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 In 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 income and earnings of 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.

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 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

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

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

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)

CBDT: New Income Tax Policy changes under new 26AS

CBDT: New Income Tax Policy changes under new 26AS For More Transparency and Compliance

www.carajput.com; CBDT New Income Tax Policy

www.carajput.com; CBDT New Income Tax Policy

  1. Income Tax New declarations needed in the latest ITR forms 1to7 are as follows: Ownership of the house: Individual taxpayers who are joint owners of the house can not file ITR 1 or ITR4.
  2. If having the Passport: Than the Passport number must be recorded if it is owned by the taxpayer. It is to be furnished both in ITR 1-Sahaj and ITR 4-Sugam. Hopefully, this will be made mandatory in other ITR forms as and when they are notified.
  3. In the case of Cash deposit: In the case of ITR 4-Sugam filings, it has been made mandatory to report the money deposited as cash on the bank account if the balance exceeds Rs 1 crore during the financial year.
  4. International travel: If you expended more than Rs 2 lakh traveling abroad during the FY, you need to report the exact cost expended.
  5. Energy consumption: If your energy costs were more than Rs 1 lakh in total throughout the year, you need to report the actual amount.
  6. Investment details: details of the investment eligible for deduction under Chapter VIA with details of the capital invested during the period from 1 April 2020 to 30 June 2020.
  7. For each assessment year, the last date for filing tax returns is July 31, but this year the ITR filing deadline has been expanded to November 30, 2020, due to the Covid-19 pandemic.
  8. Income tax deductions and exemptions that can be sought under the current tax law for FY 2020-21 (AY 2021-22): the withdrawal of an employee from the Employees’ Provident Fund (EPF) is not taxed after 5 years of sustained service.
  9. Withdrawal from the National Pension Scheme (NPS) at maturity or discontinuance, up to 40% of the money raised on such withdrawal remains tax-free for all. In the event of a partial withdrawal from the NPS, up to 25% of the contributions made by individuals will be tax-free. Business owners’ contribution to NPS up to 10% of their basic salary and allowances persist tax-free.
  10. Pursuant to Section 10(10D) of the Income Tax Act, the balance of the insurance and bonus paid on maturity or surrender of the life insurance scheme is tax-free. Revenue on maturity continues to be excluded under Section 10(10D) even under the current system. The maturity number, including the interest charged to Sukanya Samriddhi Yojana, does not incur any tax.
  11. Conveyance reimbursement given to cover the cost of transport incurred in the execution of the duties of the office and any compensation provided to the employee to cover the cost of traveling on tour or move (including relocation) is tax-free.
  12. Interest received from the post office savings account balance to 3.500 per individual per year will remain tax-free.
  13. Any scholarship given to cover the cost of education is excluded from tax under Section 10(16) of the Income Tax Act. Compensation earned from the employer up to 20 lakh after five years of continuous service. Leave the encashment earned at the time of resignation or retirement up to 3 lakh.
  14. Form 26AS will now be the full profile of the taxpayer w.e.f. 01.06.2020, CBDT empty Notification dated 28 May 2020 as amended Form 26AS in Sec 285BB w.e.f. 01.06.2020.

The main take-feature in amended Form 26AS is: With the launch of The Transparent Taxation: Honoring the Honest on August 13, 2020, Honorable PM Narender Modi announced a landmark shift in income tax management to put things easy, pain-free and transparent.

www.carajput.com; CBDT new Form 26AS

www.carajput.com; CBDT new Form 26AS

  1. New form 26AS will also provide details on “Specified financial transactions” that include transactions for the purchase/sale of goods, properties, services, works contracts, investments, expenditures, receipt or approval of any loan or deposit of the value that may be approved but not less than Rs 50,000. The FM also suggested steps to ensure full compatibility by extending the scope of monitoring and reporting on subsequent transactions in New Form 26AS:
  • Schooling fee/donation payment over Rs . 1 lakh per year
  • Power consumption Recharge of more than Rs 1 lakh per year
  • Domestic Air Travel or Foreign Travel
  • Payment over Rs 20,000 to Hotel
  • Jewelry purchase, white goods, sculptures, marbles, etc. above Rs 1 lakh
  • Financial assets/credits over Rs 50 lakh in the current account
  • Deposits or credits over Rs 25 lakh in the non-current account
  • Property tax payments above Rs 20,000 per annum
  • life insurance Primum over Rs 50,000
  • Health Premium Cover over Rs 20,000
  1. Data on income tax claim, refund, delayed hearings, and completed proceedings which may include assessment, reassessment pursuant to section 148,153A 153C, revision, the appeal will also be shared in this form 26AS. New form 26AS will also provide the “selected monetary Transactions” information which includes:
  • Buy / sale of goods or real estate transactions, delivering of services
  • Transactions under contractual works,
  • Transactions made by way of an expenditure or expense.
  • Receiving or approving any loan or deposit of the amount specified but not less than Rs 50,000.
  • Demand & Refund under the income tax act
  • Pending and completed proceedings which may include assessment, re-evaluation under section 148,153A 153C, revision, appeal
  1. In this form, 26AS will also be posted details about income tax demand, refund, pending proceedings, and completed proceedings which may include assessment, reassessment under section 148,153A 153C, revision, and appeal.
  2. Details on this Form 26AS at year-end will not be a one-time affair. This will be a live 26AS, as this will be updated regularly within 3 months from the end of the month that such information is gathered in.
  3. For that specific year, Form 26AS will now be a full taxpayer profile as opposed to the previous form 26AS, which only provided taxpayer information via TDS / TCS or self-assessment. This form will also have e-mail, mobile no, and Aadhar no. of the taxpayer.
  4. An enabling provision has also been notified authorizing the CBDT to authorize DG Systems or any other officer to upload information received from any other officer, the authority under any law, in this form. Thus any negative action initiated or found or order carried under any other legislation such as custom, GST, Benami Law, etc. as well as data on turnover, import, export, etc. will also be placed in this form 26AS so that not only the taxpayer involved but also all the tax authorities will understand and have access to the data.
  5. This 26AS form will provide information obtained from any other nation by Tax Deptt under the agreement/exchange of taxpayers due to income data outside India.
  6. The implication of this new form 26AS will be that financial institutions, financial institutions or any other authority or customer, buyer, etc. will now ask for form 26AS while performing thorough research of the person/corporation worried so as to ensure that there are no significant problems about such people/corporations. And
  7. It will now make it impossible for any taxpayer to keep secrets from any bank / financial institution/authority about any proceedings against any statute or tax demand, tax disputes, etc.
  8. The govt has also suggested deducting TDS / collecting TCS at higher rates for those who do not file returns on income tax (ITR). There is also a proposal for the obligatory filing of ITR by those who have their bank transactions above Rs. 30 lakh, all professionals, companies with revenue above Rs. 50 lakh, and rent payment above Rs. 40,000.

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 obtain tax savings through Business Loan in Indian

Tax Saving on business loans in India

www.carajput.com;Tax Benefits

www.carajput.com; Tax Benefits

Whether you’re thinking about taking benefit of a small business loan, but you’re hesitating to go for it and you’re not sure how it will affect your taxes for next year.

Actually, the answer is  – Interest on Corporate loans is  Tax-deductible expenses!

Business loans don’t dramatically alter what the other one owes in taxes. Pursuant to the 1961 Income Tax Act, having money through loans is like not earning money for the company. The interest paid on a commercial loan is also called tax-deductible, while the principal sum is not tax-deductible. Yet, then you have to obey certain laws.

How To Take Advantages of  Business Loan?

www.carajput.com;Business Loan

www.carajput.com; Business Loan

Financing for the company serves as a fuel that helps them to be alive and functional. Business loans are those investment funds designed to meet a business’s funding needs. From meeting the requirements for working capital to buying inventory and from paying the staff to paying rent for the workspace or factory space a business loan has the potential to help you with all these. So, it’s not likely to be incorrect if we suggest a business loan plays a vital role in the growth of the company. Taking up a business loan India offers the borrowers several benefits

  • You can use a business loan to serve multiple business purposes.
  • Business loans are easily accessible and come with flexible repayment terms which make borrowers’ loan repayment more convenient.
  • The government has launched several loan schemes to support small and medium-sized enterprises that have very flexible terms and conditions and off course pocket-friendly borrowing costs.
  • Interest paid on business loans is tax-deductible because it is considered an expense for companies. The reduction of interest rates lightens the tax burden on the borrower.

Tax benefits under the Business Loan which can be used?

www.carajput.com;Tax Benefits on Business Loan

www.carajput.com; Tax Benefits on Business LoanThe interest rate on business loans varies from lender to lender, where it is classified as a cost owing to the use of loan funding to fulfill business purposes.

Hence the element of interest paid in the loan repayment is claimed as a tax-deductible cost.

The interest payable is deducted from the gross income when calculating income tax on your company. Make sure you keep correct records of your business loan so that you can have proof if the income tax department requests for it.

In the case of company debt principal which is not tax-deductible

www.carajput.com;Tax Deductible

www.carajput.com;Tax-Deductible

The principal balance on a corporate loan is not tax-deductible. And you are not permitted to subtract the number from your gross business income when calculating taxes.

The fact of the matter, however, is that your company is not really getting the principal amount. The cash is borrowed by a third party and is due to be repaid. And it can’t be counted as your revenue from the company.

What does it mean you can not include the balance of the business loan in your gross revenue? And you don’t have to pay income tax on this sum nor should you deduct it from your taxable profits.

In today’s world, getting a business loan has become fairly straightforward; this has become possible with the introduction of advanced banking technology. The loan is readily available and will help you grow your business and hit new heights. However, the crucial part that can not be discounted with any of these advantages is that it’s a loan that has to be repaid over time.

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)

Section 234F -Fee (Penalty) for delay in filing Income-tax return

Under this section, the fee (penalty) is levied if the Income-tax return is not filed within the due date. It is likely to be increased from 1st April 2018 onward as per Section 234F of the Income Tax Act. Provisions of Section 234F of the Income Tax Act are as follows.

 Section 234F: New penalty for late filing of Income Tax Return under section 234F is introduced in Budget 2017. This penalty is applicable for the assessment year commencing from the 1st Day of April 2018. If a person who is compulsorily required to file Income Tax Return (ITR) under section 139, doesn’t file a return on time then he is liable to a penalty as follows

Total Income Return filed Fee (Penalty)
Exceeds Rs. 5 Lakh On or before 31st December of Assessment Year but after the due date Rs. 5,000/-
In any other case Rs. 10,000/-
Upto Rs. 5 Lakh After the due date Rs. 1,000/-

 

Let us discuss the above provision below:-

AMOUNT OF PENALTY

For a person with a Total Income of more than Rs. 5,00,000. The penalty amount would be as follows:-

  1. If ITR is filed on or before 31st December following the last date – Rs. 5,000
  2. If ITR is filed after 31st December – Rs. 10,000

For a person with Total Income of up to Rs. 5,00,000 – Rs. 1,000

Before 1st April 2018 – Penalty for Late Filing would be as follows-

Up to FY 2016-17, taxpayers who do not file their income tax return in a stipulated time period are liable to a fine (penalty) of Rs. 5,000.

It is further noted that liability to pay the penalty of Rs.5,000 is arises when an Income Tax Officer issues a notice for a late filing of the income tax return. It is worthwhile to note that the penalty for the late filing of income tax return is based on the conclusion of the assessing officer.

Contract us to Know more about the consequences and penalty for late filing income tax return. We also handle tax & registration services 

We offer our service in ​all Taxation and Various Registration related services ​managed by professional,

our bouquets of services portfolio are:

S.No. COMPLIANCES NATURE OF COMPLIANCES
1 INCOME TAX Return Filing, Tax Deposit, TDS Returns, TAN, PAN, MAT, Tax Planning, NRI Taxation, Scrutiny, Assessments, Representing for Appeals etc.
2 GST Registration, GST Tax Deposit, Monthly & Annually Return Filing, Input Credit, Department Notice, Assessment, And Other Compliance.
3 COMPANY PVT. LTD./LTD/LLP Company Incorporation, Minutes, Annual Filing, Income Tax Return Filing, Routine Compliance, Section 8 Company, Nidhi Company, Inspection & Investigation for Mergers & Takeover.
4 SOCIETY/ TRUST (NGO) Registration of Society/Trust, All India society, MOA, Income Tax Return Filing, Registration 80G & 12A, Utilization Certificates, Regs in NITI Aayog/NGO Darpan, etc.
5 PARTNERSHIP FIRM Partnership Deed, Registration, Accounting, Income Tax Return Filing etc
6 PROPRIETOR FIRM Registration, Accounting, Income Tax Return Filing, Refund etc.
7 IMPORT-EXPORT CODE Registration

​ & ​

Amendment

8 ACCOUNTING ​Accounting of  Prop. The firm, Partnership Firm, Company, Trust, Society, Proper Accounting in Tally, Ledger Management, Inventory Management, etc
9 OTHER REGISTRATION &COMPLIANCE SSI/MSME REGS, ESI, EPF, GMP CERTIFICATION, CGMP, HACCP, SA 8000, UL MARKING, CE MARKING ETC.

We are always available with the best of our assistance and services for you.

 

 

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)

New Turnover Threshold for the Purposes of TDS Applicability

New Turnover Threshold for the Purposes of Tax deducted at Source (TDS) Applicability as per the Finance Act 2020.

 

www.carajput.com;Income TAX and TDS Update

www.carajput.com; Income TAX and TDS Update

TDS was applicable to individuals and to HUF if their accounts were subject to audit in Section 44AB of the preceding year. The Finance Act 2020 specifies that All individuals & HUF will be liable to deduct TDS if the revenue exceeds Rs. 1 Crore in the case of corporation and Rs. 50 Lakhs in the case of the profession in the previous year. Such revisions shall take effect from 1 April 2020.

Below is the TDS average for the year 2020-21. In the following table valid from 14th May 2020

o   Individuals include the individual and HUF

o   Company and others include Company, Company, LLP, Co-op Society, Local Authority.

Interest in delayed payment and late deduction of TDS:

As per section 201(1A), Interest at the rate of 1 % per month or part of the month on the balance of TDS deductible from the date of tax before the date of the tax finally deducted shall be paid for the late deduction.

In addition, interest for late payment at a rate of 1.5 percent per month or half of the month on the number of TDS withheld from the date of tax to the day on which the tax is collected shall be levied.

Profit in late payment of TDS: amendments made pursuant to the Taxes and Other Laws (Relaxation of Other Provisions) Order 2020 of 24 March 2020:

For late fees payable on self-assessment tax; advanced tax, income tax, TDS, TCS, equalization cessation, STT, CTT made between 20 March 2020 to 30 June 2020, the interest rate will be decreased by 9% instead of 12%/18% per year (i.e. 0.75% per month instead of 1/1.5% per month).  No late fee/penalty shall be paid for any delay in respect of that time.

Default fees for the TDS / TCS return file:

Fees are payable at Rs. 200 a day for each day on which the loss continues. The amount of the fees can not exceed the value of the TDS.

You can give your comments and suggestions under the comment box.

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 ALLOWS ONE TIME RELAXATION FOR VERIFICATION OF ITR

CBDT Circular dated on 13th July 2020: CBTD allows to verify previous ITR one time relaxation for verification for the FY 2014-15 TO FY 2018-19  by September 2020

www.carajput.com;CBDT: INCOME TAX

www.carajput.com; CBDT: INCOME TAX

The tax return filer effectively makes a declaration by reviewing the tax return that the information contained in the return are correct.

Normally, the tax return must be checked within 120 days of the filing of the income tax return or any extended date announced by the tax department.

The procedure for filing income tax returns is not complete until the tax return is checked. The return will not be processed by the tax department until, and until confirmed. If not confirmed, the return is invalid.

1) By circular no. 3/2020 of 13 July 2020, CBDT offered one more-time opportunity for taxpayers whose income tax returns had been filed electronically but were awaiting verification.

2) Now any taxpayer whose ITR is pending for verification can verify their ITR by 30 September 2020 or before that date.

3) It is possible to check ITR for the duration 2014-15 to FY 2018-19 via this one-time relaxation scheme

4) All these checked ITRs are to be issued by 31 December 2020 or before.

5) ITRs may be checked by EVC or by a properly signed hard copy being sent to CPC Bangalore.

Note: if any lawsuits against taxpayers have been launched in view of the fact that the taxpayer has not filed a report for that year then the value of relaxation can not be used

Benefits:-

  • In the event of failure to acknowledge return, AO may initiate proceeding u / s 144 as such returns filed are deemed invalid.
  • The carryforward of loss can get permitted, ThanksRajput 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)

Happy Chartered Accountant Day!& Best Wishes on the 72nd day of CA!

Happy Chartered Accountant Day!

www.carajput.com; CA Day

www.carajput.com; CA Day

Greetings & Best Wishes on the 72nd day of CA!

On the occasion of CA Day,

I convey my best wishes for the hard work and motivating Chartered Accountants who support improve our country’s economy……… HAPPY CA DAY!

We stand proudly together and promise to keep the global pandemic together. The days of hardship that the entire world is facing together in the present day will also soon be forgotten.

Keep healthy and secure.

Thanks

Rajput Jain & Associates

www.carajput.com

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)

Govt has extended numerous time limits under Direct Tax & Benami Act

Govt has extended numerous time limits under The Direct Tax & Benami Acts.

www.carajput.com;INCOME TAX extend time limit

www.carajput.com; INCOME TAX extend the time limit

In consideration of the difficulties faced by taxpayers in fulfilling the legislative and regulatory enforcement requirements across sectors as a result of the outbreak of Novel Corona Virus (COVID-19), on 31 March 2020 the Government adopted the Taxation and Other Laws (Relaxation of Some Provisions) Ordinance, 2020 [the Ordinance], which expanded different time limits, among other items.

In order to provide some relief to taxpayers for creating multiple compliances, on June 24, 2020, the Government issued a Notification, the main features of which are as continues to follow:

www.carajput.com;INCOME TAX extend time limit

www.carajput.com; INCOME TAX extend time limit

the Government issued a Notification, are as follows:  Link

For the period from 14 May 2020 to 31 March 2021, the Finance Minister has already released a decreased TDS rate for specified non-salaried payments to residents and specified TCS rates by 25 percent. The press release dated 13th May 2020, also followed the announcement. In this regard, the appropriate legislative amendments shall be moved in due time.

Thanks

Rajput Jain & Associates

www.carajput.com

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)

Essential key concepts Gift Taxation: Income Tax

Essential Key concepts Taxation on gifts

www.carajput.com; Income Tax (Gift taxation)

www.carajput.com; Income Tax (Gift taxation)

Gifts up to Rs 50,000 per year are exempt from tax in India. In addition, donations from particular relatives, such as parents, spouses, and siblings, are also exempt from tax. Gifts are taxable in other cases. The gift tax in India falls under the Income Tax Act as there is no specific gift tax after the Gift Tax Act of 1958 was enacted in 1998.

In India, gifts are given on a number of occasions, such as celebrations such as Diwali, Holi, or the occasion of marriage, to express love for our loved ones. Nevertheless, gifts are now also used for tax planning reasons as, in multiple given to a specific, any amount of gifts received is exempt from tax. Some people whose gifts they got in their ITR claim that they’re still gifts obtained out of love and affection.

Even so, it’s not the right way, since donations are tax-exempt only in such specific circumstances or where they are obtained by particular persons. Non-disclosure of gifts could result in penalties of between 50 and 200 percent of the tax payable on the income attempted to be avoided.

  1. Gifts received from the employer

There are occasions when employers give the employee a present on a special occasion or to boost their productivity, or because they do well. An employee shall be liable for gifts received from the employer only if the value of such gift is equal to or greater than Rs. 5,000. Gifts below Rs. 5,000 in value within the financial year shall be excluded from vat. These gifts shall be taxable as perquisites under the Head of Salary Income.

  1. Gifts received from any other person;

Section 56(2)x) of the Income Tax Act, 1961 deals with the taxability of gifts received by a person, except the employer, throughout the year. This provision shall apply regardless of the status of the resident or of the class of assessee. The donor or donor can be an individual, a partnership business, LLP, a corporation, AOP, BOI, a cooperative society, or an artificial legal body, whether resident or non-resident.

Previous gifts from a resident to a non-resident are, even then, claimed to be non-taxable in India as the recipient used to claim that income does not accrue or arise in India. In order to make sure that the receipt of gifts is also taxed in the hands of non-residents, Section 9 has been amended by the Finance Act (No. 2), 2019, to provide that income is considered to have accrued or to have arisen in India as a result of the payment of gifts (exceeding Rs. 50,000) without adequate consideration by a resident to a non-resident. It does not provide proof of the taxability of the gift of the estate as referred to in Section 56(2)(x), inter-alias, immovable property, gold, securities, etc.

Therefore, after the amendment, it may be inferred that gifts in the nature of money in the hands of non-residents provided by resident persons would be paid in their hands, even though gifts of any other manner are also beyond the control of the Income Tax Act.

2.1. Gifts received in cash form

Where even a person receives any amount of money without consideration and the total value of that sum exceeds Rs. 50,000, the total aggregate value of that sum shall be taxed on the basis of capital income from other sources. For the determination of the threshold, the aggregate amount of receipt from different sources and persons throughout the year shall be considered.

2.2. Gifts obtained in the form of real estate

Immovable property received by the assessee for the year, either without consideration or for lack of consideration, shall be deemed to have been income in his hands and to have been taxable in that year if the receipt is within a period of time.

  • If the immovable property is received without consideration as well as the stamp duty value of the property reaches Rs. 50,000, the stamp duty value of the immovable property shall be liable to tax.
  • If an immovable property is obtained for payment far less than the stamp duty value, the discrepancy between the stamp duty value and the compensation shall be taxable if the difference meets the above two limits: Rs . 50,000; or 10% of the consideration

For all cases, the cap of Rs. 50,000 shall be reviewed for each transaction and not for all transactions as a whole.

2.3. Gifts received in the form of Movable Goods

Movable property as described in the Act shall include any property in the form of shares and stocks, jewels, historical artifacts, sketches, portraits, sculptures, any work of art, or bullion. In which the transaction includes any other movable property, such as car furniture, the excess consideration for the fair market value shall not be taxed. In this case, the deemed income shall be calculated as follows given way :

If any property is obtained without regard and the total fair market value of it reaches Rs. 50,000, the entire fair market value of such property shall be paid.

3. Gifts Exempt

I Upon the occurrence of a specified incident
  • On the occasion of marriage of an individual
  • By will or by means of inheritance
  • Considering the death of the payer or of the donor.
II Due to the status of the Doner
  • The gift is to be accepted from any specified relative;
  • Gifts obtained by any local authority;
  • Gifts earned from any fund or foundation or university or other educational institution or hospital or medical institution or from any trust or institution referred to in Section 10(23C);
  • Gift received from any trust or institution registered under section 12A/12AA/12AB[2];
  • Gift obtained by an person from a trust formed or established exclusively for the benefit of the relative of the recipient.
III. Owing to the position of the Donee
  • Gifts shall be handled by any trust or institution registered under section 12A/12AA/12AB2;
  • a certain fund or trust or institution, or any university or other educational institution, or any hospital or medical institution referred to in Section 10(23C)(iv)/(v)/(vi)/(via).
IV Due to transactions not considered to be a transfer
  • Any distribution of capital assets to the full or partial division of the HUF[Section 47(i)]
  • the transfer of capital assets by an Indian parent company to its subsidiary company;
  • Transfer of a capital asset to a merger, demerger or company reorganization scheme such that the requirements laid down in Section 47(vi) to Section 47(vii) are fulfilled.
V Other class of persons who have been notified
  • Immovable property acquired by a citizen of an illegitimate colony in the NCT of Delhi, pursuant to the requirement that such transaction must be regularized by the Central Government on the basis of the most current power of attorney, the selling document, the will, etc.
  1. The first and only manner to save the tax via a gift

The alternative tax can be saved is by offering gifts to your parents or legitimate guardians or to a kid who is a major. Nonetheless, when you contribute the sum, your taxable income stays the same. However, the interest they earn from other products by continuing to invest these funds becomes their own income. So, presuming that their income is lower, you can rest in peace knowing that the money is not going to be taxed.

Previously, so when long-term capital gains (LTCG) tax was effective, gift money can also be invested in a mutual fund or stock for 1 year and used as tax-free income. However, it is not feasible now as the LTCG tax has been reintroduced with effect from 1 April 2018.

  1. Are gifts, both in cash and kind, taxable?

Actually, all sorts of donations, including dollars, jewelry, real estate, paintings, or some other valuables, are taxable. However, if the amount of cash or the value of the gift in kind is less than Rs 50,000, the same amount would not be taxable.

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)