CORPORATE AND PROFESSIONAL UPDATE DATED MARCH 30, 2016

CORPORATE AND PROFESSIONAL UPDATE DATED MARCH 30, 2016

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DIRECT TAX

  • Income Tax: Where assessee claimed deduction of secret commission paid to employees of different companies who had given business to assessee, since assessee had not kept any accounts as to where and to whom such commission was paid, Tribunal was justified in allowing assessee’s claim to extent of one per cent of total sales – [2016] 67 taxmann 257 (Gujarat)
  • Income Tax: TDS on sale of property u/s 194IA : CPC-TDS has enabled functionality for online correction in form 26QB (challan / statement) with effect from 29/02/2016.

INDIRECT TAX

  • SERVICE TAX : Where assessee is engaged in promoting brand of foreign holding company and receives consideration from foreign holding company, then : (a) since services are provided on principal-to-principal basis, such services cannot be regarded intermediary services; (b) their Place of Provision would be location of service recipient, viz., outside India; and (c) same would amount to export of service and not liable to service tax – [2016] 67 taxmann 324 (AAR – New Delhi)
  • DELHI VAT : Deputy Chief Minister Manish Sisodia presented a ‘zero tax budget’ Monday aimed at rationalizing Delhi’s Value Added Tax (VAT) structure. The budget implies cheaper sweets, namkeen, watches, readymade garments, shoes and school bags, even as the government continues to focus on education, health and transport sectors.
  • DELHI VAT : Education, health, and transport sectors are likely get a major allocation of funds in the Delhi Budget, which will be tabled in the assembly Monday by Deputy Chief Minister Manish Sisodia. Sisodia, who holds the finance and education portfolios, is likely to allocate 25 per cent of the total budget to the education sector
  • EXCISE : Refund claim – pre-deposit – As soon as the order appropriating such fine was set aside they became eligible to refund of the deposits made during the investigations – refund allowed with Interest- (M/s Shoreline Hotel Pvt. Ltd. Versus Commissioner of Central Excise, Mumbai-I And Vice-Versa – 2016 (3) TMI 806 – CESTAT MUMBAI)

MCA  UPDATES 

  • COMPANY LAW : Where appellants did not impugn either allotment of Rights Issue or their removal from Board of Directors at relevant time and raised such grievances only when company’s economic difficulties were over and it was on path of substantial progress, appellant’s interest in company was limited to their initial shareholding and nothing more – [2016] 67 taxmann 263 (Delhi)
  • COMPANY LAW : Where Single Judge dismissed earlier winding up petition filed by appellant with a liberty to bring fresh action in accordance with law and respondent was not prepared to deposit sum due, second winding up petition filed by appellant was not barred by res judicata and same was to be admitted – [2016] 67 taxmann 262 (Calcutta)

Key Dates

  • E-Payment of Service Tax for the month/quarter ended March: 31/03/ 2016
  • E-Payment of Excise duty for the month/quarter ended March: 31/03/ 2016
  • Last date of filing of ITR for A.Y. 2015-16 without penalty & A.Y. 2014-15 with penalty of Rs. 5000: 31/03/2016
  • Last date for filing Wealth Tax return for A.Y. 2014-15: 31/03/2016
  • Payment of balance advance income tax by all: 31/03/2016
  • Reconciliation return of statutory forms for the year 2014-15: 31/03/2016
  • The content of this article is intended to provide a general guide to the subject matter.Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional  endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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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)

GENERAL ANTI – AVOIDANCE RULES GAAR

GENERAL ANTI – AVOIDANCE RULES GAAR

www.carajput.com; Tax Complainces

www.carajput.com; Tax Compliances

NOTETHIS ARTICLE IS TO GIVE A GENERAL IDEA ABOUT GAAR ONCE IT IS INTRODUCED IN INDIA” THE LAW IS NOT YET EFFECTIVE IN INDIA

Abbreviation: General Anti Avoidance Rules

Tax avoidance is a major area of concern across the world. Rules framed by different countries to minimize avoidance of tax, in simple terms are named as GAAR.

Methods adopted to reduce tax liability can be broadly classified into four categories:

  1. Tax Evasion: Illegal arrangements where tax liability is hidden or ignored. The tax payer pays less than he is legally obligated to pay by hiding income or the information from the tax authorities.
  1. Tax Avoidance: Avoidance of tax by legal means, which would be otherwise incurred by taking advantage of some provisions or lack of provision in the law.
  1. Tax Mitigation: Situation where the tax payer takes advantage of a fiscal incentive afforded to him by the legislation by actually submitting to the conditions and economic consequences that the particular tax legislation entails. A good example is the setting up of a business in a SEZ.
  1. Tax Planning: Arrangement of a person’s business and/ or private affairs in order to minimize tax liability.

*GAAR refers to Tax avoidance;

GAAR is a concept which empowers the revenue authorities to deny the tax benefits which do not have any commercial substance or consideration. There were conflicts between tax payers whenever revenue authorities question on such transactions. In a nutshell, GAAR is a set of rules which are based on general principles to check the potential avoidance of tax in general.

What are Tax Havens?

Tax havens are countries which have low tax regimes which provide individuals and business opportunities of tax avoidance or tax evasion. There are roughly 45 tax havens in the world today. In Indian context, Mauritius is considered to be the most significant tax havens or tax evading route.

The Mauritius route can be described as a channel used by individuals and MNC’s to evade paying taxes in India. The tax evasion in India through this route is estimated to be in tune with 55 billion dollar.

Implications of GAAR in India:

•Increased litigations.

•      Implementation of GAAR provides tremendous powers to deny tax benefit to an entity if a transaction has been carried with the sole intention of tax avoidance. Due to powers in the hand of taxmen, now innocents may be harassed by them.

GAAR – Example

  1. 1. An undertaking set up in an under developed area by putting in substantial investment of capital, carries out manufacturing activities therein and claims a tax deduction on sale of such production/ manufacturing.

Here there is an arrangement and one of the main purposes is a tax benefit.

This is a case of tax mitigation where the tax payer is taking advantage of a fiscal incentive offered to him by submitting to the conditions and economic consequences of the provisions in the legislation. So this would not invoke GAAR.

  1. 2. A business sets up a factory for manufacturing in an under developed tax exempt area. It then diverts its production from other connected manufacturing units and shows the same as manufactured in the tax exempt unit (while doing only process of packaging there).

Here there is an arrangement and there is a tax benefit. The transaction lacks commercial substance and there is misuse of the tax provisions and thus revenue would invoke GAAR.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:info@carajput.com or call at 9555555480

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)

HIGHLIGHTS – DIRECT TAX PROPOSALS OF UNION BUDGET 2020

HIGHLIGHTS – DIRECT TAX PROPOSALS OF UNION BUDGET 

www.carajput.com; Budget

www.carajput.com; Budget

UNION BUDGET 2020 FEATURES

The review of the budget is divided into two main categories: (a) Direct Tax (b) Indirect Tax, with a significant emphasis on the proposed change to the Direct Tax.

The budget was very strong on the expectations of individual taxpayers, as the hopes for tax relief were very high. The key themes of this budget were the aspiration of India, economic growth, and the creation of a caring community.

The budget statement was the largest speech recorded by any finance minister, but N. Sitharaman still failed to energise the stock market as the market responded negatively. In this report, the Government’s Direct Tax Plan, which is divided into different categories, will be discussed as follows:

  • Individual taxpayers
  • Corporate
  • NRIs
  • Foreign
  • Others

INDIVIDUAL TAX RATES

The budget provided taxpayers a new choice to apply for a lower slab rate if they forgave any deductions or exemptions available under the Income Tax Act, 1961. The updated tariffs are as follows:

S.No Income (Lakh) Old Slab rate (%) Income New Slab rate (%)
1 2.50L-5.0L 5 2.50-5.0L 5
2 5.0-10L 20 5.0-7.5L 10
3 10L & Above 30 7.5-10L 15
4 10-12.5L 20
5 12.5-15L 25
6 Above 15L 30

The Finance Bill gives taxpayers the opportunity to exercise the different choice of using new rates or staying under the old regime. The main change is that although the exemptions under section 10 of the Income Tax Act 1961 extend to new rates, the housing interest rate and principal deduction under section 24B and the deductions available under chapter VI-A cannot be used. As a result, no such benefit will be accessible under the proposed format.

NEW SURCHARGE RATES APPLICABLE FOR THE FINANCIAL YEAR 2020-21

S.No Assesse Type Net Income up to Surcharge Rate (%)
1 Individual/HUF/AOP/BOI Exceeds 50L upto 1Cr 10
2 Individual/HUF/AOP/BOI From 1 Cr to 2 Cr 15
3 Individual/HUF/AOP/BOI From 2 Cr to 5 Cr 25
4 Individual/HUF/AOP/BOI Beyond 5 Cr 37
5 Domestic Company 1 to 10Cr 7
6 Domestic Company Exceeds 10Cr 12
7 Firm/LLP/Cooperative Society/Local authority Exceeds 1Cr 12
8 Foreign Company 1 to 10 Cr 2
9 Foreign Company Exceeds 10Cr 5

Limit for tax audit

Tax audit In compliance with section 44AB, the threshold is now increased to Rs. 5 Cr in order to promote small medium-sized enterprises that were needed to carry out such audits. The tax audit limit has been raised from Rs 1 crore to Rs 5 crore given that the turnover/gross receipts in cash did not exceed 5 percent in the previous year. In addition, the payment made in P.Y. in cash does not exceed 5%. For such taxpayers, the time limit for the tax audit has been extended from 30 September to 31 October.

Intellectual Property

It is recommended that a digital network be set up to promote the smooth implementation and security of intellectual property rights. In comparison, it is suggested that the Center of the Institute of Excellence should be developed to work on the complexities and creativity of intellectual property.

Rates for Real Estate Circle and Stamp Duty Variation

The Bill aims to expand the exemption by allowing for a difference of 10% between the real consideration and the circle rate as opposed to the existing 5% rate. This is a significant relief for the seller of the property for the measurement of profit and profit on the selling of immovable property.

TDS DEDUCTION BY E-COMMERCE OPERATORS FOR SALES AND SERVICES THEIR WEBSITE.

New section 194-O is intended to be introduced whereby ‘e-commerce operators’ would be allowed to deduct tax at a source of 1% of the gross sum of sales and services promoted or delivered via their digital or electronic platforms. The person or HUF e-commerce participant with less than 5 lakhs of sales and his PAN shall not be liable.

Cooperative Societies

Cooperative Societies by new section 115BAD will be taxed at a tax concessions tax rate of 22 percent without exemptions compared to the current 30 percent. The taxability of the dividend in the hands of the beneficiary is increased to Rs. 5000 of Rs. 2500 Taxpayer’s Charter in the Act.  New section 119A of the Act under which the Board shall declare a Taxpayer’s Charter and give such orders, directives, instructions or guidance to other revenue-tax authorities as it may find necessary for the administration of the Charter.

Abu Dhabi Investment Authority and Sovereign Wealth Fund Certain Income Exemption

Section 10 of the Income Tax shall provide for the exemption of any income in the form of a dividend, interest or long-term capital gain arising from an investment made in India before 31.03.2024 and retained for a period of three years in respect of equity and debt investment, and such investment will be made in respect of any prescribed sector.

The privileges provided to the assessee, with income and earnings from the business of establishing and building affordable homes subject to circumstances, can be deducted at a rate equal to 100% of the profits and earnings from that business. The requirements are that such business must be licensed by the competent authority during the period from 1 June 2016 to 31 March 2021. Enhancing the benefits of these kinds of projects to one more year pursuant to Section 80-IBA of the Act.

Electricity generation companies under the concept of manufacturing

New Amendment of Section 115BAB to incorporate the generation of electricity as production as current domestic manufacturing companies formed on or after 1 October 2019 and which start production or production on or before 31 March 2023 and which do not gain from any concessional deductions or incentives may pay tax at a rate of 15%. The same section will now also provide a gain of adding the “electricity generation business” as described in the concept of output.

DEPOSIT INSURANCE LIMIT INCREASED TO RS. 5 LAKH

The other major announcement made was with respect to bank deposit insurance, which would be raised to Rs. 5 Lakhs from Rs. 1 lakhs, which was founded in May 1993.

The cap will be raised by the Deposit Insurance and Credit Guarantee Company. This is a major relief for depositors in the recent case of Punjab and Maharashtra Cooperative Bank’s inability to pay and eventual RBI action on depositor and other issues. In the case of banks, the rise will mean further premium charges to insurance co. Hopefully, this would bring more relief to the depositor, however, the real problem is the Financial Resolution and Deposit Insurance Bill, 2017 the real devil for the depositor.

Non-residents Definition changes & taxability

The third big reform is the concept of non-resident and the status of taxability if you are not taxed anywhere around the world. Now the non-resident is a person who has remained outside India for a period of not 182 days but 246 days. Thus a person has to stay a little later to claim the status of a non-resident otherwise as a resident and is liable to be taxed on both Indian and non-Indian income.

Taxability of non-tax residents anywhere in the world

Further to the above, if a person is a citizen of India and is not liable for tax in any foreign country on the grounds of residency, that person would be a resident of INDIA and would be liable for tax on his or her global income in India.

Hence the government widens the coverage of residents and targets Indian people who live or make arrangements where they do not pay tax elsewhere they will be liable to pay tax in India.

Exemption from the filing of an income tax return to non-residents

Exemptions for non-residents from the completion of the Income Tax Return under 139(1) by revising Section 115A, which now states that if the overall non-resident income contains royalties or fees for technical services (FTS) then they are not required to file the return. Existing provisions allow for relief only in the event of an interest or dividend income and TDS has been charged on that income.

ETF for G-Sec investment for the retail investor

Retail investors now have a new investment door through the G-Securities ETF following the success of the Bharat Bond ETF, which expanded the scope for any further issues.

AMENDMENT PROPOSED FOR CORPORATE

Dividend Distribution Tax

Currently, dividends paid by a corporation are subject to the DDT at an effective rate of 20.56%. Such Dividend Distribution Tax is applied to the company’s post-tax revenue, i.e. after the company has already suffered corporate tax on its profits. Although Dividend Distribution Tax is a tax liability of the distributing business i.e. it is not in the essence of the source tax deduction), such Dividend Distribution Tax is not available as a credit to the shareholder. The dividend so earned from the distribution company is excluded from tax on the part of the shareholders Excluding a few having a dividend income of Rs. 10L. DDT has been discontinued. Instead, the recipients of the dividend will have to pay tax at their applicable rate. The dividend Distribution Tax has been abolished. Instead, the recipients of the dividend will have to pay tax at the respective applicable Tax Rate.

Currently the same would be being eliminated for companies and will be taxed after 31.03.2020 in the hands of the Shareholder but still the responsibility is to deduct TDS is on the Company, again making the compliance burden.

Decriminalization of the Rules on Corporations

It is recommended that the Government expand its attempts to eliminate criminal liability under the Companies Act, 2013. The activities would be in line with the priorities of the Ease of Doing Business. Measures are already being taken with more new steps in the new FY that would pave the way for such decriminalisation of the provisions of the Companies Act, in particular those relating to directors and non-commissioned officers.

CELL INVESTMENT CLEARANCE

A proposal has been made to set up an Investment Clearance Cell through a portal that will provide “end to end” facilitation and support, including pre-investment guidance, information on land banks and facilitate clearance at central and state level. This initiative is in line with ongoing government efforts to make “ease of doing business” in India.. This is to help the entrepreneur with the clearance and knowledge available in a free and hassle-free way.

ESOP & ITS TAXABILITY

Start-ups and companies depend on ESOP to attract and retain talent, but the same ESOP is now becoming a source of a burden as tax provisions are complicated. But the Bill has made life easier as ESOPs are taxed earlier than 5 years or leave the Business or sell shares.

Under the Section 80-IAC of the I Tax Act relating to special arrangements in respect of the prescribed business. It provides for the deduction of a sum equal to 100 percent of the income and benefits obtained from a qualified company by an eligible start-up for three consecutive assessment years out of 10 years at the option of the assessor and the gross turnover of its business does not exceed INR 100 Crore. The turnover cap for start-ups is then raised to INR 100 Crore from 25 Cr and also to 10 years.

FEW OTHER CHANGES ARE HEREUNDER:

  • The Government has introduced a new income regulatory structure Section 115BAC, which entails a major improvement in the rate of tax levies. Taxpayers have been given a choice whether they want to pay taxes under the new scheme or whether they want to continue paying taxes under the old scheme. But a few taxpayers might not be able to go back to the old tax slab once they chose to adopt the latest one.
  • Through Section 194J-Technical Services Fees, TDS was decreased from 10% to 2%.
  • Section 80EEA, the incremental deduction of Rs.1.5 lakh for interest paid on home loans will also be given for loans approved prior 31 March 2021.

TDS Rates – Financial Year 2020-21  i.e. Assessment Year 2021-22

Section Particulars Domestic Company (in %) Other than domestic Company (in %) TDS Rate Individual/ HUF (Indian Resident)(in %) TDS Rate for (NRI) in India (in %)
194H Commission or brokerage

(Monetary Limit – Rs 15,000)

5 5
194-I Rent

(Monetary  Limit   –  Rs  2,40,000)

  a. Plant &  Machinery 2 2
  b. Land or  building or  furniture or fitting 10 10
194-IA Payment on transfer of certain immovable property other than agricultural  land (Monetary  Limit  –Consideration exceeding Rs 50,00,000) 1 1
194-IB A Payment of rent by an individual   or  HUF not liable to tax audit

(Monetary Limit – Rent for the month or part of the month exceeds Rs  50,000)

5
194K Payment of any income in  respect of:

a) Units of a  Mutual Fund as  per  Section  10(23D)

b)The Units from    the administrator

c) Units from
the specified company

10

(w.e.f. 01.04. 2020)

10

(w.e.f. 01.04.2020)

194M Payment of commission  (not being insurance commission),  brokerage,  contractual fee, the professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. 5 5
194N Cash withdrawal in excess of Rs. 1 crore during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in the business of banking or a post office 2 2
194-O

 

 

 

Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. 1

(w.e.f.  01.04.2020)

 

1

(w.e.f. 01.04.2020)

195 Payment of any other sum to a Non-­resident
a)Any other income 41.60 31.20
b)Income by way of fees for technical services 10.40
c) Income in respect of investment made by a Non-resident Indian Citizen 20.80
d) Income by way of interest payable by Government or an Indian concern on money borrowed or debt incurred by Government or the Indian concern 20.80
e) Income by way of long-term capital gains as referred to in Section 112A 10.40
f) Income by way of short -term capital gains referred to in Section 111A 15.60
192 Payment of salary Normal Slab Rate Normal Slab Rate
194J A Payment  for fees for  Technical  services,  Professional services    or royalty etc.  (Monetary Limit –Rs  30,000 p.a)        
a. Fee for  technical  services 2

(w.e.f. 01.04. 2020)

2

(w.e.f. 01.04.2020)

b. Fee in other all cases as per Section 194J

Note: With effect from June 1, 2017, the rate of TDS would be 2% in case of payee engaged in the business of operation of the call center.

10 10
194 Dividend

(monetary limit- Rs 5000)

10

(W.e.f. 01.04. 2020)

 –
194A Income by way of interest other than “Interest on securities”

(Monetary Limit – Rs 40,000)

10  – 10
194B Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort

(Monetary Limit – Rs 10,000)

31.20 30
194BB Income by way of winnings from horse races

(Monetary Limit – Rs 10,000)

31.20 30
194C A Payment to contractor/ sub­contractor

(Monetary Limit – Rs 30,000 per contract or Rs 1,00,000 for aggregate amount during the year)

a. HUF/ Individuals 1 1
b. Others 2 2
194D Insurance commission

(Monetary Limit – Rs 15,000)

10 5
194DA Payment in respect of life insurance policy w.e.f. 1/9/2019, the tax shall be deducted on the amount of income comprised in insurance pay-out

(Monetary Limit – Rs 1,00,000)

5

New Deadline Dates for Return filing and TDS Payment :

Month of Deduction Due dates for TDS payment through challan Quarter ending Due Date for filing of Return for All Deductors
For Govt. Deductor For Other Deductor
April
May
June
7th May
7th June
7th July
30th June 31st July
July August September 7th August
7th September
7th October
30th
September
31st October
October November December 7th November
7th December
7th January
31st
December
31st January
January February March 7th Feb
7th March
7th April
30th April 31st
March
31st May

Basic characteristics of our Foreign Tax Consultant:

  • Confidentiality and data protection of clients is accomplished by effective internal controls and risk policies.
  • Focus on business specialisation in order to be well versed in the problems and challenges facing different industries.
  • Qualified practitioners who serve as trusted consultants to corporate tax and regulatory clients.

Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 9555-555-480

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)