Publisher:SECTION 80 IAC- TAX BENEFITS UNDER INCOME TAX ACT, 1961
Dec 12,2023
Tax Benefits of Section 80-IAC Under The Income Tax Act, 1961
In the dynamic landscape of India's start-up ecosystem, the Government's initiatives often serve as catalysts for growth and innovation. Section 80-IAC of the Income Tax Act, 1961, among these provisions, emerges as a pivotal mechanism enabling recognized start-ups to claim substantial tax exemptions and bolster their financial footing. Let's delve deeper into the contours of this provision and the process involved in leveraging its benefits.
What is Section 80-IAC?
Section 80-IAC represents a cornerstone for eligible start-ups recognized by the Department for Promotion of Industry and Internal Trade -DPIIT to achieve significant tax exemptions. Instituted on April 1, 2017, this provision facilitates a 100% tax deduction for three consecutive profitable years, acting as a vital incentive for start-ups within the Indian entrepreneurial landscape.
What is the Eligibility Criteria?
Claiming the 80-IAC deduction necessitates adherence to specific eligibility criteria:
- Possession of a DPIIT certificate
- The entity should be a Private Limited Company (PLC) or Limited Liability Partnership (LLP)
- Incorporation after April 1, 2016
- Eligibility to claim deductions for three out of the initial five years post-incorporation
- Origination as an independent entity, not stemming from a split or reconstruction of an existing business
What is the application Process?
Leveraging the benefits of Section 80-IAC involves a systematic application procedure:
1. Start-up India Portal Login
Initiate the process by creating a Start-up India login and applying for the DPIIT recognition certificate via the Start-up India registration process.
2. Form Submission
Within the portal, access the 'Claim Tax Exemption' section and furnish the required details:
- Start-up name
- Date of incorporation
- Incorporation/registration number
- Business address and location
- Nature of business (LLP or PLC)
- DIPP number
- Contact details (phone number, email ID, and PAN number)
3. Document Submission
Alongside the form, submit vital documents in PDF format:
- Memorandum of Association (for PLC) or Limited Liability Partnership Deed (for LLP)
- Board Resolution (if applicable)
- Certified balance sheet and Profit and Loss statements by a Chartered Accountant (CA)
- Financial statements and Income Tax Returns for the past three years or since incorporation
- Link to a video pitch of the start-up and a pitch deck in PDF format
Conclusion:
Post-submission, the DPIIT evaluates the application and provided documents, extending an outcome within a timeline averaging between 3 to 9 months. During this period, monitoring the application progress through the Start-up India portal's dashboard becomes crucial.
Section 80-IAC of the Income Tax Act, 1961, stands as a testament to the government's commitment to fostering the growth of recognised start-ups by reducing their tax liabilities. Navigating the procedural intricacies empowers these entrepreneurial ventures, providing them a supportive environment to thrive and innovate within India's rising start-up landscape.
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Publisher:ADVANCE TAX: APPLICABILITY, DUE DATES AND PROCEDURE | ACADEMY TAX4WEALTH
Jan 31,2024
Advance Tax: Applicability, Due Dates and Procedure
Advance tax, often overlooked or misunderstood, is a crucial component of responsible financial management. Rather than facing a hefty lump sum payment at the end of the fiscal year, advance tax allows individuals and businesses to contribute towards their tax liability throughout the year proactively. In simpler terms, it's the tax you pay as you earn, spread across several instalments, as mandated by the income tax department.A. Who Should Consider Advance Tax?Advance tax is a requirement for various segments of taxpayers, encompassing salaried individuals, freelancers, and businesses alike. If your total tax liability exceeds Rs 10,000 in a financial year, you must pay advance tax. This rule applies uniformly to all taxpayers, irrespective of their professional status.However, there's an exception for senior citizens. Individuals aged 60 years or more, who do not operate a business, are exempt from paying advance tax. This means that only senior citizens with business income are mandated to fulfil their advance tax obligations.B. Special Considerations for Businesses and Professionals :For businesses operating under the presumptive taxation scheme outlined in section 44AD, the entire advance tax amount must be paid in a single instalment on or before 15 March. Alternatively, businesses also have the flexibility to settle their entire tax dues by 31 March.Independent professionals falling under the presumptive scheme defined in section 44ADA, such as doctors, lawyers, architects, etc., share a similar obligation. They are required to remit their entire advance tax liability in a single instalment on or before 15 March, with the option to complete the payment by 31 March.Understanding and complying with advanced tax regulations is not just a legal obligation; it's a strategic move towards efficient financial planning. By embracing the concept of paying taxes as you earn, individuals and businesses can avoid the financial strain associated with a lumpsum payment at the year-end and foster a more proactive approach to managing their financial responsibilities. So, whether you're a salaried employee, a freelancer, or a seasoned professional, incorporating advance tax into your financial strategy is a wise step towards fiscal prudence and peace of mind.C. Advance Tax Due Dates for FY 2023-24 :1. For both individual and corporate taxpayers:✅ On or before 15th June - 15% of the total advance tax amount is due.✅ On or before 15th September - 45% of the advance tax, minus any advance tax already paid, is required.✅ On or before 15th December - 75% of the advance tax, reduced by the advance tax already paid, is to be paid.✅ On or before 15th March - The remaining 100% of the advance tax, adjusted for any advance tax already paid, is due.2. For taxpayers who have chosen the Presumptive Taxation Scheme under sections 44AD & 44ADA for Business Income:✅ On or before 15th March - The entire 100% of the advance tax amount is required. D. Process of Advance Tax payment :Paying advance tax online in India is a convenient way to meet your tax obligations throughout the year. Here's a step-by-step guide on how to do it:1. Determine your advance tax liability:✅ Before you make any payments, you need to estimate your total taxable income for the financial year.✅ You can use the Income Tax Department's advance tax calculator to get an estimate.2. Calculate your advance tax instalments:✅ Once you know your estimated taxable income, you can calculate the advance tax instalments you need to pay.3. Choose your payment method:✅ You can pay your advance tax online through the government's e-filing portal or through net banking.4. Pay your advance tax online:1. Through the e-filing portal:✅ Go to the incometaxindia.gov.in website.✅ Login to your account using your PAN and password.✅ Click on the "e-pay taxes" link.✅ Select the relevant challan (ITNS 280) and enter the required details.✅ Make the payment through your Internet banking account.2.Through net banking:✅ Go to your bank's net banking website.✅ Login to your account.✅ Select the "tax payments" option.✅ Choose "income tax" as the tax type.✅ Select the relevant challan (ITNS 280) and enter the required details.✅ Make the payment.5. Keep track of your payments:✅ Once you have made your payment, you will receive a confirmation receipt.✅ Keep this receipt safe for your records.✅ You can also track your advance tax payments on the incometaxindia.gov.in website.✅ Advance tax on time, you will be liable for interest charges.For more information, Visit us at: https://academy.tax4wealth.com/
Publisher:NEW FORM 26AS: A COMPREHENSIVE GUIDE | ACADEMY TAX4WEALTH
Feb 05,2024
Understanding the New Form 26AS: A Comprehensive Guide
The recent interim budget 2024 by Finance Minister Nirmala Sitharaman shed light on significant changes in the Indian tax System, particularly the introduction of updated Income Tax Returns and a new Form 26AS. These changes are aimed at simplifying the tax filing process and enhancing the overall efficiency of the tax system.
In her budget speech, Minister Sitharaman advocated maintaining uniform tax rates for both direct and indirect taxes, encompassing import duties. A major emphasis was placed on streamlining the tax filing procedure through the incorporation of updated income tax return, a novel Form 26AS, and the pre-filling of tax returns. One of the significant outcomes of these reforms is the drastic reduction in the average processing time for tax refunds, plummeting from 93 days in 2014 to an expedited 10 days in the present year.
What is the Role of Form 26AS?
Form 26AS functions as a vital tool for validating tax credits and ensuring accurate income computation before filing income tax returns. It enables individuals to verify the timely deposit of tax deducted or collected by respective deductors or collectors.
Beyond this, Form 26AS provides insights into the Annual Information Return (AIR), submitted by various entities based on an individual's investments or expenditures, particularly high-value transactions. It becomes essential for taxpayers to ensure alignment between the details in Form 26AS and all taxes paid. Discrepancies between the claimed TDS amount in the tax return and the updated TDS amount in Form 26AS should be avoided. Serving as an indispensable financial document, Form 26AS comprises tax-related statements. It aids in verifying the accuracy of TDS statements filed by deductors or TCS statements filed by collectors, offering a detailed account of tax deductions or collections made on behalf of the taxpayer.
What is new in Form 26AS?
The renewed Form 26AS now serves as a comprehensive profile of the taxpayer, comprising detailed information on taxes paid, the status of pending and completed income tax proceedings, and the status of income tax demand and refund, among other crucial details. Additionally, the new form includes the taxpayer's mobile number, email ID, and Aadhar number. Unlike the previous version, this updated Form 26AS is a dynamic document, continuously updated within three months from the end of the month in which relevant information is received.
Financial institutions, banks, or any other authorities conducting due diligence on individuals or corporations will now seek the new Form 26AS to ensure there are no major issues associated with the concerned entity. Furthermore, the updated form provides information on "Specified financial transactions," adding an extra layer of transparency.
How to Access Form 26AS on TRACES?
For individuals seeking to view their Form 26AS on TRACES, the process is outlined below:
Visit the e-filing website.
Enter the user ID (PAN or Aadhaar number) and password.
Navigate to the 'e-file' section, select 'Income Tax Returns,' and choose 'View Form 26AS' from the drop-down menu.
Confirm the disclaimer to be redirected to the TRACES website.
On the TRACES (TDS-CPC) website, select the designated box and click 'Proceed.'
Navigate to the bottom of the page, click on 'View Tax Credit (Form 26AS),' and choose the desired Assessment Year and format for viewing (HTML or PDF).
Input the verification code and click 'View/Download.'
Open the downloaded Form 26AS to review its contents.
By following these steps, individuals can efficiently access and review their Form 26AS.
For more information, Visit us at: https://academy.tax4wealth.com/
Publisher:APPLICABILITY OF TDS ON SALE OF PROPERTY BY NRI | ACADEMY TAX4WEALTH
Mar 07,2024
Applicability of TDS on Sale of Property by NRI
Whenever any property is purchased/sold, TDS is required to be deducted. The buyer when paying the amount to the seller will deduct some amount (technically called as TDS) and pay the balance to the seller. This amount which has been deducted by the buyer would then be required to be deposited with the Income Tax Department by the buyer.
The amount to be deducted would be depend on the residential status of the seller. In case the seller is a resident indian – the amount of TDS to be deducted would be 1% of Sale Price whereas in case the seller is a NRI – the amount of TDS to be deducted would depend on the quantum of money received by the seller.
The residential status of the buyer would not be considered and only the residential status of the seller would be considered for computing the amount of TDS to be deducted.
The manner and amount of deduction of TDS in case the seller is a Resident Indian has been explained in detail in here –
The manner and amount of deduction of TDS in case the seller is a NRI has been explained in detail below.
TDS Rates for NRI Property Sales
When an NRI sells property in India, the Tax Deducted at Source (TDS) must be applied based on the nature of the capital gain — whether it's long-term or short-term. Below is a detailed explanation of the applicable TDS rates:
Type of Capital Gain
Criteria
TDS Rate for NRI Property Sale
Long-Term Capital Gains (LTCG)
Property held for more than 2 years
20%
Short-Term Capital Gains (STCG)
Property held for less than 2 years
As per the Income Tax Slab Rates of the Seller
TDS Rate Table for Long Term Capital Gains (LTCG) on NRI Property Sales
Property Sale Price
Less than ₹50 Lakhs
₹50 Lakhs to ₹1 Crore
Above ₹1 Crore
LTCG Tax Rate
20%
20%
20%
Add: Surcharge
Nil
10% of LTCG Tax
15% of LTCG Tax
Total Tax (incl. Surcharge)
20%
22%
23%
Add: Health & Ed. Cess
4% of above
4% of above
4% of above
Applicable TDS Rate
20.80%
22.88%
23.92%*
*Note: The maximum surcharge has been capped at 15% post-Budget 2022, making the highest applicable TDS rate 23.92% regardless of property values exceeding ₹1 Crore.
Key Insights
Surcharge and Cess: In addition to the base LTCG tax of 20%, a surcharge (if applicable) and a Health & Education Cess of 4% are levied to determine the effective TDS rate.
Surcharge Adjustments: The 2022 Budget capped the maximum surcharge at 15%, standardizing the TDS rate to a maximum of 23.92% for property sales exceeding ₹1 Crore.
Short Term Capital Gains (STCG): For properties held for less than 2 years, surcharge and cess are added to the tax rate according to income tax slabs, akin to the LTCG calculation.
Universal TDS Deduction: TDS on property sales to NRIs must be deducted for any transaction value, including properties valued below ₹50 Lakhs, and deposited with the Income Tax Department by the buyer.
This table and insights aim to clarify the TDS implications for NRIs selling property in India, taking into account the latest tax regulations and surcharge adjustments.
Basis for TDS Deduction on NRI Property Sales
TDS for NRIs selling property is governed by Section 195, focusing primarily on capital gains rather than the sale price. The computation of capital gains, however, isn't the seller's responsibility but must be determined by an Income Tax Officer.
Sellers are advised to submit Form 13 to the Income Tax Department, requesting an assessment of their capital gains. Given the complexity of this process, seeking help from a chartered accountant is advisable. Upon evaluation, the department may issue a certificate authorizing either no deduction or a reduced TDS rate based on the capital gains incurred. This certificate must be provided to the buyer to adjust the TDS deduction accordingly.
Without this certificate, TDS defaults to being deducted from the total sale price, making it crucial for the seller to obtain it. Moreover, it's recommended to document TDS details within the property sale agreement, though the property registrar's role doesn't extend to verifying TDS compliance.
Should TDS be inaccurately or insufficiently deducted, the Income Tax Department's recourse will be against the buyer for the shortfall.
Compliance for TDS Payment, Returns, and TAN Requirements
Purchasing property from an NRI necessitates several compliances, including the need for a TAN (Tax Deduction and Collection Account Number) for TDS deduction, not required when buying from resident Indians. If multiple buyers are involved, each must obtain a TAN.
Deducted TDS must be deposited with the Income Tax Department by the 7th of the following month after deduction, using Challan No./ITNS 281. Subsequently, a TDS return, Form 27Q, must be filed for each quarter of deduction, within 31 days post-quarter. After filing, the buyer should issue Form 16A to the seller as proof of TDS deposit.
Identifying the Seller's Residential Status
Determining if a seller is a resident or non-resident in India is pivotal, as it influences the TDS rate. This determination is based on the number of days spent in India, not citizenship or possession of identification like Aadhaar or PAN cards.
The Income Tax Department provides resources, including a Residential Status calculator, to assist in these determinations, emphasizing that income earned outside India is taxable for residents but not for NRIs.
Guidelines for Sellers and Buyers
Sellers should aim to secure a capital gains computation certificate from the Income Tax Department to minimize TDS deduction. Failing which, TDS will be deducted on the total sale value, potentially leading to an excess deduction.
Sellers should also consider reinvestment options within India to reduce capital gains tax liability and can apply for a refund of over-deducted TDS at the year's end. Co-owners must each file Form 13 to benefit from reduced TDS rates, applicable to both NRIs and OCI cardholders.
Buyers are tasked with timely TDS deduction and deposit, filing TDS returns, issuing Form 16A to the seller, and adhering to the strict timelines for deposit and return filing to avoid penalties and interest for delays. For properties purchased with a home loan, TDS deductions should align with payments to the seller, not EMI payments to the bank, including for advance payments before any lower TDS certificate issuance.
Avoiding Double Taxation for NRIs on Property Sales Across Borders
Double taxation often occurs when NRIs sell property in India while residing in another country, such as the USA, where taxes are imposed on global income. To prevent this, India has Double Taxation Avoidance Agreements (DTAAs) with numerous countries. These agreements enable NRIs to claim a tax credit for taxes paid in India, thereby reducing their tax obligation in their country of residence. For successful claims, NRIs must properly disclose their property sale transactions and taxes paid in India on their foreign tax returns, using specific forms like Section D of Form 1040 in the US, to avail of the tax credit as per the DTAA.
Repatriating Sale Proceeds for NRIs
NRIs looking to transfer their property sale proceeds outside India must complete Form 15CA and Form 15CB, available through the Indian Income Tax website. While Form 15CA can be filled out by the NRI or their Chartered Accountant, Form 15CB requires a Chartered Accountant's certification. These forms, which detail the source of funds and affirm that all due taxes have been paid in India, must be submitted to the bank to repatriate funds. The Reserve Bank of India (RBI) allows NRIs to repatriate up to $1 million USD per calendar year, subject to these conditions.
Minimizing TDS for NRIs on Property Sales
NRIs can apply for a Certificate for Nil or Lower Deduction of TDS by submitting Form 13 to the Indian Income Tax Department. This certificate significantly reduces the TDS burden on property sales. Given the complexity of the application process, it's common for NRIs to engage a Chartered Accountant to navigate this task efficiently. This strategic move is widely adopted by NRIs to lessen their tax liabilities from property transactions in India.
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