Advance Tax Liability for the A.Y. 2018-19:

The Finance Act 2017 (Act No. 07 of 2017) has not bring any change in Advance Tax provisions. Therefore the Advance Tax provisions related to A.Y. 2017-18 will continue applicable on A. Y. 2018-19. Following are key points related to Advance Tax Liability for the A. Y. 2018-19:

(a)  Section 211(1) was amended by Finance Act 2016 to provide that advance tax will be paid in four installments of 15%, 45%, 75% and 100% of tax payable on the current income by 15^th June, 15^thSeptember, 15^th December and 15^th March, respectively in case of all assesses.

Earlier upto A.Y. 2016-17 the assessee other than corporate assessee paid Advance Tax in three Installment. Now all assessee except assessee covered u/s 44AD is treated at par for Advance Tax provisions.

(b)  Assessees covered u/s 44AD are to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year consequent upon raising of the turnover limit from Rs.1 crore to Rs. 2 crore.

Based on above amendments the advance tax related provision under income tax law is as under:

Advance tax (Section 208, 209 & 211)

Advance tax is payable on all income during the financial year in every case where the amount of such tax payable by an assessee during that year is Rs. 10,000 or more. Following is chart showing Advance Tax Liability for the A.Y. 2018-19:

File Your Income Tax Return for AY 2017-18:

Advance Tax Liability for All Assessee (other than covered under section 44AD of the I.T. Act 1961)

Advance Tax Liability for Assessee covered under section 44AD of the I.T. Act 1961

What is HRA?

HRA or House Rent Allowance is a component of salary provided by employer to his employee. If you receive HRA as part of your salary and you live in a rented accommodation, then you can claim full or partial HRA exemption under section 10. 

However, HRA is fully taxable if you don’t live in a rented accommodation.

How to Calculate HRA?

Your HRA calculation depends on four factors. These factors are as follows: 

1) Salary
2) HRA component of salary
3) Rent paid
4) Location of your rented residence

HRA Exemption Rules:

Tax exemption on HRA is least of the following:

1) Actual HRA received
2) Actual rent paid reduced by 10% of salary
3) 50% of basic salary if the taxpayer is living in a metro city
4) 40% of basic salary if the taxpayer is living in a non-metro city

 Since the least of the above is exempt from tax, you can ask your employer to restructure your salary to get maximum tax benefit.

If all the factors mentioned above remain constant then tax exemption on HRA can be calculated annually but if any factor changes within the relevant Financial Year then calculation needs to be done on a monthly basis.

Let’s understand calculation of HRA with the help of an example:

HRA Exemption Calculation with Example:

Example: Suppose Mr. Pratik lives in New Delhi and earns a basic salary of Rs. 30,000 per month. The HRA component of his salary is Rs. 15,000 but the actual rent paid by him is Rs. 10,000. How much exemption can he get?

Solution: To solve this problem, first let us look at the factors affecting HRA calculation. 

    a) Actual HRA received is (Rs. 15,000 x 12) = Rs. 1,80,000 
    b) Actual rent paid (Rs. 10,000 x 12) – 10% of salary [(Rs. 30,000 x 12) x 10%] = Rs. 84,000 
    c) 50% of basic salary [(Rs. 30,000 x 12) x 50%] = Rs. 1,80,000 

Rs. 84,000 is the least among the above obtained figures so Mr. Pratik can get Rs. 84,000 exempt.

Frequently Asked Questions about HRA:

1. Can I get tax benefits on HRA along with tax benefits on home loan?

Yes you can claim both tax exemptions together. If you are a home owner paying back home loan but living in a rented accommodation then you can get tax benefits for both cases.

To claim HRA, whom do I pay rent to?.HRA benefits can be claimed if you pay rent to your landlord, i.e. owner of the property in which you live. However, the owner can be anyone including your parents. But remember that the at least 70% of the rent you pay to your parents get added to their taxable income also.

2. Is my landlord’s PAN mandatory to claim HRA?

If you pay rent in excess of Rs. 1 lakh p.a. then it is necessary to mention PAN details of your landlord in your tax return to claim tax exemption on HRA.

My employer does not give me HRA. Can I still claim relevant tax deduction?

Section 80GG of Income Tax Act allows tax deduction to the individual even if he does not get HRA from his employer

Much debate has been going on about whether Aadhaar must be provided in income tax return. Recently, the Supreme Court of India has said that if you have an Aadhaar Card you must mention it while filing your income tax return.

Here is a brief summary of the honorable Supreme Court’s decision :

• Starting 1st July, anyone who has an Aadhaar Card must mention it in their tax return.

• Those who do not have an Aadhaar Card and do not wish to get one, can still file their tax returns without Aadhaar. For such persons, PAN will not be cancelled.

Do note that returns can still be filed until 30th June 2017 without mentioning Aadhaar number.

This decision has come in the wake of an ongoing case in the Supreme Court challenging the linkage of Aadhaar with income tax return. This is based on the premise that such linkage is a threat and invasion of ‘privacy’ of an individual and details of his/her personal income should not be mandatorily linked with Aadhaar.

Another decision is pending in the same court regarding privacy concerns of Aadhaar in general. A constitutional bench has been asked to review Aadhaar law and privacy rights of citizens of India due to its use. Therefore, the Supreme Court has ruled that no PAN can be cancelled due to non-linkage with Aadhaar.

Taxpayers often ignore different types of income while filing their income tax returns. These incomes fall under ‘income from other sources’ category. This may happen due to the taxpayer’s unawareness about the taxability of such income or they hiding it intentionally from the tax authorities.

There are several heads of income like income from salary, income from capital gains, income from profession and business and income from house property for which you need to file ITR. There are, however, certain types of income that fall under the head ‘income from other sources’.

Income that comes under the income from other sources head must satisfy certain conditions. Firstly, income shouldn’t be exempt under the provisions of the I-T Act, and secondly, income should not fall under any other income head.

Incomes Falling under the Head Income from Other Sources

Let’s take a look at such incomes that can be mentioned under this head:

• Other incomes: Interest on loans, interest received on unrecognisable PF, recurring deposits, interest received on delayed refund, National Savings Certificate, Senior Citizens Saving Scheme, rent from a vacant piece of land, Post Office Savings Scheme, interest received on bank deposits/ deposit with companies, income made in the form of insurance commissions and some perquisites fall under income from other sources

• Dividend income: Dividends received from mutual funds and a domestic company are exempt from tax. However, if the dividend received from a domestic company is more than Rs. 10 lakh then the amount will be taxable at 10 percent. Moreover, the dividends received from a foreign company are taxable under the head income from other sources.

• Gifts: Income made in the form of gift that exceeds Rs. 50,000 without proper consideration is taxable. However, if you receive a gift from a person and he qualifies as a relative under the Income Tax Laws, it is exempted from tax.

• Interest on securities: Interest income earned through investment in securities will be taxable under this head.

• Pension received by legal heirs of deceased: Pension received by legal heirs of a deceased person is taxable but not fully. They can claim a deduction on the amount @33.3 % or Rs. 15,000 whichever is less.

• The amount received from winning lotteries, horse races, gambling, etc.: Any income received from winning lotteries, horse races, gambling and card games, etc., fall under this head, which is fully taxable at 30%.

• Consequences of Ignoring Other Sources of Income

  It is important to match your income details with your Form 26AS to avoid any mismatch in the ITR filing. This can result in the following consequences:

  • You may receive a notice from I-T Department.

  • If you claim TDS but fail to report interest income, the Assessing Officer will consider your return as defective and will send a defective return notice under section 139(9).

  • If the A.O. determines that you have misreported or under-reported your income, then you will have to pay taxes due along with interest u/s 234B and 234C. He can even impose a penalty from 50 percent to 200 percent for misreporting or under-reporting of income u/s 270A.

While a final decision on the rates is yet to be taken, the rating agency said the final rates to be notified would be the key determinant of the impact of GST on the sector

New Delhi: The proposed goods and services tax (GST) rate of 18% for construction or works contract will be neutral on home prices, with some variation across states due to the divergences in current taxation practices, according to rating agency ICRA.

While a final decision on the rates is yet to be taken, the rating agency said the final rates to be notified would be the key determinant of the impact of GST on the sector.

The GST Council in its third meeting this month proposed a four-tier GST structure, with a lower rate of 6%, two standard rates of 12% and 18%, and a higher rate of 26%. Services, which would include works contract, are expected to fall under the 18% slab.

"If the final GST rate slab notified for the sector is significantly higher than the current expectations, it could turn out to be a negative development for the industry which is already impacted by subdued demand and reduced pricing flexibility,” said Shubham Jain, vice president, ICRA.

A GST rate of 18% would be higher than the current effective rate of value added tax (VAT) and service tax for sale of under construction property in most states. However, the higher tax rate is expected to be offset to some extent by a reduction in the basic price through better utilisation of input tax credits.

The GST paid by the developers for all inputs such as labour, materials and other services can be taken as input credit and offset with the GST payable by the end customer.

"Under the GST regime, there will be better utilisation of these input taxes paid, which can lower the project cost," said Jain.

Some states like Karnataka could see potential savings in the final cost to the end customer, whereas other states like Haryana and Maharashtra could see higher prices, according to ICRA.

RCM not applicable to Intra-State Supply of Goods & Services below value of Rs. 5000

RCM not applicable to Intra-State (within one state) Supply of Goods & Services below the value of Rs. 5000 by an Unregistered Person to a Registered Person. Only transactions between parties registered in same state can get benefit of this notification. Note that transaction between parties registered in different state where IGST will be applicable can not take benefit of this notification.

Notification issued gives relief only in matter of CGST. It does not speak anything about SGST. It means 

RCM is withdrawn only for CGST and under SGST & IGST position of RCM has not changed.

We expect that soon State Governments will issue similar notification to give full effect to the notification issued by Central Govt.

Below is Notification Extract.

What is GST?

Goods and Services Tax, GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level.

Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.

The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.

Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate.

What are the benefits of GST?

Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.

It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets).

Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.

How will it benefit the Centre and the States?

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

What are the benefits of GST for individuals and companies?

In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.

What type of GST is proposed for India?

India is planning to implement a dual GST system. Under dual GST, a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.

All goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services.

How to Pass Entries under GST Regime:

Under the new GST Regime all these taxes (excise, VAT, CST, Service tax, Entry Tax) will get subsumed into one account and assesse will get benefit of setting of and availing Input credit at all levels.

Following are the accounting ledgers which needs to be maintained by assesse for recording in books of accounts apart from Purchase, Sales and other ledgers.

• Input CGST A/C
• Output CGST A/C
• Input SGST A/C
• Output SGST A/C
• Input IGST A/C
• Output IGST A/C
• Electronic Cash Ledger (Government GST portal to pay GST)

The Accounting entries can be divided into two Parts: One is Intra State (within State) and other is Inter State (other State).

GST Updates:

1) PAN is mandatory for taking registration under GST. PAN will be validated by CBDT. After successful validation, registration will be granted.

2) If a person has a SEZ unit, then he is required to make separate registration application for that unit. Similarly, a separate application of registration is required for becoming Input Service Distributor.

3) A non- resident seeking registration under Non-Resident Taxable Person has to appoint an authorized signatory who will sign the application of registration. That person must be resident of India having a valid PAN.

4) A person registered under GST is required to display his certificate of registration at a prominent location at his principal place of business and GST Number on the name board at entry of his principal place of business.

5) Physical verification of place of business will not be conducted to grant registration under GST. But officer can do physical verification after granting of registration, if he is satisfied that it is necessary to do the same. He must upload verification report on GST Portal within 15 working days after verification.

6) Tax invoice in case of supply of taxable services must be issued within 30 days of date of supply of services. However, time limit for banking company, insurance company or financial institutions is 45 days.

7) The invoice shall be in triplicate for Supply of Goods and in duplicate for Supply of Services.

8) The serial number of invoices issued will be furnished electronically on GST Portal.

9) On receiving advance, Receipt Voucher will be issued. If rate is not determinable, tax is to be paid at 18%. If nature of supply is not determinable, it will be treated as Inter-State Supply.

10) If reverse charge is applicable, the recipient will issue Payment Voucher.

11) Electronic Liability Register shall be maintained for each person liable to pay tax on the GST Portal.

12) Electronic Credit Ledger and Electronic Cash Ledger shall also be maintained on the GST Portal for the person eligible for input tax credit and for person liable to pay tax respectively.

13) Tax will be paid only through internet banking, RTGS, NEFT or Debit and Credit Cards. However, over the counter payment is allowed through authorized banks for the amount up to Rs.10,000 per challan per tax period.

14) A separate formula is prescribed for Maximum Refund in case of inverted duty structure, i.e., GST rate is higher on Inputs than on Output Supply.

15) Refund application shall be filed electronically on GST Portal.

16) The grant of provisional refund shall be made if person clamming refund has not been prosecuted during any period of 5 years preceding the tax period for which refund is claimed. However, the following 2 condition mentioned in Draft Refund rules have been deleted:

a) The assessee should have a GST compliance rating of not less than 5.

b) The assessee should not have any pending proceeding or appeal on any issue.

17) If Commissioner wants to withhold refund, order must be issued along with reasons of withholding refund.

Q: What is Tax ? 

Ans : It is an Amount which is payable by a person to the government so that govt can meet out of its certain expenses for which directly there are no charges.

For Example: Defense, hospitals, government schools, roads, etc.

Q:  Why is Tax ?

Ans : Tax is an amount payable to governemnet for various services provided by Government like:

1. To create infrastructure facilities like roads, dams, bridges, water, power etc.
2. Education.
3. Health care.
4. Defense requirement.
5. Social welfare.

Q : What is the border classification of taxation system in india ?

Ans : Indian government collects both Directly and Indirectly Income Tax .

There are two major classification of Tax:

1. Direct Tax
2. Indirect Tax

Direct Tax: Direct Taxes are paid by the person Directly to the Government. The Person paying Taxes cannot pass its Burden on some other person.

              In case of Direct Tax Incidence and Impact will be on the same Person.

Examples: Income Tax & Wealth Tax.

Indirect Tax: Indirect Taxes are those taxes which the Tax payers pays Indirectly. The person paying the tax can recover from it from some other person. Therefore in case of Indirect Tax Incidence and Impact will be on some other person.

Examples: Service Tax, VAT(Value Added Tax), Exise/Custom duty, etc.

Difference Between Direct And Indirect Tax:

Basis Of Taxation:

1. Source basis
2. Residence

Note 1: A person resident in India shall pay tax on all income whether Indian Income or Foreign Income.

Note 2: A person non-resident in India shall pay tax only on Indian Income and not on foreign income.

Note 3: India has entered into a agreement with different countries to avoid double taxation.