What is TCS Tax? The Amendments of Tax collected at Source.

Sneha Kejriwal
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What is TCS Tax? The Amendments of Tax collected at Source.

Introduction to Tax Collected at Source

Tax Collected at Source(TCS) is the concept wherein the seller collects a percentage of tax from the buyer on the sales amount.

The tax collected by the seller is then to be deposited with the government. The collector of tax i.e. sellers is required to furnish quarterly returns online with CPC-TDS in Form No. 27EQ on prescribed dates.

Applicability and rates of TDS are discussed in Section 206 of the Income Tax Act, 1961.

Initially, the TCS(Tax Collected at Souce) income tax provisions were applicable only to certain goods with specified limits such as-

  • Alcoholic Liquor for human consumption
  • Tendu leaves
  • Timber
  • Parking lots, Toll Plaza
  • Minerals
  • Bullions
  • Motor Vehicles

However, the Finance Act 2020 has extended the TCS provisions to three new categories of businesses/activities with effect from 1.10.2020:

  • Foreign currency dealers,
  • Foreign tour operators, and
  • Sellers of goods whose turnover exceeds INR 10 crore.

Now let’s discuss the TCS (Tax Collected at Source) amendments in the section 206C of the Income Tax Act, 1961:

Rate of TCS for Foreign currency dealers

According to sub-section (1G) of Section 206C of the I.T. Act, every Authorized Dealer who receives an amount from a buyer to remit the same out of India under the Liberalized Remittance Scheme of RBI, shall collect TCS @ 5% from the buyer if aggregate sum remitted by the Buyer during the financial year exceeds INR 7,00,000/-.

The Dealer shall collect TCS at the time of debiting the account of the buyer or on receipt of the amount from the buyer whichever is earlier, and deposit it in the government account on behalf of the buyer.

“Authorised Dealer” means a person authorized by the Reserve Bank of India under subsection (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999) to deal in foreign exchange or foreign security.

In case wherein the amount remitted out of India is for pursuing education after taking loan from any financial institution referred to in section 80E, then a rate of 0.5% will be appliable for TCS.

Rate of TCS for Foreign tour operators

As per sub-section (1G) of Section 206C of the I.T. Act, every Seller of ‘overseas tour program package’ shall collect TCS @5% of such amount from the buyer, being the purchaser of such package.

The seller shall collect TCS at the time of receipt of the amount from the Buyer or debit of the account of the Buyer whichever is earlier, and deposit it in the government account on behalf of the Buyer.

“Overseas Tour Programme Package” means any tour package which offers a visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.

Sellers of goods whose turnover exceeds INR 10 crore.

According to sub-section (1H) of section 206 of the I.T. Act, every specified person shall deduct a TCS @ 0.10% and deposit the same with the government.

Specified person:

Who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, and whose total sales or turnover from the business carried on by him exceed INR 10 crore during the immediately preceding financial year.

Non-applicability of sub-section (1H):

This provision doesn’t apply to the sale of goods covered in sub-section (1) or sub-section (1F) or sub-section (1G),

This provision will not apply to the export or import of goods.

This provision will not apply if the aggregate value of the sale consideration for any goods to a Buyer does not exceed INR 50 lakh in a year.

In case the buyer has not provided PAN/Aadhar Number to the seller, then the TCS rate shall be @ 5% or 1% as prescribed.

Non-applicability of sub-section (1G) and (1H):

This provision is not applicable where the buyer is the Central Government or a State government, or foreign embassy or mission, etc., or a Local Authority or an entity notified by CBDT.

These provisions are also not applicable if the buyer is liable to deduct tax at source under any other provision of Income-tax Act on the goods purchased by him from the Seller and has deducted such amount.

Relevant FAQs regarding Tax collected at source

TCS to be collected on the amount before or after including GST?

Ans: The Income Tax Department on TCS provides that the “amount debited to the account of buyer or payment shall be received by seller inclusive of VAT/Excise/GST. TCS to be collected on inclusive of GST”.

The above view was also affirmed by Madhya Pradesh HC in the case of Vinod Rathore (278 ITR 122). Therefore, considering the above judgment, in respect to section 206C(1H), TCS may be leviable on the GST component as well.

Does TCS u/s. 206C(1H) excludes its applicability when goods are procured for the purpose of further manufacturing/ processing subject to declaration by the buyer, as stated in section 206C(1)?

Ans: Section 206C(1) provides such exemption however No similar exemption is given in section 206C(1H), TCS may have to be levied and collected for any sale of goods covered by section 206C(1H), even if the goods are procured for subsequent manufacturing/ processing.

Whether TCS u/s. 206C(1H) be collected on amounts over and above INR. 50 Lakhs or on entire consideration?

Ans: Section 206C(1H) provides for the collection of TCS on the portion of sale consideration exceeding INR 50 Lakhs. For instance, if a seller has sold goods worth INR 80 Lakhs, then TCS shall be appliable only on INR 30 Lakhs.

New National Education Policy 2020: All you need to know

Meghal D Thakker
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New National Education Policy 2020: All you need to know

Important News: The Union Cabinet renamed the Ministry of Human Resource Development to the Ministry of Education. Making the announcement, Union Ministers Prakash Javadekar and Ramesh Pokhriyal Nishank said there would be a single regulator for all higher education institutions and MPhil would be discontinued. In a bid to ramp up digital learning, a National Educational Technology Forum (NETF) would be created.

What is New National Education Policy?

A National Education Policy or NEP is a comprehensive framework to guide the development of education in the country.

[History: A new NEP usually comes along every few decades. India has had three to date. The first came in 1968 and the second in 1986, under Indira Gandhi and Rajiv Gandhi respectively; the NEP of 1986 was revised in 1992 when P V Narasimha Rao was Prime Minister. The third is the NEP released Wednesday under the Prime Ministership of Narendra Modi.]

Recent Changes in Educational Policy:

  1. In school education, the policy focuses on overhauling the curriculum, “easier” Board exams, a reduction in the syllabus to retain “core essentials” and thrust on “experiential learning and critical thinking”.
  2. In a significant shift from the 1986 policy, which pushed for a 10+2 structure of school education, the new NEP pitches for a “5+3+3+4” design corresponding to the age groups 3-8 years (foundational stage), 8-11 (preparatory), 11-14 (middle), and 14-18 (secondary). This brings early childhood education (also known as pre-school education for children of ages 3 to 5) under the ambit of formal schooling. The mid-day meal programme will be extended to pre-school children. The NEP says students until Class 5 should be taught in their mother tongue or regional language.
  3. The new national education policy 2020 also proposes phasing out of all institutions offering single streams and that all universities and colleges must aim to become multidisciplinary by 2040.
new education policy Academic Structure
Academic Structure

The curricular and pedagogical structure and the curricular framework for school education will therefore be guided by a 5+3+3+4 design, consisting of the Foundational Stage (in two parts, that is, 3 years of Anganwadi/ Pre-school + 2 years in primary school in Grades 1-2; both together covering ages 3-8),

  • Preparatory Stage (Grades 3-5, covering ages 8-11),
  • Middle Stage (Grades 6-8, covering ages 11-14), and
  • Secondary Stage (Grades 9-12 in two phases, i.e., 9 and 10 in the first and 11 and 12 in the second.

For Board Examinations:

While the Board exams for Grades 10 and 12 will be continued, the existing system of Board and entrance examinations shall be reformed to eliminate the need for undertaking coaching classes.

To reverse these harmful effects of the current assessment system, Board exams will be redesigned to encourage holistic development; students will be able to choose many of the subjects in which they take Board exams, depending on their individualized interests.

Board exams will also be made ‘easier’, in the sense that they will test primarily core capacities/competencies rather than months of coaching and memorization; any student who has been going to and making a basic effort in a school class will be able to pass and do well in the corresponding subject Board Exam without much additional effort.

To further eliminate the ‘high stakes’ aspect of Board Exams, all students will be allowed to take Board Exams on up to two occasions during any given school year, one main examination and one for improvement, if desired.

For Students with Innate Talents:

The National Scholarship Portal will be expanded to support, foster, and track the progress of students receiving scholarships. Private HEIs will be encouraged to offer larger numbers of free ships and scholarships to their students.

new national education policy
new national education policy

For Graduation Degree:

Now, in the new policy, there will be a 4 year course and for every year passed, one will receive a certificate which can be regarded as a qualification and also there is an inclusion of re-entry meaning if by whatsoever reason, one discontinues education from year 1 or 2 or 3, s/he can re-enter the next year after whatsoever time instead of re-starting from year 1.

With the removal of B.com, B.Sc., B.A. etc., a student will receive graduate certificate on completion of Year 1, Graduate Diploma on completion of Year 2, Graduate Degree on completion of Year 3 (i.e. if a job specification in general requires a Graduate as a qualification for a job application, the student must have completed 3 years of education post Std. 12 and received the Graduate Degree), and if the student completes 4th Year, then s/he receives Graduate in Research.

For Post-Graduation:

Post-Graduation is now in 1 or 2 years course (provided PG can be applied for on completion of at least 3 years of Graduation Course) which means that if a student has completed all 4 years of Graduation Course then s/he can complete Post Graduation in just 1 year; while if a student has completed only 3 years course, then he has to undertake PG course of 2 years; meaning PG is received after completion of 5 years of Graduation as well as PG.

Note: M.Phil course has been removed but PhD. is still part of the policy with a 4 year course to achieve PhD.

New Inclusions in the National education policy 2020:

  • With the implementation of New National Education Policy, the top 50 Universities in the world will be able to open their branches in India.

  • There will be a capping of fees in all categories of School (private schools as well as public schools).

  • The marking system will include a self-assessment marking thereby enabling the student to practice self-assessment of his/her confidence, morality, behavior etc.; this will also include marking by other students as well as teachers which will enable a bond with teachers as well as other students.

  • There will be separate departments which will be set to encounter different types of activities like determining syllabus, books, distribution of results, administrative department etc.

Key Points of New Education Policy 2020:

  1. Board Structure of 10+2 is dropped.
  2. New school structure will be 5+3+3+4. ( i.e. Up to 5 pre-school, 6 to 8 Mid School, 8 to 11 High School , Std. 12 on-wards Graduation)
  3. Any Degree will be 4 years.
  4. 6th standard on-wards vocational courses available.
  5. From 8th to 11 students can choose subjects.
  6. All graduation course will have major and minor.

Example – A Science student can have Chemistry as Major and Music as minor also. Any combination can be chosen.

  1. All higher education will be governed by only one authority.
  2. UGC AICTE will be merged.
  3. All University government, private, Open, Deemed, Vocational etc. will have same grading and other rules.
  4. New Teacher Training board will be setup for all kinds of teachers in country, no state can change.
  5. Same level of Accreditation to any college, based on its rating college will get autonomous rights and funds.
  6. New Basic learning program will be created by government for parents to teach children up to 3 years in home and for pre-school 3 to 6.
  7. Multiple entry and exit from any course.
  8. Credit system for graduation for each year, student will get some credits which he can utilize if he takes break in course and come back again to complete the course.
  9. All schools exams will be semester wise twice a year.
  10. The syllabus will be reduced to core knowledge of any subject only.
  11. More focus on student practical and application knowledge.
  12. For any graduation course if student completes only one year he will get a basic certificate, if he completes two years then he will get Diploma certificate and if he completes full course then he will get degree certificate. So no year of any student will be wasted if he breaks the course in between.
  13. All the graduation course feed of all Universities will be govern by single authority with capping on each course.

Form DIR-3 KYC- Mandatory annual compliance for DIN holders

Khushi Surana
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Form DIR-3 KYC- Mandatory annual compliance for DIN holders

What Is DIR-3 KYC Form?

DIR-3 KYC is an annual e-form which is to be filed by every Director/Partners/Designated Partners who has been allotted a ‘Director Identification Number’ (DIN) as on 31st March of a financial year and is to be submitted as an e-form DIR-3-KYC to the Central Government on or before 30th September of immediate next financial year. The concept and compliance requirements of a Director KYC was introduced in 2018 w.e.f. 10.07.2018 through the new Rule “12A” inserted by MCA. As per Rule 12A of the Companies (Appointment and Qualification of Directors) Rules 2014,

“Every individual who holds a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-form DIR-3-KYC for the said financial year to the Central Government on or before 30th September of immediate next financial year.

Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October, 2018.”

Provided further that where an individual who has already submitted e-form DIR-3 KYC in relation to any previous financial year, submits web-form DIR-3 KYC-WEB through the web service in relation to any subsequent financial year it shall be deemed to be compliance of the provisions of this rule for the said financial year.

Provided also that in case an individual desires to update his personal mobile or the e-mail address, as the case may be, he shall update the same by submitting e-form DIR-3 KYC only.”

Explanation

  1. Filing of e-form DIR-3 KYC is an annual compliance which has to be compulsorily adhered to in every financial year, where any individual hold DIN on 31st March of that financial year.
  2. Where a DIN Holder has already filed e-form DIR-3 KYC in the previous financial year and there are no details to be updated, they only need to submit web-form DIR-3 KYC-WEB through the web service.
  3. In case an individual desires to update his personal mobile number or the e-mail address, he is required to file DIR-6 before submitting DIR-3 KYC for updating their particulars.

ORIGINAL AND REVISED DUE DATES FOR F.Y.2018-19

Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October, 2018.”

DUE DATE FOR F.Y.2019-20

The original due date for every financial year to submit and upload e-form DIR-3 KYC form is 30th September of the immediate succeeding financial year.

CONSEQUENCES OF NOT FILING DIR-3 KYC

On the expiry of due date for filing of DIR-3 KYC, all the Approved DIN will be marked “Deactivated” with reason of ‘Not filing of DIR-3 KYC’. Penalty of Rs. 5,000/- shall also be levied on the expiry of the due date. RELIEF: DIRECTOR KYC AND COMPANIES FRESH START SCHEME, 2020 (CFSS-2020) Owing to the financial discomfort and distress to Companies caused by the global pandemic Covid-19, a series of measures have been taken by MCA in the form of extensions of due date to reduce the compliance burden of Companies Act,2013 .

The General Circular No. 11/ 2020 dated 24th March, 2020 reads:

“No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’. The Circulars specifying detailed requirements in this regard are being issued separately.”

Crux of the scheme:

A moratorium period from 1st April, 2010 to 30th September, 2020, has been provided by MCA, by which no additional fess shall be charged for late filing during the said moratorium period.

To file DIR-3KYC: Extended timelines between 1st April 2020 and 30th September 2020 is provided by MCA for the director whose DIN is deactivated to come forward and file DIR-3KYC/DIR-3 KYC-Web. The late filing fee of Rs 5,000 will not apply.

Since it is aforesaid that DIR-3 KYC only came into force and implementation since July, 2018, it implies that any default in non-compliance of DIR-3 KYC in the year Financial Year 2018-19 can be made good without paying the late filing fee of Rs. 5,000 which is usually levied by MCA under normal circumstances. This relaxation has been only provided for the time being looking at the Covid-19 crisis and in the moratorium period specified above. Any default in compliance subsequent to this period will attract the original penalty of Rs. 5,000.

REQUIREMENTS FOR FILING DIR-3 KYC FORM

For filing your DIR 3 -KYC form, the DIN holder will need the following documents:
    1. Details of Nationality and Citizenship details like gender, and date of birth.
    2. Permanent Account Number (PAN)
    3. Voters Identity card
    4. Passport (mandatory if a foreign national is holding a DIN)
    5. Driving License
    6. Aadhaar card
    7. Personal Mobile
    8. Personal Email Address
    9. Residential address.

CONCLUSION

 For the financial year 2019-20, the due date of filing DIR-3 KYC is the original date of 30th September, 2020 hence no benefit of CFSS,2020 is required to be availed for the F.Y. 2019-20. However for F.Y. 2018-19, the de-activated DIN shall be re-activated if Form DIR-3-KYC is filed upto 30th September, 2020 without any additional fee, thereby availing the benefit of the CFSS Scheme 2020.

What is faceless tax assessment or e assessments In Income Tax?

Anjali Garg
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What is faceless tax assessment or e assessments In Income Tax?

A Modern Generation of TRUST, TRANSPARENCY and TAX

“A lot of things would depend on the discretion of assessing officer in manual assessment. We have completely revamped it. Instead of territorial jurisdiction, we have brought in dynamic jurisdiction,” Prime Minister Narendra Modi said. Wondering if what we’re doing is really making an impact. But, it’s important that we’re always moving forward, India will perhaps be the first country to implement such a system that taxpayers will no longer be tied to a specific jurisdiction or office for assessments because now the Central Board of Direct Taxes has launched a faceless, randomized and fully electronic assessment system, removing all human interfaces. Now, that income Tax Department would increase the amount of faceless scrutiny, and the algorithm for allocating such scrutiny would adjust occasionally. Owing to such faceless scrutiny, further transition of Income Tax officer will be less. So here’s the three big announcements that were made by Prime Minister Narendra Modi on Thursday launching a “Transparent Taxation — Honouring the Honest” platform:
  1. Faceless appeal scheme– to be implemented from 25th September, 2020.

 Elements to this scheme are:

      1. Appeals to be randomly allotted to any officer.
      2. The identity of officers deciding appeal will remain unknown
      3. No need to visit the officer/office
      4. The appellate decision will be Team Based & reviewed

Exceptions for the situations concerning:

      1. Serious fraud, Major Tax Evasion, Sensitive & Search matters
      2. International tax
      3. Black Money Act & Benami Property
  1. Faceless e assessment scheme

Elements to this scheme are:

      1. Selection only through system using data analytics & AI
      2. Abolition of territorial jurisdiction
      3. Automated random allocation of cases
      4. Central issuance of notices with Document Identification No. (DIN)
      5. No physical interface, No need to visit income tax office
      6. Team-based assessments and Team-based review
      7. Draft assessment order in one city, review in another city & finalization in third city

Exceptions for the situations concerning:

      1. Serious fraud, Major Tax Evasion, Sensitive & Search matters
      2. International tax
      3. Black Money Act & Benami Property
  1. Taxpayers’ Charter
       The income tax department has dedicated itself to:
      1. Provide fair, courteous, and professional assistance in all dealings with the taxpayer.
      2. Treat taxpayer as honest unless there is a reason to believe otherwise.
      3. Provide fair and impartial appeal and review mechanism.
      4. Provide complete and accurate information for fulfilling compliance obligations under the law.
      5. Mean to provide timely decisions in every income- tax proceeding within the time prescribed.
      6. Shall collect the correct amount of tax.
      7. Respect the privacy of the taxpayer and be no more intrusive than necessary in any inquiry, examination, or enforcement action.
      8. Maintain confidentiality and shall not report to the department any information received by the taxpayer, unless approved by law.
      9. Authorities shall keep accountable for their actions.
      10. Every taxpayer can choose an authorized representative of his / her choice.
      11. Provide the mechanism to lodge complaint and prompt disposal thereof.
      12. The Department shall have a fair and unbiased framework and address tax problems in a time-limited manner
      13. Intend to update the service quality standards periodically.
      14. Reduce cost of compliance when administering tax legislation.

Expectations from taxpayers:

      1. Be honest and fulfill his compliance obligations.
      2. Remain aware of their obligations to comply.
      3. Hold accurate records.
      4. Know what the representative does on his behalf.
      5. Respond in due course.
      6. Pay in Time.
The PM focused on the fact that the honest taxpayers contributed immensely to the national development. When the taxpayers’ life became simple, they progressed and so did the nation. The new facilities were in consonance with, and further strengthened, the government’s motto of ‘minimum government’, ‘maximum governance’. The government had adopted people-centric approach towards making laws, rules and policies. “This is an experiment of the New India’s new governance model and the country is getting positive results. Everyone has now realized that short-cuts are not acceptable, and it is not wise to adopt wrong means,” he said, adding that sense of duty was now the most appreciated approach.

Return filing is not easy anymore!

CA Yash Kapadia
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Return filing is not easy anymore!

The government has made many changes in Income Tax Returns and reporting of various details are made compulsory since last two years. Also the government wants to link all the details such as bank account, Aadhar details, property and investment details relating to assessee with the return of income. Linking of PAN and Aadhar, Pre validation of bank accounts on e-Filing Portal for refund etc. is made mandatory from last Assessment Year. Now let us discuss the various changes in ITR and various details which are being asked by the Income Tax Department while filing the return of income since A.Y. 2019-20.

(A) From A.Y. 2019-20, if the assessee is having income from LTCG, then the assessee is required to report scrip wise additional details such as Name of Company, FMV of Shares / MF as on 31.01.2018, ISIN code etc. in Schedule CG. Also, if LTCG arise on account of sale of immoveable property, then details such as Name, Address, PAN and % of sharing etc. is mandatorily required to be reported.

(B) From A.Y. 2019-20, in the Income Tax Return the assessee is required to provide the various details like Name- PAN – Type of the company, listed or unlisted, DIN etc. of the company / companies in which the assessee was / were directors at any time during the previous year. Therefore, the assessee is required to provide all the details of his / her directorship in listed as well as unlisted company at the time of filing return of income.

(C) From A.Y. 2019-20, at the time of filing return of income, the assessee is required to provide Name and PAN of the firm / firms in which he / she was / were partner at any time during the previous year.

(D) Form A.Y. 2019-20, the assessee is required to report regarding shares of the unlisted company held at any time during the previous year. Details such as Name of company, PAN, Shares held at the beginning of the year, Cost of acquisition, Shares acquired during the year and its price, Shares Transferred and Sale consideration etc. are required to be reported at the time of filing return of income. This proves to be the very burdensome for the assessee.

(E) From A.Y. 2019-20, the assessee is required to report various details of Foreign Depository Accounts held (including any beneficial interest) at any time during the relevant accounting period.

(F) Up to A.Y. 2019-20, only the person whose income exceeds the basic exemption limit was required to file his / her income tax return. But the FM has inserted seventh proviso to section 139(1) vide the Finance (No. 2) Act, 2019 and as per this proviso “if the income of any person is below maximum amount which is not chargeable to tax but falls under any of the criteria (as mentioned below), is required to furnish his / her return of income”.

(1) Has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(2) Has incurred expenditure of an amount or aggregate of the amounts exceeding two lakhs rupees for himself or any other person for travel to a foreign country; or

(3) Has incurred expenditure of an amount or aggregate of the amounts exceeding one lakhs rupees towards consumption of electricity.

In view of the above, we can say that at the time of preparing books of accounts, the assessee is required to verify and analyze these additional details.


(G) From A.Y. 2020-21, if the assessee is having income from House Property (Rent Income), then he / she is required to compulsorily provide PAN / Aadhar No. of the Tenant.

(H) From A.Y. 2020-21, a person who is required to file ITR – 7, then required to report additional details such as name, nature of activity, classification, approval from Income Tax Department or any other department of any project or institution run by the assessee at any time during the previous year.

(I) From A.Y. 2020-21, If the person is filing return of income in response to the Notice issued by the Department, then UDIN Number is required to be quoted in the respective field.

As the adage two sides to a coin, the increasing number of required details while filling of return of income is both a boon and curse as it makes the process of return filing more accurate and precise along with making it a little tedious and mundane. This leads to increased maintenance of data at the central level thereby making economy transparent and it also helps in the nation building.

What is Form ADT 1? Form ADT1 For Appointment Of Auditor

Anjali Garg
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What is Form ADT 1? Form ADT1 For Appointment Of Auditor

When a company appoints an auditor, it is obliged to accept the appointment of an auditor to the Registrar of Companies (ROC) in a specified manner in compliance with section 139(1) of the new company act 2013. In this reason the Form ADT-1 is used.

Under Section 139(1) of the New Companies Act 2013, a company shall disclose its appointment to the auditor and, at the same time, notice of such appointment must be filed with the company registrar within 15 days of the appointment. Such note about the appointment of an auditor must be filled out in the MCA portal in Form ADT 1 as per the law.

I’ll narrate you a brief understanding of the ADT-1 type through this post. This is where we go:

What is Form ADT 1?

Form ADT-1 may be referred to an intimation sent by any company to the Registrar of Companies concerning the appointment of an auditor following the assumption of its Annual General Meeting u/s 139(1) of the Companies Act , 2013 (fourth proviso to subsection ( 1)).

According to Sec 139 (1) of the new Companies Act 2013, it is mandatory to file this form every year with the Registrar Of Companies as a notice of appointment of auditor after the AGM wherein the new auditor was appointed.

When to file ADT-1 Form?

IN CASE OF NEW COMPANY INCORPORATION:- Form ADT-1 is expected to be filed within 15 days of the company’s first board meeting, to be held within 30 days of incorporation in which the auditor shall be named by the company’s board of directors.

FOR EXISTING COMPANY:- The corporation will file Form ADT-1 with the company’s registrar within 15 days of the AGM in which Auditor was appointed or reappointed as the case may be. For e.g., if an AGM of the company was held on 30 August 2020, the company should file Form ADT-1 by 14 September 2020.

Also Read:

Penalty u/s. 270A and 271(1)(c)

What are the Documents required?

Following documents are required:

  1. Copy of Resolution of the Board of Directors announced at the Annual General Meeting
  2. Written consent on nomination from the Auditor
  3. A confirmation from the Auditor that he/she is not disqualified or unable to be named as auditor u/s 141
  4. Copy of the company’s intimation to an auditor

ADT 1 Form Filing Fees:

The filing fees of form ADT 1 with the registrar of companies are as follows:

Nominal Share Capital of the Company Fee in (INR)
Under 1 lakh 200
Falls from 1 lakh to 5 lakhs 300
Is between 5 lakhs and 25 lakhs  400
Falls from 25 lakhs to 1 crore 500
More than or equal to 1 crore 600

Also Read:
What are the Amendments

Delayed Filing Penalty

Late filling of ADT-1 form will impose following penalties:

Sr.No Delay in Filing (in no. of days) Penalty Leviable
1 Up to 30 days Twice the Normal Fees
2 More than 30 days but less than 60 days 4 x Normal Fees
3 More than 60 days but less than 90 days 6 x Normal Fees
4 More than 90 days but less than 180 days 10 x Normal Fees
5 More than 180 days 12 x Normal Fees

Points to remember

  1. For all companies listed/ unlisted/ public/ private/ others, submitting Form ADT 1 is compulsory.
  2. For the appointment of the first auditor, there is a general thinking that Form ADT 1 is not required to register. That is because Rule 4(2) of the laws of the company addresses only Sec 139(1) – appointment of auditors and not Sec 139(6)- Appointment of the first auditor. However, it is a good practice to file Form ADT 1 for the appointment of the first auditor too.
  3. Even in case the auditor is named for a casual vacancy, Form ADT -1 must be filed.
  4. Form ADT-1 can be submitted online electronically via the website of the Ministry of Corporate Affairs.
  5. It will auto-approve the e-form uploaded.
  6. When the organization also files its AOC-4, they must also note the ADT-1 form SRN number.

Conclusion:

Form ADT-1 matters most when it comes to appointing an auditor to your company. Such Forms are required for businesses to file within the specified 15-day deadline. Where the Company is appointed as First Auditor pursuant to Section 139(6) of Company Act 2013. It can therefore be concluded, in the light of the above provisions that we do not need to file Form ADT-1 mandatorily for the appointment of the Company’s first auditor.

Manner of computing disputed tax in cases where loss or unabsorbed depreciation is reduced – Vivad se Vishwas Scheme.

Raghav Bajaj
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Manner of computing disputed tax in cases where loss or unabsorbed depreciation is reduced – Vivad se Vishwas Scheme.

The Direct Tax Vivad se Vishwas Act, 2020 introduced a dispute resolution scheme, which was applicable to all appeals/petitions filed by the taxpayers or the income tax department, which were pending until 31 January 2020, before any appellate forum. In essence, it offered complete waiver of interest and penalty if the taxpayer agreed to pay the disputed tax amount by 31 March 2020 which is now extended to 30th June 2020.

The VSV rules lays out the manner of computing disputed tax in specific situations such as those where loss or unabsorbed depreciation under Rule 9 of the DTVSV Rules 2020.

As per sub-rule(1), where the dispute in relation to an assessment year relates to reduction in loss or unabsorbed depreciation to be carried forward under the Income-tax Act, the declarant shall have an option to

(i) include the tax, including surcharge and cess, payable on the amount by which loss or unabsorbed depreciation is reduced in the disputed tax and carry forward the loss or unabsorbed depreciation by ignoring such amount of reduction in loss or unabsorbed depreciation; or

It means either to pay only tax amount on disputed amount/addition without reducing the carry forward of amount of loss or unabsorbed depreciation; or

(ii) carry forward the reduced amount of loss or unabsorbed depreciation.

It means to pay no tax under Vivad se Vishwas Scheme and carry forward the reduced amount of loss or unabsorbed depreciation for subsequent years.

As per sub-rule(2), where the declarant exercises the option as per clause (ii) of sub-rule (1), he shall be liable to pay tax, including surcharge and cess, along with interest, if any, as a consequence of carrying forward the reduced amount of loss or unabsorbed depreciation in subsequent years.

For Example:

XYZ Ltd. has carried forward loss of Rs.100 and addition made by the assessing officer is Rs.70, thus leaving a reduced carried forward loss of Rs.30. If XYZ Ltd. opts to go under VSV scheme, it will have two options:

Option-1– To pay Tax on Rs.70 (Disputed Addition) as per the provisions of the Act and carry forward the loss of Rs.100.

Option-2– To carry forward the reduced loss i.e. Rs.30. and pay no tax under VSV Scheme.

The option 2 for not to pay tax under VSV Scheme looks attractive but there is catch here which we should understand. The ITR returns of subsequent years are to be scrutinised. If the assessee has utilised the carry forward loss or unabsorbed depreciation of the relevant assessment year in the next assessment years and set off the same against income of future years, then the assessee shall have be liable pay tax to the extent of the loss utilised in subsequent years along with interest. In such scenario, exercising the option 2 shall be a costly affair and it is advisable to work out the cost benefit analysis based on facts and circumstances of each case before arriving at an option.  

For Example: Continuing the above example

Let us assume that XYZ Ltd. in the subsequent assessment year earns profit of Rs.140. Now as per assessee he had brought forward loss of Rs.100 and therefore paid taxes on profit of Rs.40 after setting of the brought forward losses of previous assessment year. However as per the provisions of the DTVSV Act and as per our understanding the assessee shall have to compute the tax liability after considering the reduced loss of Rs.30 only and shall have to pay taxes along with interest on Rs.70(as it has already paid taxes on profit of Rs.40) after setting off the brought forward losses computed by Assessing Officer.

Note: In case of tax authority’s appeal or in case where a favourable order has been obtained on the same issue from a higher appellate authority and which has not been reversed then the payment of disputed tax will be limited to 50% of the such tax.

Let us now take different scenarios and possibilities into consideration and determine the feasibility of the options in other cases.

Case 2- Where there was carry forward loss but after addition there is income

XYZ Ltd. had carry forward losses of Rs.100 but AO made addition of Rs.120. Now it is a case of disputed reduced losses as well as disputed income.

Option -1 To pay Tax on Rs.120 (Whole Disputed Addition) as per the provisions of the Act and carry forward the loss of Rs.100.

Option -2 To pay Tax on Rs.20 only under VSV Scheme. However, the carry forward will become Nil and assessee has to pay tax on Rs.100 if it has claimed set off, of such loss which is disallowed by AO in the current year, in any subsequent year or years.

Opinion: Usually, the carry forward losses is used as set off in subsequent years and in such case Option-2 is not a advisable option as the assessee have to pay taxes on such used carry forward loss(set off) along with interest. However, there can be a possibility that in subsequent years the tax rate is reduced and in such scenario the amount of reduced taxes will be more than the interest charged as per the provisions of DTVSV Act 2020. Then it might be a feasible option to choose.

Case 3- When the carry forward losses is not utilised in subsequent years or return filed in current year or subsequent is not within due date (i.e. Belated Return).

XYZ Ltd. has returned loss of Rs.100 and AO made addition of Rs.80. However, the assessee files belated return or in the subsequent year he fails to use the carry forward losses against its income. In simple words, the assessee did not take the benefit of losses in subsequent years.

Option-1 To pay Tax on Rs.80 and there will be no changes in the items of subsequent years as claimed by assessee.

Option-2 To pay No Tax under VSV Scheme.

Opinion: Insuch case it is advisable to choose Option-2 as there will be no benefit in choosing Option-1 as the assessee has failed to utilise the carry forward losses in subsequent year or is not allowed to carry forward the loss in subsequent years as it has not filed return within the due date or fails to fulfil the conditions of claiming carry forward losses. Therefore, in such case Option-2 is the preferred or advisable choice.

Conclusion: This option of non-payment of tax under VSV Scheme can be more expensive and can result in greater outflow of cash depending on case to case basis. Therefore, it is suggested that taxpayers should evaluate the actual tax/cash outflow currently as well as in future if they wish to opt for the VSV scheme.

Date of Allotment to be considered for calculating Holding period even if Date of possession is later.

Sneha Kejriwal
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Date of Allotment to be considered for calculating Holding period even if Date of possession is later.
  1. Capital gain is the profit or gain that is earned from the sale of any capital asset. There are two types of capital gain: a) long term capital gain and b) short term capital gain. While calculating capital gain tax, a taxpayer must take careful consideration of the various dates i.e. date of allotment, purchase date, date of possession, date of improvement, etc.
  2. However, we may see a difference in opinion between taxpayers and Income Tax Authorities while determining the holding period of a property to determine the nature of capital gain i.e. Long term or Short term. In many situations, Income Tax Authority may take date of possession instead of date of allotment while calculating holding period which may lead to change in nature from long term capital gain to short term capital gain. This change will prevent the taxpayers from various benefits:
    (a)Cost of Indexation
    (b)Exemption under section 54, 54EC, 54F, 54B.
  3. The above difference is clarified by the decision of the Honourable ITAT (Mumbai bench) in case of Yogesh Mavjibhai Gala vs. PCIT [ITA No. 3373/Mum/2019]. In the above case, the assessee has sold 2 flats vide separate agreements dated 17.07.2013 and 21.05.2013. A letter of allotment in respect of the aforesaid property was issued on 20.02.2010 by the builder. The assessee computed long term capital gain taking date of allotment as base. Against the sale of the aforesaid flats, the assessee purchased a new residential property and claimed deduction u/s. 54. However, the PCIT was not satisfied with the claim of deduction u/s. 54 by the assessee and revised the assessment order u/s. 263 of the Act, due to the following observations:
    (a) The allotment letter did not vest any right to acquire the property with the asssessee, and only created an interest to acquire the same on the terms and conditions as would be laid down in the agreement to purchase.
    (b) The assessee had became the owner of the 2 flats, only on the basis of the respective agreements for purchase i.e dated 05.07.2013 (registered on 08.07.2013) and dated 04.05.2013 (registered on 08.05.2013) and not on the basis of the allotment letter, dated 20.02.2010 that was issued to him by the builder.
    (c) The assessee had sold the 2 Flats while they were still under construction.
    (d) The property sold by the assessee was still under construction and possession of the same was yet not handed over to him till the date of their sale.
    (e) The assessee had neither received the possession of the aforesaid flats which were under construction, nor used the same for his residence for a period of 3 years.
  4. The Honourable ITAT stated that the assessee had filed a ‘Completion certificate’, dated 12/01/2011 issued by the Architects, wherein they had stated that the 7th Floor Slab (the flats were situated on the 7th floor) had been completed. It was held that “we may herein observe that the view taken by the A.O that the date of allotment of the flats i.e 20/02/2010 was to be taken as the basis for calculating  the  period  of  the  holding  by  the  assessee,  on  the  date  of  framing  of  the assessment  was  supported  by  the  order  of  the  jurisdictional  Tribunal  i.e  ITAT,  Mumbai Bench „F‟, Mumbai  in ACIT, 18(3), Mumbai   Vs. Smt. Vandana  Rana  Roy  [ITA  No. 6173/Mum/2011, dated 07/11/2012]. In the said case, the Tribunal had observed that the “date of allotment” was to be reckoned as the date for computing the holding period for the purpose of capital gains. Also, in the case of Richa Bagrodia  Vs. Dy. CIT [2019] 175 ITD  552  (Mum), the  jurisdictional  Tribunal has held  that  in  case  of  sale  of  flat  it  is  the date of allotment of the flat and not the date of giving of possession of flat which has to be  considered  for  computing  the  holding period  of  36  months.”  Accordingly, the tribunal set aside the order passed by the PCIT u/s. 263.
  5. According to the CBDT in its circular No.471 dated 15th October, 1986 had clarified this position by holding that when an assessee purchases a flat to be constructed by Delhi Development Authority (“D.D.A.” for short) for which allotment letter is issued, the date of such allotment would be relevant date for the purpose of capital gain tax as a date of acquisition. It was noted that such allotment is final unless it is cancelled or the allottee   withdraw   from   the   scheme   and   such   allotment would   be   cancelled   only   under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the  payment  of  installments  was  only  a  follow-up  action  and  taking  the delivery of possession is only a formality. In the circular dated 16th December, 1993 the board  has  considered that  in  cases  of allotment  of  flats  or  houses  by  co-operative  societies  or  other  institutions  whose  schemes  of allotment and consideration are similar to those of D.D.A. may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act.
  6. It  can  thus  be  seen  that  the  entire  issue  was  clarified  by  the  CBDT  in  its  above  mentioned  two circulars dated 15th October, 1986 and 16th December, 1993. In terms of such clarifications, the date of allotment would be the date on which the purchaser of a residential unit can be stated to have  acquired  the  property.

Compliances after Incorporation of Company:-

CA Harshi Modi
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Compliances after Incorporation of Company:-

1.Bank Account:-

After the incorporation of the company there must be a bank account in the name of the company so that authenticity of each and every transaction can be maintained for the sake of stakeholders of the company. Since the company is a separate legal entity, the transactions cannot be done in the name of any natural person. The said bank account shall be needed for other legal registrations.

2.Commencement of business certificate:-

Within 180 days, the company shall obtain a certificate of commencement of business by filing Form INC 20A. Every subscriber of Private Limited Company has to introduce share capital within 60 days of its incorporation by way of cheque or online transfer. Shareholder holding shares worth less than rupees twenty thousand can introduce his share capital by way of cash. However it is not advisable to introduce share capital by cash.There is a requirement to file a disclosure made by the directors of the company stating that every subscriber has paid the amount due on the shares.

3.Allotment of the Securities and Issue of Share Certificate:-

Company must allot the shares to its subscribers within 60 days from the date of incorporation of the company whose name is mentioned in the articles of association and memorandum of association of the company. Company must issue share certificates to all the subscribers of the Company within 60 days from the date of incorporation of the company duly signed by MD and CS if any otherwise by any two directors of the Company

As per the requirement of the provision of the Indian Stamp Act 1899 every instrument must bear a stamp duty with proper amount and it must be paid to the concerned department within 30 days from the date of issue of share certificates (Revenue Department). It can be paid via portal SHCIL online with necessary attachment.

4.First meeting:-

The company shall hold a meeting of the Board of Directors in less than 30 days of incorporation of Company. Directors are permitted to attend the meeting either in person or through video conferencing. Company should maintain minutes of meeting of all the board meetings and attendance register for its records. The first directors of the company has to disclose their interest in other entities to the company in the meeting of board of directors and board will discuss on the same and intimate to ROC. If required the company will also maintain the record of the same in the register of the company.

5.Appointment of First Auditor:-

Company has to appoint the first auditor of the company within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting. Failing which the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees.

6.Statutory registers:-

The company shall be required to maintain statutory registers at the registered office of the company. i.e. register of members, register of directors, charges, Debenture holders and other matters pertaining to the shareholders and management of the company and it must be regularly updated and to be kept at the registered office of the company.

7.GST Registration and PF/ESIC Compliance:-

In the GST Regime, businesses whose turnover exceeds Rs. 40 lakhs* (Rs 10 lakhs for NE and hill states) is required to register as a normal taxable person. A labour consultant may need to be appointed for compliance of PF/ESIC/other labour laws applicable to the Company.

8.Books of Accounts:-

Every company shall maintain proper books of accounts at their registered office which shall represent an accurate and fair view of the state of affairs of the company. The double entry system shall be followed, and the accounting is to be done on an accrual basis. A proper accountant may be appointed on Full time/part time basis to carry out data entry on regular basis. An option for online Accounting Software like Zoho books or Quickbooks may be explored.

9.Compliance related to stationery

As per the provisions of the Companies Act, all the companies are required to print its name, registered office address, Corporate Identity Number (CIN), telephone number, fax number (if any), email address and website address on all its visiting cards, letterheads, billheads, notices and all other official publications.

10.Annual Compliances

As a part of Annual filing, Companies are required to file AOC-04 for filing financial Statements, MGT-07 for filing Annual Return by companies having share capital.

Learn How To Increase Office Productivity

Priya kejriwal
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Learn How To Increase Office Productivity

About MERAOFFICE

MERAOFFICE is an online cloud-based platform useful for Professionals to easily manage their office work, clients & staff. 

Why MERAOFFICE?

Due to Coronavirus, many people prefer to shift their work from the office to homes, with this cloud-based system it gets all the easier to delegate and assign work, it increases team productivity & helps to manage every deadline for your clients. It is a platform to ensure you are updated with your daily tasks even working from home/remote offices by just streamlining your work on MERAOFFICE.

Brief knowledge about the terminologies used in MERAOFFICE:-

1. Service – the main nature/department of work to be performed.

For example – GST, INCOME TAX, STARTUPS, PROJECT FINANCING SERVICES

2. Task – the sub nature of work under the main department of work ( under services)

For example – under GST it can be GSTR1, GSTR3B, GSTR9, GST REFUND

3. Milestones – actual work to be performed/collected in order to complete a particular task

For example – In order to complete GSTR 3B various milestones have to be checked from details of taxable supply and credit note, details on which RCM is applicable, details of non-get and exempt supply, etc

4. Blockers- task/milestones which are pending to be completed because of clients/due from clients end

For example – DSC not received, appeal fees not paid by the client

5. Inward attachments- all the attachments/documents received from clients

For example- Financials of a particular AY for the audit, some signed documents

6. Outward attachments – all the attachments/documents to be submitted to clients

For example – final audit reports, GST 

7. Activities – all the action/motion done by you in MERAOFFICE for all services

For example – If you create a task, your activity tool will be shown that you have created a task along with date and time.

Easy steps to follow to work on MERAOFFICE:-

1. Firstly you will be welcomed on-boarding to get registered on MERAOFFICE by simply creating your account by filling up a few credentials. It is as easy as creating a Google account. 

2. There are five productivity tools on the software – dashboard, task, clients, reports, and activities.

3. Start by creating a task, click on ‘add’ to generate new task. Select your service, task type, task template, task leader, task supervisor, task team, number of target days, due date, and lastly add client/multiple clients in one go for a particular task.

4. After creating the task, the dashboard reflects other five productivity tools to see and manage your tasks, you can adjust your daily work by seeing task which is critical to the due date, a task which is performed in last 24 hours, etc

5. Each task has few milestones to be checked mark to ensure that task is being completed, as and when you complete the milestone and update on software, an email will be sent to all the people associated to the task (to ensure the team/staff/client know the status for their work)

6. For the bulk task which are recurring in nature you can create task template for each service.

7. Reports can be generated to check each team member’s contribution to each team task, to check the contribution of the overall team in getting tasks completed and health checkup reports are useful to check if milestone A is completed but milestone B is pending.

This was the overview of cloud-based platform MERAOFFICE. All your office members have to just log in and update from time to time about the work they are during so that it is useful for everyone around, it always helps to avoid frequent calls from clients to check on their status of work as they can easily receive mails for the same and it ensures that your time is utilized in the most efficient way.

Do visit https://meraoffice.in and explore it by starting your 1-month free trial.

Book a one to one demo at https://calendly.com/mera-office/meraoffice-in-virtual-demo?back=1&month=2020-08&date=2020-08-10

After all, at the end of the day, you don’t have to have a hard disk to store your data subscribe to MERAOFFICE and you are ready to rock and roll.

Also, for any further doubts please do watch https://meraoffice.in/tutorial or book your virtual memo session of MERAOFFICE on the website.

Thank You!

 

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