Topics covered in this article :-

• GST on renting of Residential dwelling
• GST on residential rent under RCM (reverse charge mechanism)
• GST on renting of Commercial Property
• Summary
• Frequently asked question (FAQs)

In this article, we will discuss in detail how GST will be charged on renting a residential and commercial property. We shall discuss different scenarios where GST will not be charged and cases where GST will have to be paid under RCM (reverse charge mechanism)

Renting of Residential dwelling :

According to entry No. 12 of Notification No. 12/2017 dated 28.06.2017, the service provided by way of renting a residential dwelling is exempt.

So, if a residential property is rented for residential purposes, then it is exempt from GST.

Renting of Residential dwelling to Registered person / GST on residential rent under RCM :

According to Notification no. 04/2022- Central Tax (Rate) dated 13th July 2022, entry number 12 was amended where after “Services by way of renting of residential dwelling for use as a residence “except where the residential dwelling is rented to a registered “person” words were added.

If we understand this notification when a property is rented out for residential purpose, then it is exempted from GST, but when a property is rented out as a residential dwelling to a GST-registered person for residence purpose, then GST is leviable on it and according to Notification no. 05/2022 –Central Tax (Rate) dated 13th July 2022, this service will be taxable under RCM. The recipient of the service will have to pay GST under RCM.

Moreover, in the 48th GST Council meeting, this matter was clarified that if the residential dwelling is being used for personal purpose by the registered person and the rent paid is not claimed as business expenses then GST will not be paid under RCM.

It means that for a registered person who is the proprietor of a proprietorship firm and has taken a house on rent for his residential purpose, whose rent he is paying in his personal capacity, then GST will not be applicable on it.

Renting of Commercial Property :

Rental income of commercial nature falls under Entry No. 16 of Notification no. 11/2017 (Central Tax Rate) Dated 28th June 2017, in which GST is applicable at the rate of 18%, which has to be charged by the service provider (i.e. Landlord) under 'forward charge mechanism'.

But, if both landlord and tenant are unregistered, then in this case, GST will not be applicable.

What we have understood, let's understand with some examples: -
Example-1
Q : A bank is providing accommodation facilities for its employees. Where the bank pays rent directly to the landlord, will GST be applicable in this case?
A : If a residential dwelling is rented out to a GST-registered person for residence purpose, then GST will be leviable on it and the recipient of the service will have to pay GST under RCM.
In this case, the Bank is registered under GST and it is paying rent for its employee's accommodation, so in this case, the bank will have to pay GST in RCM.

Q : ‘Mr. B’ is registered in GST, he took commercial property on rent from an unregistered person. Will the applicability of RCM arise in this case?
A : In case of rental income of a commercial nature, GST has to be charged under 'forward charge'. If the landlord is unregistered, there is no provision that the registered person will have to pay GST in RCM.

Therefore, in this case, the applicability of RCM will not arise. Besides this, the landlord is not GST-registered. Therefore, no GST will be charged on this rent income.

Summary of above provisions:

Frequently asked question (FAQs)

Q : What is Reverse Charge Mechanism (RCM) under GST?
A : As per Section 9 of CGST, The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on a reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

It means, under RCM liability to pay GST has been shifted on the recipient of goods/ services.

Q : Is RCM applicable on rent paid to unregistered persons?
A : There may be below situation in this case :-

1. In case of commercial property taken on rent from unregistered person by a registered/ unregistered person :
   Furthermore, a landlord is unregistered, and hence, there will not be any GST under forward charge. If commercial property is taken on rent by a registered or unregistered person, in both cases, there is no GST under RCM.
2. In the case of residential property taken on rent from an unregistered person by a registered person:
   If the residential property is taken on rent by the registered person, then GST will be paid under RCM.
3. In case of residential property taken on rent from an unregistered person by a unregistered person:
   In this case, there is no applicability of RCM.

Q : When RCM is applicable in the case of commercial property?
A : In case of rental income of a commercial nature, GST has to be charged under 'forward charge' only. If the landlord is unregistered, there is no provision that the registered person will have to pay GST in RCM.

Q : Is residential property taken on rent is subject to RCM?</strong
A :If a residential dwelling is rented out to a GST-registered person for residence purposes, then GST is leviable on it and according to Notification no. 05/2022 –Central Tax (Rate) dated 13th July 2022, this service will be taxable under RCM. The recipient of the service will have to pay GST under RCM.

Q : What will be the rate of GST under RCM ?
A : GST under RCM will be paid at the rate of 18%.

Q: Can a tenant (service recipient) claim an input tax credit (ITC) for the GST paid under RCM on residential rent?
A : Yes, the tenant is eligible for ITC for the GST paid under RCM.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website.

Tax in India

Direct taxes in India refer to taxes that are imposed directly on individuals and entities based on their income or wealth. Levies like income tax, corporate tax and erstwhile wealth tax fall under the ambit of direct taxes and are levied by the Union Government. They play a vital role in generating revenue for the government and funding various developmental initiatives and public welfare.

Types of Direct Taxes

In India, several types of direct taxes are levied by the central government. Let’s take a look at some of the most common forms of direct taxes. Direct tax is a tax that a person or organization pays directly to the entity that imposed it. In can’t be transfer to other person.

• Income Tax
• Corporate Tax
• Capital Gains Tax
• Securities Transaction Tax (STT)
• Dividend Distribution Tax (DDT)
• Gift Tax
• Estate Tax

What is Income tax act?

It is a tax levied by the Government of India on the income of every person. The provisions governing the Income-tax are covered in the Income-tax Act, 1961.

Income tax levied under Entry No. 82 & Corporation tax in India is levied under Entry 85 of List I of the Seventh Schedule of the Constitution of India. This entry empowers the Parliament of India to make laws for the imposition of corporation tax

The Basic Concept of Income Tax Act, 1961 is an act to levy, administrate, collect & recover Income-tax in India. It came into force from 1st April 1962.

Charge of Income-tax

Tax cannot be levied or collected in India except under the authority of Law. Section 4 of the Income- tax Act, 1961 gives authority to the Central Government for charging income tax. This section is the backbone of the law of income-tax

This is the charging section in the Income-tax Act, 1961 which provides that:

• Income tax shall be levied at the rates specified in the Annual Finance Act for the relevant year.
• The income tax liability applies to all individuals and entities defined as 'persons' under Section 2(31) of the Income Tax Act.
• Income tax is assessed based on the total income earned during the previous year, not the assessment year. However, certain exceptions are outlined in Sections 172, 174, 174A, 175, and 176 of the Act.

Scope of Tax

Taxability of income in India depends on a person’s residential status & place of income earned or Accrued.

For tax purposes, the residential status of an individual is classified as:

1. 1. Ordinarily Resident
   2. Not Ordinarily Resident
   3. Non-Resident

Head Of Income

"The Heads of Income are crucial for determining tax liability under the Income Tax Act. Any income that is subject to taxation must be classified under one of these heads."

• Income from salary
• Income from house property
• Income from profits and gains from business or profession
• Income from capital gains
• Income from other sources

It is of utmost importance to correctly identify the appropriate/Correct Head of Income for taxation purposes.

Disclaimer:-The information available on this Website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on Website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this Website/Application.

Topics covered in this Article :

• What is GTA
• What is Consignment Note
• Contains of Consignment Note
• Taxability on transportation services by GTA
• Registration Requirement of GTA
• Services covered under RCM if provided by GTA
• Reverse Charge if the GTA is unregistered
• Other Services provided by GTA
• Who will pay under Reverse Charge
• GST Rates for GTA
• The last date to exercise the option to pay under the forward charge mechanism
• GTA Services which are exempted from GST
• Place of Supply for a GTA
• FAQs (Frequently Asked Questions)

In this article, we shall understand all about the impact of GST on goods transport services. We will delve into topics like RCM on transportation / RCM on freight Charges, registration requirements, GST on hiring of vehicles, GST Rate on transport of goods by road, related notifications etc.

What is GTA:

The full form of "GTA" in the context of GST is "Goods Transport Agency." According to Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, "Goods Transport Agency" or GTA means the person who provides goods transport services by road and issue consignment note. A consignment note is also known as builty.

What is Consignment Note:

A Consignment Note is a document that contains particulars of goods for shipment and which provides proof that the consignment has been received by the carrier (goods transportation agency) for delivery. If a Consignment note is not issued by the Transporter, then the service provider will not fall under the definition of GTA (Goods Transport Agency).

Contains of Consignment Note :

• Consignor's details (name, address, and contact information, etc.)
• Consignee's details (name, address, and contact information, etc.)
• Registration number of the carriage of the goods in which the goods are transported
• Details of the goods
• Place of origin
• Place of destination.
• Consignment Note Number
• Charges and Payment Details
• Signature and Date
• Person is liable to pay GST – consignor, consignee, or the GTA.
• Other Relevant Information (like any specific instructions for shipment)
• Terms and Conditions

Taxability on transportation services by Road under GST :

In GST, the service of transportation of goods has been exempted from GST through Entry Number 18 of Notification No.12/2017- Central Tax (Rate), but, if the transportation of goods is being done through the below mode, then the services Will become taxable:-

• A goods transportation agency
• A courier agency

If transportation of goods is done through GTA or Courier Agency, then GST will apply to these services.

Registration Requirement of GTA:

According to section 22 of CGST, if the aggregate turnover of a person is above Rs. 20 lakh or in special category states it is above Rs.10 lakh, then it is mandatory to get GST registration.

But, as per section-23(2) and Notification No. 05/2017- Central Tax, It has been specified that if a person supplies such goods, services, or both on which the liability to pay GST falls on the recipient in RCM, that the person is exempted from taking registration.

With this, we can say that if the turnover of any service provider is above Rs.20 lakh/ Rs.10 Lakhs (as the case may be). But, all his tax liability is payable by the recipient in RCM, in that case, GTA is not required to take registration.

Services covered under RCM if provided by GTA:

According to Section 9(3) of CGST ACT 2017, the Government, on the recommendation of the Council, may notify a special category, in which the liability to pay tax on the supply of goods, services, or both is shifted on the recipient on the Reverse Change Mechanism.
According to Notification No.13/2017- Central Tax (Rate), if the service of transportation of goods is provided to the below-specified person in the taxable territory, then, in that case, such services will be covered in RCM: -

• Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
• Any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
• Any co-operative society established by or under any law; or
• Any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
• Any body corporate established, by or under any law; or
• Any partnership firm whether registered or not under any law including association of persons; or
• Any casual taxable person; located in the taxable territory.

If GTA is not registered in the forward charge mechanism, in that case, the person specified above will have to pay tax in reverse charges. But, if the GTA is registered in a forward charge mechanism, then in that case GTA will pay tax.

Reverse Charge if the GTA is unregistered:

If the unregistered person does not fall in the above category, then the applicability of RCM will not come. Along with this, an unregistered transporter firm (GTA) will also not have to pay any tax.

Other Services provided by GTA:

Services not only include transportation of goods but also other intermediate/ancillary services, such as:

• Loading/unloading
• Packing/ unpacking
• Transshipment
• Temporary warehousing etc.

If the above services are not being provided independently then they can be included with GTA services.

Who will pay under Reverse Charge:

The person who is located in the taxable territory and who is liable to pay freight for the transportation of goods will be considered as receiver of service.

GST Rate on transport of goods for GTA:

If the GTA has opted for the option to pay GST under the forward charge mechanism, then the GTA has 2 options to pay GST
If he wants to claim ITC then pay GST at the rate of 12%.
But, if do not want to claim ITC then GST will be paid at the rate of 5%.

Last date to exercise the option to pay under the forward charge mechanism :

As per Notification No. 06/2023- Central Tax (Rate) dated 26-07-2023, the last date to exercise the option to pay GST under the forward charge mechanism is 31st March of the preceding financial year. The starting date for exercising the option will be 1st January of the preceding financial year.

GTA is not required to file a declaration to exercise the option to pay GST under the forward charge mechanism every year. If they have exercised this option for a particular financial year, then it will be deemed that they have exercised it for the next and future financial years, unless they file a declaration n in Annexure VI to revert under the reverse charge mechanism on or after the 1st January of the preceding Financial Year but not later than 31st March of the preceding Financial Year.

Example: If Amar Goods Carrier wants to pay GST under forward charge in the financial year 2024-25, then he will have to opt for this option to pay GST under the forward charge mechanism on or before 31st March in the current financial year (2023-24).

GTA Services which are exempted from GST:

According to Entry No. 21 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 if services provided by a goods transport agency, by way of transport in a goods carriage of below cases are exempt:–

• Agricultural produce;
• Milk, salt, and food grains including flour, pulses, and rice;
• Organic manure;
• Newspaper or magazines registered with the Registrar of Newspapers;
• Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishaps; or
• Defence or military equipment.

Services by way of giving on hire :

According to Entry Number 22 of Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 in the below cases services by way of giving on hire is exempt :

• To a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or
• To a goods transport agency, a means of transportation of goods.

Example :-

Let us assume that Mr. A is a Goods transport agency (GTA). Mr. A does not own any truck. Mr. A provides the service of goods delivery by arranging trucks from others and Mr. A issues consignment note to good recipient.

Q1. Will GST be charged on hire charges?
Ans : No, as per Entry No. 22 of Notification No.12/2017-Central Tax Rate, hire charges is exempt from GST.

Q2. Is there any liability for Mr.A to pay GST?
Ans : If the option of forward charge has not been exercised by Mr. A, then Mr. A will not be liable for GST. The service receiver will have to pay GST in RCM.

Place of Supply for a GTA

According to section 12(8) of the IGST Act 2017, the place of supply for services of transportation of goods is as follows:
If these services are being provided to a registered person then the location of that person will be considered as place of supply.
If these services are being provided to other than registered person then the location where the goods are being handed over for transportation will be considered as place of supply.

FAQ (Frequently Asked Questions) :

Question 1: Mr. B is a single truck owner-operator and he plies his truck mostly between States and carries the goods booked by an agent. Is there any requirement to take GST Registration if the aggregate value of service exceeded twenty lakh rupees during last year?
Answer: Mr. B is not liable to take GST Registration, as services provided by way of transportation of goods by road are exempt vide Notification number 12/2017-Central Tax (Rate), dated 28th June, 2017.

Question 2: Mr. B owns some trucks and he rented his trucks to others, who provide GTA service. Should B is required to take GST Registration in the case if the aggregate value of service exceeds twenty lakh rupees? Does monthly rental/lease income attract GST in case of hire charges?
Answer: Mr. B is not required to take Registration, since services by way of giving on hire, a means of transportation of goods to a GTA are exempt from tax vide entry no. 22 of Notification number 12/2017-Central Tax (Rate) dated 28th June, 2017.

Question 3: Is transportation of agricultural produce attract RCM?
Answer: According to Entry No. 21 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 if services provided by a goods transport agency, by way of transport of Agricultural produce are exempt.
According to explanation no.(vii) of para 4 of Notification No. 11/2017 (central tax rate) :-

"agricultural produce" means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material, or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for the primary market.

Question 4: Mr. C is a broker of a truck supplier. Mr. C gets orders for truck owners and quotes the rate for transportation to GTA on behalf of truck owners. In lieu of this, Mr. C receives a small amount as commission out of the truck hire fixed with the GTA. This brokerage is paid by the truck owners. As the services provided by way of transportation of goods by road are exempt from tax, is Mr. C liable for registration?
Answer: This commission income will not fall under the exemption category. Mr. C is required to take GST registration if the aggregate amount of commission received exceeds Rs. 20 lakhs (Rs. 10 lakhs in special category States).

Question 5: What are the documents required to be maintained for services of transportation?
Answer: In terms of section 35(2) of the CGST Act, 2017 transporter is required to maintain records of the consigner, consignee, and other relevant details of the goods. Further, in terms of rule 56 of the CGST Rules, 2017 transporter is required to maintain records of goods transported, delivered, and goods stored in transit by you along with the GSTIN of the registered consigner and consignee.

Question 6: Are intermediary and ancillary services like loading/unloading, packing/unpacking, transshipment, and temporary warehousing, provided in relation to transportation of goods by road to be treated as part of the GTA service, being a composite supply, or these services are to be treated as separate supplies.
Answer: The GTA provides service to a person in relation to the transportation of goods by road in a goods carriage, which is a composite service. The composite service may include various intermediary and ancillary services like loading/unloading, packing/unpacking, transshipment, and temporary warehousing, which are provided in the course of transport of goods by road.

These services are not provided as independent services but as ancillary to the principal service, namely, transportation of goods by road. The invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services.

In view of this, if any intermediary and ancillary service is provided in relation to the transportation of goods by road, and charges, if any, for such services are included in the invoice issued by the GTA, such service would form part of the GTA service and would not be treated as a separate supply.

In fact, any service provided along with the GTA service that is part of the composite service of GTA shall be taxed along with GTA service and not as separate supplies. However, if such incidental services are provided as separate services and charged separately, whether in the same invoice or separate invoices, they shall be treated as separate supplies.

Question 7: Mr. B is GTA, he does not have any other income other than services from transportation by goods by road. If his turnover exceeds Rs. 20 Lakhs, Is Mr. B required to take GST Registration?
Answer: As per Notification number 05/2017-Central Tax dated 19th June, 2017, the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on a reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the CGST Act, 2017 are exempted from obtaining registration under the said Act.
So, Mr. B, a GTA providing service in relation to the transportation of goods by road under RCM can avail the benefit of this exemption.

Question 8: Whether input tax credit is available to the recipient of service when the GST paid by him is at a concessional rate of 5% under RCM.
Answer: Yes, input tax credit is available in such cases.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on the website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website.

Section 194C of the Income Tax Act outlines the provisions for tax deduction at source (TDS) on payments made to resident contractors and sub-contractors. The applicability, time of deduction, rates, threshold limits, and various other aspects related to TDS under this section are clarified below.

1. Applicability of TDS under Section 194C:

TDS under Section 194C applies to payments made to resident contractors and sub-contractors for work carried out under various categories, including contracts with the

• The Central Government or any State Government; or
• Any local authority; or
• Any statutory corporation; or
• Any company; or
• Any co-operative society; or
• Any statutory authority dealing with housing accommodation; or
• Any society registered under the Societies Registration Act, 1860; or
• Any trust; or
• Any university established under a Central, State or Provincial Act and an institution declared to be a university under the UGC Act, 1956; or
• Any firm; or
• Any Government of a foreign State or foreign enterprise or any association or body established outside India; or any person, being an individual, HUF, AOP or BOI, who has total sales, gross receipts or turnover from the business or profession carried on by him exceeding Rs. 1 crore in case of business and Rs. 50 lakhs in case of profession during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.

2. Time of Deduction:

Tax must be deducted at the time of payment or when the sum is credited to the contractor's account, whichever is earlier. If the sum is credited to an account in the books of the payer, it is considered as credited to the payee, and TDS should be applied.

3. Rate of TDS:

The TDS rates under Section 194C are as follows:

• 1% for individual and HUF contractors/sub-contractors
• 2% for other payees
• Nil for contractors or sub-contractors in the transport business who furnish their PAN

4. Threshold Limit for TDS:

No TDS is required for contract considerations that do not exceed ₹30,000. However, TDS is applicable if the aggregate sum paid to a contractor or sub-contractor exceeds ₹1,00,000 during the financial year, even if a single payment is below ₹30,000.

5. Definition of Work:

Work includes various activities, such as advertising, broadcasting, carriage of goods or passengers, catering, and manufacturing or supplying products based on customer requirements. However, contracts for manufacturing or supplying products using raw materials from a source other than the customer are considered sales contracts and not covered under Section 194C.

6. Non-Applicability of TDS:

TDS is not required for payments made in the nature of transport charges during the business of plying, hiring, or leasing goods carriages if the contractor furnishes their PAN. Specific conditions, including owning ten or fewer goods carriages, engagement in the transport business, and PAN submission, must be met for this exemption.

• • Owns ten or less goods carriages at any time during the previous year
  • Engaged in the business of plying hiring, or leasing goods carriages
  • Furnished Declaration With Pan

Meaning of Goods carriage:
Goods carriage means -

• Any motor vehicle constructed or adapted for use solely for the carriage of goods; or
• Any motor vehicle not so constructed or adapted, when used for the carriage of goods.

The term “motor vehicle” does not include vehicles having less than four wheels and with engine capacity not exceeding 25cc as well as vehicles running on rails or vehicles adapted for use in a factory or in enclosed premises.

7. Important Points:

• Section 194C applies to work contracts and labor contracts, not sales contracts.
• Contracts for professional services are not covered under Section 194C; separate provisions exist under Section 194J.
• TDS must be deducted at the time of crediting the sum to the contractor's account or at the time of payment, whichever is earlier.

8. Deduction of Tax on Gas Transportation Charges:[Circular No. 9/2012 dated 17.10.2012]:[ [Circular No. 9/2012 dated 17.10.2012]

Gas transportation charges paid by the purchaser to the owner/seller of natural gas are not covered under Section 194C if the contract remains essentially a sale and not a works contract.

9. Applicability of TDS on Payments by Broadcasters/Television Channels: [Circular No. 04/2016, dated 29-2-2016]

The distinction between payments for content production as per broadcaster specifications and payments for acquiring broadcasting/telecasting rights is essential. The former falls under Section 194C, while the latter may be subject to TDS under other sections of Chapter XVII-B.
In conclusion, understanding the applicability of TDS under Section 194C is crucial for businesses and individuals to comply with tax regulations when making payments to contractors and sub-contractors for various types of work.

10- The time limit to deposit TDS (Tax Deducted at Source)

If the amount is paid or credited in a month other than March: The TDS must be deposited within 7 days from the end of the month in which the deduction is made.
If the amount is paid or credited in the month of March: The TDS must be deposited on or before 30th April of the same financial year.

11- The time limit to file the TDS return under Section 194C,

Due dates for filing TDS returns for different quarters are as follows:

• April to June: The due date for filing the return is 31st July.
• July to September: The due date for filing the return is 31st October.
• October to December: The due date for filing the return is 31st January.
• January to March: The due date for filing the return is 31st May.

Exceptions to TDS Under Section 194C

The following are the exceptions to TDS under Section 194C:

• Payments made to individuals and HUFs for personal use. [Keep in mind Section 194M]
• Payments made to the government or local authority.
• Payments made for the purchase of goods.
• Payments to a contractor who has furnished a valid declaration under Form 15G/15H.
• Payments made to non-resident contractors who do not have a permanent establishment in India.

Various consequences of non-complianc u/s 194C

TDS regulations can lead to various consequences, including financial penalties and disallowances. Here are the consequences of non-compliance:
A. Non-Deduction or Non-Payment of TDS:

• TDS Default for Non-Deduction or Non-Payment:
  • If tax is deductible but not deducted, 30% of the expenditure is disallowed in the current year.
  • If tax is deducted in a subsequent year, the disallowed expense will be allowed in the year in which TDS is deducted and deposited.

• Tax Deducted but Not Deposited on Time:
  • If tax is deducted but not deposited on or before the due date of filing the income tax return, 30% of the expenditure is disallowed in the current year
  • If tax is deposited after the due date of filing the income tax return, the expense will be allowed in the year of depo

B. Interest on Default:
The deductor will be deemed to be in default, and interest will be levied in the following cases:

• If a person fails to deduct tax, interest is levied at the rate of 1% per month or part of the month from the date on which the tax was deductible to the date on which the tax is deducted.
• If a person has deducted tax but failed to deposit it, interest is levied at the rate of 1.5% per month or part of the month from the date on which the tax was deducted to the date on which the tax is actually paid.

C. Late Fee for TDS Return Filing:
The deductor is liable to pay a fee under Section 234E for default in furnishing quarterly TDS return in Form 26Q. The fee is Rs. 200 for every day during which the failure to file the return continues. However, the fees shall not exceed the maximum amount of TDS deducted. It is mandatory to pay the late fee before filing the return.

General Point

1. Payment made by an individual or a HUF for contract work or by way of commission or brokerage or fees for professional services [Section 194M]
2. Sponsorship of debates, seminars and other functions in schools/colleges/associations – It is in the nature of advertising – provisions of Section 194C would apply
3. Payment made by a cable operator to get licence of TV channels is covered u/s 194C
4. Payment made to travel agency or an airline for purchase of a ticket for travel is not liable for TDS u/s 194C.
5. Payments made to courier agency including clearing or forwarding agent – Provisions of section 194C is applicable.
6. TDS not applicable on serving food in a restaurant because the restaurant services are not covered under catering.
7. Payments made to an electrician is liable for TDS u/s 194C
8. Rendering any services for procurement of orders is covered under section 194J and not under section 194C
9. Recruitment agency- ection 194C apply to a contract for carrying out any work including supply of labour for carrying out any work. Payments to recruitment agencies are in the nature of payments for services rendered. Accordingly, provisions of section 194C shall not apply. The payment will, however, be subject to TDS under section 194J of the Act.
10. This section does not require a written contract , even if agreement is verbal, TDS should be deducted.

Disclaimer:-The information available on this website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/Application

In India, any excess premium received by a company on shares is subject to taxation under the head of income from other sources. This taxation applies under specific conditions:

1. Issuing Shares in a Closely Held Company:

The excess premium taxation is applicable when shares (equity or preference shares) are issued by a closely held company. A closely held company is one where the public is not substantially interested.

2. Receipt of Consideration:

The excess premium taxation comes into effect when the consideration for issuing shares is received from any person, whether a resident or a non-resident.

3. Conditions for Exemption:

There are exemptions to this provision in specific cases:
Exemption applies when the consideration is received by a Venture Capital Undertaking from a Venture Capital Company, Venture Capital Fund, Category-I or Category-II Alternative Investment Fund (AIF).
Exemption also applies when the company is an eligible start-up fulfilling conditions as prescribed in Notification No. GSR 127 (E) [F.NO.5 (4)/2018-SI], Dated 19-2-2019.

4. Limit for Start-up Exemption:

To claim the exemption under Section 56(2)(viib), a start-up must ensure that the aggregate amount of paid-up share capital and share premium does not exceed Rs. 25 crores after the issuance or proposed issuance of shares.

5. Declaration Requirement for Start-ups:

Start-ups recognized by DPIIT (Department for Promotion of Industry and Internal Trade) need to file a declaration in Form 2 with DPIIT, along with details of the company, to claim the exemption. DPIIT forwards the self-declaration to the CBDT (Central Board of Direct Taxes) for approval.

6. Computation of Fair Market Value:

The fair market value of shares can be determined by:
Taking into consideration the suggestions received in this regard and detailed interactions held with stakeholders, Rule 11UA for valuation of shares for the purposes of section 56(2)(viib) of the Act has been modified vide notification no. 81/2023 dated 25th September, 2023.
The key highlights of the changes in Rule 11 UA are:
a) In addition to the two methods for valuation of shares, namely,

• Discounted Cash Flow (DCF) and
• Net Asset Value (NAV) method, available to residents under Rule 11UA,

Five more valuation methods have been made available for non-resident investors, namely,

• Comparable Company Multiple Method,
• Probability Weighted Expected Return Method,
• Option Pricing Method,
• Milestone Analysis Method,
• Replacement Cost Method.

b) Where any consideration is received for issue of shares from any non-resident entity notified by the Central Govt., the price of the equity shares corresponding to such consideration may be taken as the FMV of the equity shares for resident and non-resident investors, subject to the following:

• To the extent the consideration from such FMV does not exceed the aggregate consideration that is received from the notified entity, and
• The consideration has been received by the company from the notified entity within a period of ninety days before or after the date of issue of shares which are the subject matter of valuation.
• On similar lines, price matching for resident and non-resident investors would be available with reference to investment by Venture Capital Funds or Specified Funds.
• Valuation methods for calculating the FMV of Compulsorily Convertible Preference Shares(CCPS) have also been provided.
• A safe harbor of 10% variation in value has been provided.

The notified rule provides for expansion of the valuation methodologies to include globally accepted methodology and provide a broad parity to resident and non-resident investors.

7. Reporting and Penalties:

Failure to comply with these conditions may result in the consideration received from the issuance of shares exceeding the fair market value being deemed as the company's income and subject to taxation.
When the exemption is withdrawn, it's considered a misreporting of income, and a penalty is levied as per Section 270A.
In conclusion, understanding the taxability of excess consideration for shares issued at a premium involves careful consideration of specific conditions and compliance with the law. Both closely held companies and start-ups should be aware of these provisions and exemptions, as well as follow the appropriate methodology for determining the fair market value of shares. This knowledge ensures businesses can navigate the tax landscape with confidence and in compliance with the law.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken.

Introduction

Section 40A(3) of the Income Tax Act outlines provisions related to the disallowance/ inadmissible expenses of cash payments in certain situations. This section aims to promote transparency and accountability in financial transactions, particularly in business expenditure. It restricts the deductibility of expenses exceeding a specified limit when they are not paid through prescribed electronic modes or financial instruments. In this article, we will explore the key aspects of Section 40A(3), its exceptions, and its implications.

Applicability

If a business makes any payment(s) or expenditure(s) to -

• A single person
• In a single day
• Other than by account payee cheque or an account payee bank draft(i.e., Makes payment via cash)
• Exceeding Rs 10,000/-

then such expenditure will not be allowed as a deduction under section 40A(3) of the Income Tax Act.

Modes of payment allowed

• An account payee cheque or
• Demand draft or
• ECS or digital payment
• Payments through Cards (Debit, credit), IMPS, UPI, RTGS, NEFT etc.
• Other prescribed electronic modes.

The Threshold Limit

According to Section 40A(3), if the payment or aggregate of payments for an expenditure to a person in a day exceeds Rs. 10,000, it must be made by specific payment methods to be considered for deduction. However, for payments related to plying, hiring, or leasing goods carriages, a higher threshold of Rs. 35,000 is applicable.

Exceptions

Section 40A(3) does not apply to all types of payments. Several exceptions [Rule 6DD ] and situations exist where the disallowance provision does not come into play.

Some notable exceptions include:

1. Payments to Specified Institutions
   There is no disallowance for payments made in non-specified modes to institutions like RBI, banking companies, co-operative banks, and more.
2. Payments in Legal Tender to the Government
   No disallowance for payments required to be made to the government in legal tender, such as freight charges or taxes.
3.  Payments by Specified Modes
   Payments are made through letter of credit, telegraphic transfers, book adjustments, or bills of exchange payable to a bank.
4. Payments by Book Adjustment / Book Entries
   Payments are made by adjusting against the liability incurred for goods or services provided.
5. Payments for Agriculture or Animal Produce
   No disallowance for payments made to producers of agricultural, animal husbandry, horticulture, or apiculture products.
6.  Payments for Cottage Industry Products
   Payments for products manufactured in cottage industries without power aid.
7. Payments in Remote Places
   Cash payments in areas not served by banks are exempted.
8. Terminal Payments to Low-Paid Employees
   Payments like gratuity, retrenchment compensation, or similar benefits up to Rs. 50,000.
9. Payment of Salary at Remote Places
   Salary payments to employees temporarily posted in remote locations without a bank account.
10. Payments to Agents
    Payments made by any person to their agent for goods or services in cash.
11. Payments by Authorized Dealers
    Authorized dealers and money changers are exempt from disallowance for cash payments in their normal business operations.
12. Purchase of Animals
    Exemption for individuals buying animals from farmers for slaughter and meat sale, subject to specific conditions.

Implications of Non-Compliance

If a taxpayer claimed a deduction for an expense in previous years and subsequently made a payment in violation of Section 40A(3), the payment may be treated as business income in the year it was made.

Conclusion

Section 40A(3) of the Income Tax Act aims to promote transparency and accountability in financial transactions. It restricts the deductibility of expenses exceeding specified limits when not paid through prescribed modes. Understanding these provisions and exceptions is crucial for businesses and individuals to ensure compliance with tax regulations.

Disclaimer:-The information available on this website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/Application

As per the data published by the Ministry of Finance, the GST (Goods and Services) Collection for October 2023 is Rs. 1.72 lakh crore. The GST revenue collection for October 2023 is the second-highest-ever.

This is a record increase of 13% Y-o-Y (Year-Over-Year).

Also, Revenue from domestic transactions (including import of services) is 13% higher Y-o-Y.

The average gross monthly collection of the GST in FY 2023-24 now stands at ₹1.66 lakh crore; which is 11% higher on Y-o-Y.

The gross GST collection for October 2023 is ₹ 1,72,003 crore out of which ₹ 30,062 crore is CGST, ₹ 38,171 crore is SGST a ₹ 91,315 crore (including ₹ 42,127 crore collected on import of goods) is IGST and ₹ 12,456 crore (including ₹ 1,294 crore collected on import of goods) is cess.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.

Are you embarking on the journey of getting a new PAN card or perhaps making some corrections to your existing one? Buckle up, because we've got a guide that's like the treasure map to smooth sailing. Check out these intriguing do's and don'ts to ensure your PAN card experience is as seamless as possible:

The Do's:

1. Use the Right Form: Start by picking the right form - "Request for New PAN Card Or/And Changes Or Correction in PAN Data."
2. Ink it Right: Fill out your application in block letters using the color black, like you're penning a mystery novel.
3. Picture Perfect: Add a recent, color photograph that's just the right size (3.5 cm x 2.5 cm).
4. Signature Sleuth: Leave your signature within its designated box, like an author signing their bestseller.
5. PAN Accuracy: Ensure your PAN (Permanent Account Number) is spot-on; no room for mistakes here.
6. Thumbprint Trail: If you opt for a thumb impression, get it attested by a Magistrate, Notary Public, or Gazetted Officer under official seal and stamp.
7. Document Detective: Provide the necessary Proof of Identity (POI), Proof of Address (POA), and Proof of Date of Birth (PODB, for Individuals & Karta of HUF) as per Rule 114 (4) of Income Tax Rules, 1962.
8. Name Match Game: Make sure the name on your application matches exactly with what's on your POI, POA, and PODB documents.
9. Tick the Right Boxes: Indicate the changes you need and back them up with solid proof.
10. Address Details: Write your complete postal address, including landmarks, for a smooth delivery.
11. PIN-Point Accuracy: Don't forget to include the correct pin code in your address.
12. Contact Connection: Share your telephone number and email ID for easy communication.
13. PAN Proof: Attach proof of your PAN, like a copy of your PAN card or the PAN allotment letter from the Income Tax Department, if available.

The Don'ts:

1. Erase and Replace: Don't scribble over or cancel out any information on the application.
2. No Pins or Staples: Avoid using pins or staples on the photograph – we're not building a scrapbook.
3. Signature Stays Inside: Your signature should stay within its designated box, like a detective sealing a confidential document.
4. Document Duplication Drama: Don't submit documents (POI, POA, and PODB) that aren't in your name.
5. Signature Solo: Don't team up your signature with additional details like dates, designations, or ranks.
6. Name Unveiled: Keep the husband's name out of the Father's Name column.
7. Initials Alert: Don't get too abbreviation-happy; use full names in the first and last name fields.

By following these do's and don'ts, you'll navigate the PAN card application process like a seasoned detective, ensuring your document is free of mysteries and mishaps.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.