MARCH 2021

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Recent updates

  • - - by CA Sridharani S

GST:

1. Clarification of applicability of dynamic quick response code in B2C invoices and compliance of notification 14/2020 – Central Tax dated 21 March 2020: This notification is applicable to companies whose turnover exceed 500 Crores in any FY from 2017-18 and does not have a taxable service as below: .

i. Insurer or banking co. or a financial institution

ii. GTA in relation to transportation of goods by road in a goods carriage.

iii. Supplying passenger transport service

iv. Supplying services by way of admission to exhibition of cinematograph in films in multiplex screens.

v. OIDAR supplies made by registered person to an unregistered person

2. SOP for implementation of provision of suspension of registration under sub rule (2A) of Rule 21 of CGST Rules, 2017 – Where any registration is cancelled for a person, it is intimated to the person through form GST REG 31. Highlighting the difference and anomalies to explain within 30 days as to why registration shall not be cancelled. The said person is required to file the response within the time limit of 30 days in FORM GST REG 18. In case of cancellation on the ground of non filing of return then the said person cn file the return and intimate the response to the department. Post submission the same may be approved by the officer in FORM GST REG 20 or cancel the registration in FORM GST REG 19. Based on ehich the status will change to Active or Cancelled Suo-moto.

3. Instructions under section 119 of the Income-tax Act,1961 read with section 6 and section 84 of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,2015 regarding handling of Income-tax cases and Black Money cases: It has been Stated that all cases under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BM Act) pending with Jurisdictional Income-tax Authorities, excluding those cases wherein ADIT(Inv.)/DDIT(lnv.) is exercising the jurisdiction under BM Act, shall be transferred to the respective Central Charges. As per section 6 of the BM Act, jurisdiction of a Black Money Act case (BMA case) shall be decided as per the jurisdiction of the said case under the Income-tax Act,1961 (Income-tax Act) under section 120 or any other provision of that Act. It shall be conducted ADIT(Inv.)/DDIT(lnv.) is exercising the jurisdiction under BM Act, shall be transferred to the respective Central Charges. As per section 6 of the BM Act, jurisdiction of a Black Money Act case (BMA case) shall be decided as per the jurisdiction of the said case under the Income-tax Act,1961 (Income-tax Act) under section 120 or any other provision of that Act. It shall be conducted

MCA:

1. Amendment to Companies (Share Capital and Debenture) Rule, 2014 – A new Rule 12A is inserted stating the time period within which the offer shall be made for acceptance shall not be less than 7 days from the date of offer.

2. Producer Companies Rule, 2021 – Rule to producer companies has been newly inserted with effect from the date of publication. The Rule contains the following –

i. Change of place of registered office from one state to another – Rule 27,30, 31 of Companies (incorporation) rule shall be applied to Producer Companies also.

ii. Investment of General Reserve – The producer companies can utilise the general reserve in any of the combination as below:

(a) in approved securities, fixed deposits, units and bonds issued by the Central Government or State Governments or co-operative societies or scheduled bank; or
(b) in a co-operative bank, State co-operative bank, co-operative land development bank or Central co-operative bank; or
(c) with any other scheduled bank; or
(d) in any of the securities specified in section 20 of the Indian Trusts Act, 1882 (02 of 1882); or
(e) in the shares or securities of any other inter-State co-operative society or any co-operative society; or
(f) in the shares, securities or assets of public financial institutions specified under clause (72) of section 2 of the Act.




FEMA

  • - - CA Jayashree Krishnamurthy

FOREIGN CONTRIBUTIONS – AN UNDERSTANDING

In last month’s article, we understood about what are Foreign Contributions, the law governing the same and what is a Foreign Source. In this article, we will learn about what are Foreign Securities, regulations relating to who can accept foreign contributions and who are restricted from accepting foreign contributions, approvals and cancellation of registration.

What is a Foreign Security?

a) Security in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency

b) Securities expressed in foreign currency but where redemption or any other form of return such as interest or dividends are payable in Indian Currency.

Allowed Foreign Contributions:

A person (individuals, HUF, AOP, Non- Profit Companies) having a definite cultural, economic, educational, religious or social programme can accept foreign contributions, provided they are registered and have obtained prior approval from Central Government to accept such contributions.

Who cannot accept Foreign Contributions?

As per Section 3(1) of FCRA 2010, the following persons are not allowed to receive foreign contributions:

Individuals or associations who have been prohibited from receiving foreign contribution.

  • Election Candidate
  • correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
  • Judge, government servant or employee of any Corporation or any other body controlled on owned by the Government;
  • member of any legislature;
  • political party or office bearer thereof;
  • organization of a political nature as may be specified under sub- section (1) of Section 5 by the Central Government.
  • association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (i) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication
  • correspondent or columnist, cartoonist, editor, owner of the association or company referred to above relating to broadcast industry

    • “Corporation’ means a corporation owned or controlled by the Governmentand includes a Government company as defined in section 617 of theCompanies Act, 1956.


    APPROVALS FOR RECEIPT OF FOREIGN CONTRIBUTIONS:

    Prior approval is mandatorily needed to receive foreign contributions. Permissions are generally valid for a period of 5 years. Adhoc permissions can also be obtained for a specific amount from a specific donor for a specific purpose.

    SITUATIONS WHERE RESGISTRATION CAN BE CANCELLED:

    The Central Government may cancel the registration under the following circumstances:

    • a) When the holder of the certificate has submitted an incorrect or false statement, at the time of submission of application for grant or renewal of registration
    • b) The holder of the certificate has violated any of the terms and conditions of the certificate
    • c) It is necessary to cancel the certificate in public interest
    • b) The holder of the certificate has violated any of the provisions of the Act or rules
    • e) The holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years has become defunct.

    Any person whose certificate has been cancelled shall not be eligible for re-registration or grant of prior permission for a period of three years from the date of cancellation of certificate.

    SUSPENSION OF CERTIFICATE:

    Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of cancelling the certificate on any of the grounds, it is necessary so to do, it may, by order in writing, suspend the certificate for such period not exceeding 180 days as may be specified in the order.

    Such person whose certificate is suspended,

    • a) Shall not receive any foreign contribution during the period of suspension of certificate unless a specific permission is obtained to receive it
    • b) Shall utilise, in the prescribed manner, the foreign contribution in his custody with the prior approval of the Central Government.

    In terms of Rule 14 of the Foreign Contribution (Regulation) rules, 2011, the unspent amount that can be utilised in case of suspension of a certificate of registration may be as under: -

    (a) In case the certificate of registration is suspended under sub-section (1) of section 13 of the Act, up to 25% per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received.

    (b) The remaining 75% per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.




    Companies Act

    • - - Durgasri Mahendiran

    RECENT AMENDMENTS IN COMPANIES ACT 2013

    Ministry of Corporate Affairs shall time to time amend the Companies Act by way of releasing notifications to ease the process of doing business by introducing significant compliance and other relaxations.


    In account of this, MCA has released a notification on March 5th 2021, thereby, eliminating certain particulars required in Annual Return filed by companies , prescribing a simplified annual return for One Person Company (OPC) in place of the comprehensive annual return filed by them currently and enabling Aadhar Authentication as well in GSTIN Registration through SPICe+ Form which is a reform introduced under ease of doing business (EODB) initiative that helps to incorporate a company by further reducing the complexity and duration in incorporation.


    1.Amendment in Section 92 (1) of Companies Act 2013:

    (1) Section 92 deals with preparation of Annual return in prescribed form containing particulars as on the close of the financial year. The Amendment has resulted in elimination of certain particulars in the annual return viz
    (i) Its indebtedness
    (ii) Indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by or on behalf of Foreign Institutional Investors.


    2.Amendment in Companies (Management and Administration) Rules

    (1) Rule 11 states that Every Company shall file its annual return in Form MGT 7 except One Person Company (OPC) and Small Company. One Person Company and Small Company shall now file annual return from the financial year 2020-2021 onwards in Form MGT -7A.
    (2) Rule 12-A copy of the annual Return shall be filed with the registrar with such fee as may be specified for the purpose. Consequently, the company shall henceforth not be required to attach the extract of the annual return with the Board’s report and the weblink of such annual return need not be disclosed.


    3.Amendment in Companies (Incorporation) Rules.2014

    Aadhar Authentication for GSTIN registration is now enabled in FORM INC-35 AGILE. Any user who intends to incorporate a company through SPICe+ eform having registered office address can now also apply for GSTIN through this eform.





    Taxation

    • - - CA Gokul K

    RATES OF TDS APPLICABLE FOR FINANCIAL YEAR 2021-22 OR ASSESSMENT YEAR 2022-23
    Section Nature of Payment Threshold Limit for deduction tax Rate of TDS applicable for the period or Basic Cut off (Individual/Company and others New Rate %) Summary
    Individual Company Other If No Pan or Invalid PAN (Rate)
    192 Salary As per Slab [Please note that no Change in Slab Rates have been introduced for FY2021-22] Slab Rates Slab Rates - 30 Option to choose between new and old tax slab regime for salaried employees
    192-A Premature withdrawal from Employee Provident Fund (Payment ofaccumulated balanceof provident fundwhich is taxable in the hands of anemployee) Rs 50000.00 10 NA NA 20 TDS provisions u/s 192A will be applicable when withdrawal of accumulated balance in Recognized Providend Fund is tobe included in the total income 10% in case of Resident and 10.40% in case of Non - Resident
    193 Interest on securities Rs 2500.00 10 10 - 20 Threshold limit for interest paid on debentures is Rs. 5,000. Threshold limit for interest on 7.75% GOI Savings (Taxable) Bonds 2018 is Rs. 10,000.
    194 Dividend other than the dividend as referred to in Section 115-O Rs. 5000.00 10 10 - 20 This amendment proposes toamend second proviso to section194 of the Act to further providethat the provisions of section 194 i.e. TDS on dividend shall alsonot apply to dividend incomecredited or paid to a businesstrust by a special purposevehicle or payment of dividend toany other person as may be notified.

    This means that no TDS needs tobe deducted to AIF Category IIIalso.
    194-A Interest other than interest on securities – Banks Time deposits, Recurring deposit and Deposit in

    Senior Citizen Rs. 50000.00

    Others Rs. 40000.00

    		 10 - - 20 -
    194-B Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort Rs.10000.00 30 30 - 30

    30% in case of Resident Indians and Domestic Companies

    31.2% in case of Non Resident and Foreign Companies
    194-BB Income by way of winnings from horse races Rs.10000.00 30 30 - 30 30% in case of Resident Indiansand Domestic Companies.
    194-C Payment to Contractors Single payment : Rs. 30,000

    Aggregate payment: Rs. 100000

    		 1 2 - 20 -
    194-C Contract – Transporter not covered under 44AE Single payment : Rs. 30,000

    Aggregate payment:Rs.75000

    		 1 2 - 20 TDS is to be deducted at the rate of 2.0% if the payee is an AOP or BOI.TDS is not applicable on payment to Contractor engaged in plying, hiringor leasing of goods carriages, where such contractor owns 10 or lessgoods carriages during the Financial Year and furnishes amend definition of “work” to include purchase of raw material from associate of thecustomer. The word Associate shallhave the same relations as stated u/s40A(2)(b).
    194-D Insurance commission Rs 15000.00 5 10 - 20
      10%: If deductee is domestic Company

      5%: In any other case
    194-DA Payment in respect of life insurance policy,the tax shall be deducted on the amount of income comprised in insurance pay-out 10,000 5 5 - 20
      Section 194DA is not applicable incase of amount is exempt u/s10(10D) i.e. the Sum is received atthe time of maturity of policy or Death benefit received. Form15G/15H can be given wherever applicable.
    194-E Payment to non-resident sportsmen/ sports association 20 20 - 20
      Section 194DA is not applicable incase of amount is exempt u/s10(10D) i.e. the Sum is received atthe time of maturity of policy orDeath benefit received. Form15G/15H can be given wherever applicable.
    194-EE Payment in respect of deposit under National Savings scheme Rs 2500.00 10 10 - 20
      Resident Indians & Domestic Companies – 10%
      Non Resident – 10% + Cess + Surcharge (If Applicable)
    194-EE Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India 20 20 - 20
      Resident Indians & Domestic Companies – 10%
      Non Resident – 10% + Cess + Surcharge (If Applicable)
    194-G Commission on sale of lottery tickets Rs 15000.00 5 5 - 20
      Threshold Limit of Rs.15,000 on Commission, etc., on sale of lottery tickets, the 5%, 5.20%, 5% and 5.20% will be applicable on resident Indians, Non- Resident Indians, Domestic Companies, and Foreign Companies respectively.
    194-H Commission or brokerage Rs 15000.00 5 5 - 20
      The Threshold Limit is Rs.15,000 for the Commission or brokerage 5% TDS will be applicable on resident respectively. Indians and Domestic Companies
    194-I RENT: 194-I(a) Plant & Machinery Rs 240000.00 2 2 - 20
    • The Threshold Limit of Rs.2,40,000 for Rent on Plant & Machinery and Land Building, Furniture and Fittings.
    • The 2% TDS in case of Rent on Plant & Machinery for resident Indians and Domestic Companies respectively.
    • The 10% TDS in case of Rent on Land Building, Furniture and Fittings for resident Indians and Domestic Companies respectively.
    194-I(b) Land or building or furniture or fitting Rs 240000.00 10 10 - 20
    194-IA Transfer of certain immovable property other than agriculture land Rs 50,00,000.00 1 1 - 20 The Threshold Limit is Rs.50,00,000 for the payment on transfer of certain immovable property other than agricultural land 1% applicable on resident Indians and Domestic Companies respectively.
    194-IB Payment of Rent by Individuals or HUF not liable for Tax Audit Rs 50,000 per month 5 5 - 20 The Threshold Limit is Rs.50,000 per month for the Payment of rent by an individual or HUF not liable to tax audit and 5% TDS is applicable on resident Indians.
    194-IC Payment of monetary consideration under Joint Development Agreements - 10 10 - 20
    194-J Fees for professional or technical services: Fees for professional or technical services. If recipient is engaged in business of operation of call Centre If sum is payable towards fees for technical services(other than professional services) Rs 30000 2 2 - 20 The Threshold Limit of Rs.30,000 on Any sum paid by way of:Cases,
    • Wherein, the payee is engaged in the business of the operation of Call Centre only, 2% TDS is applicable on resident Indians and Domestic Companies respectively.
    • Fee for technical services, 2% TDS is applicable on resident Indians and Domestic Companies respectively.
    • Professional royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic film 10% TDS is applicable on resident Indians and Domestic Companies respectively.
    • In case of fees for any other professional services 10% TDS is applicable on resident Indians and Domestic Companies respectively.
    • In case the payee fails to furnish PAN 20% TDS is applicable on resident Indians and Domestic Companies respectively.
    Fees for professional or technical services: In all other cases Rs 30000 10 10 - 20
    194-K Payment of any income in respect of Units of Mutual fund as per section 10(23D) or Units of administrator or from a specified company - 10 10 - 20 Units of Mutual Fund have been specified under section 10(23D) of Income Tax Act, 1961. “Administrator”, “specified company” and “specified undertaking” are specified u/s 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002.
    194-LA TDS on compensation for compulsory acquisition of immovable Property Rs 2,50,000.00 10 10 - 20 No tax will be deducted if payment is made in respect of any award or agreement which has been exempted from levy of income-tax u/s 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
    194- LBA(1) Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders - 10 10 - 20 Interest payment from a SPV and Distribution of dividend by a Business Trust, to Resident unit holders shall be liable for TDS @ 10%. Whereas, in case of Non-Resident payee, TDS on dividend shall be @ 10% & that on interest payment shall be @ 5%.
    194- LBA(2) Distribution of, any interest received or receivable from SPV by Business trust - - - - - The TDS at the rate of 5.20% is applicable on Non- resident Indians and foreign company in the case of business trust shall deduct tax while distributing any interest income received or receivable by it from a SPV to its unit holders
    194- LBA(3) Distribution of, any income received from renting or leasing or letting out any real estate asset owned directly by Business trust - - - - - The TDS at the rate of 31.20% and 41.60%is applicable on Non-resident Indians and foreign company respectively.
    194- LB Payment of interest on infrastructure debt fund to Non Resident - 5 5 - 20 The TDS at the rate of 5.20% is applicable on Non- resident Indians and foreign company in the case of Payment of interest on infrastructure debt fund.
    194-LBB Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] - 10 10 - 30 The TDS at the rate of 10%, 31.20%, 10%, and 41.60% will be applicable on resident Indians, Non-Resident Indians, Domestic Companies and foreign companies respectively.
    194-LBC Income in respect of investment made in a securitization trust (specified in Explanation of section115TCA) - 25 10 - 30 The TDS at the rate of 25% , 31.20%, 10%, and 41.60% will be applicable on resident Indians, Non- Resident Indians, Domestic Companies and foreign companies respectively.
    194-M Payment of commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. Rs.50,00,000.00 5 5 - 20 The threshold Limit of Rs.50,00,000 payment of commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct 5% TDS by the resident Indians and Domestic Companies respectively.
    194-N Cash withdrawal - - - - 20
    • If a person defaults in filing of return: 20 lakhs
    • If no default is made in filing of return: Rs 1 crore
    • 2%: In general if cash withdrawn exceeds Rs. 1 crore
    • 2%: If assessee has not furnished return for last 3 assessment years and cash withdrawn exceeds Rs. 20 lakhs but does not exceed Rs. 1 crore
    • 5%: If assessee has not furnished return for last 3 assessment years and cash withdrawn exceeds Rs.1 crore
    194-O Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. Rs.50,00,000.00 1 1 - 20 The Threshold Limit is Rs.5,00,000 for the Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. The TDS at the rate of 1% will be applicable on resident Indians and Domestic Companies respectively.
    194-Q Purchase of goods (applicable w.e.f 01.07.2021) Rs 50,00,000.00 0.10 0.10 - - Budget UpdateA new section 194Q is proposed to be inserted to provide for deduction of TDS by person responsible for paying any sum to any resident for purchase of goods @ 0.1%. The Threshold Limit is Rs.50,00,000 applicable when total sales or gross receipts or turnover from the business carried on exceeds Rs. 10 Crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
    195 Payment of any other sum to a Non-resident Rs 50,00,000.00 0.10 0.10 - -
    • The TDS at the rate of 20.80% is applicable on income from investments made by a NRI.
    • The TDS at the rate of 10.40% is applicable on income from long-term capital gains under Section 115E for a NRI
    • The TDS at the rate of 10.40% is applicable on Income from long-term capital gains.
    • The TDS at the rate of 15.60% is applicable on Short-term capital gains under Section 111A
    • The TDS at the rate of 20.80% is applicable on any other income from long-term capital gains
    • The TDS at the rate of 20.80% is applicable on Interest payable on money borrowed in foreign currency
    • The TDS at the rate of 10.40% is applicable on Income from royalty payable by the Government or an Indian concern.
    • • The TDS at the rate of 10.40% is applicable on Income from royalty other than that which is payable by the Government or an Indian concern.
    • • The TDS at the rate of 10.40% is applicable on Income from fees for technical services payable by the Government or an Indian concern.
    • • The TDS at the rate of 31.20% is applicable on Any other source of income
    194-P TDS on Senior Citizen above 75 Years - - - - - Budget Update
    • Relaxation for senior citizen from filing ITR (Subject to Tax Deduction under Section 194P) [AY 2021-22]
    • It is proposed to insert a new section 194P to the Act, which proposes to provide relief to the senior citizens of the age of 75 years or above from the compliance of section 139 of the Act which provides for filing of return of income.
    • A senior citizen of the age of 75 year or above is not required to file the return of income, if the following conditions are satisfied –
    • 1. The senior citizen is resident in India and of the age of 75 or more during the previous year;
    • 2. He has only pension income and may also have interest income from the same bank (specified bank – to be notified by the CG) in which he is receiving his pension income;
    • 3. He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.
    206-AB TDS on non-filers of ITR - - - - - The TDS on non-filers of ITR at higher rates This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. The Resident Indian are liable to pay twice the rate specified in the relevant provision of the Act; or twice the rate or rates in force; or the rate of 5%. It is noteworthy, after considering cess at the rate of 4% and shall be increased by applicable surcharge.



    Trending Topics

    • - - Priyanka Ganesh

    Tax Bubbles

    Amidst the various dynamic initiatives taken by the taxation departments under Ministry of Finance, a nationwide drive is in place to identify irregularities and to enforce the tax payers to abide the law.

    In the recent past the GST enforcement wing, has identified company named M/s. Madhumita Steels Industries Private Limited involved in using fictitious invoices to claim input tax credit , consequent to which series of inspection where carried out across 14 establishments which was related to M/s. Madhumita Steels Industries Private Limited , the inspection identified that all the related establishment are happened to be sham.

    The inspection has thrown a light that the establishments neither carried business nor involved any transaction involved, it happened that all the transactions was a mere book entries. The director of the company, Mr. Kashmira Kumar Agrawal, is being held accountable. The director has been released on bail, subsequent to evidence obtained and declaration being admitted.

    Another instance has happened in the capital, Delhi. An advocate by profession has involved himself passing on fake invoices without conducting business. The total ineligible inputs amounted to Rs.50.03 crores. This case also involved establishing fictitious firms using different KYC from different sources. The officer of Central Goods and Service tax has unearthed this fictitious network of firm.

    In continuation of rigorous efforts taken by the government, it has further detected GST fraud of Rs. 20,124 crore during the year ending March 2021 consisting of 2692 cases.

    To counter the frauds identified under GST, swift action has been taken and an amount of Rs. 857.75 crore was recovered and 282 persons involved in the fraud were arrested.

    Adding to further initiative by the Ministry of finance, the income tax department has initiated search across the nation. Owing to the search assets were seized amounting to Rs. 6,500.78 crore and undisclosed income of Rs. 2,223.88 crores has been identified.

    The frauds were mainly due to invalid and bogus invoices. This is an eye opener for all the taxpayers, to abide the various Input tax Credit norms and other documentary requirements.

    A robust system is being executed at a regular intervals, thus keeping a monitor high risk cases.

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