Sep 262016
 

How to compute TDS, when a Employee has exited from the current company and joined a new company in a single financial year

Section 192(2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head “Salaries” due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1).

Under which circumstances an employee could work under more than employer?

Normally an employee is expected to work under one employer throughout the year. But in circumstances like change in employment in the middle of the year or in case there is shift based payment and employee in working under different employer in different shift or working on part time basis there could be more than one employer in a financial year.

What difficulties arouse when there are more than employers in a year?

In case employee work under more than one employer there is possibility of giving excess benefit of maximum amount not chargeable to tax or deduction being given more than allowed as given in the below diagram:

Employee working under

  • Employer 1
  • Employer 2
  • Employer 3

In the above circumstances all employer might have given employee the benefit of maximum amount not chargeable to tax (Rs. 250000/-) is given by all employers. Hence, TDS might have deducted at lower rate causing a delay in deposit of tax at departmental end and heavy burden of tax with interest to employee at the end of financial year on the other hand.

To prevent this sec 192(2) have introduces form Form 12B which will be given by employee to the employer of this choice so that any one employer have the knowledge of facts of tax being deducted by other employer(s) and correct computation and deposit of TDS taken place.

What are the contents of Form 12B?

Form 12B have following information:

  1. Name and address of the employee
  2. Permanent Account No.
  3. Residential status
  4. Name and address of employer(s)
  5. TAN of the employer(s) as allotted by the ITO
  6. Period of employment
  7. Particulars of salary as defined in section 17, paid or due to be paid to the employee during the year
  8. Amount deducted in respect of life insurance premium, provident fund contribution, etc., to which sec. 80Capplies (Give details)
  9. Total amount of tax deducted during the year (enclose certificate issued under section 203)
  10. Particulars of value of perquisites and amount of accretion to employee’s provident fund account

The form 12B is employee self declaration and not authentication is required from any of the current / previous employer.

How Form 12A will work?

Where an employee has more than one employer, he is required by section 192(2) to furnish Form 12B to one of the employers the details of salary due / received by him from other employers.

Only after submission of information in form 12B, it becomes the obligation of the employer to deduct TDS after considering the information submitted by Form 12B.

What is the effective date of change is rate of TDS in case employee submitted in Form 12B?

As mentioned above it is only after submission of Form 12B employer is under obligation to alter his rate of TDS deduction.

For example in case Form 12B is submitted in the month of September 2016, only from September 2016 onwards, tax shall be deducted at the average rate determined after considering the details submitted in Form 12B.

Is the present employer is under obligation to declare the details of income earned by employee from previous employment(s) in form TDS certificate also (Form 16)?

No, Form 16 will be issued by each employer(s), including all previous employer(s), normally for income earned by employee from him and tax deducted by him.

Information given in Form 12B is only for the purpose of correct computation of TDS only.

Case study:

Case Study 1 – Employed simultaneously under more than one employer

Employee Name Mr. X
Previous Year 2016-17 Assessment Year 2017-18
Employed by Salary (pm) Total
A Ltd
Basic Salary Rs. 15,000.00
HRA Rs. 7,500.00
Conveyance Rs. 0.00
Special allowance Rs. 7,500.00
Taxable Salary Rs. 30,000.00 Rs. 360,000.00
B Ltd
Basic Salary Rs. 20,000.00
HRA Rs. 10,000.00
Conveyance Rs.  2,000.00
Special allowance Rs. 10,000.00
Taxable Salary Rs. 42,000.00 Rs. 504,000.00
Total Rs. 72,000.00 Rs. 864,000.00
Mr. X has the option to chose any one employer to whom Form 12B be submitted.
If he Chose B Ltd Total tax deductible
case 1 : If employee furnishes Form 12B at the time of appointment:
Total tax deductible Rate of deduction Monthly deduction
TDS to be deducted by A Ltd Rs. 6,180 1.72% Rs. 515.00
TDS to be deducted by B Ltd Rs. 94,554 18.76% Rs. 7,879.50
Case 2 : If employee furnishes Form 12B after one month of his appointment:
Total tax deductible Rate of deduction Deduction in 1st month Deduction from 2nd month onward
TDS to be deducted by A Ltd Rs. 6,180 1.72% Rs. 515.00 Rs. 515.00
TDS to be deducted by B Ltd Rs. 94,554 18.76% Rs. 2,214.50 ** Rs. 8,394.50
** Tax less deducted as employee have not furnished details of previous employer and hence TDS computed only on income given by employer B ltd, i.e., ₹ 5,04,000/-

Case Study 2 – Successively employment under more than one employer

Employee Name Mr. X
Previous Year 2016-17 Assessment Year 2017-18
Employed by Salary (pm) Period of employment Total
A Ltd Rs. 30,000.00 9 month Rs. 270,000.00
B Ltd Rs. 42,000.00 3 month Rs. 126,000.00
Total Rs. 72,000.00 12 month Rs. 396,000.00
Mr. X has no option but to submit Form 12B to his new employer B Ltd.
Suppose he submitted Form 12B in his appointing month.
TDS to be deducted by A Ltd Rs. 4,635
TDS to be deducted by B Ltd Rs. 96,099

 

Sep 192016
 

The following conditions shall be satisfied for levy of CGST/SGST:

  1. There must be a person.
  2. There must be a taxable person.
  3. There must be some goods and/or services
  4. Such goods must be specified in schedule …. of this act.
  5. There must be an intra state supply (supply within state) of such goods and/or services.
  6. The tax shall be paid at the time of supply.

If any of the above ingredient is missing the tax is not payable.

Taxable person

Taxable person means a person who carries on any business at any place in India / state of ….. and who is registered or required to be registered under Schedule III of this act.

Goods and / or services

“Goods” means every kind of movable property other than actionable claim and money but includes securities, growing crop, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply.

Movable property shall not include any intangible property.

“Services” means anything other than goods. Services includes intangible property and actionable claim but does not include money.

Description of supply Goods Services
Movable property, i.e., things which can be moved from one place to another without dismantling. x
Growing crops x
Things attached to land and agreed to be severed before supply x
Securities x
Actionable claim x
Things attached to land and supply as such, i.e., immovable property x
Intangible property x
Money x x

Goods and/or services must be specified in schedule

The goods and / or services must be specified in schedule. The tax shall be levied at the rates specified in that schedule. However Central government or state government have power to give exemption from payment of tax. The process of giving exemption is detailed in following diagram:

Supply

The liability to pay GST arises when there is a supply of goods and/or services. Under GST regime supply is taxable activity. Section 3 of the act had widened the scope of the terms supply from its natural meaning. From the plain reading of section following shall be included within supply:

  1. Sale made or agreed to be made for a consideration in the course or furtherance of business.
  2. Transfer made or agreed to be made for a consideration in the course or furtherance of business.
  3. Barter / exchange made or agreed to be made for a consideration in the course or furtherance of business.
  4. License made or agreed to be made for a consideration in the course or furtherance of business.
  5. Rental made or agreed to be made for a consideration in the course or furtherance of business.
  6. Lease made or agreed to be made for a consideration in the course or furtherance of business.
  7. Disposal made or agreed to be made for a consideration in the course or furtherance of business.
  8. Import of service.
  9. Permanent transfer / disposal of business assets made or agreed to be made without a consideration.
  10. Temporary application of business assets to a private or non business use made or agreed to be made without a consideration.
  11. Service put to a private or non-business use made or agreed to be made without a consideration.
  12. Assets retained after deregistration.
  13. Supply by a taxable person to another taxable or non taxable person in the course or furtherance of business made or agreed to be made without a consideration excluding supply to job worker.

After having ascertained that there is a supply, next step is to identify whether it is supply of goods or supply of service. The detailed guideline for the same is given in Schedule II of the act and will be deal in our next blog.

Sep 122016
 

Levy of central / state Goods and Service Tax

There shall be levied a tax called the Central / State Goods and Service Tax on all intra state supplies of goods and/or services at the rate specified in the schedule …. to this Act and collected in such manner as may be prescribed.

The CGST/SGST shall be paid by every taxable person in accordance with the provisions of this act.

The liability to pay CGST/SGST on the goods shall arise at the time of supply as determined in terms of the provisions of this section.

The liability to pay CGST/SGST on services shall arise at the time of supply, as determine in terms of the provision of this section.

The following conditions shall be satisfied for levy of CGST/SGST:

  1. There must be a person.
  2. There must be a taxable person.
  3. There must be some goods and/or services
  4. Such goods must be specified in schedule …. of this act.
  5. There must be an intra state supply (supply within state) of such goods and/or services.
  6. The tax shall be paid at the time of supply.

In any of the above ingredient is missing the tax is not payable.

Taxable person:

Taxable person means a person who carries on any business at any place in India / state of ….. and who is registered or required to be registered under Schedule III of this act.

Who are person in the act. Places to be consider in India + Who are required to be registered Persons not considered as taxable person
Individual HUF Company Firm LLP
AOP / BOI Corporation or government company
Body corporate of a country outside India
Co-operative society
Local authority
Society Trust Artificial Judicial person
A place from where the business is ordinarily carried on Warehouse Godown Other places where goods are stored or provides / receives goods and/or services Places where account books are maintained.Place of agent I.   Person making inter- state supply
II.   Casual person
III.   Person liable under RCM.
IV.   Person undertaking transaction in India without having fixed place in India.V.   Persons required to deduct tax.VI.   Person who supply on behalf of others.

VII.   Input service distributor.

VIII.   Supply via e commerce.

IX.   Supply exceeding rupees nine lakh.

 I.   Agriculturist
II.   Employee
III.   Person engaged in business of exclusively supplying goods and/or services that are not specified in schedule……IV.   Person liable to pay tax under reverse charge mechanism, if receiving services of value <= ……. rupees in a financial year.
Calculation of Nine lakh: Gross Turnover (Including export turnover) of a person having same PAN
Add: Turnover of supplies not levy able to tax
Add: Turnover of supplies made as an agent
Less: taxes charges under the CGST Act, SGST Act and the IGST Act
Less: Value of supplies on which tax is levied on reverse charge basis
Less: Value of inward supplies
Less: Supply of goods after completion of job-work by a registered job worker Total suppliesOnce the threshold limit is crossed the supplier shall be liable to be registered in all such states from where he makes a supply of goods and/or services on which tax is levyable.

Hence it is always of immense importance to see whether supplies are being made by taxable person or not. In case supplies are made by non taxable person same are not taxable and no input credit will be given in case tax is wrongly paid to such person. Other element of CGST / SGST will be discussed in out forthcoming blogs.

Sep 072016
 

ESIC raises wage threshold to Rs 21,000

The Employees’ State Insurance Corporation (ESIC) today raised the monthly wage threshold to Rs 21,000, from the current Rs 15,000, for coverage under its health insurance scheme.

In a meeting held today, the ESIC board also decided to give an option to existing insured persons to continue membership even if their wage breaches the ceiling of Rs 21,000 per month.

At present, all those insured under the ESIC scheme lose their membership of ESIC as well as that of the insurance cover if their wage overshoots the ceiling.

“ESIC has raised the threshold wage limit from Rs 15,000 to Rs 21,000,” Labour Minister Bandaru Dattatreya told PTI after the board meeting of ESIC here. Labour Minister is the Chairman of the ESIC Board.

Both the decisions will be implemented from October 1.

Dattatreya added that the move of raising the threshold will help bring in an additional 50 lakh members to ESIC.

At present, ESIC has 2.6 crore insured persons, which covers over 10 crore people, assuming four members of a family.

The minister also said there is a plan to increase the wage threshold for retirement fund body EPFO subscribers and it may be considered in the next meeting of the Central Board of Trustees (CBT).

At present, the wage threshold is Rs 15,000 per month for coverage under its social security scheme.

Gazzeted copy of the same will be shared very soon.

Courtesy: Prakash Consultancy Services

Sep 022016
 

Tax collection on Cash payments

Section 206(1D)

Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery 87[or any other goods (other than bullion or jewellery) or providing any service], shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

  (i) for bullion, exceeds two hundred thousand rupees; or

 (ii) for jewellery, exceeds five hundred thousand rupees; 88[or]

88[(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees:

Provided that no tax shall be collected at source under this sub-section on any amount on which tax has been deducted by the payer under Chapter XVII-B.]

88[(1E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfill such conditions, as may be prescribed.

Why this section:

Indian economy was facing with some serious problems like:-

  1. Large flow of unaccounted cash in trading system resulting in loss of revenue and growth of economy.
  2. Large quantum of cash transactions in the sale of goods and services resulting in such transaction remain unnoticed to taxman.

Hence, there was a great necessary to bring high value transaction into tax net and promote more transaction via baking channel.

In essence the objective to introduce TCS on cash payment is to trace high value transactions.

Now, henceforth high value transactions can not remain unnoticed. Either these can be traceable via banking channels or can be traceable in the returns of buyers and sellers; as either buyer might have deducted TDS on such payments while making payment or buyer must have paid TCS to seller and must have claimed in his returns.

Practicable problems in application of TCS:

Issue Solutions
Whether TCS shall be collected on each bill or aggregate value of bills made during a particular year? While considering TCS, case of each transaction needs to be consider separately:For example:Mr X sold goods and received payment in the following manner:

Date Particulars Ref Amount (in Rs)
XX/XX/XXXX Sale 01 500000
XX/XX/XXXX Sale 02 700000
XX/XX/XXXX Bank 01 -300000
XX/XX/XXXX RTGS 02 -500000
XX/XX/XXXX Cash(Full and final settlement) 0102 -200000-200000

Now for applicability of TCS bill no 1 & bill no 2 are two different transactions and as in both cases cash involvement is not more than two lacks and hence TCS need  not to be collected.

Whether TCS needs to be collected by an individual seller Yes, if such individual seller is liable to get his accounts audited under income tax act.
What if only part payment is made in cash? TCS needs to be collected in part cash payment only if such part exceeds two lacs rupees.
Whether TCS will be collected on total value of transaction or only such part which is paid in cash? TCS will be collected only on such part payment which is made in cash.

 

Sep 012016
 

Due dates for the Month of September 2016
5th
Service Tax**
- Service Tax payments for August
** If Service Tax Payment is done online, then the due date of payment of service tax is 6th.
Central Excise**
- Duty Payment for all Assessees other than SSI Units for August
** If Excise Duty, Payment is done online, then the due date of payment of Excise Duty is 6th.
7th
Income Tax
- TDS Payment for August
10th
Central Excise
- Monthly Return in Form ER-1 (Ann-12) for other than units availing SSI exemption for August
– Monthly Return in Form ER-2 (Ann-13) by 100% EOUs for August
– Montly information relating to principal units in Form ER-6 (Ann – 13AC) for specified assessees for October.
– Exports – Procurement of specified goods from EOU for use in manufacture of Export goods in Form Ann-17B for DTA units, procuring specified goods from EOU for manufacture of export goods.
– Proof of Exports in Form Ann.-19, once in a month for all exporters, exporting goods under Bond
– Export details in Form Ann.-20, for Manufacturing following simplified export procedure.
– Removal of excisable goods at concessional rate in Form Ann. -46 for Manufacturers receiving the excisable goods for specified use at concessional rate of duty in terms of Rules described in Col. 4.
15th
Income Tax
- Advance Income Tax – All Assessees
Providend Fund
- PF Payment for August
21st
ESIC
- ESIC Payment for August
MVAT *
– MVAT Monthly Return for August (TAX>1000000/-). If paid in time additional 10 days for uploading e-return.
30th
Income Tax
- Return of Income and Wealth for others covered under Audit and Companies but other than covered under Transfer Pricing Regulations
Profession Tax
- Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
Central Excise
– Particulars relating to clearances, electricity load etc., in Form Ann.-4 exceeding the limit of Rs. 90 lakhs of exempted clearances for small scale units availing exemption and whose turnover exceeds or has exceeded Rs. 90 lakhs in a financial year, as the case may be.
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