TCS Under Income Tax - Provisions Applicable from 01.10.2020

 

Tax Collected at Source Under Income Tax — New Provisions Applicable from 01 October 2020

Introduction
Finance Act, 2020 introduced 3 new provision under Tax Collected at Source (“TCS”):

TCS on foreign remittance through LRS;

TCS on selling overseas tour packages; and

TCS on sales of any goods

TCS unlike TDS is required to be collected additionally along with consideration for certain transaction;

That is TCS is required to be collected by the payee;

Whereas, TDS is required to be deducted on certain payments made by the payer for certain transactions.

TCS ON FOREIGN REMITTANCE THROUGH LRS

The new provisions of tax collected at source are applicable w.e.f 01 October 2020

TCS ON SELLING OVERSEAS TOUR PACKAGES

TCS ON SALE OF ANY GOODS (1/3)

TCS ON SALE OF ANY GOODS(2/3)

TCS ON SALE OF ANY GOODS(3/3)
We have tried to address few practical aspects in implementation of the said provision by way of FAQs:

How to Collect Tax from the buyer? The seller needs to raise the invoice inclusive of the amount of TCS. However, liability of remittance does not arise until the time when amount is to be collectedHow to determine the applicability of these provision?The law does not make mandatory to comply continuously once the seller is obliged to follow, which means the applicability needs to be determined on a year to year basisWhether TCS applicable on sale of property?Sale of property is covered distinctively under the provision of section 194IA for value exceeding INR 50 LakhsWhether TCS should be refunded in case of sales returns?No, only primary sales value should be refunded as the amount of TCS would have been credited as prepaid taxes and will appear in Form 26AS of the buyer. However, if the amount has not been settled or net settlement is being made post adjustment of return then on such net consideration TCS should be collectedWhether the consideration will include the amount collected towards GST?The word consideration is not defined. In terms of section 145A irrespective of the treatment in books of accounts, the value of sales will be inclusive of GST

TCS PAYMENT AND RETURN

• TCS collected needs to be paid within 7 days of the nextmonth.
• Every tax collector shall submit quarterly TCS return i.e., Form 27EQ in respect of the tax collected by him in a particular
• The due date of quarterly return is asunder

WAY FORWARD AND SCOPE LIMITATION

WAY FORWARDSCOPE LIMITATIONWe shall assist in determining the applicability of the above provision, depending on the nature of business and each business transaction;andWe have not considered the current revised rates as proposed by the government in view of the global pandemic COVID — 19;andThe amount on which the tax should be collected and the amount of remittance for each of the transaction.However, for the sake of the completion, the rates w.r.t sale of goods have been reduced to 0.075% for buyer having PAN/Aadhar, for current financial year only

Disclaimer
Please note that the above note is subject to government clarification or changes in law, we have merely discussed the applicability in the current scenario

Source: https://pkchopra.com/blog/index.php/tcs-under-income-tax-provisions-applicable-from-01-10-2020/

Income Tax Audit in India

 

What is a Income Tax Audit in India?
Under Section 44 AB of the Income Tax Act, 1961, provision of Income Tax Audit is covered. Income Tax Audit is a way to examine an individual’s organization tax returns by any outside agency. Income Tax Audit done to verify all income, get the deduction information or about expenditures incurred. To do tax audit is mandated as per the provisions of the Income Tax Act. This act states that all the taxpayers are required to do an audit of all the accounts of their business or organization.

As per Section 44AB, the audit aim is to ascertain the factual veracity of the returns filed and the accomplishment of other requirements as per applicable rules.

The Chartered Accountant performing the tax audit is required to do the submission of all its findings and observations in the form of an audit report. The audit report is given as per format available in the form numbers 3CA/3CB and 3CD.

What is section 44AB?
Section 44AB contains the provisions related to class of taxpayers for whom getting their accounts audited by a chartered accountant is mandatory.

Tax audit objectives
Following are the objectives of tax audits:

1. A structured tax audit ensures all the organizations and businesses are mapped on similar grounds as far as financial transparency is concerned.
2. It ensures all businesses maintain account books and records relating to revenue and expenses
3. It ensures that total income and deductions are claimed accurately and to the best of everyone’s knowledge.
4. It nullifies the chances of any possible fraudulent practices.

Who all are covered under tax audit rule?
Following is the list of people or class of people who compulsorily need to get their accounts audited:
1. An individual engaged in any form of business with turnover more than Rs. 1 crore.
2. Any professional with annual income more than Rs. 50 lakhs
3. Any individual covered under section 44AD, presumptive taxation rule but later on claims and proves that the profits are lower than as calculated for the taxation purpose. Same is the case with an individual who’s on record income is more than the amount which is tax-free.
4. Anybody who earlier qualified under the presumptive taxation rule but later on opted out of it. He/she would lose the option to revert back to the rule for a straight 5 assessment years span.
5. Individual who qualifies for presumptive taxation scheme but later on claims the actual profits are lower than the calculated ones under the section 44AE.
6. Individual who qualifies for presumptive taxation schemes but later on claims that the actual profits are lower than the calculated ones under section 44BBB.

How to get/file Tax Audit Report
​The tax audit report is to be electronically filed by the chartered accountant to the Income-tax Department.

After filing of report by the chartered accountant, the taxpayer has to approve the report from his e-fling account with Income-tax Department (i.e., at www.incometaxindiaefiling.gov.in).

Penalty for not getting Tax Audit
If any person who is required to comply with section 44AB and fails to get his accounts audited or fails to furnish tax audit report ​, the Assessing Officer may impose a penalty.

The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession.
(b) Rs. 1,50,000.

Hence, it is very important to conduct a tax audit in a timely manner to ensure the transparent and hassle-free running of the business. Any failure in doing so attracts heavy fines and penalty. Being vigilant regarding the financial declarations and filings is important for the smooth running of the business as well as business owner’s mental peace.

If you have any questions or want to know more, kindly contact us.

Internal Auditing Services in India