FAQs on Section 43B(h) of Income Tax Act- Payment to MSEs

Section 43B of the Income Tax Act provides for certain deductions to be allowed only on actual payment.  Clause (h) has been inserted in the Section, by Finance Act 2023 (to be applicable from FY 2023-24), to include payments made to Micro and Small Enterprises within the ambit of Section 43B of the Income Tax Act.

Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, provides that payment for any Goods or Services to Micro and Small Enterprises should be made within time as per written agreement, which cannot be more than 45 days . If there is no Agreement then the payment has to be made within 15 days.

Section 43B has been amended to provide that any sum payable by the assessee to a Micro or Small Enterprise beyond time limit specified in section 15 of MSMED Act (i.e. agreed time or 45 days whichever less), then deduction of same shall be allowed only on actual payment. Deduction will be allowed on accrual basis only if the payment has been made within the time mandated u/s 15 of the MDMED Act.

Micro or Small Enterprises as defined in MSMED Act mean, Manufacturers or Service providers having Turnover upto Rs.50 Crores and Investment in Plant & Machinery upto Rs. 10 Crore.

Whether the Section is applicable for Payments outstanding to Traders registered under Udyog Adhar?

Section 43B(h) is only applicable for payments outstanding to Micro or Small Enterprises.  Only Manufacturers and Service Providers with Turnover less than Rs.50 Crores are covered in the definition of Micro or Small Enterprises.

Traders (Even if Registered under Udyog Adhar), are not covered in definition of Micro or Small Enterprises under the MSMED Act 2006. As Registration of Traders under Udyog Aadhar is only for the limited purpose of Priority Sector Lending. Therefore there will not be any disallowance u/s 43B(h) if PAYMENT TO TRADERS is made beyond the period specified in section 15 of the MEMED Act.

 

Whether the Section is applicable for Payments outstanding to Manufacturers or Service Providers not registered under Udyog Aadhar?

Section 43B(h) is applicable for payments outstanding to Micro or Small Enterprises beyond period specified in section 15 of the MSMED Act. The Section 15 mentioning the Liability of the Buyer to make payment, is applicable only for payments to ‘Suppliers’. MSMED Act defines ‘Supplier’ as Micro or Small Enterprise which has filed memorandum as specified. Thus section 15 of the MSMED Act is not applicable for payment to Micro or Small Enterprises who are not registered under Udyog Aadhar.

Therefore this section will also not be applicable for Payments outstanding to Manufacturers or Service Providers not registered under Udyog Aadhar

 

The period of 15 days/ 45 days will be counted from which Date?

For the Purpose of calculating delayed payment u/s 15 of the MSMED Act, the period will be counted from day of acceptance or day of deemed acceptance, i.e.

a. Day of Actual Delivery of Goods or rendering of services.

b. Where any objection is made by buyer in writing regarding acceptance of goods or services within 15 days of delivery; the day on which the objection is removed.

Example:

Invoice Date: 1st March 2024

Actual Delivery of Goods: 6th March 2024

Agreement period: 45 days

The Period of 45 Days will be counted from 6th March 2024 and not from 1st March 2024. The Payment for the Invoice can be made till 20th April 2024 to avoid disallowance u/s 43B(h)

 

When should Payment to Micro and Small Enterprises be made for Expenditure of 2023-24 to claim deduction in 2023-24 itself?

Assuming there is an Agreement between Purchaser and Seller to make payment in 45 days, and Delivery of Goods is on the Date of Invoice

For Invoices raised till 15/02/2024: Payment should be made till 31st March 2024

For Invoices raised from 16/02/2024 to 31/03/2024: Payment should be made within 45 days

Examples:

Invoice Date 01/01/2024: if payment made till 31/03/2024 deduction allowed in 2023-24

Invoice Date 01/03/2024: if payment made till 15/04/2024 deduction allowed in 2023-24, if payment made on 20/04/2024 deduction allowed in 2024-25.

Whether old outstanding Balances as on 31/03/2023 will also be covered for disallowance u/s 43B(h)?

Section 43B(h) is applicable from FY 2023-24. Only the Expenditure incurred after 01/04/2023 will be covered for disallowance under this section. Old outstanding balances have already been allowed as deduction during the earlier Financial Years. These will not be covered for disallowance under this section for current year.

However if any payment is being made in the current year to any Supplier having outstanding balance as on 31/03/2023, the same will first be adjusted against old balance before making any adjustment for the Purchases of current year.

Example 1:

Amount outstanding to ABC Ltd as on 31/03/2023 : Rs.15 lakhs

Purchases during the FY 2023-24 : Rs.10 Lakhs

Payment during the FY 2023-24 to ABC Ltd : Rs.15 lakhs

The payment of Rs.15 lakhs in the current year will first be adjusted against old balance and Rs.10 lakhs out of current year Purchases, will be disallowed as the same has not been paid.

Example 2:

Amount outstanding to XYZ Ltd as on 31/03/2023 : Rs.10 Lakhs

No transaction during the FY 2023-24

No disallowance will be made u/s 43B(h) during FY 2023-24.

Whether this section is applicable only to Taxpayers who are covered under Tax Audit u/s 44AB?

This Section is applicable to all assesses whether they are covered under Tax Audit or not. In the Income Tax Return Forms recently notified for the AY 2024-25, a new column has been inserted under Part A-OI (Other Information) to disclose the sum payable to Micro or small enterprises beyond the specified time limit per the MSMED Act.

 

Will this section be applicable if ITR is filed on presumptive basis u/s 44AD or 44ADA?

Sections 44AD and 44ADA start with the words “Notwithstanding anything contained in sections 28 to 43C”. When ITR is filed under these sections, it is deemed that all Deductions/ Allowances under sections 28 to 43C have been allowed. There will not be any disallowance u/s 43B if ITR is filed u/s 44AD or 44ADA.

 

What is the Rate of Interest payable under MSMED Act for delayed payment?

When the payment is not made within the time specified u/s 15 of the MSMED Act, Buyer shall be liable to pay compound interest with monthly rests to supplier, at 3 times the Bank Rate notified by the RBI. (i.e. if Bank Rate notified by RBI is 6.75%, then Interest is payable at 20.25% for delayed payment). Moreover this Interest is also not allowed as Deduction while computing Profits from Business in Computation of Income. This Interest is payable even if there is no agreement between the Buyer and the Supplier.

 

Disclaimer: The information provided in this article is intended for general informational purposes only. While every effort has been made to ensure accuracy, completeness, and timeliness of the content, it should not be construed as legal or professional advice . Readers are advised to consult a qualified tax professional to obtain specific advice tailored to their individual circumstances. The author and publisher disclaim any liability for any loss or damage incurred by individuals or entities relying on the information presented in this article.

Union Budget 2017

BUDGET 2017 PROPOSALS

TAX RATES

·         There is a change in Tax Rates, which will benefit Individual/HUF taxpayers. Tax Slab for Individual/HUF will be:

o   Upto Rs.250000/-                             NIL

o   Rs.250001 to Rs.500000                  5%

o   Rs.500001 to Rs.1000000               20%

o   Above Rs.1000000                           30%

·         Rebate of Rs.5000/- was allowed to taxpayers with Income below Rs.500000/-. Now this rebate has been reduced to Rs.2500/- and will be available only to persons with Income below Rs.350000/-.

·         Exemption Limit for Senior Citizens and Super Senior Citizens will continue to be Rs.300000/- and Rs.500000/- respectively.

·         Surcharge @ 10% has been imposed on the Individuals having income > 50 Lakhs and less than 1 Crore. Those with Income > 1 Crore will continue to pay surcharge @ 15%.

·         Corporate Tax in case of Domestic Companies will be 25% if Turnover was less than 50 crores in FY 2015-16.

MEASURES TO REDUCE CASH TRANSACTIONS

·         Revenue Expenditure incurred in Cash exceeding Rs.20000/- is not allowed as Expenditure while calculating Taxable Income. This limit is proposed to be reduced to Rs.10000/- w.e.f. 01/04/2017 (FY 2017-18, AY 2018-19)

·         Earlier restriction on Cash Expense was only applicable to revenue expenditure. Now this is proposed to be made applicable to Capital Expenditure also. If any Fixed Asset is purchased for which payment is made in Cash exceeding Rs.10000/-, then Depreciation will not be allowed on the Cash portion.

·         A new section 269ST has been proposed, which provides that no person shall receive amount of Rs.300000/- or more in Cash, in aggregate from a person in a day; or in respect of a single transaction; or in respect of transactions relating to one event or occasion from a person. Any person who contravenes the provision of this section can be levied penalty equal the amount of Cash received. [Eg. If Invoice is of R.450000/- and multiple Cash Receipts in respect of the Invoice are more than or equal to Rs. 300000/-, then penalty equal to the amount of cash received can be levied. ] This provision will be applicable from 1^st April 2017.

·         Deduction u/s 80G was allowed if the payment upto Rs.10000/- was made in Cash. Now this limit is proposed to be reduced to Rs.2000/-. If Donation of amount exceeding Rs.2000/- is made in Cash, then no deduction u/s 80G will be allowed.

PRESUMPTIVE TAXATION

·         Turnover limit for Presumptive Taxation for Businesses was increased from Rs.1 Crore to Rs. 2 Crore last year. It is again clarified that limit for Audit u/s 44AB is Rs.1 Crore. However if any person opts for presumptive taxation having turnover upto Rs.2 Crores, then he will not be required to get Books audited u/s 44AB.

·         To promote digital transactions and to reduce cash transactions, it is proposed that for persons opting for presumptive taxation u/s 44AD rate of income to be declared will be 6% for Non Cash Sales and 8% for Cash Sales. In respect of any Sale, if the payment is received otherwise than Cash, then deemed profit will be 6% of such Non Cash Sales. Such receipts can be made before the due date u/s 139(1) of filing Income Tax Return. This benefit will be given from FY 2016-17 (AY 2017-18).

·         Partnership Firms will have to declare income @ 8% (or 6% as applicable) of the Sales and pay tax on the same. Salary and interest to partners will not be allowed as deduction w.e.f. FY 2016-17 (AY 2017-18).

TDS/TCS

·         TDS on Rent is applicable in case of Individual/HUF only if the Turnover is more than 1 crore during the last Financial Year. Now TDS on Rent is proposed to be made applicable on Individuals/HUF with Turnover less than 1 Crores, or not doing Business, also. Applicable if monthly Rent is more than 50000/- pm. TDS @ 5% to be deducted. No need to obtain TAN only for this purpose. (applicable w.e.f. 01/06/2017)

·         TCS is applicable on Cash Sale of Jewellery if single invoice exceeds Rs. 5 Lakhs. This amount is proposed to be reduced to Rs.2 Lakhs. (w.e.f. 01/04/2017)

·         Form 15G/H can now also be filed by Insurance Commission Agents for non deduction of TDS, if Income is below exemption limit. (w.e.f. 01/06/2017)

·         TDS on Professional Services is proposed to be reduced to 2% in case of Call Centre Business.

·         TDS @ 20% or applicable rate (whichever higher) is applicable in case PAN of deductee is not available. No such provision existed in case of TCS. Similar provision is proposed to be introduced for TCS. TCS @ double the rate mentioned in section or 5%, whichever higher will be collected if PAN is not available. (w.e.f. 01/04/2017)

CAPITAL GAINS

·         In case of immovable property (Land or Building or Both), period of holding for qualifying an asset as long term has been reduced from 36 months to 24 months.

·         Base Year for calculation of Capital Gains will be shifted from 01/04/1981 to 01/04/2001.

·         In case of assets acquired before 01/04/2001, Fair Market Value as on 01/04/2001 shall be considered for Capital Gains calculation.

·         Presently Exemption is available on Sale of securities (Shares/ MF), if STT has been paid on the Sale. It is proposed that the Exemption of Capital Gain on Sale of Securities will only be available if the STT has also been paid on Purchase of such Securities (If Purchased after 01/10/2014). Some cases like IPO, Bonus Issue, Rights issue, etc. will be notified on which such condition will not apply. Now proof of Date of Purchase will also be required for claiming exemption.

·         To widen the scope of the section 54 EC, it is proposed to add notified bonds by the Central Government apart from bonds of REC or NHAI where investment can be made. (w.e.f. AY 2018-19 onwards)

OTHER PROVISIONS

·         Section 44AA is proposed to be amended to increase monetary limits of income and gross receipts for maintenance of books of accounts from Rs. 120000/- to Rs. 250000/- and from Rs. 10 Lakhs to Rs. 25 Lakh, respectively in the case of Individuals and HUF carrying on business or profession. (w.e.f. AY 2018-19). For Other Assessees, limit remains the same.

·          If return is not filed within due dates u/s 139(1)

(i) a fee of 5000/- shall be payable, if the return is furnished after the due date but on or before 31^st December of the Asst Year;

(ii) a fee of 10,000/- shall be payable in any other case.

However, in a case where the total income does not exceed five lakh rupees, it is proposed that the fee amount shall not exceed Rs.1,000/-. The amount of fees will have to be paid before filing the Return. If the Fees is not paid, then the same will be shown as demand during the processing.

·         For the Assessment Year 2018-19, the time limit for making assessment has been reduced to 18 months from the end of assessment year, from the existing 21 months. From the Asst Year 2019-20, the time limit will be 12 months from the end of the Asst Year.

·         Receipt of any sum of money or the property by any person without consideration or for inadequate consideration in excess of Rs. 50,000 is chargeable to tax as Income from Other Sources in hands of recipient being Individual/HUF. Now this provision is made applicable to all assessees.

·          In case of Charitable Trusts, for claiming Exemption, they will have to file their Income Tax Return within Due Date. If Return is filed late, their exemption can be withdrawn. In case there is change in the Objects of the Trust, they have to file fresh registration by making application within a period of 30 days from the date of such change.

Analysis of changes in TCS Provisions, PAN Reporting requirements and Annual Information Return

ANALYSIS OF TCS PROVISIONS [applicable w.e.f. 01/06/2016]

SECTION 206C


(1D) Every person, being a seller, who receives any amount in cash as consideration for sale of bullion 35[***] or jewellery, or any other goods (other than bullion or jewellery) or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

(i) for bullion, exceeds two hundred thousand rupees; or
(ii) for jewellery, exceeds five hundred thousand rupees; or
(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees:

Provided that no tax shall be collected at source under this subsection on any amount on which tax has been deducted by the payer under Chapter XVII-B.

(1E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfill such conditions, as may be prescribed.

(1F) Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent of the sale consideration as income-tax.

· "seller" means

the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or
any company or
firm or
co-operative society and
also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) or sub-section (1D) are sold or services referred to in sub-section (1D) are provided.


· TCS @ 1% to be collected even if no PAN is provided by the Purchaser. In that case Form 60 to be obtained from the Purchaser and Return in Form 61 also to be filed (if Tax Audit applicable).

· Deduction at higher rate in case PAN not available (Section 206AA) is not applicable for TCS.

RULES 114B, 114C, 114D [Applicable w.e.f. 01/01/2016]

· PAN to be quoted in all the documents pertaining to specified transactions.

· Requirement of quoting PAN shall not apply to Central Government, State Government and the Consular Offices. However this exemption is not available for Local authorities, Improvement Trust, Development Boards

For General Transactions of Sale or Purchase of Goods or Services of any nature PAN to be quoted where amount exceeds Rs. Two lacs per transaction excluding following transactions :

a) Sale or purchase of motor vehicle where PAN to be quoted irrespective of amount

b) Sale of purchase of immovable property where PAN to be quoted for amount > 10 lacs.

c) Sale or Purchase of Securities (other than shares) where PAN to be quoted for transactions > Rs. One lac.

d) Sale of purchase of shares of unlisted Company where PAN to be quoted for transactions > Rs. One lac.

e) Purchase of foreign currency in cash where PAN to be quoted for payment exceeding Rs. 50000 at any one time.


f) Purchase of units of Mutual funds from issuing mutual fund where PAN to be quoted for payment exceeding Rs. 50000.

g) Purchase of debentures or bonds from issuing company where PAN to be quoted for payment exceeding Rs. 50000

h) Purchase of RBI Bonds from RBI where PAN to be quoted for payment exceeding Rs. 50000

i) Payment in cash for services to Hotel or restaurant against a bill exceeding Rs. 50,000 at any one time.

j) Payment in cash for services in connection with foreign travel exceeding Rs. 50000 at any time.


1. Limit of two lacs shall apply whether transaction is conducted in cash or cheque. However for payments to Hotel, restaurants, payments for foreign travel, foreign exchange while limit for cash transactions is Rs. 50,000, limit for non cash transactions only shall be two lacs.

2. PAN Reporting requirements is applicable for Goods/Services if Invoice Exceeds Rs. 2 lacs (whether payment received in cash or otherwise). However TCS applicable if any amount is received in cash.

3. In case of Motor Vehicles (other than 2 wheelers), PAN is to be quoted irrespective of the amount or mode of payment, but TCS applicable if value exceeds Rs.10 lacs (cash or non-cash)

4. A person who does not have PAN and enters into transaction specified in R. 114B shall make a declaration in F.60. Old Form 60 has been replaced with new Form 60. Earlier Form 61 which pertained to perons having agriculture income only has been rescinded and replaced with statement in Form 61 for providing information to the department.

5. Form 60 is required to be retained for six years from end of financial year (not assessment year) in which transaction is under taken. E.g. transaction for AY 2016-17 is undertaken in FY 2015-16, then Form 60 to be retained till 31-03-2022.

6. Form 61 statement required to furnished electronically by 30th April and 31st October for declarations received till 31st March and 30th September. For period 01/01/2016 to 31/03/2016, the date has been extended to 31st October 2016.

7. U/R 114C(2) , seller issuing bill to ensure after verification that PAN has been correctly furnished and mentioned in the document or that F.60 has been duly furnished with complete particulars where PAN is not available.

8. However all such sellers are not required to electronically furnish data about F. 60 to the department and it is only where audit is required u/s 44AB (including audit for presumptive taxation) that data is required to be furnished electronically in F. 61 besides retaining F.60 for six years from end of financial year.

9. Seller of Immovable Property and Seller of Motor Vehicles have to electronically furnish data in Form 61 (whether Tax Audit applicable or not)

ANNUAL INFORMATION RETURN and REPORTING (RULE 114E) [applicable w.e.f. 01/04/2016]

1. Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year.

2. Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

3. Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current account of a person

4. Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.

5. One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.

6. Payments made by any person of an amount aggregating to-
(i) one lakh rupees or more in cash; or
(ii) ten lakh rupees 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.

7. Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more.

8. Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature

· Last Date of filing Annual Information Return which was earlier 31st August, now it will be 31st May of the succeeding Financial Year.

· For Delay in filing Annual Information Return, penalty @ 100/- per day for default can be imposed

Major Provisions for Business/Profession

In case of Immovable Property,

1. AIR Reporting required if value exceeds Rs. 30 lacs, but PAN to be quoted if value exceeds Rs. 10 lacs.

2. Responsibility of Seller and Registering officer to ensure PAN is duly and correctly mentioned, or declaration in Form 60 duly furnished with complete particulars.

3. Seller to file online Form 61, (if PAN of Purchaser not mentioned). Liability of seller even if not liable to Tax Audit.

4. AIR Reporting liability is of Inspector General/Registrar/Sub-Registrar

In case of Goods/Services

1. TCS applicable if any amount is received in cash , if invoice > 2 lacs. Applicable to all Firms/Companies/Co-op Society. Applies to Indl/HUF only if Sale in preceding year > 1 crore.

2. PAN to be quoted if invoice more than 2 lacs (whether cash or otherwise).

3. AIR Reporting applicable if Cash Receipt more than 2 lacs.

4. Filing Form 61 and AIR Reporting applicable only for Tax Audit cases (including Audit u/s 44AD presumptive taxation)

In case of Sale of Motor Vehicle (Other than Two Wheelers)

1. AIR Reporting required if cash receipt exceeds Rs. 2 Lakhs. (If Seller liable for Tax Audit).

2. PAN to be quoted irrespective of the amount. Responsilbility of Seller to ensure PAN is duly and correctly mentioned, or declaration in Form 60 duly furnished with complete particulars.

3. Seller to file online Form 61, (if PAN of Purchaser not mentioned). Applicable to seller even if not liable to Tax Audit.

4. TCS Applicable if Sale Consideration > 10 lacs, and Seller is Firm/Co/Co-op Society. TCS on Sale of Motor Vehicle not applicable if Seller is Individual/HUF.

Penalty for Non Compliance

272B. (1) If a person fails to comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees.

For Filing Form 61 and Form 61A, create authorized user in E-filing website

· On menu “Manage ITDREIN”
· An authorized user will be created and the a new user –id of the authorized user will be created.
· Same user-id will be used to upload Form 61 and 61A on the IT E-filing website.




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Readers are advised to consult the professional for understanding applicability of these provisions. While due care has been taken in preparing this blog, the existence of mistakes and omissions herein is not ruled out. No part of this blog should be distributed or copied (except for personal, non-commercial use) without our written permission.

UNION BUDGET 2016- MAJOR PROPOSALS

BUDGET 2016 PROPOSALS

INCOME DECLARATION SCHEME 2016

·         Government to bring Income Declaration Scheme 2016, to give opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and pay tax. Scheme will start from 1^st June 2016 and will remain open till date to be notified. Tax @ 30%, Surcharge @ 7.5% and penalty @ 7.5% (Total 45% ) will be charged by the Government on the undisclosed income. The tax will have to be paid on or before the date to be notified by the Central Govt.

TAX RATES

·         No change in personal income tax slabs has been proposed. However Rebate of Rs.5000/- in tax will be allowed to individuals earning upto Rs.500000/- per year. Earlier this rebate was Rs.2000/-.

PRESUMPTIVE TAXATION SCHEME

·         Turnover limit for Presumptive Taxation for Businesses has been increased from Rs.1 Crore to Rs. 2 Crore. Net Profit @ 8% will have to be declared in the Income Tax Return, if Sale is less than 2 Crores, otherwise Tax Audit will apply. Firms will have to declare income @ 8% of the Sales and pay tax on the same. Salary and interest to partners will not be allowed as deduction, as was being allowed earlier.

·         Any person paying tax under presumptive taxation scheme (section 44AD) will have to pay tax under the scheme for a continuous period of 5 years. If he opts out of the scheme during any year, then the option to pay tax on presumptive basis will not be allowed to him for next 5 years, and he will have to maintain proper books of accounts and get them audited during those 5 years.

·         Presumptive Tax introduced for Professionals like doctors, engineers, chartered accountants, architects. Professionals will have to declare income @ 50% of Gross receipts, otherwise will have to get the books of accounts audited. Tax Audit Limit for professionals increased to Rs. 50 lakhs.

ADVANCE TAX & RETURNS

·         Advance Tax will now have to be paid in four installments by all assessees – 15^th June, 15^th September, 15^th December, 15^th March. Earlier these installments were only for the Companies.

·         If Income Tax Return (in which Refund is due) is filed late, then department will not pay interest for the delayed period.

·         Now Income Tax Return can be filed only till one year from the end of the Financial Year. Earlier this limit was 2 years.

·         Income Tax Return which was filed after the due date could not be revised. Now the late filed return can also be revised if there is any mistake in the original return.

·         Earlier Dividends were exempt in the hands of the recipients. Now Dividend recipient will be liable to pay tax @ 10% if dividend received during the year is more than 10 lakhs.

TDS/TCS

·         Threshold limit for deduction of TDS on Commission has been increased from Rs.5000/- to Rs.15000/-. TDS on Commission reduced from 10% to 5%.

·         Threshold limit for deduction of TDS on Contract (Section 194C) increased to Rs.100000/- per year from Rs.75000/-.

·         Recipients of  Rental Income can also file Form 15G/15H for non deduction of TDS, if total income is below taxable limit.

·         TCS @ 1% introduced on Sale of any Goods or Services in Cash exceeding Rs.2 lakhs. If any Goods/Services are sold and payment is received in Cash exceeding Rs. 2 lakhs, then TCS will have to be collected from the person and paid to the government on monthly basis.

SERVICE TAX

·         Krishi  Kalyan Cess @0.5% introduced. W.e.f. 1^st June 2016, effective rate of service tax will be 15% (Service Tax 14%, Swach Bharat Cess 0.5%, Krishi Kalyan Cess @ 0.5%).

·         Annual Return of Service Tax introduced. Earlier there were only two half yearly returns of service tax. Now there will be three returns -  2 Half yearly and one annual.

·         Delayed payment of Service Tax, Interest @ 15% will have to be paid. However if Service Tax is collected but not paid to Government, then interest @ 24% will have to be paid 

Rule 37 BB of the IT Rules amended - Finance Ministry's Tweets

Sec 195 of the IT act empowers the CBDT to capture information in respect of payments made to non-residents whether chargeable to tax or not

— Ministry of Finance (@FinMinIndia) December 17, 2015

Rule 37 BB of the IT Rules amended to strike a balance between reducing the burden of compliance and collection of information .

— Ministry of Finance (@FinMinIndia) December 17, 2015

No Form 15CA & 15CB will be required to be furnished by individual for remittance which do not requiring RBI approval .

— Ministry of Finance (@FinMinIndia) December 17, 2015

List of payments which do not require submission of Forms 15CA & 15CB has been expanded from 28 to 33 including payments for imports.

— Ministry of Finance (@FinMinIndia) December 17, 2015

CA certificate in Form No. 15CB will be required in payments made to non-residents which taxable & the amt during the year exceeds Rs.5 lakh

— Ministry of Finance (@FinMinIndia) December 17, 2015

The amended Rules will become applicable from 01.04.2016.@arunjaitley

— Ministry of Finance (@FinMinIndia) December 17, 2015

Notification is available on the website of the Department at https://t.co/rSnAZ892vr. @IncomeTaxIndia

— Ministry of Finance (@FinMinIndia) December 17, 2015

#BUDGET2014

#Budget2014 IT Exemption Limit raised to 2.50 Lacs (3.00 Lacs for senior citizens)
— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 No change in Surcharge or Education Cess

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 80C Deduction Limit proposed to be raised to 1.50 Lacs

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 Interest on Housing Loan deduction proposed to be increased to 2.00 lacs from 1.50 lacs

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 In case of failure of deduct TDS, only 30% of the amount to be disallowed rather than 100%

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 Advance forfeited for Sale of Capital Asset, to be taxed as Income. Earlier it was deducted from Cost at time of Sale

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 Amount deposited in PPF per year proposed to be increased to 1.5 Lac from 1.00 Lac

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

#Budget2014 Special national savings certificates and savings instruments for parents to invest in name of girl child announced

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

Budget 2014: Tax savings of Rs 20,000 in highest tax slab - The Economic Times http://t.co/Zxof1oXnYk

— N.K.Gaba & Co. (@cankgaba) July 10, 2014

Income Tax Notification for Exemption to File ITR if Income below Rs. 5 lacs

An Individual having income not exceeding Rs. 5 lacs from salaries/other sources for A.Y. 2011-12 is not required to file return u/s 139(1) 

NOTIFICATION NO. 36/2011 [F. NO. 142/09/2011 (TPL)], DATED 23-6-2011

In exercise of the powers conferred by sub-section (1C) of section 139 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby exempts the following class of persons, subject to the conditions specified hereinafter, from the requirement of furnishing a return of income under sub-section (1) of section 139 for the assessment year 2011-12, namely :—

Class of Persons

1. An Individual whose total income for the relevant assessment year does not exceed five lakh rupees and consists of only income chargeable to income-tax under the following head,—

 (A)  "Salaries";

 (B)  "Income from other sources", by way of interest from a savings account in a bank, not exceeding ten thousand rupees.

Conditions

2. The individual referred to in para 1,—

  (i)  has reported to his employer his Permanent Account Number (PAN);

 (ii)  has reported to his employer, the incomes mentioned in sub-para (B) of para 1 and the employer has deducted the tax thereon;

(iii)  has received a certificate of tax deduction in Form 16 from his employer which mentions the PAN, details of income and the tax deducted at source and deposited to the credit of the Central Government;

(iv)  has discharged his total tax liability for the assessment year through tax deduction at source and its deposit by the employer to the Central Government;

 (v)  has no claim of refund of taxes due to him for the income of the assessment year; and

(vi)  has received salary from only one employer for the assessment year.

3. The exemption from the requirement of furnishing a return of income-tax shall not be available where a notice under section 142(1) or section 148 or section 153A or section 153C of the Income-tax Act has been issued for filing a return of income for the relevant assessment year.

4. This notification shall come into force from the date of its publication in the Official Gazette.

CBDT'S INSTRUCTIONS ON ISSUANCE OF TDS CERTIFICATES IN FORM NO. 16A AND OPTION TO AUTHENTICATE SAME BY WAY OF DIGITAL SIGNATURE

Section 119 of the Income-tax Act, 1961 - Income-tax authorities - Instructions to subordinate authorities - Issuance of TDS Certificates in Form No. 16A downloaded from TIN Website and option to authenticate the same by way of digital signature

CIRCULAR NO. 3/2011 [F. NO. 275/34/2011-(IT-B), DATED 13-5-2011

Section 203 of the Income-tax Act 1961 ("the Act") read with the Rule 31 of the Income-tax Rules, 1962 ("the IT Rules") provides for furnishing of certificate of tax deduction at source (TDS) by the deductor to the deductee specifying therein the prescribed particulars like amount of TDS, permanent account number (PAN), tax deduction and collection account number (TAN), etc. The relevant form for such TDS certificate is Form No.16 in case of deduction under section 192 and Form No.16A for deduction under any other provisions of Chapter XVII-B of the Act. TDS certificate in Form No.16 is to be issued annually whereas TDS certificate in Form No.16A is to be issued quarterly.

2. Currently, a deductor has an option to authenticate TDS certificate in Form No.16 by using a digital signature. However, no such option of using a digital signature is available to a deductor for issuing TDS certificate in Form No.16A and it, therefore, needs to be authenticated by a manual signature. The Central Board of Direct Taxes (the Board) has received representations to allow the option of using digital signature for authentication of TDS certificate in Form No.16A as issuance of TDS certificate in Form No.16A by manual signature is very time consuming, specially for deductors who are required to issue a large number of TDS certificates.

3. The Department has already enabled the online viewing of Form No.26AS by deductees which contains TDS details of the deductee based on the TDS statement (e-TDS statement) filed electronically by the deductor. Ideally, there should not be any mismatch between the figures reported in TDS certificate in Form No. 16A issued by the deductor and figures contained in Form No.26AS which has been generated on the basis of e-TDS statement filed by the deductor. However, it has been found that in some cases the figures contained in Form No. 26AS are different from the figures reported in Form No.16A. The gaps in Form No.26AS and TDS certificate in Form No. 16A arise mainly on account of wrong data entry by the deductor or non-filing of e-TDS statement by the deductor. As at present, the activity of issuance of Form No.16A is distinct and independent of filing of e-TDS statement, the chances of mismatch between TDS certificate in Form No.16A and Form No. 26AS cannot be completely ruled out. To overcome the challenge of mismatch a common link has now been created between the TDS certificate in Form No.16A and Form No.26AS through a facility in the Tax Information Network website (TIN Website) which will enable a deductor to download TDS certificate in Form No.16A from the TIN Website based on the figures reported in e-TDS statement filed by him. As both Form No.16A and Form No.26AS will be generated on the basis of figures reported by the deductor in the e-TDS statement filed, the likelihood of mismatch between Form No.16A and Form No.26AS will be completely eliminated.

4. In view of the above, for proper administration of the Act, the Board have, in exercise of powers under section 119 of the Act, decided the following:—

4.1 Issue of TDS Certificate in Form No. 16A

  (i)  For deduction of tax at source made on or after 1-4-2011:

 (a)  The deductor, being a company including a banking company to which the Banking Regulation Act, 1949 applies and any bank or banking institution, referred to in section 51 of that Act or a cooperative society engaged in carrying the business of banking, shall issue TDS certificate in Form No.16A generated through TIN central system and which is downloaded from the TIN Website with a unique TDS certificate number in respect of all sums deducted on or after the 1st day of April, 2011 under any of the provisions of Chapter-XVII-B other than section 192.

 (b)  The deductor, being a person other than the person referred to in item (a) above, may, at his option, issue TDS Certificate in Form No.16A generated through TIN central system and which is downloaded from the TIN Website with a unique TDS certificate number in respect of all sums deducted on or after the 1st day of April, 2011 under any provisions of Chapter-XVII-B other than section 192.

 (ii)   For deduction of tax at source made during financial year 2010-11:

        The deductor, may, at his option, issue the TDS certificate in Form No.16A generated through TIN central system which is downloaded from the TIN Website with a unique TDS certificate number in respect of all sums deducted during the financial year 2010-11 under any of the provisions of Chapter- XVII-B other than section 192.

4.2 Authentication of TDS Certificate in Form No. 16A

  (i)  The deductor, issuing the TDS certificate in Form No.16A by downloading from the TIN Website shall authenticate such TDS certificate by either using digital signature or manual signature.

 (ii)  The deductor being a person other than a person referred to in item 4.1(i)(a) above and who do not issue the TDS Certificate in Form No.16A by downloading from the TIN Website shall continue to authenticate TDS certificate in Form No.16A by manual signature only.

5. The Director General of Income-tax (Systems) shall specify the procedure, formats and standards for the purpose of issuance of TDS certificate in Form No.16A which is downloaded from the TIN Website and shall be responsible for the day-to-day administration in relation to the procedure, formats and standards for issuance of TDS certificate in Form No.16A in electronic form.

6. It is further clarified that TDS certificate issued in Form No. 16A by the deductors covered by para 4.1(i)(a) in accordance with this circular and procedure, format and standards specified by the Director General of Income-tax (Systems) shall only be treated as a valid TDS certificate in Form No. 16A for the purpose of section 203 of the Act read with Rule 31 of the IT Rules, 1962.

CBDT Press Release streamlining procedure for Scrutiny of IT Returns

No.402/92/2006-MC (07 of 2011) 

Government of India / Ministry of Finance 

Department of Revenue 

Central Board of Direct Taxes 

***

New Delhi dated the 14th March 2011 

PRESS RELEASE 

Streamlining procedure for scrutiny of income-tax returns 

Scrutiny of income tax returns is an important mechanism for ensuring taxpayer compliance and to counter tax-evasion. However, it  has evoked some concern from small taxpayers and senior citizens about prolonged enquiries.  Concerns have also been raised about selection of the same cases in scrutiny year after year.

Appreciating the concern of these taxpayers and with a view to mitigate their hardships, Central Board of Direct Taxes has reviewed its scrutiny selection procedure. In order to redress the grievance, it has been decided that during the financial year 2011-12, cases of senior citizens and small taxpayers, filing income-tax returns in ITR-1 and ITR-2 will be subjected to scrutiny only where the Income Tax department is in possession of credible information.

Senior citizens for this purpose would be individual taxpayers who are 60 years of age or more. Small taxpayers would be individual and HUF taxpayers whose gross total income, before availing deductions under Chapter VIA, does not exceed Rupees ten lakh.

UNION BUDGET 2010-11

Changes in Direct Taxes proposed in the Union Budget 2010-11.

TAX RATES

1. Slabs of Income Tax for the Financial Year 2010‐11, are proposed to be changed. The new slabs are:

• Income Up to Rs.1,60,000 NIL
• Rs.1,60,001 to Rs.5,00,000 10 per cent
• Rs.5,00,001 to Rs.8,00,000 20 per cent
• Rs.8,00,001 and above 30 per cent

2. In case of a woman assessees, the threshold limit will remain Rs.1,90,000 and for senior citizens it will be Rs.2,40,000.

3. Surcharge on Income Tax of Domestic Companies, if income above Rs. 1 crore, reduced to 7.5% from 10%.

4. MAT has been increased to 18%.

COMPLIANCE RELATED

1. Limit of Tax Audit increased to Rs.60 lakh from Rs.40 lakh, in case of Business and Rs.15 lakh from Rs.10 lakh in case of Profession.

2. Turnover Limit for presumptive taxation also increased to Rs.60 lakh, i.e. in case of ANY BUSINESS (other than that of plying, hiring goods carriages), if the Turnover is less than Rs.60 lakh, then 8% of the Turnover will be deemed to be the Profit of the Business. If Net Profit is less than 8% then the Books of Accounts will be required to be audited.

3. Maximum Penalty for Failure to get the Books of Accounts audited, increased to Rs.1.50 Lakh from Rs.1 Lakh.

(These changes will be applicable from Financial Year 2010‐11)

GIFTS

1. In the last Budget, the Purchase of Property for inadequate consideration (i.e. Purchase consideration less than Fair Market Value or Stamp Duty Value) was made taxable. In this Budget a change has been made that the receipt of immovable property will be taxable only if it is received without any consideration. If a IMMOVABLE PROPERTY is purchased and the purchase value is less than stamp duty value (i.e. inadequate consideration), then the balance will not be added to the Income of the recipient. However if the Immovable Property is received without any consideration (Gift), it will continue to be taxable.

2. If a property is received by a person (for inadequate or without consideration) and it forms part of stock in trade or raw material of his business, then it will not be added to the income of the recipient.

DEDUCTIONS

1. Deduction u/s 80CCF upto Rs.20000/‐ will be available to Individuals & HUF on subscription during Financial Year 2010‐11 made to long term infrastructure bonds. This will be over and above the 80C limit of Rs. 1 lakh.

2. Contribution to Central Government Health Scheme will also be allowed as deduction u/s 80D (Medical Insurance Premium).

TDS

1. Threshold limits for deduction of Tax at Source have been increased. New limits will be effective from 1st July 2010.

NATURE OF PAYMENT EXISTING LIMIT NEW LIMIT

Winning from Lottery 5000 10000

Winning from Horse Race 2500 5000

Payment to Contractors

(Single payment) 20000 30000

(Total in year) 50000 75000

Insurance Commission 5000 20000

Commission 2500 5000

Rent 120000 180000

Fee for Professional Services 20000 30000

2. In case of any Interest, Commission, Rent, Fees for Professional Services, Payment to Contractor (Freight etc.) paid during the year and on which TDS is not deducted and deposited during the year, then the amount is not allowed as deduction while computing Total Income. Now, w.e.f. Financial Year 2009‐10, if TDS is deducted during the Financial Year and deposited before the due date of Filing the Return, the amount will not be disallowed.

3. Rate of Interest payable in case of delay in payment of TDS has been increased to 1.5% p.m. (from date of deduction to payment) from existing 1% p.m. (w.e.f. 1st July 2010)