TDS on Payment of Dividend on Mutual Fund [Section 194K]:
Budget 2020 introduced Section 194K which proposes a tax deduction on the amount paid on the units of mutual funds, without a limit, to any resident individual. Earlier such income was exempt from Income Tax under section 10(35). Hence,this new section abolished the older section 10(35) of the Income-tax Act, 1961.This section has come into effect from 1st April 2020.
Section 10(35):
The provisions of section 10(35) offer exemption towards the following:
Any income arising in respect of the units of the specified mutual fund; or
Any income arising in respect of the units from the Administrator of the specified undertaking; or
Any income arising in respect of the units from the specified company.
Thus, in case the income falling within the criteria mentioned above, the entire income was exempted under section 10(35) of the Income Tax Act.
However, with the insertion of section 194K,no exemption under section 10(35) would be available to income arising in respect of units received on or after 1st April 2020.
Nature of Income covered under Section 194K:
Provisions of section 194K are applicable only on payment of dividends by fund houses. No TDS shall be deducted on capital gains arising on redemption of units. Provisions of section 194K are applicable to
following incomes:
Units of a Mutual Fund: Mutual fund means units specified under section 10(23D) of the Income Tax Act.
Units from the Administrator: Administrator means the Administrator, as referred under section 2(a) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Units from a Specified Company: Specified company means the company as referred under Section 2(h) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Liability to Deduct TDS:
The liability to deduct TDS under this section rests on the shoulders of Mutual Fund Houses distributing dividends to the investors. The deductor must deposit the TDS and file the TDS Return on TRACES.
Deductee under this Section:
Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K.
Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Section 194.
NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
Rate and Threshold Limit for TDS Deduction:
TDS shall be deducted at the rate of 10% on the amount of dividend paid.
If a valid PAN is not furnished by the deductee, TDS shall be deducted at the rate of 20%.
Threshold Limit for TDS deduction is Rs. 5000. This means no TDS shall be deducted if the total dividend paid/payable in a financial year does not exceed Rs. 5000.
TDS on Repurchase of Units by Mutual Fund or Unit Trust of India [Section 194F]:
Section 194F deals with TDS on payment relating to repurchase of units of Mutual Funds or Unit Trust of India.Under this section,liability to deduct TDS arises on payment of such amount as referred to in Section
80CCB of the Acton repurchase of units issued by them.
Nature of Income Covered:
This section becomes applicable at the time of making payment of any amount referred to in referred to in section 80CCB (2).
Section 80CCB(2):
Section 80CCB (2) of the Income Tax Act refers to the amount which is invested by the assessee in the units being issued under a plan formulated under the Equity Linked Savings Scheme.
The amount so invested has been allowed as a deduction, however, the amount invested (whole or part) is returned back to the assessee by the Fund / Trust either by way of repurchase of the units or on the termination of the plan.
Liability to deduct TDS under this Section:
The mutual fund house or the UTI responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall is liable to deduct on such amount.
Rate of TDS and Threshold Limit:
TDS shall be deducted at the rate of 20%at the time of payment of amount as referred to in Section 80CCB of the Act. Please note that there is no exemption limit provided under section 194F. This means TDS shall be deducted irrespective of quantum of payment.
TDS on Payment for Deposit under National Savings Scheme (NSS) [Section 194EE]:
National Savings Scheme is a fixed-income investment scheme backed by the Government of India. The savings bond is suitable for small and medium-income investors to save tax while earning returns. This is a secure and
low-risk product. The primary objective of such schemes is to mobilize savings and help individuals build a substantial corpus eventually. The rates of return under such schemes are revised frequently. The fact that this
scheme is backed by the Government makes it a safe investment options and a preferred instrument for millions of small investors across India.
Liability to Deduct TDS:
Section 194EE of the Income Tax Act, 1961 mandates deduction of TDS on withdrawal of amount deposited under the National Saving Scheme. This section states that the person making payment of amount referred to in section
80CCA(2)(a) is required to deduct TDS.
Rate of TDS and Threshold Limit:
The TDS under section 194EE shall be deducted at the rate of 10%.
Exemption from TDS Deduction under this section:
No TDS shall be deducted under section 194EE in following cases:
If the aggregate amount of payments in a financial year does not exceedRs. 2,500.
Where the payment is made to the heirs of the deceased assessee (depositor), no tax shall be deducted at source.
If a declaration is submitted under section 197A by the recipient to the payer, then no tax is deductible.
Extract of Section 194EE of Income Tax Act, 1961
194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :
Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.
The Goods and Services Tax (GST) Council’s 47th meeting was held on June 28-29, 2022 under the chairmanship of the Finance Minister Nirmala Sitharaman and made several recommendations to implement changes to the GST regime.
Key Changes in the GST Rates for Goods, w.e.f. July 18, 2022:
Goods
Existing GST rate
Proposed GST Rate
Printing, writing, or drawing ink
12%
18%
Power-driven pumps primarily designed for handling water. For example, centrifugal pumps, deep tube-well turbine
pumps, submersible pumps, and bicycle pumps
12%
18%
LED lamps, lights and fixture, and their metal printed circuits board
Orthopedic appliances − splints and other fracture appliances, artificial parts of the body, or other appliances that
are worn or carried, or implanted in the body to compensate for a defect or disability, intraocular lens
12%
5%
Ostomy appliances
12%
5%
Tetra packs (aseptic packaging paper)
12%
18%
Cut and polished diamonds
0.25%
1.5%
IGST on specified defense items imported by private entities or vendors, when end-user is the defense forces of India
Applicable Rate
Nil
Cheques, lose or in book form
Nil
18%
Petroleum/coal bed methane
5%
12%
E-waste
5%
18%
Maps and hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes
Nil
12%
Withdrawal of Exemption in case of Services:
1
Transportation by rail or vessel of railway equipment and material.
2
Storage or warehousing of commodities which attract tax (nuts, spices, copra, jaggery, cotton etc.)
3
Fumigation in a warehouse of agricultural produce.
4
Services by Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), Securities and Exchange Board of India (SEBI), Food Safety and Standards Authority of India (FSSAI) and Goods and Services Tax Network (GSTN).
5
Renting of residential dwelling to registered business entities.
6
Services provided by cord blood banks by way of preservation of stem cells.
7
Common bio-medical waste treatment facilities for treatment or disposal of biomedical waste shall be taxed at 12 percent with ITC benefit.
8
Hotel accommodation of value up to INR 1000 per day shall be taxed at 12 percent.
9
Room rent (excluding ICU) charged by a hospital, exceeding INR 5,000 per day per patient shall be taxed. The tax shall be levied only on the room rentals at five percent without ITC.
10
GST exemption on training or coaching in recreational activities relating to arts, culture or sports is restricted only when supplied by an individual.
Change in GST Rate for Services:
Goods
Existing GST rate
Proposed GST Rate
Services supplied by foreman to chit fund
12%
18%
Job work in relation to processing of hides, skins and leather
5%
17%
Job work in relation to manufacture of leather goods and footwear
5%
12%
Job work in relation to manufacture of clay bricks
5%
12%
Works contract for roads, bridges, railways, metro, effluent treatment plant etc.
12%
18%
Works contract service supplied to Central and State governments, local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals etc. and its sub-contracting
12%
18%
Works contract service supplied to Central and State governments and local authorities involving predominantly earthwork and its sub-contracting
5%
12%
Transport of goods and passengers by ropeways
18%
5% (with ITR for services)
Renting of truck/ goods carriage where cost of fuel is included
18%
12%
Secretarial audit is a mandatory compliance which has to be carried out by certain companies in India. The main law that regulates secretarial audit in India is the Companies Act, 2013. Under section 204(1), companies are required to obtain a secretarial audit report from the secretarial auditor. Such provision has to be read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
The Secretarial Audit is an audit where the Secretarial Auditor expresses an opinion as to whether there subsist appropriate systems and processes in the company proportionate with the size and operations of the company to monitor and check compliance with applicable laws, rules, regulations, and guidelines. In this article we will discuss some of the key features of Secretarial Audit.
Applicability of Secretarial Audit:
As per section 204(1) read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the following companies require to carry out secretarial audit:
Every Listed Company; and
Every Public Company:
Having a paid-up share capital of 50 crore rupees or more. Or
Having a turnover of more than Rs. 250 crore or more.
Every company having a borrowing of 100 crores or more. Note: If a private company is a subsidiary of a public company, then secretarial audit would be carried out as per the requirements of the public company.
Procedure of the Secretarial Audit:
The below steps must be carried out in process of conducting Secretarial Audit:
Appointment of Secretarial Auditor;
Communication to earlier Incumbent;
Acceptance of Appointment by the Secretarial Auditor;
Preliminary Discussions about the company with the Secretarial Auditor;
Preliminary Meeting with the Auditor;
Finalization of Audit plan and briefing the staff;
Testing, Interview and Analysis;
Preparing the working papers;
Audit Summary for Discussions;
Submission of Secretarial Audit Report.
Eligibility of Secretarial Auditor:
Members of the ICSI (Institute of Company Secretaries of India), who are holding the certificate of practice which validates to perform as a secretarial audit, can only conduct Secretarial Audit and prepare the Secretarial Audit Report of the Company.
Appointment of Secretarial Auditor:
Obtain the consent of secretarial Auditor.
File certified true copy of a resolution passed in Board Meeting with the Registrar of Companies as an attachment in MGT– 14.
Appoint the Secretarial Audit in Board Meeting.
Fix the remuneration in Board Meeting.
Statutory Laws covered under the Scope of Secretarial Audit:
Following Statutory laws are covered under the scope of Secretarial Audit:
Companies Act, 2013 and the rules made thereunder.
Securities Contracts (Regulation) Act, 1956 (‘SCRA’), and the rules made thereunder.
Depositories Act, 1996, and the rules made thereunder.
Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings.
Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’).
Reporting on the compliance of secretarial standards issued by the Institute of Company Secretaries of India.
Reporting on Compliances with the Listing Agreement.
Reporting on compliance of ‘Other laws as may be applicable specifically to the company which shall include all the laws which are applicable to specific industry for example for Banks- all laws applicable to Banking Industry; for insurance company-all laws applicable to insurance industry; likewise for a company in petroleum sector- all laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry etc.
Examines and reports regarding the adequacy and efficiency of the systems and processes with other laws.
Monitor and ensure compliance with general laws like labor laws, competition law, and environmental laws.
Examines and reports on the specific observations or qualification, reservation or adverse remarks in respect of the Board Structures/system and processes relating to the Audit period.
Secretarial Auditor may rely on reports given by statutory auditors or other designated professionals to check compliance with other laws like Income Tax, Customs, GST.
Document Checklist for Secretarial Audit:
Verification of the following documents/registers/reports fall under the scope of Secretarial Audit:
Notice, agenda, notes on agenda minutes of meetings, attendance registers;
Draft Financial Statements, Auditor’s Report, Director’s Report;
Statements for borrowings and investments;
Disclosures / Consents / Declarations;
Filings with RoC / Regulatory Authorities / RBI;
Filings / submissions to Stock Exchanges;
Relevant Approvals/correspondence/disclosures by directors;
Compliance Certificates of functional heads for compliance of applicable laws;
Charter Documents and Statutory Registers;
Annual Performance Reports, Lease Deed, Bonds and returns;
Registers maintained under Labour Laws;
Admission and Statement for code of conduct received from the directors;
Remuneration and Sitting fees details paid to directors;
Particulars of CSR amount;
SAST Disclosures;
Bank account details for dividend;
Details of ECB Returns, in case of foreign borrowings in the company.
Secretarial Audit Report:
Just like the Independent Auditors’ Report, the Secretarial Audit Report is also to be addressed to the Members. There are two types of reports to be submitted as a part of secretarial audit as follows:
1. Secretarial Audit Report:
Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed with effect from the year ended March 31, 2019.
The said report shall be submitted in the Form MR-3.
2. Secretarial Compliance Report:
This report is to be submitted in addition to the Secretarial Audit Report.
All listed companies to submit, in addition to Secretarial Audit Report, Secretarial Compliance Report to the stock exchanges within 60 days of closure of financial year.
This report is a feeder to SAR.
SCR applied only to Listed Entities (Not applicable to Material Unlisted Subsidiary).
Note: “Material Unlisted Subsidiary” means a subsidiary of a listed company whose income or net worth exceeds 10 % of the consolidated income or net worth, respectively, of the Company and its Subsidiaries in the immediately preceding accounting year.
Frauds and Penalties:
Section 448:
Section 448 of Companies Act 2013, deals with the penalty for false statements.
The section provides that if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement –
Which is false in any material particulars, knowing it to be false; or
Which omits any material fact, knowing it to be material, he shall be liable under section 447.
In Terms Of Section 448, a PCS is liable to attract penal provision if, he makes statement in the Secretarial Audit Report which is false is any material particulars, knowing it be false or omits any material fact knowing it to be material.
Section 447:
Section 447 deals with Punishment for Fraud.
It provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which
Punishment for Defaulter:
If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this secretarial audit, then –
.The company, or
.Every officer of the company, or
.The company secretary in practice,
…who is in default, shall be punishable with:
Minimum fine of Rs. 1 lakh which may extend up to Rs. 5 lakh.
Cost Audit is the verification of cost accounts to determine the accuracy of cost accounting records. Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures and objectives.
A cost audit comprises the following:
Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique.
Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.
To report to the government on optimum utilization of national resources.
Objectives of Cost Audit:
Prospective Objective: Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.
Constructive Objectives: Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing cost of operation and reformulating cost accounting plans.Relevant Definitions:
Cost Audit:
Cost Audit is a system of audit introduced by the Government of India for the review, examination and appraisal of the cost accounting records and attendant information required to be maintained by specified industries.
If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
Cost Accountant:
Cost Accountant means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
Cost Accountant in Practice:
Cost Accountant in practice means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants.
Cost Auditor:
Cost auditor means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board.
Cost Audit Report:
Cost audit report means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report.
Cost Records:
The definition of the word ‘cost records’ has been provided under rule 2 (e) of the Companies (Cost Records and Audit) Rules, 2014 which means books of account relating to the utilization of materials, labour and other items of cost as applicable to the production of the goods or provision of services as provided in section 148 of the Act and the Companies (Cost Records and Audit) Rules.
Relevant Provisions under the Companies Act, 2013:
Section 148 of the Companies Act, 2013:
Section 148 of the Companies Act, 2013 contains provisions relating to the cost records and cost audit applicability under the Companies Act.
As per Section 148, Cost Audit shall be conducted by the cost accountant who is appointed by the Board;
Rights of Central Government:
Section 148 (1) empowers the Central Government to direct the companies specified in the production of goods or provisions of service to include particulars relating to utilization of material or labour or other items of cost in the books of accounts of the company;
Section 148 (2) empowers the Central Government to direct, based on the net worth or turnover of the company, audit of cost records of the specified class of companies;
Rule 4 of the Companies (Cost Records and Audit) Rules, 2014:
Rule 4 of the Companies (Cost Records and Audit) Rules, 2014 contains the provisions relating to the companies which are liable to get their cost records audited;
It contains the list of specified companies, which needs to maintain the cost records, is provided under Table A and Table B of rule 3 of the Companies (Cost Records and Audit) Rules, 2014;
Applicability of Maintenance of Cost Records [Rule 3 of the Companies (Cost Records and Audit) Rules, 2014]:
As discussed, the definition of the word ‘cost records’ has been provided under rule 2(e) of the Companies (Cost Records and Audit) Rules, 2014 which means “books of account relating to the utilization of materials, labour and other items of cost as applicable to the production of the goods or provision of services as provided in section 148 of the Act and the Companies (Cost Records and Audit) Rules”.
Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 contains two table namely
Table A – Regulated Sectors; and
Table B – Non-regulated sectors.
Cost records need to be included in the books of accounts of the companies being engaged in the production of goods or provision of service as covered under the table A or Table B and the total turnover from all its production or service in more than INR 35 crore during the preceding financial year.
In a nutshell, cost records are mandatory in the case following conditions are satisfied:
– The company is engaged in manufacturing goods or provision of services which are listed in Table A or Table B; and
– Total aggregate turnover of the company from all its production or service is more than INR 35 Crore in the preceding financial year.
Applicability of Cost Audit [Section 148(2) & Rule 4 of Companies (Cost Records and Audit) Rules, 2014]:
CG may direct to conduct audit of cost records of such class of companies having turnover or net worth as may be prescribed.
According to Rule 4 of Companies (Cost Records and Audit) Rules, 2014, Cost Audit shall be applicable to following companies:
Turnover
Every company specified under Rule 3A in Regulated Sector
Every Company specified under Rule 3B in Non-Regulated Sector
Turnover from all products and services:
Rs. 50 Crore or more
Rs. 100 Crore or more
Turnover from individual products or services specified for cost records under Rule 3:
Rs. 25 Crore or more
Rs. 35 Crore of more
Non-Applicability of Cost Audit:
Cost Audit shall not be applicable in case of following companies:
The company’s export revenue exceeds 75% of its total revenue. The export revenue needs to be in foreign exchange; or
The company which is operating from the special economic zone;
The company which is engaged in the generation of electricity for captive consumption through Captive Generating Plant*.
*Note: The term ‘Captive Generating Plant’ shall have the same meaning as assigned to it in Rule 3 of the Electricity Rules, 2005.
Eligibility of a Cost Auditor:
Only a Cost Accountant can be appointed as Cost Auditor for conducting cost audit. ‘Cost Accountant’ means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
From the above definition we can say that only a member of the Institute of Cost Accountants of India who has a valid certificate of practice can be appointed as Cost Auditor. Such member may be:
An Individual who is a Cost Accountant in Practice;
A Firm of Cost Accountants in practice.
Provided that no person appointed statutory auditor of the company shall be appointed for conducting the audit of cost records.
Appointment of Cost Auditor:
Cost Auditor shall be appointed by the Board within 180 days from the commencement of financial year.
Consent must be obtained from the cost auditor for conducting the Cost Audit.
After obtaining the consent, a Board Meeting should be held for the appointment of Cost Auditor.
Pass the Resolution at the Board Meeting and file the Form with ROC within 30 days or within a period of 180 days of the commencement of the financial year.
Form CRA-2:
Every company appointing the Cost Auditor must file a notice of such appointment through electronic mode in Form CRA-2 within a period of:
30 days of the Board Meeting in which such appointment is made or
Within a period of 180 days of the commencement of the financial year, whichever is earlier,
Submission of Cost Audit Report:
A cost auditor is required to submit his audit report along with his/ her qualifications, reservations, observations or suggestions if any, in form CRA-3 to Board of Directors of the Company within 180 days from the closure of financial year to which the report relates.
The Audit Report shall be filed with the Central Government within 30 days from the date of receipt of the Audit Report.
Relevant Forms:
Form
Details
Time Limit
CRA-1
Format of Cost Audit Records
Not Applicable
CRA-2
Appointment of Cost Auditor
30 days of the Board meeting in which such appointment is made or within a period of 180 days of the commencement of the financial year
CRA-3
Format of Cost Audit Report
Not Applicable
CRA-4
Submission of Cost Audit Report
30 days of receipt
Penalty in case of Default in compliance with above provisions:
Default on part of Company:
In case of Company
In case of Officer of the Company
In case of any default on the part of the company, it shall be punishable with the fine of an amount not less than INR 25,000, however, such fine cannot be more than INR 5 Lakhs.
every officer, in default, of the company shall be punishable with imprisonment for a term up to 1 year or with the fine not less than INR 10,000, however, the same cannot be more than INR 1,00,000;
Default on part of Cost Auditor: In case the cost auditor is in default, he shall be punishable in the manner as provided under section 147 (2) to section 147 (4).
Section 194C of the Income Tax Act, 1961 deals with the provisions related to deduction of TDS at the time of payment to contractors/sub-contractors. According to this section any person making payment to the resident contractor (or subcontractor) for carrying out any contract (including the supply of labor) is required to deduct tax on such payment.
Meaning of Contractor:
A contractor is a resident person, who is engaged in carrying out any ‘work’, including the supply of labor, on account of a contract entered by him with ‘Specified Person’.
The specified person is required to deduct TDS at the time of making payment to the contractor.
Meaning of Sub-Contractor:
A sub-contractor is a resident person who has entered into a contract with the contractor for carrying out such ‘work’, which the contractor has agreed to complete as a part of his contract with the specified person.
The sub-contractor might have entered into a contract with the contractor for following:
Conducting either all or part of work, which the contractor has agreed to complete.
Supplying manpower for all or part of work taken by the contractor.
Specified Person:
Specified Person for the purpose of this Section include following persons:
The Central or State Government;
The local authority;
The Corporation established by the Central, State or Provincial Act;
The Company;
The Trust;
The Co-operative Society;
The Registered Society;
The authority engaged either for the purpose of dealing with and satisfying the need for the housing accommodation or for planning, improvement or development of cities, town and village;
The university established / incorporated by Central, State or Provincial Act;
The firm;
The Government of a foreign state / a foreign enterprise or any association / body established outside India;
The individual or HUF liable to audit under section 44AB [Clause (a) or Clause (b)] during the financial year immediately preceding the financial year in which the sum is credited or paid to the account of the contractor.
Meaning of the term ‘Work’:
For the purpose of this Section, the term ‘Work’ includes following activities:
Advertising;
Carriage of goods / passengers by any mode of transport except railway;
Broadcasting and telecasting (which also includes the production of programmes for such broadcasting or telecasting);
Catering;
Manufacturing / supplying a product based on the requirement and specification of customers by using material purchased from the customer. However, it doesn’t include when the material is purchased from any person other than the customer.
Rate of TDS Deduction u/s 194C:
TDS u/s 194C shall be deducted at following rates:
Contractor/Sub-Contractor
Rate of TDS (if PAN available)
Rate of TDS (if PAN not available)
Payment to Resident Individual/HUF
1%
20%
Payment to:
Trust;
Company,
Firm;
Cooperative Society;
Registered Society;
Government, Local Authority;
University, Cooperation.
2%
20%
Threshold Limit for TDS Deduction:
1. Threshold limit is the maximum amount of payment till which TDS is not applicable. If the amount of payment in a financial year exceeds such maximum limit, there shall be a deduction of TDS.
Particulars
Threshold Limit
Single Payment to a Contractor
Rs. 30,000
Aggregate Payment to a contractor during a Financial Year
Rs. 1,00,000
TDS Deduction in case of Customized Products:
2. Many a times, a product is manufactured by the contractor as per the specifications provided by the customer. Similarly, the material used for such manufacture is also purchased from the customer himself. In such a case the amount of TDS u/s 194C to be deducted shall be computed on following value:
Scenario
TDS to be computed on Value
Where price of material and service charges are indicated separately in the Invoice by the contractor.
Invoice value excluding the value of material
Where price of material and service charges are not indicated separately but a lump sum amount is charged by the contractor in the Invoice.
Total Invoice Value
Applicability of Section 194C to Transport Business:
3. There are two types of transport businesses namely:
Passenger Transport
Goods Carriage Transport
4. Under Section 194C(6), TDS deduction is not required in case payment is made to a goods transport agency (in the business of plying, hiring or leasing goods) which owns 10 or fewer carriages at any time during the previous year. However, the contractor has to submit a declaration of above along with PAN.
5. Such exemption is not allowed to a goods transport agency which owns more than 10 trucks at any time during the year.
6. Similarly, this benefit is only for Goods Carriage Transport. Passenger transport businesses do not enjoy any such exemption.
Nature of Transport Business
Rate of TDS (if PAN available)
Rate of TDS (if PAN not available)
Individual/HUF
Others
Passenger Transport
(irrespective of number of vehicles owned)
1%
2%
20%
Goods Transport
Owning up to 10 carriages at any time during the FY.
Nil*
Nil*
20%**
Owning more than 10 carriages at any time during the FY.
1%
2%
20%
Goods Transport Contractor not owning any carriages (all carriages are hired/sub-contracted.)1
1%
2%
20%
* Declaration must be furnished along with copy of PAN Card.
**No Declaration can be furnished in absence of PAN.
Note:
1. When a person undertakes any transportation contract who does not own any truck or goods carriage and arranges trucks from other truck owners he cannot be said to be a person engaged in the business of transport i.e. plying, hiring or leasing goods carriage and he is also not eligible to compute income as per the provisions of section 44AE. In this case even if such a person gives a declaration of owning less than 10 trucks (zero number of trucks), he will not be given the benefit of non-deduction of TDS under section 194C(6).
Other Important Points:
FD Commission and brokerage are not covered under section 194C.
Payment made to an electrician or payment made to a contractor for providing electrician service is covered under section 194C.
Payment made to courier covered under section 194C.
Payment made to travel agent or an airline for purchase of a ticket is not subjected to TDS under section 194C. However, if the plane, bus or any other mode is chartered, then TDS is liable to be deducted under section 194C.
Payment made to clearing and forwarding agents for the carriage of goods is liable to TDS under section 194C.
Time Limit to deposit TDS:
• TDS deducted is required to be deposited to the credit of the Government within given below timeline to avoid interest:
Month of Deduction
Due date of deposit of TDS
During any month from April to February
7th of Subsequent Month
During the month of March
30th April
TDS Return Filing Due Date:
Quarter
TDS Return Filing Due Date
Q1: April to June
31st July
Q2: July to September
31st October
Q3: October to December
31st January
Q4: January to March
31st May
TDS Certificate (For 16A):
Quarter
TDS Return Filing Due Date
Q1: April to June
15th August
Q2: July to September
15th November
Q3: October to December
15th February
Q4: January to March
15th June
Interest on Late Filing:
Section
Nature of Default
Interest Payable
Period for which interest is to be paid
201A
Non deduction of tax at source, either in whole or in part
1% per month or part thereof
From the date on which tax deductible to the date on which tax is actually deducted.
After deduction of tax, Non-payment of tax either in whole or in part
1.5% per month or part thereof
From the date of deduction to the date of payment.
Notes:
The above interest should be paid before filing of TDS return. The deductor can make the payment of interest on such late payment of TDS before filing TDS returns or demand raised by TRACES.
The interest paid u/s 201A is not allowed as an expense under the Income Tax provisions.
Interest to be calculated on a monthly basis and not on the number of days i.e. part of a month is considered as a full month.
Penalty for late filing of TDS Returns:
Section 234E:
The deductor will be liable to pay by way of fees Rs.200 per day till the failure to pay TDS continues.
However, the penalty should not exceed the amount of TDS for which the statement was required to be filed.
Section 271H:
Also, a penalty from Rs.10,000 to Rs.1 lakh is leviable under Section 271H if a company provides incorrect information or fails to submit the returns within the specified due date.
This penalty will be charged in addition to the penalty under Section 234E.
No penalty under Section 271H will be charged in case of delay in filing the TDS/TCS return if the following conditions are satisfied:
i. The tax deducted/collected at source is paid to the credit of the government.
ii. Late filing fees and interest (if any) is paid to the credit of the government.
iii. The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf.
As per the IGST law, import of services under GST applies when the trade occurs in inter-state. It also applies when the consumer receives the services from a person residing outside India. Those importing services on a regular basis shall enhance the impact of GST on their business, as GST applies to imported services. However, in this article we will focus on issues like import of software and whether software is considered as service or goods and tax implications of import of software.
Generally, organizations enter into licensing agreements under which software is imported for using the same for business purposes. There are generally two ways of importing the software either by downloading it electronically or by loading it on CD.
Import of Service (Section 2(11) of the IGST Act):
Import of services means the supply of any service where –
The supplier of service is located outside India;
The recipient of service is located in India; and
The place of supply of service is in India.
As per Section 7(4) of the IGST Act, 2017:
“Supply of services imported into the territory of India shall be treated to be supply of service in the course of inter-state trade or commerce.”
If the services are covered within the scope of ‘import of service’ then tax would be payable by the recipient of service under GST as per Notification No-10/2017 IGST (Rate) dated 28th June, 2017.
Software as Service:
In terms of Schedule II of the CGST Act 2017, development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property rights are treated as services.
For the software downloaded directly from the website or made available through any electronic medium, then study of following provision is required:
As per Entry No 5(h) of Schedule-II to CGST Act, 2017, temporary transfer or permitting the use or enjoyment of any intellectual property right shall be treated as supply of Service, thus software is covered under the above entry specifically.
Then, import of software from outside India will be considered as Import of Service, further definition of same is extracted thereafter.
Software as Goods:
If a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.
If supply of software in the physical form (i.e. CD, DVD Packages) of Information Technology Software (branded as well as tailor-made) shall apply as goods under the Customs Tariff Act with HSN Code 8523 80 20. The GST rate for software sold in physical form is also 18%.
The above stand on software has been clarified and confirmed by various Courts. In the case of Tata Consultancy Services v. State of Andhra Pradesh, it has been held that canned software which is sold in packages or CDs or DVDs or USB Drivers will be classified as goods.
Though the copyright of the program would remain with the development company, the moment copies are made and marketed, it would be termed as goods.
Conclusion:
GST implications for import of software can be understood with the help of following table:
Mode of Importing Software
Nature of Supply
HSN/SAC
GST Rate
Software downloaded directly from the website or made available by way of any electronic medium.
Supply of Service
SAC-99733
18%
Software imported in the form of DVD, CD or pen drive packages.
Supply of Goods
HSN-8523 80 20
18%
As per the IGST law, import of services under GST applies when the trade occurs in inter-state. It also applies when the consumer receives the services from a person residing outside India. Those importing services on a regular basis shall enhance the impact of GST on their business, as GST applies to imported services. However, in this article we will focus on issues like import of software and whether software is considered as service or goods and tax implications of import of software.
Generally, organizations enter into licensing agreements under which software is imported for using the same for business purposes. There are generally two ways of importing the software either by downloading it electronically or by loading it on CD.
Import of Service (Section 2(11) of the IGST Act):
Import of services means the supply of any service where –
The supplier of service is located outside India;
The recipient of service is located in India; and
The place of supply of service is in India.
As per Section 7(4) of the IGST Act, 2017:
“Supply of services imported into the territory of India shall be treated to be supply of service in the course of inter-state trade or commerce.”
If the services are covered within the scope of ‘import of service’ then tax would be payable by the recipient of service under GST as per Notification No-10/2017 IGST (Rate) dated 28th June, 2017.
Software as Service:
In terms of Schedule II of the CGST Act 2017, development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property rights are treated as services.
For the software downloaded directly from the website or made available through any electronic medium, then study of following provision is required:
As per Entry No 5(h) of Schedule-II to CGST Act, 2017, temporary transfer or permitting the use or enjoyment of any intellectual property right shall be treated as supply of Service, thus software is covered under the above entry specifically.
Then, import of software from outside India will be considered as Import of Service, further definition of same is extracted thereafter.
Software as Goods:
If a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.
If supply of software in the physical form (i.e. CD, DVD Packages) of Information Technology Software (branded as well as tailor-made) shall apply as goods under the Customs Tariff Act with HSN Code 8523 80 20. The GST rate for software sold in physical form is also 18%.
The above stand on software has been clarified and confirmed by various Courts. In the case of Tata Consultancy Services v. State of Andhra Pradesh, it has been held that canned software which is sold in packages or CDs or DVDs or USB Drivers will be classified as goods.
Though the copyright of the program would remain with the development company, the moment copies are made and marketed, it would be termed as goods.
Conclusion:
GST implications for import of software can be understood with the help of following table:
Mode of Importing Software
Nature of Supply
HSN/SAC
GST Rate
Software downloaded directly from the website or made available by way of any electronic medium.
Supply of Service
SAC-99733
18%
Software imported in the form of DVD, CD or pen drive packages.
Supply of Goods
HSN-8523 80 20
18%
The article focuses on following areas:
Non-availability of Input Tax Credit on certain inward supplies under GST.
Exception to rules / provisions of non-availability of Input Tax Credit under GST.
Refer to the below table for further details:
Membership of a Club, Health and Fitness Center.
Travel benefits extended to employees on vacation such as leave or home travel concession.
Sr. No.
ITC Negative List
Further Details
(a)
Motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including the driver).
Exceptions:
If motor vehicles are used for making following taxable supplies:
Further supply of such motor vehicles, or
Transportation of passengers, or
Imparting training on driving such motor vehicles.
Imp Notes:
If capacity of MV is less than or equal to 13 (including driver), Input credit will be available if used for specified purpose only.
If capacity of MV exceeds 13 (including driver), Input credit shall be available if used or to be used for furtherance of business.
(aa)
Vessels and aircraft
Exceptions:
A. If vessels and aircrafts are used for making following taxable supplies.
Further supply of such vessels or aircraft, or
Transportation of passengers,
Imparting training on navigating such vessels,
Imparting training on flying such aircraft.
B. For transportation of goods.
(ab)
Services related to motor vehicles, vessels or aircraft such as:
General Insurance
Servicing
Repair and Maintenance
Exceptions:
A. Where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein.
B. Where received by a taxable person engaged in:
The manufacture of such motor vehicles, vessels or aircraft or
The supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him.
(b) (i)
Food and Beverages,
Outdoor Catering,
Beauty Treatment,
Health Services,
Cosmetic and Plastic Surgery,
Leasing, Renting or Hiring of Motor Vehicles, Vessels or Aircraft,
Life Insurance and Health Insurance.
Exceptions:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply.
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
Example:
Assuming the government passes a rule for all employers to provide mandatory cab services to female staff in night shifts ABC Ltd hires a rent a cab to provide to transportation to its female staff on night shifts. In such case, ITC will be available to ABC Ltd on the GST paid to the rent a cab service.
(b) (ii)
Membership of a Club, Health and Fitness Center.
(b) (iii)
Travel benefits extended to employees on vacation such as leave or home travel concession.
(c)
Works contract services when supplied for construction of an immovable property (other than plant and machinery).
Exceptions:
ITC shall be available if there is sub-contracting for construction of immovable property, and then the contractor can avail the ITC.
ITC to work contract services availed by Builders/ developers for providing outward supply of services, would be eligible for ITC.
Explanation:
Immovable property is plant and machinery i. e. ITC on works contract services used for construction of immovable plant and machinery is available.
Example:
XYZ makes some repair work in its office building and treats the expenditure as revenue expenditure, then it can take input tax credit
If the expenses are capitalized in the books, then no ITC is available.
(d)
Goods or services or both received by a taxable person for construction of an immovable property on his own account, (other than plant and machinery), even when such goods or services or both are used in course or furtherance of business.
Exceptions:
Inward supply of goods or services for construction of an immovable property for ‘own use’ would not be eligible for ITC.
However, if the person is building such immovable property for the further selling then he is eligible to avail the ITC.
Explanations:
Construction: Term ‘construction’ includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.
Plant & Machinery: Term ‘Plant and Machinery’ means apparatus, equipment, machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes:
Land, building or any other civil structures.
Telecommunication towers.
Pipelines laid outside the factory premises.
(e)
Goods and/or services on which tax has been paid under section 10(Composition Levy).
Imp Notes:
Composition Scheme is a simple and easy scheme under GST for taxpayers.
Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
They cannot charge GST from their customer They need to pay tax out of their own pocket.
This scheme can be opted by any taxpayer whose turnover is less than INR 1.5 crore.
No Input Tax Credit can be claimed by a dealer opting for composition scheme.
(f)
Goods or services or both received by a non-resident taxable person except on goods imported by him.
Explanation:
A non-resident taxable person is a person who temporarily supplies any goods or services with in India even though they are not a resident of the taxable territory.
No ITC shall be available to such person in respect of the goods and services availed by him in India.
Exception:
ITC shall be available on the Goods imported by such person.
(g)
Goods and/or services used for personal consumption.
(h)
Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
Explanation:
Any goods which are disposed through these mechanisms will be covered here.
Lost: It includes goods getting lost as part of process loss due to any abnormal activity.
Stolen: When any goods are found to be lower upon physical verification, it may be considered as stolen.
Destroyed: Any goods which get destructed due to any natural calamity like flood, earthquake or a manmade event like fire, water leakage etc.
Written off: If any goods are having a certain value as per the books of accounts but are completely written off due to any reason, this clause will get attracted.
Disposed off: by way of gift or free samples.
Example:
E.g. Free samples given by the pharma companies are also covered by the clause and no ITC shall be available in relation to such free samples.
Imp Notes:
The objective behind blocking input credit in above cases is to avoid leakage of tax. The government will not be able to get any tax benefit on the goods lost / disposed off by way of free gifts etc. if it allows input credit in such cases.
Above view has been confirmed by department also by Circular No. 92/11/2019-GST dated 7 March 2019. Advance ruling authorities has also given similar opinion in case of Sanofi India Limited and Surfa Coats (India) Private Limited.
(i)
Any tax paid in terms of section 74, 129 or 130.
Section 74:
Taxes are not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or willful misstatement or suppression of facts.
If the supplier is making payment of taxes under forward charge, no input tax credit will be available to the recipient.
In case of reverse charge, if the recipient is making payment of taxes, even the recipient will not be allowed to avail input tax credit.
Section 129:
Detention, seizure and release of goods and conveyance in transit.
Section 130:
Confiscation of goods and/ or conveyance and levy of penalty.
In both the cases, if any payment is made by any person under these sections, no input tax credit will be available
Notes:
Generally, recipient claims input credit on the basis of tax invoice which does not contain any details of payment of tax by supplier.
Supplier has paid tax under fraud is decided by the courts which takes longer time period to decide. However, time limit for the recipient to take input credit is 30 September of next FY.
Circular:
Circular No. 123/42/2019– GST dated 11 November 2019 allows 120% input credit of invoices uploaded by the suppliers.
It seems that when government allows input credit to recipient only when suppliers uploads their invoices in the GST return, it seems sr. no. (i) of Section 17 is practically redundant.
The Income Tax Return Filing due dates for Previous Year 2018-19 (Assessment Year 2019-20) are 31st July 2019 for Individuals, HUF, BOI & AOP and 30th September 2019 for businesses which are required to get their accounts audited. There are many queries and confusions particulars to individuals while filing ITR. In this article we will try to cover all the important topics everyone must keep in mind before filing ITR.
1. Selecting the Correct ITR Form:
Selecting the correct ITR Form applicable to you is the first important step. There are two important criteria for selecting the right form:
The nature of income earned by you;
The total income threshold.
ITR-1 SAHAJ: For individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand.
ITR-2: For Individuals and HUFs not having income from profits and gains of business or profession.
ITR-3: For individuals and HUFs having income from profits and gains of business or profession.
ITR-4 Sugam: For Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE.
2. Make sure you have Form 16 and Form 26AS:
Form 16:
Form 16 has the details of TDS deducted by the employer from salary paid to you.
If you are salaried, Form 16 is the most important document for filing your tax returns.
It has details of PAN, TAN, address, salary earned and tax deducted, which is required to be reported in your ITR.
Starting this year, Form 16 format has been revised and made in sync with fields required in ITR.
If you have worked with more than one employer in the past, income from the previous employer will also have to be reported in the ITR forms.
Make sure that you have a Form 16 from your previous employer and include this income while filing tax returns.
Form 26AS:
Form 26AS is the consolidated statement that reflects TDS deducted on any type of income you have earned, it includes TDS on salary, TDS on interest income from deposits, TDS deducted by buyer in case you have sold a property etc.
This is a very important document as the tax department will only allow TDS to be adjusted against tax due, if it appears in your Form 26AS.
3. Disclosure of all the Income including Foreign Income:
You must disclose all the income earned during the financial year 2018-19, even if you have an exempt income.
Interest income from bank savings account, family pension, capital gains, etc. make sure you have every income listed down for inclusion.
Wherever TDS has been deducted, you may be able to locate details from your Form 26AS.
Also, if you have any foreign income from foreign assets such as a bank account, a retirement account, shareholding, or any other asset owned, it will also have to be disclosed in the ITR forms.
4. Keep all Tax Deduction Proofs:
Make sure you put together a proper file to keep all payment receipts and proofs of tax saving investments made, deductions claimed, rent paid and any other tax benefit claimed by you.
If there is a discrepancy in your ITR, you may be requested to provide proofs by the tax department.
5. Disclose Correct Personal Details in ITR:
Ensure that the personal details such as Name, Aadhaar Number, Phone Number, Date of Birth, Address, Email ID, etc. entered in the ITR form are correct.
Further, if you are claiming a refund, make sure that the bank details provided are accurate so that you receive your refund smoothly.
Also, you have to report all bank account details held by you except dormant accounts (accounts which are inactive for the past three years).
Tax Payers have registered in GST Regime either as migrated category based on provisional ID provided based on existing registration (VAT/Service Tax/ Excise, etc) or have obtained fresh registration post commencement of GST.
In many cases they have obtained the assistance of tax professional or have registered on their own.
While obtaining registration number or enrolling they provided email id or mobile number which may require to be changed now since they have changed the professional, employees have left the organisation whose details were provided.
It becomes a cumbersome process to change the mobile number or email id of primary authorized signatory on GSTN Portal.
Hence, we are providing step by step process to change mobile number or email id of primary authorized signatory which is as follows:
Important Note: Older mobile and email id will be pre-fetched by the system. Please ensure to change the mobile and email id to which you want to add. For Company/LLP DSC sign the application with DSC and for individuals please use OTP.
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