Comprehensive Scrutiny of Non-Filers and Tax Evasion Cases

The income tax department has announced its plans for the current financial year, emphasizing the thorough scrutiny of certain cases. The focus will be on two main categories: cases where no return was furnished, and cases where specific instances of tax evasion were detected. The Central Board of Direct Taxes (CBDT) has listed these criteria as parameters for the compulsory selection of returns for complete scrutiny during the fiscal year 2023-24.

1. Cases with No Furnished Return

The income tax department will give special attention to cases where taxpayers have failed to furnish their returns. These are individuals or entities who have not complied with their obligation to file a tax return for the relevant assessment year. By conducting comprehensive scrutiny of these cases, the department aims to ensure that all taxpayers fulfill their legal responsibilities and contribute their fair share towards the nation's development.

2. Cases with Specific Instances of Tax Evasion

Another crucial focus area for the income tax department is cases in which specific instances of tax evasion have been detected. These instances may have been brought to the attention of the department through various means, such as information provided by law enforcement agencies. The CBDT has emphasized the significance of such information, recognizing it as a valuable resource for identifying potential tax evasion and ensuring compliance with tax regulations.

When both specific information pointing out tax evasion for the relevant assessment year and the return for that year are furnished by the taxpayer, the department will prioritize these cases for complete scrutiny. This indicates the department's commitment to thoroughly investigate instances where taxpayers may have intentionally or inadvertently evaded their tax liabilities.

By implementing these measures, the income tax department aims to strengthen its enforcement mechanisms and enhance tax compliance. Complete scrutiny of these selected cases will help uncover any potential tax irregularities, ensure fairness in the tax system, and maintain public trust in the integrity of the income tax department.

In conclusion, the income tax department's decision to prioritize search and survey cases, as well as instances of specific tax evasion, for complete scrutiny during the fiscal year 2023-24 reflects its dedication to promoting transparency, accountability, and fairness in the tax administration process.

 

Increased Limit for Tax Exemption on Leave Encashment for Non-Government Salaried Employees Notified

 Introduction:

In a significant move, the Central Government has recently announced a noteworthy update concerning tax exemption on leave encashment for non-government salaried employees. Previously limited to Rs. 3 lakh under section 10(10AA)(ii) of the Income-tax Act, 1961, the government has now raised the limit to Rs. 25 lakh, effective from April 1, 2023. This amendment comes as a result of the proposal put forth in the Budget Speech, 2023, by the honorable Finance Minister. The revised limit applies to retirement or other cases where non-government salaried employees receive leave encashment payments.

Key Highlights:

1. Increased Limit: The new limit for tax exemption on leave encashment for non-government salaried employees has been raised to Rs. 25 lakh, compared to the previous limit of Rs. 3 lakh. This change aims to provide substantial relief and support to employees upon retirement or under other circumstances.

2. Multiple Employers: In cases where a non-government employee receives leave encashment payments from more than one employer within the same previous year, the aggregate amount exempt from income tax under section 10(10AA)(ii) of the Act should not exceed Rs. 25 lakh. This provision prevents individuals from surpassing the set limit when receiving payments from different employers.

3. Adjustments for Previous Years: The amount exempt from income tax under section 10(10AA)(ii) of the Act should not exceed Rs. 25 lakh, taking into account any previous tax exemptions already granted. This ensures that the limit is applied effectively, considering any previous years where tax exemption was availed.

Conclusion:

The Central Government's decision to increase the tax exemption limit on leave encashment for non-government salaried employees to Rs. 25 lakh is a welcome step in providing financial relief during retirement or other circumstances. This move acknowledges the evolving needs and aspirations of the workforce, aligning with the government's commitment to fostering employee welfare. Non-government salaried employees can now avail higher tax exemptions on their earned leave encashment, thereby helping secure their financial future.

To learn more about the updated regulations and guidelines, interested individuals can refer to Notification No. 31/2023 dated May 24, 2023, available at the official e-gazette website: [https://egazette.nic.in].

A Comprehensive Guide to TDS on GST @ 2% (with Examples)

 Introduction:

Tax Deducted at Source (TDS) on Goods and Services Tax (GST) is an important provision introduced by the government to monitor transactions, ensure compliance, and prevent tax evasion. In this comprehensive guide, we will delve into the intricacies of TDS on GST, its applicability, deductions, deposit procedures, and consequences of non-compliance. We will also provide illustrative examples to enhance understanding.

TDS @ 2% on GST: TDS @ 2% is required to be deducted when making payments to suppliers of taxable goods or services if the contract value exceeds Rs. 2.5 Lakhs. The provisions of TDS on GST became effective from October 1, 2018 (Notification No. 50/2018 – Central Tax dated 13th Sept 2018). The following elements are excluded when computing the contract value for TDS purposes:

1. Central GST
2. State GST
3. Union Territory GST
4. Integrated GST
5. Cess

TDS Rate: 1% or 2%? The TDS rate is 1% under both the CGST and SGST Acts, resulting in a total TDS deduction of 2%. In the case of inter-state transactions, where IGST is levied, the TDS rate remains 2%. Let's consider an example to understand this better:

Example: A supplier makes an intra-state supply worth Rs. 10,00,000 to a recipient, with CGST @ 9% and SGST @ 9%. In this case, the recipient deducts 1% TDS (Rs. 10,000) under the CGST Act and 1% TDS (Rs. 10,000) under the SGST Act. Hence, the total TDS deducted would amount to Rs. 20,000.

Applicability of TDS on GST: TDS on GST is applicable to the following class of persons who deduct TDS when making payments exceeding Rs. 2.5 Lakhs:

• Departments or establishments of the Central or State governments
• Local authorities
• Government agencies
• Persons or categories of persons notified by the government

The government has specified the following categories of persons on whom the provisions of TDS on GST would be applicable:

1. Authorities, boards, or bodies with 51% or more equity or control: a. Established by an Act of Parliament or State Legislature, or b. Established by any government

2. Societies established by the Central or State governments or a local authority under the Society Regulations Act, 1860.

3. Public Sector Undertakings

Exceptions to TDS Deductions: TDS on GST is not required to be deducted in the following cases:

1. When the contract value does not exceed Rs. 2.5 Lakhs.

   • Example 1: If a contract is valued at Rs. 2 Lakhs for Income Tax Advisory and Rs. 1.5 Lakhs for GST Advisory, TDS provisions will not apply since the value of each contract is less than Rs. 2.5 Lakhs.
   • Example 2: If a single contract worth Rs. 3 Lakhs is divided into two payments of Rs. 1.5 Lakhs each, TDS provisions will apply as the total contract value exceeds Rs. 2.5 Lakhs.

2. When the location of the recipient is different from the location of the supplier and the place of supply.

   • Example 1: If Delhi Government contracts with Radisson Haryana to rent space for an event, and the place of supply and the location of the recipient is Haryana, TDS provisions will not apply.

TDS Deposit and Certificate Issuance: After deducting TDS, the deductor is required to deposit the TDS amount with the government by the 10th of the following month through the GST portal. Failure to deposit TDS within the prescribed time may attract interest liabilities.

The deductor must issue a TDS certificate (Form GSTR 7A) to the deductee within five days of depositing the TDS. Late issuance of the certificate may lead to the payment of late fees.

Claiming TDS Credit and Penalty for Non-compliance: Suppliers can view TDS deductions in Form GSTR 2A and include them in their returns (GSTR 2) to claim credit. Non-compliance with TDS provisions may result in penalties, such as interest on non-deduction or late payment, late fees for delayed issuance of TDS certificates, and late fees for late filing of TDS returns.

Refund of Excess or Erroneous Amounts: Excess or erroneous amounts deducted as TDS can be refunded under Section 54, except when already credited to the supplier's electronic cash ledger.

Conclusion: Understanding the provisions of TDS on GST @ 2% is crucial for businesses and individuals involved in taxable transactions. By following the guidelines, deductors can ensure compliance and contribute to a transparent and efficient taxation system. We hope this comprehensive guide has shed light on the various aspects of TDS on GST, helping you navigate this aspect of GST with confidence.

Enhancing Exemptions for Agricultural Land in the Income Tax Act: Promoting Fairness and Consistency

Introduction: The Income-tax Act provides crucial exemptions for agricultural land, recognizing its unique importance to the economy. However, certain provisions within the Act, particularly Section 54B, present limitations that hinder the accessibility and flexibility of exemptions. In this article, we delve into the existing provisions, highlight the disparities between different sections, and advocate for aligning the exemption provision under Section 54B with Sections 54 and 54F. By doing so, we can establish a fair and efficient tax system that benefits individuals and Hindu Undivided Families (HUFs) involved in agricultural activities.

Understanding the Current Provisions: The Income-tax Act grants exemptions for agricultural land based on its classification as rural or urban. Rural land is defined as situated beyond a specified distance from the boundaries of a municipality or cantonment board, as determined by aerial measurement. The transfer of rural agricultural land enjoys tax exemptions without any conditions. In contrast, the transfer of urban agricultural land is only exempt from taxes if the capital gains from the transfer are reinvested in new agricultural land, as outlined in Section 54B of the Income-tax Act.

Eligibility and Restrictions: According to Section 54B, individuals or HUFs can claim an exemption on capital gains from the transfer of urban agricultural land if they reinvest the gains in a new agricultural land. However, there are specific conditions to be met. The exemption is only available if the new land is purchased within two years of the transfer and can be located anywhere, regardless of its rural or urban classification or whether it is situated in India or abroad.

Disparity with Other Sections: Section 54B, although providing an exemption on capital gains from the transfer of urban agricultural land, has limitations that differentiate it from Sections 54 and 54F. Notably, Section 54B does not allow the purchase of agricultural land prior to the date of transfer, which is a significant limitation compared to the provisions of Sections 54 and 54F. These sections allow exemptions for the purchase of residential properties both before and after the transfer of the original asset.

The Tribunal Ruling and the Call for Alignment: The case of Paras Chinubhai Jani v. Pr. CIT shed light on the limitations of Section 54B. The Tribunal ruled that the exemption can only be claimed if the agricultural land is purchased after the transfer of the original capital asset. Acquiring land before the transfer date is deemed invalid, as it goes against the language of the Act. The Tribunal emphasized the clarity of the legislature's intention, as other sections of the Act use phrases such as "before or after the transfer of the capital asset." Therefore, the Tribunal upheld the decision to disallow the exemption under Section 54B in the specific case.

Enhancing the System for Fairness and Efficiency: To ensure consistency and fairness, it is recommended that the exemption provision in Section 54B align with the provisions of Sections 54 and 54F. This alignment would allow individuals and HUFs to claim exemptions even if they acquire new agricultural land before disposing of the original asset. By doing so, we would simplify the process for taxpayers, eliminate disparities between different types of assets, and reduce administrative burdens. This harmonization would ultimately establish a more fair and efficient tax system that benefits the agricultural community.

Conclusion: Enhancing the exemptions for agricultural land in the Income-tax Act is essential to support the growth and development of the agricultural sector. Aligning the exemption provision in Section 54B with Sections 54 and 54F will create consistency, promote fairness, and reduce administrative burdens for taxpayers. It is imperative that we work towards a tax system that encourages investment, supports agricultural activities, and fosters economic prosperity. By advocating for alignment, we can pave the way for a fairer and more efficient tax environment. 

FAQS on Form 10BD and 10BE to be filed by Charitable organisation and deduction allowable to donor

 Table of FAQs

FAQ Number	Question	Answer
Q1	Is filing of online Form 10BD mandatory for every charitable trust or institution?	Yes, Income tax has made filing of Statement of Donations received during the previous financial year (in Form 10BD) mandatory.
Q2	If my trust or institution has tax exemption certificate u/s 12AA (now 12AB) but has not applied for nor has tax deduction certificate for donors, must Form 10BD still be filed?	No. The new Rule 18AB of Income Tax Rules is applicable to all entities that have approval u/s 80G and u/s 35(1) of the Income Tax Act, 1961 which allows tax deductions for donors.
Q3	What is the deadline or due date for this new compliance?	The statement of donations for Financial Year 2021-22 is required to be filed by 31st May 2022.
Q4	What is the step-by-step process for filing this form?	We suggest that this process be handled by an experienced professional accountant in your organization or by your Chartered Accountant / Auditor. The detailed steps can be found in the previous response.
Q5	Is Certificate of Donation (for Donor) in Form 10BE also mandatory?	Yes, it is mandatory. After filing of Statement of Donations in Form 10BD, one can download and issue Certificate of Donations in Form 10BE.
Q6	What if my organization fails to comply or misses the due-date of 31st May?	Every organization having 80G or 35(1) is mandated to comply with the filing of Form 10BD & Form 10BE, and failure to comply will attract a fee of Rs.200/- per day of delay as per newly inserted section 234G. Additionally, failure to file such a statement will also attract penalty u/s 271K, which shall not be less than Rs.10,000/- and which may extend up to Rs.1,00,000/-.
Q7	What if my organization has not received a single donation or grant during the financial year? Should we be filing for Nil donation?	If your organization has not received a single donation or grant during the financial year, you need not file Form 10BD. The portal does not seem to accept Nil declaration at the moment.
Q8	Must every single donation or grant received during the previous financial year be reported in Form 10BD?	No. In online Form 10BD, only upload information or details of donors who are interested in enjoying tax deduction u/s 80G or u/s 35(1) of the Income Tax Act.
Q9	We receive a lot of retail donations of small amounts, including through crowdfunding platforms, where donors do not provide PAN details. Should this be a cause of worry or concern?	It should not be a cause of worry to your organization. If you do not have the donor’s PAN, your donor will not be able to enjoy tax deduction u/s 80G or u/s 35(1). If the donor is interested in availing tax deduction, they should provide their PAN so that details of donations made can be auto-filled in their ITR form for tax deduction.
Q10	We also collect donations through donation cash boxes which we have installed at a few shopping malls. Should we report these donations in Form 10BD?	No. These collections would be considered as anonymous donations and are subject to specific tax treatment as per Section 115BBC(1) of the Income Tax Act, 1961. You are not required to report these donations in Form 10BD.
Q11	How can we be sure that only details of donors seeking tax deduction should be uploaded and not every single donation received by our organization?	In Form 10BD, you only need to upload the details of donors who are seeking tax deduction under Section 80G or Section 35(1) of the Income Tax Act. Ensure that you have proper documentation and communication with donors who wish to avail tax benefits, and collect their PAN details for reporting.
Q12	Should corpus donations and grants given for specific purposes also be reported in Form 10BD?	No, corpus donations and grants given for specific purposes should not be reported in Form 10BD. Only report the donations received for which the donors are seeking tax deduction under Section 80G or Section 35(1).
Q13	A donor has donated a sum of Rs. 50,000/- to our organization, but by cash and not by cheque or electronic transfer. How do we report this donation?	Cash donations of Rs. 2,000 or more received in a day, or in respect of a single transaction, or in connection with an event or occasion, are required to be reported in Form 10BD.
Q14	What if donations that are reported in our Annual Return in ITR-7 do not match with donations that we report in Form 10BD?	It is important to ensure consistency between the donations reported in your Annual Return (ITR-7) and the donations reported in Form 10BD. If there are any discrepancies, it is recommended to consult with a professional accountant or tax advisor to rectify the issue and ensure accurate reporting.
Q15	We have a donor who has donated a certain sum of money but has specifically told us that he is not interested in claiming tax deduction u/s 80G. Should we still report his donation in Form 10BD?	If the donor has explicitly stated that they do not wish to claim tax deduction under Section 80G, you are not required to report their donation in Form 10BD.
Q16	Should we report grants received from Indian grantmaking foundations in Form 10BD?	Yes, grants received from Indian grantmaking foundations should be reported in Form 10BD if the grantmakers are seeking tax deduction under Section 35(1) of the Income Tax Act.
Q17	Should CSR grants received from companies be reported in Form 10BD?	Yes, CSR grants received from companies should be reported in Form 10BD if the companies are seeking tax deduction under Section 35(1) of the Income Tax Act.
Q18	Should foreign contributions received from a 'foreign source' under FCRA 2010 also be reported in Form 10BD?	No, foreign contributions received from a 'foreign source' under the Foreign Contribution Regulation Act (FCRA) 2010 should not be reported in Form 10BD. Form 10BD is specifically for reporting donations and grants received under Section 80G and Section 35(1) of the Income Tax Act.
Q19	Should we request every donor to furnish contact details and PAN?	It is recommended to request every donor to furnish their contact details and PAN, especially if they are seeking tax deduction under Section 80G or Section 35(1). PAN details are necessary for accurate reporting and to enable donors to avail tax benefits.
Form 10BE FAQs:
Q1	Is Certificate of Donation (for Donor) in Form 10BE mandatory?	Yes, after filing the Statement of Donations in Form10BD, it is mandatory to issue the Certificate of Donation in Form 10BE to the donors who have made eligible donations and requested for the certificate.
Q2	When should the Certificate of Donation (Form 10BE) be issued to the donors?	The Certificate of Donation (Form 10BE) should be issued to the donors within the prescribed timeline, which is usually within one month from the date of filing the Statement of Donations in Form 10BD.
Q3	What information should be included in the Certificate of Donation (Form 10BE)?	The Certificate of Donation (Form 10BE) should include the details of the donor, such as name, address, PAN, and the amount of donation made during the financial year for which the certificate is issued.
Q4	Can the Certificate of Donation (Form 10BE) be issued in a digital or electronic format?	Yes, the Certificate of Donation (Form 10BE) can be issued in a digital or electronic format, such as a PDF file or through email, as long as it contains all the required information and is digitally signed or authenticated by the authorized person.
Q5	Is it necessary to provide the Certificate of Donation (Form 10BE) to all donors, including those who have not requested it?	No, the Certificate of Donation (Form 10BE) should be issued only to those donors who have made eligible donations and specifically requested for the certificate. It is not necessary to provide the certificate to all donors by default.
Q6	What should be done if a donor requests a duplicate copy of the Certificate of Donation (Form 10BE)?	If a donor requests a duplicate copy of the Certificate of Donation (Form 10BE), the organization should verify the request and, if valid, issue a duplicate copy mentioning it as a duplicate on the certificate.
Q7	Can the Certificate of Donation (Form 10BE) be issued for donations made in previous financial years?	No, the Certificate of Donation (Form 10BE) should be issued only for donations made during the specific financial year for which the certificate is requested. It cannot be issued for donations made in previous financial years.
Q8	Is it necessary to keep a record of the issued Certificates of Donation (Form 10BE)?	Yes, it is important to maintain a record of the issued Certificates of Donation (Form 10BE) for future reference and audit purposes. The organization should maintain a proper system to track the issuance of certificates and keep them securely for the required period.
Q9	Can the Certificate of Donation (Form 10BE) be modified or amended after it has been issued?	No, once the Certificate of Donation (Form 10BE) has been issued, it should not be modified or amended. It should accurately reflect the details of the donation and cannot be changed retrospectively.
Q10	What should be done if there are errors or discrepancies in the Certificate of Donation (Form 10BE)?	If errors or discrepancies are identified in the Certificate of Donation (Form 10BE) after it has been issued, the organization should rectify the errors and reissue a corrected certificate to the donor. The corrected certificate should clearly indicate that it is a corrected version.

Please note this is knowledge sharing and not a professional guidance. For professional guidance you can write to us giving your organizational details and doubt for which clarification desired.