Year End Five Crucial Income Tax Tasks to Complete by March 31, 2024
As the current financial year draws to a close, it’s essential for taxpayers to wrap up all income tax-related tasks by March 31. This ensures a smooth transition into the new fiscal year and helps avoid penalties or complications. Here are the key tasks you need to focus on:
1. Investing in Tax Saving Schemes:
Tax-saving investments are a vital part of tax planning for taxpayers in India. Under the old tax regime, individuals can make investments eligible for deductions under Section 80C of the Income-Tax Act, 1961, before the March 31 deadline. Options include Public Provident Funds (PPF) and tax-saving fixed deposits. Maximizing deductions under Section 80C reduces tax liabilities and ensures future financial security.
2. Advance Tax Payment:
For taxpayers who missed the March 15 deadline for advance tax payments, March 31 offers a chance to catch up and avoid penalties under Section 234B of the Income-Tax Act. Any tax payment made on or before March 31 qualifies as advance tax, provided it covers more than 90% of the assessed tax amount.
3. Submitting Form 12B to New Employer:
If you’ve switched jobs during the fiscal year (April 1, 2023, to March 31, 2024), it’s crucial to submit Form 12B to your new employer. This form ensures the accurate calculation of total taxable income, correct tax deductions, and the issuance of Form 16.
4. Filing Updated Returns:
March 31 is the last date for taxpayers to file their updated Income-Tax Return (ITR-U) for the Assessment Year 2021-22 (financial year 2020-21). This provides an opportunity for those who missed the initial filing deadline to rectify the omission and comply with tax regulations.
5. Minimum Investment in Government Schemes:
Government savings schemes like Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) require a minimum annual investment. If you haven’t met the minimum investment amount for the current financial year, you have until March 31, 2024, to do so and avoid penalties.
Conclusion:
The end of the financial year is an ideal time to assess your finances and strategize for the upcoming year. Review your budget, savings, and investments to ensure they align with your long-term financial goals. Consider any adjustments or improvements you can make to enhance your financial stability and growth.
In a significant move toward enhancing the insurance landscape, the Insurance Regulatory and Development Authority of India (IRDAI) is on the brink of realizing its long-anticipated electronic insurance marketplace – Bima Sugam.
On February 13, the regulatory body unveiled draft regulations, marking a pivotal step towards establishing a unified digital platform for insurers, policyholders, and intermediaries. Bima Sugam aims to streamline the sale and purchase of life, health, and general insurance policies, alongside facilitating seamless policy servicing, claim settlement, and grievance redressal. Notably, access to this platform will be fee-free for customers.
Describing Bima Sugam as a robust digital public infrastructure, the IRDAI envisions it as a protocol with open standards and interoperable platforms. It will allow for the integration of various services, simplifying insurance-related transactions.
Operated as a not-for-profit entity under section 8 of the Companies Act, 2013, Bima Sugam will ensure widespread shareholding among life, general, and health insurers, with no single entity holding a controlling stake. The IRDAI will nominate two members to the company’s board, which will appoint a chairperson and chief executive officer (CEO), subject to regulatory approval, and establish a risk management committee.
The inception of Bima Sugam, after nearly two years of development, reflects the IRDAI’s commitment to safeguarding policyholders’ interests and bolstering insurance penetration in India. By enhancing the availability, accessibility, and affordability of insurance products and services, the marketplace is poised to play a pivotal role in realizing the regulator’s vision of ‘Insurance for all by 2047.’
IRDAI Chairman views Bima Sugam as akin to a ‘UPI (United Payments Interface) moment’ for the insurance sector, emphasizing its potential to revolutionize industry dynamics. Addressing concerns raised by distributors, the Chairman assured that the marketplace would not jeopardize their businesses; rather, it would create new avenues for efficient distribution models.
Seeking input from stakeholders including policyholders, insurance companies, distributors, and insurtech players, the IRDAI has invited feedback on the Bima Sugam proposals until March 4, 2024. This collaborative approach underscores the regulator’s commitment to fostering an inclusive and dynamic insurance ecosystem in India.
“Unlock Your Financial Potential: Expert Tax Planning Strategies for Optimal Savings and Growth
Section 43B(h)-Payment based deduction for amount payable to micro and small enterprise
👉Applicable from 1st April, 2024 FY 2024-25 onwards -Not Applicable for Transaction pertaining to on or before 31/03/2023
👉Due Date for Payments -15 Days from Date of Acceptance if No Written Agreement -45 Days from Date of Acceptance if Written Agreement is there
👉Applicable for Amount payable to micro and Small Enterprise (MSE) who are manufacturers or service providers -Not Applicable for amount payable to medium enterprises -Not Applicable for amount payable to unregistered MSEs -Not Applicable for amount payable to traders because their registration on UDYAM portal is for the purpose of priority sector lending only
👉Applicable for the amount payable for Goods & Services -Not Applicable for actionable claims and money -Not Applicable on Interest on Loans as it is not goods nor services -Not Applicable on Salary as it is not goods nor services -Not Applicable on Amount Payable for Capital Goods as it was not claimed as Expense
👉Definitions -Buyer means whoever buys any goods or receives any services from a supplier for consideration -Supplier means a micro or small enterprise, which has filed a memorandum with the authority referred to as u/s 8(1) -Manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use
👉Not Applicable for Buyer filing ITR u/s 44AD/44ADA/44AE (Presumptive Taxation) -These sections have overriding effect over section 28 to 43C, so section 43B(h) not applicable -If buyers turnover below 10 Crore and Cash transactions is below 5% then audit u/s 44AB is not applicable but Books of Accounts are required to be maintain, in such cases section 43B(h) is Applicable
👉If Amount payable to MSME is liable to TDS and that TDS is also not paid to government then dis-allowance will be u/s 43B(h) only and not under section 40(a)(ia)
👉If Amount payable to MSME is inclusive of GST then dis-allowance will be limited to the amount exclusive of GST because GST was never claimed as expenses so it can’t be dis-allowed as expenses
👉Form 3CD for FY 23-24 are yet to be notified by Income Tax Department so what to be reported in Form 3CD will be known once the notification of Form 3CD by Department
👉The enterprise category as Micro, Small & Medium as described in the Micro, Small and Medium Enterprises Development Act, 2006 is made for your reference:
194C- Payment to Contractor – Single Transaction (Note 4)
30,000
Individual: 1% Company: 2%
20%
194C-Payment to Contractor – Aggregate During the Financial year (Note 4)
1,00,000
Individual: 1% Company: 2%
20%
194C- Contract – Transporter not covered under 44AE (Note 4)
30,000 / 75,000
Individual: 1% Company: 2%
20%
194C- Contract – Transporter covered under 44AE & submit declaration on prescribed form with PAN
–
–
20%
194D – Insurance Commission
15,000
Individual: 5% Company: 5%
20%
194DA Payment in respect of life insurance policy (Note 5)
1,00,000
Individual: 5% Company: 5%
20%
194E – Payment to Non-Resident Sportsmen or Sports Association
–
Individual: 20% Company: 20%
20%
194EE – Payments out of deposits under National Savings Scheme
2,500
Individual: 10% Company: 10%
20%
194F – Repurchase Units by MFs
–
Individual: 20% Company: 20%
20%
194G – Commission – Lottery
15,000
Individual: 5% Company: 5%
20%
194H – Commission / Brokerage
15,000
Individual: 5% Company: 5%
20%
194I – Rent – Land and Building – furniture – fittings
2,40,000
Individual: 10% Company: 10%
20%
194I – Rent – Plant / Machinery / equipment
2,40,000
Individual: 2% Company: 2%
20%
194IA -Transfer of certain immovable property other than agriculture land
50,00,000
Individual: 1% Company: 1%
20%
194IB – Rent – Land or building or both
50,000 per month
Individual: 5%
20%
194IC – Payment of Monetary consideration under Joint development agreement
–
Individual: 10% Company: 10%
20%
194J – Professional Fees for technical services (w.e.f. from 1.4.2020) (Note 6)
30,000
Individual: 2% Company: 2%
20%
194J – Professional Fees in all other cases
30,000
Individual: 10% Company: 10%
20%
194K- Payment of any income in respect of Units of Mutual fund as per section 10(23D) or Units of administrator or from a specified company (Note 7)
–
Individual: 10% Company: 10%
20%
194LA – TDS on compensation for compulsory acquisition of immovable Property (Note 8)
2,50,000
Individual: 10% Company: 10%
20%
194 LBA (1)- Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. (Note 9)
Individual: 10% Company: 10%
20%
194LB – Income by way of interest from infrastructure debt fund (non-resident)
–
Individual: 5% Company: 5%
20%
194LBB – Income in respect of investment in Securitisation trust.
–
Individual: 10% Company: 30%
30%
194LBC- Income in respect of investment made in a securitisation trust
–
Individual: 25% Company: 30%
30%
194 LC – Income by way of interest by an Indian specified company to a non-resident / foreign company on foreign currency approved loan / long-term infrastructure bonds from outside India (Note 10)
–
Individual: 5% Company: 5%
20%
194LD – Interest on certain bonds and govt. Securities (Note 11)
–
Individual: 5% Company: 5%
20%
194M – Payment of Commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J.
50,00,000
Individual: 5% Company: 5%
20%
194N – Cash withdrawal in excess of Rs. 20 Lakh during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office.
20,00,000
Individual: 2% Company: 2%
20%
194N – Cash withdrawal in excess of Rs. 1 crore during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office. (Note 12)
100,00,000
Individual: 2% Company: 2%
20%
194N – Cash withdrawal in excess of Rs. 3 crore during the previous year from one or more account maintained by a Co operative society with a banking company, co-operative society engaged in business of banking or a post office. (Note 15)
300,00,000
Co-operative Society : 5%
20%
194O – Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.
–
Individual: 1% Company: 1%
20%
194P- TDS by specified bank to specified senior citizen
–
Rates applicable to particular slab of income including applicable Surcharge and Health & Education Cess
194Q- Purchase of goods
50,00,000
0.1%
194R- Deduction of tax on benefit of perquisite in respect of business or profession
Resident Indiviual: 20,000
10%
194S- Transfer of a virtual digital asset
Resident Individual & HUF: 50,000
Others: 10,000
1%
195- Payment of any sum to Non resident
–
–
Higher of Rate in force or Double Taxation Avoidance Act rate
196B – Income from units
–
Individual: 10% Company: 10%
20%
196C-Income from foreign currency bonds or GDR (including long-term capital gains on transfer of such bonds) (not being dividend)
–
Individual: 10% Company: 10%
20%
196D – Income of FIIs from securities
–
Individual: 20% Company: 20%
20%
What is the due date for depositing the TDS to the government?
The Tax Deducted at Source must be deposited to the government by 7th of the subsequent month. For instance, TDS deducted in the month of June must be paid to the government by 7th July. However, the TDS deducted in the month of March can be deposited till 30th April.
What is the due date of filing TDS returns?
Filing TDS returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly. Different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows:
1. Form 26Q – TDS on all payments except salaries
Q1 – 31st July
Q2 – 31st October
Q3 – 31st January
Q4 – 31st May
2. Form 24Q – TDS on Salary
Q1 – 31st July
Q2 – 31st October
Q3 – 31st January
Q4 – 31st May
3. Form 27Q – TDS on all payments made to non-residents except salaries
If the individual Adopted New Tax regime has to follow the below slab rates:
SI
Total Income
Rate of Tax
1
Up to Rs. 3,00,000
Nil
3
From Rs. 3,00,001 to Rs. 6,00,000
5 percent.
4
From Rs. 6,00,001 to Rs. 9,00,000
10 percent.
5
From Rs. 9,00,001 to Rs. 12,00,000
15 percent.
6
From Rs. 12,00,001 to Rs. 15,00,000
20 percent.
7
Above Rs. 15,00,000
30 percent
If the individual opts for old tax regime then has to follow the rates as below slab.
SI
Total Income
Rate of Tax
1
Up to Rs. 2,50,000
Nil
2
From Rs. 2,50,001 to Rs. 5,00,000
5 per cent.
3
From Rs. 5,00,001 to Rs. 10,00,000
20 per cent.
4
Above Rs. Rs. 10,00,000
30 per cent.
For Individuals of age from 60 years upto 80 years (Senior Citizens)
If the individual Adopted New Tax regime has to follow the below slab rates:
SI
Total Income
Rate of Tax
1
Up to Rs. 3,00,000
Nil
3
From Rs. 3,00,001 to Rs. 6,00,000
5 percent.
4
From Rs. 6,00,001 to Rs. 9,00,000
10 percent.
5
From Rs. 9,00,001 to Rs. 12,00,000
15 percent.
6
From Rs. 12,00,001 to Rs. 15,00,000
20 percent.
7
Above Rs. 15,00,000
30 percent
If the individual opts for old tax regime then has to follow the rates as below slab.
SI
Total Income
Rate of Tax
1
Up to Rs. 3,00,000
Nil
2
From Rs. 3,00,001 to Rs. 5,00,000
5 per cent.
3
From Rs. 5,00,001 to Rs. 10,00,000
20 per cent.
4
Above Rs. Rs. 10,00,000
30 per cent.
For Individuals of age above 80 years (Super Senior Citizens)
If the individual Adopted New Tax regime has to follow the below slab rates:
SI
Total Income
Rate of Tax
1
Up to Rs. 3,00,000
Nil
3
From Rs. 3,00,001 to Rs. 6,00,000
5 percent.
4
From Rs. 6,00,001 to Rs. 9,00,000
10 percent.
5
From Rs. 9,00,001 to Rs. 12,00,000
15 percent.
6
From Rs. 12,00,001 to Rs. 15,00,000
20 percent.
7
Above Rs. 15,00,000
30 percent
If the individual opts for old tax regime then has to follow the rates as below slab.
SI
Total Income
Rate of Tax
1
From Rs. 5,00,001 to Rs. 10,00,000
20 per cent.
2
Above Rs. Rs. 10,00,000
30 per cent.
Rebate under section 87A
1. Under the provisions of section 87A of the Act, an assessee, being an individual resident in India, having total income not exceeding Rs 5 lakh, is provided a rebate of 100 per cent of the amount of income-tax payable i.e., an individual having income upto Rs 5 lakh is not required to pay any income-tax that will be consumed by the government.
2. From assessment year 2025-26 onwards, an assessee, being an individual resident in India whose income is chargeable to tax under the proposed sub-section (1A) of section 115BAC, shall now be entitled to a rebate of 100 per cent of the amount of income-tax payable on a total income not exceeding Rs 7 lakh.
Rate of tax for Association of Person and Body of Individuals
As per section 167B the following is the rate of tax for AOP/ BOI:
a. In case the shares of the members are known and if all members are having Net Taxable income is up to basic exemption limit and none of the member is a foreign company then the income is taxed at slab rate
b. In case the shares of the members are known and if one or more member’s net taxable income is more than basic exemption limit and none of them is foreign company then the tax the entire income at Maximum Marginal rate i.e. 42.744%
c. In case the shares of the members are unknown then the tax the entire income at Maximum Marginal rate i.e. 42.744%
Rate of tax for Cooperative Society
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part I of the First Schedule to the Bill. They remain unchanged as below:
Slab of Income
Rate
Upto Rs. 10,000
10%
10,001 to 20,000
20%
Above 20,000
30%
Surcharge in case of Cooperative Society a) In the case of every co-operative society (except resident co-operative society opting under section 115BAD) or firm or local authority, at the rate of twelve per cent of such income-tax, where the total income exceeds one crore rupees; (b) In case of resident co-operative society opting under section 115BAD, at the rate of ten percent of such income tax.
Rate of tax for Firms:
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part I of the First Schedule to the Bill. They remain unchanged. Income of Partnership firms and LLP shall be taxable at the rate of 30%.
Note: LTCG shall be taxed at 20% and STCG 111A at 15% for firm
Surcharge in case of firms:
In case of firm 12% surcharge will be levied if Net total income exceeds Rs. 1 Crore.
Rate of tax for Local authorities
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part I of the First Schedule to the Bill. They remain unchanged at 30%.
Rate of tax for Companies
The rates of income-tax in the case of companies have been specified in Paragraph E of Part I of the First Schedule to the Bill.
Type of company
Rate of tax
Domestic company (If turnover for FY 2018-19 is up to 400 Crores) Opting for Section 115BAA
25% 22%
Domestic Company (Others)
30%
Foreign Company
40%
Surcharge In Case Of Company
Type of Company
Rate
Domestic with income upto Rs. 1 Crore but not exceeding Rs. 10 crore
7%
Domestic with income exceeding Rs. 10 crore
12%
Company exercising option under section 115BAB and 115BAA
10%
Foreign with income upto Rs. 1 Crore but not exceeding Rs. 10 crore
2%
Foreign with income exceeding Rs. 10 crore
5%
Note:
All of the above tax calculated shall be further increased by health and education cess of 4%
If you missed the December 31, 2023, deadline for filing your Income-Tax Returns (ITRs) for the financial year (FY) 2022-23 or assessment year (AY) 2023-24, there’s still hope to rectify errors and file the Updated Income-Tax Return (ITR-U).
The Income-Tax portal, enhanced by the Central Board of Direct Taxes (CBDT), streamlines the electronic filing of revised ITRs for FY 2022-23 or AY 2023-24.
In the Union Budget 2022, the government introduced the ITR-U form for updating ITRs. ITR-U allows taxpayers to correct omissions or errors on their ITRs up to two years from the end of the relevant AY to keep their ITRs up to date.
The ITR-U form is an option for individuals who have not filed their ITR or incorporated inaccurate entries while filing their ITR.
Leveraging the provisions of Section 139(8A) of the Income-Tax Act (ITA), 1961, taxpayers can rectify errors or updates in their original return without facing legal action for incorrect information. A taxpayer has the opportunity to update the ITR within two years.
The calculation of these two years is considered from the end of the year in which the original ITR was filed. For example, for AY 2023-24, if a taxpayer missed the revised or belated return filing window, they can file an ITR-U after the end of the assessment year, i.e., March 31, 2024, but within two years from there, which is March 31, 2026.
Regardless of whether a taxpayer has filed an original, belated, or revised ITR or has completely missed filing the ITR in a specific FY, they can still benefit from the ITR-U form.
However, note that the ITR-U form cannot be filled in cases where an updated return has already been filed, for claiming a refund, for filing a nil return, and when an updated return results in lower income tax liability.
If the updated ITR is filed within 12 months from the end of the relevant assessment year, the taxpayer needs to pay additional taxes of 25% of the aggregate tax and interest due. This additional amount increases to 50% if the ITR-U is filed after 12 months but before 24 months from the end of the relevant AY.
To file an ITR for both years, ensure you are registered on the e-filing portal. Good news – there is no penalty for filing an ITR-U form. However, be aware that an additional tax will be levied under Section 140B of ITA. Don’t miss this opportunity to set things right!
Income tax audit under Section 44AB is a crucial compliance requirement, distinct from statutory audit under the Companies Act. This article provides insights into the applicability, calculation of turnover, due dates, penalties, and related aspects of income tax audit for the financial year 2022-23.
Mandatory Tax Audit:
Income tax audit applies to all companies and LLPs whose turnover or gross receipts exceed prescribed thresholds. The thresholds for other business entities and professionals are aligned with those for companies. For businesses, a turnover exceeding Rs. 10 crore triggers the audit, while for professionals, gross receipts surpassing Rs. 50 lakhs necessitate an audit.
Sr. No.
Category
Tax Audit Applicability
Conditions
1
Business
Yes
– Turnover > Rs. 10 Cr – Not opting for presumptive taxation – Cash transactions up to 5% of total gross receipts and payments
2
Business
No
Turnover < Rs. 10 Cr and Condition of 5% of Gross Receipts and Payment satisfied.
3
Business
Yes
– Turnover between Rs. 1 Cr and Rs. 10 Cr – Not opting for presumptive taxation – Cash transactions exceeding 5% of total gross receipts and payments
4
Business
No
Turnover < Rs. 2 Cr and opted for Section 44AD
5
Business
Yes
Carrying on business under specified sections with profits or gains lower than presumptive taxation limit
6
Profess.
Yes
– Turnover > Rs. 50 Lac – Not opted for presumptive taxation under 44ADA – Opted for 44ADA but claims profits below presumptive taxation limit
7
Profess.
No
Opted for presumptive taxation under 44ADA and declares profits within the prescribed limit
Calculating Turnover for Tax Audit:
For tax audit applicability, turnover is a vital parameter. In this context, turnover refers to the total sales with necessary adjustments for goods returned, price adjustments, and trade discounts, rather than just the overall sales figure. Excluded from turnover calculations are transactions involving fixed assets, rental/interest income, advances from customers, cash and trade discounts, returned goods, and sale proceeds of investments like shares and securities.
Due Date and Penalty:
The due date for tax audit of FY 2022-23 is September 30, 2023. Failure to conduct tax audit by this date attracts penalties. The penalty is either 0.5% of sales/turnover/gross receipts or Rs. 1,50,000, whichever is lower.
Limit on Chartered Accountants:
Chartered Accountants (CAs) are the only professionals authorized to sign tax audit reports. A CA can conduct a maximum of 60 tax audits, which also applies individually to each partner in a partnership firm.
Accounts Audited Under Other Laws:
If accounts are audited under other laws (e.g., statutory audit under the Companies Act), a separate audit for income tax purposes isn’t required. Only an audit report compliant with income tax regulations needs to be filed.
Tax Audit Forms:
Assessees subject to tax audit must file relevant forms along with their income tax returns. The forms include:
Form 3CA & Form 3CD: For entities audited under other laws.
Form 3CB & Form 3CD: For entities exclusively audited for income tax compliance.
Form 3CE: For non-residents and foreign companies receiving royalty/fees for technical services.
Tax Audit Report Revision and Penalty Waiver:
Tax audit reports can be revised multiple times through the income tax portal. Penalty waivers are possible if reasonable causes are provided for non-submission of tax audit reports by the deadline.
In conclusion, understanding income tax audit under Section 44AB is vital for businesses and professionals to ensure compliance with the law and avoid penalties.
Disclaimer:
The information provided in the above article is intended for general informational purposes only and should not be construed as professional advice. The article is based on the latest amendment applicable to FY 2022-23 and is subject to change based on updates to tax laws, regulations, and guidelines. Readers are advised to consult with qualified tax professionals, accountants, or legal advisors to obtain accurate and up-to-date information specific to their individual circumstances. While every effort has been made to ensure the accuracy of the information presented, no responsibility or liability is assumed for any errors or omissions in the content. Tax regulations and laws can be complex and subject to interpretation, and the application of these rules may vary based on individual circumstances. The author and publisher of this article disclaim any liability for actions taken or decisions made based on the information provided herein. Readers are encouraged to independently verify the accuracy and applicability of the information provided before making any financial or legal decisions.
ln order to address these issues, a Press Release dated 28.6.2023 (copy enclosed) was issued by Ministry of Finance wherein the following decisions relating to income-tax have been taken:
first Rs 7 lakh remittance under LRS there shall be no TCS. Beyond this Rs 7 lakh threshold, TCS shall be at the rate of –
0.5% (if remittance for education is financed by loan taken from a financial institution);
5% (in case of remittance for education/medical treatment);
20% for others.
For purchase of overseas tour program package under clause (ii) of sub-section (1G) of section 206C, the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakh per individual per annum, and the 20% rate will only apply for expenditure above this limit
lncreased TCS rates to applicable from 1st October, 2023:
The increase in TCS rates; which were to come into effect from 1’t July,2023 shall now come into effect from 1″t October, 2023 with the modification as in (i) above. Till 30th September, 2023, earlier rates (prior to amendment by the Finance Act, 2023) shall continue to apply.
Earlier and new TCS rates are summarised as under:
Nature of payment (1)
Earlier rate before Finance Act,2023 (2)
New rate w.e.f 1st October, 2023 (3)
LRS for education, financed by loan from financial institution
Nil upto Rs 7 lakh 0.5% above Rs T lakh
Nil upto Rs 7 lakh 0.5% above Rs 7 lakh
LRS for Medical treatment/ education (other than financed by loan)
Nil upto Rs 7 lakh 5% above Rs 7 lakh
Nil upto Rs 7 lakh 5% above Rs 7 lakh
LRS for other purposes
Nil upto Rs 7 lakh 5% above Rs 7 lakh
Nil upto Rs 7 lakh 20% above Rs 7 lakh
Purchase of Overseas tour program package
5% (without threshold)
5% till Rs 7 lakh, 20% thereafter
*Note:
(i) TCS rate mentioned in column 2 shall continue to apply till 30” September,2023.
(ii) There shall be no TCS on expenditure under LRS under clause (i) of subsection (1G) of section 206C upto Rs 7 lakh, irrespective of purpose.
Sub-section (1-l) of section 206C of the Act provides that if any difficulty arises in giving effect to the provisions of sub-section (1G) of this section, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty. Accordingly, the following guideline is issued under this provision.
FAQ:-
Question 1:
Whether payment through overseas credit card would be counted in LRS?
Answer: As announced in the press release dated 28th June, 2023, the classification of use of international credit card while being overseas, as LRS is postponed. Therefore, no TCS shall be applicable on expenditure through international credit card while being overseas till further order.
Question 2:
Whether the threshold of Rs 7 lakh, for TCS to become applicable on LRS, applies separately for various purposes like education, health treatment and others? For example, if remittance of Rs 7 lakh under LRS is made in a financial year for education purpose and other remittances in the same financial year of Rs 7 lakh is made for medical treatment and Rs 7 lakh for other purposes, whether the exemption limit of Rs 7 lakh shall be given to each of the three separately?
Answer: lt is clarified that the threshold of Rs 7 lakh for LRS is combined threshold for applicability of the TCS on LRS irrespective of the purpose of the remittance. This is clear from the first proviso to sub-section (1G) of section 206C of the Act. The proviso states that the TCS is not required if the amount or aggregate of the amounts being remitted by a buyer is less than seven Iakh rupees in a financial year. The amendment by the Finance Act, 2023 has only restricted it to education and medical treatment purpose. Now, after press release, old position has been restored and the threshold continues to apply for seven lakh rupees in a financial year, irrespective of the purpose.
Thus, in the given example, upto Rs 7 lakh remittance under LRS during a financial year shall not be liable for TCS. However, subsequent Rs 14 lakh remittance under LRS shall be liable for TCS in accordance with the TCS rates applicable for such remittance.
ln the example, if the remittances under LRS are made in the current financial year at different point of time, TCS rates for the remaining Rs 14 lakh remittances under LRS would depend on the time of remittance as TCS rates changes from 1st October 2023.
TCS rates would be applicable as under:-
First Rs 7 lakh remittance under LRS during the financial year 2023-24 for education purpose (or for that matter any purpose)
No TCS
Remittances beyond Rs 7 lakh under LRS during the financial year 2023-24, if on or before 30th September 2023
TCS 5% (irrespective of the purpose unless it is for education purpose financed by loan from a financial institution when the rate is 0.5%)
Remittances beyond Rs 7 lakh under LRS during the financial year 2023-24, if on or after 1’t October 2023
TCS at O.5o/o (if it is for education purpose financed by loan from a financial institution), 5% (if it is for education or medical treatment) and 20% (if it is for other purposes)
Question 3: Since there are different TCS rates on LRS for the first six months and next six months of the financial year 2023-24, whether the threshold of Rs 7 lakh, for the TCS to become applicable on LRS, applies separately for each six months?
Answer: No. The threshold of Rs 7 lakh, for the TCS to become applicable on LRS, applies for the full financial year. lf this threshold has already been exhausted; all subsequent remittances under LRS, whether in the first half or in the second half, would be liable for TCS at applicable rate.
Question 4: Whether the threshold of Rs 7 lakh, for TCS to become applicable on LRS, applies separately for each remittance through different authorised dealers? lf not, how will authorised dealer know about the earlier remittances by that remitter through some other authorised dealer?
Answer: lt is clarified that the threshold of Rs 7 lakh for LRS is qua remitter and not qua authorised dealer. This is clear from the first proviso to sub-section (1G) of section 206C of the Act. The proviso states that the TCS is not required if the amount or aggregate of amounts being remitted by a buyer is less than seven lakh rupees in a financial year. The threshold continues to apply qua remitter.
Since the facility to provide real time update of remittance under LRS by remitter is still under development by the RBl, it is clarified that the details of earlier remittances under LRS by the remitter during the financial year may be taken by the authorised dealer through an undertaking at the time of remittance. lf the authorised dealer correctly collects the tax at source based on information given in this undertaking, he will not be treated as “assessee in default”. However, for any false information in the undertaking, appropriate action may be taken against the remitter under the Act.
It is further clarified that same methodology of taking undertaking from the buyer of overseas tour program package may be followed by the seller of such package.
Question 5: There is threshold of Rs 7 lakh for remittance under LRS for TCS to become applicable while there is another threshold of Rs 7 lakh for purchase of overseas tour program package where reduced rate of 5% TGS applies. Whether these two thresholds apply independently?
Answer: Yes, these two thresholds apply independently. For LRS, the threshold of Rs 7 lakh applies to make TCS applicable. For purchase of overseas tour program package, the threshold of Rs 7 lakh applies to determine the applicable TCS rate as 5% or 20%
Question 6: A resident individual spends Rs 3 lakh for purchase of overseas tour program package from a foreign tour operator and remits money which is classified under LRS. There is no other remittance under LRS or purchase of overseas tour program during the financial year. Whether TCS is applicable?
Answer: ln case of purchase of overseas tour program package which is classified under LRS, TCS provision for purchase of overseas tour program package shall apply and not TCS provisions for remittance under LRS.
Since for purchase of overseas tour program package, the threshold of Rs 7 lakh for applicability of TCS does not apply, TCS is applicable and tax is required to be collected by the seller. ln this case the tax shall be required to be collected at 5o/o since the total amount spent on purchase of overseas tour program package during the financial year is less than Rs 7 lakh. The TCS should be made by the seller.
Question 7: There are different rates for remittance under LRS for medical treatment/education purposes and for other purposes. What is the scope of remittance under LRS for medical treatment/education purposes?
Answer: As per the clarification by the RBl, remittance for the purposes of medical treatment shall include,-
remittance for purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between lndia and the overseas destination;
his medical expense; and
other day to day expenses required for such purpose.
It may be noted that code 50304 (under the Purpose Group Name “Travel”), in RBI master direction for LRS, pertains to travel for medical treatment. As per BPM6, A.P. (DlR Series) Circular no 50, dated 11 Feb 2016 this code covers the transactions which are related to health services acquired by residents travelling abroad for medical reasons, which includes medical services, other healthcare, food, accommodation and local transport transactions
ln addition, code 51108 (under the Purpose Group Name “Personal, Cultural & Recreational services”) covers transactions for health services rendered remotely or onsite (that is no travel by service recipient is involved). This cover services from hospitals, doctors, nurses, paramedical and similar services, etc. TCS provision for purpose of medical treatment would apply when remittance is under code 50304 or under code 51 108.
Education :
Remittance for purpose of education shall include,-
remittance for purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination;
the tuition and other fees to be paid to educational institute; and
other day to day expenses required for undertaking such study
It may be noted that code 50305 (under the Purpose Group Name “Travel”), in RBI master direction for LRS, pertains to travel for education (including fees, hostel expenses, etc). As per BPM6, A.P. (DIR Series) Circular no 50, dated 11 Feb 2016 this code covers education related services such as tuition, food, accommodation, local transport and health services acquired by resident students while residing overseas. tn addition, code 51107 (under the Purpose Group Name “Personal, Cultural & Recreational services”) covers transactions for education (eg fees for correspondence courses abroad) where the person receiving education does not travel overseas. TCS provision for purpose of education would apply when remittance is under code 50305 or under 51 1 07.
Question 8: Whether purchase of international travel ticket or hotel accommodation on standalone basis is purchase of overseas tour program package?
Answer: The term ‘overseas tour program package’ is defined as to mean any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.
It is clarified that purchase of only international travel ticket or purchase of only hotel accommodation, by in itself is not covered within the definition of ‘overseas tour program package’. To qualify as ‘overseas tour program package’, the package should include at least two of the followings:-
international travel ticket,
hotel accommodation (with or without food)/boarding/lodging,
any other expenditure of similar nature or in relation thereto.
CHOOSE THE RIGHT ITR FORMS WHILE FILING THE RETURN
Income tax filing can be a daunting task for many individuals. With changing regulations and evolving tax laws, it’s essential to stay updated on the latest requirements to ensure accurate and timely filing. In this blog post, we will discuss the income tax filing forms to be used for the Assessment Year (AY) 2023-24, covering the Financial Year (FY) 2022-23. By understanding the purpose and significance of these forms, you’ll be better equipped to navigate the process with confidence.
Form ITR-1, also known as SAHAJ, is primarily designed for individuals having income from salary, one house property, or other sources like interest. It is one of the most commonly used forms by salaried individuals or pensioners who have a straightforward income structure. ( For individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand.
Form ITR-2 is applicable for individuals and Hindu Undivided Families (HUFs) not eligible to file Form ITR-1. It includes individuals with income from multiple sources, such as salary, house property, capital gains, and more. If you have earned income from foreign assets, or you are a director in a company, or have invested in unlisted equity shares, this form is suitable for you. (For Individuals and HUFs not having income from profits and gains of business or profession)
Form ITR-3 is specifically meant for individuals and HUFs having income from business or profession. If you are a self-employed professional or a partner in a partnership firm, this form is suitable for reporting your income, deductions, and business-related details.(For individuals and HUFs having income from profits and gains of business or profession.)
Form ITR-4, also known as SUGAM, is applicable for individuals, HUFs, and firms (other than LLPs) having a presumptive income from business or profession. This form simplifies the process for small taxpayers who opt for the presumptive taxation scheme under Section 44AD, 44ADA or 44AE and agricultural income upto Rs.5 thousand.)
Form ITR-5 is for individuals, HUFs, firms, Association of Persons (AOPs), and Body of Individuals (BOIs) who are not eligible to file forms ITR-1 to ITR-4. It is suitable for reporting income from partnership firms, LLPs, or income from multiple sources for which other forms are not applicable. (For persons other than- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7
Form ITR-6 is specifically designed for companies, excluding those claiming exemption under Section 11 (Income from property held for charitable or religious purposes).
Form ITR-7 is for individuals, companies, and entities that are required to furnish a return under Section 139(4A), Section 139(4B), Section 139(4C), or Section 139(4D) of the Income Tax Act. This form is applicable for reporting income of trusts, political parties, institutions, and more.
Choosing the right income tax filing form is crucial to ensure accurate reporting of income and compliance with tax regulations. By understanding the purpose and applicability of each form, individuals can effectively file their returns for the Assessment Year 2023-24, covering the Financial Year 2022-23. Stay informed, seek professional assistance if needed, and fulfill your tax obligations seamlessly.
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