Direct Taxes Code panel for status quo on LTCG tax, STT; wants DDT to go

Suggests rejig of 20% and 30% slabs of personal income tax.

The task force to overhaul the nearly 60-year-old Income Tax Act has recommended retaining the long-term capital gains (LTCG) tax and the securities transaction tax (STT), while abolishing the dividend distribution tax (DDT). The panel has instead suggested imposing tax on the person receiving dividends, sources in the know said.

The proposed move to withdraw the DDT would help encourage investments by addressing multiple taxation of income and bringing down the effective tax rate on companies, which is among the highest in the world, the sources said.

The eight-member panel on the direct taxes code (DTC), which submitted its report to Finance Minister Nirmala Sitharaman last week, has proposed a range of reforms for personal income tax by rationalising the highest tax slabs of 20 per cent and 30 per cent to improve compliance.

Although the market has been demanding the withdrawal of the LTCG tax reintroduced in last year’s Budget, the panel, led by Central Board of Direct Taxes Member Akhilesh Ranjan, is learnt to have taken a view that no preferential treatment must be given to any class of investors. The LTCG tax is levied on gains arising from the transfer of listed equity shares exceeding Rs 1,00,000, at 10 per cent.

Besides, the case for retaining the STT has been its simplicity of collection and assured revenues. The STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange.

It is levied at 0.1 per cent of turnover for delivery-based equity transactions, while for intra-day transactions, the STT for purchase is nil, and for sale, it is 0.025 per cent of the turnover.

“There is a strong case to do away with the DDT to improve investor sentiment. It is resulting in multiplicity of taxation for companies. Besides, foreign shareholders cannot avail of foreign tax credit as the DDT is not borne directly by them,” said a person in the know. “LTCG should continue to be levied as is the case today to promote parity.”

Business Standard

ITR 2019-20: A simple step-by-step guide to filing your income-tax return

Good news is that the income-tax department has extended the last date for filing ITR from July 31 to August 31, 2019.

Business Standard : Filing Income Tax Returns (ITR) can be a tedious task. Before filing ITR, you will need to create an e-filing account on the Income Tax website, incometaxindiaefiling.gov.in and register yourself. Registration will be completed after you click the activation link sent via e-mail and enter the provided one-time password (OTP) received on your mobile. Click on 'Registered User' if you have already registered yourself on the website.

Important note: The income-tax department has extended last date of filing ITR, which is now August 31.

Here's a step-by-step guide to filing Income Tax Returns (ITR):

A. Keep essential documents with you

Collect documents such as Form 16, salary slips, and interest certificates and Form 26AS. Keeping them handy will help you compute your gross taxable income and will provide you with the details of tax deducted at source (TDS) from your income in 2018-19.

B. Get Form 26AS: You can download Form 26AS from the TRACES website. To download it, login to your account on the e-filing website, click on 'My Account' tab and select 'View Form 26AS'.

C. Calculate total income for the financial year

Once you have verified all the taxes deducted from your income, you have to calculate the total income chargeable to tax. Total income is computed by adding income from five different heads and claiming all the relevant deductions allowed under the Income-tax Act and setting off losses, if any. In addition to that, you are required to provide source-wise bifurcation of the incomes taxable under the head 'Income from other sources'.

D. Calculate tax liability: Compute tax liability by applying tax rates according to your income tax slab.

E. Compute final tax payable: Now that you have calculated your tax liability, minus taxes that have already been paid for (through TCS, TDS, Advance Tax). Add interest, if any, payable under sections 234A, 234B and 234C.

What are TDS provisions, exemption thresholds and claim of credit?

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned.

Business Standard : Tax Deducted at Source (TDS) was introduced by the government to crack down on the tax evaders. TDS is basically collecting tax at source. TDS can also be considered a prepayment of tax. As per the TDS concept, if the payment exceeds a defined threshold, then a company or a person making the payment (deductor) must deduct tax while making a payment. The deductor must then deposit the tax deducted into the account of the central government on behalf of the recipient of income. TDS is applicable at various rates as specified by the Income Tax Department. The person from whose payment tax is being deducted (deductee) is issued a TDS certificate by the deductor.

TDS Provisions

The person receiving income (like salaried individuals) faces TDS in the form of a tax deducted salary paid to them. TDS laws have given the authority to the payee or employer, to deduct tax prior to making the full payment to the employee.

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned. Any TDS deduction also gets mapped to Form 26AS.

TDS Exemption Threshold

Tax has to be deducted by the deductor at the rates (specified below) if the amount payable is more than the threshold limit as given in the following table, the below rates are applicable for FY 2018-19:

There have been changes to the threshold in some the aforementioned section applicable from the FY 2019-20 onwards. For instance,

1. Under section 194A, the threshold of interest earned on bank/post office deposits has been raised from Rs 10,000 to Rs 40,000.

2. Tax deduction limit on rent under section 194I has also been increased from Rs 1,80,000 to Rs 2,40,000.

Claiming TDS Credit

A TDS deductor must issue TDS certificates to the deductee. This includes banks and employers. For instance, employers issue Form 16 to their employees annually, whereas a bank provides Form 16A quarterly to the deductees whose tax was deducted at source.

The TDS certificate states how much tax was deducted as TDS along with the income received from the employer/ deductor. You can view and download your Form 26AS by logging into TRACES through your PAN.

A step-by-step guide to filling salary details in your income tax return

ITR-1 can be used to report income from salary, one house property, income from other sources, and agricultural income of up to Rs.5,000.

Business Standard : Salaried individuals can file income tax returns (ITR) using the forms ITR-1 or ITR-2. ITR-1 applies to individual resident taxpayers with a total income of up to Rs 50 lakhs. Whereas, ITR-2 applies to other individual taxpayers who do not have income from business or profession.

ITR-1 can be used to report income from salary, one house property, income from other sources, and agricultural income of up to Rs.5,000. The form ITR-2 can be filed by individuals having income from more than one house property, capital gains, holding directorship in any company, or unlisted equity shares.

The salary TDS certificate in Form 16 has been revised to provide for more detailed information on the various tax-exempt allowances and deductions provided under the income tax law. Part B of Form 16 has been revised to provide for details of the various exemptions and deductions allowed under the income tax law.

Filling up your ITR:

ITR-1

Taxpayers would have to fill in aggregate values of the broad components of salary:

Salary

Perquisites

Profits in place of salary

Furthermore, a complete break-up would need to be provided of all allowances exempt under section 10. For example:

House rent allowance

Leave travel allowance

Gratuity

Similarly, each of the deductions allowed under chapter VI-A from section 80C to 80U must be reported separately. For example:

Life insurance premium, tuition fees for children, and PPF investment under section 80C

Medical insurance premium under section 80D

Donations under section 80D

Eight common mistakes to avoid while filing your GSTR-9 return

While the Government is going to be extra vigilant to flag defaulting filers, taxpayers need to be cautious to avoid making any errors, as there is no way to amend the GSTR-9 return once filed.

Business Standard : There’s less than a month to go for the deadline to file the first ever annual GST return - form GSTR-9. While the Government is going to be extra vigilant to flag defaulting filers, taxpayers need to be cautious to avoid making any errors, as there is no way to amend the GSTR-9 return once filed.

So what are some of the mistakes that taxpayers can avoid while filing their GSTR-9 return?

1. Not filing your annual GST return on time

In the case of GSTR-9, the Government has already clarified that no further extensions will be given. Taxpayers should take note of this and file their GST returns well before the deadline as this could save this not only interest and penalties, but also the issue of a demand notice in cases where the GST return has not been filed.

2. Not ensuring a separate GSTR-9 return is filed for every State/Union Territory

GST returns are filed on the basis of a GSTIN held by a business. Businesses having operations in multiple States/UTs need to file a separate GSTR-9 annual return for each State/UT, and not for the entire company/business as a whole.

3. Reporting April-June 2017 transactions while filing GSTR-9

GST was introduced in India in July 2017, which means the first year of filing the annual return form GSTR-9 will only be for 9 months and not for the entire year. Taxpayers need to be extremely careful while reporting transactions for FY 17-18 as only data for the 9-month period i.e July 2017 to March 2018 needs to be reported.

4. Mismatch of filed data in monthly and quarterly returns

Taxpayers should ensure that all monthly and quarterly filed returns match with the data reported in the GSTR-9. Mismatch of data could be one of the primary causes of getting a demand notice at a later date from the GST department. While the due date for making amendments to data of FY 17-18 has passed, taxpayers can still disclose any additional tax liability in the GSTR-9 return.The same can be paid in form DRC-03.

5. Not maintaining proper documentation

Before filing the annual return, it is the duty of the taxpayer to reconcile, verify and report only accurate information. In addition to this, the taxpayer should ensure that there is substantial documentary proof of all data that is reported in the return, in order to avoid unnecessary hassles at a later date.

Pay high income tax? Govt may call you to have tea with the PM or FM

The idea is to encourage taxpayers to willingly pay more.

In a rather unconventional plan, the Ministry of Finance has decided to reward India's top income tax payers by inviting them to tea with the prime minister or the finance minister.

The idea is to encourage taxpayers to willingly pay more, according to a report published in Livemint. The scheme is likely to figure in Modi's government's first Budget session, after being re-elected in the recently conducted Lok Sabha elections. Along with the privilege of having tea, the taxpayers will also get other non-monetary incentives.

Government data shows that 1,053 individuals with incomes of Rs 5 crore or more contributed over Rs 12,000 crore in personal income tax in assessment year 2017-18.

Currently, the income tax department issues certificates of appreciation to those who pay their taxes diligently.

The plan to honour top taxpayers comes amid the government's need to meet the fiscal deficit target and the revenue department's need to find additional resources for welfare schemes.

Direct tax receipts for the year ended March 31 missed the government’s revised target of Rs 12 trillion. At the close of the fiscal year 2018-19, direct tax collection touched Rs 11.5 trillion, leaving a gap of Rs 50,000 crore against the revised revenue target of Rs 12 trillion.

An expert committee on revamping the Income Tax Act is expected to submit its report by the end of July.

Tax bracket

At present, individuals who earn between Rs 50 lakh and Rs 1 crore a year pay a surcharge of 10% and those with incomes above Rs 1 crore pay a 15% surcharge on their taxable income. Businesses, too, pay surcharge on incomes above Rs 1 crore.

Domestic companies with incomes in the range of Rs 1-10 crore, a 7% surcharge is applicable

Surcharge goes up to 12% for domestic companies and 5% for foreign companies with incomes above Rs 10 crore.

Business Standard

Tax saving tips: Invest in real estate and save tax on LTCG

Taxpayers can save the taxes on the gains by availing the benefit of tax exemptions allowed under the Indian tax laws.

Investments in real estate are borne out of savings made out several years of earnings. These investments have both monetary value and emotional value for investors. 

Individuals buy and sell real estate to reinvest in upcoming real estate projects, to meet growing family needs, to move to another location of choice etc. Since real estate investment involves a large amount of money, the sale of property results in large gains. Tax may have to be paid on these gains unless they have been invested. Let’s find out how to save tax on sale of a property.

Taxpayers can save the taxes on the gains by availing the benefit of tax exemptions allowed under the Indian tax laws. The law allows a taxpayer to invest in real estate and avail the benefit of exemptions on taxable gains realised on the sale of assets or real estate.

A.Tax saving exemptions:

I.Investment in real estate upon exit from a real estate property

Individuals who have earned gains upon exit of a residential house and wish to reinvest in another residential house can avail of an exemption from taxation of the capital gains.

For example:

Mr A sells his residential house on 5th April 2018 for Rs 50,00,000. Mr A had bought the house for Rs 20,00,000 on 25th March 2013. With the proceeds of the house, Mr A purchases a new residential house for Rs 60,00,000.

To claim this exemption the property which is sold should have held by a taxpayer for more than 2 years.

The above exemption is now extended w.e.f 1 April 2019 to investment in 2 residential properties (once in a lifetime benefit), the one condition being that the gains are not above 2 crore rupees.

II.Investment in real estate upon the sale of any other asset

Individuals who have earned gains upon sale of any other asset and desire to invest in a residential house can avail an exemption from taxation of the capital gains. Other assets would include land, gold etc.

Business Standard

Here's all you need to know about ITR 1, 2 and 3 for FY 2018-19

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return.

The income tax return forms have been notified for the tax filings due for AY 2019-20. The due date for filing the income tax returns for FY 2018-19 is 31 July 2019. The returns require some additional and detailed disclosures in comparison to the income tax returns of earlier years.

Taxpayers need to be aware of the key changes that would impact their tax filings.

Keep Reading : Business Standard

Form ITR-1:

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return. The form ITR-1 can be filed for reporting income from salary, one house property, income from other sources and agricultural income up to Rs 5,000.

Taxpayers have to report the gross salary under income from salary i.e., salary, perquisites and profits in lieu of salary. The exempt allowances have to be disclosed allowance-wise and deducted from gross salary e.g., if a portion of the HRA has been claimed as exempt, it’s amount should be separately reported. For income earned from other sources, a taxpayer has to also provide detailed break-up of incomes e.g, Interest income from savings or fixed deposits etc.

Form ITR-2:

ITR-2 can be used by taxpayers who are individuals and Hindu Undivided Families (HUFs) to report all types of income other than income from business or profession.

Resident individuals who have total income above Rs 50 Lakh have to use ITR-2. Also, a taxpayer who is a non-resident or a Director in any company or has invested in unlisted equities at any time during the financial year has to file the returns in ITR-2 even if their income is less than Rs 50 Lakh. Such taxpayers have to disclose information on their Directorships in various companies and details of their investment in unlisted equity shares.

In ITR-2, in reporting the income from salary, taxpayers need to provide a complete break-up of the details of various components of salary. The specifications of the amounts falling under salary, perquisites and profits in lieu of salary have to be mentioned therein. Taxpayers would be able to draw this information from the annexure to Form 16 provided by the employer.

Also, an employee earning income from more than one employer during a financial year has to provide the complete salary details (as above) for each employer.

In making the disclosure under ‘residential status’, taxpayer has to furnish the details of days of stay in India in the previous year, during the preceding four years etc.

Income Tax dept revises Form 16: Here's all you need to know

The amended form will come into effect from May 12, 2019. This means the income tax returns for financial year 2018-19 will have to be filed on the basis of revised Form 16.

The Income Tax department has revised Form 16 by adding various details, including income from house property and remuneration received from other employers, thereby making it more comprehensive to help check tax avoidance.

The amended form will come into effect from May 12, 2019. This means the income tax returns for financial year 2018-19 will have to be filed on the basis of revised Form 16. Form 16 is a certificate issued by employers, giving details of employees' TDS (tax deducted at source) usually by mid June and is used in filing I-T returns.

Keep Reading : Business Standard

Here's the revised Form 16

form 16, income tax Click on image to see the revised Form 16

The move is aimed at stricter scrutiny of claims made by assessees to check tax avoidance or evasion.

The Income-tax Act, 1961 requires every employer to issue a certificate giving details of salary along with the tax deducted at source (TDS) of each its employee in Form 16.

It will also include segregated information regarding deductions under various tax saving schemes, investments in tax savings instruments, different allowances received by the employee as well as income from other sources.

Among other things, the revised Form 16 will also include details of deductions in respect of interest on deposits in savings account, and rebates and surcharge, wherever applicable.

The I-T department has already notified income tax return forms for fiscal 2018-19. Salaried class and those who do not have to get their accounts audited, will have to file their ITRs by July 31 this year.

Meanwhile, the income tax department has also modified Form 24Q, which is furnished by employer to the tax department. It will include additional details like Permanent Account Number (PAN) of non-institutional entities from whom the employee has taken loan for buying or constructing housing property.

Nangia Advisors (Andersen Global) Director Sanjoli Maheshwari told news agency IANS that the Form 16 and Form 24Q have been amended with an intent to make them more informative. The same has been done in order to bring the Forms in parity with latest changes made in ITR Forms such as disclosure of standard deduction and exemptions claimed under section 10.

"Earlier, where the disclosure of various deductions were mentioned in a consolidated manner, ranging from 80C, 80CCD, 80E, 80G would now be required to be disclosed separately. These specific disclosures would provide ease to the tax authorities in understanding the various components of income of the taxpayer and thereby, facilitating the conduct of scrutiny more precisely," Maheshwari said.

New ITR forms decoded: Know the changes and how to file returns with ease

Aadhaar and PAN must be linked for those who are eligible for an aadhaar.

Business Standard : The new Income Tax Return (ITR) forms were notified recently. As per the new forms, the taxpayer will have to provide additional details such as days of residency in India, holdings in unlisted shares and details of the buyer(s) of property in case of capital gains earned by a seller on the sale of immovable property.

Changes in ITR-1 form

ITR-1 form is applicable to resident individuals, except for the director of a company or the holders of unlisted equity shares. Total income must not exceed Rs 50 lakh. An additional row has been provided for claiming a standard deduction of Rs 40,000 for FY 2018-19.

The taxpayer is also required to furnish income-wise details, like interest income from savings account, bank deposits, income tax refund, family pension income and others, under ‘Income from other sources’ column of new ITR-1. If there are allowances, exempted from tax partially or fully, then their amount should be mentioned separately in ITR-1.

Changes in ITR-2 form

Individuals and Hindu Undivided Families (HUFs) who do not have income from profits and gains from business or profession can file their returns with ITR-2 form.

As per the newly notified ITR-2 form, taxpayers will be required to specify their residential status of the FY 2018-19. An individual can be considered as a resident, ordinary resident or non-resident in the financial year for income tax purposes. Detailed information regarding days present in India must be provided to satisfy residential status.

Additionally, in the column for 80G the amount must be segregated into cash and other modes of contribution.

Changes in ITR-4 form

Taxpayers with a cumulative income of up to Rs 50 lakh and those who are Resident, or Ordinarily resident of India can file ITR-4 form. Directors or those who held unlisted equity shares at any time during the financial year 2018-19 can no longer file returns with ITR-4 form; they have to file ITR 3 form.

The taxpayers having a business of plying, hiring and leasing goods carriages and have opted for presumptive taxation scheme (Section 44AE) will now have to provide details, such as registration no. of goods carriage, whether owned/leased/hired, tonnage capacity of goods carriage (in MT) etc.in new ITR-4.

88 lakh taxpayers didn't file returns in demonetisation year: Report

There are several reasons that could have led to the spike in stop filers. The two main reasons could be - job loss and drop in income.

Income-tax returns (ITRs) have seen a surge post demonetisation and GST introduction, and the government claims these numbers suggest a surge in tax compliance in the country. However, according to Indian Express as many as 8.80 million taxpayers turned out to be 'stop filers' - those who did not file tax returns in a given year despite doing so in previous years- in the financial year 2016-17 - the year Prime Minister Narendra Modi demonetised high-value currency notes.

(Business Standard)

Records accessed by The Indian Express reveal a massive spike in the number of “stop filers” in the same year, reversing a four-year trend. In 2016-17, the number of stop filers jumped 10-fold to 8.80 million from 856,000 in 2015-16, the highest increase since 2000-2001.

Who are 'stop filers'?

Stop filers are individuals who filed returns previously but didn't do so in the current year. They do not include taxpayers who have passed away or whose PAN cards have been cancelled or surrendered.

Here's what the latest report on 'stop filers' reveals

In 2013 the number of stop filers was 3.75 million. Since then there was a continuous slide in the number of stop filers. It slipped to 2.70 million in 2014, 1.63 in fiscal 2015 and 856,000 in fiscal 2016.

Records show that the trends reversed in 2017-2018. The number of stop filers jumped to 8.80 million, highest in almost a decade.

Reasons behind the spike in stop filers in 2017-2018

There are several reasons that could have led to the spike in stop filers. The two main reasons could be

— job loss

— drop in income

The Indian Express quoted officials as saying that the number may have increased because of a fall in economic activity. “Typically, the number of stop filers reflects a compliance and enforcement gap, which the tax administration fails to enforce,” said an official. “But this huge increase in stop filers for 2016-’17 cannot be attributed to sudden changes in compliance behaviour. The spike could be due to a fall in income or loss of jobs during the year.”