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Capital Gain on transf...
on 27 Feb 2023
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The time limit for E-v...
on 5 Aug 2022
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A brief analysis on va...
on 4 Aug 2022
27 Feb

Capital Gain on transfer of Agricultural Land: Understanding the Tax Implications

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The taxation of capital gains on the sale of agricultural land is governed by the Income Tax Act, 1961. According to the Act, capital gains are taxable if there is a profit or gain resulting from the transfer of a capital asset during a financial year. Hence, three conditions must be met: 1. the asset must be a capital asset 2. it must be transferred 3. the transfer must have resulted in profits or gains. Agricultural land can be broadly classified into two categories: rural agricultural land and urban agricultural land. The Income Tax Act specifically excludes rural agricultural land from the definition of a capital asset, and hence the transfer of such land is not taxable. However, urban agricultural land is considered a capital asset and is subject to tax on its transfer, subject to certain exemptions. Rural Agricultural Land Rural agricultural land is agricultural land located in India that does not fall a. within the jurisdiction of a municipality, notified area committee, town area committee, or cantonment board which has a population not less than 10,000; b. within range of the following distance measured aerially from the local limits of any municipality or cantonment board:

  1. not being more than 2 KMs, if the population of such area is more than 10,000 but not exceeding 1 lakh;
  2. not being more than 6 KMs, if the population of such area is more than 1 lakh but not exceeding 10 lakhs; or
  3. not being more than 8 KMs, if the population of such area is more than 10 lakhs.
Urban Agricultural Land Urban agricultural land, on the other hand, is any agricultural land that does not meet the criteria for rural agricultural land. The profits and gains resulting from the transfer of urban agricultural land are normally taxable, with the rate depending on the period of holding the land. If the period of holding is more than 2 years, long-term capital gain tax is attracted and the capital gain arising on transfer is chargeable to tax @ 20%. If the period of holding is less than 2 years, the transfer is subject to short-term capital gain tax at slab rates or normal rates. Transfer of Agricultural Land by Compulsory Acquisition The transfer of urban agricultural land on account of compulsory acquisition is exempted under section 10(37) of the Act subject to the following conditions.
  1. the land was used for agricultural purposes for 2 years immediately preceding the date of transfer.
  2. the compulsory acquisition is approved by the Central Government or Reserve Bank of India.
  3. the compensation for such transfer was received by the assessee on or after April 1, 2004.
54B Exemption Apart from the exemption under section 10(37), another exemption specifically available on transfer of urban agricultural land is under section 54 B. This exemption is available when the capital gains are utilised for the purchase of another agricultural land subject to the following conditions.
  1. the transferor should be an individual or HUF
  2. the transferred land was used for agricultural purposes by the transferor or his/her parents or HUF for 2 years immediately preceding the date of transfer.
  3. another agricultural land should be purchased within 2 years from the date of transfer
  4. the newly purchased agricultural land should not be sold within a period of 3 years from the date of its purchase.
  5. the assessee shall deposit the capital gains in capital gain account scheme if the purchase of new agricultural land is not effected before the due date of filing income tax return.
  6. if the amount is deposited in capital gain account scheme, it should be withdrawn and utilised within 2 years from the date of transfer.
Conclusion We have tried our best to present the capital gain on transfer of agricultural land in a simplified manner. Please note that the taxability on sale of agricultural land held as stock in trade is not covered in this piece of writing as it is dealt separately under business income.
05 Aug

The time limit for E-verification of income tax returns (ITR) has been reduced

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The time limit for E-verification of income tax returns (ITR) has been reduced from 120 days to 30 days with effect from August 1 2022. A notification was issued by the income tax department on 29 July lowering the time limit

What is E-verification

The ITR filing process is complete once it is e-verified or physical copy is send , and if it is not done within the stipulated period, then the ITR will be considered invalid. A taxpayer can either E-verify their return or submit a signed ITR-V after filing an Income Tax Return (ITR). Until now, the period given for e-verifying the ITR or sending a signed ITR-V through the post was 120 days from the date of filing the ITR.

How to do E-verification

Taxpayer can E-verify your ITR in several ways. Income tax return can be e-verified using any of the following ways:
  • OTP on mobile number registered with Aadhaar
  • Digital Signature Certificate (DSC)
  • EVC generated through Net banking
  • EVC generated through Bank account
  • EVC generated through Net banking

How to send physical copy of ITR-V

For those taxpayers who wish to submit hard copies of the ITR-V,  can send their duly signed  ITR-V by Speed Post to Centralized Processing Centre, Income Tax Department, Bengaluru-560500, Karnataka. For the purpose of determining the 30 days period from the date of transmitting the electronic Income Tax Return, the date of dispatch of speed post of duly verified ITR-V will be taken into account.

Time-limit for taxpayers who filed their return prior to 1st August,2022

The change will only apply to returns filed after the notification became effective, i.e. August 1, 2022. All taxpayers who filed their returns prior to August 1 2022 will get a 120-day time limit for e-verification or hard copy submission of ITR V.  
04 Aug

A brief analysis on various loans in Companies

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Many a times we come across these questions whether a company can give loans to or accept loans from its directors/ shareholder/ relatives of directors. The provisions regarding the borrowing and lending are dealt with in detail in sections of the Companies Act, 2013. Let us know more about the provisions of theses sections here.

Section 185 – Loan to directors and more

Section 185 does not permit a company to directly or indirectly advance any loan to any of its directors, its holding company, any relative or partner of the director or any firm in which the director or relative is a partner. Here loan includes any loan represented by a book debt. It further prohibits giving any guarantee or provide any security in connection with any loan taken by the abovementioned parties.

Specified Conditions where Companies are permitted to give loans.

However, a company may advance loans to the directors and related parties mentioned above if it satisfies the following conditions.
  • A special resolution is passed by the company in general meeting and the explanatory statement to the notice for general meeting shall disclose
    • The full particulars of loans or guarantee or security provided.
    • The purpose for which the loan or guarantee or security is proposed to be utilized by the recipient.
    • Any other relevant fact.
  • The loans are utilized by the borrowing company for its principal business activities.

Non-Applicability of restrictions

The restrictions stated above shall not apply in the following cases.
  • The loan is given to the managing director or whole time director of the company as part of the conditions of services extended generally to all its employees or according to a scheme approved by the members by a special resolution.
  • The company is engaged in the business of lending and the interest rate is in par with the interest yield in government securities.
  • The loan or guarantee or security is given by a company to its wholly owned subsidiary for its principal business activities.
  • The guarantee or security is provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company for its principal business activities.

Penalty for contravention

The penalty for contravention of Sec 185 shall be as under
  • Penalty to company – Fine ranging from Rs.5,00,000 to 25,00,000
  • Penalty to every defaulting officer – Fine ranging from Rs.5,00,000 to 25,00,000 or with imprisonment upto 6 months.
  • Penalty to the director who is the recipient of this loan - Fine ranging from Rs.5,00,000 to 25,00,000 or with imprisonment upto 6 months.

Other Exemptions

Other than the general exemptions mentioned in the Non Applicability of restrictions section, certain specific exemptions are also mentioned as follows.
  • Government companies
Section 185 shall not apply to Government Companies in case those companies obtain approval of the Ministry or Department of Central Government or State Government which is in the administrative control of the company before giving any loan or guarantee or security.
  • Private Companies
Section 185 shall not apply to a private company
  • In whose share capital no other body corporate has invested any money.
  • If the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or fifty crore rupees whichever is lower
  • Such company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.
Similar to a government company, this exemption is not applicable to a private company if it has committed default in filing its financial statements or Annual Return.
  • Nidhi Companies
Section 185 shall not apply to a Nidhi company if the loan is given to a director or his relative in their capacity as a member and such transaction is disclosed in the annual accounts by a note. However, the Nidhi company shall ensure that the interests of its shareholders are protected while giving loans or guarantee or security.

Loan from Directors and their relatives

A private company can accept loans from its directors / the relative of a director. However the director or relative of director shall furnish a declaration before the company that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s Report. In case of a public company, it can accept loans from its directors but not the relatives of the directors subject to the following conditions.
  • The director shall furnish a similar declaration as in case of a private company.
  • Special resolution is required to be passed in the general meeting if the proposed borrowings together with existing borrowings exceed the sum of paid up capital and free reserves.

Loan from shareholders

Public companies are restricted to accept loans or deposits from its members if the sum of proposed borrowings and existing borrowings exceed 35% of the aggregate of paid up share capital, free reserves and securities premium of the company. However, the private companies are exempted from this restriction if
  • A private limited company is a startup for 10 years from the date of its incorporation.
  • A private limited company which fulfills all of the following conditions
    • Not an associate or subsidiary of any other company
    • The borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or fifty crore rupees, whichever is less
    • Such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under Section 73

Annual Compliance for Loans or deposits accepted

All the companies are required to file form DPT-3 giving details of loans and deposits accepted from directors/ shareholders or other third parties after the end of every financial year. Disclaimer: The points and provisions discussed here are only for information purposes and are not supposed to be relied upon as a professional advice. The Companies Act and Rules undergo frequent changes and the information contained in this section may become irrelevant at a later point of time.

Frequently asked questions

  • Can a private limited company give loans to its directors?
Yes, a private limited company can extend loans or guarantee or security to its directors and the relatives subject to the following conditions.
  1. Its share capital is not held by any body corporate.
  2. Its borrowing from banks and financial institutions should not exceed the lower of twice the share capital or Rs.50 crore as on the date of giving loan.
  3. It has not defaulted in repayment of such borrowings subsisting at the time of giving loans.
  • Can a private limited company accept loan from its director?
Yes, a private limited company can accept loans from its director provided the director furnishes a declaration that the amount is not given out of borrowed funds and the company shall disclose all the details in the board report.
  • Can a private limited company accept loans from its shareholder?
A private limited company can accept loans from its members or shareholders subject to the maximum cumulative limit of 35% of its share capital, free reserves and securities premium.
  • Can a private limited company grant loan to its shareholders?
The Companies Act is silent upon whether a company can grant loan to its shareholders. However from a personal point of view it can be interpreted that the conditions applicable to advancing loans to the directors holds good in case of loan to shareholders as well.
  • Can a public company accept loans from the relative of a director?
No. A public company cannot accept loans from the relative of a director. However, it can accept loans from a director if it satisfies the conditions mentioned.
  • Can a company give loans to another company?
A company can give loans to another company within the ceiling limit of 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account whichever is more. However, these limits can be exceeded if it is pre-approved by a special resolution. The activities of banking companies and other financial institutions are not included here.
08 Jul

Deduction in respect of Rent Paid: Sec 80GG

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What is Section 80GG Deduction

Sec 80GG provides deduction of maximum Rs 60,000 per annum for the rent paid by a salaried person or self-employed person who is not a recipient of HRA from employer.  If HRA is part of salary package, then taxpayer can claim tax benefit for HRA under Section 10 (13A).

Calculation

The taxpayer can claim the least of the Following:
  1. 25% of the total income
  2. Actual rent paid minus 10% of total income
  3. Rs 5,000 per month (Rs 60,000 per annum)
Total income mentioned above is calculated after making all deductions under Chapter VI-A but before making deduction under this section.

Conditions to be satisfied to qualify for 80GG tax deductions

  • Taxpayer should not be receiving any house rent allowance exempt under section 10(13A).
  • Rent incurred by the tax payer should exceed 10 % of his total Income.
  • The accommodation should be occupied by the taxpayer for his own residence.
  • The taxpayer or his spouse or his minor child or HUF where he’s a member should not own any accommodation at the place where he resides or performs his duty or carries his business or profession.
  • Taxpayer should not own any accommodation for which value is determined as Self-occupied property under the chapter “Income from House Property”.
  • To claim benefits under Section 80GG, a taxpayer has to fill declaration under Form 10BA.

Case Scenario

Mr Joe is a software engineer working with an IT company in Bangalore. He is getting a salary of Rs 580,000 per annum. He paid house rent of Rs 10,000 per month. He uses his rented house for his residence purpose and he or his spouse is not owning any other residential house in Bangalore or any other place in India.
  • Scenario 1: He is not receiving HRA as part of his salary package.
  • Scenario 2: He is receiving HRA of Rs 5000 per month as part of his salary package.
Mr Joe can claim deduction only if he satisfies the all the conditions mentioned in Sec 80GG of Income Tax Act.
Scenario 1: Mr Joe is not receiving HRA as part of his salary package.
Conditions
Analysis & Conclusion
Taxpayer should not be receiving any house rent allowance exempt under section 10(13A).
Analysis: HRA is not included in the salary package

Conclusion: Eligible for deduction
Rent incurred by the tax payer should exceed 10 % of his total Income.
Analysis:
1. 10% of total income 580,000*10%= 58,000
2. Annual rent paid 10,000*12 months = 120,000

Conclusion: Eligible for deduction
The accommodation should be occupied by the taxpayer for his own residence.
Analysis: Accommodation is used for residential purpose

Conclusion: Eligible for deduction
The taxpayer or his spouse for his minor child or HUF where he’s a member should not own any accommodation at the place where he resides or performs his duty or carries his business or profession.
Analysis: Neither Joe or his spouse or his minor child owns any accommodation in Bangalore

Conclusion: Eligible for deduction
If taxpayer should not own any accommodation for which value is determined as Self-occupied property under the chapter “Income from House Property”.
Analysis: Joe does not own any accommodation in his name in any other places.

Conclusion: Eligible for deduction
Since Mr Joe satisfied all conditions, he will be eligible for the deduction under 80GG if he files the declaration in Form 10BA. Least of the following amounts will be allowed as deduction
Particulars
Working Amount
25% of the total income
580,000*25% = 140,000
Actual rent paid minus 10% of total income
120,000-58,000 = 62,000
Rs 5,000 per month (Rs 60,000 per annum)
60000
Mr Joe will be eligible for Rs 60,000 as deduction under sec 80GG for the Ay 2022-23.
Scenario 2: Mr Joe is receiving HRA of Rs 5000 per month as part of his salary package.
Conditions
Analysis & Conclusion
Taxpayer should not be receiving any house rent allowance exempt under section 10(13A).
Analysis: HRA is included in the salary package

Conclusion: Ineligible for deduction.
Since Mr Joe is getting HRA as part of his salary package, he won’t be eligible for deduction under sec 80GG.
03 Jun

Perks of being an entrepreneur

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Flexible work schedule

Flexible work schedule. As an entrepreneur, you can choose to work when it's most convenient for you. If you're a morning person, start your day early and get the most out of your working hours. If night owls are more your thing, then perhaps it would be best if you kept late hours and got some things done while everyone else is asleep. As a parent who also works from home, I find myself doing my best work at night after my children have gone to bed. My husband gets up at 5:30am every morning so he can help them get ready for school by 7am and then leave for his commute at 8am sharp; this gives me plenty of time in those precious few minutes before they wake up again (and ask questions) to knock out a few tasks on my task list!

Being your own boss

Being your own boss has a lot of perks. For one, you get to make the decisions about how much work you want to do and when. You can determine what kind of business you want to start and where it will be located. You are also responsible for finding employees and keeping them happy, which means that no matter what happens in the company, it's on you—or at least partially so! This aspect of being an entrepreneur can be both positive and negative: While it's great having control over all aspects of your business, this freedom comes with responsibility as well: You'll have to take responsibility if something goes wrong (and believe me when I say things will go wrong).

Work remotely or work from home

If you're an entrepreneur, it's likely that you understand the benefits of working remotely or from home. For one thing, it helps reduce your carbon footprint by eliminating the need for cars or public transportation and reducing travel costs. If you work from home, it also means your commute is eliminated completely! Another benefit is that being able to work remotely lets you become more productive when things get busy; instead of sitting in traffic at rush hour on your way into work or waiting in line at the coffee shop before starting your day (not to mention paying for expensive parking) you can log in right away with minimal disruption to your life routine. In some cases this even makes sense financially: depending on the industry and location where a firm operates there may not be any tax incentives for providing flexible hours—but there are plenty who do offer perks like telecommuting options if given the opportunity. When designing features for our product we considered how different users would find value within this feature set: if someone was looking for a job posting related? Just as important: how might someone find value in not having access? We assumed that this type of feature would appeal mostly women—and so we made sure there were safeguards in place should anything go wrong (such as requiring passwords).

Build your own team

As an entrepreneur, you have the opportunity to build your own team. You can develop your team members by:
  • Developing their skills and abilities
  • Developing their character

Creating a shared vision that everyone is working toward together

If you want to grow as an entrepreneur, it's important to help others grow as well. You can do this by mentoring them and sharing your knowledge and experience with them.

Develop new skills and knowledge

One of the best things about being an entrepreneur is that it gives you the opportunity to develop new skills and knowledge. As you work, you’ll find yourself learning new things every day and growing as a person. This can be especially helpful when it comes to gaining confidence in your abilities: with each new skill or piece of knowledge, your self-esteem will increase as well! And this isn't just limited to work—as your confidence grows over time, so does its influence on other areas of life.

Discover a sense of accomplishment

As an entrepreneur, you will have the opportunity to set and achieve goals. This can be a rewarding experience that gives you a sense of accomplishment and pride. You will also feel good about yourself because you are doing something meaningful with your life. You may even gain new skills while working toward these goals, which is highly beneficial for your overall well-being and growth as an individual.

Helps family values

As an entrepreneur, you are free to set your own schedule. If you want to spend more time with your family, you can choose a family-friendly business that allows you to do so. You can also choose clients that respect your hours and encourage flexible schedules. Many entrepreneurs have found that by working from home they have more time for their children because they don't have to commute or deal with traffic jams.

Help others grow their businesses too

Mentoring and coaching others can be a great way to help your business grow. The strength of the U.S. economy depends on the success of small businesses, and mentorship is one way to ensure that they are thriving. You may have found success in your own business, but someone else needs help getting started or expanding their company. By sharing what you know with others, you can give them the opportunity to learn from someone who has been through similar situations and overcome challenges like theirs—all while helping yourself get ahead as well! Mentoring has benefits for everyone involved:
  • Mentors gain new perspectives by sharing their expertise with someone else's career path
  • Mentees receive expert advice from an experienced entrepreneur
  • Both mentors and mentees walk away feeling more confident about their abilities
The benefits of being an entrepreneur are many, but entrepreneurs must be prepared to take risks and face challenges that can be intimidating and difficult. Being an entrepreneur is a way of life and not a job. Entrepreneurship is not for everyone. It is not a quick fix to financial problems. It can be intimidating and difficult, but the rewards are great when you succeed!
06 May

Statement of Financial Transactions (SFT)

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To keep a watch on high value transactions and track undisclosed income, the Income-tax Law framed the concept of Statement of financial transaction or reportable account. Specified entities are mandated to report certain financial transactions during the year in the prescribed format.

Basic Provision

Section 285BA of the Income Tax Act,1961 stipulates specified entities to furnish a statement of financial transaction or reportable account in respect of specified financial transactions or reportable account registered/recorded/maintained by them during the financial year to the income-tax authority or such prescribed authority.

Who are required to file SFT or RA?

Below listed persons are required to furnish the statement of financial transactions or reportable accounts registered or recorded or maintained by them during a financial year: (a) an assessee; (b) the prescribed person in the case of an office of Government; (c) a local authority or other public body or association; (d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908); (e) the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988); (f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); (g) the Collector referred to in clause (g) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013); (h) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); (j) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); or (k) a prescribed reporting financial institution (l) a person, other than those referred to in clause (a) to (k), as may be prescribed.

What transactions are required to be reported?

Transaction details
Reporting Person
1. Payment made in cash for purchase of bank drafts or pay orders or banker's cheque of an amount aggregating to Rs. 10 lakh or more in a financial year
A banking company or a cooperative Bank
2. Payments made in cash aggregating to Rs. 10 lakh or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India
A banking company or a cooperative Bank
3. Cash deposits or cash withdrawals (including through bearer's cheque) aggregating to Rs. 50 lakh or more in a financial year, in or from one or more current account of a person
A banking company or a cooperative Bank
4. Cash deposits aggregating to Rs. 10 lakh or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person
- A banking company or a cooperative Bank -Post Master General
5. One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to Rs. 10 lakh or more in a financial year of a person
- A banking company or a cooperative Bank -Post Master General -Nidhi Company -NBFC
6. Payments made by any person of an amount aggregating to: (a) Rs. 1 lakh or more in cash; or (b) Rs. 10 lakh or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year
A banking company or a cooperative bank or any other company or institution issuing credit card
7. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company)
A company or institution issuing bonds or debentures
8. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring shares (including share application money) issued by the company
A company issuing shares
9. Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs. 10 lakh or more in a financial year
A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013
10. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund)
A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund
11. Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to Rs. 10 lakh or more during a financial year
Authorised person under Foreign Exchange Management Act, 1999
12. Purchase or sale by any person of immovable property for an amount of Rs. 10 lakh or more or valued by the stamp valuation authority referred to in section 50C of the Act at Rs. 30 lakh or more
Inspector-General or Registrar or Sub-Registrar appointed under the Registration Act, 1908
13. Receipt of cash payment exceeding Rs. 2 lakh for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 12 of this rule, if any.)
Any person who is liable for audit under section 44AB of the Act
14. Cash deposits during the period 9th November, 2016 to 30th December, 2016 aggregating to— (i) Rs. 12,50,000 or more, in one or more current account of a person; or (ii) Rs. 2,50,000 or more, in one or more accounts (other than a current account) of a person.
- A banking company or a cooperative bank to which the Banking Regulation Act, 1949 applies - Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898
15. Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under SI.No.14 because cash deposited in this account between 9th November, 2016 to 30th December, 2016 aggregating to— (i) Rs. 12,50,000 or more, in one or more current account of a person; or (ii) Rs. 2,50,000 or more, in one or more accounts (other than a current account) of a person.
- A banking company or a cooperative bank to which the Banking Regulation Act, 1949 applies - Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898
16. Capital gains on transfer of listed securities or units of Mutual Funds
-Recognised Stock Exchange; -Depository as defined in section 2(1)(e) of Depositories Act, 1996; -Recognised Clearing Corporation; -Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992
17. Dividend Income
-A company
18. Interest Income
-A Banking company or a Co-op. Bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (Including any bank or banking institution referred to in section 51 of that Act); -Post Master General as referred to in section 2(j) of the Indian Post Office Act, 1898; -Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public

The CBDT, vide Income-tax (4th Amendment) Rules, 2021, enhanced the scope of nature of transactions to be reported under Statement of Financial Transaction (SFT) as per Rule 114E by including the transactions under No. 16,17 & 18 above, for the purpose of pre-filling the Income-Tax Return.

What is the due date to furnish statement of financial transaction or reportable account?

The statement shall be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded. However, the statement of financial transaction in respect of the transactions listed at number 14 and 15 in the Table given above, had to be furnished on or before the 31st day of January, 2017. Section 285BA (5) empower the tax authorities to issue a notice to the person who had not filed the statement within due date. In such a case, the tax authorities may serve upon such person a notice requiring him to furnish the statement within a period not exceeding 30 days from the date of service of such notice and in such a case the person shall furnish the statement within the time as specified in the notice.

How does it affect a common man?

Objective of SFT or RA is to track financial transactions that are otherwise not reported by an assessee. Even if an individual earns income by not paying tax and deposits the amount in bank (or in any other specified entity), the bank (or the specified entity) shall report to the tax authorities based on which the Dept can issue notice seeking explanation for non-disclosure.
04 Apr

Impact on your TDS/ TCS if you didn’t file ITR for the AY 2021-22

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TCS/TDS for FY 2020-21 was Rs50,000 or more and missed to file ITR for FY2020-21? Then your income may be subject to deduction of TDS/TCS at higher rate. This is because Govt had introduced new rules in Budget 2021 for deduction of TDS/TCS of non-filers of Income tax return.

What is the new rule?

Section 206AB and Section 206CCA was inserted in the Income Tax Act w.e.f 1st July, 2021, stipulating special provisions for deduction/collection of tax at source for non-filers of income tax return. For FY2021-22, if an individual has not filed ITR for FY2018-19 and FY2019-20 and TDS and TCS deducted in each year exceeded Rs 50,000, then higher rate of tax will be deducted from the specified income of taxpayer. The above rule was amended in Budget 2022, making it more stringent. As per the amendment, if an individual has failed to file the ITR for FY20-21 and TDS deduction in FY20-21 exceeded Rs50,000, then higher TDS and TCS will be applicable to such individuals.

What is the applicable rate of tax?

TDS/TCS will be deducted at the higher rate of the following:
  • Twice the rate specified in the relevant provision of the Act; or
  • Twice the rate in force; or
  • Rate of five percentage

What all income is exempted under the new rule?

Not all incomes are subject to the new rule. Income from salary, Provident fund, cash withdrawal from bank, winning from lotteries/horse races, etc are excluded from the rule.

How to check if you fall in the specified category?

The income tax portal has new feature for Compliance Check. List of persons falling under the specified category can be verified by entering the PAN. Portal provides for checking each PAN or Bulk upload. Once an individual file their ITR, their name will be removed from the list.
02 Apr

Download Income Tax Return Form – AY 2022-23

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Form - ITR-1 SAHAJ

  • For individuals being a resident (other than not ordinarily resident)
  • Total income: Up-to Rs.50 lakh
  • Income sources:
    1. Salaries
    2. One house property
    3. Other sources (Interest and many more)
    4. Agricultural income up-to Rs.5 thousand

Form - ITR-2

  • For Individuals & HUFs - Not having income from gains & profits from business or any profession

Form - ITR-3

  • For Individuals & HUFs - Having income from gains & profits from business or any profession

Form - ITR-4 Sugam

  • For Individuals, HUFs and Firms (except LLP) being a resident having total income up-to Rs.50 lakh
  • Having income from business and profession which is computed under sections 44AD, 44ADA or 44AE

Form - ITR-5

  • For persons except individual, HUF, company & person filing Form ITR-7

Form - ITR-6

  • For Companies except companies claiming exemption under section 117

Form - ITR Verification

  • Where the data of the Return of Income in Form ITR-1 (SAHAJ), ITR-2, ITR-3, ITR-4(SUGAM), ITR-5, ITR-7 filed but NOT verified electronically

Form - ITR Acknowledgement

  • Where the data of the Return of Income in Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 filed and verified
Credits: Government of India

21 Mar

GST Blocked Credits

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Facility to avail Input Tax Credit of almost all inputs used for the furtherance of business is considered as one of the most beneficial features of GST law. Registered person can claim ITC of goods, services or both if received in the course of furtherance of business provided certain conditions stipulated under section 16 & 18 of CGST Act, 2017 are complied. GST law has, however, restricted the ITC of few supplies, notwithstanding anything contained in Section 16 and section 18. Blocked credits have been listed under section 17(5), which has been amended from time-to-time to bring clarity to various provisions contained therein.

Blocked Credits:

Input tax credit shall not be available in respect of the following, namely: -
Clause (a) : Motor vehicles for transportation of persons
  • Motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver).
Exceptions: ITC shall be availed if such motor vehicles are used for;
  • Further supply of such motor vehicles; or
  • Transportation of passengers; or
  • Imparting training on driving such motor vehicles;
Clause (aa): Vessels and Aircraft
Exceptions: ITC shall be availed if such vessels and aircraft are used for transportation of goods or making the following taxable supplies;
  • Further supply of such vessels or aircraft or
  • Transportation of passengers or
  • Imparting training on navigating such vessels or
  • Imparting training on flying such aircraft
Clause (ab): Services related to Motor vehicles for transportation of persons, vessels and aircraft
Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in (a) or (aa) above Exceptions: ITC shall be availed if such motor vehicles, vessels or aircraft are;
  • Used for he specified purposes therein
  • Received by a taxable person engaged in the manufacture of such motor vehicles, vessels or aircraft; or in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him
Clause (b) : Food and beverages, outdoor catering, life insurance, health insurance and few other services
Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in (a) or (aa) except when used for the purposes specified therein, life insurance and health insurance Exceptions: ITC shall be availed if inward supply of these are used for making an outward supply of same category or as an element of a taxable composite or mixed supply
Clause (c) : Membership of a club, health and fitness Centre
Clause (d) : Travel benefits extended to employees on vacation
Travel benefits extended to employees on vacation such as leave or home travel concession Exceptions: ITC shall be availed if the above supply is obligatory for an employer to provide to its employees under any law for the time being in force
Clause (e) : Works contract services
Works contract services when supplied for construction of an immovable property Exceptions: ITC shall be availed if such service is availed for construction of plant and machinery or is an input service for further supply of works contract service
Clause (f) : Construction of an immovable property
Inward supply for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business and is not capitalized Note: "Plant and machinery" mentioned in (e) & (f) means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply and includes such foundation and structural supports but excludes -
  • Land, building or any other civil structures
  • Telecommunication towers
  • Pipelines laid outside the factory premises.
Clause (g) : Tax has been paid under composition scheme
Inward supply on which tax has been paid under section 10 (composite scheme)
Clause (h) : Supply received by a non-resident taxable
Inward supply received by a non-resident taxable person except on goods imported by him
Clause (i) : Supply used for personal consumption
Clause (j) : Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
Clause (k) : Tax paid under special circumstances
Any tax paid in accordance with the provisions of sections 74 (fraud), 129 (seize) and 130 (confiscation)        
10 Mar

Tax Incentives for Startups

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In Finance Act 2016, Section 80-IAC of Income Tax Act was introduced to promote start-ups by providing an incentive to boost their growth in the early stages of their business. Sec 80 IAC provides tax holiday for start-ups for three consecutive years out of the first ten years after incorporation.

Eligibility

Startups incorporated as Company or LLP during the period 1.4.2016 to 31.3.2023(new Amendment), engaged in
  • Innovation, development or improvement of products or processes or service
  • A scalable business model with a high potential of employment generation or wealth creation.

Quantum & Time Frame of Deduction

A deduction of 100% of the profits and gains of the eligible start-up. Deduction is allowed for any three consecutive assessment years out of ten years beginning from the year in which the eligible start-up is incorporated.

Conditions to be fulfilled

  • Turnover:
Total turnover of the startup should not exceed 100 crores in the P. Y relevant to the A.Y for which deduction is claimed.
  • Tax Exemption Certificate:
Eligible startups need to get Tax Exemption Certificate from IMBC under the Department of Promotion of Industry and Internal Trade.
  • Incorporation:
Eligible startup is not formed by splitting up, or the reconstruction, of a business already in existence.
  • Plant & Machinery:
Eligible Startup is not formed by the transfer of machinery and plant previously used for any purpose. However, it will be considered as the condition satisfied if Plant & Machinery used for any purpose transferred to eligible startup does not exceed 20% of the total value of the Plant & Machinery used in the Business.
  • Plant & Machinery used outside India:
Any Plant & Machinery which was used outside India by any person other than the assessed will not be considered as previously used for any purpose. if
  1. Such Plant & Machinery was not used in India before the date of the installation by the Eligible startup.
  2. Such Plant & Machinery is imported into India.
  3. No Depreciation on such Plant & Machinery was claimed by any person for any period prior to the date of the installation by the startup.
  • Audit of accounts:
Eligible Startup needs to do tax audit by a practicing Chartered Accountant for claiming the deduction.

How to apply

  • Obtain “Start-up” recognition from DPIIT
  • Register on the “Start-up India Portal” (startupindia.gov.in) after being recognized by DPIIT for Tax Exemption