Dear friends, in continuation of my earlier article on topic “FAQ’s generally asked while Filing Income Tax Return” in Today’s article, we will discuss some more FAQ’s which are asked by taxpayers while filing their Income Tax Return.
During the last year, I have started my new business and this time I am going to file my first business ITR, what documents do I need to prepare for my business tax return?
Required documents for filing Income Tax returns for business vary, based on the constitution of the business. For example in the case of Non-audit case of proprietorship business, GST Turnover, purchase value, closing stock value, sundry debtors, and creditors value as of 31st March along with bank statements serve the purpose. On the basis of these documents, your professional can extract the required details and file your ITR.
In the case of businesses having a constitution other than proprietorship in addition to the above documents, more documents are required: a Balance Sheet, Digital signature, Stock market-related information, if invested, Shareholder details, partner details, tax saving investments, etc.
I am running a Proprietorship firm and this business Income is the only source of income for me and I am regularly paying GST, whether I have to pay income tax also? Is GST the only tax I can pay?
Income Tax is the Direct tax, which a person has to pay when he earns income whereas GST is an indirect tax, which a person has to collect from his customer and after collection has to pay to the treasury of the Government. Here, it should be noted, that the burden to pay GST falls on the end consumer. The middle chain has just to collect taxes from its customers and deposit the same with the GST Department.
In the case of a proprietorship business, a dealer has to collect GST from its customer and has to deposit with the GST Department within the specified period to avoid interest and late fees. If your income/ profit from this business is more than the exemption limit as prescribed in Income tax law, then you have to pay taxes (if applicable) and have to file ITR within the specified period.
Whether it is possible that I can sell my house and invest that amount in shares / mutual funds and avoid capital gains tax in India?
As per the Income Tax Act, 1961, if you sell your house, you have to pay capital gain (Long term/ Short Term) depending on the holding period of the house property. To avoid capital gain, you have to take the benefit of Section 54 (Purchase of another house property).
If you want to sell a house property and invest that money in a Share Market/ Mutual Fund, you are not allowed to save capital gain earned on this transaction and you have to pay capital gain taxes. Tax benefit for investment in the mutual fund is allowed U/s 80C of the Income Tax Act in the form of ELSS Mutual fund with a lock-in period of 3 years up to Rs.150000/-.
During the last year I received some jewelry as a gift from a relative, whether this gift is taxable and where should it have to be shown in ITR 1?
If gifts are received from relatives covered in the definition of relative as per the Income Tax Act, 1961 then this gift is not taxable, and no need to show this jewelry in your ITR subject to the condition that your income is not more than Rs.50 Lakh per annum otherwise you have to give details of assets, jewelry held as on 31st March.
If gifts are received from a person who is not relative as per the Income Tax Act then the provision of section 56 triggers and the recipient has to pay taxes under the head Income from other sources and Fair market value of Jewelry will be considered as income if jewelry value is more than Rs.50,000/- (Exception gift received on the occasion of marriage.)
I am trading in Crypto, do I have to pay taxes on crypto sold through P2P trading in India since I am getting money directly in our banks from some person? Is it possible just to pay normal income tax on it?
In today’s time, many people (many NRI) are sending and receiving crypto using P2P platforms, which in my view, is not correct. In P2P trading you do not know the legality of the income of the person who is transferring money into your bank account. At the time of investigation, it may be considered as a Hawalla transaction and you have to face the heat of PMLA and FEMA Act. In my view, you should not be involved in P2P Trading of Crypto.
Further, in my opinion, to avoid litigation in the Income Tax Act, you should pay tax at 30% as applicable on crypto currency instead of paying taxes at the normal rate. Because, if the case is selected for scrutiny then you have to disclose this income is related to P2P Crypto currency, and at that time you have to pay higher taxes, interest, and penalties.
My father has a house on home loan, if he gifts (registered gift deed) it to me, can the loan be transferred to my name and will I be eligible to claim tax benefits? Can I get home loan and avail tax benefits in the following scenario?
In my view, in such a situation, your father cannot gift you property unless and until he repays the home loan. Because till the time he has not cleared his home loan, he has no right to transfer that property to anyone. Further, until the time the home loan is sanctioned in your name, you are not allowed to claim interest on the home loan in your ITR.
I am unmarried and most of my income is given away in charity and I am left with just enough money to meet my personal requirements. What will be considered as my income? Whether I have to pay taxes on whole amount or amount left after making Charity?
As per the Indian Income Tax Act, ultimate disposal of your income is not considered for taxation purposes unless and until it does not fall under clubbing provisions. You have to pay taxes on your earned income and not on income that is left after incurring your expenses. In this case, you have to pay taxes on whole earned income subject to deduction U/s 80G, if you made a donation to any NGO that is registered under this section to receive the donation, and the donor is allowed to get the benefit of Section 80G.
While donating to an 80G Registered NGO, you should donate to NGO that have final registration approval letter because donating money to a provisional registered NGO may cause problems at later stage.
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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The author will not be held responsible for any loss, if occur after using above information. Kindly consult your professionals before taking any action. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers. The Author “CA Shiv Kumar Sharma” can be reached at Mobile/WhatsApp–9911303737.
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