Tax Collected at Source (TCS)

TCS is a tax collection mechanism employed by the government to ensure the collection of tax at the source of certain specified transactions. Under TCS, the seller collects a certain percentage of the transaction value as tax from the buyer at the time of sale. This collected tax is then remitted to the government. TCS is applicable on specific goods or services identified by the government where they want to ensure tax collection at an early stage of the transaction.

Here are the key points to understand about TCS:

Applicability: TCS is typically applicable to specific categories of transactions, such as luxury goods, expensive items, or other goods and services as determined by the tax authorities. The intention is to target transactions that might involve a higher risk of tax evasion.

Collection Process: The seller adds the TCS amount to the transaction value and collects the total amount from the buyer. The TCS collected is separate from the sale price of the goods or services.

Rate: The rate at which TCS is collected can vary based on the type of transaction and the applicable tax laws. It's determined by the government and is a fixed percentage of the transaction value.

Accounting and Remittance: The seller is responsible for accounting for the TCS collected separately from their regular sales. The collected TCS amount is then remitted to the government within a specified time frame, usually through a government portal.

Reporting: The seller is also required to file periodic TCS returns, disclosing the details of the TCS collected and the transactions. This reporting enables the tax authorities to track TCS compliance.

Adjustment against Tax Liability: Similar to Tax Deducted at Source (TDS), the TCS amount collected can be adjusted against the final tax liability of the buyer when they file their tax return. This prevents double taxation on the same income.

TCS is implemented to ensure early-stage tax collection and improve tax compliance by reducing the possibility of underreporting or evasion of taxes on certain transactions. However, the specific rules and regulations surrounding TCS can vary from country to country, and they may change over time. If you have specific questions about TCS in a particular jurisdiction or for a particular type of transaction, it's advisable to consult the relevant tax authority or a qualified tax professional.

Tax Deducted at Source (TDS)

TDS is a mechanism used by governments to ensure the collection of tax at the source of income. Under TDS, a person or entity making certain specified payments is required to deduct a certain percentage of the payment amount as tax before making the payment to the recipient. This deducted tax amount is then remitted to the government. TDS is applicable to a variety of payments, such as salaries, interest, rent, professional fees, and more.

Here are the key points to understand about TDS:

Applicability: TDS is typically applicable to payments made to individuals, businesses, or other entities based on specific categories of transactions outlined by the tax authorities. The goal is to ensure that tax is deducted at the point of income generation.

Deduction Process: The person or entity making the payment deducts the TDS amount from the payment before disbursing it to the recipient. The TDS amount is calculated based on the applicable rate and the total payment amount.

Rates: The rates at which TDS is deducted can vary based on the type of payment and the relevant tax laws. Different types of payments may have different TDS rates.

Accounting and Remittance: The entity deducting TDS is responsible for maintaining proper records of the TDS deductions and remitting the deducted amount to the government within the prescribed time frame

TDS Certificate: After deducting TDS, the deductor (the entity deducting TDS) issues a TDS certificate to the deductee (the recipient of the payment). This certificate provides details of the TDS deduction, which the deductee can use for claiming credit while filing their tax return.

Reporting: The deductor is required to file periodic TDS returns, providing details of the TDS deductions made during the reporting period. This reporting helps the tax authorities track TDS compliance.

Adjustment against Tax Liability: The TDS amount deducted can be adjusted against the final tax liability of the deductee when they file their tax return. This prevents double taxation on the same income.

TDS is implemented to ensure that tax is collected at the source of income, thereby improving tax compliance and preventing tax evasion. However, the specific rules and regulations regarding TDS can vary from country to country and may change over time. If you have specific questions about TDS in a particular jurisdiction or for a specific type of payment, it's advisable to consult the relevant tax authority or a qualified tax professional.

Income Tax Return (ITR)

An Income Tax Return (ITR) is a crucial financial document that individuals and entities in India are required to file with the Income Tax Department. It serves as a comprehensive record of an individual's or business's financial activities and income for a specific financial year. The process of filing an Income Tax Return is a fundamental aspect of the Indian taxation system and plays a significant role in ensuring transparency, tax compliance, and revenue collection. Here's a descriptive overview of Income Tax Return filing in India

Here are the key points to understand about TCS:

Filing Process:

The process of filing an Income Tax Return in India involves several steps:

Gathering Documents: Taxpayers need to gather documents such as salary slips, investment proofs, bank statements, Form 16 (for salaried individuals), and other relevant financial records

Selecting the Appropriate ITR Form: Depending on the taxpayer's category and income sources, the appropriate Income Tax Return form needs to be selected. The forms are labeled as ITR-1, ITR-2, ITR-3, etc.

Income and Deduction Details: Taxpayers are required to provide accurate details of their income, deductions claimed, and taxes paid during the financial year

Filling the Form: The chosen ITR form needs to be filled out meticulously, ensuring all relevant sections are completed accurately.

Verification and Submission: Once the form is filled, it can be submitted electronically on the Income Tax Department's official e-filing portal. Taxpayers need to verify the submission using methods such as digital signature, Electronic Verification Code (EVC), or sending a physical signed copy to the Centralized Processing Center (CPC).

Acknowledgment: After successful submission, a confirmation receipt known as an ITR-V is generated. This needs to be retained for future reference.

Benefits:

Compliance: Filing an Income Tax Return ensures compliance with the tax laws of India.

Refunds: If excess tax has been paid, filing ITR allows individuals to claim refunds.

Financial Records: ITR acts as a comprehensive financial record, which can be useful for obtaining loans and visas

Proof of Income: ITR serves as proof of income for various financial and legal purposes.

Penalties for Non-Filing:

Failure to file an Income Tax Return can lead to penalties, interest charges, and legal consequences. Therefore, timely and accurate ITR filing is essential to avoid such repercussions.

In conclusion, filing an Income Tax Return in India is a vital obligation that contributes to the transparency and integrity of the taxation system. It enables individuals and businesses to fulfill their tax responsibilities, avail benefits, and maintain a clear financial record. Proper understanding of the process, selection of the appropriate ITR form, accurate reporting, and timely submission are key factors in ensuring a seamless and compliant filing experience.

Ensuring Taxation Compliance: Your Trusted Partner in Financial Integrity

Welcome to BIRBALSUREDIA&CO., where we specialize in providing comprehensive taxation compliance services that empower businesses to navigate the intricate landscape of tax regulations with confidence. With our team of experienced Chartered Accountants, we are dedicated to ensuring that your financial operations remain aligned with the ever-evolving tax laws, minimizing risks and maximizing opportunities.

Our Taxation Compliance Services:

Tax Planning and Strategy: Our seasoned experts work closely with you to develop strategic tax plans tailored to your business goals. We help you optimize your tax liability, making informed decisions that contribute to sustainable growth.

Tax Return Preparation and Filing: Stay ahead of deadlines and complexities. We meticulously prepare and file your tax returns, ensuring accuracy and adherence to all legal requirements. Our deep understanding of various tax forms ensures that you claim every eligible deduction and credit.

GST and Indirect Tax Compliance: Navigating the nuances of GST and other indirect taxes demands precision. We assist you in registering, filing returns, and complying with GST regulations, minimizing the risk of penalties.

TDS and TCS Compliance: Our team handles all aspects of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), from accurate deductions to timely filing of returns. Trust us to keep you compliant with these critical obligations.

Transfer Pricing Compliance: In the era of global transactions, transfer pricing compliance is paramount. We offer expert guidance to ensure compliance with transfer pricing regulations, minimizing the risk of disputes.

Audits and Representations: In case of tax audits or assessments, our experienced professionals provide the necessary support. We represent you before tax authorities, ensuring your position is well-communicated and your rights upheld.

Tax Due Diligence: When considering mergers, acquisitions, or investments, our tax due diligence services provide a clear understanding of the tax implications, helping you make well-informed decisions

Why Choose Us:

Expertise: Our team of Chartered Accountants possesses deep expertise in tax laws and compliance, ensuring that you receive accurate and up-to-date advice.

Personalized Approach: We understand that each business is unique. Our solutions are tailored to your specific needs and goals, providing you with a personalized roadmap to tax compliance.

Attention to Detail: We leave no stone unturned in ensuring that every detail of your tax compliance is meticulously handled, minimizing the risk of errors and penalties.

Timely Compliance: Our commitment to timely filing and adherence to deadlines guarantees that you remain compliant, avoiding unnecessary stress and penalties.

Transparent Communication: We believe in transparent communication. We keep you informed about your tax compliance status, opportunities for optimization, and potential risks.

At [Your CA Firm Name], we stand as your trusted partner in maintaining taxation compliance. With our guidance, you can focus on growing your business, secure in the knowledge that your financial practices are aligned with the law. Contact us today to embark on a journey of tax compliance excellence. Your success is our commitment.

INDIRECT TAXATION IN INDIA

Service tax is a central tax, which has been imposed on certain services and is the latest addition to the genus of indirect taxes like customs and central excise duty. India, a developing country, was somewhat slow in discovering the potential of this kind of indirect taxation for enhancement of revenue collection and it was the Finance Act 1994 that first introduced the service tax provisions through its Chapter V. Service Tax is collected by Central Excise Department.

Some of our services include :

• Compiling and calculating the net service tax on output services after taking benefit of Cenvat Credits.
• Compiling the data of Cenvat Credits for service tax.
• Preparing & Filing of Service tax Returns.
• Advising on the issues relating to Service tax.
• Consultancy on the maintenance of prescribed records.
• Tax Planning as regards the minimization of Service Tax Liability.

Goods and Services Tax (GST)

GST stands for "Goods and Services Tax," which is a value-added tax levied on most goods and services for domestic consumption. It's a comprehensive indirect tax that replaced a complex web of indirect taxes in many countries to simplify the tax structure and improve tax collection efficiency.

GST is typically applied at each stage of the supply chain, from manufacturer to consumer, but businesses in the supply chain can claim input tax credits to avoid double taxation. The tax is ultimately borne by the end consumer.

List of some common GST-related services that we offers:

• GST Registration: Assisting businesses in obtaining GST registration as per their turnover and business requirements.
• GST Returns Filing: Helping businesses file their regular GST returns accurately and on time, including GSTR-1, GSTR-3B, GSTR-9, etc.
• GST Compliance Review: Reviewing and ensuring that businesses are complying with all GST regulations and guidelines.
• Input Tax Credit (ITC) Reconciliation: Ensuring proper reconciliation of input tax credits claimed with purchase records and GST returns.
• GST Audit: Conducting GST audits for businesses that are required to get their accounts audited under GST law.
• Export and Import GST Compliance: Advising businesses on GST implications for exports and imports, including issues related to zero-rated supplies and claiming refunds.

Capital asset

Any profit or gain arising from the sale or transfer of a capital asset is computed under this head. Capital asset refers to property of any kind held by an assessee, whether or not connected with his business or professional, excluding the following:

• Any stock-in-trade, consumable stores or raw materials held for the purposes of business or profession;
• Personal effects, namely, movable property (including apparel and furniture held for personal use by assessee or any other member of his/her family dependent on him/her, but excludes jewellery, archaeological collections, drawings, paintings, sculptures or any work of art;
• Agricultural land in India, subject to certain conditions;
• Certain specified government bonds.

VShort-term and long term capital assets

For the purposes or taxation, capital assets are classified as long-term or short-term, depending upon the period of holding of such assets.

A long-term capital asset means a capital asset held by an individual for more than 36 months immediately preceding its date of transfer. However, the following are treated as long-term capital assets, if held for more than 12 months:

• Shares held in a company;
• Other securities listed in a recognized stock exchange in India ;
• Units of the Unit Trust of India or specified mutual funds.

(Sec 2(29A) and 2(42A) of the Income-tax Act, 1961)

Short-term and long-term capital gains

The distinction between short-term and long-term capital assets is important, since this distinction determines whether the capital gain should be taxed as short-term capital gain or as long-term capital gain and consequently the tax rate that applies to such type of capital gains.

Short-term capital gains are included within normal income, and taxed in accordance, with the progressive slab rates of tax for individuals. Long-term capital gains are generally taxable at the rate of 20%, though this rate could be reduced to 15% in case of capital gains arising from transfer to certain long-term capital assests (sec 2(29B), 2(42B) and 112 of the Income-tax Act, 1961).

However, short term capital gains arising on transfer of equity shares in a company or a unit of an equity oriented fund (on satisfaction of prescribed conditions) are taxable at the rate of 15%.

Further, any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund (subject to conditions being satisfied) is exempt.

Computation of capital gains

In order to compute capital gains, expenditure incurred in relation to the sale or transfer as well as the cost of acquisition and improvement of the capital asset are reduced from the full value of the consideration arising on the transfer of the capital asset.

No deduction is allowed in computing the capital gain in respect of any sum paid on account of securities transaction tax.

In case an employee transfers shares, warrants or debentures under a gift, or an irrevocable trust, which were allotted to him under an Employee Stock Option Plan (“ESOP”), that meets certain guidelines laid down by the Government, the fair market value on the date of transfer is regarded as the full value of consideration.

Where the sale consideration for transfer of land or building (or both) is less than the value adopted or assessed for levy of stamp duty in respect of such transfer, then the value so adopted as assessed for stamp duty purposes shall be deemed to be the sale consideration for computing the capital gains. However, if the taxpayer disputes the value so adopted, the Revenue Officer may refer the matter to the valuation officer under the Act. If the valuation officer revises the stamp duty value, the capital gains shall be computed with reference to the revised value provided such revised value is lower than the stamp duty value.

The cost of acquisition for certain modes of acquisition (gifts, inheritance, etc) is generally the cost of acquisition to the previous owner(s).

Cost of acquisition of bonus shares is considered as nil.

In the case of the long-term capital assets, if the capital asset was acquired prior to 1 April 1981, cost of acquisition would be substituted by the fair market value as on 1 April 1981 and the indexation would be available with reference to the value as on 1 April 1981.

In case of long-term capital assests, the costs of acquisition and improvement can be adjusted upwards by applying an inflation index number, which has been specified for every year, since 1981 (sec 48 and 50C of the Income-tax Act, 1961).

Consequent to ESOP being brought within the purview of fringe benefit tax, the value of the specified securities or sweat equity taken into account to compute fringe benefits will be the acquisition cost of the specified securities or shares to derive the capital gains on the transfer of such securities or shares.

Special provision for non-residents

Capital gain arising to a non-resident on transfer of shares and debentures of an Indian company acquired for foreign currency is computed in the following manner:

• Convert the full value of consideration, in the original currency of acquisition of shares or debentures, using the exchange rate on the date of transfer.
• Convert the cost of acquisition in the original currency of acquisition of the shares or debentures at the exchange rate on the date of acquisition of shares.
• Convert the expense incurred in connection with the transfer, in the original currency of acquisition of the shares or debentures at the exchange rate on the date of incurring the expense.
• Reduce the cost of acquisition and expense incurred in connection with the transfer, as computed above, from the full value of consideration, to arrive at the capital gains in foreign currency.
• Convert such capital gain calculated in foreign currency, into Indian rupees, using the exchange rate on the date of transfer.

When the above conversion option is applicable to a non-resident in the case of transfer of shares and debentures of an Indian company qualifying as long-term capital assets, indexation provisions do not apply (sec 48 of the Income-tax Act, 1961).

Exemptions

Long-term capital gains are exempt, if such gains or the sale proceeds of long-term capital assests are invested in certain specified assets, subject to satisfaction of certain conditions. The relevant exemptions are discussed in detail below.

Sale proceeds of residential property reinvested in residential property

Capital gains arising from transfer of a residential property, being buildings or land appurtenant thereto, the income of which is chargeable under the head income from house property, are eligible for an exemption subject to fulfilment of the following conditions:

• The residential property is a long-term capital asset.
• The individual either:

a) Purchases a residential property within a period of one year before or two years after the date of transfer;
b) constructs a residential property within a period of three years after the date of transfer.

The extent of exemption available from capital gains is the lower of the following:

• The cost of new residential property purchased or constructed ;
• The amount of consideration.

If the new residential property is sold/transferred within a period of three years from the date of purchase or construction, the amount of capital gains arising therefrom, together with the amount of capital gain in the year of subsequent sale/transfer is taxed in the year in which property is sold.

If the net consideration is not appropriated towards purchase or construction or the new residential house, it should be deposited in any branch of a public sector bank or institutions in accordance with the Capital Gains Account Scheme, before the due date of filing the personal income tax return.

The amount so invested should be utilized within two years from date of transfer of the original capital asset for purchasing, or within three years of such date of transfer, for construction of a new residential house. The amount invested if not utilized for the purchase of construction, within three years from the date of transfer of the original capital asset, is taxed as long-term capital gain (sec 54 of the Income Tax Act, 1961)

Sale proceeds of long-term capital assets reinvested in specified bonds

Capital gains arising from the transfer of any long-term capital asset, are eligible for an exemption subject to fulfillment of the following conditions:

• The individual has, within six months from the date of transfer of the asset, invested whole or any part of the capital gains in specified long-term assets. These assets are defined to include any bond redeemable after three years issued on or after 1 April 2006 by the National Highways Authority of India and by the Rural Electrification Corporation Limited. Further, from 1 April 2007, a ceiling of INR 5,000,000 has been stipulated for investments in “long-term specified bonds” made during any financial year and the requirement of notifying such bonds in the Official Gazette has been dispensed with.
  The Exemption available from capital gains is:
• The amount of capital gain, if the cost of the specified long-term asset is not less than the amount of capital gain;
• If the cost of the specified long-term asset is less than the amount of capital gain, then the amount of exemption is equal to the amount invested in the specified asset.

There is a restriction on transferring or converting the specified asset into money (including in the form of any loan/advance against the security of the specified asset) within a period of three years from the date of its acquisition. If so transferred or converted, capital gains arising from transfer of original asset that had not been charged to tax shall be taxed as long-term capital gains in the year in which such specified asset is transferred or converted (sec 54EC of the Income Tax Act, 1961).

Sale proceeds of long-term capital assets reinvested in residential property

Capital gains arising from transfer of long-term capital asset, not being a residential house, are eligible for an exemption, subject to fulfillment of the following conditions:

• The individual either:

a) Purchases a residential property within a period of one year before or two years after the due date of transfer;
b) Constructs a residential property within a period of three years after the date of transfer.

The exemption available from capital gains is :

• The amount of net consideration, if the cost of new residential house purchased or constructed, is not less than the amount of net consideration;
• If the cost of new residential house purchased or constructed is less than the amount of net consideration, the amount of net consideration pro-rated against the cost of the new residential house purchased or constructed out of the net consideration.
  Net consideration means full value of the consideration arising or transfer of capital asset after deduction of any expenditure incurred in connection with the transfer.

However, the above exemption may be withdrawn in the following circumstances and taxed accordingly:

• If the individual sells or transfers the new residential house within three years of its purchase or construction;
• If the individual purchases, within a period of two years of the transfer of the original asset, or constructs within a period of three years of transfer of such asset, a residential house (whose income is taxable under Income from house property) other than the new residential house.

In the aforesaid two cases, the amount of capital gains arising from transfer of original asset, which was not taxed, will be deemed to be long-term capital gains and taxed in the year in which such new residential house is transferred, or another residential house (other than the new house) is purchased or constructed.

If the net consideration is not appropriated towards purchase or construction of the new residential house, it should be invested in a deposit account in any branch of a public sector bank or institution in accordance with the Capital Gains Account Scheme before the due date of filing the personal income tax return.

The amount so invested should be utilized within two years from date of transfer of the original capital asset for purchasing, or within three years of such date of transfer, for construction of a residential house. The amount invested, if not utilized within three years from the date of transfer of the original capital asset, is taxed as long-term capital gain (sec 45 to 55 of the Income-tax Act, 1961).