Lease Financing Model: Lease Financing as a Viable Business Option

Meghal D Thakker
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Lease Financing Model: Lease Financing as a Viable Business Option

Ever heard of businessmen exploring the idea of using an asset on a rental basis on account of a shortage of finance to buy the asset.

In terms of finance, the term ‘Lease’ is defined as ‘an agreement whereby the Lessor (legal owner) conveys to the Lessee (another party) in return for a payment or series of periodic payments (Lease rents), the right to use an asset for an agreed period of time.’

Here, we would be talking more about a specific type of leasing that is ‘Equipment Leasing’

Why does a company consider leasing?

The following are the benefits to a company if it considers investing in capital equipment especially when compared to a cash purchase:

  • 100% of the rentals (both the capital repayment and interest) are tax-deductible for a profit-making company.
  • In most cases, no large deposit is required.
  • Repayments are fixed which makes for easy budgeting;
  • Maintains other credit lines;
  • Flexible term ranging from 1 to 5 years;
  • Easy to upgrade when you need to replace aging equipment with new ones;
  • Almost all equipment types can be funded;
  • Allows the equipment to pay for its self over the time period;
  • Most importantly, it protects your cash flow to cover future unexpected costs or just to give you peace of mind knowing your money is in your bank account and not tied up in equipment.

Why do people invest in Leasable Assets?

Equipment leasing platforms allow you to pool your money with other investors to invest in capital equipment that can be leased to businesses.

The equipment will be sold directly to the lessee as part of a lease-to-own program. Assets that are leased can be electric bikes, batteries, furniture, etc.

The advantages of leasing assets include:

  1. Consistent Cash Flow – Fixed lease payments are provided for consistent and high distribution rates throughout the operating periods of most programs.
  2. Low Correlation – Thoughtfully underwritten leasing receivables have the ability to withstand the biggest hits to both equity and debt markets.
  3. Strong Collateral – Leasing typically provides the lessor with a purchase money security interest (PMSI), meaning the lessor legally owns the equipment. Contrast this with a loan where the lender may have a lien on an asset, which is a significantly weaker position than a PMSI.
  4. Less Volatile than Stock Market – There is more stability in the leasing system as the same is not controlled by the market forces but solely by the lease agreement.
  5. Returns – As leasing is a relatively stable option, the rate of returns is also more or less stable; also they can offer an Internal Rate of Return (IRR) of up to 20%+ which can further offer an opportunity to diversify one’s portfolio.
  6. More beneficial to New Entrants like students or people who have freshly started their career.

Lease Financing Model explained with an example

Say, an electrical vehicle is leased to a company (Lessee), the following terms will be implicated vide this transaction of leasing:

  • The title of the vehicle will not be transferred to the Lessee and the same will be returned in case of termination.
  • The purchase price will be reduced on account of various subsidies received from the Govt.’s promotion scheme of Electric Vehicles (applicable on electric vehicle leasing linked to promotion scheme only).
  • Complete compensation in case of loss of vehicle by the lessee.
  • The lessee will be responsible for all maintenance expenses, including repair, accident, running costs, regular maintenance, etc.
  • A fixed amount of security deposit would be paid by the lessee to the lessor which shall be returned to the lessee upon completion of the lease agreement.
  • A pre-determined percentage would be reserved for management expenses, (normally termed as ‘Management Fees’).

What are the ways or platforms to structure a lease financing deal and invest in it?

Investing in lease financing would require negotiating with the lessee for lease rentals, negotiating with purchase vendors for the lowest purchase price, and doing the due diligence of the lessee and other legal paperwork. This structuring is difficult for a normal investor.

However, platforms like Gripinvest do it for you and all you need to do is complete the KYC, which takes 5 minutes and invest an amount that gives you a return from the very next month.

The expected IRR is as high as 22% (Pre-tax) and the structuring through LLP makes the return totally tax-free in the individual’s hands.

To maximize the returns, the asset class chose which entitles the depreciation rate of 40% and an investor may start as low as Rs.20,000/-which is also one of the reasons for best returns on investment.

Interested to know more about such opportunities? Follow the ITAT Orders blog!

File Form 10A in 5 Easy steps

Priya kejriwal
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File Form 10A in 5 Easy steps

Are you an applicant registered under Section 12A and 80G or Section 12AA? (i.e Trust/Societies/Hospitals, etc.). Then you need to obtain fresh registration in the prescribed format under Sec 10(23C) of the Act by 30th June 2021.

The Central Board of Direct Taxes (CBDT) has tabled a new form i.e. Form 10A for the registration/ intimation/approval/provisional approval of charitable trusts that are compulsory being effective from April 1, 2021.

This states that the person who has received income and who want to avail the benefit as per section 11 & 12 has to make an application in the prescribed standard form i.e. 10A or 10B and the stated manner to the Principal Commissioner or Commissioner, for registration of the trust or institution.

One can file Form 10A online by simply visiting the E-filing website of the income tax department using a digital signature.

Steps to file Form 10A

Step 1: First, you need to log on to the E-filing portal of the income tax department through https://incometaxindiaefiling.gov.in/

Step 2: Then, you have to go to the E-file menu located at the upper-left side of the website page and click on the Income Tax Forms.

Step 3: You need to select Assessment Year and Form 10A from the drop-down list.

Step 4: You have to select the submission mode as Prepare and submit online from the drop-down list and click on continue.

Step 5: Before filing the form, you need to read the instructions carefully and click on the submit button to complete the process.

Along with the form 10A application, the following documents must be attached by the taxpayer:

  • Where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
  • Where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
  • Self-certified copy of the registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
  • Self-certified copy of the documents evidencing adoption or modification of the objects, if any;
  • Where the trust or institution has been in existence during any year or years before the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;
  • Note on the activities of the trust or institution;
  • Self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be; and
  • Self-certified copy of the order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be if any.

The Commissioner shall on receipt of such application examine the documents provided by the applicant and issue an order in Form 10AC with sixteen digits Alphanumeric Unique Registration Number.

Relevant FAQ’S for Form 10A are as follows:-

Q1: A charitable trust has obtained registration under Section12A of the Income Tax Act,1961. Now, suppose it wants to obtain registration under Section 80G of the relevant Act. Is it required to file a new application in Form 10A?

Ans. Yes. For each unique section code as specified in the section code list in Form 10A, applicant is required to file a separate application in Form 10A.

Q 2: Is it possible to obtain registration under multiple sections such as Section 10(23C) and Section 80G of the Income-tax Act, 1961 by filing a single application in Form 10A?

Ans. No. Applicant needs to file a separate application in Form 10A by selecting the relevant section code from the Section Code list.

Q 3: A trust is already registered under Section 10 (23C) of the Income-tax Act, 1961. It wants to obtain registration under Section 12A of the relevant act. Is it eligible to file Form 10A in such a case?

Ans. No. If the applicant is already registered under Section 10(23C) of the Income-tax Act, 1961, he is not eligible to obtain registration under Section 12A of the relevant act, and hence, he will not be allowed to file Form 10A for Section 12A registration.

Q 4: Is it possible to select multiple section codes in Form 10A to obtain registration under different sections?

Ans. No. Applicants cannot select multiple section codes in Form 10A. One single application in Form 10A can be submitted only for one section code

The form can be accessed at https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007795.pdf

How RSA Consultants can help?

We are a team of experienced Chartered Accountants, Company Secretaries, and Business consultants and having experience of working with many NGO’s and understands the needs of such organization.

We will fill out the application and submit it on your behalf with the Income Tax Department and will give you absolute clarity on the process to set realistic expectations. You may explore more at NGO 12ab Registration.

Solve your Income Tax puzzle with Us!

Priya kejriwal
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Solve your Income Tax puzzle with Us!

Have you received any income tax notice so far? Are you the lucky one? or the unlucky one! If yes, next 5 minutes is worth investing your time. A notice issued on you does not necessarily mean you have committed a crime. Even a minor error in tax return can invite a notice from the tax department.

The Mission of Our Income Tax Department is “To promote Compliance with our direct tax laws, through caring taxpayer service and strict enforcement, and thus realize maximum resources for the Nation.”

With the above mission in the mind, recently Income Tax department are sending Notice to various assesses.

Major reasons to expect notices or communication from Income Tax Department are as follows:-

  • Income is more than the exemption limit and ITR (Income Tax Return) is not filed.
  • Income does not exceed exemption limit but TDS (Tax Deducted at Source) is deducted and ITR is not filed.
  • TDS mismatch in ITR filed and 26AS (Govt. record).
  • Arithmetical errors in ITR filed.
  • Investments in the name of spouse or minor kids but you are claiming deduction for them.
  • For setting off refunds against remaining tax payable
  • Misreporting LTCG from equity
  • For tax evasion in earlier years 
  • Non-disclosure of foreign assets and Indian assets in certain cases.
  • Unsecured loan or advances taken/given to others.
  • High value transactions:
    1. Cash deposits in a bank totaling Rs. 10 lakh or more in a year.
    2. Credit card purchases of Rs. 2 lakh or more.
    3. Mutual fund investments of Rs. 2 lakh or more.
    4. Purchase of bonds and debentures worth Rs. 5 lakh or more in a year.
    5. Sale or purchase of property worth Rs. 30 lakh or more.

Let’s explore few of the above reasons with examples:-

1.Delay in filing Income Tax return

If you’re nearing the ITR filing deadline and still haven’t filed your returns, you will receive a reminder to do so. Notice may be issued under Section 142(1)(i) of the Income Tax Act that requires you to furnish the return.

2. For scrutiny assessment

You may receive a notice specifically under section 143(2). This means that the ITR filed by you has come under the tax authorities’ lens. Such scrutiny can be related to anything from a mismatch to inaccurate reporting etc.

3. Settlement of refunds against remaining dues and tax payable by you

You may also receive a notice if there are any dues in the form of tax, penalty, fines or any other sum payable by you. In case you claimed a refund, the assessing officer may send you a notice as an intimation that the dues will be adjusted against the Income Tax refund you have claimed.

4. For non-disclosure of income or if some income has escaped assessment.

If the income tax authorities believe that not all income from various sources has been declared then a notice is served to you on grounds of non-reportage. To avoid such incidences of non-disclosure of income while filing your Income Tax Return, you should collect all your financial statements and evidence of all your income sources, including payslips, bank statements, invoices etc.

5. A misreported LTCG from equity

Long-term Capital Gains derived from equity has to be declared and reported in your ITR. It is a complex computation, and tends to be miscalculated. Under Section 143(3), this could be included as taxable income and interest can be charged on the income tax shortfall.

6. When the TDS claimed by you does not match with Form 26AS

Your TDS at the time of filing the ITR should match with the one mentioned in Form 26AS and Form 16 or 16A as per Govt. records. If a mismatch is found, a notice will be issued under Section 143 (1).

7. For non-declaration of investments made in the name of spouse

Income from such investments is taxable in your hands, the non-disclosure of which will invite a notice from the Income tax authorities.

Unaware of the fact that whether such notices are issued to you?

It is advisable to Login to the e-filing portal (https://incometaxindiaefiling.gov.in) using your PAN and the registered password and check the your notice status. Or Consult your Tax expert to solve your Tax puzzles easily.

Suppose you have received one such notice. So what to do next?

Do not panic, simply oblige the query. Respond to the notice, and furnish the documents and information the department has sought. File a rectified return and pay the tax due, if any, within the stipulated period.

Reply to all notices issued!

Eg1. If the notice is about complete scrutiny or reassessment, you may have to undergo detailed scrutiny. Such notices come along with a questionnaire asking for information on a particular transaction, asset or income.

Eg2.If the notice is related to limited scrutiny, you have to provide details of particular assets mentioned such as when it was purchased, its cost and source of fund. The notice will also specify the date before which such information and documents are to be submitted.

Now with Faceless Scheme the government has introduced an e-proceeding facility under which all notices can be responded to online. Not responding to the notice could cost you a lot of time, money and in some cases, it could also lead to imprisonment.

Match the pieces and get the right picture.

You can either choose to represent your case yourself or authorise a tax expert to do so. The latter option is better as a professionals will fully understand each and every explanation sought and respond appropriately.

CBDT extends various compliance dates due to Covid-19 Second Wave

Sourabh Agarwal
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CBDT extends various compliance dates due to Covid-19 Second Wave

In view of the adverse circumstances arising due to the severe Covid-19 pandemic and also in view of the several requests received from taxpayers, tax consultants & other stakeholders from across the country, requesting that various compliance dates may be relaxed, the Government has extended certain timelines today.

In the light of multiple representations received (supra) and to mitigate the difficulties being faced by various stakeholders, the Central Board of Direct Taxes (CBDT) has, under section 119 of the Income-tax Act, 1961(the Act), provided the following relaxation in respect of compliances by the taxpayers:

  • Appeal to Commissioner (Appeals) under Chapter XX of the Act, for which the last date of filing under that Section is 1st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31st May, 2021, whichever is later;
  • Objections to Dispute Resolution Panel (DRP) under Section 144C of the Act, for which the last date of filing under that Section is 1st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31st May, 2021, whichever is later;
  • Income-tax return in response to notice under Section 148 of the Act, for which the last date of filing of return of income under the said notice is 1st April, 2021 or thereafter, may be filed within the time allowed under that notice or by 31st May, 2021, whichever is later;
  • Filing of belated return under sub-section (4) and revised return under sub-section (5) of Section 139 of the Act, for Assessment Year 2020-21, which was required to be filed on or before 31st March, 2021, may be filed on or before 31st May, 2021;
  • Payment of tax deducted under Section 194-IA, Section 194-IB and Section 194M of the Act, and filing of challan-cum-statement for such tax deducted, which are required to be paid and furnished by 30th April, 2021(respectively) under Rule 30 of the Income-tax Rules, 1962, may be paid and furnished on or before 31st May, 2021;Statement in Form No. 61, containing particulars of declarations received in Form No.60, which is due to be furnished on or before 30th April, 2021, may be furnished on or before 31st May, 2021.

CBDT Circular No.8/2021 in F. No. 225/49/2021/ITA-II dated 30.04.2021 issued. The said Circular is available on www.incometaxindia.gov.in.

New Penalty provision under section 270A |A blessing in disguise?

Priya kejriwal
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New Penalty provision under section 270A |A blessing in disguise?

Penalty on Concealment of particulars of income or furnishing inaccurate particulars of income has always been a matter of litigation between the department and the assessee.

The scope of such provisions was always a subject matter of litigation since the tax authorities always levied the penalty whenever there was an addition or disallowance made by the AO even in cases where there was no prima facie case against the taxpayer.

The Finance Act, 2016 (FA, 2016) has, with effect from 1.4.2017, inserted section 270A in the Income-tax Act, 1961 with a view to substituting the provisions of section 271(1)(c) dealing with a levy of penalty for concealment of income or furnishing of inaccurate particulars.

The Finance (No. 2) Act, 2019 has amended section 270A with retrospective effect from 1.4.2017.

Which authorities can levy penalty u/s 270A

Penalty u/s 270A of the Act can be imposed by Assessing Officer, Commissioner (Appeals) or the Principal Commissioner or Commissioner.

Scope of penalty u/s 270A

Penalty u/s 270A shall be levied on the under-reported Income or under-reported Income as a consequence of any misreporting thereof.

Quantum of Penalty u/s 270A

ParticularsQuantum
In case of Underreporting of Income50% of the amount of tax payable on under-reported income
In case of Underreporting of Income in consequence of any misreporting thereof200% of the amount of tax payable on under-reported income

What is Under-Reporting of Income?

A person shall be considered to have under-reported his income if, –– 

  1. the income assessed is greater than the maximum amount not chargeable to tax, where no return of income is filed; 
  2. the assessed income is greater than the income determined upon processing under section 143(1)(a), where the return is filed; 
  3. the income assessed is greater than the income assessed or reassessed immediately before such reassessment;
  4. the income assessed or reassessed has the effect of reducing the loss or converting such loss into income; 
  5. the amount of deemed total income assessed or reassessed under section 115JB/115JC is greater than the deemed total income determined in the return processed under section 143(1)(a); 
  6. the amount of deemed total income assessed as per the provisions of section 115JB/115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed;
  7. the amount of deemed total income reassessed as per the provisions of section 115JB/115JC is greater than the deemed total income assessed or reassessed immediately before such reassessment.

What is Mis-reporting of income?

Cases of misreporting of income shall be the following – 

  1. misrepresentation or suppression of facts; 
  2. failure to record investments in the books of account; 
  3. the claim of expenditure not substantiated by any evidence; 
  4. recording of any false entry in the books of account; 
  5. failure to record any receipt in the books of account having a bearing on total income; and 
  6. failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X of the act.

Section 270AA has been inserted into the Act to reduce the litigation and tet the speedy recovery of the tax along with interest.

In section 270AA of the Act, the Assessee has been provided with an option to making application to AO for granting immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 276CC, subject to fulfilment of following conditions: –

  • (a) the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and
  • (b) no appeal has been filed

The application has to be made in form No. 68 within 30 days from the end of the month in which the order has been received by the Assessee.

After providing opportunity to the Assessee, the AO shall pass the order either accepting the application or rejecting the same within one month from end of month in which application is made by the Assessee. The order so passed by the AO shall be final and is non appealable. 

If the application is accepted by the AO, then no appeal u/s 246A or revision u/s 264 shall be admissible. However, the Assessee can file appeal u/s 246A or revision u/s 264 of the Act, if the immunity application has been rejected by the AO. The appeal in such cases has to be filed with condonation of the delay.

Immunity u/s 270AA is not available in the cases covered u/s 270A(9) i.e. misreporting of income.

Accordingly, immunity from penalty can be granted only in the case where penalty has been initiated on the ground of under-reporting of income.

Further, immunity is not available in piecemeal or issue wise, it has to be for the Assessment Order in its entirety.

Therefore, the Assessee has to forego his right to appeal with respect to all the additions made in the Assessment Order of the assessee. As per the strict interpretation of the Section, Assessee cannot pray for immunity on issue wise.

Conclusion:-

As compared to the earlier penalty mechanisms, new provisions are certainly at a higher objective to fulfil.

However, as is the case with any new provisions of law, there are a number of unresolved issues which need to be resolved in order to make these provisions workable in a clear and litigation free manner.

The income Tax department is also taking a technological turn with the new Income Tax portal designed to serve taxpayers and stakeholders. get the full coverage about the New Income Tax portal here.

FAQ’s for seek VC and seek VC adjournment for appearing in e-proceeding.

Priya kejriwal
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FAQ’s for seek VC and seek VC adjournment for appearing in e-proceeding.

What is VC?

VC stands for ‘Video Conferencing’. Using the VC facility, an assessee is enabled to express or submit one’s response orally before an Income Tax Authority who has initiated the proceeding and expect the response from the user.

This facility has been enabled by the department as a substitute for personal appearance/hearing before an Income Tax Authority.

The facility for oral submission is in addition to submitting response in writing.

Who can avail video conferencing facility?

It shall be noted that, assessee on whose account hyperlink of video conference is enabled against a notice, will only be eligible. Question that may arise is how to check such link appearance, then for that assessee will be required to login to e-filling, then will be required to click on e-Proceeding and will be required to select from pending proceeding link, which will show the link for video conference (If allowed).

What is the process to seek VC facility?
If a VC hyperlink is found against a notice issued by the department under the column “Video Conferencing”, the user needs to click on that hyperlink. On clicking, another window appears with the notice details prefilled.

  • Click on the hyperlink “Seek VC”.
  • On click on the same, a window appears. The user needs to choose the appropriate reason from the drop-down values. If there are no predefined dropdown, the user may select “Others” and enter the description in text box.
  • Thereafter, a text box will appear wherein user needs to provide reasons in detail for seeking VC and also can provide the date on which the user desires to submit oral submission. (Maximum 4000 characters)
  • If the user wants to upload any document supporting such a claim, there is provision to attach the same by click the button “choose File”. The document that are PDF format can only be attached and should not exceed 5 MB.
  • Now Click, submit button. A success message will be displayed on submission of request.

How to check the status of VC request raised?

VC request raised by assessee will either be approved or rejected. If approved, then the department will send an email and SMS communication informing the date and time for VC along with VC URL. The VC details will be displayed in the user’s e-proceeding VC Notice schedule. The login password will be shared 2 hours before the scheduled time of VC on to the registered mobile number. If rejected, then rejection remarks and rejection letter will be displayed to the assessee in VC Notice schedule in addition to email and SMS communication.

How to check the status of VC request ?

Steps are quiet simple:-

  • Login to e-Filing->e-Proceeding->Select Proceeding Name ->
  • Click VC hyperlink under the Video conferencing column. On click of VC hyperlink, the details of VC request submitted will be displayed.

• If request is approved, scheduled date & time of VC will be displayed under the column “VC date & Time” and status will be displayed as “Approved”. Under ITD Remarks column “VC Schedule Notice” will be displayed in hyperlink to view and download. ‘VC link’ will be visible 2 hours before the scheduled time of VC under the ‘VC link details’ column.

• If request is rejected, status will be displayed as “Rejected”. Under ITD Remarks column “Remarks” and “Rejection letter” will be displayed in hyperlink to view and download along with email & SMS communication.

What if video conference date and time is not suitable?

In case if video conference date and time given by department is not suitable than in that case assessee may submit adjournment request and can seek other date and time for such video conference. This can be done by clicking on “Seek VC Adjournment”. The point which is worth noting is the said request is required to be submitted before expiry of video conference date and time. If the said time is expired than, no request for adjournment will be accepted.

How assessee will be able to join the meeting?

If assessee wants to join the meeting, then he will be required to communicate video conference URL (which is communicated by department) to the browser. On opening of site, assessee will be required to enter the user id and password. The user name will be the registered id of taxpayer and the password for the same will be communicated by department.

While attending meeting, assessee shall keep in mind following points, that he will be required to keep identification document like Aadhaar, PAN Card, Passport or any other government issued identification document handy and share as an when required. He will be required to keep softcopy of all the documents on which you want to place reliance during the Videoconference and which may be shared during video conference.

What if video conference failed due to technical issues?

If due to technical issue video conference is not conducted than in that case, department will cancel the existing video conference and will share new date and time for video conferencing and required link for connecting.

Can Authorized Representative also join the VC meeting?

It shall be noted that only assessee can join Video Conference; however, in case were any authorized representative has been appointed through the e-filing account for such proceeding, then both assessee and authorized representative can join.

Can assessee avail the recording of meeting?

Yes, after video conferencing is successfully conducted. Further ‘VC recording’ hyperlink will be displayed, through which assessee can avail the recording of meeting. Further no charge will be paid by assessee for availing such recording, and it shall be made available to assessee within two days of video conference.

By clicking “Seek Adjournment” which facility is provided to assessee? Who can avail such facility?

If assessee is not able to join the meeting or he is not able to attend the hearing than in that case assessee can avail the facility of seek adjournment, by clicking on it assessee submits request to extend the response due date of a notice issued by an Income Tax authority. Only those taxpayers for whom hyperlink “Seek Adjournment” is enabled against a notice, can avail the facility of adjournment.

Is there any date limit within which adjournment request can be sought?

If assessee wants adjournment and he has decided to get it before response date mentioned in noticed, then he may seek adjournment up to 15 days from response date mentioned in notice. On other hand if adjournment is applied after response date than he may seek adjournment up to 15 days from date of seeking adjournment.

Have you received any VC links? Schedule a Consultation Call if you wish to hire a Legal Counsel to conduct VC hearing on your behalf.

Virtual CFO Services – A smart choice for newgen

Priya kejriwal
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0
Virtual CFO Services – A smart choice for newgen

What is Virtual CFO?

Virtual CFO (or vCFO for short) stands for virtual Chief financial officer. A virtual CFO is an outsourced service provider offering high skill assistance in financial requirements of an organization, just like a chief financial officer does for large organizations. A virtual CFO may be a single person or an entity.

But instead of delivering those services in person, as a full-time employee, the virtual CFO works remotely, on a contractual,part-time schedule.

Why does one need a Virtual CFO?

If you’re launching a startup, there are a number of roles that you need to fill straight away such as CEO and marketing manager. Many startups choose to leave the job of hiring a Chief Financial Officer, or CFO, until later.

This is where hiring a virtual CFO could make a lot of sense for small companies.

Growing your company’s revenue is a beautiful thing. There’s no feeling quite like the one that comes with hitting a financial goal that’s long been on your horizon. But reaching new revenue levels also comes with growing pains.

If you’ve hit that point, now the business needs a financial executive. But at this stage it’s also highly unlikely you can afford to hire a full-time CFO.This is where there is a Role of Virtual CFO services where you can balance out the cost and at the same time enjoy the benefits of professional consultation. 

If you’ve got a full-time CFO then you’re already in safe hands. A virtual CFO isn’t going to offer anything you don’t already have. If you’re lacking a CFO, however, then hiring a virtual CFO comes with a number of benefits.

Some Nuts and bolts of Virtual CFO includes:-

  • Broad Expertise
  • Greater gain Access to Their Contacts
  • Better return on your investment
  • Customized service based on your needs and budget
  • Someone to grow with you
  • Deep industry knowledge, diverse financial expertise
  • Technology and resource recommendations
  • Rebuilding balance sheet
  • Enhance financial processes

Virtual CFO services are provided to the businesses who have not appointed an in-house CFO (Chief Financial Officer). In the present scenario, many challenges are being faced by the organizations in terms of growth, financial aspects, accounting as well as management. For this a designated position is required to be appointed who can be primarily entrusted with managing the financial risks, company valuation and reviewing the various KPIs relevant to the Startup or SMEs.


Thus a virtual CFO shall be there to meet the challenges effectively by providing the financial and professional advice, analysis and support to the management. 

As a young, growing business ourselves, we understand what you’re going through. We have the experience and the tools to help you stay in control of your finances, improve your cashflow and keep investors happy.

So, if your foggy understanding of your business’s financials inhibits and your ability to make decisions, working with a virtual CFO may be a good idea.

To take the first step in exploring a virtual CFO relationship, schedule your virtual CFO consultation with us!

QRMP: Quarterly Return Monthly Payment Scheme under GST

Vedant Biyani
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QRMP: Quarterly Return Monthly Payment Scheme under GST

Taking another step towards the goal of increasing “Ease of doing business” in India and providing relief to small taxpayers; the GST Council in their 42nd Meet on 5th October 2020 proposed a quarterly return filing system for small taxpayers to be implemented w.e.f. 1st January 2021 for the 4th Quarter.

QRMP or Quarterly Return Monthly Payment Scheme is an optional scheme that CBIC has rolled out for small-scale businesses having aggregate turnover up to 5 crore rupees to furnish returns on a quarterly basis along with monthly payment of tax.

Thus, the small taxpayers would only need to file 8 returns (4 GSTR 1 and 4 GSTR 3B) in a year as compared to 16 returns a year at present.

Eligibility for QRMP

A registered Taxable Person whose Aggregate turnover (PAN wise) does not exceed ₹5 Crores in the preceding Financial Year, is eligible for the QRMP Scheme.

Further, in case the Aggregate Turnover exceeds ₹5 Crores during any Quarter in the current Financial Year, the registered person shall not be eligible for the scheme from the next Quarter.

Time Limit to opt for QRMP scheme

Sr. No.Period – QuarterTimeline
1.April – June1st Feb 2021 to 30th April 2021
2.July – Sept1st May 2021 to 31st July 2021
3.Oct-Dec1st August 2021 to 31st Oct 2021
4.Jan – March1st Nov 2021 to 31st Jan 2022

Monthly Payment of Tax under QRMP

Registered Persons under the QRMP Scheme need to pay the tax due in each of the first two months by 25th of the following month of the Quarter by depositing the due amount in FORM GST PMT-06, by selecting Monthly Payment for the Quarterly Taxpayer as the reason for generating Challan.

How can Taxpayers pay their tax liability under QRMP?

Fixed Sum Method

The Taxpayer must pay an amount of tax mentioned in a pre-filled Challan in form GST PMT-06 for an amount equal to 35% of the tax paid in cash in the previous Quarter or 100% of the tax paid in the previous month (in case GSTR-3B was previously filed Monthly during the last Quarter).

Self-Assessment Method

Manual Computation of taxes to be paid in cash where the tax liability is equal to the liability on outward supplies plus tax under RCM on inward supplies net Eligible ITC.

If the cash balance is available in the Electronic Cash Ledger, then only a balance deposit would be sufficient.

Invoice Furnishing Facility (IFF)

The registered persons opting for the Scheme would be required to furnish the details of an outward supply in FORM GSTR-1 quarterly as per rule 59 of the CGST Rule.

For each of the first and second months of a quarter, such a registered person will have the IFF to furnish the details of such outward supplies to a registered person, as he may consider necessary, between the 1st day of the succeeding month till the 13th day of the succeeding month.

The said details of outward supplies shall, however, not exceed the Rs. 50 Lakhs in each month. It may be noted that after the 13th of the month, this facility for furnishing IFF for a previous month would not be available.

As a facilitation measure, a feature of continuous upload of invoices would also be provided for the registered persons wherein they can save the invoices in IFF from the 1st day of the month till the 13th day of the succeeding month.

The facility of furnishing details of invoices in IFF has been provided so as to allow details of such supplies to be duly reflected in the FORM GSTR-2A and FORM GSTR-2B of the concerned recipient.

The said facility is not mandatory and is only an optional facility made available to the registered persons under the QRMP Scheme.

The details of invoices furnished using the said facility in the first two months are not required to be furnished again in FORM GSTR-1.

Accordingly, the details of outward supplies made by such a registered person during a quarter shall consist of details of invoices furnished using IFF for each of the first two months and the details of invoices furnished in FORM GSTR-1 for the quarter.

At their option, a registered person may choose to furnish the details of outward supplies made during a quarter in FORM GSTR-1 only, without using the IFF.

Quarterly GSTR-3B Return

  • Such registered persons would be required to furnish FORM GSTR-3B, for each quarter, on or before the 22nd or 24th day of the month succeeding such a quarter.
  • In FORM GSTR-3B, they shall declare the supplies made during the quarter, ITC availed during the quarter, and all other details required to be furnished therein.
  • The amount deposited by the registered person in the first two months shall be debited solely for the purposes of offsetting the liability furnished in that quarter’s FORM GSTR-3B.
  • However, any amount left after the filing of that quarter’s FORM GSTR-3B may either be claimed as a refund or may be used for any other purpose in subsequent quarters.
  • In case of cancellation of registration of such person during any of the first two months of the quarter, he is still required to furnish the return in FORM GSTR-3B for the relevant tax period.

Return Filing Due-Dates w.e.f 1st Jan 2021

Category of TaxpayersGSTR-1Invoice Filing FacilityPMT- 06 for M 1PMT-06 for M 2GSTR-3B
Taxpayers who are required to file monthly returns: (whose ATO TO is more than 5 Cr. Or who have not opted from QRMP Scheme)11th of the following monthNANANA20th of the following month
Taxpayers who have opted for QRMP Scheme13th day of the month following the quarter1st to 13th day in M 1 and M 225th day of the month following M 125th day of the month following M 2
22nd or 24th day of the month following the quarter

Applicability of Late Fee

The late fee will be applicable on the delay in furnishing the quarterly GSTR-3B and GSTR 1 within the due date, i.e., Rs. 25 per day (CGST/SGST) subject to a maximum late fee of ₹5,000(CGST/SGST)

However, it is clarified that no late fee is applicable for delay in payment of tax in the first two months of the quarter in form GST PMT-06.

That’s is it for the 42nd meet of the GST council. With the onset of Covid-19, the GST council discussed in their 43rd meet regarding exemption on goods and service taxes. Check out the full 43rd GST Council Meeting Updates and Relaxations here.

Rates of TDS applicable for financial year 2021-22 or assessment year 2022-23

Vedant Biyani
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1
Rates of TDS applicable for financial year 2021-22 or assessment year 2022-23

Tax Deducted at Source, also known as TDS, is a system of taxation where the person/entity responsible for making specific payments deducts the applicable tax before the payment is credited to the receiver if it exceeds threshold limit specified in particular section.

There are various sections in Income Tax Law, which specify different TDS rates, nature of payment & its threshold limits for TDS and the same have been summarized in this article.

Section No.Nature of Payment ThresholdTDS Rate
192 Salaries As per Slab Normal Slab Rate
(or)
New Tax Regime Slab Rate as opted by employee
192A Premature withdrawal from EPF 50,000 10%
193 Interest on Securities 2,50010%
194Dividends 5,000 10%
194AInterest (Banks) 50,000(Senior Citizen)
40,000(Others)		10%
194A Interest (Others)5,000 10%
194B Winning from Lotteries 10,000 30%
194BB Winnings from Horse Race10,000 30%
194C Contractor – Single Transaction 30,0001%(Ind/HUF)
2%(Others)
194C Contractor – During the F.Y.1 Lakh1%(Individual/HUF)
2%(Others)
194C Transporter (44AE) declaration with PAN––
194D Insurance Commission (15G-15H allowed) 15,0005%(Individual)
10%(Company)
194DA Life insurance Policy 1 Lakh5%
194E Non-Resident Sportsmen or Sports Association–20%
194EE NSS 2,500 10%
194F Repurchase Units by MFs –20%
194GCommission – Lottery 15,000 5%
194HCommission / Brokerage 15,000 5%
194I(a)Rent of Plant / Machinery / Equipment 2.40 Lakh 2%
194I(b)Rent of Land Building & Furniture2.40 Lakh 10%
194IA 

Transfer of certain immovable property other than agriculture land50 Lakh1%
194IB

Rent by Individual / HUF not liable to tax audit50,000/PM 
5%
194IC Payment of monentary consideration under Joint Development agreement –10%
194J
Fees for technical services, call center, royalty for sale etc. 30,000 2%
194J
Fee for professional service or royalty etc. 30,000 10%
194K Payment of income in respect of units payable to resident person –10%
194LA Compensation on transfer of certain immovable property2.50Lakh10%
194LB Income by way of interest from infrastructure debt fund(non-resident) –5%
194LBA Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. –10%
194LBB Income in respect of investment of investment fund –10%
194LBC Income in respect of investment in securitization trust –30%(Others)
25%(Individual & HUF)
194M

Payment to commission( not being insurance commission), brokerage etc. by individual & HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. 50 Lakh5%
194N Cash withdrawal in excess of 1 crore during the previous year from 1 or more account with a bank or co-operative society1 Cr2%
194NCash withdrawal in excess of 20 Lakhs during the previous year if assessee has not furnished return for last 3 assessment years20 Lakh2%
194NCash withdrawal in excess of 1 Cr during the previous year if assessee has not furnished return for last 3 assessment years 1 Cr5%
194OTDS on e-commerce participants5 Lakh1%
194QPurchase of goods (applicable w.e.f 01.07.2021) 50 Lakh0.10%
195Payment of any other sum to a Non-resident(The rate of TDS shall be increased by applicable surcharge and Health & Education cess):-
a) Income in respect of investment made by a Non-resident Indian Citizen–20%
b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen–10%
c) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112–10%
d) Income by way of long-term capital gains as referred to in Section 112A–10%
e) Income by way of short-term capital gains referred to in Section 111A–15%
f) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses 10(33), 10(36) and 112A–20%
g) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC)– 20%
h) Any other Income–30%
194PTDS on Senior Citizen above 75 YearsRefer Note 1 Refer Note 1
206ABTDS on non-filers of ITR at higher rates
(applicable w.e.f 01.07.2021)		Refer Note 2 Refer Note 2

Note 1:-

A senior citizen of the age of 75 year or above is not required to file the return of income, if the
following conditions are satisfied –

  • The senior citizen is resident in India and of the age of 75 or more during the previous year,
  • He has only pension income and may also have interest income from the same bank (specified bank – to be notified by the CG) in which he is receiving his pension income,
  • He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.

Note 2:-

The TDS on non -filers of ITR at higher rates This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. The Resident Indian are liable to pay twice the rate specified in the relevant provision of the Act; or twice the rate or rates in force; or the rate of 5%. 

Faceless Penalty Scheme, 2021: Simplified

Priya kejriwal
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0
Faceless Penalty Scheme, 2021: Simplified

The Central Board for Direct Taxes (CBDT) vide Notification No. 3 of 2021 dated January 12, 2021, has notified the “Faceless Penalty Scheme” for conducting penalty proceedings under the Income-tax Act, 1961 (Act) in a faceless manner.

The said scheme is aligned with the Faceless Assessment Scheme and the Faceless Appeal Scheme. It lays down the procedure for virtually conducting penalty proceedings without any physical interaction between the taxpayer and the Income-tax Department.

The said Scheme leverages technology developments and aims to live up to the Honourable Prime Minister’s vision of improving transparency, efficiency, and accountability in tax administration.

Section 274 of the Income Tax Act provides for the procedure, for imposing a penalty (for underreporting or misreporting of income u/s 270A) under Chapter XXI of the Act.

In response to a showcase notice issued by the Assessing Officer (AO), the assessee or his authorised representative was still required to visit the office of the Assessing Officer.

With the advent of the Faceless Assessment Scheme, 2019, to ensure that the reforms initiated by the Department to eliminate human interface from the system reached the next level, it was imperative to launch a Faceless Penalty Scheme on the lines of Faceless Assessment Scheme, 2019.

Therefore, the Finance Act 2020 has inserted an enabling provision in the form of a new sub-section (2A) in section 274 of the Act to provide that the Central Government may notify an e-scheme for imposing a penalty to impart greater efficiency, transparency and accountability.

The new faceless penalty proceedings to be conducted under the Faceless Penalty Scheme, 2021:

Sr No.ParticularsFaceless Penalty Proceedings under Faceless Penalty Scheme, 2021
1.Applicability All pending and new Penalty Proceedings w.e.f. 12.1.2021.
2.Penalty Adjudicating AuthorityDynamic Jurisdiction comprised in any Penalty Unit in Regional Faceless Penalty Centre (RFPC) under the overall monitoring and supervision of National Faceless Penalty Centre (NFPC).
3.Penalty Notice Issuing Authority National Faceless Penalty Centre (NFPC)
4.Assignment of Penalty ProceedingsThe NFPC assigns the Penalty Proceedings to any Penalty Unit located in any one Regional Faceless Penalty Centre through an automated random allocation system.
5.Inquiries/Adjudication during the course of penalty proceedingsThe NFPC may issue appropriate notice or requisition u/s 274 read with 270A, to the assessee or NFAC/AO, for obtaining any further information, documents or evidence, as required by the Penalty Unit in the Regional Faceless Penalty Centre, to which the penalty proceedings have been assigned by the NFPC.
6.Provision of Draft Penalty OrderDraft Penalty Order is to be passed by the Penalty unit in the Regional Faceless Penalty Centre, to which the penalty proceedings have been assigned by NFPC.

This Draft Penalty Order shall be examined by NFPC based on Risk Management Parameters and this draft Penalty Order may be sent by NFPC for Review to a Penalty Review Unit.
7.Action on Draft Penalty OrderThe penalty review unit shall review the proposal of penalty unit, whereupon it may concur with, or suggest a modification to, such proposal, for reasons to be recorded in writing, and intimate the National Faceless Penalty Centre.

Where the penalty review unit concurs with the proposal of the penalty unit, the National Faceless Penalty Centre shall pass the Final Penalty Order.

Where the penalty review unit suggests a modification, the National Faceless Penalty Centre shall assign the case to a specific penalty unit, other than the original penalty unit in any one of the Regional Faceless Penalty Centres through an automated allocation system.
8.Final Penalty OrderWhere the case is assigned by NFPC to a new penalty unit, such penalty unit, after considering the material on record including suggestions for modification and reasons recorded by the penalty review unit,

(a) in a case where the modifications suggested by the penalty review unit are prejudicial to the interest of assessee, as compared to the draft penalty order of the original penalty, shall follow the same procedure as laid down in point no.7 above and prepare a revised draft order for imposition of penalty;

or(b) in a case where the modification is not prejudicial to the interest of assessee, shall prepare a revised draft order for imposition of penalty;

or(c) may propose non-imposition of penalty, for reasons to be recorded in writing, and send such order or reasons to the National Faceless Penalty Centre;

Upon receipt of revised draft order from the penalty unit, the National Faceless Penalty Centre shall pass the penalty order as per such draft and serve a copy thereof upon the assessee or not impose penalty under intimation to the assessee.

Where in a case, as referred to in sub-clause (a) or (b) of clause (i), the National Faceless Penalty Centre has passed a penalty order, or not initiated or imposed penalty, as the case may be, it shall send a copy of such order or reasons for not initiating or imposing a penalty to the jurisdictional AO or the National Faceless Assessment Centre, as the case may be, for such action as may be required under the Act.
9.Mode of Interface between the Assessee and the Penalty Adjudicating AuthorityAll the communication between the assessee and the NFPC is to be done exclusively through Electronic Mode via the ‘proceedings functionality in the ITBA Module.

As the case may be, the assessee or his authorised representative may request for a personal hearing to make his oral submissions or present his case before the penalty unit under this Scheme.

The Chief Commissioner or the Director-General, in charge of the Regional Faceless Penalty Centre, under which the concerned appeal unit is set up, may approve the request for personal hearing, if he is of the opinion that the request is covered by the circumstances as may be notified by CBDT.

Where the request for personal hearing has been approved by the Chief Commissioner or the Director-General, in charge of the Regional Faceless Penalty Centre, such hearing shall be conducted exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, in accordance with the procedure laid down by the Board.

Related article: CBDT extends various compliance dates due to Covid-19 Second Wave

Steps taken by CBDT to implement Faceless Penalty Scheme:

National Faceless Penalty Centre

These centres are made to facilitate the conduct of faceless penalty proceedings in a centralised manner and vest it with the jurisdiction to impose penalties in accordance with the provisions of this Scheme

Regional Faceless Penalty Centres

As it may deem necessary, to facilitate the conduct of faceless penalty proceedings, which shall be vested with the jurisdiction to impose penalty in accordance with the provisions of this Scheme

Penalty Units

As it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the function of drafting penalty orders, which includes

  • Identification of points or issues for the imposition of penalty under the Act
  • Seeking information or clarification on points or issues so identified
  • Providing the opportunity of being heard to the assessee or any other person
  • Analysis of the material furnished by the assessee or any other person
  • Such other functions as may be required for imposing a penalty

Penalty Review Units

As it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the functions of review of draft penalty order, which includes

  • Checking whether the relevant material evidence has been brought on record
  • Whether the relevant points of fact and law have been duly incorporated in the draft order
  • Whether the issues on which penalty is to be imposed have been in the draft order
  • Whether the applicable judicial decisions have been considered & dealt with in the draft order
  • Checking arithmetical correctness of computation of penalty if any
  • Such other functions as may be required for review

The board may specify their respective jurisdiction.

The Notification can be accessed at:https://www.incometaxindia.gov.in/communications/notification/notification_no_3_2021.pdf

Will the National Faceless Penalty Scheme help to boost transparency? Will objectivity in the penalty proceedings may smoothen the experience of taxpayers? Will it help in achieving better compliance in the long term?

Well only time, taxpayers and government authority will decide that!

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