Goods and Services Tax (GST) audit plays an essential role in complying with the tax regulations in India. The process is conducted to ensure that businesses comply with GST rules and regulations. Further, section 65 of GST Act empowers the tax authorities to conduct the audit of any registered person under the GST regime.
Section 65 GST Act allows the Commissioner or any officer authorized by the registered person to conduct the audit at any time during the financial year. It can also be conducted within two years from the date of filing of the annual return for the financial year to which the audit relates.
It is important to note here that GST audit Section 65 extends the time limit by the Commissioner for six months if he is satisfied that there is no reasonable cause of delay.
Understanding the time limits associated with Section 65 GST audit is crucial for both taxpayers and tax authorities. This article delves deep into the various aspects of the tie limit for GST audits under Section 65.
Under the Goods and Services Tax (GST) regime in India, a GST audit is an examination of the books of accounts and other relevant documents of registered taxpayers to ensure compliance with the various provisions of the GST Act.
GST Department conducts the audit to verify the books for accuracy and completeness of the return filed, claiming input tax credit, and payment of taxes due. The audit focuses on the maintenance of proper records, accuracy of documentation, and other compliance requirements under the law.
The objective here is to ensure that the registered taxpayer is complying with the provisions of the GST Act 2017 and to detect non-compliance issues that might require corrective action. Audit under Section 65 has to be conducted either once a year or at any time deemed necessary by the department. The outcome can have a significant impact on business and non-compliance can result in penalties and interest charges.
The Commissioner or any officer authorized undertakes an audit of any registered person for such period at a frequency prescribed under GST audit Section 65. This audit can be conducted at the place of business of the registered person or their office. Before the conduct of an audit, the taxpayer has to be informed by way of a notice at least fifteen working days in Form GST ADT-01. As per Section 65(4) of GST Act audit of taxpayers has to be completed within three months from the date of the inception of the audit.
However, in case the Commissioner is satisfied that the audit of the taxpayer cannot be completed within three months, he shall extend the period for a further six months after recording genuine reasons for doing so.
In case the assessing authority thinks that the value has not been correctly declared by the taxpayer or the credit availed is not within the normal limits, the Commissioner or any officer can direct the taxpayer to get his books of account examined and audited by a Chartered Accountant.
Section 65 and 66 of the GST Act also mandate to inform registered persons about the audit finding in Form GST ADT-04 after the audit is concluded. In case of discrepancies in terms of tax short paid, tax not paid, or input tax credit wrongly computed, the officer shall initiate action under Sections 73 and 74 of the Act.
- Taxpayers remain prepared for potential audits by maintaining proper records and adhering to compliance norms.
- Taxpayers must seek clarification in case they receive an audit intimation outside the stipulated timeframe.
- Taxpayers must engage constructively with authorities during the audit process.
The timeframe in the GST audit is essential. Exceeding the stipulated timeframe might raise concerns but it doesn't automatically render the audit invalid. Despite this, if the taxpayer feels that the extended period is unreasonable or unjustified, they can approach higher authorities with their grievances.
The Commissioner can commence an audit anytime within the ongoing financial years. The audit can be conducted within two years from the date of filing the annual return for that relevant financial year. This means that even if the return is filed after the due date, an audit is mandatory. The GST Act does not prescribe any specific frequency for conducting audits. The authorities can select taxpayers for audit based on various factors; turnover threshold, potential non-compliance indicators, and risk assessment.
As per Section 65(4) of GST Act, the audit ideally has to be completed within three months from the date of the inception and can be extended for six months only if the Commissioner is satisfied that the audit could not be completed due to genuine reasons.
The commissioner can give in writing extend the period for the following factors affecting the time limit:
- In case there are complexities of the case like complex transactions, large turnovers, or suspected irregularities, an audit might require more time for scrutiny, potentially leading to an extension.
- The taxpayer's promptness in providing necessary records and other documents and cooperating with the audit process can expedite its completion. In case a taxpayer fails to cooperate with the audit or provide account or other documents, Section 62 of the CGST Act empowers the authorities to resort to a best judgment assessment. This assessment can be made within a period not exceeding five years from the due date of the annual return for the relevant financial year.
- The overall workload of the tax departments and their assessing officers in a particular jurisdiction can influence the audit duration.
In Conclusion, it is crucial to remember that the time limits outlined in the Act serves as a guideline for authorities and taxpayers. While adhering to these time limits is essential, transparency and communication help to adhere to the process. it ensures a fair and efficient GST audit process.
What are the documents required to be maintained for GST Audit Under Section 65?
Registered taxpayers must have the following documents for the GST audit;
- Invoices received and issued
- Purchase orders
- Payment vouchers
- Debit and credit notes
- Receipt vouchers
- Input tax credit registers
- Stock registers
- Output tax liability registers
- Book of accounts
- Annual financial statements
- Bank statements and reconciliation statements
- Other documents maintained under the GST
All these documents are required from the date of last used to at least six years from the end of the relevant financial year.
What is the Timeline For GST Audit Completion?
The entire audit process conducted under Section 65 of the CGST Act has to be completed within 3 months from the date of inception of the audit. Delays caused beyond the reasons mentioned by the jurisdictional Commissioner are subjected to penalties and interest charges.
In India, Tax Deducted at Source (TDS) acts as a tax collection mechanism computed at the source of income. This ensures a steady flow of revenue to the government and also helps to minimize tax evasion. Understanding various types of TDS return forms is essential for individuals and businesses responsible for deducting TDS.
TDS is an advance tax that is paid or credited to the receiver's account. The TDS deductor or the collector has to submit a TDS return quarterly. These returns can be submitted in TDS return form depending upon certain conditions;
- For quarterly statements for TDS from salaries, TDS return Form 24Q is applicable.
- For quarterly statements for TDS in respect of all payments other than salaries, TDS return Form 26Q is applicable.
- For quarterly statements of deduction of tax from interest or dividends, TDS return Form 27Q is applicable. It is also valid for sums payable to non-residents or foreign companies.
This is a comprehensive guide that consists of all relevant information about different types of TDS return forms, highlighting their specific purposes and filing requirements.
TDS return filing form 24Q has to be filled up for the declaration of citizen's TDS returns in detail. It has to be filed by employers to declare and deposit TDS deducted from employee salaries during the specific quarter.
This TDS return filing form has to be filled with information based on citizen’s salary payments, Permanent Account Number (PAN) of Deductor and Deductees, deductions made for taxation, and Challans. The declaration and payment have to be made quarterly by Indian companies and firms. With all the other relevant information, the deductor must submit the Form 24Q to the Income Tax Department.
There are different variants of one can download TDS return forms, such as Form 24Q-Q1, Form 24Q-Q2, Form 24Q-Q3, and Form 24Q-Q4. It needs to be filed electronically for the four quarters of the financial year (April to March). Further, each form filed for the respective quarter is essential for compliance on part of the employer. This ensures accurate reporting of TDS on salary payments.
The form is also supported by Annexure I and Annexure II wherein Annexure I is to be submitted by the deductors for every quarter of the financial year. Annexure II has to be furnished and submitted only in the fourth quarter of the financial year. This annexure also contains the details of the salaries paid to the employees in an entire financial year.
Form 26 TDS return is a quarterly statement of tax collected at source from payment other than salary under Section 200 (3), 193 and 194 of the Income Tax Act 1961. People who are living and working in India or are Indian citizens must file TDS return Form 26Q. This form caters to the declaration if TDS is deducted on rent, director's remunerations, interest on investments, professional fees, and includes interest on securities dividend securities, etc.
Similar to Form 24Q, it is filed quarterly and requires information like PAN details of the payee, the nature of payment, and the amount of TDS deducted under different sections. The due date to file Form 26 TDS return electronically is 15 days after the quarter's end.
It needs to be indicated in the Income-tax TDS return Form 26Q whether the deductor is Government or non-government. TDS return filing form 26 Q requires the non-government deductors to furnish PAN. Non-government deductors will have to mention 'PANNOTREQD'.
Form 27Q is made under Section 206c of the Income Tax Act 2017. 27 A form for TDS return is compulsory for non-government deductors to mention the PAN in the form and government deductors mention “PANNOTREQD”. In case the deductors are from the Central or State Government, the ministry or department must be mentioned.
Here tax is collected by the Seller from the buyer for certain goods while debiting the amount payable to the account of the buyer. It is applicable on the amount received from the buyer for selling goods mentioned under Section 206C. amount can be received in the form of cheque, cash, demand draft, or any other mode of payment.
Form 27EQ TDS return is a quarterly statement that shows TCS, tax collected by the seller. This form furnishes the details and information of tax collected at source. Therefore, it is mandatory to furnish TAN.
Form 27D is a TDS revised return form that also serves the purpose of revising previously filed TCS/TDS statements due to errors and omissions. Although there is no specific due date for this, it is recommended to file this GST TDS return form as soon as possible to avoid penalties. Filing a TDS return requires details about the revised information, along with the original challan number and date of the statement being revised.
E TDS Return Form has to be submitted in four categories wherein a taxpayer will have to choose the particular category for which he or she has to file a TDS return accordingly.
- Taxpayers will first visit the official website of NSDL to begin e-filing for the TDS return form.
- Then click on the downloads tab and choose E-TDS/E-TCS from the drop-down list menu to select between different types of TDS return forms i.e. Form 24Q 26Q 27Q 27EQ.
- Once the applicant clicks on “Quarterly Returns” and chooses the 'regular' option, he or she shall be redirected to the new page.
- Lastly, taxpayers can choose the TDS Return Form from section “Form” as per the requirements mentioned in the Income Tax Act 1961 details.
Considering the summary of the Income Tax Act 1961, here are a few considerations that taxpayers can consider.
Every deductor is required to obtain a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department before deducting or collecting tax. Timely filing of TDS returns is essential to avoid penalties and interest charges. Detailed guidance is owed to the Income Tax Department and online tools for filing TDS returns electronically.
How Many Types of TDS TDS Are There?
According to the Income Tax Act 1971, an individual earning above a certain threshold is required to file TDS. There are various types of TDS return forms depending on the purpose of the TDS. Form 24Q Form 27Q Form 26QB Form 26QC Form 26Q TDS.
What Is Form 16A?
Form 16A is a TDS certificate that every employer is provided as a TDS certificate. It is only for salary income, and Form 16A applies to income sources apart from salary. It will be issued when TDS is deducted for fixed deposits and carries all amounts of TDS nature being deposited with the Income Tax Department.
Which Form Is Used For TDS?
Tax laws in India mandate TDS returns to be submitted in various forms depending on certain conditions. TDS returns are filed quarterly according to the specified payments mentioned under the Income Tax Act.
Gone are the days when paper trails and manual filing made the tax paying a tedious task. Electronic Tax Deducted at Source (E-TDS) return filing is the procedure of sending online the TDS returns to the Income Tax Department of India. With this, filing returns becomes a breeze, eliminating the paperwork woes. It is governed by the Income Tax Act 1961 and businesses must comply with the tax rules to receive return benefits of TDS and avoid fines.
eTDS translates to convenience and accuracy. Taxpayers can avail the advantages of TDS without worrying about getting cheated as they are automatically deducted. Pre-filled data ensures fewer errors and timely filing. Further, the government keeps a check on taxpayers to avoid evasion.
In simple words, TDS or tax deducted at source is the amount of income tax reduced by the person who is paying salaries, educational fees, rents, etc. as per the rates prescribed by the government. Section 23 of the Income Tax Act requires employers to deduct TDS from their employee's salary. The amount of TDS deducted acts as a stable revenue for the government and helps to manage their expenses
Any person or business making payments defined under the Income Tax Act of 1961 is obligated to withhold tax at source and submit a TDS report. This includes Hindu Undivided Families, partnership firms, businesses, LLPs, and other entities that incur different types of payments like rent, wages, interest, or any form of professional fees.
In recent years, discussions surrounding TDS rates have garnered increased attention within the financial landscape. The Financial Bill of 2016 introduced TDS rates of 25% for individuals and HUFs and 30% for other resident entities.
TDS is applicable to the employee's tax slab rates for the relevant financial year. The TDS rates on salary are determined by the employee's tax slab rates (based on their annual income). It is deducted on a specified transaction only when the payment exceeds the specified threshold limit. For instance, Section 194 J mentions no TDS is required to be deducted if the professional fee is less than Rs. 30000. So, the threshold limit here is Rs. 30000.
While the rates vary from year to year, employers need to keep themselves updated on changes in tax laws. Recent Union Budget 2024-25 announced by Finance Minister Nirmala Sitharaman on February 1, 2024, did not mention any changes in the income tax slabs or tax rates.
Before we begin understanding the advantages and disadvantages of TDS, it is crucial to know its main objectives.
- While it helps the government keep a check on taxes paid by taxpayers, it also creates transparency between the government and taxpayers ensuring no discrepancies or evasion.
- A deduction and collection account is one of the most stable income sources for the government.
- It is automatically deducted, allowing seamless and easier for taxpayers and reducing the burden on tax collectors.
- TDS certificate serves as proof of tax payment. E-filing of TDS returns can be used in availing loans, claims, and record keeping.
Lastly, the implementation of E-TDS assists in broadening in tax base as it includes a large number of individuals within the tax bracket.
Faster Processing and Acknowledgement
For taxpayers, one of the major advantages of TDS returns is quicker processing and recognition of returns. since returns are submitted electronically, it cuts down the scope for inaccuracy too. Further, to ensure tax regulations are being followed in a timely, transparent and effective manner, the income tax department allows taxpayers to check their filing status online and receive a rapid acknowledgment receipt on acceptance of the e-TDS return.
Cost Effective While Being Efficient
One of the greatest benefits of TDS is that it is economical and efficient when compared to traditional paper filing. Moreover, access to previous returns is simple and businesses can focus on their main business activities while streamlining their tax compliances. At the same time, taxpayers can reduce their overall tax burden by claiming TDS as a credit against their tax liability.
Reduced Chances of Error & Possibility of Correction
Filing TDS returns reduces the possibility of making mistakes as the data is input electronically and verified by the system. While it ensures correct reporting and adherence to tax laws, it also allows you to make corrections online without any physical correction forms. The errors can be immediately found and fixed, ensuring correct tax reporting.
Timely Compliance
The TDS return is filed by the deductor on the income of the deductee, which means the deductee will not have to file tax again. This reduces the job of the deductee automatically. The tax collection authority also takes into account the earnings of every person to ensure no person escapes the tax slabs and pays taxes on time. E-filing of TDS returns makes it easy for the Income Tax Department and for the deductee as the tax system ensures timely tax payment.
Income Tax Laws in India are strict and businesses or employers will have to face serious consequences for non-compliance. Moreover, the TDS tax deducted every month must be remitted to the government within a specific time.
These consequences can act as a major disadvantage to businesses. Here are a few consequences of non-compliance:
- Late filing costs of Rs. 200 per day of delay are charged in case returns are filed after the due date
- Section 271 H of the Income Tax Act also permits the imposition of fines.
- An interest at the rate of 1 percent per month on the tax amount withheld at source is also chargeable.
- Any failure to file eTDS returns may be followed by penalties and legal action.
Who gets the TDS benefit?
TDS helps a deductee to reduce his or her burden for filing taxes. It is collected after earnings reach a certain limit. A maximum of 30 percent TDS is applicable on money won from lotteries, horse races, and other games.
How is TDS beneficial?
E-filling of TDS ensures timely compliance as it helps taxpayers avoid penalties for non-payment or delayed payment of taxes. Taxpayers have to deduct and remit taxes on time to the government. Tax amount is deducted at the source of payment, making it easier for them to pay taxes and reduce their tax liability (overall tax burden).
Can Deductor Revise TDS Returns?
TDS Returns are filled with NSDL by the deductor at regular intervals. However, if any mistake or misinformation is noticed, existing returns will have to be changed to file a revised eTDS return. However, only those TDS returns can be revised for which the statements have been issued after the fiscal year 2007-08. To begin online rectification, a taxpayer will have to register on the online portal.
Can Payee Claim Refund on TDS?
TDS is deducted by the employer before the salary is credited to the employee's account. You can claim a TDS refund when filing income tax returns for the financial year. If you have made declarations at the beginning of the year that are lower than your actual investment proofs, you are eligible for a TDS refund. The process is easy and is not time-consuming.
Is TDS Applicable on Foreign Payments?
TDS is applicable on foreign payments from a range of 10 to 40 percent, depending upon the type of payment and nature of transactions. These deductions must be made at the time of the payment and the payment recipient shall be entitled to receive the balance amount after reducing the TDS.
In 2017, the Goods and Services Tax (GST) replaced the complex web of Central and State taxes. GST is an indirect sales tax on goods and services sold for domestic consumption. Some essential commodities have been exempted from GST.
The implementation of this GST regime in India showcased a monumental shift in the country's tax structure. Major advantages of GST in India benefited businesses and the economy as the tax regime became more unified, efficient, and transparent.
Further small businesses (with a turnover of Rs. 20 to 75 lakhs) can avail the advantages of the GST as it gives them an option to lower taxes by utilizing the GST Composition Scheme.
Before you jump to a conclusion, go through all the advantages and disadvantages of GST for different sections of people.
GST is a comprehensive indirect tax designed to bring indirect taxation under one umbrella. It provides a comprehensive input tax credit mechanism to prevent cascading effects of taxes or 'tax on tax effect'.
Moreover, uniform GST rates have reduced the incentive for evasion by eliminating rate arbitrage between neighboring states.
Before the introduction of the GST regime in India, any business with a turnover of more than Rs. 5 lakhs (variably different in states) was liable to pay Value Added Tax or VAT. Also, service tax was exempted for service providers which incurred a turnover of less than Rs. 10 lakhs. The advantage of GST tax India is that the threshold has been increased to Rs. 20 lakhs. This limit exempts small traders and service providers. The table below shows how the threshold limit was different in different tax systems.
| Tax | Threshold Limit |
|---|---|
| Excise Tax | Rs. 1.5 Crores |
| VAT | Rs. 5 lakhs in most states |
| Service Tax | Rs. 10 lakhs |
| GST | Rs. 20 Lakhs (Rs. 10 lakhs for North Eastern States) |
This indirect tax regime has made the entire process of filing GST returns online. It is super simple and beneficial for small businesses that do not have to run from pillar to post to get different registrations.
Businesses now have to file 11 GST returns annually, out of which 4 are basic returns that apply to all regular taxable persons under GST. Only GSTR-1 is manually populated while GSTR-2 and GSTR-3 are automatically populated.
Before the implementation of GST, there were several indirect taxes and naturally, there were several compliance rules that businesses had to abide by. Filing a single unified return has been one of the greatest benefits of GST in India.
One of the most important advantages of GST to businesses is that they no longer need to pay state-level taxes during interstate movement. This has improved logistics and operations. This brought in advantages of GST tax in India for the e-commerce sector. Earlier, states like Kerela, West Bengal, and Rajasthan considered e-commerce platforms as facilitators. Online websites delivering goods to another state had to file a VAT declaration and mention the registration number of the delivery truck. Tax authorities could seize goods if documents were not produced.
GST regime mapped out common provisions applicable to e-commerce sectors. Now they can take advantage of registration under GST and face no complications in the inter-state movement of goods anymore.
While it is important to understand the advantages of goods and services tax GST, it is equally important to understand why critics call it a regressive tax. This means it takes a relatively larger percentage of income from lower-income households in comparison to the higher-income households.
Businesses with the goods and services tax GST registration levy tax uniformly on the consumption of goods and services, rather than on income and wealth. This means lower-income households tend to spend more of their income on consumables, which are subjected to GST.
While many businesses benefited from the merits of GST, it is also true that GST has raised complexity for many business owners across India. Small and medium enterprises with a total income of Rs. 75 lakhs could avail of the composition scheme. They can pay a mere 1% tax on turnover and abide by lesser compliances. However, they cannot claim input tax credit.
GST has received criticism for being called a 'Disability Tax; as it is levied on articles used by physically and mentally challenged people. Braille paper, wheelchairs, and hearing aids are some of the articles that have not been exempted from this single tax.
The finance sector is one sector that incurred the implications of both advantages and disadvantages of GST in India.
The GST transaction fees within the financial sector have become more expensive. It increased from 15 to 18 percent. Insurance premiums became more expensive.
Why is GST Important?
GST has transformed the Indian economy since its introduction in 2017. It has replaced the complex web of indirect taxes like excise duty, octroi, and VAT, with a single unified tax structure. The integrated goods and services tax GST allows simplified compliance for businesses, has streamlined the supply chain, eliminated cascading taxes, and encouraged free movement of goods across the nation.
What are the 4 Types of GST?
The four different types of GST in India are Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). Besides, the government has fixed different taxation rates under each of these taxes.
What are the features of GST?
Key features of GST include:
- It is a single levy on goods and services
- It comprises Central GST (CGST) and State GST (SGST).
- Allows businesses to claim credit for taxes paid on purchases and reduces tax liability.
- It tracks the movement and supplies of goods and services through an E-way bill system.
What is the scope of GST?
The scope of GST extends from supplies of goods and services with a few exceptions. It includes groceries, clothes, electronics, vehicles, transportation, healthcare, communication, and professional services. Understanding this scope is crucial to provide the benefit of GST to businesses and individuals as it determines their tax obligations and claims the input tax credit.
Introduced in the Union Budget 2020, the new tax regime launched an era of dual system of taxes for individuals and Hindu Undivided Families (HUFs). With new tax slabs and rates, individuals can opt for either of the two methods in place, i.e. old and new tax regimes. However, once you choose either of the two methods, the taxpayer will have to stick to the chosen regime for that financial year.
Tax season can be a daunting time for taxpayers who want to maximize their deductions. New tax regime deductions are expenses that you can subtract from your taxable income. It effectively reduces the amount of income taxes you pay, thus lowering your tax liability. Think of it as chipping away at your taxable income.
Not all expenses qualify as deduction allowed in new tax regime, numerous deductions are available under various sections of the tax code. While most deductions and exemptions have been discontinued, some deductions allowed in new tax regime include HRA, LTA, 80C, 80D, and more.
Understanding the deductions in your specific tax regime is crucial to minimizing tax burden and saving your hard-earned money.
Let’s look into some of the deductions and exemptions that are still allowed:
Deduction under Section 80 CCD(2): This deduction applies to salaried individuals as they can claim a deduction for the employer’s contribution to the pension scheme. Employees working in the private sector can claim 10% of their salary. Under the subsection of Section 80CCD, the new tax regime deductions for government employees is up to 14% of basic salary + dearness allowance.
- Standard Deductions: Budget 2023 has extended the standard deduction of Rs. 50000 to the new tax regime for FY 2023-24 onwards. With this, the benefit from standard deduction remains the same under new and old tax regimes.
- Gratuity: Gratuity payouts i.e. the amount paid on completion of 5 years or more of continuous service is a deduction under new tax regime. The limit for gratuity that is tax-free is Rs. 20 lakhs during the lifetime of a taxpayer. Gratuity paid on the death of a taxpayer is fully exempted.
- Leave encashment: Section 115 BAC, allows non-government employees to use leave encashment as tax exemption. This income is not taxable up to a limit of Rs. 3 lakhs.
- Public Provident Fund (PPF) and Sukanya Samriddhi Account earnings: The interests earned and maturity amounts received from both these schemes are tax exempted.
- EPF Contribution by Employer: Employer contribution to Employee Provident Fund (EPF) which is up to 12% of basic and dearness allowance is a deduction available in new tax regime. The exemption applies to a maximum contribution of Rs. 7.5 lakhs annually for all such accounts.
- Amount withdrawn from NPS: An amount withdrawn up to 60% of your NOS account balance at maturity is tax deductible. Partial withdrawals of up to 25% of your self-contribution are tax-free.
- Voluntary Retirement Scheme (VRS) Proceeds: VRS proceeds of up to Rs. 5lakhs are exempted from tax.
- Allowances for Official Duties: The permissible deductions in the new tax regime include; transport allowances for specially-abled individuals, allowances to cover transportation costs, compensations for travel expenses from official tours, and daily allowances.
There are many new tax regime deductions, however, several major deductions from the old tax regime are not allowed in the new tax regime. These include:
- Section 80D deduction for health insurance payment
- Section 24 (b) deduction for interest paid on home loan
- Section 10 (5) Leave Travel Allowance (LTA)
- Deduction from family pension under 57 (iia)
- House Rent Allowance (HRA) under section 10 (13A)
| Total Deductions | Tax Regime Beneficial |
|---|---|
| Rs. 1.5 Lakhs or less | New regime |
| Rs. 1.5 lakhs to Rs. 3.75 lakhs | Depends upon Income level* |
| Rs. 3.75 lakhs or more | Old regime |
*If gross total income is less than R.s 7.5 lakhs or Rs. 10 lakhs any tax regime can be followed. For gross total income Rs. 8 to 9 lakhs, old tax regime shall be beneficial and for gross total income above Rs. 10 lakhs, the new tax regime will be beneficial.
The government introduced the new tax regime to simplify calculations and reduce tax burden on Indian taxpayers. Taxpayers can select from either of the two tax regimes for efficient tax planning.. While choosing two tax regimes consider the two main parameters; the tax exemption you currently avail, and the deduction you currently claim.
You will loose exemptions under the new tax regime if your taxable income includes;
- HRA (if you are living in rented accommodation)
- Food coupons
- Leave allowance, and
- Compensation for phone bills.
The new tax regie excludes the following:
- Home loan EMI for self-occupied property
- 80C investments like life insurance premiums
- 80D investments like health insurance premiums
Taxpayers should find out the total amount of exemptions and deductions to avail. Subtract it from the income and calculate the tax payable under the old regime.
Further, taxpayers can compute taxable income without claiming such benefits. Compute the tax payable as per the new tax rates.
Taxpayers can compare the tax amounts to make a wise decision. For better understanding, it is advised that taxpayers use the comparison tool available on the official website of the income tax department.
Remember, not to make your investment decisions solely based on tax savings. For instance, the old tax regime is appropriate for life insurance policyholders as tax deductions will translate to greater savings. While life insurance does provide tax savings, it should not be the only reason for this investment.
Is there any exemption in the new tax regime?
There are many exemptions in the new tax regime. However, taxpayers will have to forego 70 deductions in the new tax regime if they choose the new tax regime over the old one.
Is interest deduction allowed in the new tax regime?
Yes, homeowners can claim a deduction for interest on home loan under the new tax regime if the said home is put on rent. The deduction for interest paid on home loan if restricted to Rs. 2 lakhs in case of self-occupied property.
What are the benefits of new tax regime?
The government introduced the new tax regime to reduce the tax burden for taxpayers. While this new tax regime simplified the tax laws, it also removed the complicated calculations of the deduction percentages. Moreover, the new tax regime helps to save on taxes on long-term investments too.
Can we claim 80C and 80D in new tax regime?
Deductions under new tax regime including the popular ones like 80C (for investments), 80D (for medical insurance premiums), and 80E (for education loan interest) are no longer allowed.
What is the Section 10 exemption in the new tax regime?
Certain exemptions are considered special allowances under Section 10 of the Income Tax Act. These exemptions are granted to specific individuals who are high court judges, UNO employees, Supreme Court and High Court judges entitled to receive Sumptuary Allowance, and Indian citizens working as government employees outside India.
Section 24 of Income Tax Act is the key tax relief on homeownership in India. It allows for deductions on income from house property, helping taxpayers reduce their taxable income and ultimately lowering the tax burden.
Section 24 of Income Tax Act India of 1961 considers the amount of interest a taxpayer pays for home loans. Often referred to as deductions from income from house property, it allows taxpayers to assert tax exemptions on the interest of home loans. The maximum amount of deduction under section 24 of Income Tax Act is Rs. 1.5 lakhs.
The benefits of Section 24 of income tax extend beyond loan interest. Taxpayers can claim deductions for municipal taxes and interest paid on pre-construction until the year the property is acquired is also eligible for deduction in five equal installments.
Since the income from house property is taken into consideration and a person can hold more than one house, it is crucial to understand the definition of income as given in Section 24.
Section 2 24 of Income Tax Act defines income for taxation. Income is inclusive of salaries, income from house property, profits and gains of business or profession, income from other sources, capital gains, contribution of EPF account, VRS compensation, winnings from lotteries, and foreign income.
The section excludes agricultural income, income from a charitable institution or trust, and income from the Hindu Undivided Family (HUF) from the computation of income.
There are three scenarios wherein income occurs from house property:
- Housing income by way of rent.
- The annual value of the property that it deemed to be let out.
- The annual value of the property that is self-occupied
Here are a few points to keep in mind while analyzing income from house property:
Section 24 of the Income Tax Act calculates tax on house property on the Net Annual Value of the property. In case the house is vacant for a particular period and later it is let out, the owner or deemed owner receives the rent, computation of income should be done only on the rent received and not the whole year.
Contrarily, if the taxpayer’s home is vacant for the whole year, the taxpayer is residing at different locations, then income is computed from other sources like salary within the same year. This income can be carried forward for up to eight years.
Taxpayers can claim the following tax benefits;
- Tax deduction on rental income: Taxpayers can claim a flat 30% on the net annual value of the house or rental income received. This deduction is referred to as a standard deduction on rental income and is not applicable on self-occupied housing properties. The main purpose of this Section 24 deduction is to provide tax relief for any property taxes and maintenance charges for property upkeep that may be incurred during the year.
- Tax Benefit on Home Loan Interest Payment: Annual deduction of up to Rs. 2 lakhs can be claimed for repayment of home loan interest. This tax benefit is limited to the actual amount of home loan interest the taxpayer has repaid up to the maximum limit. To avail of this benefit, taxpayers must calculate the interest payment to banks or other financial institutions from where the money has been borrowed.
To be eligible for claiming deductions on interest on home loans, taxpayers must satisfy three requirements:
- If the loan obtained for a property purchased or constructed after April 1, 1999
- If the acquisition or construction of the home is finished within five years following the end of the fiscal year when the loan was taken
- If the interest certificate of the loan is easily accessible.
Following Section 24 and 80 EE of the Income Tax Act, taxpayers can avail an extra deduction of up to Rs. 50000 by meeting specified requirements under the following circumstances:
- If a home loan was taken to buy a residence for personal use
- If the taxpayer does not have any other residential property at the date of sanction of the loan
- If a taxpayer obtains a loan from a financial institution to purchase a residential home
- If the loan was approved between April 1, 2016 to March 31, 2017 (inclusive)
- If the house’s total property worth is less than Rs. 50 lakhs
- If the loan sanction amount for the purchase of a residential property is less than Rs. 35 lakhs
Taxpayers can benefit from deductions from both sections. Firstly, claim for up to Rs. 2 lakhs in tax advantage under Section 24 of the Income Tax Act, and secondly utilise Section 80 EE to collect Rs. 50000 in home loan interest.
In addition to Section 24 of the Income Tax Act, taxpayers can avail of home loan benefits of up to Rs. 1.5 lakhs in a year if the housing property is first home to the taxpayer. The same property should not cost more than Rs. 45 lakh 9affordable housing.
Taxpayers can also benefit if the loan has been sanctioned between April 1, 2019, to March 31, 2022. These interest repayment benefits are additional to the Section 80 C investment and deduction benefits that are worth up to Rs. 1.5 lakhs.
What is the limit of Section 24 exemption?
Section 24 1 of Income Tax Act exempts homeowners to claim a deduction of up to Rs. 2 lakhs on their home loan interest in case the owner or his family resides in the property. When the house is on rent, the entire interest is waived off as a deduction.
What is the difference between Section 24 and 80 EEA?
While both sections are meant to claim the deductions, there is no possession required for 80 EEA deduction. Once you start the interest payment process, you can claim an exception. However, for claim deduction under Section 24, you must have possession of the property.
What is Section 24 eligibility criteria?
The most essential criterion to avail of benefits of Section 24 Income Tax India is that the property must be self-owned. While tax benefits is fixed at 30%, there is no maximum limit specified under Section 24 (a).
Taxpayers can avail tax deduction of up to Rs. 2 lakhs under Section 24 (b) if they have taken a home loan on or after April 1, 1999. Taxpayers must possess an interest certificate showing the interest amount payable against the borrowed amount. The property should be built or owned within five years from the financial year it was borrowed.
What is Section 24 for joint owners?
Joint owners can enjoy maximum tax benefits of up to Rs 2 Lakhs on the amount paid towards the interest on home loans as per their ITR statements. The amount paid towards interest is proportional to the percentage ownership of each co-applicant.
However, to avail of the tax benefits, both co-owners and co-borrowers are the same. Their name must be on the loan book to request the benefit.
What is Section 24 deduction list?
Section 24 deductions can help reduce tax outgo. A standard deduction of 30% is applicable on the net annual value of the property even if the definite expenditure on the property is higher or lower. Besides, tax exemption is allowed on the interest amount of property that is repaired, acquired, constructed, reconstructed, or renewed.
The Income Tax Act of 1961 has various sections regarding income tax regulations around tax audits. A business personnel or a professional will have to comply with the regulations based on their eligibility criteria.
Section 44 AB of Income Tax Act 1961 deals with the audit of accounts for individuals who meet certain requirements and need to get their accounts audited by a Chartered Accountant (CA). the section states the threshold limit mandatory for a tax audit. If a business or a professional crosses this threshold, a mandatory tax audit will be conducted for them.
Here it is important to note for taxpayers who own more than one business or profession, aggregate turnover will have to be above the threshold limit to conduct a mandatory tax audit.
A tax audit under Section AB A of Income Tax Act is an examination and assessment of the books of accounts of an organization carrying businesses or professionals. It reviews income, expenses, deductions, and their taxes.
Section 44 AB of Income Tax Act states that businesses with a gross turnover in the preceding year crossing Rs. 1 crore, will have to get a tax audit. In case, the cash transactions are less than 5%, then the threshold will be Rs. 10 crores.
Further, the section mandates that if gross receipts from a taxpayers profession crosses Rs. 50 lakhs in the preceding year, an audit becomes mandatory.
Section 44 AB also states that an audit becomes mandatory if a business or profession has opted for presumptive taxation as per Section 44 AE, Section 44DA, Section 44BB, and Section 44 BBB.
The preceding year is the year before the financial year in which the tax audit is required. However, the due date for completion of tax audit and filing returns is always 30th September of the assessment year wherein tax audit report has to be filed through Form 3 CA and Form 3CD.
Tax audit mandates proper maintenance of accounting books for the computation of taxes with the following objectives:
- Proper maintenance of accounting books avoids fraudulent activities and certification by auditor.
- Report discrepancies if any
- Report compliance with the provisions of the Section 44 AB tax audit
- Verify information filed in ITR regarding income, deductions, and taxes
- Make computation of tax and deductions easy
The tax audit reports are prepared electronically by a CA either in Form 3CA or Form 3CB. In either case, the tax auditor will furbish the prescribed particulars in Form 3CD which will form a part of audit report.
Every person who earns an income from any business or profession shall maintain books of accounts and get a tax audit done, except if they are exempted under a presumptive taxation scheme.
| Category of Person | Threshold For Tax Audit |
|---|---|
| Business | |
| Carrying Business while not opting for a presumptive taxation scheme | Total turnover, sales, or gross receipts exceed Rs. 1 crore in financial year. The threshold is Rs. 10 crores if cash transactions are up to 5% of total gross payments and receipts. |
| Carrying Business not eligible to claim presumptive taxation scheme under Section 44AD | If income exceeds the maximum amount not chargeable to tax in subsequent 5 consecutive tax years |
| Profession | |
| Carrying on profession | Total gross receipts must exceed Rs. 50 lakhs in the financial year |
| Carrying profession eligible for presumptive taxation scheme under Section 44ADA | Income must exceed the maximum amount not chargeable to income tax Under the presumptive taxation scheme, claim profit or gain lower than the prescribed limit |
| Business Loss | |
| Carrying on business while not opting for presumptive taxation scheme | Total turnover, sales, or gross receipt of taxpayers exceed Rs 1 crores. In case the taxpayer has incurred a loss from carrying a business and the taxpayers total income exceeds the basic threshold limit |
| Carrying on business (Section 44AD) and having business loss with income below basic threshold limit | 44 AB tax audit is not applicable. |
| Carrying on business (Section 44AD) and having business loss with income exceeding basic threshold limit | If a taxpayer has income exceeding the basic threshold limit and declares a taxable income within prescribed limits under presumptive tax scheme. |
All eligible businesses and professionals must comply with the jurisdiction and tax laws applicable under Section 44 AB of Income Tax Act 1961. Failure to comply with these laws may impose monetary penalties typically calculated as a percentage of the tax liability or income subjected to audit. Moreover, interest charges may be accrued on unpaid tax liability and in severe cases of repeated non-compliance, legal action may be taken against the taxpayer. In some cases, tax authorities report to credit agencies about non-compliance, negatively impacting your credit rating.
A taxpayer must comply with the provisions to avoid penalties and legal complications. All taxpayers must furnish a tax audit report and maintain complete books of accounts.
What is the difference between 44AB and 44AD?
Income tax section 44AB is applicable for businesses with total sales, turnover, or gross receipts exceeds one crore rupees in previous year or professionals who have gross recipts exceeding Rs. 50 lakhs.
Section 44 AD is applicable for businesses with turnovers not exceeding Rs. 2 crores and declared profit is not exceeding 6%.
Who are eligible for 44AD?
The scheme under section 44AD is applicable to businesses, professionals, and partnership firms. It is applicable for professionals since the simple taxation process came into effect in the financial year 2016-17. While it is applicable for India-based firms, limited liability partnership firms are not applicable. All types of businesses other than plying carriages, hiring, brokerage or commission are eligible for the Income Tax Act 1961.
What is the clause of 44 AD?
Small taxpayers can adopt presumptive taxation schemes of Section 44AD, 44ADA, 44AE to avoid the tedious task of maintaining accounts and getting them audited. For all eligible businesses or professionals, income is computed on the presumptive basis at the rate of 8% of the annual total sales turnover or gross receipts for the year.
What is the turnover limit for ITR 4?
The taxpayers turnover or gross receipts of the business must be less than Rs. 2 crores to avail of benefits of ITR-4 under 44 AB of income tax.
What is the last date of the 44AB tax audit?
The due date for completion of tax audit under Section 44 AB and filing returns is always 30th September of the Income Tax Act (assessment year) wherein tax audit report has to be filed through Form 3 CA and Form 3CD.
What is the penalty for 44AB?
Failure to comply with Section 44 AB of Income Tax Act means the taxpayer will have to pay a penalty of 0.5% of the annual gross sales/ turnover/ gross receipts or Rs. 1.5 lakhs. The penalty payable will be lower of the two. However in case of labor strikes, natural disasters, delay on account of tax auditor resigning, loss of books of accounts due to genuine reasons, and if a partner in charge of accounting books becomes physically incapacitated, penalty may be waived.
What is Form 3CA?
Form 3CA is where the Chartered Accountant enters the details on the audit of the account of business or profession of the assessee before proceeding to Form 3CD.
The Goods and Services Tax (GST) is designed to be self-policing, and so the taxpayers are expected to voluntarily comply with the provisions of the law. Since it is susceptible to errors, taxpayers are required to self-assess their tax liability to avoid unnecessary departmental interventions and litigations.
An audit under GST is an examination of taxpayers records to verify the accuracy of their reported GST liability. It may be conducted by the tax authorities wherein taxpayers will have to cooperate and provide all relevant information and documents.
From the statutory audit that assesses the correctness of the financial statements to the compliance audit that assesses the compliance with the rules, familiarising with audits and its types under GST is crucial.
Equally essential is to know which type of audit is suitable for the taxpayers following the GST audit turnover limit. For this purpose, taxpayers will have to calculate the total turnover under the PAN. The GST audit procedure depends upon the type of audit. For instance, special audits under GST are conducted by CA CMA nominated by the commissioner while department GST audits are conducted by the commissioner or any officer authorized.
Section 2 (13) of CGST defines audit as an examination of records, returns, and other documents maintained or furbished by a registered person under this Act to verify the correctness of turnover declared, taxes paid, refund claimed, assess compliance, and input tax credit availed.
The GST Act provides for different types of audits under GST, including;
To ensure proper calculation and discharge tax liability, tax authorities conduct departmental audits regularly. Section 65 and Rule 101(3) of GST Audit Rules, the commissioner or an officer authorized by him can conduct this audit and verify the details of the records and books of account of the registered person.
The audit by tax authorities shall be conducted at the place of business of a registered person or office. An intimation of the audit is provided at least 15 days in advance and has to be completed within 3 months from the date of commencement.
As of 30th July 2021, the government has notified the removal of GST audit and certification done by CA CMA. Now the GST audit turnover limit is Rs 2 crores in a financial year, which means taxpayers exceeding the turnover limit shall submit self-certified GSTR 9C.
According to Section 66 and Rule 102 of GST Audit Rules, an authorized officer at any stage of scrutiny, inquiry, or investigation may avail of the services provided by CA CMA. The authorized officer can consider the nature and complexity of the business to know if the value has not been correctly declared or credit availed is not within the normal limits.
The expense of such special audits and examination of records returns is paid by the commissioner. The period required to audit the account can be provided with an extension of an additional ninety days. Conclusions of the special audit under GST are communicated to the auditee in Form GST ADT-04.
A limited audit is conducted only in specific cases wherein tax authorities suspect non-compliance with the provisions of the GST Act. The objective of this audit is to verify compliance with other provisions of the law and ensure the tax returns filed are correct.
This audit is initiated by the taxpayer to verify compliance with the provisions of the GST Act. The law provides for several consequences of non-compliance including fines, imprisonment, and penalties. Henceforth, taxpayers must ensure compliance.
Taxpayers are advised to keep accurate and complete books of accounts including invoices, receipts, returns, and other documents.
Understanding the five types of audits under GST is essential for businesses operating in India as it will serve as a crucial tool to ensure compliance, accountability, and transparency in the GST framework.
| Audit Type | Conducted By | Frequency | Provision |
|---|---|---|---|
| Departmental Audi | Tax authorities | Ad-Hoc | Section 65, Rule 101 (3) |
| Statutory Audit | Self | Annually | Section 35(5) |
| Special Audit | Tax authorities | Ad-Hoc | Section 66, Rule 102 |
| Limited Scrutiny | Tax authorities | Ad-Hoc | Form ASMT-10/11 |
| Taxpayer Initiated Audit | Self | As per your own discretion | GST Law |
Taxpayers are advised to keep accurate and complete records of their books of account, business transactions, file their tax returns on a timely basis. Non-compliance with the provisions of the GST law can lead to severe consequences, including fines, penalties, and imprisonment. Litigation Management Solutions (LMS) are developed with in-depth experience in litigation, knowledge of the subject, and an understanding of practical difficulties faced by various industries.
What are the 4 types of GST?
The 4 types of GST audit under GST are; Mandatory GST audit, Departmental GST Audit, Special Audit under GST, and Statutory Audit. Taxpayers must familiarize themselves with these GST audits to gain valuable insights into the requirements, timelines, and ethical practices. This knowledge will mitigate the risk of non-compliance.
What is audit under GST?
Instead of mandatory audits by CAs, the current system relies on self-certification. GST audit ensures taxpayers are complying with the provisions of the Goods and Services Tax (GST) Act. Further, it identifies errors and discrepancies in taxpayers records. Taxpayers with an annual turnover exceeding Rs. 5 crores in a financial year were required to file a reconciliation statement on the GST portal.
Who can file GST audit?
Starting the financial year 2020-21, all registered taxpayers exceeding a turnover of Rs. 5 crores are required to get their accounts audited by a Chartered Accountant; CA CMA, and submit a copy of the audited financial statements on the GST portal.
What is the time limit for GST audit?
Tax authorities send a notice to the auditee at least 15 days prior to the audit. The entire GST audit procedure must be completed within 3 months from the date of commencement of the audit. The jurisdictional Commissioner CGST, audit can extend the audit period for a further 6 months with reasons recorded in writing.
Why is GST audit important?
The audit is crucial to verify compliance with the provisions of GST law. It ensures that taxpayers pay the correct amount of GST. The audit identifies errors and discrepancies in the records and further educates the taxpayers on the GST laws and procedures.
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