Friday, 21 June 2019

Assessment of Firms - CBDT directions to Assessing Officers

Central Board of Direct Taxes (CBDT) has preferred that Assessing Officers (AO) should suitably take into consideration the following issues while conducting assessments of firms, including limited scrutiny:
  • Interest on capital & remuneration paid to partners shall be cross-verified from the ROI of the partners;
  • Interest on capital & remuneration shall be allowed as per Section 40(b)(iv);
  • ‘Book Profit’ shall be computed for the payment of remuneration to the working partners and shall be the net profit for the relevant previous year which shall be increased by the remuneration paid to partners;
  • Non-compliance with provisions of section 184 may result in dis-allowance of expenses claimed by firm such as remuneration, interest, etc, payable to partners which are otherwise allowable under this provision;
  • AO should verify the claim of firm regarding carry forward & set off of losses as per Sec 78 and shall disallow the claim in case of change of constitution of firm or on succession; and
  • Instruction No.9/2008, dated 31.7.2008, of CBDT should be followed scrupulously, with respect to issues concerning possible action against Tax Auditor.

Instruction No.09/2008, dated 31/07/2008

Source: CBDT & Taxmann

Tuesday, 14 May 2019

Recent development in the scope of basic wages under EPF & MP Act, 1952.

'Allowances', paid by employer to its employees, will be included in the scope of 'basic wages' and hence subject to Provident Fund contributions.

A Bench of Hon'ble Justices Arun Mishra and Navin Sinha of the Hon'ble Supreme Court vide judgement dated 28th February, 2019 in the case of The Regional Provident Fund Commissioner (II) West Bengal Vs Vivekananda Vidyamandir & Ors. has reiterated the principle that the crucial test to be applied for inclusion of allowances as part of "Basic Wages" is that of universality i.e. all allowances which are universally, uniformly, necessarily and ordinarily paid to all employees would form part of "Basic Wages" for the purpose of computing provident fund contributions under the Employees' Provident Fund and Miscellaneous Provision Act, 1952 (Act)
Supreme Court ruling expanding the scope of 'basic wages' for calculation of employee provident fund contributions is likely to result in gains for those employees whose basic salary was below Rs.15,000 or Rs.6,500 (as applicable in earlier years) because their employers may have to make good the short contribution in those years. Whereas the ruling will have retrospective impact, presently there's lack of clarity on the precise date back that it'll apply. 

The Supreme Court has processed that solely allowances of the subsequent nature can be excluded from 'basic wages' for calculation of Provident Fund contributions:
a) Allowances which are not paid across the board to all employees in a particular category; or 
b) Allowances which are variable in nature; or 
c) Allowances which are linked to any incentive for production resulting in greater output by an employee; or 
d) Allowance which are paid especially to those who avail the opportunity.

What categories of employees does it impact? 
For employees with basic salary exceeding Rs.15,000 per month - there could be no impact of this ruling as for such employees, Provident Fund contributions are already made on monthly pay exceeding the ceiling limit as prescribed under the law. 

Will the above impact be retrospective or prospective? 
Three points to consider: 
1. The Supreme Court ruling is an interpretation of existing law 
2. The Supreme Court has reiterated the principles laid down earlier in its 1962 ruling within the case       of Bridge & Roof 
3. There is no statute of limitation within Provident Fund 
Given the above, yes - the ruling may have retrospective impact. The major impact will be for the period after 1 September 2014 for employees with basic salary less than Rs.15,000. Where companies have employees prior to 1st September, 2014 with basic salary less than Rs.6,500 - there could be impact for them as well. 

If retrospective, who will bear the cost for past compliance and problems related to the same? 
For the past, employer may need to bear the cost of past compliance. Provident Fund rules do not allow employer to recover past contributions from the current salary of the employees. On the question how far the authorities can go back, the law is silent. The PF office has issued a circular No. 7(l)2012/RCs Review Meeting/345, earlier on 30th November, 2012 stating under para 10 that 7A enquiry period cannot go beyond preceding 7 financial years. However, this circular was kept in abeyance vide another circular No. 7(1)2012/RCs Review Meeting/21224, dated 18th December, 2012. 

Friday, 19 April 2019

Changes in form 16 and 24Q

The Central Board of Direct Taxes [CBDT] has vide NOTIFICATION NO. GSR 304(E) [NO.36/2019(F.NO.370142/4/2019-TPL)], DATED 12-4-2019, notified changes in Form 16 (TDS Certificate for Salary Income) and Form 24Q (TDS return in respect of salary). The changes have been made to bring TDS certificate in sync with new ITR forms issued for AY 2019-20.


Monday, 25 February 2019

FAQ on Form INC-22A (ACTIVE)

Ministry of Corporate Affairs has come up with another stern step by inserting a new Rule 25A under the Companies (Incorporation) Rules, 2014 and introduced a new Form INC-22A (ACTIVE).

Saturday, 23 February 2019


It is crucial to your business - Learn Why! 

If the amounts received in the course of, or for the purpose of, business and bearing a genuine connection to your business become refundable, and not repaid within 15 days from the date on which they become due for refund will leave you in big trouble.

Read full article

Tuesday, 19 February 2019

Form DPT - 3

The Companies (Acceptance of Deposits) Amendment Rules 2019, as notified by the MCA on 22 Jan 2019, has introduced a new form DPT - 3. 

Form DPT-3 shall be used for filing return of deposit or particulars of transaction not considered as deposit or both by every company other than Government company.



Thursday, 14 February 2019

Life Insurance - Taxability and tax exemptions

Life Insurance is a compulsion for anyone who has financial responsibilities. In addition to the basic life insurance amount, one needs to add cover as and when liabilities increase. Riders are additional benefits in a life insurance policy and are optional. Premiums paid towards insurance plan qualify for a tax benefit under the Income tax Act, 1961. In this article taxability and tax benefits are discussed with respect to life insurance policies only.
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