9 Major Direct Tax Amendments in Budget 2021-22

Vishvas Nandwani
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9 Major Direct Tax Amendments in Budget 2021-22

On 1st February 2021, Finance minister Nirmala Sitharaman introduced the Union Budget for the financial year 2021-22 of which the major Direct tax amendments have been discussed here:

Latest Tax Amendments 2021-22

1. Relief to tax payers on paying advance taxes on dividend:

From 1st April, 2020 the corporate tax was reduced to 25% and subsequently dividend which was earlier exempt upto Rs 10,00,000 in the hands of taxpayer was now made to be taxable. Since this meant that the taxpayers were now required to pay advance tax on dividends which they were not aware of. This attracted interest under section 234C of the Income Tax Act, 1961. Now the section 234C has been amended to include advance tax on dividend only on its receipt.

2. Goodwill has been excluded from Block of Assets

From 1st April, 2021 taxpayers would not be allowed to take depreciation on goodwill as the same has been excluded from the block of assets which means even the goodwill which has been paid for will not be allowed for depreciation under the amendments of Sec 32 and Sec 55 of Income Tax Act,1961.

3. Tax Audit Requirements:                  

From 1st April 2021 tax audit requirements have been changed from turnover of Rs 5 Crores to Rs 10 crores for businesses who have 95% of digitalized transactions. This is a welcome initiative by the government which will ease compliances of small tax payers and promote digital payments.

4. Relief to Senior Citizens

No filing Requirements for Senior Citizen having only pension income and interst income: Senior citizens above 75 years of age and having only Pension and interst income will now be not required to file ITR.

5. Interest and Principal repayment of loans extended to 31st March, 2022

Repayment of principal and interest of home loans can now be availed under section 80C of Income Tax Act, 1961. For joint owners both the owners can obtain the deduction of Rs 1,50,000 each.

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6. Start-ups and innovators:

Start ups incorporated up to April 01, 2022 will be eligible to avail tax holiday. Similarly, capital gains arising from sale of residential property on or before March 31, 2022 and invested by eligible assesses to subscribe the equity shares of an eligible startup will be eligible for tax exemption. Such investment can be made by the due date of filing of return of income of such eligible assesse.

7. Increase in safe harbor threshold between purchase price of house and stamp value


As per Income Tax Act, 1961 homebuyers were taxed for differential between purchase price and stamp value if the stamp duty was more. For this purpose, a difference of 10% was considered normal. Due to Covid-19 as there is  reduction in real estate prices in recent times, this budget proposes to increase the safe harbor threshold from 10% to 20% thus avoiding uncalled for taxation in the hands of the home buyers.

8. LLPs to be excluded from the scope of Section 44ADA i.e Presumptive Income

It is proposed that benefit of the Section 44ADA is not extended to LLP. LLP are required to maintain books of accounts under LLP Act and accordingly, presumptive taxation u/s 44 ADA is not applicable

9. Reduction in Time limit for assessment or reassesment

The time limit for issuance of notice for assessment or reassessment has been reduced as under:

– From six years to three years;

– In cases of serious tax evasion, wherein there is evidence of concealment of income, the notice can be issued upto ten years provided such income is in excess of INR 50 lakh or more. Notice to be issued post prior approval from the specified authority being Principal Commissioner or Principal Director or Commissioner or Director (if three years or less have elapsed from the end of the relevant assessment year) and authority being Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General (if more than three years have elapsed).

This latest tax amendment will be applicable from assessment year 2021-22 i.e., from April 01, 2021

All public sector companies will now be allowed to carry forward losses and unabsorbed deprecation after amalgamation

Presently the said provisions were applicable only to company/(ies) in the business of operation of aircraft shall now be applicable to any public sector company/(ies) irrespective of its business. In case of amalgamation or divestment of erstwhile public sector company/(ies), through share purchase agreement, on expiry of period of five years, the loss of the amalgamating company/(ies) shall be the loss of the amalgamated company/(ies).

Key Highlights of Union Budget 2021

Priya kejriwal
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Key Highlights of Union Budget 2021
The Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, presented the first-ever digital budget for 2021-22 on February 1, 2021. The total budget outlay earmarked is 34.83Lakh Crore for the year 2021-22, which is slightly higher than the previous year total budget outlay of 83.50 Lakh Crore. The increased outlay was required to boost the economy and achieve the vision of Atma Nirbhar Bharat, the budget proposals strengthen:
  • The Sankalp of Nation First
  • Doubling of farmers’ income
  • Strong infrastructure
  • Healthy India
  • Good governance
  • Opportunities for youth
  • Education for all
  • Women empowerment
  • Inclusive development
The Finance Minister declared that the Budget 2021-22 stands on 6 pillars:
  1. Health & Well Being
  2. Physical & Financial Capital and Infrastructure
  3. Inclusive Development for Aspirational India
  4. Reinvigorating Human Capital
  5. Innovation and R&D
  6. Minimum Government and Maximum Governance
Let’s walk through each pillar one by one: Pillar 1 – Health and Wellbeing:
  • A substantial increase in the investment in health infrastructure and well being has been proposed in the budget for Rs. 2,23,846 crores as against Rs. 94,452 crores last year which is a 137% increase. This increase was much required post pandemic to beat the recovery rate.
  • A new centrally sponsored scheme called Pradhan Mantri AtmaNirbhar Swasth Bharat Yojna will be launched with an outflow of Rs.64,180 crores over 6 years.
  • Provisions have been made to the tune of Rs. 35,000 crores for COVID-19 vaccines.
  • The government will merge the Supplementary Nutrition Program and the Poshan Abhiyan and launch a Mission Poshan 2.0 to strengthen the nutritional content, delivery, outreach, and outcome.
  • With a proposed outlay of Rs. 2,87,000 crores over 5 years, the Jal Jeevan Mission (Urban) will be launched for universal water supply in 4,378 urban local bodies.
  • A voluntary vehicle scrapping policy to phase out old and unfit vehicles was announced.
Pillar 2 – Physical and Financial Capital and Infrastructure:
  • AtmaNirbhar Bharat Production Linked Incentive (PIL) Scheme has been announced for 13 sectors with a capital outlay of Rs.1.97 lakh crores in the next 5 years starting from FY 2021-22. The scheme aims to bring scale and size in key sectors, create nurture and. Provide jobs to the youth.
  • A scheme of Mega Investment Textile Parks (MITRA) will be launched in addition to the above PIL scheme to make the textile industry globally competitive, attract large investments and create employment. The scheme aims to establish 7 Textile parks in 3 years.
  • The National Infrastructure Pipeline (NIP) announced in December 2019 with 6,835 projects has now expanded to 7,400 projects with around 217 projects worth Rs. 1.10 lakh crore under key infrastructure ministries completed.
  • A professionally managed Development Financial Institution (DFI) is proposed to be constituted for the purpose of infrastructure financing. A sum of Rs. 20,000 crores has been set aside to capitalize the DFI. The DFI establishment will be made with the aim of having a lending portfolio of at least Rs. 5 lakh crore in 3 years’ time.
  • A National Monetization Pipeline of potential infrastructure assets will be launched with the development of an Asset Monetization Dashboard for tracking the progress and providing visibility to investors.
  • It was announced that under the Bharatmala Pariyojana project, more than 13,000 km length of roads has been awarded at the cost of Rs. 3.3 lakh crore of which 3,800 km have been constructed.
  • The government aims to award a further 8,500 km length of roads and complete an additional 11,000 km of national highways by March 2022.
  • The Ministry of Road Transport and Highways received an enhanced outlay of Rs. 1,18,101 crores of which Rs. 1,08,230 crores is for capital (the highest ever).
  • Indian Railways have proposed a National Rail Plan for India 2030 – to create a future-ready Railway network. The Western Dedicated Freight Corridor (DFC) and the Eastern DFC will be commissioned by June 2022.
  • Measures for passenger convenience and safety were proposed.
  • With the view of raising the share of public transport through metro rail and city bus service in urban cities, the government proposed the next few phases of the metro projects will be taken up in metro cities.
  • ‘MetroLite’ and ‘MetroNeo’ – two new metro rail technologies will be deployed in tier 1 and tier 2 cities.
  • The budget also reflected on the launch of a revamped reforms-based result-linked power distribution sector scheme with an outlay of Rs.3,05,984 crore over 5 years. The proposed scheme will assist the DISCOMS for infrastructure development tied to financial improvements.
  • A proposal has been made to merge various allied laws of the securities market to the Securities Market Code.
  • An announcement was made that SEBI will be notified to regulate the setting up and development of the commodity market system in India.
  • The finance minister also proposed to increase the permissible FDI limit from 49% to 74% and permit foreign ownership and control with safeguards.
  • Following divestment transactions are proposed to be completed in 2021-22 – BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, and Neelachal Ispat Nigam Limited.
  • The government also plans on bringing out an IPO of LIC in 2021-22 for which appropriate amendments will be made in the Session itself.
  • The Finance minister confirmed the governmental approval on the policy of strategic divestment of public sector enterprises which was announced in the AtmaNirbhar package.
Pillar 3 – Inclusive Development for Aspirational India:
  • Emphasizing the government’s commitment to the welfare of the farmers, the Finance minister declared that the MSP regime had undergone significant changes to ensure that the price is at least 1.5 times the cost of production across all commodities.
  • The agricultural credit target has been enhanced to Rs. 16.5 lakh crore in FY 2022 by the government to provide sufficient and adequate credit to the farmers.
  • The allocation to the Rural Infrastructure Development Fund has been increased from Rs. 30,000 crores to Rs. 40,000 crores.
  • The Micro Irrigation Fund has been created under NABARD with a corpus of Rs. 5,000 crore would be doubled, augmenting it by an additional Rs. 5,000 crore.
  • Earlier only applicable to tomatoes, onions and potatoes, the Operation Green Scheme will be enlarged to include 22 perishable products.
  • A proposed 1,000 mandis will be integrated with the e-NAM, which already has around 1.68 crore registered farmers.
  • The fishing harbours Kochi, Chennai, Visakhapatnam, Paradip and Petuaghat have been proposed to be developed as hubs of economic activity.
  • The government announced the One Nation One Ration Card Scheme which would allow the beneficiaries to claim rations anywhere in the country.
  • Under the scheme of Stand Up India for SCs, STs and women, margin money requirements have been reduced from 25% to 15% to facilitate credit flow.
  • The government has provided Rs. 15,700 crores to support the MSME sector, which is double the last year’s provision.
Pillar 4 – Reinvigorating Human Capital:
  • The finance minister announced that the reception towards the National Education Policy (NEP) has been largely positive. The budget proposed the addition of more than 15,000 schools to incorporate the elements of the NEP.
  • The budget also proposed the setting up of 100 new Sainik Schools in partnerships with NGOs/private schools/states.
  • The Finance Minister also announced the establishment of a Higher Education Commission of India having 4 separate arms for standard-setting, accreditation, regulation and funding.
  • The government has proposed the establishment of 750 Eklavya model residential schools in tribal, hilly and difficult areas.
  • The central assistance provided under the revamped Post Matric Scholarship Scheme has been enhanced to Rs. 35,219 crores for 6 years till 2025-2026. This will benefit about 4 crore SC students.
Pillar 5 – Innovation and R&D:
  • The government will undertake a new initiative – the National Language Translation Mission (NTM), which aims to bring the government and policy information on the internet to the masses in major Indian Languages.
  • The PSU under the Department of Space, the New Space India Limited (NSIL) will carry out the PSLV-CS51 launch carrying the Amazonia satellite from Brazil along with other smaller Indian satellites.
  • 4 Indian astronauts are being trained in Russia as a part of the Gaganyaan mission activities. The first unmanned launch is expected to be executed in December 2021.
Pillar 6 – Minimum Government, Maximum Governance:
  • The budget proposed to make a number of reforms in the Tribunals for speedy assessments and delivery of justice.
  • The finance minister announced that the upcoming census drive would be the first-ever digital census in the history of India. The budget allocated Rs. 3,768 crore in 2021-22 for the exercise.
  • The fiscal deficit for 2021-22 is estimated to be 6.8% of the GDP as against the revised estimate of 9.5% of the GDP in 2020-21.
  • The government plans to bring down the fiscal deficit below 4.5% of the GDP by 2025-26.
  • The government is permitting the normal ceiling of net borrowing for the states at 4% of the GDP for 2021-22 based on the views of the 15th Finance Commission.
Direct Tax Proposals in the Budget:
  • The Union Budget leaves the direct taxes largely unchanged. The budget provides incentives to ease tax-compliance for the taxpayers.
  • The finance minister announced that the income tax return filers increased to 6.48 crore in 2020 from 3.31 crore in 2014.
  • Individuals over the age of 75 years, who are pensioners, need not file an income tax return (ITR).
  • The establishment of a dispute resolution committee for small taxpayers and a faceless dispute resolution committee for individuals is under works. Anyone with an income of up to Rs. 50 lakh (disputed income of Rs. 10 lakh) will be eligible to approach the dispute resolution committee.
  • The liability to pay advance tax on dividend income will be attracted only after the payment of dividend.
  • Pre-filled tax forms with details like salary income, tax payment and TDS have been proposed.
  • In a bid to provide relief to taxpayers, the reduction has been proposed in the re-opening of the past assessments from 6 years to 3 years.
  • In order to boost the NRIs, the government will notify rules and regulations to eliminate double taxation for NRI on foreign retirement funds.
  • The interest earned by Provident Fund contributions in excess of Rs. 2.5 lakhs will be chargeable to tax at normal rates. This provision applies only to the employee’s contribution and not that of the employers.
  • To incentivize startups, the budget extends the eligibility requirements for claiming the tax holiday by 1 year till March 31, 2022. To further incentivize the startups, Capital Gains exemption has been extended by 1 year till March 31, 2022.
  • The budget proposes to make dividend payments to REIT/InvIT exempt from TDS provisions.
  • The government has proposed to extend the eligibility of the erstwhile tax sop on home loans till FY 2022.
  • In order to ease the compliance burden on charitable trust running educational institutions and hospitals, the government has increased the limit of annual receipts from Rs. 1 crore to Rs. 5 crores for non-applicability of compliances.
  • The budget provides for tax exemptions for the relocation of funds to IFSC.
Indirect Tax Proposals in the Budget:
  • The finance minister proposed to review 400 old exemptions in the customs duty structure this year.
  • A revised customs duty structure free from distortions is proposed to be put forth from October 1, 2021 after extensive consultations.
  • The budget proposed reducing the customs duty uniformly to 7.5% on products of alloy, non-alloy and stainless steel.
  • The budget also exempted the customs duty on steel scrap till March 2022.
  • The budget reduced the customs duty on copper scrap from 5% to 2.5%.
  • An agri-infra cess of Rs.2.50 on petrol and Rs.4 on diesel has been imposed.
  • The budget imposed a 100% cess on alcohol.
Closing remarks: The Union Budget 2021-22 is expansionary. It pushes for infrastructure and healthcare spending with a target to reduce the fiscal deposit without ostensibly raising the tax burden. So, are we headed to the promised AtmaNirbharta? Is the budget really fair? Well, only time will tell. Stay Positive, Test Negative! Happy Investing.

Section 206C(1H): Area of decision making for company management and business owners for smooth implementation of TCS on sale of goods

Editor
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Section 206C(1H): Area of decision making for company management and business owners for smooth implementation of TCS on sale of goods

TCS provision would apply on all sale consideration (including advance received for sale) received on or after 01- 10-2020 even if the sale was carried out before 01-10-2020.

With effect from 01-10-2020, the Finance Act, 2020 inserted Sub-Section (1H) in Section 206C. This provision is applicable to assessee having turnover of more than 10 Crore in the preceding year and requires a seller to collect tax at source from the amount received as consideration for the sale of goods if it exceeds Rs. 50 lakhs in any previous year. There has been a lot of hues and cry around the implementation of the new provisions of TCS on Sale of goods u/s 206(1H). The ambiguities and confusion surrounding the provisions have led to the issuance of various clarifications vide Circular No. 17/2020 dated 29th Sep 2020 by CBDT and Professionals and Tax Practitioners have added their own clarifications based on judgment and practicality while advising their clients. In this article, I have made an attempt to consolidate the areas of decision making and have tried to approach the issue through a different perspective.

At para 4.4.2(ii) of Circular 17/2020, CBDT has clarified that “this provision applies on receipt of sale consideration, thus the provision of this subsection shall not apply on any sale consideration received before 01-10-2020. Consequently, it would apply to all sale consideration (including advance received for sale) received on or after 01-10-2020 even if the sale was carried out before 01-10-2020”. Though the clarification has been given in respect of another issue, the language of the CBDT’s circular indicates that the tax should be collected when the consideration received during the previous year exceeds the threshold limit. Even otherwise, as per the provisions of law, it is undisputed that the provision of TCS applies on receipt of sale consideration and not Sales ‘per se’ however for administrative convenience, the management of the Company or business owners have to take a call for adherence to any one of the following methodology for the smooth implementation of TCS provisions.

  • 1.Do not pass any entry at the time of Sales on account of the TCS component and Pay TCS at the time of collection.
    • At the time of Sales: Do not pass any accounting entry at the time of Sales on account of the TCS component. You may mention a Note in Sales Invoice that “The Customer shall be required to pay an additional amount of 0.10% (0.075% if the payment is made in FY 2020-21) over and above the Sale Consideration at the time of payment to fulfil the requirement of the provisions of Section 206(1H)” Alternatively, an additional field in Invoice may be given stating “Amount with TCS” but no accounting entry to be passed for the same.
    • At the time of receipt of Sales consideration: A common monthly debit note may be raised for all total Sale consideration received in the name of Customer at the end of the month. The Accounting Software at this point may ask whether the Sale consideration received is inclusive of TCS or exclusive of TCS. Where the assessee selects that Sale consideration is inclusive of TCS, the debit note should be raised by grossing up of the net amount received.
    • For outstanding Debtors as of 1.10.2020: No accounting entry needs to be passed.
    • Reflection in Quarterly TCS returns: The TCS returns may be prepared and filed as per the dates of Debit Notes raised crediting the TCS payable account which should be paid at the end of seven days of next month.
    • Use Cases: In this case, a consolidated entry is passed for each customer whose payment has exceeded the threshold limit of Rs. 50 lakhs which is as per law. This is the best methodology where there are fewer customers with ongoing business who can be trained to voluntarily pay an additional amount of 0.10% at the time of each payment. This method is also apt where the business transactions with the customer are maintained like a current account without any actual one-to-one correlation between Invoice and Payment so payment may be considered as inclusive of TCS and a simple year-end account contra confirmation exercise may be carried out to discuss any mismatch.
  • 2.Pass accounting Entry at the time of Sale on account of TCS but treat it as a parked account and pay TCS at the time of collection only.
    • At the time of Sales: Charge the amount of TCS on Invoice value after GST and mention the total Invoice Amount with TCS separately. In the accounting, debit the customer at the time of Sale and credit the TCS component to separate parked accounts called “TCS to be collected”. This account only acts as a “storage of memory” as a separate variable for a seller because otherwise, we might have to remember the amount to be collected on account of TCS from customers in a separate Spreadsheets and remind them at periodic intervals.
    • At the time of receipt of Sales consideration: After recording the Payment of Sale consideration in the customer’s account, a corresponding entry needs to be passed debiting the “TCS to be collected account” and crediting the same to “TCS Payable”
    • For outstanding Debtors as of 1.10.2020: A debit Note needs to be raised for all outstanding payment subject to the applicable threshold on 01.10.2020 and credited to “TCS to be collected”
    • Reflection in Quarterly TCS returns: The TCS returns may be prepared and filed as per the amount credited to TCS Payable account and not when the amount is credited to TCS to be collected. In fact, ideally “TCS to be collected” is just a control account which may be reversed as on 31st March each year by crediting Debtors account and re-entered on 1st April every year which shall present a fairer view of the affairs of the business. Similarly, reversal entry may be passed in case of Bad debts and so the seller does not end up paying the TCS from his pockets in case of bad debts.
    • Use Case: This method should be adopted by businesses wherein the payment is mostly received on Bill to Bill basis and there are many customers whose accounting Department releases payments only on basis of outstanding dues ledgers and at the same time, the seller does not wish to make payment to the credit of the Government without receiving his own payment from the customer.
  • 3.Pass accounting Entry at the time of Sale on account of TCS and pay TCS at the time of credit to TCS account during the Sale itself.
    • At the time of Sales: Charge the amount of TCS on Invoice value after GST and mention the total Invoice Amount with TCS separately. In the accounting, debit the customer at the time of Sale and credit the TCS component to TCS Component.
    • At the time of receipt of Sales consideration: No additional entry.
    • For outstanding Debtors as of 1.10.2020: A debit Note needs to be raised for all outstanding payment subject to the applicable threshold on 01.10.2020 and credited to “TCS Component”
    • Reflection in Quarterly TCS returns: The TCS returns may be prepared and filed as per the amount credited to the TCS Component account.
    • Use Case: This method should be followed only for administrative convenience when Method 1 and 2 are not feasible or that method disturbs the ease of doing business “more”. Imagine a scenario where the seller has sold goods of Rs. 1 Cr and passed the entry on account of TCS and the outstanding balance as of 31st March is Rs. 40 lakhs and the buyer makes this payment in the next year wherein as per law no TCS is collectible on this payment but the seller would have already deposited the TCS to the credit of the Government giving rise to anomalies.  However, this method may be required to be followed because of the peculiar nature of the Accounting Package used by the business owners or some rigidness in the ERP system where following the earlier stated method may lead to a discrepancy in some other modules of ERP.

Disclaimer:

This publication has been written in general terms and we recommend that you obtain
professional advice before acting or refraining to act on any of the contents of
this publication.

What is TDS on Dividend Income and Its Impacts on Shareholders?

CA Yash Kapadia
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What is TDS on Dividend Income and Its Impacts on Shareholders?
In the earlier tax regime, after corporate tax of 25% to 30% (effectively 33.99% including surcharge and cess), the Company was also liable to pay Dividend Distribution Tax (commonly known as DDT) to the tune of 20.56% (after grossing up) while distributing the same profit to its shareholders or investors while the dividend received was exempt in the hands of the shareholders. In Union Budget 2020, the Honorable Finance Minister Nirmala Sitharaman abolished the Dividend Distribution Tax (commonly known as DDT) and correspondingly made the dividend taxable in the hands of individual shareholders and as a result of the same w.e.f. April 1, 2020, Companies would also be required to withhold taxes at the prescribed rates on dividend paid to its shareholders, depending on their residential status and the documents submitted by them and accepted by the Company.

What is TDS on Dividend Income?

The irony is explained by the fact that, while some categories of equity investors will get the benefit of lower taxes on their dividend income after the DDT abolition, others will end up paying through their nose. Those super rich residential individuals and trusts who fall under the highest slab of 30% with income more than Rs. 5 crore will have an effective tax rate of 35.88% (including surcharge and cess) and would be the biggest losers in the proposed DDT regime. Hence, out of Rs. 100/- earned by the company, Rs. 57.67/- is collectively taken by the government as corporate tax and individual income tax which is very high and results into double taxation and the surplus that remains in the hands of the business person is only Rs. 42.33/-. The dividend received on equity shares and mutual funds which were earlier exempt is now taxable in the hands of investors / shareholders. Further, the government has proposed deduction of TDS on dividend Income distribution as per Section 194 which seems unnecessary as most of the dividend is now directly credited in the bank account of the shareholder through banking channel (ECS) and hence there was no need for that mechanism to check tax erosion. This provision is resulting into another jeopardy as discussed below:

TDS Rate on Dividend Income paid to Resident Shareholders:

Particulars Applicable Rate Documents required (if any)
With PAN 7.5%* Update the PAN, if not done
Without PAN/Invalid PAN 20% –
*A TDS of 10% applies to the dividend income distribution per investor. For FY 2020-21, the rate of TDS stands reduced to 7.5% for dividends paid till 31 March 2021.

TDS on Dividend Income and its impact on Shares lying in Broker Member’s Pool Account:

Due to this amendment, a practical difficulty is being raised for share brokers with regard to shares of their clients lying in their Pool Account on the record date of dividend. Therefore, the brokers receive dividends on behalf of their clients whose shares currently lie in the Pool Account and pursuant to above amendment, TDS deducted by the Companies declaring dividend will also start appearing in 26AS statement of the Brokers although this dividend does not belong to the Broker. Let’s take a hypothetical situation where a share broker receives dividend (against shares lying in the pool account) of Rs.20,000/- pertaining to two clients – Mr. X Rs. 14,000/- and Mr. Y Rs. 6,000/-. Following entries need to be passed in books of accounts by the broker: TDS details So, while filing Income tax return share brokers need to ensure that credit for TDS on clients’ dividend appearing in their Form 26AS is not claimed by them, otherwise the said dividend might be treated as their income which may cause adjustments in their taxable income. Clients get their TDS credit although not appearing in their own Form 26AS. Therefore, it is imperative that brokers keep ready details of their clients’ TDS in such format from the starting so that there are no issues at the time of filing returns from AY 2021-22 onwards. In legitimate situation as described above, when the shares lying in Broker Member’s Pool Account on the record date of dividend, although the TDS would be deducted, it is very likely that the shareholders would not be able to claim the credit as same would not be reflected in their Form 26AS and hence naturally the processing of return of income u/s. 143(1) by the CPC would result into tax demand along with interest giving rise to unnecessary hardship and tax burden on such shareholders. Considering this, the surplus in the hands of shareholders would be only Rs. 35.73/- (i.e. Rs. 42.33/- (less) Rs. 6.60/- TDS as stated above). Therefore, it is high time that the Ministry of Finance takes a apt policy decision so that the tax payer does not end up paying tax twice or thrice on the same profit. A flat rate of tax on dividend at the rate of 10% and scraping of Section 194 would be a wise decision if India really wants to attract investments and wish to encourage local entrepreneurs.  Related: What are the amendments in TDS provisions

What is TCS Tax? The Amendments of Tax collected at Source.

Sneha Kejriwal
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What is TCS Tax? The Amendments of Tax collected at Source.

Introduction to Tax Collected at Source

Tax Collected at Source(TCS) is the concept wherein the seller collects a percentage of tax from the buyer on the sales amount.

The tax collected by the seller is then to be deposited with the government. The collector of tax i.e. sellers is required to furnish quarterly returns online with CPC-TDS in Form No. 27EQ on prescribed dates.

Applicability and rates of TDS are discussed in Section 206 of the Income Tax Act, 1961.

Initially, the TCS(Tax Collected at Souce) income tax provisions were applicable only to certain goods with specified limits such as-

  • Alcoholic Liquor for human consumption
  • Tendu leaves
  • Timber
  • Parking lots, Toll Plaza
  • Minerals
  • Bullions
  • Motor Vehicles

However, the Finance Act 2020 has extended the TCS provisions to three new categories of businesses/activities with effect from 1.10.2020:

  • Foreign currency dealers,
  • Foreign tour operators, and
  • Sellers of goods whose turnover exceeds INR 10 crore.

Now let’s discuss the TCS (Tax Collected at Source) amendments in the section 206C of the Income Tax Act, 1961:

Rate of TCS for Foreign currency dealers

According to sub-section (1G) of Section 206C of the I.T. Act, every Authorized Dealer who receives an amount from a buyer to remit the same out of India under the Liberalized Remittance Scheme of RBI, shall collect TCS @ 5% from the buyer if aggregate sum remitted by the Buyer during the financial year exceeds INR 7,00,000/-.

The Dealer shall collect TCS at the time of debiting the account of the buyer or on receipt of the amount from the buyer whichever is earlier, and deposit it in the government account on behalf of the buyer.

“Authorised Dealer” means a person authorized by the Reserve Bank of India under subsection (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999) to deal in foreign exchange or foreign security.

In case wherein the amount remitted out of India is for pursuing education after taking loan from any financial institution referred to in section 80E, then a rate of 0.5% will be appliable for TCS.

Rate of TCS for Foreign tour operators

As per sub-section (1G) of Section 206C of the I.T. Act, every Seller of ‘overseas tour program package’ shall collect TCS @5% of such amount from the buyer, being the purchaser of such package.

The seller shall collect TCS at the time of receipt of the amount from the Buyer or debit of the account of the Buyer whichever is earlier, and deposit it in the government account on behalf of the Buyer.

“Overseas Tour Programme Package” means any tour package which offers a visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.

Sellers of goods whose turnover exceeds INR 10 crore.

According to sub-section (1H) of section 206 of the I.T. Act, every specified person shall deduct a TCS @ 0.10% and deposit the same with the government.

Specified person:

Who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, and whose total sales or turnover from the business carried on by him exceed INR 10 crore during the immediately preceding financial year.

Non-applicability of sub-section (1H):

This provision doesn’t apply to the sale of goods covered in sub-section (1) or sub-section (1F) or sub-section (1G),

This provision will not apply to the export or import of goods.

This provision will not apply if the aggregate value of the sale consideration for any goods to a Buyer does not exceed INR 50 lakh in a year.

In case the buyer has not provided PAN/Aadhar Number to the seller, then the TCS rate shall be @ 5% or 1% as prescribed.

Non-applicability of sub-section (1G) and (1H):

This provision is not applicable where the buyer is the Central Government or a State government, or foreign embassy or mission, etc., or a Local Authority or an entity notified by CBDT.

These provisions are also not applicable if the buyer is liable to deduct tax at source under any other provision of Income-tax Act on the goods purchased by him from the Seller and has deducted such amount.

Relevant FAQs regarding Tax collected at source

TCS to be collected on the amount before or after including GST?

Ans: The Income Tax Department on TCS provides that the “amount debited to the account of buyer or payment shall be received by seller inclusive of VAT/Excise/GST. TCS to be collected on inclusive of GST”.

The above view was also affirmed by Madhya Pradesh HC in the case of Vinod Rathore (278 ITR 122). Therefore, considering the above judgment, in respect to section 206C(1H), TCS may be leviable on the GST component as well.

Does TCS u/s. 206C(1H) excludes its applicability when goods are procured for the purpose of further manufacturing/ processing subject to declaration by the buyer, as stated in section 206C(1)?

Ans: Section 206C(1) provides such exemption however No similar exemption is given in section 206C(1H), TCS may have to be levied and collected for any sale of goods covered by section 206C(1H), even if the goods are procured for subsequent manufacturing/ processing.

Whether TCS u/s. 206C(1H) be collected on amounts over and above INR. 50 Lakhs or on entire consideration?

Ans: Section 206C(1H) provides for the collection of TCS on the portion of sale consideration exceeding INR 50 Lakhs. For instance, if a seller has sold goods worth INR 80 Lakhs, then TCS shall be appliable only on INR 30 Lakhs.

New National Education Policy 2020: All you need to know

Meghal D Thakker
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New National Education Policy 2020: All you need to know

Important News: The Union Cabinet renamed the Ministry of Human Resource Development to the Ministry of Education. Making the announcement, Union Ministers Prakash Javadekar and Ramesh Pokhriyal Nishank said there would be a single regulator for all higher education institutions and MPhil would be discontinued. In a bid to ramp up digital learning, a National Educational Technology Forum (NETF) would be created.

What is New National Education Policy?

A National Education Policy or NEP is a comprehensive framework to guide the development of education in the country.

[History: A new NEP usually comes along every few decades. India has had three to date. The first came in 1968 and the second in 1986, under Indira Gandhi and Rajiv Gandhi respectively; the NEP of 1986 was revised in 1992 when P V Narasimha Rao was Prime Minister. The third is the NEP released Wednesday under the Prime Ministership of Narendra Modi.]

Recent Changes in Educational Policy:

  1. In school education, the policy focuses on overhauling the curriculum, “easier” Board exams, a reduction in the syllabus to retain “core essentials” and thrust on “experiential learning and critical thinking”.
  2. In a significant shift from the 1986 policy, which pushed for a 10+2 structure of school education, the new NEP pitches for a “5+3+3+4” design corresponding to the age groups 3-8 years (foundational stage), 8-11 (preparatory), 11-14 (middle), and 14-18 (secondary). This brings early childhood education (also known as pre-school education for children of ages 3 to 5) under the ambit of formal schooling. The mid-day meal programme will be extended to pre-school children. The NEP says students until Class 5 should be taught in their mother tongue or regional language.
  3. The new national education policy 2020 also proposes phasing out of all institutions offering single streams and that all universities and colleges must aim to become multidisciplinary by 2040.
new education policy Academic Structure
Academic Structure

The curricular and pedagogical structure and the curricular framework for school education will therefore be guided by a 5+3+3+4 design, consisting of the Foundational Stage (in two parts, that is, 3 years of Anganwadi/ Pre-school + 2 years in primary school in Grades 1-2; both together covering ages 3-8),

  • Preparatory Stage (Grades 3-5, covering ages 8-11),
  • Middle Stage (Grades 6-8, covering ages 11-14), and
  • Secondary Stage (Grades 9-12 in two phases, i.e., 9 and 10 in the first and 11 and 12 in the second.

For Board Examinations:

While the Board exams for Grades 10 and 12 will be continued, the existing system of Board and entrance examinations shall be reformed to eliminate the need for undertaking coaching classes.

To reverse these harmful effects of the current assessment system, Board exams will be redesigned to encourage holistic development; students will be able to choose many of the subjects in which they take Board exams, depending on their individualized interests.

Board exams will also be made ‘easier’, in the sense that they will test primarily core capacities/competencies rather than months of coaching and memorization; any student who has been going to and making a basic effort in a school class will be able to pass and do well in the corresponding subject Board Exam without much additional effort.

To further eliminate the ‘high stakes’ aspect of Board Exams, all students will be allowed to take Board Exams on up to two occasions during any given school year, one main examination and one for improvement, if desired.

For Students with Innate Talents:

The National Scholarship Portal will be expanded to support, foster, and track the progress of students receiving scholarships. Private HEIs will be encouraged to offer larger numbers of free ships and scholarships to their students.

new national education policy
new national education policy

For Graduation Degree:

Now, in the new policy, there will be a 4 year course and for every year passed, one will receive a certificate which can be regarded as a qualification and also there is an inclusion of re-entry meaning if by whatsoever reason, one discontinues education from year 1 or 2 or 3, s/he can re-enter the next year after whatsoever time instead of re-starting from year 1.

With the removal of B.com, B.Sc., B.A. etc., a student will receive graduate certificate on completion of Year 1, Graduate Diploma on completion of Year 2, Graduate Degree on completion of Year 3 (i.e. if a job specification in general requires a Graduate as a qualification for a job application, the student must have completed 3 years of education post Std. 12 and received the Graduate Degree), and if the student completes 4th Year, then s/he receives Graduate in Research.

For Post-Graduation:

Post-Graduation is now in 1 or 2 years course (provided PG can be applied for on completion of at least 3 years of Graduation Course) which means that if a student has completed all 4 years of Graduation Course then s/he can complete Post Graduation in just 1 year; while if a student has completed only 3 years course, then he has to undertake PG course of 2 years; meaning PG is received after completion of 5 years of Graduation as well as PG.

Note: M.Phil course has been removed but PhD. is still part of the policy with a 4 year course to achieve PhD.

New Inclusions in the National education policy 2020:

  • With the implementation of New National Education Policy, the top 50 Universities in the world will be able to open their branches in India.

  • There will be a capping of fees in all categories of School (private schools as well as public schools).

  • The marking system will include a self-assessment marking thereby enabling the student to practice self-assessment of his/her confidence, morality, behavior etc.; this will also include marking by other students as well as teachers which will enable a bond with teachers as well as other students.

  • There will be separate departments which will be set to encounter different types of activities like determining syllabus, books, distribution of results, administrative department etc.

Key Points of New Education Policy 2020:

  1. Board Structure of 10+2 is dropped.
  2. New school structure will be 5+3+3+4. ( i.e. Up to 5 pre-school, 6 to 8 Mid School, 8 to 11 High School , Std. 12 on-wards Graduation)
  3. Any Degree will be 4 years.
  4. 6th standard on-wards vocational courses available.
  5. From 8th to 11 students can choose subjects.
  6. All graduation course will have major and minor.

Example – A Science student can have Chemistry as Major and Music as minor also. Any combination can be chosen.

  1. All higher education will be governed by only one authority.
  2. UGC AICTE will be merged.
  3. All University government, private, Open, Deemed, Vocational etc. will have same grading and other rules.
  4. New Teacher Training board will be setup for all kinds of teachers in country, no state can change.
  5. Same level of Accreditation to any college, based on its rating college will get autonomous rights and funds.
  6. New Basic learning program will be created by government for parents to teach children up to 3 years in home and for pre-school 3 to 6.
  7. Multiple entry and exit from any course.
  8. Credit system for graduation for each year, student will get some credits which he can utilize if he takes break in course and come back again to complete the course.
  9. All schools exams will be semester wise twice a year.
  10. The syllabus will be reduced to core knowledge of any subject only.
  11. More focus on student practical and application knowledge.
  12. For any graduation course if student completes only one year he will get a basic certificate, if he completes two years then he will get Diploma certificate and if he completes full course then he will get degree certificate. So no year of any student will be wasted if he breaks the course in between.
  13. All the graduation course feed of all Universities will be govern by single authority with capping on each course.

Form DIR-3 KYC- Mandatory annual compliance for DIN holders

Khushi Surana
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Form DIR-3 KYC- Mandatory annual compliance for DIN holders

What Is DIR-3 KYC Form?

DIR-3 KYC is an annual e-form which is to be filed by every Director/Partners/Designated Partners who has been allotted a ‘Director Identification Number’ (DIN) as on 31st March of a financial year and is to be submitted as an e-form DIR-3-KYC to the Central Government on or before 30th September of immediate next financial year. The concept and compliance requirements of a Director KYC was introduced in 2018 w.e.f. 10.07.2018 through the new Rule “12A” inserted by MCA. As per Rule 12A of the Companies (Appointment and Qualification of Directors) Rules 2014,

“Every individual who holds a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-form DIR-3-KYC for the said financial year to the Central Government on or before 30th September of immediate next financial year.

Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October, 2018.”

Provided further that where an individual who has already submitted e-form DIR-3 KYC in relation to any previous financial year, submits web-form DIR-3 KYC-WEB through the web service in relation to any subsequent financial year it shall be deemed to be compliance of the provisions of this rule for the said financial year.

Provided also that in case an individual desires to update his personal mobile or the e-mail address, as the case may be, he shall update the same by submitting e-form DIR-3 KYC only.”

Explanation

  1. Filing of e-form DIR-3 KYC is an annual compliance which has to be compulsorily adhered to in every financial year, where any individual hold DIN on 31st March of that financial year.
  2. Where a DIN Holder has already filed e-form DIR-3 KYC in the previous financial year and there are no details to be updated, they only need to submit web-form DIR-3 KYC-WEB through the web service.
  3. In case an individual desires to update his personal mobile number or the e-mail address, he is required to file DIR-6 before submitting DIR-3 KYC for updating their particulars.

ORIGINAL AND REVISED DUE DATES FOR F.Y.2018-19

Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October, 2018.”

DUE DATE FOR F.Y.2019-20

The original due date for every financial year to submit and upload e-form DIR-3 KYC form is 30th September of the immediate succeeding financial year.

CONSEQUENCES OF NOT FILING DIR-3 KYC

On the expiry of due date for filing of DIR-3 KYC, all the Approved DIN will be marked “Deactivated” with reason of ‘Not filing of DIR-3 KYC’. Penalty of Rs. 5,000/- shall also be levied on the expiry of the due date. RELIEF: DIRECTOR KYC AND COMPANIES FRESH START SCHEME, 2020 (CFSS-2020) Owing to the financial discomfort and distress to Companies caused by the global pandemic Covid-19, a series of measures have been taken by MCA in the form of extensions of due date to reduce the compliance burden of Companies Act,2013 .

The General Circular No. 11/ 2020 dated 24th March, 2020 reads:

“No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’. The Circulars specifying detailed requirements in this regard are being issued separately.”

Crux of the scheme:

A moratorium period from 1st April, 2010 to 30th September, 2020, has been provided by MCA, by which no additional fess shall be charged for late filing during the said moratorium period.

To file DIR-3KYC: Extended timelines between 1st April 2020 and 30th September 2020 is provided by MCA for the director whose DIN is deactivated to come forward and file DIR-3KYC/DIR-3 KYC-Web. The late filing fee of Rs 5,000 will not apply.

Since it is aforesaid that DIR-3 KYC only came into force and implementation since July, 2018, it implies that any default in non-compliance of DIR-3 KYC in the year Financial Year 2018-19 can be made good without paying the late filing fee of Rs. 5,000 which is usually levied by MCA under normal circumstances. This relaxation has been only provided for the time being looking at the Covid-19 crisis and in the moratorium period specified above. Any default in compliance subsequent to this period will attract the original penalty of Rs. 5,000.

REQUIREMENTS FOR FILING DIR-3 KYC FORM

For filing your DIR 3 -KYC form, the DIN holder will need the following documents:
    1. Details of Nationality and Citizenship details like gender, and date of birth.
    2. Permanent Account Number (PAN)
    3. Voters Identity card
    4. Passport (mandatory if a foreign national is holding a DIN)
    5. Driving License
    6. Aadhaar card
    7. Personal Mobile
    8. Personal Email Address
    9. Residential address.

CONCLUSION

 For the financial year 2019-20, the due date of filing DIR-3 KYC is the original date of 30th September, 2020 hence no benefit of CFSS,2020 is required to be availed for the F.Y. 2019-20. However for F.Y. 2018-19, the de-activated DIN shall be re-activated if Form DIR-3-KYC is filed upto 30th September, 2020 without any additional fee, thereby availing the benefit of the CFSS Scheme 2020.

What is faceless tax assessment or e assessments In Income Tax?

Anjali Garg
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What is faceless tax assessment or e assessments In Income Tax?

A Modern Generation of TRUST, TRANSPARENCY and TAX

“A lot of things would depend on the discretion of assessing officer in manual assessment. We have completely revamped it. Instead of territorial jurisdiction, we have brought in dynamic jurisdiction,” Prime Minister Narendra Modi said. Wondering if what we’re doing is really making an impact. But, it’s important that we’re always moving forward, India will perhaps be the first country to implement such a system that taxpayers will no longer be tied to a specific jurisdiction or office for assessments because now the Central Board of Direct Taxes has launched a faceless, randomized and fully electronic assessment system, removing all human interfaces. Now, that income Tax Department would increase the amount of faceless scrutiny, and the algorithm for allocating such scrutiny would adjust occasionally. Owing to such faceless scrutiny, further transition of Income Tax officer will be less. So here’s the three big announcements that were made by Prime Minister Narendra Modi on Thursday launching a “Transparent Taxation — Honouring the Honest” platform:
  1. Faceless appeal scheme– to be implemented from 25th September, 2020.

 Elements to this scheme are:

      1. Appeals to be randomly allotted to any officer.
      2. The identity of officers deciding appeal will remain unknown
      3. No need to visit the officer/office
      4. The appellate decision will be Team Based & reviewed

Exceptions for the situations concerning:

      1. Serious fraud, Major Tax Evasion, Sensitive & Search matters
      2. International tax
      3. Black Money Act & Benami Property
  1. Faceless e assessment scheme

Elements to this scheme are:

      1. Selection only through system using data analytics & AI
      2. Abolition of territorial jurisdiction
      3. Automated random allocation of cases
      4. Central issuance of notices with Document Identification No. (DIN)
      5. No physical interface, No need to visit income tax office
      6. Team-based assessments and Team-based review
      7. Draft assessment order in one city, review in another city & finalization in third city

Exceptions for the situations concerning:

      1. Serious fraud, Major Tax Evasion, Sensitive & Search matters
      2. International tax
      3. Black Money Act & Benami Property
  1. Taxpayers’ Charter
       The income tax department has dedicated itself to:
      1. Provide fair, courteous, and professional assistance in all dealings with the taxpayer.
      2. Treat taxpayer as honest unless there is a reason to believe otherwise.
      3. Provide fair and impartial appeal and review mechanism.
      4. Provide complete and accurate information for fulfilling compliance obligations under the law.
      5. Mean to provide timely decisions in every income- tax proceeding within the time prescribed.
      6. Shall collect the correct amount of tax.
      7. Respect the privacy of the taxpayer and be no more intrusive than necessary in any inquiry, examination, or enforcement action.
      8. Maintain confidentiality and shall not report to the department any information received by the taxpayer, unless approved by law.
      9. Authorities shall keep accountable for their actions.
      10. Every taxpayer can choose an authorized representative of his / her choice.
      11. Provide the mechanism to lodge complaint and prompt disposal thereof.
      12. The Department shall have a fair and unbiased framework and address tax problems in a time-limited manner
      13. Intend to update the service quality standards periodically.
      14. Reduce cost of compliance when administering tax legislation.

Expectations from taxpayers:

      1. Be honest and fulfill his compliance obligations.
      2. Remain aware of their obligations to comply.
      3. Hold accurate records.
      4. Know what the representative does on his behalf.
      5. Respond in due course.
      6. Pay in Time.
The PM focused on the fact that the honest taxpayers contributed immensely to the national development. When the taxpayers’ life became simple, they progressed and so did the nation. The new facilities were in consonance with, and further strengthened, the government’s motto of ‘minimum government’, ‘maximum governance’. The government had adopted people-centric approach towards making laws, rules and policies. “This is an experiment of the New India’s new governance model and the country is getting positive results. Everyone has now realized that short-cuts are not acceptable, and it is not wise to adopt wrong means,” he said, adding that sense of duty was now the most appreciated approach.

Return filing is not easy anymore!

CA Yash Kapadia
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Return filing is not easy anymore!

The government has made many changes in Income Tax Returns and reporting of various details are made compulsory since last two years. Also the government wants to link all the details such as bank account, Aadhar details, property and investment details relating to assessee with the return of income. Linking of PAN and Aadhar, Pre validation of bank accounts on e-Filing Portal for refund etc. is made mandatory from last Assessment Year. Now let us discuss the various changes in ITR and various details which are being asked by the Income Tax Department while filing the return of income since A.Y. 2019-20.

(A) From A.Y. 2019-20, if the assessee is having income from LTCG, then the assessee is required to report scrip wise additional details such as Name of Company, FMV of Shares / MF as on 31.01.2018, ISIN code etc. in Schedule CG. Also, if LTCG arise on account of sale of immoveable property, then details such as Name, Address, PAN and % of sharing etc. is mandatorily required to be reported.

(B) From A.Y. 2019-20, in the Income Tax Return the assessee is required to provide the various details like Name- PAN – Type of the company, listed or unlisted, DIN etc. of the company / companies in which the assessee was / were directors at any time during the previous year. Therefore, the assessee is required to provide all the details of his / her directorship in listed as well as unlisted company at the time of filing return of income.

(C) From A.Y. 2019-20, at the time of filing return of income, the assessee is required to provide Name and PAN of the firm / firms in which he / she was / were partner at any time during the previous year.

(D) Form A.Y. 2019-20, the assessee is required to report regarding shares of the unlisted company held at any time during the previous year. Details such as Name of company, PAN, Shares held at the beginning of the year, Cost of acquisition, Shares acquired during the year and its price, Shares Transferred and Sale consideration etc. are required to be reported at the time of filing return of income. This proves to be the very burdensome for the assessee.

(E) From A.Y. 2019-20, the assessee is required to report various details of Foreign Depository Accounts held (including any beneficial interest) at any time during the relevant accounting period.

(F) Up to A.Y. 2019-20, only the person whose income exceeds the basic exemption limit was required to file his / her income tax return. But the FM has inserted seventh proviso to section 139(1) vide the Finance (No. 2) Act, 2019 and as per this proviso “if the income of any person is below maximum amount which is not chargeable to tax but falls under any of the criteria (as mentioned below), is required to furnish his / her return of income”.

(1) Has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(2) Has incurred expenditure of an amount or aggregate of the amounts exceeding two lakhs rupees for himself or any other person for travel to a foreign country; or

(3) Has incurred expenditure of an amount or aggregate of the amounts exceeding one lakhs rupees towards consumption of electricity.

In view of the above, we can say that at the time of preparing books of accounts, the assessee is required to verify and analyze these additional details.


(G) From A.Y. 2020-21, if the assessee is having income from House Property (Rent Income), then he / she is required to compulsorily provide PAN / Aadhar No. of the Tenant.

(H) From A.Y. 2020-21, a person who is required to file ITR – 7, then required to report additional details such as name, nature of activity, classification, approval from Income Tax Department or any other department of any project or institution run by the assessee at any time during the previous year.

(I) From A.Y. 2020-21, If the person is filing return of income in response to the Notice issued by the Department, then UDIN Number is required to be quoted in the respective field.

As the adage two sides to a coin, the increasing number of required details while filling of return of income is both a boon and curse as it makes the process of return filing more accurate and precise along with making it a little tedious and mundane. This leads to increased maintenance of data at the central level thereby making economy transparent and it also helps in the nation building.

What is Form ADT 1? Form ADT1 For Appointment Of Auditor

Anjali Garg
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What is Form ADT 1? Form ADT1 For Appointment Of Auditor

When a company appoints an auditor, it is obliged to accept the appointment of an auditor to the Registrar of Companies (ROC) in a specified manner in compliance with section 139(1) of the new company act 2013. In this reason the Form ADT-1 is used.

Under Section 139(1) of the New Companies Act 2013, a company shall disclose its appointment to the auditor and, at the same time, notice of such appointment must be filed with the company registrar within 15 days of the appointment. Such note about the appointment of an auditor must be filled out in the MCA portal in Form ADT 1 as per the law.

I’ll narrate you a brief understanding of the ADT-1 type through this post. This is where we go:

What is Form ADT 1?

Form ADT-1 may be referred to an intimation sent by any company to the Registrar of Companies concerning the appointment of an auditor following the assumption of its Annual General Meeting u/s 139(1) of the Companies Act , 2013 (fourth proviso to subsection ( 1)).

According to Sec 139 (1) of the new Companies Act 2013, it is mandatory to file this form every year with the Registrar Of Companies as a notice of appointment of auditor after the AGM wherein the new auditor was appointed.

When to file ADT-1 Form?

IN CASE OF NEW COMPANY INCORPORATION:- Form ADT-1 is expected to be filed within 15 days of the company’s first board meeting, to be held within 30 days of incorporation in which the auditor shall be named by the company’s board of directors.

FOR EXISTING COMPANY:- The corporation will file Form ADT-1 with the company’s registrar within 15 days of the AGM in which Auditor was appointed or reappointed as the case may be. For e.g., if an AGM of the company was held on 30 August 2020, the company should file Form ADT-1 by 14 September 2020.

Also Read:

Penalty u/s. 270A and 271(1)(c)

What are the Documents required?

Following documents are required:

  1. Copy of Resolution of the Board of Directors announced at the Annual General Meeting
  2. Written consent on nomination from the Auditor
  3. A confirmation from the Auditor that he/she is not disqualified or unable to be named as auditor u/s 141
  4. Copy of the company’s intimation to an auditor

ADT 1 Form Filing Fees:

The filing fees of form ADT 1 with the registrar of companies are as follows:

Nominal Share Capital of the Company Fee in (INR)
Under 1 lakh 200
Falls from 1 lakh to 5 lakhs 300
Is between 5 lakhs and 25 lakhs  400
Falls from 25 lakhs to 1 crore 500
More than or equal to 1 crore 600

Also Read:
What are the Amendments

Delayed Filing Penalty

Late filling of ADT-1 form will impose following penalties:

Sr.No Delay in Filing (in no. of days) Penalty Leviable
1 Up to 30 days Twice the Normal Fees
2 More than 30 days but less than 60 days 4 x Normal Fees
3 More than 60 days but less than 90 days 6 x Normal Fees
4 More than 90 days but less than 180 days 10 x Normal Fees
5 More than 180 days 12 x Normal Fees

Points to remember

  1. For all companies listed/ unlisted/ public/ private/ others, submitting Form ADT 1 is compulsory.
  2. For the appointment of the first auditor, there is a general thinking that Form ADT 1 is not required to register. That is because Rule 4(2) of the laws of the company addresses only Sec 139(1) – appointment of auditors and not Sec 139(6)- Appointment of the first auditor. However, it is a good practice to file Form ADT 1 for the appointment of the first auditor too.
  3. Even in case the auditor is named for a casual vacancy, Form ADT -1 must be filed.
  4. Form ADT-1 can be submitted online electronically via the website of the Ministry of Corporate Affairs.
  5. It will auto-approve the e-form uploaded.
  6. When the organization also files its AOC-4, they must also note the ADT-1 form SRN number.

Conclusion:

Form ADT-1 matters most when it comes to appointing an auditor to your company. Such Forms are required for businesses to file within the specified 15-day deadline. Where the Company is appointed as First Auditor pursuant to Section 139(6) of Company Act 2013. It can therefore be concluded, in the light of the above provisions that we do not need to file Form ADT-1 mandatorily for the appointment of the Company’s first auditor.

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