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1. Change in Section 28: Cash Perquisites are now taxable in the hands of recipient

Earlier Cash Perquisites were not specifically taxable in the Hands of recipients, but the department felt that it was against the intention of the Lawmaker. Many Courts refused to accept the department’s view that perquisites in cash received are also taxable in the hand of recipient, hence in order to bring clarity following amendment made to Section 28(iv):

“the value of any benefit or perquisite arising from business or the exercise of a profession, whether––

(a) convertible into money or not; or

(b) in cash or in kind or partly in cash and partly in

kind;”.

Now all types of perquisites whether in cash or kind or partly in cash or partly in kind are taxable in the hands of the recipient as Profits and Gains from business or profession.

2. Section 43B: Expenditure to MSME allowed on actual payment basis

Section 43B talks about deduction of Expenditures like bank interest, taxes, PF contribution etc. on actual payment basis.

These deductions are allowed only if the actual payment is made on or before the due date of filing the return.

Now new addition has been brought to this list under clause (h) which is as follows:

“any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006,”

This Amendment is applicable only on Payment Made to Micro & Small Enterprises & Not on Medium Enterprises

Time limits under section 15 of MSMED Act are as follows:

If written agreement w.r.t. period is available:

Date as per agreement, or
45 days
Whichever is earlier

If written agreement w.r.t. period is not available:
Within 15 Days

 

Therefore it can be concluded that the expenditure w.r.t. Micro and Small enterprises will be allowed only on actual payment basis in the year in which payment is actually made.

It can be allowed on accrual basis if the time limit prescribed under Section 15 of MSMED Act has not expired at the last day of financial year and actual payment was before the expiry of time limit prescribed.

Biggest cause of concern here is that if Payment is not made within the time limits prescribed above, the expenditure will be disallowed even if the payment has been made on or before the due date of filing the return and will be only available in the Income Tax Return of the Year in which payment actually made

3. Change in Section 44AD & 44ADA:

Both section talks about computation of Income on Presumptive Basis

Benefit of Section 44AD is available to resident Individual, HUF and Partnership firms engaged in Businesses other than Commission Agent & Transport

Earlier Taxpayers who had Turnover upto 2 Crores were allowed take the advantage of this section, now the Turnover limit has been revised to 3 crores with an additional condition that the cash receipts in business should not exceed 5% of total Turnover.

Benefits of Section 44AD are as follows:

Conditions Benefits
If Turnover Upto 2 Crore
  • Can Declare Profit as follows:

8% of turnover received in Cash

6% of turnover received in Bank

  • No Need of Tax Audit
(i) If Turnover is above 2 crores but upto 3 Crores

and

(ii)  Cash Receipts is upto 5% of Total Turnover/receipts

  • Can Declare Profit as follows:

8% of turnover received in Cash

6% of turnover received in Bank

  • No Need of Tax Audit

 Benefit of Section 44ADA is available to resident Individual and Partnership firms engaged in following profession:

1.Legal 2. Medical 3. Engineering 4. Architecture 5. Accounting 6. Technical Consultancy 7. Interior decoration 8. Film Artist

Earlier Taxpayers who had Gross Receipts upto 50 Lakhs were allowed take the advantage of this section, now the Gross Receipts limit has been revised to 75 Lakhs with an additional condition that the cash receipts in profession should not exceed 5% of total Turnover.

Benefits of Section 44ADA are as follows:

Conditions Benefits
If Gross Receipt Upto 50 Lakhs
  • Can Declare Profit as follows:

50% of receipts

  • No Need of Tax Audit
(i) If Gross Receipt is above 50 lakhs but upto 75 lakhs

and

(ii) Cash Receipts is upto 5% of Gross receipts

  • Can Declare Profit as follows:

50% of receipts

  • No Need of Tax Audit

 (The Author of this Article is Chartered Accountant in Practice at Ashoknagar (M.P.) and can also be reached at rohitjain3663@gmail.com)

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