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Friday 28 April 2017

Presumptive Taxation for Professionals u/s 44ADA

If you are a freelancer, consultant or professional, you are luckier than your salaried friends in more ways than one. Not only are you your own boss, you can also get away with paying income tax on only half of your income. And that too, legally!
Section 44AD of Income Tax Act provides an option to businessmen to assess income as 8% of the turnover on presumptive basis. This is applicable to businesses with turnover of less than Rs.1 crore. This limit is raised to Rs.2 crore from financial year 2016-17. Similar section is now introduced for professionals from financial year 2016-17 Section 44ADA. Under this section professionals such as legal, medical, engineering or any of the profession as given in section 44AB are allowed to presume 50% of the gross receipts as net profit. This is applicable only to professional whose gross total receipts does not exceed Rs.50 lakhs.
The benefit by showing income under presumptive basis is the assessee is not required to maintain books of account, neither he is required to get account audited. However, if the assessee wants to show the income less than above then he can do so subject to maintenance of books of account and audit.
Specified profession includes Legal, Medical, Engineering, Architecture, Accountant, Technical consultancy, Interior decoration, Other notified professionals, Authorized representatives, Film Artists, Certain sports related persons o Company Secretaries and Information technology.

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Friday 21 April 2017

PFC Bonds eligible for claiming exemption u/s 54EC

Image result for pfcThe section allows a deduction in respect of long-term capital gains arising from sale/transfer of any long-term capital asset (like any immovable property, jewellery or shares) which was held for a period exceeding 3 years. The holding period should be one year in case of equity shares. Any profit arising from the sale of long term capital assets is called as long term capital gain and is chargeable to tax at the rate of 20%. However, you can save this tax if you invest the amount of capital gains in long term specified bonds as notified by the government under section 54EC for a minimum period of 3 years. In order to claim exemption from capital gains tax by investing in the bonds of PFC, REC or NHAI under sec 54EC, following conditions must be kept in mind:

The bonds should not be transferred or converted into money at any time within a period of 3 years from the date of its acquisition. Otherwise the capital gain so exempted will be chargeable to tax in the year in which such bonds are transferred or converted into money.
Any loan or advance taken on the security of such bonds is also not allowed. It is considered as conversion of such bonds into money.

Wednesday 12 April 2017

Get started with One Person Company

The revolutionary new concept of 'One Person Company' (OPC) has been introduced by the Companies Act, 2013. One Person Company is defined in Sub-Section 62 of Section 2 of The Companies Act, 2013, which reads as follows:
'One Person Company means a company which has only one member'
An OPC can be incorporated with only one shareholder, the same needs to appoint a nominee, both should be residents of India. On incorporation, OPC becomes active and comes in existence as long as the annual compliances are done on a regular basis. Otherwise, the OPC will become Dormant and is liable to be struck-off from the register after a period of time. On being struck off, the same can be revived for a period of upto 20 years. There is no statutory limit prescribed for a minimum contribution to start an OPC.
To get started Click Here. For more info contact

Thursday 6 April 2017

Guide to file your Tax Returns for FY 2016-17

The Income tax department has already notified the income tax return forms to be used for filing returns for FY 2016-17 or assessment year 2017-18. Income tax return forms for most categories of tax return filers have changed-some more some less. Although the last date to file for individuals is July 31, it helps to start work on your income tax return now so that one is not rushed at the last minute. Here is a step by step guide on how to do it. The income tax department through its website has provided an easy to use platform for users to pay taxes, file ITRs, cross-check TDS through TRACES, download forms, claim refunds, check status of dues, refunds, challans etc. However, a technologically-challenged tax-payer may find it difficult to use these services. 

Step 1. Collect TDS certificates, capital gains statements
Collect all the required documents such as your TDS certificates, which have to be mandatorily in TRACES format, from all deductors. You can also collect your, capital gains statement from mutual funds for redemption of units, if any, done, in the financial year 2016-17 etc. However, it is not mandatory to obtain these capital gains statements from your MFs. Most MFs provide it as an additional service for the redemption of units you held in their schemes in a particular FY. You can calculate your capital gains yourself or cross check the calculations sent by your MFs also. In case of digitally signed TDS certificates ensure that there is a check mark on the digital signature indicating it has been verified. Non-verified certificates will have a question mark over the digital signature. Cross check the TDS figure on the certificate with that shown as deducted from your income e.g. TDS figure on salary slip with the figure on the TDS certificate. Check whether deductor has deducted and deposited the tax with the government. TDS certificates are in Form 16 for salaried employees and Form 16A for other deductors.
Step 2. Download and check Form 26AS
Download your tax credit statement (Form 26AS) from TRACES and cross-check the amount of tax deducted with that mentioned in TDS certificates. You should be getting certificates for all TDS reflecting in your Form26AS and all the TDS from your income should reflect in Form26AS. You need to log into your e-filing account on the income tax e-filing website to download your Form26AS. You can also download it via net-banking wherever the bank provides for this.
Step 3. Get Form 26AS errors, if any, set right
In case of any difference in the TDS amount shown in Form 26AS and TDS certificates, take up the matter with the deductor (employer, or others, as the case may be) and request for rectification. It is advisable to keep track of all the TDS deducted during the financial year so as to avoid any discrepancies at return filing time.
Step 4. Compute total income for the financial year
Now compute your total income for the relevant financial year by adding income under all 5 heads and claiming all the relevant deductions, rebates and setting off the current year and brought forward losses. Make sure that you don't miss any income in computing your total income which is chargeable to tax. 
Step 5. Compute your tax liability
Compute your tax liability by applying the tax rates in force for the financial year for which you are calculating the tax as per the income slabs your income falls in. Most filers would be filing tax return for the financial year 2016-17 therefore the tax rates and corresponding income slabs for this FY would be applicable.
Step 6. Calculate final tax payable
Next, compute your final tax dues payable or refund of taxes. This is done by deducting the taxes that you have already paid for the year by way of-TDS, TCS, and Advance Tax from the tax liability computed above and adding interest payable under sections 234A, 234B, 234C, if any. Finally pay the final tax dues, if any. Tax can be paid physically via cheque or online using challan ITNS 280. Income tax payments made after 15th March of the financial year for which return is to be filed are called payment of self-assessment tax. The same should get reflected in your Form 26AS within 2-3 working days from the date of payment which you should cross check.
Step 7. File income tax return after all taxes are paid
(a)  Return filing deadline
Once you have paid your taxes, file the return. The deadline for filing individual tax returns ( except for those whose accounts are required to be audited as per section 44AB or those who are required to furnish the Transfer pricing report) is normally July 31 of the year immediately after the financial year for which the return is being filed.
(b)  Electronic return compulsory for certain categories
The return has to be filed electronically by every assessee except (i) if the assessee is an individual of age 80 years or more during the financial year for which the return is being filed and (ii) An Individual or HUF whose income doesn't exceed Rs 5 lakh and no refund is claimed.
(c)   Log-in to income tax e-filing website
To start filing the return, one has to login to income tax department's e-filing website with User ID, Password, Date of Birth and enter the Captcha Code. Once you login, you will see different tabs like "dashboard", "my Account" etc. 
Step 8. New users to register first
In case of new user - Register yourself with income tax site first. You need to choose your status (individual, chartered accountant, tax deductor etc.) and fill in your basic details like address, DOB, PAN to get registered. Only then you can login to e-filing.
Step 9. Choose the applicable form
After signing in, choose the form applicable to you for the purpose of filing return. Income tax department this year has made some changes in the ITR forms to make them simpler. Also, they have rationalized the ITR forms such as ITR-2, ITR-2A and ITR-3 have been rationalized as ITR -2.
Step 10. Filing online
In case Form ITR-1 or ITR-4 is applicable to you, then you can simply file your return online without any need to download the blank ITR forms and then upload the filled ones. 
Step 11. Aadhaar to be filled in ITRs
Remember to keep Aadhaar number handy while filing returns this year as it has become mandatory to mention the same in the ITR forms from July 1.
Step 12. Download forms
In case of other forms like ITR-2, ITR-3 and, you need to download the relevant form from the website (either in excel utility or Java utility). 
Step 13. Fill form and upload return
Once you have downloaded the relevant form, you need to fill in your personal details, income details and other details required in the form. After filling the form completely, the same is to be uploaded to the website and the return will be filed.
Step 14. E-filed return not valid without verification
E-filing of return (whether directly or after uploading the ITR-forms) is not valid without verification of the return so filed. Return once e-filed has to be verified by the user. 
Step 15. Verification of ITR
Verification of return can be done by any one of two modes i.e. e- verifications of ITR and Physical verification of ITR. E-verification methods include:
(i)) Making use of Internet Banking,
(ii) or by using the OTP sent on your mobile number after you have linked your Aadhaar with your account on the e-filing portal of the Income tax department or by generating the EVC.
(iii) Another method for verification of your ITR is through bank account-based validation system if you don't have Aadhaar number or internet banking facility.
(iv) Bank account-based validation
On the other hand, ITR can be verified physically as well. An acknowledgement or ITR-V is generated by the e-filing website immediately after you file/upload your return. To verify your return physically, you need to take a print-out of this acknowledgement, check and sign it and send it to the address mentioned on this acknowledgement.
Step 16. E-verification acknowledgement
Once you have received the acknowledgement of your e-verification, filing of your return is complete. You should receive an email confirming that your ITR-V has been received by the IT department i.e. your return stands verified. The email will be sent to the email you have registered in your e-filing account on the income tax department's e-filing website.
Step 17. IT department will process return after verification
After receiving the ITR-V, either through e-verification or physical, the Income tax department will process your return to ensure that all the details filed by you are correct as per the Income Tax Act and also cross check the details filed by you with other data available with it.

Once processed, the I-T department communicates the same. In case any discrepancies are found, they may ask you to explain further or correct the mistakes made while filing the original ITR.
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