PROCEDURES FOR CONVERSION OF PARTNERSHIP FIRM TO PRIVATE COMPANY

PROCEDURES FOR CONVERSION OF PARTNERSHIP FIRM TO PRIVATE COMPANY 

Untitled213STEP 1

HOLD A MEETING OF THE PARTNERS TO TRANSACT THE FOLLOWING BUSINESS

  • Assent of majority of its members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose of registering the firm under the Companies Act, 2013. Since the liability of the members of the firm is unlimited, when a firm desires to register itself as a company as a limited company, the majority required to assent as aforesaid shall consist of not less than ¾ of the members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose.
  • To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm as a Company.
  • To execute a supplementary Partnership Deed to align it with the requirements as under:
    • THERE MUST BE AT LEAST 7 PARTNERS IN THE PARTNERSHIP FIRM;
    • The firm may be registered with the Registrar of Firms;
    • There must be a fixed capital divided into units ;
    • There must be provision of converting a firm into company.
    • There must be an agreement by the partners to convert the partnership to a company. This can be done by a contract in writing to this effect to which the partner’s resolution for conversion can be attached as annexure.
    • Execute a settlement deed.

(If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered)

 STEP 2

APPLICATION FOR DIRECTOR’S IDENTIFICATION NUMBER AND DIGITAL SIGNATURERS CERTIFICATE 

STEP 3

NAME APPROVAL

  • An application in Form needs to be filed with the Registrar of Companies (ROC) with following annexure(s) stating the fact that the partnership firm pro­posed to be converted under the Companies Act. (Annexure 1).
  • Certified true copy of Partnership Deed.
  • Certified true copy of the latest balance sheet of the partnership.
  • Certified true copy of the latest income tax assessment order/return.
  • Consent of all the partners stating that they have agreed to register the partnership firm as a Company.
  • Certified True Copy of the resolution passed by the firm in this regard.
  • The application is required to be digitally signed by one of the promoters.

Other steps in Conversion of a Partnership firm into a Company are similar to steps involved in formation of an Indian Private Limited Company (Except processing of few additional forms.

KEY BENEFITS:

Automatic Transfer

All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.

No Stamp Duty

All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.

No Capital Gain Tax

No Capital Gains tax shall be charged on transfer of property from Partnership firm to Company.

Continuation of Brand Value

The goodwill of the Partnership firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.

Carry forward and Set off Losses and Unabsorbed Depreciation

The accumulated loss and unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.

KEY CONDITIONS TO GET SUCH BENEFITS:

  • All partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
  • The partners receive consideration only by way of allotment of shares in company and the partners shareholding in the company in aggregate is 50% or more of its total voting power and continue to be as such for 5 years from the date of conversion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-23343333

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PENALTY FOR CONCEALMENT OF INCOME – EFFECT OF DISALLOWANCE OF CLAIM

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PENALTY FOR CONCEALMENT OF INCOME – EFFECT OF DISALLOWANCE OF CLAIM

29No penalty on disallowance of capital gains if disclosure was made to identify investment and stock-in-trade

Section 271(1)(c), read with section 45, of the Income-tax Act, 1961 – Penalty for concealment of income – effect of Disallowance of claim

Where assesse had disclosed all particulars relating to capital gain on sale of shares in return and balance sheet, no penalty could be levied under section 271(1)(c) merely because Assessing Officer treated such capital gain as business income of assesse [2015] -HIGH COURT OF DELHI –CIT v. Anant Overseas (P.) Ltd

FACTS

The assessee was engaged in the investment of shares and securities cum business of shares and securities and other related activities. In the return of income, the assessee disclosed certain short-term capital gains on account of sale of shares.

However, the Assessing Officer held that the aforesaid sale and purchase was not in the nature of investment but transactions relating to trading in shares and, accordingly, treated it as business income. The reasons given by the Assessing Officer to treat the shares in question as stock-in-trade were that the broker notes did not indicate whether the shares were procured as investment or as stock-in-trade and the physical delivery of shares was not taken.

The Assessing Officer also levied penalty under section 271(1)(c) holding that the assessee did not disclose full and necessary particulars.

On appeal, the Commissioner (Appeals) deleted the penalty observing that all particulars relating to capital gains were duly disclosed in the return as well as in the balance sheet which indicated that the assessee was maintaining a clear demarcation between the shares which were treated as investment and shares held as stock-in-trade for business.

On revenue’s appeal, the Tribunal affirmed the finding of the Commissioner (Appeals).

On appeal to the High Court, The High Court held in favour of assessee

In the written submission filed before the Commissioner (Appeals) it was stated that the details of shares held as investments were duly mentioned in the balance sheet and in note forming part of the balance sheet, detail of transactions which were treated as business was clearly reflected. Further, the shares which were sold and treated as short-term capital gains were not accounted for in the opening balance nor in the closing balance. In the books of account also, the shares in question were shown under the head ‘investment’ and in the profit and loss account, short-term capital gains was duly credited.

The aforesaid finding of the Commissioner (Appeals) was affirmed by the Tribunal in the impugned order. Thus, the finding of the Assessing Officer that material facts were not duly disclosed by the assessee is not correct. No document or material has been filed to support or contend that the finding of the appellate authorities including the Tribunal is perverse or factual incorrect.

Coming to the question of bona fides and the explanation offered by the assessee, it is to be noticed that the question whether the shares were held as investment or stock-in-trade is highly debatable and a difficult call in many cases.

The assessee was investing in shares and securities and also dealing in purchase and sale of securities. There is no adverse comment or observation of the Assessing Officer on the submission and assertion made by the assessee that it was maintaining two separate portfolios, one for shares held as investment and the other for the shares held as stock-in-trade.

The assessment order itself records that there were number of transactions relating to the shares which were held as stock-in-trade. Further, the aforesaid demarcation of shares held as investment and as stock-in-trade had existed in earlier and subsequent years also.

Two observations in the assessment order; (1) physical delivery of the shares was not taken; and (2) brokers did not indicate whether the shares were held as investment or as stock-in-trade, are not acceptable and cannot be a ground to hold that the shares were held as stock-in-trade and not as an investment.

The assessee had brought forward long-term capital loss and the short-term capital gains were sought to be set off from the said long-term capital loss. This is indicative of the fact that in the earlier years, the assessee had sold or transferred certain shares held as an investment and suffered long-term capital loss. The assessee was certainly holding shares as investment. In fact, the assessment order itself records that the assessee held certain shares of group companies as investment.

In view of the aforesaid position, no substantial question of law arises for consideration in this appeal. The appeal is dismissed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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NON RESIDENT INDIANS UNDER FEMA:-

RAJPUT JAIN AND ASSOCIATES  3

NON RESIDENT INDIANS UNDER FEMA

Untitled94AAn Indian Citizen who stays abroad for (a) employment/ carrying on business or (b) vacation outside India or (c) stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident.  Persons posted in U.N. organizations and officials deputed abroad by Central/ State Government and Public Sector Undertakings on temporary assignments are also treated as non-resident.

Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.

  1. Who is a person of Indian Origin?
  2. For the purpose of availing of the facilities of opening and maintenance of bank accounts and investments in shares/ securities in India:-

A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian Origin, if,

  1. He, at any time, held an Indian passport,
  2. He or either of his parents or any of his grandparents was a citizen of India but virtue of the Constitution of India or Citizenship Act, 1956(57 of 1955).

A spouse( not being a citizen of Pakistan or Bangladesh ) of an Indian citizen /Indian origin is also treated as a person of Indian origin provided the Bank accounts are opened or investments in shares/securities in India are made by such persons jointly with their NRI spouses.

  1. For Investment in immovable properties:-

A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri lanka or Nepal), is deemed to be of Indian origin if,

(i) He held an Indian passport at any time,

OR

(ii) He or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

NONRESIDENT INDIANS UNDER INCOME TAX ACT :-

The laws in this regard are quite complicated as these it  does not  define who is nonresident. Rather these define who is resident and who are not ordinarily resident.  Therefore, if a person does not fall in the category of resident or not ordinarily resident, he / she will be non-resident.

Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year. There are three types of status based on the stay in India:-

(1) Resident:-

An individual is resident if any of the following conditions are satisfied:

(i) He stayed in India for 182 days or more during the previous year, or

(ii) He stayed in India for 365 days or more during the four preceding years and stays in India for at least 60 days 9 182 days in case of an Indian citizen or a person of Indian Origin coming on a visit to India or 182 days in case of an Indian citizen going abroad for an employment) during the previous year.

Stay in India for the above criteria may be continuous or intermittent. 

  1. Hindu Undivided Family (HUF) or firm or other Association of persons is resident of India except in cases where the control and management of its affairs is wholly situated outside India in the previous year

A company is resident in India if:-

  1. It is an Indian company, or
  2. During the previous year, the control and management is situated wholly in India.
  3. A person resident in India, in a previous year in respect of any source of income shall be deemed to be resident in India in respect of his other sources of income.

(2) Non-Resident

A person is non-resident if he is not resident in India.

(3) Resident but not ordinarily resident

An individual or an HUF is treated to be not ordinarily resident in India in any previous year if he or the manager of HUF:-

  1. Has not been resident in India in 9 out of 10 previous years preceding the previous year; or
  2. Has not during the seven previous years preceding that year, been in India for a period of or periods amounting in all to 730 days or more.

Thus according to condition in clause (a) a newcomer to India would remain not ordinarily resident in India for the first 9 years of his stay in India. Similarly, in case where a person who is resident in India goes abroad and ceases to be resident in India for at least 2 years, he would upon his return, be treated as, not ordinarily resident for the next 9 years.

HOW THE RESIDENTIAL STATUS OF A PERSON IS DETERMINED:-

In case of Indian citizen who leaves Indian during previous year for the purpose of employment :-

Such a person is resident in India if he satisfies the following conditions:-

  1. He stays in India for at least 182 days during the previous year.
  2. He is resident in India for at least 9 out of 10 years proceeding the previous year.
  3. He is resident in India for at least 730 days during 7 years proceeding the previous year.
  4. If such a person satisfies condition (a) but does not satisfy either of the conditions at (b) or (c) above, such a person would be resident but not ordinarily resident.

Such person would be non-resident if he does not satisfy condition (a) stated above.

  1. In case of Indian citizen or a person of Indian origin living abroad comes to India for a visit during the previous year

The residential status of such a person is to be determined after looking into the following

  1. He stays in India for at least 182 days during the pervious year and,
  2. He is resident in India for at least 9 years out of 10 years preceding the previous year.
  3. He is resident in India for at least 730 days during seven years preceding the previous year.

The person would be resident in India if he satisfies all the conditions (a) to (c) above.

The person would be resident but not ordinarily resident if he satisfies the condition at (a) but does not satisfy any or either of the conditions at (b) and (c) above.

The person would be non-resident if he does not satisfy the condition at a) above.

Thus condition (a) is of fundamental importance and must be satisfied to be resident in India. Conditions ( b) and (c) only help to qualify that resident status.

  • In case of any other individual

For individuals other than those included in category ( I ) or (ii), we have to look into the following four conditions to determine the residential status:-

  1. He stays in India for at least 182 days during the previous year.
  2. He stays in India for at least 60 days during the previous year and for at least 365 days during 4 year proceeding the previous year.
  3. He is resident in India at least in 9 out of 10 years proceeding the previous year.
  4. He is resident in India for at least 730 days during 7 years preceding the previous year.

A person would be resident in India if he satisfies any of the conditions at (a) or (b) and both the conditions at (c) and (d) i.e. he either satisfies conditions (a), (c) and (d) or (b), (c) and (d).

A person would be resident but not ordinarily resident if he satisfies either of the conditions at (a) or (b)and does not satisfy both or either of the conditions at (c) and (d). In other words, if a person satisfies condition (a) or (b) only but does not satisfy either (c) or (d) or both, he would be treated as resident but not ordinarily resident in India.

If a person satisfies neither of the conditions (a) or (b), he is non-resident. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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NEW CHANGES ON TDS – CHANGES IN WITHHOLDING TAX

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NEW CHANGES ON TDS – CHANGES IN WITH HOLDING TAX

Untitled29ASection 192 (2D) – TDS on Salary: The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

Now the employer is responsible to verify all the supporting documents before determining the applicable Tax liability of employees.

Applicable with effect from 1 June 2015

Section 195 – Payment to Non-Resident: The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

Now the 15 CA should be furnished for the cases even if tax at source is not applicable

Applicable with effect from 1 June 2015

Section 194 C – Deduction of Tax on Transporter :In section 194C of the Income-tax Act, in sub-section (6), with effect from the 1st day of June, 2015, for the words “on furnishing of”, the words “where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with” shall be substituted.

Now the transporter needs to provide above stated declaration along with PAN to get the payment without ant Tax Deduction

Applicable with effect from 1 June 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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INPUT CREDIT ON CONSTRUCTION SERVICES

Input Credit on Construction Services

Untitled28ARULE 2(l): Input Services

 “Input Service” means any service,-

  • used by a provider of output service for providing an output service; or
  • used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal;

But excludes services,-

(A) Specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-

Construction of a building or a civil structure or a part thereof; or

laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

Sec. 65(105)(p) Architect’s Services
Sec. 65(105)(zn) Port Services
Sec. 65(105)(zzl) Other Port services
Sec. 65(105)(zzm) Airport Services
Sec. 65(105)(zzq) Construction services in respect of commercial or industrial buildings or civil structures
Sec. 65(105)(zzzh) Construction services in respect of residential complexes
Sec. 65(105)(zzzza) Works contract service
  • The definition of input services excludes (a) Construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods. Thus CENVAT CREDIT of service tax paid for such specified services are not allowed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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INDIA LIAISON OFFICE MANAGEMENT

RAJPUT JAIN AND ASSOCIATES  1

India Liaison office management

Untitled4AForeign companies planning to set up their business operations in India need to start a liaison office. The main purpose of starting a liaison office is to explore possible business opportunities in India by gathering relevant business information. This helps the companies to develop a business strategy to tap the existing business potential in India. A liaison office also acts as a marketing channel to provide business information about the parent company and their products to the prospective clientele in India. As the name suggest the Liaison office is setup by a foreign company in India to carry out the liaison activity for its business. The company cannot have any revenue for the Indian Liaison office; It has to meet all its expenses of Indian office through remittances from the Head office. The Liaison office is not allowed to earn any income in the India

Liaison office is suitable for a foreign company to test and understand the Indian market , as it does not allow the companies to do business but just to be in the market and understand the Indian market or carry out the Research & Development activities or to understand the problem of existing clients of the company and serve them better.

The application for Liaison office Licenses is approved by the RBI , but as per the recent changes the applications for Liaison office are routed through the A.D i.e Authorized Dealers. Due to this the timeline for setting up the liaison office has increased tremendously. Further the documentation required for the same has also increased.

GENERAL FEATURES OF LIAISON OFFICE

  • The name of Indian liaison office shall be same as parent company.
  • The governing body for the Liaison office License is Reserve Bank of India.
  • It is suitable for foreign Companies looking to setup a temporary office in India to liaison its existing business with Indian clients.
  • The Liaison office does not have any ownership, it is just extension of the exiting company in the foreign country.
  • All the expenses of the Liaison office are met by the head office, hence the funds shall be received from head office account only.
  • The Licence for the Liaison office is given for three years and shall be renewed every 3 years.

ACTIVITIES ALLOWED TO LIAISON OFFICE IN INDIA

  • Representing in India the parent company / group companies.
  • Promoting export / import from / to India.
  • Promoting technical/financial collaborations between parent/group companies and companies in India.
  • Acting as a communication channel between the parent company and Indian companies.

CONDITION FOR SETTING UP LIAISON OFFICE

  • The company looking to start a Liaison office in India shall have a profitable track record during immediately preceding three years in the home country.
  • The Net Worth i.e total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less then of equal to USD 50000/- .

DOCUMENTS REQUIRED FOR LIAISON OFFICE SETUP

Currently as per the RBI Requirement the application for the branch office and Liaison office is submitted through the Authorized dealer. The authorized dealer means the various institution having banking licenses.
The applicant of the Branch/Liaison office has to opt for the any of the Authorized Dealer , it is always preferable for the company to opt for the same authorized dealer as it is dealing in the home country.

  • Form FNC 1 Three copies
  • Letter from the principal officer of the Parent company to RBI.
  • Letter of authority from the parent company in favor of Local Representative.
  • Letter of authority/ Resolution from parent company for setting up liaison office in India.
  • Comfort letter from the parent company intending to support the operation in India.
  • Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
  • Certification of Incorporation – Translated & Duly Not arised and Certified by Indian Consulate
  • The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years. & Certified by Indian Consulate & Directors
  • Name, Address, email ID and telephone number of the authorized person in Home Country.
  • Details of Bankers of the Organization the Country of Origin along with the bank account number
  • Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
  • Expected funding level for operations in India.
  • Details Relating to address of the proposed local office , number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided
  • Details of Activity carried out in Home Country by the applicant organisation in brief about the product and services of company in Brief.
  • Bankers Certificate
  • Latest Proof of identity of all the Directors – Certified by Consulate and Banker in Home Country
  • Latest Proof of address all of Directors – Certified by Consulate and Banker in Home Country
  • Details of the Individuals / Company holding more 10% of Equity
  • Structure of the Organization w.r.t. Shareholding pattern
  • Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
  • Resolution for Opening up Bank Account with the Banker
  • Duly Signed Bank Account Opening Form for Indian Bank

NOTE – THE ABOVE LIST IS NOT EXHAUSTIVE AND MAY DIFFER DEPENDING UPON THE REQUIREMENT FROM THE AUTHORISED DEALER. 

BRIEF SUMMERY OF STEPS TO GET RBI LICENCES

  • Selection of Authorized Dealer by Client, As the same AD will have the bank account of the Company.
  • Working on the documentation required for Liaison office.
  • Submission of documents to the AD.
  • Scrutiny of documents by the AD
  • Providing clarification and additional documents to AD
  • Submission of final application to RBI by the AD.
  • Follow up and getting the Licenses from AD.

PROCEDURE AFTER GETTING THE RBI LICENCE

Every Liaison office registered with RBI shall get itself registered with the Ministry of Corporate Affairs, It is a registration by the Liaison office as a establishment of foreign company in India. On such registration a CIN i.e. Corporate Identity Number is allotted by the Registrar of Companies. The following documents shall be filled with the Registrar of Companies :-

  • Form 44
  • Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Govement’s) General Rules and Forms, 1956)
  • If the above documents are not in english then the translated version of the documents.
  • Director(s) details individuals
  • Director(s) details bodies corporate
  • Reserve bank of India approval letter
  • Secretary(s) details
  • Power of attorney or board resolution in favor of the authorised representative(s)

OTHER BUSINESS LICENCES APPLICABLE TO LIAISON OFFICE

  • PERMANENT ACCOUNT NUMBER PAN NUMBER
  • TAX DEDUCTION NUMBER TAN NUMBER
  • SHOP & ESTABLISHMENT REGSITRATION

ANNUAL ACTIVITY TO BE CARRIED OUT BY LIAISON OFFICE

  • Maintenance of Books of Account
  • Getting Annual Accounts audited
  • Filling of Annual Activity Certificate with RBI
  • Filling of Annual Return and Balance sheet with Registrar of Companies
  • Intimating any change in constitution of Foreign Company to RBI & ROC
  • Intimating any change in Directors of Foreign Company to RBI & ROC
  • Intimating each and every change in the Liaison office to RBI & ROC
  • No additional place of business can be started unless approval is taken from RBI.

CLOSURE OF LIAISON OFFICE

Generally the Liaison office licenses is given for three years , if at any time the Company plans to close the Liaison office setup in India it shall file the necessary documents with the Authorized Dealer , and the application for the closure shall be forwarded by the Authorized Dealer.

  • Copy of the Reserve Bank’s permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
  • Auditor’s certificate- i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
  • No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
  • Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
  • A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.
  • Any other document/s, specified by the Reserve Bank while granting approval.

FAQ’s ON LIAISON OFFICE 

  1. How can foreign companies open Liaison/Project/Branch office in India?

Foreign company can set up Liaison/Branch Offices in India after obtaining approval from Reserve Bank of India.

Reserve Bank of India has given general permission to foreign companies to establish Project Offices in India Subject to certain conditions.

2.What is the procedure to be followed for obtaining Reserve Bank’s approval for opening Liaison Office/ Representative Office?

A Liaison office can carry on only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office abroad. The role of such office is therefore, limited to collecting information about possible market opportunities and providing information about the Company and its products to the prospective Indian customers. The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central office Mumbai. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Regional Office in whose jurisdiction the office is set up. Liaison/ Representative offices have to flee an Activity Certificate on an annual basis from a Chartered Accountant to the concerned Regional Office of the Reserve Bank of India, stating that the Liaison office has undertaken only those activities permitted by Reserve Bank of India.

  1. What is the procedure for setting up Project Office?

Foreign companies are granted projects in India by Indian entities. General Permission has been granted by Reserve

Bank of India Vide Notification No. FEMA 95/ 2003-RB dated July 2, 2003 to foreign companies to open Project

Office/s in India provided they have secured from an Indian company, a contract to execute a project in India, and

  • the project is funded directly by inward remittance from abroad; or
  • the project is funded by a bilateral or multilateral International Financing Agency; or
  • the project has been cleared by an appropriate authority; or
  • a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution

or bank in India for the project.

  • However, if the above criteria are not met, or if the parent entity is established in Pakistan, Bangladesh Sri Lanka, Afghanistan, lran or China, such applications have to be forwarded to Central Office of the Foreign  Exchange Department of the Reserve Bank at Mumbai for approval.
  1. What is the procedure for setting up Branch office?

Reserve Bank permits companies engaged in manufacturing and trading activities abroad to set up Branch Office

in India for the following purposes:

  • To represent the parent company/ other foreign companies in various matters in India e.g. acting as buying/selling agents in India.
  • To conduct research work in the area in which the parent company is engaged.
  • To undertake export and import activities and trading on wholesale basis
  • To promote possible technical and financial collaborations between the Indian companies and overseas companies
  • Rendering professional or consultancy services
  • Rendering services in Information technology and development of software in India
  • Rendering technical support to the products supplied by the parent/ Group companies. .
  • A branch office is not allowed to carry out manufacturing, processing activities directly/ indirectly. A Branch office is also not allowed to undertake Retail Trading activities of any nature in India. Branch Offices have to submit Activity Certificate

5.What are the forms in which business can be conducted by a foreign company in India?

A foreign company planning to set up business operations in India may:

  • Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.
  • Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.

6.What is the procedure for receiving Foreign Direct Investment in an Indian company?

An Indian company may receive Foreign Direct Investment under the two routes as given under:

  • Automatic Route
  • FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
  • Government Route
  • FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance
  • The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank.

7.What are the instruments for receiving Foreign Direct Investment in an Indian company?

Foreign investment is reckoned as FDI only if the investment is made in equity shares , fully and mandatorily Convertible preference shares and fully and mandatorily convertible debentures with the pricing being decided Upfront as a figure or based on the formula that is decided upfront. Any foreign investment into an instrument issued

By an Indian company which:

  • gives an option to the investor to convert or not to convert it into equity or
  • does not involve upfront pricing of the instrument as a date would be reckoned as ECB and would have to comply with the ECB guidelines.

The FDI policy provides that the price/ conversion formula of convertible capital instruments should be determined upfront at the time of issue of the instruments. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with the extant FEMA regulations [the DCF method of valuation for the unlisted companies and valuation in terms of SEBI (ICDR)Regulations, for the listed companies]. 

8.What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?

An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India

shall receive the amount of consideration required to be paid for such shares /convertible debentures by:

(i) Inward remittance through normal banking channels.

(ii) Debit to NRE / FCNR account of a person concerned maintained with an AD category I bank.

(iii) Conversion of royalty / lump sum / technical know how fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares.

(iv) conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB.

(v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.

If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE / FCNR (B) / Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund / allot shares for the amount of consideration received towards issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt. 

9.Which are the sectors where FDI is not allowed in India, both under the Automatic Route as well asunder the Government Route?

FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:

  1. i) Atomic Energy
  2. ii) Lottery Business

iii) Gambling and Betting

  1. iv) Business of Chit Fund
  2. v) Nidhi Company
  3. vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities (other than Tea Plantations)

vii) Housing and Real Estate business (except development of townships, construction of residential/commercial premises, roads or bridges to the extent viii) Trading in Transferable Development Rights (TDRs).

 viii) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes.

  1. ix) What are the advantage & Disadvantage of Liaison office?

 Advantages of Liaison office:

  • Fewer ongoing formalities although there are set-up costs.
  • No separate legal entity but does provide a formal presence for UKCo in India.

Disadvantages of Liaison office:

  • Cannot trade or generate revenue in India.
  • UKCo may be exposed to claims and liabilities in India.
  • What are the points to consider while setting-up a of Liaison office?

Five points to consider while setting-up a Liaison Office in India

Any Foreign Entity looking for an office in India as a sourcing division or to facilitate export or to test the Indian market with a prospective business venture to improve the relations with the authorities and business community or to have the presence in the country from worldwide business outlook, Liaison Office (LO) is the best option.

A Liaison Office or a Representative Office can undertake only liaison activities, which means that it can act as a channel of communication between the Head Office (out of India) and parties in India. It is not allowed to undertake any commercial activity in India. As there is no income of Liaison Office of its own, its expenses are to be met entirely through inward remittances from the parent company outside India received in Convertible Foreign Exchange.

Establishment of Liaison Office/Representative Office in India is governed by Reserve Bank of India (RBI) together with Ministry of Finance, Government of India.The rules and regulations in respect to Liaison Offices are framed under Foreign Exchange Management Act, 1999 and Circulars/Notifications issued by RBI from time to time.There are 2 routes to establish a Liaison Office in India:

RBI Route

If the industry the Foreign Entity is in, comes in the specified industries for 100% automatic route of investment as per Foreign Direct Investment Policy then the Liaison Office will be approved by the Reserve Bank of India.

Government Route

If the industry the Foreign Entity is in, doesn’t come in 100% automatic route and Non Profit and Non-Government Organization, then the Liaison Office will be approved by Reserve Bank of India in consultation of  the Ministry of Finance, Government of India.

In addition to above, Reserve Bank of India has prescribed eligibility criteria for Foreign Entities to apply for Liaison Office. The application of Foreign Entities satisfying the below criteria will be processed:

  • Profit making track record during immediate preceding 3 financial years.
  • Net worth as per latest audited balance sheet certified by CPA should not be less than US $50,000 or its equivalent amount in home country.

The other prequisites of Liaison Office application are to have a designated manager of the proposed Liaison Office and a prospective office space of the proposed Liaison Office which can be provided by consultants who help the foreign entities in applying for LO as part of their services which is called Virtual Office or Service Office Services.

The Application has to be made to RBI through Authorized Dealer Category-1 Bank in India. RBI will allot a UIN (Unique Identification Number) on approval of application. Once approved the intimation has to be given to Registrar of Companies (ROC) and Director General of Police (DGP). An application has to be sen to the Income Tax Department to allot Permanent Account Number (PAN).

Annual Compliance

A Liaison office has to do minimal annual compliances as compared to other forms of business in India.

As annual compliance, an annual activity certificate issued by a Practicing Chartered Accountant at the end of March 31, need to be submitted to the Authorized Dealer Category-1 Bank, Directorate General of Income Tax (International Taxation), concerned Registrar of Companies and Director General of Police, on or before 30th September of each financial year (In India the Financial Year is April to March) including audited receipts and payments account.

Tenure

Approval is generally given for a period of 3 years and extension is granted on the basis of

  • Track record of annual activity certificates.
  • Record of the account maintained with the designated bank as per the terms and conditions of original approval.

Additional Activities and Offices

For establishing additional office, a fresh application duly signed by authorized signatory of the foreign entity, is filed to Reserve Bank of India with a justification to open additional office and identify one of the offices as nodal office to co-ordinate the activities of all offices.

Conclusion:-

Liaison Offices are very popular forms of business in India since a long time. However, the issue of taxability of liaison offices still looms over the foreign entities and is not free from ambiguity. To capture the entities in tax clutches, tax authorities have been contending that the liaison offices are transgressing the list of permitted activities and constitute company’s permanent establishment in India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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SUMMARY ABOUT INCOME-TAX ASSESSMENTS PROCEDURES, APPEALS AND REVISION

SUMMARY ABOUT INCOME-TAX ASSESSMENTS PROCEDURES, APPEALS AND REVISION

Untitled17A

  1. TIME FOR FILING RETURN OF INCOME [SEC. 139 (1)] Different Situations Due Date for filing Return 1. Where the assessee is a company i. Required to file a Transfer Pricing report under section 92E ii. In any other case 30th November 30th September 2. Where the assessee is person other than a company – i. In case where accounts of the assessee are required 30th September to be audited under any law ii. Where the assessee is “working partner” in a firm whose accounts are required to be audited under any law iii. In any other case 30th September 31st July
  1. FILING OF RETURNS – STEPS  Compute income for each Source of Income  Aggregate the income from various sources under the respective Heads of Income  Arrive at the Gross Total Income Claim the Deductions available  Arrive at the Total Income
  1. FILING OF RETURNS – STEPS  Compute  Reduce  Add the Tax payable on the Total Income the Rebates, if any from the tax payable Surcharge as applicable to the tax  Add the Education Cess to the figure of tax plus surcharge  Arrive at the Gross Tax Liability
  1. FILING OF RETURNS – STEPS  From the Gross Tax payable, reduce the TDS  Arrive at the Net Tax Payable or the Refund due as the case may be  If the net tax payable is equal to or more than Rs. 10,000 then Advance Tax is payable  Advance tax is payable in 3 installments (4 in case of companies) during the previous year itself.
  1. FILING OF RETURNS – STEPS  If there is a shortfall in payment of advance tax then calculate Interest u/s. 234B and/or 234C  If the return is filed late then calculate Interest u/s. 234A  From the net tax payable, reduce the Advance Tax  Add the Interest to the balance amount to arrive at the Self Assessment Tax Payable / Net Refund Due.
  1. FILING OF RETURNS – STEPS  Pay the Self Assessment Tax  File the Return physically or upload the return electronically.
  1. ADVANCE TAX [SECTION 211]  Advance tax is payable in 3 Installments (4 in case of Companies)— Payable on 15th June  15th September  15th December  15th March— and Where first installment of 15th June is payable only if the assessee is a company.
  1. SELF ASSESSMENT TAX [SECTION 140A] When on computation of income for the year for the purpose of filing the return of income it is found that some tax remains payable even after adjustment of advance tax along with deducted/collected at source, such balance tax along with interest thereon is required to be paid as self-assessment tax before filing the returns of income.  From A.Y 2013-14, any return uploaded without paying the Self-assessment tax would not be accepted by the Income-tax department and considered defective.
  1. RETURN OF INCOME [SECTION 139]  Normal Return  Belated Return  Revised Return  Loss Return  Defective Return.
  1. NORMAL RETURN  Who is required to file return of income — Company or a firm – mandatory requirement — Others – total income exceeds basic threshold limit (i.e. INR 2,00,000 for A.Y. 2013-14)— Any person who is otherwise not required to furnish return of income will be required to file a return if he has any asset located outside India or has signing authority in any account located outside India.
  1. BELATED RETURN  Any person who has not furnished a return within the time allowed u/s 139(1) or  Within the time allowed under a notice issued u/s— 142(1), but filed before the end of one year from the relevant assessment year or the completion of the assessment, whichever is earlier.
  1. REVISED RETURN Can be filed if the assessee discovers an omission or wrong statement  Replaces the original return  Can be filed before the end of one year from the relevant assessment year or the completion of the assessment, whichever is earlier  Can be revised further  Belated return cannot be revised.
  1. LOSS RETURN  Return must be filed within the prescribed time limits  If not filed, no carry forward of loss, however carry forward of loss under House property head, unabsorbed depreciation & unabsorbed family planning expenses are permissible.
  1. DEFECTIVE  RETURN  Incomplete return  Assessee may be given an opportunity to rectify the defect  If the defect not rectified, the return treated as invalid.  Return will be defective if: columns of return not filled or annexures are not attached;  computation of income tax not attached;proof of tax deposited is not produced within the period of two years, Non furnishing of tax audit report; etc,Self-assessment tax is not paid (from A.Y 2013-14).
  1. RETURN IS FILED – WHAT NEXT?  Either a summary assessment (Section 143(1)) and/or  A regular (scrutiny) assessment (Section 143(3)).
  1. SUMMARY ASSESSMENT [SEC. 143(1) To be issued only if there is a demand or a refund due.  If no demand/refund then Acknowledgement is deemed to be the intimation  Time limit – the end of one year from the relevant assessment year or the completion of the assessment, whichever is earlier .There will be no processing of the returns where assessee are selected for Scrutiny.
  1. SCRUTINY ASSESSEMENT [SEC. 143 (2)/(3)]  Time limit for issuing notice Time limit for completing the scrutiny Type of questions that are being asked.
  1. REFUNDS [SECTION 237]  A claim for refund shall be claimed in Form No. 30  Adjustment of refund against demand for another year (Section 245).
  1. INTEREST [SECTION 234A 234D]  For Defaults in furnishing return of income [SECTION 234A]  For Failure to Deduct and pay tax at source [SECTION 201(1A)] A Interest for Default in payment of Advance Tax [SECTION 234B].
  1. INTEREST [SECTION 234A 234D] TO SECTION For Deferment of Advance Tax [SECTION 234C] Corporate Assessee [SECTION 234C(1)(a)] Non Corporate Assessee [SECTION 234C(1)(c)] àShort payment of Advance Tax in case of Capital Gains/Casual Income [First Proviso to SECTION 234C(1)].
  1. INTEREST [SECTION 234A 234D]  Interest TO SECTION on Excess Refund [SECTION 234D] For Making Late Payment of Income tax [SECTION 220(2)]  Interest Payable to Assessee [SECTION 244A].
  1. RECTIFICATION OF MISTAKES [SECTION 154]RECTIFICATION OF MISTAKES  An income-tax authority may with a view to rectifying any mistake apparent from the record:  amend any order passed by it—  amend any intimation or deemed intimation under— section 143(1) and section 200A. Rectification may also be made on application by the assessee  Orders cannot be rectified after expiry of 4 years from the end of the financial year in which order sought to be amended was passed  On rectification plea by assessee – Amendment / refusal order to be passed within 6 months from the end of the month in which the application is received by the incometax authority.
  1. RECTIFICATION OF MISTAKES  Mistake  Obvious and patent—  Self evident and reached without debate—  Fresh determination of facts should not be required—  Misreading of a clear provision of law/ applying an— inapplicable provision/ overlooking mandatory provision  Statutory interpretation should not be involved—  Record  Includes all materials/ documents available at the time— of passing the order of assessment  Fresh documents/ materials not recorded at the time of— passing the order cannot be considered  Record of any period can be considered—
  1. RECTIFICATION OF MISTAKES  Examples of mistakes apparent from record which can be rectified — Error of law or fact — Clerical or arithmetical error — Error in determination of written down value — Overlooking the obligatory provisions of the legislature — Mistakes arising out of retrospective amendment of law
  1. REVISION OF ORDERS BY COMMISSIONER [SECTION 263 & 264]REVISION OF ORDERS BY COMMISSIONER U/S 263  Pre-requisites — Erroneous order Record shall include and shall be deemed always to have included all records available at the time of examination by the Commissioner Revised order should be passed before the expiry of 2 years from the end of the financial year in which order sought to be revised was passed Opportunity of being heard should be given to the assessee before passing an order under section 263 Powers of Commissioner – Enhance, modify or cancel the assessment and direct a fresh assessment Appeal can be filed to the Appellate Tribunal against the order under section 263 —  Prejudicial to interests of Revenue
  1. REVISION OF ORDERS BY COMMISSION U/S 264 : Revision of orders, on own motion of Commissioner or on application by the assessee Revision of order on own motion by the Commissioner, to be passed within one year from date of order sought to be revised Application by assessee should be made within 1 year from date on which the order in question was communicated or date on which assessee came to know of order, whichever is earlier Order to be passed within 1 year from end of financial year in which application is made by assessee for revision Pre-requisite – Assessee to waive right of appeal Where appeal against the order has been filed – no revision possible
  1. APPEALS TO COMMISSIONER(APPEALS) [SECTION 246A TO 249]APPEALS TO COMMISSIONERS (APPEALS) Appealable orders (Illustrative):  Scrutiny assessment order—  Best Judgment assessment order—  Reassessment order—  Rectification order enhancing assessee’s liability—  Appeal against intimation passed under section 200A—  Tonnage tax order— Appeal to CIT(A) within 30 days of  Date of payment of tax, where appeal is in respect of TDS—under section 195  Date of service of notice of demand relating to assessment or— penalty  Date on which intimation of order sought to be appealed against— is served
  1. APPEALS TO COMMISSIONERS (APPEALS)  Time extended if sufficient cause proven Appeal to be filed in prescribed form and manner CIT(A) fixes a day and place for hearing the appeal, and notice of the same is given to the appellant and the assessing officer whose order is being appealed against During the course of the hearing, CIT(A) may entertain additional ground/evidence raised by the appellant in seeking modification of the assessment order passed by the assessing officer  CIT(A)’s order disposing of the appeal is in writing and states decision and reasons supporting the same  CIT(A) has powers to confirm, reduce, enhance or annul the assessment Where possible, CIT(A) to dispose within 1 year from the end of the financial year in which appeal was filed
  1. APPEALS TO TRIBUNAL [SECTION 252 TO 255]APPEALS TO TRIBUNAL  Should be filed within 60 days of the date on which the order sought to be appealed against is communicated Memorandum of cross-objections – within 30 days of receipt of notice that an appeal has been preferred to the ITAT Time extended if sufficient cause proven To be filed in prescribed form and manner Additional ground/ evidence can be raised for the first time before the ITAT. In such a case opportunity of being heard should be given to the assessing officer After hearing both parties, the ITAT passes an order as it thinks fit and communicates the same to the assessee and the Commissioner Where possible, ITAT to dispose within 4 years from the end of the financial year in which appeal was filed In case order of stay is made, appeal to be disposed within 180 days of stay order; else, stay stands vacate.
  1. APPEALS TO TRIBUNAL Mistakes apparent from record – Order of ITAT can be amended within 4 years from date of ITAT order [Section 254(2)] if it is brought to the notice by the assessee or the assessing officer  Final fact finding authority  Binding nature
  1. APPEAL TO HIGH COURT [SECTION 260A] APPEALS TO HIGH COURT Right exercisable u/s 260A  Preferred against ITAT’s order  Only for a case involving a “substantial question of law”  Should be filled within 120 days of receipt of ITAT’sorder  Can also be filed by the Tax department  Rules framed for court proceedings and conduct has to be observed
  1. APPEALS TO SUPREME COURT Right exercisable u/s 261.  Preferred against High Court’s order Only for a case involving a “substantial question of law”  Should be filled within 60 days of receipt of High Court’s order  Can also be filed by the Tax department  Rules framed for court proceedings and conduct has to be observed

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-23343333

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INCOME TAX SAVINGS THROUGH HOUSE PROPERTY

RAJPUT JAIN AND ASSOCIATES  5

INCOME TAX SAVINGS THROUGH HOUSE PROPERTY

21Does your home, saving your income tax? Buying a house for self occupation can be biggest tax saving instrument.  It saves your income tax in two ways.   You can save maximum Rs 75750 per year on your home.

Introduction:

There are two main benefits which are available under Income Tax Act, 1961 in relation to Purchase or Construction of House Property which are described as under:

  • Deduction of Interest on Capital borrowed for purchase or construction of House Property under Section 24 (b) of the Income Tax Act, 1961. (Interest paid by house owner on housing loan)
  • Principle amount paid towards Housing loan for  purchase or construction of House Property under Section 80 C of the Income Tax Act, 1961.
  • The amount stamp duty/ Registration charges paid while acquiring property will be allowed deduction U/s 80C.

Interest Paid towards housing loan:-

The house property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount payable towards interest on borrowed capital is allowed as deduction under u/s 24(b) of Income tax act.

  • We have to note here Interest payable on borrowed capital is allowed (Interest paid is irreverent here).
  • In case of under construction property, Interest will aggregated from the date of borrowing till the end of the previous year prior to the previous year in which the house is completed and allowed in five successive financial years starting from the year in which the acquisition or construction was completed.
  • In case Assesses is owner of more than one residential property, he may exercise an option to treat any one of the houses to be self occupied and the other houses will be deemed to be let out and annual value of such house will be determined as per Section 23(1)(a) of the Income Tax Act, 1961.

How much Interest Deduction allowed U/s 24(b) :-

In case of self occupied house:-

(a)   In case property is acquired or constructed with capital borrowed on or after 01-04-1999 and such acquisition or construction is completed within 3 years of the end of the financial year in which the capital was borrowed:

Minimum of Actual Interest payable or Rs 1, 50,000/- .

(b)   In case property is acquired or constructed with capital borrowed

Minimum of Actual Interest payable or Rs 30,000/- .

In case of Rental / Deemed to be let out House Property.

Interest payable on barrowed capital for the previous year is allowed as deduction under U/s 24(b).

Principle Amount paid towards Housing Loan:-

Any payment made for purchase or construction of a residential house property which is chargeable to tax under the head “Income from House Property” towards any installment or part payment due to any Bank, Financial Institution, Company or Co-Operative Society towards the cost of the house property allotted to him is allowed as deduction U/s 80 C of the Income Tax Act, 1961 to the extent of Rs. 1,00,000 along with other Specified Investments mentioned under Section 80 C of the Income Tax Act, 1961.

Stamp Duty and Registration Charges for a home:-

The amount you pay as stamp duty or registration fee when you buy a house  can be claimed as deduction under section 80C in the year of purchase of the house.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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INCOME TAX CALCULATION – RESIDENTIAL STATUS

INCOME TAX CALCULATION – RESIDENTIAL STATUS

6

  • Resident & Ordinary Resident
  • Resident But not Ordinary Resident
  • Non –Resident

Based on the duration for which individual present in India determine the residential status.

Resident: An individual is said to be resident in India in any previous year if he fulfills any one of the following two conditions:

  • He is in India in that year for a period of 182 days or more; (Should be determined total no days stay)
  • He is in India for a period of 60 days or more during the previous year and 365 days or more during the 4 years preceding that previous year.

Resident and ordinarily resident: If any individual fails to satisfy below both conditions he will be treated as Resident and ordinary resident.

  • He has been a non-resident in India in 9 out of the 10 preceding previous years; And
  • He has been in India for a period not exceeding 729 days during the last 7 years before the assessment year.

Resident, But not ordinarily resident: If an individual satisfy the conditions for Resident But does not fall under Ordinary resident defined above treated as not Ordinary resident.

Non-resident: If an individual does not satisfy any of the conditions that require to be qualifying as resident, will be considered as non-resident.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

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FAQ’s ON EXCISE

RAJPUT JAIN AND ASSOCIATES  1

FAQ’s on Excise

32Excise Registration

What is Excise Duty?

Excise duty is a tax which is charged on Manufacturer / Production of goods as well as from Importers of some specified Goods. Excise Duty is generally recognized as:-

  • Central Excise: – This is the duty which is collected by central Govt.
  • State Excise:- This is collected by Specific state in which the business is located
  • Additional Duties on Import:- This is the duty which is collected on import of those items on which Excise is collected if that product was manufactured in India instead of importing it. This duty is in kind of compensatory duty which is collected to compensate the revenue loss caused by import of those goods.

The Central Excise Law & Procedures essentially embody Central Excise Act, 1944, Central Excise Rules, 2002, Cenvat Credit Rules 2004, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008, Central Excise (Compounding of Offenses) Rules, 2005, Central Excise (Appeals) Rules, 2001, CESTAT (Procedure) Rules, 1982 and Notifications issued under Central Excise Act, 1944 and the Rules made thereunder.

 Who need to apply for Excise?
Every person who produces or manufactures excisable goods will have to register themselves with Excise Department.

Persons Requiring Registration under Excise Department: The accompanying classifications of persons oblige enrollment:

  • Every Manufacturer if dutiable excisable products.
  • First and second stage merchants (counting maker’s stops and shippers) wanting to issue Cenvatable receipts.
  • Persons holding distribution centers for putting away non-obligation paid products.
  • Persons who acquire excisable products for profiting end-use based exception.
  • Exporter-producers under refund/ security method; Export Oriented Units and EPZ units which have connection with the residential economy

Every Business which is planning to start a manufacturing unit or planning to import any item from abroad ,need to consult about the excise duty implication on that particulars product. It is always advisable to be certain about the tax implication and its compliance.Separate enlistment is needed in admiration of divided premises (production line, warehouse, godown and so forth.) aside from in situations where two or more premises are really piece of the same plant (where procedures are between interfaced) yet are isolated by open street, channel or track line. On account of materials, a solitary enlistment will accomplish for all premises recorded in that. Further, a few producers owning apparatus, (for example, force looms) under a typical shed or in as something to be shared premises will be dealt with as a different manufacturing plant each for their particular hardware and there will be no clubbing of their generation/freedom.
For Example the If you want to set a manufacturing plant confirm the duty liability under Central as well as State Excise well in advance before starting the activity.

Factor Excise tax before you start a manufacturing unit.

As mentioned above it is utmost important to factor the excise tax impact due to:-

  • Decision on cost of final product
  • Decision on selling price of product
  • Decision on Manufacturing or Import

Exemption for Small Scale Industry

Considering the importance and for its promotion small scale industries are exempted from paying of excise duty.

Any Manufacturing unit which has a turnover of less than 1.5 Cr is exempt from payment of Excise duty.

When Excise is chargeable?

Excise is an event based taxes, and taxes is charged once goods are exit from gate of manufacturing plant. The invoice is made on gate pass basis

 What is the Type of Excise registration?

Type of Excise Registration

TYPES OF EXCISE REGISTRATION  :
Single Premises: Single Registration is required in case of one premises More than Single Premises: If the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises.

What are the Documents & Process required for Excise registration?

Documents Required for Excise Registration Excise Registration Procedure
  • Filled Form A-1 (2 Copies)
  • PAN No.
  • Constitution of Applicant
  • Ground Plan for Factory Premises
  • Detail of Manufacturing Process
  • Tariff Classification Code
  • Board Resolution(In Case of Company)
Step 1: Excise Registration Application to AC/DC [FormA-1(2 copies) and PAN No.]Step 2: AC/DC will grant Excise Registration Certificate after receipt of application and all documents and due verification premises.

Excise Compliance :

What is the compliance under Excise?

All the compliance can be divided in two steps:-

  • Payment of Taxes
  • Filing of Return on 10th of next month.

What is the rate of Central Excise duty?

Rate of Excise duty is depend on Product to product which is decided as per Central Excise Tariff which is notified and updated each year in Finance Act, the same can be found in.

Every Person who is registered with Excise has to file Periodic Return on timely basis. There are various types of return as mentioned below to be filed by Assessee.

Form of Return Late Fees/ Amount Payable Who is required to file Time limit for filing return
ER-1[Rule 12(1) of Central Excise Rules] Monthly Return by large units Manufacturers not eligible for SSI concession 10th of following month
ER-2[Rule 12(1) of Central Excise Rules] Monthly Return by EOU EOU units 10th of following month
ER-3[Proviso to Rule 12(1) of Central Excise Rules] Quarterly Return by SSI Assessees eligible for SSI concession (even if he does not avail the concession) 10th of next month of the quarter
ER-4[rule 12(2) of Central Excise Rules] Annual Financial Information Statement Assessees paying duty of Rs one crore or more per annum either through PLA or Cenvat or both together. Annually by 30th November of succeeding year
ER-5[Rules 9A(1) and 9A(2) of Cenvat Credit Rules] Information relating to Principal Inputs Assessees paying duty of Rs one crore or more per annum (either through PLA or Cenvat or both together) and manufacturing goods under specified tariff headings Annually, by 30th April for the current year (e.g. return for 2005-06 is to be filed by30-4-2005].
ER-6 [Rule 9A(3) of Cenvat Credit Rules] Monthly return of receipt and consumption of each of Principal Inputs Assessees required to submit ER-5 return 10th of following month
ER-7 [Rule 12(2A) of Central Excise Rules] Annual Installed Capacity Statement All assessees, except manufacturers of biris and matches without aid of power and , reinforced cement concrete pipes Annually, by 30th April for the previous year (e.g. return for 2010-11 should be submitted by30-4-2011
ER-8 [Sixthproviso to Rule 12(1) of CE Rules] Quarterly return Assessees paying 1%/2% excise duty and not manufacturing any other goods Quarterly within 10 days after close of quarter
Form as per Notification No. 73/2003-CE(NT) [Rule 9(8) of Cenvat Credit Rules] Quarterly return of Cenvatable Invoices issued Registered dealers By 15th of following month
ST-3 [Rule 9(10) of Cenvat Credit Rules] Half yearly return of Cenvat credit distributed Input Service Distributor Within one month from close of half year

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 011-233 433 33

 

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