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.

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)

How to check the status of TAN Application

How to check the status of TAN Application on the TIN NSDL Portal

www.carajput.com; TAN Application

www.carajput.com; TDS

You monitor the status of the TAN Application on the TIN NSDL Website

The Payer / Deductor can use the 14-digit acknowledgment number to check the TAN status of the TIN NSDL. The status of the TAN application represents the status of the TAN application after 3 days of submission of the TAN application.

There are three ways to interpret the TIN NSDL position:

www.carajput.com; TAN Status

www.carajput.com; TAN Status

  1. Using the NSDL TIN track status facility,
  2. Calling the TIN-FC Call Center,
  3. By sending a Text message to the NSDL number of the TIN.

How do I know the status of my TAN application?

Following Steps to be followed for viewing TAN Application status on TIN NSDL Portal. You have to take the procedures below.

Step 1:  Visit the NSDL-TIN website.

Select the “TAN” link from the “Services” drop-down list on the TIN-NSDL Portal screen.

Pick “Know Status of Your Application”

www.carajput.com; TAN Application

www.carajput.com; TAN Application

Step 2:  Select “Know Status of Your Application” from the “TAN” segment. TIN-NSDL-Track TAN Status Link.

www.carajput.com; TAN Application

www.carajput.com; TAN Application

Step 3:  Select the option “TAN – New / Change Request” from the drop-down list “Application Form”

Insert the 14-digit acknowledgment number in the chosen fields. TIN-NSDL-Track your TAN position

www.carajput.com; TAN Application

www.carajput.com; TAN Application

Step 4:  Press on the option “Submit”

Before sending, enter the captcha code from the given image.

Thus, when you click on the “Send” button, the Position of your TAN will be shown.

TAN STATUS ONLINE

  • Generally, it takes 5 to 10 days to obtain your TAN after an application has been submitted. Often, due to inadequate documentation, it can be postponed. Learn how to check your TAN status online at the tin-nsdl portal. The progress check will allow you to know if your TAN application has been postponed for some reason.
  • The revenue tax agency provides online facilities to TAN and PAN holders. Users may apply for a PAN card or a TAN number online. Learn how to monitor the status of TAN applications online in just a minute. We’ve shown here how to monitor the progress of TAN after submitting.

 Contact NSDL in Case of any Further Information

In case you need more information, you can contact NSDL at the following sources:

Call PAN/TDS Call Centre at 020 – 27218080; Fax: 020 – 27218081

e-mail us at tininfo@nsdl.co.in

SMS NSDLTAN <space> Acknowledgement No. & send to 57575 to obtain application status

What is the NSDL TAN ADDRESS?

If you have not made a payment online, sign this acknowledgment and return it with a check or DD. A DD or check should be made payable to Mumbai for the benefit of NSDL – TIN. Send it to the NSDL address given below:

  • Write to: NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune-411016

Remember to superscribe this envelope as ‘TAN APPLICATION – (note your acknowledgment number)’

If you have paid online, just send the receipt of the confirmation. Please ensure that it reaches NSDL, Pune, within 15 days from the date of the online application. Your TAN application will be processed upon receipt of payment and acknowledgment.

What is the process to know your TAN Jurisdiction building?

To know the name of the TAN jurisdiction building, follow the following steps:

  • In the first place, visit www.incometaxindia.gov.in.
  • Now, under the ‘Important Ties’ tab, select ‘Jurisdiction.’
  • Next, pick your state.
  • You are now being routed to a PDF file. Find the name of the TAN jurisdiction building in the table.

TIN Support Desk
NSDL (National Securities Depository Limited)
Trade World, ‘A’ Wing, 4th floor; Kamala Mills Compound
Senapati Bapat Marg; Lower Parel; Mumbai – 400 013

How to File an Application for Cancellation of TAN?

Process of cancellation of surrendering Multiple TAN

Complete coverage about TAN

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)

Complete Overview of Tax Residency Certificate (TRC)

What is the Tax Residency Certificate (TRC)?

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www.carajput.com; Tax Residency Certificate

With effect from 1st April 2013, A person residents of India who receive income from countries with whom India has a Double Taxation Avoidance Agreement can acquire a tax residence certificate from the Department of Income Tax. The same can be sent to the payer for the Double Taxation Avoidance Agreement benefit. Double Taxation Avoidance Agreement can acquire a tax residence certificate from the Income Tax Department. The same can be sent to the payer for the DTAA benefit.

The government has now issued notification No. NOTIFICATION No 39/2012, DATED 17-9-2012, published the following forms, which shall apply w.e.f 1st April 2013 and onwards:-

  • FORM No. 10FA – Filling an Application for a Certificate of Residency according to Sections 90 & 90A of the IT Act, 1961
  • FORM No. 10FB – Get the TRC for the purposes of Sections 90 and 90A of the IT Act 1961,

In order to receive a certificate of residency for the purposes of the arrangement referred to in Section 90 and Section 90A, the assessee, being a resident of India, shall make an application to the assessing officer in Form No. 10FA.

The AO shall, upon receipt of the application referred to in sub-rule (3) and fulfilled in that regard, grant the certificate of residency for the assessee in Form No. 10FB.

Kind of Abroad income to which the Double Taxation Avoidance Agreement applies: 

Here are the various kinds of foreign income that DTAA refers to:

  1. Income from Interest on FD
  2. capital gains on the selling of property
  3. Lease of assets
  4. Salary-Income from India is to be filed in form 1040 of the tax return. If you receive a tax credit, please fill out Form 1116. or  Income from Salary earned in foreign countries
  5. Agricultural revenue
  6. Share and mutual fund dividends
  7. Any income earned for freelance or consultancy work in India
  8. Interest in bank deposits, as well as other securities held in India and Income, earned as Interest on Savings bank Account
  9. Income from Capital income gained in foreign countries

Tax Residency Certificate for claiming relief under an agreement referred to in sections 90 and 90A is specified under rule 21AB of the Income Tax Rules.

Tax Residency Certificate needed to be acquired by non-residents: the new law specified that the TRC should be acquired by a non-resident from the Government of the country or designated territory of which he/she is resident and should include the following information:

  • Name of the taxpayer.
  • The status of the assessee (individual, corporation, firm, etc.)
  • Citizenship (in the case of individuals)
  • Country or designated territory of incorporation or registration;
  • The tax identification number of the assessor in the country or designated territory of residence or, in the event that such number does not exist, the specific number on the basis of which the person is known by the Government of the country or designated territory of residence.
  • Residential status for tax purposes as specified in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, is applicable;
  • The period of validity of the certificate
  • Address of the assessee for the period of validity of the certificate

Steps/Process to be followed to acquire Tax Resident Certificate (TRC) in India

In this situation, a completely manual procedure is implemented.

You can need to visit the Office of the Assessing Officer (AO) at least 2-3 times.[Rule 21AB]

Step 1: Find your appraisal officer online via the e-filling website by entering the PAN and the registered mobile number. [Left corner of the page under the Quick Link tab]

Step 2:

  • Create a document describing your travel in and out of India with a stamped passport.
  • In the circumstance of an electronic check-in or check-out via smart gates, and air ticket should be saved to clarify to the Evaluating Officer. [Happens primarily in the UAE]
  • Add days in a foreign land and make your stay in Indian soil transparent for the remaining number of days in the financial year.

    www.carajput.com; TRC

    www.carajput.com; TRC

Step 3:

  • Download Form 10FA and send the completed form to the appraisal officer (AO).
  • It is clear that the object of the tax resident certificate is revealed. Example: to subtract the sum of the tax withheld from the income earned abroad. [Form 10FA of paragraph (x) of 2]
  • Attach a copy of the passport and display all the arrival and departure stamps as shown in step 2.

 Step 4:

  • The Assessing Officer (AO) may ask you to visit his office to discuss your application.
  • The satisfaction of the Assessing Officer is required to receive the Tax Resident Certificate (TRC).
  • Upon being assured, TRC will be provided in Form 10FB.

Tax Residency Certificate required to be obtained by residents of India:

A resident taxpayer can send an application to the Assessing Officer (‘AO’) in Form 10FA to acquire a TRC in India. According to the provisions of sub-rule (2), for the purposes of  Section 90(5) and Section 90A(5), the following details shall be given by the assessee in Form No. 10FB:—

  • The status of the assessee (individual, corporation, firm, etc.)
  • Name of the assessee (taxpayer)
  • E-mail Address
  • Permanent Account Number / Tax Deduction Account Number (where applicable)
  • Citizenship (in the case of individuals)
  • The basis on which the status of resident in India is asserted
  • Purpose to receive the Tax Residency Certificate
  • The period of validity of the certificate
  • Address of the assessee for the period of validity of the certificate
  • Some more information

The application form, along with supporting documentation, must be sent to the Assessing Officer. The New Rule specifies that, upon receipt of the application and on the fulfillment of the particulars found therein as in sub-rule(3), the Assessing Officer shall grant the Tax Residency Certificate to the resident taxpayer in Form 10FB.

How to get the Form 10FB Indian Tax Resident Certificate-

Impacts/ advantages of the Tax Residency Certificate:

  • In order to prevent foreign tax deductions, all Indian residents are expected to apply a resident tax certificate to their foreign tax authorities.
  • Indian citizenship is not applicable to this certificate. This can also be acquired by a foreign national such that he fulfills the required requirements.
  • The specified format would make it possible for international residents to know in advance what is appropriate to receive tax credits. This would speed up the whole payment process.
  • The Tax Residency Certificate provision gives the tax authorities the right to test the tax beneficiary under these treaties.
  • In this post, we will discuss different aspects of the tax-resident certificate and the process by which it may be issued.
  • Save the tax!

How to get TAX Relief through TRC

TRC & TIN are required to claim exemption from higher withholding tax

  • Tax Residency Certificate and Tax Identification Number to demand exemption from higher TDS (for those who do not have PAN) u/s 206AA of the I Tax Act
  • CBDT brings additional Rule 37BC providing for information to be provided by a non-resident payee for relief from tax deduction at a higher percentage u/s 206AA of the I Tax Act
  • Latest Rules specifies that a non-resident deductee is not subject to the high tax on payments of ROYALTY, INTEREST, Charge FOR TECHNICAL SERVICES AND TRANSFER OF CAPITAL ASSETS,
  • In addition, it was stated that in the case of a deductee protected by current Rules 37BC, “PAN NOT AVAILABLE” should be indicated in Form 27Q when filing the TDS return.

What happens when non-residents do not have Tax Residency Certificate?

TRC from a non-resident or a foreign person for the purpose of getting advantages the DTAA/tax treaty

In cases where non-residents must provide Tax Residency Certificate or delays occur, the paying entity can withhold taxes at higher rates instead of applying the beneficial provisions of the Treaty. In that scenario, a non-resident will have to apply for refunds in India by filing his Income-tax Returns.

Even in cases of net financial dealings where the tax is paid by the Indian individual, they will have to look for consideration of those specifications.

Few Basic Question and Answer on TRC

S. No. Questions answers.
i if in addition to the tax residence certificate, the development of other fair proof is required for proper compliance with the residence test Yes
ii if the creation of other reasonable facts, even without a tax residence certificate, providing proof of residence of the payer would make the payer liable for the benefit of the Treaty? Yes
iii Does this indicate that the Tax Residency Certificate is just one of the proofs, but not definitive proof of the residence of the payer? Yes
iv if the tax residence certificate of the payer U/S 90(4) is a necessary condition for the payer to be qualified for the benefit of the Treaty? No
v Whether the generation of the Tax Residency Certificate by the payer alone is appropriate No

To reach the conclusion:

therefore before paying to non-residents or foreign organizations, it is compulsory to the corresponding non-residents for a tax residence certificate in order to benefit from the tax treaties. Besides that, instead of asking for the specified details in the Tax Residency Certificate itself, the government can now apply for the same data independently by other information and documents. This is a good development as investors from some countries have been faced with a problem because their governments have declined to change the Tax Residency Certificate format simply to fulfill the standards of the Indian Government. International investors are and will continue to be an important part of Indian markets. Steps must be taken to ensure that the flow of FDI continues to rise in India.

For complete solution and find out the complete answer of the following question you may contact us on 9555 5555 480

  • Whom to apply for Tax Residency Certificate and How to apply for Tax Residency Certificate?
  • Is there any form of application?
  • Is there any time limit for the issue of a Tax Residency Certificate?
  • This content is for annual members only.

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)

QUICK OVERVIEW ON INCOME TAX DEDUCTION U/S 80C-80U

INCOME TAX DEDUCTION UNDER SECTION80C-80U TO INDIVIDUALS, HUF

Income Tax Deduction

The income Tax deduction is a decrease in tax liability from the gross taxable income. Tax deductions are reduced from total income, also known as adjusted gross income. As per the provision of the income tax act, 1961 the amount of tax deductions varies as per different earnings are handled accordingly. An additional deduction of Rs. 1, 50,000 for home loan interest is given for the purchasing of affordable houses of up to Rs.45,00,000 for the current year ended on March 2020.

Section 80C

Section 80C is by far the most commonly used choice for income tax savings. In this case, a person or a HUF (Hindu Undivided Families) who invests or spends on fixed tax-saving schemes can claim a tax deduction of up to Rs. 1.5 lakh. With effect from 1st April 2016, the income tax abolished section 88 and introduced the new Section 80C in this place. This section analyzed the payment made under this provision. Eligible taxpayers are entitled to require gross deductions of up to Rs. 1,50,000 per year. The Indian Government also supports some of them as tax saving instruments (PPF, NPS, etc.) to enable individuals to save and accumulate in retirement. Spendings/investment u / s 80C is not approved as a deduction from profits resulting from capital gains. This ensures that if the individual’s income consists of capital gains on its own, Section 80C can not be used for the purposes of saving tax. Any of the investments mentioned below are eligible for exemption under Section 80C, 80CCC, and 80CCD(1) up to a limit of Rs 1.5 lakh. All the individuals and Hindu undivided families are eligible for deduction under section 80C of the income tax act, 1961.

Best Section 80C instruments Which can reduce your tax Burden  

 

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www.carajput.com; Income Tax Deduction

The following investments and expenditures are included in this section:

Tax Saving Investment Options under section 80C

80C Investment Option Lock-In Period Return Risk Taxability
PPF 15 Years 7.9% Risk-Free Interest: Exempt Withdrawal: Exempt
SSY 21 Years 8.4% Risk-Free Interest: Exempt Withdrawal: Exempt
ELSS 3 Years 10-15% (approx) Risky Dividend is exempt
FD 5 Years 7-8% (approx) Risk-Free Interest is taxable
NSC 5 Years 7.9% Risk-Free Interest is taxable
SCSS 5 Years 8.6% Risk-Free Interest is Taxable
ULIP 5 Years 8-10% (approx) Risky Returns are taxfree subject to certain conditions taxable
NPS Till Retirement 8-10% (approx) Risk Return: Partially exempt
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www.carajput.com; Income Tax Deduction

  • Investment in Public Provident Fund: You will claim a deduction for Rs. 1,50,000 per year for contributions made in the Public Provident Fund account. Receipts are tax-free on maturity and withdrawal.
  • Investment in National Savings Certificate: under section 80C, the National Savings Certificate is liable for deductions in the year of acquisition. Interest earned on such certificates is liable for tax deductions, but it becomes taxable at the date of retirement.
  • Fixed deposit investment: According to section 80C, interest received on fixed deposits for a period of not less than five years is eligible for a tax deduction. Tax-exemption on interest earnings on deposits with banks has been raised from 10,000 to 50,000 only for senior citizens. In addition, under section 194A, TDS is not required to be excluded and it has been applied to both FD and RD schemes.
  • The premium on a Life insurance policy: As per section 80C of the income tax act, 1961, You will claim a refund for the premium charged for a life insurance policy.
  • Contribution to Employee Provident Fund: You will demand a tax exemption for the payment made under section 80C to the Employee Provident Fund. The government will contribute 12% of the EPF contribution to new workers (with less than 3 years of employment) in all sectors. In contrast to the contribution made 12 percent earlier, for new women employers (with less than 3 years of employment) contribute just 8 percent of the wage as an EPF contribution.
  • Equity-oriented mutual funds: A tax-deductible can be claimed on contributions made in any mutual fund unit, whether or not it is listed on the stock exchange.
  • Repayment of the principal on the housing loan: You will demand a tax deduction under section 80C for the principal amount charged on the home loan.
  • Payments of Tuition fees: You can demand a tax deduction for the tuition fees charged under section 80C. The deduction for each individual is available for 2 children. Thus, a deduction can be requested for up to 4 children, 2 for each parent.

ADDITIONAL DEDUCTION CAN BE CLAIMS NOT COVERED U/S 80C

Section 80CCC and 80CCD : Tax deductions U/s 80CCC and 80CCD for investments in pension fund

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www.carajput.com; Income Tax Deduction

 For the contribution made in Pension Funds, you can claim a tax deduction under Section 80CCC and 80CCD. If you have contributed any amount to earn a pension under any insurance plan, then you will demand a tax exemption under 80CCC. Even so, if you have paid up to 10 percent of your income to any pension fund launched by the Govt, such as the National Pension Scheme, then you can claim a tax deduction U/s 80CCD.

Note: According to the Income-tax act, 1961, a Total deduction that can be demanded under Sections 80C, 80CCC and 80CCD is Rs. 1, 50,000. Under section 80CCD, an exclusive tax advantage is available for NPS subscribers. As per the Income-tax act, 1961, Tier 1 account holders earn an extra savings allowance of up to Rs.50, 000 in NPS. This Tax deductions under Section 80CCC and 80CCD is over and above the deduction applicable U/s 80C i.e of Rs. 1, 50,000.

Section 80TTA: Interest on savings accounts

Under Section 80TTA, you will demand a tax deduction on interest received on a savings bank account. A maximum amount of Rs.10,000/- is entitled to the deduction. The income received will first be added under the head of income other sources, only after that, the deduction will be asserted.

Section 80CCF: Investment made in long-term infrastructure bonds

Under section 80CCF, you can claim a tax exemption on an investment made in government-notified long-term infrastructure bonds. An overall deduction of up to around Rs. 20,000 can be claimed.

Section 80CCG: Investment made in equity saving scheme

The deduction is also known as the Rajiv Gandhi Equity Saving Scheme. For an investment made in listed shares or mutual funds, you will demand a tax deduction. The amount of deduction is 50% of amt. invested in equity share. However, the maximum deduction permitted under the provision cannot exceed Rs. 25,000.

Income Tax Deduction under Section 80D

There could be Five various situations U/s 80D for claiming the deduction; these are:

  • If the individual and parents are both aged more than 60 years, the deduction available is Rs.25,000 each, i.e. a total of Rs.50,000.
  • If the individual, family, and parents all are aged more than 60 years, then the deduction available is of ₹50k each, i.e., a total of ₹1,00,000.
  • If the individual and family are aged less than 60years, but the parents are aged more than 60 years, then the deduction for self and family is Rs. 25000, in addition to Rs.50,000 for parents. The cumulative deduction is allowed is Rs.75k.
  • For HUF members, the total deduction is Rs. 25,000 each (self and family plus parents), i.e. a total of Rs. 50k.
  • The available deduction is also Rs. 25,000 each for non-resident individuals, i.e. a total of Rs. 50k.

Section 80D Payment for the medical insurance premium and health check-ups

Under this section, you can claim a tax deduction for the payment of medical insurance premiums for yourself,  spouse, or any child. In addition, tax exemptions that may not surpass Rs.5k can also be demanded on money spent on health check-ups.

Section 80E: Interest paid on the Education Loan

Under section 80E, you will claim a tax deduction on interest paid on the repayment of the Education Loan. The deduction may be demanded only on the interest paid on the repayment of the loan and not on the amount of the principal.

Section 80EE: Interest on loan taken for the purchase of residential property

Under section 80EE, you can demand a tax deduction for interest payable on a loan taken for the purchase of a residential property. The overall claimed deduction is Rs. 50k under the income tax Act.

Section 80G and Other: Deduction on made donations Under Section 80G, 80GGA, 80GGB and 80GGC

  • For a general contribution received within a financial year, you will demand a tax deduction under section 80G.
  • If a contribution is made for scientific research or rural development, deductions under section 80GGA may be demanded.
  • If contributions are made to any political party, deductions under sections 80GGB and 80GGC may be demanded

Section 80GG: Tax exemption for leases purchased in favors of FY-20-21

For the house rent expenses, you can demand a tax deduction under section 80GG. Nevertheless, in Section 80GG, you can only demand a deduction if you have not earned a house rent allowance. If you earn an HRA, you are not entitled to a deduction in this section. Under section 80 GG, you can demand a deduction, if

  • rent paid by you is greater than 10% of your total income subject to a maximum of Rs. 5,000 per month or
  • 25% of your total income, whichever is less.

Summary of Different type of Income-tax exemption as per the Income-tax Act, 1961

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www.carajput.com; Income Tax Deduction

Section Permissible limit Type of investment, expense, or income Eligible claimants
80C Maximum ₹ 1,50,000 (aggregate of 80C, 80CCC and 80CCD) PPF, EPF, Bank FD’s, NSC, LIC premium, tuition fees Individuals, HUFs
80CCC Maximum ₹ 1,50,000 (aggregate of 80C, 80CCC and 80CCD) Pension funds Individuals
80CCD Maximum ₹ 1,50,000 (aggregate of 80C, 80CCC and 80CCD) Pension fund initiated by the central government Individuals
80TTA Up to ₹ 10,000 per year Interest on bank savings account Individuals and HUFs
80CCG 50% of amount invested subject maximum of ₹ 25,000 Equity saving schemes Individuals
80CCF Up to ₹ 20,000 Long term infrastructure bonds Individuals and HUFs
80D For individual taxpayers Premium up to ₹ 25,000 in case of individuals and up to ₹ 50,000 for senior citizens
For HUFs- Premium up to ₹ 25,000 and up to ₹ 50,000 in case the member insured is a senior citizen or super senior, citizen
Medical insurance premium and Health check-up Individuals and HUFs
80E No limit defined Interest on repayment of Education loan Individuals
80EE Maximum ₹ 50,000 Interest on loan payable for acquiring a residential house property Individuals
80G Differs with the amount of donation General donations of any recognized society Individuals, HUF’s, Companies, Firms
80GGA Depends on the quantum of donation Donations to Scientific Research or Rural development Those who do not have income from business or profession
80GGB Depends on the quantum of donation Donations to political parties Indian companies
80GG ₹ 5,000 per month or 25% of total income whichever is less Rent paid if HRA is not received Individuals not receiving HRA

Summary View on Tax Exemption on the bases of residence status 

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www.carajput.com; Income Tax Deduction

This summarises the list of tax deductions under the India income tax law. Make the most of the tax deductions with careful tax planning. Decrease your tax liability and liabilities while you save on taxes.

Know about More related Link Mentioned Below;

Deduction u/s 80CCD of Income Tax Act, 1961

Deduction benefit u/s 35AC not available

Additional deduction on new payroll expenses

New TDS deduction No cash transactions exceeding 1 Crore -Section 194N

Deduction u/s 80CCD of Income Tax Act, 1961

Regards

Rajput Jain & Associates

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)

Taxation on Income from Equity and Debt Mutual Fund

Taxation on Income from Equity and Debt Mutual Fund Under section 10(35) of the Income Tax Act, 1961

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www.carajput.com; taxation on mutual fund

1.Equity Mutual Fund

The equity mutual fund is a kind of mutual fund scheme in which a substantial proportion of the assets under administration is primarily invested in stocks including the equity stock market. They come under the class of “Stock Mutual Funds” which is defined as funds with at least 65% of the portfolio is invested in equity and equity-related securities. Every mutual fund is known as equity mutual funds or stock mutual funds, including equity mutual funds, balanced funds, sectoral funds, large-cap funds, mid-cap funds, and small-cap funds, etc.

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www.carajput.com; Equity mutual fund

A.Chargeability of DDT(Dividend Distribution Tax)

In the hands of the investor, and distribution of income on equity mutual funds is totally tax-free. In addition, no dividend distribution tax is imposed on equity mutual funds, which means the house of the mutual fund is also not liable to deduct the dividend tax declared on an equity mutual fund scheme.

Note: DDT is the abbreviation for ‘Dividend Distribution Tax’ which refers to the tax deducted or charged by the fund house (mutual fund company), on any divided declared and distributed to its investors.

B. Calculation of capital gains on Equity mutual Fund?

Capital gains generated from the selling of equity mutual funds would only be liable to capital gains tax if the retention period has been longer than one year. Equity Mutual Funds are excluded from paying long-term capital gains tax, meaning you would not be allowed to pay any capital gains tax on those transactions if you sell your equity mutual fund after 1 year of holding.

Under section 10(38) of the Income Tax Act, equity mutual funds are excluded from paying long-term capital gains tax, which ensures that if you sell your investment in equity mutual funds after 12 months of holding, you are not allowed to pay any capital gains tax on those transactions.

C. Calculation of Tax Liability of Equity Mutual funds

Based on whether the gain on sale is known as short-term or long-term capital gains, equity mutual funds are subject to capital gains tax. Tax rates on capital gains are the same for both resident Indians and non-resident Indians.

There is no dividend distribution tax on the payment of dividend income into equity mutual funds, unlike debt mutual funds. 

Type of Tax Tax rate
Short Term Capital Gains Tax (under section 111A)
Resident Indian 15%
Non-Resident Indian 15%
Long Term Capital Gains Tax ( under section 112 (A)]
Resident Indian 10% ( Capital gains exceeding ₹ 1 Lakh)
Non-Resident Indian 10%( Capital gains exceeding ₹ 1 Lakh)
Dividend Distribution Tax Nil (as per section 115R)

2. Debt Mutual Fund

The debt mutual fund is a kind of mutual fund scheme in which a substantial proportion of the assets under administration are invested mainly in fixed income instruments, including bonds and debentures. They come under the ‘Non-Equity Mutual Funds’ group, which is classified as funds with less than 65% of their portfolio invested in equity and equity instruments. All mutual funds, including debt mutual funds, gold funds, money market funds, balanced funds, etc. are Classified as non-equity mutual funds.

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www.carajput.com; Debt mutual fund

A. Chargeability of Dividend Distribution Tax

For individuals and HUF investors, the allocation of income on debt mutual funds is subject to a dividend distribution tax at the rate of 28.33 percent (including surcharge and cessation). Asset management companies subtract DDT from the dividend in the debt mutual fund holder’s portfolio prior to crediting the dividend.

B. Calculation of capital gains on Equity mutual Fund?

Capital gains generated from the selling of Debt mutual funds incur capital gains tax. Depending on the retention time, the sale may incur short term capital gain tax or long term capital gain tax.

Long-term capital gains- If, after 3 years of holding time, you sell your investment in a debt mutual fund, capital gains resulting from that sale are known as a long-term capital gain (LTCG) and will be charged at the tax rate on long-term capital gains. Long term capital gains are eligible for an indexation advantage in which the cost of purchasing an asset over the retention period is adjusted for variations in the cost inflation index. In the event of an increase in the index, the purchase rate is changed upwards, thus decreasing the value of the capital gain and, thus, the tax on capital gains. The price indexes used for the adjustment are maintained and issued by the Department of Income Tax.

Short-term capital gains- If you sell your investment in less than 36 months (3 years) in a debt mutual fund, the capital gains resulting from the sale are known as a short-term capital gain (STCG) and are charged at the tax rate on short-term capital gains.

C. Calculation of Tax Liability on Debt mutual Fund?

For debt mutual funds, there are two types of taxes applied:

  • capital gains tax Based on which the gain on sale is classified as short-term or long-term capital gains, For resident Indians and non-resident Indians, capital gains tax rates are different.
  • Dividend Revenue or dividend tax reported on the debt investment mutual fund
Type of Tax Tax rate
Short Term Capital Gains Tax
Resident Indian As per individual’s income tax bracket
Non-Resident Indian As per individual’s income tax bracket
Long Term Capital Gains Tax (under section 112)
Resident Indian 20% (with indexation benefit)
Non-Resident Indian On listed funds- 20% (with indexation benefit) On unlisted funds- 10% (without indexation benefit)
Dividend Distribution Tax (DDT) At the rate of 28.84% (including surcharge and cess) for individuals and HUF(under section 115R)

Which is a better option: STOCK or MUTUAL FUNDS?

Over 1 crore of new Demat accounts was opened in the previous year. Just 49 lakh demat accounts were opened in 2019 in order to bring that into perspective.

There is no doubt that interest in equities has spiked with the financial markets back to all-time highs, whether it was the lockdown or the market rally or low deposit rates. But should investors invest in shares for the first time by purchasing stocks directly, or should they opt for mutual funds? In this blog, we look at each of the positives and negatives side so that when you decide to park your hard-earned money in the stock market to reach your financial goals or want to build wealth for the long term, you can make an informed decision.

STOCKS:

Stocks are financial instruments issued by companies that give part ownership of a company to investors. Investors stock their surplus mainly for capital appreciation, dividends, as well as voting rights, allowing them to be part of important business decisions. Stocks are also classified in common parlance as securities and as equities.

MUTUAL FUNDS:

Mutual funds are financial vehicles in which, depending on the investment purpose of the fund, capital is mobilized from multiple investors and invested in various asset classes such as equity, debt, gold, etc

While both of these options allow you to invest in equities, you should take the Mutual Fund route for more than a few reasons. Some basic reason is as follows:

  • Diversification of Portfolios

Mutual Funds invest in a large stock universe that offers outstanding portfolio diversification and eliminates the risk of concentration. A decent number of the industry’s diversified funds have 50 or even more stocks in their respective portfolios.

This diversification helps to reduce portfolio losses in the event that 1 or 2 stocks are harmed due to such negative events. The fact that only 10% of exposure to a single stock can be taken by equity funds also minimizes the risk factor in the investments

The stock portfolio of an investor usually appears to be 10 to 15 stocks. This is similar to higher portfolio volatility, which would be measured as the market goes up and down. Today, you would need a huge amount of money if you want to get the same kind of diversification as a mutual fund. In addition, there are expenditures involved in purchasing and selling. For e.g., if you wish to buy 1 share of each of the constituents of NIFTY 50, you will need more than Rs. 1 lakh.

The advantage of mutual funds is that an investor gets exposure to a large range of stocks through market capitalization and various sectors in his portfolio, even by investing a small sum of only Rs. 500 in a mutual fund.

  • Professional Management

With a fund management team that does a lot of research on stocks, sectors, and the economy, mutual funds are professionally managed. This team spends a large amount of time reviewing the financial statements of the companies and meeting with the management of these companies until they decide on the universe of stocks, which helps them to get a holistic view of the stocks to be included in the portfolio. Most fund houses are also proficient in a robust risk management process that puts strict binding constraints on their portfolios, which in turn does not allow the fund management team to take undue risks.

Investors would have to spend a significant amount of time researching stocks and various sectors to understand the headwinds and tailwinds in the underlying market. Investors dealing directly with stocks should also have a fair understanding of the macro-economic situation, giving them a clear outlook on which industries and stocks will be able to perform well in the future.

This is an important exercise that investors need to do, as their portfolio of 10 to 15 stocks needs to be diversified according to their risk profile across market capitalization and sectors.

In other terms, most of the aspects that the fund management team of fundamental analysts, technical analysts, economists, and risk modelers do must be done by the individual investor. That is definitely not the cup of tea of a beginner investor from a time & effort perspective.

  • Costs

In terms of the cost-benefit, one of the economies of scale enjoyed by Mutual Funds is due to the large transaction volumes involved in the purchasing and sale of stocks.

In addition, SEBI launched Direct Plans for the Mutual Fund Industry in 2013. In a direct plan arrangement, the fund houses subtract from the operating costs the fee-fees to marketers, resulting in a lower cost ratio for the investor.

If you purchase stocks directly, you will have to pay charges such as brokerage, STT, SEBI turnover charges, GST, transaction fees, etc. But the good part is that these costs tend to be minimal over the long run unless you do frequent daily stock trading.

  • Variety of Options

You have a wide range of options for pursuing your financial goals when it comes to Mutual Funds. Different funds, such as equity funds, debt funds, gold funds, foreign funds, etc., cater to various asset groups. There are also funds that fulfill particular purposes, such as retirement and plans for children. The other possible alternatives are active and passive funds. Depending upon their risk profile and time period, you will decide on the choices. So, if your risk profile is cautious, then you can choose from a range of small-exposure debt funds to equity-side large-cap funds. On the other side, you can get across the market capitalization curve and also have sector funds in your portfolio if you are an active investor. If you have a time horizon of 1 to 5 months, from a tenure perspective, then he can go in for liquid funds, while the short term/corporate bond funds would be a good match for a 3-year time horizon.

There is just 1 asset class as far as stock investment is concerned. Of course, there are over 5,000 companies to choose from within the stocks, but there are usually only 500 odd companies that are investable in the Indian stock exchanges.

The wide range of options available in Mutual Funds offers you a lot of benefits that are not available when investing directly in stocks, such as particular categories or funds to accomplish targets, diversification, debt exposure, etc.

  • Disciplined Investing

When it comes to exposure to the markets, mutual funds allow you to pursue a disciplined approach to investing.The most common way to invest in mutual funds is through Systematic Investment Plans (SIPS), as they allow you to make a daily investment of as little as Rs. 500 in mutual funds.

Some brokerages have begun SIPs into inventories as far as stocks are concerned. The key thing to remember here, however, is that the correct stock selection should take place, and the volume of the SIP can vary according to the price of the stocks included in the portfolio.

  • Tax benefits

While the taxation of equity mutual funds and shares is the same, section 80C enables investors to demand a deduction of up to Rs. 1.5 Lakh per year from the Equity Linked Savings Schemes (ELSS), a form of mutual fund scheme. For stocks, there is no such choice.

The other tax benefit is that there is no tax to be charged by you when fund managers move across stocks, while in the case of direct investment in stocks, depending on your holding period, you will have to pay taxes once you leave a stock.

  • Variability in Returns

The diversification of the portfolio of mutual funds not only helps to reduce risks but also makes it possible to receive stable returns over time.

Stocks, on the other hand, have the potential to gain superlative returns. As mutual funds have caps on their holdings in each stock and are highly diversified, there would also be limited ability to earn high returns.

This is why, for HNIs and ultra HNIs, stocks are the chosen vehicles. This approach to investment through stocks, however, may not be sufficient for new-to-invest users.

Conclusion:

If you are a seasoned investor with the time and experience to look at company financial statements and have a research flair, then you should consider creating your own stock portfolio. There is a reasonable amount of uncertainty in the superlative returns associated with stock investments, which should be taken into consideration when dealing with them.”If you have trouble imagining a 20 percent loss in the stock markets, you should not be in stocks,” John Bogle, the founder of index funds, rightly said.

Moreover, if you are fine with a team of experts managing your money whose aim is to give you consistent long-term returns, then mutual funds are the right choice for you. Mutual funds offer you a wide range of choices to choose from, which will help you achieve your goals with greater consistency in the time periods stated. Therefore, if you are a first-time investor who has not explored the waters in the capital market, then before trying your hand at stocks, start with mutual funds.

Also, read the below-mentioned links

Delisting regulation for Equity Shares

Fema Compliance for FDI in Equity Share in India

Regards

Rajput Jain & Associates

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)

TAX AUDIT CEILING U/S 44AB FROM RS 1 TO RS 5 CR APPLIES W.E.F AY 2020-21

TAX AUDIT CEILING U/S 44AB FROM RS 1 TO RS 5 CRORE APPLIES WITH EFFECT FROM AY 2020-21

www.carajput.com; Tax Audit

www.carajput.com; Tax Audit

There might be some uncertainty between specialists as to the assessment year from which the modification to raise the tax audit ceiling under section 44AB from Rs 1 crore to Rs 5 crore applies, i.e. whether the amendment means with effect from AY 2020-21 (for accounts for the financial year 2019-20) or from AY 2021-22 (The financial year 2020-21).

Pursuant to paragraph (a) of Section 44AB, as it stood before the Finance Act of 2020, any person engaged in the company was required to have audited accounts if the overall sales, turnover or total receipt in business exceeds Rs.1 crore. The Finance Act, 2020 raised this ceiling to receive audited accounts from Rs.1 crore to Rs.5 crore in those situations where the sum of all collections in cash during the year and the sum of all payments rendered in cash over the year does not cross 5 % of total receipts and total payments, respectively.

Who is a binding and required Compulsory Tax audit?

A taxpayer is expected to carry out a tax audit if revenue, turnover, or gross business receipts surpass Rs 1 in the financial year. However, under some other cases, a taxpayer might be forced to have their accounts audited. In the tables below, we have classified the different circumstances:

POINT TO BE NOTED: The requirement of Rs 1 crore for a tax audit is expected to be raised to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) if the taxpayer’s cash receipts are restricted to 5 percent cent of the gross receipts or turnover and if the taxpayer’s cash payments are restricted to 5 percent of the aggregate payments. Below are different categories of taxpayers below:

www.carajput.com; Tax Audit Applicability

www.carajput.com; Tax Audit Applicability

Category of person Threshold
Business

 

www.carajput.com; Tax Audit Applicability

www.carajput.com; Tax Audit Applicability

Carrying on business (not opting for presumptive taxation scheme*) Total sales, turnover, or gross receipts exceed Rs 1 crore in the FY
Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme
Carrying on business eligible for presumptive taxation under Section 44AD Observes taxable income below the limits specified by the presumptive taxation system and has income that exceeds the basic limit.
Carrying on business and is not eligible for presumptive taxation under Section 44AD by opting for presumptive taxation in any one financial year of the lock-in period, i.e. 5 consecutive years from the date on which the presumed taxation system was implemented. If the income reaches the permissible amount not to be paid for tax in the following five successive tax years from the financial year in which the assumption of tax was not introduced,
Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD If the overall revenue, turnover, or gross receipts for the financial year do not exceed Rs 2 crore, the tax audit would not apply to such entities.
Profession

 

Who Carrying on the profession Total gross receipts exceed Rs 50 lakh in the FY
Who Carrying on the profession eligible for presumptive taxation under Section 44ADA 1. Claims for profit or gains below the permissible level under the presumptive taxation scheme

2. Profits increases the permissible sum not to be paid for taxation

www.carajput.com; Tax Audit Applicability

www.carajput.com; Tax Audit Applicability

Business loss

In case of loss from carrying on of business and not opting for a presumptive taxation scheme Total sales, turnover, or gross receipts exceed Rs 1 crore
If the gross income of the taxpayer exceeds the basic threshold but has suffered a loss from carrying on a business (not opting for a presumptive taxation system) In case of loss from business when sales, turnover, or gross receipts exceed 1 crore, the taxpayer is subject to tax audit under 44AB
If continuing on business (opting a presumptive tax scheme under section 44AD) and making a business loss but with profits below the basic level This Tax audit not apply
If going on business (presumed tax scheme under section 44AD applicable) and making a business loss but with profits above the basic threshold Declares taxable income far below limits specified by the presumed tax scheme and has income that exceeds the basic level.

It should be observed that there is no uncertainty in the amendment on this subject. It is explicitly mentioned in the amendment that it is valid from AY 2020-21 (FY 2019-20). In this regard, it is necessary to notice that the Memorandum of Understanding on the provisions of the Finance Bill 2020 and the Clauses Notes created as part of the Finance Bill 2020 clearly state that ‘These amendments will take effect from 1 April 2020 and will therefore apply in reference to the assessment year 2020-2021 and corresponding assessment years.’

As a result, the amendment made to section 44AB will apply from AY 2020-21 (Financial Year 2019-20) itself and no individual engaged in business will be allowed to obtain the accounts audited for FY 2019-20 if the revenue does not cross Rs 5 crore during that year given that the specified condition is met, i.e. the total of all cash receipts and the combination of all payments.

For effective from 01/04/2020, that is to say from the assessment year 2020-21, this requirement is changed as follows:

The threshold limit has been updated in order to increase it for an individual engaged in business from Rs . 1 crore to Rs . 5 crores if the following criteria are satisfied.

www.carajput.com; Thresshold limit for Business Assesse

www.carajput.com; Threshold limit for Business Assess

  • The sum of all receipts in cash in the preceding year shall not exceed 5 percent of such revenues.
  • The sum of all payments in cash during the previous year does not exceed 5 percent of all expenditures.

Through AY 20-21, the stated date shall be one month before the due date for the income tax return referred to Section 139(1). Thus, I inform you that the 44AB limit is still 1 crore (except as indicated above) and the 44AD limit is Rs . 2 crores. Also, there is NO Improvement IN FINANCE BILL 2020 in Section – 44AD, which deals with a special provision for calculating the income and earnings of the industry on a presumptive basis. ​

As a result of such an amendment, some strange situations could arise which CBDT should explain.

It should be noted that the modification of the increased threshold extends to any ‘person’ engaged in business and, thus, the value of the modification is available to all individuals, corporations, LLP, Firms, etc. engaged in business.

However, it should be explained that the amendment made is only applicable to an individual engaged in ’employment’ and thus an individual engaged in ‘profession’ would continue to be allowed to have audited accounts if the gross receipt in the profession exceeds Rs.50 lakh in the year.

Due to the planned amendment under the 2020 budget, the scenario is as follows:

– For assesse who have TO>2 crores (but less than 5 crores and have cash receipts and cash payments not exceeding 5 percent), they are NOT liable for a tax audit. This holds true regardless of whether the assessee shows income of up to 6 percent or 8 percent in 44AD or not.

– For assesse who have TO<2 crores (but have cash receipts and cash payments not exceeding 5 percent), they are liable for tax audit if they do not have an income of up to 6 percent or 8 percent as per 44AD.

Mandatory validation of UDIN in all Income Tax Forms

The Central Board of Direct Taxes will validate the UDIN created from the ICAI portal while uploading the Tax Audit and other Income Tax Reports as per their press release. Tax audit reports/forms submitted to the e-filing portal from 27 Nov 2020 and beyond.

Tax Audit Reports/forms will only be accurate if their Unique Document Identification Numbers have been checked by the CBDT E-filing portal. In order to do so, Charted Accountants would have a buffer time of fifteen days to update their UDIN on the e-filing portal in addition to providing the same immediately.

The income tax department will validate the ICAI Unique Identification Number of the CA/auditors when they submit the tax audit reports to the e-filing server.

It has been noted that the financial documents/certificates attested to by a third party misinterpreting itself as chartered accountants Representatives are deceptive to the Authorities and Stakeholders. Institute of Chartered Accountants of India also receives a variety of concerns about non-chartered accountants’ signatures forged by chartered accountants. In order to curb malpractice, the Institute of Chartered Accountants of India Professional Development Committee has phased out a groundbreaking UDIN concept, i.e. Unique Identification Number of Documents.

The Direct Taxes Committee of ICAI has asked for an extension of the different due dates under the Income Tax Act, in particular, the Tax Audit Reports & related returns, including that of the ITR Forms for AY 2020-2021 to the CBDT.

Also, read the related links for better understanding;

Overview of Tax Audit

Amendment in Tax Audit u/s 44AB

Limit Applicable for tax Audit U/S 44 AB under Income Tax

Amendment in section-44AB for Tax Audit

Legal Compliance Audit service in India

Income tax Chart 2020 with covering latest Covid Relaxations & Alternative Tax Regime 

Tax Audit Check List 

Regards 

Rajput Jain & Associates

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)

Three-tier TP Documentation & threshold Requirement

Three-tier Transfer Pricing Documentation & threshold Requirement

www.carajput.com; III-Tier

www.carajput.com; III-Tier

Taxpayers are expected to maintain, on a yearly basis, a collection of detailed information and documentation relating to international transactions performed with AEs or specified domestic transactions. Rule 10D of the Income Tax Rules of 1962 provides for accurate records and documents to be kept by the taxpayer. These specifications may generally be divided into two sections.

The very first part of the rule sets out required documents/data which must also be preserved by a taxpayer; the second part of the rule specifies that sufficient documentation is kept to support the data/analysis/studies recorded below the first part of the law. The second part also includes a suggested list of such supporting documentation, like government papers, reports, surveys, technical papers/market research studies performed by credible organizations, price publications, relevant agreements, agreements, and communications.

https://carajput.com/learn/aims-and-objective-of-transfer-pricing.html

Taxpayers with cumulative foreign transactions just below the defined INR 10 million threshold and specified domestic transactions below the INR 50 million thresholds are exempted from keeping the defined documents. However, even in these situations, it is crucial that the documents preserved should be sufficient to sustain the price of the arms-length of international transactions or defined domestic transactions.

Both required records and details must be preserved at the same time (to the extent possible) and must be in order by the due date of the filing of the tax return. Businesses subject to the regulations are usually expected to file their tax returns on or before 30 November following the conclusion of the tax year in question. The required records must be retained for a period of nine years from the end of the applicable tax year and must be revised on a continual basis an annual basis. Supporting document provisions also extend to multinational companies whose income is subject to Indian tax liability.

https://carajput.com/learn/overview-of-transfer-pricing-in-india.html

Applicable Transfer Pricing Documentation

www.carajput.com; Transfer Pricing

www.carajput.com; Transfer Pricing

Purpose

Timeline

Applicable -Form 3CEB Chartered Accountant’s report in respect of the international transaction Within 8 months from the end of the financial year.
Last Date:- 31st October 2020
TP Study Report Analysis to show international transactions are at arm’s length Within 8 months from the end of the financial year.
Last Date:- 31st October 2020

Structure of three-tier transfer pricing documentation:

www.carajput.com; sturture of III-Tier

www.carajput.com; the structure of III-Tier·         Local File-This must be recorded by the Organization itself.

·         Master File-Requires to be filed with the IT department.

·         Nation by Nation Study – Requires to be sent to the IT Department.

Applicability of CbCR

Particulars

Threshold

Consolidated revenue of International Group INR 5500 Crore

Note:

Turnover to be taken for Master File is the Accounting Year (i.e., for F.Y 2019-20, accounting Year will be 2019-20)

Compliance applicable on Transfer Pricing

Master File– Forms and Timelines

Section 92D (Master File Forms)

Purpose

Conditions Apply

Timeline

Form 3CEAA Part A: – Basic Limited details to be furnished. Every constituent entity/ designated constituent entity of an international group has to file Part-A irrespective of the turnover. Within eight months from the end of the FY.
For Assessment Year 2020-21:- 30th November 2020
Part B: – Detailed details to be furnished. (Broadly same as OECD Master File) 1.       Total revenue > 500 cr; and
2.       Aggregate international transactions> 50 cr or; intangible related transactions > 10 cr.
Form 3CEAB To notify the Constituent Entity designated for furnishing Master File When there is more than one CE in India. 30 days before the due date of furnishing Form 3CEAA.
For Assessment Year 2020-21:- 31st October 2020

Transfer pricing rules wouldn’t really apply if the arms-length price results in a downward revision of the income taxed in India.

Burden of proof

The responsibility of establishing the arm’s length existence of the transaction rests mainly with the taxpayer. If during the audit process on the basis of content, details, or records in their possession, the tax authorities are of the opinion that the arm’s-length price did not apply to the transaction or that the taxpayer did not maintain / Produce sufficient and accurate documentation / Details/information, the overall taxable income of the taxpayers may be computed as follows after the hearing right has been provided.

                       Compliance Under CBCR

CbCR – Forms and Timelines :

Particulars Purpose When to file? Timeline
Form 3CEAC To intimate Alternate Reporting Entity

or PE (Whether itself or some other)

If international Total revenue > 5500 crores (If CE is resident in India) 2 months prior to the due date for furnishing Form 3CEAD.
To intimate Alternate Reporting Entity

or PE (Whether itself or some other)

For Assessment Year 2020-21:- 31st October 2020
Form 3CEAC CBCR Reporting requirement If international  Total revenue > 5500 crores Within twelve months following the end of reporting accounting year.
For Assessment Year 2020-21:- 31st December 2020
Form 3CEAC To notify the Constituent Entity designated for furnishing CBCR, only if there is more than one Constituent Entity in India (and conditions given in note 1 below are fulfilled) If international Total revenue > 5500 crores Not Specified yet as per the Final Rules.
S.No Turnover Compliance to be made
1. a)   Upto 500 Crores All Constituent Entity /Designated Constituent Entity of the international group to file Part A of Form 3CEAA
    b)   >500 crores but < 5500 crores
    c)   International transaction < 50 crore and;
    d)   Intangible related transactions < 10 crores
2. a) >   500 crores but < 5500 crores; and Part A and Part B of Form 3CEAA
    b)   International transaction > 50 crore; or
    c)   Intangible related transactions > 10 crores
3. a)   > 5500 crores CBCR requirements apply on entity
4. a) >5500 crores; and Details to be Maintain and furnish Master File. Also, CBCR requirements apply on entity
    b)   International transaction > 50 crores; or
    c)   Intangible related transactions > 10 crores

Time-Time for Creating Transfer Pricing Documents

www.carajput.com; Creating Transfer pricing

www.carajput.com; Creating Transfer pricing

Regrettably, the timeline for processing the report varies from country to country. Many countries need details to be ready when a tax return is filed. Other countries want to see something ready at the time of the audit.

Even so, the whole rationale of the transfer pricing legislation is to consciously enforce the Arm’s Length concept. You do this by determining the right transfer price before the actual transaction takes place. What this means is that you build up the transfer pricing paperwork over the year when you’re doing the business. Not at end of each year, like that.

https://carajput.com/learn/rulespenaltiesmethodsdocumentation-required-in-transfer-pricing.html

TP : LIBOR IS THE BEST BENCHMARK FOR INTEREST-FREE LOAN GRANTED TO AE

Summarizing

The latest events have given rise to a renewed emphasis on transfer pricing practices. Standard reporting standards are now in place to address (assumed) abusive tax practices.

The aims of such provisions are, first of all, to increase awareness of the transfer pricing legislation and the environment of adherence. In addition, the report provides policymakers with an analysis of possible threats. In the end, it makes the future audit much simpler.

There are many three reports to be given. Master File, Local File, Country-by-Country Chart. The Country-by-Country report is for major Multi-National Companies with a turnover of Dollars 750 million or more.

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)

Tax Planning Tips towards availing Tax-saving/Benefits

Tax Planning Tips towards availing Tax-saving/Benefits

www.carajput.com;Save Income Tax

www.carajput.com; Save Income Tax

Right now that most of us don’t start earning, we’re all wondering why someone needs to hear about the tax-savings mess. But when we get our first salaries and see the amount of tax reduced, we know how much efficient tax management is required. Yet most of us are unable to take advantage of all the tax-saving opportunities that we have. Most of the time, we fail to claim a deduction under chapter VI i.e Section 80C, mostly because we don’t know about the investment that saves our tax and lack of understanding of other options.

Where would you save up to 78,000 annually?

Investment Tax applicable Surcharge (4%) Total amount
In the U/s 80C (NPS, Term Life Insurance, ELSS, PPF, etc.) ₹150,000 ₹45,000 ₹1,800 ₹46,800
NPS under Section 80CCD (1B) ₹50,000 ₹15,000 ₹600 ₹15,600
Health insurance for self, family and parents under Section 80D ₹50,000 ₹15,000 ₹600 ₹15,600

Let’s address in depth the various sub-sections under Chapter VI deductions  and other benefits :

In this blog, we’re going to tell you about some strategies that could save you tax above Rs. 1.5 lakh. Here are some possibilities that will help you invest money in tax benefits;

www.carajput.com;tax incentive

www.carajput.com; tax incentive

  1. Investment in National Pension Scheme under Section 80CCD (1B)

Under Section 80C, you can claim a deduction up to Rs 1.5 lakh by donating to the National pension scheme or NPS per year. Besides this, by adding another Rs 50,000 you will claim an extra deduction under Section 80CCD (1B). This implies you can minimize your tax value by Rs 15,600 by investing in NPS if you fall below a 30 percent tax bracket. Also included in this is 4 percent educational cess.

  1. Health Insurance under Section 80D

Today health insurance is not an option but a requirement. If you do not have a health insurance policy then your financial stability will be negatively impacted by a medical crisis. But health insurance policies come with some tax incentives so more and more consumers are adopting it.

Under Section 80D, you can obtain tax incentives for the additional payment charged for your insurance cover. And the incentives can be applied for – a regular life insurance policy, health insurance providers, and child-care plan as well. You can also receive a tax deduction for routine health check-ups, as long as it is under the insurance coverage limits.

Type of policy Deduction limit from Tax
Individual, spouse & children, and if anyone is a senior citizen Rs. 50,000
Parents which are not a senior citizen Rs. 25,000
The parent which are a senior citizen Rs. 50,000

If your immediate family and not parents are insured by the insurance scheme, then you can demand up to Rs 25,000 on the premium charged. If an individual above the age of 60 is covered by the scheme then the maximum you can demand is Rs 50,000. Besides, if you have taken any scheme for your parents, then the premium is Rs 25,000 for non-senior citizens. And it’s Rs 50000, for senior citizens. This is beyond the limitations of family protection.

Let us take a look at one case. Suppose Anil, a 35-year-old working professional, has acquired a health insurance policy covering him, his wife, and child. Under Section 80D, he may in a financial year claim up to Rs 25,0000 for this policy. This policy also includes preventive health check-ups. For this policy, he pays Rs 18,000 each year and another Rs 4,000 for a preventive health check-up. Under Section 80D, he may claim a Rs 22,000 deduction.

Now for his parents, who are senior citizens, taken another health policy. He will demand deductions up to Rs. 50,000 under this scheme. In total, he could claim a deduction for two policies up to Rs 75,000.

  1. Disabled Dependent under Section 80DD

If a taxpayer caring for a disabled dependent, then he can claims tax deductions under Section 80DD. This deduction is provided as a support to the disabled family members. A disability dependent may come under this section are spouse, children, parents, and sibling  It may be any family member of the Hindu Undivided Family (HUF).

It is important to ensure that the disabled dependent has not claimed a deduction under section 80U for receiving compensation under this act. Under the section, Disabilities which are covered –

  • Blindness
  • Low vision
  • Loco-motor disability
  • Hearing impairment
  • Mental retardation
  • Mental illness
  • Autism
  • Cerebral palsy

May you demand deductions on Expenses for the care, caring, development, and rehabilitation of disabled persons.

  • For the premium paid for these particular conditions on policies
  • But the deduction amount depends on the severity of the disease. The taxpayer will demand deductions up to Rs 75,000 if the injury is up to 40 percent. If the individual with a disability is at least 80% disabled, then the taxpayer will demand a deduction up to Rs 1,25,000.
  1. Interest on Education loan under Section 80E

Section 80E states that tax incentives can be obtained on the interest portion of an educational loan. And, that does not have a fixed limit. This deduction can be received by either the student or the guardians, whoever makes the repayment. However, this advantage will be accessed from the first year of the loan to the eighth year or until the loan period is complete, whichever is earlier.

Let’s suppose, for example, you finish the repayment period within six years, so you will take advantage of the gain for six years. On the other hand, even after the eight-year term, you will continue to repay the college debt, but in any situation, this tax incentive can not be taken advantage of.

  1. Interest on Saving Bank account under Section80TTA & 80TTB

We already have money in the banks and we get an interest in it. Any individual and HUF can claim a tax deduction on the interest paid. Taxpayers who are not senior citizens which claim exemptions under Section 80TTA and senior citizens which demand tax under Section 80TTB. Tax deductions can not be claimed on interest earned on Fixed Deposit, Recurring Deposit, or term deposits.

Section 80TTA:

www.carajput.com;Section-80TTA

www.carajput.com; Section-80TTA

Under this clause, the maximum amount to be deducted is Rs 10,000. You can demand a deduction of interest earned up to Rs 10,0000. And if you have several savings accounts, the interest earned from all the deposits will be combined. Surplus income will be defined as income from other sources and taxable profits. This deduction is given on interest received –

  • From a bank deposit account
  • From a savings account with a cooperative organization engaged in the banking industry
  • From a savings account with a postal office

This deduction is NOT permitted for interest received on time deposits. Term deposits mean deposits which are repayable at the end of fixed periods. It is not permitted for –

  • Interest in fixed deposits
  • Interest in recurrent deposits
  • Any other deposits of time

Section 80TTTB:

This section was initiated as a reward for senior citizens to use as their source of revenue, interest earned by saving savings accounts and deposits on 1 April 2018. Senior citizens can assert tax deductions as high as Rs 50,000 under such a provision.

Amount of deductions allowed: A deduction of less than Rs 50,000 or a sum from a defined income is permitted from the total income. Mentioned income is the sum of all of the following income:

  • Interest in deposit accounts (savings or fixed deposits);
  • Interest in deposits held in a cooperative company engaged in banking operations, like a cooperative land mortgage bank or a cooperative land development bank; or
  • Interest in deposits at the post office

    www.carajput.com;summary

    www.carajput.com; summary

  1. PPF (Public Provident Fund)

Established by the National Savings Organization and sponsored by the Government of India, PPF is a long-term fund (read 15 years) that you can use for purposes such as raising your child or retiring.  This ensures the investment you make, the profits you receive, and the gains from the growth are absolutely tax-free. You will also demand tax benefits for the amount you spend according to Section 80C of the Income Tax Act.

For PPF the minimum contribution is just Rs. 500. For a financial year, you can spend up to 1,50,000 Rs. The central government sets the interest rate for PPF along with many other savings schemes and revises the rates each quarter.

  1. EPF (Employee Provident Fund)

T hat is only if, of course, you deduct the money after retirement! Premature withdrawal if you have kept the EPF account for 5 consecutive years is tax-free. The amount of interest would be tax-free too. Accordance with Section 80C you can demand tax deductions for the amount invested.

You should pay 12 percent of your basic salary to EPF compulsorily while your employer contributes equally. EPF includes a company employing 20 or more employees with a rate of 12 percent applied to these organizations. However, the EPF rules specify that under some requirements and conditions those organizations that have less than 20 employees will contribute to 10 percent. You may also make voluntary contributions in excess of that limit. How much can you help? In your EPF, you could spend up to 100 percent of your minimum salary plus dearness allowance. Both of the investments you make will receive the same rate of interest. The tax and withdrawal regulations would also be similar for such voluntary contributions.

Remember that the employer’s contribution to the Employee pension scheme (EPS) would be 8.33 percent. Rs 1250 will be spent in EPS for any employee whose basic salary is Rs. 15,000 or more. If the basic salary is less than Rs. 15,000, so EPS will earn 8.33 percent of the wage. The average interest rate for EPF is 8.55 percent, measured on the basis of the monthly operating balance. Assume you receive a basic salary of Rs. 50,000, the EPF balance will be Rs. 1.29 lakhs at the end of one year considering the existing interest rate. If you include the balance of your EPS it will be Rs. 1.34 lakhs.

Today, after one month of resigning from service, EPF customers will deduct 75 percent of their overall account balance.

  1. ULIP (Unit-Linked Insurance Plan)

A portion of the ULIP premium, being a hybrid option, will go into insurance coverage and another portion will be deposited in the stock market. The premium you pay counts under Section 80C for tax exemptions and the returns you will obtain on maturity will also be excluded from tax under Section 10(10D) of the Income Tax Act.

According to the Insurance Regulatory and Development Authority (IRDAI) of  India’s, the overall annual fund management fees can be 1.35 percent. The minimum insurance plan must therefore be 10 times the average premium, it has reported. These rules guarantee that the premiums do not reduce the returns, and insurance coverage is not negligible.

You can select from the fund options that insurer offers that come with various asset allocations. Based on your risk profile, investing in both equity and debt may allow you to invest more in equity, debt, or have a balanced approach. Post-tax returns from ULIPs may be between 7 percent -9 percent.

  1. SSY (Sukanya Samridhi Yojana)

    Are you going to have a baby girl? SSY is also one of the best long-term initiatives to produce tax-free returns. The average interest rate of the program is 8.1%. Pursuant to Section 80C, the money deposited will be registered as a tax deduction. The minimum deposit balance is Rs. 250 and you can invest Rs. 1.5 lakhs in a financial year.

    You can create an SSY account before your child turns 10. You’ll handle your account until you get married, or 21 years from the opening date of your account, whichever is earlier. Once she turns 18, you will make a partial withdrawal for your daughter’s education.

  2. Contribution Given to political party

Section80GGC

  • If, in the previous year, any individual except the local authority and any artificial legal entity, wholly or partially supported by the government, contributes to any political party or political trust. The tax incentive is required to pay 100% of the amount only if the donation is not paid in cash.

Section GGB

  • If, in the preceding year, any Indian Corporation contributes to any political party or political trust and to the expenses incurred, directly or indirectly, by an advertising company in any publication by or on behalf of a political party. The deduction shall be given to 100% of the value of the donation only if the donation is not paid in cash.
  1. Investment in notified equity saving scheme Section 80CCG

If a resident person (may be ordinarily resident or not ordinarily resident) invests in registered equity or listed unit or equity-oriented fund. The tax benefit shall be given to a resident person for 3 financial years of assessment, beginning with the assessment year applicable to the preceding year in which the listed share or the listed share of the equity-oriented fund was first acquired. The incentive is given at 50 percent of the amount invested, but the tax incentive is not allowed at more than Rs. 25.000.

  1. Contribution to certain pension fund Section 80CCC

Where an individual has made a contribution of taxable income to LIC or to some other eligible insurer under an eligible pension scheme. The tax benefit is the sum of the deposit of Rs. 1,50,000, whichever is less. However, the pension earned or the amount withdrawn by the applicant or his / her candidate is taxable in the year of receipt. There were also two subsections in this section:
Section 80CCD (1): NPS investments are eligible for tax deductions under this provision. Any Indian citizen between the ages of 18 and 60 can invest in NPS and make use of this tax benefit. This profit may also be asserted by NRIs. The maximum deduction that can be made under this clause is 10% of your income (including basic salary + DA). For self-employed people, the cap is 20% of their gross net income. Also, the maximum profit you will enjoy per year under this section is 1.5 lakh.
Section 80CCD (1b): This clause allows for an extra deduction of 50,000 for investment in NPS. This is over and beyond the 1.5 lakh available in Section 80CCD(1).

So, in brief, you can make use of a total income tax deduction of 2 lakh a year when you invest in pension fund Section 80CCC i.e NPS.

  1. Housing Loan

Section 80C

  • Housing loan principal payments: whether you have borrowed a home loan, the portion of EMI that is used to repay the principal sum is qualified for tax deductions under Section 80C. The amount you pay as interest is not eligible to claim deduction under this provision.
  • If a person or HUF has taken a loan for his first house which is self-occupied or leased or vacant (deemed to be disposed of) then he may obtain a maximum tax reward of Rs. 1,50,000 only for payment of the principal amount repaid.

Section 80EE with Section 24 and Section 80EEA

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www.carajput.com; Home-Loan-Tax-Benefit

  • The deductions under this clause are only applicable to individuals. This means that whether you are a HUF, AOP, a corporation, or any other form of the taxpayer, you can not assert any advantage under this clause.
  • Limit of amount: this deduction (up to Rs. 50,000) exceeds the cap of Rs 2 lakh in compliance with section 24 of the Act on income tax. Learn more about the deduction of Rs 2 lakh on home loan interest here.
  • In order to claim this deduction, you need not own any other property on the date of the approval of the loan from a financial institution.
  • Conditions to be met for the claim deduction
    House value should be Rs 50 lakhs or less
    Loan to the house must be Rs 35 lakhs or less

When you’re in a position to comply with both Section 24 and Section 80EE of the Income Tax Act, be swift to assert the benefits. Next, reach the deductible maximum under section 24, which is Rs. 200,000. Then proceed to claim additional benefits under section 80EE. In addition to the Rs 2 lakh limit authorized under section 24, these deductions are also permitted.

The additional deduction is allowed to the individual in respect of interest paid on loan taken for residential house property to provide benefits for first home buyers. The tax incentive shall not allow Rs. 50,000. The Union budget 2019 announced a new section 80EEA to increase the tax advantages of interest deductions to Rs 1,50,000 for housing loans for affordable homes over the term 1 April 2019 to 31 March 2020. The taxpayer should be a first-time homeowner and should not be eligible for a tax deduction 80EE. The tax incentive is only available until the repayment of the loan continues.

14. Section 80TTA

Section 80TTA allows you to demand a deduction of Rs. 10,000 on your interest earnings. This deduction is really only applicable to individuals and to HUFs. The deduction shall be entitled on:

  • Money earned in a savings bank account.
  • Profit earned on a savings bank account with a cooperative organization engaged in banking activities
  • Profit in a savings bank account with a post office

Your whole interest income would count as a deduction if it is less than 10,000. If your interest income is more than Rs. 10,000, your deduction shall be limited to Rs. 10,000.

CONCLUSION: What you need to know about saving income taxes

Prior to actually selecting a tax-saving instrument, it is necessary to take into account the degree of risk, lock-in time, liquidity, and returns. There is no point in opting for a tax-saving plan unless it fits the particular needs as well. It also helps to keep up-to-date on the latest trends in tax-saving legislation. Barring Section 80C, most taxpayers are not acquainted with some other parts of the Income Tax Act that allow them to substantially keep their tax burden. It is Strongly advised ways to save taxation under Sec 80C & 80D

  • Investment Rs 1.5 lakh under Section 80C to limit your net income
  • Buy Medical Insurance & seek a deduction of up to Rs. 25.000 (Rs. 50.000 for senior citizens) for a medical insurance premium under Section 80D.
  • Claim deductions up to Rs 50,000 for housing loan Interest under Section 80EE

Govt. scheme Launched for Public and National Benefits

National committee on deduction benefits u/s 35AC

Regards 

Rajput Jain & Associates

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