Author Archives: Aristotle Consultancy

Last minute checklist for filing income tax return

With only four days left for the deadline for filing income tax returns to expire. Here’s a checklist to help you file your ITR successfully.

Keep required documents handy
The most important thing to start with ITR filing is getting the required documents together. Documents you would need would vary depending on the types of income you have.

Documents commonly required (depending on your situation) include: Form 16 from your employer, Interest statement for interest earned on savings bank account and fixed deposits, TDS certificates, Proof of various deductions (80C to 80U) to be claimed, statement of Interest paid for home loan etc.

Switched jobs? TDS certificate or Form 16 from employer is needed
If you have switched jobs in the last financial year, then you must have received two Form 16 this year – one from current employer and one from the previous one. Most people find it difficult to deal with 2 Form-16s as they find it confusing to figure out how much is total TDS deducted etc.

Matching TDS certificates with Form 26AS
Most salaried employees receive salary from employers after tax is deducted. To ensure that every TDS instalment deducted from your salary is deposited in government’s account on your behalf by your employer, you must match the amount mentioned in TDS certificate with that of Form 26AS.

Form 26AS is the annual tax credit statement reflecting all the taxes deposited under your name.

Paying all dues before filing ITR
Before filing ITR, you must ascertain the total amount of tax to be paid by you. Once you have correctly determined the total amount of tax you, you need to subtract TDS from this total and then pay the balance. The balance tax payable can be paid using net-banking facility of your bank or by visiting the bank branch and paying taxes using Challan.

Once you have paid your dues, ensure that the tax paid is reflecting in Form 26AS too. However, it is to be mentioned that normally as the deadline for ITR filing nears there is a gap of several days between the date of tax payment and the date by when it starts reflecting in the Form 26AS.

Getting the ITR form correct
Make sure you file your tax return using correct form applicable to you as otherwise it would be treated as a defective return. If you file ITR using the wrong form for you, you might receive notice under section 139(9) from the department asking you to file ITR again within the stipulated time.

If you fail to file revised ITR within the given time, then it will be treated as if you never filed the ITR.

Reporting all interest incomes
As a taxpayer, it is your duty to report all the interest incomes earned by you in the previous year – in this case financial year 2016-17 – while filing ITR. Many people tend to forget mentioning the accrued interest earned on fixed deposits linked to bank lockers, recurring deposits, or interest earned on savings bank account.
Remember that for interest earned on bank savings accounts you can claim a deduction up to Rs 10,000 under section 80TTA.

Tax exempted income details in ITR
Income exempted from tax such as interest earned from PPF account or tax-free bonds etc. must be reported in your ITR under the ‘Exempt Income’ schedule.
Also remember that the last budget has made it mandatory for you to file ITR even if your total income plus exempted long term gains exceeds the minimum exemption limit of Rs 2.5 lakh.

Verifying the ITR
The last step to complete the process of filing the ITR is verifying the uploaded return. Your return won’t be considered ‘Valid’ until it is verified by you. The I-T department has made the process of verifying ITR easier by offering 6 ways to verify your return including using Aadhaar OTP, net-banking.

Filing the ITR before deadline
Filing ITR before the deadline has an utmost importance as by doing this you ensure that you do not lose certain benefits. It is also advisable to develop this habit as starting next year there will be late filing fee, maximum up to Rs 10,000 if return is filed after the notified deadline.

Source – ET WEALTH

Myths about GST busted

Rumour mills have gone on an overdrive since the launch of GST. Here’s a reality check for both GST supporters and its detractors

NOW IT’S ONE NATION ONE TAX

MYTH: Since GST will replace all other taxes on all goods and services, we are in a single tax regime.

REALITY: Though this was the original idea, petroleum products—petrol, diesel— are still outside GST’s ambit and, therefore, their tax rates vary significantly across states. For example, petrol is still sold in Mumbai at `74.30 per litre (as on 5 July) compared to `63.12 in New Delhi. Similarly, some other items, such as liquor, have also bee kept out of GST for now.

SMALL BUSINESSES WILL SUFFER

MYTH: The life of small businessmen will become difficult under GST because of computerised billing, need for Internet connectivity.

REALITY: Shops can do manual billing under GST and Net connectivity is needed only at the time of filing monthly return and can be managed from a cyber cafe.

NO TAX OTHER THAN GST IS NOW A REALITY

MYTH: For every good or service that has been brought under GST, there won’t be any additional tax.

REALITY: GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie tickets up to `100 and 28% for tickets that cost more than `100. But be-cause of local body levies, tax in Tamil Nadu will be 48% for tickets up to `100 and 58% for tickets that cost more. Not surprisingly, the cinema hall owners in the state went on strike. “Action of the Tamil Nadu government is against the spirit of the GST and the GST council should take action against it,” says Amit Sarkar, Partner and Head, Indirect Taxes, BDO India.

PRICES WILL SHOOT UP

MYTH: Personal expenses will go up on account of GST making it inflationary because tax rates have been fixed at higher levels—18%, 28%.

REALITY: Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.— did not reflect on your bill. If one adds up all the taxes, it would have been more for most items (ie effective tax rates will be lower for most products). For example, the price of chicken dish in Kerala should fall because there was a 14.5% tax on live chicken earlier, which has come down to zero now under GST.

ECONOMIC GROWTH WILL RISE

MYTH: GST will push up the economic growth.

REALITY: Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes diffi-cult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the or-ganised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.

CORPORATES MAY TRY TO PROFITEER BUT GOVT WON’T

REALITY: Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3%.

PAY GST TWICE FOR CARD PAYMENTS

MYTH: GST will be charged twice, if you make payments via credit card.

REALITY: There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a `10,000 payment and a company charges `50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So the 3% increase is very small—just `1.5 on `50.

Relax! Penalty for filing income tax return after due date is only applicable from FY 2017-18

The government has introduced a maximum fee amount of Rs. 10,000 for delayed filing of income tax return by individuals in the last budget presented in February this year.

However, you need not worry just yet. This fee is applicable with effect from April 1, 2018 and will not apply for returns filed for FY2016-17 for which the deadline is July 31, 2017.

A new section 234F has been inserted by the government in the Income Tax Act. As per this section, an individual would have to pay a fee of up to Rs 10,000 for filing income tax return after the due dates specified in section 139(1) of the Act.

The fee to be levied is based on the time period of delay which is as follows:
(i) A fee of Rs 5,000 in case returns are filed after the due date but before the December 31 of the relevant assessment year or
(ii) Rs. 10,000 in case it is filed after December 31 of the relevant assessment year.

However, as a relief to the taxpayers earning not more than Rs 5 lakh the maximum penalty will be Rs. 1000, says Abhishek Soni, CEO, Tax2win.in

For the purpose of filing income tax returns, financial year (FY) refers to the year in which you have earned the income through various sources such as salary, rent etc.

The financial year immediately following the above mentioned year is the assessment year for the preceding FY. You are required as per income tax rules to file your income tax returns for the income earned in a financial year in the related assessment year.

This penalty will be applicable from assessment year April 1, 2018 and onwards and therefore apply to returns filed after this date. This means that all income tax returns to be filed for the financial year 2016-17 or assessment year 2017- 18 and before will not come under the purview of this section.

Currently, section 271F allows an assessing officer at his sole discretion to levy penalty of Rs 5,000 only if an individual fails to file his/her return before the end of relevant assessment year. This section will not be applicable from assessment year 2018-19 and thereafter but will be applicable for returns filed for FY2016-17 and before.

However, the current provisions of section 234A will still be applicable along with the newly introduced fees. According to Section 234A, simple interest is levied at the rate of 1% per month or part of it on any tax amount if not paid within due dates.

This interest will be payable for the period starting from due date of filing return till the date the return is filed. In case the return has not been filed at all then interest will be calculated from the due date till the date of completion of assessment order passed by the assessing officer.

However, the amount already paid via advance tax or TDS will be subtracted from the total tax payable plus interest along with the fees, applicable from April 1, 2018, as per section 140A of the Act.

Abhishek further adds, “You will also be required to pay this fees along with the self-assessment tax.”

If you have claimed a refund in your return which is filed after due date even then, fees provision will be applicable under section 234F.

Since all the new changes will be applicable from assessment year 2018-19 and onwards so even if you have missed the deadlines for earlier income tax returns, the penalty of maximum of Rs 10,000 will not be applicable, says, Soni.

Source – ET Wealth

Return Filing - Under GST, this is how you will file tax returns from July 1

Small businesses are the backbone of Indian economics. They drive the velocity of country’s economics, industrial growth, and catalyst for job creation. However, a large number of businesses in the country are unorganized and irregular in filing returns and paying taxes.

This could be due to knowledge gap, situational issue or perception among businessman that they are small in size, operations and earnings, and it is okay to miss the deadline.

As a result, they end up getting a notice from the tax department demanding tax payment, interest, late fee and penalties for non-compliance. Especially in case of VAT dealers, the severity of consequence in terms of monetary impact is lesser to extent of additional cash outflow to the extent of default.

GST, a comprehensive indirect tax system is all set to subsume a host of existing indirect taxes and with its implementation, compliance will become a key factor for the success and credibility of a business. GST works on a self-monitoring mechanism, which is matching the concept of invoice between supplier and recipient of goods and services. Only after matching of invoices and payment of tax by the supplier, the input tax credit will be available to the recipient.

Thus, a customer will always want to do business with vendors who are compliant. This results in a change of relationship between supplier and recipient from ‘customer-cum-emotional relationship to compliance relationship’.

Hence under GST, non-compliance will not only affect your cash outflow in paying fines, interest, and penalties but also affect the continuity your business and compliance rating.

Let us understand the various returns to be furnished under GST and things to be taken care of during return filing.

10th of Subsequent Month – Form GSTR-1
In Form GSTR-1, you need to declare the details of all the outward supplies of goods and/or services effected during the month. Invoice-wise details of outward supplies made to registered dealer and aggregate taxable value of supplies made to consumer are required to be declared. In case, taxable value of supply made to consumer is more than Rs 2.5 lakh and if it is interstate supply, you need to declare invoice-wise details.

11th of Subsequent Month – Form GSTR-2A
On 11th, the visibility of inward supplies is made available to the recipient in the auto-populated GSTR-2A. This is generated based on the outward supplies declared by your supplier in Form GSTR-1.The period from 11th to 15th will allow for any corrections (additions, modifications and deletion) in Form GSTR-2A.

This is the most critical phase of filing of your return, as any omission or correction not reconciled as per the statement in Form GSTR-2A with your inward supplies register, will impact your Input Tax credit eligibility. To save time, quicker and accurate reconciliation, technology will play a key role in your compliance.

15th of Subsequent Month – Form GSTR-2
After reconciling, any additional claim or correction as per Form GSTR-2A needs to be incorporated and submitted in Form GSTR-2 by 15th of subsequent month. Based on the claim reported in Form GSTR-2, ITC will be credited to your E-credit ledger on provisional basis and post matching of invoice, it will be finalized.

16th of Subsequent Month – Form GSTR-1A
The corrections (addition, modification and deletion) reported by you in Form GSTR-2 will be made available to your supplier in Form GSTR-1A. The supplier has to accept or reject the adjustments made by the customer by verifying with suppliers outward supply register.

20th of Subsequent Month – Form GSTR-3
On 20th, based on the Form GSTR-1 and Form GSTR-2, an auto-populated return GSTR-3 will be available for submission along with the payment.

Final Acceptance of Input tax credit in Form GST MIS-1
After the due date of filing the monthly return in Form GSTR-3, the inward supplies will be matched with the outward supplies furnished by the supplier, and then the final acceptance of input tax credit will be communicated in Form GST MIS-1.The following details will be considered in the matching of invoices:
GSTIN of the supplier
GSTIN of the recipient
Invoice/or debit note number
Invoice/or debit note date
Taxable value and
Tax amount

The claim of input tax credit will be considered as matched, if the amount of input tax credit claimed is equal to or less than the output tax paid on such tax invoice or debit note by the corresponding supplier.

Also, the mismatch input tax credit on account of excess claims or duplication claims will be communicated to recipient in Form GST MIS-1 and to supplier in Form GST MIS-2. Discrepancies not ratified will be added as output tax liability along with interest. However, there will be some breathing space since the law provides a window of two months to ratify the discrepancies before reversing the ITC claim on provision basis.

Conclusion

Compliance is ‘No More a One-Day Activity. The return cycle under GST will put an end to the existing practice. Today, most of the small business prepare their returns in a day by summarizing their purchase and sales transactions. This will no longer be relevant since GST Return cycle is spread across the month.

Secondly, the businesses need to move from offline data recording to online data recording to file the return. Today, most of the small businesses port the data from their books to offline tools and file their return. This will prove to be a costly affair since, under GST inward supplies and outward supplies will be auto-populated by GSTN and need to be reconciled with books.

Technology will play a pivot role for businesses under GST as GST is highly transaction based compliance system. The technology should help you to seamlessly prevent, detect and correct the exceptions before the filing of return and reconcile your books with GSTN. With the right technology, businesses will have timely compliance, manage cash flows better and adding up to compliance credibility.

Source – ET RISE

Eight things that businesses need to do before GST

GST is less than a week away. ET brings a last minute check-list by PwC of all the things that businesses need to do.

GET REGISTERED FOR GST

Under GST laws, entities supplying taxable products and services need to be registered in all the states from which these will be supplied. An entity already registered in a state under any existing law should be migrated to the GST regime. Unregistered entities will have to get registered in the specific states from which supplies are made. The window for this is likely to open from June 25 for a month or so.

GEAR UP IT SYSTEMS TO ISSUE INVOICES FROM DAY 1

IT systems will need to be readied, and all the requisite changes made, to issue invoices from the first day of the GST regime. Invoice formats will have to be amended as soon as possible. Moreover, according to GSTIN requirements, customerrelated data as well as tax codes and conditions (used to compute tax on every transaction) will need to be updated in IT systems and configured to generate reports required for GST

TRAIN YOUR TEAM AND STAKEHOLDERS

It is imperative that all employees and supply chain partners, such as vendors, distributors and C&F agents, are trained well on amendments in the law. And since the GST law envisages seamless passing of credit of taxes only on suppliers’ compliance with its requirements, it is imperative that all stakeholders are appropriately educated on compliance-related requirements.

FINALISE YOUR TAX POSITIONS

Supply of goods or services will attract tax in the GST regime. Credit provisions will also see changes. In addition, if a company is registered in different states it will be treated as a distinct entity for levy of GST. Therefore, considering the quantum of changes, each transaction undertaken by a company will have to be identified separately, irrespective of whether GST will be applicable for it or not, in order to determine the tax treatment of the transaction. After the mandatory tax treatment is determined, the transaction will need to be configured in the entity’s IT system.

REVISIT AND UPGRADE YOUR BUSINESS PROCESSES

From taxation being imposed on the manufacture or sale of goods and provision of services under the present system, it will move to GST being levied on supply of goods and services. In addition, there are various other procedural amendments, such as self-invoicing in the case of purchases made from unregistered vendors, reversal of credit in the case of non-payment of consideration for goods, etc. Such amendments in the law will necessitate significant changes in various business processes and it will be necessary for entities to assess the impact of these and change the processes, wherever required.

AMEND YOUR CONTRACTS WITH VENDORS AND CUSTOMERS

Under the existing indirect tax regime, a correlation between the location of receipt of input services and for receipt of invoices for such services at any location in India is not required. In the GST regime, since the credit pool for every state will need to be maintained separately, it will be necessary to ensure that an invoice for input services is received at the place where credit of such services is eligible. This will need an analysis of procurements of services and amendment of contracts with service providers, where required. Similarly, contractual terms with customers will have to be reassessed and revised, if needed.

DETERMINE YOUR PRODUCT PRICING EARLY

At present, the margins of supply chain partners such as distributors and retailers are computed on the assumption that they are only liable to pay VAT on their sale price. Going forward, supply chain partners will also be required to pay GST on their sale price, and accordingly, their margins will need to be recomputed due to the changes in tax rates and availability of credits. And in addition to revised margins for supply chain partners, the impact on tax credits and movement in the tax rate along with the anti-profiteering provisions under GST will require companies to reset the prices of goods or services supplied by them. Therefore, they will need to determine the overall impact of the new taxation regime on their businesses before taking any decisions on pricing.

CLAIM CREDIT FOR TAXES IN TIME

The GST law provides for carry-forward of accumulated tax credit as well as for claiming credit of various taxes paid on stock in hand (which cannot be claimed at present), subject to fulfilment of the prescribed conditions. Furthermore, for carry forward of their VAT credit balance, taxpayers will have submit their sales tax declaration forms or certificates in Form C, Form F, Form H, etc., as applicable, wherever they have claimed exemption or a concessional rate of CST on such sales. But relevant declaration forms or certificates have not been submitted to the authorities till now. So there is an urgent need to accelerate submission of these forms — sooner rather than later!

Source – ET Retail