Equalisation Levy

Applicability of Equalisation Levy

Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient. The two conditions to be met to be liable to equalisation levy:

  • The payment should be made to a non-resident service provider;
  • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.

Services Covered Under Equalisation Levy

Currently, not all services are covered under the ambit of equalisation Levy. The following services covered:

  • Online advertisement;
  • Any provision for digital advertising space or facilities/service for the purpose of online advertisement;

Equalisation Levy was aimed at taxing Business to Business (B2B) ecommerce transactions. Therefore, the scope of the levy may be expanded to cover a larger scale of digital goods and services as the time progresses.

Rate of Tax Under Equalisation Levy

The Equalisation Levy would be applicable at 6% on gross consideration payable for a ‘Specified Service’.

Due Dates for Compliance

Due date of furnishing Equalisation Levy Statement (Form-1) is on or before 30th June of Financial Year ended. This is annual statement.

We will have to deposit the tax with the authorities by 7th of the subsequent month and file the statement (i.e. Form -1) on or before 30th June, 2018.

Consequences of Delayed Payments

In case there is a delay in payment: Interest is charged at 1% of the outstanding levy for every month or part thereof is delayed

In case there is non-compliance on behalf of the service recipient: The compliance procedure for the Equalisation Levy is the responsibility of the service recipient

i. Penalty for failure of payment

Equalisation Levy not deducted: Penalty equal to the amount of levy failed to be deducted (along with interest and depositing of the principal levy outstanding)

Equalisation Levy deducted but not deposited: Penalty equal to INR 1,000/day subject to the maximum of the levy failed to be deducted (along with interest and depositing of the principal levy outstanding)

Disallowance of such expenditure in the hands of the payer (unless the defect is rectified)

ii. Penalty for failure of filing statement of compliance

INR 100/day for each day the non-compliance continues

Advance tax

What is Advance tax?

Advance tax means income tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in installments as per due dates provided by the income tax department.

Why we need to pay Advance tax?

Section 207 of the Income Tax Act,1961: Every Assessee shall estimate his Income and Tax Liability for any previous year and Income Tax So Estimated shall be paid in advance in accordance with the manner given u/s 211 of the Income Tax Act,1961.

Section 208 of the Income Tax Act,1961: A Person Shall be liable to pay advance tax only if Tax Liability exceeds Rs. 10,000 i.e. a person shall be exempt from payment of Advance Tax If Tax Liability does not exceed Rs. 10,000.00. The Education Cess and Secondary Higher Education cess shall also be considered for the purpose of calculating the Tax Liability. Note: A Senior Citizen who do not have Income u/h Business or Profession shall be exempt from the Payment of Advance Tax.

Due Dates for payment of Advance Tax (Section 211)?

For both individual and corporate taxpayers

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax

For taxpayers who have opted for Presumptive Taxation Scheme – Business Income  

Due Date Advance Tax Payable
by 31st March 100% of advance tax

Note: However the Presumptive Tax Payers Covered u/s 44AE and 44ADA shall Pay Advance Tax in accordance with Installments given above.

Interest for default in payment of Advance Tax

S.No. Interest under Section Rate of Interest Why Charged?
1 234 C 1% per month for a period of 3 months (1 Month in case of Last Installment) on the amount of Default in each Installment** For Non-Payment of Advance Tax on or before the Due Date
2 234 B 1% per month or part of a month from 1st April of Assessment Year upto the Date of Payment* For payment of Tax in Assessment Year
3 234 A 1% per month or part of a month for the period beyond the due date of filing return of income For payment of tax beyond the due date of filing return of income.

** If 12% of Tax Liability has been paid upto 15th June and 36% of Tax Liability has been paid upto 15th September then The Interest u/s 234C shall not be charged on such Default.

*The Interest Under Section 234B shall not be Charged if Advance Tax Paid by the Assessee is 90% or more of the Actual Tax Liability of the Assessee.

Statement of Specified Financial Transactions (SFT )

Introduction:

For keeping a watch on the high-value transactions done by the taxpayers, the Income Tax Act has framed a new concept to furnish a Statement of Financial Transactions in a prescribed form 61A also known as AIR (Annual Information Return) previously. In other words, the Statement of Financial Transactions or Form 61A is a record of specified financial transactions that should be furnished under the Income Tax Act.

Section 285BA:

Any person, being who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any report able account as may be prescribed, under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such report able account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed.

Rule 114E:

As per Rule 114E, Statement in Form No 61A shall be furnished by specified persons in respect of all the specified transactions registered or recorded by such specified persons on or after the 1st day of April 2016.

Which are the Specified Financial Transactions?

The specified financial transactions referred above are of following kinds:

  • Sale, purchase or exchange of goods, right, property, or interest in any property.
  • Works contract.
  • Delivering services.
  • Any investment or expenditure.
  • Accepting any deposit or taking any loan.

It is important to note that CBDT can recommend different values with respect to different transactions for different persons by considering the nature of the transactions. The aggregate value of transactions in a particular financial year must be more than Rs.  50,000.

Due date of furnishing SFT:

Further, the statement shall be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded.

Transactions to be reported in Form 61A:

Nature and value of transaction Reporting Person
Receipt from any person of an amount aggregating to INR 1,000,000 or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company) A company or institution issuing bonds or debentures
Receipt from any person of an amount aggregating to INR 1,000,000 or more in a financial year for acquiring shares (including share application money) issued by the company. A company issuing shares
Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to INR 1,000,000 or more in a financial year. A company listed on a recognized stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).
Receipt of cash payment exceeding INR 200,000 for sale, by any person, of goods or services of any nature (other than those specifically provided in the other clauses) Any person who is liable for audit under section 44AB of the Act.

Filing Nil SFT Statement:

Filing of Nil Statement in form No. 61A is not mandatory under section 285BA read with rule 114E but to be on safer side Assessee may consider filing such return. Further to maintain consistency Assessee who has filed Annual Information Return for earlier financial year may consider filing such return for subsequent financial year too despite no specified transaction in subsequent financial year.

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