An additional compliance of submitting estimated current Income & Advance tax payment
TAX TALK-02.10..2017-THE HITAVADA
TAX TALK
CA. NARESH JAKHOTIA
Chartered Accountant
Proposed amendment requiring taxpayer to file estimated
current income in Form No. 28AA is in straight contravention to the concept of
“Ease of doing business” for which the present Government is committed. It is
not going to yield any additional revenue but will surely kill the time &
energy of the businesses on the unproductive work & is a pure wastage of
talented human resources.
An
additional compliance of submitting estimated current Income & Advance tax
payment
Query 1]
We have read in the newspaper about filing of estimate of
income tax return before 30th September? Ours is a private limited
company and so whether it is compulsory to file any such estimate? Is it
applicable from FY 2017-18 or 2018-19? If yes, why is so much additional
compliance burden if the advance tax payment law is already there and taxpayers
are complying with it? We are already over burdened with GST, will this not add
to unwanted compliances? Ultimately, even if there is a delay in payment of
tax, it is paid with interest at the end of the day. Why such ridiculous
provisions? Any logic for this additional formality? [mukesh.motwani63@gmail.com]
Opinion:
“Taxation without Representation is never a good law”.
1. As of now, a taxpayer is liable to discharge part of its tax
liability by way of advance tax. Failure to pay advance tax results in levy
of interest u/s 234B & 234C. Presently, there is no mandatory requirement
to report the estimate income & advance tax liability to the Income Tax
Department.
2. Central Board of
Direct Taxes (CBDT) has proposed to create a new mechanism
for self-reporting of estimated income & tax thereon by certain class of taxpayer
(i.e., companies & assessees covered by tax audit provision) on voluntary
compliance basis. The proposed reporting mechanism is sought to be
created by way of inserting a new Rule 39A and Form No. 28AA in the Income-tax Rules, 1962.
3. In Rule 39A, it is
proposed that companies & other persons covered by tax audit provisions u/s
44AB would be required to file a statement incorporating estimated income, tax
liability and payment of taxes. An estimate of income has to be filed by 15th
November for the period up to 30th September. Further, in case, the
income estimate is less than the income for the previous corresponding period
by Rs. 5 lakh or 10%, whichever is higher, the assessee has to give another
estimate of income as on 31st December before the end of the following
month. The detail is to be provided in Form 28AA.
4. If the draft rule
is implemented, it will be obligatory for the above referred class of taxpayers
to submit annually new set of data consisting of estimated income & tax
details. If implemented, it is sure to increase the compliance burden for the
trade & industry who are already struggling hard with the hefty compliance
burden under the new GST regime.
5. As of now, it is
merely a proposal by the CBDT. Taxpayers may forward their
suggestions/recommendations/ objections at dirtpl4@nic.in. Inviting representation before enforcing any law is a good initiative
by the CBDT which deserves appreciation.
6. In my opinion, present
proposal is in straight contravention to the concept of “Ease of doing
business” for which the present Government is equally committed. It is not
going to yield any additional revenue but will surely kill the time &
energy of the businesses on the unproductive work & is a pure wastage of
talented human resources. Long back, there was similar provision in the Income
Tax Act-1961 (section 212) which required filing of estimate by the assessee.
It was omitted by the Finance Act-1987 & the circular No. 516 Dated
15-6-1988 is worth reading. It reads as under:
“10.5 The old sections 209A and 212 contained detailed provisions which were different for old and new assessees in regard to filing of statement, estimate or revised estimates, etc. of advance tax payable by them, on the basis of which the assessees paid advance tax during the financial year. These provisions were very complex and became unnecessary under the new scheme of payment of advance tax introduced by the Amending Act, 1987, under which assessees have themselves to pay advance tax in three installments. In case of default, a mandatory interest @ 2 per cent p.m. and in case of deferment of installment of advance tax, a mandatory interest @ 1 per cent p.m. is to be charged in all cases under the provisions of the new sections 234B and 234C introduced by the Amending Act, 1987. The Amending Act, 1987 has, therefore, omitted sections 209A and 212, thus dispensing with the requirement of filing of statements/estimates of advance tax payable by the assessees. This saves the assessees as well as the Department from enormous paper work involved.”
“10.5 The old sections 209A and 212 contained detailed provisions which were different for old and new assessees in regard to filing of statement, estimate or revised estimates, etc. of advance tax payable by them, on the basis of which the assessees paid advance tax during the financial year. These provisions were very complex and became unnecessary under the new scheme of payment of advance tax introduced by the Amending Act, 1987, under which assessees have themselves to pay advance tax in three installments. In case of default, a mandatory interest @ 2 per cent p.m. and in case of deferment of installment of advance tax, a mandatory interest @ 1 per cent p.m. is to be charged in all cases under the provisions of the new sections 234B and 234C introduced by the Amending Act, 1987. The Amending Act, 1987 has, therefore, omitted sections 209A and 212, thus dispensing with the requirement of filing of statements/estimates of advance tax payable by the assessees. This saves the assessees as well as the Department from enormous paper work involved.”
Query 2]
Government
has suitably amended and added clause 54EE in Income Tax Act to save additional
Rs. 50 lakhs in capital gain in specified securities of Govt. undertakings. So
far, Government has not issued any notification. The investment has to be made
within 6 months of property sale. It appears that those who have sold property
are awaiting it and will not be able to avail this provision. Kindly intimate
if any info is there & elaborate more about section 54EE. [Ramnarayan
Dubey-ra.du.1944@gmail.com]
Opinion:
1. To promote the startup ecosystem in the country, it was envisaged in
‘Startup India Action Plan’ to establish a Fund of Funds by raising Rs 2500
crore annually for four years to finance the startups.
2. To achieve this objective Section
54EE was inserted by the Finance Act, 2016 which offers exemption up to Rs.
50 Lakh from Long Term Capital Gain (LTCG) if the amount of LTCG is invested in
units of long term specified funds notified by the Central Government to finance
the start ups.
3. Encouraging start up is an excellent initiative of
the Government and carries the potential to take the country to the next higher
level of economy. With the amendment, legislature has bestowed powers to the
Central Government to notify the funds. However, there are no such funds
notified by the Central Government so far. As
such, no exemption as of now can be claimed u/s 54EE. There were lots many
taxpayers who were expecting the funds to be notified but ended up paying taxes.
Though option to save tax is provided in the Act by section 54EE but nothing is
done at ground level to enable taxpayer to actually utilize it. At least, Status
update on 54EE by the Government could provide relief to the taxpayer. They can
plan their transactions by exploring alternate tax saving option or can defer the
transaction or will enter in to the transactions with the upfront clear mindset
of paying tax.
Query 3]
I have purchased a flat for Rs. 32
Lakh & residing in it. Please tell me
if I can take some tax benefit towards maintenance of house, tax paid
etc. If yes, under which section and procedure of claim. [Gurudas-gcmaji@gmail.com]
if I can take some tax benefit towards maintenance of house, tax paid
etc. If yes, under which section and procedure of claim. [Gurudas-gcmaji@gmail.com]
Opinion:
For
the self occupied house property, no deduction is admissible towards tax &
maintenance charges paid.
Query 4]
If an apartment has been purchased in
cash without availing bank finance and stamp duty/ vat/etc paid whether these
taxes get exemption in the income tax? I believe that there should not be tax
on tax and these taxes duties paid to the Govt may get exemption in the income
tax. Kindly opine and oblige. [K.S.Popat-
kaushikpopat@gmail.com]
Opinion:
Stamp duty &
registration charge paid is eligible for deduction u/s 80C subject to
common overall cap of Rs. 1.50 Lakh. Further, the same can also be considered
if any taxpayer is investing in the house property to claim an exemption u/s 54
or 54F. Payment in cash does not bar the claim in either case.
[The author is a practicing
Chartered Accountant from Nagpur. Readers may send their direct tax related
queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
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