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Identifying Instances Leading to Income Tax Notices in Real Estate Deals and Credit Card Transactions

editor — Sat, 13 Apr 2024 13:21:14 +0000

Tracking Financial Activities:

The Income Tax Department meticulously monitors all financial transactions carried out by individuals, utilizing various data sources to ensure adherence to tax regulations. Certain transactions may trigger heightened scrutiny from tax authorities.

High-Value Cash Transactions:

The tax department pays particular attention to high-value cash transactions. For instance, if an individual receives a cash deposit exceeding Rs 10 lakh in a savings account within a fiscal year, this could prompt the department to issue a notice seeking clarification regarding the source of funds.

Mandatory Reporting by Banks:

As per the Central Board of Direct Taxes (CBDT) directives, banks are mandated to report instances where an individual deposits Rs 10 lakh or more across one or more time deposit accounts during a financial year, excluding deposits made through the renewal of another time deposit. Additionally, all banks, including cooperative banks, must report cash deposits of Rs 10 lakh or more across one or multiple accounts of an individual, excluding current accounts and time deposits.

Scrutiny of Securities Transactions:

Financial institutions and companies issuing bonds or debentures are obligated to report receiving Rs 10 lakh or more from any individual in a financial year for acquiring such securities. This measure is aimed at detecting potential instances of tax evasion or undisclosed income associated with significant cash movements.

Credit Card Transactions:

Several instances of credit card transactions may trigger Income Tax notices:

Cash deposits exceeding Rs 10 lakh for savings accounts and Rs 50 lakh for current accounts, along with substantial withdrawals, may prompt inquiries into the origin and intended use of the funds.
Real estate transactions exceeding Rs 30 lakh may come under the scrutiny of the tax department, which seeks detailed information about the transaction and involved parties.
Investments surpassing Rs 10 lakh in stocks, mutual funds, or bonds may attract scrutiny if the origin of funds appears inconsistent with reported income.
Although the Income Tax department does not actively monitor individual credit card transactions, cash payments exceeding Rs 1 lakh towards credit cards or substantial debt settlements exceeding Rs 10 lakh made in cash may undergo scrutiny and investigation. Ensuring transparency in significant transactions with verifiable fund sources is imperative, as unaccounted cash inflows may trigger investigations.

Mismatch of Declared Income:

Discrepancies between declared income and bank data may prompt notifications from the tax department, highlighting the importance of maintaining accurate financial records.

Foreign Exchange Transactions:

Any purchase of foreign exchange totaling Rs 10 lakh, including travelers’ checks, forex cards, or debit/credit card transactions, must be reported to ensure compliance with tax regulations.

Source: https://www.businesstoday.in/personal-finance/tax/story/real-estate-deals-credit-card-transactions-6-times-one-can-get-income-tax-notice-425280-2024-04-12

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Income tax refund will be available soon and the seized properties will also be returned

editor — Sat, 13 Apr 2024 10:52:23 +0000

If you pay tax then it is a matter of relief for you. The Income Tax Department will dispose of the appeals related to TDS payment and tax from the current financial year i.e. 2024-25 as soon as possible. With this you will also get income tax refund soon. The department is preparing an action plan for this, which will be implemented soon. The Central Board of Direct Taxes (CBDT) has asked the Income Tax Department to prepare an action plan by which possible tax-related issues are identified and resolved immediately. In this scheme, there will be a fixed time limit for returning the seized property. The department said that such properties will be returned by June 30, 2024. It aims to finalize pending compounding proposals by March 31, 2024, and dispose of at least 150 appeals by June 30.

You can file a case before the Assessing Officer: Under the new decision of the Income Tax Department, taxpayers will now have to file an application for pending refund before the Assessing Officer. Processing of applications for nil/reduced TDS or TCS certificates under section 195/197/206C will be expedited. They will be resolved within a month of receipt of applications from April 1, 2024.

Priority for disposal of appeals filed before April 1, 2020: The department said that disposal of appeals filed before April 1, 2020 will be given priority. After this, appeals filed after April 1, 2020 will be disposed of. This decision is an important step towards increasing administrative efficiency. Immediate measures have been initiated for resolution of complaints through e-redressal and CPGRAMS platforms.

Source: https://www.internationalnewsandviews.com/income-tax-refund-will-be-available-soon-and-the-seized-properties-will-also-be-returned/

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Understanding the Mechanisms of Tax Relief: Remission and Extinguishment

editor — Wed, 10 Apr 2024 08:33:34 +0000

Introduction:

The concepts of remission and extinguishment of tax demand involve the cancellation or forgiveness of a taxpayer’s outstanding tax liabilities. These legal mechanisms offer relief to taxpayers facing difficulties in settling their tax obligations fully. In this article, we will delve into the provisions of remission and extinguishment of tax demand, exploring their definitions, legal frameworks, and implications.

Government Initiatives:

Recent Example in India (as of March 2024):

In the 2024 Interim Budget, the Indian government announced a remission and extinguishment program for specific direct tax demands, waiving outstanding tax demands up to a certain limit depending on the tax year.

Key Points to Remember:

Remission of Tax Demand:

Legal Framework:

Grounds for Remission:

Procedure for Remission:

Extinguishment of Tax Demand:

Legal Basis:

Key Considerations:

It's not a refund; the forgiven amount is not returned to the taxpayer.
There may be limitations on the amount of tax that can be remitted or extinguished, as well as the reasons for doing so.
This concept typically applies to direct taxes like income tax and may not apply to indirect taxes like sales tax.

Conclusion:

Remission and extinguishment of tax demand are crucial legal mechanisms that provide relief to taxpayers facing financial difficulties. While remission offers relief through forgiveness of outstanding tax liabilities, extinguishment permanently terminates the taxpayer’s tax liability. Understanding the legal framework and procedures associated with these concepts is essential for taxpayers and professionals navigating the complexities of tax law. By comprehending the intricacies of remission and extinguishment, taxpayers can seek relief when appropriate, ensuring compliance and mitigating potential financial hardships. Additionally, tax authorities must administer these mechanisms judiciously, balancing relief for deserving taxpayers with revenue collection for the benefit of society as a whole.

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Entitlement to Interest Commences After Sixty Days from Refund Application Until Credited to Bank Account

editor — Sat, 06 Apr 2024 05:35:52 +0000

In a significant ruling by the Hon’ble Delhi High Court, Raghav Ventures vs. Commissioner of Delhi [W.P.(C) NO. 12209 OF 2023 dated March 01, 2024], the issue of entitlement to interest on delayed GST refunds was examined. The case sheds light on the statutory provisions and clarifications regarding the payment of interest under the Central Goods and Services Tax Act (“the CGST Act”).

Facts of the Case:

M/s Raghav Ventures ("the Petitioner") engaged in exporting mobile phones and accessories to M/s AZ Logistic, Dubai, UAE, thereby paying Integrated Goods and Services Tax ("IGST").
During the Impugned Period (December 2022, February 2023, March 2023, and May 2023), the Petitioner paid IGST totaling significant amounts i.e. Rs. 1,63,16,851/-, Rs. 50,46,889/-, Rs. 17,26,288/-, and Rs. 13,85,382/-, respectively.
The Petitioner filed refund applications for the IGST paid during the Impugned Periods in accordance with the prescribed procedure under the CGST rules.
Despite receiving acknowledgments for the refund applications, the refunds were not processed within the stipulated time frame.
The IGST refunds were eventually sanctioned and credited into the Petitioner's bank account but without any accompanying interest.
The Petitioner subsequently filed an application to the Revenue Department seeking interest on the delayed refunds.

Issue:

Whether the Petitioner is entitled to interest on the delayed refund of IGST as per statutory provisions?

Held:

The Hon’ble Delhi High Court, in the Writ Petition (C) NO. 12209 OF 2023, held the following:

Interest becomes payable under Section 56 of the CGST Act if the refund ordered under Section 54(5) is not processed within 60 days from the date of the refund application.
The payment of interest under Section 56 is a statutory provision and does not rely on any claim made by the assessee.
Circular No. 125/44/2019-GST dated November 18, 2019, clarifies that interest accrues from the date immediately after the expiry of sixty days from the date of the refund application until the amount is credited to the applicant's bank account.
Consequently, the Petitioner is entitled to statutory interest at the rate of 6% from the date following the expiry of sixty days from the date of the refund application until the refund is credited to the bank account.
The Court directed the Revenue Department to process the refund of interest and credit the same into the Petitioner's account within four weeks.

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Income Tax Dept. issued Updated TDS Rate Chart for FY 24-25/Ay 25-26

editor — Thu, 28 Mar 2024 04:20:53 +0000

The Income Tax Department has published a revised TDS Rate Chart for the Financial Year 2024-25 (Assessment Year 2025-26).

You can access the complete TDS rate chart at: https://www.nyca.in/wp-content/uploads/2024/03/IT_TDS-Chart_2024-25.pdf

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A Closer Look at the Significant Tax Adjustments Coming into Force on April 1, 2024

editor — Tue, 26 Mar 2024 07:04:10 +0000

April 1 signifies the start of a fresh fiscal year and holds great importance for personal finances, as many income tax adjustments from the Budget come into effect on this date. Additionally, various other alterations are also implemented, potentially influencing individual financial situations. These modifications were unveiled by Finance Minister Nirmala Sitharaman during her Budget speech this year. Let’s delve into some significant changes you need to know, such as the widened basic exemption thresholds, among others.

New Tax Regime Default Adoption

The default choice of the new tax regime is a significant alteration aimed at simplifying tax filing and encouraging more people to opt for the new regime.
The new regime offers reduced tax rates but fewer deductions and exemptions.
Taxpayers still have the option to continue with the old tax regime if it suits them better.

Elevated Basic Exemption Limit and Rebate

Effective from April 1, 2023, the basic exemption limit was raised to ₹ 3 lakh from ₹ 2.5 lakh under the new tax regime.
The rebate under Section 87A of the Income Tax Act, 1961, was increased to ₹ 7 lakh from ₹ 5 lakh.
Individuals with a taxable income up to ₹ 7 lakh under the new regime will receive a full tax rebate, exempting them from paying any income tax.

New Tax Slabs

Income between ₹ 3 lakh and ₹ 6 lakh will be taxed at 5%.
Income between ₹ 6 lakh and ₹ 9 lakh will be taxed at 10%.
Income between ₹ 9 lakh and ₹ 12 lakh will be taxed at 15%.
Income between ₹ 12 lakh and ₹ 15 lakh will attract a 20% tax.
Income above ₹ 15 lakh will be taxed at 30%.

Restoration of Basic Deduction

Reduced Surcharge

Life Insurance Taxation

Exemption of Enhanced Leave Encashment

Source: https://www.ndtv.com/india-news/new-tax-rules-to-come-into-effect-from-april-1-all-you-need-to-know-5283150

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Assessee is entitled to interest from the date immediately after the expiry of sixty days from the date of receipt of the GST refund application

editor — Tue, 26 Mar 2024 06:28:11 +0000

The Hon’ble Delhi High Court, in the case of Raghav Ventures vs. Commissioner of Delhi [Writ Petition (Civil) No. 12209 of 2023 dated March 01, 2024], held that the payment of 6% interest under the Section 56 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is statutory and does not depend if the claim made by the Assessee. It is automatically payable if the GST refund is not made within 60 days from the date of receipt of the application.

Facts of the case:

Raghav Ventures, referred to as “the Petitioner,” engaged in exporting mobile phones and accessories to M/s AZ Logistic, Dubai, UAE, and paid Integrated Goods and Services Tax (IGST). The normal procedure for claiming GST refunds involved submitting shipping bills, which Customs processed through ICEGATE.

In December 2022, exports amounted to Rs. 9,06,49,174/- with IGST payment of Rs. 1,63,16,851/-. In February 2023, exports totaled Rs. 2,80,38,271/- with IGST payment of Rs. 50,46,889/-. Similarly, in March 2023, exports amounted to Rs. 95,90,489/- with IGST payment of Rs. 17,26,288/-, and in May 2023, exports of mobiles and accessories worth Rs. 76,96,568/- were made, with IGST payment of Rs. 13,85,382/-.

According to Sub-Rule (2) of Rule 96 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”), export invoice details from Form GSTR-1 are electronically transmitted to Customs. Once the system confirms export, GST refunds are processed through ICEGATE under Rule 96(3) of the CGST Rules.

The Petitioner submitted GST returns in Form-GSTR-3B and refund applications for the mentioned periods via Form-GST-RFD-01. Acknowledgments were received via Form-GST-RFD-02, confirming receipt of the GST refund applications.

While the writ petition was pending, the IGST refund for the period was credited to the Petitioner’s bank account on December 4, 2023, without any interest. On December 6, 2023, the Petitioner applied to the Special Commissioner, Department of Trade & Taxes (“the Respondent”), seeking 6% interest from the refund application date until December 3, 2023.

Therefore, aggrieved by these circumstances, the present writ petition was filed, requesting the Respondent to grant the total IGST refund of Rs. 2,44,75,410/- for the tax periods of December 2022, February 2023, March 2023, and May 2023, along with interest as per Section 56 of the CGST Act.

Issue:

Does the Assessee have a statutory entitlement to interest on delayed GST refunds?

Held:

The Delhi High Court, in Writ Petition (Civil) No. 12209 of 2023, ruled as follows:

It was observed that interest payment under Section 56 of the CGST Act is mandatory and not contingent upon the Assessee's claim. It automatically becomes due if the GST refund is not issued within 60 days from the date of application receipt. Denial of GST refund based on waiving interest claims in FORM GST-RFD-01 is unjustifiable. Additionally, interest is only applicable if the refund isn't granted within 60 days from the application date, making interest payment obligatory and automatic.
It was also noted that Circular No. 125/44/2019-GST dated November 18, 2019, clarifies that interest calculation starts from the day immediately following the 60-day period from the application receipt until the amount is credited to the applicant's bank account.
The court held that the Petitioner is entitled to statutory interest at a rate of 6%, starting from the day immediately following the expiry of the 60-day period from the application receipt until the refund is credited to the Petitioner's bank account. The Respondent was instructed to process the refund of interest and credit it to the Petitioner's account within four weeks. Consequently, the petition was resolved along with the pending application.

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Understanding the Contrast: Income Tax vs Tax Deducted at Source (TDS)

editor — Wed, 20 Mar 2024 09:27:10 +0000

Distinguishing Income Tax:

Income tax and Tax Deducted at Source (TDS) represent distinct facets of taxation, each with its own operational framework.

Income tax constitutes a levy imposed on an individual’s or company’s yearly earnings within a specific financial period. Governed by the Income-Tax Act (ITA) of 1961, it delineates the procedures for tax computation, evaluation, and collection.

This tax is applicable to various income streams such as salaries, rental income, professional profits, and capital gains. Individuals surpassing the threshold of Rs 2.5 lakh under the old tax system or Rs 3 lakh under the new regime are liable to pay income tax. Attempting to evade income tax constitutes a punishable offense under the law.

Decoding TDS:

On the other hand, Tax Deducted at Source (TDS) pertains to tax deductions made from the source of income and promptly remitted to the government. In TDS, entities disbursing specified payments like salaries, interest, rents, or professional fees are mandated to withhold a designated tax percentage before disbursing the amount. This measure aids in curbing tax evasion and streamlines the tax collection process.

Comparison: Income Tax Return (ITR) vs TDS:

Income Tax Return (ITR):

Tax Deducted at Source (TDS):

Key Differences between Income Tax and TDS:

Timing of Payment: While income tax is settled at the culmination of the financial year, TDS is deducted periodically throughout the year at the income source.
Taxation Responsibility: TDS is deducted by the payer, whether an employer or financial institution, and remitted to the government, whereas income tax is directly paid by the taxpayer after determining their tax liability.
Tax Rate Determination: TDS rates are predetermined by the government based on the nature of payments, whereas income tax rates are structured according to income slabs as stipulated by tax laws.
Scope of Application: TDS applies to specific payments such as salaries, interest, rents, and professional fees, while income tax is levied on the total annual income, including salaries and capital gains.

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Section 194G of the Income Tax Act

editor — Sat, 16 Mar 2024 13:09:34 +0000

Lottery tickets are often seen as gateways to instant wealth, but few realize the tax implications that accompany such windfalls. Section 194G of the Income Tax Act delineates the provisions for Tax Deducted at Source (TDS) on various activities related to lottery tickets, including their sale, distribution, and associated transactions. Let’s delve into the intricacies of Section 194G:

Scope of Section 194G:

Section 194G pertains to any income accrued by individuals in the form of commission, remuneration, or prize from lottery ticket transactions. This applies to individuals engaged in selling, stocking, distributing, or purchasing lottery tickets. If the income exceeds Rs 15,000, the entity responsible for payment must deduct TDS before disbursing the amount.

Rate of TDS under Section 194G:

The TDS rate applicable under Section 194G is 5% of the income earned. This deduction is made at the source, and no additional charges such as surcharge, education cess, or SHEC are levied at this specified rate. However, if the deductee fails to furnish their PAN, the TDS rate increases to 20%. Notably, if the payment amount does not exceed Rs 15,000, no tax deduction is applicable.

Timing of TDS Deduction:

Tax on income from lottery tickets is deducted either at the time of crediting the income to the deductee’s account or at the time of payment, whichever occurs earlier. Even if the income is credited to a “suspense account” or any other account per the deductor’s books, it is considered a payment to the deductee’s account, subject to the provisions of Section 194G.

Certificate of No or Lower TDS:

Recipients of lottery ticket income can apply to the Assessing Officer (AO) using Form No. 13 to obtain a certificate authorizing nil tax deduction or deduction at a reduced rate. However, to avail of this facility, it is imperative to quote the PAN in accordance with Section 206AA(4).

Responsibilities of the Deductor:

The entity responsible for deducting TDS, or the deductor, has two primary responsibilities:

In essence, Section 194G aims to ensure tax compliance and transparency in lottery ticket transactions, safeguarding the interests of both parties involved.

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Guide to Tax Collected at Source (TCS) – Rates, Payment, and Exemption

editor — Sat, 16 Mar 2024 12:55:45 +0000

The Indian Income Tax Act incorporates provisions for Tax Collected at Source (TCS), where specific individuals are mandated to collect a predetermined percentage of tax from their buyers during certain transactions. These regulations primarily affect business transactions and have minimal impact on the general public.

Recent Updates:

In Budget 2023, the TCS rate for foreign remittances under the Liberalized Remittance Scheme (LRS) was increased from 5% to 20%, effective from July 1, 2023. This adjustment extends to various international transactions such as travel expenses and remittances, excluding education and medical purposes.

Understanding Tax Collected at Source (TCS):

TCS refers to the tax collected by a seller from the buyer during a sale, which is then remitted to the tax authorities. Section 206C of the Income Tax Act governs the goods subject to TCS, with sellers required to possess a Tax Collection Account Number (TAN) for TCS collection.

Goods Covered and Applicable Rates:

Goods covered under TCS provisions encompass various categories, each with its specified rate:

Instances of Higher TCS Rates:

Under Section 206CCA, higher TCS rates apply to buyers who haven’t filed Income Tax Returns (ITR) for the last two financial years, exceeded a certain TCS and TDS threshold, or failed to meet specified criteria.

Seller and Buyer Classifications:

Specific entities such as governments, corporations, and partnerships are categorized as sellers for TCS. Buyers exempt from TCS collection include public sector companies, government entities, and diplomatic missions.

TCS Collection Timing and Calculation:

TCS should be collected either upon debiting the buyer’s account or upon receiving payment. For motor vehicle sales, TCS is collected upon receipt of payment from the buyer. The TCS amount is calculated as a percentage of the transaction value.

TCS Payments, Returns, and Certificates:

Sellers must deposit TCS amounts within seven days from the end of the month in which the tax was collected and file quarterly TCS returns.
A TCS certificate (Form 27D) detailing the transaction specifics must be issued to the buyer within 15 days of filing quarterly returns.
Deadlines for TCS returns and certificates are outlined for each quarter.

TCS Exemptions and GST Provisions:

Submission of Form 24G:

In cases where TDS or TCS is deposited without a challan, relevant entities must submit Form 24G electronically within specified timelines.

Conclusion:

Tax Collected at Source (TCS) plays a vital role in India’s tax collection framework, ensuring revenue compliance and facilitating seamless transactions. Understanding TCS provisions and adhering to associated regulations is essential for sellers and buyers alike to navigate tax obligations effectively.

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