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Service Tax/ VAT / Income Tax / Excise Returns

Service Tax

Concept

What is Service Tax and who pays this tax?
Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994.
It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.

Who is liable to pay service tax?
Normally, the „person who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government (Sec.68 (1) of the Act). However, in the following situations, the receiver of the Services is responsible for the payment of Service tax:

1. Taxable services are provided by Foreign Services providers with no establishment in India, the recipient of such services in India is liable to pay Service Tax.
2. For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company
3. For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. (a) a factory (b) a company (c) a corporation (d) a society (e) a co-operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm.
4. For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

What is the rate of Service Tax?

At present, the effective rate of Service Tax is 10.3% on the value of the taxable service.

Registration

What is meant by ?Registration? Who should apply for registration under Service Tax law?
In terms of Section 69 of the Finance Act,1994 (Chapter V) read with rule 4 of the Service Tax Rules,1994

1. Every person who has provided a taxable service of value exceeding Rs. 9 lakhs, in the preceding financial year, is required to register with the Central Excise or Service Tax office having jurisdiction over the premises or office of such service provider.
2. In case a recipient of services is liable to pay service tax he also has to obtain registration.
3. The „Input Service Distributors? are also required to register them as per Notification No.26/2005-ST dated 07.06.2005 as amended.
4. Every person who provides taxable service and is liable to pay service tax.

Why registration is necessary?
Registration is identification of an assessee. Identification is necessary to deposit service tax, file returns and undertake various processes ordained by law relating to service tax. Failure to obtain registration would attract penalty.

What is the procedure for Registration? Who should be approached for Service Tax Registration?

A prospective Service Tax assessee (service provider or service receiver) or Input Service Distributor? seeking registration should file an application in Form ST-1 (in duplicate) before the jurisdictional Central Excise/Service Tax officer. To verify the correctness of declaration in the said form, certain documents such as copy of PAN card, proof of address of business premise(s), constitution of the business [proprietorship, firm, company, trust, institute etc.] etc. may be required by the registering authority. The copies may be self-certified by the applicant. In case of doubts in select cases, original documents may have to be presented for verification.

The ST-1 form should be filled online at www.aces.gov.in by generating online user ID and password. On submission of ST-1 online a provisional Service Tax Code (STC) is generated. Copy of provisional STC along with ST-1 and other documents to be submitted to registering authorities for activation of provisional STC.

How much time is taken for the issuance of the Registration Certificate?
The Registration certificate should be issued within a period of seven days from the date of submission of application ST-1 along with all relevant details/documents. In case the registration certificate is not issued within seven days, the registration applied for is deemed to have been granted.

Is there any provision for centralized registration?
Service providers having centralized accounting or centralized billing system who are located in one or more premises, at their option, may register such premises or office from where centralized billing or centralized accounting systems are located and thus have centralized registration.

Commissioner of Central Excise/Service Tax in whose jurisdiction centralized account or billing office of the assessee exists, is empowered to grant centralized registration

In case of multiple services provided by an assessee, is separate registration certificate required for each service?
Only one Registration certificate is to be taken even if the person provides more than one service from the same premises for which registration is sought. However, while making application for registration, all taxable services provided by the person should be mentioned.

If there is centralized registration, only one registration certificate is required for services provided from different premises, declared in the application for centralized registration.
What is to be done when the existing assessee starts providing a taxable service not mentioned in the registration certificate?
He should intimate to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise in writing if there is a change in any information or details furnished by him in the original ST-1 form submitted at the time of obtaining registration or if he intends to furnish any additional information or details within a period of thirty days of such change.

Is PAN allotted by the Income Tax Department a must for obtaining Service Tax Registration?
Having PAN is essential because the Service Tax Code/Registration number is generated based on the PAN issued by the Income Tax Department. The PAN based Service Tax Code/Registration number is a must for payment of service tax using the G.A.R. 7 Form.

What should be done with the Service Tax Registration on cessation of business of providing taxable service -?
The Service Tax Registration certificate (ST-2) should be surrendered immediately to the Superintendent of Central Excise.

Whether a service provider can make payment of Service Tax and file Returns before the grant of registration by the proper officer?
A person liable to pay service tax must apply for registration before he starts paying service tax and filing return. Service provider should apply well in advance to obtain registration, which is normally granted within 7 days of filing of application. If registration is not granted within seven days, it deems to have been granted.

Is there any penal provision for non-registration?
Failure of registration may attract a penalty upto Rs.10000/- or Rs. 200/- for every day during which such failure continues, whichever is higher

Payment of Service Tax

Category Frequency Due Dates
Payments through Bank :
In case of Individuals, Proprietary Firms & Partnership Firms Quarterly as mentioned below -
( i ) For Q.E. 30th June
(ii ) For Q.E. 30th Sept.
( iii ) For Q.E. 31St Dec.
( iv ) For Q.E. 31st March
- by 5th July
- by 5th Oct
- by 5th Jan.
- by 31st March
Others (e.g. Companies, Societies, Trusts etc.) Monthly By 5th of the month immediately following the month in which payments are received towards the value of taxable services. However, in case of March, the payment should be made by 31st March.

Electronic Payments through Internet : 40% 60%
In case of Individuals, Proprietary Firms & Partnership Firms Quarterly as mentioned below -
( i ) For Q.E. 30th June
(ii ) For Q.E. 30th Sept.
( iii ) For Q.E. 31St Dec.
( iv ) For Q.E. 31st March
- by 6th July
- by 6th Oct
- by 6th Jan.
- by 31st March.
Others (e.g. Companies, Societies, Trusts etc.) Monthly By 6th of the month immediately following the month in which payments are received towards the value of taxable services. However, in case of March, the payment should be made by 31st March.

What is the procedure to be followed for payment of Service Tax if full details are not available to assess the correct service tax liability? Under what circumstances, provisional assessment is resorted to?
If an assessee is unable to correctly calculate the actual amount of Service Tax payable for any particular month or quarter, as the case may be, he can make a request in writing to the Asstt. / Dy. Commissioner of Central Excise as provided under sub –rule (4) of Rule 6 of the Service Tax Rules, 1994, giving reasons for seeking payment of Service Tax on provisional assessment basis. On receipt of such request for provisional assessment, the Asstt. / Dy. Commissioner of Central Excise may allow payment of Service Tax on provisional basis on such value of taxable service as may be specified by him in a speaking order issued to that effect.

How is the provisional assessment finalized?
In case the Service Tax assessee resorts to provisional assessment after following the procedure and furnishes the returns in Form ST-3A along with Form ST-3, it is the responsibility of the Asstt. /Deputy Commissioner to complete the assessment after calling for from the assessee the relevant documents or records, as may be considered necessary by him. The order finalizing the assessment shall be passed as soon as the relevant information is received.

Whether the payment of Service Tax is to be made for the billed amount or for the amount received?
a) Service Tax is to be paid on the invoice amount or the billed amount. Where invoice is not issued within a period of 14 days then the tax becomes payable on the date of such completion of the provision of the service and on the amount mentioned in the invoice.
b) Further the amount of tax to be paid in a case where the person providing the service receives a payment before 14 days then it will be on the basis of the extent of such payment received by the service provider. For instance wherever any advance by whatever name known is received by the service provider to the provision of Taxable Service that advance will form the basis for calculating the Service Tax liability.

Can service tax be paid in advance, where the gross amount has not yet been received?
Yes. As per Rule 6(1A) of Service Tax Rules, 1994, service tax can be paid in advance to the credit of the central government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period. The assessee is required to intimate the details of the amount of service tax paid in advance to the jurisdictional superintendent of Central Excise/Service Tax within a period of 15 days of such payment and indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act.

Can service tax be paid by cheque?
Yes, service tax can be deposited by cheque.

When paid by cheque, which date will be treated as date of payment?
The date of presentation of the cheque to the bank designated by the Central Board of Excise & Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque.

When payment is made by a client to an assessee after deducting his Income Tax liability under the Tax deduction at source (TDS) provision, whether the Service Tax liability of the assessee is only towards the amount actually received from that client or tax is to be paid on the amount including the Income Tax deducted at source also?
Service Tax is to be paid on the gross value of taxable service which is charged by a Service Tax assessee for providing a taxable service. Income tax deducted at source is includible in the charged amount. Therefore, Service Tax is payable on the gross amount including the amount of Income Tax deducted at source also.

What is the interest rate applicable on delayed payment of Service Tax?
Every person, liable to pay the service tax in accordance with the provisions of section 68 of the Act or rules made there under, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest @18% per annum. Interest is payable for the period from the first day after the due date till the date of payment of any defaulted service Tax amount.

Can interest be waived, and by whom?
Interest payments are mandatory in nature and the same cannot be waived.

What are the penal consequences if the Service Tax is not paid or paid late?
If a person who is liable to pay Service Tax fails to pay service tax, he shall pay in addition to such tax and interest, a penalty which shall not be less than Rs.100/- for every day during which such failure continues or @1% of such tax per month, whichever is higher. However, the penalty amount payable shall not exceed the amount of Service Tax payable.

What is e-Payment of Central Excise and Service Tax?
e-Payment is a payment made through which a Taxpayer can remit his tax dues to the Govt. (CBEC) using Internet Banking Service. It is an additional facility being offered by the banks besides conventional procedure.

Is E-payment of Service Tax mandatory?
Yes. E-payment is mandatory for assesses who have paid service tax of Rs.10 lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year. However, there is no bar for other assessee to pay their tax electronically. In other words, other assessee may also pay their service tax through e-payment, if they choose to do so.


Filing of Returns

4.1. What are the Returns a service tax assessee has to file?
ST-3 Return – For all the registered assessee, including Input Service Distributors.

ST-3A Return –The assessee who is making provisional assessment under rule 6(4) of the Service Tax Rules, 1994.

When to file returns?
ST-3 Return is required to be filed twice in a financial year – half yearly.
Return for half year ending 30th September and 31st March are required to be filed by 25th October and 25th April, respectively.

How to file Service Tax Returns?
(i) File an application to the jurisdictional Asst./Deputy Commissioner of Service Tax, specifying
a.) 15-digit PAN based registration number (STP Code)
b.) Valid e-mail address – so that the Department can send them their User ID and password to help them file their Return.
(ii) Log on to the Service Tax e-filing home page by typing the address http://servicetaxefiling.nic.in in the address bar of the browser.
(iii) Upon entering the Service Tax code, user ID and password, you will be permitted to access the e-filing facility.
(iv) Follow the instructions given therein for filing the Returns electronically.
(v) Obtain the acknowledgement.

Is there any provision to file a revised return?
Yes, under rule 7B of Service Tax Rules, 1994 an assessee may submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of ninety days from the date of submission of the return under Rule 7. However, where an assessee submits a revised return, the relevant date for the purpose of recovery of service tax, if any, under section 73 of the Finance Act, 1994, shall be the date of submission of such revised return.

How to file Service Tax return?
With effect from 25th August, 2011 in terms of Notification No. 43/2011 all Service Tax returns are to be filed electronically.

What is the procedure for e-filing?
Requirements e-filing facility
In order to avail this facility the tax payer must file a simple application to the jurisdictional assistant and deputy commissioner of the service tax department. There are certain requirements and documents that the tax payer must have in order to submit the ST-3 return with ease. The application to the jurisdictional assistant and deputy commissioner must contain the tax payer’s 15 digit service tax payer (STP) number which is a PAN-based number and the application must also contain a valid e-mail address because the department will, in turn, send the user-ID and password to the e-mail address provided by the tax payer.

There are two Methods of filling the return electronically: -

• Online filling of data in service tax return and then submit it.
• Offline filling of data using excel utility and then upload it.

Online filling of data in service tax return and then submit it.

• Login into ACES by entering the user-id and password
• Home page of the assessee will appear.
• Go to ‘RET’ Main menu – Click on the ‘Fill’ option of ‘Fill ST-3’ submenu. RET Menu
• Fill ST-3
• Fill.
• Page will appear listing the Premises code and Address of the registered premises of the Assessee. Premises code will appear as hyperlink
• Click on the hyperlink to prepare the ST-3 Return
• After filling the Service Tax return correctly, Click on the ‘SAVE’ Button appearing on last page and confirmation page of ST-3 will appear.
• To Amend, Click on the ‘Modify’ button or ‘Save’ to store the Return in the database
• Return saved in ACES can be amended before submission by the assessee by clicking on the “Amend ST-3” button under “Fill ST-3” sub-menu.
• To submit the ST-3 Return to the department, press “SUBMIT” button.
• Confirmation will appear for successful submission of ST-3 Return displaying the Unique No. for such Return.
• Return after submission can be revised once in 90 days by clicking on the “Revise ST-3” option of “Fill ST-3” submenu.

Offline filing of Data & Upload

• Click on the ‘Download’ button provided on the left side of ACES Homepage and download excel utility by clicking on the hyperlink “Download ST3 Return Excel Utility” i.e. RET
• e Filing
• Download Excel Utility
• Use the excel utility to prepare ST-3 return and click on “Validate & Submit” button on the last page to generate XML file.
• The XML file will be saved in the same folder where the download utility is saved by the user.
• To upload the ST-3 Return, login into ACES by entering the user-id and password. Click on “Upload File” option of “e-filing” submenu under “RET” Main Menu.
• Click the “Save” button to save the return in the database of the assessee or Else click on “SUBMIT” button to file the return.
• Confirmation will appear for successful uploading of Return without any Unique No.
• After uploading, click on “View Status” option of “e-filing” submenu under “RET” Menu to view status of Return.
• A return will be considered as filed only when its status is shown as ‘FILED’, which should be appeared on or before the last due date of 25th April/25th October, as the case may be, for treating the return ‘filed on time’.
Further, Assessee can also ‘VIEW’, ‘SAVE’ AND ‘PRINT’ ST-3 RETURN at any time by clicking on the button ‘view ST-3’ under ‘RET’ menu after successful login into ACES.

Is there any penalty for non-filing or delayed filing of the Returns?
If a person fails to file the ST-3 Return by the due date [25th October and 25th April every year], he shall be liable to penalty which may extend to Rs. Twenty thousand rupees.

Mandatory Penalty for Late filing of ST-3 Return under Rule 7C of Service Tax Rules, 1994:-
Sr.No. Period of Delay from the prescribed date Penalty
1. 15 days Rs.500/-
2. Beyond 15 days but not later than 30 days Rs.1000/-
3. Beyond 30 days Rs.1000/- plus Rs. 100/- for every day from the thirty first day till the date of furnishing the said return (not exceeding Rs.20000)

Records

Are there any statutory documents prescribed by the Government such as specified invoice proforma, specified registers etc. for use by the service providers?
There are no specific statutory records which have to be maintained by a Service Tax assessee. The records including computerized data, if any, which are being maintained by an assessee on his own or as required under any other law in force, such as Income Tax, Sales Tax etc. are acceptable for the purpose of Service Tax.

Whether issue of Invoice/Bill/Challan is mandatory? When should the same be issued?
Issue of Invoice/Bill/Challan by a Service Tax assessee is mandatory as per Rule 4A of the STR, 1994. The same should be issued within 14 days from the date of completion of taxable service or receipt of payment towards the service, whichever is earlier. However, if the service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, the Invoice/Bill/Challan shall be issued within 14 days of the date when each such event specified in the contract, which requires the service receiver to make any payment to service provider, is completed.

Is there any prescribed format for the Invoice/Bill?
There is no prescribed format for issue of Invoice. However, the invoice/bill/challan should contain the following information (Rule 4A of the STR, 1994):

i. Serial number.
ii. Name, address and registration no. of the service provider.
iii. Name and address of the service receiver.
iv. Description, classification and value of taxable service being provided or to be provided.
v. Amount of Service Tax payable (Service Tax & Education cess should be shown separately)

Note: If the service provider is a Banking company, the details at Sl. No (i) and (iii) are not necessary.

In respect of the taxable services relating to the transport of goods by road, provided by the Goods Transport Agency, the service provider should issue a consignment note containing the following information : -

i. Serial Number
ii. Name of the consignor and consignee
iii. Registration no. of the vehicle
iv. Details of the goods transported
v. Details of the place of origin & destination
vi. Person liable for payment of Service Tax (consignor /consignee / GTA)

Is the amount of Service Tax charged from the client compulsorily to be indicated separately in the Bills / Invoices / Challans raised on him?
Yes. It is mandatory to separately indicate the amount of Service Tax charged in the Bills/Invoices/Challans raised on the clients, as per Section 12A of the Central Excise Act, 1944 which is made applicable to Service Tax, under Sec.83 of the Finance Act, 1994. Such mention of the Service Tax amount in the Invoice / Bill / Challans, would also facilitate the service receiver to avail the CENVAT credit of the Service Tax paid on the input services.

What is the preservation period for service tax records and documents?
All records and documents concerning any taxable service, CENVAT transactions etc. must be preserved for a minimum period of 5 years immediately after the financial year to which such records pertain (Rule 5(3) of Service Tax Rules 1994.)

Misc. Issues

Is the Service Tax payable by the assessee even in cases where his clients [recipient of service] do not pay for the service(s) rendered or when the client pays only a part of the bill raised in this regard?
Though the burden of Service Tax ultimately rests on the service recipient the law requires the service provider to collect the tax from the service recipient on the services provided and deposit to the Government Account. Therefore whether the service provider receives the payment from his client (service recipient) or not, he is legally bound to pay the service Tax liability in respect of the services rendered by him. The Service Tax has to be paid when the Invoice is issued or the completion of service provided or certain advance/payment is received for the services provided. Therefore Service Tax is payable when payment for the part of the bill is paid by the service recipient. However the tax liability will be to the full extent on the total amount to be received by the service provider.

What is meant by “completion of service” as in many situations it is not possible to issue invoices within 14 days of the completion of the service since the exact date of completion of service is difficult to identify?
The Service Tax Rules, 1994 requires that invoice should be issued within a period of 14 days from the completion of the taxable service. The invoice needs to indicate interalia the value of service so complete. Thus the term “completion of service” referred above would include not only the physical part of providing the service but also the completion of all other auxiliary activities like measurement, quality testing etc. but excluding any flimsy or irrelevant grounds. Thus the test for determination if a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice.

How does one work out the Service Tax liability and pay the same to the Government, in case the customer or a client pays only the value of the service amount, but not the Service Tax amount mentioned in the bill?
Service Tax is payable on amount realized. In given situation, the amount so realized from the client would be treated as gross amount inclusive of Service Tax and accordingly the value of taxable service and the Service Tax liability are worked out as follows:

For example:

Value of taxable service (AV) = Rs. 1000
Amount Billed = Rs.1000 + Service Tax Rs.103.00 = Rs.1103.00
Amount paid = Rs.1000. Treat Rs.1000 as gross amount inclusive of service tax.
In case the gross amount, including service tax, received is, say, Rs 1000. In such cases the service tax liability may be arrived at by reverse calculation in the following manner.
1000
——- X 100 = Rs. 906.62 (Rs.907) 110.3
110.3
Amount of Service Tax + Education Cess Payable = Rs.93
Note: If the recipient of service pays full billed amount later, the differential service tax must be paid forthwith.

Exemptions

8.1. What are the conditions of exemption to small scale service providers?
Taxable services provided by the small scale service provider were exempted from whole of service tax leviable there-on upto the aggregate taxable value Rs.10 lakhs in any financial year of vide Notification No.06/2005-ST dated 01.03.2005 (effective from 01.04.2005) revised vide Notification No.4/2007-ST dated 01.03.2007 (effective from 01.04.2007) and again revised vide Notification No.8/ 2008-ST dated 01.03.2008 (effective from 01.04.2008).
1. Above exemption is not admissible to :-
1. taxable service provided by a person under a brand name or trade name, whether registered or not, of another person or
2. such value of taxable services in respect of which service tax shall be paid by recipient of service under section 68 (2) of Finance Act read with Service Tax Rules, 1994.
2. Above exemption is admissible subject to following conditions :-
1. Taxable service provider has the option not to avail the said exemption and pay service tax on the taxable service and such option are exercised in a financial year shall not be withdrawn during the remaining part of such financial year ;
2. The provider of taxable service shall not avail CENVAT credit of service tax paid on any input used for providing taxable service on which exemption of small scale is availed.
3. The provider of taxable service shall not avail CENVAT credit under Rule 3 of the CENVAT Credit Rules 2004, during the period in which the service provider avail small scale exemption.
4. The provider taxable service shall avail CENVAT Credit only on such inputs or input services received on or after the date on which the service provider starts paying service tax and used for provision of taxable services on which service tax is payable.
5. The provider of taxable service shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which he starts availing exemption under this notification.
6. The balance CENVAT Credit lying unutilized if any after the adjustment of credit under (e) above, shall lapse on the day such service provider starts availing the exemption under this notification.
7. This notification shall apply to the aggregate value of one or more taxable services provided from one or more premises and not separately for each premises or each service.
8. The aggregate value of taxable services rendered by a provider of such service from one or more premises does not exceed exemption limit fixed (i.e. Rs. Ten lakhs) in the proceeding financial year.

Whether Gross Value of taxable services on which recipient has paid service tax as specified under Section 67(2) of the Finance Act, 1994 read with Service Tax Rules 1994, charged by goods Transport Agency shall be counted for determining aggregate value of small scale exemption ?
No. The Gross amount charged by Goods Transport Agency under Section 67 ibid to the recipient of service shall not to be taken into account for determining the aggregate taxable value under the small scale exemption.

What is the meaning of ?brand name or ?Trade name?
A “brand name” or “trade name” means brand name or trade name, whether registered or not i.e. to say, a name or a mark, such as symbol, monogram, logo, label, signature, or a invented word or writing which is used in relation to such specified services for the purpose of indicating or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any identification of the identity of that person.

How to determine the aggregate value of Rs 10 lakhs under small scale exemption notification?
The aggregate taxable value means the sum of total of first consecutive payments received during financial year towards gross amount.

8.5 Are there any other General exemptions?
The following general exemptions from payment of whole of the amount of Service Tax are available for the Service Providers:

1. Services provided to the United Nations or International Organisations.
2. Services provided to a developer of Special Economic Zone or a unit of Special Economic Zone as prescribed in the notification.
3. The value of the goods and materials sold by the service provider to the recipient of the service is exempted from payment of the Service Tax, if there is a documentary proof specifically indicating the value of the goods and materials and no credit of duty paid on such goods and material sold, has been taken under the provisions of CENVAT Credit rules, OR where such credit has been taken by the service provider on such goods and materials, but such service provider has paid the amount equal to such credit availed before the sale of such good and materials.
4. Exemptions to Diplomatic Missions for official use of taxable services and also to the officers and their families of a Diplomatic Mission for personal use of taxable services.
5. Specified taxable services, as listed below, received by an exporter and used for export of goods (Notification No. 17/2009 dated 07.07.2009 as amended). Under this notification, the service tax paid by an exporter on these services is refunded to the exporter on compliance of conditions mentioned in that notification.
i. General Insurance
ii. Port Service
iii. Technical Testing & analysis
iv. Technical Inspection & Certification
v. Other Ports
vi. Transport of Goods by Road from the inland container depot to the port of export
vii. Transport of goods in containers by Rail [from inland container depot to the port of export.
viii. Cleaning Service
ix. Storage & Warehousing
x. Courier
xi. Transport of Goods by Road (from place of removal, to inland container depot/ port/airport)
xii. Transport of Goods by Rail (from place of removal to inland container depot/ port/ airport)
xiii. Custom House Agent
xiv. Banking & other Financial Services
xv. Business Auxiliary Services
xvi. Service of sale or purchase of foreign currency including money changing by a banking company or financial institution including non-banking financial company or a body corporate or a financial concern.
xvii. Service of sale and purchase of foreign currency including money changing provided by a person other than those referred at above.
xviii. Service of supply of tangible goods for use without transferring the right of possession and effective control.
xix. Clearing and forwarding service
xx. Terminal handling charges.

Is there any exemption from payment of Service Tax if the receiver/provider of the service is the Central/State Government organization and Public Sector Undertakings?
No. There is no such exemption. All service providers, including the Central/State Government Organisations and the Public sector undertakings rendering the specified taxable service, are liable to pay Service Tax.

Penal Provisions

What are the penal provisions for various contraventions of the Service Tax Law?

The Penal provisions for various contraventions of the Service Tax Law are as follows:-
i. Non registration or delayed registration: An amount which may extend to Rs. 10000/- or Rs.200/- for every day during which such failure continues, whichever is higher could be imposed as penalty under sec 77(1)(a) of the Act.
ii. Non payment or delayed payment of service tax- A mandatory penalty, not less than Rs.100/- for every day during which such failure continues or @1% of such tax per month, whichever is higher, shall be imposed by the adjudicating authority. However, the penalty amount payable shall not exceed fifty percent of the service tax payable. [Section 76 of the Act]
iii. Non-filing / delayed filing of returns: A mandatory penalty has been prescribed under Rule 7C of the Service Tax Rules, 1994, as also an amount not exceeding Twenty Rupees could be imposed as penalty under sec 77(1)(a) of the Act. (see para 4.11 of this Booklet)
iv. Contravention of any of the provisions of the Finance Act, 1994 (Chapter V) or the Rules made there-under for which no penalty is separately provided: An amount which may extend to Rs.10000/- shall be liable to be imposed as penalty under Sec.77 (2) of the Act.
v. Failure to keep, maintain or retain books of account and other documents as required in accordance with the provisions of the Finance Act, 1994 (Chapter V) or the Rules made there under: An amount which may extend to Ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(b) of the Act]
vi. Failure to—
1. furnish information called by an officer in accordance with the provisions of the Finance Act,1994 (Chapter V) or rules made thereunder; or
2. produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rules made thereunder; or
3. Appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce a document in an inquiry, An amount which may extend to Ten thousand rupees or two hundred rupees for every day during which such failure continues, whichever is higher, shall be liable to be imposed as penalty. [Section 77(1)(c) of the Act]
vii. Person who is required to pay tax electronically, through internet banking, but fails to pay the tax electronically: An amount which may extend to Ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(d) of the Act]
viii. Person who issues invoice in accordance with the provisions of the Act or rules made thereunder, with incorrect or incomplete details or fails to account for an invoice in his books of account: An amount which may extend to ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(e) of the Act]
ix. where Service Tax was not levied or paid or erroneously refunded, by reason of fraud, collusion, willful mis-statement, suppression of facts; or contravention of any of the provisions of the Act or the rules made thereunder with an intent to evade payment of Service Tax, penalty shall be equal to the amount of Service Tax so not levied, paid or short-levied or short-paid or erroneously refunded. Such liability towards penalty shall be in addition to the Service Tax amount evaded or erroneously refunded and the interest thereon (Section 78 of the Act).
x. Reduced Penalty in respect of Sl. No. (ix):
a. where true and complete details of the transactions are available in the specified records, penalty shall be reduced to 50%.
b. If the Service Tax amount as determined by the competent authority is paid within 30 days from the date of communication of the order, along with interest, the amount of penalty liable to be paid shall only be 25% of the Service Tax amount so determined.
c. The benefit of reduced penalty equivalent to 25% of the said Service Tax is available only if such lesser penalty amount is also paid within thirty days (First and second proviso to Section 78 of the Act).
Launching of Criminal Prosecution: – A new Section 89, has been inserted to provide launching of criminal prosecution for Service Tax offence. In cases, where the amount involved exceeds Rs. 50 lakhs, there is a provision for imprisonment upto three years and in other cases it will be one year. For this prosecution, prior sanction of the Chief Commissioner will be required ( Section 89 of the Finance Act, 1994).

Is there any provision to waive the penalty under Service Tax law?
The penal provisions under Service Tax are provided under Sections 76, 77 and 78 of Finance Act, 1994. Although the penalty is liable to be imposed for the circumstances covered under the said provisions, the Section 80 of the Finance Act, 1994, provides provisions not to impose penalty, for any failure referred to in the said provisions, if the Service Tax assessee proves that there was sufficient cause for such failure.

Why does Department issue show cause notice?
When any amount is demanded as Service Tax or other dues from any person under the Finance Act, 1994 and rules made thereunder towards recovery of service tax or other dues which is not levied or paid or short levied or short paid by any person, or erroneously refunded to any person, and/or any person is liable to penalty under the said Act/Rules, notices are issued in the interest of natural justice to enable such person to understand the charges and defend his case before an adjudicating officer.

Taxable Services

What are the taxable services?
Taxable Services have been specified under Section 65(105) of the Finance Act, 1994. All the taxable services as on 01.05.2011 are listed below:-
S.No. Service Category Date ofIntroduction Accounting Codes
1 Advertising 01.11.1996 00440013
2 Air Travel Agent 01.07.1997 00440032
3 Airport Services 10.09.2004 00440258
4 Architect 16.10.1998 00440072
5 Asset management (by other than Banking company ) 01.06.2007 00440418
6 ATM Operations, Management or Maintenance 01.05.2006 00440346
7 Auctioneers service, other than auction of property under directions or orders of a count of or auction by Central Govt. 01.05.2006 00440370
8 Authorised Service Station 16.07.2001 00440181
9 Auxiliary to General Insurance / Life Insurance 16.08.2002 00440169
10 Banking & Other Financial Services also includes foreign exchange broking and purchase or sale of foreign currency 16.07.2001 00440173
11 Beauty Parlour 16.08.2002 00440209
12 Broadcasting 16.07.2001 00440165
13 Business Auxiliary Service including promotion or marketing or all games of chance whether or not conducted online i.e. lottery, lotto, bingo etc. 01.07.2003 00440225
14 Business Exhibition Service 10.09.2004 00440254
15 Business Support Service 01.05.2006 00440366
16 Cable Operator 16.08.2002 00440217
17 Cargo Handling also covers packing with transportation 16.08.2002 00440189
18 Chartered Accountant 16.10.1998 00440092
19 Cleaning Service 16.06.2005 00440318
20 Clearing & Forwarding Agent 16.07.1997 00440045
21 Clubs and Associations 16.06.2005 00440322
22 Commercial or Industrial Construction 10.09.2004 00440290
23 Commercial Training or Coaching 01.07.2003 00440229
24 Company Secretary 16.10.1998 00440100
25 Construction of Residential Complex 16.06.2005 00440334
26 Consulting Engineer 07.07.1997 00440057
27 Convention Centre 16.07.2001 00440133
28 Cost Accountant 16.10.1998 00440096
29 Courier 01.11.1996 00440014
30 Credit Card, Debit Card, Charge Card or other payment and related services 01.05.2006 00440394
31 Credit Rating Agency 16.10.1998 00440088
32 Custom House Agent 15.06.1997 00440026
33 Commodity exchange service 16.05.2008 00440438
34 Cosmetic & Plastic Surgery 01.09.2009 00440460
35 Design Service 01.06.2007 00440422
36 Development & Supply of Content 01.06.2007 00440414
37 Dredging 16.06.2005 00440310
38 Dry Cleaning 16.08.2002 00440221
39 Erection, Commissioning or Installation 01.07.2003 00440233
40 Event Management 16.08.2002 00440197
41 Fashion Designer 16.08.2002 00440213
42 Forward Contract Services 10.09.2004 00440282
43 Franchise Service 01.07.2003 00440237
44 General Insurance 01.07.1994 00440005
45 Health Club & Fitness Centre 16.08.2002 00440205
46 Information Technology Software 16.05.2008 00440452
47 Intellectual Property Service 10.09.2004 00440278
48 Interior Decorator 16.10.1998 00440076
49 Internet Café 01.07.2003 00440241
50 Internet Telecommunication 16.05.2008 00440382
51 Life Insurance 10.09.2004 00440185
52 Legal Consultancy Service 01.09.2009 00440480
53 Mailing List Compilation and Mailing 16.06.2005 00440330
54 Management Consultant 16.10.1998 00440116
55 Management of Investment ULIP 16.05.2008 00440430
56 Management, Maintenance or Repair Service 01.07.2003 00440245
57 Mandap Keeper 01.07.1997 00440035
58 Manpower Recruitment or Supply Agency 07.07.1997 00440060
59 Market Research Agency 16.10.1998 00440112
60 Mining of Mineral, Oil or Gas 01.06.2007 00440402
61 On-line Information & Database Access or Retrieval Service 16.07.2001 00440153
62 Opinion Poll Service 10.09.2004 00440274
63 Outdoor Catering Service 10.09.2004 00440051
64 Packaging Service 16.06.2005
65 Pandal & Shamiana Service 10.09.2004 00440054
66 Photography 16.07.2001 00440129
67 Port Service 16.07.2001 00440177
68 Port Service (other) 01.07.2003 00440177
69 Processing & Clearing Houses in relation to securities, goods and forward contracts 16.05.2008 00440442
70 Public Relations Service 01.05.2006 00440374
71 Rail Travel Agent 16.08.2002 00440201
72 Real Estate Agent / Consultant 16.10.1998 00440104
73 Recognized Association goods/ Forward contracts 16.05.2008 00440438
74 Recognized Stock Exchanges 16.05.2008 00440434
75 Recovery Agent 01.05.2006 00440350
76 Registrar to an Issue 01.05.2006 00440338
77 Rent – a – Cab Operator 16.07.1997 00440048
78 Renting of Immovable Property inclusive of permission to use such property irrespective of transfer of possession or control of property. 01.06.2007 00440406
79 Sale of space or time for advertisement, other than print media 01.05.2006 00440354
80 Scientific & Technical Consultancy 16.07.2001 00440125
81 Security Agency 16.10.1998 00440108
82 Share Transfer Agent 01.05.2006 00440342
83 Ship Management Service 01.05.2006 00440378
84 Site Preparation 16.06.2005 00440306
85 Sound Recording 16.07.2001 00440161
86 Sponsorship service provided to anybody corporate or firm, other than sponsorship of sports event 01.05.2006 00440358
87 Steamer Agent 15.06.1997 00440029
88 Stock Broker 01.07.1994 00440008
89 Storage & Warehousing 16.08.2002 00440193
90 Supply of tangible goods 16.05.2008 00440445
91 Survey & Exploration of Minerals 10.09.2004 00440270
92 Survey and Map Making 16.06.2005 00440314
93 T.V. & radio Programme Production Services 10.09.2004 00440286
94 Technical Testing & Analysis , 01.07.2003 00440249
95 Technical Inspection & Certification 01.07.2003 00440249
96 Telecommunication Service 01.06.2007 00440398
97 Tour Operator except for the use of educational bodies. 01.09.1997 00440063
98 Transport of goods by Air 10.09.2004 00440266
99 Transport of goods by Road 01.01.2005 00440262
100 Transport of goods in containers by rail by any person other than Government railway 01.05.2006 00440390
101 Transport of goods other than water, through Pipeline or other conduit 16.06.2005 00440302
102 Transport of Passengers embarking on international journey by air, other than economy class passengers 01.05.2006 00440362
103 Transport of persons by cruise ship 01.05.2006 00440386
104 Travel Agent other than Air & Rail Travel 10.09.2004 00440294
105 Transport of goods through waterways 01.09.2009 00440470
106 Transport of goods 01.09.2009 00440390
107 Underwriter 16.10.1998 00440084
108 Video Tape production 16.07.2001 00440157
109 Works Contract 01.06.2007 00440410
110 Services of promoting, marketing or organizing of games of change, including lottery. 01.07.2010 00440595
111 Health services undertaken by hospitals or medical establishments for the employees of business organization and health services provided under health insurance scheme offered by Insurance companies. 01.07.2010 00440598
112 Services provided for maintenance of medical records of employees of a business entity. 01.07.2010 00440601
113 Promoting a „brand‟ of goods, services, events, business entity etc. 01.07.2010 00440604
114 Services of permitting commercial use or exploitation of any event organized by a person or an organization. 01.07.2010 00440607
115 Services provided by Electricity Exchanges. 01.07.2010 00440610
116 Services related to two types of copyrights hitherto not covered under existing taxable services „Intellectual Property Right(IPR), namely, that on (a) cinematographic films and (b) sound recording. 01.07.2010 00440613
117 Special services provided by builder etc. to the prospective buyers such as providing preferential location or external or internal development of complexes on extra charges. 01.07.2010 00440616
118 Services of Air-conditioned restaurants having license to serve alcoholic beverages in relation to service of food or beverages. 1.5.2011 00441067
119 hotels / inns/ cubs/ guest houses/ campsite for a continuous period of less than three months 1.5.2011 00441070

Compliance Services at K. Behari & Associates

• Getting yourself registered with Service Tax Authorities.
• E-Filing of Service Tax Returns.
• Consultancy on Service Tax Matters.
• Maintenance of Service Tax Records.
• Payment of Service Tax
• Retainerships
• Liaison with Service Tax Authorities.

Income Tax Services
  
Taxation on Income in India
Charge to Income-tax

Everyone exceeds the maximum amount which is not chargeable to the income tax is an assessee, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status. Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year by every Person. 

Residential Status For the purposes of levy of tax, the Income-tax Act in India has classified the status of an individual assessee into three viz.,

  • Resident and ordinarily resident (ROR)
  • Resident but not ordinarily resident (R but NOR)
  • Non-resident (NR) 

The residential status of an Individual is determined based on the number of days of stay in India. Financial year (FY) is April to March. 

*Not applicable to a

  1. Resident going outside India for employment,
  2. A Resident who leaves India as a member of crew of an Indian ship,
  3. An Indian citizen or person of Indian origin who is abroad and comes to India for a visit i.e. if such a person stays in India for less than 182 days, he would be a non-resident.
  • An individual and company who are Indian residents are also taxed on their income outside India and receive a credit for overseas taxes. In the case of a ROR, his global income is taxed in India. Normally areturning Indian would be assessed as RNOR on his return to India.
  • In the case of a Non-resident, only the income earned or received in India is taxed in India. Accordingly, income earned outside India would not be taxable in India.

India has contracted Double Tax Avoidance Agreements (DTAAs) with various countries. Taxability of Indian income would be decided as per the provisions of these DTAAs. Most of these DTAAs contain provisions for lower rates of tax in case of incomes like dividend, royalties, fees for technical services etc. Provisions of some DTAAs provide interesting opportunities for efficient tax planning. For instance, the DTAA with Mauritius. Structuring of likely income in India therefore requires a ‘case to case’ study depending on facts of each case. 

Heads of Income

The total income of a person is divided into five heads, viz., taxable:

Income from Salary

All income received as salary under Employer-Employee relationship is taxed under this head. Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and net paid income. In addition, the Form 16 will contain any other deductions provided from salary such as:

  1. Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills.
  2. Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if provided as conveyance allowance. No bills are required for this amount.
  3. Professional taxes: Most states tax employment on a per-professional basis, usually a slabbed amount based on gross income. Such taxes paid are deductible from income tax.
  4. House rent allowance: the least of the following is available as deduction
    1. Actual HRA received
    2. 50%/40%(metro/non-metro) of basic ‘salary’
    3. Rent paid minus 10% of ‘salary’.

Income from House Property

Income from House property is computed by taking into account what is called Annual Value of the property. The annual value (in the case of a let out property) is the maximum of the following:

  • Rent received
  • Municipal Valuation
  • Fair Rent (as determined by the I-T department)

If a house is not let out and not self-occupied, annual value is assumed to have accrued to the owner. Annual value in case of a self occupied house is to be taken as NIL. (However if there is more than one self occupied house then the annual value of the other house/s is taxable.) From this, deduct Municipal Tax paid and you get the Net Annual Value. From this Net Annual Value, 
deduct :

  • 30% of Net value as repair cost (This is a mandatory deduction)
  • Interest paid or payable on a housing loan against this house

In the case of a self occupied house interest paid or payable is subject to a maximum limit of Rs,1,50,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and Rs.30,000 (if the loan is taken before 1 April 1999). For all non self-occupied homes, all interest is deductible, with no upper limits. The balance is added to taxable income. 

Income from Business or Profession

The income referred to in section 28, i.e., the incomes chargeable as “Income from Business or Profession” shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. In summary, the sections relating to computation of business income can be grouped as under: -

  1. Deductible Expenses – Sections 30 to 38 [except 37(2)].
  2. Inadmissible Expenses – Sections 37(2), 40, 40A, 43B & 44-C.
  3. Deemed Incomes – Sections 33AB, 33ABA, 33AC, 35A, 35ABB & 41.
  4. Special Provisions – Sections 42 & 43D
  5. Self-Coded Computations – Sections 44, 44A, 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, 44-D & 44-DA.

The computation of income under the head “Profits and Gains of Business or Profession” depends on the particulars and information available. 

Income from Capital Gains

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of the I.T. Act, 1961 as property of any kind held by an assessee such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for businesses and personal effects. Transfer has been defined under section 2(47) to include sale, exchange, relinquishment of asset, extinguishment of rights in an asset, etc. Certain transactions are not regarded as ‘Transfer’ under section 47. For tax purposes, there are two types of capital assets: Long term and short term. Long term asset is that which is held by a person for three years except in case of shares or mutual funds which becomes long term just after one year of holding. Sale of such long term assets gives rise to long term capital gains. There are different scheme of taxation of long term capital gains. These are:

  1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no tax is payable. STT has been applied on all stock market transactions since October 2004 but does not apply to off-market transactions and company buybacks; therefore, the higher capital gains taxes will apply to such transactions where STT is not paid.
  2. In case of other shares and securities, person has an option to either index costs to inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The indexation rates are released by the I-T department each year.
  3. In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.
  4. All capital gains that are not long term are short term capital gains, which are taxed as such:\
  5. For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not paid).
  • Under section 111A, for shares or mutual funds where STT is paid, tax rate is 15%.
  • In all other cases, it is part of gross total income and normal tax rate is applicable.

Income from Other Sources

This is a residual head, under this head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are to be taxed under this head.

  1. Income by way of Dividends
  2. Income from horse races
  3. Income from winning bull races
  4. Any amount received from key man insurance policy as donation.
  5. Gift received in Cash or in Kind

Deduction

While exemptions are on income some deduction in calculation of taxable income is allowed for certain payments. 

Section 80C Deductions 
Section 80C of the Income Tax Act [1] allows certain investments and expenditure to be deducted from total income up to the maximum of 1 lac. The total limit under this section is Rs. 100,000 ) which can be any combination of the below:

  • Contribution to Provident Fund or Public Provident Fund.
  • Payment of life insurance premium
  • Investment in pension Plans.
  • Investment in Equity Linked Savings schemes (ELSS) of mutual funds. Among other investment opportunities, ELSS has the least lock-in period of 3 years.
  • Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit)
  • Tax saving Fixed Deposits provided by banks for tenure of 5 years. Interest is also taxable.
  • Payments towards principal repayment of housing loans.
  • Payments towards tuition fees for children to any school or college or university or similar institution (Only for 2 children).
  • Post office investments

Section 80CCF: Investment in Infrastructure Bonds
From April, 1 2011, a maximum of Rs. 20,000 is deductible under section 80CCF provided that amount is invested in infrastructure bonds. This is in addition to the 100,000 deduction allowed under Section 80C. 

Section 80D: Medical Insurance Premiums 
Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to Rs. 35,000.00 (Rs. 15,000.00 for premium payments towards policies on self, spouse and children and (read as in addition to) Rs. 15,000.00 for premium payment towards non-senior citizen dependent parents or Rs. 20,000.00 for premium payment towards senior citizen dependent). This deduction is in addition to Rs. 1,00,000 savings under IT deductions clause 80C. For consideration under a senior citizen category, the incumbent’s age should be 65 years during any part of the current fiscal. This deduction is also applicable to the cheques paid by proprietor firm.

Tax Rates

Tax Rate for Individuals For resident woman (who is below 60 years at any time during the previous year)

Net Income Range Income – tax Rates Education Cess Secondary & Higher Education Cess
Up to Rs. 1,90,000 N I L N I L N I L
Rs. 1,90,001- Rs. 5,00,000 10% of income exceeding Rs. 1,90,000 2% of income tax 1% of income tax
Rs. 5,00,001- Rs. 8,00,000 Rs. 31,000+20% of income exceeding Rs.5,00,000 2% of income tax 1% of income tax
Above Rs. 8,00,000 Rs. 91,000+30% of income exceeding Rs.8,00,000 2% of income tax 1% of income tax

For resident Senior citizen (who is 60 years or more but below 80 years at any time during the previous year)

Net Income Range Income – tax Rates Education Cess Secondary & Higher Education Cess
Up to Rs. 2,50,000 N I L N I L N I L
Rs. 2,50,001- Rs. 5,00,000 10% of income exceeding Rs. 2,50,000 2% of income tax 1% of income tax
Rs. 5,00,001- Rs. 8,00,000 Rs. 25,000+20% of income exceeding Rs.5,00,000 2% of income tax 1% of income tax
Above Rs. 8,00,000 Rs. 85,000+30% of income exceeding Rs.8,00,000 2% of income tax 1% of income tax

For resident Super Senior citizen (who is 80 years or more at any time during the previous year)

Net Income Range Income – tax Rates Education Cess Secondary & Higher Education Cess
Up to Rs. 5,00,000 N I L N I L N I L
Rs. 5,00,001- Rs. 8,00,000 20% of income exceeding Rs.5,00,000 2% of income tax 1% of income tax
Above Rs. 8,00,000 Rs. 60,000+30% of income exceeding Rs.8,00,000 2% of income tax 1% of income tax

For any other individual, every HUF/AOP/BOI/artificial juridical person.

Net Income Range Income – tax Rates Education Cess Secondary & Higher Education Cess
Up to Rs. 1,80,000 N I L N I L N I L
Rs. 1,80,001- Rs. 5,00,000 10% of income exceeding Rs. 1,80,000 2% of income tax 1% of income tax
Rs. 5,00,001- Rs. 8,00,000 Rs. 32,000+20% of income exceeding Rs.5,00,000 2% of income tax 1% of income tax
Above Rs. 8,00,000 Rs. 92,000+30% of income exceeding Rs.8,00,000 2% of income tax 1% of income tax

Tax Rate for non-Individuals 

  Partnership Firms/ LLP (Limited Liability Partnerships) Domestic Company with Income of less than one Crore Domestic Company with Income of more than one Crore Foreign Company with Income of less than one Crore Foreign Company with Income of more than one Crore
Basic Tax Rate

30%

30%

30%

40%

40%

Surcharge

-

-

7.5%

-

2.5%

E. Cess

2%

2%

2%

2%

2%

S & H E. Cess

1%

1%

1%

1%

1%

Effective Tax Rate

30.9%

30.9%

33.22%

41.2%

42.23%

Special Rates of Income Tax:

Long term Capital gain chargeable to Securities Transaction Tax (STT) Exempt u/s 10 (36)
Short term Capital gain chargeable to Securities Transaction Tax (STT) (No deduction u/s 80 allowed from this type of Income) 15%
Long term capital gain other than above (e.g. long term capital gain arising on sale of property ) (No deduction u/s 80 allowed from this type of Income) 20%
Short term capital gain other than above (e.g. long term capital gain arising on sale of property) Normal Income*

The Special Rates are required to be increased by surcharge & educational cess wherever applicable.
* Where the total income as reduced by above income is below the maximum amount not chargeable to income tax then above income shall be reduced by amount by which total income as so reduced falls short of the maximum amount which is not chargeable to income tax.

Withholding Taxes or Tax Deducted at Source (TDS)

TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. It is similar to “pay as you earn” scheme also known as Withholding Tax in many other countries, one of the countries is USA. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.

Made To resident Threshhold Limits Payment made to
Company,firm.Co-op Society,Local authority HUF , Individual, AOP, BOI
Section Nature of payments Rate in %
194A Interest From Bank 10000 10 10
194A Other Interest 5000 10 10
194B Winning from Lotteries and Cross Word Puzzles 10000 30 30
194BB Winning from Horse Races 5000 30 30
194D Insurance Commission 20000 10 10
193 Interest Payable on –
  1. Any debenture or other security of any local authority or Govt. Corpn.
  2. Any debenture listed in Stock Exchange
  3. Any security of the Central or State Government

 10 

10 

1010 

10 

10194CPayment to Contractors, ,30000 (75000 in year)2 1 194CPay to Advt/Sub Contr30000 (75000 in year)21194CPayment to Transportor NILNIL194FPayment on repurchase of ELSS units u/s 80CCB 2020194EEPayment on withdrawal from NSS’87 A/c 2020194GCommission, remuneration or reward on sale of lottery tickets 1010194HCommission/Brokerage50001010194OPayment of rent for use of any machinery/ plant/ equipment 1010194IRent-property1800001010194IRent-Plant / Machinery18000022194JProfessional Fees300001010194JSums referred under 28(va) 1010194LACompensation/ consideration or enhanced compensation/ consideration on account of compulsory acquisition of any immovable property (other than agricultural land) on or after 1.10.2004 1010 Any other Income 2020Note -1For Section 194C Rs. 30000 for single payment & Rs.75000 for aggregate Payment during a financial year.Note -2Payment Made to Transportor : Tds is Not required If pan is provided By the TransporterNote-4If pan not provided by the deductee then rate as per above table or 20% which ever is higher is to be charged.(effective from 01.04.2010 section 206AA)

 

INCOME TAX – PRIVILEGES TO THE DONORS U/S 35AC

 
INTRODUCTION

01 As we already know that an NGO can avail income tax exemption by getting itself registered and complying with certain other formalities, but such registration doesn’t provide any benefit to the persons making donations. The Income Tax Act has certain provisions which offer tax benefits to the “donors”. All NGOs should avail the advantage of these provisions to attract potential donors. Section 35AC is one of such sections.

REGISTRATION UNDER SECTION 35Ac

02 The Central Government approves certain NGOs and notifies them as eligible for project or schemes for the purposes of section 35AC. If an NGO succeeds in getting such an approval for its projects then it stands a very good chance of mobilising funds from the corporate and the business sector. Business houses making contribution to such approved projects are allowed the benefits of deducting such contribution as expenditure.

NATIONAL COMMITTEE

03 The Central Government has constituted a National Committee to identify projects and schemes to be notified under section 35AC, such committee normally consists of eminent persons. All NGOs are entitled to apply to the National Committee to get its projects or schemes approved.

WHERE THE APPLICATION IS TO BE MADE

04 The application for approval by the National Committee should be made to the Secretary, National Committee for Promotion of Social & Economic Welfare, Dept. of Revenue, Govt. of India, North Block, New Delhi – 110001.

THE APPLICATION AND ITS ENCLOSURE

i) The application is to be made in 2 Sets, written either in Hindi or English.

ii) Details such as name, address and status of applicant, the district/ ward circle where assessed/PAN number.

iii) Audited Balance Sheet, Profit& Loss Account or Income& Expenditure Account for the latest year and two preceding years.

iv) How is it constituted i.e. whether as a trust, society, etc supported by relevant documents like trust deed, rules & regulation, memorandum of association etc. and registration certificate, if any.

v) Name & Addresses of the persons managing the affairs of the association or institution, including those who left the organisation but were managing the affairs of the association or institution during the 3 years preceding the date of application.

vi) If the association or institution is notified under section 10(23)(C) or is approved for the purposes of section 80G, the particulars of such approval granted.

vii) Brief particulars of the activities of the association or institution during 3 years preceding the date of application or since inception if the association or institution is less than 3 years old.

viii) Such other information as the association or institution may like to place before the National Committee.

ADDITIONAL INFORMATION REGARDING THE PROJECT/SCHEME TO BE SUBMITTED

(i) Title of project or scheme;

(ii) Date of commencement;

(iii) Duration and the likely date of completion;

(iv) Estimated cost of the project ;

(v) Category or class of persons who are likely to be benefited from the project or scheme;

(vi) Affirmation that no benefit from the project or scheme other than remuneration or honorarium, will accrue to persons managing the affairs of the NGO ;

(viii) Such other particulars as the applicant may place before the National Committee.

CERTIFICATE TO BE ISSUED TO THE DONOR

05 All approved NGOs are required to issue a certificate to the donor for all contributions & receipts under section 35AC. The certificate is to be issued in Form 58A.

06 This certificate will enable the donor to claim exemption from its taxable income. Further, the NGOs should also send an Annual Report to the National Committee indicating the progress of the work relating to the project/scheme and the following informations in respect of each contributor :

i) name of the contributors & their addresses.

ii) PAN.

iii) amount of contributions.

iv) the project/scheme for which the contribution is made.

v) total amount of contribution received during the year.

vi) total cost of the project approved by the National Committee.

07 Such Annual Report should reach the National Committee by 30th June, following the financial year in which the amount is received.

DEDUCTION OF CONTRIBUTION UNDER SECTION 80GGA

08 Section 35AC is available to assessees who have income from the head ‘business’ or ‘profession’. Therefore, for the assessees who do do not have income from business or profession, section 80GGA provides for deduction on donations made to eligible projects under section 35AC. Section 80GGA, is a broader section and deductions are also available for contributions made for scientific research under section 35CCA & 35CCB, which have been withdrawn. 100 per cent deduction is available under section 80GGA, subject to the available gross total income under section 80A. Therefore, unlike section 35AC, deduction under section 80GGA cannot be carried forward in the form of losses to next year .

OVERALL SUMMARY

09 To sum up the discussions :

i) Under section 35AC, organisations having income from business or profession can get 100 per cent deduction. Charitable Organisations can get registered themselves u/s. 5AC by applying to the National Committee under rule 11F to 11-O, if they are carrying on any business.

ii) The Central Goverment has specified various types of projects of national needs for which Charitable Organisations can make donations.

iii) Business houses making donations for the purpose of section 35AC, should be careful that the donee organisation continues to enjoy approval u/s. 35AC. As the approval under section 35(AC) is not permanent in nature.

iv) To get approval u/s. 35AC two sets of application have to be made alongwith specified enclosures to secretary of National Committee, New Delhi.

v) The National Committee may recommend or reject the project but when the approval is recommended then it is for a period of maximum 3 years and it could be further extended if the National Committee is satisfied with the performance during the period.

vi) A certificate has to be issued to the donor in Form 58A. This certificate will enable the donor to claim exemptions.

vii) The National Committee may withdraw the approval if the project is not carried out in accordance with the approved conditions. To withdraw a project National Committee should provide an opportunity of being heard to the aggrieved organisation.

viii) Section 35AC provides deduction from income from business and profession. Similar deduction is also available u/s. 80GGA, for assessees having income from other heads.

 

 

 

Direct Tax Consultancy

Taxation is an extremely complex subject and needs professional skill of the highest order and the consultant has to keep track of frequent changes and modifications made in the Income tax rules from time to time to be able to guide aptly in tax planning, documentation and represent the cases skillfully. Even a minor lapse can cost tons of money to an assessee. So we offer pragmatic solutions to manage the affairs in the most tax efficient manner. We have an aptitude for providing expert advice in tax planning. Our tax consultancy service include international tax planning, Indian direct tax consultancy to corporate sector, individuals and NRIs. 

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Preparation and filing of various statutory returns and documents with the revenue authorities periodically. A plethora of paper work is involved in filing numerous tax returns on quarterly, half-yearly and yearly basis. It is always a very complicated and lengthy process to be complied with punctually and regularly. Failure of compliance attracts heavy penalties and even prosecution in certain cases. An elaborate data has to be procured from account books of the firm/ company to fill in the returns entailing huge amount of labour and knowledge.

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Income tax assessing officers are generally of very suspicious nature and confront the assessee with very tricky questions during the course of assessment. With one stroke of pen they raise demands of colossal amounts unreasonably. The tax representative, therefore, has to be a very knowledgeable, experienced and an eloquent counsel to be able to derive full justice from the revenue authorities lest the client should face any harassment or undue loss. 

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We take a holistic view, combining industry insight with the technical skills of financial and tax professionals, economists, lawyers and our other in-house resources as necessary, to develop comprehensive integrated solutions. Our tax services include:

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7 comments to Service Tax/ VAT / Income Tax / Excise Returns

  • Thanks for such detailed information. it might be helpful for many people. I must appreciate your efforts that you have taken to explain this point.

  • Sandeep

    My query about Cenvat credit admissibility on input services in Construction of Residential Complexes from 1.07.2013 please explain.

  • Amit Yadav

    What is online process of service tax registration ?

    • admin

      Name of site is http://www.aces.gov.in and register the same as per information required in particular columns.In this process login id will be generated. By using this fill form 1 and submit the same.

      For any further query contanct us:
      K.Behari & Associates
      Kunj Behari Mahipal
      Shekhar Mahipal
      (Project Consultants)
      CA.Anand Mahipal
      (Chartered Accountants)

      Address: “DGM Building”
      Old Court Road, Near Railway Crossing
      SIRSA-125055 (HARYANA) INDIA

      Contact Numbers:
      Phone: +91(1666)232543, 234565
      Mobile: +91-9416-351-167, 9050-902-425

  • Its very difficult to find such an informative blog with so much details. Great work indeed. This blog is special because it will help both the end user and those who are studying this particular topic.

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