Section 194-IA: TDS On Purchase of Immovable Property – Simplified

TDS On Purchase of Immovable Property – Section 194-IA

The buyer of immovable property is under a statutory obligation to deduct the TDS and pay it to the government within the due date. TDS has to be deducted under section 194-IA of the Income Tax Act, 1961. We have tried to explain the provisions in simplified language.

Who is liable to deduct TDS u/s 194-IA?

A Buyer of the property who is responsible for paying (other than the person referred to in section 194LA) to a resident seller any sum by way of consideration for transfer of any immovable property other than agricultural land.

Criteria to be met, so that TDS has to be paid under section 194-IA –

✓ The buyer of immovable property other than agricultural land is required to deduct tax at source u/s 194-IA. It means if you buy an agricultural land, there is no liability for the payment of the TDS.
✓ The seller should be a resident person. Thus, this section is not applicable where the seller is a non-resident. In case the seller is a non-resident section, 195 is applicable and TDS has to be paid according to that section.
✓ Even if the buyer has no income, still TDS has to be deducted and paid.
✓ The purpose of purchase is not relevant, i.e. it is immaterial whether the property is acquired as stock-in-trade or as a capital asset.

Important definitions for section 194-IA

Q. What is Immovable property?

Ans: Any land or any building or part of a building. But Immovable property shall not include agricultural land, which is not a capital asset.

Q. What is Agricultural Land?

Ans: Agricultural Land means agricultural land in India, not being a land situated in any area referred to in items (a) & (b) of section 2(14)(iii).

Q. What is “Consideration for the purposes of section 194-IA?

Ans: “Consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee, or any other charges of similar nature, which are incidental to the transfer of the immovable property.

Meaning of “Agricultural Land” simplified –

Items (a) & (b) of section 2(14)(iii) are as under agricultural land situated –

(a) In any area comprised within jurisdiction of a municipality or a cantonment board having a population not less than 10,000;

(b) In any area within the distance, measured aerially,

(i) Not being more than 2 km. From local limits of any municipality or cantonment board, which has a population of more than 10,000, but not more than 1,00,000
(ii) Not being more than 6 km. From local limits of any municipality or cantonment board, which has a population of more than 1,00,000 but not more than 10,00,000
(iii) Not being more than 8 km. From the local limits of any municipality or cantonment board, which has a population of over 10 Lakhs.

When to deduct TDS u/s 194-1A –

• At the time of credit or at the time of payment, whichever is earlier.

TDS rate /s 194-IA –

• TDS Rate: 1%.
• If Pan Not Available: 20%.

Threshold Limit u/s 194-IA –

• No TDS where consideration is less than Rs. 50 Lakhs.

More than 1 buyer or seller –

More than 1 Buyer

• More than one buyer: In the case of more than one buyer and the purchase price of each buyer is less than Rs. 50 lakhs but the aggregate sales consideration of the property is more than Rs. 50 Lakhs, section 194-IA will be applicable and all the buyers will be required to deduct TDS on their respective share of the purchase price.

Note – For contradictory views, refer: Vinod Soni vs. ITO (2019)

• More than one seller: If there is more than one seller in a single sale deed in respect of the property and the aggregate consideration for the property exceeds Rs. 50 Lakhs however the share of each co-owner is less than Rs. 50 Lakhs, section 194-IA will be applicable. Therefore, the buyer would be required to deduct TDS u/s 194-IA.

Important Points on TDS On Purchase of Immovable Property – Section 194-IA –

• If the immovable property is purchased from a non-resident person for any value, no TDS is required to be deducted u/s 194-IA as section 195 shall apply in such a case.
• It is not necessary that the land or building should be situated in India. Thus, if any person purchases property outside India from a person resident in India, he is liable to deduct tax at source @ 1%.
• This is a unique section as TAN is not required in this section for making deduction of tax at source.
• Section 194-1A shall not be applicable where the immovable property has been transferred by way of gift, will or inheritance as there is no consideration in this case.
• In the case where the property value is Rs. 50 Lakhs or more and payment is made in installments, TDS shall be required to be deducted on every part of payment (installment) of the consideration.

Amendment on Section 194-IA by Finance Bill, 2022:

The cases where the actual consideration is different from stamp duty value Amendment by Finance Bill, 2022:

• The Income Tax Act, 1961 provides for deduction of tax at source @ 1% where the sales consideration
Of the property is not less than Rs. 50 Lakhs. However, section 194-IA was not consistent with the
provisions of section 43CA and section 50C of the Act.
• In order to bring consistency, the Finance Bill, 2022, has proposed amendment in section 194-1A, and
now TDS @ 1% shall be deductible on the sales consideration or the stamp duty value of the
immovable property, whichever is higher.
• But where both the sales consideration as well as the stamp duty value are less than Rs. 50 Lakhs,
no deduction of tax will be required u/s 194-IA.
• This amendment is effective from 01st April 2022

How and When TDS has to be paid under section 194-IA –

• TDS deducted u/s 194-IA is to be deposited within a period of 30 days from the end of the month in which tax is so deducted.
• TDS is to be deposited electronically through a challan-cum-statement in Form No. 26QB. This
challan can be accessed at the NSDL portal.
• PAN of both buyer and the seller are sufficient for the purposes of Form 26QB. Other details needed
are the details of property sold, address details of buyer and seller along with their email id and mobile numbers.
• The person (buyer) who has deducted & deposited tax u/s 194-1A shall issue TDS certificate in Form No. 16B to the seller within 15 days from the due date of furnishing the challan-cum-statement in Form No. 26QB.

Important Note – No TAN is required for deduction of tax at source u/s 194-1A and no filing of TDS return is required.

Penalties Applicable on non-filing of Form 26QB.

Interest on:	Calculation
Non-deduction of TDS	1% per month for the period from the date on which TDS is deductible/collectible to the date on which TDS/TCS is actually deducted.
Non-remittance of TDS	1.5% per month for the period from the date on which TDS is deducted to the actual date of payment.

Late filing fee:	Calculation
Late filing fee under section 234E @ Rs 200 per day	In case of default of non-filing or late filing of Form 26QB, a penal fee is applicable under section 234E of the income tax act. Rs. 200 has to be paid for every day during which such failure continues. The buyer would also be liable for defaults of late deduction, late payment, and interest thereon.

Penalty

Calculation

Penalty under section 271H

Assessing Officer may levy penalty under section 271H at his discretion. This section is applicable when a statement as required by the tax laws is not submitted timely.
The penalty under this section must be more than Rs 10,000 and can extend to Rs 1 lakh. However, if TDS is deposited with a fee & interest and the statement is submitted within 1 year of the time prescribed, no penalty shall be levied.

Union Budget – FY 2023-24 – Income Tax Amendments

Union budget 2023-24 has proposed various amendments in the Income tax act such as Change in slab rates, extended benefits to MSME Enterprises, relaxation in tax audits threshold limits, Relaxations for cooperative societies etc.

During the budget, every person, from a big corporation to a small businessman, looks after amendments in Income tax because it does not only impact pockets of taxpayers but also decides on compliances a business needs to carry out. Every extra compliance leads to an increase in cost and have other impacts as well.

In this article a detailed discussion is made of amendments proposed in Income Tax Act, 1961 by Union Budget FY 2023-2024.

1. Amendments in Personal Income Tax

⦁ Union Budget, 2023-24 has proposed amendment in slab rates under section 115BAC (i.e., New Tax Regime) within an objective to reduce income tax liabilities.
⦁ Following are the new slab rates:

Income Range	Income Tax Rate
Upto INR 3,00,000	NIL
INR 3,00,000 to INR 6,00,000	5% on income above INR 3,00,000
INR 6,00,000 to INR 9,00,000	15000+ 10% on Income above INR 6,00,000
INR 9,00,000 to INR 12,00,000	45,000 + 15% on income more than INR 9,00,000
INR 12,00,000 to INR 1500,000	90,000 + 20% on income more than Rs 12,00,000
Above INR 15,00,000	150,000 + 30% on income more than Rs 15,00,000

⦁ Further, tax rebate under section 87A has been increased from INR 12,500 to INR 25,000 under the new regime. Therefore, the threshold limit of exempted income has been increased from INR 5,00,000 to INR 7,00,000.
⦁ Highest slab of surcharge has been reduced from 37% to 25%. Therefore, the highest rate of income tax has been reduced from 42.744% to 39%.
⦁ New tax regime shall be the default scheme and if the taxpayer wants to opt for the old regime then he has to specifically opt the same.

2. Enhancement in Threshold limit of Presumptive Taxation

⦁ Presumptive income allows ad hoc deduction of expenses for small business and professionals.
⦁ Threshold limit to avail benefit of presumptive taxes has been enhanced:

Nature of Business	Existing Threshold limit to avail presumptive taxation	Proposed Threshold limit to avail presumptive taxation
Eligible Business	INR 2 Crores	INR 3 Crores
Eligible Professional	INR 50 Lacs	INR 70 Lacs

⦁ However, the benefit of enhanced threshold limit shall be provided where atleast 95% of receipts and payments are made through non-cash methods.

3. Amendment in TDS & TCS Provisions

⦁ As per Section 194N, cash withdrawal from a bank exceeding INR 1 Crores is subject to TDS @ 2%. The Union Budget has proposed to enhance the threshold limit of INR 1 Crore to INR 3 Crores where the recipient is a Co-operative society.
⦁ TDS on winning from online games shall be deducted at rates in force without any threshold limit. TDS shall be deducted at the time of withdrawal of funds or at the end of the Financial year.
⦁ Interest to listed debentures has been brought under TDS ambit. TDS shall be deducted @ 10%.
⦁ TDS on withdrawal of funds from employees provident funds (EPF) shall be deducted @ 20% in case of non-furnishing of PAN. Earlier TDS was required to be deducted at maximum marginal rate.
⦁ Refund of TDS Deducted across Financial years
- ⦁ Taxpayers generally face addition with respect to income disclosed in ITR of a year and TDS on such income is deducted by the counterparty in subsequent financial year.
- ⦁ Union budget has provided that in such cases, assessee can make an application in prescribed form to the Assessing officer to claim benefit of such TDS.
- ⦁ Such an application can be filed within 2 years from the end of the financial year in which TDS has been deducted.
- ⦁ Further, the provisions of rectification shall also apply and the assessee also can make an application for rectification. For the purpose of rectification, a period of 4 years shall be reckoned from the end of the financial year in which such tax has been deducted.
⦁ As per Section 206AB, TDS shall be deducted at higher rate from specified persons, i.e., persons who have failed to file income tax returns. Union budget has excluded following persons from specified persons list:
- ⦁ a non-resident who does not have a permanent establishment in India;
- ⦁ a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.

4. Deductions to be allowed on payment basis

⦁ In order to provide more security to MSME, the union budget has amended Section 43B to provide that deduction of sum payable to Micro, Small and Medium Enterprises (MSME) shall be allowed only on payment basis.
⦁ So far, deduction for deposit taken from NBFC is permitted during the Financial year in which payment is made. Now, Government shall prescribe the list of NBFCs for Section 43B.

5. Lower rate of Income Tax for manufacturing cooperative societies

⦁ A new section 115BAE is proposed to be inserted, which provides that following reduced rates of income tax shall apply:
- ⦁ Manufacturing co-operative societies (established on or after April 1st, 2023, and commencing production on or before March 31st, 2024): Income tax shall be charged at 15% (plus surcharge of 10% & cess) [provided that specified incentives or deductions are not availed].
- ⦁ Income not derived or incidental to manufacturing or production: Income shall be charged at 22%.

6. Income tax on maturity proceeds of Life Insurance Policy

⦁ Section 10(10D) provides that the amount received on maturity of life insurance policies is exempted from income tax subject to given conditions.
⦁ Union budget has proposed to withdraw such exemption on insurance policies, other than unit linked insurance policies, issued on or after 01.04.2023 if the amount of premium payable exceeds INR 5 lacs for any of the previous year during the term of policy.
⦁ In case of more than one life insurance policies, other than ULIP, threshold hold of INR 5 Lacs shall be checked for all premiums paid during the year.
⦁ However, such exemption is not withdrawn on the sum received on death of a person.
⦁ Amount received on maturity, net of non-tax deducted premium, shall be taxed under head “Other Incomes” in the year of receipt.

7. Exemptions to Newly established Units in Special Economic Zones (Section 10AA)

⦁ Section 10AA provides for 100% and 50% deduction of profit derived from the export by newly set-up units in SEZ.
⦁ As per amendments, deduction under section 10AA shall be provided only if return is filed within the due date specified u/s 139(1).
⦁ Further, Deduction shall only be allowed if the proceeds from the sale of goods or provision of services are received within 6 months from the end of the previous year or within such further period as the competent authority may allow in this behalf.

8. Amendments in Capital Gain

⦁ Similar to goodwill, cost of acquisition and cost of improvement of self-generated intangible assets and rights shall be considered as “NIL” while computing capital gains on sale of such asset.
⦁ Capital gain arise on transfer or redemption or maturity of Market Linked Debenture shall be considered capital gains arising from the transfer of a short-term capital asset. Further, while computing such capital gain, no deduction shall be allowed in respect of securities transaction tax.
⦁ Investment under Section 54 and Section 54F has been capped for INR 10 Crores. Therefore, if cost of new asset exceeds INR 10 Crores, the amount exceeding INR 10 Crores shall not be taken into account.
⦁ The transformation of physical gold into Electronic Gold Receipts and vice versa by a Vault Manager registered with the Securities and Exchange Board of India (SEBI) shall not be considered as a transfer for purposes of capital gains taxation.
⦁ While computing cost of acquisition of the asset or the cost of improvement, no additional shall be made of interest expense for which deductions are already claimed u/s Section 24(b) or or Chapter VI-A of Income Tax Act.

9. Other Amendments

⦁ Benefit of Section 115BAC (i.e., new tax regime) is proposed to be extended to Association of Persons (AOP) (other than co-operative societies), Body of Individuals (BOI) and Artificial Judicial Persons (AJP). This will help in reduction of Income tax liabilities.
⦁ For the purpose of claiming deductions under section 80-IAC, incorporation date of eligible start-ups is proposed to be extended from 1st April, 2023 to 1st April, 2024.
⦁ The exemption can be claimed by trusts or institutions only if return of income is furnished within time limit prescribed under section 139(1) or 139(4).
⦁ Government has provided for a new appellate authority, the Joint Commissioner (Appeal), for specific categories of taxpayers, such as individuals and HUFs, to speed up the resolution process in appeal proceedings.

The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

How to Determine the Taxability of Foreign Resident in India?

According to the provisions of the Income Tax Act, 1961; all the foreigners or individuals who belong to a different country but staying and working in India or individuals who belong to India but working in any other part of the world, have to pay income tax, as the Income Tax Act, 1961 provides for taxability depending upon the residential status of a person. Here in this article, we are going to discuss all the details related to tax by NRI and foreigners.

This tax is levied regardless of the individual’s status of citizenship, or intention of staying in India. However, the extent of taxability may vary depending upon the residential status of the person.

There could be some tax deduction at source on income earned in India, though the person will be entitled to take credit of such amount while filing the income tax return. However, if Income tax payable is less than tax deducted at source, then balance amount can be claimed as refund.

Tax By NRI and Foreigners- How is a foreign national’s or expatriate’s income taxed after becoming a resident of India?

In India, the taxability of income of a foreign national solely depends on the person’s residential status. The following can be the different scenarios of taxability based on residential status:

1. Resident and Ordinary Resident: For a person who is a resident and ordinary resident in India as per Income Tax Act, 1961 then the total income earned by such person anywhere in the globe, including India, is taxable in India. This includes even if the income is earned in the country of citizenship and taxed there.
2. Non-Resident (NR) and Resident But Not Ordinary Resident (RNOR): In case the expatriate is a Non-Resident (NR) or Resident but Not Ordinarily Resident (RNOR) as per Income Tax Act, only the income earned, i.e, Income accrued or deemed to be accrued in India or Income received or deemed to be received in India, is taxable in his hands in India.

So the first thing is you need to find out your residential status to ensure what tax is levied on your income.

As per the Income Tax Act, residential status rules, the first 2 years of a foreign national’s arrival to India will put the person into RNOR (Resident but Not Ordinarily Resident) status and he/she will pay tax for only the income earned in India.

However, there are certain other criteria given under Income Tax Act to determine whether a person is NRI (Non-Resident), RNOR (Resident but not Ordinary Resident), or ROR (Resident and Ordinary Resident) and then only one can check tax by NRI.

How to check Residential Status?

To determine residential status, Income Tax Act, 1961 defined 2 stages wherein first we need to determine whether a person is resident or not and if a person is found resident then it is further determined whether he is an ordinary resident (ROR) or not (RNOR).

Let’s have a look at criteria given by the Income Tax Act, 1961 to determine residential status:

1. Resident

The first step is to determine whether a person is a resident or not for the relevant previous year or not. As per Section 6 of the Income Tax Act, if he satisfied either of the following condition:

The concerned individual has been in India for more than 182 days during the relevant previous year; or
The concerned person has stayed in India for 365 days or more for 4 years immediately preceding the relevant previous year and has stayed in India for 60 or days during the relevant year.

As per explanation to Section 6(1), if any person who is an Indian Citizen or person of Indian Origin and staying outside India and he comes to India for a visit in any Previous year then in the second option period of instead of 60 days, period of 182 days shall be considered.

Let’s understand the same with an example. Mr A has the following different scenarios of stays in India for F.Y. 2019-20:

Stay in India During F.Y. 2019-20	Stay in India During F.Y. 2015-16 to F.Y. 2018-19	Residential status
200 days	600 days	Resident. Criteria A satisfies. So, we are not required to check Criteria B.
200 days	30 days	Also regarded as Resident. Criteria A satisfies. So, we are not required to check Criteria B.
150 days	600 days	Resident. Criteria A doesn’t satisfy. Criteria B satisfied
40 days	600 days	Non-Resident. No criteria satisfied.

Amendments by Finance Act, 2020.

However, with an objective to stringent provisions related to residential status, the Finance Act, 2020 has proposed to change the period of 182 days, in explanation to section 6(1), to 120 days in case where total income of a person, other than income from foreign sources, exceeds INR 15 lacs. Therefore, If concerned individuals have stayed in India for more than 120 days during the relevant financial year then he shall qualify as resident.

2. Resident and Ordinary Resident (ROR)

Once it is determined that a person is a resident for a financial year then it is determined that whether such person Ordinary Resident (ROR) or Not Ordinary Resident (RNOR).

To get the status of ROR, an expatriate must have to meet the following 2 conditions simultaneously:

⦁ Such a person is Resident In India during 2 or more Financial years out of 10 financial years immediately preceding relevant Financial year; and
⦁ Such persons have resided in India for a total duration of 730 days or more during 7 financial years prior to the relevant Financial Year.

3. Resident but not Ordinary Resident (RNOR)

If a person fails to satisfy the above-mentioned conditions then he will be considered RNOR.

Let’s understand the same with an example. Mr. A has qualified as Resident for FY 2019-20. Now following are the different scenarios to check his status as ROR and RNOR:

No of years during which Mr. A was resident during F.Y. 2009- 2010 to F..Y. 2018 -2019	Stay in India During F.Y. 2012-13 to F.Y. 2018-19	Status
1 Year	720 Days	RNOR.
1 year	740 days	Same
3 years	720 Days	Same
3 years	740 days	ROR

Amendments by Finance Act, 2020

Finance Act, 2020 has proposed to replace the period of 2 years to 4 years. Therefore, to qualify as ROR, you have to qualify as a resident for 4 or more out of 10 immediately preceding financial years.

4. NR (Non-Resident)

If a person fails to satisfy either of the condition given for residential status then he shall be considered as Non-Resident for the purpose of Income Tax Ac, 1961.

You can refer to the table below to understand better and determine your residential status,

	Basic conditions	ROR	RNOR	RNOR	NR
A.	1. Your total stay in the country is 182 days (120 days from F.Y, 2020-21 onwards) or more during the relevant financial year. Or,2. stay is 60 days or more in India in the relevant financial year and total stay is 365 days or more during the last 4 financial years.	Yes	Same	Same	No
	Additional Conditions	ROR	RNOR	RNOR	NR
B.	Your cumulative stay in India is 730 days or more during 7 financial years	Yes	Yes	No	NA
C.	You were an Indian resident for at least 2 (4 years or more from F.Y. 2020-21 onwards) of the last 10 financial years	Yes	No	Yes	NA

⦁ If you satisfy all the conditions i.e. condition A, B, and C then you qualify as a ROR.
⦁ If you satisfy condition A and any of conditions B and C then you qualify as an RNOR.
⦁ But if you do not satisfy condition A then you qualify as NR. Therefore, the condition B and C does not apply in this case.

What are the factors in determining the Tax liability of a Foreign National in India?

As we’ve already mentioned, the tax liability of a foreign individual depends only on the residential status which can be outlined as follows-

⦁ Resident and Ordinary Resident: Expatriates who have qualified to be a resident of India, need to pay tax on the total income earned throughout the globe. This income may also include the amount of remuneration which is paid to them in their own country.
⦁ Non-Resident (NR) or Resident but Not Ordinary Resident (RNOR): Foreign individuals who qualify to have the status of an NRI or RNOR, are liable to pay tax on the income which is accrued or deemed to be accrued in India or received or deemed to be received in India Only.

What type of incomes of Foreign Nationals are taxable in India?

Foreign nationals residing in India are liable to pay tax for the following types of incomes-

⦁ Employment Income
- ⦁ Reimbursements
- ⦁ Cash compensations
- ⦁ Salaries
- ⦁ Wages
- ⦁ Allowances
⦁ Non-Employment Income
- ⦁ Income generated through the investments made abroad but sent directly to a bank account in India
- ⦁ Royalties received from an Indian individual
- ⦁ Capital gained through the selling of Indian based assets
- ⦁ Interest payments on the infrastructure bill funds in India

DTAA (DOUBLE TAXATION AVOIDANCE AGREEMENT)

In the case of residents, income earned in India or outside India is liable to Income Tax in India and in case of non-resident, income earned in India is taxable.

However, there are certain cases where an expatriate may get assigned to pay tax two times [in India and another country] for the same Income.

To avoid such instances, the Government of countries enters into an agreement with the Government of other countries. To avoid double taxation of Income and these agreements are known as facilities of the Double Tax Avoidance Agreement (DTAA).

DTAA or Double Tax Avoidance Agreement is a particular agreement that two countries have made to help the foreign individuals in avoiding taxation of his/her total income in both the countries.

By availing the benefits of DTAA, one can easily avoid paying tax two times on such income which is taxable in India and another country as well.

DTAA set out different conditions which help in determining the tax amount by foreigners.

Documents required by Foreign Nationals to file ITR in India –

Certain documents that you are mandatory to have or required to be provided by a foreign national while filing Income Tax Returns (ITR) in India. These are-

⦁ Form 16- Form 16 is a certificate issued under the Income Tax Act, 1961 which shows Tax deducted by the payer on salary. For the purpose of claiming credit for such TDS, the person needs to furnish a copy of his Form 16. Please note that Form 16 is applicable as per the Income Tax laws of India. Such credit of TDS will get reflected in 26AS of the assessee also.
⦁ Form 16A: Similarly to Form 16, Form 16A represents TDS deducted on Incomes other than Salary and this certificate consists of information related to the amount of tax which has been deducted at source and also other details of deductor.
⦁ Bank Statements- Expatriates have to provide bank statements mandatorily, that contains the detail of transactions made with the purpose of income accrued, investments, and expenditure owing to a taxation year.
⦁ Investment Proofs- If an expatriate has certain investments that don’t show up in Form 16 then he requires to provide the proof separately for the same.
⦁ Details of Property- If any property or asset of a foreign individual is sold in India, the capital gain tax will be levied on the income that came from the sale. The details of selling the property or asset must be presented at the time of filing Income tax Returns.

Note – The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Specified Person u/s 206AB (TDS) & 206CCA (TCS)

CBDT has notified Section 206AB (TDS) & 206CCA (TCS) on 1st July 2021 for deducting a higher rate of TDS & TCS for persons not filed their Income Tax Returns for the last 2 assessment years to which the due date for filing ITR has been expired, provided that this provision will apply only when the TDS & TCS credit of that person during those assessment years are more than Rs. 50,000 each.

The rate of TDS will be: (Higher Rate of the following) – TDS

1. 5% (or)
2. Twice the original rate specified in the respective sections.

The above provisions are not applicable to:

⦁ 192 – TDS on Salary Payments
⦁ 192A – TDS on Provident Fund Withdrawals
⦁ 194B – TDS on Lottery (or) Crossword Puzzle Payments
⦁ 194BB – TDS on Horse Races Winnings
⦁ 194LBC – TDS on Income of Investment Securitization Trust
⦁ 194N – TDS on Cash Withdrawal

Amendment in Finance Act, 2022 (From 1st April 2022):

CBDT has bought down the conditions to last one assessment year instead of 2, i.e., TDS & TCS has to be deducted at a higher rate as specified above if a person has TDS & TCS credit of more than Rs. 50,000 and doesn’t file his ITR for the last assessment year to which the due date for filing ITR has expired. The higher rate of TDS mentioned above remains the same as before.

List of Sections to which S. 206AB & 206CCA are not applicable:

⦁ 192 – TDS on Salary Payments
⦁ 192A – TDS on Provident Fund Withdrawals
⦁ 194B – TDS on Lottery (or) Crossword Puzzle Payments
⦁ 194BB – TDS on Horse Races Winnings
⦁ 194-IA – TDS on transfer of Immovable Property other than Agricultural Land
⦁ 194-IB – TDS on rent by certain individuals (or) Hindu Undivided Family
⦁ 194LBC – TDS on Income of Investment Securitization Trust
⦁ 194M – TDS on Payment of Contract, Commission, Professional Charges, or Fees for Technical Services by certain individuals (or) Hindu Undivided Family
⦁ 194N – TDS on Cash Withdrawal

Source:

1. Provisions of 206AB – up to 31st March 2022 & After 1st April 2022
2. Provisions of 206CCA – up to 31st March 2022 & After 1st April 2022
3. Other Notifications & Circulars for 206AB & 206CCA – Circular No. 11 of 2021 dated 21st June 2021 & Notification No. 1 of 2021 dated 22nd June 2021 (Directorate of Income Tax – Systems).

Thanks for reading! Have a Good Day!

Chartered Accountant in Pimpri Chinchwad

Windfall tax: Will India impose it too?

This question has been a buzz in Indian media for the past few weeks. But what is this windfall tax that Indian media is going on about?

What is the windfall Tax?

When a company benefits from something that they are not responsible for and, as a result of that, enjoys the financial gain, that gain is referred to as windfall profits.

Governments, typically, levy a one-time tax over and above the normal rates of tax on such profits, and that is called windfall tax.

Why Now?

So what’s happening is global oil and gas prices are at a peak level due to the Russia-Ukraine conflict. If we take the example of any Indian upstream oil companies, say ONGC, or Oil India. They declared an all-time high net profit in the fiscal year 2021-22.

ONGC declared that its net profit grew by 258% to reach ₹40,306 crores. While the Oil India announced a net profit of ₹3,887.31 crore, which is 123% higher than in the preceding year.

As the Indian government has recently gone for the cut in Central Excise Duty and considering that it is spending more on food and fertilizer there is the requirement of any alternate levy to full fill this gap and one of the solutions could be levying a windfall tax on oil companies.

Countries like Italy and the UK have already imposed a windfall tax over the past couple of weeks.

Will such tax increase the Price of the Fuel?

Very unlikely, as this tax is not part of the input or output cost, but levied only on profit.

Is India really considering such a levy of tax?

While there is no formal denial by the government, upstream oil companies have said they have heard nothing about this.

Let me know your thoughts on whether you believe that such a tax should be levied or not?

#oilcompanies #tax #fi ntaxfirst#indianeconomy

Chartered Accountant in Pimpri Chinchwad

Test of Control (TOC) vs Test of Details (TOD)

In a process of Statutory Audit, the Test of Control and Test of Details are two important stages and it also makes an important question from the interview pov.

I have discussed a comparison of both gathered from my experience.

TOC is a type of audit procedure we perform to evaluate whether a client’s internal control works effectively. Thus, we perform the test to obtain evidence of effectiveness before we can rely on controls. In case controls are weak, we will need to increase our substantive tests.

So, we take out the samples from SCOT (Significant class of Transactions), test various assertions, capture the details of the given sample, and match them with supporting documents. The sample size depends on the population and frequency of control.

Based on the TOC, we determine the extent of TOD. Test of Details is a substantive procedure used to collect evidence to verify individual transactions or balances.

So, after a combined assessment of risk and control (CRA), we define the tolerable error (TE) for deviations and obtain the samples for transactions to do the testing. The goal here is to confirm that supporting docs match with each other and the source.

I have only explained the surface of it and there are a lot of other things done throughout this.

I hope it was worth a read! Do add your learnings in the comments.

Windfall tax: Will India impose it too?

This question has been a buzz in Indian media for the past few weeks. But what is this windfall tax that Indian media is going on about?

What is the windfall Tax?

When a company benefits from something that they are not responsible for and, as a result of that, enjoys the financial gain, that gain is referred to as windfall profits.

Governments, typically, levy a one-time tax over and above the normal rates of tax on such profits, and that is called windfall tax.

Why Now?

ONGC declared that its net profit grew by 258% to reach ₹40,306 crores. While the Oil India announced a net profit of ₹3,887.31 crore, which is 123% higher than in the preceding year.

Countries like Italy and the UK have already imposed a windfall tax over the past couple of weeks.

Will such tax increase the Price of the Fuel?

Very unlikely, as this tax is not part of the input or output cost, but levied only on profit.

Is India really considering such a levy of tax?

While there is no formal denial by the government, upstream oil companies have said they have heard nothing about this.

Let me know your thoughts on whether you believe that such a tax should be levied or not?

#oilcompanies #tax #fi ntaxfirst#indianeconomy

Chartered Accountant in Pimpri Chinchwad

Form 10BD, return of donation – Income Tax update for Trusts

Dear Trustees,

Re: New Provision of Income Tax to be followed by you.
As informed donation received by you to be filled in the form, you should electronically upload & sign no 10BD and should be uploaded before 15th May 2022 and every year.

The following details are to be filled up:

1. Name of the donor.
2. Address of donor.
3. Nature of donation.
4. Mode of receipt.
5. Amount of donation.
6. Section code under which donation was received.
7. PAN no. /Aadhar no./Tax Identification no. of the donor.

After uploading Form 10BD, Form 10BE is to be downloaded and this Certificate of Donation is to be issued to the Donor before 31st May of every year and contains the following details.

1) Name of Charitable Organization.
2) PAN
3) Aadhar
4) Approval number u/s 80G

There is a heavy penalty for not filling the form, Rs. 200 per day for Delay in uploading FORM 10BD. The Assessing Officer may also impose a penalty of a minimum of Rs. 10,000 to a maximum of Rs. 1 Lakh.

Department has made live form 10BD, return of donation. 31st May is the last date. Reporting template, instruction, and notification are there for quick reference.
#cbdt #tax #incometaxupdate #directtax #ca #incometax #incometaxreturn #taxplanning

Income Tax Return – Changes in ITR Form – FY 2021-2022 –

Income Tax Return – Changes in ITR Form – FY 2021-2022

The CBDT has well in advance notified the Income-tax Return (ITR) Forms for the AY 2022-23 vide Notification No. 21/2022 dated 30-03-2022 & Notification No. 23/2022 dated 01-04-2022. There are various changes in the disclosure requirements in the new ITR Forms. Let us have a look at some of the key changes in the ITR that may be relevant to most taxpayers.

1. Applicability of ITR Forms:

The new ITR forms do not tinker with the applicability of ITR forms. The criteria for selecting the ITR forms for the AY 2022-23 shall be the same as that of the AY 2021-22.

2. Schedule of Capital Gain:

New ITR forms require the following additional disclosures in the Schedule of Capital Gain:

(a) Date of purchase & sale of Land/Building (b) Country and Zip Code if the property is situated in a foreign country (c) Disclosure of FMV & consideration received in slump sale transaction (d) Year-wise details of the cost of improvement to land/building (e) Separate disclosure of cost & indexed cost of acquisition
Further, new ITR 5 has been suitably amended for disclosure of deduction allowable u/s 48(iii) in respect of the capital gains of firm u/s 45(4).

3. Disclosure of the taxable EPF interest:

FA-2021 has amended Sections 10(11) and 10(12) to provide that no exemption shall be allowed in respect of interest income from the recognized and statutory provident fund to the extent it relates to the amount of the contribution made by the employee exceeding Rs. 2,50,000 in any year on or after 01-04-2021. The new ITR forms have amended “Schedule OS” (Other Sources) to incorporate specific reporting of such interest income.

4. Change in “Schedule FA” (i.e., Foreign Assets):
Schedule FA requires the reporting of foreign assets. The new ITR Forms have replaced the expression “Accounting Period” with “Calendar Year ending as on 31st December 2021”. As a result, the taxpayers shall be required to furnish the details of all foreign assets held between 01-01-2021 and 31-12-2021 in return to be filed for AY 2022-23.

5. Taxation of ESOP:

New Schedule has been inserted for reporting of tax-deferred on ESOP whereby an employee can defer the payment or deduction of tax in respect of shares allotted under ESOP (Specified Securities) by an eligible start-up referred U/s 80-IAC. The New ITR Forms have inserted a “Schedule: Tax-Deferred on ESOP” to keep a proper track of such transactions.

6. Nature of employment of pensioner:

In earlier ITR forms, an individual receiving a pension was just required to choose the option of ‘Pensioners’ in the dropdown menu ‘Nature of Employment. Now, the following options have been further incorporated for pensioners (i) Pensioners–CG (ii) Pensioners–SC (iii)Pensioners–PSU, and (iv) Pensioners–Others.

7. Taxpayers who have opted for alternative tax regime U/s 115BAC:

Now, taxpayers have an option of a new tax regime of lower tax without any deduction or exemption. The following disclosures are required in ITR 3 and ITR 4:

(a) Whether the assessee has opted for an alternative tax regime, u/s 115BAC & filed Form 10-IE in AY 2021-22;

(b) For the AY 2022-23, the assessee has to choose from the following options:
· Opting in now
· Not opting
· Continue to opt
· Opt-out

8. Taxpayers who have opted for alternative tax regime U/s 115BA/115BAA/ 115BAB/ 115BAD:

All taxpayers who have opted for an alternative lower tax regime are now required to give the details of the year wherein the option was first exercised as well as the details of having filed the prescribed form (like Form No. 10IB, 10 IC etc). Similarly, if the taxpayer is continuing the option, then the details of filing such a prescribed form in an earlier year are also required to be given.

9. Disclosure for a person not opting for audit u/s 44AB:

Audit u/s 44AB is not mandatory for taxpayers with turnover between Rs. 1 crore to 10 Cr if the cash receipt and cash payment do not exceed 5%. Now, for the purpose of computing the limit of 5%, payment or receipt by cheque drawn on a bank or by a bank draft, which is not an account payee, shall be deemed to be the payment or receipt in cash only [FA-2021]. The old ITR Forms required the assessee to furnish the response regarding cash receipts and payments only. Now, the following additional disclosures are required regarding Audit Information:

(a) Whether total sales, turnover or gross receipt is between Rs. 1 Cr & Rs. 10 Cr? If not, is it below Rs. 1 Cr or exceeds Rs. 10 Cr?

(b) The new ITR forms require aggregation of receipts and payment in cash and non-account payee cheque or DD while computing the limit of 5% as mentioned above.

10. Residential Status:

In the new ITR, it is now mandatory to choose the suitable option in support of residential status in India. Few more options have been added to the ITR forms so as to ascertain the exact nature of the residential status of the taxpayers.

11. Disclosure of Deemed Dividend Separately:

Until last year, there was no separate disclosure of dividend income taxable u/s 2(22)(e) i.e., Deemed Dividend. Now, in the new ITR forms, dividend income taxable u/s 2(22)(e) has to be reported separately.

12. Capping the surcharge on dividend income:

In the case of individuals, HUF, AOP, BOI, or AJP, the surcharge on tax on dividend income is attracted @ 10% if it exceeds Rs. 50 lakh but does not exceed Rs. 1 Cr and @ 15% if it exceeds Rs. 1 crore. The consequential change has been done in Schedule Part B–TTI (Computation of tax liability on total income).

13. Exempt Income Disclosure:

The New ITR Form now requires disclosure of exempt income u/s 10(23FB), 10(23FBA), 10(23FC)/10(23FCA), etc. Earlier there was no need to make specific disclosure of the applicable section.

14. Disclosures in respect of Significant Economic Presence:

In the new ITR forms, the non-resident has to confirm if there is a Significant Economic Presence (SEP) in India or not. If there is a SEP in India, the details of the transactions & users are to be incorporated into the ITR Form.

Conclusion :

The information in the database of the income tax department has increased drastically and so are the reporting requirements of the reporting in the ITR forms. Artificial intelligence is going to play a vital role in tax administration. Taxpayers need to be all the more careful and cautious while filing their income tax returns.

Chartered Accountant in Pimpri Chinchwad

Chartered Accountant in Wakad

What will happen if you don’t file your ITR (Income Tax Return) within the due date?

The taxpayers for whom the tax audit is not required have to file the income tax return of their income earned during the period of 1st April 2020 to 31st March 2021 on or before 31st July 2022 unless extended.

Let’s discuss the implications of the late filing of Income Tax Return:

Unable to set off Losses – Income Tax Return

Losses incurred (other than house property loss) are not allowed to be carried forward in subsequent years. You cannot set off these losses against future gains if the return has not been filed within the due date. However, if there are losses under house property, carry forward of losses is permitted.

Interest on the delay of filing a return

If the taxpayer fails to file the ITR by the due date, then under section 234A penalty interest at the rate of 1% per month or part thereof is levied on the outstanding tax until the payment of tax.

Late filing fees u/s 234F

A late filing fee is applicable for filing your returns after the due date under Section 234F. The maximum penalty of Rs 5,000 will be levied if you file your ITR after the due date. However, there is a relief given to small taxpayers–if their total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1000.

Delayed Refunds

If one is entitled to receive a refund from the government for excess taxes paid, he/she must file the returns before the due date to receive the refund at the earliest.

Prosecution–As per Section 276 CC

As per Section 276 CC, the income tax officer can initiate proceedings for prosecution if the person willfully fails to file a return, even after issuing notices. The imprisonment can be for a term of three months to two years with a fine. If the tax you owe to the income tax department is higher, the prosecution period may extend to seven years.

#Incometax #incometaxindia #incometaxreturn #incometaxindia #incometaxreturnfiling #itrfiling

Chartered Accountant in Pimpri Chinchwad