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Agricultural Income Tax Calculation

Agricultural Income Tax Calculation | Types, Calculation and Factors of Agricultural Income Tax

Leave a Comment / Income Tax / By / February 21, 2024

Agricultural Income Tax Calculation: Agricultural income is the revenue earned from sources concerned with agricultural activities. These sources of income are inclusive of activities such as farming, activities related to building or use of agricultural or commercial yield from a horticultural land.

What is Meant by Agricultural Income in India?

Agriculture is the primary activity of the majority of the population in India. The whole economic structure is greatly dependent on the country’s agriculture. Due to this reason, the government has issued some policies and taken measures to help the agricultural sector balanced and ensure growth. Out of these various schemes, an exemption to income tax is mention-worthy.

The Income Tax Act of 1961 of the Government grants tax exemption for the three major activities as mentioned below:

  1. The Revenue earned from any Agricultural lands located in India
  2. The Revenue earned from any Agricultural lands through the process of commercial production of goods obtained from the said agricultural land.
  3. The Revenue earned from leasing or renting of any such buildings located within or surrounding the agricultural plot.

The conditions mentioned for this point are:

  • The said building should be occupied by any farmer or any cultivator by the process of paying rent.
  • The said building is being used as a storehouse or warehouse.
  • The agricultural land on or around which this building is located is assessed for local evaluation rates or land taxes as stated by the Government officials.

Types of Agricultural Income

The types of agricultural income areas are listed below:

Income received as revenue from any agricultural land: Rent can be defined simply as payment in cash or kind that the landowner accepts from a person through consideration of grants of land-use rights.

Any amount gained (in the form of cash or kind) from the cultivator by the landowner is agricultural income whether he performs operations himself or on a contract basis.

Income obtained from Agricultural Operations: Income acquired from lands that are located in India by utilizing agricultural regulations is considered agrarian income.

If all the fundamental procedures, such as land preparation for activities like planting, sowing, watering, etc., are practiced, any income resulting from these operations is agricultural income. Agricultural income also constitutes income from horticultural lands or orchard farming.

Income obtained from the cultivator by the performance of marketing goods: Suppose a means is not yet employed by the cultivator or the landlord receiving the product as revenue in kind.

In that case, any income acquired from such a process (as mentioned before) is considered agricultural income. This process is crucial to render the products suited for marketing. This method may be either manual or automated.

Taxability of Agricultural Income in India

The Income Tax Act has issued a method to tax agricultural income, indirectly called Partial Integration of agricultural income. Its objective is to tax non-agricultural income at high rates. The following conditions must be met to utilize this method.

It is compulsory for Individuals, Artificial juridical persons, HUF, BOI, and AOP, to calculate their taxable income utilizing this method.

Thus Company, LLP, Firms, local authorities, and co-operative societies are eliminated from using this method.

The total agricultural income is larger than Rs. 5,000 during the fiscal year.

Non-agricultural Income

Greater than Age
Rs. 2,50,000 below 60 years
Rs. 3,00,000 60 – 80 years
Rs. 5,00,000 above 80 years

Calculation of Tax on Agriculture

Step 1: Evaluation of tax on non-agricultural income and total agricultural income.

Step 2: Calculate tax on total agricultural income and maximum exemption limit according to slab rates.

Step 3: Calculate the annual tax as a difference in the amounts as calculated in Steps 1 and 2. An individual can obtain the following:

  • Deduction of any individual who has paid excess taxes or rent, if available.
  • Incorporation of surcharge if it is applicable.
  • Addition of Cess on Health and Education.

Factors to Consider for Amounts Earned through Agricultural Income

To categorize revenue earned from agricultural land, one should consider the factors below.

  • Presence of land: The income derived should be acquired from an existing plot of agricultural land.
  • The utilization of land for agricultural purposes: Revenue or rent obtained from the farmland and the income gained by a cultivator via the sale of products should be based on agricultural procedures on a plot of land. Besides the revenue obtained from agrarian policies, the scope of agricultural assets also comprises operations undertaken to make the products marketable.
  • Cultivation of land is compulsory: An individual should generate income by way of land cultivation. Agricultural income includes the whole land produce like commercial crops, grain, fruits, etc.

But it does not involve using a plot of land for activities like poultry farming, dairy farming, breeding of livestock, and such others.

  • Ownership of land is optional: The law has not made the cultivator the landowner obligatory in agricultural procedures.

However, in cases concerning revenue or rent, includes an individual who must possess an interest in the farmland, either as an owner of the land or a contractor.

Taxability for Unique Cases

Suppose your income is Rs 2,80,000, and your agricultural income is Rs 3,50,000 from 2018 to 2019 or 2019 to 2020. In that case,

Calculation of tax on total income of Rs 6,30,000

Specifications Amount
Tax on Rs. 2,50,000 –
Tax on the following Rs. 2,50,000 at 5% 12,500
Tax on remainder of Rs. 1,30,000 at 20% 26,000
Gross Tax 38,500

Calculation of tax on basic exemption limit and agricultural income

Specifications Amount
Tax on Rs. 2,50,000 –
Tax on the following Rs. 2,50,000 at 5% 12,500
Tax on the remainder of Rs. 1,00,000 at 20% 20,000
Gross Tax 32,500
Tax on Agricultural incomes 6,000
Rebate under 87A 2,500
3,500
Other applicable Cess 105
Total payable tax 3,610

Agricultural Income Tax Limit

Capital Gains will not occur for sales of land situated in Rural Areas since it is excluded from the section on Capital Asset. However, Capital Gains will occur on the sale of land located in Non-Rural Areas, as mentioned.

But the exemption can be claimed from such Capital Gains as mentioned under Section 54B for investment in agricultural land. The new agricultural land acquired may either be Rural Land or Non-Rural Land.

To claim an exemption under Section 54B, people should meet the following criterion.

  • The exemption can be claimed only by Individuals or HUF.
  • The transferred asses (long term or short term) must be an agricultural plot.
  • The plot must be used for agriculture by Individuals (or guardians) for two years and HUF by any members.
  • If a person cannot acquire a new field before the due date for income tax filing, they should deposit the Capital Gain in the Account Scheme.

Agricultural Tax Exemption from Income Tax

Conditions

  • The total agricultural income is lesser than Rs. 5,000
  • The income from agricultural land is the solitary source of income.
  • Both agricultural and other sources of income and the total income except agricultural income are smaller than the basic exemption limit.

If the agricultural income exceeds Rs. 5,000, and there are other sources of income. In that case, the tax liability for that year will be as follows:

  • Calculation of income tax on the aggregate income according to the prevalent tax rates.
  • Computation of income tax on aggregate of basic exemption limit and agricultural income according to the prevalent tax rates and calculate the tax liability for the fiscal year.

FAQ’S on Agricultural Income Tax Calculation

Question 1.
What amount of income enjoys tax exemption?

Answer:
Agriculture income is exempted from additional taxes. However, the state government may charge agriculture tax from a person’s income.  An amount of up to Rs. 5000 revenues from agricultural activities are not taxable.

Question 2.
How does one calculate agricultural income?

Answer:
You can compute agriculture income by subtracting expenses of agriculture causes from the total agriculture revenue.

Question 3.
What is meant by partial agricultural income?

Answer:
Partial agriculture income is that income where one cultivates agricultural products and uses them as raw materials to manufacture products. The income from product sales is known as partial agriculture income.

Question 4.
What if someone practices agricultural activities on urbanized land?

Answer:
The provision of taxability on agriculture income remains the same and applies to payment obtained from urbanized land.

Question 5.
Is income from animal husbandry be considered as agricultural income, then?

Answer:
No. Any such income generated from animal husbandry will not be considered as agriculture income.

Question 6.
Calculation of taxes on agricultural income?

Answer:
Process:

  • Additional agriculture income and non-agriculture income.
  • Calculating taxes on net income
  • Adding the basic exemption limit to total agriculture income

Question 7.
Calculating income tax.

Answer:
Process:

  • Subtracting the amount of income tax from the amount on net income
  • Subtracting deduction as per Section 87A
  • Addition of health Cess

Question 8.
What kind of income is not considered agricultural income?

Answer:
Income from activities like Livestock, Dairy, Poultry farming, or Pisciculture is not considered agricultural income.

Question 9.
What is Section 54B under the Income Tax Act of 1961?

Answer:
Section 54B stated information related to the exemption available for the individuals and HUF.

Suppose Individual/HUF is trading urban agriculture land and acquiring urban/ rural land within two years of the date of transfer. The exemption would be available for lower capital.

Gross TotalIncome

Gross Total Income (GTI) | What is GTI? and Difference Between GTI and TI

Leave a Comment / Income Tax / By / February 21, 2024

Gross Total Income (GTI): Tax in itself is a tedious phenomenon, and the complexity increases when various terms are also included in the list. We all know that tax is charged levied on an individual’s income. However, the pay can further be classified and referred to by numerous names in India, such as

  • Exempt Income
  • Taxable Income
  • Total income
  • Gross Total Income Etc.

In this article, we will discuss the understanding of the Gross Total Income or GTI.

What is Gross Total Income?

As the title suggests, Gross Total Income is the accumulation of all the income earned by an individual during a specific period. As per Section 14 of the 1961 Income Tax Act, the income of any individual or any assessee can be classified under these five categories,

And, the Gross Total income is calculated when the earnings from all the five categories of income are taken under together.

Taxation calculation and investment in tax-saving schemes are essential annual exercises if you are earning money. In India, one may feel overwhelmed with the number of many tax jargons and numerous deductions.

The 1961 Income Tax Act defines both the terms as follows:

Section 80B (5) of the IT Act defines the Gross Total Income

  • Includes income received or receivable by an individual in the prior-year adjusted for the clubbing and carry-forward amounts from previous years.
  • Deduct the non-taxable parts of one’s income from this amount to estimate ‘Gross Total Income.’

What are the Various Additions that Needed to be Made in the Gross Total Income?

Apart from summing up the earnings from all the five categories of income, the following might also be added in order to calculate one’s total gross income.

  • Income to be added according to the clubbing provisions under the Income Tax Act.
  • Adjustments for the set-off and carry forward of the losses.
  • Unexplained Tax Credit under section 68 of the 1962 Income Tax Act, received in cash or credit. This implies receipt of any amount of which one does not have sufficient or valid explanation describing the source of receipt of such income. These kinds of income are added to one’s Gross Total Income.
  • Unexplained Investments, i.e., the investments one has made, but one cannot give a satisfactory explanation about the source, or improper disclosures have been made on their part. In all such situations, their investments are going to be termed unexplained investments as per the purview of section 69 of the 1961 Income Tax Act. Also, it shall be added to the Gross Total Income (GTI)
  • Assets and other income under Section 69A, valuables such as money, jewelry etc., for which no proper explanation is ready with the assessee, is going to be added to the Gross Total Income of the individual.
  • Undisclosed or the lower disclosed income is going to be added to the individual’s Gross Total Income as per Section 69B of the 1961 Income Tax Act. This relates to all those income and assets that have not been reported or made a lower disclosure than the actual funds.
  • Unexplained expenditures under section 69C. Suppose one has made some expenses and no proper explanation regarding the same available. In that case, it is going to be added to the Gross Total Income and subsequently charged to taxes accordingly.
  • Hundi amount borrowed or repaid. Suppose one has taken or refunded a particular amount on the Hundi. In that case, it is going to be added to the individual’s Gross Total income or GI according to the provisions of section 69D of the 1961 income tax act.

Even though we have understood the above income and assets or expenditures added to the total gross income, these additions or the nature of additions are not usually witnessed in routine.

Why Must the Gross Total Income (GTI) be Calculated?

The computation of total gross income is necessary as

  • It is the amount needed to be disclosed when filing the Income Tax Return.
  • Deductions under Chapter VI A are needed to be deducted from the GTI to arrive at the taxable or total income.

Gross Total Income is not going to include:

While calculating the total gross income, one is needed to sum up all of their income without reducing the amount for any tax-saving investments that have been made under Section 80C to 80U under the 1961 Income Tax Act.

What is the Total Income? State the Difference Between one’s Gross Total Income (GTI) and the Total Income?

The income that arrived after claiming all the allowable deductions from an individual’s Gross Total Income is known as the individual’s Total Income.

Gross Total Income is the sum of all of the income an individual receives during a year. On the other hand, Total income is the amount of income subject to taxation after all the allowable deductions from Total Income or exemptions have been subtracted from the Gross Total Income.

Total income =Gross Total Income –Allowable Deductions

When Do Taxpayers have to Pay the Taxes on their Income?

The taxes on one’s income can be finalized after the completion of the previous year. But, to enable a regular flow of the funds and easing the taxes collection, the 1961 Income-tax Act has provisions for payment of taxes in advance during the year of earning itself or prior to completion of the previous year. It is also known as the Pay as one’s made concept.

The Government collects taxes by the following means:

  • Voluntary payment by the country’s taxpayers into different designated Banks like the Self-Assessment tax, Advance tax, etc.
  • Taxes deducted at source.
  • Taxes collected at source
  • Equalisation Levy

FAQ’s On Gross Total Income

Question 1.
What is included in total gross income?

Answer:
Gross income is an individual’s income earned, the total income on a paycheck before the taxes and others are deducted. It involves all the incomes of an individual from all the sources – including wages, interest income, rental income, and dividends.

Question 2.
How do I calculate the gross income from net income?

Answer:
Revenue – Cost of the Goods Sold – Expenses = Net Income

The first part of the formula, revenue subtracted from the cost of goods sold, is also the formula for gross income.

Question 3.
Is total gross income yearly or monthly?

Answer:
Gross income refers to the total amount earned by an individual before the taxes and other deductions, just like the annual salary. In order to determine gross monthly income, divide the full salary by 12 for the months in the year.

Speculative Income

Speculative Income | Meaning, Eligibile Transactions and Considerable Exceptions

Leave a Comment / Income Tax / By / February 21, 2024

Speculative Income: Under the Income Tax Act, one can categorize income earned under five significant heads. Hence, the proper classification of income is essential owing to the various methods of calculation. Among these types of income, one can be termed Speculative Income.

What is Speculative Income?

We can categorize the income earned by taxpayers under five primary columns such as income earned from salary, income earned from property, income earned from business, income earned from capital gain, and income earned from sources, excluding the ones mentioned.

It is necessary to correctly categorize income earned, following the various methods of computation of taxes, incentives, and deductions.

Through the thorough calculation of the income, one can put them under the categories of income earned from business, salary, property, capital gains, or other sources.

According to the Income Tax Act, Speculative income is the kind of income that results from a said ‘Speculative Transaction.’

Understanding Speculative Transaction

If someone could define the phrase ‘Speculative Transaction,’ it would be interpreted as a type of transaction where the said contract includes the records of sale or purchase of certain assets such as shares, stocks, or commodities over a fixed period.

For example, in the case of the shares of intra-day trading, it can be considered the simplest example of a Speculative Income source since there is no such delivery or exit from the trading profile. The entrance and exit of sales can be traced as the same day and are not entered in the Demat Account.

The term ‘intra-day trade’ refers to the process of trading that takes place within one day or 24 hours. Owing to the scenario where no delivery is seen to take place, it can be categorized under the head of ‘Speculative Transaction.’

Considerable Exceptions

The points stated below are certain transactions that have been expressly prohibited from being manipulated as Speculative transactions under the Act.

A Hedging agreement concerning merchandise or raw materials

It is an agreement an individual enters during the production or marketing of their business, concerning raw materials or commodities, to restrict loss.

Such said loss may occur due to anticipated pricing inconstancies about their arrangements for the actual delivery of manufactured goods or the commodities sold by them.

These arrangements cover business losses concerning raw materials or items through actual delivery.

Hedging agreement concerning shares or stocks

This is an agreement about stocks and shares an individual dealer or investor enters to restrict loss in their stock holdings and allocations through value inconstancies.

Forward contract

This is an agreement for an individual who is a member of a particular forward market or stock exchange during any transaction such as jobbing or arbitrage to restrict loss that may appear in the regular course of their business.

A forward market is a type of marketplace that installs the price of a financial tool or asset for scheduled delivery.

Dealing in derivatives

A transaction that is conducted electronically on screen-based operations through a verified broker according to relevant laws and supported by a time-marked contract.

It symbolizes unique client identity and PAN number concerning trading in derivatives as referred to in the Securities Contracts Act of 1956.

Dealing in commodity derivatives

A transaction that is conducted electronically on screen-based operations through a verified broker according to relevant laws and supported by a time-marked contract.

It symbolizes unique client identity and PAN number concerning the trades in commodity derivatives born out in an acknowledged association that is liable to commodities transaction tax as mentioned under Chapter VII of the Finance Act of 2013.

Speculative Business Loss

Suppose a taxpayer is conducting many businesses simultaneously, besides a speculative trade. In that case, such speculative business of the said taxpayer is necessary to be deemed as discrete and separate from any other firms conducted by the same taxpayer.

Treatment of Loss from Speculative Business

  1. Processing speculative businesses as discrete and separate firms are essential for activating the loss provisions.
  2. According to Section 73 of the Act, losses arising from speculation business can be activated only against the gains from speculative trade, unlike losses from any other firm, which an individual can initiate against the profits of any such interaction.
  3. Moreover, one can activate the loss from a specific speculation business advanced into the following year only against the gains of any speculative trade in the next year.
  4. Besides managing a speculative business as a separate business, an individual should also handle the profits and losses emanating from speculative transactions as distinct from other profits and professional gains.
  5. Loss resulting from speculative business cannot be born out for more than four assessment years from the successive year in which loss is incited.
  6. Moreover, if reduction and capital investment on scientific research incurred in speculative business are being led forward, such depreciation or capital expenditure should be activated first.

Loss under Section 73 of the Act

  • The individual should not activate the loss as estimated regarding the said speculation business as led by the individual except against the profits of another speculation business.
  • Suppose the loss calculated regarding speculation business has not been totally set off for any assessment year, where the assessee had zero income from the other speculative business. In that case, they are subject to additional stipulations and thereby led forward to the next assessment year:
    • If any, it shall be put against the profits by the speculation business led for that particular assessment year.
    • If the assessee cannot activate the loss entirely, the firm should lead the loss forward to the next assessment year.
  • Regarding allowance on the calculation of reduction and capital investment made for scientific research (as per subsection 2 of 73), the provisions employed to speculation business are made in such other firms.
  • No loss is to be carried forward past four assessment years from the year in which the business incurred the loss.
  • One must consider that a section of the business containing the purchase and sale of shares of any other firm should be assumed to lead a speculation business to the extent to which the company consists of purchasing and selling such assets.

What is Eligible Transaction?

‘Eligible Transaction’ is defined below:

  • A transaction executed electronically through a stockbroker or sub-broker or any agents registered under Section 12 of the Act. Those who have followed the requirements of the following rule and regulations issued under the Acts by a bank or mutual fund on any of the acknowledged stock exchanges:
    • Securities Act of 1956
    • Securities and Exchange Board of India Act, of 1992
    • Depositories Act of 1996
  • A transaction approved by a time-stamped contract issued by a stockbroker or sub-broker/other agents to every client indicates the unique client identity number and PAN as granted.

Understanding Eligible Transaction for Commodity Derivatives

‘Eligible Transaction’ for commodity derivatives is defined below:

  • A transaction executed electronically through a member or an intermediary registered according to the rules and regulations of the acknowledged organizations for dealing in products derivative as per the provisions, bye-laws, and directions issued under the Forward Contract Act of 1952.
  • A transaction approved by a time-stamped agreement issued by any member or intermediary to clients indicating the unique client identity number as allotted under the Act rules, directions, unique trade number, the bye-laws as mentioned in the sub-clause(A), and permanent account number authorized under the Act.

Important Points

  • Turnover for Speculative business: The sum of positive and negative anomalies is called turnover.
  • Speculative loss: A business where purchases and sales of assets are made and delivery is unaffected is called a speculative transaction. A loss in this transaction is a speculative loss.
  • Taxes Speculative Income: Intra-day trading where the speculation gains occur regularly is a speculation business transaction.
  • Non-Speculative business: A transaction of purchase or sale of commodities settled differently than delivery, transfer, or scrip is a speculative transaction. Any other business is a non-speculative business.
  • Speculative trade– Trading an asset with a high-risk rate and expecting more returns to make more profit is a Speculative Trade.

At What Point is Audit Mandatory?

An audit is necessary if an individual has a business income and if the business turnover rate is more than Rs 1 crore. The audit is also a requirement according to section 44ADA in the cases where the turnover rate is less than Rs. 2 Crores but the business profits are lower than 8% of the turnover rate, and the total income is exceeding the minimum exemption limit.

Hence, the applicability of tax audit in the case of F&O Trading complies with the following:

  • In the case of Profit gained from transactions of F&O Trading:
  • In Profit gained from derivative transactions, the tax audit is applicable if the turnover rate exceeds Rs. 1 crore.
  • Tax audit under Section 44AB is also applicable if the net profit from any such transactions is lower than 8% of the turnover rate from such transactions.

In the case of Loss from F&O Trading:

  • In the case of Loss from derivative trading, since profit is lower than 8% of the turnover rate, the Tax Audit is applicable under Section 44AB of the Act.

Tax Handling of Derivative

If any individual is trading in the stock market regularly (mainly non-delivery trade), the returns obtained from it can be categorized as follows:

  • Speculative Business Income: Individuals can categorize profits earned from intra-day trading under speculative business income. Tax treatment is similar to business income tax. Individuals can tax as per the tax slab their business falls under and offset the losses only against speculative gains.
  • Non-speculative Business income: An individual can categorize income earned from trading advantages on recognized exchanges (like equity, currency, and commodity) under non-speculative business income.

Taxes levied on share trading in these cases are similar to the business income tax. According to the tax group they fall in, a person can tax the profits earned on F&O trading, whereas they can put off the losses on such F&O trading against business profit.

  • Loss regarding Non-Speculative Business Income: One can apply the loss regarding such a business against any other source of income.
  • Loss regarding Speculative Business Income: Individuals cannot set off loss regarding speculative business against any other sources of income. One can apply it only against additional speculative revenues in the same year. If not used, they should carry such losses forward.

Why can’t Singular Transactions Constitute Speculative Business?

According to Section 28, it is clear that speculation business should be separate and discrete, while Section 43(5) describes the term speculative transaction.

Through, one cannot apply the provisions unless the loss concerns speculative business. In almost every segment, there is a reference to ‘speculative transactions’ that indicates that if the speculative business should progress within the extent of the given explanation, a particular transaction is inadequate unless there is an organized activity course.

Hence, a single transaction made instead of actual delivery is not sufficient as per section 28 of the Act.

F&O in Share and Commodities

F&O or Futures and Options in the subject of shares or commodities is not considered a speculative business if it is a qualified transaction, as mentioned in the sections of the Income Tax Act and executed in a recognized Stock exchange or a renowned association.

Maintaining Books of Accounts

All the transactions implemented must be recorded, such as buying and selling, electricity and phone bills expense, Demat charges, etc.

If a trader is involved in various trades such as intra-day, F&O Trading, investing in MFs, one should disclose the business income earned from each clearly since the tax treatment is different for each type of trade.

We can categorize the everyday expenses depending on the amount of time spent on these various types of businesses by taxpayers.

Renowned Stock Exchanges in India

The renowned Stock Exchange Limited and the United Stock Exchange of India Limited are a part of MCX, which is the abbreviation of Multi Commodity Exchange. They are some of the most famous stock exchange associations located within the Indian subcontinent. NSE or National Stock Exchange and BSE or Bombay Stock Exchange are the most well-known Stock Exchanges in India.

FAQ’S on Speculative Income

Question 1.
How can we calculate turnover for a ‘speculative business’?

Answer:
In the case of speculation business, the aggregate of both positive and negative differences in the business’s turnover.

Question 2.
What is meant by the term ‘speculative loss’?

Answer:
At a business transaction where delivery of assets is not affected, it is a ‘speculative transaction’. The loss arising from a speculative business transaction is a ‘speculative loss’.

Question 3.
How does one tax speculative incomes?

Answer:
According to Section 43(5) under the Income Tax Act of 1961, we can consider an intra-day trade as speculative, and the income earned from it would be either speculative loss or profit. Tax levied on income from such speculation is done at regular rates like other businesses.

Question 4.
How does one define a non-speculative business?

Answer:
Purchasing or selling assets, including stocks and shares resolved differently from actual delivery or transfer of the item, is termed a speculative transaction. The business that consists of speculative transactions is called a speculative business. A business other than a speculative business is named a non-speculative business.

Question 5.
What does speculative trading mean?

Answer:
Speculation is the name given to trading in an asset or handling a financial transaction with a risk of loss. The goal is to take the highest advantage of rate inconstancies in the market.

Question 6.
Can we consider Dabba Trading a speculative transaction?

Answer:
Dabba trading, where the broker assists the taxpayer in dealing outside the stock exchanges is considered a speculative transaction.

Question 7.
What are some exceptions considered in the subject of speculative income?

Answer:
Certain transactions may appear speculative but have explicitly been excluded from the interpretation of speculative transactions. Hedging contracts regarding raw materials or commodities, hedging contracts concerning forward contracts, stocks, and shares, and dealing in and commodity derivatives.

Conclusion on Speculative Income

Understandably, under the Income Tax Act of 1961, speculative income is a complex deal and, at times, can be pretty risky. The taxpayers have to administer several transactions and their actual reliability as a speculative business.

It is crucial to conclude whether a speculative transaction can obtain good profits within the asserted rights. Sometimes, several transactions are misrepresented or misunderstood as speculative transactions depending on the non-delivery of shares and commodities and based on the business’s purpose.

One should be meticulous with all the clauses to conclude which transaction is speculative and file the tax and other approved purposes accordingly.

Section 64 Clubbing Income

Section 64 Clubbing Income | Specified Persons and Scenarios for Clubbing Income

Leave a Comment / Income Tax / By / February 21, 2024

Section 64 Clubbing Income: There are many occasions when an individual may need to club the income of someone else with the individual’s income. If one is planning to transfer any of the assets/income owned by an individual to another person as a means of tax planning for avoiding the income getting taxed in the individuals’ hands, hold on. Such transfers can result in the attraction of the clubbing provisions under the laws of Indian income tax.

Even genuine gifts extended to an individual’s kith and kin can have such income tax implications. It will help an individual immensely if they get some insights on the clubbing provisions under the laws of Indian income tax. Therefore, let us understand these requirements a little more in detail.

Clubbing of Income

As the phrase suggests, clubbing of an individual’s income implies adding or including another individual’s income (mostly family members) to one’s income. This is permitted under Section 64 of the IT Act. However, some restrictions about the specified individual(s) and specified examples are mandated to discourage this practice.

Specified Persons for Clubbing Income

The income of any individual cannot be clubbed on a random basis when computing the total income of any individual. Also, not all income of a specific person can be clubbed. According to Section 64, there is the only particular specified income of particular individuals which can be clubbed when computing the total income of an individual.

Specified Scenarios When One Can Club Income

Section Specified person Specified scenario Income to be clubbed
Section 60 Any person Transferring income without transferring the assets either by the way of any agreement or any other way, Any income from such an asset is going to be clubbed in the hands of the transferor

 
Section 61 Any person Transferring the asset on the condition which it can be revoked Any income from these assets are going to be clubbed by the hands of the transferor
Section 64(1A) Minor child Any income arising or increasing to the minor child where the child includes both a stepchild and adopted child. The clubbing provisions apply to even minor married daughters. Income is going to be clubbed by the hands of higher-earning parents.

Note:

In case the marriage of the child’s parents doesn’t exist, income should be clubbed into the payment of the parent who has maintained the minor child in the year before.

In case a minor child’s income is clubbed in the parent’s hands, then the exemption of Rs. 1,500 is permitted to the parent.

Exceptions to clubbing

Income for a disabled child (disability of nature that has been specified in section 80U)

Income is earned by the manual work done by the child or by the activity involving the application of their skill and talent or specialised knowledge and experience.

Income earned by a notable child. This is going to also include income earned from the investments made out of the money given to the adult child. Also, the money that is given to an adult child is exempted from the gift tax under gifts to ‘relative’.
Section 64(1)(ii) Spouse** In case a spouse receives any remuneration irrespective of the nomenclatures like Salary, fees, commission or any different form and by any mode, i.e., cash or in-kind, from a concern in which an individual has substantial interest* Income should be clubbed in the taxpayer’s hands or spouse, whose income is greater (before clubbing). The privilege of clubbing: Clubbing is not attracted in case the spouse possesses professional or technical qualifications concerning any of the income arising to the spouse, and this income is entirely attributable to the application of the professional or technical knowledge and experience.
Section 64(1)(iv) Spouse** Direct or indirect transfer of the assets to the spouse by an individual for the inadequate consideration Income from out of this investment is clubbed in the transferor hands. Provided the support is different than the house property.

Exceptions for clubbing of No clubbing of income in the stated cases:

a. Where the asset has been received as part of the divorce settlement

b. In case the assets are being transferred prior to marriage

c. No husband-and-wife relationship survives on the date of accrual of income

d. Asset out of pin money (i.e., an allowance that is given to the wife by her husband for the personal and general household expenses)
64(1)(vi) Daughter-in-law Transfer of the assets transferred directly or indirectly to the daughter-in-law by the individual for the inadequate consideration Any income from these assets transferred is clubbed in the transferor hands.
64(1)(vii) Any individual or association of person Transferring any of the assets directly or directly for the inadequate consideration to any individual or association of persons to benefit the daughter-in-law either immediately or on a deferred basis Income from these assets is going to be considered as the individual’s income and clubbed in their hands.
64(1)(viii) Any individuals or association of person Transferring any of the assets directly or directly for the inadequate consideration to any individual or association of persons for benefiting their spouse either immediately or on a deferred basis Income from these assets is going to be considered as the individual’s income and clubbed in their hands.
Section 64(2) Hindu Undivided Family In case the member of a HUF transfers their individual property to the HUF for inadequate consideration or converts this property into the HUF property, Income from this converted property is going to be clubbed in the hands of an individual.

*An individual is known to have a strong interest in the concern in case–

  • If in a company, a person either by themselves or along with their relative/s beneficially owns the shares having 20% or more for voting power (not being shares entitled to a particular rate of the dividend whether with or without a further right for participating in profits)
  • In any other scenarios, such people, either singly or along with their relative/s, is entitled to 20% or more of the profits in the aggregate of these concern at any time during the year before.

**Income from these reinvestments of the clubbed income by an individual’s spouse is not going to be clubbed in the individual hands.

Situation 1

Ms. P owns a shop that has a rent of Rs.12,000 each month. She transfers the rent to her friend Mr. S but holds onto the ownership of the shop.

In this case, Ms. P has transferred the source of income without transferring the asset itself. Hence, according to section 60 of the income tax act, Ms. P needs to include the rental income when computing her total income.

Situation 2

Mrs. Jayita is beneficially holding the 21% equity shares of the PTK Pvt. Ltd. Her spouse has been employed as a finance manager in the same company. The monthly salary received from the company is Rs. 40,000. Mrs. Jayita’s spouse is not having any qualifications, experience, or knowledge of finance.

In this scenario, Mrs. Jayita has a keen interest in PTK Pvt. Ltd., With a 21% shareholding. But her spouse is employed without any such qualification or technical knowledge of finance. Hence, the salary received by her spouse from the company is going to be clubbed with the income of Mrs. Jayita according to section 64(1)(ii) of the income tax act.

In this case, if Mrs. Jayita’s husband had the qualification and the knowledge for the finance management post in PTK Pvt. ltd., then the income earned by her spouse would not be clubbed with the income of Mrs. Jayita.

Situation 3

Mr. Sunny has gifted Rs. 6,00,000 to his wife. Mrs. Sunny has invested this same amount in a fixed deposit. Mrs. Sunny gets the interest of Rs. 5,000 p.a. from such a fixed deposit.

Mr. Sunny has transferred the Cash (asset) without proper consideration, and it has been converted into a new purchase by Mrs. Sunny. Therefore, interest earned of amount Rs. 5,000 from the converted asset (fixed deposit) is going to be clubbed in Mr. Sunny’s income according to section 64(1)(iv) of the income tax act.

Note:

  1. In the case in the above scenario, Mr. Sunny transfers the asset as a settlement for a divorce, so clubbing provisions will not be applied.
  2. Also, in case the cash had been transferred prior to marriage and interest is accrued after marriage, no income is going to be clubbed in the hands of Mr. Sunny.

Therefore, the relationship of husband and wife has to exist at the time of transfer of the asset(s) and during the time of the accrual of income.

Things To Keep in Mind

  • The clubbing provision is applicable for Income and loss both.
  • Capital gain on any transfer of any asset by the transferee will be considered income, and it must be clubbed into the transferor’s income.
  • The income accrued from the converted form of any asset must be clubbed into the hands of the transferor.
  • If part consideration is paid or payable, only the inadequate care is going to be clubbed transferor’s hands.
  • The clubbing provisions are not going to be applicable to the income accrued from the clubbed income.

For example, if Rs. 5 lakh is transferred to the spouse or the daughter-in-law without proper consideration and interest of Rs. 20,000 on these bonds are clubbed transferor’s hands. However, if the spouse or the daughter-in-law further gets any income from these interests of Rs. 20,000, no clubbing provisions are going to be applicable on such income.

The clubbing provisions are going to apply in case of indirect transfers or cross transfers as well.

For example: In case Mr. M gifts a sum of Rs. 8,000 to Mrs. S and Mr. S gifts a sum of Rs. 15,000 to Mrs. M. Say both the gifts have been given without any consideration. Then the overlapping amount – Rs. 8,000 is going to be clubbed in the hands of the transferors.

Is a minor child’s income going to be clubbed with the income of the parent? Or how can a parent claim the TDS deducted from their minor’s child’s income?

According to section 64(1A), a minor child’s income will be clubbed with their parent’s income (*). Income of a minor child that has been earned on account of manual work or other activities involving the application of the child’s knowledge, skill, talent, or experience, etc., is not going to be clubbed with the parent’s income. However, accumulation from this income is going to be clubbed with the income of the parent of such a minor child.

A minor child’s income will be clubbed with the income of the parent whose salary (excluding the minor’s income) is more significant.

In case the marriage of guardians does not sustain and ends up in divorce, then the minor’s income is going to be clubbed with the parent’s income who takes care of the minor.

In case the income of the parent of the child involves the income of their minor child, these individuals can choose to claim an exemption under section 10(32)) of Rs. 1,500 or the wage of the minor child so clubbed, whichever is lesser.

(*) Provisions of section 64(1A) are not going to be applicable to any income of a minor child who has any disability specified under section 80U. In other words, the income of a minor child who has any disability that has been established under section 80U is not going to be clubbed with their parent’s income.

Situation 4

Mr. Akash has two minor children, that is Master M, and Master N. Master M is a child artist, and Master N suffers from a disability specified under section 80U. Income of M and N are as follows:

  • Income of M from stage shows Rs. 1,00,000
  • Income of M from bank interest: Rs. 6,000
  • Income of N from bank interest: Rs. 1,20,000.

Will the income of these minor children – M and N – be clubbed with the income of their parents (Mrs. Akash does not have any income)?

According to section 64(1A), the income of a minor child is clubbed with the income of their parent whose income (excluding the minor’s income) is higher. In this scenario, Mrs. Akash does not have any such income and, thus, if any income is going to be clubbed, then it is going to be clubbed with the income of Mr. Akash.

Income earned by a minor child on account of manual work or income from their knowledge, skill, talent, or experience, etc., of the minor child, is not going to be clubbed with the income of their parents. Thus, the income of M from the stage show is not be clubbed with the income of Mr. Akash but the income of M from the bank interest of Rs. 6,000 is going to be clubbed with the income of Mr. Akash.

The income of a minor who suffers from a disability specified under section 80U is not going to be clubbed with the income of the parent. Thus, any income of N will not be clubbed with the income of Mr. Akash.

The taxpayer can choose to claim an exemption under section 10(32)). Hence, in respect of the interest income of Rs. 6,000 clubbed with the income of Mr. Akash, and he is going to be entitled to claiming exemption of Rs. 1,500 under the section 10(32)). Thus, the net income that will be clubbed will be Rs. 4,500 (as., Rs. 6,000 – Rs. 1,500).

Deductee files as a declaration from the deductor. The deductor reports the tax deduction in the other individual’s name in the information related to a tax deduction as referred to in the sub-rule (1) of rule 37BA.

Will, any of the provisions of clubbing be applied in case the asset(s) are transferred to a Hindu Undivided Family (HUF) by the family member?

According to section 64(2), when a person, being a member of a HUF, transfers their property to the HUF or for adequate consideration, otherwise converts their property into a property that belongs to the HUF (this is done by associating such property with the character of the joint family property or throwing this property into common stock of the HUF), then clubbing provisions will be applicable as follows:

Before a HUF part, the whole income from this transferred property is going to be clubbed along with the transferor’s income.

On the partition of the family, this property is distributed between the members of the HUF. In such a scenario, the income incurred from this transferred property by the transferor’s spouse is going to be clubbed along with the income of an individual and is going to be charged to tax in their hands.

Can income from the transferred assets to an individual for the benefit of the spouse or advantage of the son’s wife without proper consideration be clubbed to the transferor’s income?

According to section 64(1)(vii), if a person transfers (directly or indirectly) their asset otherwise for proper consideration to an individual or an association of people for the immediate or deferred benefit of their spouse, then income that arises from this asset that has been transferred is going to be clubbed with the transferor’s income.

According to section 64(1)(viii), if a person transfers (directly or indirectly) their asset otherwise for adequate consideration to an individual or an association of people for the immediate or deferred benefit of their son’s wife, then income coming from the asset(s) that have been transferred will be clubbed with the transferor’s income.

Can income from the transferred assets to the son’s spouse without regular consideration be clubbed along with the transferor’s income, i.e., father-in-law or mother-in-law?

According to section 64(1)(vi), if a person transfers (directly or indirectly) their asset to their son’s spouse otherwise than for adequate consideration, then income from this asset will be clubbed along with the income of the person (i.e., transferor being father-in-law or mother-in-law). The provisions for clubbing are going to apply even if the asset form is alerted by the transferee- son’s spouse.

In case the assets are being transferred prior to the marriage of the son, no income is going to be clubbed from the asset even after they get married, as the relation between the father-in-law or the mother-in-law and son’s spouse must exist both during the time of the transfer of the asset and at the time of the collecting of income from the asset.

If the relation between the father-in-law or the mother-in-law and son’s spouse doesn’t exist on the date of collection of income, then the clubbing provisions are not going to apply.

In which situations make the clubbing provisions does not apply if the income from transferred assets to spouse?

The provisions of clubbing of section 64(1)(iv) are not applied in the following situations:

  • If the asset transfer is for proper consideration;
  • If the asset transfer is connected with an agreement of living apart;
  • If the asset transfer is done before marriage, no income is going to be clubbed even after the wedding, as the relation of spouses must exist both during the time of transfer and collection of income.
What is VID Number

What is VID Number? | Advantages, Characteristics, Validity, Requirements and Legal Offences

Leave a Comment / Finance / By / February 17, 2024

What is VID Number?: As proposed by the Unique Identification Authority of India (also known as UIDAI) is a unique feature for the citizens of India. It will ensure the security of sensitive information and enable authorization of transactions through increased safekeeping of crucial data such as name, address, photographs instead of their Aadhaar number.

What is Meant by VID?

As per the UIDAI, VID is a unique 16 digit random number that users can use instead of the Aadhaar number. The full form of VID is Virtual Aadhaar ID. It is a digital ID; hence it can be regenerated by the users more than one time. The VID allows users to authenticate transactions and their KYC services using the VID Number instead of the Aadhaar number.

The Aadhaar Virtual ID can be generated via an OTP-based registered mobile authentication; therefore, the users must register their mobile number with the UIDAI database. As of June 1st, 2018, VID Registration has been made mandatory for applicants and agencies by the UIDAI.

Get the details on How to Correct or Update Aadhar Card?

The Process of Generation of VID

The Steps to generate Aadhaar Virtual ID are listed below in detail:

  • Step 1: Go to the official online portal or website of UIDAI.
  • Step 2: Select the option’ Virtual ID Generator’ in the tab names’ Aadhaar services.’
  • Step 3: The VID Generation page will open. Enter your 12-digit Aadhaar number plus your security code.
  • Step 4: Click on the option titled ‘Send OTP.’ Shortly, an OTP will be sent to the mobile number that the user registers.
  • Step 5: Enter the OTP and click on the option ‘Generate VID or the ‘Retrieve VID’ option.
  • Step 6: Click on the ‘Submit’ option.
  • Step 7: If you have successfully registered, you will receive a verification message on the registered number containing a 16-digit Virtual ID in the form of an SMS.

The Advantages of VID Generation

There are various advantages of registering the VID policy under the UIDAI are mentioned below:

  • The user will gain access to the type of data that is essential. Hence, they can be sure about only crucial data that is being scanned.
  • The work-related KYC purpose is made relatively more manageable with the launch of the VID feature.
  • The process of generating the Virtual Aadhaar ID is straightforward and can be completed online. The verification does not take more than a few minutes after the completion of registration.
  • The ID is easy to access and secure.
  • The most significant benefit is that you can use it instead of the Aadhaar number; hence it is very convenient.
  • In the case of enjoying new insurance policies and to avail of Government subsidies, a user must register their VID with the UIDAI.

The Unique Characteristics of VID

The unique characteristics are stated below:

  • VID is a 16-digit number unique number that is randomly generated.
  • Users can use the VID feature to download a replica of the user’s Aadhaar.
  • The VID Number is secure, and no one can trace the Aadhaar information of any user from the VID without consent.
  • No such Government or Private agencies or institutions can save the user’s VID number for future use.
  • The VID number is revocable which means, it can be canceled at any time.
  • The Generation Process requires an OTP that is shared only to the registered mobile number.
  • Users can use it in place of the Aadhaar number for authentication.
  • The VID is valid until the user generates a fresh VID via the UIDAI portal.
  • The old ID deactivates automatically, and a new one can be generated anytime.
  • The generation process of VID is entirely online and requires no money for its completion by users.
  • As per the new rule, agencies cannot deny approval of VID instead of Aadhaar number of users for authentication and e-KYC procedure.
  • The introduction of VID is advantageous since it helps avoid the misuse of its users’ sensitive information.
  • The regeneration process of VID does not have a fixed limit. Hence it can be done as many times as needed.

Why does an Individual need Vid?

The UIDAI had introduced the VID feature to enhance the security of user’s private data and Aadhaar details. In other words, it protects the details of a user’s Aadhaar card with a virtually generated 16-digit number. Malicious entities will be unable to access any user’s Aadhaar number. Therefore, preventing the misuse of the user’s Aadhaar information/ data.

Get To Know How To Write Indian Naming System, Name in Pan Card, Passport and Aadhar Card.

Validity for VID

The validity period for VID is 24 hours. It can be regenerated via the official UIDAI portal any number of times by the user as per requirement at any time. The registration is free of cost and extremely easy.

Requirements for VID Generation

  1. The applicant must have an updated Aadhaar Card with correct information.
  2. The mobile number registered with the UIDAI website must be in use.
  3. The information entered in the website must be original and free of errors.
  4. The user should first link their Aadhaar Card with the official UIDAI portal.
  5. A unique OTP will be sent to the mobile number linked with the website, and it needs to be entered to complete the VID registration process.

Is VID Safe?

The use of VID is very safe for users since no one has any chance to trace personal information from a user’s Virtual Aadhaar ID.

Legal Offences under VID

The legal offense under the VID feature can result from altering the identity of an Aadhaar Cardholder or attempting to change the demographic or the biometric information of a user’s Aadhaar. Imprisonment of 3 years with an additional fine of Rs.10.000 will be charged from lawbreakers.

How to Correct or Update Aadhar Card

How to Correct or Update Aadhar Card? – Details That Can Be Changed

Leave a Comment / Certificate / By / February 17, 2024

How to Correct or Update Aadhar Card?: UIDAI has made it more manageable for people to get their Aadhar card updated both offline and online. Aadhar card correction or update processes through which people can easily get their e-Aadhaar card details updated and corrected are mentioned below.

An Aadhaar Card consists of a 12-digit unique identification number that is granted an essential document for proof of address and proof of identity. An Aadhaar Card is also needed for availing various government benefits and subsidies. However, it is of absolute importance that your Aadhaar Card is updated to avoid any impediment. By visiting the Aadhaar Enrolment/Update Centre, any individual updates the Aadhar card name, date of birth, address, mobile number, and email id on the Aadhaar card online and offline.

Details That Can Be Changed in the Aadhar Card Online

As per the newest developments, one can only get their address changed in their Aadhaar card Using the online portal of SSUP. In case a person want to update the following details; they have to visit an Aadhaar Enrolment Centre:

  • Name of the applicant
  • Gender
  • Address
  • Date of Birth
  • Mobile number
  • Email ID

In order to register the mobile number of a resident with UIDAI, visit a nearby Aadhaar Enrolment Centre and submit your mobile number in the Aadhaar Enrolment/Correction Form. One does not have to provide any proof for registering their mobile number with Aadhaar.

Steps to Update Aadhaar Card by Visiting Enrolment Centre

Any individual can get details of their Aadhar updated by simply visiting the Aadhaar Seva Kendra.

Make sure that entered information is correct and not the one that is pre-specified in your Aadhaar.

The applicant needs to get self-attested photocopies of proofs validating their update request.

Submit the filled form along with documents for verification.

You need to pay Rs—25 as a charge for every such visit to the Enrolment Centre for updates or corrections.

An individual can get their biometric data, all including their details, image, mobile number, etc., updated at the centre for enrolment.

Aadhaar Card mobile number update or change can also be done at the enrolment centre.

Moreover, you can also visit several banks to update your Aadhaar card. For example, one can make changes to your Aadhaar Card by visiting the nearest Axis bank branch and opting for their Axis Bank Aadhaar.

Note:  Whether a person updates one field or many, charges for the Aadhaar Update will be Rs. 50 (if only demographics details of the applicant are being updated) and Rs. 100 (if the person is also updating biometrics).

Fill Aadhaar Card Enrolment Form, Content, Steps To Fill and How To Track?

Steps to Update Aadhaar Details through Post

Residentss can correct or update their Aadhaar Data by sending the request form by Post. One can download the Aadhaar Data Correction/Update Form For Request Through Post.

Fill in the complete Aadhaar Data Correction/Update Form and then sign off.

Depending on the field to be updated, as per the Valid Documents List, attach self-signed supporting documents. On all your document copies, do mention your Aadhaar Number.

Review the data entered for completeness and correctness in English as well as the local language.

Seal the envelope correctly; Mark the envelope as “Aadhaar Update/Correction” on top.

Along with the supporting documents, send the form to one of the addresses given below.

You will receive a suggestion of an update request receipt.

Steps to Update Aadhar Card Details Online

Usually, a person can modify the address, name, date of birth, gender, email id and mobile number on the Aadhar card. In order to change the details of an individual Aadhaar card online, follow these steps to change/correct/update.

  • Step 1. Open and visit the Aadhaar Self Service Update Portal and click on “Update your Address Online.”
  • Step 2. The person then needs to click on the “Proceed to Update Address” option only when the individual has valid address proof.
  • Step 3. In the new window, you are required to enter your 12-digit Aadhaar number and click on “Enter a TOTP” or “Send OTP.”
  • Step 4. A One Time Password (OTP) will be sent to the applicant’s registered mobile number in the database of UIDAI.
  • Step 5. Enter this OTP to log in to your Aadhaar account. Alternately, to authenticate, you can use the TOTP feature.
  • Step 6. One then required to select either the “Update Address vis Secret Code” option or the other option of “Update Address by Address Proof”.
  • Step 7. One can now enter the residential address mentioned in the Proof of Address (PoA) and click on the “Preview” button.
  • Step 8. In case you want to alter your address, click the “Modify” option else, next tick the declaration and then click on the “Submit” button.
  • Step 9. One then needs to select the document type they want to submit as PoA for verification and upload the scanned copy of the address proof and then click on the “Submit” button.
  • Step 10. The request for the individual Aadhar update will be accepted, and a new 14-digit URN will be generated

One can use the Update Request Number (URN) to check the status of the Aadhaar address update. Once updated, the person can download the updated version and get your Aadhar card print out.

Vital Things To Be Kept In Mind While Updating Aadhar Card Details

The changes that a person enters must be appropriate, and the correct documents that an individual is attaching with the form must be self-attested and approved.

The individual details are required to be filled in the local language or in English.

While correcting the details in the Aadhar card, it must be assured that the URN is kept safe as it helps to track the status of the Aadhar Card.

In case the resident’s mobile number is not registered, then they must visit the most adjacent Aadhaar Enrolment to make corrections to their Aadhaar card.

The resident must ensure that all the details entered are filled in capital letters in the correction form.

All the necessary information must be filled in, and no option should be kept neglected.

Only those documents that are needed as proof should be sent adjacent to the form.

The Aadhar card, which has been corrected, will be sent to the designated address in the Aadhaar card.

The photocopy of the documents must be self-attested by the resident before sending.

Why does the Request for Aadhar Card Correction/Updation Get Rejected?

The request for Aadhaar Card correction/updation gets rejected sometimes, as the UIDAI follows specific provisions to check the details before executing any changes in the Aadhar details. Only when these guidelines are fulfilled, the details on UIDAI’s system get updated. The following requirements should be fulfilled before corrections are made in the Aadhaar details:

  • Junk Data in the request: When the inputted data in the request field is junk or illogical data such as “Aaajjjjj”, “kmlkjf”, AA etc. If no meaningful data is mentioned in the request field.
  • Invalid Documents: When the request is unable to be supported with a valid POI/PoA as guided in the policy.
  • Document Not Legible: When photo and document are not clear (or readable).
  • Document Not-Self Attested: When the document is not self-attested by the resident.
  • Data Mismatch in Document and Update Request: When there is a mismatch in the document uploaded/sent and in entered data in the request by Resident.
  • Transliteration Error in the Request Field: When local language transliteration does not match or found to be incorrect with the data in the uploaded document. The process of translating a word to its phonetic (similar sound) equivalent in another language is known as Transliteration.

In Aadhaar enrollment, all demographic details of the resident are transliterated to the state’s local language where the enrollment happened.

Transliteration Error in the Request Field means that the information provided by the resident at the time of submission in English did not translate to your local language rightly.

Try updating afresh and make sure whatever details are written on the left side in English is getting correctly translated in your local language. Go on the right-hand side to the local language field and retype in English.

You may tweak some of the spelling a little to get the right phonetics and local language correct spelling. Press the tab key if more than one option in the local language appears on the local language field for the word, judge and select the one that is correct. The instructions for transliteration are provided on the same page where data entry is done.

If the mentioned process still does not work, send the updated Request through Post.

  • Photo Mismatch on Aadhaar and POI: When there is a mismatch between the resident’s photo in the Aadhaar database and on the POI document.
  • Mismatch of Age on a document with photo on Aadhaar: When there is a visible mismatch of age between the age-cited photo in the Aadhaar database and in the request field.
  • Update declined: If the resident has declined an update request, on telephonic verification.
  • Verification Call Failed: When the resident is unable to answer all the questions convincingly.
  • Resident Not Reachable: When the resident is unreachable on the contact number in the registered Aadhar Database after three attempts on three separate days.
FORM MSME-1 Furnishing Return with ROC

FORM MSME-1 Furnishing Return with ROC

Leave a Comment / Finance / By / February 17, 2024

FORM MSME-1 Furnishing Return with ROC: The MSME I Form is created to present information in the framework of the outstanding payments to Micro or Small Enterprises for a period exceeding 45 days with the ROC- Registrar of Companies on a half-yearly basis.

In the context of preserving the interest of the small group of businesses or companies, significant revisions have been made by the Ministry of Corporate Affairs. Whether the company is Public or Private, Micro or Small, the Ministry of Corporate Affairs laid a prior emphasis on following compliance by all Specified Companies.

What is MSME Form 1(MCA)?

The Ministry of Corporate Affairs states it is mandatory to submit a half-yearly return by all those companies who obtain the supply of goods or services or both from Micro or small enterprises and is required to mention the payment done to certain micro and small enterprise suppliers exceed 45 days from the date of reception (or deemed receipt) of the associated good or services.

The following points must be stated in the form:

  • the due amount and
  • the causes or reasons for the delay

As per the provision mentioned in Section 405 of the Companies Act, 2013, (18 of 2013), the Central Government made it essentially obligatory for all the “Specified Companies” to fulfill the above-notified information pertaining to the payment to micro and small enterprise suppliers.

In respect of the payments outstanding to Micro or Small Enterprises, they are required to furnish all the returns with ROC.

As one is aware that the MCA wide order dated 22nd January 2019 commanded all companies who receive supplies of goods or services from enterprises which are micro and small and whose payments to Micro and small enterprise suppliers surpasses forty-five days from the date of deemed acceptance or the date of acceptance of the goods or services in accordance to the guidelines as mentioned in Section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (related to as “Specified Companies” from now on), shall submit stating the following points a half-yearly return to the Ministry of Corporate Affairs :

  • the due amount and
  • the causes or reasons for the delay

All the outstanding due payments to Micro or small enterprises suppliers of every specified company shall file in MSME Form I details, existing on the date of notification of this order; i.e., 22nd January 2019, within 30 days from the date of deployment on the portal of MCA 21. (i.e., from the 1st May 2019, within 30 days)

As per MSME-1, all specified companies shall file a return for the period from April to September for the period from October to March, by 31st October, and by 30th April.

MSME-1 FORM is needed to file two times in the month of May 2019:

  1. As of 22nd January 2019, the Initial Return for the amount outstanding
  2. As of 31st March 2019, the Half Yearly Return for the amount is due.

Important Definitions

Specified Companies suggest all companies who receive supplies of goods or services from enterprises that are micro and small and whose payments to enterprise suppliers, whether micro and small, exceed forty-five days from the date of deemed acceptance or the date of acceptance of the goods or services in accordance to the provisions made in section 9 of the Enterprises Development Act,2006 for Micro, Small and Medium Enterprises.

Note: MSME-1 form is not applicable to Medium Enterprises.

Micro & Small Enterprises above indicates any class or classes of enterprises (including Partnership firm, Companies, Association of Person, Co-operative Society, Proprietorship Firm, Hindu Undivided Family, other entities, etc.) shall be classified into:

Ceiling on Investment in Machinery and Plant for enterprises engaged in or preservation, production, or processing of goods (in INR):

  1. Micro- Below INR 25 lakhs
  2. Small– More than INR 25 lakh but does not exceed INR 5 crore

Ceiling on Investment in equipment for enterprises engaged in the service sector (in INR):

  1. Micro- Below INR 10 lakhs
  2. Small– More than Rs.10 lakh but does not exceed Rs. 2 crore

Note: Only registered enterprises having valid MSME certificates shall be acknowledged, and as MSME registration, Udyog Aadhar is also recognized.

Day of Acceptance means:

  • The day of the actual rendering of services or delivery of goods; or
  • Within the specified deadline of fifteen days from the day of the delivery of goods or the commencement of services, if any objection is made in writing regarding the acceptance of goods or services, by the buyer the day on which the supplier withdraws such objection.

Day of Deemed Acceptance means a day of the rendering of services or the actual delivery of goods, where no objection is made in writing by the buyer regarding the acceptance of goods or services within the time limit of fifteen days from the day of the rendering of services or the delivery of goods.

Details To Be Furnished in MSME-1

  1. Supplier’s Name
  2. Supplier’s PAN
  3. The due amount against the rendering of services or supplies of goods
  4. Date from which the amount is due
  5. Reason/Causes for the delay in payment of the unpaid amount

Procedure

  • Firstly, every individual must identify their MSME registered suppliers and demand their certificate for registration.
  • If under the MSME Act, there are any such suppliers who are already registered and if for more than a time span of 45 days from the date of acceptance of the goods and services, the payments to them are due, then in Form MSME-1, details of such suppliers shall be furnished.

Consequences for Not-Filing or Non-Filing

If within 30 days any company knowingly furnishes any information or statistics which is incomplete or incorrect in any material respect or fails to file MSME-1, the company with a penalty fee which may even extend to twenty-five thousand rupees shall be punishable, and every company officer who is in default shall be condemned with fine which shall not be less than twenty-five thousand rupees but which may essentially extend to three lakh rupees, or with imprisonment for a term which can even extend to six months or with both.

[DISCLAIMER]: All the information mentioned in this document has been made on the basis of the Rules enacted in accordance with it, as well as requirements of the Companies Act of 2013. It is based on the interpretation through analysis of applicable laws as of date. The material in this document is not legal aid or a recommendation, and it is intended for generalized informational purposes only.

One should seek the advice of the legal counsel of their choice before acting upon any of the information mentioned in this document.

PAN Card Verification

PAN Card Verification | How To Verify? Types of Online PAN Verification

Leave a Comment / Finance / By / February 21, 2024

PAN Card Verification: To retrieve information related to PAN, ‘Know your PAN’ is a service initiated by the Income Tax Department. When one loses their PAN card or needs their PAN number immediately, but the information is unavailable, or when one wants to cross-check their address registered against their PAN, this service is beneficial. In all these situations, ‘Know your PAN’ rescued us, as one can retrieve all the information just by entering their

  • Full name,
  • Registered mobile number, and
  • Date of birth (DOB).

However, with the help of the ‘trial and run’ method, accessing someone’s PAN information has become more accessible. The service started to pose a threat to security and privacy as it was often misused. The Income Tax Department discontinued the ‘Know your PAN’ service to avoid further fraud and misuse of the government service. They instead started a new service known as “Verify your PAN Service,” through which one can verify their PAN credentials.

Verify your PAN

An individual can use this service to cross-check the information related to their PAN, which is saved in the database of the Income Tax department. For the verification of the PAN card online, three options are provided, which are mentioned below:

  1. Click on the link provided below to open the online portal https://www1.incometaxindiaefiling.gov.in/e-FilingGS/Services/VerifyYourPanDeatils.html?lang=eng
  2. Once the link opens, a window will appear on the desktop.
  3. The spaces marked with an asterisk need to be filled compulsorily.
  4. Fill in the spaces with the necessary details and then put in the captcha.
  5. After filling in the necessary details, submit the form. The screen will show the PAN’s current status. If the registered information with the database and the PAN is activated, a window will appear on your desktop.
  6. The displayed window will display the message that the PAN is active and the details match the database.

Types of Online PAN Verification

Three types of online verification of PAN are available. They are:

File-Based Verification

  1. Under this PAN verification method, the first one has to log in.
  2. Users can upload a file consisting of a maximum number of 1000 PAN cards here.
  3. Now, the details related to the PAN will appear on the screen.

Screen-Based Verification

  1. Under this PAN verification method first one has to login
  2. A minimum of 5 PAN card details can be given under this method.
  3. Now, the details related to the PAN will appear on the screen.

Software Based Verification

  1. Under this verification method, through a software application, online verification of PAN by a verification site is possible.

Get To Know How to Cancel PAN If You Have More Than One PAN from here

Bulk PAN Verification

There are three different methods through which users can verify PAN details online.

  1. Verification of a single PAN card at a time.
  2. Bulk PAN Verification (for external agencies).
  3. Bulk PAN Verification based on the User Pay model.

Bulk PAN Verification Service for External Agencies

Both government and non-government external agencies are provided with the choice of registering themselves as PAN Verification agencies and verifying several PAN details together. Income Tax India EFiling is a government website that offers the process of PAN verification in bulk.

The process of verifying PANS in bulk is mentioned below:

  1. For Bulk PAN verification, agencies need to register themselves on the website of Income Tax IndiaEFiling.
  2. After registering, open the ‘Bulk PAN Query Page’ and select the ‘upload query.’
  3. Use the XML format to upload the query and then click on Submit.
  4. If the submission is successful, then a token number is generated. Users can use the number to view the PAN details uploaded by the system.

Process of Bulk PAN Verification user Registration

  1. Login to the website of Tax E-filing of the Indian Government.
  2. On the homepage, select the option ‘Register Yourself.’
  3. To select the user type, click on the ‘Bulk PAN Verification User.’
  4. If applicable, provide the agency’s PAN/TAN card details, password details, PAN of the individual, organization’s contact details, and digital signature certificate.
  5. Then click on ‘Submit.’
  6. The applicant must provide an authorization letter signed by the agency head. Once the documents are received successfully, the PAN request evaluation will take place.
  7. An activation link and the User ID details will be sent to the registered email address.
  8. Now, the user can log in with the provided User ID and password to activate their account.

Bulk PAN Verification Based on the User Pay model

This model of bulk PAN Verification can only be used by approved government and non-government agencies. PAN verification utilizing this service can be either File and Screen-based or Software-based, whichever the user prefers.

For this service, the registration fee per annum is Rs.12,000 plus GST at 18%. As registration is valid for only one year, this service must be renewed every year (charges remain the same).

FAQ’s on PAN Card Verification

Question 1.
For performing PAN verification, who are the authorized members?

Answer:
Certain agencies and organizations, such as central and state government agencies, the Reserve Bank of India or RBI, corporations required to provide Annual Information Return (AIR), etc., are granted permission to be the authorized members to perform PAN verification.

Question 2.
Which individuals or companies are eligible to carry out the online verification of PAN?

Answer:
Everyone. All individuals and companies are eligible to carry out the online verification of PAN.

Question 3.
How can one know the date of issue for their PAN?

Answer:
The date of issue for one’s PAN is always provided in a vertical direction on the right side of their photograph.

Question 4.
In the verification process, what does “residential status” stand for?

Answer:
Here, residential status does not stand for one’s nationality. Anyone can be a resident. For the computation of income, the IT department made this deviation.

Question 5.
Can one send the documents to PAN verification through email?

Answer:
No. Applicants can not send the documents via email.

Question 6.
For verification of PAN, will one need to pay the initial advance?

Answer:
Yes. Payment of an initial advance is necessary.

Aadhar

Aadhar – What is Aadhaar, How to Enrol?, Check Aadhaar Status, Download e Aadhaar

Leave a Comment / Certificate / By / February 17, 2024

Fill Aadhaar Card Enrolment Form | Content, Steps To Fill and How To Track?

Aadhar: Jan Dhan Yojana, Aadhaar and Mobile number or JAM are assumed to be a reformation that will permit the transfer of benefits in a well-targeted, leakage proof and cashless way. The Aadhaar card is now becoming an essential document which one should have.

This article will talk about how crucial it is to get an Aadhaar card, how to enroll for Aadhaar, how to download e-Aadhaar, and how to check Aadhaar status. JAM trinity alludes to the government of India initiative to link Jan Dhan accounts of Indian to plug the leakages of government subventions.

What is Aadhar?

Aadhaar number is a 12-digit irregular or random number given by the UIDAI (“Authority”) to India’s inhabitants in the wake of fulfilling the confirmation and verification procedure set by the Authority.

Any individual, regardless of age and gender, who is an occupant of India, may deliberately enlist to get an Aadhaar number. Individuals willing to select needs to give insignificant demographic and biometric data during the enrolment procedure, which is thoroughly liberated from cost.

Individual requirements to enroll for Aadhaar just a single time, and after de-duplication, only one Aadhaar will be produced. The uniqueness is accomplished through the cycle of the segment and biometric de-duplication.

Aadhaar number is verifiable in an online, financially savvy way. It is kind and strong enough to dispense with copies. It might be utilized as a primary/essential identifier to carry out various government welfare plans and projects for successful help conveyance, subsequently advancing straightforwardness and excellent administration. This is the only scheme of its sort worldwide. A best-in-class advanced and online Id is being given liberated from cost at a vast scope to individuals and can change the way administration conveyance capacities in the country.

Aadhaar number is without any knowledge and doesn’t profile individuals dependent on caste, religion, pay, wellbeing and geographic location. The Aadhaar card and number is proof of identity, even though it doesn’t present any right of citizenship or habitation regarding an Aadhaar number holder.

Fill Aadhaar Card Enrolment Form, Content, Steps To Fill and How To Track?

Aadhaar is an essential strategy apparatus for social and monetary consideration, public area conveyance changes, overseeing financial spending plans, increment accommodation, and advanced problem-free individuals-driven administration.

Aadhaar can be utilized as a lasting Financial Address and works with monetary consideration of the oppressed and more vulnerable segments of the general public and is a distributive equity and uniformity device.

The Aadhaar identity stage is one of the vital mainstays of the ‘Digital India’, wherein each occupant of the nation is given a novel character. The Aadhaar identity program has effectively accomplished a few achievements and is a long shot of the most considerable biometrics-based distinguishing proof framework globally.

Aadhaar identity platform, with its innate highlights of Uniqueness, Authentication, Financial Address and e-KYC, empowers the Government of India to straightforwardly arrive at the inhabitants of the country in the conveyance of different sponsorships, advantages and administrations by utilizing the occupant’s Aadhaar number as it were.

Aadhaar is connected to plans given by the state or Center, which are either cash moves, endowments or administrations. The public Authority can likewise get to data sets like ICDS, SarvaSikhsha Abhiyan, patient records at the neighbourhood, local or general levels and people through their life.

Significance of Aadhaar

For the significance of Aadhaar you can peruse Aadhaar’s report :

  • The initial move towards giving on the web, between operable, minimal expense installment stage and Aadhaar is expected to utilize it. MicroATMs will be sent by banks either straightforwardly or through specialist co-ops and worked by people.
  • It follows RBI rules for interoperability, mobile banking and uses Kisan Credit Card conspire.
  • You can connect your financial balance to it.
  • Some of the National plans connected to it are Indira AwaasYojna, Integrated Child Development Services; Janani Suraksha Yojna; MNREGA; NREGS; National Social Assistance Program; RashtriyaSwasthyaBimaYojna; Swarnajayanati Gram SwarozgarYojna; SSA; Targeted Public Distribution System.

How to Enrol for Aadhar or Get Aadhar?

  • Aadhaar enrolment is free of price.
  • You can go to any approved Aadhaar enlistment centre anyplace in India with your identity and address evidence.

UIDAI measure acknowledges 18 PoI (Proof of Identity) and 33 PoA (Proof of Address) reports. Regular verifications of personality and address are voter ID.

  • Card, Ration card, passport and driving license.
  • Personal ID cards like PAN cards and Govt ID cards are reasonable for identity evidence. Address verification records likewise incorporate water – power – phone bills from the most recent three months.
  • If by chance you don’t have the above-normal confirmations, the Certificate of Identify having photograph given by Gazetted Officer/Tehsildar on letterhead is additionally acknowledged as PoI. Endorsement of Address having photo provided by MP or MLA/Gazetted Officer/Tehsildar on paper or by Village Panchayat head or its comparable expert (for rural territories) is acknowledged as legitimate PoA.
  • Regardless of whether somebody in a family doesn’t have individual legitimate reports, the inhabitant can, in any case, enlist if his/her name exists in the family privilege document. For this situation, the Head of Family in qualification record should be enrolled first with substantial PoI and PoA archive. The top of the family would then be able to present different individuals in the family while enlisting. UIDAI acknowledges eight archive types as Proof of Relationship.
  • Where there are no reports accessible, the inhabitant may likewise take the assistance of Introducers accessible at the enrolment community. The Registrar tells the Introducers. For additional subtleties, if it’s not too much trouble, contact the office of the concerned Registrar.
  • At the enlistment community, kindly fill your subtleties inside the structure. Your photograph, fingerprints and iris sweep will likewise be taken as a piece of the enrollment. You can survey the information you have given and make rectifications during enrolment itself. You will get an affirmation slip with an impermanent enrolment number and different subtleties caught during enrolment.
  • You need to select just a single time as another enrolment will bring about dismissals. Choosing again is a misuse of your time as you will get just a single Aadhaar number.
  • In light of your data gave, your information will be checked halfway. If your application is fruitful, an Aadhaar number will be created and sent to your location.
  • The sitting tight, an ideal opportunity for Aadhaar may change from 60-90 days after receipt of inhabitant information parcels in CIDR. Notwithstanding, it could take considerably more on the off chance that enrolment is done through NPR workout.

Some Points To Keep In Mind

  • Take a copy of address verification and Identity proof.
  • Convey your verifications.
  • Convey information of bank like Bank Name, Branch Name, IFSC code, Account no. (if you need to connect it during enlistment of bank subtleties with radar itself)
  • Verification of birth record is available with you (just if you wish to say Birth is Verified and not pronounced). Suppose you fill Declared, no need for any verification. Note PAN card isn’t acknowledged as evidence of birth.
  • Have a functioning mobile number to give during enrolment structure.

When the enrolment is over, you will get the affirmation slip. Kindly save the enrolment no., Date with time, complete name and versatile number in an accessible spot. As most of us have smart cell phones with cameras, we would prescribe you to have an examined duplicate of it in mobile or mail.

Online Appointment for Aadhaar Enrolment

The office (pilot) is for booking an arrangement at an Aadhaar Seva Kendra for Aadhaar administrations recorded underneath:

  1. New Aadhaar enrolment
  2. Name Update
  3. Address Update
  4. Mobile No. Update
  5. Email ID Update
  6. Date of Birth Update
  7. Gender orientation Update
  8. (Photograph + Fingerprints + Iris) Update

Prerequisites for Internet Booking of Arrangement

You would require a mobile number (may not be Aadhaar enlisted) and the information of critical documents for booking an appointment. Enlistment for another Aadhaar is free. One citizen can secure a limit of 4 meetings in a month.

What is Aadhar

Step by Step Instructions to Book an Online Arrangement

  • Visit the page https://appointments.uidai.gov.in/bookappointment.aspx.
  • Arrangement booking at UIDAI run Aadhaar Seva Kendra
  • Select the centre name, and snap-on Proceed to book arrangement.
  • Pick the help you need to get to – New Aadhaar or Aadhaar update
  • Fill in your mobile number and enter Captcha and submit. Enter the OTP created to your versatile. On fruitful validation of your portable, a structure to fill in the necessary subtleties is shown. Fill in the essential subtleties and present the design.
  • You can deal with the arrangement subtleties (Date and time) by visiting the Manage appointment tab.
  • Arrangement booking at Registrar runs Aadhaar Seva Kendra.
  • You need to do one-time enrollment with your mobile number.
  • Enter the OTP created and shipped off your mobile number for verification.
  • On successful confirmation, you will be coordinated to fill the structure for booking.

How To Check The Online Status Of Aadhar Enrolment

You can follow your Aadhaar status on the web. To check status, go to https://resident.uidai.net.in/registration status and fill in the information as instructed.

  • Fill in the information of Enrollment ID and Date and Time. If it’s not too much trouble, note Both fields of the structure are required, and you should guarantee that you embed the areas in the proper organization, which is shown just underneath the information field box.
  • You can then enter the picture text (Ex 4767 in the picture underneath) in entering the Security Code. In case you can’t peruse it, you can get another code by tapping on Try another.
  • After filling every one of the sections, click on the Check Status button.

If by chance that you get a blunder, attempt again with the correct information.

Find UID Aadhar Number Or Enrolment Number If It Gets Lost

In case you have lost your AADHAR card Enrollment ID and don’t have any idea about your Aadhar number, you can get the AADHAR card by following these means underneath:

  • Go to https://resident.uidai.net.in/find-uid-eid
  • Select proper choice, Aadhaar No (UID) OR Enrolment No (EID), under You need to get your lost:
  • Enter your complete name
  • Enter your email address
  • Enter your enlisted Mobile Number
  • Enter the security code as shown, and snap on the Get OTP button.
  • Once Password (OTP) will be conveyed to your portable as well as an email address.
  • In the box beneath, enter the OTP you just got on your portable and additionally email address.
  • Tap on Verify OTP.
  • Then you will get a message on your mobile with your AADHAR card number or Enrollment Id as you chose in Step above.

What To Do If You Want To Check Your Aadhar Status Through SMS

You should send an instant message (SMS), UID STATUS <14 Digit EID> to 51969,

You need to send SMS from your enrolled mobile number, a similar which was entered at the hour of your enrolment to 51969

You need your enrolment number for this reason. Kindly eliminate cuts ‘/’ from your enlistment number.

You will, at that point, get the most current status of your Aadhaar as an answer to your SMS on your mobile number. You will get your present Aadhaar status and no other information.

This assistance is given free to you, yet, your mobile operator may charge you standard SMS costs.

How to Download e-Aadhar?

In case you need to download and print an e-Aadhaar card on the web, you need to follow the beneath referenced advances:

  • Step 1: Visit the Aadhar official site https://uidai.gov.in/
  • Step 2: Click on ‘Download Aadhaar’ choice from My Aadhaar alternative or visit the connection https://eaadhaar.uidai.gov.in/
  • Step 3: Select the “Aadhaar” alternative under the “I Have” segment
  • Step 4: Now, enter the 12-digit Aadhaar Number. Tap on ‘I need a covered Aadhaar’ choice on the off chance you need to download Masked Aadhaar.
  • Step 5: Enter Captcha Verification Code and Click the “Send OTP” alternative to get the one-time password on your enrolled mobile number.
  • Step 6: Enter the OTP got on your mobile number.
  • Step 7: Complete the study and snap “Confirm And Download” to download an electronic duplicate of your Aadhaar.
  • Step 8: the secret key ensures an E-Aadhaar card. The password is the Pincode of his private location, and the equivalent can likewise be found on the affirmation slip.

How to Get Aadhar on Mobile?

Give your Enrolment ID (found on the Enrolment slip given to you at the hour of enrolment) to get your Aadhaar on your enrolled portable number. Your enrolled mobile number is equivalent to the one you provided at the hour of enrolment.

You can follow your Aadhaar status on the web. To check status, go to https://resident.uidai.net.in/get-aadhaar-no and fill in subtleties as demonstrated in the structure beneath

  • Fill in the information of Enrollment ID and Date and Time. Kindly note Both fields of the structure are obligatory, and you should guarantee that you embed the areas in a suitable arrangement, which is shown just underneath the information field box.
  • You, at that point, enter the picture text in entering the Security Code. In case you can’t peruse it, you can get another code by tapping on Try another.
  • After filling in every one of the passages, click on the Check Status button.
List of Exempted Services under GST

List of Exempted Services under GST

Leave a Comment / GST / By / February 17, 2024

List of Exempted Services under GST: On May 19th, 2017, the GST council meeting decided the list of exempted services under GST. The GST rates were also agreed upon. Five GST rate categories for goods and services at 0%, 5%, 12%, 18%, and 28% were approved by the council.

List of Services Exempted Under GST

  1. Services provided by the local authority or the Government excludes the following services—
    • Services are provided by the Department of Posts through express parcel post, speed post, life insurance, and agency services provided to any person other than the Government.
    • Services concerning an aircraft or a vessel, inside or outside the precincts of a port or an airport.
    • Transportation of passengers or transportation of goods
    • Services other than the services which are covered under clauses (i) to (iii) above are provided to business entities.
  2. Services which the RBI provides
  3. Services provided by a foreign diplomatic mission located in India
  4. Services related to the growth of plants and breeding of every life form of animals, except the breeding of horses, for food, fiber, fuel, raw material, or other similar products or agricultural produced using —
    • Agricultural operations are directly related to the production of any agricultural produce, including cultivation, harvesting, threshing, plant protection or testing or
    • Supply of labour for farms
    • Processes that are carried out at an agricultural farm includes tending, cutting, harvesting, drying, pruning, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging, and such like operations that do not change the essential characteristics of the agricultural production but make it sellable for the primary market;
    • Leasing or renting agro machinery or vacuous land with or without a structure incidental for its utilisation;
    • Packing, unloading, loading, warehousing, and storage of agricultural production;
    • Services for agricultural extension;
    • Services by any Agricultural Production Marketing Committee or the services provided by a commission agent to purchase or sell agricultural production;
  5. Service using access to a bridge or a road on the clearance of the custom prices.
  6. By an electricity distribution utility, the distribution of electricity.
  7. Services using renting of residential dwelling for use as an abode.
  8. Services using:
    • Extending of deposits, advances, or loans in so far as the consideration is represented by way of discount or interest (other than interest involved in credit card services)
    • Inter sale or inter purchase of foreign currency amongst banks or authorised dealers of foreign exchange.
  9. Services using transportation of goods:
    • Services by road except:
      • An agency for transportation of goods or,
      • A courier agency.
    • Services by the inland canal.
  10. Services that are provided to the United Nations or a stated international organisation.
    The exemption may be notified by issuing notification under section 55 of the Act of SGST/CGST.
  11. Services which are provided by the workers of the Common Bio-medical Waste Treatment Facility or CBWTF to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental to that;
  12. Services by a veterinary clinic about the health care of birds or animals.
  13. Services provided by an organisation registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by charitable activities.
  14. Services provided by a stated organisation regarding a religious pilgrimage aided by the Ministry of External Affairs (India), under the respective preparations;
  15. Services that are provided by-
    • An arbitration council to–
      • Any individual other than a business organisation; or
      • A business organisation with a turnover up to rupees twenty lakh (ten lakh rupees in a particular category state) in the preceding financial year;
    • An individual advocate or partnership firms of advocates apart from a senior advocate, using legal services to-
      • An individual advocate or a firm of advocates providing legal services;
      • Any person other than a business organisation; or
      • A business organisation with a turnover up to rupees twenty lakh (ten lakh rupees in a particular categorised state) in the prior fiscal year; or
    • A senior advocate using legal services to-
      • Any person other than a business e; or
      • A business organisation with a turnover up to rupees twenty lakh (ten lakh rupees in a unique category state) in the prior fiscal year.
  16. Services provided-
    • By an educational institution to its staff members, faculty members, and students;
    • To an educational institution, using-
      • Transportation of students, staff, and faculty;
      • Catering, comprising any system of mid-day meals, is Government-sponsored;
      • Security or house-keeping services performed in such educational institution;
      • Services relating to admission to or examination by such institution;

Provided that nothing included in clause (b) of this entry shall be implemented to an educational institution other than an organisation providing services using pre-school education and education up to higher secondary school.

  1. Services provided by the IIM or Indian Institutes of Management, according to the guidelines of the Central Government, to their students, using the following educational programs, except Executive Development Programme, –
    • Full-time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management for two years, to which admissions are made based on (CAT) Common Admission Test, conducted by Indian Institute of Management;
    • Fellow Program in Management;
    • In Management, a five-year integrated program
  1. Services provided to an acknowledged sports organisation by-
    • An individual as a player, umpire, team manager, coach, or referee for participation in a sporting event organised by a recognised sports organization;
    • Another recognised sports organisation;
  1. Services provided by an artist using performance in the art forms of classical or folk
    • music, or
    • theatre, or
    • dance, if the percentage charged for such performance is not above rupees one lakh and fifty thousand:

Given that, an exemption will not be applied to the services that are provided by artists who are the brand ambassadors;

  1. Services by way of collecting news or providing news by the United News of India or Press Trust of India or an independent journalist;
  2. Services using giving on rent–
    • To a state road transport undertaking, a motor vehicle which is meant to carry above twelve tourists; or
    • To a goods transportation agency, a method of goods transportation
  3. Transportation of tourists, with or without attended belongings, by:
    • Air, boarding from or stopping in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or at Bagdogra or Tripura;
    • Non-airconditioned carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, a charter; or
    • Stage carriage rather than an air-conditioned stage carriage.
  1. Services of life insurance business provided using annuity under the National Pension Scheme regulated by PFRDA also known as Pension Fund Regulatory and Development Authority of India under the Act of Pension Fund Regulatory And Development Authority, 2013
  2. Services of life insurance business provided by the Naval, Air Force Group Insurance Funds and Army, to the Navy, Air Force, and Army, respectively, under the Central Governments Scheme of Group Insurance.
  3. Services that are provided by an incubatee up to an overall turnover of rupees fifty lakh in a fiscal year subject to the following conditions, namely:-
    • The overall turnover had not surpassed fifty lakh rupees during the prior fiscal year; and
    • three years has not been passed from the date of agreeing on an incubate
  4. Service by an unincorporated organisation or a non-profit entity registered under any law for the time being in force, to its members by way of recompensation or share of benefaction–
    • As a union of trade;
    • For the provision of carrying out of any activity which is exempted from the duty of GST; or
    • Up to the amount of five thousand rupees per month each member for collecting of goods or services for everyday use from a third person
  5. Services that an organiser provides to an individual in respect of a business exhibit held outside India;
  6. Services using animal slaughtering;
  7. Services received from a service provider located in non-taxable territory by –
    • Government, a local authority, governmental authority or an individual about any purpose other than industry, commerce or any other profession or business;
    • An organisation registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) to provide generous actions; or
    • An individual located in a non-taxable region; Given that the exemption will not be applied to the–
      • Database access or retrieval services and online information received by people specified in clause (a) or (b); or
      • Services using transport of goods using a vessel from a place outside of India till customs duty of consent in India received by people designated in the (c) clause;
  8. Services of public libraries using publications, lending of books, magazines, or any other knowledge-enhancing material or content or item;
  9. Services provided by the Employees’ State Insurance Corporation to people governed under the Act of Employees’ Insurance, 1948;
  10. Services using transfer of a going concern, as an independent part of a whole part;
  11. Services using public conveniences such as the provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;
  12. Services by Government, local authority, or a governmental authority using any activity about any gathering entrusted to a municipality under the 243 W Article of the Constitution of India.
  13. Services that the Reserve Bank of India receives from outside India about foreign exchange reserves management;
  14. Services provided to a foreign tourist by a tour operator about a wholly outside India tour.
  15. Services using pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of vegetables and fruits which do not alter the necessary characteristics of the said vegetables or fruits;
  16. Services using admission to a museum, national park, wildlife sanctuary, tiger reserve, or zoo;
  17. Services provided by the Government or a local authority to a business organisation with an overall turnover up to rupees twenty lakh (ten lakh rupees in a particular category state) in the prior fiscal year.

Explanation – For this entry, at this moment, it is clarified that the provisions of this entry should not apply to

  • Services at S. No. 1 (i), (ii)and (iii); and
  • Services using renting or leasing of immovable or fixed property;
  1. Services provided by the Employees Provident Fund Organisation (EPFO) to people governed under the Act of Employees Provident Funds and Miscellaneous Provisions Act, 1952;
  2. Services provided by the Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Act of Insurance Regulatory and Development Authority of India, 1999;
  3. Services provided by SEBI or Securities and Exchange Board of India set up under the Act of Securities and Exchange Board of India, 1992 by way of protecting the interests of investors in securities and encouraging the growth and development of security market;
  4. Services provided by NCCD or National Centre for Cold Chain Development under the Ministry of Agriculture (India), Cooperation and Farmer’s Welfare using cold chain knowledge dissipation;
  5. Services using transportation of goods by an aircraft from a place outside India up to the customs station of clearance in India.
  6. Services provided by a local authority or the Government to another local authority or Government:

Given that nothing contained in this entry shall apply to services at S. No. 1 (i), (ii)and (iii) above

  1. Services are provided by the Government or a local authority by issuing a driving license, death certificate, birth certificate, visa, passport.
  2. Services provided by a local authority or the Government using enduring b non-performance of a contract for which b compensation in the form of penalties or liquidated damages is payable to the local authority or the Government following such agreement;
  3. Services provided by the local authority or the Government using-
    • registration needed under any law for the moment in force;
    • testing, safety check, calibration, or certification correlating to the safety of consumers, workers, or the public at large, including fire license, required under any law for the time being in force;
  4. Services provided by the Government or a local authority using responsibility of the right to use natural resources provided to a farmer for the growth of plants and breeding of every life form of animals, except the breeding of horses, for food, fuel, fiber, raw material or other related items;
  5. Services by a local authority, or the Government or a governmental authority using any activity about any gathering entrusted to a Panchayat under article 243G of the Constitution:

it will be continued by way of notification under section 7(2) (b) of CGST/SGST Acts.

  1. Services provided by the Government or a local authority by way of assignment of the right to use any natural resource where the Government or the local authority assigned such right to use before April 1st, 2016:

Given that the exemption will be applied only to service tax payable on one time charge payable, in total upfront or installments, for assignment of the right to use such natural resource;

  1. Services provided by a local authority or the Government using allowing a business organisation to work as a telecom service provider or use radio frequency spectrum during the period before April 1st, 2016, on payment of license fee or spectrum user charges, as the case may be;
  2. Services provided by the Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or other duties to import export cargo on MOT, also known as Merchant Overtime charges.
  3. Services by a procuring bank to any person about the settlement of rupees two thousand in a one-time transaction transacted through credit card, debit card, charge card, or other payment card service.

Explanation — For this entry, “procuring bank” means any financial institution, banking company, including a non-banking commercial company or any other individual, who makes the payment to another individual who accepts such cards.

  1. Services of leasing or renting assets (rolling stock assets including locos, wagons, coaches) by Indian Railways Finance Corporation (IRFC) to the Indian Railways.
  2. Services provided by any individual for official use of a foreign diplomatic mission or consular post in India or personal use or for the members of the family of diplomatic agents or career consular officers posted there. This exemption is available on a reciprocal based on a certificate which is issued by MEA (Protocol Division): this will be continued using notification under section 55 of the Act of CGST/SGST.
  3. Taxable services, which are provided or will be provided, by TBI or Technology Business Incubator or STEP or Science and Technology Entrepreneurship Park, which is recognised by the NSTEDB of the Department of Technology and Science, India or bio-incubators which are recognised by the BIRAC, under the Department of Biotechnology, India;
  4. Taxable service provided by the State Government Industrial Development Corporations to the industrial unit. Using granting extended duration lease (thirty years, or more) the industrial plots from so much of tax leviable, as is leviable on the single upfront amount known as premium, price, cost, salami, or any other name due before-mentioned lease.
  5. Services provided to the Government using transportation of passengers with or without attended belongings, by air, boarding from or terminating at a provincial connectivity system airport, against contemplation in the form of VGF or viability gap funding.

Given that nothing contained in this entry will be applied on or after the expiry of a period of a year from the date of commencement of operations of the provincial connectivity system airport as notified by the Ministry of Civil Aviation

  1. Services that are provided by cord blood banks using preservation of stem cells or any other service about such conservation;
  2. Services using coaching or training in recreational activities relating to,-
    • Culture or arts; or
    • Sports by a charitable organisation registered under section 12AA by the Act of Income-tax, 1961;
  3. Any services that are provided by-
    • The National Skill Development Corporation, also known as NSDC, which n Government the Government of India sets up;
    • A Sector Skill Council is also known as SSC, which the NSDC approves;
    • An assessment agency which the SSC or NSDC approves;
    • A training partner who the NSDC or SSC approves;
      • The National Skill Development Corporation implemented the National Skill Development Programme; or
      • The National Skill Certification and Monetary Reward Scheme started a vocational skill development course; or
      • The National Skill Development Corporation implemented many other schemes.
    • Services provided by the assessing bodies empanelled centrally by the Directorate General of Training, Ministry of Skill Development and Entrepreneurship using assessments under SDI or Skill Development Initiative.
    • Services that are provided by the training providers under Deen Dayal Upadhyaya Grameen Kaushalya Yojana, under the Ministry of Rural Development, offer vocational or skill training courses certified by the National Council for Vocational Training.
    • Services using sponsorship of sporting events organised-
      • By a national sports organisation, or its affiliated federations, where the participating teams or individuals represent any state, district, country, or zone;
      • By Paralympic Committee of India or Special Olympics Bharat,
      • Association of Indian Universities, Games Federation of India, All India Sports Council for the Deaf, Inter-University Sports Board School.
      • By Sports Board and Central Civil Services Cultural;
      • Under the Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme; or
      • As part of national games, by Indian Olympic Association.
  1. Services provided using actual labour contracts of construction, commissioning, erection, installation, alteration, fitting out, repair, maintenance, renovation, or completion of a civil structure or any other original works about the beneficiary-led individual house enhancement or construction under the Pradhan Mantri Awas Yojana (PMAY);
  2. Services using pure labour contracts of construction, erection, commissioning, or installation of original works of a single residential unit otherwise a part of a residential complex;
  3. Services of general insurance business that are provided under the following schemes –
    • Scheme for Hut Insurance; and
    • Scheme for Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna; and
    • Scheme for the Tribal Insurance; and
    • Gramin Accident Policy and Janata Personal Accident Policy; and
    • For Self-Employed Women, Group Personal Accident Policy; and
    • Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, implemented by the Ministry of Agriculture and approved by the Government of India; and
    • Premia collected on export credit insurance; and
    • Agricultural Pump set and Failed Well Insurance; and
    • Pilot Scheme on Seed Crop Insurance; and
    • Pradhan Mantri Suraksha Bima Yojna; and
    • Jan Arogya Bima Policy; and
    • Central Sector Scheme on Cattle Insurance; and
    • Niramaya Health Insurance Scheme constituted under the provisions of the National Trust for the Welfare of People with Mental Retardation, and, Cerebral Palsy, and, Trust implements autism, and, Multiple Disabilities Act, 1999; and
    • Rashtriya Swasthya Bima Yojana; and
    • Coconut Palm Insurance Scheme; and
    • National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); and
    • Universal Health Insurance Scheme; or
    • Any other insurance scheme by the State Government may be notified by the Indian Government by the GSTC recommendation.
  4. Services by life insurance business provided under following schemes –
    • Varishtha Pension BimaYojana; and
    • Aam Aadmi Bima Yojana (AABY); and
    • Jayashree Bima Yojana (JBY); and
    • Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having the maximum amount of cover of fifty thousand rupees; or
    • Pradhan Mantri Vaya Vandan Yojana;
    • Pradhan Mantri Jeevan JyotiBimaYojana;
    • Pradhan Mantri Jan DhanYogana; and
    • Any other insurance scheme by the State Government may be notified by the Government of India on the recommendation of GSTC.
  5. Services using a collection of contributions under Atal Pension Yojana (APY).
  6. Services using a collection of contributions under any pension system of the State Governments.
  7. Service of transport of passengers, with or without accompanied belongings, by—
    • Railways in a class except for the—
      • An air-conditioned coach; or
    • First-class;
      • Inland waterways;
      • Metro, monorail or tramway;
      • Public transport, other than mainly used for tourism causes, in a vessel within places in India; and
      • Auto rickshaws or metered cabs (including E-rickshaws)
  8. Services by an individual using-
    • Carrying out any religious ceremony; and
    • Renting of areas of a religious place which is meant for the common public, managed or owned by an organisation which is registered as a sacred or religious or charitable trust under the section of 12AA of the Income-tax Act 1961, or a trust or an institution which is registered under sub-clause (v) of clause (23C) of section 10 of the Income-tax Act: Given that nothing contained in (b) of this exemption will be applied to –
      • Renting or letting of rooms where per day charges are Rs 1000/- or more; and
      • Renting or letting of premises, community halls, Kalyan mandapam or open area, etc. where per day charges are Rs 10,000/- or more; and
      • Renting or letting shops or other spaces for business or commerce where per month charges are Rs 10,000/-or more.
  9. Services by a guest house, hotel, inn, campsite or club, for lodging or residential or purposes, having declared duty of a unit of an accommodation per day is less than one thousand rupees
  10. Services using transportation via rail of a vessel from one place to another in India of the goods given below –
    • Relief materials for victims of natural or artificial disasters, calamities, accidents, or mishaps;
    • Military or defence equipment;
    • Magazines or newspapers registered with the Newspaper Registrar;
    • Railway materials or equipment;
    • Agricultural product;
    • Salt, milk, and food grain including rice, flours, and pulses; and
    • Organic compost
  11. Services provided by a goods transportation agency, using transportation in a carriage of goods-
    • Agricultural product;
    • Goods, where the gross amount charged for transport of all such goods for a single consignee is not more than rupees seven hundred fifty;
    • Goods, where the gross amount charged for the transportation of goods on a consignment transported in a single carriage is not more than one thousand five hundred rupees;
    • Salt, milk, and food grain including rice, flours, and pulses; and;
    • Organic compost;
    • Newspaper or magazines registered with the Newspaper Registrar;
    • Relief materials meant for victims of artificial or natural disasters, calamities, accidents, or mishap; or
    • Defense or military equipment
  12. Services by the following people in respective capacities –
    • A business correspondent or the business facilitator to a banking company concerning accounts in its rural region branch;
    • The business facilitator or a business correspondent to an insurance company in a rural region;
    • Any individual as an intermediary to a business facilitator or a business correspondent for services mentioned in the clause (g); or
  13. Carrying out an intermediary production method as job work about the growing of plants and breeding of all life forms of animals, except the breeding of horses, for food, fuel, fibre, raw material, or other similar agricultural products;
  14. Services using packing, storage, warehousing, loading, unloading or storage of rice;
  15. Services using right to admission to, –
    • Dance, circus, or theatrical performance including ballet or drama;
    • Concert, pageant, musical performance, award function or any sporting event other than a distinguished event of sporting;
    • Distinguished event of sporting;

The consideration for admission of each person is not more than 250 rupees per person in (i), (ii), and (iii) above.

  1. Services provided by a local authority or the Government or a where the gross amount charged for such services is not more than 5000 rupees.

Given that nothing contained in this entry shall apply to services S. No. 1 (i), (ii)and (iii) above:

Given further that a constant supply of service, as defined in sub-section (33) of section 2 of the Act of CGST, 2017, which is provided by a local authority or the Government, the exemption will be applied only where the gross amount is charged for such service is not more than Rs. 5000/- in a fiscal year;

  1. (i) Services provided by health care systems by an authorised medical practitioner, para-medics, or a clinical establishment;
    (ii) Services provided using transportation of a patient in an ambulance, apart from those specified in (i) above;
  2. Services that are provided by the Goods and Services Tax Network (GSTN) to the State Governments or Union Territories for the implementation of GST
  3. Pure services (excluding the contract services or other composite supplies which involve the supply of goods) that are provided to the Government, a local authority, or a governmental authority by way of any activity about any function entrusted to a Panchayat under Article 243G of the Constitution or any role assigned to a Municipality under the 243W Article of the Constitution
  4. Services that are provided to the Government under any insurance scheme for which the Government pays the total premium
  5. Services that are provided to the Government under any training or education program, the Government bears the total expenditure of the provided service.
TDS Practical Guide with Examples

Tax Deducted Source (TDS) | Practical Guide with Examples

Leave a Comment / TDS / By / February 17, 2024

TDS: TDS stands for Tax Deducted Source. In the TDS system, individuals responsible for making payment for specified services such as brokerage, professional consultancy, commission, etc., are required to subtract a fixed percentage from the amount.

About TDS

The like deducted amount (which is called TDS) have to be deposited to the government by the deductor (person who is deducting tax) on behalf of the deductee (person who is providing services), which deductee can claim as Income Tax Paid at the time of filing his Income Tax Return.

  • For example, ABC Pvt Ltd has to pay Rs 1,00,000 to Mr XYZ for a professional fee. TDS rate specified on the professional cost is 10%. The TDS needed to be deducted 10% on Rs 1,00,000, which equals Rs 10,000, and the Net payment to Mr XYZ is TDS Deducted from the Gross Amount that equals Rs 1,00,000 – Rs 10,000 and gives Rs 90,000. So, the TDS to be deposited to the Government by ABC Pvt Ltd is Rs 10,000.

TDS can also be deducted from salary. The calculation of tax subtractable is different in the case of wages since TDS is not deductible as a fixed percentage but according to a specific method under section 192.

Persons Who Are Required to Deduct TDS

The government has notified the persons mentioned below, who are required to subtract TDS for the services specified:

  1. An Individual and HUF is needed to deduct TDS on the selected services if they are involved in:
  2. Any business having a turnover of Rs 1 crore or above during the last financial year.
  3. A professional with receipts of Rs 50 lakh or above during the previous financial year must get books of account audited under section 44AB.

Exception

  1. If a person is required to get his books of account audited due to reporting the net profit, which is lower than 8% of the business’s turnover (according to Section 44 AD). According to Section 44ADA, 50% of the gross receipt in professional services; is not required to subtract TDS.
  2. Other persons apart from Individual and HUF include Private Limited Company, Partnership Firm, Co-operative Society, LLP, etc.

Exception for Individual and HUF

The cases below are also required to deduct TDS:

  1. In the case of the Purchase of immovable property where the consideration paid for the property is more than Rs 50 Lakh (as per Section 194IA).
  2. The rent paid for building exceeding or land exceeds Rs 50,000 per month (according to Section 194IB). Only those Individuals or HUF are covered, which are not required to deduct TDS as per the point mentioned above (as per section 194IB). If an individual is covered as per point (a), they must deduct TDS under section 194I and not section 194IB.
  • The only two cases in which a non-business is also required to deduct TDS are mentioned above.

What is TAN? Its Requirement and Exception

The Tax Deduction and Collection Account Number (TAN) is a unique ten-digit alphanumeric number allotted to the deductor or collector of TDS. It is furnished to identify every deductor.

Each individual who is required to deduct TDS should apply for TAN. TAN is needed to be quoted on all TDS payment challans, TDS certificates & TDS returns. You can use Form 49B in any NSDL office, or you can also apply online for TAN from the NSDL website.

Penalty – The penalty of Rs. 10,000 on failing to apply for TAN or quoting TAN in payment challans, TDS return and TDS certificates.

The Time Limit to get a TAN

No specified time limit is given for getting TAN. However, you should apply for TAN when you become liable to deduct the TDS of any person since TDS payment and return filing cannot be accomplished without TAN.

Notes

  • A separate TAN is not required to obtain TCS.
  • If you have made any payment above the threshold limit and TDS is required to be deducted, you must apply for the TAN. For example, if you certify as a Private Limited Company and do not make any payment on which TDS is required to be deducted, there is no need for a TAN.

Exception

TAN is not required if TDS is deducted for Purchase of Immovable property (Section 194IA) or rent paid (Section – 194IB). Deductor has to use their PAN for the TDS payment and for filing returns.

Tax Deducted at Source

When to Deduct TDS?

The time of deducting TDS depends on the nature of the payment. TDS is required to be removed at the time of actual payment only, not on a due or accrual basis in the following cases:

  1. Salary
  2. The Payment of the assembled balance of the Employee’s Provident Fund.
  3. Victory from lottery or crosswords puzzle.
  4. Win from horse races.
  5. The Payment in respect of life insurance policy to the policyholder.
  6. The Payment for deposits under the National Saving Scheme.
  7. The Payment on account of repurchase of units by Mutual Funds or Unit Trusts of India.
  8. The Payment of compensation on compulsory acquisition of specified immovable property.

During the time of credit of such income to the payee’s account or at the time of actual payment, whichever is earlier in case of all other payments (such as commission, profession fee, consultancy etc.) except the payments mentioned in the above point.

Note: TDS must be deducted from the beginning if it is likely that the total amount will exceed the threshold limit during the financial year.

For example: if you have a professional service contract amounting to Rs 2,00,000 and the first payment is due in April, adding up to Rs 13,000. If so, TDS is required to be deducted at 10%, as it is likely that the total amount will exceed the threshold limit.

The Threshold Limits and Nature of Payments

The points below summarize the nature of the transaction where TDS is required to be subtracted if the amount exceeds the threshold limit, together with the applicable rates of TDS for payments commonly used.

TDS Amount Calculation

TDS needs to be subtracted from the total amount if such amount exceeds the threshold limit specified for that particular nature of transactions.

Few examples which will help in understanding the calculation of TDS

Example 1 – Service provided by an individual contractor ‘A’ to a partnership firm ‘B’. The contractor during the year is being paid as per the payment that follows.

Payment 1 is Rs 32,000

Payment 2 is Rs 24,000

Payment 3 is 60,000.

Solution:

When Payment 1 is Rs 32,000: the TDS is required to be deducted at 1% as the sum exceeds the threshold limit of Rs 30,000 in a single payment. After deduction, the net payment to ‘A’ will be Rs 31,680, with a TDS of Rs 320 (32000 * 1%).

If Payment 2 being Rs 24,000: no TDS is required to be deducted as the single payment is less than Rs 30,000, and the total payment made during the year will be Rs 56,000 (32,000 + 24,000), which is also less than the threshold limit of RS 75,000.

If Payment 3 is 60,000: the TDS should be deducted at 1% on the gross amount as the total payment in the year surpasses Rs 75,000.

The total TDS required to be deducted is Rs 840 (24,000 * 1% + 60,000 * 1%) at the time of making payment of Rs 60,000. Net payment is to be made to ‘A’, which is Rs 59,160.

Example 2 – If contractor A is a Partnership Firm in place of the individual.

Solution:

If Payment 1 is Rs 32,000, then TDS is required to be deducted at 3% as the sum exceeds the threshold limit of Rs 30,000 in a single payment. The net payment that needs to be paid to ‘A’ is Rs 31,360, after deduction of TDS of Rs 640.

If payment 2 is Rs 24,000: No TDS is required to be deducted as the single payment is less than Rs 30,000, and the total payment made during the year will be Rs 56,000 (32,000 + 24,000), which is also less than the threshold limit of RS 75,000.

If payment 3 is 60,000: the TDS at the rate of 2% must be deducted from the total amount as the annual payment in the year exceeds Rs 75,000.

The total TDS required to be deducted is Rs 1680 when making a payment of Rs 60,000. The net revenue to be made to ‘A’ will be Rs 58,320.

Payment And Return Filing

Persons deducting TDS must deposit the TDS amount to the government and file quarterly returns with the TDS details removed.

TDS Deposit

The TDS deducted in salary or non-salary must be deposited within seven days from the end of the month in which TDS is deducted. However, TDS deducted in March is required to be deposited on or before 30 April.

The due date for deducting TDS under sections 194IA & 194IB – 30 days from the end of the month in which TDS is deducted.

Notes:

TDS is required to be deposited using challan or form:

(Section 194IA) TDS on Purchase of property of Form 26QB

(Section 194IB) TDS on rent of the property of Form 26QC

Challan No./ITNS 281 for other TDS payments.

  • TDS can be deposited in any Authorized bank or online.
  • E-payment is compulsory for companies, and a person must get his books of account audited under section 44AB.
  • A separate challan needs to be entrusted for each nature of payment for which TDS is subtracted.

For example, you must deposit two forms for each section if TDS is deducted on the contractor fee and a professional fee.

TDS Return

A quarterly TDS return is required to be filed by the deductor. For filing return as different return forms are specified below:

  • In the case of Form 24Q for salary, the deductee can be a resident or non-resident.
  • In the case of Form 26Q, apart from salary, the deductee should be a resident.
  • In the case of Form 27Q, apart from salary, the deductee can be a non-resident, not an Ordinary Resident, or a Foreign Company.
  • In the case of Form 26QB for immovable property, the deductee should be a resident.
  • In the case of Form 26QC for Payment of Rent, the deductee should be a resident.

For the following Quarters; the due date for Form 24Q or 26Q are:

  • Apr to Jun: 31 July
  • July to Sep: 31 October
  • Oct to Dec: 31 January
  • Jan to Mar: 31 May

For the following Quarter; the due date for Form 27Q is:

  • Apr to Jun: 15 July
  • July to Sept: 15 October
  • Oct to Dec: 15 January
  • Jan to Mar: 15 May

Form 26QB and 26QC: It is a challan cum TDS statement that is needed to be filed under 30 days from the end of the month in which TDS needs to be deducted.

TDS - Tax Deducted at Source

TDS Certificate

TDS Certificate shows the amount of tax that the deductor has deposited. Deductor is required to issue a TDS certificate to the deductee within the specified time limit given in the below table. Such certificates have to be generated online using TRACES websites only. Deductor is required to deposit tax and file TDS returns to the government before requesting a certificate from TRACES.

Nowadays, individuals can quickly check the tax deposited via 26AS, so the importance of such a certificate has been reduced. However, it is better to collect the certificate from the deductor to make sure TDS has been deposited along with the correct reporting of the Deductee PAN.

The Nature of Payment and Due Dates

  • Form 16 for TDS on Salary: to be paid on or before 31 May of the financial year.
  • Form 16A apart from Salary: Within 15 days from the due date of furnishing TDS return.
  • Form 16B for Purchase of Immovable Property: Within 15 days of turning return cum challan (Form 26QB).
  • Form 16C for TDS on rent: Within 15 days of turning return cum challan (Form 26QC).

Provisions for Penalty

Under TDS, various penalties are applicable on the deductor, such as:

Interest on late payment of TDS to Government

Interest is chargeable on short payment/late payment of TDS. There can be the following scenarios:

  • When TDS is not deducted: The interest rate of 1% every month or part thereof for the period starting from when TDS is deductible or collectible until TDS or TCS is deducted/collected.
  • If TDS is deducted, but payment is made late: The interest rate of 1.5% monthly or part thereof starts when TDS is deducted or collected until TDS /TCS is paid.

The calendar month is considered in calculating interest; therefore, you have to pay interest for two months if you delay the payment by one day. For example, if TDS is deducted in July and deposited on 8 August, you must pay interest for two months, i.e., July and August. The total interest payable will be 3%.

Penalty on the wrong/late filing of TDS return:

  • Rs 200 per day as a Late filing fee (section 234E).
  • The penalty of Rs. 200 per day is payable for any delay in furnishing the TDS statement.
  • The total late filing fees should not surpass the total amount of TDS reported in return.
  • A Penalty ranging Rs 10,000 to Rs 1,00,000 (section 271H).
  • Delay in filing TDS statement for more than a year from the due date of filing such TDS return.
  • If a TDS statement is not filed within a year from the due date of furnishing of TDS return, a minimum penalty of Rs 10,000 to Rs 1,00,000) can be levied. The liability under this section will be in addition to the late filing fee under section 234E.
  • Incorrect furnishing details in the statement filed like PAN, Challan and TDS Amount, etc. – Section 271H also covers filing faulty TDS/TCS return cases. Similarly, a minimum penalty of Rs 10,000 (which can go up to Rs 1,00,0000) can be levied.

Penalty on late issuing of TDS Certificate: A penalty of Rs 100 per day shall be payable for any delay in issuing the TDS certificate. The total late issuing fees should not exceed the total amount of TDS reported in return.

Utility to Check the Amount Deducted and Credited to Deductee’s Account

You can quickly check the number of TDS that has been deducted from your receipts/incomes online.

  • Step 1: Go to income tax India e-filing.
  • Step 2: Then, for the income tax account, Log in or register.
  • Step 3: Select the option ‘View Form 26AS’ (Tax Credit) available under My Account.
  • Step 4: You will automatically be redirected to the TRACES website, where you are required to select the Assessment Year for which you want to check the TDS amount.

Details of Form 26AS

  • Tax deducted at source
  • The tax collected at the source
  • Advance or Self-assessment tax deposited by the assessee
  • Income tax refund issued by IT Department
  • Annual Information Return (AIR) of high-value transaction

Request for Non-Deduction or Lower Deduction

You can request the tax deductors not to deduct tax if your income stands below the basic exemption limit. The two ways of doing this are: –

Filing Form 15G/15H

  • A resident individual or HUF can file a declaration in Form 15G/15H for non-deduction of TDS. In this declaration, the deductee declares that his income is below the basic exemption limit at a particular financial year; no TDS should be deducted.
  • The deductee is required to file this declaration for each financial year.

Note: Form 15G applies to an individual, and Form 15H applies to senior citizens.

Application in Form 13 to Assessing Officer

Anyone can apply for a certificate for non-deduction or lower deduction to his assessing officer. If satisfied, a certificate to the deductee will be issued by the Assessing Officer.

Applying for a Refund

The only refund, i.e., Income Tax Refund, is an excess of tax already paid by TDS, TCS, advance tax or self-assessment tax less tax on your total income. You can get an additional tax refund only after filing your income tax return for that particular year.

In other words, there are no other methods to get a refund other than by filing an Income Tax Return.