What is New Income Tax Slab for AY 2020-21 in India?

Raghav Bajaj
-
0
What is New Income Tax Slab for AY 2020-21 in India?

The FM has announced New Income Tax Slab for AY 2020-21 giving taxpayers an option to pay taxes as per the new tax slabs.

Income Tax Slab for A.Y 2020-21 and 2021-22 for Individuals/HUF

New Income Tax Rate For AY 2020-21 For Individual/HUF

Entity type Income Tax Slabs
1. Individuals/HUF A.Y.2020-21 A.Y.2021-22
Individual (other than Senior or super senior citizen) and HUF (Including AOP, BOI and Artificial Juridical Person)
Individual -Senior Citizen (who is 60 years or more at any time during the previous year)
Individual -Super Senior Citizen (who is 80 years or more at any time during the previous year)
Tax rates if the assessee has opted for section 115BAC
Individuals and HUF     [Note: The option to pay tax at lower rates shall be available only if the total income of assessee is computed without claiming specified exemptions or deductions ] —

Plus: –

Health and Education cess: – 4% of income tax and surcharge.

Note: A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less.

Surcharge: – 10% of income tax where total income exceeds Rs. 50,00,000.

               15% of income tax where total income exceeds Rs. 1,00,00,000.

                     25% of income tax where total income exceeds Rs. 2,00,00,000.

                     37% of income tax where total income exceeds Rs. 5,00,00,000.

Note – Enhanced surcharge levied at the rates of 25%/37% shall not be levied in case of income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

However, marginal relief is available from surcharge in following manner-

In case where net income Marginal relief shall be available from surcharge in such a manner that
Exceed 50 lakhs but doesn’t exceed Rs. 1 Crore The amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs.
Exceed 1 Crore but doesn’t exceed Rs. 2 Crore The amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Exceed 2 Crore but doesn’t exceed Rs. 5 Crore The amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.
Exceeds Rs. 5 crore The amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore

New Income Tax Slab For Assessment Year 2020 21 For Firms/LLP

Entity type Income Tax Slabs
2. Firms A.Y.2020-21 A.Y.2021-22
Partnership Firm [including LLP] 30% 30%

Plus:-

(a) Health and Education cess: – 4% of income tax and surcharge.

(b) Surcharge : 12% of income tax where total income exceeds Rs.1 Crore.

However, the surcharge shall be subject to marginal relief

In case where total income Marginal relief shall be available from surcharge in such a manner that
Exceeds Rs. 1 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

New Income Tax Slab For Assessment Year 2020-21 For Companies

Entity type Income Tax Slabs
3. Domestic Company A.Y.2020-21 A.Y.2021-22
Where its total turnover or gross receipt during the previous year 2017-18 does not exceed Rs. 400 crore 25% —
Where its total turnover or gross receipt during the previous year 2018-19 does not exceed Rs. 400 crore — 25%
Any other Domestic company 30% 30%
Special Tax rates applicable to a domestic company
Where it opted for section 115BA (NOTE 1) 25% 25%
Where it opted for Section 115BAA (NOTE 2)              22% 22%
Where it opted for Section 115BAB (NOTE 3) 15% 15%

Note 1: Section 115BA – A domestic company which is registered on or after March 1, 2016 and engaged in the business of manufacture or production of any article or thing and research in relation to (or distribution of) such article or thing manufactured or produced by it and also It is not claiming any deduction u/s 10AA, 32AC, 32AD, 33AB, 33ABA, 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB), 35AC, 35AD, 35CCC, 35CCD, section 80H to 80TT (Other than 80JJAA) or additional depreciation, can opt section 115BA on or before the due date of return by filing Form 10-IB online. company cannot claim any brought forwarded losses (if such loss is related to the deductions specified in above point).

Note 2: Section 115BAA – Total income of a company is taxable at the rate of 22% (from A.Y 2020-21), if the following conditions are satisfied: – Company is not claiming any deduction u/s 10AA or 32(1)(iia) or 32AD or 33AB or 33ABA or 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB) or 35AD or 35CCC or 35CCD or section 80H to 80TT (Other than 80JJAA). – Company is not claiming any brought forwarded losses (if such loss is related to the deductions specified in above point). – Provisions of MAT is not applicable on such company after exercising of option. company cannot claim the MAT credit (if any available at the time of exercising of section 115BAA).

Note 3: Section 115BAB – Total income of a company is taxable at the rate of 15% (from A.Y 2020-21), if the following conditions are satisfied:

– Company (not covered in section 115BA and 115BAA) is registered on or after October 1, 2019 and commenced manufacturing on or before 31st March, 2023.
– Company is not formed by splitting up or reconstruction of a business already in existence.
– Company does not use any machinery or plant previously used for any purpose.
– Company does not use any building previously used as a hotel or a convention center, as the case may be.
– Company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to (or distribution of) such article or thing manufactured or produced by it. Business of manufacture or production shall not includes business of –

  • Development of computer software;
  • Mining ;
  • Conversion of marble blocks or similar items into slabs;
  • Bottling of gas into cylinder;
  • Printing of books or production of cinematographic film; or
  • Any other notified by Central Govt.

– Company is not claiming any deduction u/s 10AA or 32(1)(iia) or 32AD or 33AB or 33ABA or 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB) or 35AD or 35CCC or 35CCD or section 80H to 80TT (Other than 80JJAA and 80M).

– Company is not claiming any brought forwarded losses (if such loss is related to the deductions specified in above point).

– Provisions of MAT is not applicable on such company after exercising of option. company cannot claim the MAT credit (if any available at the time of exercising of section 115BAA).

Education Cess: 4% of Income tax plus surcharge

Surcharge:
a) 7% of Income tax where total income exceeds Rs.1 crore
b) 12% of Income tax where total income exceeds Rs.10 crore
c) 10% of income tax where domestic company opted for section 115BAA and 115BAB

However, the surcharge shall be subject to marginal relief for in any other case, which shall be as under:

In case where total income Marginal relief shall be available from surcharge in such a manner that
Exceed 1 Crore but doesn’t exceed Rs. 10 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Exceeds 10 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore
Entity type Income Tax Slabs
4. Foreign Company A.Y.2020-21 A.Y.2021-22
Irrespective of Turnover or gross receipts or income 40% 40%

Plus:-

  • Health and Education cess: – 4% of income tax and surcharge.
  • Surcharge: 2% if income exceed Rs. 1 crore but does not exceed Rs. 10 crore.

                       5% if income exceeds Rs. 10 crore.

However, the surcharge shall be subject to marginal relief for in any other case, which shall be as under:

Also Read:

  1. What is Faceless Tax Assessment
  2. FAQs on New Income Tax Regime 115BAB
In case where total income Marginal relief shall be available from surcharge in such a manner that
Exceed 1 Crore but doesn’t exceed Rs. 10 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Exceeds 10 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore

NewIncome Tax Slab For AY 2020-21 For Local Authority

Entity type Income Tax Slabs
5. Local Authority A.Y.2020-21 A.Y.2021-22
Local Authority 30% 30%

Plus:-

  • Health and Education cess: – 4% of income tax and surcharge.
  • Surcharge: 12% of income tax where total income exceeds Rs. 1 Crore

However, the surcharge shall be subject to marginal relief

In case where total income Marginal relief shall be available from surcharge in such a manner that
Exceeds Rs. 1 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

New Income Tax Slab For Assessment Year 2020 21 For Co-operative Society

Entity typeIncome Tax Slabs
6. Co-operative Society A.Y.2020-21 A.Y.2021-22
Co-operative Society
Spceial tax regime under section 115BAD
If the conditions mentioned u/s.115BAD are satisfied 22% 22%

Plus:-

  • Health and Education cess: – 4% of income tax and surcharge.
  • Surcharge :

In case assessee has opted for section 115BAD:

Flat 10% irrespective of amount of total income

In any other case:

12% of income tax where total income exceeds Rs. 1 Crore

However, the surcharge in any other case shall be subject to marginal relief

In case where total income Marginal relief shall be available from surcharge in such a manner that
Exceeds Rs. 1 Crore The total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

What Are the Best Indian Stocks to Buy in 2020?

Shailesh Shah
-
0
What Are the Best Indian Stocks to Buy in 2020?

Let’s starts with an example. {Don’t be sentimental, please take it as an example only}

When my grandfather went to the market to buy something, most of the FMCG products were available from Hindustan Unilever. So, my grandfather thought that the company would go very far. He invests in that company and left those equities for me. Now with my great luck, the Hindustan Unilever Company becomes no. 1 in FMCG and I got a huge profit from it. But the twist came here. In my time, Baba Ramdev came in the FMCG sector. In the name of Ayurveda and Swadeshi, He distracts the business of Hindustan Unilever. Now I have two questions.

1) If I leave this Hindustan Unilever Stocks for my grandkids, will the company still perform?

2) May it be possible that Hindustan Unilever may shut down?

It may possible that this company will perform well and give us an extraordinary return. But there is no guarantee about the returns. My Grandfather was right at his end. But I want to tell you that investing in any individual company for the long term is not a wise decision.

Twist One: Where to invest?

Now assume that if my grandfather had the choice to invest in a self-managed portfolio that automatically (right… automatically) removes the non-performing companies and includes the performing one. This portfolio is called Nifty50.

Nifty is NSE’s Index that holds top 50 companies in it. Nifty is a self-managed portfolio and it removes the non-performing companies from it and includes the performing one. It also gave higher weight to the top-performing companies. The more a company performs, the more weight it gains in the portfolio. That means I don’t need to worry about the fundamental or technical analysis. If my grandfather invested in Nifty50, he got the top 50 companies of his time. When he passed that portfolio to me, I will get the top 50 companies of my time and when I will pass that to my grandkids, they will get the top 50 companies of their time.

I know you are arguing that Nifty may also fall, and we may also get loss in it. Wait… There is a solution and there are some more twists

Twist Two: How to secure my capital if the market falls?

Yes. I am not denying. Nifty may fall drastically. But we have a solution for it. We can take hedging through Put Option against it. Hedging works like insurance. Whenever market falls Put premium will rise. In the end, it will give us an exact profit as much loss we made in Nifty. The maximum loss will be the premium of Put Option we paid initially. Other Indian stocks and indices have options with only 3 months expiries while nifty is having options with 5 years expiries. Though liquidity is available only in options of max 1-year expiries.

Surprisingly 1-year ATM Put option in Nifty is trading around 5% of Nifty. That means If I buy Nifty at Rs 10,000 then I need to pay only Rs 500 for the hedging of 1 year. The other will get nifty at Rs. 10,000 but I will buy at Rs. 10500. I will pay an extra 500 but that will ensure me that my maximum loss will be only Rs. 500 if Nifty falls drastically during that year. That means If I invest Rs. 1 crore in this strategy, my 95 lacs will be secure in any worst scenario of Nifty.

Now, this is a good talk. What will be the worst-case scenario?

For example, if nifty is running around 10000 in 2019 and in 2023 nifty will be the same at 10000. That means our loss will be 5% every year. Then you will say it is not a good strategy. Let’s check.

We take a hypothetical scenario in the above table so that we can understand the importance of hedging. We invest Rs. 1 Crore in 2019 and take hedging of Rs 5 lacs to protect that 1 Crore. Now when the market moves to 12000 in 2020 my portfolio will rise to Rs 1.2 crore. Here we will take other insurance for next year and we will pay Rs 6 lacs for that. Now when nifty falls to 8000 in 2021 our portfolio remains the same Rs 1.2 Crore because the loss will be covered from the profit of hedging and we will reinvest it to the nifty. Now when the market starts rising from 8000, we will start earnings from Rs 1.2 Crore and in 2022 when Nifty reaches 12000 our portfolio value will be reached to Rs. 1.8 Crore. Now again if nifty falls to 10000 in 2023, our portfolio remains the same at Rs. 1.8 Crore. Now if we reduce the cost of hedging, we paid every year, our portfolio value will be Rs. 1.54 Crore.

This means that … when Nifty rise our portfolio value rise & when Nifty falls then our portfolio value remains the same. Just think … only this line can help you to achieve your financial freedom.

Now above is a hypothetical scenario. What happened in real? Here is the past 15 years of performance.

What is the best strategy for hedging the Future with an Option?

Raghav Bajaj
-
0
What is the best strategy for hedging the Future with an Option?

Please note that hedging Futures’ Risk with options depends on market situation, your risk taking capacity and the amount of your investment.

Generally, people believe if you

Long or Buy Futures it can be hedged with Long Put or Short Call

and

Short Futures or Sell Futures it can be hedged with Long Call or Short Put.

But you might not know…

Future Buy + Put Buy = Synthetic Call Buy

Future Buy + Call Sell = Synthetic Put Sell

Future Sell + Call Buy = Synthetic Put Buy

Future Sell + Put Sell = Synthetic Call Sell

This are called Formulas for Synthetic Derivatives.

That means you need to apply option strategies for hedging futures risk instead of buying or selling naked option.

There is a course from FinIdeas i.e. Smart Futures’ Trader. This course contain following most important topics for hedging future’s risk through Options.

  • Futures: Meaning, Terminology, Pricing and Settlement
  • Margin Calculation, Rewards & Risk in Futures Trading
  • How and when can we get stuck in Futures Trading? (Think but don’t take this question for granted)
  • Call – Put Options – Meaning, Payoff & Break Even Points
  • Formula for Synthetic Derivatives (Most Important topic for fund management & Risk Management)
  • Options Strategies – Bull & Bear Spreads & Ratio Spreads
  • Risk hedging concepts.
  • Hedging long Futures with necked Options trading & Options Strategies.
  • Hedging Short Futures with necked Options trading & Options Strategies.

This is an online course so you can learn at your convenience time and place. You can learn all this thing in only 8 -10 hours.

Remember: The Hedging is not only for controlling the risk but also managing funds. Happy Trading!!!

Visit FinIdeas for more details.

How to invest in Nifty and Mechanism of Nifty Index?

Shailesh Shah
-
0
How to invest in Nifty and Mechanism of Nifty Index?

Mechanism of Nifty Index

There are more than 2000 companies listed on NSE Exchange. The company that holds the highest free-float market capitalization becomes the no. 1 company on NSE. The Nifty Index is a portfolio of such top 50 Companies. Now based on market capitalization, each company gets its weight in Index. That means the company with the highest market capitalization got the highest weight in the portfolio. There are other rules, too but the above mention is fair enough for a simple understanding of Index.

Nifty Index started from 1000 points in 1996 under the same rules. Now NSE revises the index every quarter and revises the weight of all the companies. If 50th companies market cap falls down more than 51st company, then it will automatically go out from Nifty Index and the new company enters in the portfolio. Hence, the only performing companies remain in the index.

Now let’s come back to the main question….

In which the Indian company’s stock should you invest for the long term?

After analyzing the mechanism of Nifty Index, now we understand that Nifty will never get ZERO in value. Nifty automatically removes the non-performing companies from its portfolio. On the second hand, it also gives more weight to top-performing companies.

If you want to invest in companies that are going to be No. 1 in the future, then invest in the Nifty Index. You will always have the best companies in your portfolio. You don’t need to have any fundamental or technical knowledge for the investment.

Now the question is how to invest in Nifty?

Generally, you can buy Nifty ETFs or invest in funds. Even small investors can also start their investments with NiftyBEES. You can purchase NiftyBEES the same as like you are purchasing equities of Reliance, TCS, or HDFC Bank.

The advantage of Nifty is that hedging is also available for its investment at a very cheap rate. You can secure your portfolio against worst market situations with such hedging.

To get more information about hedging and strategy, you can watch the detailed explanation by FinIdeas in the following video:

How to start investment afresh during COVID-19 ? Learn about Index Long Term Strategy.

Raghav Bajaj
-
0
How to start investment afresh during COVID-19 ? Learn about Index Long Term Strategy.

There are 5000 + companies listed on BSE and to choose a good company from so many companies for long term becomes very difficult as the future is always uncertain. There is always a risk associated that the share price of the company you choose to invest might become Zero or Negligible after certain period of time depending on various factors.

There have been companies which have drastically eroded the wealth of the share-holders. Further, according to a survey, only 3-4% business runs smoothly till the 3rd generation and then may start facing hiccups.

So where do we invest?

If you are not able to identify good stocks to invest for your goal of having a diversified portfolio of quality stocks for long term, here is a perfect strategy for the same.

The best instrument for investment is Index like Nifty or Sensex.

Nifty over the years:

Year Nifty
2002 1100
2005 2837
2010 6135
2015 7946
2019 12168

Sensex over the years:

Year Sensex
1979 100
1988 600
1998 3600
2008 21600
2019 40000

Sensex started its journey from 100 points in 1979 and in 2019 it was trading around 40000. The various pitfalls in this journey involves incidents like:

  • Many Governments came and went
  • Harshad Mehta Fraud
  • Ketan Parekh Fraud
  • Kargil War
  • Bomb blast in BSE and Parliament
  • Several terrorists attack
  • Some bad political decisions
  • Global recession
  • Demonetisation
  • COVID-19

Despite all these incidents, the Sensex has only made progress. But at the same period of time, many companies came and disappeared.

If we talk about Nifty, then in 2008, it dropped from 6100 to less than 3000. But today it has gone up to 12000.

Now the questions arises as

“How to invest in Nifty?”

“What to do when events like Covid-19 disrupts the market?”

“How to hedge risk under in case of events like Covid-19?”I surveyed and researched a lot on the web as well as through offline webinars to find the right strategy to consider these parameters and have interestingly come up with a unique strategy called “Long Term Index Strategy” from Finideas. As a part of the strategy, it involves dynamic returns by investing into Nifty, Benefits of Leverage through Futures and protection against market through hedging. Thus, the strategy involves

Step 1: Invest in Nifty Delivery + Nifty Futures + Debt Market

Step 2: Purchase protection of Investment

The returns over a period of 6-7 years may far exceed the returns if the investment is made into shares of individual Companies forming part of Nifty.

To Learn more about the strategy, the user may go through the You Tube Video or visit the FinIdeas WebPage here.

RCM under GST applies to remuneration to employee director u/s 194J and not u/s 192 – Clarifies CBIC!

Monark Padmani
-
0
RCM under GST applies to remuneration to employee director u/s 194J and not u/s 192 – Clarifies CBIC!

Introduction

Under the current GST Law, remuneration given to a Director (by whatever name given) is a taxable service chargeable under Reverse Charge Mechanism (‘RCM’) for levy of GST1.

On the other hand, an employee performing his functions under the contract of employment is not a taxable service exigible to GST2.

The dispute arises when a director is an employee of the company and receiving salary and remuneration as a director. There were contradictory views taken by varied appellate forums3.

The CBIC has tried to put the dispute to rest vide Circular No. 140/10/2020 dated 10th June, 2020.

The summary of the Circular can be tabulated as under:

Sr.  No. Remuneration paid to Employee of the Company? Applicability of GST Applicability of TDS under IT Act
1 Non-Employee Director (typically Independent Directors) No Yes 194J
2. Employee Director (Typically WTD, MD etc) Yes No – On Salary Component   192 – On Salary Component (Treated as any employee of the company deriving salary, PF, gratuity etc)
3. Employee Director (Typically WTD, MD etc) Yes Yes – On Non Salary Component (Typically Directors sitting fees) 194J – On Non Salary Component

Comments:

  1. A Whole Time Director (WTD) or Managing Director (MD) who is an employee of a company performs dual roles within the Company.
    • Contract of Employment – Employer-Employee relationship exists and thus no GST is chargeable on the salary component of the Director. These directors perform day to day affairs of the company and actually run the company on a daily basis. This remuneration is treated as salary in the books of the company and income tax u/s 192 is deducted at source.
    • Contract of Service – All other remuneration other than salary derived in performance of his duty as Director i.e Director Sitting fees. This remuneration is not treated as salary and income tax u/s 194J is deducted at source.
  2. On the other hand, a director by whatever name called who is not an employee of the company will derive entire remuneration as a contract of service chargeable to GST under RCM. Payment made for their participation are not in terms of employer-employee relationship and also not treated as “Salaries” in books of accounts. Further, TDS has to be deducted u/s 194J of the Act

1Notification No. 13/2017 – Central Tax (Rate) dt 28.06.17, Sr. No. 6 of the Table annexed

2Sch III of CGST Act

3 M/s. Alcon Consulting Engineers (India) Pvt. Ltd. [AR No.  KAR ADRG  83/2019] (Karnataka AAR) and M/s Clay Craft India Private Limited [RAJ/AAR/2019‐20/33] (Rajasthan AAR) holds a view that all payments to director are liable to RCM as director is not an employee of the company

M/s. Anil Kumar Agarwal [AR No. KAR ADRG 30/2020] (Karnataka AAR) hold a view that payments made to directors as employee of the company is outside scope of GST being covered by Schedule III of CGST Act, 2017

Loophole in GST refund application on Portal

CA Divyesh Sodha
-
0
Loophole in GST refund application on Portal

Rule 89(4)

In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula –

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply

of services) x Net ITC ÷Adjusted Total Turnover

Where,-

(A) “Refund amount” means the maximum refund that is admissible;

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking;

(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-

Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of

services have not been completed during the relevant period;

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

(F) “Relevant period” means the period for which the claim has been filed.

Now let us discuss the loophole while making an online application for Refund of Input Tax Credit on Zero-rated supply without payment of GST. 

In Statement 3A the portal is asking two figures:

  1. Turnover of Zero Rated supply (Export turnover)
  2. Adjusted total turnover

Now as discussed above adjusted total turnover means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period”

The importance of Adjusted total turnover is to work out the Refund amount.

Refund amount is defined in rules means the maximum refund that is admissible.

It means the refund amount is the maximum amount that can be claimed as a refund for a relevant period.

Formula for refund amount:

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply

of services) x Net ITC ÷Adjusted Total Turnover

Here comes the involvement of Net ITC.

“Net ITC” means input tax credit availed on inputs and input services during the relevant period;

It means ITC availed during the relevant period. ITC availed means ITC available as per table 4C of GSTR 3B.

Now let us understand the loophole with the help of the following example:

Say refund claim to be applied for the month of April 2019

Export turnover                                               : 1,00,00,000/-

Taxable turnover                                             : 10,00,000/- (5% GST applicable)

GST Payable: 50,000/-

ITC availed as per GSTR 3B for the month: 5,00,000/-

ITC utilizes for payment of GST: 50,000/-

ITC carried forward in Credit ledger: 4,50,000/-

As per formulae given for Refund amount the maximum admissible refund in above case would be:

5,00,000/- (Net ITC) x 1,00,00,000/- (Export turnover) / 1,10,00,000/- (Adjusted total turnover)

Which comes to Rs.4,54,545/-. (Subject to maximum of ITC carried forward in credit ledger for relevant period i.e. Rs.4,50,000/- in the present case).

Now when we are making an application on the portal the portal applies the above formulae to the carried forward ITC i.e. to Rs.4,50,000/- and not to Rs.5,00,000/-.

Accordingly as per portal the refund amount will come to (4,50,000/- x 1,00,00,000/- / 1,10,00,000/-): Rs.4,09,090/-

So because of the above loophole on the portal, the taxpayer is losing its eligible refund which is not a correct position.

To cope up with the above loophole on the portal it is advisable to enter Export turnover and Adjusted total turnover as the same figure. This will lead to litigation but it is better to fight than to give away the legitimate right of refund.

Gujarat high court explains the constitutional mandate of taxation.

Jayraj Dhakan
-
0
Gujarat high court explains the constitutional mandate of taxation.

A. Facts

  1. In view of the judgment of the apex court, dated 22.09.2017, in case of another dealer, Addl. Commissioner issued revision notice on 06.11.17 u/s 75 of the GVAT Act.
  2. On 16.03.2018, the high court set aside the revision notice being beyond the period of limitation period.
  3. By virtue of the VAT Amendment Act, 2018, Section 84A came to be added in the VAT Act to be operative retrospectively w.e.f 01.04.2006, inter alia, providing for the exclusion of the period commencing from the date of the decision of high court dated 18.01.2013 rendered against the revenue up to the date of the decision of the Supreme Court i.e., 22.09.2017 being in favor of the revenue and thereby removing the basis of the judgment dated 16.03.2018.

B. Points of challenge

  1. On the basis of above Addl. Commissioner issued another revision notice dated 01.09.2018 which is challenged on following grounds;
    • Section 84A of the GVAT Act is ultra vires and beyond the legislative competence of the State under Entry 54 of List II of the seventh schedule to the Constitution of India.
    • Section 84A of the GVAT Act is manifestly arbitrary and violative of the Articles 14 and 19(1)(g) of the Constitution of India.
    • Section 84A of the GVAT Act is not a validating Act.

C. Reasoning

  1. After insertion of Article 246A (to enact a law relating to GST) of the constitution, the scope of Entry 54 has been drastically curtailed to six specific products only and State Legislature does not have the competence to enact any law under Entry 54 except the law concerning only the six specific products. Therefore, the power to amend any law with respect to levy of tax on the sale or purchase of goods such as the “Gujarat VAT Act” could be said to have been abolished with the aforesaid amendment in the Entry 54 in List II in Schedule VII of the Constitution of India.
  2. If at the time of the amendment, the Legislature does not have the competence, then the law cannot be enacted on the ground that the same is concerning the period when the Legislature had the necessary competence.
  3. Section 84A of the VAT Act is not saved under Article 246A of the Constitution. Article 246A of the Constitution was inserted by the 101st Constitution Amendment Act with the prime object of subsuming multiple indirect taxes and to confirm concurrent power upon the Parliament and State Legislature to impose “Goods & Services Tax’ in accordance with the recommendations of the Goods & Services Tax Council constituted under Article 279A of the Constitution.
  4. Section 84A has been inserted in the Gujarat Value Added Tax Act, 2003 with retrospective effect. However, it does not provide for any validation of various acts of the revenue authorities namely the assessment, re-assessment, collection, etc. Accordingly, the said Act cannot be treated as a “validating Act”.
  5. Section 64 of the VAT Act requires the dealer to preserve books of accounts only for a period of six years from the end of the relevant accounting year. The proviso thereto requires further preservation of books of accounts only to the extent a matter is pending in appeal or revision. However, the impugned provision exposes the dealer to assessment/reassessment/ revision for an indefinite period which is excessive and disproportionate. In fact, the retrospective operation of the provision w.e.f 1st April, 2006 allows reopening of assessments of years in respect of which a dealer was not required to preserve the books of accounts and, therefore, the retrospective operation is all the more onerous and manifestly arbitrary. (Shayara Bano vs. Union of India – 9 SCC 1)
  6. If an unlimited time period is available to the Revenue for assessment/reassessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable.

D. Conclusion

Accordingly, the amendment was held to be beyond legislative competence, manifestly arbitrary, and not being a validating act and was struck down.

(Reliance Industries Limited vs State of Gujarat – SCA No. 14206 of 2018 – Date 16.04.2020)

Form 26AS : Now more than just taxes paid history of the Assessee!!

Monark Padmani
-
0
Form 26AS : Now more than just taxes paid history of the Assessee!!

“Question: Hey! What is your Tax History? Are you compliant and paying Income tax properly??

Tax Payers (before): I do pay taxes regularly, but I need to check with my accountant whether there are any defaults with the tax department!

Tax Payers (now): Wait, I will provide my Form 26AS, it has all the information! You can check this. I am honest!”

1. Introduction

As the mandate of existing Form 26AS was required to be extended beyond information about taxes deducted and paid, the government has introduced new section 285BB vide Finance Act, 2020 replacing the existing section 203AA of the Income Tax Act, 1961 (“the Act”) which will now allow the income tax authority to produce additional information which is necessary and to the extent is in the interests of Revenue in Form 26AS.

2. Old and New Provisions

Particulars Old 26AS New 26AS (“AIS”)
Name of Form Annual Tax Statement Annual Information Statement (“AIS”)
Applicable Provisions Section 203AA r.w. Rule 31 AB   Section 285BB r.w. Rule 114-I
Time Limit to issue Form 26AS It shall be issued upto 31st July of the relevant Assessment Year (A.Y.).` It shall be issued within 3 months from the end of the month in which the information is received by himBut, no time limit w.r.t. information under Rule 114-I(2), i.e. information received from (i.)officer any other laws, (ii)foreign govt under information exchange agreement or (iii) any other person.

3. What information would the AIS capture?

Nature Information Old 26AS New 26AS (“AIS”)
TDS/TCS Yes Yes
Payment of Taxes Yes Yes
Refund Status Yes Yes
Demand Status No Yes
Pending proceedings
(assessments, penalty proceedings, appeals, etc.) 		No Yes
Completed Proceedings No Yes
Annural Information Report (AIR)/ Specified Financial Transactions (SFT) AIR SFT*
Information received from the foreign government (under the Exchange of Information treaty) No Yes
Information received from officers under other law (GST Department, CBI, SFIO, SEBI, etc.) No Yes
Information received from any other person
(Tax Evasion Petition) 		No Yes

*SFT will contain details regarding various transactions exceeding various thresholds relating to purchase/sale of- goods, shares-securities and immovable property; rendering of services, works contract, cash deposits and withdrawals with banks, cash receipt in respect of sale of goods, etc. undertaken by the taxpayer during the year as reported u/s 285BA with whom such transaction is entered into.

4. Where will the AIS be available?

  • The AIS can be accessed from the e-filing portal of the taxpayer.

5. Comments:

  • Income Tax Report of Taxpayer
    • Based on the above, the notified new Form 26AS will bring out a complete chart about the assessee in terms of its compliance under Direct tax. It will now become Income Tax Compliance Record of Tax Payer similar to what CIBIL Score analysis for checking Financial Status or like Birth Chart of a Person.
  • Higher compliance by assessees:
    • The tax payer knowing that the Income Tax Department is aware of the transactions undertaken by him during the year would be driven to be more compliant and driven to correctly report them in their returns. This will not only ensure compliance but also potentially reduce assessment selection, leading to a reduction in litigation.
  • Assessee and tax professional can gauze in advance the likelihood of scrutiny selection:
    • As the information would be regularly updated within 3 months of receipt of the information, the assessee would be more aware and gauze whether his case is likely to be selected in scrutiny.
  • Erroneous reporting can be corrected during the year itself:
    • In case of erroneous reporting, the assessee would be known within 3 months and in a position to reach out to the reporting entity to revise their SFT.
  • Impact on void transfers u/s 281:
    • Some transfers/charge of assets (such as land, building, FDs, shares, plant & machinery, sale of the business (merger or secondary sale of securities), etc.) may be treated void u/s 281 of the IT Act if it is made during the pendency (or completion) of any proceeding of the seller under the Act but before the issue of demand notice by the Tax Recovery Officer to him.
    • An exception to this rule is if the transfer is made for adequate consideration and without notice of pendency or without notice of tax demand. With the express inclusion of such details of pending & completed proceedings as well as demand status in the AIS, the purchaser would not be able to claim ignorance of proceeding and (or) demand of seller and request him to obtain prior permission from tax department before such transfer/charge.
  • Tool for due-diligence:
    • The AIS will serve as a good tool to analyze the pending tax demand and undertake due diligence of taxpayers by banks while processing loan applications, other stakeholders such as creditors, suppliers before providing credit, by due diligence professions during mergers and acquisitions.

Note: This article is just for information and personal view of the author.

Extension invalidity for Names Reserved and Resubmission of Forms by MCA

CA Richa Agarwal
-
0
Extension invalidity for Names Reserved and Resubmission of Forms by MCA

In view of the situation arising due to COVID-19 pandemic and extended lock down period in the country, Ministry of Corporate Affairs has extended PERIOD/DAYS OF EXTENSION FOR NAMES RESERVED AND RE-SUBMISSION OF FORMS.  

Sr. No

Issue description

Period/Days of Extension

1

Names reserved for 20 days for new company incorporation. SPICe+ Part B needs to be filed within 20 days of name reservation.

Names expiring any day between 15th March 2020 to 31st May would be extended by 20 days beyond 31st May 2020.

2

Names reserved for 60 days for change of name of company. INC-24 needs to be filed within 60 days of name reservation.

Names expiring any day between 15th March 2020 to 31st May would be extended by 60 days beyond 31st May 2020.

3

Extension      of    RSUB validity          for companies.

SRNs where last date of Resubmission (RSUB) falls between 15th March 2020 to 31st May 2020, additional 15 days beyond 31st May 2020 would be allowed. However, for SRNs already marked under NTBR, extension would be provided on case to case basis.

Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non- resubmission during this extended period as detailed above.

It also includes IEPF Non-STP eForms ( IEPF- 3, IEPF-5 and IEPF-7)

4

Names reserved for 90 days for new LLP incorporation/change of name. FiLLiP/Form 5 needs to be filed within 90 days of name reservation.

Names expiring any day between 15th March 2020 to 31st May would be extended by 20 days beyond 31st May 2020.

5

RSUB validity extension for LLPs.

SRNs where last date of resubmission (RSUB) falls between 15th March 2020 to 31st May 2020, additional 15 days would be allowed from 31st May 2020 for resubmission. However, for SRNs already marked under NTBR, extension would be provided on case to case basis.

Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non- resubmission during this extended period as detailed above.

6

Extension for marking IEPF-5 SRNs to ‘Pending for Rejection u/r 7(3)’ and ‘Pending for Rejection u/r 7(7)’

SRNs where last date of filing eVerification Report (for both Normal as well as Re- submission filing) falls between 15th March 2020 to 31st May 2020, would be allowed to file the form till 30th Sep 2020. However, for SRNs already marked under ‘Pending for Rejection u/r 7(3)’ and ‘Pending for Rejection u/r 7(7)’, extension would be provided on case to case basis.

Note: Status of IEPF-5 SRN will not change to ‘Pending for Rejection u/r 7(3)’ and ‘Pending for rejection u/r 7(7)’ till 30th Sep’20.
Disclaimer: This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.

1...141516...23Page 15 of 23