employee provident fund organization epfo

Employee Provident Fund Organization (EPFO)

by CA Topics

Employee Provident Fund Organization (EPFO)

The employee provident fund came into existence with the promulgation of Employees’ Provident Funds Ordinance on the 15th November 1951. It was replaced by Employees’ Provident Fund Act, 1952. The act is now referred to as the Employees’ Provident Funds & Miscellaneous provisions Act, 1952.
The Act and schemes framed there under are administrated by a tri-partite Board known as the Central Board of trustees, Employees’ Provident Fund, consisting of representatives of the Government (Both Central and State), Employers and Employees.

The Board administers a contributory provident fund, pension scheme and an insurance scheme for the workforce engaged in the organized sector in India. It is one of the world’s largest organizations in terms of clientele and the volume of financial transactions undertaken by it. The Board is assisted by the Employees’ PF Organization (EPFO), consisting of offices at 122 locations across the country. The EPFO is under the administrative control of Ministry of Labor and Employment, Government of India. The organization also has a well-equipped training set up where officers and employees of the organization as well as representatives of the employers and employees attend sessions for trainings and seminars.

Services for Employers:

  1. Online Registration of Establishment
  2. Online ECR / Challan Submission / OTCP
  3. EPFiGMS (Register your Grievance)
  4. For Principal Employers
  5. Pradhan Mantri Rojgar Protsahan Yojana
  6. TRRN Query Search
  7. Establishment Search
  8. UAN Dashboard

Services for Employees:

  1. Member Passbook
  2. Member UAN/Online Service (OCS/OTCP)
  3. OCS / UMANG – FAQs / Eligibility
  4. Know Your Claim Status
  5. EPFiGMS (Register your Grievance)
  6. Fillable Application Form for COC
  7. Pensioner’s Portal
  8. One Employee – One EPF Account
taxable perquisites for salaried employee

Taxable Perquisites for Salaried Employee

by CA Topics

Taxable Perquisites for Salaried Employee

Related taxable perquisites

1. Taxable Perquisites for Salaried Employee Education Expenses – Value of perquisite up to 1,000 pm

2. Interest-free loans – difference between SBI lending rate and ACTUAL RATE

3. PREMIUM – RPF

  • Employer contribution more than 12%
  • Employee contribution more than 12%
  • Interest on EPF more than 9.5%
  • URPF – All contribution related to PF, Interest

4. Movable Assets

  • For Computers 50% dep WDV
  • For Car 20% WDV
  • For Others 10% SLM

5. Food

  • Food costs more than 50rs in-office time
  • Food provided other than office hours

6. Car perquisite

a. Car owned by employee

  1. Expenses incurred by employee – Not a perquisite
  2. Expenses incurred by employer –
    • business purpose – No perquisite
    • private purpose – Expenses incurred less expenses recovered
    • both – 2400/1800 pm less 900 for chauffeur less amount recovered

b. Car owned by employer

  1. Expenses incurred by employee
    • Office purpose – No perquisite
    • Private purpose – 10% of AC – amount rec
    • Both- 600/900pm + 900 pm for chauffeur
  2. Expenses incurred by employer
    • Office purpose – No perquisite
    • Private purpose – 10% of AC – amount rec
    • Both – 1800/2400pm + 900 pm for chauffeur

7. Gift – More than the value of 50,000

8. Rent-free accommodation

a. Furnished – (Value of UFRFA + value of furniture(if own 10% of AC or else hire charges – amount rec))

b. Unfurnished R F A

  1. Government – License fee determined Less Amount rec
  2. Other than government –Taxable Perquisites for Salaried Employee
  • Employer own – 15%/10%/7.5% of salary Less amount rec
  • Hired – Hire charges or 15% of salary less amount rec
  • Hotel – Hire charges or 24% of salary less amount rec

9. Medical Expenses – Expenditure incurred for medical treatment of the employee or his/her relative more than 15,000.

indian accounting standard

Indian Accounting Standard

by CA Topics

Indian Accounting Standard (Ind AS) 109

Financial Instruments

The objective of this Indian Accounting Standard is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements. IND AS 109 Financial Instruments deals with classification, recognition, de-recognition and measurement requirements for all the financial assets and liabilities.

Definition

A financial instrument is any contract that gives rise to – a financial asset of one entity and a financial liability or equity instrument of another entity.
An asset that is:

Cash

An equity instrument of another entity

A contractual right

  • To receive cash or another financial asset; or
  • To exchange financial assets or financial liabilities under potentially favorable conditions; or

A contract that will or may be settled in the entity’s own equity instruments and is

A non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or
A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments
A financial liability is any liability that is :
A contractual obligation :

  • To deliver cash or another financial asset to another entity or
  • To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity or
  •  A contract that will or may be settled in the entity’s own equity instruments and

A non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or
A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
A puttable instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset or is automatically put back to the issuer on the occurrence of an uncertain future event or the death or retirement of the instrument holder.

Classification

Indian Accounting Standard

Indian Accounting Standard

Debt Instruments

If the Financial asset is debt instrument, the management should consider the following assessments in determining its classification:
a. The entity’s business model for managing the entity.
b. The contractual cash flows characteristics of an asset.

Recognition

Initial Recognition – An entity shall recognize a financial asset or a financial liability in its balance sheet when, and only when, the entity becomes party to the contractual provisions of the instrument.
Subsequent Recognition – A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting or settlement date accounting.

Derecognition

Financial Assets:

a. In consolidated financial statements, this concept is applied at a consolidated level. Hence, an entity first consolidates all subsidiaries in accordance with Ind AS110 and then applies de-recognition to the resulting group subject to certain conditions.
b. An entity shall de-recognize a financial asset only
i. When the contractual rights to the cash flows from the financial asset expire, or
ii. It transfers the financial asset and the transfer qualifies for derecognition.
c. An entity transfers a financial asset if, and only if, it either:
i. Transfers the contractual rights to receive the cash flows of the financial asset, or
ii. Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions.
d. When an entity retains the contractual rights to receive the cash flows of a financial asset (the ‘original asset’), but assumes a contractual obligation to pay those cash flows to one or more entities (the ‘eventual recipients’), the entity treats the transaction as a transfer of a financial asset if, and only if, all of the following three conditions are met.
i. The entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original asset. Short-term advances by the entity with the right of full recovery of the amount lent plus accrued interest at market rates do not violate this condition.
ii. The entity is prohibited by the terms of the transfer contract from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows.
iii. The entity has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the entity is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents (as defined in Ind AS 7 Statement of Cash Flows) during the short settlement period from the collection date to the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients.

Financial Liabilities

a. An entity shall remove a financial liability (or a part of a financial liability) only when it is extinguished (Contract obligation is discharged or canceled or expires).
b. An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
c. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognized in profit or loss.
d. If an entity repurchases a part of a financial liability, the entity shall allocate the previous carrying amount of the financial liability between the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the repurchase. The difference between (a) the carrying amount allocated to the part derecognized and (b) the consideration paid, including any non-cash assets transferred or liabilities assumed, for the part derecognized shall be recognized in profit or loss.

Embedded derivatives

1. An embedded derivative is a component of a hybrid contract that also includes a non-derivative host contract. Some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.
2. A derivative that is attached to an FI but is contractually transferable independently of that instrument, or has a different counterparty, is not an embedded derivative, but a separate FI.
Impairment- Financial instruments:
1. Applicability:-
i. Debt instruments measured at amortized cost
ii. Debt instruments measured at fair value through other comprehensive income
iii. Loan commitments and financial guarantee contracts not measured at fair value through profit or loss
iv. Trade receivables and contract assets
v. Lease receivables.
2. Expected credit loss model:
i. According to the simplified approach, for trade receivables and contract assets that do not contain a significant financing component, an entity shall always measure loss allowance at an amount equal to lifetime expected credit losses.
ii. A provision matrix could be used to estimate ECL for these financial instruments.
3. Determining significant increases in credit risk
i. At each reporting date, an entity shall assess whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, an entity shall use the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, an entity shall compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
ii. An entity may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.
iii. If reasonable and supportable forward-looking information is available without undue cost or effort, an entity cannot rely solely on past due information when determining whether credit risk has increased significantly since initial recognition. However, when information that is more forward-looking than past due status (either on an individual or a collective basis) is not available without undue cost or effort, an entity may use past-due information to determine whether there have been significant increases in credit risk since initial recognition. Regardless of the way in which an entity assesses significant increases in credit risk.
Write-off:
Gross Carrying Amount of a financial asset is directly reduced when no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.
Hybrid contracts with financial asset hosts:
A hybrid contract contains both derivative and non- derivative which is not possible to transfer independent of the host contract. If a hybrid contract contains a host that is not an asset, an embedded derivative shall be separated from the host and accounted for as a derivative only if:
(a) The economic characteristics and risks of the embedded derivative are not closely related to the host.
(b) If an embedded derivative is separated, the host contract shall be accounted for in accordance with the appropriate Standards. This Standard does not address whether an embedded derivative shall be presented separately in the balance sheet.
(c) The hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss.
If unable to separate and measure embedded derivative from its host either, then designate the entire hybrid contract as at FVTPL.
If an entity is unable to measure reliably the fair value of an embedded derivative on the basis of its terms and conditions, the fair value of the embedded derivative is the difference between the fair value of the hybrid contract and the fair value of the host.
Hedging Accounting (HA):
Application of hedge accounting permits to:
1. Remeasure both the items from which the risk exposure arises and the instruments used to manage the risk in profit or loss; or
2. Defer recognition in profit or loss of certain gains and losses on derivatives by recognizing them in OCI.
A hedged item is remeasurement to fair value in respect of hedged risk recognized in profit or loss. The hedged item can be a single item or a group of items which are reliably measurable or probable.
A hedging relationship qualifies for hedge accounting only if all of the following criteria are met:
(a) It consists only of eligible HI and eligible hedged item
(b) There are formal designation and documentation and the entity’s risk management objective
(c) Meets all of the following hedge effectiveness requirements:
a. Economic relationship between the hedged item and HI
b. The effect of credit risk does not dominate the value changes and
c. The hedge ratio of the hedging relationship is the same as that the entity actually hedges and the quantity of the HI that the entity actually uses to hedge that quantity of hedged item

Type of Hedges:

1. Fair Value Hedge
2. Cash flow Hedge
3. Net Investment Hedge

Accounting treatment for the three types of hedging relationships:

A. Fair value hedge:
1. The gain or loss on the HI recognized in profit or loss
2. Hedging gain or loss on the hedged item is adjusted to the GCA. Gain or loss of financial asset measured at FVTCI is recognized in profit or loss
3. Hedged item is an equity instrument adopting changes in FVOCI shall remain in OCI
4. Hedged item is an unrecognized firm commitment, the cumulative change in the fair value is recognized as an asset or a liability with a corresponding gain or loss recognized in P&L
B. Cash flow hedge:
1. Cash flow hedge reserve is adjusted to the lower of the following:
(i) The cumulative gain or loss on the HI from its inception
(ii) The cumulative change in fair value of the HI
2. The portion of the gain or loss on the HI that is determined to be an effective hedge is recognized in OCI.
3. Any remaining gain or loss on the HI is hedge ineffectiveness is recognized in P&L
C. Net Investment Hedge:
1. Portion of the gain or loss on the HI that is determined to be an effective hedge is recognized in OCI
2. An ineffective portion is recognized in P&L.
Compound instruments:
1. The issuer of a non-derivative financial instrument shall evaluate the terms of the financial instrument to determine whether it contains both a liability and an equity instrument.
2. Such components shall be classified separately as financial liabilities, financial assets or equity instruments.
Reclassification:
An entity is required to reclassify financial assets when it changes its business models for managing financial assets. Investment in equity instruments that are designated as at FVTOCI at initial recognition cannot be reclassified, since, the election to designate as at FVTOCI is irrecoverable.
Reclassifications are to be expected to be very infrequent. Such changes must be determined by the entity’s senior management as a result of external or internal changes in an entity’s operations and demonstrable to external parties.
When an entity changes its business model for managing financial assets then reclassify all affected financial assets. An entity cannot reclassify any financial liability.
Classification is done based on certain principles, hence reclassification to be done if principles changes. Measurement has to be done on the date of reclassification.

Measurement of Reclassification

Initial Revised Accounting
Amortized Cost FVTPL FV on reclassification date and difference in PL
Amortized Cost FVOCI FV on reclassification date and difference in OCI
FVOCI Amortized Cost FV on reclassification date is carrying value. Cumulative gain/loss in OCI adjusted to FV
FVOCI FVTPL Asset considered at FV. Cumulative gain/loss in OCI adjusted in PL
FVTPL FVOCI Asset considered at FV
FVTPL Amortized Cost FV on reclassification date is carrying value. New EIR computed
Fixed Maturity Plan FMP

Fixed Maturity Plans

by CA Topics

Fixed Maturity Plans

Fixed maturity plans (FMPs) are a special class of close-ended debt mutual funds that mature after completion of a pre-determined time period. Thus you can make investments in an FMP only during the new fund offer (NFO) period. Subsequent to the completion of the NFO period, no new investments can be made into an FMP scheme. After the closing date, the offer to invest ceases to exist.

FMP – Investment Streams:

As a result of being classified as non-equity investments, the main investments of FMPs are various debt and money market instruments. The following are some of the more popular debt investments of FMPs:

  1. CBLOs (collateralized borrowing and lending obligations)
  2. Government Securities (G-Secs)
  3. T-Bills (Treasury Bills)
  4. Liquid scheme units
  5. Repo and Reverse Repo Instruments
  6. Highly-rated NCDs (non-convertible debentures)
  7. Securitized Debt Instruments
  8. CDs (certificate of deposits)
  9. CPs (commercial papers) and
  10. Various other cash-equivalent investments.

The above list of FMP investments is indicative and the allocation of individual instruments in the scheme’s portfolio, as well as their credit quality and residual maturity, may vary significantly from one FMP to another.

Features of Fixed Maturity Plans

The following are the key features of these schemes

  1. The maturity period of an FMP is fixed and once you have invested through NFO, your investment is essentially locked-in till maturity. The maturity period of FMPs is usually more than 3 years from the date of unit allocation. This ensures that indexation benefits can be obtained on FMP investments.
  2. This typically means that you can invest in the scheme only during the NFO period of the scheme. After completion of the NFO period, no additional investment can be made by investors and redemption of scheme units can only be made after the maturity of the scheme units.
  3. A majority of the investments made by these schemes are held till maturity hence FMPs tend to feature low levels of interest rate sensitivity. In effect, FMP investments allow you to lock-in interest rates for longer periods of time, which can be beneficial during a period of falling interest rates.
  4. A majority of investments made by FMPs are made into high-quality debt and money market instruments that feature potentially low levels of credit risk for investors.

Tax Compliances

The taxability of FMP’s is similar to the taxability of mutual funds which are taxed under the head Income from Capital Gains.

A majority of new FMPs feature a maturity period of 3 years or more. This ensures that long term capital gains tax rules including indexation benefits are applicable to capital gains from these non-equity investments. Indexation provides investors the benefit of factoring in inflation, which reduces overall tax liability on gains.

FMPs can also be useful for investors in the high-income tax brackets. These investors usually end up paying huge amounts as the tax on the interest earned on the FDs held by them. FMPs give them the option of making similar returns at a much lower tax rate (due to indexation benefit in long-term capital gains).

Distinguishes:

FMP Debt funds
No frequent buying and selling of debt securities Unlike FMP there is no particular provision like buy and hold the securities.

 

Comparison Criteria Fixed Maturity Plans Fixed Deposit
Returns Market – Linked Returns Guaranteed Returns
Taxation Capital Gains Taxation Rules are applicable with the  benefit of indexation Taxation is as per IT slab rate of investor
Liquidity Low Liquidity Premature withdrawal options with penalties available (more liquid than FMPs)
Maturity Options Varies for each individual scheme (typically 3-4 years) Varies by bank (typically 7 days to 10 years)

 

 

GST Registration for Partnership

Income Tax Refund Status

by CA Topics

Income Tax Refund Status

Under Income tax, the term refund can be defined as excess tax amount paid or deducted during the financial year which will be credited back to assessee. It will be credited back along with the Interest. The tax amount paid or deducted could be in the form of advance tax, self-assessment tax, tax deducted at source, In case of double taxation, for example – when a person is a citizen of one country but derives income from another country. However, there are a few countries with which India has a Double Taxation Avoidance Agreement (DTAA). This means you can claim a tax refund if you are a non-resident Indian working in a foreign country with which India has DTAA. For example, you hold a non-resident ordinary (NRO) deposit in an Indian bank. The interest earned on such deposits shall be taxed as per the applicable slab rate. However, if you qualify to be a tax resident of the foreign country where you reside, you may claim a tax refund for the TDS deducted on interests earned in India on your NRO deposit credit, etc. The only process to get a refund is by filing income tax returns.

Process for getting Refund:

  1. Compute the income and tax payable.
  2. Fill Income tax return form with the required details.
  3. Fill the TDS and self-assessment tax paid column with the amount of taxes deducted or paid.
  4. Check the amount of refund in Taxes paid and verification page.
  5. Then submit the return and e-verify the return or send a copy to CPC, Bangalore.
  6. Once the return gets processed then the IT department will issue a refund to the bank account mentioned in Income tax return.

Steps to Check Income Tax refund status:

Step 1: Visit https://tin.tin.nsdl.com/oltas/refund-status-pan.html

Step 2: Enter PAN, relevant assessment year and captcha then tap on proceed.

Step 3: You will see the Refund Status displayed on the next screen

You can also access the Refund payment details reflected in Form 26AS in the ‘Tax credit statement.

Cases where refund wouldn’t get processed:

  1. If there is intimation under section 143(1) seeking reply for the difference in calculation between assessee and Income Tax officer.
  2. In case if the return was either e-verified or sent to a centralized processing center (CPC), Bangalore.
  3. If there is a mismatch in bank details provided by the assessee then also the refund won’t be processed.
  4. Department may not pay you all the refunds due to you. If at all you have taxes due for any of the previous years and a refund due to you in another year, the income tax department may adjust the refund accordingly. However, the department cannot do so without giving the taxpayer an opportunity to explain why such an adjustment should not be done.

Important points about Income Tax Refund:

  1. E-file your returns before the due date for speedy processing of income tax refunds.
  2. Ensure that the amount of excess tax paid by you is also reflected in Form 26AS.
  3. Ensure that the details of the bank account mentioned at the time of ITR filing are correct to prevent any delay in the credit of the tax refund amount. In case you furnish incorrect details, “Refund Unpaid” will be displayed as the income tax return status.
  4. Timely review the income tax refund status to take the applicable corrective measures if any.

An interest is compulsorily paid by the Income Tax Department if the amount of refund is 10% or more of the total tax paid. As per Section 244A of the Income Tax Act, simple interest at the rate of 0.5% per month or part of the month on the amount of tax refund is paid.

section 80d

Section 80D

by CA Topics

Section 80D

Deduction in respect of Health Insurance Premium

Assessee being individual or HUF can take deduction on which such assessee incurred health insurance premium if any, while computing income tax. Such deduction is available on if such amount is paid through any mode other than cash.

Applicability:

  1. The whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or such other Scheme as may be notified by the Central Government in this behalf or any payment made on account of preventive health check-up of the assessee or his family as does not exceed in the aggregate 20,000 Rs; and
  2. The whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee or any payment made on account of preventive health check-up of the parent or parents of the assessee as does not exceed in the aggregate 20,000 Rs;
  3. The whole of the amount paid on account of medical expenditure incurred on the health of the assessee or any member of his family as does not exceed in the aggregate 50,000 Rs;
  4. The whole of the amount paid on account of medical expenditure incurred on the health of any parent of the assessee, as does not exceed in the aggregate fifty thousand rupees.

Provided that the amount referred to in clause (3) or clause (4) is paid in respect of a senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of such person.

In case one of the parents is a senior citizen and another is a very senior citizen or both of them are very senior citizens, the aggregate of deduction, in respect of payment of medical insurance premium and medical expenditure incurred, as specified in clause (1) and (2) above can not exceed 30,000 Rs.

Deduction allowed for aggregate of preventive health checkup expenditure mentioned in clause (1) or clause (2) is the maximum of 5,000 Rs.

Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1), shall be the aggregate of the following, namely:—

  • whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate twenty-five thousand rupees and
  • the whole of the amount paid on account of medical expenditure incurred on the health of any member of the Hindu undivided family as does not exceed in the aggregate fifty thousand rupees.
 

Description

 Premium paid Deduction under 80D
Self, family, children Parents
Individual and parents below 60 years 25,000 25,000 50,000
Individual and family below 60 years but parents above 60 years 25,000 50,000 75,000
Both individual, family and parents above 60 years 50,000 50,000 1,00,000
Members of HUF 25,000 25,000 25,000
Non-resident individual 25,000 25,000 25,000

 

Budget 2018 has introduced a new provision for claiming a deduction with regards to single premium health insurance policies. Under the new provision, where a taxpayer has made a lumpsum premium payment in a single year for a policy valid for more than one year, he can claim a deduction equal to the appropriate fraction of the amount, under Section 80D. The appropriate fraction is arrived at, by dividing the lump sum premium paid, by the number of years of the policy. However, this would again be subject to the limits of Rs.25,000 of Rs.50,000 as the case may be.

statement of financial transactions sft code

Statement of Financial Transactions (SFT) Code

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Statement of Financial Transactions (SFT) Code

Finance Act 2014 replaced Section 285BA and renamed it as ‘obligation to furnish statement of financial transaction or reportable account’ to widen the scope of specified persons and to introduce various other provisions. In this article, we have discussed provisions of Section 285BA and related Rules.

Definition:

It is a report of specified financial transactions that shall be furnished by a specified person in Form 61A. It is mandatory to submit this report by specified persons to Income tax authorities.

Reporting Authorities:

  1. An assessee; or
  2. The prescribed person in the case of an office of Government; or
  3. A local authority or other public body or association; or
  4. The Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908); or
  5. The registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988); or
  6. The Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or
  7. The Collector referred to in clause (g) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013); or
  8. The recognized stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or
  9. An officer of the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); or
  10. A depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); or
  11. A prescribed reporting financial institution

who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account to the income-tax authority or such other authority or agency as may be prescribed.

Transactions to be reported as follows:

Sl. No. Class of Person (Reporting Authority) Nature of Transaction
1. A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act). (a)    Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount. Aggregating to ten lakh rupees or more in a financial year.

 

(b)    Payments made in cash for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007). Aggregating to ten lakh rupees or more during the financial year

 

(c)    Cash deposits or cash withdrawals (including through bearer’s cheque), in or from one or more accounts of a person. Aggregating to fifty lakh rupees or more in a financial year, if current account and Ten lakh rupees or more if other than current account

 

(d)    One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person. Aggregating to ten lakh rupees or more in a financial year

 

(e)    Payments made by any person of an amount aggregating to – (i) one lakh rupees or more in cash; or (ii) ten lakh rupees or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.

 

(f)     Cash deposits during the period  01st April 2016 to 30th December 2016 aggregating to ̶ (i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts    (other than a    current account) of a person.
2. Post-Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898). (a)   Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person

 

(b)   One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.

 

(c)    Cash deposits during the period  01st April 2016 to 30th December 2016 aggregating to ̶ (i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts    (other than a    current account) of a person.

 
3. Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013); (a)   One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.
4. Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (6 of 1934), to hold or accept deposit from public. (a)   One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.
5. Any other company or institution issuing credit card. (a)   Payments made by any person of an amount aggregating to – (i) one lakh rupees or more in cash; or (ii) ten lakh rupees or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.
6. A company or institution issuing bonds or debentures (a)   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).
7. A company issuing shares. (a)   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.
8. A company listed on a recognized stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013). (a)   Buyback of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year.
9. A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorized by the trustee in this behalf. (a)   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund)
10. Authorized person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999). (a)   Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travelers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year.
11. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed

under section 6 of that Act.

 (a)   Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more.
12. Any person who is liable for audit under section 44AB of the Act. (a)   Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)

 

SFT Codes:

There are various SFT codes which are as follows

SFT- 001  Purchase of bank drafts or pay orders in cash
SFT- 002  Purchase of pre-paid instruments in cash
SFT- 003  Cash deposit or withdrawals in current account
SFT- 004  Cash deposit in account other than current account
SFT- 005  Time deposit
SFT- 006  Payment for credit card
SFT- 007  Purchase of debentures
SFT- 008  Purchase of shares
SFT- 009  Buyback of shares
SFT- 010  Purchase of mutual fund units
SFT- 011  Purchase of foreign currency
SFT- 012  Purchase or sale of immovable property
SFT- 013  Cash payment for goods and services
SFT- 014  Cash deposits during the specified period

 

 

tds on cash withdrawal of more than 1 crore

TDS on Cash withdrawal of more than 1 Crore

by CA Topics

TDS on Cash withdrawal of more than 1 Crore

In order to discourage cash transactions and move towards a cashless economy, a new Section 194N has been inserted under Income-tax Act with effect from September 1, 2019, to provide for deduction of tax on cash withdrawals made by any person from his bank or post-office account.

Deductor: Every banking company, co-operative bank or post office.

Time of Deduction: TDS under Section 194N tax shall be required to be deducted only when the aggregate amount of cash withdrawal during the previous year by a person from one or more of his bank or post office account, as the case may be, exceeds Rs. 1 crore. Further, the tax shall be required to be deducted only on the amount exceeding Rs. 1 crore.

Rate of TDS: 2%

Exceptions: No TDS when the recipient is the following,

(i) the Government;

(ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office;

(iii) any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934;

Other Provisions:

  1. The bearer cheque of the bank does not fall in the definition of cash.
  2. TDS is deducted on payments made which tends exceeding 1 crore limit. For example, the aggregate payments made till the last payment was Rs 99,99,000/- and the present payment is Rs 10,000. The aggregate payments so made crosses and reaches Rs 1,00,09,000/-. Now the matter for consideration whether the TDS is on Rs 9,000 or on Rs 10,000. From the language of the provision, it is applicable at 2% of Rs 9,000 = 180 and the net payment to be made by a banker is Rs 9820.
income computation disclosure standards icds

Income Computation Disclosure Standards (ICDS)

by CA Topics

Income Computation Disclosure Standards (ICDS)

Central Board of Direct Taxes has notified 10 income Computation and Disclosure standards to ensure control over disclosure of income of assessee, to bring uniformity in accounting policies governing computation of income in accordance with the tax-related provisions, also reducing irregularities among them. ICDS is not for the purpose of maintenance of books of accounts. These are similar to Accounting standards as per Companies Act, 2013 in major aspects.

Applicability:

The Standards are to be followed by all assessees (other than an individual or a Hindu undivided family who is not required to get his accounts of the previous year audited in accordance with the provisions of section 44AB of the said Act) following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profits and gains of business or profession” or “Income from other sources”.

List of ICDS:

ICDS I Accounting Policies
ICDS II Valuation of Inventories
ICDS III Construction Contracts
ICDS IV Revenue Recognition
ICDS V Tangible Fixed Assets
ICDS VI Changes in Foreign Exchange rates
ICDS VII Government Grants
ICDS VIII Securities
ICDS IX Borrowing costs
ICDS X Provisions, Contingent Liabilities, and Contingent assets

 

Provisions:

  1. In case of conflict between ICDS and provisions of the Income Tax Act, 1961, the provisions of the Income Tax Act shall prevail.
  2. ICDS will also apply to non-corporate taxpayers who are not required to maintain books of account and/or those who are covered by presumptive scheme of taxation like sections 44AD, 44AE, 44ADA, 44B, 44BB, 44BBA, etc. of the Act. ICDS income tax is applicable to specified persons having income chargeable under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’. Therefore, the relevant provisions of ICDS shall also apply to the persons computing income under the relevant presumptive taxation scheme.
  3. The provisions of ICDS shall not apply for computation of MAT and for computation of AMT.
  4. The term `goods’ has neither been defined in this ICDS nor in the Income-tax Act, 1961. Under section 2(7) of the Sale of Goods Act, 1930, “goods” inter alia means every kind of movable property other than actionable claims and money. Thus, it does not include immovable property. Considering this, a view may be taken that this ICDS will not apply to a dealer in immovable property.
  5. Retention money, being part of overall contract revenue, shall be recognized as revenue subject to reasonable certainty of its ultimate collection condition, as contained in ICDS-III on Construction contracts.
  6. The aggregate cost and NRV of each category of security are compared and the lower of the two is to be taken as carrying value as per ICDS-VIII.
  7. It is clarified that borrowing costs to be considered for capitalization under ICDS IX shall exclude those borrowing costs which are disallowed under specific provisions of the Act. Capitalization of borrowing cost shall apply for that portion of the borrowing cost which is otherwise allowable as a deduction under the Act. Bill discounting charges and other similar charges are covered as borrowing cost. The capitalization of general borrowing costs under ICDS-IX shall be done on an asset-by-asset basis.
  8. As per ICDS recognition of interest shall accrue on the time basis determined by the amount outstanding and the rate applicable.
  9. The provisions of ICDS shall also apply for computation of these incomes on a gross basis for arriving at the amount chargeable to tax.
  10. Under this ICDS, assets for the purpose of rental and administration are not explicitly covered. However, the definition covers assets held with the intention of being used for the purpose of producing or providing goods or services. Accordingly, assets held for administrative purposes shall be considered included in ICDS V.
  11. As compared to the scope under this ICDS, both AS 10 and Ind AS 16 specifically exclude from their scope assets such as biological assets related to agricultural activity other than bearer plants, produce on bearer plants, wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources. However, both these Standards include property, plant, and equipment used to develop or maintain such assets.
  12. In cases where, stand-by equipment, servicing equipment or spares are classified as inventory in books, but as per ICDS V, these are required to be recognized as tangible assets, necessary adjustment will have to be done in computing the taxable income.
  13. ‘Forward exchange contract’ as defined under this ICDS means an agreement to exchange different currencies at a forward rate, which is also the definition of this term under AS 11. However, the definition under this ICDS also specifically includes a foreign currency option contract or another financial instrument of a similar nature
  14. The net effect of the above-stated changes shall be disclosed in 3CBCD report.

 

Non Compliance:

Non Compliance with ICDS can be ground for an assessing officer to complete the

Assessment under “Best Judgment Assessment” under Section 144.

Provident Fund

Provident Fund

by CA Topics

Provident Fund

Provident fund is regulated by the Employee Provident Fund scheme, 1952. is one of the primary savings schemes for people working in government, public or private sector organizations in India. Provident fund is a welfare scheme for the benefits of the employees. Under this scheme, both the employee & employer contribute their part but the whole of the amount is deposited by the employer. The Fund shall vest in, and be administered by, the Central Board constituted.

Applicability of Provident Fund

Provident fund registration is mandatory for all establishments-

  1. Which is a factory engaged in any industry having 20 or more persons, and
  2. To any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification specify in this behalf.

Central Government may apply any establishment employing less than 20 employees after giving not less than two months’ notice for compulsory registration.

Even if there are employees less than 20 members the establishment can obtain EPF registration voluntarily.

Taxability of Provident fund:

Deduction of PF can be claimed under section 80C while calculating Income Tax & when the employee withdraws the amount of PF & Interest after the retirement then, PF amount & Interest amount is not taxable.

Particulars Statutory PF Public PF Recognized PF Unrecognized PF
Employer’s Contribution Fully Exempt Not Applicable Amount in excess of 12% of salary is taxable Not taxable yearly
Employee’s Contribution Eligible for deduction u/s 80C Eligible for deduction u/s 80C Eligible for deduction u/s 80C Not eligible for deduction
Interest Credited Fully Exempt Fully Exempt Amount in excess of 9.5% p.a., is taxable Not taxable yearly
Amount received on retirement, etc. Fully exempt Fully exempt Amount withdrawn from EPF is not taxable, provided employee retires or terminates the job after 5 years of continuous services
Employee Contribution Not Taxable
Employer Contribution Taxable under Income from Salaries
Interest on Employee Contribution Taxable under Income from other sources
Interest on Employer Contribution Taxable under Income from Salaries

 

Pf can be accumulated withdrawn by the employee if he is unemployed for more than 2 months. 75% PF can be withdrawn after the employment of 1 month &   rest 25% PF can be withdrawn after the unemployment of 2 months. It is on the choice of the employee after withdrawn of 75% amount that they should continue with the PF account or want to withdrawal the whole amount.

Types of Provident Fund

There are four types of Provident Fund, which are as follows

  1. Statutory Provident Fund (SPF)
  2. Public Provident Fund (PPF)
  3. Recognized Provident Fund (RPF)
  4. Unrecognized Provident Fund (URPF)
  5. Statutory Provident Fund (SPF)

It is a provident fund registered under Provident fund Act, 1925. They are also known as government provident fund. So, the employees who are meant for govt, semi-govt employees, university or educational institutions affiliated to a university established under the statue or other specified institution would be qualified to give to them.

Public Provident Fund (PPF)

PPF is covered under Public Provident fund Act, 1968. Any member of the public whether employed or not can invest in PPF. Minimum Contribution in this fund is Rs. 500 & Maximum amount is 1,50,000 per year. The contributions made to the scheme along with the interests are repayable after 15 years unless extended. The rate of interest, at present, under the scheme is 8% per annum.

Recognized Provident Fund (RPF)

This Scheme is registered under Employee’s Provident Funds and Miscellaneous Provisions Act, 1952. According to the Act, any person who employees 20 or more employees is under an obligation to register himself under this Act. Any person can register himself by their choice weather they had less than 20 employees.

Unrecognized Provident Fund (URPF)

A scheme started by the employer and the employees in an establishment, whether approved by the commissioner of Income Tax is called an unrecognized provident fund.

Provident Fund Contribution Rate:

Contribution of PF paid by employer & employee is 12% (basic pay + dearness allowance + retaining allowance) Equal contribution is paid by the employer & employee. The establishment in which employees less than 20 people shall be restricted to contribute 10% for both employee & employer contribution.

It is voluntary for the employees who draw a salary less than 15000 per month to become a member of EPF. The employee who drawn a salary more than 15000 per month at the time of joining is not required to make pf contribution. If they want to become a member of EPF, then they become with the consent of the Employer & Assistant PF Commissioner.

The entire 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer, while the balance 8.33% from your employer’s side is diverted to your EPS (Employee’s Pension Scheme) and the balance goes into your EPF account.

Registration Process:

Registration can be done through www.epfindia.gov.in portal by following below procedure,

  1. First click on register a new user, then fill the employer details like First name, Surname, PAN, Address, Mobile No., Mail ID then select and enter username and password on your choice, then security question.
  2. Activation link will be sent to mail and prior to that PIN will be sent to mobile number which should be filled before submitting application.
  3. Once after successful user creation then register Digital Signature (DSC) then select the employer details and register the DSC using USB token.

Documents required as follows:

To be Submitted by Employer :

  1. Registration Certificate or Licence issued under Shops and Establishment Acts or Factories Act.
  2. Address Proof: Latest Rent receipt of the premises you are occupying indicating the capacity in which the premises are occupied, if applicable.
  3. Latest building Tax/Property Tax receipt (Photocopy).
  4. Memorandum and Articles of Association/Partnership Deed/Trust Deed depending on the entity that is applying for registration.
  5. Photocopy of certificate of Commencement of production and/or Registration No. of CST/ST (or GST once it becomes applicable).
  6. Copy of PAN Card
  7. Evidence in support of the date of commencement of production/business/first sale (e.g. Copy of First Invoice).
  8. Month wise employment position, salary, etc.
  9. Copy of bank statement

To be Submitted by Employees :

  1. Family Photo