Tax saving investments routes

Tax saving is the strategy by which one saves taxes by using the provisions specified under law. At the time of filing your return, you can seamlessly claim these exemptions and deductions from the income tax department. Such provisions are provided by the government to incentivize savings and investments in the economy. The process of tax saving is completely legal and encouraged by the government. It is a compulsory contribution to state revenue levied by the government on workers income and business profits or added to the cost of some goods, services and transaction. Taxes paid by public are used by the government for carrying out various welfare schemes including employment programs. Under section 80 of Income Tax Act, 1961 (“Act”) there are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo.

Every year most of us struggle to save our tax and it might be challenging for the new earners or newly recruited employees as well. Most commonly used option to save income tax is section 80C. According to this section, if an individual or hindu undivided family (HUF) invests in or spends on specified sources, then up to INR 1.5 lakhs of such investment can be claimed as a deduction from gross total income before calculating tax payable on it in financial year. Such deduction made can be claimed only from the income in the financial year in which such investment was made.
Tax saving investment is an essential part of tax planning we do to save our tax and also an activity which every tax payer should undergo. So, here is all the information and analysis we need in order to choose the tax saving investment scheme under section 80C:

1. Public provident fund (PPF): Investment in PPF is the best option under section 80C of Income Tax Act. It is worthiest for the ones who need to keep aside funds for their retirement. It declares to allow the return on par with the inflation generally. Contribution amounting INR 150,000 is allowed under PPF. Rate of interest is determined by Ministry of Finance from time to time. Interest earned is tax-free. The lock-in period for PPF is 15 years. After five years amount can be withdrawn subject to certain conditions. It is amongst the best strategies for tax saving.
2. 5 year bank fixed deposits (FDs): Any term deposit with the tenure of at least 5 years with the scheduled bank also qualifies for the deductions under section 80C and the interest earned on it is taxable. The investment made in FDI cannot be withdrawn in between.
3. Equity Linked Saving Schemes (ELSS): ELSS funds have the shortest mandatory lock-in period of three years among the tax-saving investment options available under section 80C. The investment is made in equity, directing more prominent returns and gives about 15% in the long term. The deduction can be claimed u / s 80C easily. ELSS is an overall financial plan and is perfect to assemble one’s long-term fiscal goals.
4. National Savings Certificate (NSC): The best thing about this instrument is that unlike an insurance policy or a pension plan NSC does not require a multi-year commitment. So, it is a good option for those who don’t have time to study the features of the plan or look up to the promising ELSS funds. It is issued in the post offices. The income tax deduction for this investment can be claimed under section 80C of the Act.
5. Unit Linked Investment Plan (ULIP): ULIP came into focus from last year after the budget introduced tax on long-term capital gains from stocks and equity funds. It is the combination of investment and insurance which is eligible for tax exemption. It covers the return but there are no guaranteed returns.
6. Premium of life insurance: The scheme is covered under section 80 of the Act. The schemes of life insurance help a person to protect itself and its dependents from any risk occurring in future.
7. Senior Citizens Savings Scheme (SCSS): SCSS was already the best tax-saving option for those above 60 years of age, but last year’s budget made it more attractive by offering senior citizens an additional INR 50,000 exemption on interest income. This means that the overall tax exemption for senior citizens above 60 is now INR 3.5 lakhs and for very senior citizens above 80 is INR 5.5 lakhs. Maximum limit for the above mentioned investment is INR 15 Lakhs. The lock-in period of 5 years. The deduction is allowed under section 80C.

Above stated are the investments which provide deductions that can be claimed under section 80C for saving the tax, considering various provisions. The last quarter of every financial year that is January to March is the time when most of us rush to settle our tax saving exercise by submitting the documents to our employers and also making various investments. Doing this we should keep in mind some important points or measures which we should take for exercising the tax saving benefit. The same will be discussed in our next segment.

We have a team of skilled professionals who can help you with making appropriate investment decisions, tax planning, computation and payment of advance taxes, etc. Still confused and have questions regarding Income tax saving or planning, get assistance from our team of experts click here.

Perceiving tax scrutiny

Thousands of income tax returns (“return”) filed are reviewed and filing patterns are monitored by Income Tax department (“Department”) annually. Some scrutiny cases are selected randomly whereas some are chosen deliberately as a result of meeting the pre-set watch criteria, laid down by the Department. Income tax scrutiny notice is sent to a large number of individuals as well as businessmen filing returns by the Department as a part of their routine check and annual supervision. The idea behind this process is to assess that all the filings made by any person are in compliance with all the protocols, norms and regulations laid down by the Department.

Scrutiny assessment
Critical examination of returns by giving reasonable opportunity to the assessee to substantiate the income, losses and expenses furnished as well as deductions and exemptions claimed, in the return in relation to information provided in the evidence. Income tax officer conducts enquiry from assessee and third party as a part of its assessment. Scrutiny assessment is undertaken to ascertain the factual and legal correctness of the claims for deductions, exemptions, etc.

Purpose of scrutiny assessment
Enquiries are conducted by the assessing officer to ensure that following activities are not performed by the assessee:

• Understatement of income as compared to actual
• Computation of excess loss than actual
• Underpayment of tax
• Concealing any material facts, incomes, etc.

Penalties
In case information supplied in the return is incorrect under any circumstances, whether in the form of omissions, inaccuracies, discrepencies, etc. as a result of this examination. Assessing officer is authorized to assess the income in accordance with his best knowledge (termed as best judgement) as well as evidence or facts so derived and as per the provisions under section 143(3) of the Income Tax Act (“Act”). Assessing officer further has the following authorities:

• Charging of requisite additional interest
• Levying penalties as per the set provisions of the Act
• Initiating prosecution proceedings

Types of scrutiny assessments
Following are the types of scrutiny assessments:

1. Manual scrutiny cases
2. Compulsory scrutiny cases

We have a team of professionals possessing desired experience in annual filings of returns or e-TDS returns as well as other compliances, representation, opinion, litigation, conducting independent audit, furnishing reports, assessments and tax planning services.
Our team is also proficient in the areas of accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, income tax, tax planning, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation India, corporate compliance, foreign branch / liaison office registration. Get in touch with us for any assistance by clicking here

Source: http://www.newcompanyregistrationindia.com/blog/perceiving-tax-scrutiny/

What is Foreign Tax Credit (FTC)?

If you have paid or accrued foreign taxes in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, you may be able to take either a credit or an itemized deduction for those taxes.

Characteristics of FTC

• FTC is a method for elimination of double taxation.
• Credit for the amount of any foreign tax paid in the source country against the taxes to be discharged in the residence country.
• In India income tax system, tax Residents and Ordinary Residents (ROR) on worldwide income and offer FTC to tone down the potential for double taxation of income.
• It can be adjusted against tax, cess and surcharge payable under the Income Tax Act.
• It cannot be adjusted against interest, fee or penalty payable under the Act.
• It is not available in case foreign tax or part thereof is disputed by the assessee in any manner.

Conditions to avail FTC
For a tax payer to be eligible for FTC:

• He must have made a payment to a foreign government;
• The payment must be towards an income tax, or a tax in lieu of an income tax; and
• It is permissible in the year where income is offered in India by the assessee within six monthsfrom the end of the month.

Regulations governing FTC

• Section 91includes the tax credit for countries where no DTAA is in force.
• Section 90includes the tax credit for countries where India has entered into a Double Tax Avoidance Agreement (DTAA).
• Rule 128along with Form 67 was introduced in 2016 and came into force on 4.2017

Before the introduction of Rule 128 and Form 67, these provisions were there in the Income Tax Act but no specific rules governing mechanism for determining foreign tax credit.

Unilateral tax credit system in India (Section 91 of Act)

Preconditions

• Available to a tax resident of India.
• Available in respect income accruing or arising outside India.
• Actual tax payment in foreign country on such income.
• Tax liability resulting in tax payment in India (i.e. income is actually doubly taxed).
• No DTAA with the foreign country in which tax is paid.

Quantum of relief

• Proportionate relief at lower of ‘Indian tax rate’ or ‘foreign tax rate’.
• Not full credit.

Bilateral agreements elimination of double taxation (Section 90 of Act)

Two methods envisaged by Model convention – Choice left to the treaty partners.

Exemption method	Credit method
Focus is on income.	Thrust is on taxes and not on income.
Full exemption is granted. Doubly taxed income do not form part of resident country tax computation.	Full credit is granted. Deduction allowed for taxes paid in the source country.
Exemption with progression. Resident country considers doubly taxed income only for the purposes of rate determination.	Ordinary credit is granted. Deduction quantified with relevance to resident country tax on double taxed income. Most of the DTAAs provide for this model of relief.
Taxes retained at the level imposed by source country.	Equality in treatment of capital investment whether made within or outside resident country. If the source country has lower tax rate, overall taxes are increased to that prevailing in the resident country while if source country has higher tax rate, credit is restricted to taxes prevailing in resident country.
Losses incurred in source country can be adjusted.	Losses incurred in source country can lead to “double dip”.

Form-67

Documents required to claim FTC

• Form 67 fully verified and certified by a Charted Accountant (CA) on or before furnishing the tax return.
• Produce a certificate issuedby the concerned tax authority of the foreign country or the specified territory or from the person who is responsible for the deduction (ex. employer) that includes (i) Nature of foreign income and (ii) the amount of TDS.
• A proof of payment of foreign tax.

Few key points

• Form 67 is to be filed electronically.
• It is to be filed on or before due date of filing Income Tax Return.
• It is available on the e-filing portal itself.
• Electronic Verification Code (EVC) or a Digital Signature Certificate (DSC) is required to be filed.
• It should be submitted before filing of Income Tax Return.

This is a complex compliance; you can seek help from our tax experts to claim your FTC.

Visit: Company formation in India

Private Ltd, LLP or Public Ltd, which to choose when going for New company registration in India

Fortunately, the new rules and regulations are easier when it comes to start-up a new business in India. Also, there are hassle free new company registration service providers available in India who take care of A to Z of forming and registration of the company. In this post, we will touch upon various forms of new company registration In delhi presently available and which is best suited for your business.

To start with, below mentioned is explanation for new company registration in gurgaon that are done in India:

Sole Proprietorship: The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

When to incorporate: However, after the introduction of the concept of One Person Company. It is not recommended to form a proprietorship in India.

Limited Liability Partnership: Partnerships when given the feature of limited liability, the LIMITED LIABILITY PARTNERSHIPS came into picture. LLP is a separate legal entity and which can be formed in India by minimum of two persons with a motive of earning profit.

When to incorporate: LLP enjoys the benefits of private limited company and traditional partnerships, therefore, because of increasing compliance in private limited company, it is recommended for start-ups to incorporate LLP if they are not planning to raise investments in future.

Partnership: A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business. Partnerships are easy to form. There is no minimum capital requirement. Only two people are needed to incorporate the partnership.

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Deposit in bank accounts of political parties exempt from tax

The government has said political parties depositing the demonetised Rs 500 and Rs 1,000 notes in their accounts will not face income tax investigation. 

"If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar. If the individual is putting money in his own account, then we will get information," revenue secretary Hasmukh Adhia told reporters. 

The Section 13A of the Income Tax Act, 1961 grants exemption from tax to political parties in respect of their income from house property, other sources, capital gains and income by way of voluntary contributions received from any person. 

Read Also:  How to register your own company in India?

Adhia was replying in response to a question whether the government is also investigating political parties/political treasuries depositing their own cash in banks. 

This came on a day the government gave tax offenders a last chance to come clean.

The exemption in respect of contributions is available only when in the case of all voluntary contributions in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.

Read Also: How foreign nationals/NRI’s can setup a business in India[Overview]?

This mean anonymous contribution cannot be more than Rs 20,000. Farmers exempt from tax on agricultural income will need to furnish a self-declaration that his earnings are less than Rs 2.5 lakh in a year to make deposits in bank without PAN. “We will not go unnecessarily after those with Rs 2.5 lakh deposits. But where we find people have tried to misuse the provision by putting in multiple accounts in different banks (we will go after them),” Adhia said.

Read Original Article:   http://bit.ly/2hHukgW

Government proposed amendments in Income tax provisions

The government has proposed few amendments in the existing Income tax provisions in order to catch up those people who want to convert black money into white using illegal channels. At same time, it has created confusion among a section of people.

The government also cleared that it is only for unaccounted or black money. It will not affect any genuine tax payers.

1.    The government will charge 30 percent tax and 33 percent surcharge of the tax with 10 percent penalty. It amounts to total 50 percent of income declared.

2.    The government will deposit 25% of declared income in the Pradhan Mantri Garib Kalyan Yojana or PMGKY-interest free deposit scheme – for four years. For instance, if a person deposit 1 crore rupee, 49.9 percent will be deducted as tax, surcharge & penalty. Out of the rest 50 lakh, 25 lakh will be deposited in PMGKY for four years.

Also Read: Business Opportunities in India

3.    Anyone who continues to hold onto undisclosed cash & caught      then according to existing tax provisions, 75 percent tax will be charged on his/her income. The assessing officer can charge 10 percent penalty in addition to the 75 percent tax.

4.    The jewelry or gold purchased out of disclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources is neither chargeable to tax under the existing provisions nor under the proposed amended provisions.

5.    The Government also clarified that no seizure of jewelry and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male of the family shall be made.

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AJSH helped various individuals in company formation in India. They offer services such as auditing services, tax consulting services and foreign investment approvals.