DIRECT TAXATION
TDS NEED TO BE DEDUCTED ON PERQUISITE / BENEFIT OFFERED
1. With effect from 1 April 2022 the Company need to deduct TDS under section 194R @ 10% provided quantum of benefit or perquisite of a business or profession exceeds 20,000.
Analysis: Say as a promotional activity, the Company offer free international travels /incentivization to its distributor for meeting the sales target or for business development and such offers are made in the nature of the benefits/perquisite offered other than in form of the payments. In such a scenario the Company need to deduct the TDS @10% for such freebie offered to its distributor, the provided value exceeds 20,000 annually.
TAXABILITY OF VIRTUAL DIGITAL ASSETS (VDA)
2. With effect from 1 April 2023, Section 115BBH has been inserted to tax on VDA @30% on Income from the sale of VDA and No expenditure ( other than Purchase cost) and set off loss shall be allowed
- Further, if VDA is sold at less the market value then such amount will be treated in the hand of the recipient under the head of another source
- Additionally, TDS @1% will be deducted at the time of making the payment to the recipient
Definition of VDA
(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically
(b) a non-fungible token or any other token of similar nature, by whatever name called;
(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:
PROFIT EXEMPTED FOR 3 YEARS OUT OF 10 YEARS PROVIDED “ELIGIBLE STARTUP” INCORPORATED BEFORE 1 APR 2023 ( earlier it was 1 April 2022)
3. Section 80 IAC says eligible start-ups shall be allowed for deduction @ 100% of profit for 3 consecutive years out of 10 years provided all conditions met
A. Startup Incorporated between the period 1 April 2016 to March 2023
B. Turnover of the business does not exceed Rs. 100 crores
C. It holds a certificate of eligible business issued from the inter-ministerial board of certification
COVID EXPENSES INCURRED BY THE COMPANY FOR ITS EMPLOYEES WILL NOT BE TREATED AS INCOME IN THE HANDS OF THE EMPLOYEE
4. Section 56(X)(c)
Clause xii has been inserted which clarify that amount received by the Individual on COVID treatment shall expense incurred by the company for its employee shall not be treated as Income under another source for an employee
Clause XIII has been inserted which provide any amount received from an employer with 12 months from death an amount up to Rs 10 lakh shall not consider as income under another source
INCOME TAX AND CESS PAID IS NOT BUSINESS EXPENDITURE
5. Section 40: the term “tax” shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Therefore, the amount paid toward income tax, cess, education cess is not an allowable expenditure under the income tax
THE COMPANY CAN UPDATE THE INCOME TAX RETURN NOW
6. Section 139(8) has been inserted to provide that the Company can update the income tax return or In case the company missed to file the return, can file the return now within the period of 2 years.
Additional tax liability
- The company needs to pay the additional tax @ 15% plus interest and fees if the return is filed within 12 months or
- The company needs to pay the additional tax of @25% plus interest and fees if the return is filed within 24 Months
GOOD AND SERVICE TAX
TIME LIMIT TO AVAIL INPUT TAX CREDIT /CREDIT NOTES/ RECTIFICATION OF RETURNS EXTENDED TILL 30 NOVEMBER OF THE NEXT YEAR
7. The upper time limit to avail the Input Tax Credit/Credit Notes/ rectification of returns i.e GSTR-1/ GSTR3B has been extended to 30 November of the next year which was otherwise 30 September of the next year.
GST INPUT IS INELIGIBLE IF THE SUPPLIER DOESN’T FILE THE RETURN
8. The company can claim input tax credit once the supplier file the return and amounts are reflected in the GSTR 2B. If the supplier does not file the GST return, the Company cannot claim the input tax credit
INCORRECT OR WRONGFUL UTILISATION OF INPUT TAX CREDIT ATTRACT INTEREST OF @18%
9. The company needs to discharge interest @18% on account of incorrect ITC availed and utilised
THE COMPANY CAN TRANSFER THE BALANCE STANDING IN THE CASH LEDGER OF GST PORTAL TO ITS OTHER BRANCH ENTITY
10. The Company can transfer the unutilized cash ledger in one GSTN to another GSTN with the same PAN no, the same shall solve the challenge of the working capital issue wherein credit is blocked in the cash ledger.
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Devan Gupta | Partner | Startup Advisory & Audits | Cretum Advisory | E: [email protected] / [email protected]
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