Friday, 16 September 2016

Maharashtra VAT increases to 13.5% and 6%

Maharashtra Notification Amends Schedule C, D, & E Enhance tax rate to 6% and 13.5% w.e.f. 17-9-2016
Notification No. VAT. 1516/CR-123/Taxation-1- Dated 16th September, 2016
In exercise of the powers conferred by sub-section (1) of section 9 of the Maharashtra Value Added Tax Act, 2002 (Mah. IX of 2005), the Government of Maharashtra hereby, with effect from the 17th September 2016 amends Schedule 'C', 'D' and 'E' appended to the said Act, as follows, namely :-

Wednesday, 14 September 2016

Advance Tax Liability for the A.Y. 2017-18 F.Y. 2016-2017

Advance Tax Liability for the A.Y. 2017-18

Advance Tax provisions has been amended by the Finance Act 2016 (No. 28 of 2016) which is effective from 01-06-2016 for Assessment Year 2017-18. Following are major amendments related to Advance Tax Liability for A. Y. 2017-18:
(a)  Section 211(1) is amended to provide that advance tax will be paid in four installments of 15%, 45%, 75% and 100% of tax payable on the current income by 15th June, 15thSeptember, 15th December and 15th March, respectively in case of all assesses. Earlier upto AY 2016-17 the assessee other than corporate assessee paid Advance Tax in three Installment. Now all assessee except assessee covered u/s 44AD is treated at par for Advance Tax provisions.
(b)  Assessees covered u/s 44AD are to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year consequent upon raising of the turnover limit from Rs.1 crore to Rs. 2 crore.
Based on above amendments the advance tax related provision under income tax law is as under:



Advance tax (Section 208, 209 & 211)
Advance tax is payable on all income during the financial year in every case where the amount of such tax payable by an assessee during that year is Rs. 10,000 or more. Following is chart showing Advance Tax Liability for the A.Y. 2017-18:
Advance Tax Liability for All Assessee (other than covered under section 44AD of the I.T. Act 1961)
Due DateInstallment Payable
 On or before 15th Jun, 2016 Not less than 15% of advance tax.
 On or before 15th  Sep, 2016 Not less than 45% of advance tax as reduced by the amount paid in the earlier installment.
 On or before 15Th Dec, 2016 Not less than 75% of advance tax as reduced by the amount paid in the earlier installments.
 On or before 15Th Mar, 2017 The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.
Advance Tax Liability for Assessee covered under section 44AD of the I.T. Act 1961
Due DateInstallment Payable
On or before 15th Jun, 2016
On or before 15th  Sep, 2016
On or before 15Th Dec, 2016
On or before 15Th Mar, 2017 The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.
Note:
  1. Resident individuals who are over 60 years of age and do not have income chargeable under the head ‘Profits and Gains of Business or Profession’ are not required to pay advance tax.
  2. Any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during financial year ending on that day
  3. Deduction under Chapter VIA are allowable while computing liability of advance tax.
  4. TDS is to be reduced from total tax liability of assessee and then specified percentage be calculated of advance tax.

Frequently Asked Questions on Advance Tax


What is Advance Tax and why it is paid in Advance?
Tax is a major source of fund for any Government in the world. In India as per general provision of the Income Tax Act, 1961 every person whose income is exceeds threshold exemption limit is liable to pay income tax. However for speedy and efficient tax collection a mechanism is developed by government in the form Advance Tax. Advance tax is a payment mechanism in which tax is deposited by assessee in installment instead of entire amount deposited at the end of financial year. For assessee’s point of view advance tax is helpful for fund management as the tax liability is divided in installments.

What are the Statutory Provisions for payment of Advance Tax in India?
Following are the sections of the Income Tax Act, 1961 which deal with the provisions of advance tax:
  • Section 208: Conditions of liability to pay advance tax
  • Section 209: Computation of advance tax
  • Section 210: Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing Officer.
  • Section 211: Installments of advance tax and due dates.

Who is liable to pay Advance Tax in India?
As per section 208, advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee is ten thousand rupees or more. Thus provision of advance tax is applicable on all assessee whose tax liability comes more than Rs.10,000/-. However in case following case advance tax need not be deposited :
1) where entire tax liability is covered by TDS deducted then in this situation advance tax is not applicable.
2) Resident individuals who are over 60 years of age and do not have income chargeable under the head ‘Profits and Gains of Business or Profession’ are not required to pay advance tax. Further assessees covered under section 44AD of the Act can deposit his liability of entire advance tax upto 15th March 2017.

What are the due dates and amount of advance tax payment paid in India?
Type of Assessee
By 15th June 2016By 15th Sept 201615th Dec 201615th March 2017
All Assessee except covered u/s 44AD
15%
45%75%
100%
Assessee Covered u/s 44AD
100%
Note: Any tax paid till 31st March 2017 is treated as advance tax.

Whether a Non-Resident Indian (NRI) or a Non Resident is required to pay Advance Tax in India?
Yes. The advance tax is applicable on both Non-Resident Indian (NRI) or a Non Resident if they have any income accrue during the year in india.

What are the mode of payment of Advance Tax?
Advance Tax can be deposited through cash, cheque and electronic mode (Debit Card/Credit Card). The challan specified for advance tax is ITNS 280. All designated branches of banks empanelled with the Income Tax Department are accepted the advance tax. Assessee can pay Advance Tax Online through TIN-NSDL website.

What are the penal consequences in case of failure to deposit Advance Tax within prescribed time?
If advance tax is not paid or the amount of advance tax paid is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @1% p.m. u/s 234B from 1st day of assessment year upto date of deposit tax & interest. Further u/s 234C if the payment of advance tax is deferred beyond the due dates, interest @1% p.m., for a period of 3 months, will be payable for every deferment, except for the last installment of 15th March where it will be 1% for one month.

How can assessee verify the status of his tax deposition and other tax credit?
Due care should be taken with respect to PAN, Assessment Year and tax Code before depsoiting advance tax. The assessee may verify status his Advance Tax deposited through following links :
  1. Form No.26 AS: The credit of tax depsoited would be reflected in Form 26AS within one week of making the payment.
  2. NSDL e-Governance: Challan Status Inquiry can be made through OLTAS Application (NSDL) by visiting https://tin.tin.nsdl.com/oltas/index.html.

Can Income tax department issue notice to assessee for payment of Advance Tax ?
Yes. Assessing Officer may pass an order u/s 210(3) of the Income Tax Act 1961 or amended order u/s 210(4) and issue a notice of demand u/s 156 requiring assessee to pay advance tax.

Whether agricultural income would be included in total income for computing advance tax ?
Yes. Net agriculture income to be taken into account for computing advance tax in terms of section 209(2) of Income Tax Act, 1961.

How to Compute Advance Tax Liability ?
The Computation of Tax Liability for the determine Advance Tax is given in below table:
Particulars
Amount
Income from salary (Net)
XXXXX
Income from house property (Net)
XXXXX
Profits and gains of business or profession(Net)
XXXXX
Capital gains(Net)
XXXXX
Income from other sources(Net)
XXXXX
Gross Total Income
XXXXX
Less : Deductions under Chapter VI-A (u/s 80C to 80U))
(XXXXX)
Total Income (i.e., taxable income)
XXXXX
Tax
on total income at applicable rates
XXXXX
Less : Rebate under section 87A
(XXXXX)
Tax Liability After Rebate
XXXXX
Add: Surcharge
XXXXX
Tax Liability After Surcharge
XXXXX
Add: Education cess @ 2% on tax liability after surcharge
XXXXX
Add: Secondary and higher education cess @ 1% on tax liability after surcharge
XXXXX
Tax liability for the year
XXXXX
Less:  TDS
(XXXXX)
Tax payable
XXXXX
Advance Tax
(Above Tax) x (specified percentage u/s 211)

Sunday, 4 September 2016

Taxation of Shares, Future options Transactions

1.1 The broad legal positions are as follows- Dealing in shares whether Investment or Business
Dealing in shares can result either in "Business income" (chargeable as Profits & Gains of Business or Profession chargeable under section 28 of the Income Tax Act, 1961) or "Capital Gains" (chargeable under Sec.45 of the Act). Thus, dealings in shares could either be in the course of business - chargeable as Business Income, OR for the purpose of investment - chargeable as Capital Gains. Classification into Business Income and Capital Gains depends on facts & circumstances of each case. However, as a very broad guideline, as held in many cases, it can be said that - ordinarily, the purchase and sale of shares with the motive of earning a profit, would result in transaction being in the nature of trade, but where the object of investment in shares of a company is to derive income by way of dividend etc., then the profit accruing by sale of shares will yield capital gains and not revenue gains (business income).
2. This article deals with the situation where trading in shares have been considered as business income
3. Explaining Speculation and Non Speculation Business:
Trading in shares can be of two types namely
A) Delivery based trading 
B) Non delivery based (also called intraday trading)
3.1. DELIVERY BASED TRADING:
Under this type of trading, the share transaction is said to be complete only when there is actual delivery of shares/securities upon the settlement of transaction i.e. in other words, when shares are purchased/ sold on delivery basis, then those shares will be transferred to/from Demat account of the buyers/sellers. The buyer of the share will have to pay the full value of share and the share will become his asset with that either he can trade in his business or hold for investment.
3.2. NON DELIVERY BASED TRADING (or intraday trading):
Intraday trading by the name itself one can get a view that it refers to the trading system where the traders have to square-off their trade on the same day. Squaring off the trade means that the traders have to do the buy and sell or sell and buy transaction on the same day before the market close. In other words in this trading, shares are not actually transferred to the DEMAT account of the buyer instead they have to square off their position before the market close on same day by selling the same number of shares. The buyer of the shares will not pay the full value of shares instead he will pay only the difference margin arising on account of such buy/sell transaction.
3.3 Speculative Business Income:
3.3.1. Income from intra-day trading is considered as speculation income and taxed as such.
3.3.2. As per Section 43(5) of the Income Tax Act, 1961, intra-day trading shall be considered as speculation business transactions and the income therefrom would be either speculation gains or speculation losses. Income from speculation gains is taxed at the normal rates.
3.3.3. Intra-day trading is the trading of shares within the same day. Generally, delivery is not taken in case of intra-day trading, and thus, these are said to be speculative transactions. As per Section 43(5) of the Income Tax Act, 1961, the said transactions shall be considered as speculation business transactions and the income therefrom would be either speculation gains or speculation losses.
3.3.4. For a person earning income from any head of income, intra-day trading in shares is always treated as speculative business. Section 43(5) of the Income Tax Act, 1961, deals with speculative transaction. It states that a transaction of purchase or sale of a commodity including stocks and shares settled otherwise than by actual delivery or transfer of the commodity or scrip is a speculative transaction.
3.3.5. In intra-day trading in shares, there is no actual delivery as the shares enter and exit from the trading account on the same date and it does not enter the DEMAT account at all.
3.4 Non Speculative Business Income:
3.4.1. Income from trading F&O (both intraday and overnight) on all the exchanges is considered as non-speculative business income as it has been specifically defined this way. F&O is also considered as non-speculative as these instruments are used for hedging and also for taking/giving delivery of underlying contract. Even though currently almost all equity, currency, & commodity contracts in India are cash settled, but by definition they give rise to giving/taking delivery (there are a few commodity future contracts like gold and almost all agri-commodity contracts with delivery option to it).Income from shorter term equity delivery based trades (held for between 1 day to 1 year) are also best to be considered as non-speculative business income if frequency of such trades executed by you is high or if investing/trading in the markets is your main source of income.
3.4.2. Profit / Loss in derivatives (futures and options) is treated as non-speculation business even though delivery is not effected in such transactions.
3.4.3. From the reading of the above it is clear that trading in derivatives including commodity derivatives on a recognized stock exchange will not be considered as a speculative transaction and hence not treated as speculative business. Therefore since these are not considered as speculative business, therefore income from such transactions will be considered as normal business income and loss from such transactions will be considered as normal business loss.
4. How is turnover computed.?
DETERMINATION OF TURNOVER:

                
DETERMINATION OF TURNOVER IN RESPECT OF SPECULATIVE TRANSACTION
Now, your attention may be directed to the Para 5 of “Guidance Note on Tax Audit under Section 44AB of the Income Tax Act,1961" issued by The Institute of Chartered Accountants of India (ICAI), which provides the guidelines regarding "Turnover or Gross Receipts in respect of transactions in shares.." as follows:
a) In a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so as to result in the sale as per value of contract note.
b) The contract is settled otherwise and squared up by paying out the difference which may be positive or negative. As such, in such transaction the difference amount is 'turnover'.
c) In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction.
d) Further, amount paid on account of negative difference paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences.
e) Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transactions for determining the liability to audit vides section 44AB, whether the differences are positive or negative.
DETERMINATION OF TURNOVER IN RESPECT OF NON SPECULATIVE TRANSACTION
Determination of turnover in case of F&O is one of the important factors for every individual for the income tax purpose. Turnover must be firstly calculated, in the manner explained below:
1. The total of positive and negative or favorable and unfavorable differences shall be taken as turnover.
2. Premium received on sale of options is to be included in turnover.
3. In respect of any reverse trades entered, the difference thereon shall also form part of the turnover.
Here, it makes no difference, whether the difference is positive or negative. All the differences, whether positive or negative are aggregated and the turnover is calculated.
DETERMINATION OF TURNOVER IN RESPECT OF DELIVERY BASED TRANSACTION:
Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sales is to be considered as turnover.
5. When is audit required?
An audit is required if you have a business income and if your business turnover is more than Rs 2 crores (was Rs 1 crore until FY 16/17) for the given financial year. Audit is also required as per section 44AD in cases where turnover is less than Rs.2 Crores but profits are lesser than 8% of the turnover and total income is above minimum exemption limit.
Therefore, the applicability of tax audit will be as follows in case of F&O Trading:
5.1 In case of Profit from transactions of F&O trading
a) In the case of profit from derivative transactions, tax audit will be applicable if the turnover from such trading exceeds Rs. 1 crore.
b) Tax audit u/s 44AB r/w section 44AD will also be applicable, if the net profit from such transactions is less than 8% of the turnover from such transactions.
5.2 In case of Loss from F&O Trading
In case of Loss from derivative trading, since profit (Loss in this case) is less than 8% of the turnover, therefore Tax Audit will be applicable u/s 44AB read with section 44AD.
6. Tax Treatment:
Business incomeIf you are trading in the stock market frequently (mostly non-delivery trade), returns from it can be classified as follows:
6.1. Speculative Business income:  Profit from intraday trading is categorized under speculative business income. Tax treatment is similar to your Business income tax. It is taxed as per the tax slab you fall in while losses can be offset only against speculative gains. 
6.2. Non-speculative Business income: Income from trading futures & options on recognized exchanges (equity, commodity, & currency) is categorized under non-speculative business income. Tax on share trading in such cases is similar to your business income tax. The profits on F/O trading are taxed as per the tax slab you fall in whereas losses on such F/O trading can be set off against business profit.
7. Treatment of Adjustment for loss
7.1 Loss in respect of non speculative business income:
As per the Section 71 of the Income Tax Act, loss in respect of such business can be set off against any other heads of income including income from speculative business but excluding  income under the head “salaries” of that year.
As per Section 72 of the Income Tax Act, if there is any such loss which is not set off against the above said incomes, such losses are eligible to be carried forward and set off against the other incomes excluding income from salary for a period of 8 subsequent assessment years in the manner as specified in the above order of set off.
7.2 Loss in respect of speculative business income:
As per the Section 73 of the Income Tax Act, loss in respect of speculative business cannot be set off against any other heads of income i.e. it can be set off only against other speculative incomes if any in that year.
If there is any such loss which is not set off, such losses are eligible to be carried forward and set off only against speculative incomes for a period of only 4 subsequent assessment years.

GST Audit Report and Reconciliation Statement Format notified

The CBIC has notified the has notified Form GSTR-9C  for Audit Report and Reconciliation Statement  vide  Central GST (Tenth Amendment) Rul...