Category: Miscellaneous

Revised format u/s 143(2) of Income Tax Act for scrutiny notices

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CBDT has decided to modify notice under section 143(2) of the Income-tax Act. Now  all scrutiny notices shall be issued in following revised format:
–Limited Scrutiny
-Complete Scrutiny
-Manual Scrutiny

 (F.No. 225/162/2016/ITA ,CBDT , 11th of July, 2016)
Limited Scrutiny
Notice under Section 143(2) of the Income-tax Act, 1961

PAN: ………………………………………………………. Dated:         
To
Sir/Madam
This is for your kind information that the return of income for Assessment Year ………………….filed vide ……………………………………………….  on ……………………  has been selected for Scrutiny. Following issues have been identified for examination:
—————————————-
2. In view of the above, we would  like to give you an opportunity to produce, or cause to be produced, any evidence which:you feel is necessary in support of the said return of income on (date) in the office of the undersigned.
3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.
4. Specific questionnaire/show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.
5. (#)The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the above mentioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.
Yours faithfully,
Seal
(Name of the Assessing Officer)
(Designation)
(Telephone No./Fax No.)
(E-mail id.)
Note: (#)Applicable only in case of taxpayers whose Income-tax jurisdiction falls in the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata or Mumbai
Complete Scrutiny
Notice under Section 143(2) of the Income-tax Act, 1961
Sir/Madam
This is for your kind information that the return of income for Assessment Year …………………. filed vide ………………………………………………  on ……………………..  has been selected for Complete Scrutiny.
2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on (date) in the office of the undersigned.
3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.
4. Specific questionnaire/ show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.
5. (#) The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the above mentioned date. In case, you wish to opt out frorii this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.
Yours faithfully,
Seal
(Name of the Assessing Officer)
(Designation)
(Telephone No./Fax No.)
(E-mail id.)
Note:(#) applicable only in case of taxpayers whose Income-tax jurisdiction falls in the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata or Mumbai
Manual Selection
Notice under Section 143(2) of the Income-tax Act, 1961
PAN: ……………………………………………………….. Dated: 
To
Sir/Madam
This is for your kind information that the return of income for Assessment Year ………………….filed vide ……………………………………………….  on ……………………….  has been selected for Scrutiny on the basis of parameter at Para 1(……………. … ) of the Manual Compulsory Guidelines of CBDT issued vide Instruction No. ……………………………. dated………………….
2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on (date) in the office of the undersigned.
3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.
4. Specific questionnaire/show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.
5. (#) The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the above mentioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.
Yours faithfully,
Seal
(Name of the Assessing Officer)
(Designation)
(Telephone No./Fax No.)
(E-mail id.)

Note:(#) applicable only in case of taxpayers whose Income-tax jurisdiction falls in the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata or Mumbai.

Income Computation and Disclosure Standards (ICDS) shall be applicable from A/Y 2017- 18

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Income Computation and Disclosure Standards (ICDS) shall be applicable from 1.4.2016 i.e. previous year 2016-17 (Assessment Year 2017- 18) (Press release dated 06th July 2016, CBDT).


Applicability of Income Computation and Disclosure Standards (ICDS) notified under section 145 (2) of the Income tax Act, 1961.

Vide Notification No. SO 892 (E) dated 31st March, 2015, Central Government notified 10 Income Computation and Disclosure Standards (ICDS). These ICDS are applicable from 1.4.2015 i.e. previous year 2015-16 (Assessment Year 2016-17). Subsequent to notification of the ICDS, a number of representations were received which were examined by an Expert Committee. The Committee has recommended amendments to the notified ICDS and also issuance of clarification in respect of certain points raised by the stakeholders.

The revision of ICDS/issue of clarifications as recommended by the Committee, is under consideration. The revision of the Tax Audit Report is also being made for ensuring the compliance with the provisions of ICDS and for capturing the disclosures mandated by the ICDS.

Some of the tax payers might have filed their return of income and obtained Tax Audit Report without incorporating the compliance with the ICDS and related disclosures in the absence of the revised Tax Audit Report. 

Considering these facts, it has been decided that the ICDS shall be applicable from 1.4.2016 i.e. previous year 2016-17 (Assessment Year 2017- 18). The notification to this effect will be issued shortly.

Procedure for filing e‑TDS/TCS statement online through e-filing portal

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Procedure for filing e‑TDS/TCS statement online through e-filing portal

As per amendment made by  Notification No. 11/2016 dated 22 June 2016, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures of registration in the e-filing portal, the manner of the preparation of the statements and submission of the statements as follows:
The deductors/collectors will have the option of online filing of e-TDS-TCS returns through e-filing portal or submission at TIN Facilitation Centres. 
Procedure for filing e‑TDS/TCS statement online through e-filing portal is as under:
a. Registration: The deductor/collector should hold valid TAN and is required to be registered in the e-filing website (https://incometaxindiaefilinq.gov.in/) as “Tax Deductor & Collector” to file the “e-TDS/e-TCS Return”.
b. Preparation: The Return Preparation Utility (RPU) to prepare the TDS/TCS Statement and File Validation Utility(FVU) to validate the Statements can be downloaded from the tin-nsdl website (https://www.tin-nsdl.com/). The statement is required to be uploaded as a zip file and submitted using either Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). For DSC mode, the

signature for the zip file can be generated using the DSC Management Utility (available under Downloads in the e-Filing website http://incometaxindiaefiling.gov.in/). Alternatively, deductor/collector can e-Verify using EVC.

c. Submission: The deductor/collector is required to login to the e-filing website using TAN and go to TDS -> Upload TDS. The deductor/collector is required to upload the “Zip” file along with the signature file (generated as explained in para (b) above) or EVC.
EVC can be generated using one of the following modes:
a. Net Banking – Principal contact person’s net banking login (linked to the registered PAN) can be used to generate the EVC for the TAN of the deductor/collector.
b. Aadhar OTP – The principal contact person’s PAN can be linked with AADHAAR to
c. Bank Account Number – The principal contact person can use his pre validated bank account details to avail this option.
d. Demat Account Number – The principal contact person can use his pre validated demat account details to avail this option.
This pre generated EVC can be used to e-Verify the TDS return.
Once uploaded, the status of the statement shall be shown as “Uploaded”. The uploaded file shall be processed and validated. Upon validation, the status shall be shown as either “Accepted” or “Rejected which will reflect within 24 hours from the time of upload. The status of uploaded file is visible at TDS -> View Filed TDS. In case the submitted file is “Rejected”, the rejection reason shall be displayed.


Refer Notification No. 11/2016 dated 22 June 2016:

F. No. DGIT(S)-ADG(S)-2/e-filing notification/106/2016

Notification No. 11/2016
New Delhi, Dated: 22nd June, 2016
Procedure for online submission of statement of deduction of tax under sub-section (3) of section 200 and statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 read with rule 31A(5) and rule 31AA(5) of the Income-tax Rules, 1962 respectively
The provisions relating to the statement of deduction of tax under sub-section (3) of section 200 and the statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 (the Act) are prescribed under Rule 31A and Rule 31AA of the Income-tax Rules, 1962 (the Rules) respectively. As per sub-rule (5) of rule 31A and sub-rule (5) of rule 31AA of the Rules, the Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements and shall be responsible for the day to day administration in relation to furnishing and verification of the statements in the manner so specified.
2. In exercise of power conferred by sub-rule (5) of rule 31A and sub-rule (5) of rule 31AA of the Rules, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures of registration in the e-filing portal, the manner of the preparation of the statements and submission of the statements as follows:
3. The deductors/collectors will have the option of online filing of e-TDS-TCS returns through e-filing portal or submission at TIN Facilitation Centres. Procedure for filing e‑TDS/TCS statement online through e-filing portal is as under:
a. Registration: The deductor/collector should hold valid TAN and is required to be registered in the e-filing website (https://incometaxindiaefilinq.gov.in/) as “Tax Deductor & Collector” to file the “e-TDS/e-TCS Return”.
b. Preparation: The Return Preparation Utility (RPU) to prepare the TDS/TCS Statement and File Validation Utility(FVU) to validate the Statements can be downloaded from the tin-nsdl website (https://www.tin-nsdl.com/). The statement is required to be uploaded as a zip file and submitted using either Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). For DSC mode, the signature for the zip file can be generated using the DSC Management Utility (available under Downloads in the e-Filing website http://incometaxindiaefiling.gov.in/). Alternatively, deductor/collector can e-Verify using EVC.
c. Submission: The deductor/collector is required to login to the e-filing website using TAN and go to TDS -> Upload TDS. The deductor/collector is required to upload the “Zip” file along with the signature file (generated as explained in para (b) above) or EVC.
4. EVC can be generated using one of the following modes:
a. Net Banking – Principal contact person’s net banking login (linked to the registered PAN) can be used to generate the EVC for the TAN of the deductor/collector.
b. Aadhar OTP – The principal contact person’s PAN can be linked with AADHAAR to
c. Bank Account Number – The principal contact person can use his pre validated bank account details to avail this option.
d. Demat Account Number – The principal contact person can use his pre validated demat account details to avail this option.
This pre generated EVC can be used to e-Verify the TDS return.
5. Once uploaded, the status of the statement shall be shown as “Uploaded”. The uploaded file shall be processed and validated. Upon validation, the status shall be shown as either “Accepted” or “Rejected which will reflect within 24 hours from the time of upload. The status of uploaded file is visible at TDS -> View Filed TDS. In case the submitted file is “Rejected”, the rejection reason shall be displayed.
Gopal Mukherjre)
Pr. DGIT (Systems). CBDT

A ‘startup’ company receives consideration exceed the fair market value of the shares is not chargeable to tax (N/N 45/2016, Dated: June 14, 2016)

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A ‘startup’ company receives  consideration  exceed the fair market value of the shares  is not chargeable to tax 


A ‘startup’ company receives from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares  is not chargeable to tax under Income from other sources(Refer notification no. Notification No. 45/2016, Dated: June 14, 2016)


F.No.173/103/2016-ITA-I
Government Of India
Ministry Of Finance
Department Of Revenue
Central Board Of Direct Taxes
New Delhi
Notification No. 45/2016, Dated: June 14, 2016
In exercise of the powers conferred by the clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby notifies the ‘classes of persons’ for the purposes of the said clause as being the ‘person’ defined under sub-section (31) of section 2 of the said Act, being resident, who make any consideration exceeding the face value for issues of shares of a ‘startup’ company.
Explanation. – For the purposes of this notification, “startup” shall mean a company in which the public are not substantially interested and which fulfills the conditions specified in the notification of the Government of India, Ministry of Commerce and Industry. Department of Industrial Policy and Promotion, number G.S.R. 180(E), dated the 17th February, 2016, published in the Gazette of India, Extraordinary, part II, section 3, sub-section (i), dated the 18th February, 2016.
(Rohit Garg)
Deputy Secretary to the Govt. of India


Extract of Section 56(1)(viib)(ii) of the Income Tax Act, 1961:
Income from other sources.
56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.( Heads of income, A.—Salaries.,B,C.—Income from house property.,D.—Profits and gains of business or profession, E.—Capital gains).

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—

    (viib)
where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received—
(i)
by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii)
by a company from a class or classes of persons as may be notified by the Central Government in this behalf.

Notification No. 45/2016, Dated: June 14, 2016: classes of persons’ for the purposes of the said clause as being the ‘person’ defined under sub-section (31) of section 2 of the said Act, being resident, who make any consideration exceeding the face value for issues of shares of a ‘startup’ company.

For the purposes of this notification, “startup” shall mean a company in which the public are not substantially interested and which fulfills the conditions specified in the notification of the Government of India, Ministry of Commerce and Industry. Department of Industrial Policy and Promotion, number G.S.R. 180(E), dated the 17th February, 2016, published in the Gazette of India, Extraordinary, part II, section 3, sub-section (i), dated the 18th February, 2016.
Explanation.—For the purposes of this clause,—
(a)
the fair market value of the shares shall be the value—
(i)
as may be determined in accordance with such method as may be prescribed; or
(ii)
as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,
whichever is higher;
(b)
“venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of[Explanation] to clause (23FB) of section 10;]




15 things you should know about Model GST Law

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15 things you should know about Model GST Law
On June 14, 2016 the Finance Ministry has released the ‘Model GST Law’. It outlines the structure of the GST regime. Further, the draft of ‘Integrated GST Bill, 2016’ is also released along with such Model GST laws. It also provides the framework for levy and collection of CGST and SGST. “CGST” is the tax levied under the Central Goods and Services Tax Bill, 2016. “IGST” is the tax levied under the Integrated Goods and Services Tax Bill, 2016.

Key takeaways from Model GST law are given hereunder:

1) Threshold limit for registration

The dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakhs. However, dealers conducting business in any North Eastern State are required to take registration if their turnover exceeds Rs.4 lakhs.

2) Place of registration

The dealer has to take registration in the State from where taxable goods or services are supplied.

3) Migration of existing taxpayers to GST

Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of 6 months. Such person will have to furnish the requisite information within 6 months and on furnishing of such information, final registration certificate shall be granted by the Central/State Government.

4) GST compliance rating score

Every taxable person shall be assigned a GST compliance rating score based on his record of compliance with the provisions of this Act. The GST compliance rating score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain.

5) Levy of Tax

The person registered under this law is liable to pay tax if his aggregate turnover in a financial year exceeds Rs 10 lakhs. However, a dealer conducting business in any of the North Eastern is required to pay tax if his aggregate turnover exceeds Rs. 5 lakhs.
A negative list has also been prescribed for transactions and activities of Government and Local Authorities which shall be exempt from GST levy, like activities of issuance of passport, visa, driving license, birth certificate or death certificate, etc.

6) Taxable Event

The taxable event under GST regime will be supply of goods or services. Supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration. It also includes importation of service, whether or not for a consideration.

7) Point of taxation

CGST/SGST shall be payable at the earliest of the following dates, namely:
  (i) Date on which the goods are removed for supply to the recipient (in case of movable goods).
 (ii) Date on which the goods are made available to the recipient (in case of immovable goods).
(iii) Date of issuing invoice by supplier; or
(iv) Date of receipt of payment by supplier; or
 (v) Date on which recipient shows the receipt of the goods in his books of account.

8) TCS on online sales of goods or service

Every E-commerce operator engaged in facilitating the supply of any goods and/or services (like Amazon, Flipkart, etc.) shall collect tax at source at the time of credit or at the time of payment whichever is earlier.

9) Valuation Rules

Such Rules shall apply to the supply of goods and/or services under the IGST/CGST/SGST Bill. Some of the methods prescribed for valuation are given hereunder:

  a) Transaction Value: As per this method the value of goods and/or services shall be the transaction value.

  b) Transaction value of goods or services of like kind: Where value of supply cannot be determined under previous method [i.e. point a], the value shall be determined on the basis of transaction value of goods and/or services of like kind and quality supplied at or about the same time to customers.

  c) Computed Value Method: Where value cannot be determined under previous method [i.e., point b], it shall be based on computed value which shall include cost of production, manufacture or processing of the goods or, the cost of the provision of services, the charges, if any, for design and brand and amount towards profit and general expenses.

  d) Residual Method: Where the value cannot be determined under the computed value method, the value shall be determined using reasonable means consistent with the principles and general provisions of these Rules.

10) Utilization of credit:

Utilization of IGST: The amount of input tax credit on account of IGST available in the electronic credit ledger of dealer shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.
Utilization of SGST: The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST.
Utilization of CGST: The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST.
Note: The input tax credit on account of CGST shall not be available for payment of SGST.

11) Payment

Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using credit/debit cards or NEFT or RTGS. This amount shall be credited to the electronic cash ledger of dealer.

12) TDS

The Central or a State Government may mandate certain departments (viz, local authority, Govt. agencies) to deduct tax at the rate of one percent on notified goods or services, where the total value of such supply, under a contract, exceeds Rs 10 lakhs.

13) Refund

A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/SGST. The application can be made before the expiry of two years from the relevant date as may be prescribed. It has been provided that the limitation of two years shall not apply where such tax or interest or the amount has been paid under protest.

14) Returns

Dealers shall be required to furnish following returns

  a) Monthly Return: Every registered taxable person shall have to e-file a monthly return for inward and outward supplies of goods and/or services, input tax credit availed, tax payable, tax paid and other particulars within 20 days after the end of such month.
  b) Return for Composition Scheme: Dealers paying tax under composition scheme shall have to furnish a return for each quarter or part thereof, electronically within 18 days after the end of such quarter.
  c) TDS Return: Every dealer who is required to deduct tax at source shall furnish a return electronically within 10 days after the end of month in which deduction is made.
  d) Return for Input Service Distributor: Every Input Service Distributor shall file e-return for every calendar month or part thereof, within 13 days after the end of such month.
  e) First Return: Every registered taxable person paying CGST/SGST on all intra-State supplies of goods and/or services shall have to furnish the first return from the date on which he became liable to registration till the end of the month in which the registration has been granted.
  f) Annual return: Every registered taxable person shall have to furnish an annual return for every financial year electronically on or before the 31st day of December following the end of such financial year.
  g) Final return: Every registered taxable person who applies for cancellation of registration shall have to furnish a final return within three months of the date of cancellation or date of cancellation order, whichever is later, in a prescribed form.

15) Transitional Provisions

  a. Under the Model GST Law, a registered taxable person will be entitled to take credit of the amount of cenvat credit/ Value Added Tax carried forward in a return furnished by him in respect of the period ending with the day immediately preceeding the appointed day.
  b. As per Model GST Law, a registered taxable person shall be entitled to take in his electronic credit ledger/credit of the unavailed cenvat credit/ unavailed input tax credit in respect of capital goods not carried forward in a return furnished by him for the period ending with the day immediately preceding the appointed day.
  c. If a person registered under GST was not liable to be registered under the earlier law or if he was manufacturing exempted goods under the earlier law which are not taxable, then he will be allowed to take credit of eligible duties and taxes in respect of inputs held in stocks or semi-finished/finished goods.
  d. Every claim for refund of any duty/tax and interest, if any, paid on such duty/tax or any other amount, filed by any person before the appointed day, shall be disposed of in accordance with the provisions of earlier law and any amount eventually accruing to him shall be paid in cash. However, where any claim for refund is fully or partially rejected, the amount so rejected shall lapse

Sec. 14A disallowance: CBDT specifies new method for disallowance computation

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CBDT specifies new method for disallowance u/s 14A subject to total amount calculated as per new method shall not exceed the total expenditure claimed by the assessee. 

Refer extract of amendment notification:


INCOME-TAX (FOURTEENTH AMENDMENT) RULES, 2016 – AMENDMENT IN RULE 8D

NOTIFICATION NO. SO 1949(E) [F.NO.370142/7/2016-TPL], DATED 2-6-2016
In exercise of the powers conferred by section 295 read with sub-section (2) of section 14A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—

1. (1) These rules may be called the Income–tax (14th Amendment) Rules, 2016.

     (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules 1962, in rule 8D,—

(I) for sub-rule (2), the following sub-rule shall be substituted, namely:—
“(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:—
(i) the amount of expenditure directly relating to income which does not form part of total income; and
(ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income:

Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.”;
(II) sub-rule (3) shall be omitted.

After amendment Rule 8D of Income Tax Rule,1962 will be read as under:


[Method for determining amount of expenditure in relation to income not includible in total income.

8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with—

(a)   the correctness of the claim of expenditure made by the assessee; or
(b)   the claim made by the assessee that no expenditure has been incurred,
in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2).

(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely :—
(i)   the amount of expenditure directly relating to income which does not form part of total income;
(ii)   in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely :—
A × B
  C  
Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year ;
    B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ;
    C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ;
(iii)   an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year.

“(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:—
(i) the amount of expenditure directly relating to income which does not form part of total income; and
(ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income:
Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.”;

(3) For the purposes of this rule, the “total assets” shall mean, total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets.



Section – 14A, Income-tax Act, 1961 – FA, 2016[Expenditure incurred in relation to income not includible in total income


 14A. [(1)] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.]

[(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed(Rule 8D), if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act.

(3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act :]

[Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.]

FAQs on filing the return of income (Finance Act, 2016)

Posted on by Business So Simple in Miscellaneous

  • FAQs on filing the return of income ( As amended by Finance Act, 2016)


  • What is a return of income?

  •
    It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department. Different forms of returns of income are prescribed for filing of returns for different Status and Nature of income. These forms can be downloaded from http://www.incometaxindia.gov.in

    ​


  • ​What are the forms of return prescribed under the Income-tax Law?
    ​​​​
    Under the Income-tax Law, different forms of returns are prescribed for different classes of taxpayers. The return forms are known as ITR forms (Income Tax Return Forms). The forms of return prescribed under the Income-tax Law for filing of return of income for the assessment year 2016-17 (i.e., financial year 2015-16) are as follows:
    Return Form Brief Description
    ITR – 1 Also known as SAHAJ is applicable to an individual having salary or pension income or income from one house property (not a case of brought forward loss) or income from other sources (not being lottery winnings and income from race horses).
    ITR 2A It is applicable to an individual or HUF whose total income for the assessment year 2016-17 does not include income from business or profession, capital gains. Further, an individual or HUF claiming foreign tax credit or having any asset (including financial interest in any entity) located outside India or having any signing authority in any account located outside India or having income from any source outside India cannot use this form for filing of return of income.
    ITR – 2 It is applicable to an individual or a Hindu Undivided Family having income from any source other than “Profits and gains of business or profession”.
    ITR – 3 It is applicable to an individual or a Hindu Undivided Family who is a partner in a firm and where income chargeable to tax under the head “Profits or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm.
    ITR – 4S Also known as SUGAM is applicable to individuals or Hindu Undivided Family or partnership firm (other than limited liability partnership firm) who have opted for the presumptive taxation scheme of section 44AD/44AE.​
    ITR – 4 It is applicable to an individual or a Hindu Undivided Family who is carrying on a proprietary business or profession.
    ITR – 5 This Form can be used by a person being a firm, LLP, AOP, BOI, artificial juridical person referred to in section 2(31)(vii), co-operative society and local authority. However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) or section 139(4E) or section 139(4F) shall not use this form (i.e., trusts, political parties, institutions, colleges, investment fund etc.)
    ITR – 6 It is applicable to a company, other than a company claiming exemption under section 11 (exemption under section 11 can be claimed by charitable/religious trust).
    ITR – 7 It is applicable to a persons including companies who are required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F) (i.e., trusts, political parties, institutions, colleges, investment fund, etc.).
    ​ITR – V It is the acknowledgement of filing the return of income.

    ​

  • ​From where can I get a return form?

  •
    The return form can be downloaded from the site http://www.incometaxindia.gov.in or http://incometaxindiaefiling.gov.in​
  • ​What are the different modes of filing the return of income?
    ​

    The Return Form can be filed with the Income-tax Department in any of the following ways, –
      (i) by furnishing the return in a paper form;
     (ii) by furnishing the return electronically under digital signature;
    (iii) by transmitting the data in the return electronically under electronic verification code;
    (iv) by transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V;
    Note
    Where the return of income is filed in the manner given at (iv) without digital signature, then the taxpayer should take two printed copies of Form ITR-V. One copy of ITR-V, duly signed by the taxpayer, is to be sent (within the period specified in this regard, i.e., 120 days) by ordinary post or speed post to “Income-tax Department – CPC, Post Bag No. 1, Electronic City Post Office, Bengalore-560100 (Karnataka). The other copy may be retained by the taxpayer for his record.

    ​

  • ​For whom e-filing of return is mandatory?

  •
    ​Following taxpayers shall file their return of income only through e-filing mode:
    (1) From the assessment year 2015-16 onwards any asessee filing ITR 1/2/2A (other than an individual of the age of 80 years or more at anytime during the previous year) having a refund claim in the return or having total income of more than Rs. 5,00,000 is required to furnish the return of income electronically with or witho​ut digital signature or by using electronic verification code.
    (2) Every company shall furnish the return of income electronically under digital signature. In other words, for corporate taxpayer e-filing with digital signature is mandatory.
    (3) A firm or an individual or a Hindu Undivided Family (HUF) whose books of account are required to be audited under section 44AB shall furnish the return of income electronically under digital signature. In other words, in such a case, e-filing with digital signature is mandatory.
    (4) A resident assessee having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India or income from any source outside India shall furnish the return of income electronically with or without digital signature or by using electronic verification code.
    (5) Taxpayers claiming relief under section 90, 90A or 91 shall furnish the return of income electronically with or without digital signature or by using electronic verification code.
    (6) A person who is required to file ITR – 5 shall file the same electronically with or without digital signature. However, a firm liable to get its accounts audited under section 44AB shall furnish the return electronically under digital signature.
    (7) A taxpayer who is required to furnish a report of audit under sections 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)via), 10A, 10AA, 12A(1)(b), 44AB,44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW​ or to give a notice under section 11(2)(a) shall furnish the return electronically.
    (8) Return Form ITR- 3 is to furnish electronically in the following modes:
       (i) by furnishing the return electronically under digital signature;
      (ii) by transmitting the data in the return electronically under electronic verification code;
     (iii) by transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V.
    (9) Return Form ITR-4 is to be furnish electronically in the following modes:
       (i) by furnishing the return electronically under digital signature;
      (ii) by transmitting the data in the return electronically under electronic verification code;
      (iii) by transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V;
    However, where the books of accounts are required to be audited under section 44AB, the return is required to be furnished in the manner provided at (i) i.e. e-filing with digital signature.
    (10) Return Form ITR – 7 is to be furnished electronically in the following modes :
       (i) by furnishing the return electronically under digital signature;
      (ii) by transmitting the data in the return electronically under electronic verification code;
     (iii) by transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V;
    However, a political party shall compulsorily furnish the return in the manner mentioned at (i) above. Where the Return Form is furnished in the manner mentioned at (iii), the assessee should print out two copies of Form ITR-V. One copy of ITR-V, duly signed by the assessee, has to be sent by ordinary post to Post Bag No. 1, Electronic City Office, Bangalore-560100 (Karnataka). The other copy may be retained by the assessee for his record.

    ​

  • ​Is it necessary to attach any documents along with the return of income?

  •
    ​​​​​ITR return forms are attachment less forms and, hence, the taxpayer is not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income (whether filed manually or filed electronically). However, these documents should be retained by the taxpayer and should be produced before the tax authorities when demanded in situations like assessment, inquiry, etc.
    As discussed above, no documents are to be attached along with the return of income, however, in case of a taxpayer who is required to furnish a report of audit under section​ 10(23C)(v), 10(23C)(vi), 10(23C)via), 10A, 10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW​​​​ or to give a notice under section 11(2)(a) shall furnish it electronically on or before the date of filing the return of income.

    ​

  • ​Where and how am I supposed to file my return?

  •
    ​Return of income can be filed either in hard copy at the local office of the Income-tax Department or can be electronically filed at http://www.incometaxindiaefiling.gov.in 

    In the case of certain persons (already discussed in previous FAQ) e-filing is mandatory.​
  • ​Who can use ITR – 1 (SAHAJ)?
    ​

    Return Form ITR – 1 (SAHAJ) can be used by an individual whose total income includes:
    (1) Income from salary/pension; or
    (2) Income from one house property (excluding cases where loss is brought forward from previous years); or
    (3) Income from other sources (excluding winnings from lottery and income from race horses).
    Further, in a case where the income of another person like spouse, minor child, etc., is to be clubbed with the income of the taxpayer, this return form can be used only when such income falls in any of the above categories.

    ​

  • ​Who cannot use ITR – 1 (SAHAJ)?
    ​

    ​Return Form ITR – 1 (SAHAJ) cannot be used by an individual:
       •  Whose total income for the year includes income from more than one house property.
       •  Whose total income for the year includes income from winnings from lottery or income from race horses.
       •  Whose total income for the year includes income chargeable to tax under the head “Capital Gains”.
       •  Whose total income for the year includes agricultural income of more than Rs. 5,000.
       •  Whose total income for the year includes income from business or profession.
       •  Whose total income for the year includes loss under the head “Income from other sources”.
       •  Who has claimed relief under section 90 and/or 91​.
       •  Any Resident​ having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India.
       •  Any resident having income from any source outside India.

  • ​Who can not use ITR-2A?

  •
    ​​​​Return Form – ITR 2A cannot be used by an individual or a Hindu Undivided Family whose total income for the assessment year 2016-17 includes,-
     (a) Income from Capital Gains; or
     (b) Income from Business or Profession; or
     (c) Any claim of relief/deduction under section 90, 90A​ or 91; or
     (d) Any resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India; or
     (e) Any resident having income from any source outside India.

    ​

  • Who can use ITR-2A?​​

  •
    ​​Return Form ITR – 2A can be used by an individual or a Hindu Undivided Family whose total income for the assessment year 2016-17​ includes:-
     (a) Income from Salary / Pension; or
     (b) Income from House Property; or
     (c) Income from Other Sources (including Winning from Lottery and Income from Race Horses).
    Further, in a case where the income of another person like spouse, minor child, etc. is to be clubbed with the income of the assessee, this Return Form can be used where such income falls in any of the above categories.

  • ​Who can use ITR – 2?
    ​
    Return Form ITR – 2 can be used by an individual or a Hindu Undivided Family whose total income for the year includes:
       •  Income from Salary / Pension; or
       •  Income from House Property; or
       •  Income from Capital Gains; or
       •  Income from Other Sources (including winnings from lottery and income from race horses).
    Further, in a case where the income of another person like spouse, minor child, etc., is to be clubbed with the income of the taxpayer, this Return Form can be used if income to be clubbed falls in any of the above categories.

    ​

  • ​Who cannot use ITR – 2?

  •
    Return Form ITR – 2 cannot be used by an individual whose total income for the year includes income from Business or Profession.

    ​

  • ​Who can use ITR – 3?

  •
    Return Form ITR – 3 can be used by an individual or a Hindu Undivided Family who is a partner in a firm and income chargeable to income-tax in his/its hand under the head “Profits or gains of business or profession” does not include any other income, except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm.
    In case a partner of the firm does not have any income from the firm by way of interest, salary, etc., and has only exempt income by way of share in the profit of the firm, he shall use Form ITR – 3 only and not Form ITR-2. ​

  • ​Who cannot use ITR – 3?

  •
    Form ITR – 3 cannot be used by an individual or HUF whose total income for the year includes income from Business or Profession under any proprietorship.​

  • ​Who can use ITR – 4S (SUGAM)?
    ​​​
    Form ITR – 4S (SUGAM) can be used by an Individual/HUF/Firm (Other than LLP)​ whose total income for the year includes:
    (a) Business income computed as per the provisions of section 44AD or ​44AE; or​; or
    (b) Income from salary/pension; or
    (c) Income from one house property (excluding cases where loss is brought forward from previous years); or
    (d) Income from other sources (excluding winnings from lottery and income from race horses).
    Further, in a case where the income of another person like spouse, minor child, etc., is to be clubbed with the income of the taxpayer, this return form can be used where income to be clubbed falls in any of the above categories. ​

  • ​Who cannot use ITR – 4S (SUGAM)?
    ​​​
    Form ITR – 4S (SUGAM) cannot be used by an individual/HUF:
    • Whose total income for the year includes income from more than one house property.
    • Whose total income for the year includes income from winnings from lottery or income from race horses.
    • Whose total income for the year includes income chargeable to tax under the head “Capital Gains”.
    • Whose total income for the year includes agricultural income of more than Rs. 5,000.
    • Whose total income for the year includes income from speculative business and other special incomes.
    • Whose total income for the year includes income from profession as referred to in section 44AA(1).
    • Whose total income for the year includes income from agency business or income in the nature of commission or brokerage.
    • Who claims relief under section 90, 90A and/or section 91
    • Who is a resident and ordinarily resident and has any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India.
    In case of a taxpayer who is engaged in any business eligible for the presumptive taxation scheme of section 44AD​ or section 44AEbut he does not opt for the presumptive taxation scheme, then such a taxpayer has to maintain the books of account of the business as per the provisions of section 44AA and has to get these accounts audited. In such a case he cannot use ITR 4S.

    ​

    In case of a taxpayer who is engaged in any business eligible for the presumptive taxation scheme of section 44AD or section 44AE but he does not opt for the presumptive taxation scheme, then such a taxpayer has to maintain the books of account of the business as per the provisions of section 44AA​​ and has to get his accounts audited. In such a case he cannot use ITR 4S. 

    ​
  • ​Who can use ITR – 4?

  •
    ​​Form ITR – 4 can be used by an individual or a Hindu Undivided Family who is carrying on a proprietary business or profession. ​
  • ​Who cannot use ITR – 4?

  •
    ​​Form ITR – 4 cannot be used by any person other than an individual or a HUF. Further, an individual or a HUF not having income from business or profession cannot use ITR – 4.​​
  • ​Who can use ITR – 5?

  •
    Form ITR – 5 can be used by a person being a firm, LLP, AOP, BOI, artificial juridical person , cooperative society and local authority.​
  • ​Who cannot use ITR – 5?

  •
    Form ITR – 5 cannot be used by, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or ​139(4D) or ​section 139(4E) or ​section 139(4F)​ (i.e., trusts, political party, institutions, colleges, investment fund, etc.).
  • ​
  • Who can use ITR – 6?

  •
    ​​Form ITR – 6 can be used by a company, other than a company claiming exemption under section 11 (charitable/religious trust can claim exemption under section 11​).
  • ​Who cannot use ITR – 6?

  •
    ​​​​​Form ITR – 6 cannot be used by a company claiming exemption under section 11​ (charitable/religious trust can claim exemption under section 11).​
  • ​Who can use ITR – 7?

  •
    ​Form ITR – 7 can be used by persons including companies who are required to furnish return under section 139(4A) or section 139(4B)​ or section 139(4C)or section 139(4D) or section 139(4E)​​​ or section 139(4f)​ (i.e., trusts, political party, institutions, colleges, investment fund, etc.).
  • ​
  • Who cannot use ITR – 7?

  •
    ​​​​​Form ITR – 7 cannot be used by a person who is not required to furnish return under section 139(4A) or section 139(4B)​ or section 139(4C) or section 139(4D) or section 139(4E​)​ or section 139(4F​)​ (i.e., trusts, political party, institutions, colleges, investment fund, ​etc.). ​
  • ​How to file the return of income electronically?

  •
    Income-tax Department has established an independent portal for e-filing of return of income. The taxpayers can log on to http://www.incometaxindiaefiling.gov.in for e-filing the return of income.​
  • ​What is e-filing utility provided by the Income-tax Department?

  •
    The Income-tax Department has provided free e-filing utility (i.e., software) to generate e-return and furnishing of return electronically. The e-filing utility provided by Department is simple, easy to use and also contains instructions on how to use it. By using the e-filing utility, the taxpayers can easily file their returns of income. Utility can be downloaded from http://www.incometaxindiaefiling.gov.in​

  • ​Is there any e-filing help desk established by the Income-tax Department?

  •
    ​​In case of queries on e-filing of return, the taxpayer can contact 1800 4250 0025.​​

  • ​What is the difference between e-filing and e-payment?

  •
    ​E-payment is the process of electronic payment of tax (i.e., by net banking or SBI’s debit/credit card) and e-filing is the process of electronically furnishing of return of income. Using the e-payment and e-filing facility, the taxpayer can discharge his obligations of payment of tax and furnishing of return easily and quickly.​

  • ​Will I be put to any disadvantage by filing my return?

  •
    No, on the contrary by not filing your return inspite of having taxable income, you will be liable to the penalty and prosecution provisions under the Income-tax Act.​

  • ​What are the benefits of filing my return of income?

  •
    ​​Filing of return is your duty and earns for you the dignity of consciously contributing to the development of the nation. Apart from this, your income-tax returns validate your credit worthiness before financial institutions and make it possible for you to access many financial benefits such as bank credits, etc.​​
  • ​What are the benefits of e-filing the return of income?

  •
    E-filing can be done from any place at any time and it saves time and efforts. It is simple, easy and faster. The e-filed returns are generally processed faster as compared to returns filed manually.​​
  • ​Is it necessary to file return of income when I do not have any positive income?

  •
    If you have sustained a loss in the financial year, which you propose to carry forward to the subsequent year for adjustment against subsequent year(s) positive income, you must make a claim of loss by filing your return before the due date. ​​

  • ​What are the due dates for filing returns of income/loss?

  •
    ​​​Due date of filing of return of income
    Sr. No. Status of the taxpayer Due date
    1 Any company other than a company who is required to furnish a report in Form No. 3CEB under section 92E (i.e. other than covered in 2 below) September 30 of the assessment year
    2 Any person (may be corporate/non-corporate) who is required to furnish a report in Form No. 3CEB under section 92E November 30 of the assessment year
    3 Any person (other than a company) whose accounts are to be audited under the Income-tax Law or under any other law September 30 of the assessment year
    4 A working partner of a firm whose accounts are required to be audited under this Act or under any other law. September 30 of the assessment year
    5 Any other assessee July 31 of the assessment year . ​

    ​

  • If I fail to furnish my return within the due date, will I be fined or penalized?

  •
    ​​​​​Yes, if you have not furnished the return within the due date, you will have to pay interest on tax due. If the return is not filed up to the end of the assessment year, in addition ​to interest, a penalty of Rs. 5,000 shall be levied under section 271F​​.

  • ​Can a return be filed after the due date?
    ​​
    Yes, if one could not file the return of income on or before the prescribed due date, then he can file a belated return. A belated return can be filed within a period of one year from the end of the assessment year or before completion of the assessment, whichever is earlier. Return filed after the prescribed due date is called as a belated return. However, w.e.f. 01-04-2017, belated income-tax return for the Assessment Year 2017-18 and onwards can be filed at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. A belated return attracts interest and penalty as discussed in previous FAQ.​
    E.g., In case of income earned during FY 2015-16, the belated return can be filed up to 31st March, 2018. ​​
  • ​If I have paid excess tax how will it be refunded to me?

  •
    ​​​The excess tax can be claimed as refund by filing your Income-tax return. It will be refunded to you by crediting it in your bank account through ECS transfer. The department has been making efforts to settle refund claims at the earliest.​​

    ​

  • ​If I have committed any mistake in my original return, am I permitted to file a revised return to correct the mistake?​

  •
    Yes* Return can be revised within a period of one year from the end of the relevant assessment year or before completion of the assessment whichever is earlier.​
    E.g., E.g., In case of income earned during FY 2015-16, the due date of filing the return of income (considering no audit) is 31st July, 2016. If the return of income is filed on or before 31st July, 2016 then the return can be revised upto 31st March, 2018 (assuming assessment is not completed by that date).​
  • ​How many times can I revise the return?

  •
    ​Theoretically a return can be revised any number of times before the expiry of one year from the end of the assessment year or before assessment by the Department is completed, whichever event takes place earlier.​​
  • ​Am I required to keep a copy of the return filed as proof and for how long?

  •
    ​​Yes, since legal proceedings under the Income-tax Act can be initiated up to four or six years (as the case may be) prior to the current financial year, you must maintain such documents at least for this period. However, in certain cases the proceedings can be initiated even after 6 years, hence, it is advised to preserve the copy of return as long as possible. Further, after introduction of the e-filing facility, it is very easy and simple to maintain the copy of return of income.​​
  • ​There are various deductions that are not reflected in the Form 16 issued by my employer. Can I claim them in my return?
    Yes, it can be claimed if you are otherwise eligible to claim the same.​

  • ​Why is return filing mandatory, even though all my taxes and interests have been paid and there is no refund due to me?

  •
    Amounts paid as advance tax and withheld in the form of TDS or collected in the form of TCS will take the character of your tax due only on completion of self-assessment of your income. This self-assessment is intimated to the Department by way of filing of the return of income. Only then the Government assumes rights over the taxes paid by you. Filing of return is critical for this process and, hence, has been made mandatory. Failure will attract levy of penalty.​​
  • ​Am I liable for any criminal prosecution [arrest/imprisonment, etc.] if I don’t file my Income-tax return, even though my income is taxable?
    Non-payment of tax attracts interests, penalty and prosecution. The prosecution can lead to rigorous imprisonment from 3 months to 2 years (when the tax sought to be evaded exceeds Rs. 25,00,000 the punishment could be 6 months to 7 years).​​
  • ​What is Form 26AS?

  •
    A taxpayer may pay tax in any of the following forms:
    (1) Tax Deducted at Source (TDS)
    (2) Tax Collected at Source (TCS)
    (3) Advance tax or Self-assessment Tax or Payment of tax on regular assessment.
    The Income-tax Department maintains the database of the total tax paid by the taxpayer (i.e., tax credit in the account of a taxpayer).  Form 26AS is an annual statement maintained under Rule 31AB​ of the Incom​e-tax Rules disclosing the details of tax credit in his account as per the database of Income-tax Department. In other words, Form 26AS will reflect the details of tax credit appearing in the Permanent Account Number of the taxpayer as per the database of the Income-tax Department. The tax credit will cover TDS, TCS and tax paid by the taxpayer in other forms like advance tax, Self-Assessment tax, etc.
    Income-tax Department will generally allow a taxpayer to claim the credit of taxes as reflected in his Form 26AS.

    ​
  • ​What to do if discrepancies appear in actual TDS and TDS credit as per Form 26AS?

  •
    Every person deducting tax at source has to furnish the details of tax deducted by him to the Income-tax Department. The details will cover the name of the deductee, Permanent Account Number of the deductee, amount of tax deducted, amount paid to the deductee, date of payment of TDS to the credit of Government, etc. On the basis of the details of TDS provided by the deductor, the Income-tax Department will update Form 26AS of the deductee.
    Many times the actual amount of TDS and TDS credit as appearing in Form 26AS may differ and it may happen that the TDS credit appearing in Form 26AS may be less as compared to actual TDS, this may happen due to reasons like non-furnishing of TDS details to the Income-tax Department by the deductor, deducting the tax in incorrect Permanent Account Number, etc. In such a case the deductee should approach the deductor and request him to take the necessary steps to rectify the discrepancy due to above reasons.
    The Income-tax Department updates the TDS details in Form 26AS on basis of details provided by the person deducting the tax (i.e., the deductor), hence, if there is any default on the part of deductor like non -furnishing of TDS details (i.e., TDS return) to the Income-tax Department, deducting the tax in incorrect Permanents Account Number, etc. then Form 26AS will not reflect the actual TDS. In such a case, the taxpayer may not be able to claim the credit of correct TDS. Hence, the taxpayers are advised to confirm the tax credit appearing in Form 26AS and should reconcile the difference, if any. 

  •  
  • ​What precautions should be taken while filing the return of income?
    ​​​​​
    Following is the list of few important steps/points/precautions to be kept in mind while filing the return of income:
    • The first and foremost precaution is to file the return of income on or before the due date. Taxpayers should avoid the practice of filing belated return. Following are the consequences of delay in filing the return of income :
    • ​Loss (other than house property loss) cannot be carried forward.
    • Levy of interest under section 234A.
    • Penalty of Rs. 5,000 under section 271F can be levied.
    • Exemptions/deductions under section 10A​, section 10B, 80-IA, 80-IAB, 80-IB, 80-IC , 80-ID and 80-IE are not available.​

    ​

      ​

    • Belated return cannot be revised under section 139(5). However, w.e.f. 01-04-2017, income-tax return for the Assessment Year 2017-18 and onwards filed under section 139(1) or section 139(4)[belated return’ can also be revised.

    ​

    • Taxpayer should download Form 26AS and should confirm actual TDS/TCS/Tax paid. If any discrepancy is observed then suitable action should be taken to reconcile it.
    • Compile and carefully study the documents to be used while filing the return of income like bank statement/passbook, interest certificate, investment proofs for which deductions is to be claimed, books of account and balance sheet and P/L A/c (if applicable), etc. No documents are to be attached along with the return of income.
    • The taxpayer should identify the correct return form applicable in his case.
    • Carefully provide all the information in the return form.
    • Confirm the calculation of total income, deductions (if any), interest (if any), tax liability/refund, etc. 
    • If any tax is payable as per the return of income, then the same should be paid before filing the return of income, otherwise return would be treated as defective return.
    • Ensure that other details like PAN, address, e-mail address, bank account details, etc., are correct.
    • After filling all the details in the return of income and after confirmation of all the details, one can proceed with filing the return of income.
    • In case return is filed electronically without digital signature and without electronic verification code do not forget to post the acknowledgement of filing the return of income at CPC Bangalore (as discussed earlier).

      For details on e-filing please logon to www.incometaxindiaefiling.gov.in ​​

[As amended upto Finance Act, 2016​]​

Draft Rule:Manner of determination of fair market value and reporting requirement for Indian concern-Indirect transfer

Posted on by Business So Simple in Miscellaneous



F No 142/26/2015-TPL
F No 142/26/2015-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
*******
New Delhi, Dated 23rdMay, 2016

Subject: Manner of determination of fair market value and reporting requirement for Indian concern-Indirect transfer provisions-section 9(1) of the Income-tax Act, 1961-Draft Rules-reg.

 Under section 9 of the Income-tax Act, 1961 (the Act), income arising from indirect transfer of assets situated in India is deemed to accrue or arise in India. The provisions of section 9(1)(i) of the Act provides that if any share or interest in a foreign company or entity derives its value substantially from the assets located in India, then such share or interest is deemed to be situated in India. Thereby, any income arising from transfer of such share or interest is deemed to accrue or arise in India.
2.   The share or interest is said to derive it value substantially from assets located in India, if fair market value (FMV) of assets located in India comprise at least 50% of the FMV of total assets of the company or entity. The computation of FMV of Indian and global assets is to be in the prescribed manner.
3.   Further, section 285A of the Act mandates reporting requirement on the Indian concern through or in which the foreign company or entity holds the assets in India. The information to be furnished and its manner is also required to be prescribed.
4.    Therefore, the manner of computation of FMV of assets of the foreign company or entity and the reporting requirement by the Indian concern are proposed to be provided through the amendments of the Income-tax Rules, 1962. The draft rules and forms, on which comments and suggestion of stakeholders and general public may be sent electronically by 29thMay, 2016 at the email address,  ustpl1@nic.inin this regard, are as under:
11UB: Fair market value of assets in certain cases
(1)               The fair market value of assets (tangible and intangible) as on the specified date, held directly or indirectly by a company or an entity registered or incorporated outside India (hereafter referred to as “foreign company or entity”), for the purposes of clause (i) of sub-section (1) of section 9, shall be computed in accordance with the provisions of this rule.
(2)               Where the asset is the share of an Indian company listed on a recognized stock exchange not being the case referred to in sub-rule (2), the fair market value of the share shall be the observable price of such share on the stock exchange:
Provided that where the share is held as part of the shareholding which confers, directly or indirectly, any right of management or control in relation to the aforesaid company, the fair market value of the share shall be determined in accordance with the following formula, namely :-

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Fair market value = (A+B) /C
Where,
A= the market capitalisation of the company on the basis of observable price of its shares quoted on the recognised stock exchange;
B= the book value of liabilities of the company as on the specified date;
C= the total number of outstanding shares:
Provided further that where, on the specified date the share is listed on more than one recognized stock exchange, the observable price of the share shall be computed with reference to the recognised stock exchange which records the highest volume of trading in the share during the period which is considered for determining the price.
(3)               Where the asset is the share of an Indian company not listed on a recognized stock exchange on the specified date, the fair market value shall be the fair market value on such date as determined by a merchant banker or an accountant in accordance with any internationally accepted pricing methodology for valuation of shares on arm’s length basis and increased by the liability, if any, considered in such determination.
(4)               Where the asset is an interest in a partnership firm or in a limited liability partnership or an association of person, the fair market value shall be the proportional enterprise value on the specified date of such firm or limited liability partnership or association of person, as determined by a merchant banker or an accountant in accordance with any internationally accepted valuation methodology as increased by the liability, if any, considered in such determination.
(5)               The fair market value of the assets other than those referred to in sub-rules (2), (3) and (4) shall be estimated to be the price it would fetch if sold in the open market on the specified date as determined by a report from a merchant banker or an accountant as increased by the liability, if any, considered in such estimation.
(6)                 The fair market value of all the assets of the foreign company or the entity shall be determined in the following manner, namely:-
(i) Where the transfer of share of, or interest in, the foreign company or entity is between persons who are not associated persons and the consideration for transfer of share or interest is determined on the basis of a report prepared by an accountant or merchant banker of international repute, then the fair market value of all the assets of the foreign company or the entity shall be the value determined in such report as increased by the aggregate amount of liabilities, if any, that have been reduced for computing the value of assets for determination of such consideration;
(ii)              In any other case, –
(a)  Where, as on the specified date, the share of the foreign company or entity is listed on a stock exchange, the fair market value of all the assets owned by the foreign company or entity shall be determined in accordance with the following formula, namely:-


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Fair market value of all assets = A+B
Where,
A = Market capitalization of the foreign company or entity computed on the basis of the observable price of the share on the stock exchange where the share of the foreign company or the entity is listed;
B = book value of the liabilities of the company or the entity as on the specified date:
Provided that where, as on the specified date, the share is listed on more than one stock exchange, the observable price in the aforesaid formula shall be in respect of the stock exchange which records the highest volume of trading in the share during the period which is considered for determining the price.
(b) Where, as on the specified date, the share in the foreign company or entity is not listed on a stock exchange the value of all the assets owned by the foreign company or entity shall be determined in accordance with the following formula:
Fair market value of all assets = A+B
Where,
A = fair market value of the foreign company or the entity and its subsidiaries on a consolidated basis as determined by a merchant banker or an accountant as per the most appropriate internationally accepted valuation methodology;
B = book value of liabilities of the company or the entity as on the specified date.
(7) The rate of exchange for the calculation in foreign currency, of the value of assets located in India and expressed in rupees shall be the telegraphic transfer buying rate of such currency as on the specified date.
Explanation: For the purposes of this rule and rule 11UC, –
(i)             “telegraphic transfer buying rate” shall have the meaning as assigned to it in the Explanation to rule 26;
(ii)           “observable price” in respect of a share quoted on a stock exchange is the higher of the following:-
(a)  the average of the weekly high and low of the closing prices of the shares quoted on the said exchange during the six months period preceding the specified date; or
(b)  the average of the weekly high and low of the closing price of the shares quoted on the said exchange during the two weeks preceding the specified date;


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(iii)          “book value of the liabilities” means the value of liabilities as shown in the balance-sheet of the company or the entity as the case may be, excluding the paid-up capital in respect of equity shares/members’ interest.
(iv)        “specified date” shall have the meaning as assigned to it in clause (d) of Explanation 6 to clause (i) of subsection (1) of section 9;
(v)          the terms “accountant”, “merchant banker” and “recognised stock exchange” shall have the meaning as assigned to them in rule 11U;
(vi) “balance sheet” ,-
(a)  in relation to an Indian company, means the balance-sheet of such company (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date which has been audited by the auditor of the company appointed under the laws relating to companies in force and where the balance-sheet on the specified date is not drawn up, the balance-sheet (including the notes annexed thereto and forming part of the accounts) drawn up as on a date immediately preceding the specified date which has been approved and adopted in the annual general meeting of the shareholders of the company;
(b)  in any other case, means the balance-sheet of the company or entity (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date or as drawn up on a date immediately preceding the specified date and which has been submitted to the relevant authority outside India under the laws in force of the country in which the foreign company or the entity is incorporated or established.
11UC : Determination of Income attributable to assets in India
(1) The income from transfer outside India of a share of, or interest in, a company or entity referred to in clause (i) of sub-section (1) of section 9, attributable to assets
located in India ,shall be determined in accordance with the following formula, namely: –
A x BC Where
A = Income from the transfer of the share of, or interest in, the company or the entity computed in accordance with provisions of the Act as if such share or interest is located in India.
B = Fair Market Value of assets located in India as on specified date, from which the share or interest referred to in A derives its value substantially, computed in accordance with rule 11UB.
C = Fair Market Value of all the assets of the company or entity as on specified date, computed in accordance with rule 11UB:

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Provided that if the transferor of the share of, or interest in, the company or entity fails to provide the information which is necessary for the application of the aforesaid formula then whole of the income from the transfer of such share or interest shall be deemed to be attributable to the assets located in India.
(2) The transferor of the share of, or interest in, a company or entity that derives its value substantially from assets located in India, shall obtain and furnish along with the return of income a report in Form 3CT duly signed and verified by an accountant providing the basis of the apportionment in accordance with the formula and certifying that the income attributable to assets located in India has been correctly computed.
114DB. Information or documents to be furnished under section 285A.
(1)               Every Indian concern referred to in section 285A shall, for the purposes of the said section, maintain and furnish the information and documents in accordance with this rule.
(2)                 The information shall be furnished in Form 49D electronically under digital signature to the Assessing Officer having jurisdiction over the Indian concern within a period of ninety days from the end of the financial year in which any transfer of the share of, or interest in, a company or entity incorporated outside India (hereafter referred to as “foreign company or entity”) referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9 has taken place:
Provided that where the transaction in respect of the share or the interest had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern, the information shall be furnished in the said form within thirty days of the transaction.
(3) The Indian concern shall maintain the following (an English translation has to be prepared if the documents originally prepared are in foreign languages) and produce the same when called upon to do so by any income-tax authority in the course of any proceeding to substantiate the information furnished under sub-rule (2), namely: –
(i)             details of the immediate holding company or entity, intermediate holding company or companies or entity or entities and ultimate holding company or the entity of the Indian concern;
(ii)             details of other entities in India of the group of which the Indian concern is a constituent ;
(iii)             the holding structure of the shares of, or the interest in, the foreign company or entity before and after the transfer;
(iv)            any transfer contract or agreement entered into in respect of the share of, or interest in, any foreign company or entity that holds any asset in India through, or in, the Indian concern;
(v)            financial and accounting statements of the foreign company or the entity which directly or indirectly holds the assets in India through, or in, the Indian concern for two years prior to the date of transfer of the share or interest ;


F No 142/26/2015-TPL
(vi)            information relating to the decision or implementation process of the overall arrangement of the transfer;
(vii)            information relating to, –
(a)  the business operation;
(b)  personnel;
(c)  finance and properties;
(d)  internal and external audit or the valuation report, if any, forming basis of the consideration in respect of share, or the interest,
of the foreign company or the entity being transferred and its subsidiaries, which directly or indirectly hold the assets located in India through, or in, the Indian concern;
(viii)            the asset valuation report and other supporting evidence to determine the place of location of the share or interest being transferred;
(ix)             the details of payment of tax outside India, which relates to the transfer of the share or interest;
(x)             the valuation report in respect of Indian assets and total assets duly certified by a merchant banker or accountant with supporting evidence;
(xi)             documents which are issued in connection with the transactions under the accounting practice followed.
(4)       The Principal Director General of Income-tax (Systems) or Director General Income-tax (Systems), as the case may be, shall specify the procedure for filing of Form No. 49D and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the information so furnished under this rule.
(5)                  The information and documents specified in sub-rule (3) shall be kept and maintained for a period of eight years from the end of relevant assessment year.
Explanation: For the purposes of this rule,-
(i)      “ultimate holding company or entity” means a company or the entity that has ultimate control of the Indian concern directly or indirectly and such company or entity is not itself controlled by or is subsidiary of any other company or entity ;
(ii)    “intermediate holding company or entity” means a company or an entity that has controlling interest in another company or entity and is itself controlled by or is subsidiary of another company or entity;
(iii)   “immediate holding company or the entity” means the company or entity that directly maintains the controlling interest in the Indian concern’.
5.                  The following Forms are proposed to be provided:


(A)

FORM NO. 3CT

[See rule 11UC]
Income attributable to assets located in India under section 9 of the Income-tax Act, 1961
* I/We have examined the accounts and records of M/s ** (name and address of the assessee) having PAN ……….. being transferor of the

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share of, or interest in, …………………………..(name of company or entity incorporated outside India)# referred to in Explanation 5 to clause (i) of sub -section (1) of section 9 during the previous year ended on …………..
* I/We have obtained all the information and explanations which to the best of my/our * knowledge and belief were necessary for the purposes of ascertaining the income of the said assessee attributable to the assets located in India .
* I/We certify that in respect of the assessment year ………………………… the income deemed to accrue or arise in India to the assesse on transfer of share/interest* in the above mentioned company/entity* is Rs………………… which has been worked out on the basis of the details given in the Annexure to this form. In my/our * opinion and to the best of my/our * information and according to the explanations given to me/us * the particulars given in the Annexure are true and correct.
Date                                   .
Signed
‡  Accountant Membership No. ______
ANNEXURE
1.  Details of consideration received for transfer of share or interest:
Sr.No
Name  of
Quantum  of
Cost
of
Date  of
Consideration
the
share/interest
acquisition
transfer
received
company
transferred
of
share
/entity
/interest
2.   Income derived from transfer of share or interest. (company/ entity wise details) Rs……………..
3. Value of assets located in India from which the share or interest derives its value (company/ entity wise details): Rs…………….
4.  Value of global assets of the company or the entity (entity wise details)   :
Rs……………
5. Income attributable to assets located in India(entity wise breakup and aggregate) Rs………….
6.   Details of the method employed for arriving at the value of assets in item 3 and 4.
7. Details of the documents and valuation report, if any, relied upon 8. Remarks including any assumption made.”;

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(B)
FORM NO. 49D [see Rule 114DB]
Information and documents to be furnished by an Indian concern under section 285A
To
The Assessing Officer
_________________
_________________
PART A
1.
Name and address of the Indian concern
2.
Status [whether company, LLP/firm/permanent establishment
etc.]
3.
Residential status
4.
Permanent Account Number
5.
Previous Year
6.
Assessment Year
7.
Details  of  immediate  holding  entity,  intermediate  holding
entity and ultimate holding entity, –
(A) Immediate holding entity: –
(a) Name
(b) Country of incorporation
(c) Country of which it is tax resident
(B) Intermediate holding entity: –
(a) Name
(b) Country of incorporation
(c) Country of which it is tax resident
(C) Ultimate holding entity: –
(a) Name
(b) Country of incorporation
(c) Country of which it is tax resident
8.
(a) Whether share of, or interest in, any company or entity
derives  its  value  substantially  from  assets  located  in
India, which are held in or through, the Indian concern;
Yes/No
(b) If yes, give details of the company (ies) or entity (ies).
PART B
[ To be filled in to report the transaction resulting in transfer of right of management or control]
9.
Whether any transaction in respect of share of, or interest in,
any  company  or  entity  referred  to  in  8  has  the  effect  of
transferring the right of management or control over the Indian
Yes/No


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concern.
If yes give details.
(i).
Name of the company or entity
(ii).
Details of the transactions including consideration for
such transaction
(iii).
Name of transferor along with address
(iv).
Percentageshare/interesttransferredincluding
percentage holding of transferor during the period of 12
months preceding the transfer
(v).
Details of the transferee along with address
(vi).
Holding structure in respect of shares of, or interest in,
the company or entity before and after the transfer
(vii).
Financial and accounting statements of the company
or the entity
(viii).
Basis of determining the location of share or interest
being transferred
(ix).
Value and breakup of assets of the Indian concern
immediately before the date of transfer
(x).
Basis of valuation of assets of the company or entity
(xi).
Details of supporting documents in respect of items (viii)
and (x)
PART C
[To be filled for reporting the information in respect of transfer of share/interest during the previous year ]
10.
(a) Whether share of, or interest in, the company or entity
referred to in 8 has been transferred during the previous
Yes/No
year, the income from which is deemed to accrue or
arise in India under the provisions of section 9(1).
(b) If yes give details: –
(i).
Name of the company or entity
(ii).
Details of the transaction(s)
(iii).
Name of transferor along with address
(iv).
Percentage share/interest transferred including holding
percentage of transferor during the period of 12 months
preceding the transfer
(v).
Value of total assets of the company or the entity
(vi).
Details of transferee along with address
11.
Whether any transaction in respect of shares of, or interest in,
any  company  or  entity  referred  to  in  8  has  the  effect  of
transferring right of management or control over the Indian
Yes/No
concern.
If yes give details.
(i).
Name of the company or entity
(ii).
Details of transactions including consideration
(iii).
Name of transferor along with address
(iv).
percentage   share/interest   transferred   including


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holding percentage of transferor during the period
of 12 months preceding the transfer
(v).
Details of transferee along with address
Yes/No
(vi).
Whether  Form 49D was furnished in respect of the
transaction
If yes date of furnishing Form 49D ___/__/__
If No ,-
(a) reason for not furnishing the Form 49D
(b) furnish the following details:
(i).
Holding chart in respect of shares of, or interest in, the
company or entity before and after the transfer
(ii).
Financial and accounting statements of the company
or entity
(iii).
Basis of determining location of share of, or interest in,
the company or entity
(iv).
Value and breakup of assets of the Indian concern
immediately before the date of transfer
12.
Value and breakup of assets of the Indian concern, –
(i).
at the beginning of the year
(ii).
at the end of the year
13.
Basis of valuation of assets referred to in items 10(v), 11(b) (iii)
and (iv) and 12.
14.
Details
of  supporting  documents  in  respect  of  items  10(v),
11(b)(iii) and (iv) and 12.