GST, TDS Rate for coworking spaces needed to be reduced in Budget 2021

The GST & TDS Rate for Coworking Spaces need to be cut off in Budget 2021

Coworking office buildings have had a significant increase in previous years but at present, the rate of Tax Deduction Source applied to coworking facilities services is Ten Percent because co-working companies offer rental services to both immovable and movable.

The rate of TDS is expected to be reduced in such a way as to provide benefits to their clients in the context of real estate at budgetary GST rates, in addition to helping to enhance the flow of working capital, there is the requirement to reduce the GST on clients in coworking spaces. Currently, there is an 18 percent GST rate for coworking spaces services that are applied/extended to all consumers who have a seriously positive effect on start-ups.

Under the Goods & Services Tax, It is advisable to get a cut-off  GST rate to its lowest slab for start-up establishments. this will have a positive effect on this budget. In addition to Goods & Services Tax, the Govt. of India should be allowed co-working business owners to make use of input Tax credits on work contracts as well as on construction services provider under the new GST plan.

It would analyze the rising cash flow of the coworking companies which they are now facing. There is an expansion of the ITC under the Goods & Services Tax, which developers can be there to pass on to the companies who used to provide the space on lease/rent.

The govt. of India should allow the banks to offer loans to the coworking Business owners in respect of the cash flow of the business owners. After all, in order to improve the funding/Loan of the coworking sector, the govt. should assign investment benefits to them.

In addition, in order to expand from metropolitan areas to Tier II and Tier III markets, the sector is also awaiting the Govt’s infrastructural push, and a various window of assistance is required to help set up coworking spaces. The Govt of India must consider firms that give the Rent space/place below specific policies such as the real estate investment trust & provide the industry with a tax benefit for successful real growth.

Co-working space companies are start-ups, in particular by early and mid-starts, which the Govt of India could see at the reducing of the current rate of enrolment fee, Moreover, stamp duty to register credential at registrar offices as high rates will be giving a burden on them. Then it serves as a catalyst for both coworking spaces & start-ups

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

All about Sole Proprietorship

Starting a Sole Proprietorship-Pros & Cons

A sole proprietorship is an unincorporated company that has only one owner who pays personal income tax on profits earned from the company, also referred to as a sole trader or a proprietorship. Due to a lack of government regulation, a sole proprietorship is the easiest type of company to establish or take apart. As such, sole owners of companies, individual self-contractors, and consultants, these types of businesses are very popular. Many sole proprietors do business under their own names because it is not essential to create a separate business or trade name.

Key Points to know if you desire to start Sole Proprietorship:

  • An audit is not needed

Proprietorship organizations are not required to submit audited financial statements to the Ministry of Corporate Affairs each and every year. The audit of the financial statements is therefore not expected. However, a tax audit may be expected of a proprietorship organisation if the turnover exceeds the prescribed limits.

  • Registration for a sole proprietor

In the case of sole proprietorship business, no registration is required in India. You just need to open a bank account with the name and style you want to work with. But if your business is liable for GST Registration, you must obtain GST Registration. Furthermore, no separate income tax PAN is required for the sole proprietorship. The owner’s PAN will be the firm’s PAN and the owner will have to file an income tax return in his own name.

  • Required People

Only one person is required to start a Proprietorship, and the Proprietorship will have only one Promoter.

  • Requirements to be the Proprietor 

The owner must be an Indian citizen and a resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in the Proprietorship with the prior consent of the Government of India.

  • Required Documents

In order to register a sole Proprietorship, the following documents are required:

  1. Aadhar Card
  2. Pan Card
  3. Bank Account
  4. Proof of registered office

While the sole proprietor does not need any special registrations, he is recommended to obtain a few registrations to ensure that his company operates smoothly.

  1. Registration as an SME
  2. The license of the Shop and Establishment Act
  3. Registration of GST
  • Required capital

There is no limit to the minimum capital required to start the Proprietorship. Proprietorship may therefore begin with any amount of minimum capital

  • Transfer of ownership

Unlike a Limited Liability Partnership or a Private Limited Company, a business operated by a proprietorship firm cannot be transferred to another person. Only the properties of the Proprietorship can be transferred to another person through the sale. Intangible properties, such as government licenses, registrations, etc., cannot be transferred to another individual. Partners in Proprietorship

Proprietorship Organizations are business entities owned, operated, and controlled by one person. As a result, Partners cannot be incorporated into a sole proprietorship.

Why you should go for Sole Proprietorship?

  1. Easy to Form and Close the business:

It’s really easy to establish a sole proprietorship company. In setting up such kind of organisation, there is hardly any legal formality required. Any specific law does not govern this type of organisation. The only condition is that business practices should be legal and comply with the rules and regulations defined by local authorities. And, without any legal problems, the company may be closed whenever the proprietor desires.

  1. Ease of operation and flexibility to management:

All decisions relating to business operations are taken in a sole proprietary company by one person who makes the business functioning simple and easy. Changes in the scope and nature of the activity may also be brought on by the single owner. This gives business flexibility.

  1. Only Beneficiary of Profits:

The only person to whom the income belongs is the sole proprietor. A direct relation exists between effort and reward. It inspires him to work hard and bear the risks of the business.

  1. Small-Scale Activities benefits: 

A sole proprietorship is normally structured for Small-scale businesses. This allows the family members of the proprietor to be active and working in the business. Around the same time, a company like this is therefore entitled to some government concessions. For eg, on a priority basis, a small industrial organization may get electricity and water at concessional rates.

  1. Decisions Making:

An owner can make quick decisions about his business affairs (e.g., price policy, credit policy, discount policy, disposal of surplus funds, etc.).

As and when required, he can take spot decisions. In critical decisions, this avoids delay.

  1. Secrecy Retaining:

For any business, the secrets of their business are very important. The secrets may be the manufacturing process, the range of goods to be made, the use of raw materials, the marketing of products, etc. In this type of organization, trade Secrecy can be retained.

  1. Social desirability

It offers self-employment, discourages wealth accumulation in a few hands, and helps to maintain personal self-reliance, self-confidence, tact, and diligence qualities.

  1. Benefits in Taxation :

In comparison with other types of business organisations, a sole proprietorship corporation has a minimum tax burden. The owner is individually taxed as an entity and not as a business unit.

  1. Total Control: 

The sole owner of such an organisation has complete control over the operation of the enterprise.

  1. Regulation of Minimal Government:

The Sole Proprietorship Organization Form does not have a specific Act enforced for it. So, it runs under the minimal supervision of the government.

The drawback for running Sole Proprietorship

  1. Management Skills Limitation:

A sole proprietor may not be able to effectively run the business as he is not likely to have the requisite expertise for all dimensions of the business. In the growth of companies, this creates difficulties.

  1. Capital Limitation:

In general, the sole owner of a business is at a limitation in raising sufficient capital. Its own resources may be limited and its personal assets may also be insufficient for borrowing against its security. This limits the scale of business growth.

  1. Unlimited responsibility:

The sole owner is directly responsible for all business obligations. Unlimited liability of the owner brings him at huge risk in times of losses. His personal property can also be used for the payment of business debts if the assets of the business are limited.

  1. Inability to continue:

A sole proprietary organisation suffers from a lack of consistency. If the owner is sick, this could result in a temporary closing of the company; and if he dies, the business may be shut down permanently.

  1. Lower Bargaining Position:

Due to its limited financial capital, the owner cannot control the market. Thus, his bargaining position is weak, both as a buyer and as a seller.

  1. Limited Expansion scope:

Due to capital and management limitations, the company cannot grow and develop on a large scale.

  1. Risk of incorrect decisions:

Any wrong decision taken by the owner could bring disaster to the fortunes of his company. Because no one is assisted and it can lead to inaccurate results.

  1. No Large-Scale Economy:

Small-scale concerns cannot access the economies that large-scale business organisations enjoy in their activities due to higher demand and lower operating costs per unit. Their cost of production is higher and they cannot meet competition from large units.

  1. The restricted area of jobs for employees:

The sole proprietorship of businesses has restricted employment prospects, which means that they are unable to attract skilled and qualified people.

Conversion of Sole Proprietorship to LLP

Should choose to register with the LLP

As eventually as business income increases, several sole proprietors are becoming aware of the need to differentiate their accounts and tax filings from those of the business. There are several other reasons why the conversion of your sole proprietorship into a LLP is a smart decision. This conversion allows you to take advantage of the dual benefits of keeping your goodwill and brand value in close contact while enjoying perpetual structure. Other key benefits include the following:

  • Expanding business
  • Improved funding options
  • Greater visibility and acceptance of the public
  • Protection of assets
  • Risk management
  • Corporate Tax Profit

Documents are required for LLP conversion

Well, at a later stage, there are procedures to convert the Sole proprietorship business into a company or an LLP. Documents are required for LLP conversion are a follows:

  1. Latest photographs of all partners in the passport size;
  2. Aadhaar Card/Passport/Driving License/Voter ID: proof of identity of each partner;
  3. Each partner’s proof of residence: bank statement/passbook/electricity bill/telephone bill/service bill;
  4. All Partners PAN Card;
  5. Evidence of the proposed registered office-Electricity Bill along with proof of possession of the proposed registered office of the Rent Agreement OR;
  6. Subscribers paper, including each partner’s consent;
  7. Partners’ interest in other entities;
  8. Copy of BR (if Body Corporate is a Partner) (the name and address of the person nominated to act on his behalf as the nominee/designated partner shall also be indicated).

Steps involved in the conversion of a Sole proprietorship into an LLP

  • DSC (Digital Signature Certificate)-

DSC is required and must be obtained by the designated LLP partners. The documents which are required to be submitted contain Identity Proof & Address Proof to receive this DSC.

  • Apply for DPIN (Designated Partner Identification Number)-

The conversion phase is a pre-requisite for DPIN. This specific DPIN number should be processed or approved by the appointed partners and they should obtain a provisional DPIN. Partners should provide photos, proof of identity and proof of address to obtain the DPIN.

  • Application for name availability

The application to convert the business as an LLP is expected to be completed in the FORM-1 for the organization’s availability of a name. A maximum of 6 names in the order of priority may be suggested by the partner, and the application must then be sent to the respective ROC for approval of the name.

  • Changes if any suggested by the ROC

If the ROC suggests any change in the name application, it must be complied with and if the ROC finds that the name is not suitable for the business, he/she will reject the name.

  • Documents required

Several documents must be submitted to the ROC. The MOA or AOA must be submitted immediately after the designated partners have verified it and must be sent for the purpose of printing. A Stamping is also needed for multiple Document such as:

  1. Agreement LLP
  2. Forms 3
  3. The promoters’ signed subscription sheet
  4. LLP Agreement Duly Stamped
  5. Evidence of Registered Office Address
  6. Other forms required: Other forms must be filed along with the ROC, such as Form 32 and letter of Authority or POA.
  • Final procedure:

You must follow up with the ROC and make the required changes to the MOA or AOA or other stated documents as given priority by the ROC to fill in all of the above mandatory documents with the ROC. Below are the mandatory steps to be taken,

  • Upload the formsThe MCA platform must upload all the accurately completed forms. An online service is available for the forms.
  • Fee payment For the incorporation process, the fees must be charged.
  • Collecting the Incorporation Certificate after the ROC is satisfied that all the required steps have been properly followed and no errors have occurred during the initial to the final process, he/she will provide the Company with the Incorporation Certificate.

BENEFITS OF PROPRIETORSHIP TURNING INTO LLP

  • The Automated Switch

All the firm’s assets and liabilities become the LLP’s assets and liabilities immediately before the conversion.

  • No Tax on Stamps

All the company’s movable and immovable assets are deposited automatically in the LLP. No transfer instrument is required to be executed, and no stamp duty is therefore required to be paid.

  • No Tax on capital gains

No tax on capital gains is imposed on the transfer of assets from the Sole Proprietorship business to the LLP.

  • Carry forward/Set-Off

The business’s cumulative loss and unabsorbed depreciation is known to be the loss/depreciation of the LLP successor for the previous year in which the conversion was carried out. This failure can also be taken into the possession of the successor LLP for an additional eight years.

  • Expansion of business

You will have more opportunities for business expansion after Conversion into LLP from Sole Proprietorship.

  • Management skills:  

Can have better management skills to effectively run the business as by converting Sole Proprietorship to LLP, because more than one person will operate the business with designated partners skills and mutual terms/agreement

However, the procedures to convert a proprietorship business into a Company or LLP are cumbersome, expensive, and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start an LLP or Company instead of a Proprietorship.

Conclusion :

Rajput Jain & Associates Associate will understand your business requirements and help you start a Proprietorship by obtaining the relevant registrations. We will help obtain the necessary registrations to help the Proprietor open a bank account in the name of the business, thereby proving an identity for the business.

Rajput Jain & Associates can help startup a Proprietorship in 4 to 7 days, subject to Government processing time. Since the proprietorship is itself not distinguishable from its owner hence there is no registration or approval is required to start a proprietorship business. Proprietorships do not have a process of incorporation. Therefore, our Business Advisors will advise you on the way the identity of the Proprietorship business can be established through other Government registrations.

Know more about the relevant blogs:

Mandatory compliance of Private Limited Company

Procedures for the conversion of partnership firm into Private limited company

Conversion of LLP into Company Limited by Shares

Business Setup in India

RJA is a robust choice for this work – With 5 offices, 12+ plus years of industry experience, competitive; we have a team of professional specialists who will Convert your Sole Proprietorship firm to LLP in India with in possible turnaround time. Specialists +91 9555 555 480  NOW!!!

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

A guide to Tax Implications on NRIs

A guide to Tax Implications on NRIs

Who is considered as NRI?

If you do not satisfy any of the following conditions, A person shall be considered a non-resident of India (NRI).you will be an NRI if.

  • If you are in India during the financial year for at least 6 months (182 days to be exact)
  • If you are an Indian citizen who works abroad or is a member of a crew on an Indian ship in India and you have been in India for 2 months (60 days) in the last year and have lived for an entire year (365 days) in the last four years.

A person who is not a resident of India shall be considered a non-resident of India (NRI). You are a resident if you stay in India for a given financial year: 182 days or more or 60 days or more and 365 days or more in the four preceding years. In the event that you do not meet either of the above conditions, you will be regarded as an NRI.

FOR FY 2019-20 (I.E DURING COVID PANDEMIC)

If an individual has come to India on a visit before 22 March 2020 and

  • has not been able to leave due to lockdown on or before 31 March 2020, the period of stay from 22 to 31 March is not considered for FY 2019-20.
  • Quarantined due to Covid 19 on or following 1 March 2020 and departure on or before 31 March 2020 on an evacuation flight or failure to leave India on or after 1 March 2020 shall not be treated for the period from quarantine to quarantine.
  • The period of stay from 22 March 2020 until departure shall not have been considered on the evacuation flight on or before 31 March 2020.

1.1 Key Points you have to know!

  • The income taxes of an NRI in India would depend on his residential status for the year. Your global income is taxable in India if your status is ‘resident’. Your income that is received or accrued in India is taxable in India if your status is ‘NRI.’ Examples of income obtained or accrued in India are wages paid in India or salaries for services rendered in India, income from household assets located in India, capital gains on transfer of assets located in India, income from fixed deposits or interest on savings bank accounts. For an NRI, these profits are taxable. In India, income that is received outside India is not taxable. Interest gained on an account with NRE and FCNR is tax-free. NRO account interest is taxable on an NRI.
  • Taxable Income for NRI
    NRI or not, any person whose income exceeds Rs.2,50,000 is required in India to file an income tax return.

  • July 31st is the last date in India for NRIs to file income tax returns.
  • You are obligated to pay advance tax if the tax obligation reaches INR 10,000 in a FY. When you do not pay the advance tax, interest under Section 234B and Section 234C is applicable.

When you earn your salary in India or anyone does it on your behalf, your salary income is taxable. Therefore, if you are an NRI and you earn your salary directly into an Indian account, Indian tax laws should apply to you. This benefit is charged at the slab rate to which you belong.

2.1 Income from salary

If your services are rendered in India, income from salary will be considered to arise in India. Even if you may be an NRI, but if your salaries are paid for services you provide to India, it is taxable in India irrelevant to where you receive your money.

  • If your employer is the government of India and you are a resident of India, salary income is also taxed in India.
  • if your service is made outside India. Remember that the salary of diplomats and ambassadors are exempt from tax.

2.2 House Property Income

For an NRI, income from a property located in India is taxable. The measurement of such income shall be carried out in the same way as that of the citizen.

  • This property may be leased out or empty. An NRI is entitled to claim a standard deduction 30 %, deduct property taxes and take advantage of an interest deduction if a home loan exists.
  • A deduction for principal repayment under Section 80C is also allowed by the NRI.
  • Under Section 80C, stamp duty and registration charges payable on the purchase of a property may also be claimed.
  • House property income is taxed as applicable at slab rates. Nandini owns a house in Goa and, while staying in Bangkok, she rented it out. She set up the rent payments to be paid directly from her Bangkok bank account. In India, Nandini’s income from this home, which is in India, shall be taxable.

2.3 Rental Payments to an NRI 

A tenant who pays an NRI owner’s rent must agree to deduct 30 percent of the TDS. The income can be collected from an account in India or from the account of the NRI in the country in which it currently resides. Maria is paying her NRI landlord of Rs 30,000 pm. Before transferring the amount to the landlord’s account, she must deduct 30 % of the total TDS (30,000 *30% = Rs 9,000). Maria also has to get a Form 15CA prepared and send it to the Department of Income Tax online. Form 15CA must be submitted by a person making a remittance (a payment) to a Non-Resident Indian. This form must be submitted online. In some situations, before uploading Form 15CA online, a certificate from a chartered accountant on Form 15CB is required.  In Form 15CB, the CA certifies details of the payment, TDS rate, and TDS deduction as per Section 195 of the Income Tax Act, If any Double Tax Avoidance Agreement( DTAA ), and other details of the nature and intention of the transactions. There is no need for Form 15CB when:

  • Remittance is not more than Rs 5,00,000 (in total in a financial year). In this case, only Form 15CA has to be addressed.
  • If a lower TDS is to be deducted and a certificate is issued in compliance with Section 197, the order of the AO shall deduct the lower or lower TDS.
  • If the transaction comes under Rule 37BB of the Income Tax Act, where it lists 28 items, neither is required. Here: check out the entire list. And New Rules related to 15CA and 15CB are attached

In all other situations, if a remittance is made outside India, the person making the remittance will receive a CA certificate on Form 15CB and will send Form 15CA to the government online after receiving the certificate.

 2.4 Income from Other sources

  • Interest income is taxable in India from fixed deposits and savings accounts kept in Indian bank accounts. Interest is tax-free on NRE and FCNR accounts. NRO account interest is completely taxable.

2.5 Income from Business and Profession 

  • Any revenue from a company operated or set up in India received by an NRI is taxable to the NRI.

2.6 Income from Gains in Capital

  • Any capital gain arising from the transfer of capital assets situated in India is taxable in India. Capital gains on investments in shares in India and securities are also taxable in India. The buyer must deduct TDS at 20% if you sell a home property and have a long-term capital gain.
  • However, by investing in a house property pursuant to Section 54 or investing in capital gain bonds pursuant to Section 54EC, you are entitled to invoke the capital gain exemption.

2.7 Special Investment Income Related Clause 

  • Individual (NRI) is taxed at 20 % when an NRI invests in certain Indian properties. If the only income the NRI has during the financial year is Special investment income then TDS has been deducted from that income, then such an NRI is not expected to file a tax return on income.
  1. The Special Care Eligible Investments

Revenue from the following foreign currency-acquired Indian assets:

  • Shares in an Indian public or private company
  • Debentures of a public Indian company
  • Deposits with banks and public Indian companies
  • Securities from the Central Government
  • NSC VI and VII issues

In this case, if the cost of the new asset is less than the net consideration, capital gains are proportionately exempt. Keep in mind that if the purchased new asset is transferred or sold back within 3 years, the exempted profit will be added to the income in the sale/transfer year.

Even when he/she becomes a resident, the above benefit may be available to the NRI before such an asset is transformed into money, and upon submission of a declaration by the NRI for the application of the special provisions to the assessing officer.

Income (investment income and LTCG) will be Charged to Tax Under the usual provision of the Income Tax Act if, the NRI may decide not to apply these special provisions.

  1. Exemptions and Deductions for NRIs 

  • NRIs are also entitled, like residents, to obtain various deductions and exemptions from their overall income.
  • NRIs still have most of the deductions U/s 80. A maximum deduction of up to Rs 1.5 lakhs is permitted under Section 80C from gross total income for an individual for FY 2020-21.

4.1 Deductions under Section 80C permitted to NRIs:

  • Payment of the life insurance premium:
    • The policy must be on behalf of the NRI or on behalf of their spouse or on behalf of any child (child may be dependent/independent, minor/major, or married/unmarried).
    • The fee must be less than 10% of the total amount assured.
  • Children’s tuition fees:
    • Tuition fees charged for the full-time education of two children at any school, college, university, or other educational facility located within India (including payments for play school, pre-nursery and nursery).
  • Principal reimbursement of loans for purchases of a building:
    • Reimbursement of loans taken to buy or build a house is permitted.
    • Stamp duty and other expenses for transferring the property to the NRI are also permitted to be paid.
  • Unit Linked Insurance Plan (ULIPS):
    • ULIPS is sold under Section 80C for life insurance coverage and includes the unit-linked LIC mutual fund coverage, e.g. Dhanraksha 1989 and the UTI insurance scheme for the other units.
  • Investments in ELSS:
    • In recent years, ELSS has been the most favored option as it allows you to claim a deduction under Section 80C up to Rs 1.5 lakhs, it provides taxpayers with the EEE (Exempt-Exempt-Exempt) benefit, and at the same time offers an excellent opportunity to earn as these funds invest mainly in a diversified way in the stock market.

4.2 Deductions not Authorized under Section 80C, below are not permitted to NRI

  • PPF investment is not permitted (NRIs are not allowed to open new PPF accounts, however, PPF accounts which are opened while they are a resident are allowed to be maintained)
  • NSCs investments
  • 5-year deposit scheme by post office
  • Savings Scheme for Senior Citizen
  1. Other Allowable Deductions

In addition to the deduction that an NRI can claim under Section 80C, he is also eligible to claim other deduction under the income tax laws :

  • House Property Income Deduction for NRIs
    • NRIs can seek all the deductions applicable to a resident for a house purchased in India from house property income.
    • The deduction is also allowed on property tax paid and interest on home loan deduction. Here you can read in dept about home property profits.
  • Section 80D deduction
    • NRIs are permitted to claim a health insurance premium deduction. This deduction is eligible for senior citizens up to Rs 30,000 (increased to Rs 50,000 effective 1 April 2018) and up to Rs 25,000 for self-, spouse-, and dependent children insurance in other cases.
    • In addition,an NRI can also claim a deduction for parents insurance (father or mother or both) up to Rs30,000 (raised to Rs 50,000 effective April 1, 2018) for senior citizens, and for the parents who are not senior citizens is Rs 25000.
    • A deduction of up to Rs 5,000 for preventive health check-ups is also available under the existing limit starting from FY 2012-13.
  • Section 80E deduction
    • NRIs can claim a deduction from interest paid on an education loan under this section. This loan may have been taken for the NRI, or the spouse or children of the NRI, or for a student for whom the NRI is a legal guardian for higher education.
    • This deduction is valid for a maximum duration of 8 years or until interest is paid, whichever is earlier.
    • The deduction for the principal repayment of the loan is not available.
  • Section 80G deduction
    • Under Section 80G, NRIs are permitted to demand a deduction for donations for social causes.
    • Here are all the donations that are eligible under Section 80G.
  • Section 80TTA Deduction
    • Like Resident Indians, Non-resident Indians can also claim a deduction on income from interest on savings bank accounts up to a limit of Rs 10,000.
    • This is permitted for savings account deposits (not time deposits) with a bank, cooperative Society or post office and is available since FY 2012-13.
  • Investment as per “Rajiv Gandhi Equity Saving Scheme” RGESS (Section 80CCG)
    • In the successful AY 2013-14, deductions under Section 80CCG or the Rajiv Gandhi Equity Savings Scheme were introduced.
    • The primary aim behind this deduction was to increase the involvement among institutional investors in stock markets.
    • The permissible deduction allowed under RGESS is 50% of the total amount invested s.t. Maximum investment of Rs 50,000. if certain requirements are met.
    • NRIs do not have this deduction at their disposal. In respect of any assessment year starting on or after the 1st day of April 2018, no deduction under this section shall be permitted.
    • Deduction under section 80CCG has been discontinued starting from 1st April 2017. Due to this phasing out, a new investor in Financial Year 2017-18 will not be eligible to claim the deduction under section 80CCG.
  • Under Section 80DD Deduction for the Differently-Abled
  • NRIs are eligible for deduction under this Section for maintenance including medical treatment of a handicapped dependent (person with a disability as specified in this Section).
  • The Selling of Property Exemption for the NRI
    • Long-term capital gains are taxed at 20% (when the property is owned for more than 3 years) . Remember that a TDS of 20% is subject to long-term capital gains gained by NRIs.
    • Under Section 54, Section 54 EC & Section 54F on long-term capital gains, NRIs are entitled to claim exemptions. Therefore, at the time of filing a return, an NRI can take advantage of capital gains exemptions & demand a refund of TDS deducted from Capital Gains. There is an exception under Section 54 for long-term capital gains on the selling of a property.
    • There is an exception under Section 54F for the selling of any asset other than the property of a building.
  • How you’re taxed when you are:  

  • The resident person on a foreign temporary assignment:
    • Rohit worked for four months out of Singapore on a temporary assignment and received during that time in Singaporean dollars. He has attributed this income to a bank account here in India. He has now returned home. How does he file his tax return on his income?
    • Rohit’s taxes will depend on his residential status for this year. He will be considered a citizen because Rohit has not been outside India for more than 182 days. This year he will be expected to file his income taxes in India. This will also include his salary received in Singapore during the foreign mission.
    • Rohit’s residential status will change if the assignment lasts to more than 182 days and he will be expected to pay taxes only on the Indian income received so far. Remember that the foreign income of Rohit that is credited to an Indian bank account is taxable in India.
  • Living in a foreign country
    • Since 3 years Arjun moved to the US. They pay him in U.S. dollars. He has his money in India held in a savings account and FDs. He bought an apartment and rented it out for Rs.35,000 a month. He gifts a car to his parents and transfers Rs.10,000 to their account every month to assist with their household expenses throughout the year.
    • In order to cover the expense of the insurance policy he has purchased for his parents, he also transfers Rs 20,000 into his father’s account.

  • Arjun’s gift to his father and his mother’s money transfer of Rs 10,000 are exempt from tax. Regarding his parents’ insurance expenses, Rahul may claim a deduction of Rs 20,000 under Section 80D, because his father is over 65 years of age.
  • As his gross income exceeds Rs 2,50,000, he will be expected to file a tax return in India.
  • Resident Person recently relocated overseas:

On a new assignment, Sonu transfers to the US. In India, he gets his US income credited to an NRE account. He continues with his investments in FD and has some money put away in India in a savings account. He had just obtained Form 16 from his employer in India. Will he have his returns filed in India this year? NRI or not, whether their income exceeds Rs 2,50,000, every person has to file a tax return.

  • NRI Return back to India recently.
    • Returning NRIs assume the status of RNOR (Resident, Non-Ordinary Resident) when: a. In 9 of the 10 financial years previous to the year of your return, you were an NRI. b. In the last 7 financial years, you have stayed in India for 2 years or less (729 days or less)
    • The Income-tax Dept allows RNORs (Resident, Non-Ordinary Resident) to continue to benefit from exemptions made available to NRIs for a period of 2 years after their return.
    • Deposits kept in foreign currencies which are exempt from the NRI shall also be exempt from the repayment of NRIs for a period of 2 years. Returning NRIs are classified as resident individuals after 2 years.
  • A Global Income Citizen
    • Your global income is taxable in India if you are a citizen of Indian. This income may have been obtained or received outside of India, but in India it is taxed.
    • You can take advantage of DTAA (Double Tax Avoidance Agreement) if this income is also taxable in another country.
    • Remember to report it in your income tax return if you are a citizen and have received some income from overseas.
  1. How can Double Taxation Avoid by NRIs?

  • By seeking relief from DTAA between the two countries, NRIs may avoid double taxation (meaning: being taxed on the same income twice in the country of residence and in India).
  • There are two methods for seeking tax relief under DTAA: the form of exemption and the method of tax credit.
  • NRIs are taxed in only one nation by the exemption system and exempted in another. Tax relief can be claimed in the country of origin under the tax credit system, where income is taxed in both countries.
  1. How NRIs may claim Benefits under DTAA

The Double Tax Avoidance Agreement (DTAA) was amended as a measure to avoid this are as follows:

  1. Understanding DTAA
  • The Agreement on Double Tax Avoidance is a treaty signed by two nations.
  • The agreement is signed to make a country an attractive destination and to allow NRIs to get relief from several times having to pay taxes.
  • DTAA does not mean that the NRI can avoid taxation entirely, but it does mean that in both countries the NRI can avoid paying higher taxes.
  • The DTAA helps the NRI to reduce its tax effect on India’s revenue. The DTAA also decreases tax evasion cases.
  1. DTAA rates
  • DTAA, which India has signed with various countries, provides a particular rate at which tax is to be deducted on the income paid to the citizens of that country.
  • This means that the applicable TDS will be in line with the rates set out in the Double Tax Avoidance Agreement with that country when NRIs receive income in India.
  1. Types of income under DTAA

NRIs do not have to pay tax twice on the following income received from: Under the Double Tax Avoidance Arrangement.

  • provide services in India.
  • Salary collected in India.
  • House- based property in India.
  • Capital gains in India on the transfer of assets.
  • fixed deposits in India.
  • India’s savings bank account.

If income from these sources is taxable in the country of residence of the NRI, by taking advantage of the DTAA benefits, they can avoid paying taxes on it in India.

  1. DTAA methods

The advantage of DTAA can be exploited by two methods:

  • Tax credit: Tax relief can be claimed in the country of residence under this method.
  • Exemption: In each of the two countries, tax exemption under this method can be claimed.

In the DTTA with the resident country, the income on which an NRI can claim tax exemption/credit will be mentioned. For all countries, the DTAA provisions are not the same.

  1. Countries with whom India has a DTAA

With most major nations in which Indians live, India has signed a Double Tax Avoidance Agreement. There are some of these countries that are:

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

High Court issues bail to assessee accused of offenses punishable u/s 132(1)(a)

Hon’ble High Court(Gujarat ) issues regular bail to assessee accused of offenses punishable u/s 132(1)(a) of the CGST Act

Hon’ble HC(Gujarat), Idrish Yusufbhai Malvasi v. State of Gujarat & Ors to grant a periodic bail to the MD of M/s. Mishkat Agro Industries Private Limited., who was arrested on charges of wrongfully availing of tax exemption by misapplying and misinterpreting the notices of exemption notifications provided by the Dept by deliberately using the company’s brand name &  by willingly suppressing the fact/truth.

Facts:

Idrish Yusufbhai Malvasi (“Applicant/Assessor”) is MD of M/s. Mishkat Agro Industries Private Limited who has been arrested for offenses punishable under Section 132(1)(a) of the CGST Act, via order dated October 29th, 2020, passed by the Superintendent (Prev.), Central Goods & Service Tax & C. Excise (“Respondent No.2”), with the important claim that the tax exemption was incorrectly granted by misapplying and misinterpreting the notices of the exemption provided by the Dept by simply using the company’s brand name, on the goods and thus having them subject to Goods & Services Tax. This is also stated that the Claimant has deliberately withheld the truth in order to benefit from the zero-rate exemption/exempt supplies and thus prevented a large amount of Goods and services tax by wrongly invoking the advantage of Notification No. 2/2017-Central Tax (Rate) dated 28th June 2017, which can’t have been used in the light of Notification No. 1/2017-Central Tax dated 28th June 2017, as modified.

The Claimant filed a periodic bail in accordance with the above order issued by Respondent No. 2.

Issue:-

In relation to punishable offenses under Section 132(1)(a) of the Central Goods & Services Act, if regular bail could be issued to the Assessee?

Held:-

Hon’ble Gujarat HC, R/Criminal Misc. Application No. 18320 of 2020 agreed on 10th December 2020 to be observed & held as follows:

  • The Applicant took advantage of Notification No. 2/2017—Central Tax (Rate) dated 28th June 2017, following intimation by the Dept via Communication dated 22 September 2017, which was recognized by the Dept on 17th June 2020 to the impact that the name of the Company had been wrongly seen as a brand name & that the Company had agreed to forfeit its rights over the brand name. Consequently, the commodity produced and processed by the claimant is protected as exempted products. Already, the returns have been filed, which have also been audited.
  • Whether or not the licensed trademark was foregone & whether or not the Applicant deceived the authority will be a matter for adjudication. The claimant is stated to have deposited a total of INR 75,00,000/- in the process of the inquiry In view of the facts and circumstances of the case, the Court decided that it was reasonable to exercise judgment in support of the Applicant.
  • The Applicant is ordered to be released on normal parole in accordance with the order of 29 October 2020 passed by Respondent No. 2 on the execution of a personal bond of INR 15,000/-with a guarantee of the like amount, to the satisfaction of the trial court and subject to the conditions which it may impose;

(a) Do not place undue liberty or misuse liberty;

(b) not act in a way that is injurious to the interests of the prosecution;

(c) surrender of the passport, if there are any, to the district court within one week.

(d) cannot leave India without the prior authorization of the court concerned;

(e) furnish the current residence address to the Investigator as well as to the Court at the time of the implementation of the bond and would not change the residence without the specific authorization of the concerned trial court;

  • The Authorities are directed to comply with their own circular relating to the Coronavirus disease (COVID-19) pandemic and, then, to release the applicant only if it is not necessary for the time being in link with any other offense. If a violation of any of the above situations is committed, the Judge concerned shall be free to issue a warrant or to take the appropriate required step in the matter. The bail bond is to be implemented before the court which has jurisdiction to try the case

Relevant Provision: Section 132(1) (a) of the Central Goods & Services Act:

“Punishment for such offenses-

  1. (1) So whoever commits or induces any of the following crimes to commit and maintain the benefits arising from them, namely: –

(a) supply any goods or services, or both, without the issue of any invoice, in breach of the laws of this Act or of the rules laid down therein, with a purpose to escape tax;

would be punishable –

(i) in cases where the amount of illegal evasion of taxes or the amount of ITC incorrectly used or the refunds incorrectly taken exceeds 5,00,00,000 Rupees, with a period of Up to 5 years’ imprisonment and alongwith a fine;

(ii) in situations where the amount of tax escape or the amount of ITC incorrectly used or the amount of refund incorrectly imposed exceeds 200,00,000 Rs. but does not exceed  500,00,000 Rs., with imprisonment for a period of up to 3 years and a fine;

(iii) in the case of any other violation where the amount of tax eluded or the amount of ITC incorrectly used or the amount of refund incorrectly imposed exceeds 100,00,000 but does not exceed 200,00,000 Rs., with imprisonment for a period of one year and a fine;

(iv) In the case where the offense referred to in clause (f) or clause (g) or clause (j) is committed or abets, the person would be punished with imprisonment for a period which may be extended to 6 months or with a fine or along with both.”

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

IMPACTS OF GST E-INVOICING SYSTEM

IMPACTS OF E-INVOICING SYSTEM FOR BUSINESSES UNDER THE GST 

What is an electronic invoice?

E-Invoice is the platform for automatically reporting B2B (Business to Business) invoices to the GST system to make it easier to file monthly returns. Under the current system, invoices created by various accounting software used by different companies cannot be read by different software systems, nor by the GST network, which needs them to be manually translated into the new software again by means of data entry. The e-Invoice Platform is a uniform standard that is being implemented to allow all GST registered invoices to be formatted according to the same standard in the industry and to be automatically applied to all applications and platforms.

The documentation required for e-Invoicing and reporting to the Invoice Registration Portal (IRP):

  • The supplier’s credit notes,
  • Debit notes from retailer,
  • Invoices from suppliers
  • A specific mention should be disclosed under the statute, or any other necessary document, by a specific mention.

Workflow of invoice

  1. Interaction between supplier/seller with IRP & GST/E-Way Bill System

Step 1:

The invoice is created by the billing or accounting software of the Seller. This can be proprietary or third-

party software that is aligned with the Standard of GST e-Invoice requirements or those using the utility programme offered by EXCEL or GSTN. It needs to have the appropriate parameters/fields req. By the laws of the GST Council, if not the optional ones. And most significantly, to submit to the IRP, the seller’s programme must be able to create a JSON of the final invoice. JSON is a text format in which data between servers flows. You can later reconvert this text format to JAVA Script Objects. Only the JSON, not the entire invoice is uploaded.

Step 2:

An optional step that generates the Invoice Reference Number (IRN) (e.g. SHA256). The generation of IRN-Supplier GST Identification Number, Supplier Invoice Number and the financial year includes three parameters.

Step 3:

The seller uploads the JSON of the invoice along with the IRN (if generated) into the IRP. This can be done directly on the IRP or through GSPs-developed third-party applications (GST Suvidha Provider).

Step 4:

To ensure that the same invoice is not repeated in the system, the IRP will validate the hash on the uploaded JSON and check the hash from the Central Register of the Central Registry. The Invoice Data adds a signature and the IRP adds a QR code to the JSON. This will include the GSTN number of the seller and buyer, invoice number and date, number of line products, major product HSN classified by hash, weight, etc. For the e-Invoice, which is unique to each invoice, this hash provided by the IRP will become the final IRN (Invoice Reference Number). The uniqueness is kept by maintaining a record in a central repository of invoice hashes.

Step 5:

In the backend, the uploaded data is shared with the server maintained by the GSTN.

Step 6:

along with the QE Code, a digitally signed JSON with IRN is given back to the seller. Also, the registered invoice is sent to both the buyer and the seller by e-mail.

  1. Interaction between buyer with IRP & GST/E-Way Bill System

 Step 1:

The GST system and the E-Way Bill System share the JSON of the uploaded e-Invoice along with the IRN.

Stage 2:

Update of ANX – 1 and ANX 2 with the purchaser automatically by the GST method to evaluate the liability and the sum of the input tax credit.

Step 3:

Using this information, the E-Way bill system will create Part-A of the E-Way bill to which only the vehicle number should be attached in Part-B of the e-way bill.

Benefits of E-Invoice System for Businesses

There are many benefits of the E-Invoice System for Business are as follows:

  1. Better service is provided to the taxpayer

The process of generating invoices for GST will be self-regulated by E-Invoices. This will significantly speed up the task, cut prices, eliminate human error due to the need for manual data entry at every step.

Elimination of multiple formats by automating the reporting of B2B invoice data (purchase, sale, etc.) in the unified and native format in which it is generated. There is no need for different formats for the generation of GSTR 1 and e-way bills.

Sales and Purchase registered data are automatically generated from this so that the Return (RET 1) is pre-prepared and kept ready for filling. These details may also be used to initiate an e-way bill.

  1. Enhancing the business process

The format would become part of the company’s business process and practise. For companies who are already using accounting software, a single framework format across the industry can help the relationship between businesses and banks, auditors and investors, who can now access the data without first having to translate it to the format they use. In the case of small businesses that do not use computerised accounting software, the GST Council is courtesy of the Government. Provides free ERP and Accounting software to GST registered company to boost the Digital India Initiative.

  1. Save time & Cost control

With e-invoicing, the invoicing process is cut off by several unnecessary steps. Using online e-invoicing tools, both you and your client can save time. You may not have to pay for paper or for postage costs for paperless invoicing. In addition, you save work time by saving time with e-invoicing instead of using templates and emailing PDFs. Concentrate more on other things that add value and can save both time and cost.

  1. Reduction in input tax verification issues:

The input tax is the amount of tax already charged on the raw materials in the product (input) that must be deducted from the output product taxable amount. By-hand estimates in the filing of GST returns often lead to errors in the under or over-claiming of input tax credits. This results in the amount of deduction which an undertaking is entitled to in respect of the tax already paid on the commodity. Inadequate Input Tax Credit claims may lead to a significant loss for the company, as well as extra costs and difficulty fixing mistakes. An automated system can remove human mistakes and ensure that accurate input tax data is always entered.

  1. Reduction in input tax verification issues:

The input tax is the amount of tax already charged on the raw materials in the product (input) that must be deducted from the output product taxable amount. By-hand estimates in the filing of GST returns often lead to errors in the under or over-claiming of input tax credits. This results in the amount of deduction which an undertaking is entitled to in respect of the tax already paid on the commodity. Inadequate Input Tax Credit claims may lead to a significant loss for the company, as well as extra costs and difficulty fixing mistakes. An automated system can remove human mistakes and ensure that accurate input tax data is always entered.

  1. Administrative Efficiency

Before the e-Invoice system, several fake invoices were made, which will now be reviewed as the system is automated.

Timeline and Impact of Business Based on Turnover

The e-Invoice system is scheduled to be carried out on a volunteer basis from January 2020. The mandatory complexity of the programme will be gradually enforced in phases to bring the entire system acclimatised to the new level of software changes in its accounting standards and business practises. Initially, the scheme will be made compulsory for businesses over a specific turnover, on a voluntary basis for everyone else. After that, it will gradually become uniformly mandatory. It is important to keep in mind that small and medium-sized taxpayers (with an annual turnover below Rs 1.5 Crores) can make use of GSTN’s cost-free financial reporting and billing systems.

What Are The Standards Of E-Invoice?

There was a lack of a standard invoicing system on the market and the GST Council, in discussion with the ICAI (Institute of Chartered Accountants of India), the statutory body regulating the practice and profession of chartered accountants in India, introduced a new requirement with this invoicing system. This norm has been chosen as it takes into account the specifications of the statutory tax legislation and is also compliant with global business practices. The standard also enables the generation of multiple data fields that are not required to be reported under the GST regime. Businesses are free not to create and report such data if they choose or do not produce such data.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Basics of Remission of Duties & Taxes on Export Products Scheme (RoDTEP)

Remission of Duties & Taxes on Export Products Scheme (RoDTEP)

Introduction:

On 14 September 2019, the Government of India (GOI) announced the Remission of Duties and Taxes on Exported Goods (RoDTEP) scheme to replace the existing Merchandise Exports from India Scheme (MEIS) and establish a completely automated GST Input Tax Credit (ITC) path to nicely boost India’s exports. It was initially to be announced from April 2020 onwards, however, agreed to continue to allow the benefit until 31.12.2020 under MEIS & RoSCTL. Therefore, with effect from 1 January 2021, the value of the scheme on all export goods has been extended.

The scheme includes all industry sectors, including textiles. This scheme offers for the rebate of duties and taxes that were not earlier provided, such as local taxes, coal cessation, mandi duty, electricity duties, and transportation fuel. However, the rebate programme only allows for exports of goods, while the rebate for services would be covered under the current SEIS scheme (Service Export from India Scheme).

Key Features of Remission of Duties & Taxes on Export Products Scheme (RoDTEP) :

  • Tax/Duties/Levies Remission

The reimbursement of duties and taxes (like VAT, mandi fee,  and central fuel excise, etc.) imposed at central, state and local level is protected by RoDTEP and is not offered to refund by any other scheme. In addition, elements currently protected by the MEIS and RoSCTL schemes will be transferred to the scheme for RoDTEP.

  • An automated method for refunds

Reimbursement will be issued to exporters in line with Digital India in the form of transferable duty credits and electronic scripts that are maintained in a digital ledger.

  • Speedy clearance by digitalisation

A monitoring and audit system with a risk management system focused on information technology will be placed in order to physically check the exporters’ records. This will enable rapid digital platform clearance.

  • Scheme for all sectors

RoDTEP includes all sectors, including the textile industry. Furthermore, the sequence of implementation of the scheme across sectors, prioritisation of sectors and the degree of benefit to be provided to different products shall be determined by the dedicated committee.

Key benefits of Remission of Duties & Taxes on Export Products Scheme (RoDTEP) :

  • The RoDTEP scheme, being a WTO member and in accordance with WTO trade standards, will provide a seamless flow of government economic benefits.
  • Increasing competition in international markets would be introduced with guaranteed duty benefits by GOI.
  • Some taxes, like state taxes on energy, oil, water, and education, are not included in the existing schemes. Under RoDTEP, it is also stated that these taxes be included in the indicative list keeping the scheme exhaustive.
  • It will enable exporters to meet international standards and boost market growth by being more consistent and open with WTO standards.
  • Tax assessment for exporters has become fully automatic. Through an automatic refund route, companies can get access to faster GST refunds.

How to Claim the Benefits of Remission of Duties & Taxes on Export Products Scheme (RoDTEP)

in the present situation, users can log into their ICEGATE account & make a the RoDEP Credit Ledger A/c, as scrip creation provision will be made functional on the issuance corresponding notification by the department and availability of the budget. Implementation of the scheme in Custom Automated System has been developed.

  • The first aspect that an exporter needs to do is declare his intention to take benefit of the scheme on the shipping bill or export bill.
  • Customs will be processed once the EGM (Export General Manifesto) has been filled in.
  • Once a scroll with all individual shipping bills for the admissible sum was collected, it would be generated and made available at ICEGATE in the user account.
  • Under the Credit Ledger tab, users can build a RoDTEP credit ledger account. IECs who have registered with a DSC on ICEGATE may do this.
  • After selecting the relevant shipping bills, the exporter may log in to its account and generate a scrip.
  • In the bill of entries license table, the details of the scripts used for paying a fundamental custom duty will be registered.

Conclusion:

In the present Covid-19 Pandemic, where export growth is declining and industries are already facing uncertainty and decline, the government must support export-oriented industries so that they can survive. Only such incentives are available for Indian exporters to tap into the international market under the current RoDTEP scheme. The efficient and effective implementation of RoDTEP will greatly enhance the current expectations of the export industry which have been different.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CBDT: Section 271AAD- Penalty for False Entries and Fake Invoices

CBDT orders IT officers may charge a fraudulent entry penalty in the account book

Introduction

The background to the introduction of the penalty provision has been set out clearly in the Memorandum having to explain the provisions of the Finance Bill 2020 which are constructed as follows:

CBDT notified us of the penalty for false entry, etc. in account books defined under section 271AAD the Income Tax Act, 1961, which is effective from 9 April 2020. In accordance with the provisions of 271AAD, where it is stated during a proceeding that there is a false entry or omission of any entry performing for the avoidance of tax liability in the account books maintained by any individual, the assessing officer shall, by way of penalty, pay the amount equivalent to the aggregate of such false or missing entry.

  • Object

In the past years, since the introduction of Goods & Services Tax (GST), many instances of false claims of Input Tax Credit (ITC) have been caught by the GST authorities, the Explanatory Memorandum to the Finance Bill, 2020 reported. Fake invoices were shown by GST licensed suppliers to fraudulently claim ITC and reduce their GST liability in such cases. These invoices are provided by connectors who do not carry out any business or occupation. They just issue invoices without delivering products or services.

The GST on such invoices shown to have been charged is neither paid nor expected to be paid. Under the Act, such fraudulent arrangements deserve to be addressed with harsher provisions.

In order to prevent taxpayers from manipulating their books and claiming the incorrect input credit under GST, the penalty clause was added.

  • The penalty under what circumstances

A new provision has been implemented to provide for a penalty levy on an individual if it is identified during any proceeding under the Act that there is (i) a false entry in the account books held by that person or (ii) any entry relating to the calculation of that person’s total income has been omitted in order to escape tax liability.

The new section 271AAD was added to penalise the individual keeping account books if an entry related to the measurement of total income was false entered or omitted.

  • Under section 271AAD Quantum of Penalty

The penalty owed by the person concerned shall be equal to the cumulative sum of the false entries or omitted entries. It has also been provided that any other individual who in any manner induces or causes a person to make a false entry, or omits or causes any entry to be omitted, shall also pay a sum equal to the aggregate amount of any false entry or omitted entry by way of a penalty.

  • What are “false entries” for penalty consider under section 271AAD?

In the following paragraph 271AAD, what is incorrect is the video clarification. Include usage or plan to use false entries –

(a) fake or falsified documents such as a misleading invoice or a false documentary proof in general;

(b) invoice regarding supply or receiving, without or without actual provision or receipt of such goods or services or both, provided by the individual or by any other person;

(c) an invoice for the provision or receipt, to or from a non-existent individual, of goods or services.

Falsified or forged documents, fraudulent invoices, receipt of goods and services without real provision of, or receipt of, such goods or invoices using fake IDs would also be included in false entries. So we can extract the purpose or intention of false entries:

(i) false or forged material; (such as false or fake invoices)

(ii) invoiced on the provision and receipt of or without real provision or receipt of goods or services both

(iii) invoice for the delivery or receipt to or from a person who does not exist of goods or services;

However, it must influence the measurement of income to attract penalty provisions under Section 271AAD if entry into account books is omitted.

  • Anybody else who causes any false entry shall also be punished.

A penalty shall also be imposed on anyone else, in accordance with Section 271AAD(2), who causes the person forced to make or cause any false entry in, or omitting or omitting entries in, the account books to maintain the books or to cause any entry. Applicants, accountants or bookkeepers, consultants or advisors may be included for the purposes of this Section.

Key points regarding section 271AAD

a) Penalty can be issued if, in any proceeding under this Act, a false entry or any omission of entry to avoid tax liability is found in books of accounts held by a person.

(b) Penalty of how much: the sum of a sum equal to the amount of false entries or omitted entries a person must maintain a book of accounts. In that case, a penalty under Article 271AA

(d) may not be imposed for a person who is not required to keep books of accounts. A further question arises, whether a person who has not kept the account’s books but has not maintained books account may levy this penalty.

c) The power to impose the penalty is with Assessing Officer

e) “any person” shall be imposed by this Penalty.

Conclusion

From the above discussion, we can make out that accounting and bookkeeping need to be done by keeping the above points in mind. Proper reconciliation of books for the purpose of Income-tax as well as for the purpose of GST and the Returns filed (Income tax and GST Returns) is vital in order to avoid any inconvenience. Any negligence or error or mistake on the part of the assessee can expose him to the imposition of penalties under the Income-tax as well as GST. It is important to periodically check and make cross-verification of vendors as well as customers/ clients.

In relation to the repercussions under the GST legislation, the new penalities provision will have far-reaching consequences under the Income Tax Act. Information under the Income Tax Acts and the GST Acts is obligated to be exchanged, so the regulations of the GST Act are also relevant.

U/s 122 of the GST Act provides that, in addition to the tax avoided, a person is also subject to a penalty equivalent to the total of tax avoided. The provision for punishment of offences has been made pursuant to section 132 of the CGST Act.

Respective modifications were also made under the CGST ACT by way of the Finance Bill 2020. Section 122 of the CGST Sanctions Act has been modified to penalise the person who maintains the benefit of the transaction and in whose case the transaction is carried out. U/s 132 of the CGST Act on penalties for offences has been amended to ensure that anyone who commits or causes the offence to commit & retain the benefits resulting from the offences, is also subject to similar penalties. GST Registration under the GST laws may also be cancelled in the situations.

In simple terms, the law is further modified to give effect to the strict penalty and penalty provisions of the Income Tax Act and the GST Act for a person who commits an error or an offence, and for a person who causes, in any way, a person who has made or cause such false entries or causes him or her to fail to enter.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Overview of the GST New Rule 86B

Under GST new Rule 86B-: Restriction on Input Tax credit Utilisation in Electronic Credit Ledger

A new rule in CGST rules 2017 has been declared by the Central Government; rule 86B provides restrictions on the use of Input Tax Credit to release output liabilities. This regulation extends from 1 January 2021 onwards and has an overriding effect on other laws. It ensures that the registered individual cannot use the amount available in the credit ledger to pay the output tax liability in excess of 90% of that tax liability. If the amount of the taxable supply exceeds the exempted supply and the zero-rated supply, it exceeds 50 lakh rupees per month.

Prior to rule 86B, ITC utilization permitted

By avoiding the cascading impact of taxes, the ITC plays an important role in the GST. There have been several improvements in the order of use of ITC for various components such as CGST, SGST and IGST. However, to release the output tax liability, the ITC available in the electronic credit ledger can be fully utilized. The use of the ITC balance for payment of its production tax liability has been limited by new rule 86B.

Restrictions imposed according to rule 86B

Rule 86B restricts the use of the open ITC in the electronic credit ledger for the release of the liability for output tax. This rule has a negligible effect on all the other CGST laws.

Applicability

This rule extends to registered persons with a taxable supply value greater than Rs.50 lakh per month. Before filing each return, the limit has to be reviewed every month.

Imposed Restriction

On ITC, applicable registered individuals will not be responsible for more than 99% of the production tax liability. In other words, by using the input tax credit, more than % of the production tax liability cannot be released.

Exceptions to the law

  • In cases where the individuals mentioned below have deposited more than Rs. 1 lakh rupees as an income tax under the Income-tax Act 1961, payment of income tax of more than one lakh rupees will not be applicable.
  1. The individual who is registered
  2. The Owner, Karta or managing partner of a registered individual or of a registered person
  3. Either of the two spouses, full-time directors, members of the associations’ executive committee or the registered persons’ board of trustees, as the case may be.
  • If, in the preceding financial year, registered persons received a refund sum of more than one lakh rupee than the unused ITC input tax credit refund for zero-rated supplies of products or services or Rule 86B, it would not be applicable.
  • Applicability: This rule extends to registered persons with a taxable supply value greater than Rs.50 lakh per month. Before filing each return, the limit has to be reviewed every month.
  • Imposed Restriction: If a registered person is concerned, then a cumulative amount of the total production tax liability by electronic cash register has been discharged up to that month within that financial year. Therefore, the taxpayer must keep track of whether his cumulative discharge of the tax liability for output tax through the electronic cash ledger is more than 1% up to the month of filing of the return when filing the return for each month.

  • If one of the following is the registered individual under examination:
  1. Department of Government
  2. Undertaking in the public sector
  3. Local authority
  4. Statutory Authority

Impact of new 86B regulation

  • After analyzing the restrictions and exemptions set out in Rule 86B above, it is clear that the rule referred to above applies only to large taxpayers.
  • There will be no effect on micro and small enterprises, and it is specifically mentioned under this provision that this rule is intended to regulate the problem of fake invoices in order to use the input tax credit to discharge the liability.
  • Without possessing any financial reputation, it restricts fraudsters from displaying high turnovers.
  • The enforcement burden on taxpayers would be further increased by the limitations imposed by rule 86B.
  • Having complied with the above restrictions and derogations introduced by Rule 86B, it is clear that the above-mentioned rule applies only to large taxpayers. There will be no impact on micro and small enterprises. The motto behind the implementation of this rule is to control the issue of counterfeit invoices for the use of counterfeit input tax credits to discharge the liability. Furthermore, it constrains fraudsters from having high turnover without financial credibility.
  • In addition, CBIC has explained that 1% is to be calculated on the tax liability for the month and the turnover for the month in question.
  • Although this rule has also started to bring real taxpayers under the purview of making it difficult for them, the government’s motto is to avoid false invoicing and ultimately reduce tax evasion.

CBIC has, however, explained that 1% of tax liability is often unveiled for which refund is not permitted. The new law includes numerous exceptions such as exporters, inverted tariff structure suppliers, and taxpayers whose footprint is in the database on income tax.

This New GST rule on ITC might be created disputes for Honest Taxpayers.

A new amendment & several changes have been introduced under the GST plan via the 14th GST amendment rules 2020. The blog focuses on the essential rule added with regard to the ITC that will be implemented on 1/01/2021.

This latest rule has been implemented in 86B which shows that at least 1 percent of their output GST liability in cash is the division of the assessee to mandate discharge. Fake people are seeking to discharge the Complete GST liability through an Income Tax credit so avoiding cash payments. The fraudster can be tracked via this limit. Which has been Founded by lawmakers just because of the increase in daily fake invoicing spam. In this way, it would ensure the verification of unfaithful acts and the disclosure of revenue inside the Govt’s safe.

As a consequence of this required obligation to release Goods & Services Tax liabilities of no less than 1 Percent it is more difficult through cash during the Covid -19 lockdown period, below are the mentioned compliances for these procurements, which provide a different viewpoint. The amount of the taxable supply (Excluding exempt & Zero-rated) is less than INR 50,00,000/- Per month. As a result, smaller assessees will not include in this assent. The assessee or principal officers of him, such as MD, Full-time Director, etc., possess INR 1,00,000/- as income tax benefit under the Income Tax Act, 1961, in each of the last two Financial Years.

The fund that is not used shall be reimbursed by the assessee for those funds that are more than INR 1,00,000/- in the Past FY in respect of Zero Rated Supplies furnished, except any payment of tax or inverse duty structure. A Goods & Services Tax liability via the cash is paid by the assessee of 1 Percent of the output tax liability that is steadily being added to the tax period in the current  FY. The Assessee is a Govt.  Dept, a PSU, Municipal authority/statutory authority.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Expected Tax Relief in Budget 2021 on Medical expenses & insurance

Expected Tax relief in Budget 2021- on Medical Expenditure & Insurance

On February 1, 2021, the finance minister is scheduled to present a paperless Union budget and has her task cut out provided that the FY 2020-21 has been challenging and unprecedented for both the government and the common man. Although the government has made many attempts to provide relief by stimulus packages, this year is a bigger challenge, as the balancing act of controlling the burgeoning fiscal deficit and taxpayer expectations would have to be managed.

Some focus areas and planned improvements are set out as follows:

  1. Incentives from taxes to raise spending 

The government implemented a tax relief scheme if a person purchased goods or services during the period October 12, 2020 to March 31, 2021, instead of traveling. These goods and services should be subject to a GST of 12% or more and payments should be made in an electronic medium.

For non-central government employees, the deemed LTC fare (as this tax relief is called) is up to Rs 36,000 per person and the entity has to pay 3 times the deemed fare in order to benefit from tax exemption.

The Finance Minister is expected to be able to extend the LTC cash voucher scheme from March 2021 to FY 2021-22 in order to improve consumer demand in the economy. This is more so because it will take time to return to its flourishing avtaar for actual travel.

  1. Planning to expand the Section 80D – Deduction for premiums/expenses for medical insurance

Current tax laws allow individual taxpayers to receive a medical insurance premium tax credit for themselves and their families.

In view of the current situation, the common man expects the finance minister to liberalise section 80D provisions and extend its reach to include medical expenditure on COVID-19 or any other illness sustained by taxpayers, without restricting the age or availability of medical insurance.

In addition, under section 80D, the currently recommended limits (Rs 25,000 to Rs 100,000, depending primarily on the age of the person and the coverage of family members) are not in line with the possible cost that an individual may incur. It is a demand that the total limit be raised to represent the reality on the ground.

  1. Charge on long term capital gains

Equity markets are at an all-time high and have stabilised from the downturn at the start of the outbreak of COVID-19. There is a clear argument that long-term capital gains are not affected by the tax rate (earned from the sale of shares on a stock exchange platform or equity mutual funds). The government, however, may look to raise the rate of tax on such capital gains from the current 10 percent in order to obtain additional revenue. In addition, for taxpayers who own more than 2 properties, the tax rate on profits earned from the selling of home property can be raised.

The reform around the taxation of employee stock option profits – i.e. deferment of taxation to the event of selling of shares instead of taxation at the time of allotment of shares – is a long-running request that has maybe become more relevant in the last year. This will ensure more liquidity in individuals’ hands, especially with salary cuts replaced by stock options.

  1. Tax-deductible infrastructure bond re-introduction

There is also discussion regarding the potential for the government to reintroduce tax-deductible infrastructure bonds where taxpayers subscribing to bonds are entitled to claim the deduction (subject to certain limits) of such expenditure from their gross income.

It will serve the dual purpose of providing taxpayers with a tax benefit as well as the much-needed inflow to enhance the infrastructure sector for the nation.

  1. Estate duty/tax on inheritance

Another subject that is much debated is the implementation of estate duty or inheritance tax. Since 1985, when estate duty was abolished, the re-introduction controversy has emerged every now and then. However, due to the extreme effect of COVID 19 on individuals/businesses, such a levy is unlikely to be introduced in the current Union Budget.

There seems to be mention of imposing a tax or duty on high-end luxury goods, but considering that the surcharge rates were just raised in 2019 (making the highest tax rate 42.7 %), in terms of expectations vs. real income collections, this will again take a lot of thought.

The Finance Minister Nirmala Sitharaman has its job cut out – this year is harder than others and apart from taxes or other problems concerning the personal finances of an individual, there are several issues of discussion – e.g. the new labour codes where there will be a possible effect on the net take home. What we can perhaps say is that the probability of relief, cuts, and sops is not quite realistic with the fiscal deficit, but one can only predict – Feb 1 is going to be the day to look out for.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CBDT: Introduces The Faceless Penalty Scheme 2021

The Faceless Penalty Scheme 2021 introduces by Income Tax Department    

The Department of Income Tax presents The Faceless Penalty Scheme, 2021. On the date of its publication in the Official Gazette, it shall accept into force. In an additional step to significantly reduce the physical interface between taxpayers and tax authority, the income-tax dept has arrived out with a ‘faceless penalty scheme’. It is intended to enhance the faceless assessment scheme by managing penalty guidelines. As part of the tax reforms, the government introduced a faceless tax assessment scheme last year.

Scope of the Faceless Penalty Scheme.

The penalty shall be levied for the geographical region, persons or class of persons, income or class of income or cases or class of cases, or penalties or class of penalties defined by the Board, as provided for in this Scheme.

Faceless Penalty Centres.

The Board may create, for the purposes of this Scheme,

a National Faceless Penalty Centre to promote, in a centralised manner, the conduct of faceless penalty proceedings and to grant it the power to enforce penalties in compliance with the provisions of this Scheme;

Penalty units, as may be deemed appropriate, in order to facilitate the conduct of faceless penalty proceedings, to carry out the purpose of drawing up penalty orders, including identifying points or issues for the imposition of penalties under the Act, seeking information or clarification on points or issues so identified, providing the assessor or any other person with an opportunity to be heard, evaluating points or problems so identified.

Units for the penalty assessment to help in the conduct of faceless penalty proceedings, as it may find it appropriate to perform the functions for the revision of the draft penalty order, which include checks on the records of material facts, Whether in the Draft Order it was correctly integrated in the relevant points of fact and law, whether in the Draft Order the questions of which penalty should be imposed were discussed, the arithmetical correctness of the penalty computation review, if the relevant judicial decisions have been considered and discussed in the draught order, If any, and any other functions that may be needed for review purposes, and specify their respective jurisdiction.

(ii) Regional Faceless Penalty Centres shall, as the Regional Faceless Penalty Centres may deem appropriate, facilitate the conduct of faceless penalty proceedings with the competence to impose penalties in compliance with the provisions of this scheme.

Any interaction, as the case may be, between the penalty unit and the penalty review unit or the assessee or any other individual, or any income-tax authority or the National Faceless Assessment Centre, as to the information or records or facts or any other details required for the imposition of the penalty pursuant to this Scheme, shall be communicated by the National Faceless Penalty Centre.

The penalty unit and the penalty review unit shall be created by the following authorities:-

(a) Additional Commissioner or Additional Director or, where necessary, Joint Commissioner or Joint Director;

(b) Deputy Commissioner or Deputy Director or Assistant Director or Assistant Director or, where applicable, Incometax Officer;

(c) any other income tax authority, ministerial staff, executive or consultant, as the Board can find appropriate.

(4) The Board for the purposes of this Scheme, direct the National Faceless Assessment Centre, the    Regional Faceless Assessment Centre, the Assessment Unit and the Review Unit to operate as the National Faceless Penalty Centre, the Regional Faceless Assessment Centre, the Assessment Unit and the Review Unit for the purposes of this Scheme until the date on which the National Faceless Penalty Centre or Regional Faceless Penalty Centres, the Penalty Units or Penalty Review Units are formed.

 Penalty proceedings.—

The penalty shall be imposed under this Scheme in compliance with the following procedure in the case referred to in paragraph 3, namely:—

(i) Where, in a situation, every revenue-tax authority or the National Faceless Assessment Centre has, if

(a) the introduction of penalty proceedings and the issuance of a notice            of demonstration of cause for the imposition of a penalty; or

(b) The suggested initiation of a penalty proceeding shall refer the case             to  the National Faceless Penalty Centre in the manner stated in clause            (viii) of paragraph 12;

(ii) The National Faceless Penalty Centre shall allocate such a case to a particular penalty unit in any of the Regional Faceless Penalty Centres, where reference has been obtained in accordance with clause I by means of an automated allocation system;

(iii) if the initiation of penalty proceedings has been recommended in a case assigned to a penalty unit, that unit may determine, after reviewing the material available on record, to,

(a) comply with the recommendation and prepare a draft notice requesting, as the case may be, the assessee or any other person to prove why the penalty should not be imposed in compliance with the applicable provisions of the Act; or

(b) disagree, for reasons to be reported in writing, with the recommendation,and send the draught notice or the reasons, where necessary, to the National Faceless Penalty Centre;

(iv) on receipt of the drafted notice or reasons mentioned in paragraph (iii) of the Penalty Unit, the National Faceless Penalty Center shall —

(a) notify the assessee or any other person, as the case may be, of the show-cause, in accordance with the draught referred to in sub-clause (a) of clause (iii), specifying the date and time for filing the reply; or

(b) in the cases referred to in sub-clause (b) of clause (iii), do not initiate the penalty;

(v) if, while assigned to the Penalty Unit, a penalty proceeding has commenced, that unit shall prepare and forward such a draught notice to the National Faceless Penalty Centre. This will demonstrate why a penalty should not be imposed in compliance with the applicable provisions of the Act;

(vi) a notice of display shall be sent to the assesse or any other individual by a National Facless Penalty Centre, according to the draught of Clause (v), indicating, as the case may be, the date and time to send a response;

(vii) within the date and time stated accordingly, and the extended date and time as may be permitted on the basis of an order made in this name, an Assessee or any other person shall file an answer to that show-case correspondence referred to in sub-clause (a) of clause (iv) or clause (vi), with the National Faceless Penalty Center as may be required;

(viii) the National Faceless Penalty Center shall send a response to the penalty unit where a response from the assessee or any other individual may be lodged and notify the unit if such a reaction is not submitted;

(ix) the unit of penalty can submit an application to the national penalty centre for,

(a) the receipt by an income-tax authority or the National Faceless Evaluation Centre of additional information, documents or evidence;

(b) the provision by the assessee or any other person of any additional information, records or evidence;

(c) searching or performing verification of technical assistance;

(x) The National Faceless Penalty Center may send to the income-tax authority, or the National Faceless Assessment Centre, or the assessor, or any others as applicable any such information, document, and proof, as defined by a penalty unit, upon receipt of a request under sub-clause (a) or (b) of paragraph (ix) (ii), the required notice or requisition. (x) The National Faceless Penalty Center may send to the income-tax authority, or the National Faceless Assessment Centre, or the assessor, or any others as applicable any such information, document, and proof, as defined by a penalty unit, upon receipt of a request under sub-clause (a) or (b) of paragraph (ix) (ii), the required notice or requisition.

(xi) a notice or submission, as provided for under paragraph (x), or an extended date and time that could be granted on the basis of an application on that behalf, shall be provided to the National Faceless Center, by the income-tax authority, or the National Faceless Assessment Centre, or by an Assessee or any other person as the case may be;

(xii) the National Faceless Penalty Unit sends such a request to the National Faceless Assessment Center specifying the date and time for sending a report when a request for certain enquiries or verifications is made for or requiring technical assistance from the penalty unit;

(xiii) the National Faceless Center shall send such response to the penalty unit if a response to the correspondence provided for under clause (x) is filed by the income-tax authority or a National Faceless Assessment Center or the assassee, or any other individual, as the case may be.

(xiv) the National Faceless Penalty Centre shall send the report to the penalty unit in response to the request referred to in paragraph (xii) and notify the penalty unit, where no such report is received;

(xv) after considering record content, including response, if any, provided for in (viii) and (xiii) paragraphs, or reports as referred by paragraph (xiv), the penalty unit is to propose,

(a) enforcing a penalty and drafting an order in respect of such a penalty imposition;

(b) no penalty taxes,

For the reasons to be written down and sent to the National Faceless Penalty Center along with certain draught orders or grounds, as the case may be;

(xvi) in accordance with the risk management strategy defined by the Board, including by way of an automated examination method, as referred to in clause (xv), the National Faceless Penalty Center shall review the proposal, where it may decide, –

(a) in the event that the penalty imposition has been proposed, the penalty order is passed and copy it to the assessee or any other person as the case may be in compliance with the provisions of sub-clause (a) of paragraph (xv),

(b) not impose the penalty on an assessee or any other person, as the case may be, in the event of a suggestion that no penalty be imposed;

(c) to assign, through an automated assignment system, the case for revising the proposal to a penalty review unit at each of the Regional Façeless Penalty Centres;

(xvii) for reasons to be reported in writing and to be intimate to the national faceless penalty centre, the penalty review unit may revise the proposed penalty unit as referred to in clause (xv) where it may agree with or propose a modification of such proposal;

(xviii) the National Faceless Penalty Centre shall apply the procedure referred to in (a) or paragraph (b) of sub-clause xvi where the penalty evaluation unit complies with the proposal of the penalty unit; (xviii);

(xix) the National Faceless Penalty Center shall assign the case in a Regional Faceless Penalty Center through an automated allocation system, where the unit implies that the proposal is to be amended under subclause (a) or subclause (b) of clause (xv), rather than the penalty unit referenced in clause (xv). (xix)

(xx) if, after consideration of the material in record including recommendations for changes and reasons reported by the penalty review unit, the case is allocated to a unit of penalty referred to in paragraph (xix), such penalty unit;

(xxi) the National Faceless Penalty Center shall pass a penalty order under that draft on receipt of a modified draft order from the penalty unit as referred to in clause(xx), and shall provide the assessor or other person with copies of it or shall not impose penalties on him/her, as the case may be;

(xxii) If in the case of a copy of an order, or the reasons for not initiating or imposing a penalty on the income tax authority, specified in paragraph (i), or on the National Faceless Assessment Centre, as the case may be, in paragraphs (a) or (b) in subsection I the National Faceless Penalty Centre has passed an order, or has not initiated or imposed a penalty.

Where applicable, the Principal Chief Commissioner, or Senior Managing Director for the National Faceless Penalty Center, may move the proceedings to the tax authorities or to the National Facless Assessment Center with jurisdiction over the assessee or to any other group, regardless of anything set out in the subparagraph (1) (1), at any time of penalty proceedings.

Procedures for Rectification  –

(1) The National Faceless Penalty Centre can, through a written order to be given, amend any order passed under this Scheme in order to rectify any apparent error reported.

(2) The request may be filed with the National Faceless Penalty Centre, subject to other provisions of this Scheme, for the rectification of an error, as referred to in sub-paragraph (1),

(a) The assesse or, where applicable, any other person;

(b) The unit of penalty planning the order; (b)

(c) A review unit of penalties that has updated the order;

(d) The authority for income tax;

(e) National Center for Faceless Assessment

(3) In the instance where an application is received by the national-facing penalty centre as provided for in subparagraph (2), the application shall be allocated via an automated allotment system to a special penalty unit in one of the regional facing penalty centres.

(4) The penalty unit shall examine the request and prepare an opportunity notice,

(a), if the application was submitted by the authorities under clauses (b) or (c), or (d), or (e), of subparagraph (2); or (a) by the assessee or any other person, as the case may be;

(b) where the application has been made by an assessment officer or some other person as the case may be, and to the authorities referred to in subparagraph (b) or (c) or (e) of sub-paragraph (2), Send the message to the Penalty Center National Faceless.

(5). In order to determine the grounds why error correction should not be carried out under the applicable Act provisions, setting a date and time, the National Faceless Penalty Center shall, in its proposal under subparagraph (4), inform the assessor or any other person where appropriate, or the authorities referred to in subparagraph (b), (b) or (c) or (e) of paragraph (2).

(6) The reply to the Show Cause Notice referred to in paragraph (5) shall be furnished to the National Faceless Penalty Centre within a prescribed date and time or such extended time as may be permitted on the basis of a request submitted on that behalf.

(7) Where a response, as referred to in sub-paragraph (6), is filed, the National Faceless Penalty Centre shall send such response to the penalty unit, or where no such response is filed, inform the penalty unit.

(8) The penalty unit shall, after taking into consideration the response, if any, referred to in sub-paragraph (7), prepare a draft order,––

(a) for rectification of the mistake; or

(b)or denial of the request for correction, citing the reasons for that request,

And give the order to the Centre for the National Faceless Penalty.

(9) The National Faceless Penalty Centre shall upon receipt of the draft order, as referred to in sub paragraph (8), pass an order as per such draft and communicate such order to, –

(a) the assessee or any other person, as the case, may be; and

(b)for such action as may be needed under the Act, the National Faceless Assessment Centre or the income tax authority with jurisdiction over the event.

Appellate Proceedings.

An application against a penalty order made under this Scheme by the National Faceless Penalty Centre shall be brought before the Commissioner (Appeals) having jurisdiction over the competent income-tax authority or, as the case may be, before the National Faceless Appeal Centre; and any reference to the Commissioner (Appeals) in any correspondence from the National Faceless Penalty Centre shall mean that success

Communication exchange exclusively through electronic mode.

(1) For the purposes of this Scheme,—

(a) all interactions shall be exchanged exclusively by electronic means between the National Faceless Penalty Centre and the assessee or any other individual, as the case may be, or his designated representative; and

(b) all internal correspondence shall be shared exclusively through electronic mode between the National Faceless Penalty Centre, the National Faceless Assessment Centre, the Regional Faceless Penalty Centres, any income-tax authority, the penalty unit.

Electronic record authentication.—

An electronic record is authenticated by the,—for the purposes of this Scheme.

(i) The National Faceless Penalty Center, with its digital signature affixed to it;

(ii) the assessor or any other person, by affixing his or her digital signature, where he or she is required to return his or her income under a digital signature pursuant to the Rules, and, in any other case, by affixing his or her digital signature or electronic verification code.

Explanation. – The definition of the “electronic verification code” for the purposes of this paragraph shall be the same as that provided for in Rule 12 of the Law.

Electronic record delivery.—

(1) Any notice or order or other electronic communication under this Scheme shall be provided by way of,—by the addressee, being the assessee or any other individual,

(a) putting an authenticated copy of it in the registered account of the assessee or any other person, as the case may be; or

(b) sending an authenticated copy thereof to the registered email address of the assessee or any other person, as the case may be, or his designated representative; or to the registered email address of the assessee or any other person, as the case may be;

(c) upload an authenticated copy, as the case may be, to the Mobile App of the assessee or any other user, and

(2) Any notice or order or other digital means under this Scheme shall be sent to the addressee, being any other individual, by sending an authenticated copy thereof to that person’s registered email address, accompanied by a real-time notification.

(3) An assessee or any other person, as the case may be, shall send his or her reaction to any notice or order or to any other electronic communication under this Scheme via his or her registered account, and the reply shall be deemed to be authenticated once an acknowledgement is sent by the National Faceless Penalty Centre containing the hash result produced upon successful submission of the reply.

(4) In compliance with the provisions of section 13 of the Information Technology Act, 2000, the time and place of dispatch and receipt of electronic records shall be determined (21 of 2000).

No personal presence in the Centres or Units.-

No Individual Appearances: The assessee shall not be permitted to appear either individually or through an authorised representative in link with any proceedings under this Scheme before the revenue-tax authority of the National Faceless Penalty Center or the Regional Faceless Penalty Center or the Sanctions Unit or the Sanctions Review Unit set up under this Scheme. Fortunately, the assessee, his authorised representative, may request a providing personal in order to make oral submissions or to present his case to the penalty unit within this scheme.

(1) A individual shall not be required to appear before the income-tax authority of the National Faceless Penalty Centre or Regional Faceless Penalty Centre or penalty unit or penalty review unit formed under this Scheme either directly or through an appointed representative in connection with any proceedings under this Scheme.

(2) An assessee or any other individual, as the situation may be, or an appointed representative of the assessee, may request a personal hearing in order to make oral submissions or to bring his case before the penalty unit under this scheme.

(3) An application for a personal hearing, as referred to in sub-paragraph (2), may be authorised by the Chief Commissioner or the Director-General in charge of the Regional Faceless Penalty Centre under which the penalty unit concerned is created, if he is of the opinion that the application is protected by the circumstances set out in paragraph 12 of clause (ix).

(4) Where if the request for a context of person has been authorised by the Chief Commissioner or the Director-General in charge of the Regional Faceless Penalty Centre, the hearing shall be conducted exclusively by means of video conferencing, including the use, in accordance with the procedure laid down by the Board, of any telecommunications application software enabling video telephony;

(5) The Commission shall organised appropriate video conferencing equipment, including telecommunications application software, to facilitate video telephony at such locations as may be required in order to ensure that the assessee, or his approved representative, or any other person, is not denied the benefit of this Scheme solely on the ground that the assessee, or his authorised representative, or any other person is not denied the benefit of this Scheme solely on the ground that the assessee, or his authorised representative, or the assessee, or his authorised representative is denied the benefit of this Scheme.

Power to determine format, mode, procedure and processes.

The National Faceless Penalty Centre, the Regional Faceless Penalty Centre, the standards, procedures and procedures for the effective functioning of the National Faceless Penalty Centre, the Regional Faceless Penalty Centre, the penalty unit and the penalty re re re penalty shall be formed with the approval of the Board by the Principal Chief Commissioner or the Principal Director Commanding general of the National Faceless Penalty Centre

(i) the note, order or some other message to be served;

(ii) receipt, in response to a notice, order or any other correspondence, of any information or documents from the person;

(iii) question of acceptance of the person’s response;

(iv) the provision of e-procedures, including the login account facility, the monitoring of the status of the penalty proceedings, the display of relevant information and the download facility;

(v) access to, check and authenticate the details and respond, including the documents submitted during the penalty proceedings;

(vi) the centralised receipt, storage, and retrieval of information or documents;

(vii) in the respective centres and divisions, the general administration and grievance redress mechanism;

The Faceless Penalty Scheme 2021

In addition, the new system ensures that all communications between the units and the assesses are conducted in digital format via e-mail. or mobile apps, while physical hearing is permitted only with the approval of CBDT.

In the case of appeals, the assessee may approach the Commissioner responsible for appeals or the national faceless appeal center.

The new faceless tax regime follows last year’s launch of faceless assessment and faceless appeals. So far more than 58,000 cases described for faceless assessment during the first phase have been finalised in more than 24,700 cases.

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