reliance Retail, Future Group, Trent HyperCity and DMart, among others, are looking at aggressive price reductions.

The common objective of all retailers is also that margins should be protected, while ensuring that prices remain under check. “We will reduce prices by 2 to 20 per cent on various consumer products,”

GST will create a level-playing field for modern trade,” he added, explaining that the biggest challenge is to see that customers are not unhappy. “I believe tax rates should not be so complex as to create variations that adversely affect consumers,” he said.

Most retailers are awaiting more clarity on various issues, including input tax credit and e-way bills. Several retail stores have announced big discounts especially in the consumer electronics segment ahead of the GST rollout, in a bid to to clear inventories and to avoid implementation issues.

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Goods and Service Tax

Records you should Maintain under GST

GST Laws in India mandate that all registered persons under GST maintain records and accounts in a specified manner. Every law of Direct and Indirect Tax in our country also mandates that information in a prescribed manner has to be captured and preserved for a certain period of time.  In this article, we look at the list of records to be maintained under GST in detail.

Present Tax System:

  1.  Excise Duty : Under Excise, the general records to be maintained are the RG-1 register (Daily stock account of excisable goods), Form IV register (Register of receipt or issue of raw material), invoice book and job work register.
  2.  Service Tax : Under Service Tax, the suggested records include the bill register, receipt register, debit/credit notes register, CENVAT credit register, etc.
  3.  VAT (Value Added Tax) : Under VAT, the records to be maintained include purchase records, sales records, stock records, VAT account containing details of input and output tax, works contract account, etc

Documents to be Maintained (GST)

  • Details of production or manufacture of goods.
  • Details of inward and outward supply of goods or services.
  • Stock of goods.
  • Input tax credit availed.
  • Output tax payable and paid.
  • Any other particulars as may be prescribed.

If more than one place of business is specified in the registration certificate, accounts relating to each place of business must be kept at the respective places.

Maintaining books and records in electronic form will be ideal and convenient for accurate and timely compliance under GST.

Related Posts:

Goods & Services Tax

Basics that Every One Should Know about GST

How GST Works in India

If you have any query regarding this Click Here

Tax-Return

Efiling of Income Tax Return

What is a income tax return ?

It is a prescribed form through which the particulars of income earned by a person through various sources(like salary, business, professional fees, interest, capital gains, etc.) in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year, called as income tax return or ITR. It is like your report card in school but instead of  marks you have income and taxes.  It is the constitutional obligation of every person earning income to compute his income and pay taxes correctly. Different forms are prescribed for filing of returns for different Status and Nature of income .

What is efiling ?

Efiling or electronic filing is submitting your income tax returns online. There are two ways to file your income tax returns. The traditional way is the offline way where you go the Income Tax Department’s office to physically file your returns. The other way is when you efile through the internet. Over the past few years, efiling has become popular because it is easier, doesn’t require prints of documents and can be done for free.

What are advantages of e-Filing?

  • Anywhere, Anytime files, 24 x7 x 365 service.
  • Easy, fast,free and secure
  • Faster processing and quicker refunds.
  • Value added services like viewing Form 26AS,  tracking of refunds,email, SMS alerts regarding status of processing and refunds.
  • And now it is also compulsory for most.

Is E-filing of Income tax Return compulsory?

  • E-Filing Returns is  compulsory for:
    Individuals earning over Rs 5 lakh a year. They are required to file their tax returns in the electronic format from AY 2013-14 (FY 2012-13) and subsequent assessment years.
  • Individual/HUF, having total Income of Rupees 10 lakhs. It was made mandatory from AY 2012-2013((FY 2011-12) and subsequent assessment years.
  • Individual/HUF /Firm auditable under section 44B of the IT Act, 1961. It was made mandatory for AY 2012-2013 and subsequent assessment years.
  • All Companies

Difference between AY and FY

Financial Year is period between 1st April to 31st March. Assessment Year is the next year in which the income is liable to tax.

For example, if your financial year is from 1 April 2017 to 31 March 2018, then it is known as FY 2017-18. The assessment year for income earned during this period would begin after the financial year ends–that is on 1 April 2018 till 31 March 2019.

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Goods-And-Service-Tax-GST

Basics That Everyone Should Know About GST

With the passage of the GST bill in both the houses of Parliament, its implementation from 1 July 2017 is nearly certain.

India currently has a dual system of taxation of goods and services, which is quite different from dual GST. Taxes on goods are described as “VAT” at both Central and State level. It has adopted value added tax principle with input tax credit mechanism for taxation of goods and services, respectively, with limited cross-levy set-off.

GST (Goods and Service Tax)

GST means Goods and Service Tax. It is an indirect tax levied on sale of goods and services. The reformists believe that GST is one of the most awaited law which upon introduced will boost the economic growth in the country. This law if passed by the parliament may come into force from April 2016. As everyone is talking about it now, let’s get into the basics of the proposed law in this article.

Does GST apply to you?

Being an indirect tax, it is applicable to businesses, professionals, freelancers and service providers. It does not apply to salaried individuals.

Is it easy to implement in India?

Not really. Today states have autonomy in collecting state taxes. They have the feeling of losing their rights! They want liquor, fuel to be out of GST tax system. They are also worried about Central government sharing GST revenue with the states. If India becomes one common market, then the states will have to share their powers of taxing with the union government. (Which means states can’t increase the taxes as and when, as much as they want)

What is a “casual taxable person?”

A person who occasionally supplies goods and/or services in a territory where GST is applicable but does not have a fixed place of business in the said state is treated as a casual taxable person. For example, a person who has a place of business in Bangalore gives consulting services in Pune (where he has no place of business), then he would be treated as a casual taxable person in Pune.

What are the differences between the UPA’s GST and the NDA’s GST?
Below are the primary differences:

  • Petroleum sector has been kept out of the ambit of GST
  • Liquor for human consumption is exempt however tobacco and tobacco products will fall under GST.
  • There is a 1% tax on top of the GST for inter-state movement of goods and services.

What will be the short-term impact of GST?

The GST will fuel inflation for the short term. The GST rate starts at 5% and 18% taxation services such as restaurants, movies etc. are bound to increase prices. Another problem with the GST that many pundits feel is not including liquor and petroleum under GST’s ambit. These are major revenue sources for the government and experts feel this is being done due to a few crony capitalists who need some time to funnel away their black money as the GST promises to widen the tax paying population.

Related : How GST Works in India

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