Many taxpayers have recently received an email from the Income Tax Department titled “Transfer of Rectification Rights to the Jurisdictional Assessing Officer (JAO)”.
– Please note that this is not a notice, but simply an informational communication.
– It indicates that the Centralized Processing Center (CPC) has transferred the authority to handle your rectification request to your Jurisdictional Assessing Officer.
– This step is generally taken when CPC is unable to process the rectification accurately, and hence, human intervention is required.
– You can now approach your AO directly for rectification of your Income Tax Return (ITR) for the relevant assessment year.
– The communication includes details of your JAO like email ID, ward, and office address.
There is encouraging news for taxpayers seeking relief from tax notices or court cases, including serious situations that could lead to jail time. Recently, in March 2024, a woman from Delhi faced imprisonment for failing to submit her income tax return (ITR). To avoid such circumstances, the finance minister announced a simplification and rationalization of compounding procedures in the Budget 2024. Following this, revised guidelines were released on October 17, 2024. From this date, all offenses under the Income Tax Act, 1961 have become compoundable.
According to the new guidelines, taxpayers can submit a compounding application offline to the tax department. If the application is approved, the department will dismiss the case. This option is particularly useful for those who fear losing their case in court. However, if you are confident in your position and believe the judge will rule in your favor, you may choose to forgo the compounding process and continue your fight in court.
Circular No. 04/2025
Sub: Frequently Asked Questions (FAQs) on Guidelines for Compounding of Offences under the Income-Tax Act, 1961 dated 17.10.2024
CBDT issued rev’ised guidelines for Compounding of offences (‘guidelines’) under the Income-tax .Act. 196.1.1 the ‘Act’) on 17.10.2024. The revised guidelines superseded all existing guidelines on the subject and are applicable to pending as well as new ap llCations. from the date or their issuance.
2 The re ‘ised giiidelines have bc•en simplilled tioin previous guidelines. inter-alia. by eliminatinJu caleporization of’ offences. removing the límit on number ot occasions for filing applications. allowing fresh application upon curing of’ defects, which was not permissible under earl ier giiidelines. allos ius conapounding ot oft’ences under section 275A and 27ó B of the Act, rcinoviiig the existint time liniit for filing application viz 36 inonths from the date of iiling ot coniplaint. etc.
3 For better awareness and understanding among the stakeholders with respect to the revised guidelines dated 17.10.2024. clari Creations are pro› ided by issue of a Circular in the tomb of anse ers to the frequently asked questions (FAQs) as follow’s:
A. Compounding of offence
What is compounding ot otfence‘?
Ans: Compounding ot an ofténce is a mechanism w herebj the defaulter is reprieved of major legal consequences bj affording lairn an oppoiJiini¿ to pay certain stint of money to escape prosecution. The specified offences can be compounded by the competent authority either before or atier thc initiation o1 pre cecdings.
W’hether conipounding of an oI’fence constituie as an adnaission of an offence bj the applicant‘?
Ans: No. c‹ampounding is intended to resolx’e the offence(s) and it is not to be construed as an admission of such otfence(s) by Hoc itpplicant. (Ref: para 9.11 of the guidelines)
Are there any offence(s) under Incoine Tax Act i hich are not coinpoundable?
Ans: No. all ot’túnce under Inct mc Tax .Act hai c been made coiiiptiundable in revi sed guidelines dated 17. 10.2024.
B. Competent authority/Jurisdiction
there can the compounding application be fi led by the applicant‘?
Ans: The compounding application can be filed before the jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT, being the Competent Authority for compounding of offences. (Ref: para 8.1 of the guidelines)
Who will be the competent authority where jurisdiction of the applicant lies with more than one jurisdiction charge for TDS related offences?
Ans: In such case, the Pr. CCIT/ CCIT/ Pr. DGIT/ DGIT in whose jurisdiction compoundln@ application has been t4led will be the Competent Authority. However, in case the applicant files applications in more than one jurisdictional charge, the Competent Authority will be the jurisdictional authority where the quantum of TDS default is higher. (Ref: para 8.2 of the guidelines)
Who will be the competent authority there the applicant has more than one TAN and jurisdiction over these TANs lies with more than one jurisdiction charge?
Ans: In such case. the jurisdictional authority where the quantum of TDS detault is higher, shall be the Competent Authority. (Ref: para 8.3 of the guidelines)
C. Compounding application and fee
Whether any fomiat and fees has been prescribed for an application for compounding?
Ans: The applicatitin for compounding must be filed in the format prescribed in Annexure-1 to the revised guidclines. The application may include one or more offence(s) under different sections pertaining to one or multiple 5’ears/quarters. The application should be filed in the tomb of an affidavit on stamp paper of Rs. 100, along with applicatlon fees as per Para 4.2.1 of the revised guide Iines dated 17.10.2024. (Ref: para 4.1.1 and 4.2.1 of the guidelines)
Is there any time limit for filing o1 an application ior compounding?
Ans: No. an application for compounding can be filed at any time atier committing the offence. regardless of whether the same has come to the notice of the department or prosecution pi’oceedings have been launched. (Ref: para 4.1.3 of the guidelines)
Whether an applicant whose application was pending before issuance of revised guidelines required to deposit application fee as per para 4.2.1‘?
Ans:No application fees are payable for applications tiled under earl ier guidelines and pending on 17.10.2024. (Ref: para 4.2.4 of the guidelines)
Whether conapoundinj application 1’ee is adjustable against compounding charge payable?
Ans: Y es. coiiipounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the p‹irticular application. Cross application adjustment is not allow’ed. However, if compounding application is rejected for any reasons,
the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines)
Whether compounding is al1ow’ed if the application 1or siich an offence was previously rejected? lf so. w’hether separate applications need to be filed for more than one applications rejected under the previous guidelines? How will the compounding application fees be charged?
Ans: Yes, an applicant may apply for compounding of offence(s) through a single consolidated application, if one or more applications had been rejected under previous guidelines. How’ever. the fresh application can only be filed if such rejection(s) were on account of curable defects (illustrative examples in para 3.2 of the revised guidelines) and no application is al1ow’ed to be filcd for any of the rejection(s). made by the Competent Authority, on merits with those particulars i.e. of‘fence and relevant tinancial year. Compounding application fees chargeable for a ’consolidated compounding application’ would bc charged in this case. (Ref: para 3.2 and 4.2.3 of the guidelines)
Whether revised guidelines are applicable on pending compounding applications? If yes. whether applicants have to file a fresh application?
Ans: Yes. revised guidelines are applicable on the applications, pending betore issuance of these guidelines. The applicants whose applications were pending on 17.10.2024 are not required to file a lresh application or pay any fresh application fees. (Ref: para 3.1 and 4.2.4 of the guidelines)
Whether applicant can withdraw’ a compounding application and file a new application?
Ans: The applicant can the a next single application or consolidated application after withdra ’al of earlier application(s). However, such new application shall be treated as a subsequent application and higher rate shall be applicable as per Para 10. (Ref: para 10.2 of the guidelines)
Whether applicant is required to file compounding application for all the offences together. for which prosecution proceedings has been initiated?
Ans: No, the applicant may apply for one or multiple of’fences in an application. His application cannot be rejected on the ground that he has not applied for particular offence for u hich notice for prosecution has been issued and proceedings are under progress. (Ref: para 4.1.2 and 4.1.3 of the guidelines)
Is there any limitation as to the number of times compounding applications can be filed by a person†
Ans: No, there is no limitation on the number of times a person can file compounding application. However, the Competent Authority may reject an application tiled by a person on the ground of him being a “habitual ofi’ender . (Ref: para 7.1 and 7.2 of the guidelines)
Whether the applicant whose application was rejected in earlier guidelines on the ground of being cont icted is eligible to re-apply tor compounding as per revised guidelines?
Ans: Yes. in case the rejcction was solely on account of conviction, without examination of merits, as per any of the earlier guidelines, such applicant can reapply in terms of revised guidelines. (Ref: para 6.1(a) and (b) of the guidelines)
Whether applicant can file a compounding application if his application is returned back due to defect(s)?
Ans: Yes. defective application can be revix’ed by removing defects within a period of one month from date of intimation of defects(s). If defects are not cured within such time, the application w’ill be returned back to the applicant and shall be deemed lo be rejected. In such case. applicant may apply again which shall be treated as a subsequent compounding application for the purpose of detemaination of compounding charges. (Ref: para 5 and 10 of the q•uidelines)
Ans: The application pending as on 17.10.2024 shall be governed under new’ guidelines. However. date of such pending application shall be the original date of application for any purpose.
Whether the applicant whose application was re¡ected on account of not being filed in time as provided for in the earlier guidelines. i.e. w ithin expiry of 12/24/36 months fiom the end of the month of filing ot complaint, is eligible to file fresh compounding application?
Ans. The lirnitation of 12/24/36 months has been eliminated in revised guidelines and all such applicants whose application were rejectcd earlier on limitation ground, may file fresh applications foi‘ compounding of ottences, w hich shall be treated as subsequent application for the purpose taf determination or’ compounding charges. (Ref: para 3.2 and 10 of the guidelines)
D. Terms for com pounding
Whether an applicant is required to withdraw appeal related to ofl’ence sought to be compounded before filing a compounding application’?
Ans: No such withdrawal is required. Ho ‘ever. applicants shall undertake to withdraw appeals including \\’rit petitions. if any, related to offences being compounded or grounds of appeal related to the ot1’ence to be compounded where appeal has mixed grounds. (Ref: para 4.5 of the guidelines)
Whether an applicant who has filed a Writ Petition for rejection of his application being not filed within stipulated period of 12/24/36 mtinlhs from filing of compliant as pcs earlier guidelines and is still to be decided by the Hon’ ble Court. can again file a compounding application and thou’ shall this application be treated’?
Ans: Yes. after submission ot’ an undertaking to withdraw the Writ Petition from the Hon’ble Court along with the application, the applicant can again file the compoiinding application,
which shall be treated as a subsequent applicatitin for the purpose of determination ot compounding charges. (Ref: para 3.2, 4.5 and 10 of the guidelinesJ
Approx alofHigher.Authority
Whether offence can be compounded where applicant has been convicted for iniprisoniiient for‘ tn’o years or more?
Anx: \’es. even il applicant has been convicted with imprisonment of two years or more for any otfence undei‘ Income Tax Act or for an oft?nce under any other law’. which is related to offence under the Income Tax Act, may apply tor compounding. Such orlénce shalI. however. be conaptaundable onlj with the apprt» al ot’ Chairman. CBDT as per para 6. I of revised guidelines. (Ref: para6.1(a and (b) of the guidelines)
fi hether cases ink olv inyu other agencies such as ED .”CBI can be compounded?
Ans: Yes. such offence(s) may be compounded by the competent authority if applicant is not found to be inv‹alved in anti-national or terrorist activity. However, if the applicant is found to be involved in such actin ity, the offence shall be compounded only n’ith the approval of Chairman. C BD 1 . as per para 6. 1(c) ot the revised guidelines. (Ref: para 6.1(c) of the guidelines)
If the main accused has more than one director/partner and one of these directors.*partners fiie an application for compounding ot offence(s). w’here it is fiound that the other director(s)/partner(s). who ha ‘e litit 11led the compounding application, comes under the conditions as mentioned in Para 6.1 tit) (fdcilltated tax evasion through mechanisms such as use of entities tier laundering ot money. generation oI bogus in› oices of sale/purchase w’ithout actual business bj accommodation entries or in any ‹ather manner) of these guidelines. ›v’hether approx al of II igher .Authoriy is required for deciding the compounding application?
Ans: lt a case in volves multiple offences and one of those offences requires approval front a higher authority under paragraph 6.1 Ot’ the guidelines. the compounding application will be processed based on the offence for w’liich the application has been filed, a5 explained below’:
If the application has been ti led Fy the main accused or one or more of the co-accused, for an otfence that does ntit require appro›’al from Higher authority. such offence will be examined for compounding w’ithout the need for any approval. irrespective of the fact that anj of co-accused(s) are also accused of any other otTence(s) which require appro v‹il trout higher authority (e.g., an offense under Section 277A) and thej have not filed any compounding ‹application for either of the offences.
ii. II the application has been t“ileñ for an oi’Iénse. b\ the main accuscd or one or more of’
the co-accused. that red uircs approval morn a higher authority (c.g., an offense under Section 277A), the offense will be compounded only with the approval of the higher aut Inority. (Ref: para 6.1(d) of the guidelines}
F. C’ompounding cbarges
Q.23 How shall the compounding charges be calculated for the application(s) rejected under earlier guidelines and tor which tresh allowable application has been filcd?
Ans: All app1icaiion(s) rejected under earlier guidelines shall be defined to be the first compoundinti application. The fresh consolidated application c’ill. accordingly, be considered as the second application and compounding charges will be calculated as per para 10 ot the revised guidelines. f’urther details ‹me discussed in question number 30. (Ref: para 10 of the guidelines)
Ho\¥ SUCH the COITlpounding charges be calcul‹ited for applicai ions pending belore issuance of these guidelines?
Ans: The coinpr›unding charges tor pending application are subject to re-determination as per para 10 of the revised guidelines. All pending applications. whether for single or multiple years’quarters. shall be treated as first compounding application and compounding charge shall be re-computed tier each oKence disclosed in the application as given in Annexure-4 ot the guideline. (Rvf: para 3.1 and 10 of the guidelines)
Whether credit ot payment shall be allowed ivhile re-computing compounding chari,e for pending applications’? If yes, whether the excess payment shall be refundable or adjustable?
Ans: Yes, credii tit the amount already paid for particular offence pertaining to particular year shall be allow ed ior such particular offence and j ear only. during re-computation of ctiinpoundiilti U lilrge for pc•rlding application. How ei cr. any excess payment shall not be refundable c r adjustable. (Ref: para 3.1 of the guidelines)
If a new consolidated application includes a year for which application was filed earlier and then withdrawn, whether partial compounding charges paid lor such year tor which application is withdrawn can be adjusted against iotal compounding charges too ards consolidated application’?
Ans: No. Pariial compounding charges paid for the year for which application is w’ithdraxvn can be adjusted in new’ consolidated application only towards the otfence and particular year for which payment w as made. (Ref: para 3.2 of the guidelines)
An applicant has filed compounding applications under earlier guidelines. two of which were rejected on account of Durable defects. tit o were compounded and three are pending as on issuance of this guideline. H‹a should the applicant File a compounding application alter issuance or‘these guidelines and how shall the new’ application be treated ?
Ans: ho action is pending for’ the applications which have been compounded. A consolidated application may be tiled for all applications which were rejected (on account of curable defects) and no fresh application is required to be liled for pending applications. All pending app1icati‹sns. vhether for singIe or iiiultiple years’quarters. shal1 bc treated as first corripounding application and compounding charge shall be re-computed for each offence disclosed in the application as given in Annexure-4 of the guideline. The fresh consolidated application for rejected applications will be considered as second application. Accordingly. the
application filed after issuance of these guidelines shall be treated as subsequent application (2″ application) and compounding charge shall be re-computed for each offence disclosed in the application, in terms of para 10 of the revised guidelines. (Ref: para 3.1, 3.2 and 10 of the guidelines)
Hons the rate of compounding charges will be determined in subsequent application(s)‘?
Ans: The rate of compounding charge is based on sequence of application aS well as offence applied for. If u subsequent application includes an offence which has also been included in earlier application(s). it shall be liable for higher rate i.e. 1.2 times. 1.4 times, 1.6 times and so on as per para 10.4 of the guidelines; irrespective of the fact that the offence and year of the offence are same in subsequent application and earlier application was rejected or pending or even compounded.
However, it subsequent application includes offence(s) which were not included in any compounding application filed earlier (rejected or compounded or pending) and the offence has been applied for first time. the compounding charge for such offence(s) shall be computed at normal rate as given in the annexure-4. (Ref: para 10 of the guidelines)
Illustration- An applicant has filed different applications on different dates to compound dittérent offences which will be considered as below.
Scenario
Clarifications
Applicatio nDate
.Status
Offence (FY)
Sequence of Application
Offence included inEarlierApplication’*
Rate
15/0 1 /202 I
Coin pounded
276B (2012- 13)
NA
NA
I 7/10,’’*0?2
Compounded
?76C ( I ) (?0 b-19)
EA
NA
T8/08/?023
Rejected
276B (20 I 3- I’t)
NA
NA
Pending
276D (2019-20)
First (No fresh application required)
NA
Normal rate
0 I,’ I I ’?0*4 (fi led under revised guidel in es)
Sin•mle application (for earl ier Application i ejected)
27GB (2013- 14)
Second
Yes, in applications dared 15/0 1/202 I and I 8,’08/2023. (considered as 2″‘ time) *
I .2 times o normal rate
18/ l2,’2024 (filed under revised guidelines)
Consolidated application
276i3 (20 I7- 18 l
Third
Yes. in applications dated 15.’0 1/2 1, l8,’08/2023 A 0 l/l 1/2024 (3’d time)
I .4 times oi normal rate
276C (1) (2019-?0)
Yes, in application dated I7/I0,’’20?2 (2’^ time)
I .2 times of normal rate
?7SA(2023-24)
No, first time applied for ( I*’ time)
‘Normal rate
* It is noted that the applicant has opted for compounding for this oft’ence for the third time in third application and accordingly compounding charges at 1.4 times of normal rate should apply. How’ever. since both applications were tiled under prev’ious guidelines, all such applications w’ill be cumulatively considered as ’first’ application. in terms of Para 10.6 of the revised guidelines. Thus. offence under these applications will be considered as clubbed together for calculation of conipciunding charges.
# It is noted that the applicant has opted for compounding for this offence for the tourth time in fourth application and accordingly compounding charges at 1.6 times of normal rate should apply. However. since first tw’c› applications were filed under previous guidelines. both these applications will be cumulatively considered as ‘first’ application. in terms of Para 10.6 of the rev’ised guidelines. 01 .11.2024 application will be considered as ‘second’ and this application will be considered as ‘third’. Thus. otTence under first two applications will be considered as clubbed together for calculation of compounding charges.
4’hetlier compounding application may be filed suo-moto? If yes. how the compounding charge shall bc determined?
Ans: Yes. compounding application may be filed suo-moto at any time. after the offence(s) is committed. irrespective of whether it comes to the notice of department or not. The compounding cliai ge depends on sequence of application as well as offence applied r r and is independent of n’hether application is filed suo-moto or in compliance to the notice of department. (Ref: para 4.1.3 and 10 of the guidelines)
Whether compounding application maj be tiled after launch of the prosecution? If yes, how the compounding charge will be determined‘?
Ans: Yes. If application is filed within 12 months from end of the month in which prosecution complaint is filed. the compounding charge will be determined as per para 10.2 to 10.5 of guidelines as illustrated in Question no. 30 abo› e. For applications filed after 12 months. the compounding charge so calculated shall be increased by 50% as per para 10.7. (Ref: para 10 of the guidelines)
Illustration: Assessee had made TDS default of Rs 10,00,000/- for 3 months during FY 2019-
20. The prosecution has been launched on 01/04/2022 ti/s 276B ot’ the Income Tax Act.
image
How io ctimpute compounding charges for otfence ti/s 276CC in the absence of information on tax sought to be evaded or the tax on under-reported income due to assessincnt/reassessment being not carried out?
Ans: In such cases, compounding charges shall be the minimum compounding charge applicable for compounding of offence u/s 276C C as per Annexure-4 of the guideline, (Ref: Annexure 4 of the guidelines)
V hetlaer compounding charges include Prosecution Establishnient Expenses and Litigation Expenses?
Ans:No. Siicli cxpense have been rciiiox’ed in rev ised guidelines.
Is there any specific path tier payment of compounding char8e”
Ans: Yes. there is a path on e-filint, website ot the department and payment may be made by login through PAN or TAN. The path of the same is as under:
“Login on e-F iling portal —• e-Pay Tax —• Lew Payment —• Income Tax —• Minor Head —r Other Receipts (500) — compounding charges”. (Ref: para 9.9 of the guidelines)
V’liether the compounding charge can be made under PAN in case the applicant being a deductor‘?
Ans: The compounding charge shall be made under TAN of the deductor. How’ever, if the applicant is the co-accused then compounding t’ee z may be made under PAN of co-accused as the co-accused rnuy not have access to the TAN of main accused.
Loyuin r›n e-£ iling portal though TIN—• e-Paj I ax —• Nett Payment —• Income Tax —• Minor Head Ollici‘ Receipts (50fi) —• compounding charges”. (Ref: para 9.9 of the guidelines)
€L Extension of time (Compounding charges)
Whether the time for payment of coinpound‹*8 Charges may be extended?
Ans: \”es, up to a maximum period of 24 months. as per conditions mentioned in para 9.4 of the guidelines. (Ref: para 9.4 of the guidelines)
fi’hetlier time for payment ot c‹›inpounding charges iiiaj be extended bej ond 24 months’?
Ans: No›. beyond 24 months extension is not allowable and the application shall be rejected followed by initiation o1’ prtasecution pi‘oceedings, ii’ trot already initiated. However, the
applicant can file new application for the same particulars which shall be treated as a suhseqijent application for the purpose of determination of compounding charges. (Ref: para 9.4 and 10.3 of the guidelines)
Q39. As per the new guidelines. the pai’inent period for compounding charges may be extended up to 24 months only from the end of the month in which the compounding charges were intimated. For pending applications where the payment initiation was made before the issuance or the revised guidelines but not fully paid, how’ will the period of 24 months be calculated? Additionally, will such applications require approval for extension under paragraph
9.4 of the guidelines?
Ans: For applications pending as on 17.10.2024, wherein compounding charges were not fully paid within time allowed as per earlier Guidelines or u’herein time allowed had not elapsed. the period ot 24 months w ill commence from the end of the month of issuance of these guidelines viz October 2024. The extension of timelines will require approval as prescribed in para 9.4 of they Guidelines.(Ref: para 3.1 and 9.4 of the guidelines)
Q.4tl Are extension tor payment of compounding charges subject to interest or additional charges?
Ans: No. interest or additional charges are not applicable on extension allowable under para
9.4 of the guidelines. Further, for cases pending as on date of issuance ot revised guidelines. additional compounding charge (chargeable under pre ions guidelines) shall not be applicable and compounding charge shall be detemiined as per Para 10 of the guidelines. (Ref: para 9.4 and 10 of the guidelines)
H. Co -accused and abettors-offence by Companies and HUF
Whether co-accused can file compounding application under revised guideline?
Ans: Yes, co-accused may apply for compounding ot’ offence separately or conjointly. (Ref:
para 11 of the guidelines)
Where the compounding application of the co-accused was rejected earl ier on the ground that the main accused has not tiled for compounding, whether such applicants will be eligible for lil ing again‘? If yes, whether such application shall be a subsequent application?
Ans: Yes. other than the case where application was rejected in past on merit. any of the co- accused applicant is eligible to file compounding ‹application again separately or conjointly. Such application shall be treated as a subsequent application for the purpose of determination of compounding charges. (Ref: para 3.2, 11 and 10 of the guidelines)
Similarly. where the compounding application of the main accused was rejected earlier on the ground that the co- accused has not filed for compounding or given undertaking. whether such applicants will be eligible tor tiling again? If yes. whether such application shall be a subsequent application?
Ans: Yes, other than the case where application was rejected in past on merit, the main accused applicant is eligible to file compounding application ajain separately or conjointly with the co-
accused. Such application shall be a subsequent application for the purposc of determination of compounding charges. (Rel’: para 3.2, 11 and 10 of the guidelines)
lt an a|aplici tion filed lay ct›-accused or accused kinder previous guidelines is pending,
«hether thej are required to life a fresh application under revised guidelines?
Ans: No. .A11 such pending applications u ill be clubbed together and none of the applicants (main accused and/or co-accused) are required to file a fresh application under rex ised guidelines. This consolidated application shall be considered as tirst application for the purpose ot determination ct compounding charges. (Ref: para 4.2.4, 11 and 10 of the guidelines)
If application is filed by main accused or co-accused or by both of them co-jointly. w hether separate compounding tec shall be applicable for co-accused or not?
Ans: Nti separate compoundine fee tor co-accused shall be payable. irrespective of the fact that application has been iiled by main accused or co-accused or by both ot them co-jointly. Only compounding charge(s) for the concerned offence(s) shall be payable. as per para 10 of the re› ised guidelines. fence such payiiient is made by the applicant being main accused or cc›- accused or both o1 them conjointly. the Competent A uihority shal1 compound concerned otfences for ma in accused as well as all the co-accused. (Ref: para 11 and 10 of the guidelines)
Whether any person other than main accused or co-accused can file compounding application liar compounding of an of’fence ofcompany or HUF?
Ans: ho. person other than main accused or co-accused cannot file compounding application. “I he applicant is red uired to disclose his status as main accused or co-accused in the serial no.
4 of compuunding application tAimexure-1 o1 revised guidelines). (Ref:para11and
Annexure -1 of the guidelines)
V’1int w’ill happen it co-accused has not been identified by the department for offences u s 278B’?
Ans: In cases w there co-acciise‹â have not been identified or such idenli fication is under progress u/s 278B oI the Incoiiie 1 ax Act. either the main accused or anj person who can substantiate along with supporting documents that lie vi as in-charge or responsible for conduct of the business of the company during the time of commission of oft’ence. to be considered as
’deemed It be ’gui1tj
guidelines)
u/s 278B(1 ). can file an application as co-accused. (Ref: para 11 of the
lt’ any person tiled a compounding application as a co-accused in the scenario given at Q. No. 46, whether there is any requirement to identify other co-accused?
Ans: In such cases there will be no requirement to identify other co-accused for the purpose of the compounding of‘ the offence. I4owev er. if such compounding application is rejected for any rcason, all UO•aCcused shall need to be identified as per Section 278B ot’ the Incomc Tax Act to file pt r›.sec uiion complaint be titre the concerned C’ouH. (Ref: para 11 and 10 of the guidelines)
Q.J9 Can co-accused liirnisli an undertaking for withdrawal of appeals as required in para 4.5 tel’ the griidclincs. on behalt of the main accused‘?
Ans: ho, co-accused cannot furnish undertaking for w’ithdra v’al of appeal on behalf of the main accused. Stich undertaking shall be Irirnished bj the main accused onlj w’hich must be attached with the application if application has’ been tiled by the co-accused. since ott’ences of both main accused and co-accused are being compounded. under para 1.1.2 of the revised guidelines. (Ref: parti 11 of the guidelines)
lt iipplication has been lilcd by only main accuscd or co-accused. in such case against whom name the compounding order shall be passed?
Ans: The ct›napound lng order it!S 279(2 I shall be passed in the name of’ person(s) is ho have applied for compounding. It co-accused has applied. then order shall include the name ‹at main accused ‹if so. Further. in a case where main accused has applied and co-accused has been ideiiiilic•d. the order shall be passed in the nunie taI main accused and co-accused. (Ref: Annexure-1 and 3 of the guidelines)
Whether co-accused can file compounding application where the liability of main accused company ceases under Insolvency Bankruptcy Code’?
Ans: l“he liability of co-acc used does not extinguish even if the liability ot main accused company ceases. The co-accused may file compounding application in such cases. either scparately or conjointly and payment ot’ compounding charge can be made by co-accused or the main accused company. (Ref: para 11.4 of the guidelines)
The assessee company /inain accused is under NCLT.’CIRP/Liquidation and either there is nioriitoriiim due to the prof isions of’ section 14 or liquidation process has been initiated against the company due to the prox’isions of sectitin 33 of the lnsol vency Bankniptcy Codes’ ll3C” 1. ln such condii i‹ans. wliethei Para 4.3 o1’ the guidelines tregai ding payment of all taxes. interest and other sunis) w i1 bC g1// icablc or not’?
Ans: The conditions prescribed in paragraph 4.3 of the Guidelines will apply, as explained below:
Case 1: IJuring the Moratorium Period: The demand due from the main accused is not extinguished during the moratorium period. lt u co-accused files an application for compounding during the moratorium period, paragraph 4.3 of the guidelines will apply.
Case 2: .4fter Rejection of the Resolution Plan (Liquidation Proceedings): Upon rejection of the res‹alution plan. liquidation proceedings commence under Section 33 of IBC. The pendinti demand becomes a valid c laim befibre the liquidator. If a co-accused tiles an application tier compounding after re jection oI the resolution plan. paragraph 4.3 of the gilidelines will ‹ippli .
Case 3: After Approx’al of the Resolution Plan: Once the rcsolution plan is approvcd under Section 31 of the IBC, the main accused company is absolved of the offence, provided there is change iIi the management in terms of conditions prescribed in section 32A of the IBC. The co-accused(s). however. continue to be liable for the offence. If a co-accused tiles an applicai iota for compounding after approval of the resolution plan. paragraph 4.3 of the guidelines ix’ill apply.
tax concept in India is integral to its economic framework, supplying essential government revenue for various public services such as education, healthcare, and infrastructure development. Governed by the Constitution and various tax laws, the framework includes both direct and indirect taxes, with authorities distributed between central and state governments. This overview highlights important components of the tax concept in India, emphasizing GST, income tax, and strategies for tax planning.
Categories of Taxes in India
The tax system in India is broadly categorized into three main types: Direct Taxes, Indirect Taxes, and Other Taxes, each with distinct implications for taxpayers.
Goods and Services Tax (GST): Implemented in 2017 to streamline the tax structure by subsuming most indirect taxes like VAT, service tax, and excise duty.
Excise Duty (now a part of GST): Initially applied to various manufactured goods; now limited to certain products like beverages and tobacco.
Stamp Duty and Registration Fees: Imposed on property and legal documents, with rates varying by state.
Tax Concept: Tax Administration in India
India’s taxation structure functions on a three-tier system, where taxes are administrated by the central government, state governments, and local municipal bodies. Under Article 256 of the Constitution, taxes are to be levied and managed only through legal authority.
Responsible for managing indirect taxes: GST, customs duty, and excise duty. Focuses on regulating trade policies, preventing tax evasion, and implementing tax laws efficiently.
Central vs State Taxation
Taxation in India is bifurcated between central and state authorities. Central taxes include income tax on most types of income (excluding agricultural income), customs duty, and excise duty. State taxes encompass agricultural income tax, professional tax, and land revenue.
Tax on the supply of goods and services, with CGST collected by the central government, SGST by states for intra-state transactions, and IGST for inter-state trade.
Long-Term Capital Gains: For assets held over 36 months, taxation is at 20% after indexation; for listed equity shares, a 10% tax on gains exceeding ₹1 lakh.
An income tax assessee refers to any individual or entity liable for tax under the Income Tax Act of 1961. Section 2(7) of the Act defines an assessee as anyone obligated to pay income tax based on earnings or losses for a certain assessment year.
Not paying due taxes can lead to serious consequences, including penalties ranging from 100% to 300% of the tax amount owed. Tax evasion is also considered a criminal offense, with offenders facing potential imprisonment for as long as 7 years.
Goods and Services Tax (GST) Concept in India
The Goods and Services Tax (GST) is a comprehensive tax on goods and services that merges various central and state taxes such as VAT, service tax, and excise duty. It’s characterized as a single tax applied to the supply of goods and services across India.
Tax Unification: By replacing a multitude of indirect taxes, GST has established a standardized tax framework across states, eliminating inconsistencies in tax policies.
Value-Added Tax Model: GST is only levied on additional value at each link of the supply network. Input tax credits prevent double taxation for businesses.
Consumption-Based Taxation: Unlike production-based taxes, GST is charged based on the consumption of goods and services, ensuring that tax revenues benefit the consuming state.
GST features multiple tax slabs, namely 0%, 5%, 12%, 18%, and 28%. Essential goods often enjoy exemptions or lower taxation, whereas luxury items are taxed at the uppermost rates.
Explanation of GST
The Goods and Services Tax (GST) serves as an indirect tax system that replaced various indirect taxes like VAT, excise, and service tax. Under its framework, a single tax is levied on the supply of goods and services nationwide.
GST Rates Overview
GST introduces five tax categories: 0%, 5%, 12%, 18%, and 28%. Basic goods and services are exempt or taxed at lower rates, while luxury goods attract higher tax rates.
Advantages of GST
The introduction of GST has greatly changed India’s tax landscape, transforming a complex structure into a unified one. Key advantages of GST include:
Elimination of Cascading Taxes: Prevents multiple taxations on a single transaction, minimizing total tax burdens.
Higher Registration Thresholds: Small enterprises with lower turnovers are exempt from compulsory GST registration, thus lowering compliance demands.
Reduced Compliance Burden: Unifying GST applications and returns simplifies the filing requirements for businesses.
Clear Regulations for E-commerce Operators: Establishes specific tax guidelines for e-commerce businesses.
Improved Logistics Efficiency: Removes inter-state taxation barriers to enhance transportation and logistical efficiencies.
GST Registration and Filing Requirements
Businesses with an annual turnover exceeding ₹40 lakh (₹10 lakh for special category states) are obligated to register for GST. Filing GST returns entails reporting sales, purchases, and tax obligations via forms such as GSTR-1, GSTR-3B, and GSTR-9, adhering to set deadlines.
Deadlines & Penalties for Tax Filing
Income tax returns must be submitted by July 31 for individuals and October 31 for businesses, whereas GST returns are due on a monthly and annual basis. Delays in filing can incur penalties, totaling ₹5,000 for late income tax returns and ₹50 per day for GST non-compliance.
Tax Deductions, Exemptions & Planning Strategies in India
As per Section 80C of the Income Tax Act, taxpayers can claim deductions for certain investments and expenses, such as deposits in the Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), and life insurance premiums, with a maximum deduction limit of ₹1.5 lakh each financial year.
Common Tax Exemptions
Certain income types are deemed tax-free, thereby lowering the taxpayer’s liabilities. These include agricultural income, House Rent Allowance (HRA), and other exemptions under Section 10, such as gratuity, leave encashment, and employer-provided benefits.
This individual tax is payable before filing the income tax return, after factoring in TDS and advanced tax, representing the balance dues.
Special Topics in Taxation
Apart from standard taxes, India also applies specific taxes tailored for particular situations, such as the Alternative Minimum Tax (AMT) for certain businesses, presumptive tax schemes for small enterprises and professionals, as well as capital gains taxes concerning property and stock market transactions, designed for unique taxpayer scenarios.
Digital Transaction Taxation
The rise of digital payments has prompted new tax regulations targeting online income, cryptocurrency profits, and e-commerce activities. The government has implemented TDS provisions for digital platforms and mandated a 1% TDS on e-commerce transactions exceeding specified thresholds. Digital revenue is also subject to a 30% tax, with little opportunity for deductions, particularly concerning cryptocurrency gains.
Cryptocurrency Taxation Policies
Profits from cryptocurrency trades are taxed at 30% according to Section 115BBH, with an additional 4% cess. Moreover, under Section 194S, transactions involving crypto assets exceeding a cumulative value of ₹50,000 within a financial year (or ₹10,000 in defined circumstances) are subjected to 1% TDS from July 1, 2022.
Double Taxation Avoidance Agreement (DTAA)
DTAA is an agreement between India and other nations designed to prevent the same income from being taxed in both jurisdictions, allowing taxpayers to benefit from exemptions or tax credits, particularly for cross-border transactions.
Compliance & Filing Procedures for Taxes in India
Tax compliance in India encompasses timely payment of taxes, meticulous record-keeping, and adherence to GST, TDS, and income tax requirements. The filing of ITR is crucial, where taxpayers report their income, deductions, and tax obligations accurately.
How to File Income Tax Returns (ITR)
Filing income tax returns is mandatory for individuals and businesses whose income surpasses specified limits. Selecting the correct ITR form, accurately reporting income and deductions, and submitting the return through the Income Tax e-filing portal by the stipulated deadline can help avoid penalties.
Gang of Fake Income Tax Officers Arrested in Dahod
A group of individuals posing as Income Tax (I-T) officers conducting raids in Sukhsar village, Fatepura, Dahod, has been apprehended by the police. The gang, which consisted of seven members from various professions, included a GST inspector from Vadodara, who conspired to orchestrate a phony raid at the premises of a businessman involved in textiles and money lending.
They initially demanded ₹25 lakh from the businessman but ended up extorting ₹2 lakh as a settlement. Growing suspicious of their intentions, the businessman contacted the police, leading to the arrest of five of the fake officers, while two others managed to flee the scene.
The conspirators identified include Abdul Gundia, a land broker from Dahod; Rakesh Rathod, a railway ward boy; Bhavesh Acharya, who worked as an outsourced employee for the Ahmedabad police; and Umesh Patel, Manish Patel, Vipul Patel (a GST inspector from Vadodara), alongside Nayan Patel from Surat. Together they devised this deceitful scheme.
Approximately 25 days earlier, they conducted surveillance at the shop owned by Alpesh Prajapati, a businessman dealing in textiles and money lending. Abdul and Rakesh had previously scouted the location.
Assuming the role of Income Tax officials, the gang conducted a raid at Alpesh Prajapati’s shop in Sukhsar, scrutinizing account records and customer jewelry. They initially demanded ₹25 lakh and, after negotiations, the businessman surrendered ₹2 lakh, being told to procure the remaining amount from Zalod.
While en route to Zalod with the group, the businessman became skeptical and requested identification from the supposed officers. When they failed to provide any, they attempted to escape.
Promptly, the businessman informed the police, who swiftly arrived at the scene. Five members of the gang were apprehended, while two others managed to elude capture. The police are currently working diligently to track down the absconding suspects.
Vipul Patel, a GST inspector from Anand, was identified as the mastermind behind the phony raid. He transitioned from being a clerk in the state GST department to an inspector after 16 years of service, ultimately driven by greed. He collaborated with his relatives Umesh and Manish in executing the scam.
Gundia and Rathod became aware of the businessman during a visit to the Dahod court. Lured by the promise of quick cash, they joined the conspiracy. Rathod, with four prohibition cases against him and a background as a witness in previous cases, remains on the run.
Acharya, one of those arrested, was working as an outsourced staff member at Vivekananda Nagar Police Station in Ahmedabad. He also had roles as an RTI activist and journalist, while Umesh served as a home guard at the same police station.
The investigation continues, with authorities actively pursuing the remaining two suspects.
Income tax budget on ITR filing: Will FM Nirmala Sitharaman announce tax relief for taxpayers earning up to ₹15 lakh. Every year, India’s salaried class eagerly awaits relief in income tax. This year, the middle class is also penning all their hopes for FM Nirmala Sitharaman, when she presents Budget 2025 on February 1. According to a Reuters report, the government is actively considering tax relief for the middle class, particularly earning up to ₹15 lakh annually. The 2025 Budget, to be tabled on February 1, may include an announcement on the tax breaks. This action is intended to boost consumer spending and stimulate the economy. Livemint couldn’t independently verify the information.
Income tax budget: Who will benefit?
If this is implemented, millions of taxpayers might benefit greatly, especially city dwellers struggling with high living costs. According to the Reuters report, those choosing the 2020 tax scheme, which excludes exclusions like those for housing rents, would be eligible for this.
Two tax options for income taxpayers
Two options are now available to Indian taxpayers: the Old and New Tax Regime. Under the Old Tax Regime, rent and insurance exemptions are allowed, among other expenses. The New Tax Regime lowers tax rates while doing away with most exemptions. The choice that best fits their financial situation is up to the taxpayers to choose.
According to a government source cited in the Reuters report, lowering the tax rate would encourage more individuals to opt for the new, more straightforward tax regime. The report also highlighted that a significant portion of India’s current income tax revenue comes from individuals earning at least ₹10 lakh. Under the old tax regime, these earners are taxed at 20%, while the new tax regime imposes a 10% tax rate.
Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, suggests that cutting personal income tax for individuals earning up to ₹1.5 million annually could stimulate urban middle-class consumption, which has been affected by inflation and rising living costs.
He added that the consideration of this proposal reflects the view of government officials as it relates to middle-class issues, which also revolve around the need and desire to start a consumption-based growth model.
Budget 2025
Finance Minister Nirmala Sitharaman is expected to table the Union Budget 2025 on February 1, 2025. The July presentation of Budget 2024 included many modifications to the income tax laws.
The government is thinking of reducing income tax for people who earn up to Rs 15 lakh per year, said Reuters in a report. This move can benefit millions of taxpayers, especially living in urban areas. The upcoming Union Budget 2025-26 may provide relief to the middle class and boost consumption, Reuters cited government sources. According to the report, millions of people could benefit from this move if they choose the 2020 tax system, which does not allow certain exemptions like housing rent deductions.
Experts say that to boost the economy, increasing middle-class income could help. However, high food prices are hurting demand for many goods, from basics like soap and shampoo to cars, especially in cities. In current time, government is facing pressure from the middle class, who feel they are paying too much in taxes, said the report.
New Tax Code to Replace Six-Decade-Old Income Tax Act within Six Months, Says Finance Minister Sitharaman
Nirmala Sitharaman, the Union Finance Minister, has announced the upcoming introduction of a new tax code or Income Tax Act within the next six months. This new legislation aims to streamline the tax system by employing clear and accessible language. During the 165th Income Tax Day celebrations, Sitharaman assured that at least some sections of the new act will be easily comprehensible.
In addition, the Finance Minister emphasized the importance of simplifying communication between tax officers and taxpayers to alleviate apprehension. She underscored the significance of transparency and clarity in tax-related communications, advising against disproportionate enforcement actions. Sitharaman also stressed the need for judicious use of powers by tax officers, urging that taxpayers should not face unwarranted harassment.
Notably, CBDT Chairman Ravi Agrawal, who was present at the event, highlighted the comprehensive review of the Income Tax Act, 1961, with the goal of creating a more concise, clear, and understandable act, ultimately reducing litigation and providing tax certainty to taxpayers.
Sitharaman called for the use of plain language in tax notices, ensuring their comprehensibility to the general public. She emphasized that communication should be straightforward and easily understood by everyone.
The finance minister reiterated the tax department’s objective to collect taxes in a fair and friendly manner, promoting voluntary compliance over inducing fear. She also emphasized the need to enhance the efficiency of the tax refund process, emphasizing transparency and fairness as fundamental principles.
In conclusion, Sitharaman reminded tax officers of their responsibility to balance their powers with fairness and integrity, aiming to make tax compliance less intimidating and more accessible for taxpayers.
To make the tax system more effective, transparent and easy for taxpayers, CBDT has prepared its action plan. According to exclusive information received by CNBC TV18, CBDT has prepared a detailed Central Action Plan for the financial year 2024-25. The goal of this action plan is to make the tax system easier for taxpayers as well as more effective and transparent than before. According to this, policies should be made accordingly keeping economic growth and fiscal stability in mind. Along with this, the goal of this action plan is also to prepare a roadmap for the Income Tax Department for 2047.
What is special in the action plan- The proposals given in the action plan include initiatives to enhance tax administration, steps to increase revenue collection, reduce arrears demand and improve taxpayer services. Apart from this, strict timelines have been proposed for achieving budget targets, reducing arrears demand, managing court cases, standards for providing services and redressal of grievances.
The action plan proposes to move forward by setting targets for managing tax demands, focusing on the top 5,000 arrears cases, which account for 60 per cent of the total demand of Rs 43 lakh crore, and creating a special team in each jurisdiction to analyse these cases.
In the initial phases of forming a government, crucial decisions often come to the fore. One such pressing issue is the rationalization of direct tax structures, where a new administration can prioritize long-term gains over populist concerns.
During FY23, the government garnered nearly Rs 7.1 lakh crore from individual income taxes, with an expected increase to Rs 10 lakh crore by FY25 — notably positive figures for India. However, implementing tough measures such as broadening the tax base, eliminating deductions and exemptions for certain professional categories, and reducing tax burdens for top income earners could potentially enhance the tax-GDP ratio.
Impact of Taxes on Human Behavior
A fundamental aspect of human behavior is the tendency to avoid actions perceived as detrimental to personal interests. This principle significantly influences tax payment behavior, particularly for individuals not bound by salary-based TDS deductions.
Such individuals often invest considerable time and effort in minimizing their tax liabilities through various means, such as strategic transaction categorization, offsetting income with expenses, opting for self-employment over traditional employment, and at times, resorting to cash transactions to evade taxes altogether.
While these tactics may result in reduced individual tax burdens, they deviate from the fundamental purpose of the tax system — maximizing revenue for public welfare while minimizing individual tax burdens.
Established economic literature emphasizes a key proposition: higher tax rates lead to amplified distortions in human behavior. Elevated tax rates can reduce consumption, work hours, and prompt significant efforts to evade taxes, resulting in an “excess burden” or “deadweight loss” — an additional cost to both taxpayers and society due to tax-induced distortions in economic decisions.
Consequently, while higher tax rates may boost revenue, they also escalate the “excess burden,” potentially offsetting the revenue gains.
The optimal tax structure entails a broad tax base where everyone contributes, coupled with minimal tax slabs, exemptions, and concessions. This approach enables tax rate reduction, curbing evasion, and reducing the time and effort spent on tax management.
Ensuring tax compliance is not simply reliant on enforcement measures but also hinges on providing incentives for adherence to tax laws. While stringent enforcement plays a vital role, it is most effective when coupled with incentivized compliance.
The income tax department’s investigation into Alkem Laboratories revealed large-scale tax evasion by the company. The investigation involved surveys, statements from officials, and scrutiny of data and balance sheets.
Allegations include bogus deductions for manufacturing units in Sikkim amounting to over Rs 1,000 crore, and payments to doctors for prescribing company-made drugs, totaling hundreds of crores. The probe is expected to result in heavy penalties for Alkem Labs.
Unrest Between Indian National Congress and Income Tax Department Over Tax Dues
The Income Tax Appellate Tribunal recently reserved its order on the plea by the Indian National Congress seeking a stay against the Income Tax Department’s proceedings of recovery and freezing of the party’s bank accounts. This decision comes in the midst of a heated dispute over outstanding tax dues, with the Congress expressing strong opposition to what they perceive as undemocratic actions by the IT Department.
The IT Department had recovered a substantial amount from the accounts of the Indian National Congress, contributing to the total outstanding tax dues. The Congress, in response, has vehemently criticized these measures, labeling them as undemocratic, particularly as the case pertaining to their return for previous years is still sub judice.
The conflict intensified when the IT Department issued a notice to four bankers of 11 branches of AICC, Youth Congress, and NSUI. The subsequent freezing of the Congress’ main bank accounts had a significant impact on the party’s operations. However, a temporary reprieve was granted by the I-T Appellate Tribunal, allowing the accounts to operate pending a further hearing.
The Congress took its grievances to the Income Tax Appellate Tribunal, filing a complaint against the tax recovery and firmly requesting a stay on further proceedings until the disposal of the stay application. They emphasized the potential detrimental impact on their financial standing, particularly in the lead-up to the 2024 Lok Sabha Elections.
Notably, the IT Department countered these assertions, maintaining that the actions taken were standard recovery proceedings and not linked to any political motives. Furthermore, they accused the Congress of evading payment of Income Tax dues over several years.
The situation escalated further as the Congress accused the BJP-led Centre of engaging in “financial terrorism” and orchestrating an economic assault to weaken the party in advance of the upcoming elections. These allegations were accompanied by strong sentiments towards the ruling party’s conduct, with claims that it posed a threat to democracy.
The ongoing dispute between the Indian National Congress and the Income Tax Department underscores the significant tensions surrounding tax dues, financial accountability, and political implications. As the situation continues to unfold, it remains a focal point of contention within the Indian political landscape.
Income Tax Appellate Tribunal reserved order on the plea by Congress seeking a stay against I-T Department’s proceedings of recovery and freezing of the grand old party’s bank accounts. The Income Tax Department had recovered ₹65 crore from the accounts of the Indian National Congress out of the total outstanding tax dues of ₹115 crore. The Congress had called the act “undemocratic” even when the case pertaining to their return for previous years is sub judice.
On February 14 the IT Department issued a notice to four bankers of 11 branches of AICC, Youth Congress and NSUI. The Congress’ main bank accounts were frozen on Friday over an Income Tax demand of ₹210 crore but an I-T appellate tribunal later allowed it to operate them pending a further hearing next week, a huge relief for the party which said the move had impacted all political activity.
Income Tax Return Filing: The Central Board of Direct Taxes (CBDT) has announced its strategy to dispatch notices to individuals who have not filed tax returns, even though having tax deductions at source (TDS). In an exclusive interview with Economic Times (ET), CBDT Chairman Nitin Gupta disclosed that approximately 1.5 crore taxpayers fall into this category. The notices, targeted based on precise information, are expected to be issued to a select few thousand taxpayers.
Gupta highlighted the department’s use of advanced data analytics, enabling the identification of discrepancies and facilitating outreach to taxpayers for updating their returns. Notably, the CBDT has successfully collected ₹4,600 crore from 5.1 million updated returns, emphasizing its commitment to improving taxpayer services.
According to ET, Gupta stated, “We will be sending notices to only those taxpayers for which we have definitive information.” He added that the focus remains on enhancing taxpayer services, streamlining refund processes, updating returns, and resolving significant tax disputes.
In shedding light on the CBDT’s initiatives, Gupta shared insights into the demand management center located in Mysuru, Karnataka. Originally designed for disputes exceeding ₹1 crore within the state, the center has expanded its jurisdiction nationwide since its inception in 2022. The collaborative approach, involving chartered accountants, assessing officials, and taxpayers, has successfully resolved 250,000 matters.
As reported by ET, Gupta elaborated on the CBDT’s plan to issue a detailed circular implementing the budget announcement on the withdrawal of small tax demands, up to ₹25,000 until FY15. The cumulative threshold, including penalties and interest, is set at ₹1 lakh crore.
Gupta also discussed the transition of taxpayers to the new tax regime introduced in the February 2022 budget. According to ET, Gupta said “approximately 60% have embraced the new income tax regime. Gupta emphasized the need for a wait-and-watch approach to evaluate responses and filing patterns before contemplating any rate adjustments. Source
A total of 81.8 million income tax returns have been filed for the assessment year 2023-24 up to December 31, 2023, which was the last date for filing belated returns for the current assessment year. Up on e-verifying or manual verification by sending its acknowledgement to the CPC Bengaluru, the Income-tax department in its endeavour and depending on the complexity of the filed Returns, process expeditiously and refund excess taxes paid, if any, to the taxpayers within a day to 4-5 weeks.
As mentioned, some taxpayers have yet to get their refunds despite filing returns well within the due date. There is a considerable amount of delay in getting due tax refunds. Let us have a look at the reasons for inordinate delays, the resources available to taxpayers and the responsibilities of taxpayers.
Prabhakar K S, founder and chief executive officer of tax advisory firm Shree Tax Chambers, answered the following questions for one’s better understanding.
What happens if a taxpayer whose ITR is submitted has yet to receive the refund?
Once the ITR is e-verified or manually by the taxpayer, the Department process it and sends a Intimation-cum-Notice under Section 143 (1) of the Income Tax Act, 1961, to the taxpayer’s registered e-mail id to inform him that he is eligible for a refund and initiate crediting process to his pre-validated bank account, if found eligible. A taxpayer can access the said intimation e-filing portal using login credentials. In any case, if the refund is not received within 4-5 weeks or 2-3 months, the refund fails, though the department is pushed from its side, withheld to adjust against old tax demands; the refund will be lying with the Department until the taxpayer addresses certain issues.
What should a taxpayer do?
A taxpayer’s job is not done just by filing his return. He must check his e-mails and mobile and e-filing portal for any departmental communications he might have received regularly. There could be several reasons for being delayed, but most of them require taxpayers’ end’s action to address them.
Forgotten to e-verify after filing the return;
Filing return offline or physical mode, which will delay processing the Return further
Failed to send duly signed acknowledgement’s hard copy to CPC Bengaluru within 30 days of the return filing;
Mismatch of TDS/TCS – Differences in Form 16/16A and Form 26AS;
PAN became inoperative due to non-linking with Aadhaar;
Mismatch of Name in PAN and pre-validated Bank account;
Bank Account not pre-validated for refund, which is now mandatory;
Wrong Bank details – Name, account number, IFSC;
Providing a non-operative/dormant bank account while filing the return;
Apart from the above, there could be a delay from the Department side
Rejection of refund request due to additional tax required to be paid by the taxpayer;
Refund request still under Process – Due to complexities, the Department may take extra time to process the return;
Return may be marked for scrutiny to ensure its accuracy and compliance;
Requirement of additional documents and information from the taxpayer;
Initiating the process of adjusting the Refund against old tax demands;
Return marked as defective return
Will the government pay any penalty?
No penalty as such, however, the Department pays an interest of 0.5 per cent p.m. or 6 per cent p.a, which is paid from April 1 till the date of the credit of the refund. However, if there is a delay from the taxpayer’s side, then the period of such delay will not be considered while calculating the interest.
How can one raise such a grievance?
A taxpayer can raise a grievance through the Department’s e-filing portal by using login credentials and also reach out to their Help Desk Numbers. In case the Return is not yet processed or processed but the refund has not yet been issued, he can raise an issue in their ‘Grievances’ section by selecting CPC-ITR, which predominantly deals with ITR-V status, Intimations or Notices under section 143(1), Refund not received, Return processing and among others. Similarly, SBI for Refund failed; the Refund was credited to the wrong account, and the Refund was paid but not credited.
In case of failure of refund, a taxpayer post login to the e-filing portal navigates ‘My Account’ feature, clicks the ‘Service Request’ option and chooses ‘Refund Re-Issue’ request under ‘New Request’ by providing requisite details and e-verify therein.
In addition to the above, he can reach out to the CPC Help Desk numbers at 1800 103 0025, 1800 419 0025, 080-4612 2000 and 080-6146 4700 Monday through Friday between 08.00 am- 08.00 pm. Thus, to avoid undue delays and cumbersome follow-up processes, a taxpayer is advised to keep always updated on his e-filing portal’s-profile details, check departmental communications or e-mails, SMS and ensure prompt action on priority.
Refund shall be issued to the pre-validated bank account only. In case of refund failure, taxpayer can raise the service request in e-Filing portal upon receiving communication from CPC.
Perform the following steps to raise Refund Re-issue Request:
The Income Tax (I-T) department officials made one of the largest cash seizure in Odisha’s history when conducting several raids on a liquor manufacturing company. They found cash worth over Rs 360 crore, from two liquor traders in the state. According to the news agency, the note counting machine also broke down during the counting of notes.
Allegations of income tax evasion within the liquor industry prompted massive operations on Wednesday, which targeted multiple entities. The Balangir branch of the well-known Indian liquor manufacturer and distributor Baldeo Sahu & Group of Companies in Western Odisha witnessed the seizure of over 150 crores in cash.On Thursday, the massive I-T raids on various divisions of the liquor manufacturer Boudh Distilleries Private Limited began for the second day.
Meanwhile, the corporate office located in Sambalpur was subjected to similar scrutiny, which resulted in an additional crucial seizure of funds of more than 150 crores.
The primary information reveals a connection between Boudh Distillery Private Limited and Baldev Sahu & Group of companies, linking the ongoing probe to previous I-T raids on the former. Further investigations extended to include the house, office, and local liquor Bhati at Sargipali, belonging to liquor merchant Rajkishore Prasad Jaiswal of Sundargarh.The I-T teams expanded their search, targeting the Boudh Distillery Pvt Ltd’s corporate office in Palaspalli and homes of affiliated officials. Operations extended to the company’s factory and office at Boudh Rambhikta, along with the premises of Ashok Kumar Agarwal, a businessman from Boudh Puruna Cuttack, allegedly linked to the company.
Additionally, Balangir and Titilagarh saw multiple liquor traders under the scanner, including the house and liquor store of wine merchants Sanjay Sahu and Deepak Sahu, where a 30-member I-T team conducted searches.
The reach of the I-T operations extended beyond state borders, with teams venturing to Kolkata and Ranchi, targeting directors and managing directors of the implicated companies. Despite these extensive actions, neither Boudh Distillery Private Limited nor any associated companies responded to the income tax raids, while I-T officials remained tight-lipped on the matter.
Income Tax Department enabled the “Discard ITR” option for unverified original/belated/revised Income Tax Returns (ITRs) starting from Assessment Year 2023-24.
Discard Return FAQs
Question 1: I filed my Original ITR u/s 139(1) on 30th July 2023 but not yet verified. Can I Discard it?
Response: Yes, user can avail the option of “Discard” for the ITRs being filed u/s 139(1) /139(4) / 139(5) if they do not want to verify it. User is provided a facility to file an ITR afresh after discarding the previous unverified ITR. However, if the “ITR filed u/s 139(1)” is Discarded and the subsequent return is filed after the due date u/s 139(1), it would attract implications of belated return like 234F etc., Thus, it is advised to check whether the due date for filing the return u/s 139(1) is available or not before discarding any previously filed return.
Question 2: I Discard my ITR by-mistake. Is it possible to reverse it? Response: No, if ITR is Discarded once, it can’t be reversed. Please be vigilant while availing Discarding option. If an ITR is Discarded, it means that, such ITR is not filed at all.
Question 3: Where can I find “Discard option” ? Response: User can find Discard option in below path : http://www.incometax.gov.in → Login → e-File → Income Tax Return → e-Verify ITR → “Discard”
Question 5: I sent my ITR V to CPC and it is in transit and not yet reached CPC. But I don’t want to verify the ITR as I get to know that details not reported correctly. Can I still avail “Discard” option? Response: User shall not discard such returns, where the ITR-V has already been sent to CPC. There is an undertaking to this effect before discarding the return.
Question 6: When can I avail this “Discard” option and can I avail this “Discard” option multiple times or only once? Response: User can avail this option only if the ITR status is “unverified” / “Pending for verification”. There is no restriction on availing this option multiple times. Precondition is “ITR status” is “Unverified” / “Pending for verification”.
Question 7: My ITR filed for AY 2022-23 is pending for verification. Can I avail this “Discard” option? Response: User can avail this option only from AY 2023-24 onwards for the respective ITR. This option will be available only till time limit specified for filing ITR u/s 139(1)/139(4) /139(5) (i.e., 31st December of respective AY as of now).
Question 8: I discarded my Original ITR 1 filed on 30th July 2023 on 21st August 2023 and I want to file subsequent ITR on 22nd August 2023. Which section should I select? Response: If user discards the Original ITR filed u/s 139(1) for which due date u/s 139(1) is over, they are required to select 139(4) while filing subsequent return. As there is no prior valid return exist, date of Original ITR / Acknowledgement number if Original ITR fields are not applicable. Further, if user wants to file revised return in future, he needs to provide details of “Original filing date” and “Acknowledgement number” of the valid ITR i.e., ITR filed on 22nd August 2023 for filing revised ITR
JK Paper Ltd. has been fined an aggregate amount of Rs 65.6 crore by the income tax department for assessment year 2021.
The company received the income tax and penalty demand on Tuesday, the company said in an exchange filing. The aggregate amount also includes an interest of Rs 22.4 crore.
However, the company will file an appeal against the order before the appropriate authorities, JK Paper said. The company, based on its preliminary assessment of the issues involved, is of the view that the demand is fallacious, legally untenable and would be set aside in the course of proceedings.
The Income Tax Department is fully prepared to take stringent action against high-net-worth individuals (HNIs) who engage in tax underpayment, according to Financial Express. This decision follows the department’s discovery that the reduction in the highest tax rate on personal income from 42.74% to 39% in the FY24 Budget has not deterred tax evasion among HNIs.
The department is currently engaged in a comprehensive “360-degree profiling” of individuals who have either reported or are likely to have an annual income exceeding ₹1 crore. This involves scrutinizing their investment patterns, expenditures, and income sources.
Additionally, the department has indicated that the count of taxpayers who declared an annual income of ₹1 crore or higher in FY23 significantly lags behind the true count of individuals possessing such income. This implies that a substantial portion of HNI individuals may be engaged in tax underpayment. Once the screening process is finalized, the department will issue notices to those individuals who have inaccurately reported their income.
In this year’s Budget, the government reduced the surcharge for individuals with an annual income of ₹5 crore and higher, resulting in a significant decrease of 374 basis points in their effective tax rate. Nevertheless, the department has determined that this change did not achieve the intended outcome of deterring tax evasion among HNIs.
The department’s efforts to combat tax evasion are anticipated to enhance the government’s revenue, concurrently delivering a clear message to HNIs that they are not exempt from the law.
How can HNIs evade scrutiny from the Income Tax Department?
Inclined HNIs should take the following steps to ensure compliance and reduce the risk of scrutiny by the Income Tax Department:
Also, HNIs should be aware that the Income Tax Department is employing progressively advanced tools and methodologies to identify tax evasion. Consequently, they must exercise caution and abstain from participating in any tax avoidance or evasion schemes.
The Income Tax Department takes cognizance of certain high-value transactions that could land you in the legal net if ignored. To prevent tax evasion and money laundering, tax authorities closely monitor a variety of cash-related transactions. Financial institutions, including banks, mutual fund companies, brokerages, and property registrars, have an obligation to report cash transactions exceeding a specific threshold to the tax department. Below are several cash transactions subject to vigilant monitoring by tax authorities:
Acquisition of real estate assets
In accordance with Section 12 of the Prevention of Money Laundering Act, 2002 (PMLA), property registrars are mandated to notify tax authorities about any acquisitions or sales of immovable properties valued at ₹30 lakh or higher. This notification must be submitted within 30 days from the date of property registration. The property registrar must furnish the following details to the tax authorities:
This data is utilized by tax authorities to monitor substantial cash transactions and identify potential instances of tax evasion and money laundering. The property registrar must report all transactions involving the purchase and sale of immovable property valued at ₹30 lakh or higher, irrespective of whether the payment is made in cash or by cheque.
Acquisition of stocks, mutual funds, debentures, and bonds
Companies or institutions that issue bonds or debentures must compulsorily report any receipt of ₹10 lakh or more from an individual during a financial year for the acquisition of bonds or debentures. This reporting measure is implemented to prevent tax evasion and money laundering.
Likewise, companies that issue shares must report any receipt of ₹10 lakh or more from an individual within a financial year for the acquisition of shares. This reporting obligation also extends to the purchase of mutual funds.
The company or institution must provide the following information to the Income Tax Department:
Type of security acquired (e.g., bond, debenture, share, mutual fund unit).
This data enables the Income Tax Department to identify taxpayers who may not be disclosing their complete income or who are engaging in suspicious investment activities.
The reporting mandate is applicable to investments made by individuals, Hindu Undivided Families (HUFs), and partnership firms, and it does not extend to investments made by companies.
Acquisition of foreign currency
Any purchase of foreign exchange amounting to ₹10 lakh or more during a financial year must be reported to the Income Tax Department. This reporting obligation is applicable to individuals, HUFs, and partnership firms, but it does not pertain to companies.
The subsequent foreign exchange transactions must be reported to the Income Tax Department:
The establishment that supplies you with foreign exchange is obligated to notify the Income Tax Department of the transaction. For instance, if you buy foreign currency notes and coins from a bank, the bank must report the transaction to the Income Tax Department.
This reporting mandate is implemented to deter tax evasion and money laundering. The Income Tax Department can utilize the provided information to identify taxpayers who are either underreporting their complete income or engaging in questionable foreign exchange transactions.
Cash deposits in bank accounts
The Central Board of Direct Taxes (CBDT) has instituted a compulsory rule for banks and cooperative banks to notify the tax authorities regarding cumulative cash deposits of ₹10 lakh or more in one or more accounts (excluding current accounts and time deposits) held by an individual within a financial year. This regulation is implemented to combat tax evasion and money laundering. The bank or cooperative bank must submit the following details to the CBDT:
The account number(s) in which the cash deposit was placed
This data empowers the CBDT to pinpoint taxpayers who may not be disclosing their entire income or engaging in questionable cash deposits. This reporting obligation is applicable to cash deposits in one or more accounts, excluding current accounts and time deposits, held by an individual. In essence, if you make several cash deposits, each of which is less than ₹10 lakh, but the cumulative cash deposit amount in a financial year reaches ₹10 lakh or more, the bank or cooperative bank is mandated to notify the CBDT.
Money deposited in fixed deposits
The CBDT has stipulated that banks are obligated to report instances where an individual accumulates ₹10 lakh or more in a fixed deposit (FD) within a financial year, spanning one or more time deposits (excluding renewals). This reporting measure is implemented to deter tax evasion and money laundering.
The bank must furnish the following details to the CBDT:
This data enables the CBDT to pinpoint taxpayers who may be underreporting their total income or engaging in dubious cash deposits. These are instances of cash deposits into time deposits that necessitate reporting to the CBDT:
An individual deposits ₹5 lakh in cash into a new FD in January 2023.
An individual deposits ₹3 lakh in cash into an existing FD in February 2023.
An individual deposits ₹2 lakh in cash into a new FD in March 2023.
The cumulative cash deposit in time deposits for the financial year 2022-2023 amounts to ₹10 lakh, therefore, the bank is obligated to report this to the CBDT. The obligation to report pertains to cash deposits in time deposits by individuals, HUFs, and partnership firms, excluding companies.
Payments made using credit cards
The CBDT has imposed a compulsory requirement on credit card issuers to notify the Income Tax Department regarding cash payments totalling ₹1 lakh or more for credit card balances. Additionally, if an individual settles credit card dues amounting to ₹10 lakh or more through any means in a fiscal year, these transactions must also be reported to the tax department.
The purpose of this reporting requirement is to combat tax evasion and money laundering. The Income Tax Department can employ this information to detect taxpayers who may not be accurately disclosing their complete income or those engaged in questionable credit card payments. The credit card issuer must provide the following details to the Income Tax Department:
Any notice that is received from the Income Tax Department might be alarming and frightening to the recipient. However, there is no reason to be disturbed when an income tax notice is received. On receiving an income tax notice, the taxpayer must understand the nature of notice, the request or order in the notice and take steps to comply. Some of the common reasons for receiving an income tax notice is as follows:
A return is termed defective when the IT Department identifies any contradiction or faults or any misplaced information in ITR. An assessee must rectify the flaws within 15 days and if the flaw is not rectified, it would be considered as an invalid return. Once the income-tax returns are filed, the particulars provided in the ITR are checked and processed.
Notice u/s 142(1) – Inquiry Notice before Assessment
This notice is addressed to the assessee when the return is already filed and further details and documents are required from the assessee to complete the process. This notice can also be sent to necessitate a taxpayer to provide additional documents, as required by the tax officer.
This notice is mostly received when there are discrepancies in the taxpayer tax return and an investigation of certain documents or information is required. The taxpayer is given time for submission of documents and a judicious chance of being heard before the conclusion of the process.
Notice u/s 143(2) – Scrutiny Assessment Notice
This applies when the tax is filed by the assessee himself (Self-Assessment) or in retort to a notice u/s 142(1). This notice is attended by the Assessing Officer in order to confirm that the assessee has not minima-listed the income, computed undue damage or tax had been short-paid. It is expected of him/her to execute the following:
Be present or signify before the Assessing Officer (AO) to provide proofs
Produce proof to validate the income/profits/gains/losses.
Notice u/s 156 – Demand Notice
This type of income tax notice is issued by the Income Tax Department when any tax, interest, fine or any other sum is owed by the taxpayer. All demand tax notice will stipulate the sum which is outstanding and due on the part of the taxpayer. The amount mentioned in the demand notice must be deposited by the taxpayer within 30 days or any other date mentioned on the tax notice.
Notice u/s 148 – Commence Proceedings
This notice is released for the purpose of reopening a case that has already been evaluated previously by an officer. The case is re-opened if the officer trusts that any actionable income is not stated in the return. Prior to undertaking this course of action, the Assessing Officer (AO) has to deliver a notice under section 148 by creating a valuation or re-assessment. The Assessing Officer (AO) should have a binding motive to re-open the case and must record the purpose of dispensing the notice.
Notice u/s 245 – Intimation to set off Demand and Refunds
This tax notice is issued by the income tax department to an assessee for whom the Income Tax Department owes a refund from a previous assessment year, while the taxpayer is supposed to pay the tax demanded currently. At this juncture, the Assessing Officer can setoff a refund against the tax demand which is unresolved from the taxpayer. As per Section 245, the modification of reimbursement and petition could be provided after an appropriate issue of notice to the taxpayer. The taxpayer will be given the opportunity to rectify the inaccuracy identified by raising or altering the claim.
Responding to Demand Notice
Responding to an income tax demand notice has now become easier, thanks to the digitization of the Income Tax portal and introduction of E-Assessment under the Centralised Communication Scheme, 2018. This takes away the time-consuming and painstaking manual processes of the past. Taxpayers can now view the outstanding tax demand by following the procedures listed below:
Step 1: Log in to the e-filing portal of the official website of the Income-tax department. If you do not have a username and password, please create a new user identification on the website.
Step 2: On the drop-down menu of My Accounts Section, choose the option ‘Respond to Outstanding Tax Demand’.
Income Tax Demand Notice
Step 3: Details pertaining to the Assessment year, Section Code, Demand Identification Number (DIN), Date of issue of demand will be displayed. Select the income tax demand from the list to which you would like to respond.
List of Demands
Step 4: The taxpayer, after clicking ’Submit’ is entitled to choose the response among the options available:
Demand is correct
Demand is partially correct
Disagree with demand
Demand is not correct but agree for adjustment
Now, let us examine the procedures based on the status of demand chosen by the taxpayer.
Demand is Correct
Choosing this option prohibits you from disagreeing with the demand later. To start the process under this choice, click on ‘Submit’. A success message will be displayed. If you are eligible for a refund, the outstanding amount along with interest will be adjusted against the refund due. If not, the dues should be immediately remitted. For payment of dues, click on the hyperlinked option ‘Pay Tax’, and then click on ‘Confirm’. You will be redirected to the TIN website of NSDL, where your outstanding taxes can be paid. Now click on ‘submit to bank’ option on the page to the payment.
Demand is Partially Correct
On selecting this option, two amount fields will be displayed on the screen. You must enter the correct and incorrect amount. In addition to it, you will have to choose the reason cited in the portal. You will be required to provide additional information based on the selected choice.
The following reasons are cited in the portal, among which the choice should be made:
Demand paid.
Demand paid and challan has CIN.
Demand paid and challan has no CIN.
Demand already reduced by rectification/revision.
Demand already reduced by the Appellate order but appeal effect to be given.
Filing Typee-Filed Acknowledgement No.RemarksUpload Challan CopyUpload TDS CertificateUpload Letter requesting rectification copyUpload Indemnity Bond
Demand is not Correct
This option can be selected if you have apprehensions on the correctness of the demand, after which you will be required to choose among the many options specified in the option “Demand is partially correct”. Some of the option that can be selected for citing demand is not correct include:
Demand paid
Demand already reduced by rectification/revision
Demand already reduced by Appellate Order but appeal effect to be given
In this case, you will have to specify the reasons for your disagreement with the demand, which again could be any of the following:
Demand paid
Demand already reduced by rectification/revision
Demand already reduced by Appellate Order but appeal effect to be given
Appeal has been filed
Rectification / Revised Return Filed at CPC
Rectification filed with AO
Others
Tracking Status of Response
After completing all the above procedures and successfully submitting the information to the Income Tax department, a transaction ID will be generated. The response can be checked by clicking on the ‘transaction ID’ on the income tax e-filing portal.
Transaction ID
The demand position will be updated every day. Further, interest demand u/s 220(2) is linked to the principal demand of the same assessment year. This indicates that principal demand is already adjusted/ paid and interest demand is the only outstanding value. Hence does not require any confirmation.
Tax deduction at source (TDS) means collecting tax on income in the form of salary, rent, asset sales, dividends, etc., by requiring the payer to collect income tax due on such income while crediting/paying to the payee and deposit the same to the government on payee’s behalf. Below you’ll find the TDS rate chart, which summarises all the TDS provisions of the Income Tax Act.
Budget 2023 updates –
Section 194BA – Introduction of TDS on income from online gaming
Section 196A – Starting April 1st, 2023, non-residents earning income from mutual funds in India can provide a Tax Residency Certificate to avail the benefit of TDS as per rate given in tax treaty, instead of 20%.
Section 192A – TDS rate reduced to 20% from maximum marginal rate on PF withdrawal for employees who do not have PAN
Section 194N – TDS threshold has been increased on cash withdrawal by by co-operative societies. Starting April 1st, 2023, tax will be deducted on cash withdrawals by co-operative societies if the amount exceeds Rs 3 crore, instead of the previous limit of Rs 1 crore.
Budget 2022 updates –
New Section 194S- A person is liable for Tax Deduction at Source (TDS) at 1% at the time of payment of the transfer of virtual digital assets.
Sale of immovable property under Section 194-IA- It is proposed to amend the amount on which TDS should be deducted. The person buying the property should deduct tax at 1% on the sum paid/credited or the stamp duty value of such property, whichever is higher.
New Section 194R- TDS at 10% should be deducted by any person who provides perks or benefits, whether convertible into money or not, to any resident for carrying out any business or profession by such resident.
The following tables list the various TDS rates applicable to resident and non-resident payments as well as TDS rates on domestic and foreign companies in India. Any person paying income is responsible to deduct tax at source and deposit TDS within the stipulated due date.
10% Budget 2023: Exemption of TDS on interest from listed debentures has been removed. Therefore, tax has to be deducted on interest on such specified securities.
194
R
Payment of any dividend
5,000
10%
194A
R
Interest from other than interest from securities (from deposits with banks/post office/co-operative society)
Payment in consideration of transfer of certain immovable property other than agricultural land.
50,00,000
1%
194-IB
R
Rent payment by an individual or HUF not covered u/s. 194-I
50,000 per month
5%
194-IC
R
Payment under Joint Development Agreements (JDA) to Individual/HUF
No limit
10
194J
R
Any sum paid by way of fee for professional services
30,000
10%
194J
R
Any sum paid by way of remuneration/fee/commission to a director
30,000
10%
194J
R
Any sum paid for not carrying out any activity concerning any business;
30,000
10%
194J
R
Any sum paid for not sharing any know-how, patent, copyright, etc.
30,000
10%
194J
R
Any sum paid as a fee for technical services
30,000
2%
194J
R
Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films
30,000
2%
194J
R
Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center.
30,000
2%
194K
R
Payment of any income for units of a mutual fund, for example, dividend
No limit
10%
194LA
R
Payment in respect of compensation on acquiring certain immovable property
2,50,000
10%
194LB
NR, FC
Payment of interest on infrastructure debt fund to Non-Resident
No limit
5% *This rate shall be increased by applicable surcharge and 4% cess
194LC
NR, FC
Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or the issue of long-term bonds
No limit
5%
194LC
NR, FC
Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against the issue of long-term bonds listed in IFSC
No limit
4%
194LD
NR, FC
Payment of interest on bond (rupee-denominated) to FII or a QFI
No limit
5%
194LBA(1)
R
Certain income distributed by a business trust to its unitholder
No limit
10%
194LBA(2)
NR, FC
Interest income of a business trust from SPV distribution to its unitholders
No limit
5%
194LBA(2)
NR, FC
Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders
No limit
10%
194LBA(3)
NR
Rental income payment of assets owned by the business trust to the unitholders of such business trust
No limit
30%
194LBA(3)
FC
Rental income payment of assets owned by the business trust to the unitholders of such business trust
No limit
40%
194LBB
R, NR
Certain income paid to a unitholder in respect of units of an investment fund
No limit
10%
194LBB
FC
Certain income paid to a unitholder in respect of units of an investment fund
Income by way of LTCG referred to in section 115E in the case of NRI
No limit
10%
195
NR, FC
Income by way of LTCG under section 112(1)(c)(iii)
No limit
10%
195
NR, FC
Income by way of LTCG under section 112A
No limit
10%
195
NR, FC
Income by way of STCG under section 111A
No limit
15%
195
NR, FC
Any other income by way of LTCG
No limit
20%
195
NR, FC
Interest payable on money borrowed by the government or Indian concern in foreign currency
No limit
20%
195
NR, FC
Income from royalty payable by the Indian concern or the government, for the copyright in a subject referred in the first proviso of section 115A or computer software referred to in the second proviso of section 115A
No limit
10%
195
NR
Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy
No limit
10%
195
FC
Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy
The Normal slab rates for FY 2023-24 for individuals and HUF have changed under the new tax regime.
Applicable surcharge and health and education cess shall be deducted in addition to the TDS rates deducted for NRI deductees.
In the above TDS rate chart, the ‘Resident’ payee under the column ‘TDS deducted’ includes domestic companies.
All TDS amendments introduced in Budget 2023 have been included in the TDS chart above.
Union Budget 2023 New TDS Provisions
Section 194BA – TDS on online gaming
Starting from April 1, 2023, TDS will be deducted on income earned from online gaming. If you win money, the online gaming platform giving you the winnings will deduct 30% TDS on the net winnings. TDS will be deducted when you withdraw the winnings from your account. In case you do not withdraw the winnings by the end of the financial year, then the tax will be deducted on the unwithdrawn amount lying in your account by the end of financial year.
Section 196A – Reduced TDS rate as per tax treaty
When a non-resident earned income from mutual funds in India, the TDS rate was 20%. However, from April 1, 2023, the non-resident can choose to pay a lower tax rate given in the tax treaty by providing a tax residency certificate.
Section 192A – Relaxation for employees without PAN
Starting from April 1, 2023, if an employee does not furnish PAN (Permanent Account Number), they will receive their provident fund balance after a 20% tax deduction. Earlier, tax was deducted at maximum marginal rate (MMR) which would be as high as 42.74%.
Section 193 – Tax deduction on interest from specified securities
Section 194N – Increased TDS threshold for cooperative societies
From April 1, 2023, if a co-operative society withdraws cash, TDS will be applicable when the withdrawal amount exceeds Rs. 3 Crore. This threshold was previously Rs. 1 Crore.
Section 194R – Clarification on TDS deductions for benefits or perquisites
In the 2023 budget, it was clarified that TDS should be deducted on benefits or perquisites, whether they are in cash, in kind, or a combination of both. This rule also applies to Section 28(iv).
New Section 155(20) – Credit of TDS in the year of income reporting
Interest other than interest from securities (from deposits with banks/post office/co-operative society)Interest from banks/post office/co-operative society
10%
194B
Income from lottery winnings, card games, crossword puzzles etc.
30%
194BA
Income from online games
30%
194BB
Income from horse race winnings
30%
194C
Payment to contractor/sub-contractor:-
a) Individuals/HUF
1%
b) Other than Individuals/HU
2%
194D
Insurance commission to:
a) Domestic Companies
10%
b) Other than companies
5%
194DA
Insurance pay-out in respect of a life insurance policy
5%
194E
Payment to non-resident sportsmen/sports association
20% + surcharge + 4% cess
194EE
Payment of amount standing to the credit of a person under National Savings Scheme (NSS)
10%
194F
Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund
20%
194G
Payments, commission, etc., on the sale of lottery tickets
5%
194H
Commission or brokerage
5%
194-I
Rent:
194-I(a) Rent on plant and machinery
2%
194-I(b) Rent on land/building/furniture/fitting
10%
194-IA
Payment in consideration of transfer of certain immovable property other than agricultural land.
1%
194-IB
Rent payment by an individual or HUF not covered u/s. 194-I
5%
194-IC
Payment under Joint Development Agreements (JDA) to Individual/HUF
10
194J
Any sum paid by way of fee for professional services
10%
194J
Any sum paid by way of remuneration/fee/commission to a director
10%
194J
Any sum paid for not carrying out any activity concerning any business;
10%
194J
Any sum paid for not sharing any know-how, patent, copyright, etc.
10%
194J
Any sum paid as a fee for technical services
2%
194J
Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films
2%
194J
Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center.
2%
194K
Payment of any income for units of a mutual fund, for example, dividend
10%
194LA
Payment in respect of compensation on acquiring certain immovable property
10%
194LB
Payment of interest on infrastructure debt fund to Non-Resident
5% + surcharge + 4% cess
194LC
Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or the issue of long-term bonds
5%
194LC
Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against the issue of long-term bonds listed in IFSC
4%
194LD
Payment of interest on bond (rupee-denominated) to FII or a QFI
5%
194LBA(1)
Certain income distributed by a business trust to its unitholder
10%
194LBA(2)
Interest income of a business trust from SPV distribution to its unitholders
5%
194LBA(2)
Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders
10%
194LBA(3)
Rental income payment of assets owned by the business trust to the unitholders of such business trust
30%
194LBA(3)
Rental income payment of assets owned by the business trust to the unitholders of such business trust
40%
194LBB
Certain income paid to a unitholder in respect of units of an investment fund
10%
194LBB
Certain income paid to a unitholder in respect of units of an investment fund
40%
194LBC
Income from investment in securitisation fund received to an individual and HUF
25%
194LBC
Income from investment in securitisation fund received to a domestic company
10%
194LBC
Income from investment in securitisation fund received to a foreign company
40%
194LBC
Income from investment in securitisation fund received to NRI
10%
194M
Certain payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J
5%
194N
Cash withdrawal from a banking company, co-operative society engaged in the business of banking or a post office:
2%
Filed ITR during the last three years and cash withdrawal exceeds Rs 3 crore
2%
In case person has not filed ITR for the last three years – total cash withdrawn is more than ₹20 lacs and up to ₹3 Crore in a FY – total cash withdrawn is more than ₹3 Crore is a financial year
– 2% – 5%
194O
Payment for the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform.
1% 5% in case PAN is not furnished
194P
Payment of pension or interest to specified senior citizens of age 75 years or more
Normal tax slab rates
194Q
Payments for the purchase of goods
0.10%
194R
Perquisite or benefit to a business or profession
10%
194S
TDS on the transfer of virtual digital assets
1%
195
Income on investments made by NRI citizen
20%
195
Income by way of LTCG referred to in section 115E in the case of NRI
10%
195
Income by way of LTCG under section 112(1)(c)(iii)
10%
195
Income by way of LTCG under section 112A
10%
195
Income by way of STCG under section 111A
15%
195
Any other income by way of LTCG
20%
195
Interest payable on money borrowed by the government or Indian concern in foreign currency
20%
195
Income from royalty payable by the Indian concern or the government, for the copyright in a subject referred in the first proviso of section 115A or computer software referred to in the second proviso of section 115A
10%
195
Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy
10%
195
Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy
If the agreement for such royalty payment is entered in between 31st March 1961 and 1st April 1976
50%
195
Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy
If the agreement for such royalty payment is entered after 31st March 1976
10%
195
Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy
10%
195
Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy
If the agreement for such payment is entered in between 29th February 1964 and 1st April 1976
50%
195
Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy
If the agreement for such payment is entered after 31st March 1976
10%
195
Any other income
30%
195
Any other income
40%
196B
Income (including LTCG) from units of an offshore fund
10%
196C
Income (including LTCG) from foreign currency bonds or GDR of an Indian company
10%
196D
Income (excluding dividend and capital gain) from Foreign Institutional Investors.
The I-T officials served notices on the Vemulawada temple, the Yadadri Narasimha Swamy and the Saraswati temple at Basara, among others. A total Rs 14 crore taxes were pending for the past few years.
Hyderabad: The income-tax department has served notice to several temples in Telangana asking the managements to pay their pending taxes immediately.
The I-T officials served notices on the Vemulawada temple, the Yadadri Narasimha Swamy and the Saraswati temple at Basara, among others. A total Rs 14 crore taxes were pending for the past few years.
Responding to the notices, endowments minister A. Indrakaran Reddy said that they would stage a protest against the BJP government at the Centre for utilising the I-T department to target Telangana temples. The income-tax department was deliberately serving notices on Telangana temples, he alleged.
Clause 44 made its debut as a new addition to Form 3CD of the Tax Audit Report (TAR) starting from the Assessment Year 2022-23. It is worth noting that although this clause was initially introduced through a notification dated July 20, 2018, its enforcement was consistently postponed each year through a series of circulars. The final circular addressing this matter was Circular No. 05/2021, dated March 25, 2021, which extended the deadline for its implementation until March 31, 2022. Consequently, any Tax Audit Report in Form 3CD submitted after March 31, 2022, must adhere to the requirements outlined in clause 44.
Since the introduction of this clause in the Tax Audit Report, tax professionals have expressed significant concerns and challenges related to gathering the necessary information from the assessees’ accounting records. Additionally, there has been ongoing uncertainty surrounding the interpretation of the information presented in this clause, particularly from the perspective of tax authorities.
This article endeavors to offer valuable insights into Clause 44, taking into consideration the latest Revised Guidance Note issued by the Institute of Chartered Accountants of India (ICAI) [Please see: “Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 (Revised 2023) – Ninth Edition 2023″]. Additionally, the author delves into a discussion about the risks associated with and potential mitigating strategies for providing information within this clause.
♦ Consolidated or Expenditure-wise information:
The primary question that arises is whether to provide the figures in a consolidated manner or furnish expenditure-wise details. In this context, Para 82.1 of the Guidance Note provides clarity by stating that the information required under this clause should be presented in a consolidated fashion, and there is no requirement to provide figures on an expenditure head-wise or nature-wise basis.
Less: Total value of expenditure excluded by virtue of Schedule III to the CGST Act 2017.
xxxx
Balance being value of expenditure for clause 44
xxxx
[Details of all deductions and additions must be maintained for each sub- entity (GSTIN wise) of the legal entity]
♦ Capital expenditure to be included or not:
According to the guidance note, the term “expenditure” encompasses “capital expenditure” as well. Therefore, it is essential to provide information regarding the capital expenditure also in the said clause. However, if the assessee is of the view that the capital expenditure need not be included in the total expenditure and is not in a position to give the details as required in clause 44 in respect of capital expenditures, the tax auditor should report the same in his main report (Form 3CA/3CB).
♦ Inter-branch transfers:
When it comes to transactions between distinct units of the same entity, it is crucial for the assessee to maintain accurate records. Specifically, these records should clearly indicate the value of outward supplies recorded by one unit as sales for determining GST liability and the value of inward supplies recorded by another unit as purchases for the purpose of claiming input tax credit. Although these values should be eliminated in the consolidated financial statements, it’s essential to prepare a comprehensive reconciliation statement and keep it on record. This reconciliation statement serves as a valuable resource during tax assessments and ensures transparency and compliance with tax regulations.
♦ Decoding the figures in Clause 44:
It is essential to bear in mind that the consequences of disclosing the data in this clause remain uncertain. As we are aware, the department is actively gathering information from all available sources, including the utilization of Artificial Intelligence (AI). Consequently, we cannot dismiss the possibility of cases coming under scrutiny triggered by specific flags or criteria associated with the figures reported in various columns of the Table given under clause 44. For instance, if the ratio of expenditures related to entities not registered under GST (as presented in column 7) compared to the total expenditure incurred (as reported in column 2) surpasses certain predefined thresholds, an inquiry may be initiated. This inquiry could take an internal or/and external form. When referring to internal scrutiny, it means that the department may conduct a comprehensive analysis of the available data for further investigation. In contrast, by mentioning external scrutiny, it means that the department may issue assessment notices to taxpayers, requesting additional information. It is prudent to be more concerned about internal scrutiny than external scrutiny, especially in light of the Aadhaar-PAN linking incident, given the department’s extensive repository of big data.
♦ Expenses related to entities having GSTIN but supplied exempt goods or entities falling under Composition Scheme:
Regarding the reporting of expenses related to supplies made by entities registered under GST but supplied exempted goods to the assessee or entities registered as composite suppliers, it becomes quite challenging to compile this information unless the taxpayer maintains their accounting records in a way that includes such details. This becomes particularly complex when dealing with a long list of suppliers. Therefore, a decision must be made on whether to provide figures in this column or not. If the choice is made to omit to furnish the information in this column, it is important to provide an explanation for this omission in the form of a comment in the main report.
♦ Expenses related to entities having GSTIN and supplied taxable goods:
Regarding the reporting of expenses related to supplies made by regular suppliers (excluding composite suppliers), one has got the option to cross-verify the data provided by the assessee using information obtained from the following sources:
(i)
From GST Portal: We can retrieve Table 8A of GSTR 9 data in an Excel sheet format downloaded from the GST portal and calculate the total taxable value figures.
(ii)
From the Income Tax Site: We can verify the value of purchases from GST-registered suppliers as reported in the Annual Information Statement (AIS).
While it is possible that the figures from these sources may not align perfectly, they can provide us with a sense of the reasonableness of the data provided by the assessee. In cases where a significant discrepancy exists, we may request an explanation from the assessee and then make a decision accordingly.
♦ Expenses related to entities having GSTIN and supplied taxable goods:
If the figures reported under the column “Expenditures relating to entities not registered under GST” are substantial, it is imperative for an auditor to investigate and understand the underlying reasons. The following factors may help mitigate the risk of any anomalies:
Smaller businesses might be involved in the supply chain, and they may fall below the GST registration threshold, contributing to the presence of non-registered entities in the expenses.
By examining these factors and obtaining a clear understanding of the nature of the expenses and the entities involved, the auditor can make a more informed assessment and mitigate the risk of misinterpretation or misreporting.
As a corollary, when the figures reported in the mentioned column are substantial, and the following instances are present, the auditor should exercise heightened vigilance to ensure the authenticity of the transactions:
(a)
Taxable Products: If the products purchased are taxable under GST, it raises the significance of these transactions and warrants closer scrutiny.
(b)
Cash Payments: Payments made in cash can increase the risk of irregularities or inaccuracies in reporting, and therefore, require careful examination.
(c)
Absence of TDS: Transactions not subjected to Tax Deducted at Source (TDS) can potentially indicate a need for closer inspection, as TDS is a common regulatory requirement for certain types of payments.
(d)
Internal Documentation: Transactions primarily supported by internal vouchers, bills, or purchase notes, as opposed to external invoices or receipts, may necessitate a more thorough examination to verify their legitimacy.
If the auditor encounters difficulties in forming a conclusive opinion based on the data provided by the assessee, it is essential to include appropriate comments in the main report. These comments should clearly convey an concerns or uncertainties regarding the reported transactions, ensuring transparency and clarity in the audit process.
Expenses incurred in respect of supplies made by a person registered under GST but issuing RCM invoices;
(b)
Expenses incurred in respect of supplies made by an unregistered person where the assessee pays tax under RCM on voluntary basis.
In the first scenario, the expenditure under the said category ought to be reported under column 5 of clause 44 i.e., “Relating to other registered entities”.
In the second scenario, the expenditure under the said category should be reported under column 7 i.e., Expenditure relating to entities not registered under GST”.
♦ Concluding Remarks:
Before parting with, readers attention is invited to the comment made in clause 82.20 of the Guidance Note which is reproduced hereunder:
82.20 An appropriate disclosure should be made by the Tax auditor in Form 3CA/3CB, as the case may be, for the view taken by the assessee in relation to the meaning of “Total expenditure” and the method of filling up the appropriate columns. If the assessee is not in a position to give the details as required in clause 44, an appropriate disclosure/disclaimer may be made by the auditor in Form 3CA/3CB. Where the assessee has provided reason for not being able to provide details, the same may be reported, if found appropriate.
Income Tax Department Gujarat the positions of Income Tax Inspector, Tax Recruitment 2023: There are openings for Assistant, and Multi-Tasking Staff, according to the Ahmedabad office of the Principal Chief Commissioner of Income Tax. The application procedure will start on October 1 and end on October 15. The application form must be submitted by that date. Interested candidates may apply online at incometaxgujrat.gov.in, which is the official website.
On the official website of the Income Tax Department Gujarat at incometaxgujrat.gov.in, applications must be submitted between October 1 and October 15, 2023.
To fill 59 openings, a recruitment drive is being held. Of these openings, 2 are for the position of Income Tax Inspector, 26 are for Tax Assistants, and 31 are for Multi Tasking Staff.
Candidates for the position of Income Tax Inspector must be between the ages of 18 and 30. Candidates for the positions of Tax Assistant and Multi-Tasking Staff must be between the ages of 18 and 27.
For the position of Income Tax, candidates must hold a bachelor’s degree from an accredited university. Inspector. Candidates for the position of Tax Assistant must have bachelor’s degree from an accredited university or an equivalent degree, as well as a data input speed of 8000 key depressions per hour.
The candidate must have completed their matriculation or the equivalent from a recognized board to be considered for the position of Multi Tasking Staff.
Central Board of Direct Taxes (CBDT) has notified classes of Non-Banking Financial Companies (NBFCs) which will be eligible for provision of Income Tax Act related with certain deductions to be only on actual payment. This is a crucial notification concerning the payment of interest on loans to NBFCs.
Based on the changes made in the Finance Act 2023, new classification will come into effect from September 22. “In exercise of the powers conferred by clause (da) of section 43B of the Income-tax Act, 1961, the Central Government, hereby, notifies the following classes of NBFCs, for the purpose of the said clause, namely, all NBFCs classified in the top layer, in the upper layer and in the middle layer,” the notification read.
Further, it read, “A deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company”, the words “such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf” shall be substituted.”
Section 43 of the Income Tax Act prescribes deductions to be only on actual payment and clause (da) is related with any sum payable by the assessee as interest on any loan or borrowing from deposit taking certain class of NBFCs, in accordance with the terms and conditions of the agreement governing such loan or borrowing. Under this section, a taxpayer, in this case a NBFC, is only permitted to claim statutory expenses under the section only in the year of payment and not in the year of its accrual.
The notification also mentioned that definition of middle layer, the upper layer and the top layer as prescribed by RBI will be used. According to RBI circular, the middle layer consists of all deposit taking NBFCs (NBFC-Ds), irrespective of asset size, non-deposit taking NBFCs with asset size of ₹1,000 crore and above and NBFCs undertaking the activities such as standalone primary dealers (SPDs), infrastructure debt fund – non-banking financial companies (IDF-NBFCs), core investment companies (CICs), housing finance companies (HFCs) and infrastructure finance companies (NBFC-IFCs).
Similarly, the upper layer comprises of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.
The RBI circular mentioned that he top layer will ideally remain empty. This layer can get populated if the RBI is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the upper layer. Such NBFCs shall move to the top layer from the upper layer, it clarified.
As per the Income Tax Act in India, cash transactions above a certain limit are not allowed. The limit varies depending on the type of transaction. The government has set various limits on various limits on cash transactions to tackle black money. Paying or receiving cash in excess of these limits can be punishable with penalty of up to 100 percent of amount paid or received.
As per Section 269ST of the Income Tax Act, no individual can receive an amount of Rs. 2 lakh or more in cash from a single person in a day or in relation to a single transaction or event.
Non-compliance of the Section 269ST of the Income Tax Act, 1961 attracts a penalty that is equal to the transaction amount that resulted in violation. This means that if you pay ₹2,65,000 in cash under any of the provisions of Section 269ST, you may be liable to pay a penalty of ₹2,65,000.
2. For Cash Payments:
As per Section 40A(3) of the Income Tax Act, any expense incurred by a business in cash exceeding Rs. 10,000 in a single day is not allowed as a deduction for tax purposes.
Any payment or receipt made in cash above this amount needs to be made through electronic means such as NEFT, RTGS, IMPS, or by cheque. When it comes to self-employed taxpayers, they cannot claim any expenditure over ₹ 10,000 if it’s paid in cash to a single person in a single day.
Note: The law establishes a higher threshold of ₹ 35,000 for payments given to a transporter.
3. For Specific Expenditure:
In case expenditure is allowed in respect of any liability incurred by a person in earlier years on accrual basis & if such expenditure is subsequently paid in cash/cross cheque/bearer cheque exceeding Rs 10,000 in a day then the deduction allowed earlier will be disallowed & payment will be chargeable to tax as income of the subsequent year as per Section 40A(3A) of the income tax act.
4. For Loan or Property Transactions:
As per Section 269SS of the Income Tax Act, no person can take or accept a loan or deposit or any payment towards immovable property of Rs. 20,000 or more in cash, either from a single person or in aggregate from a single person on a single day.
If the cash transaction is done beyond the limit, then a penalty of an amount equal under Section 271D of Income Tax Act will be imposed on a seller who accepts cash or refund of advance is made in cash by the seller of the property.
5. For Repayment of Loans or Property Transactions:
Cash transactions above Rs. 20,000 are not allowed for the repayment of loans. Any repayment made above this amount needs to be made through electronic means or by cheque.
However, this provision will not apply if amount accepted from government, any banking company, Post office or co-operative bank, any other institution, association or bodies which the CG may specify.
6. For Gift in Cash:
If you receive any cash amount in gift and the value of such gift is Rs. 50,000 or more, then such gift shall be taxable as Income From Other Sources u/s 56(2)(x). Also, if the Gift amount is going beyond Rs. 2 Lacs then it would also become a violation of Section 269ST and 100% penalty u/s 271DA shall also be levied.
As per this section,, any expenditure incurred by the assessee for acquisition of any asset in respect to which a payment or aggregate of payments made to a person in a day, otherwise than by banking means, equals or exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.
It simply means, if an assessee makes a payment of any amount equal to or exceeding Rs. 10,000/- in cash to any person in a single day for any expenditure towards acquisition of any asset, then such sum shall not be included in the cost of the asset, and the assessee will not be able to claim depreciation on such amount.
Therefore, now an assessee cannot make a payment of any sum of Rs. 10,000 or more in a day towards purchase of any fixed asset.
8. For Donations
Cash donations above Rs. 2,000 is not allowed u/s 80G. Any donations made above this amount need to be made through electronic means or by cheque only.
9. For Donations for Political Parties
If you made cash donations to political parties, then even if Rs. 1 is donated in cash, that will not be allowed. NO DEDUCTION at all shall be allowed u/s 80GGB and 80GGC for cash donations.
10. Health insurance premium paid in cash:
Any payment made in cash on account of premium of health insurance policy will NOT be allowed as deduction under Section 80D.
It is important to note that violating these limits can result in penalties and prosecution under the Income Tax Act. Therefore, it is advisable to conduct transactions through non-cash modes such as cheques, bank transfers, or digital payments.
Disclaimer: The information contained in this website is provided for informational purposes only.
As the deadline for filing the original income tax return (ITR) concluded on July 31, many individuals may wonder about the implications of filing a revised ITR after this date. Fortunately, there are options available for those who missed the original deadline, but it’s essential to understand the rules surrounding belated and revised returns.
For those who missed the deadline to file the original ITR, there is an option to file a belated ITR. Additionally, taxpayers who initially filed their returns, but later realised they omitted information or made incomplete disclosures can file a revised return.
To qualify for a revised return, the original return should have been filed by the due date, which was July 31, 2023, and it must have been verified within 30 days of e-filing. If the original return wasn’t filed by the due date, it will be considered a belated tax return, incurring late fees under Section 234F of the Income Tax Act, 1961.
However, if the original return was filed on time, taxpayers have time until December 31 to submit a revised return under Section 139(5). This can be done even if the original return has already been processed by the I-T Department.
Filing a belated return comes with a penalty. The taxpayers filing a belated return will be levied a late fee of Rs 5,000 and applicable interest rate. If the taxpayer’s total annual income is less than Rs 5 lakh in a financial year, the late fee will be Rs 1,000.
Interest changes will be applicable at a rate of 1 per cent per month on the taxable amount from the last date of ITR filing.
No penalty is imposed for filing a revised return. However, if the assessing officer discovers that the error was intentional or fraudulent, the revision may not be allowed, and a penalty could be imposed.
Furnishing an updated return does not incur a penalty or fee. Still, taxpayers are required to pay additional tax, if any, according to Section 140B of the Income Tax Act.
The revised or belated ITRs can be filed through the e-filing portal of the Income Tax Department at https://eportal.incometax.gov.in/. Additionally, certain private entities registered by the Income Tax Department can assist with the filing process.
The Central Board of Direct Taxes (CBDT) has released an updated Common Offline Utility for filing Income-tax Returns (ITR) 1, ITR 2, ITR 3, and ITR 4 for the Assessment Year (A.Y.) 2023-24. Taxpayers can download the ITR Offline Utility through the ‘Downloads’ menu option and use it to fill and file their ITR.
These common offline utilities can be accessed at the following link:
BackRespond to intimation of past tax demands for faster refund processing, asks IT Dept to taxpayers
To facilitate faster clearance of refunds for the 2022-23 fiscal, the income tax department on 23 September asked taxpayers to respond to intimation from the I-T department regarding outstanding demands of previous years.
The department in a post on ‘X’ said after a few taxpayers took to social media about receiving intimation from the I-T department regarding past unsettled tax demands. It said this is a taxpayer-friendly measure where an opportunity is being provided to assessees in line with “principles of natural justice”.
It wrote, “The Income Tax Department is making every effort to complete the processing of Income Tax Returns (ITRs) and issuance of refunds expeditiously.
The Income Tax Department is making every effort to complete the processing of Income Tax Returns (ITRs) and issuance of refunds expeditiously.
👉For the Assessment Year 2023-24, 7.09 crore returns have been filed. Of these, 6.96 crore ITRs have been verified, of which 6.46…
However, there are a few cases in which refunds are due to the taxpayer, but previous demands are outstanding, the department said,” the I-T department said in the social media post shared on Saturday.
“Accordingly, taxpayers with existing demand(s) in the previous years are being intimated of the same,” it added.
According to Section 245(1) of the Income-tax Act, 1961, the department must provide, to taxpayers to make a representation before adjusting the refund against an existing demand. The taxpayer is required to agree, disagree or clarify the status of the demand.
Accordingly, taxpayers with existing demand(s) in the previous years are being intimated of the same … Taxpayers are requested to avail this opportunity and respond to such intimations to enable cleaning up/reconciliation of pending demands and facilitate timely issue of refunds,” it said.
* We have two residential flats, both in the joint name of my wife and I (first name being my wife’s). One flat is rented out and the rental income is received in my account. Can I consider this full rental income in my IT return?
— Mohan Pillai
No, the rental income shall be split between you and your wife equally in case of joint ownership.
As per Section 10(16) of Income Tax Act 1961, scholarships granted to meet the cost of education are exempt from income-tax. If the primary purpose of payment of stipend is to further the education and training of the recipient, the amount received shall not be considered as salary but in the scholarship.
* I want to transfer some shares to the demat accounts of my daughter and NRI son as a gift. Should I execute a gift deed?
— R S Agarwal
Since shares are considered “movable property”, it is not mandatory to execute a gift deed. However, in order to create a legal record, it is best to execute one. A simple acknowledgement may also serve the purpose. Further, please note that capital instruments are permitted to be transferred to NRI by way of gift subject to satisfaction of certain conditions and guidelines of RBI in this regard.
Wealthy individuals are receiving summons from the investigation wing of the Income Tax department, which is probing their non-resident status.
The summons are largely based on information obtained from jurisdictions such as Singapore, Switzerland, Cayman Islands and British Virgin Islands, pertaining to Indians who are said to control certain structures or are in the role of decision-makers in certain entities.
“A large amount of data from various jurisdictions is being received by Indian authorities, linking Indians with certain offshore interests like trusts, corporate entities, and bank accounts, in various capacities. This has triggered issuances of a large number of summons from the tax authorities seeking explanations and additional information around offshore interests,” said Ashish Mehta, Partner at Khaitan & Co.
The questionnaire sent with the summons require the recipients to prove their non-resident status, if applicable, he added.
The department is asking for tax filings as well as passport and immigration details dating from the time of acquiring the asset, which, in some cases, could go as far back as 30 or 40 years.
Individuals have to determine their residential status for each financial year. If they become non-resident during any financial year, they must provide evidence of their stay outside India beyond the threshold, including addresses among other details.
“Many high net-worth individuals who migrate abroad for work or permanently, start filing their returns as non-residents but miss updating their records. This is pertinent compliance to ensure that tax authorities have the requisite details for determining their status,” said Raashi Shah, Partner, Illume Advisory.
The documents to be furnished to prove residential status include passport, lease agreement, employment contract, bank statements, and utility bills, Shah said. There would be queries related to travel history, employment, and residency status in India and abroad, she added.
Based on the submissions, the IT department can accept the non-resident status of the individual and close the file or probe further for non-reporting or tax evasion. Post this, the department can invoke the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for offshore income or initiate income tax proceedings if the tax evasion pertains to Indian income.
The proceedings could extend to a year or more after the summons.
Non-resident playbook For resident taxpayer, all income is taxable in India, irrespective of whether it is earned or accrued outside India. For a non-resident, all income which accrues or arises outside India is not taxable in India. A person is deemed to be a non-resident if the period of stay in India is less than 120 days. Citizens and PIOs staying 120-181 days in India, with income less than Rs 15 lakh and income other than foreign source, are ‘Resident’ but not ‘Ordinarily Resident’. Others staying this long are non-resident. An Indian citizen not liable to tax in any other country will be deemed to be a resident in India if the total income (other than foreign sources) exceeds Rs 15 lakh in a financial year.
