National Saving Certificates

National Savings Certificates is a saving scheme under Indian post-offices. These certificates are highly secured and are designed for salaried employees and individuals doing business. NSC is a ‘fixed period’ saving scheme. . Interest on NSC is calculated annually. There are two different issues of NSCs i.e. NSC- VIII issue and NSC IX Issue.

(I) Interest on National Savings Certificates(I) Interest on National Savings Certificates

Particulars NSC (VIII Issue) NSC (IX Issue)
Lock in Period 5 Years 10 Years
Return 8.2% 8.8%

As of today (for quarter January to March 2019) NSC gets 8% interest compounded annually.

NOTE: The Government discontinued NSC (IX Issue) in December 2015. Currently, only NSC (VIII Issue) is open for subscription.

National Savings Certificates can be purchased individually, jointly and on behalf of minors.

(II) Eligibility to open account under NSC Scheme?
NSC account can be open from the following persons:

  • Any Indian resident can invest in this scheme
  • NSC scheme is not eligible for Non-Residents
  • Investment can be done jointly with another adult or can be purchase on behalf of a minor
  • Trusts and HUF’s are also not eligible to invest in VIII issue of NSC.
  • Nomination facility is also available under NSC scheme

Note: NSCs are issued by the post office. You can buy them from any branch of the Indian postal service.

Investment limit under NSC

No Limit for Investment in National Saving Certificates.

(III) Tax Benefits of investment under NSC

  • Investment in National Savings Certificate qualifies for Deduction Section 80C of the Income Tax Act up to Rs. 1,50,000. Accrued interest on NSC also qualifies for deduction u/s 80C.
  • Interest received under NSC is taxable. Under this scheme interest is not paid to the investor but instead accumulates in the account, each year’s interest is considered reinvested in the NSC. This is allowed as a fresh deduction under Sec 80C and making it tax-free.
  • The final interest on NSC on maturity is not allowed as tax deduction as it does not get re-invested, but is paid back with the interest of the earlier years and the capital amount to the investor.
  • Interest earned from NSC is shown under Interest from other sources.
  • TDS will not deducted.

Let us understand with an illustration: Suppose an investor buys Rs 40,000 worth of NSCs in January 2019. One year later, the investment would have earned an interest of about Rs 3,600. The investor can claim deduction for this Rs 3,600 for the year 2019-20 along with the invested amount. In the next financial year, the investment would earn about Rs 4,200 in interest. This can be claimed as a deduction in 2020-21. This is allowed as a fresh deduction under Section 80C.

The final interest on NSC on maturity is not allowed as tax deduction as it does not get re-invested.

(IV) Financial benefits of investing in NSC
National Savings Certificates is the secure saving scheme of investment, which comes with attractive benefits. Some of the benefits offered by National Savings Certificates:

Attractive Interest Rates: National Savings Certificate gives an attractive interest on your savings. You can earn interest up to 8.8%.
Returns: Assured returns are there under National Savings Certificates for investment of 5 to 10 years.
Minimum/maximum limit of investments: You can invest as minimum as Rs.100. However, there is no maximum limit for investment under National savings certificates.
Availability of Loan against NSCs: Investor can use National Savings Certificates as mortgage to get loans from banks.
NSC Certificate Transfer: NSCs can be transferred from one person to another. If the certificate holder proposes to transfer.
Low Risk: Investment in NSC have low risk

(V) Procedure to invest in NSC

Currently, you can purchase and invest in NSC only through offline mode from any post office situated in India. Click Here to locate your post office.

  • Get the form for NSC and fill all the requisite details in the form
  • Submit the documents required for investing in NSC
  • Fill the nomination details
  • Make the payment through cash, cheque or demand draft.
  • Once all the verification is completed, the concerned post master will issue the NSC with the desired amount.

(VI) Documents required to open account under NSC Scheme
A filled application form along with the following documents are required to invest in NSC :

1. Original identity proof for verification

  • Passport
  • PAN card
  • Voter ID card
  • Driving licence
  • Government ID card
  • Senior citizen ID card

2. Address Proof

  • Passport
  • Telephone bill
  • Electricity bill
  • Bank Statement with Cheque
  • Certificate/ ID card issued by Post office

3. Photograph

7 Important things to be done by Individual, Businesses before 31st March 2019

1) Make Investments To Save Income Tax

There are many vehicles to reduce your taxable income and your tax liability.
Broadly speaking under Chapter VIA under certain sections you are allowed deductions above Rs.1.5 lakhs

Individuals and HUFs are entitled to deduction under section 80C of the Income Tax Act,1961 for an investment of Rs. 1,50,000 and an additional deduction of Rs. 50,000 under section 80 CCD for investments in the National Pension Scheme (NPS).
Further deductions of payment of premium for health insurance u/s 80D, donations u/s 80G etc. are allowable only if the investment/ payment has been made on or before 31st March 2019.

2) File previous year returns

As per Section 139(1) of the Income Tax Act 1961, the due date for filing income tax return (ITR) is 31st July of every assessment year for individual and Hindu Undivided Family (HUF).

If ITR is not filed within the time allowed u/s 139(1) then assessee can file ITR even after the due date, which is also known as Belated Income Tax Return. Belated or previous year ITR can be filed anytime:

  • Before the expiry of the end of the relevant Assessment Year; or
  • Before the completion of assessment

Therefore, if you have not filed your return for FY 2017-18, you can file it by 31st March 2019.

If any person after furnishing a return of income discovers any error or omission in the original return, then he may furnish a revised return at any time before the expiry of the end of the applicable Assessment Year or before the completion of assessment, whichever is earlier.

Therefore, if you have made any mistake in filing and want to revise the return, then do it before 31st March 2019.

3) Calculate GST Turnover

Businesses should keep track of their turnover, which are, not yet under the GST registration limit of Rs.20 lakh. You are required to calculate the total turnover up to 31st March for the purpose of determining the applicability of GST Registration, Eligibility of opting Composition Scheme, and Applicability of Filing returns under GST.

4) Reconcile GST Ledger

The taxpayers should reconcile their Electronic Cash Ledger, Credit Ledger and Liability Ledger on GST portal with their books of accounts. Proper entries should be done before the 31st March or the end of the year. Further, debit notes, credit notes; any difference in rates or discount, etc also should to be reconciled.

5) Payment of Advance Tax

Salaried individuals and Businesses – An assessee is required to pay advance tax if his total tax liability is Rs.10,000 or more. You will have to pay advance tax as per various installments. It applies to all taxpayers such as salaried, freelancers, and businesses. Senior citizens, aged 60 years or older not running any business are exempted from paying advance tax.

Though advance tax can be paid in 4 installments and where in case if you have missed three earlier dates please pay the balance advance tax by 15th March which is the date for last installment. Any advance payment of tax paid by 31st March is also treated as advance tax.

6) Manage Professional Income & Expenses

Where in case of professionals following cash system of accounting, all business expenses are allowed in the books only if they are actually paid on or before 31st March 2019. Hence, to record the payment of all business expenses, it is advisable to make payments up to 31st March 2019 on or before that date.

7) Calculate Capital Gains

If an assessee has sold or transferred any immovable property, mutual funds, debentures etc. during the financial year 2018-19, then you have to calculate capital gains or losses on the above transactions on or before 31st March 2019.

ACTIVE INC 22A

The government has recently released the address validation form i.e. e-form ACTIVE (INC-22A) included in the Companies (incorporation) Rules, 2014.

The Ministry of Corporate and Affairs (MCA) had earlier introduced the new MSME Form-1, which is required to be filed by Specified Companies whose outstanding payment to supplier exceed 45 days.

What is MCA E-Form ACTIVE (INC-22A)?

The Ministry of Corporate and Affairs (MCA) under the company law requires the companies to fill out the e-form ACTIVE or INC-22A for the address validation. This form is named as Active Company Tagging Identities and Verification (ACTIVE).

It is applicable for all the registered companies under the Companies Act 2013.

Applicability of e-form ACTIVE (INC-22A)

This form is applicable on the companies incorporated on or before the 31 December 2017 and has to file the details of the company and its relevant registered office within the e-Form ACTIVE or INC-22A (Active Company Tagging Identities and Verification) on or before 25.04.2019

Companies that are not required to file e-form ACTIVE (INC-22A)

E-Form Active shall not be filled by the following companies, which are:

  • Struck off;
  • Under the process of strike off;
  • Under liquidation;
  • Amalgamated;
  • Dissolved

Due Date of filing e-form ACTIVE (INC-22A)

The government has mandated the filing of e-form ACTIVE or INC-22A and it has to be filed on or before 25th April 2019. If it is filed after 25th April 2019, penalty of Rs.10,000 shall be imposed or the company may be removed from the Registrar of companies.

Where Company is marked as “Active non-compliant”

If a company does not file e-form ACTIVE or INC-22A on or before 25.04.2019, then the company would be marked as ACTIVE non-compliant. And once a company is marked as ACTIVE non-compliant, it would not be able to file or effect any of the following changes:

  • (Form SH-07) Changes in authorized capital
  • (Form PAS-03) Changes in paid-up capital
  • (Form DIR-12) Changes in Director except for cessation
  • (Form INC-22) Changes in Registered Office
  • (INC-28) Amalgamation or Merger

If a company files e-form ACTIVE or INC-22A after 25.04.2019,a penalty of Rs.10,000 would be levied. After making payment of the penalty and filing of all overdue returns, the company would be again marked as ACTIVE compliant.

Consequences of not filing e-form ACTIVE (INC-22A)

Non-filling of e-form ACTIVE (INC-22A) allows Registrar of Companies to conduct a physical inspection of the Registered office of the Company and also to strike off the name of your Company from its Register.

The Company will also be debarred for the filing of various major e-forms like Form SH-7,PAS-03 and other as discussed previously.

Documents to be attached for filing e-form ACTIVE (INC-22A)

Photograph of the registered office showing the inside office and external building, showing at least one director or KMP and the same director will affix its Digital signature (DSC) on the form.

Other Details:

  • CIN of the company
  • Name and Address of the company
  • Latitude and longitude of the registered office
  • Email Id for OTP verification
  • Number of directors with their Director Identification Number (DIN)
  • Statutory Auditor Details
  • Cost Auditor Details
  • Details of MD, CEO, Manager or WTD
  • Details of Company Secretary (CS)
  • Details of CFO
  • SRN of AOC-4 and MGT-7 filed for FY 2017-18

e-form ACTIVE (INC-22A) is required to be digitally signed by one director or one KMP or two directors in case other than OPC.

GST Registration Process – A Comprehensive Guide

1. What is GST Registration?

In the GST Regime, businesses whose turnover is more than Rs. 20 lakhs (Rs 10 lakhs for North East and hill states) are required to register as a normal taxable person. Registration under GST is mandatory for certain businesses. If the organisation is liable to register under the GST and carries on business without registering under GST, it will be considered as an offence under GST and heavy penalties will be levied. GST registration will usually take 2-6 working days.

2. Who should register for GST in India?

Under the GST regime, the tax is payable by the registered taxable person on the supply of goods and services. Here we have mentioned who needs to get registered under GST mandatorily.
  • Individuals who are registered under the previous law (Excise, VAT, Service Tax etc.)
  • When the businesses or the taxable person crosses the turnover threshold limit of Rs 20 lakhs (Rs 10 lakhs for North East and Hill States)
  • Inter-State Suppliers
  • Businesses having multiple branches in multiple states
  • Casual Taxable Person
  • A person who is required to pay tax under Reverse Charge Mechanism (if the supplier is unregistered under GST).
  • A person who want to take Input Tax Credit
  • E-Commerce operators, supplying goods or services
  • Non- Resident Taxable Person.
*Casual taxable person means the person whose place of business is not fixed and undertakes transactions occasionally involving the supply of goods or services or both. *Non-Resident Taxable Person means the person whose place of business is not fixed or is not the resident of India and undertakes transactions occasionally involving the supply of goods or services or both.

3. What are the Documents required for GST Registration?

The document list varies for every business category. The most important document for GST Registration, Click here. Different types of business categories under GST are:
  • Sole Proprietorship/ Individual
  • Private Limited Company/Public Company/One Person Company (OPC)
  • Partnerships
  • Limited Liability Partnerships (LLP)
  • Hindu Undivided Family (HUF)

4. GST Registration for different locations

Registration has to be taken in the state or union territory from where the registered supplier makes a taxable supply of goods & services. Registration is not required in that state where taxable supply is made. Where in case supplies of goods or services are made from different states, a separate registration will be required but there should be a fixed establishment in that other state from where the goods or services are supplied.

5. Time Period to get register under GST

The person is required to get himself registered under GST within 30 days from the date when turnover exceeds Rs.20 Lakhs or Rs. 10 Lakhs(for north east & hill states).

For example: BBC Ltd. is engaged in supplying taxable services in New Delhi. The turnover of BBC Ltd exceeds on 1st October, now BBC Ltd. is requiredto get registered by 1st November in the state of New Delhi.

6. What will be the penalty for not registering under GST?

The penalty of 10% of the taxable amount due, subject to a minimum of Rs.10,000 shall be levied on the person not paying tax or making short payments.
The penalty will at 100% of the tax amount due when the offender has intentionally evaded taxes.
Not registering under GST is an offence under Section 122. The GST Act has listed down 21 offences in section 122.

7. GST Registration Process – Part – A

How to make a new registration on GST Portal online?

Every business whose Annual turnover exceeds Rs 20 lakh (Rs 10 lakhs for North East & hill states) is required to register under GST as a normal taxable person. GST registration can be done online through the GST Portal. On submission of a GST registration application, GST ARN is provided immediately.

Here is a step-by-step guide on how to complete registration process (PART-A) online on the GST Portal –

Step-1 : Go to the GST Portal

  • The GST Homepage will be displayed.
  • Click the Services > Registration > New Registration option.

The Application form for GST Registration is divided into two parts as Part A and Part B.

Step-2 After clicking New Registration form, you are required to fill the following details in Part-A:

First, select the New Registration option.
From the I am a dropdown list; select the option Taxpayer as the type.
In the State/UT and District select from the drop down list.
Enter the Legal Name of the Business (As mentioned in PAN) field.
Enter the Permanent Account Number (PAN) field; enter PAN of your business or PAN of the Proprietor. This will be added in the GST registration.

Note:

  • PAN is mandatory for GST registration.
  • In case you don’t have PAN, you can apply for PAN by clicking the here link.

Enter the Email Address field, of the Primary Authorized Signatory.
Enter the Mobile Number field of the Primary Authorized Signatory.

Note: One Time Password (OTP) will be sent on your email address and mobile number for authentication.

Enter the captcha code in the Type the characters you see in the image below field.
After that, Click the PROCEED button to complete the Part-A registration.

Step-3 OTP Verification and TRN Generation

The OTP Verification page is displayed after the submitting the proceed button (as showed above). Enter the two separate OTP sent to verify email and mobile number. OTP will be valid for 10 minutes.

  • Enter the OTP received on your registered mobile number in the Mobile OTP field.
  • Enter the OTP received on your email address in the Email OTP field

Step-4 TRN Generated

On successful OTP verification, a TRN (Temporary Reference Number) will be generated which can be used to complete and submit the GST registration. You can login through your TRN to view and complete your application.

Step-5 Now, you have to fill the following details in Part-B to complete the GST Registration. Click Here to understand the detailed procedure to fill Part-B.

8. GST Registration Process – Part – B

In the previous article, we have explained the process of making application in Part-A for GST Registration. Now let’s understand the detailed procedure to fill and complete Part-B of GST Registration.

Step-1 As Part-A is already done, now you are required to fill the following details in Part-B to complete the GST Registration:

  • Again go to GST portal
  • Click the Services > Registration > New Registration option.
  • Select Temporary Reference Number (TRN). Enter the TRN and the captcha code and click on Proceed.

Then, you will receive an OTP on the registered mobile and email. Enter the OTP and click on Proceed to login.

Step-2 Login with TRN

  • Now as the TRN is generated, you can complete the GST registration process, which is PART-B of the registration. After login, The My Saved Application page will be displayed. Click the edit icon (icon in blue square with white pen) under the Action option.

Step-3 Submit Information in registration form (Part-B)

On the top of the registration page, there are 10 tabs such as Business Details, Promoter or Partners, Authorized Signatory, Authorized Representative, Principal Place of Business, Additional Places of Business, Goods and Services, Bank Accounts, State Specific Information and Verification. Click separate tab to enter the details. This will affect this verification before the process the various tab. These can be taxed in the same head for the business details tab is selected by default and displays the information to be filled for the business details required for registration in the trade name of your business and the business threshold limit for the GST registration, Taxpayers are required to file the new GST for the registration arises.

Lets understand all tabs under registration process:

A. Business Details:

This tab is selected by default and displays the information to be filled for the business details required for registration.
a) Enter the trade name of your business.
b) Select the Constitution of Business drop-down list, select the type of constitution of your business.
c) Enter the District and Sector/ Circle / Ward / Charge/ Unit from the drop-down list and select the district & sector/circle/ward/charge/unit number of your business.
d) Select the Commissionerate Code, Division Code and Range Code from the drop-down list.
e) Choose Yes in case you want to opt for the Composition Levy, or else select No.
f) Enter the Date of commencement of Business
g) Enter the Date on which liability to register arises.

Note:This is the day the business crossed the aggregate turnover threshold for GST registration. Taxpayers are required to file the application for new GST registration within 30 days from the date on which the liability arises to register.

B.Promoters/Partners Information:

In this tab details of the Promoters of business, Company director information, and Proprietors information must be submitted.

You can enter the details of upto 10 Promoters or Partners.

Following fields should be filled:
a) Personal details of the stakeholder
b) Identity Information
c) Designation / Status of the stakeholder
d) Residential Address of the stakeholder.
e) Document Upload to upload the photograph of the stakeholder.
f) Where the promoter or partner is also the authorized signatory, you can select the option Also Authorized Signatory as Yes and details will be auto-populated in the Authorized Signatory tab.
g) Click the SAVE & CONTINUE button.

C. Authorized Signatory Tab:

The authorized signatory is a person nominated by the stakeholder of the company to be responsible for filing GST returns and other compliances.

In case a stakeholder was selected as an authorized signatory in the promoter’s section, this section will be auto-populated with the relevant details. The details required for authorized signatory is same as that of the promoters.

D. Authorized Representative:
This tab requires the details of the authorized representative.
Select Do you have any Authorized Representative using the radio button and fill the required details (if any).

E. Principal Place of Business:
It is the primary location within the State where the business activities are performed. It is generally the address where the books of accounts and records of business are kept.

a) In the Address Field, enter the address of the principal place of business in Address Field.
b) Enter the contact details like Email address, telephone number, mobile number field and fax number (with STD Code).
c) From drop-Select the Nature of Possession of Premises from the drop-down list.
d) Click the Choose file button to upload the documents..

Note:

  • Maximum file size is 1 MB (PDF or JPEG files)
  • Upload the documents for the proof of Principal Place of Business.
  • Document for Own premises – Any document in support of the ownership of the premises like Latest Property Tax Receipt or copy of Municipal Khata or Electricity Bill.
  • Document for Rented or Leased premises – A copy of the valid Rent / Lease Agreement with proof of ownership of the premises of the Lessor example Latest Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill.

e) Choose the File button to upload the proof of SEZ unit or SEZ developer approval for the premises.
f) Click the checkbox for the Nature of Business activities being carried out at above-mentioned premises.
g) For additional place of business, select Yes for Have Additional Place of Business.
h) Click the SAVE & CONTINUE button.

F. Additional Places of Business:

You are required to enter the number of additional places of business and click the ADD NEW button. You can enter the same details provided above in Principal Place of Business Details.

G. Goods and Services:

This tab shows the details of the goods and services supplied by the business.
In case you deal with Goods, you are required to mention the HSN Code in the Goods tab. In case you deal with services, you are required to mention the Service Classification Code (SA) in the Services tab. Maximum 5 goods and 5 services can be added. If you have more than 5 goods or services, then you have to add the top 5 goods or services you are trading with.

H. Bank Accounts:

In this tab, it will display the details of the bank accounts maintained for managing business.
Also, You can enter details of up to 10 Bank Accounts

I. State Specific Information

J. Verification:

This is for authentication of the information submitted in the form.
You are required to digitally sign the form using Digital Signature Certificate (DSC)/ E-Signature or EVC.

After Submitting the Form, The success message is displayed. After that you will receive the acknowledgement in next 15 minutes. Application Reference Number (ARN) will be sent on your registered e-mail and mobile phone number.

Alternative Minimum Tax (AMT)

Applicability of AMT

MAT is applicable to companies only, whereas AMT is applicable to non-corporate taxpayers. Thus, it can be said that MAT applies to companies and AMT applies to a person other than a company. The provisions relating to AMT are given in sections 115JC to 115JF of Income Tax Act.

Alternate Minimum Tax (AMT) is applicable on all assessees except companies, if the tax payable under the normal provisions of Income Tax is less than 18.5% of the Adjusted Total Income (plus surcharge and cess as applicable).
However, in the case of individuals, HUF (Hindu Undivided Family), Association of Persons (AOPs) and Artificial Judicial person, AMT shall not be payable if adjusted total income of the assessee does not exceed Rs. 20 Lakhs,

In essence, AMT will only apply to an assessee who has claimed any deduction under-

a) sections 80-IA to sections 80RRB (other than section 80P); or
b) section 10AA (Deduction in respect of SEZ units); or
c) section 35AD

Rate of AMT

AMT is levied at 18.5% of adjusted total income in case of non-corporate taxpayer. Surcharge and cess will also be levied as applicable.

However, AMT is levied at the rate of 9% in case of a non-corporate assessee’s unit situated in an International Financial Services Centre and generates its income exclusively in convertible foreign exchange. Surcharge and cess will also be levied as applicable. (Applicable from Assessment Year 2019-20)

Calculation of Adjusted Total Income

Adjusted total income and AMT is computed in the following manner:

Particulars Amount
Total net income as computed under the normal provisions of Income Tax Act XXX
ADD: Deduction under Chapter VI-A from 80H to 80RRB except deduction under 80P XXX
ADD: Deduction under Section 10AA (Deduction in respect of SEZ units) XXX
ADD: Deduction claimed under Section 35AD reduced by regular depreciation allowed XXX
Adjusted total income XXX

How to calculate AMT?

As per AMT, the tax liability will be higher of the following:

  • Tax liability computed as per the normal provisions of the Income-tax Law (applying applicable tax rate).
  • 18.5% on adjusted total income (plus surcharge and cess as applicable). The tax computed at the rate of 18.5% on adjusted total income (plus surcharge and cess as applicable) is called AMT.

Note: AMT is levied at the rate of 9% in case of a non-corporate assessee’s unit is situated in an International Financial Services Centre and generates its income exclusively in convertible foreign exchange. Surcharge and cess will also be levied as applicable. (Applicable from Assessment Year 2019-20)

Let us understand calculation of AMT with an Illustration:
Illustration
The taxable income of Mr. Ranjan a resident individual aged 42 years for the year 2018-19 calculated as per the provisions of Income-tax Act is Rs. 26,40,000. The taxable income has been computed after deduction of Rs. 2,00,000 under section 80RRB in respect of royalty on patent. Will he be liable to pay AMT? What will be his tax liability for that financial year?

Ø As mentioned earlier, AMT calculation and usage only applies in cases where the tax payer has used deductions under section 80H to 80RRB (excepting section 80P), under section 35AD and under section 10AA. Further, the provisions of AMT shall also apply to an individual or a HUFs or a body of individuals(BOI) or an artificial juridical person(AJP) or an association of persons only if the adjusted total income exceeds Rs. 20,00,000. Hence, Mr. Ranjan has claimed a deduction under section 80RRB in respect of royalty on patent and his adjusted total income is exceeding Rs. 20,00,000 and thus the provisions of AMT will apply to him.

As per the provisions of AMT, the tax liability of Mr. Ranjan will be higher of the below:

  • Tax calculated as per the normal provisions of the Income-tax Law (applying applicable tax rate).
  • 18.5% on adjusted total income (plus surcharge and cess as applicable). The tax computed at the rate of 18.5% on adjusted total income (plus surcharge and cess as applicable) is called AMT.

Therefore, Tax on Rs. 26,40,000 as per applicable tax rates of an individual below 60 years of age for the AY 2019-20 works out to Rs. 6,04,500. Tax liability after health & education cess of 4% would work out to Rs. 6,28,680.
Adjusted total income will come to Rs. 28,40,000 (Rs. 26,40,000 + Rs. 2,00,000, i.e., deduction under section 80RRB). AMT at 18.5% on Rs. 28,40,000 will come to Rs. 5,25,400. AMT liability after health & education cess of 4% will come to Rs. 5,46,416.
In the given case, the liability as per the normal provisions of the Income-tax Act is more than the liability as per AMT and, hence, the tax liability of Mr. Ranjan will be Rs. 6,28,680.

Audit Report from Chartered Accountant
Assessee will be required to obtain a report from a chartered accountant certifying the computation of the adjusted total income and AMT in the Form No. 29C.
Such report will be furnished on or before the due date of filing of income tax return.

Tax Credit for Alternate Minimum Tax (AMT)

a. Alternate minimium tax (AMT) paid in excess of the regular income tax under the normal provisions of income tax act, will be available as credit against the subsequent tax liability.
b. The credit of AMT will be allowed to be carried forward and set off upto 10 succeeding financial years in which such credit becomes available.
c. AMT credit is allowed in the year in which regular tax > AMT.
d. The credit will be restricted to the difference between the regular income tax computed under normal provisions of income tax act and the AMT.

Let us understand AMT credit with an Illustration:

Illustration
The tax liability of a partnership firm XYZ Enterprises for the financial year 2018-19 under the normal provisions of the Income-tax Act is Rs. 19,40,000 and the liability as per the provisions of AMT is Rs. 19,00,000. It has brought forward AMT credit of Rs. 2,00,000. Can the firm adjust the AMT credit? Calculate the tax liability after adjusting AMT credit.

Ø AMT credit is allowed in the year in which regular tax is more than AMT. In this case, the liability as per the normal provisions of the Income-tax Act is Rs. 19,40,000 and the liability as per the provisions of AMT is Rs. 19,00,000. As the tax liability as per the normal provisions of income tax act is more than liability as per AMT, thus the firm can adjust the AMT credit.
Ø Brought forwardof AMT credit shall be allowed in the following years to the limit of the difference between the tax on total income as per the normal provisions and the liability as per the AMT provisions. Thus, after adjusting AMT credit, the liability of the firm cannot be less than liability as per the provisions of AMT. In this case, the tax charge as per AMT is Rs. 19,00,000, and, hence, after claiming AMT credit, the firm cannot pay less than Rs. 19,00,000. Hence, out of the credit of Rs. 2,00,000 the firm can claim credit of Rs. 40,000 only and the balance credit of Rs. 1,60,000 can be carried forward to the subsequent years.

ITR-4 Form – SUGAM

ITR-4 Form – For presumptive income from Business & Profession

What is ITR 4 Form used for?

ITR-4 Form is an Income Tax Return form that is used by the taxpayers who have opted for presumptive income scheme under Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act. In case, a taxpayer’s annual turnover of his business exceeds Rs 2 crores then he will have to file ITR 3.

Who can file ITR-4?

You are required to file ITR 4 form in case:

  • You are a professional as mentioned u/s 44AA, and your gross receipts are less than or equal to Rs 50 lakh, in such case you can opt for the scheme under Section 44ADA.
  • You are running a small business and earning income from such business where your gross receipts are not more than Rs 2 crore, you can opt this scheme under Section 44AD.
  • You are involved in a goods transportation business and owns less or equal to 10 goods carriages along with having opted for presumptive taxation scheme under Section 44AE.
  • If you have salary/pension income
  • If you have one house property income
  • If you have other sources income (exclusive of income from winning a lottery and race horses).

What is the Structure of ITR 4 Form?

ITR-4 Form (SUGAM) is divided into various parts:

  • Part A: General Information
  • Part B: Gross total income
  • Part C: Deduction u/s 80 and taxable total income
  • Part D: Tax computation and tax status
  • Verification & signatures on the return
  • Schedule BP –Income from Business or Profession details

*(From AY 2018-19, The new ITR forms make it mandatory for small businesses and those paying tax under the government’s presumptive taxation scheme to report their goods and services tax identification number (GSTIN) and turnover reported under the new tax regime)

  • Schedule AL: Asset & liability at the year end (applicable in case where income exceeds Rs 50 lakhs)
  • Schedule IT: Details of payment of advance-tax and self-assessment tax.
  • Schedule-TCS: Tax collected at source statement.
  • Schedule TDS1: Tax deducted at source on salary statement.
  • Schedule TDS2: Statement of tax deducted at source on income other than salary.
  • Supplementary schedule TDS1
  • Supplementary schedule TDS2
  • Supplementary schedule IT
  • Supplementary schedule TCS

Some of the significant changes made in the ITR 4 for the AY 2018-19 are:

1. From AY 2018-19 it mandatory for small businesses and those paying tax under the government’s presumptive taxation scheme to report their goods and services tax identification number (GSTIN) and turnover reported under the new tax regime.

2. Further, some other fields have been added where now an assessee has to declare the following additional information.

i. Partners/ Members Capital

ii. Secured Loan

iii Unsecured Loan

iv. Advances

v. Fixed Assets

You can see the changes in the image below:

What is Presumptive Taxation Scheme? Who is eligible to take the benefit of the scheme?

Income Tax Law makes a mandatory requirement for businesses and professionals to maintain books of accounts as per Section 44AA under certain circumstances. To provide relief to small taxpayers from this tedious job, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, sections 44ADA and sections 44AE.

A person opting presumptive taxation scheme will get a relaxation from tedious job of maintenance of books of account and an declare income at a prescribed rate. (Hyperlinks).

There are three presumptive taxation schemes as given below:

1. Section 44AD: For Computing Profits & Gains of Business on Presumptive Basis (Turnover < Rs.2 crore)

2. Section 44AE: For Computing Profits & Gains of Business of Plying, Hiring or Leasing Goods Carriages –For Transporters (Owns goods vehicle <10)

3. Section 44ADA: For computing Profits and Gains of Profession on presumptive basis (Services < Rs.50 Lakhs) – (Hyperlink Guide on Presumptive Income)

Form 16C

Form 16C is the TDS certificate which is issued by the Tenant of property to the Landowner of property in respect of TDS deducted on rent under Section 194-IB of the Income-tax Act, 1961.

Form 16C can be download from the website of Centralized Processing Cell of TDS (CPC-TDS), www.tdscpc.gov.in

Form 16C is a new TDS certificate introduced by the government of India. Form 16C reflects the amount of TDS deducted on rent at 5 % by the individual/HUF (u/s 194IB). The person deducting TDS on rent is required to deposit the TDS along with Form 26QC within 30 days of deducting TDS on rent. In addition, the Form 16C should then be provided to the deductee within 15 days of depositing the TDS and Form 26QC.

For Example:

Shivam is a salaried employee and paying a rent of Rs 70,000 per month. He deducted the TDS at the rate of 5% as per section 194IB for the whole year in the month of March. The amount of TDS comes out to be Rs 42,000 (8,40,000 x 5%). Now this TDS has to be deposited along with Form 26QC before 30th April, i.e. within thirty days from the end of the month in which TDS has been deducted. Also, Shivam is required to furnish the Form 16C to his landlord within 15 days from the due date of furnishing a challan cum statement i.e. in Form 26QC. That means you need to furnish the Form 16C to your landlord by 15th of May.

You can download Form 16C or Form 26QC online from TRACES website.

ITR-2 Form

ITR 2 Form – For Individuals and HUFs not having income from profits and gains of business or profession

Who can file ITR2?

  • Individuals and HUFs can file ITR-2. This form will be applicable to you if you receive income from:
  • Income from Salary or pension
  • House property Income from one or more
  • Capital Gains or Loss on sale of investments/property (both short-term and long-term)
  • Income from Other sources (lottery winnings, gambling and other legal channels)
  • Foreign Assets/Foreign Income
  • Agricultural income exceeding Rs 5,000
  • From AY 2018-19, RNORs (Resident not ordinarily resident) and Non-Residents have to file Form ITR-2.

Who cannot File ITR 2?

You cannot file this form if your income includes the following:

  • Income from Business or Profession
  • If you are eligible to fill out the ITR-1 Form

Structure of ITR 2 Form?

ITR-2 has the following parts:

  • Part A: General information such as identification, etc.
  • Part B: Details of total income and tax computation in respect of income chargeable to tax.

This is followed by the below schedule:

  • Part A: General Information
  • Part B-TI: Calculation of Total Income
  • Part B-TTI: Calculation of tax
  • Details if the return has been prepared by a Tax Return Preparer (TRP)
  • Schedule S: Details of income from salaries
  • Schedule HP: House Property income details
  • Schedule CG:. Calculation Capital gains income
  • Schedule OS: Calculation of Income from other sources.
  • Schedule CYLA: Income Statement after set off of current year’s losses
  • Schedule BFLA: Income Statement after set off of unabsorbed loss brought forward from earlier years.
  • Schedule CFL: Carried forward of losses
  • Schedule VIA: Deductions from total income under Chapter VIA.
  • Schedule 80G: Statement of donations entitled for deduction under section 80G.
  • Schedule SPI: Income Statement arising to spouse or minor child or son wife or any other person or AOP’s to be included in the assessee income in Schedule-HP, CG & OS
  • Schedule SI: Statement of income chargeable to tax at special rates
  • Schedule EI: Exempt Income Details
  • Schedule IT: Statement of payment of advance-tax and self-assessment tax.
  • Schedule TDS1: Tax deducted at source on salary Details.
  • Schedule TDS2: Statement of tax deducted at source on income other than salary.
  • Schedule FSI: Income Statement accruing or arising outside India.
  • Schedule TR: Details of taxes paid outside India.
  • Schedule FA: Details of Foreign Assets.
  • Schedule 5A: Apportionment of income between spouses governed by Portuguese Civil Code.
  • Schedule AL: Asset and liability at the year end(applicable in case where income exceeds Rs 50 lakhs).

Some of the significant changes made in the ITR 2 for the AY 2018-19 are:

1. From AY 2018-19, RNORs and Non-Residents have to file Form ITR-2.

2. Schedule-IF i.e. Income from firm and Schedule Business Profession (BP) has been removed. Therefore, anyone having income from partnership firm has to file ITR-3 and not ITR-2 from the financial year 2017-18.

3. Same as ITR -1, even in ITR-2, under the Schedule on TDS, an additional field has been added for furnishing details of TDS as per Form 26QC for TDS made on rent. Also, PAN of tenant is also required in certain cases.

4. “Profits and Gains from Business or Profession” Field which was earlier featuring under Part B – TI has now removed.

5. In Schedule AL, the field of “Interest held in the assets of a firm or association of persons as a partner or member thereof” has been done away with.

Taxation of HUF’s (Hindu Undivided Family)

Introduction

A Hindu undivided family(HUF) is a family which has a common male ancestor and holds joint family assets and that have not been subject to partition.

As per the Income Tax Act, Hindu Undivided Family (HUF) is treated as a separate entity for the purpose of assessment. HUF is a creation of law and does not arise from a contract. The senior-most male member of the family who is also called Karta head’s the HUF. The Karta plays an important role in an HUF as he is the custodian of assets and primary decision maker.

Conventionally, an HUF consists of a Father, sons and daughters. Moreover, a Karta would always be male and wives, daughters or daughters-in-law could not be made Kartas at any point in time. However, with a change to the Hindu Succession (Amendment) Act 2005, the eldest daughter in an HUF can now be made the Karta and coparcener. Wives and daughters in law, however, still cannot be made the Karta or coparcener. Although, in case of death of a Karta with minor children, a wife can be a guardian of the HUF till the minor children become major.

What is a coparcener?

A coparcener is any person in an HUF that has a right to the ancestral property by birth and can call for a partition of the HUF assets. An HUF has two types of members. Members who are also coparceners and members who are just regular members and cannot demand for the partition of assets in an HUF. However, when a partition does take place regular members will get the same share as coparcener members. Wives and daughters in law are regular members and not coparceners. All sons and daughters (post the Hindu Succession (Amendment) Act 2005) of the father/Karta of the HUF are coparceners.

Members of HUF

  • Every male members becomes a part of HUF either by virtue of birth or by adoption.
  • All the unmarried daughters are a part either by virtue birth or adoption.
  • A widow is a member of her husband’s HUF, where she is not a coparcener. As only a coparcener can become the Karta of HUF, thus she cannot become the Karta of her husband’s HUF.
  • Woman abandoned by her husband or divorced in any circumstances will continue to be a member of HUF.

Formation of HUF

  1. A family forms a Hindu Undivided Family, not a single person.
  2. Automatically formation of HUF at the time of marriage.
  3. Members of HUF consist of a common ancestor and all of his lineal descendants, including their wives and unmarried daughters.
  4. Hindu’s, Buddhists, Jain’s and Sikhs can form Hindu Undivided Family (HUF).

HUF Taxation and Tax saving by Forming HUF

  • The main advantage of forming a Hindu Undivided Family is that the whole family gets an extra benefit on separate PAN Card and can divide their family income to save tax and reduce tax liability. In such cases New PAN Card will be allotted to the HUF.
  • Thus, It has its own PAN Card and a separate income tax return will be filed.
  • A separate joint Hindu family business is created as a separate entity which is distinct from its members.
  • As HUF is taxed separately from its members, thus deductions under section 80 and other exemptions can be claimed by them separately.
  • Members of HUF also receive salary if they are contributing to the functioning and work of the joint Hindu family business. Such salary expense can be deducted from HUF’s income.
  • An insurance policy can be taken by HUF on the life of its members.
  • The provisions of computing income of HUF are same as of normal assessee/individual.

Let us understand the Taxability of HUF through an Illustration

Drawbacks of Forming HUF:

Partition of HUF

There are two types of partitions:

a) Total Partition
b) Partial Partition

Total Partition: In case all the assets of the family are divided amongst all the members of the family and the family terminates as HUF, then it is known as Total Partition.

Partial Partition: In case some members of the HUF go out and other remains together or in case some property is divided and some remain joint, then it is known as partial partition. It is not recognized in
the Income Tax Act,1961.
Therefore, Partition has to be a total partition. Partial partition is not recognized under income tax laws.

  • All the assets will be in the name of HUF and are assets of the whole family & not of a specific individual. Therefore, the common property or asset cannot be sold without the consent of all members of HUF. Over the years this has clause has led to many disagreements which have eventually landed up in court. When the number of members rises in an HUF, it is extremely difficult getting unanimous consensus on any matter. Moreover, with divorce rates and the concept of nuclear families on the rise the entire management of HUF becomes difficult.
  • HUF cannot make any gift of HUF property to coparcener and non-coparceners. Any gift made by the HUF are void-ab-initio.