Article Details

An additional compliance of submitting estimated current Income & Advance tax payment
TAX TALK-02.10..2017-THE HITAVADA
 
TAX TALK
 
CA. NARESH JAKHOTIA

Chartered Accountant

 
 
 
Proposed amendment requiring taxpayer to file estimated current income in Form No. 28AA is in straight contravention to the concept of “Ease of doing business” for which the present Government is committed. It is not going to yield any additional revenue but will surely kill the time & energy of the businesses on the unproductive work & is a pure wastage of talented human resources.
 
 
 
An additional compliance of submitting estimated current Income & Advance tax payment

 

Query 1]
We have read in the newspaper about filing of estimate of income tax return before 30th September? Ours is a private limited company and so whether it is compulsory to file any such estimate? Is it applicable from FY 2017-18 or 2018-19? If yes, why is so much additional compliance burden if the advance tax payment law is already there and taxpayers are complying with it? We are already over burdened with GST, will this not add to unwanted compliances? Ultimately, even if there is a delay in payment of tax, it is paid with interest at the end of the day. Why such ridiculous provisions? Any logic for this additional formality? [mukesh.motwani63@gmail.com]

Opinion:

“Taxation without Representation is never a good law”. 
 
1.      As of now, a taxpayer is liable to discharge part of its tax liability by way of advance tax. Failure to pay advance tax results in levy of interest u/s 234B & 234C. Presently, there is no mandatory requirement to report the estimate income & advance tax liability to the Income Tax Department.
2.      Central Board of Direct Taxes (CBDT) has proposed to create a new mechanism for self-reporting of estimated income & tax thereon by certain class of taxpayer (i.e., companies & assessees covered by tax audit provision) on voluntary compliance basis. The proposed reporting mechanism is sought to be created by way of inserting a new Rule 39A and Form No. 28AA in the Income-tax Rules, 1962.
  1. In Rule 39A, it is proposed that companies & other persons covered by tax audit provisions u/s 44AB would be required to file a statement incorporating estimated income, tax liability and payment of taxes. An estimate of income has to be filed by 15th November for the period up to 30th September. Further, in case, the income estimate is less than the income for the previous corresponding period by Rs. 5 lakh or 10%, whichever is higher, the assessee has to give another estimate of income as on 31st December before the end of the following month. The detail is to be provided in Form 28AA.
  2. If the draft rule is implemented, it will be obligatory for the above referred class of taxpayers to submit annually new set of data consisting of estimated income & tax details. If implemented, it is sure to increase the compliance burden for the trade & industry who are already struggling hard with the hefty compliance burden under the new GST regime.
  3. As of now, it is merely a proposal by the CBDT. Taxpayers may forward their suggestions/recommendations/ objections at dirtpl4@nic.in. Inviting representation before enforcing any law is a good initiative by the CBDT which deserves appreciation.
  4. In my opinion, present proposal is in straight contravention to the concept of “Ease of doing business” for which the present Government is equally committed. It is not going to yield any additional revenue but will surely kill the time & energy of the businesses on the unproductive work & is a pure wastage of talented human resources. Long back, there was similar provision in the Income Tax Act-1961 (section 212) which required filing of estimate by the assessee. It was omitted by the Finance Act-1987 & the circular No.  516 Dated 15-6-1988 is worth reading. It reads as under:
    “10.5 The old sections 209A and 212 contained detailed provisions which were different for old and new assessees in regard to filing of statement, estimate or revised estimates, etc. of advance tax payable by them, on the basis of which the assessees paid advance tax during the financial year. These provisions were very complex and became unnecessary under the new scheme of payment of advance tax introduced by the Amending Act, 1987, under which assessees have themselves to pay advance tax in three installments. In case of default, a mandatory interest @ 2 per cent p.m. and in case of deferment of installment of advance tax, a mandatory interest @ 1 per cent p.m. is to be charged in all cases under the provisions of the new sections 234B and 234C introduced by the Amending Act, 1987. The Amending Act, 1987 has, therefore, omitted sections 209A and 212, thus dispensing with the requirement of filing of statements/estimates of advance tax payable by the assessees. This saves the assessees as well as the Department from enormous paper work involved.”
 
Query 2]

Government has suitably amended and added clause 54EE in Income Tax Act to save additional Rs. 50 lakhs in capital gain in specified securities of Govt. undertakings. So far, Government has not issued any notification. The investment has to be made within 6 months of property sale. It appears that those who have sold property are awaiting it and will not be able to avail this provision. Kindly intimate if any info is there & elaborate more about section 54EE. [Ramnarayan Dubey-ra.du.1944@gmail.com]

Opinion:

  1. To promote the startup ecosystem in the country, it was envisaged in ‘Startup India Action Plan’ to establish a Fund of Funds by raising Rs 2500 crore annually for four years to finance the startups.
  2. To achieve this objective Section 54EE was inserted by the Finance Act, 2016 which offers exemption up to Rs. 50 Lakh from Long Term Capital Gain (LTCG) if the amount of LTCG is invested in units of long term specified funds notified by the Central Government to finance the start ups.

3.      Encouraging start up is an excellent initiative of the Government and carries the potential to take the country to the next higher level of economy. With the amendment, legislature has bestowed powers to the Central Government to notify the funds. However, there are no such funds notified by the Central Government so far. As such, no exemption as of now can be claimed u/s 54EE. There were lots many taxpayers who were expecting the funds to be notified but ended up paying taxes. Though option to save tax is provided in the Act by section 54EE but nothing is done at ground level to enable taxpayer to actually utilize it. At least, Status update on 54EE by the Government could provide relief to the taxpayer. They can plan their transactions by exploring alternate tax saving option or can defer the transaction or will enter in to the transactions with the upfront clear mindset of paying tax.

 
Query 3]
I have purchased a flat for Rs. 32 Lakh & residing in it. Please tell me
if I can take some tax benefit towards maintenance of house, tax paid
etc. If yes, under which section and procedure of claim. [Gurudas-
gcmaji@gmail.com]

Opinion:

For the self occupied house property, no deduction is admissible towards tax & maintenance charges paid.
 
Query 4]
If an apartment has been purchased in cash without availing bank finance and stamp duty/ vat/etc paid whether these taxes get exemption in the income tax? I believe that there should not be tax on tax and these taxes duties paid to the Govt may get exemption in the income tax. Kindly opine and oblige. [K.S.Popat-

kaushikpopat@gmail.com]

Opinion:

Stamp duty & registration charge paid is eligible for deduction u/s 80C subject to common overall cap of Rs. 1.50 Lakh. Further, the same can also be considered if any taxpayer is investing in the house property to claim an exemption u/s 54 or 54F. Payment in cash does not bar the claim in either case.
 
 
 
 
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com.
If you wish to unsubscribe from the mailing list, please reply back “unsubscribe”]
 
TAX TALK-02.10..2017-THE HITAVADA
 
TAX TALK
 
CA. NARESH JAKHOTIA

Chartered Accountant

 
 
 
Proposed amendment requiring taxpayer to file estimated current income in Form No. 28AA is in straight contravention to the concept of “Ease of doing business” for which the present Government is committed. It is not going to yield any additional revenue but will surely kill the time & energy of the businesses on the unproductive work & is a pure wastage of talented human resources.
 
 
 
An additional compliance of submitting estimated current Income & Advance tax payment

 

Query 1]
We have read in the newspaper about filing of estimate of income tax return before 30th September? Ours is a private limited company and so whether it is compulsory to file any such estimate? Is it applicable from FY 2017-18 or 2018-19? If yes, why is so much additional compliance burden if the advance tax payment law is already there and taxpayers are complying with it? We are already over burdened with GST, will this not add to unwanted compliances? Ultimately, even if there is a delay in payment of tax, it is paid with interest at the end of the day. Why such ridiculous provisions? Any logic for this additional formality? [mukesh.motwani63@gmail.com]

Opinion:

“Taxation without Representation is never a good law”. 
 
1.      As of now, a taxpayer is liable to discharge part of its tax liability by way of advance tax. Failure to pay advance tax results in levy of interest u/s 234B & 234C. Presently, there is no mandatory requirement to report the estimate income & advance tax liability to the Income Tax Department.
2.      Central Board of Direct Taxes (CBDT) has proposed to create a new mechanism for self-reporting of estimated income & tax thereon by certain class of taxpayer (i.e., companies & assessees covered by tax audit provision) on voluntary compliance basis. The proposed reporting mechanism is sought to be created by way of inserting a new Rule 39A and Form No. 28AA in the Income-tax Rules, 1962.
  1. In Rule 39A, it is proposed that companies & other persons covered by tax audit provisions u/s 44AB would be required to file a statement incorporating estimated income, tax liability and payment of taxes. An estimate of income has to be filed by 15th November for the period up to 30th September. Further, in case, the income estimate is less than the income for the previous corresponding period by Rs. 5 lakh or 10%, whichever is higher, the assessee has to give another estimate of income as on 31st December before the end of the following month. The detail is to be provided in Form 28AA.
  2. If the draft rule is implemented, it will be obligatory for the above referred class of taxpayers to submit annually new set of data consisting of estimated income & tax details. If implemented, it is sure to increase the compliance burden for the trade & industry who are already struggling hard with the hefty compliance burden under the new GST regime.
  3. As of now, it is merely a proposal by the CBDT. Taxpayers may forward their suggestions/recommendations/ objections at dirtpl4@nic.in. Inviting representation before enforcing any law is a good initiative by the CBDT which deserves appreciation.
  4. In my opinion, present proposal is in straight contravention to the concept of “Ease of doing business” for which the present Government is equally committed. It is not going to yield any additional revenue but will surely kill the time & energy of the businesses on the unproductive work & is a pure wastage of talented human resources. Long back, there was similar provision in the Income Tax Act-1961 (section 212) which required filing of estimate by the assessee. It was omitted by the Finance Act-1987 & the circular No.  516 Dated 15-6-1988 is worth reading. It reads as under:
    “10.5 The old sections 209A and 212 contained detailed provisions which were different for old and new assessees in regard to filing of statement, estimate or revised estimates, etc. of advance tax payable by them, on the basis of which the assessees paid advance tax during the financial year. These provisions were very complex and became unnecessary under the new scheme of payment of advance tax introduced by the Amending Act, 1987, under which assessees have themselves to pay advance tax in three installments. In case of default, a mandatory interest @ 2 per cent p.m. and in case of deferment of installment of advance tax, a mandatory interest @ 1 per cent p.m. is to be charged in all cases under the provisions of the new sections 234B and 234C introduced by the Amending Act, 1987. The Amending Act, 1987 has, therefore, omitted sections 209A and 212, thus dispensing with the requirement of filing of statements/estimates of advance tax payable by the assessees. This saves the assessees as well as the Department from enormous paper work involved.”
 
Query 2]

Government has suitably amended and added clause 54EE in Income Tax Act to save additional Rs. 50 lakhs in capital gain in specified securities of Govt. undertakings. So far, Government has not issued any notification. The investment has to be made within 6 months of property sale. It appears that those who have sold property are awaiting it and will not be able to avail this provision. Kindly intimate if any info is there & elaborate more about section 54EE. [Ramnarayan Dubey-ra.du.1944@gmail.com]

Opinion:

  1. To promote the startup ecosystem in the country, it was envisaged in ‘Startup India Action Plan’ to establish a Fund of Funds by raising Rs 2500 crore annually for four years to finance the startups.
  2. To achieve this objective Section 54EE was inserted by the Finance Act, 2016 which offers exemption up to Rs. 50 Lakh from Long Term Capital Gain (LTCG) if the amount of LTCG is invested in units of long term specified funds notified by the Central Government to finance the start ups.

3.      Encouraging start up is an excellent initiative of the Government and carries the potential to take the country to the next higher level of economy. With the amendment, legislature has bestowed powers to the Central Government to notify the funds. However, there are no such funds notified by the Central Government so far. As such, no exemption as of now can be claimed u/s 54EE. There were lots many taxpayers who were expecting the funds to be notified but ended up paying taxes. Though option to save tax is provided in the Act by section 54EE but nothing is done at ground level to enable taxpayer to actually utilize it. At least, Status update on 54EE by the Government could provide relief to the taxpayer. They can plan their transactions by exploring alternate tax saving option or can defer the transaction or will enter in to the transactions with the upfront clear mindset of paying tax.

 
Query 3]
I have purchased a flat for Rs. 32 Lakh & residing in it. Please tell me
if I can take some tax benefit towards maintenance of house, tax paid
etc. If yes, under which section and procedure of claim. [Gurudas-
gcmaji@gmail.com]

Opinion:

For the self occupied house property, no deduction is admissible towards tax & maintenance charges paid.
 
Query 4]
If an apartment has been purchased in cash without availing bank finance and stamp duty/ vat/etc paid whether these taxes get exemption in the income tax? I believe that there should not be tax on tax and these taxes duties paid to the Govt may get exemption in the income tax. Kindly opine and oblige. [K.S.Popat-

kaushikpopat@gmail.com]

Opinion:

Stamp duty & registration charge paid is eligible for deduction u/s 80C subject to common overall cap of Rs. 1.50 Lakh. Further, the same can also be considered if any taxpayer is investing in the house property to claim an exemption u/s 54 or 54F. Payment in cash does not bar the claim in either case.
 
 
 
 
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com]
 

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