Tuesday, April 12, 2011

Amendment in section 80G for Renewal of Approval – Circular 7 / 2010

Amendment in section 80G for Renewal of Approval – Circular 7/2010

Dear all Professional friends,

With effect from 1st October, 2009 the requirement of periodical renewal of approval under section 80G is being dispensed with. All trusts whose approval expires on or after 1st October, 2009 have to apply for approval again.

Their approval will continue to be valid in perpetuity unless withdrawn.

Those trusts, whose approval expires prior to 1st October, 2009 have to apply once for renewal of their approval.

Monday, April 11, 2011



The Ministry of Corporate Affairs has vide notification dated 31st March 2011 enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as requisite under Section 217 (2A) read with Companies (Particulars of Employees) Rules, 1975 from the existing limit of Rs. 24 lakh/ year/ Rs. 2 lakh per month to Rs. 60 lakh per year/ Rs. 5 lakh per month and by such notification also covers Government Companies for such disclosures. By such notification, the amended rules may be called as Companies (Particulars of Employees) Amendment Rules, 2011.

The effect of the notification shall require the Companies including Government Companies to include a statement showing the name of every specified employee of the Company in their Board Report pursuant to Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011 which provides:

(i) If employed throughout the financial year, was in receipt of remuneration for that year which, in aggregate, was not less than Rs. Sixty Lakh for the year: or
(ii) If employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less Rs. Five Lakh per month.

TDS is not applicable on the interest paid by co-operative banks to the shareholders on their deposits.

If a depositor is a shareholder of the co-operative bank TDS is not at all applicable for his deposits, irrespective of any amount. In all other cases Form 15H/ 15G required to be submitted for exemption of TDS. More importantly.

TDS is not all applicable irrespective of the amount of share capital held by the shareholder in the co-operative bank.

How to Avoid TDS

How to Avoid TDS?

If two persons are asked about income tax law in India, you will get four opinions. This is specially true when it comes to tax deduction at source (TDS). There is nothing as knotty and tangled as the provisions on TDS.

Before looking at ways to avoid TDS, let us see the three types of incomes received by a resident Indian investor that attract the TDS provisions: interest earned on securities, interest other than interest on securities, and income in respect of mutual fund and Unit Trust of India (UTI) units.

Interest earned on securities
A debenture issued by a company held by an investor is most likely to be categorized under this head. On the debenture, TDS is deductible on the interest, either during the time of actual payment of such interest or during the time of credit of such interest payable to the account of the payee, whichever happens earlier. TDS payment on a debenture can be avoided if the interest earned on the debenture on which interest is to be paid is listed and the interest payer is also a listed company and if the interest paid/payable during that financial year is not in excess of Rs. 2,500 and the interest earned is paid as an account payee cheque. If it is felt by such investors that tax on their total income from all sources for the year is likely to be nil, and they want the interest on securities to be received without any deduction of TDS, they have to fill up the form 15F and file a declaration with the company that is paying them the interest. False declaration should be avoided at all cost, which many investors might want to use to avoid deduction of tax even as their total income is more than the taxable limit. In such a case the investor willfully is making a false statement which amounts to an intentional breach of law. Thus the investor is liable to be prosecuted and punished on conviction.

Interest earned other than interest on securities
Besides interest on securities, any other type of interest, such as company deposits, is also liable for deduction of TDS, except when the payer is an HUF or an individual. TDS is applicable either during the time of actual payment of the interest or during credit of such interest, whichever happens earlier. 20 per cent of gross interest is the rate at which TDS is deducted if the receiver is a domestic company and 10 per cent of the gross interest at which TDS is deductible if the receiver is a non-corporate resident.

Avoiding TDS: No TDS is deductible on the interest earned from some of the government certificates and deposit schemes like, KVP(Kisan Vikas Patras), NSS(National Savings Certificates) and IVP(Indira Vikas Patras), the post office recurring deposit scheme, time deposit and monthly income accounts. Also, There is NO TDS applicable on the amount of interest paid/ payable by co-operative society engaged in banking business or institutions other than a bank during a financial year if that amount is less than Rs 2,500. In the case of time deposits, also called fixed Deposits, with a bank or a financial institution dealing in Home loans like HDFC, no TDS is applicable if the interest payable from that branch for the year does not exceed Rs.10,000/-.

Depositors quite often try to circumvent this rule by distributing their deposits across different branches so that the interest in a particular branch in a single financial year is not in excess of Rs. 10,000/-. No TDS is applicable on interest earned on recurring deposits and saving bank accounts. TDS is also not applicable on the interest paid by co-operative banks to the shareholders on their deposits.

If for a financial year an investor feels that tax on his income from all sources may be nil, he can file a declaration through form 15H, which may then be submitted to the interest paying institution so that no TDS is deducted.

Income Earned from UTI/MFs
There is no TDS applicable to all earnings from income from UTI and MFs.

What are the rules for deducting tax on fixed Deposit? When do the banks deduct TDS on a fixed deposit ?

TDS Information

What are the rules for deducting tax on fixed Deposit?

When do the banks deduct TDS on a fixed deposit? :

TDS (Tax Deducted at Source)

People prefer to deposit their savings in time deposits as such deposits earn higher rate of interest than normal savings account. However, they face the problem of TDS (Tax Deducted at Source) by banks for fixed deposits.
In Income Tax law, one of sources of the income is "Interest Income" and thus directions issued by income tax authorities have to be followed by all bankers.

What are the rules for deducting tax on fixed Deposit? When do the banks deduct TDS on a fixed deposit? :

Banks deduct tax (TDS), if the total interest earned on all your time deposits in the bank is greater than Rs.10000/- during a financial year. The tax liability for the purpose of TDS is determined at the branch level. Whenever the bank pays an interest on your fixed deposits, it checks it for TDS eligibility. If it qualifies, the TDS is deducted. TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year viz. 31st March every year. The rate at which TDS is deducted varies according to the category of account holders

At present no interest income is exempted from tax (earlier interest income upto Rs.12000/- per year was exempted under Section 80L of the Income Tax Act). However, in certain conditions, no TDS is deducted on the interest earned on fixed deposits, e.g. (a) if the total interest earned on the deposit in a financial year is upto Rs.10000/-.

As per present income tax guidelines, banks are required to deduct tax at source (TDS) on deposits if the total interest earned on all your fixed deposits in a bank is more than Rs.10000 in a financial year. (As per these guidelines even if a fixed deposit is in the name of a minor TDS is deducted). However, the depositors can claim the credit for such TDS in their income tax returns. (In case of minors, this credit for TDS can be claimed by the person who manages the minor's income.

Remember, now a day as and when a bank pays an interest on the fixed deposits, it checks whether the account is exempted from TDS. If it is not exempted, then TDS is deducted. You should also remember that TDS is deducted even on interest accrued (but not yet paid) at the end of the financial year i.e. 31st March every year.

In case of resident individual and HUF, TDS is deducted at a rate of 10% (thus total deduction is at the rate of 10.0%). Thus, the present applicable rates are :

Resident Individuals & HUF Tax Rate Surcharge Education Cess TOTAL
Payment upto 10 lacs 10% ---- 0% 10.00%

If one feels that your total interest income for the year will not fall within overall taxable limits, then one should inform his / her bank not to deduct TDS on deposit, by submitting a form as per the provisions of the Income Tax Act. The forms required for different categories have been listed below:

Category of Account Form Required
Individual - Srcitiges 15H
Trusts 15AA
Individual - other 15G

Remember that : -

(a) You have to obtain [earlier 15AA Form ] certificate from the Assessing Officer of Income Tax department.
(b) Even if you submit the 15H / 15AA /15G Form, the tax which has already been deducted by way of TDS during the year prior to submission of 15H Form, is usually not refunded by the banks as they are under obligation to deposit this TDS within a time bound period. . However Certificates will be issued to the customers which can be used while filing his/her tax return.
· 15H/15AA Forms are valid only for the particular financial year in which they are issued.
· Usually banks ask that a fresh15H form is needed to be furnished for each deposit that is placed with the Bank

However, if the depositor furnishes form 15H/ 15G (which is available free of cost from all banks) and therein declares he / she does not have tax liability at all, the bank will not deduct any TDS from the interest earned by the depositor.

Thus, the above, in a nutshell indicates that if the interest income from a bank branch is more than Rs.10000/- (and you have not submitted form 15H), the Bank will deduct the TDS. For any TDS deducted by the bank, it will issue a Form 16A which can be used; while filing the income tax returns.

Thus, in case you do not want the TDS to be deducted, you can split your Bank Deposits in two or more Banks or branches so that the total interest earned at one branch is less than Rs.10,000/-. (However, remember this does not mean that income earned from such deposits is exempted from income tax. You have to club all such interest income and add to your other income, and pay the tax while filing the income tax return.)

TDS provisions are not applicable to 'A' class shares holders of the Bank

E-Filing of Service Tax Return is not mandatory for all...

E-Filing of Service Tax Return is not mandatory ...

Compulsory E-filing of ST returns by specified assessees....

General Clarifications Regarding E-Filing
Service Tax Returns are mostly filed, manually by the assessee or their representative. In this era of Internet and e-governance, the government has introduced a facility for the electronic filing of Service Tax Returns, which is known as E-Filing.
E-Filing of Service Tax Return is not mandatory, it is an option provided to the assessee. Returns of Service Tax can also be filed in a regular manner i.e. Manually by the assessee if he opts not to avail E-Filing facility. However, the government is encouraging the service providers, to file the returns using the e-filing facility. Every Service Tax Office has a help centre to assist the Service Providers in case of any difficulty faced in filing such returns .
However, E-filing of service tax return is mandatory effective from
01-04-2010 in case the assessee has paid a total Service Tax of rupees ten lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year, is required to file the return electronically under sub-rule (2) of Rule 7 of the Service Tax Rules, 1994. (Service TaxNotification No. 1/2010 – ST dated the 19th February, 2010)
In any case if assessee does not succeed in filing of return electronically or in case of e-filing is unable to generate acknowledgement number, he should file manual return to avoid penal provisions.
Prerequisites for E-filing are very basic. Assessee is required to possess :
15 digit Service Tax Payer Code i.e. Popularly known as Service Tax Registration No. based on PAN allotted by Income Tax Department. In case, if assessee is not having PAN Based 15 digit Registration No., he can use temporary 15 digit no. given by the department.
Computer having Internet Connection
Valid E-mail Address
Java Enabled Browser i.e. Internet Explorer 6.0 and above or Netscape Navigator 5.0 and above or Mozilla Firefox 3.0 and above.

Step by Step Procedure for E-filing of Service Tax Return
(a) Returns can be prepared and filed on line by selecting the ‘File Return’ option under RET module after logging into the ACES
(b) All validations are thrown up during the preparation of the return in this mode and the status of the return filed using the online mode is instantaneously shown by ACES.
(c) Returns can also be prepared and filed off-line. Assessee downloads the Offline return preparation utility available at http://www.aces.gov.in (Under Download)
(d) Prepares the return offline using this utility. The return preparation utility contains preliminary validations which are thrown up by the utility from time to time.
(e) Assessee logs in using the User ID and password.
(f) Selects RET from the main menu and uploads the return. Instructions for using the offline utilities are given in detail in the Help section, under ‘Download’ link and assessees are advised to follow them.
(g) Returns uploaded through this procedure are validated by the ACES before acceptance into the system which may take up to one business day. Assessee can track the status of the return by selecting the appropriate option in the RET sub menu. The status will appear as “uploaded” meaning under process by ACES, “Filed” meaning successfully accepted by the system or “Rejected” meaning the ACES has rejected the return due to validation error. The rejected returns can be resubmitted after corrections.
(h) Once the Central Excise returns are filed online in ACES or uploaded to the system using the off-line utility, the same can not be modified or cancelled by the assessee. The Service Tax returns, however, can be modified once as per rules up to 90 days from the date of filing the initial return.
(i) Self-assessed CE returns, after scrutiny by the competent officer, may result into modification. Both the ‘Original’ and the ‘Reviewed’ return can be viewed by the assessee online.
During e-filing of return the assessee must file details as mentioned in Form ST – 3 and that of duty paying challans. A key number and acknowledgment would be generated by the system along with a copy of Form ST when return is completely submitted.
In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central Excise, service Tax and large Tax Payer Units (LTUs) as on 23rd December, 2009. ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central Excise and Service Tax for capturing returns and registration details of the assessees and hence, in supercession of the CBEC Circular No.791/24/2004-CX. dated 1.6.2004 and CBEC Circular No. ST 52/1/2003 dated 11.03.2003, this revised circular is being issued.
It has automated the major processes of Central Excise and Service Tax - registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions. It is divided into the following modules:
1) Access Control of Users (ACL)
2) Registration (REGN): Registration of assessees of Central Excise & Service Tax including on-line amendment.
3) Returns (RET): Electronic filing of Central Excise & Service Tax Returns
4).CLI: Electronic filing of claims, intimations and permissions by assessees and their processing by the departmental officers
5) Refund (REF): Electronic filing of Refund Claims and their processing
6) Provisional Assessment (PRA): Electronic filing of request for provisional assessment and its processing by the departmental officers.
7) Assessee Running Account
8) Dispute Settlement Resolution (DSR): Show Cause Notices, Personal Hearing Memos, Adjudication Orders, Appellate and related processes.Assessee Running Account
9) Audit Module
10) Export Module for processing export related documents

1) Reduce Physical Interface with the Department
2) Save Time
3) Reduce Paper Work
4) Online Registration and Amendment of Registration Details
5) Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request
6) System-generated E-Acknowledgement
7) Online tracking of the status of selected documents
8) Online view facility to see selected documents
9) Internal messaging system on business-related matters

Automation of Central Excise and Service Tax (ACES), is a right step to curb corruption

Which section 194 H or 194C for TDS on payment to Clearing & Forwarding Agents ?

Combined reading of provisions of sections 194C and 194J vis-a-vis C.B.D.T. Circular No. 720 makes it abundantly clear that payment made
to the C and F Agents, was for the services which was predominantly for "carrying out work", inter alia, relating to storage despatch, transportation, loading and unloading of goods, etc. Thus, deducted tax at source under section 194C of the Act.