1. As per section 44AB, who is compulsorily required to get his accounts audited, i.e., who is covered by tax audit?

Currently the account of an asseesse needs to be audited if:

• Annual gross turnover/ receipts in business exceeds Rs. 1Crore
• Annual gross turnover/ receipts in profession exceeds Rs. 50Lakh

A new provision also inserted in Sec 44 AB, the tax audit limit will increase from 1crore' to '5crores' if a person's

• aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed 5% of the said amount and
• Aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed 5% of the said payments.

​​2. If a person is required by or under any other law to get his accounts audited, then is it compulsory for him to once again get his accounts audited to comply with the requirement of section 44AB?

Company or co-operative societies are required to get their accounts audited under their respective law. Section 44AB provides that, if a person is required by or under any other law to get his accounts audited, then he need not again get his accounts audited to comply with the requirement of section 44AB.
It shall be sufficient if such person gets the accounts of such business or profession audited under such law and obtains the report of the audit as required under such other law and also a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. 3CA and Form 3CD.

3. What are Form Nos. 3CA/3CB and 3CD?

The form prescribed for audit report in respect of audit conducted under section 44AB ​ is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.
In case of persons, who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA and the prescribed particulars are to be reported in Form No. 3CD.​

4.What is the due date by which a taxpayer should get his accounts audited?

​​​A person covered by section 44AB should get his accounts audited and should obtain the audit report on or before the due date of filing of the return of income, i.e., on or before 30th September (*) of the relevant assessment year.
(*) In case of a taxpayer who is required to furnish a report in Form No. 3CEB under section 92 ​ in respect of any international transaction or specified domestic transaction, the due date of filing the return of income is 30th November of the relevant assessment year.

5.What is the penalty for not getting the accounts audited as required by section 44AB?

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB. The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.

(b) Rs.1,50,000.

Q1

If a business makes any payment(s) or expenditure(s) to

• A single person
• In a single day
• Other than by account payee cheque or an account payee bank draft (i.e. Makes payment via cash)
• Exceeding Rs 10,000/.

Then such expenditure will not be allowed as a deduction under section 40A (3) of the income tax act
This means it will not be considered as a business expense and will be added back to the income. Further, it will result in a higher payment of taxes.

1. What if an expense is allowed on the due basis and is paid in cash next year?

As per section 40A(3A) when an expense payable is allowed in a year and in any subsequent year the assessee makes payment of such expenditure in cash or through bearer cheque exceeding Rs 10,000, then this payment is deemed to be the profit of business or profession and will be charged to tax in such subsequent year.
2.Cash payment cannot be disallowed if not claimed as business expense or capitalized.
3.Cash gifts & presents against section 40A (3) provisions not allowable.

1. What is TDS?

The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. the payer has to deduct tax at source on the payments made by him and he has to deposit the tax deducted by him to the credit of the Government.

2. Reduction in TDS rates due to COVID-19

The government has provided relief in the TDS rates for the period 14.05.2020 to 31.03.2021, due to the pandemic and resultant lockdown affecting all sectors of the economy. The benefit of revision applies to only Resident Indians. Hence, Non residents cannot claim benefits of the same.
                                               
                                                TDS chart for FY 20-21

1. What precautions should be taken while filing the return of income?

Taxpayers should avoid the practice of filing belated return. Following are the consequences of delay in filing the return of income:

• ​Loss (other than house property loss) cannot be carried forward.
• Levy of interest under section 234A
• Penalty of Rs. 5,000 under section 271F can be levied
• Exemptions/deductions under section 10A, section 10B, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID and 80-IE are not available.​
• Taxpayer should download Form 26AS and should confirm actual TDS/TCS/Tax paid. If any discrepancy is observed then suitable action should be taken to reconcile it
• If any tax is payable as per the return of income, then the same should be paid before filing the return of income, otherwise return would be treated as defective return.

2.Am I liable for any criminal prosecution [arrest/imprisonment, etc.] if I don’t file my Income-tax return, even though my income is taxable?

Non-payment of tax attracts interests, penalty and prosecution. The prosecution can lead to rigorous imprisonment from 3 months to 2 years.

3. Is it necessary to file return of income when I do not have positive income?

​​If you have sustained a loss in the financial year, which you propose to carry forward to the subsequent year for adjustment against subsequent year(s) positive income, you must make a claim of loss by filing your return before the due date.

1. What is Long Term & Short Term CapitalAssets?

The following shall be Long Term Capital Asset if period of holding exceeds 12 months:

• Securities in Recognized stock exchange
• Units of Equity Oriented fund / units of UTI
• Zero coupon bonds

The following shall be Long Term Capital Asset if period of holding exceeds 24 months:

• Unlisted shares
• Land & Building

The following shall be Long Term Capital Asset if period of holding exceeds 36 months:

• Units of debt oriented fund
• Unlisted securities (other than shares)
• Other capital assets

The assets other than Long Term Assets are Short Term Assets.

2. How to compute long-term capital gain?​

(*)Indexation is a process by which the cost of acquisition/improvement is adjusted against inflationary rise in the value of assets.The benefit of indexation is available only to long-term capital assets. For computation of indexed cost of acquisition/indexed cost of improvement, following factors are to be considered:

• Year of acquisition/improvement
• Year of transfer
• Cost inflation index of the year of acquisition/improvement
• Cost inflation index of the year of transfer.

Indexed cost of acquisition is computed with the help of following formula:
Cost of acquisition × Cost inflation index of the year of transfer of capital asset
Cost inflation index of the year of acquisition
Indexed cost of improvement is computed with the help of following formula:
Cost of improvement × Cost inflation index of the year of transfer of capital asset
Cost inflation index of the year of improvement

Cost inflation index (CII) table

1. When is the taxpayer benefited under section 54?

When the assessee purchase a new residential house property within one year before or two years of the sale of the original house property or construct a new house property within three years of sale of old property, he or she is liable to get benefit from the exemption under section 54 and such house should not be transferred before 3 years.

2.What are the consequences if new House Property is transferred within 3 years?

If the assessee sells before the stipulated time period the benefit given to him or her will be withdrawn and he or she has to pay the tax on capital gains exempted.

3. Sale of which type of property can avail the benefit of exemption under section 54?

Exemption is only allowed on sale of a residential property which is a long term capital asset for the assessee.

4. Who pays TDS in case of sale of property?

Any person (Buyer or Transferee) who enters into an agreement with a resident seller for transfer of an immovable property (land or building or both but not an agricultural land) is required to deduct TDS @ 1% if sale consideration is Rs. 50lakh or more.

5. How much exemption is allowed under section 54?

Amount of capital gain on the sale of the original residential house property or the amount of new residential property whichever is less is completely exempt.

Important Notes:

• The property that is purchased after selling should be bought on the name of the seller and not on any other name to claim the benefit.
• When the cost of the new residential property is lower than the net sale proceeds of the original property, the exemption u/s 54F will be allowed proportionately. One can reinvest the leftover amount under section 54EC within 6 months of transfer, subject to other conditions to save tax.
• No rule is mandatory for ownership of one or more residential property.

Long Term Capital Gains fully exempt if –
Capital Gain exceeds 2Crores. - 1 residential House Property
Capital Gain is less than or equal to 2Crores - 2 residential House Properties.

1.Who can avail exemption under Section 54F?

• The taxpayer must be an Individual or HUF. The benefit of exemption is not available to the company, LLP, or Firm.
• The asset sold is a Long Term Capital Asset (LTCA) other than House Property
• On the date of sales, the taxpayer does not own more than one house property
• A new Residential House is purchased before 1 year or after 2 years from the sale of the long term capital asset, or
• In case of construction of a new House Property, within 3 years from the sale of the residential House Property.
• A new Residential House should be in India.

2. What is the Amount of exemption available u/ s 54F?

Exemption = Cost of new asset x Capital Gains / Net Consideration
Maximum Exemption is up to Capital Gains.

3.Can exemption can be claimed u/s 54 and 54F when capital gains from transfer of multiple properties are invested in a single residential property?

If other conditions as regards time limit etc. are fulfilled, exemption under section 54 is allowable where capital gains arising from sale of two residential houses are invested in a single residential house.

4. Whether exemption from capital gains is available if the I purchase two adjacent flats in the same building?

The Karnataka high court has given it decision in such case. It said that if both the flat is modified in such a way that it becomes single residential unit, the exemption would be available.

5. What is the Capital Gains Account Scheme (CGAS)?

If a taxpayer is unable to utilize the whole or part of the sales consideration for purchase/construction of new property till the due date of submission of ITR, then it should be deposited in the Capital Gains Deposit Account Scheme.Taxpayer can claim exemption of amount already spent on construction/purchase of property along with the amount deposited in CGAS.
If the amount deposited in the CGAS not utilized within the time limit mentioned, then it shall be treated as income of the last year in which 3 years expire.

6. Can NRI Claim exemption u/s 54F?

Yes, NRI can claim exemption u/s 54F provided the LTCA sold & house property purchased is situated in India.

1. I am an NRI. I have rental income from a flat that I own in India. I am employed in the US and I receive salary income in the US. What income should I offer in India?

Since you are an NRI, only the income that accrues to you in India will be taxable. You would not be taxed on your global income. Accordingly, you will have to pay taxes in India on the rental income from the flat situated in India. However, you will not be liable to pay any taxes on the salary income that you receive from the USA.

2. When should an NRI file his return of income in India?

An NRI, like any other individual taxpayer, must file his return of income in India if his gross total income received in India exceeds Rs 2.5lakhs for any given financial year.Further, the due date for filing return for an NRI i also 31 July of the assessment year.

3.I am an NRI aged 65 years. Do I have to file a return even if my gross total income is Rs 2.8 lakhs during a year from India?

The basic exemption of Rs 3 Lakhs and Rs 5 Lakhs is available only for resident senior citizens and resident super senior citizens. Hence, as an NRI, even if you are a senior citizen, themoment your income in India exceeds Rs 2.5 lakhs, you will be liable to file your return of income in India.

4. Should taxes be deducted when payments are being made to NRIs?

Specified payments in the nature of rent, professional or technical fees etc made to an NRI requires tax deduction at source by the individual making the payment.The individual must obtain a TAN for himself in order to deduct taxes at source Further, Form 15CA (to be filed by the person making the payment) and Form 15CB (to be obtained from a Chartered Accountant) are also required for making payments to non residents.

5. Will NRI be subject to capital gains tax if he sells the flat that he owns in India ?

Yes. You he will be liable for capital gains tax in India upon sale of his flat. Further, the purchaser himself must deduct taxes on the quantum of gains you make. The rate of tax deduction for a long term asset would be 20% while taxes at slab rates would be deducted at source if the asset is a short term asset.

6. What is your taxable income for the purpose of Indian Tax Laws: If you are a NON RESIDENT INDIAN

• Any income that is ‘earned’ in India is taxable for you in India.
• Your Income outside of India is not taxable in India.

7.How can NRI maintain NRI status?

An NRI can maintain NRE accounts with banks in India and the interest income from them is not taxable. But the account holder has to report to the bank within 30 days of coming back to India for permanent settlement.

8. What are the deductions allowed and not allowed to NRI?              

Deductions Allowed

• Life insurance premium payment
• Tuition fee payment
• Principal repayments on loan for the purchase of house property
• ULIPS or unit-linked insurance plan
• Home Loan Interest
• Deduction under Section 80D
• Deduction under Section 80E
• Deduction under Section 80G
• Deduction under Section 80TTA

Deductions Not Allowed

• Investment in PPF
• Investments made in NSCs
• Post Office 5 Year Deposit Scheme
• Senior Citizen Savings Scheme
• Section 80CCG, 80DD, 80DDB, 80U

9. What are the tax exemptions incomes for NRIs?

• Interest on NRE & FCNR(Foreign Currency Non- Repatriable) account
• Interest on government issued savings certificates, notified bonds
• Dividends from shares of domestic companies
• Long term capital gains from listed equity shares and equity- oriented mutual funds

Status of NRI

1. Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?

​​Form-16 is a certificate of TDS. In your case it will not apply. However, your employer can issue a salary statement.​

2.Is pension income taxed as salary income?

​Yes. However, pension received from the United Nations Organization is exempt.​​

3. Is Family pension taxed as salary income?

​No, it is taxable as income from other sources.​

4. What are allowances? Are all allowances taxable?

Allowances are fixed periodic amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. E.g., Tiffin allowance, transport allowance, uniform allowance, etc.
There are generally three types of allowances for the purpose of Income-tax Act - taxable allowances, fully exempted allowances and partially exempted allowances.​

5. Are retirement benefits like PF and Gratuity taxable?

​​In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PFreceipts are exempt from tax, if the same are received from a recognized PF after rendering continuous service of not less than 5 years.

6.Is leave encashment taxable as salary?

It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee. In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.​

7.During the year I had worked with three different employers and none of them deducted any tax from salary paid to me. If all these amounts are clubbed together, my income will exceed the basic exemption limit. Do I have to pay taxes on my own?

Yes, you will have to pay self-assessment tax and file the return of income.​

8.Are arrears of salary taxable?

​​​​Yes. However, the benefit of spread over of income to the years to which it relates to can be availed for lower incidence of tax. This is called as relief u/s 89 ​ of the Income-tax Act.​​

9.My income from let out house property is negative. Can I ask my employer to consider this loss against my salary income while computing the TDS on my salary?

​Yes, however, losses other than losses under the head ‘Income from house property’ cannot be set-off while determining the TDS from salary.​​

1. Who must apply for TAN?

Every person liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under section 194IA (*) can use PAN in place of TAN as such person is not required to obtain TAN.
(*) Section 194IA provides for deduction of taxat source from payment on transfer of certain immovable property other than agricultural land.

2. Why is it necessary to have TAN?

​​​​​As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. Section 203A also makes it mandatory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan, TDS/TCS certificates and other documents as may be prescribed. As per section 272BB, failure to apply for TAN or not quoting the TAN in the specified documents attracts a penalty of Rs. 10,000/-.

.3.Can an e-TDS return be filed without TAN or in case TAN hasnot been allotted?

Quoting of TAN is mandatory in TDS and TCS returns, whether filed in paper or electronic format. The returns, whether in paper or electronic format, will not be received in case TAN is not quoted.

4. What is the difference between PAN and TAN?

TAN is to be obtained by the person responsible to deduct tax, i.e., the deductor. In all the documents relating to TDS and all the correspondence with the Income-tax Department relating to TDS one has to quote his TAN.
PAN cannot be used for TAN; hence, the deductor has to obtain TAN, even if he holds PAN/p>

1. What is PAN?

​PAN stands for Permanent Account Number. PAN is a 10-digit unique alphanumeric number issued by the Income Tax Department. . It facilitates easy retrieval of information of PAN holder and matching of various investments, borrowings and other business activities of PAN holder.

2.Who must apply for PAN?

• ​​​​​​​Every non-individual resident persons and persons associated with them shall apply for PAN if the financial transaction entered into by them during the financial year exceeds Rs. 250,000.
• Every person if his total income or the total income of any other person in respect of which he is assessable during the year exceeds the maximum amount which is not chargeable to tax.
• Every person who is carrying on any business or profession whose total sale, turnover, or gross receipts are or is likely to exceed RS.5,00,000 in any year.
• Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory
• A charitable trust who is required to furnish return under Section 139(4A).

3. Transactions in which quoting of PAN is mandatory?

• Sale or purchase of a motor vehicle or vehicle other than two wheeled vehicles
• Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank.
• Making an application for issue of a credit or debit card.
• Opening of a demat account with a depository, participant, custodian of securities or any other person with SEBI
• Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against bill at any one time.
• Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
• Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units.
• Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it.
• Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
• Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a cooperative bank.
• 10A) Deposits of cash aggregating to more than Rs. 250,000 during the period of 09th November 2016 to 30th December 2016 with a banking company, cooperative bank or post office.
• Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts or pay orders or banker's cheques from a banking company or a co-operative bank.
• A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with - (i) a banking company or a co-operative bank (ii) a Post Office; (iii) a Nidhi referred to in section 406 of the Companies Act, 2013 or ) a non-banking financial company
• Payment in cash or by way of a bank draft or pay order or banker's cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution.
• Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
• A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction
• Sale or purchase, by any person, of shares of a company not listed in a recognized stock exchange for amount exceeding Rs. 1lakh per transaction.
• Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
• Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2lakh per transaction.

4. How to apply for PAN?

A person can apply for PAN by submitting the PAN application form (Form 49A/49AA) along with the related documents and prescribed fees at the PAN application center of UTIITSL or NSDL. An online application can also be made from the website of UTIITSL or NSDL.
The address, phone numbers, etc., of PAN application centers of UTIITSL or NSDL at which PAN application can be submitted can be obtained from :

• Website of Income Tax Department: www.incometaxindia.gov.in
• Website of UTIITSL :www.utiitsl.com
• Website of NSDL : www.tin-nsdl.com

6. Linking of PAN with Aadhar Number

The Government of India has made the linking of PAN (Permanent Account Number) with Aadhaar mandatory
For filing of income tax returns (ITR).The last date extended to 30th June, 2021 else PAN will become  inoperative.
Penalty for not complying with provisions relating to PAN or Aadhar:
The amount of penalty shall be Rs. 10,000 for each default in the following cases:

• If assessee fails to quote or intimate his PAN or Aadhaar or quotes or intimates invalid PAN or Aadhaar.
• If assessee fails to quote or authenticate his PAN or Aadhaar in specified transactions
• If receiver (i.e., banks, financial institution, etc.) of documents in respect of specified transactions fails to ensure that the PAN or Aadhaar are duly quoted and authenticated.

7. Can I file my return of income without quoting PAN?

It is mandatory to quote PAN on the return of income. Apart from return of income, PAN is also to be quoted in all challans for making payment of tax, correspondence with the Income Tax Department, etc.

8. Is it mandatory to intimate PAN to deductor i.e. person deducting tax?

In the absence of a valid PAN or Aadhaar, TDS can be charged at the rate of 20% or higher. Lower rates of TDS will not be applicable, if PAN is not provided.

Instant PAN

This facility can be used by an assessee only if the following conditions are fulfilled:

• He has never been allotted a PAN;
• His mobile number is linked with his Aadhaar number;
• His complete date of birth is available on the Aadhaar card; and
• He should not be a minor on the date of application for PAN