Comprehensive Checklist for Information System Auditor using audit tools for checking ERP Migration and E-mail Migration

 Part 1: ERP Migration

Review Project Quality Plan or Method Document

Carefully examine the project quality plan or method document to understand the overall approach to ERP migration.

Migration Plan Analysis

Verify that the migration plan includes a detailed analysis of project phases, milestones, and dependencies.

Ensure that responsibilities for each migrational activity are clearly defined.

Identification of Critical Business Processes

Verify that critical business processes have been identified and understand the criteria used for their selection.

Consideration of Business Process Aspects

Identify high-volume business processes.

Determine major revenue-generating processes.

Identify processes with the greatest impact on customer satisfaction.

Identify areas generating high profits.

Conference Room Pilot Validation

Examine the conference room pilot to validate the design, configuration, and customization activities in a controlled environment.

Risk Assessment Exercise

Ensure that a proper risk assessment exercise has been conducted by the management.

Regular Review Meetings for Risk Management

Verify that regular review meetings with managers and stakeholders have been conducted to manage and mitigate migration-related risks.

Completeness of Configuration Evaluation

Evaluate the completeness of the configuration by measuring the modules configured in each business area.

Migration Plan for ERP Data

Examine the migration plan to ensure that all data relating to the ERP system is included and accounted for in the migration process.

Data Migration Strategy

Verify whether management has followed proper steps while developing a data migration strategy, including identifying the data to be migrated, determining the timing of data migration, generating data templates, freezing migration tools, deciding on migration-related setups, and data archiving.

Backup and Contingency Plan

Verify whether an effective backup plan or contingency plan has been developed to mitigate the risk of migration failure.

Monitoring and Review of Contingency Plan

Ensure that the contingency plan has been constantly monitored and reviewed to maintain its effectiveness.

User Acceptance Testing

Verify whether user acceptance testing has been carried out to ensure that the new system meets the business requirements.

Review of User Acceptance Testing Results

Review the results of user acceptance testing to ensure that the business requirements have been properly configured in the new ERP system.

Incorporation of Delegation of Authority (DOA)

Verify whether the organization's Delegation of Authority (DOA) has been properly incorporated into the new system.

Comparison of General Ledger (GL) Data

Compare the data in the General Ledger (GL) from the migrated ERP application with the data available in the old GL.

Control Accounts Verification

Examine the control accounts in each module and verify whether they tally with the control account balances in the GL.

Examination of Cut-off Documents

Examine the cut-off documents in the old system and the new ERP environment to ensure accuracy during the migration process.

Part 2: E-mail Migration

Preparation of E-mail Data Backup

Examine whether a backup of e-mail data has been prepared before the migration.

Quality Assessment of Selected Software

Evaluate the quality of the software selected for the e-mail migration process.

Consideration of Factors in Software Selection

Examine whether the management has considered various factors while selecting an e-mail migration tool, such as client-side usability, installation requirements, pre-configuration capabilities, and file location detection.

Verification of E-mail Migration Process

Verify that the e-mail migration process meets specific requirements, including successful migration of folders and their contents, accurate transfer of messages, preservation of message subjects and dates, proper identification of unread messages, successful transfer of attachments, and correct placement of items from the old "Sent" folder to the new one.

Stress Testing for E-mail Migration

Check if stress testing has been conducted during the e-mail migration process to ensure the system's performance under high loads.

Contact Conversion Checks

Verify the successful conversion of contacts, including address books, individual contacts' accessibility, proper placement in the new system, accurate migration of relevant contact fields, ability to use names from the address book in new emails, migration of secondary email addresses, and conversion of distribution lists or groups.

Pilot Email Migration and Feedback

Verify whether a pilot email migration has been conducted and feedback has been obtained to evaluate the success and effectiveness of the migration process.

Note: The IS auditor should mark "Yes" if the requirement is met, "No" if it is not met, or "NA" if the requirement is not applicable.

CBDT issued a circular with FAQs and guidelines for Liberised Remmitance Scheme

 Circular to remove difficulty in implementation of changes relating to Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS) and on purchase of overseas tour program package

Introduction

The Finance Act, 2023, has introduced significant changes to the provisions of Tax Collection at Source (TCS) under section 206C(1G) of the Income-tax Act, 1961. The changes involve an increase in TCS rates from 5% to 20% for remittances under Liberalised Remittance Scheme (LRS) and for purchases of overseas tour program packages. Additionally, the threshold of Rs 7 lakh triggering TCS on LRS has been removed, with the exception of remittances for education and medical purposes.

Postponement of Amendment for Credit Card Transactions

The Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, which aimed to remove differential treatment for credit cards under LRS, have been postponed until further notice.

Practical Difficulties Raised

Comments and concerns were received regarding practical difficulties arising from the removal of the Rs 7 lakh threshold for TCS on LRS payments other than for education and medical treatment. Financial institutions requested additional time to modify their IT systems to address these implementation challenges.

Decisions Taken

In response to the raised concerns, the Ministry of Finance issued a Press Release dated 28.6.2023, and the following decisions were made regarding income-tax:

Revised TCS Rates for LRS

The threshold for TCS on LRS will be Rs. 7 lakh per financial year per individual. For the first Rs 7 lakh remittance under LRS, there shall be no TCS. Beyond this threshold, the TCS rates shall be as follows: a) 0.5% (if remittance for education is financed by a loan from a financial institution) b) 5% (in case of remittance for education/medical treatment) c) 20% for others

Effective Date of Increased TCS Rates

The increased TCS rates that were initially planned to be applicable from 1st July 2023 will now come into effect from 1st October 2023, as per the revised TCS rates mentioned above.

Summary of Earlier and New TCS Rates

Here is a summary of the earlier and new TCS rates applicable to various types of remittances:

Nature of Payment	Earlier Rate (Before 2023)	New Rate (From 1st October 2023)
LRS for Education (financed by loan)	Nil up to Rs 7 lakh	0.5% above Rs 7 lakh
LRS for Medical Treatment/Education (other than financed by loan)	Nil up to Rs 7 lakh	5% above Rs 7 lakh
LRS for Other Purposes	Nil up to Rs 7 lakh	20% above Rs 7 lakh
Purchase of Overseas Tour Program Package	5% (without threshold)	5% up to Rs 7 lakh, 20% above Rs 7 lakh

Guidelines Issued to Address Difficulties

Payment through Overseas Credit Card

The classification of payments made through overseas credit cards while being overseas and the applicability of TCS on such payments are clarified.

Combined Threshold of Rs 7 Lakh

The combined threshold of Rs 7 lakh for the applicability of TCS on LRS, regardless of the purpose of the remittance, is explained.

Applicability of TCS Rates within a Financial Year

Clarification is provided regarding the application of TCS rates for different periods within a financial year.

Guidelines for Authorized Dealers

Authorized dealers are provided guidelines on obtaining information about previous remittances under LRS and undertaking appropriate TCS collection.

Distinction between Medical Treatment and Education under LRS

Clear distinction is made between remittances for medical treatment and education under LRS.

TCS on Purchase of Overseas Tour Program Packages

Clarification is given on the applicability of TCS and the thresholds for different rates for the purchase of overseas tour program packages.

Conclusion

Circular No. 10 of 2023 provides necessary clarifications, revisions, and guidelines to address the difficulties faced in implementing the amendments related to TCS on LRS and the purchase of overseas tour program packages. The circular aims to provide taxpayers, financial institutions, and authorized dealers with clear instructions on the applicability and rates of TCS based on different scenarios.

CBDT Extends Deadlines for First Quarter TDS/TCS Statements

 The Central Board of Direct Taxes (CBDT) has announced an extension of the deadlines for submitting certain TDS/TCS statements. This move aims to provide relief to taxpayers and make compliance easier. The extension applies to Forms 26Q, 27Q, and 27EQ for the first quarter of the financial year 2023-24. Initially, taxpayers were required to file these statements by July 15 or July 31, 2023. However, the new deadline is now September 30, 2023. This extension specifically applies to the statement of deduction of tax (Form 26Q or 27Q) and the statement of collection of tax (Form 27EQ) for the period of April to June 2023.

CBDT's Relaxation in Compliances

The CBDT has used its powers under section 119 of the Income-tax Act, 1961, to provide relaxation in compliance requirements. This extension allows taxpayers more time to submit the required TDS/TCS statements without facing penalties or compliance issues. Let's take a closer look at the specific relaxation provided by the CBDT.

A. Extension for Statement of Deduction of Tax (Form 26Q or 27Q)

Taxpayers now have until September 30, 2023, to file the statement of deduction of tax for the first quarter of the financial year 2023-24. Previously, the deadline was July 31, 2023, as per Rule 31A of the Income-tax Rules, 1962. The extended deadline gives taxpayers additional time to ensure accurate and timely submission.

B. Extension for Statement of Collection of Tax (Form 27EQ)

Similarly, the statement of collection of tax for the first quarter of the financial year 2023-24, which needs to be filed in Form 27EQ, has been granted an extension until September 30, 2023. The original due date for this statement was July 15, 2023, according to Rule 31AA of the Income-tax Rules, 1962. By extending the deadline, the CBDT aims to reduce the burden on taxpayers and make compliance processes smoother.

Conclusion

The CBDT's extension of the deadlines for submitting TDS/TCS statements brings much-needed relief and flexibility for taxpayers. By moving the filing due date for Forms 26Q, 27Q, and 27EQ for the first quarter of FY 2023-24 to September 30, 2023, the CBDT aims to streamline compliance processes and lighten the burden on taxpayers. This extension offers several benefits, including reduced compliance pressure, avoidance of penalties, improved accuracy, and enhanced efficiency in tax filing. Taxpayers are advised to make good use of the extra time to ensure error-free and timely submission of TDS/TCS statements.

Finance Ministry Extends Deadline for TCS Rates and Credit Card Inclusion in LRS

 

The Indian finance ministry has extended the implementation date for increased Tax Collection at Source (TCS) rates and the inclusion of credit card payments in the Liberalised Remittance Scheme (LRS). The new TCS rates, which were supposed to be effective from July 1, 2023, will now come into effect from October 1, 2023. This decision provides more time for the implementation of the revised TCS rates and the inclusion of credit card payments in the LRS.

As a result of this extension, transactions made through international credit cards while abroad will not be considered LRS transactions and will not be subject to TCS, contrary to the earlier announcement. The revised TCS rates for LRS and overseas tour packages remain unchanged for amounts up to Rs. 7 lakh per individual per year, regardless of the payment mode. However, for overseas expenses on credit cards exceeding Rs. 7 lakh, a TCS rate of 20% will apply. Medical or educational expenses incurred through credit cards will be subject to a lower TCS rate of 5%. Individuals availing loans for overseas education will face a TCS rate of 0.5% above the Rs. 7 lakh threshold.

The Union Budget 2023-24 initially announced the increase in TCS rates to 20% for overseas tour packages and funds remitted under LRS, with the effective date set as July 1, 2023. However, the implementation of these rates has been delayed by three months to October 1, 2023.

It is important to note that in May, changes were made to the FEMA Current Account Transaction Rules, bringing overseas credit card expenses under the purview of the Liberalised Remittance Scheme. This scheme allows residents to remit up to USD 2.50 lakh per year abroad, with RBI approval required for transactions exceeding this limit.

A Step-by-Step Guide to Claiming Foreign Tax Credit in Your Income Tax Return

As globalization continues to connect people and businesses across borders, it's becoming increasingly common for individuals to earn income in foreign countries. If you are a resident of India and have paid taxes in another country, you may be eligible to claim a foreign tax credit in your Income Tax Return (ITR). This article will guide you through the process of claiming a foreign tax credit, ensuring you comply with the necessary requirements and maximize your tax benefits.

Determine eligibility: Before proceeding with the claim, it is crucial to verify your eligibility. As per Indian income tax laws, you can claim a foreign tax credit if you are a resident in India and have paid taxes in a country that has a Double Taxation Avoidance Agreement (DTAA) or a Tax Information Exchange Agreement (TIEA) with India.

Collect necessary information: To begin the process, gather all relevant documents and information pertaining to the foreign taxes paid. These may include tax payment receipts, tax assessment certificates, and proof of foreign income. Accurate record-keeping is essential to support your claim.

Calculate foreign tax credit: Next, determine the amount of foreign tax credit you are eligible to claim. In general, the foreign tax credit is limited to the lower of the actual foreign tax paid or the Indian tax payable on the foreign income. It is important to convert the foreign tax paid into Indian rupees using the prevailing exchange rate.

Complete the ITR form: Once you have calculated the eligible foreign tax credit, proceed to fill out the appropriate ITR form. Provide all necessary details in the relevant sections of the form. When claiming the foreign tax credit, include information such as the country name, tax identification number, and the amount of tax paid.

Attach supporting documents: To support your claim, ensure that you attach the required supporting documents to your ITR form. Include proof of foreign taxes paid, along with any other relevant documents that may be requested. It is advisable to retain a copy of these documents for your personal records.

File the ITR: After completing the ITR form and attaching the supporting documents, it's time to file your income tax return. Make sure to submit the ITR form and supporting documents to the income tax department within the prescribed due date. You can choose to file the ITR online through the income tax department's e-filing portal or offline by submitting a physical copy to the relevant income tax office.

Conclusion: Claiming a foreign tax credit in your Income Tax Return can be a beneficial step towards avoiding double taxation and optimizing your tax liability. By following these step-by-step instructions, you can ensure that you comply with the necessary requirements and maximize your tax benefits. Remember to consult a tax professional or seek guidance from the income tax department if you have any specific questions or concerns regarding your foreign tax credit claim.

The Impact of Reporting Errors on Business Income Assessment: A Case Analysis

 Introduction

The recent decision by the Income Tax Appellate Tribunal (ITAT) Allahabad Bench in the case of Brajesh Agrawal v. Assistant Director of Income-tax* highlights the significance of accurate reporting in tax audits and its impact on business income assessment. The case revolves around a mistake made by a tax auditor in reporting non-business income under clause 16(d) of Form No. 3CD, which led to an addition/adjustment in the business income of the assessee. However, the ITAT ruled that such an error should not automatically result in an addition or adjustment when the income has already been declared under the respective heads in the return of income. This article delves into the key aspects and implications of the case.

Background

In the assessment year 2021-22, the assessee declared an income of Rs. 15,21,057, which included various sources such as income from house property, interest on PPF, interest on saving bank account, interest on fixed deposit receipts (FDR), dividend income, and interest on REC tax-free bonds. The assessee also claimed certain incomes as exempt under section 10 and finally declared a total taxable income of Rs. 1,77,936. The Central Processing Centre (CPC) processed the return under section 143(1) and, based on the tax auditor's report, made an addition/adjustment of Rs. 15,21,060 under the head "any other item or items of addition" under sections 28 to 44AD.

ITAT Decision

The ITAT examined the nature of the income reported under clause 16(d) of Form No. 3CD, which pertains to any other income not falling within the scope of section 28. It concluded that the income, as described, was clearly non-business income. Therefore, a mere mistake made by the tax auditor in reporting income not forming part of the business income should not lead to an automatic addition or adjustment in the business income. This is especially true when the assessee has already declared the income under the respective heads in the return of income and claimed certain income as exempt under section 10.

The adjustment made by the CPC resulted in double taxation of income that had already been declared by the assessee under the heads of income from house property and income from other sources. Furthermore, it taxed the exempt income derived from interest on PPF account and interest on REC tax-free bonds. The ITAT emphasized that these adjustments were unjustified as they contradicted the provisions of the Income-tax Act.

The Commissioner (Appeals) had upheld the adjustment without adequately considering the assessee's arguments regarding double taxation and taxation of exempt income. The ITAT noted that the Commissioner's decision appeared to be based on a mechanical application of the guidance note on tax audits under section 44AB, rather than a thorough examination of the relevant facts and provisions of the Income-tax Act.

Conclusion

The ITAT Allahabad Bench's decision in the case of Brajesh Agrawal v. Assistant Director of Income-tax highlights the importance of accurate reporting in tax audits and its impact on business income assessment. It clarifies that a mere reporting error by a tax auditor should not automatically lead to additions or adjustments in business income when the income has already been declared under the appropriate heads in the return of income.

This ruling provides reassurance to taxpayers that inadvertent mistakes made by tax auditors should not unfairly affect their tax liabilities. It emphasizes the need for tax authorities to carefully review the facts and provisions of the Income-tax Act before making adjustments or additions to taxpayers' reported incomes.

Overall, the case serves as a reminder to both tax auditors and tax authorities about.