Did you know: Here are 21 aspects which may miss your sight about taxation in India?

A lot is talked about the taxes in informal chats. We tend to read the highlights in the news papers and other articles. Stuff may look attractive or otherwise as that look and we may tend to take the planning decisions on that information. 

Mymuneemji lists out certain subtler things of glaring day to day Income Tax stuff that a Tax payer should keep in mind before. This may otherwise skip your reading and thereby render the decisions wrong. Read on....

1. You cannot claim tax benefits on payment of life insurance premium of your parents even if they are financially dependent on you.
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3. You can claim tax benefits for payment of life insurance premium under Section 80 C for your children even if they are not financially dependent on you.
4. You can pay medical insurance premium of your parents and claim tax benefits even if they are financially NOT dependent on you.
5. You can claim tax benefit of medical insurance premium for your child only if the child is financially dependent on you.
6. For one self occupied house property you can claim deduction in respect of interest upto Rs. 2 lacs per annum from 1^st of April 2015 onward (Before that Rs.1.5Lac) but in respect of let out property you can claim full interest paid.
7. You are entitled to claim interest on loan taken even from your relatives and friends for residential and commercial property.
8. Deduction under Section 80 C for repayment of home loan is available only for a residential house property.
9. You can claim deduction for payment of tuition fee for only two children under Section 80C. The deduction for tuition fee is not available for your spouse or siblings.
10. Interest accrued on NSC for each of the years except the last year is eligible for deduction under section 80 C even though no fresh investment is made in NSC during these years. 
11. New Tax benefit under section 80C for a girl child under Sukanya Samriddhi account scheme for the amount invested, interest accrued on deposits and withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax. This tax benefit is retrospective amendment with effect from assessment year 2015-16.   
12. Sec 80 D deduction in respect of health insurance premium limits have been increased applicable from F.Y 2015-16, from Rs. 15,000 to Rs.25,000 for person below 60 years and for senior and very senior citizen from Rs. 20,000 to Rs. 30,000.  For very senior citizen deduction is available even for medical expenditure upto Rs. 30,000, as getting a medical insurance is difficult at that age but this needs to be paid in cheque which SEEMS very UNPRACTICAL. 
13. Deduction under section 80DD/80U limits have been increased for persons with disability and severe disability applicable from F.Y 2015-16. For disability the limit increased from Rs. 50,000 to Rs. 75,000, and for severe disability from Rs. 1,00,000 to Rs.1,25,000.
14. Deduction under Section 80 E is available only to individual for entire amount of interest paid during the year and no tax benefit is available for repayment of principal amount of education loan. 
15. Sec 80 EE deduction allow such home buyers an additional deduction of interest for first time buyer state of Rs. 1,00,000 was to be claimed in A.Y 2014-15. If the limit is not exhausted, the balance may be claimed in A.Y 2015-16 if the loan is sanctioned between 1.4.13 to 31.03.14, and the loan amount should not be more than 25 lakh and value of house should not be more than 40 lakh.
16. 80G -100% deduction for National fund for control of Drug abuse, Swachh Bharat Kosh and Clean Ganga fund.
17. The holding period is 12 months for certain financial assets but for other class of assets it is 36 month to avail benefits of long term capital gains.
18. Allowance of balance 50% additional depreciation as per section 32(1)(iia) applicable from F.Y 2015-16, in case were additional depreciation@20% on new plant and machinery acquired and installed and machine used for a period below 180 days were qualified for half rate(10%) of depreciation, it is proposed to provide the balance 50% depreciation in the immediately succeeding previous year.
19. If you tender listed shares in the open offer, you have to pay tax even if you have held the shares for twelve months or more. But there is no tax liability on long-term capital gains arising from the sale of listed shares sold through broker of stock exchanges.
20. Normal short term capital gains is taxable at the slab rate applicable to you but tax on short term capital gains on sale of listed shares through stock broker is taxable @ 15% if security transactions tax (STT) is paid irrespective of your slab rate.
21. You can claim tax benefits of leave travel assistance (LTA) for your spouse, child, parents and siblings. Spouse and child may be financially independent but the parents and siblings have to be dependent on you. LTA benefits can be claimed in respect of two children only if born after 1st October 1998.
22. Advanced tax is not applicable for the tax payers under presumptive taxation regime. i.e., in small Retail or plying and hiring owning below 10 trucks or such others with a turnover below Rs. 1 Cr. 

5 Simple Steps for Advance tax Calculation – For Individuals

Advance Tax is applicable for all assesses whose Tax Liability exceeds Rs. 10,000/- during the financial year

Advance tax should be paid in various installments.

Some clue on "How to" of DIY Advance Tax calculation-Individuals

Advance calculation for individuals is like filing the return of income, therefore involves similar steps.

Steps Involved

Step-1            Form 26AS of the individual is to be taken into account for calculating income. Take all incomes into consideration shown in the form 26AS on which TDS is deducted. Such income may not be of the whole year while calculating advance tax, therefore has to be projected for the whole year while calculating Advance Tax. Remember to also take TDS credit on projected basis for the whole year.

Step-2 Now see if there is any other income of the assessee during the year by coordinating with the individual or by examining his bank statements. Also, take into account previous years incomes while considering incomes of this year (some incomes accrue every year therefore, have to be taken into account every time).The incomes in step-2 are those on which TDS is not deducted, therefore not shown in 26AS.

Step-3 See the investments of the assessee to project the deductions under chapter VI-A like 80C, 80G etc.

Step-4 Also keep an eye on the surcharge applicable where total income exceeds the limits specified for applicability of surcharge in case of companies/firms.

Step-5 Once this is done and the total income is projected, then apply tax rates as applicable in the financial year for which tax is deducted and project the advance tax.

Advanced Gyan on Advance Tax....

Advance Tax Provisions under the Income Tax Act’1961

1.  Advance Tax is applicable for all assesses whose Tax Liability exceeds Rs. 10,000/- during the financial year.

2.  Advance Tax is payable as follows:

Particulars	For Companies	For other than Companies
Up to 15th June of financial year	15% of Tax Payable	Not Applicable
Up to 15th September of financial year	45% of Tax Payable	30% of Tax Payable
Up to 15th December of financial year	75% of Tax Payable	60% of Tax Payable
Up to 15th March of financial year	100% of Tax Payable	100% of Tax Payable

Points to remember:-

1. Advance Tax provisions are not applicable in case of assesses having income under head Profits & Gains from Business or Profession U/s 44AD and 44AE i.e presumptive income.
2.      Advance Tax provisions are not applicable in case of senior citizens aged above 60 years, but if senior citizens have business income then Advance Tax provisions are applicable.
3.      Note above points are applicable for residents only i.e exemptions are available only for residents. No exemption for senior citizens if such individual is Non-resident.
4.      Advance Tax can be paid by challan ITNS 280 under the minor head code 100 and Major Head code is 0020 for tax on Companies and 0021 for Tax on other than Companies.
5.      Tax can be paid by challan either by cheque, cash or by the online mode.

Interest on Late Payment of Advance Tax

If the Income Tax is not paid as per the above schedule, Interest is liable to be paid for late payment of tax as follows

1.     Interest under section 234B – Interest @ 1% is payable if 90% of the tax is not paid before the end of the financial year i.e. for Default in Payment of Advance Tax

2.     Interest under section 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e. for Deferment in Installments of Advance Tax.

Simple steps for calculation of Advance tax – For Companies, Firms & Other business Entities

For a company whose accounts are reliable and up to date as on date of calculation
Step-1- Just see the P&L up to the previous month or previous day (from date of calculation),if the accounting is complete/up to date. For Ex: Accounts upto 28th Feb’2014 can be seen for calculation Advance Tax for March’14.
Step-2 See if all entries are taken up to that month/date i.e whether the accounting is complete. If not then take entries into account which are not yet entered.
Step-3 On the basis of figures till last month or previous day (based on the date of calculation), project the figures for the current month so that P&L A/c for upto the period required for calculation is made.
Some items can be taken on actual or close to actual figures while projecting the figures for the month like:
a)      Electricity
b)      Water
c)      Salaries and other employee based expenses
d)     Telephone
e)      Other Recurring Expenses which occur every month.
f)       Depreciation should be calculated on actual basis based on the rates applicable.
Other items of expenses can be projected on a percentage basis seeing total percentage of indirect and direct expenses as in the last year.
Sales and purchases can be forecasted based on the average of the monthly figures of previous months and also look at the previous year average for the final forecast. Purchase percentage generally should remain within a range on a year on year basis.
Step-4 Now since the P&L is made, have a look at the gross profit & Net profit figures. The G.P & N.P ratios cannot be less than last year unless there is major change in turnover compared to last year. Based on this principle, arrive at a Net profit figure on which Advance Tax should be calculated (G.P & N.P Ratio may be increased a bit for current projection).
Step-5 Form 26AS should be taken into account to take all incomes into consideration shown in the form 26AS on which TDS is deducted. Remember to also take TDS credit on projected basis for the whole year

Step-6 Also keep an eye on the surcharge applicable where total income exceeds the limits specified for applicability of surcharge in case of companies/firms.

Step-7 Once advance Tax is calculated, you could pay 90% of the amount due. The 90% principle saves money (10%) and also interest. u/s 234B is saved. Only 234C interest is to be paid which is less than the amount earned by saving 10% of the amount.

For Companies/Firms etc. whose accounts are not upto date or reliable as on date of calculation
Step-1 Forecast the sales figures of the current year based on the data available till date.
Step-2 Based on the sales figures, arrive at Gross profit and net profit amounts by taking the Gross and net profit ratio (%) of the previous years. Last year’s ratios should be increased slightly.
Step-3 Based on the net profit arrived at, Calculate the amount of tax.
Points to Remember
1) Do not forget to take into account necessary expenses like depreciation, remuneration in case of firms (Remuneration should only be on Income under the head PGBP).
2) Incomes taxable under other heads of income should be separated i.e. deducted and not taken while calculating net profit under the head PGBP. Incomes taxable under other heads should be taken separately and tax should be calculated separately on these incomes. Example: Income under the head capital gains.
3) Expenses which are to be disallowed are to be added back while calculating net profit. Eg: Expenses disallowed on account of personal use.
4) Any income or expense which have not occurred yet but is expected to be done based on previous experience should be taken into account while calculating profit and consequently tax figures.
5) In case of Companies, remember to add back depreciation as per books (i.e.as per Companies Act) and deduct Depreciation as per the Income Tax Act.
6) Also keep an eye on the surcharge applicable where total income exceeds the limits specified for applicability of surcharge in case of companies/firms.
7) After taking into consideration Form 26 AS, after taking all above points advance Tax can be calculated.

Hope you find the above information relevant and useful in your daily practice.

Nuances of VAT Returns Filing in Maharashtra

The system of Value Added Tax (VAT) has been implemented, in the State of Maharashtra, w.e.f. 1st April, 2005.

Registration 

Every dealer, who becomes liable to pay tax under the provisions of MVAT, shall apply electronically for registration to the prescribed authority, in Form 101, within 30 days from the date of such liability.

Every registered dealer shall be required to file correct, complete and self-consistent return, in prescribed form, by the due date.

Periodicity and due date:–

For the periods commencing from 1-4-2008

Sr. No.	Category	Periodicity
1.	A)Newly registered dealers (up to 30-4-2010) B) Retailers opted for composition Scheme C) Tax liability, in the previous year, up to Rs. 1 lakh  or Refund entitlement up to Rs. 10 lakhs.	Half Yearly
2.	A) Dealers under Package Scheme of Incentive B) Tax liability, in the previous year, exceeds  Rs. 1 lakh but up to Rs. 10 lakhs or refund  entitlement exceeds Rs. 10 lakhs but up to Rs.1 crore. C) Newly registered dealers (w.e.f.1-5-2010)	Quarterly
3.	All other dealers whose tax liability, in the  previous year, exceeds Rs. 10 lakhs or  refund entitlement exceeding Rs. 1 crore	Monthly

Due Dates for Filing Returns

1. Monthly and Quarterly Returns – 21 days from the end of month/quarter
2. Half Yearly Returns -- 30 days from the end of six monthly period
   
   
   
   

VAT AUDIT CAUSES AND CONSEQUENCES

What is Sales Tax??? 

 

Sales tax is levied on the sale of movable goods. Most of the Indian States have replaced Sales tax with a new Value Added Tax (VAT) since 2005. VAT is a state levy. VAT is applied on each stage of sale with a mechanism of credit for the input VAT paid on purchases.

The system of VAT is based on the self-assessment and declarations made by the Dealer. In other words, the dealer is supposed to calculate his sales tax liability and file periodical returns as applicable to him and pay taxes accordingly.

Statutory audit provision introduced by the state which helps them in determining the under assessment made by the dealer if any, and thereby requiring for additional payment of tax is known as VAT Audit.

So now question arising would be what is Sales tax Audit & to whom it is applicable??

Sales tax audit is applicable to a dealer holding a valid registration certificate of MVAT and liable to pay tax and his turnover, either of sales or purchases, exceeds Rs. 60 Lakhs during the Financial Year. However the turnover limit for compulsory audit under the MVAT Act, from the Financial Year 2013-14 is increased from INR 60 lakhs to INR 1 crore.

So it is mandatory to file Audit Report in form 704 if dealer is in above criteria, as it helps the department to emphasize more on correctness and accuracy of the tax liability of the dealer based on his books of accounts. This form 704 needs to be filed before the prescribed due date by the dealer.

What if VAT Audit Report not filed???

Dealer can be charged penalty equal to 0.1% of Turnover of Sales or Purchases and can be prosecuted for imprisonment for 6 months.

Sales tax department has published a list of dealers called as Nonfilers, who have failed to file the VAT Audit Report, which affects the goodwill of the enterprise or company. 

 

Vat Audit report not filed earlier can be filed now???

Yes!! Vat audit report can be filed for all years under non-compliance. Levying of penalty would be discretionary depending on the justifications submitted to the Sales tax Department after filing of Vat Audit report.

Dealers who have not filed their VAT Audit reports should be taking Immediate decision to comply, which in turn will help to reduce the penalty if done upfront.

Please feel free to contact us or drop a line, if you require any help for the above issues.