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Refund Procedure Under GST

To get the refund of GST amount the registered person (taxpayer) has to follow the procedure mentioned under section 54 of the CGST Act, 2017. The detailed procedures are as follows: Refund of Tax (GST) [Section 54]: (1). Any person claiming a refund of GST & Interest thereon (if any) shall apply for the refund within 2 years from the RELEVANT DATE in the Form GST RFD-1. But, No need to separately apply if the registered person is claiming the refund of the amount in E-Cash Ledger. Just claim it with your periodic return e.g. GSTR-3. (2).  All person having UIN (i.e. International Bodies eg. UN, WHO, UNICEF etc.) may apply for the refund of all taxes paid on inward supply within 6 months 18 Months (AMD.) from last day of Quarter in which inward supply received. (3). Refund of unutilized ITC shall be given at the end of tax period (monthly/quarterly) and only in the following 2 cases: – Zero Rated Supply made without payment of tax. – Inverted Tax Rate Structure (ie. Higher tax rate on Input and the Lower tax rate on Output) Note-1: No such refund shall be given if “Export Duty” is being levied on export of goods. The refund shall be given only in case of export without payment of any tax. Note-2: Refund of ITC shall not be given if the supplier has taken Drawback of GST after export OR Refund of IGST Paid. Amendments:- The govt. has specified certain Goods/Services on which refund unutilized ITC due to Inverted Tax Rate Structure is not allowed. These are:- Supply of under construction house; Woven fabrics of silk/wool/cotton, knitted or crocheted fabrics; Rail locomotives powered from an external source of electricity or by electric accumulators. On these goods/services No Refund of unutilized ITC arising from Inverted Tax Rate Structure shall be allowed. BUT IF UNUTILIZED ITC IS DUE TO ZERO RATED SUPPLY THEN THAT WOULD BE REFUNED. (4). The application of the refund shall be accompanied by necessary documents to establish your claim of refund (e.g. Invoice, Dr. note, Cr. Note etc.). BUT; If the refund amount is less than Rs. 2,00,000 (i.e. up to Rs. 1,99,999) then no such documents required. ONLY SELF DECLARATION BY APPLICANT WOULD BE SUFFICIENT. (5). If proper officer is satisfied with the refund claim then he shall transfer such refund amount to the Consumer Welfare Fund (CWF). (6). In the case of Zero Rated Supply of Goods/Services, the Proper Officer shall provisionally (without any cross check etc.) allowed 90% of refund claimed. Balance 10% shall be transferred to the CWF. (7). Proper Officer shall pass refund order within 60 days from the date of receipt of the application for refund. (8). The refund amount shall not be transferred to the CWF but it shall be given to the applicant if the refund amount relates to the followings: – Zero Rated Supply of Goods/Services – Inverted Tax Rate Structure – Refund of tax paid on canceled supply – Refund of tax paid u/s 77 [i.e. IGST paid instead of CGST & SGST/UTGST and vice versa] – Other class of persons as may be notified by Govt. (9). The refund shall always be given only as per Section 54 and not under any other manner even if there is any contrary judgment, order, decree etc. of any court or tribunal etc. (10). If the applicant has any pending liability for tax, interest, penalty etc. then the Proper Officer may: – Hold applicant’s refund unless he pays the dues; OR – Adjust the dues with the refund amount and then only balance (if any) refund paid. (11). When any appeal/proceeding is pending against refund order and the Commissioner is of the opinion that the issue of refund may adversely affect the revenue then the Commissioner may Hold the refund. (12). But, once the appeal/proceeding against refund comes in the favor of the applicant then the applicant shall also get 6% P.A. interest on such refund. (13). No refund shall be given to the Casual Taxable Person (CTP) OR Non-Resident Taxable Person (NRTP) unless their period of temporary RC is expired and CTP/NRTP has furnished every returns etc. and fulfill every other compliance. (14). If the refund amount is up to Rs. 999 then NO REFUND SHALL BE GIVEN UNDER POINT 5 & 6 ABOVE. Amendment:- No refund shall be paid to an applicant, if the amount is less than Rs. 1,000. The limit of Rs. 1,000 shall apply for each tax head separately and not cumulatively. Further, the limit would not apply in cases of refund of excess balance in the electronic cash ledger. Interest on delayed Refunds: [Section 56] – If the refund is not given within 60 Days from the date of application then from 61st Day interest @ 6% P.A. shall also be given. – If the refund has been allowed by an adjudicating authority/appellate authority/tribunal/courts etc. then in case of days after 60 days the rate of interest shall be @ 9% (instead of 6%). Share It . .

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Penalties for Under Reporting & Misreporting [Section 270A]

Under the Income-tax act there might be various type of defaults or frauds etc and consequently, there is also various type of Penalties. There is also some case when the defaulter might be prosecuted (send to jail). Out of various penalties, one most important and most levied penalty is “Penalties for Under-Reporting & Misreporting”. This penalty is levied when there is any act by which the Assessee has actually reduced or attempted to reduce his tax liability through some of the wrong methods or evasions. Today we are gonna see this most levied penalty in details yet in very simple language. So, let’s get started: 1. What is Under-Reporting of Income? The income is said to be underreported when:  (A) In case of Normal Incomes: (i) the income shown by the assessee in his income tax return is proved (in assessment) to be less than what it actually should be; [means: the case of the assessee has been opened and it is found by AO that he had shown less income in his return filed.] (ii) the income of the assessee was exceeding the maximum exemption limit (i.e. taxable) but the assessee did not file the income tax return. (iii) the income of the assessee has been reassessed and in such reassessment, it is found that income is more than the previous assessment. (B) In case of income as per MAT/AMT Provisions [For Companies & Specified Persons ONLY]:  All the 3 cases mentioned above for the normal type of incomes shall be applied here as well. i.e. (i) deemed total income as per MAT/AMT provisions shown in return is less and later on, it is found in the assessment (case opening) that MAT/AMT deemed total income was more. (ii) No return was filed even if deemed total income as per MAT/AMT was exceeding the maximum Exemption limit. (iii) the deemed total income in reassessment as per MAT/AMT provisions was more than deemed total income as shown in the earlier assessment. 2. What is Misreporting of Income? Any of the below-mentioned cases would be considered as Misreporting of Incomes: (a) Misrepresentation or Suppression of Facts; (b) Failure to record Investments in books; (c) Claiming Fake Expense (i.e. without any bill/false bill etc.); (d) False entries in Books of Accounts; (e) Failure to record income; (e.g. doing transactions in cash and no recording thereof); (f) Failure to record any international transactions/specified domestic transaction as per Section 92D. Important Note- Misreporting of income is NOT DIFFERENT from Under-Reporting of  income. The facts is when any reduction in income is done by way of any of the above 6 reasons then such reduction in income is called Misreporting of income and penalty becomes 200% of tax payable. While if the reduction in income is due to ANY OTHER REASON then it shall be considered as Under-Reporting of income. And therefore all the provisions which applies for under-reporting of income is absolutely applicable on misreporting of income as well. IN SHORT, WHEN ANY UNDER-REPORTING OF INCOME IS BECAUSE OF ANY OF THE ABOVE 6 REASONS THEN IT BECOMES MISREPORTING OF INCOME.   3. What would be the amount of Under-Reporting/ Misreporting? In all the above cases the amount of under-reporting would be the difference what was shown earlier and what is the real income as per assessment/reassessment. 4. Certain Additions not to be considered as Under-Reporting and Misreporting: [i.e. Exclusions] There might be certain cases due to which income of assessees has been increased but there was no such intention of the assessee to defraud the tax authorities. These type of cases are not considered as Under Reporting OR Misreporting of Income. These are as follows: (i) Bonafide Explanation: When the A.O. is satisfied with the explanation given by the assessee in respect of such income and AO consider that it is Bonafide and the assessee has disclosed all material facts. (ii) Intangible Additions: When the A.O. has estimated the amount of Under-Reported income on the basis of books of accounts of the assessee (the tax authority must be satisfied with such books of accounts) but the method used to calculate under-reported income is such that proper determination cannot be done. For Example; A contractor filed the return of income as Rs. 100 cr. gross receipts and shows only Rs. 2 crores Returned income. While the general industry rate suggests a 20% profit. The A.O. now add Rs. 18 crores to the income of assessee without rejecting the books of accounts. Now, this addition is called “Intangible Additions” and no penalty for under-reporting or misreporting would be levied on it. (iii) Assessee’s claim reduced/disallowance increased: When the Assessee shows any claim or disallowance in books are per the income tax act but the A.O. reduced such claim (e.g. expense reduced) OR increased the disallowance then such reduction/increase would not be considered as under-reporting or misreporting. (iv) Transfer Price Adjustments: When any addition in assessee’s income is made due to variation in Arm’s Length Price calculated by assessee and calculated by Transfer Price Officer (TPO) then such increase in income would not be considered as under-reporting or misreporting provided the assessee has maintained all required books etc as per section 92D and disclosed all material facts. (v) Undisclosed Incomes which are covered u/s 271AAB: Section 271AAB specifies the penalties leviable in case of search and seizure (i.e. Raid). Although, that is a case of under-reporting or misreporting still as there is a specific section dealing with such cases it has been excluded from Section 270A. 5. How much Penalty is levied for Under-Reporting of Income? The penalty for under-reporting of income shall be 50% of the amount of Tax Payable on such under-reported incomes. 6. How much Penalty is levied for Misreporting of Income? Where the income has been shown less by way of misreporting of facts etc. then the penalty for such misreporting of income would be 200% of the amount of Tax Payable on such misreported incomes. Note: Assessee can request to A.O. u/s 270AA for immunity from the penalty for under-reporting of income. But in the case of Misreporting of income;

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Settlement Commission (SETCOM)

The “Settlement” we all must have heard about this word. In general, it is considered as the mediation or mutual coordination between the parties on any certain issue. Yes, You are absolutely right but here we are gonna discuss the Income-tax settlement. When we say the Income-tax settlement we obviously do not contradict with the general understanding of the word settlement. In the income tax act as well there is a provision for settlement between the parties. But how and when it should be headed for? Is it really beneficial for the user? Why we should opt for the settlement? These are some of the questions which we are gonna discuss in here today. So, Let’s get started: 1. What is Settlement in the Income Tax Act? When Assessees have multiple pending cases with the A.O. and there is a possibility that there might be more cases of default due to which there might be huge penalties and it may lead to prosecution as well. In such cases, the assessee has been given with an option to come clear with all such penalties and prosecutions by declaring all such hidden incomes which have not been shown earlier. This is called ‘Settlement’ under the income tax act. This opportunity is being given ONCE in a lifetime. 2. What is the Settlement Commission (SETCOM)? For the purpose of settlement, the Govt. has made one Alternative Dispute Resolution (ADR) body to deal with such cases named Income Tax Settlement Commission (ITSC) which is popularly known as Settlement Commission. Settlement Commission (SETCOM) is the body of the Govt where the Assessee can disclose his undisclosed income and settle his cases. 3. When can SETCOM be approached? The SETCOM can be approached in the following cases: (i) Where the case is pending under section 143(3)/144/147/153A. (ii) Also, it can be approached when the case has been set aside and referred back to the AO u/s 254/263/264. CONDITIONS (for both cases): – The assessee has made full and true disclosures of his income which was not earlier shown before the AO. – S/He has also disclosed the manner under which it has been derived. – S/He has disclosed the Amount of Additional Income tax payable on such case. – The Assessee has paid the amount of additional amount of income tax and interest (if any) before making the application and also attached the proof of such payment with the application. The Amount of Income tax payable on such case must be at least: – Where it is a case of Search and Seizure (Raid): Aggregate Amount of additional income tax payable of (Preceding 6 years + Current Previous year) is EXCEEDING RS. 50 LACS. – In any other case: Aggregate Amount of additional income is EXCEEDING RS. 10 LACS. NOTE– If some of the documents have been recovered in RAID belongs to any Related Party to the raiding Assessee and becuase of such documents the raid is supposed to be conducted on such related parties as well, then such ralated parties could also proceed to the SETCOM. But, in this case as well, the additional amount of income tax payable must be is EXCEEDING RS. 10 LACS. 4. How to calculate the Additional Amount of Income tax? IN CASE THE APPLICATION PERTAINS TO ONE YEAR ONLY: The calculation of the additional amount of income tax shall be calculated as follows: – When No Return of Income has been furnished: Then Additional amount of income tax would be the TAX ON TOTAL INCOME disclosed in the application. – When Return of Income has been filed: (i) Tax On [(Returned Income + Amount disclosed in the Settlement Application)] (ii) Less:  Tax on Returned Income The resultant amount would be the additional amount of the Income tax.  IN CASE THE APPLICATION PERTAINS TO MORE THAN ONE YEAR: Calculate the additional amount of the income tax as such for each year and then aggregate them. 5. What is the Procedure of Settlement after the application has been accepted? [Sec. 245D] Once the application has been fulfilled the above said criteria and the application has been accepted then the SETCOM shall proceed as follow: (i) On receipt of the application, the SETCOM within 7 days from receiving the application ask the reason with the applicant that Why the application shall be allowed to be proceeded with? [It is generally a type of clarification from the assessee that he has actually made the application and it has been made with good intentions.] (ii) After hearing the answer the SETCOM shall within 14 days from the Date of Application either Reject OR Allow the application to be proceeded with. (iii) Once it has been allowed the SETCOM may ask for the report from the CIT within 30 days from the Date of Application. [Now, CIT shall provide SETCOM the report within the next 30 days from when the SETCOM has asked it for. If CIT is unable to provide such report then SETCOM may proceed without the said report.] (iv) When the above-asked report is being provided by CIT to SETCOM then within 15 days from receiving of such report the SETCOM will declare the Application Invalid OR proceed toward passing the order against the application. (v) If not declared as Invalid: then SETCOM may again ask for any further information from CIT and also may ask the CIT to made further investigation and submit the report of it within 90 days from asking for such report. If CIT is unable to provide such report then SETCOM may proceed without such report. After being satisfied with all the facts and circumstance the SETCOM shall pass the order WITHIN 18 MONTHS from the end of the month in which application was made. IMPORTANT NOTE– The Order of Settlement shall be declared VOID if it was obtained by fraud/misrepresentation. Further, any of the matter covered by SETCOM shall be deeemd to have been Revived from the date of application for settlement. Now, IT Authorities would be able to complete such revived proceedings within 2 years from the end of F.Y.

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General Anti Avoidance Rules (GAAR)

Every person wants to reduce his taxes and for this, they use many of the methods. Basically, taxes liabilities can be reduced by 3 ways; viz. Tax Planning, Tax Evasion, and Tax Avoidance. Tax Planning is to save taxes by using the various exemption and benefits etc. available under the Income tax act itself e.g. Investing in notified investment, Setting up business in SEZ etc. Tax Planning is absolutely legal and allowed under the law. Tax Evasion, in simple term, means Tax ki Chori (i.e. theft of Govt. revenue). It is simply using the unlawful means and methods e.g. claiming fake expense, claiming fake deduction etc. to reduce the tax liability. This is illegal and therefore there are various penalties and prosecutions under the Income tax act which deals with such cases. Tax Avoidance is something which falls in between the Tax Planning and Tax Evasion. It is simply reducing the tax liability using the loopholes in the law. Any planning which is done as per legal requirements in such a way which defeats the basic purpose behind that provision. Through the Tax Avoidances Govt. loses very heavy revenues each year and yet can’t punish the offenders as they plea that they haven’t committed any breach of the law. Although, there are various specific sections which are dealing with the specific type of tax avoidance e.g. Section 40A(2), Section 2(22)(e), Section 40(a)(i)/(ia) etc. But these were the only specific section which deals with only certain specific cases. But there might be many possible ways by which people can do tax avoidance and therefore to curb such kinds of general cases which has malafide intent General Anti Avoidance Rules (GAAR) were introduced. So, let’s understand it in detail: 1. What is GAAR? General Anti Avoidance Rules (GAAR) provision deals with such type of Arrangements which is entered into to obtain a tax benefit (i.e. to reduce the tax liability). GAAR is based on the principle that transactions must have to be real and the intent of arrangement/transactions must not be only Tax Avoidance. 2. When GAAR is applicable? [Sec. 95] For applicability of GAAR, all 3 things mentioned below must be present: (i). If any Arrangement or Transaction entered into by assessee is Impermissible Avoidance Arrangement (IAA) then such arrangement would be covered under the GAAR provisions. (+) (ii) Further, GAAR would be applicable where aggregate tax benefit in the relevant A.Y. arising to all parties in the arrangement is Exceeds Rs. 3 Crore. (+) (iii) The Arrangement/ Transaction must have been entered on or after 1st April 2017. (i.e. GAAR applicable from A.Y. 18-19 onward). Note- Any Arrangement/Transaction entered into before 1st April 2017 shall be taken as GRANDFATHERED (in simple terms; old/obsolete) and therefore would not be covered by GAAR. 3. What is Impermissible Avoidance Arrangement (IAA)? [Sec. 96] An Impermissible Avoidance Arrangement (IAA) means an Arrangement, the main purpose of which is to obtain Tax Benefit (i.e. to reduce tax liability) and; The Arrangement satisfied any ONE of the following conditions (called Tainted Element Presence Test): (a). It creates rights or obligations which are not generally created between persons dealing at arm’s length, OR (b). It, directly or indirectly, misuse or abuse the provisions of this Act; OR (c). It Lack/Deemed to Lack Commercial Substance in whole or part; OR (d). It is entered into/carried out by such means or in such manners which are not generally employed for bonafide purposes. When an arrangement is deemed as IAA then whatever would deem appropriate would be taken by authorities including denial of tax benefits under DTAA, lifting of the corporate veil, disregarding the location of transaction or party, deeming connected persons as one person. Note- Burden of Proof (to prove any arrangement as not IAA) would be on Assessee. 4. When any arrangement does Lack/Deemed to Lack Commercial Substance? An Arrangement would be deemed to lack commercial substance (i.e. taken as it was not commercially required) if: (i) The Substance of an arrangement as a whole is different from individual steps or a part of the arrangement (i.e. what is intended to be shown by the form of arrangement). (ii) It includes: – Round Trip Financing (i.e. Fund is routed through such locations through which tax liability is reduced) – An Accommodating Party – Elements that have the effect of offsetting or canceling each other Where the transaction involves one or more persons and the value, source, location, ownership or control of funds etc. are disguised (i.e. manipulated). (iii) Such an arrangement involves such locations of any assets/transactions/party which have been manipulated just to obtain the tax benefit (i.e. reduce the tax liability) and there is no substantial commercial purpose behind it. (iv) The Arrangement does not have significant effects upon the business risk/cash flow of any party to the arrangement. [means: Window dressing arrangements have been created just to avoid taxes]. Share It . .

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Place of Effective Management (POEM) Guidelines

Earlier, Provisions relating to the residential status of a company were providing that a company is said to be resident when the company is an Indian Company or during the previous year the Control and Management of the company was situated WHOLLY in India. Now, To avoid the taxes companies were manipulating the residential status by holding a few Board meeting outside India and saying that we are a non-resident company. This was resulting in a reduction in the tax base of Govt. Therefore, the Govt. by Finance Act, 2015 introduced the concept of Place of Effective Management (POEM) which replaced the old Control and Management Concept. But, because there was not enough clarity on the term PLACE OF EFFECTIVE MANAGEMENT the applicability of this concept was later on postponed by Finance Act, 2016 and said that this concept would apply from Assessment Year 2017-18 and onward years. Thereafter, the CBDT, later on, issued very detailed principles for determination of POEM through Circular no. 6/2017 dated 24-01-2017. And that is what called POEM guidelines or POEM rules. So, let’s understand them in detail: 1. Residential Status of Company [Section 6(3)]: As per the amended provisions of section 6 (3) of the Income Tax Act, the company qualifies as a resident of India in any previous years, if – (i) It is an Indian Company, or (ii) Its Place of Effective Management (POEM) in that year is in India. 2. Place of Effective Management (POEM): Section 6(3) also defined POEM “a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance (actually) made. But this was unclear so wait for the circular to save this. 3. Determination of POEM [Circular no 6/2017 dt. 24-01-2017]: For determination of POEM we could divide the type of companies into Two: (I) Companies Which are involved in Active Business Outside India (ABOI) (II) Companies Which are NOT involved in ABOI Now, we will discuss both the above points in detail in separate points given below. 4. Companies Which are involved in ABOI: The Company is said to be involved in Active Business Outside India (ABOI) if it fulfills ALL the 4 conditions given as follow: (i) “Passive Income” of the company is max. up to 50% of its total income; (+) (ii) Out of the Total Assets of the company; less than 50% (i.e. up to 49%) assets are situated in India, (+) (iii) Out of the Total No. of Employees of the company; less than 50% of employees are situated/resident in India; (+) (iv) Out of the Total Payroll Expenses incurred by the company; less than 50% of payroll exp. is incurred for such employee. If all the above condition is fulfilled then the company is said to be having Active Business Outside India (ABOI). Now, before heading for determining the POEM of such companies (which are having ABOI) we need to understand the terms used in the above conditions. (a). Passive Income: It means the Aggregate of following two types of incomes: – Income from the transactions, wherein, purchase and sale both are from an associated enterprise of the company, and – Income from royalty, dividend, capital gains, interest or rental income. (b). Income: means Income As Computed for Tax Purpose; or If there is No computation available for tax purposes; then Income As Per Books of Accounts. Note- Both the Above incomes (as per books/tax computation) shall be taken as per law of THAT COUNTRY WHERE THE COMPANY IS INCORPORATED. (c). Value of Assets:  In case of Individually Depreciable Assets (i.e. Single Assets System): Value shall be “Average of Opening Value & Closing Value” for tax purposes calculated at the end of the Previous Year. In the case of Block-Wise Depreciable Assets: Value shall be “Average of Opening Value & Closing Value of Block” for tax purposes calculated at the end of the Previous Year. In any other cases: Value shall be As per Books of Accounts. Note- All the Opening/Closing Balance of Assets or Books Value of Assets shall be taken as per law of THAT COUNTRY WHERE THE COMPANY IS INCORPORATED. (d). Number of Employees: It means “Average of Opening No. of Employees & Closing No. of Employees” and it would include the persons who were not directly employed by Company but perform the similar task to those of employees of the company (i.e. Outsource Employees). (e). Payroll Expense: Payroll includes the cost of salaries, wages, bonus and all other employee compensation including related pension and social cost borne by the employer. IMPORTANT NOTE- For Calculation of Any of the above said AVERAGES the data of [Current Previous Year + 2 Preceding P.Y.] shall be considered. What is the POEM of Companies which has ABOI? The POEM of the companies which has Active Business Outside India (ABOI) shall be deemed to be OUTSIDE INDIA and consequently, it would be non-resident if the majority of Board meetings are held outside India. But, if the majority of the meetings are held in India and consequently key decisions are taken in India then POEM shall fall in India. However, if through the facts and circumstances it is established that BOD is standing aside (just a puppet) and instead any Indian Holding co./ Indian Resident is exercising the powers then POEM shall be considered in India. 5. Companies Which are NOT involved in ABOI: The determination of POEM of the companies which are NOT involved in the ABOI shall depend on two stages: (i) First Stage is to Identify those PERSONS who are Actually taking key management and commercial decisions; (ii) Second Stage is to Identify the PLACE where these decisions are actually being taken from. The place where the decisions are being taken would always be of more importance rather than the place where such decisions are being implemented. Now, the PERSONS and PLACE as mentioned in the first and second stage would impact the Place of Effective Management. To determine those impact and the

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Sukanya Samriddhi Account

The Central Govt. launched the ‘Sukanya Samriddhi Account’ programme in January 2015 with an objective to promote the welfare of girl child. It is a small deposit scheme for girl child which ensures their secure future and reduce their financial difficulties which they might have in future for their education or even for their marriage. It was also a plan which was toward the mission of ‘Beti Bachao, Beti Padao’ which was also launched on the same day. So, Let’s understand full details regarding it in very simple language: 1. Opening of Account: The account may be opened by the natural or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of 10 years. Also, any girl child, who has attained the age of 10 years, one year prior to the commencement of these rules, shall also be eligible for opening of the account under these rules. A Depositor (such guardian) may open only one account in the name of a girl child under these rules. Birth Certificate of such girl child AND Identity and residence proof of the depositor shall be submitted. Such guardian shall be allowed to open the account for two girl children only (except in cases when twin/three girl child is born together). It can be opened with Post-Offices and Notified banks as well. 2. Deposits: The account may be opened with an initial deposit of Rs. 1,000* and thereafter any amount in multiple of One hundred rupees may be deposited but the total amount deposited during the entire year shall not be less than Rs. 1,000 * and shall not exceeds Rs. 1,50,000 as well. The deposit in the account may be made through Cash, Cheque, or Demand Drafts. [* Now this limit of Rs. 1,000 has been reduced to Rs. 250/- only] Deposits can be made up to a maximum period of 14 years from the date of opening the account. After this period the account will only earn interest as per applicable rates. 3. Interest on Deposits: Interest at the rate, to be notified by the Govt., compounded yearly (the account holder may also opt for monthly interest) shall be credited to the account until the account completes 14 years. The current interest rate as on date is 8.5% per annum. 4. Operation of Account: The account shall be opened and operated by the natural or legal guardian of the girl child till the girl herself attains the age of 10 years. On attaining the age of 10 years, the girl child herself may operate the account. However, deposit in the account may be made by the guardian or any other person or authority. 5. Premature Closure of Account: In the event of Death of the account holder (i.e. the girl child), the account shall be closed immediately on the production of the Death Certificate and the balance remaining in the account shall be paid to the guardian with interest. Apart from this, Where the Central Govt. is satisfied that operation or continuation of the account is causing undue hardship to the account holder, the govt. may allow pre-mature closure of the account only in the case of extreme compassionate grounds such as medical support in life-threatening diseases, death etc. 6. Transfer of Account: The Account may be transferred anywhere in India if the girl child (i.e. the account holder) shifts to any other place other than the city or locality where account stands. 7. Withdrawal: For the higher education and marriage of such girl child, withdrawal up to 50% of the account balance at the end of preceding financial year shall be allowed. But, the withdrawal shall be allowed only when the account holder girl child attains the age of 18 years. 8. Closure on Maturity: The account shall mature on when the Girl child completes her 21 years but if her marriage takes place before being 21 years then it shall be deemed as mature. But the girl child has to furnish a declaration that she is not less than 18 years on the date of Closing the account. 9. Income tax benefit on Sukanya Samriddhi Account: The deposits made to the account, and also the proceeds and maturity amount are fully exempt from tax under section 80C of Income Tax Act. It is similar to PPF in respect of Tax Deductions. Share It . .

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Benami Transactions Act [Including Amendment, 2016] – Complete Overview

Recently, Govt. has introduced a law which has given a sudden jolt to the real estate sector. But the fact is, it is not only the real estate sector which would be affected by this law but it would have an impact on all types of properties be it movable or immovable. This law is called the Benami Transaction Act. Although, It is not a new act and it was originally created way back in 1988 but it was only the recent amendment brought in 2016 which has made a complete overhaul of this act and has made it really strong. But, of course, you might be thinking right now; what is it? How does it affect me? why should I concerned about it? Well, you’ll get to know all these things by the end of this article. So, Let’s analyze it in a very simple language and step by step:- 1. What is Benami Property? Benami literally means something “without a name”. Therefore, you could easily assume it that any property without a legal name and the valid owner is called Benami. It is a Property which is purchases/sold under a Benami Transaction and it also includes the money involved in such property. Property here means; assets of any kind, whether movable or immovable, tangible or intangible and it will include any right, interest, title to any property. 2. What is a Benami Transaction? Benami Transaction means; a transaction or an arrangement where: (A) A property is transferred to a person but the Consideration for such property has been given by another person. & Such property is held for the ultimate benefit of the person who has provided the consideration. (B) A Property has been taken in a fictitious name. [i.e. Purchased in Fake name] (C) A Property which has been taken in such manner that the owner (as per documents) of the property is not aware of such ownership. [i.e. Purchased in some unknown person name] (D) The Person giving the consideration for purchase is not traceable or is Fictitious. [i.e. Purchase money is coming from unknown sources] EXCEPTIONS: There are also some specific Exceptions to the general rule which means if Property has been taken in such manner then it will not be considered as Benami. These Exceptions would be in cases WHEN THE PROPERTY IS HELD BY: – A Karta/Member of HUF and the property is held for his own benefit or benefit of other members in the family and considerations for such property is coming from known sources of HUF. [Important Note- If a Member of HUF purchases property in the name of Another Member then that would not be taken as Exception.] – A Person standing in a fiduciary capacity (i.e. working on behalf of and benefit of other). If s/he is holding any property for the benefit toward whom he stands in such capacity then that would not be called as Benami. e.g. A share marketing company (say, Sharekhan) hold shares in the fiduciary capacity on behalf of their clients then that would not be considered as Benami. – Any Individual (buying property) in the name of his/her spouse or in the name of any child & consideration for such property is coming from the known sources of such individual. – Any Individual (buying property) in the name of Brother or Sister or lineal ascendant/ descendants, where the name of brother or sister or lineal ascendant/descendant AND the Individual appear AS JOINT-OWNERS in any document & consideration for such property is coming from the known sources of such individual. 3. Why People involved in Benami Transactions? It is generally used to enter into by the people who have unaccounted money; more commonly known as Black money. People make the Benami Transactions to hide their name and use the black money in various types of properties in such names which is either fake or which are not under the lenses of tax departments. Also, Another reason for entering the Benami Transactions is to hide the true ownership of the property from their lenders, creditors, and banks etc. 4. Who are the Parties involved in it? In any Benami Transaction the following parties are involved: (i) Benamidar: It is the person/fictitious person in whose name the property has been purchased. (ii) Beneficial Owner: It is the person who has provided the consideration for purchase. (iii) Seller: It is the person who is selling the property. 5. Which people would be affected by this Act? The people who have entered in any way transactions which are covered under Benami especially the one who has the Black Money and invested the same into Benami Transactions would be hugely affected by this act. They have to bear the Huge penalties and prosecutions under the Act. Also, the real estate sector would be certainly impacted with this and every party involved must be very clear about the true ownership of the property. People who have taken properties from their genuine sources and for their own direct benefit would not be affected by this law. 6. What are the Penalties & Prosecutions under the Act? The Act prescribes the different penalties and prosecutions for different defaults which are as follows: (i) Penalty for Benami Transactions: Where any person enters into a Benami Transaction the beneficial owner, benamidar and any other person who supports any person to enter into the benami transaction shall be guilty under the act and punishable with rigorous imprisonment for a term between 1 year to 7 years (+) shall also be liable to fine which may be extend up to 25% of the Market Value of the Property. (ii) Penalty for False Information: Any person who is required to furnish information under this Act knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with rigorous imprisonment for a term between 6 months to 5 years (+) shall also be liable to fine which may extend up to

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TDS – Quick and Complete Summary [Part-II]

In the last part of this summary, we have learned about the basic meaning of TDS, some concepts which were very useful and commonly applied on all sections, and the various sections under which the TDS is being deducted. Now, In the Part-II, we will get the details about the procedural parts regarding compliance of TDS. So, let’s proceed with that: 1. What is the Time Limit for Payment of deducted Tax? TDS needs to be deposited on or before the 7th day of Next Month in which such tax is deducted. For the month of March, the last date for depositing TDS is 30th April. [However, In case of Govt. Employer when TDS is deposited without Challan (i.e. through Book entry) then TDS deposit date shall be the Same Day.] 2. What is the Due Date for Quarterly Return of TDS? (i) For First Quarter (i.e. Qtr ending on 30June)       —              —               —  31st July (ii) For Second Quarter (i.e. Qtr ending on 30 Sep)   —              —               —  31st Oct (iii) For Third Quarter (i.e. Qtr ending on 31 Dec)     —              —                —  31st Jan (iv) For Fourth Quarter (i.e. Qtr ending on 31 Mar)   —              —                —  31st May 3. What is the TDS Certificate? TDS certificate is the statement issued by Deductor to the Effect that tax has been deducted and specifying the amount, Section, Rates etc under which it has been deducted. In common parlance, it is widely known as Form-16 (in case of Salary) and Form-16A (in other cases). 4. What is the Time Limit for the issue of TDS Certificate? In Case of Form-16: It is issued Annually and the due date for issue of Form 16 is 31st May of the following year from the year in which Tax has been deducted. In Case of Form-16A: It is to be issued Quarterly and the due date for issue of Form-16A; 15 days from the due date of Furnishing Return (i.e. which comes as 15Aug, 15Nov, 15Feb, 15June) [Imp. Note- If TDS Certificate is not issued within the said time limit then there is a penalty of Rs. 100/- per day per certificate up to which the failure continues subject to max. of TDS amount.] 5. What is the Lower Deduction Certificate? It is a certificate issued by the Assessing Officer (AO) u/s 197 on request of Assessee; if AO is satisfied that on the income of Assessee which is liable for tax deduction under TDS is such that deduction should be made on lower rates, then AO may issue a Certificate in this regard i.e. called Certificate of Lower Deduction. [Note- Certificate of Lower Deduction cannot be issued for TDS to be deducted u/s 194-IA] 6. What is Form 15G & 15H? It is a Self Declaration given by Assessee to the Payer (Deductor) that his/her tax on total income including the income on which TDS is to be deducted shall be Nil. On receipt of such form the Deductor submit this form to the Income-tax department and did not deduct any amount as TDS. Form 15G is for any assessee (excluding Firm & Company) while Form 15H is for Resident Individual who is Senior Citizen. Form 15G & Form 15H can be given only when there is a liability for TDS under 5 Section only i.e. 192A (RPF), 193 (Int. on Securities), 194A (Other Interest), 194DA (Insurance Amount), 194-I (Rent). It cannot be submitted against any other Section Liability. [Note- If any of Such Income received by any person (who is eligible for 15G) is exceeding the exemption limit then 15G can’t be submitted.] 6. What if there is no PAN detail of Payee? (i) In case the Payee (Deductee) has not provided the PAN then the TDS shall be deducted at the Rates HIGHEST from the following: – Rate given in relevant TDS Sections – At the Rates in Force (i.e. given in Finance Act) – 20% [Note:- But if the amount received itself is within the threshold limit of TDS then NO question of Deduction at higher rates.] (ii) If PAN is not given then there would not be provided any Lower tax deduction certificate. Also, any request submitted in Form 15G or 15H shall be taken as Invalid. 7. What are the consequences of Failure to Deduct or Pay TDS? If any such person who is liable to deduct TDS; – Does not deduct whole or any part of TDS; OR – Has deducted but not deposited whole or any part of TDS; Then Such person would be considered as Assessee-in-Default for tax not so deducted or deposited and therefore shall be liable for the Interest u/s 220 and Penalty u/s 221 for being Assessee in Default. V. Important Note: – If Deductor has not deducted the TDS and paid the whole amount to the Deductee (Payee); & – Deductee (resident only) has himself/herself declare this amount in his return and paid the tax thereon; then the Deductor shall not be considered as Assessee-in-Default. But still, he will be liable for the Interest on Late Deduction of TDS. 8. What are the consequences of Late Deduction/Payment of TDS? If any person is liable for deduction of TDS does not Deduct TDS within time OR after deduction does not Pay within Time then s/he shall be liable to simple interest as follows: Late Deduction: 1% Per Month or part thereof [From When Deductible –to– When Deducted] Late Payment: 1.5% Per Month or Part thereof [From Deducted –to– Actual Payment] And such interest shall be paid before filing of Return of TDS. 9. Default in Furnishing Quarterly Return of TDS? When a Person fails to Deliver the Quarterly

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TDS – Quick and Complete Summary [Part-I]

In some manner, all of us must have somehow come across the Tax Deductions, be it on Salary, on Fees or any other kind of payments. But people are very less aware of the various situations and the law governing TDS. What are the limits up to which TDS should not be deducted? What are the troubles of not deducting TDS?? etc. etc. Therefore, today we will be discussing the various provisions and other relevant details about the TDS. So, Let’s start from the very beginning: A. What is TDS? The assessee is required to pay taxes on his income. This tax is collected by two modes; (i) Direct payment by Assessee e.g. Advance tax, Self Assessment Tax. (ii) Tax Deducted at Source (TDS) which is the deduction of Tax by the payer from the income of the recipient. As per the Income Tax Act, 1961, Any person liable for making a payment is required to deduct TDS if the payment exceeds the certain threshold limits. B. Some Very Important Concepts: Before we are heading towards the main sections we must have to understand some important points which are commonly applied to all the sections of TDS. These are as follows: (i) Applicability of Surcharge and EC & SHEC: The applicability of Surcharge and EC & SHEC would generally be dependant on the Status (Resident/Non-Resident) of the payee(deductee). – In case of Resident Payee: TDS shall be deducted WITHOUT ANY SURCHARGE/EC/SHEC which means TDS shall be deducted at applicable rates only. Except for the case of Salary i.e., while deducting TDS on salary then Surcharge, EC & SHEC shall be deducted at normal slab rates. e.g if the salary exceeds Rs. 50 Lakhs then SC and EC & SHEC shall also be calculated and deducted. – In case of Non-Resident Payee: TDS shall always be deducted inclusive of the respective Surchage, EC & SHEC with the rates of TDS. (ii) In the entire chapter of TDS under any section where no TDS is required to be deducted on Individual/HUF; that Individual/HUF shall not include the Individual/HUF whose accounts are required to be audited. In simple words, Individual/HUF whose accounts are required to be audited shall not be considered as the Individual/HUF for the purpose of TDS exclusion. (iii) TDS SHALL ALWAYS BE DEDUCTED ON GST EXCLUDED AMOUNT. C. When TDS needs to be deducted? TDS needs to be deducted under various situations and for various payments which are as follows: 1. TDS on Salaries [u/s 192]: Deductor: Any person responsible for paying Salaries Deductee: Any Individual Employee [Resident/Non-Resident] When to Deduct: At the time of Payment only Rate of TDS: At the average rate of tax for Current F.Y. in which payment is being made. Important Point: (i) In the case of Non-Monetary Perquisites, Employer instead of deducting TDS could directly pay the tax him/herself. But tax rate shall be the same average rate which would have been charged on the total salary of the employee including this non-monetary prerequisite. (ii) If the employee is working under more than one employer OR has worked under more than one employer during the previous year (i.e. left the job at one place and join somewhere else) then the employee MAY (at his option) could provide any employer (if simultaneously working)/last employer (if left and join another employer) his other employment details and the Employer would calculate TDS after considering the entire salary including which he is receiving from other employers as well and deduct the TDS on such salary. (iii) If Employee is having incomes from other heads as well (any other heads) or Loss (ONLY under House Property) then Employee may give such details to his Employer and Employer would consider such income/loss (from house property) while calculating TDS. (iv) [Section 192A] TDS on Accumulated Balance of Recognised Provident Fund (RPF): While paying the amount accumulated in RPF account of Employee, Employer would Deduct TDS @10% (at MMR i.e. 35.535% if PAN not provided) if the RPF balance is Above Rs. 50,000/- & Employee has withdrawal it pre-maturely (e.g. Before completion of 5 years of continuous service). Also, If form 15G/15H provided by Employee then, No Deduction at all. 2. TDS on Interest on Securities [u/s 193]: Deductor: Any Person responsible for paying Interest on Securities Deductee: Any Person [Resident Only] When to Deduct: At the time of Credit to the Account of Payee OR Actual Payment; Whichever is Earlier. Rate of TDS: 10% Important Notes: There are also some EXCEPTIONS in which NO TDS u/s 193 would be deducted on Interest. These are as follows: (i) When Interest on Debentures is being paid by Widely Held Company to Resident Individual/HUF through A/c Payee Cheque and Such Interest amount is Up to Rs. 5,000/- only. (ii) If Debentures has been issued by Listed Company; but Debenture is in Physical form then, No TDS if Interest is Up to Rs. 5,000/-. (iii) If Debentures has been issued by Listed Company; but Debenture is Not Listed (whether Physical form or Demat Form) then, No TDS if Interest is Up to Rs. 5,000/-. [In all the above 3 cases if Interest amount exceeds Rs. 5,000 then TDS would be on entire Amount] (iv) If Any Securities (Share, Debenture, Bonds etc.) is in Demat form & Listed then there would be NO TDS at all (i.e. without any threshold). (v) No TDS at all in any manner on Govt. Securities. (vi) When the Interest On Securities is being received by the Insurance Company then, No TDS at all. 3. TDS on Dividend [u/s 194]: Deductor: Indian Company Deductee: Any Person being a Shareholder [Resident Only] When to Deduct: At the time of Credit OR Payment; whichever is Earlier. Rate of TDS: 10% [If amount up to Rs. 2,500/-  = NO TDS; If Exceeds then TDS on the whole amount] Important Note: Here Deduction would be made only in case of Dividends which are covered u/s 2(22)(e) & u/s 115BBDA. Because on rest all the other dividends Company itself pays the DDT and they are exempt in the

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Charitable/Religious Trusts & Institutions – Simplified

You must have heard about some of Charitable Trust or Religious Trust or any Trust which is doing both. You could find that in the form of NGOs, Mandir Trusts, Gurudwaras Trusts etc. They generally receive their source of operation by way of contributions, donations etc.   They mainly work toward the betterment of the Society and serve public at large. Their causes are pious and society needs them.  And that’s why in the tax system also they have been provided with a lot of benefits in order to enhance and promote them.   So, today we are going to discuss the concept of Charitable/Religious Trusts and various tax benefits which the govt. has provided them. Let’s understand them: 1. What is Charitable/Religious Trust? Charitable Trust: It is the Trusts which has an objective of Charitable Purposes and provides voluntarily help. They are non-profit based and their main purpose is toward activities which are for the benefit for the Society at large. Charitable Purpose includes various acts like the relief of the poor, promoting education, yoga, medical relief, preservation of the environment, preservation of monuments (e.g Taj Mahal, Red fort etc.) and also Advancement of any other activities which are of general public benefit.   Religious Trust: Religious Trusts has not been defined under the income tax act. The creation of Religious Trust is governed by the personal laws of the religion. But in general connotation, it can be deemed as the Trusts which are involved in the activities of promoting religion or particular belief. But in reality, most of the Religious Trusts also promote the charitable causes as well e.g. education, medical facility, providing food the poor etc. and such types of Trust are called Charitable & Religious Trust. 2. How it is being created? For this, we have to understand the types of Trusts first. Trusts can be categories mainly in two categories: (i) Private Trusts  (ii) Public Trusts The Private trusts are covered under the provisions of Indian Trusts Act, 1882 and its creation are also done as per the type of trust and as per the relevant provision of the said act. While here we are talking about Charitable and/or Religious Trusts; these are the trust which comes under the category of Public Trusts. There is no central Act for applications in all the States. But various states such as Bihar, Madras, Madhya Pradesh, Orissa, etc. have enacted their own acts prescribing conditions and procedure for the administration of Public Trusts. 3. How to get the benefit under the Income tax act? For having the benefit of exemptions under the income tax act, 1961 the Charitable or Religious Trusts have to get themselves registered under the income tax act u/s 12AA. If the objects of Trust has been modified later on from that of which was initially declared while taking the registration, then the Trust has to apply for the modification of the Registration Certificate of such Trust. If such modification is not been done then exemptions would not be allowed. [FA, 2017] Also, Return must have been filed within due date. If Gross Receipts exceeds Rs. 2,50,000/- then the accounts of Charitable or Religious trust must be audited to get the tax benefit available to the Trusts under the act. 4. What tax benefits are available to it? As the main purpose of giving the tax benefits to the Charitable/Religious Trusts is to promote their social welfare and religious causes and that’s why the exemptions provided to these Trusts have also been linked with the fulfillment of such causes. The Trusts need to pay the taxes on the receipts which has not been utilized for the said purposes. The Tax Calculation will be done as follows: Gross Receipts from property held under Trust                                      xxx [including voluntary donation*] Less: 15% Ad-hoc Deduction (It will be given in every case)                   xxx Less: Expenditure towards the main purpose of such Trust                   xxx                                                                                                 Total Income          xxx          Now tax would be calculated on such total income. The tax rate on Trusts would be same as on Individuals. [*This shall not include donation towards Corpus. Any Voluntary Donation towards Corpus of Trust shall always be Exempt.] EXCEPTIONS: Further, there might be cases when the Trust was not able to expend the amount towards the attainment of the main objective. In that case, there are various ways which the trust can opt to avoid the disallowability of exemption. These ways are discussed as follows:- (i) If the Income was not applied to charitable/religious purposes due to reason that the AMOUNT WAS NOT ACTUALLY RECEIVED (but receivable) in the previous year then; If the Trust declares this before the due date of filing of return that Trust would apply this income towards its religious/charitable purposes in the year in which it will be RECEIVED or immediately NEXT YEAR OF RECEIPT then such income would be allowed in the current year itself (even if this has not been spent actually). [If not utilized within such time limit it will be considered as income and no exemption would be given later on] (ii) FOR ANY OTHER REASON; which means even if the Trust does has received its income actually but did not apply it towards charitable/religious purposes for any other reason (which may anything) then; If the Trust declares before the due date of filing of return that it would utilize this amount for charitable/religious purposes in the immediately NEXT YEAR (next year of year to which income belongs), then it would be allowed in the current

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