goods and service tax identification number

Goods and Service Tax Identification Number

by CA Topics

Goods and Service Tax Identification Number (GSTIN)

All the business entities registering under GST will be provided a unique identification number known as GSTIN or GST Identification Number. Before GST was implemented, all dealers registered under the state VAT law were assigned a unique TIN number by the respective state tax authorities. Similarly, service providers were assigned a service tax registration number by the Central Board of Excise and Custom (CBEC).

Format of GSTIN Number:

On approval of the application, a Goods and Service Tax Identification Number (GSTIN) is assigned, based on the following format:

  1. First two character for the State Code
  2. Next ten characters for the PAN or the Tax deductions and Collection Account Number
  3. Next two characters for the entity code
  4. Last digit is a checksum character

GST Number Search by PAN:

GST number search by PAN can be done in two simple cases, let us see the step by step process of how to do GST number search by PAN.

The procedure of GST number search (Pre-login)

  1. Visit online government portal of GST registration.
  2. Click on “Search Taxpayer” tab.
  3. Select “Search by PAN” in the dropdown.
  4. Enter the PAN details in the section.
  5. Enter the correct CAPTCHA and click on search.

Procedure to search GST number (Post – login)

  1. Login to GST online portal with valid credentials and completing the CAPTCHA procedure.
  2. Click on “Search Taxpayer” tab.
  3. Select “Search by PAN” from the drop-down.
  4. Enter the PAN details and click on “Search”.

GST Number Search by Name:

  1. Visit Online GST registration portal.
  2. Click on “Search taxpayer” section.
  3. Enter the name of the business in the search bar.
  4. You have to enter at least 10 characters to find the relevant GST number information.
  5. You have to enter the initial State to get the most relevant search.

GST Verification

  1. GST number of any taxpayer can be verified with few simple steps, let us understand how to check GST number online:
  2. Visit the GST portal Online
  3. Click on “Search taxpayer” section.
  4. In “Search taxpayer” click on “Search by GSTIN/UIN” in the dropdown.
  5. Click on search.
  6. In case the GSTIN is incorrect an error message will appear on the screen which will indicate that the GSTIN entered is incorrect.

Penalties of using Fake GSTIN

There are several such businesses who use Fake GST number by modifying the existing one and using it to gain money from the customers. Such misuse of GSTIN can lead to paying huge penalties. In case any of the business works illegally or commits offenses such as making supplies without invoice or fake invoice, Issuing any documents with fake or already existing GSTIN, GST registration not done, even if they lie under GST criteria.

 

E way bill

E-way Bill

by CA Topics

E-way Bill

E-way bill refers to a document to be carried by the person in charge of conveyance generate electronically, to reduce tax evasion with proper invoicing of the goods and to stop the practice of bogus Invoicing of goods.

E-way bill is mandatory for every registered person who causes movement of goods of consignment value exceeding Rs. 50,000

  1. In relation to a ‘supply’
  2. For reasons other than a ‘supply’ ( say a return)
  3. Due to inward ‘supply’ from an unregistered person

before commencement of such movement, furnish information relating to the said goods in Form GST EWB-01, electronically on the common portal.

The taxpayer has to upload the details of each transaction to a common portal through the Internet, and once uploaded, the common portal would automatically generate a document that can be tracked and verified easily by any stakeholder.

Details to be furnished in Form GST EWB-01:

The information furnished while generating e-Way Bill such as

  1. GSTIN of recipient
  2. Place of delivery
  3. Invoice Number
  4. Invoice date
  5. Value of goods
  6. HSN code
  7. Transporter details.

The person in charge of a conveyance shall carry — (a) the invoice or bill of supply or delivery challan, as the case may be; and (b) a copy of the e-Way Bill or the e-Way Bill number. An officer authorized by the State can intercept any conveyance to verify the e-Way Bill or the e-Way Bill number in physical form for all inter-State and intra-State movement of goods.

If a transporter is transporting multiple consignments in a single conveyance, they can use the form GST EWB-02 to produce a consolidated e-way bill, by providing the e-way bill numbers of each consignment. If both the consignor and the consignee have not created an e-way bill, then the transporter can do so * by filling out PART A of FORM GST EWB-01 on the basis of the invoice/bill of supply/delivery challan given to them.

Benefits of e-Way Bill system:

The major benefits of e-Way Bill system are as follows:

  1. The traders need not visit tax offices to collect and submit the Way Bill forms as used to be done in VAT regimes in some states.
  2. Average waiting time at mobile squad reduces drastically – As the verification of the e-Way Bill is done with the common portal, it will speed up the process of verification and allowing the vehicle to pass faster.
  3. Self-policing by traders- A trader while uploading gives the identification of the buying trader who will also account the transaction automatically.
  4. Environment-friendly – The need for the paper form of the multiple copies of waybill is eliminated. Hence, the tons of paper are saved per day.
  5. Generation of GSTR-1 returns – GSTR-1 return of the supplier is auto prepared, hence he need not have to upload the same.
  6. Officials saved of monotonous work collecting and matching the manual waybill with the returns of the taxpayers.

Registration in E-way bill portal (common portal):

  1. Visit, https://ewaybillgst.gov.in/
  2. Click on the ‘e-way bill Registration’ link under ‘Registration’ option.
  3. Enter GSTIN and captcha then submit, Once submitted the details of a taxpayer are auto-populated.
  4. Then click on ‘Send OTP’, then verify using OTP sent to mobile or mail.
  5. Then the user needs to o provide his choice of User ID or username, which he/she plans to use to operate his account on this system. Username should be about 8 to 15 alphanumeric characters and can include special characters.
  6. Once a request is submitted then the user can log in using credentials and generate the E-way bill.

Cases when e-Way bill is Not Required:

In the following cases it is not necessary to generate e-Way Bill:

  1. The mode of transport is non-motor vehicle
  2. Goods transported from Customs port, airport, air cargo complex or land customs station to Inland Container Depot (ICD) or Container Freight Station (CFS) for clearance by Customs.
  3. Goods transported under Customs supervision or under customs seal
  4. Goods transported under Customs Bond from ICD to Customs port or from one custom station to another.
  5. Transit cargo transported to or from Nepal or Bhutan
  6. Movement of goods caused by defense formation under Ministry of defense as a consignor or consignee
  7. Empty Cargo containers are being transported
  8. Consignor transporting goods to or from between place of business and a weighbridge for weighment at a distance of 20 km, accompanied by a Delivery challan.
  9. Goods being transported by rail where the Consignor of goods is the Central Government, State Governments or local authority.
  10. Goods specified as exempt from E-Way bill requirements in the respective State/Union territory GST Rules.
  11. Transport of certain specified goods- Includes the list of exempt supply of goods

Process for generating E-Way bill:

  1. Login to https://ewaybill.nic.in/ using credential and captcha.
  2. Click on ‘Generate new’ under ‘E-waybill’ option appearing on the left-hand side of the dashboard.
  3. Enter the following fields on the screen that appears:
    1. Transaction Type:
      1. Select ‘Outward’ if you are a supplier of consignment
      2. Select ‘Inward’ if you are a recipient of consignment.
    2. Sub-type: Select the relevant sub-type applicable to you:
      1. If transaction type selected is Outward, following subtypes appear:
      2. If transaction type selected is Inward, following subtypes appear:

Note: SKD/CKD- Semi knocked down condition/ Complete knocked down condition

  1. Document type: Select either of Invoice / Bill/ challan/ credit note/ Bill of entry or others if not Listed
    1. Document No. : Enter the document/invoice number
    2. Document Date: Select the date of the Invoice or challan or Document.

Note: The system will not allow the user to enter the future date.

  1. From/ To Depending on whether you are a supplier or a recipient, enter the To / From section details.

Note: If the supplier/client is unregistered, then mention ‘URP’ in the field GSTIN, indicating that the supplier/client is an ‘Unregistered Person’.

  1. Item Details: Add the details of the consignment (HSN code-wise) in this section:
    1. Product name
    2. Description
  • HSN Code
  1. Quantity,
  2. Unit,
  3. Value/Taxable value
  • Tax rates of CGST and SGST or IGST (in %)
  • Tax rate of Cess, if any charged (in %)

Note: On the implementation of Eway bills, Based on the details entered here, corresponding entries can also be auto-populated in the respective GST Return while filing on GST portal.

  1. Transporter details: The mode of transport(road/rail/ship/air) and the approximate distance covered (in KM) needs to be compulsorily mentioned in this part.
  2. Apart from above, Either of the details can be mentioned:
    1. Transporter name, transporter ID, transporter Doc. No. & Date.
    2. Vehicle number in which consignment is being transported.

Note: For products, clients/customers, suppliers, and transporters that are used regularly, first update the ‘My masters’ section also available on the login dashboard and then proceed.

  1. Click on ‘Submit’. The system validates data entered and then processed and it shows up an error if any.
  2. Print the E-way bill generated after successfully processed.

Cancellation of E Way Bill:

In case, an e-way bill had been generated, but the goods have not been transported or are not transported as per the details furnished in the bill, then the e-way bill can be canceled online on the GST Portal or through a GST Facilitation Centre.

A GST e-way bill can be canceled easily within 24 hours of its generation. However, an e-way bill cannot be canceled if it had been verified in transit.

Validity of E Way Bill

The Validity of E Way Bill is depended upon 2 factors i.e. Cargo Type and Distance.

In Case of Normal Cargo:-

Up to 100 KM 1 Day
After that for every 100 KM or Part thereof 1 Day

Example: – If Distance of movement is 823 KM then validity of E way Bill is 9 Days

In Case of Over Dimensional Cargo:-

Up to 20 KM 1 Day
After that for every 20 KM or part thereof 1 Day

Example: – If Distance of Movement is 45 KM in case of Over Dimensional Cargo then the validity of E way Bill is 3 Days.

 

GST Registration

GST Registration

by CA Topics

GST Registration

GST Registration compliance

GST Registration is done by every supplier who is making a taxable supply of goods or services or both shall register in every State/Union Territory from where he makes taxable supply if his aggregate turnover exceeds 40 lakhs (10 lakhs for northeastern states) in a financial year.

Aggregate turnover means the value of all taxable supplies (excluding the value of inward supplies liable to tax on reverse charge basis), exempt supplies, exports of goods and services or both and inter-state supplies of persons having the same Permanent Account Number [PAN] to be computed on all India basis.

Mandatory GST Registration Criteria

The following person is required to take registration under GST irrespective of turnover:

  1. Person making interstate supplies
  2. casual taxable persons
  3. Persons who are required to pay tax under RCM
  4. Person who are required to pay tax under sub-section (5) of section 9
  5. Non-resident taxable persons making taxable supply
  6. Persons who are required to deduct tax under section 51
  7. Persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise
  8. Input Service Distributor
  9. Persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52
  10. Every E-commerce operator
  11. Every person supplying OIDR services from a place outside India to a person in India, other than a registered person.

Composition Scheme:

Small businesses having an annual turnover of less than Rs. 1.5 crore can opt for Composition scheme

Composition dealers will pay nominal tax rates based on the type of business:

  1. Composition dealers are required to file only one quarterly return (instead of three monthly returns filed by normal taxpayers).
  2. They cannot issue taxable invoices, i.e., collect tax from customers and are required to pay the tax out of their own pocket.
  3. Businesses that have opted for Composition Scheme cannot claim any input tax credit.

Composition scheme is not applicable to :

  1. Service providers
  2. Inter-state sellers
  3. E-commerce sellers
  4. Supplier of non-taxable goods
  5. Manufacturer of Notified Goods

Input Service Distributor:

ISD means Input Service Distributor. It is like a head office that receives the tax invoices of input services and then further distributes the credit of tax paid by it to its units proportionately.

  1. Yes, the person can voluntarily cancel the registration on wish.
  2. Even proper office, on default of tax by taxable assessee, will cancel the GST registration by giving notice.

Documents Required:

  1. PAN of the applicant & Valid Mobile Number and E-Mail ID
  2. Identity PAN and address proof along with photographs of promoter
    1. Proprietary Concern – Proprietor
    2. Partnership Firm / LLP – Managing/Authorized/Designated Partners (personal details of all partners are to be submitted but photos of only ten partners including that of Managing Partner are to be submitted)
    3. Hindu Undivided Family – Karta
    4. Company – Managing Director, Directors and the Authorised Person
    5. Trust – Managing Trustee, Trustees and Authorised Person
    6. Association of Persons or Body of Individuals –Members of Managing Committee (personal details of all members are to be submitted but photos of only ten members including that of Chairman are to be submitted)
    7. Local Authority – CEO or his equivalent
    8. Statutory Body – CEO or his equivalent
    9. Others – Person(s) in Charge
  3. Business Registration Document
    1. Partnership – Partnership Deed
    2. LLP/ Company – Incorporation Certificate
    3. Society/trust/ club/ government department/ body of individuals – Registration Certificates
  4. Address proof of business
    1. Rental – Rental Agreement/ Electricity Bill with Consent
    2. Own – Property tax/ Municipal tax receipt
    3. SEZ – Certificate issued by Govt.
  5. Jurisdiction and Commissionerate
  6. Bank account Proof
    1. Cheque
    2. Bank statement
  7. Digital Signature Mandatory only in case of Company
  8. Declaration as authorized signatory – Board Resolution/Self Declaration
  9. Declaration regarding the type of goods and nature of business.
gst

Goods and Service Tax (GST)

by CA Topics

Goods and Service Tax (GST)

GST is commonly known as tax imposed on the supply of goods and services. Earlier the Central Government used to levy tax on manufacture (Central Excise duty), provision of services (Service Tax), interstate sale of goods (CST levied by the Centre but collected and appropriated by the States) and the State Governments levy tax on retail sales (VAT), entry of goods in the State (Entry Tax), Luxury Tax, Purchase Tax, etc. It is clearly visible that there were multiplicities of taxes which were being levied on the same supply chain.

There was cascading of taxes, as taxes levied by the Central Government were not available as setoff against the taxes being levied by the State governments. Even certain taxes levied by State Governments were not allowed as set off for payment of other taxes being levied by them. Further, a variety of VAT laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres.

All the taxes mentioned above are proposed to be subsumed in a single tax called the Goods and Services Tax (GST) which will be levied on the supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So basically any tax that is previously levied by the Central or State Government on the supply of goods or services is converged into GST.

GST is proposed to be a dual levy where the Central Government will levy and collect Central GST (CGST) and the State will levy and collect State GST (SGST) on intra-state supply of goods or services. The Centre will also levy and collect Integrated GST (IGST) on inter-state supply of goods or services.

Goods kept outside the GST:

  1. Alcohol for human consumption (i.e., not for commercial use).
  2. Petrol and petroleum products (GST will apply at a later date), i.e., petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel

Advantages to Trade and Industry:

  1. Simpler tax regime with fewer exemptions;
  2. Increased ease of doing business;
  3. Reduction in multiplicity of taxes that are at present governing our indirect tax system leading to simplification and uniformity;
  4. Elimination of double taxation on certain sectors like works contract, software, hospitality sector;
  5. Will mitigate cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply;
  6. More efficient neutralization of taxes especially for exports thereby making our products more competitive in the international market and give boost to Indian Exports;
  7. Simplified and automated procedures for various processes such as registration, returns, refunds,  tax payments, Average tax burden on the supply of goods or services is expected to come down which would lead to more consumption, which in turn means more production thereby helping in the growth of the industries manufacturing in India.

Advantages to Consumers:

  1. Final price of goods is expected to be transparent due to the seamless flow of input tax credit between the manufacturer, retailer, and service supplier;
  2. Reduction in prices of commodities and goods in the long run due to a reduction in the cascading impact of taxation;
  3. A relatively large segment of small retailers will be either exempted from tax or will suffer very low tax rates under a compounding scheme – purchases from such entities will cost less for the consumers.

Aspects of GST:

CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Tamil Nadu)

SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Tamil Nadu)

IGST: Collected by the Central Government for inter-state sale (Eg: Andhra Pradesh to Tamil Nadu)

HSN code: HSN is a 4 to 8-digit code for identifying the applicable rate of GST on different products as per CGST rules of government of India.

E-Way Bill: An e-Way Bill is an electronic permit for shipping goods similar to a waybill. It was made compulsory for inter-state transport of goods from 1 June 2018. It is required to be generated for every inter-state movement of goods beyond 10 KM and the threshold limit of ₹50,000

Reverse Charge Mechanism: Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of unregistered, smaller material and service suppliers. The receiver of the goods is eligible for Input Tax Credit, while the unregistered dealer is not.

GSTIN: A unique number will be allotted to every registered user to identify such a user which is known as GST Identification Number(GSTIN).

GST Slab Rates:

Goods and services are divided into five different tax slabs for collection of tax – 0%, 5%, 12%, 18% and 28%.

Compliances with rules:

The following Final GST Rules and Formats have been approved by the GST Council and have been placed in the public domain:

  1. Registration Rules and Formats
  2. Return- Rules and GSTP Formats, Mismatch Formats, Return Formats
  3. Invoice- Debit and Credit Notes Rules
  4. Payment Rules and Formats
  5. Refund Rules and Formats
  6. Input Tax Credit Rules
  7. Valuation Rules
  8. Transitional Rules and Formats
  9. Composition Rules and Formats
  10. Accounts and Record Rules.

Input Credit Usage terms:

Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model.

IGST Mechanism:

In the case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure a seamless flow of input tax credit from one State to another.

Taxation of Imports under GST:

The Additional Duty of Excise or CVD and the Special Additional Duty or SAD previously levied on imports is subsumed under GST. IGST will be levied on all imports into the territory of India. Unlike in the previous regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

GST Registration compliance:

Every supplier who is making a taxable supply of goods or services or both shall register in every State/Union Territory from where he makes taxable supply if his aggregate turnover exceeds 40 lakhs (10 lakhs for northeastern states) in a financial year.

Aggregate turnover means the value of all taxable supplies (excluding the value of inward supplies liable to tax on reverse charge basis), exempt supplies, exports of goods and services or both and inter-state supplies of persons having the same Permanent Account Number [PAN] to be computed on all India basis.

Mandatory GST Registration Criteria:

The following person is required to take registration under GST irrespective of turnover:

  1. Person making interstate supplies
  2. casual taxable persons
  3. Persons who are required to pay tax under RCM
  4. Person who are required to pay tax under sub-section (5) of section 9
  5. Non-resident taxable persons making taxable supply
  6. Persons who are required to deduct tax under section 51
  7. Persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise
  8. Input Service Distributor
  9. Persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52
  10. Every E-commerce operator
  11. Every person supplying OIDR services from a place outside India to a person in India, other than a registered person.
UIDAI

UIDAI

by CA Topics

UIDAI

The Unique Identification Authority of India (UIDAI) is a statutory authority established under the provisions of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (“Aadhaar Act 2016”) on 12 July 2016 by the Government of India, under the Ministry of Electronics and Information Technology (MeitY).=

Prior to its establishment as a statutory authority, UIDAI was functioning as an attached office of the then Planning Commission (now NITI Aayog) vide its Gazette Notification No.-A-43011/02/2009-Admn.I) dated 28th January 2009. Later, on 12 September 2015, the Government revised the Allocation of Business Rules to attach the UIDAI to the Department of Electronics & Information Technology (DeitY) of the then Ministry of Communications and Information Technology.

UIDAI was created with the objective to issue Unique Identification numbers (UID), named as “Aadhaar”, to all residents of India that is (a) robust enough to eliminate duplicate and fake identities, and (b) can be verified and authenticated in an easy, cost-effective way. The first UID number was issued on 29 September 2010 to a resident of Nandurbar, Maharashtra. To check the total number of enrollment standing as on today and update. It is more than 120 crore.

Under the Aadhaar Act 2016, UIDAI is responsible for Aadhaar enrolment and authentication, including operation and management of all stages of Aadhaar life cycle, developing the policy, procedure, and system for issuing Aadhaar numbers to individuals and perform authentication and also required to ensure the security of identity information and authentication records of individuals.

To learn more about UIDAI, please visit the Organizational Structure sections of the website.

 

minimum alternative tax mat

Minimum Alternative Tax (MAT)

by CA Topics

Minimum Alternative Tax (MAT)

The concept of MAT was introduced for companies and progressively it has been made applicable to all other taxpayers in the form of AMT. The introduction of the concept of Minimum alternative tax was to take the “zero tax” companies into the taxation bracket. It is payable under the Income-tax Act.

According to Section 115JB, every taxpayer or company is eligible to pay income tax. It is applicable for all the public and private companies, including Indian and foreign companies working from India except those who are engaged in infrastructure and power. However, as per provisions MAT shall not apply to any income accruing or arising to a company from life insurance business, shipping income liable to tonnage taxation.

Provisions of MAT:

Minimum Alternative Tax

As per the concept of Minimum Alternative Tax (MAT) , the tax liability of a company will be higher of the following:

  1. Tax liability of the company computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the company by applying the normal tax rate (tax rate 25% plus 4% Edu cess plus surcharge (if applicable) applicable to the company. Tax computed in the above manner can be termed as normal tax liability.
  2. Tax computed @ 18.5% (plus surcharge and cess as applicable) on book profit (manner of computation of book profit is discussed in later part). The tax computed by applying 18.5% (plus surcharge and cess as applicable) on book profit is called MAT. The tax rate is 15% with effect from AY 2020-21 (FY 2019-20).

Computation of Book Profit:

Book profit means the net profit as shown in the profit & loss account for the year as increased and decreased by the following items:

Net profit as per statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013

Add: Following items (if they are debited to the statement of profit and loss)

  1. Amounts carried to any reserves by whatever name called (Other than reserve specified under Section 33AC)
  2. Provisions for unascertained liabilities
  3. Provisions for losses of subsidiary companies
  4. Dividends paid/proposed
  5. Expenditure related to incomes which are exempt
  6. The amount or amounts of expenditure relatable to, income, being share of the taxpayer in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions.
  7. The amount or amounts of expenditure relatable to income accruing or arising to a taxpayer being a foreign company, from :
    • the capital gains arising on transactions in securities; or
    • the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified
  8. if the income-tax payable on the above income is less than the rate of Minimum Alternative Tax (MAT)
  9. The amount representing notional loss on transfer of a capital asset, being share or a special purpose vehicle to a business trust in exchange of units allotted by that trust or the amount representing notional loss resulting from any change in carrying amount of said units or the amount of loss on transfer of units
  10. Expenditure relatable to income by way of royalty in respect of patent chargeable to tax
  11. Amount of depreciation debited to P & L A/c
  12. Deferred tax and the provision thereof
  13. Provision for diminution in the value of any asset
  14. The amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such an asset if not credited to statement of profit and loss
  15. The amount of gain on transfer of units computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through statement of profit and loss as the case may be.

Less: Following items (if they are credited to the statement of profit and loss)

  1. Amount withdrawn from any reserve or provision if credited to P&L account
  2. Incomes that are exempt.
  3. Amount of depreciation debited to statement of profit and loss (excluding the depreciation on revaluation of assets)
  4. Amount withdrawn from revaluation reserve and credited to statement of profit and loss to the extent it does not exceed the amount of depreciation on revaluation of assets
  5. The amount of income, being the share of the taxpayer in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of Act if any such amount is credited to the statement of profit and loss
  6. The amount of income accruing or arising to a taxpayer being a foreign company, from :
    • the capital gains arising on transactions in securities; or
    • the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII if such income is credited to the statement of profit and loss and the income-tax payable on above income is less than the rate of Minimum Alternative Tax (MAT) .
  7. The amount (if any, credited to the statement of profit and loss) representing
    • notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust; or
    • notional gain resulting from any change in carrying amount of said units; or
    • gain on transfer of units,
  8. The amount representing notional gain on transfer of units computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through statement of profit and loss, as the case may be;
  9. Income by way of royalty in respect of patent chargeable to tax under section 115BBF Aggregate amount of unabsorbed depreciation and loss brought forward in case of:
    • A company and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal, on an application moved by the Central Government under Section 241 of the Companies Act, 2013 has suspended the Board of Directors of such company and has appointed new directors who are nominated by the Central Government under Section 242 of the said Act;
  10. A company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under Section 7 or Section 9 or Section 10 of the Insolvency and Bankruptcy Code, 2016
  11. Amount of brought forward loss or unabsorbed depreciation, whichever is less as per books of account (in case of a company other than the company undergoing insolvency proceedings)
  12. Profits of a sick industrial company till its net worth becomes zero/positive
  13. Deferred tax, if credited to statement of profit and loss.

Treatment of MAT Credit:

Companies that pay their MAT liability without any issues are eligible for MAT credit. This allows companies to pay MAT over and above the normal tax liability in the upcoming years. This also shows the credibility of a company. The adjustments and carry forward processes under MAT are subject to Section 115JAA. Tax credit shall be carried forward for 15 Assessment Years immediately succeeding the assessment year in which such credit has become allowable.

Illustration:

MA Ltd has the taxable income as per normal provisions of the income tax Act Rs 60 lakhs and Book profits of Rs 90 lakhs for the FY 2019-20.

Tax payable will be higher of the following two:

Rs 50,00,000 @ 30 % plus 4% = 15,60,000

Tax liability as per MAT provisions will be :

Rs 90,00,000 @ 18.5 % plus 4% = Rs 17,31,600

Hence Tax payable by the company will be Rs 17,31,600. MAT credit available

Rs. 17,31,600 – Rs. 15,60,000 = Rs. 1,71,600.

MAT credit shall be allowed to be set off in a year when the tax becomes payable on the total income in accordance with the normal provisions of the Act. Set off shall be allowed to the extent of difference between the tax on the total income under normal provision and tax which would have been payable as per MAT under section 115JB.

kisan vikas patra kvp

Kisan Vikas Patra (KVP)

by CA Topics

Kisan Vikas Patra (KVP)

kisan-vikas-patra-kvp

The government scheme that was originally designed for farmers is now open to all. Kisan Vikas Patra (KVP) is a government-sponsored saving scheme that was initially designed specifically for farmers but is now open to all. Although the name of the scheme suggests that it is for farmers alone, you can also invest in the scheme, save money and accrue interest on your savings.

Kisan Vikas Patra (KVP) is a savings scheme available at India Post Offices in the form of certificates. It is a fixed rate small savings scheme that focuses on doubling your investment after a predetermined period of time (113 months in the currently available issue). The popularity of this scheme is linked to its risk-free nature due to the Government of India guarantee. As per current rules, KVP certificates can be purchased from select public sector banks as well as from India Post Offices.

Eligibility Criteria:

The following is the eligibility criteria for investing in the KVP scheme:

The applicant has to be an adult resident of India.

A parent/guardian may invest on behalf of a minor.

Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) cannot invest in Kisan Vikas Patra.

Features of Kisan Vikas Patra:

  1. The KVP scheme is a low-risk saving tool that is safe because it is promoted by the government.
  2. Certificates are issued for the amount invested in the scheme. The minimum amount that one needs to invest in this scheme is Rs1,000. Investments are to be made in multiples of Rs1,000 as certificates are available in only four denomination—Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000.
  3. The scheme allows you to purchase a certificate for yourself or on behalf of your child or purchase jointly with another adult.
  4. The interest on the investments in a KVP certificate is decided by the ministry of finance, the Government of India, and is not directly related to market risks. The interest rate was fixed at 7.6 percent compounded annually. If you purchase a KVP certificate today, you will get an interest of 7.6 percent, even if the rate has gone up or dropped at the time of maturity.
  5. One can purchase a KVP certificate from the nearest post office or one of the select banks that offer the certificate. That makes the scheme easy to access. In case you have to move out of the city where you purchased the certificate, you can your certificate transferred from one post office to the other. You can also choose to transfer your KVP certificate to someone else.
  6. Yet another feature of the scheme is that it allows you to nominate a family member who will be eligible to withdraw funds in case of your death.
  7. It doesn’t come under the 80C deductions, and the returns are completely taxable. However, Tax Deducted at Source (TDS) is exempt from withdrawals after the maturity period.
  8. One can use the KVP certificate as collateral to avail secured loans from Banks, the interest rate is relatively cheaper.

Interest Rate:

The KVP promises to double your investment in nine years and four months. The scheme is currently offering a 7.6 percent rate of interest on your investments for nine years and four months. The interest is compounded annually.

Investment and Encashment Procedure:

Investing in Kisan Vikas Patra is simple, as mentioned below.  Collect the application form (Form-A) and submit it duly filled to the PO. If the investment in KVP is through an agent, then the agent should fill Form-A1. You can download these forms online.

KVP certificates can be easily encashed at the issuer post office. In case of an emergency, the buyer can encash it through other post offices as well. However, the buyer has to produce the identity slip along with the KVP certificate at the time of encashment. One can withdraw the amount after 118 months. But the lock-in period is 30 months. Encashing the scheme early is not allowed, unless in the account holder’s demise or court order.

Documents Required:

ID proof has to be submitted as a KYC:

  1. PAN
  2. Aadhar
  3. Voter’s ID
  4. Driving License or Passport.

Once they verify the documents and receive the deposit, the farmer will get a KVP certificate.

allowances taxability for salaried employee

Allowances Taxability for Salaried Employee

by CA Topics

Allowances Taxability for Salaried Employee

allowances taxability for salaried employee

Allowances:-

Allowances Taxability for Salaried Employee are
1. Fully-taxable allowances:
a. DA or special allowance
b. Fixed medical allowances
c. Tiffin allowanced. Servant allowances
e. Nonparticipating allowance
f. City compensatory allowances
g. Field allowances
h. Overtime allowances
2. Partly exempted allowances:
a. Special allowances
1.) Children Education Allowance – Exempt up to actual amount received per child or Rs.100 p.m. per child up to a maximum of 2 children, whichever is less
2.) Hostel Expenditure Allowance – Exempt up to actual amount received per child or Rs.300 p.m. per child up to a maximum of 2 children, whichever is less.
3.) Tribal Area Allowance – Exempt up to actual amount received or Rs. 200 per month, whichever is less
4.) Transport Allowance – It is exempt up to Rs.800 p.m. but in case of blind or orthopedically handicapped, it is exempt up to Rs. 1600 p.m.
5.) Allowance allowed to transport employees working in any transport system –It covers Fixed Allowance given by the employer to his employee working in any transport system, to meet his personal expenditure during his performance of duty and amount of exemption shall be 70% of such allowance or rs.10,000 p.m. whichever is less.
b. HRA
1.) HRA is exempt to the extent of the minimum of following 3 amounts: Actual Amount Received, Excess of Rent paid by the assessee over 10 % of salary due to him for the relevant period, 50% of the salary if residential house is situated at Mumbai, Kolkata, Delhi, Chennai. 40% of the salary if the residential house is situated in a city other than above metropolitan cities.
c. Conveyance Allowance – Starting FY 2015-16, this limit has been increased to Rs 19,200 per annum.
d. Leave Travel Allowance (LTA) – This concession is allowed for the employee and his family where family means spouse and children. This allowance is limited to two children only and that too to only those born after Oct 1, 1998. This could also be a stepchild or an adopted one. The Income Tax Department counts twins as one unit.
3. Fully exempted allowance:
a. 1.Foreign Allowance
b. Sumptuary allowances
c. Allowance From UNO
d. Per Diem Allowance
4. Retirement benefits:-
a. gratuity
i. if employee covered under gratuity act then exemption up to least of formula-based amount or 10,00,000 or actually received
ii. if employee not covered under gratuity act then exemption up to least of 1/2(average of 10months salary)(no. of completed years) or 10,00,000 or actually received
b. Leave Salary
i. It is fully exempt for Central and State government employees
ii. For non-government employees, the least of the following three is exempt-10 months average salary preceding retirement or resignation(where average salary includes basic and DA and excludes perquisites and allowances) or Leave encashment actually received or Amount equal to salary for the leave earned(where leave earned should not exceed 30 days for every year of service) or Rs 3,00,000
c. Pension
i. For a government employee, commuted pension is fully exempt.
ii. For a non-government employee, it is partially exempt. If gratuity is also received with a pension – 1/3rd of the amount of pension that would have been received if 100% of the pension was commuted is exempt from commuted pension and remaining is taxed as salary. If only the pension is received, gratuity is not received – ½ of the amount of pension that would have been received if 100% of the pension was commuted is exempt.
d. Voluntary receipts
i. Least Compensation received is towards voluntary retirement or separation or Maximum compensation received does not exceed Rs 5,00,000. The Allowances Taxability for Salaried Employee recipient is an employee of an authority established under the Central or State Act, local authority, university, IIT, state government or central government, notified institute of management, or notified institute of importance throughout India or any state, PSU, company or cooperative society. The receipts are in compliance with Rule 2BA.

indexation on mutual funds

Indexation on Mutual Funds

by CA Topics

Indexation on Mutual Funds helps investors in long-term debt funds to save taxes. If you sell investments in debt funds after three years, the gains are treated as Long Term Capital Gains (LTCG). LTCGs are taxed at 20 percent with the indexation benefit. Indexation allows you to inflate the purchase price using cost Inflation index.

It is a prudent way of not losing money by way of taxes. It helps us in inflating the purchase price of the debt mutual fund meaning we can reduce our tax liability. Before we jump into the pool of indexation, it is important to know two concepts. Namely :

Inflation & Capital Gains

Inflation is the gradual increase in a product or service. Capital Gains refer to an increase in the value of an investment over a specific time frame.

Indexation benefit is available to Mutual funds also if those are sold after holding for long term of more than 3years.

Indexation is a prudent way to prevent draining of your debt fund returns by way of taxes. It helps you to inflate the purchase price of the debt mutual funds. In this way, you can lower your tax liability.

Taxation on Mutual Funds

  • Tax-Saving Equity Funds

Equity-Linked Saving Scheme (ELSS) are the most efficient tax-saving instruments under Section 80C. These diversified funds invest in equity shares of various companies across market capitalization.

Equity-Linked Savings Scheme (ELSS) is a type of equity fund and the only mutual fund scheme which qualifies for a tax deduction of Rs. 1.5 lakh per annum under Section 80C of the Income Tax Act. An ELSS comes with a lock-in period of 3 years which means an investment made in it cannot be withdrawn before 3 years.

  • Non-Tax Saving Equity Funds

Long-term capital gains (LTCG) on non-tax saving equity funds up to Rs 1 lakh is free of taxation. LTCG above Rs 1 lakh is taxable at the rate of 10% without the benefit of indexation.

  • Debt Funds

Long-term capital gains on debt fund are taxable at the rate of 20% after indexation. Indexation is a method which involves factoring the rise in inflation from the time of purchase to sale of the units.

Indexation allows inflating the purchase price of debt funds to bring down the quantum of capital gains. You are required to add short-term gains from debt funds to your overall income. They are subject to short-term capital gains tax (SCGT) as per the income tax slab you fall under.

Securities Transaction Tax (STT)

A Securities Transaction Tax (STT) is applicable at the rate of 0.001% on equity-oriented mutual funds at the time of redemption of units. An investor is not required to pay STT separately as it is deducted from the mutual fund returns.