Business Tax Procedures

8/4/2019 Business Tax Procedures

1/36

Business Tax Procedures and Management


2/36

Advance Tax

Interest

TDS

Assessment


3/36

ADVANCE TAX

Under the provisions of advance tax , every income isliable for advance tax payment if the tax payable isRs.10000 or more.

Every assessee is liable to pay advance tax irrespective ofresidential status or even if the income is subject to TDS.

Hence an assessee has to estimate the current yearsincome to pay advance tax

An assessee who has opted for the scheme of computingbusiness income on a presumptive basis shall be

exempted from paying advance tax


4/36

Due dates for payment of advance tax

Assessee

Non-corporate Corporate

15th

June - upto 15%15th Sep upto 30% upto 45 %

15th Dec upto 60% upto 75%

15th Mar 100% 100%

I


5/36

Computation of advance tax payable

I Estimate total income for the yearII Claim deductions if any allowable

III For the net income compute tax

IV. Add surcharge and education cess to theadvance tax payable

V Deduct TDS if any deductible from theadvance tax payable

VI If the advance tax payable is Rs.10000 or morepay advance tax in installments on the due

dates


6/36

The following are the estimated income for the year 2011-12

A B & Co C Ltd(individual) ( firm) (company)

Salaries 380000 - -

House Property 3000 36000 (14000)

Business income - 298000 550000

STCG 16000 24000 67000

Other sources 13000 43000 38000

Deduction u/s 80 28000 2000 3000

Determine the amount of advance tax payable during 2011-

12.


7/36

Class excercises

1. ABC Ltd. estimates its income for the year 2011-12 as under:

Income from house property 100000

Income from business 400000

Interest on debentures of a listed company 200000

(TDS 10% )

The company is eligible to claim deduction u/s 80 to theextent of Rs.50000. Compute advance tax payable.

If the company made a LTCG of Rs.150000 on sale of itsassets on 10th Aug 11. What would be the amount of advance

tax payable in the subsequent instalments.


8/36

Advance tax payment payment in pursuance of AOs order

The AO can may pass an order for payment of advance tax if theassessee who has been earlier assessed to tax has not paid advancetax inspite of legal obligation

The AO would calculate the current years income as under :

- Total income of the last previous year which was assessed

or

- Total income returned by the assessee for any subsequent year

whichever is higher

If subsequent to passing an order but before the end of the relevantfinancial year the assessee has furnishes a return/ assessment of anylater year has been completed at a higher figure, then the AO can passa revised order.


9/36

Lower estimate by the assessee

On receipt of the notice, the assessee can submit his own estimate and pay

advance tax ( Intimation in Form 28A )

Higher estimate by the assessee

The assessee can also make a higher estimate and pay taxes accordingly. No

intimation is required.


10/36

INTEREST

Sec 234A : Interest for default in filing of return

Interest @ 1% p.m or part of the month on tax payablefrom day immediately following the due date upto the dateof furnishing the return or date of assessment u/s 144 ifno return has been furnished

Tax payable = Tax on assessed income Advance taxTDS


11/36

Determine the amount of interest u/s 234A

X X Ltd

Due date of filing the return 30.06.10 30.09.10

Actual date of filing return 02.02.11 10.12.10

Date of completion of assessment 15.02.11 15.04.11

Income declared 350000 350000

Income assessed 352000 360000

Advance tax paid 50000 75000TDS 5000 10000


12/36

Sec 234B For default in payment of advance tax

1. When advance tax is not paid :

Interest @ 1% p.m or part of the month on the assessed taxfrom April 1 of the A.Y to the date of assessment

2. When advance tax paid is less than 90% of assessed tax

Interest @ 1% p.m or part of the month on the assessed taxminus advance tax paidfrom April 1 of the A.Y to the date ofassessment

Note :

1. If the assessee has paid tax before the assessment then

- - upto the date of tax payment interest will be calculated asabove

- - from the date of payment ,interest shall be computed on theshortfall [ assessed tax (advance tax paid +tax paid on selfassessment )]


13/36

Interest u/s 234C For deferment in payment of advance tax

Noncorporates

Due date Default Interest payable on Period

15.09.10 Tax paid < 30% (a-b) 30%(a-b)c 3 mths

15.12.10 Tax paid < 60% (a-b) 60%(a-b)-d 3 mths

15.03.11 Tax paid < 100% (a-b) 100%(a-b)-e 1 month

Corporates

15.06.10 Tax paid < 12% (a-b) 15% (a-b)c 3 mths

15.09.10 Tax paid < 36% (a-b) 45%(a-b)d 3 mths

15.12.10 Tax paid < 75% (a-b) 75%(a-b)- e 3 mths

15.03.11 Tax paid < 100% (a-b) 100%(a-b)-f 1 month

a = Tax on total income declared in return

b= TDS

c,d,e advance tax actually paid by the due dates

No interest shall be charged if the shortfall in payment of advance tax is due to capitalgains / winning from lotteries/game shows etc.


14/36

X Ltd. furnishes the following data :

Income declared in return 520000Income assessed 575000

Date of assessment 15.04.11

Advance tax paid

15.06.10 4000

15.09.10 10000

15.12.10 2500015.03.11 50000 89000

TDS 10520

Compute interest u/s 234 B and 234C


15/36

X Ltd furnishes the following data for the year 2010-11

Business income 200000

LTCG 50000

Interest on securities 60000

Details of advance tax paid

15.09.10 12000

15.12.10 12000

15.03.11 24000

The company files the return on 15.12.11. Compute taxand interest payable.


16/36

A company has made the following payments of advancetax during the financial year 2010-11.

15.09.10 600000

15.12.10 1400000

15.03.11 500000

The income returned by the company is Rs.80 lakhs asbusiness income and Rs.1000000 LTCG on sale ofproperty effected on 1.03.11. Assuming that the companyfiled the return on 30.11.11. Compute the interest payableu/s 234 A/B/C and the amount payable as self assessmenttax.


17/36

Sec 234D : Interest on excess refund

If an assessee had claimed refund in his return of income and also receivedand subsequently on regular assessment , a higher income is assessed theninterest has to be paid on excess refund @ 0.5 % p.m or part of the month fromthe date of refund to the date of regular assessment

Sec 220 (2) : Interest on late payment of income tax

If the assessee has failed to make payment of any tax ( other than advance tax) specified in a demand notice within 30 days then he is liable to pay interest @

1%. Per month or part of the month.However the Chief commissioner or Commissioner may waive such interest incertain circumstances.

Sec 201 (1A ) For failure to deduct and pay tax at source

Interest is payable @ 12% p.a on the amount of such tax from the due dates till

the date of actual payment of tax.


18/36

Sec 244 A Interest payable to the

assessee

Interest is payable by the Govt. on any refund oftax paid ( advance tax, TDS , self assessmenttax ) @ 0.5% p.m or part of the month from thefirst day of A.Y / date of Assessment order tothe date of signing the refund order


19/36

RETURNOF INCOMEAND ASSESSMENT

Who has to file a return Sec 139

Company / Firm Any income or lossA person other than company or firm If the gross total

income beforeclaiming deduction

exceed exemptionlimit


20/36

Return forms

ITR -1 Individuals having income from salaries

ITR-2 Individual/HUF not having income from business

ITR-3 Partnership firms

ITR -4 Individuals / HUF having income from business

ITR -5 AOPs / BOI

ITR-6 Companies

ITR -7 Persons claiming exemption u/s 10/11

ITR V Acknowledgement where return is filed without digitalsignature


21/36

Return of loss : A return of loss can also be filed within thedue dates . Certain losses cannot be carried forward if such

return is not submitted in time.

Belated return : If the return is not filed within the due datesor within the time of notice given , it may be filed at any time

before the end of 1 year from the end of the A.Y( before theassessment is made ). The assessee will be liable for interestand penalty

Revised return : An assessee can file a revised return if anyerror or omission is discovered after the filing of the return. Itshould be filed within I year from the A.Y or before completionof assessment whichever is earlier. A belated return cannot berevised


22/36

Defective or incomplete return

If the AO finds that a return is defective or incomplete

then he may intimate the defect to the assessee. Theassessee has to rectify it within 15 days ( time limit maybe extended by the AO). If the defective return is notrectified , the AO will consider the return as invalid.


23/36

Assessment

1. Self Assessment (sec 140A)

2. Inquiry before Assessment (Sec 142/142A): The AO maypass an order for :

- submitting the return

- produce documents and records

- furnishing in writing information on such points as he mayrequire

- Make inquiry for the purpose of obtaining full information

- give direction for audit

- refer to Valuation officer

3. Summary Assessment ( Sec 143(1)) The AO can complete anassessment without passing an order on the basis of returnfiled by the assessee. In such case an intimation may be givento the assessee if there is any interest or tax due or if anyrefund is allowable to the assessee

Scrutiny Assessment Sec 143(3)


24/36

Scrutiny Assessment Sec 143(3)The scheme of scrutiny is applicable if the AO considers it necessary to ensure that theassessee has overstated loss or understated tax

In such a case a notice may be served on the assessee to produce any evidence . Such noticeshould be served within 1 year from the end of the month in which the return is filed.

Best judgement assessment ( Sec144)

An AO can make an assessment of total income or loss based on information available withhim if the assessee has not filed a return or the AO is nor satisfied about the correctness of theaccounts or if the assessee fails to comply with the notice given earlier

Such assessment can be made only after giving the assessee a reasonable opportunity of

being heard.

Reassessment

if the AO has reasons to believe that an income has escaped assessment , he may assess/reassess that income.

e.g No return has been furnished even though income> exemption limit or

return is furnished but the income is understated or underassessed.

The AO has to issue a notice in writing to the assessee.


25/36

Rectification of mistake

An income tax authority may rectify any mistake which isapparent from record and amend the Assessment order orintimation .

A mistake is one which is obvious from records and does not

need an argument or explanation.

e.g error of law or fact, clerical error, error in determining WDVetc.


26/36

Time limit for completion of assessment :

All assessment except reassessment : 2 years fromthe end of A.Y

Reassessment : 1 year from the end of the financialyear in which notice was served.


27/36

Obligation to furnish Annual Information return ( 285 BA )

1. Banking company Cash deposits AggregatingRs.10 lacs or more in the SB

A/c of a person

2. A company issuing credit card Payment made by anyperson aggregating

Rs.200000 or more

3. A Mutual Fund co. Receipts from any personaggregating Rs.200000 or more

4 A company or Institution Receipt from a personamount issuing bonds/debentures of Rs.500000 or more

5. A company issuing shares Receipt from any person anamount of Rs.100000 or more


28/36

Appeals and Revision

I Against AO s order - Commissioner of Income Tax ( Appeals )

II Against CIT s order - Income Tax Appellate Tribunal ( ITAT )

III Against Tribunals order High Court

IV Against HC order Supreme Court

The order of the Supreme Court is final and is referred to as case law.


29/36

Income Tax Authorities

1. The Central Board of Direct Taxes2. Director General of IT / Chief Commissioner of IT

3. Directors of IT / Commissioner of IT

4. Commissioner of Income Tax ( Appeals )

5. Addnl. Directors / Addnl Commissioners ( IT /Appeals )

6. Joint Directors/ Joint Commissioners

7. Deputy directors / Deputy Commissioners

8. Asstt. Directors / Asstt. Commissioners

9. Income Tax Officers

10. Tax recovery Officers

11. Inspectors of Income Tax


30/36

A receives a salary of Rs.400000 p.a. The employer deductsRs.1200 p.m as PF and the appropriate TDS. During the yearA invests Rs.50000 in NSC, Rs.10000 is paid as life insurance

premium. A also has a housing loan on which he paysRs.60000 annually ( Rs.20000 towards principal repaymentand Rs.40000 as interest ).

A declares all the above details to his employer. A alsoreceives the following income during the year.

Interest on debentures Rs.12000

Dividend on equity shares Rs.25000Long term capital gain on sale of jewellery Rs.15000

Prepare an income and tax statement for A for the A.Y 2010-

11


31/36

Tax Deducted at Source

Under TDS provisions , persons responsible formaking certain payments are responsible to deducttax and deposit it with the Govt.


32/36

Tax deducted at Source

TDS is applicable on the following payments

1. Salaries Normal tax rates applicable to individuals

2. Interest on securities 10% + e.cess

( in case of debentures interest TDS applicable only if theamount exceeds Rs.2500 )

3. Dividends 10% + e.cess

4. Other interest ( bank interest etc ) ( > Rs.10000) 10%

( interest on Post office savings schemes, interest paidby Govt.,interest paid by a infrastructure capital companyis not subject to TDS )

5. Winnings from lotteries , crossword puzzles etc ( >Rs.10000) 30%+ e.cess


33/36

6. Winnings from horse races ( > Rs.5000) 30% + e.cess

7. Payment to contractors or sub contractors

1% + e.cess if paid to individuals2% + e.cess if paid to other persons

TDS is applicable only if a single payment exceeds

Rs.30000 or Rs.75000 aggregate in the financial year.

TDS is not applicable on payment to transport operators ifthey produce PAN.

8. Insurance commission ( > Rs.20000 ) 10% + e.cess9. Payment to non resident sportsmen or sports associations

- 10% + e.cess

10. 10.Repurchase of MF units 20% + e.cess


34/36

11. Commission on sale of lottery tickets ( > Rs.1000) 10% +e.cess

12. Commission or brokerage ( > Rs.5000) 10% +e.cess13. Rent ( > Rs.180000 ) 10% + e.cess ( 2% for machinery,

plant or equipment)

14.Fees for technical services ( > Rs.30000 in a year ) 10%

+e.cess15. Transfer of controlling interest in a foreign company having

assets in India 20% +e.cess

16 .LTCG on foreign currency bonds 10% + e.cess

17.Income of FIIs from securities 20% +e.cess


35/36

Individuals and HUF are liable to deduct tax on the followingpayments only if the turnover/gross receipts from abusiness or profession exceeds than following limits

Rs. 60 lacs in case of business

Rs.15 lacs in case of profession

Following payments are not subject to TDS as above:

Interest other than interest on securities

Rent

Commission and brokerage

Payment to contractors/sub contractors


36/36

No TDS is applicable on payment made to Government,RBI, Mutual fund

TDS certificate

For salaried persons Form 16 and form 12BAFor other Form 16A

Relief from TDS /TDS at lower rate

Form 13 to be submitted to Income Tax authorities

Form 15 G/15H to be submitted to payer of income

Form 15 G/H is applicable for interest , dividend, NSS

Documents

Business Tax Procedures