POPULAR FAQ ON DIRECT, INDIRECT TAX & CORPORATE REGULATORY MATTERS
DIRECT TAX
Q : Explain Return on Income?
Ans. It is a defined method that communicates to the Income-tax Department the details of a person’s income received in a financial year as well as the taxes levied on that income. For filing returns for various statuses and types of income, different forms of income returns are needed.
These forms are available for download at www.incometaxindiaefiling.gov.in/home.
Q : How Concept of Non-resident Indians are Different in the Income Tax Act and the FEMA Act?
Ans.1. According to the FEMA Act, An Indian citizen who stays abroad for (a) employment/business, (b) holiday outside India, or (c) stays abroad under circumstances suggesting a plan for an unknown period of stay abroad is a non-resident. Non-residents include employees of United Nations agencies and officials sent overseas on provisional assignments by the federal, state, and local governments.
- According to the Income Tax Act, an individual is a non-resident Indian if one or more of the following requirements are not met:
- He spent at least 182 daysn or more in India in the previous year, or
- He spent 365 days or more in India during the previous four years and at least 60 days (182 days in the case of an Indian citizen or a person of Indian origin visiting India or an Indian citizen going abroad for employment) during the previous year.
Q : Which earnings in India are subject to income tax in the hands of a taxpayer?
The tax incidence in the case of various individuals is depicted in the chart below:
| Nature of income
|
Residential status | ||
| ROR (*) | NR (*) | RNOR (*) | |
| Income which is deemed to be received in India; | Taxable | Taxable | Taxable |
| Income other than above (i.e., income which has no relation with India) | Taxable | Not Taxable | Not Taxable |
| Income which accrues or arises in India | Taxable | Taxable | Taxable |
| Income which is deemed to accrue or arise in India | Taxable | Taxable | Taxable |
| Income accruing outside India from a business controlled from India or from a profession set up in India | Taxable | Not Taxable | Taxable |
| Income which is received in India | Taxable | Taxable | Taxable |
- ROR- resident and ordinarily resident
- RNOR – resident but not ordinarily resident
- NR – non-resident
Q : Under how many headings is a taxpayer’s revenue classified?
The income of a taxpayer is listed under five separate heads of income under Section 14 of the Income Tax Act, namely:
- Income under the Head Salary,
- Income under the Head Business/Professional,
- Income under the Head Capital gain,
- Income under the Head House Property and,
- Income under the Head Other sources.
Q : Can I claim a deduction for my personal and household expenditure while calculating my taxable income or profit?
Ans. No, you cannot claim the deduction of personal expenses while computing the taxable income. While computing income under various heads, a deduction can be claimed only for those expenses which are provided under the Income- 5.Can I demand a personal and household expense deduction while determining my taxable income or profit?
Personal expenditures cannot be claimed as a deduction when calculating taxable profits. Just certain expenditures that are allowed under the Income-tax Act will be deducted when calculating income under different headings.
Q : Is it necessary for my employer to issue Form-16, even though no taxes have been deducted from my salary?
Ans: Form-16 is a TDS certificate. It would not happen in this situation. Your boss, on the other hand, is required to provide you with a pay statement.
Q : What is the aim of a tax audit?
Ans. The aim of a tax audit conducted under section 44AB is to determine compliance with various provisions of the Income-tax Law as well as the fulfillment of other conditions of the Income-tax Law.
The chartered accountant must submit a tax audit report in Form No. 3CA/3CB and 3CD.
Q : What is the deadline for a taxpayer who is subject to a Tax Audit to have his accounting audited?
Ans. A person subject to section 44AB should have his or her accounts audited and receive the audit report by September 30th (extended to November 30th for those required to file a Transfer Pricing Form) of the applicable assessment year.
Q : Is a person’s residence status important in deciding whether or not the money in his possession is taxable?
Well, a person’s residential status matters a lot when it comes to deciding whether or not the income he earns is taxable.
The taxability of any income in a person’s possession is determined by two factors:
- The person’s residential status under the Income Tax Law; and
- The kind of income he earns.
Q : Due dates for filing of return of Income OR Loss ?
| Companies | 31st October |
| Any person (other than companies), whose accounts are to be audited and the working partner of a firm whose accounts are to be audited | 31st October |
| In case of Companies for which Transfer Pricing provisions are applicable | 31st December |
| In other cases | 31st July |
Q : Can company/bank branches get their own TAN?
Yes, In this case, the name and place of the branch, as well as the designation of the individual responsible for deducting/collecting tax, whichever is applicable, should be explicitly stated in the application for TAN allotment.
Q : Is there a limit on the amount at which tax is not deducted?
The Income-tax Law has set a threshold limit on different products that are subject to TDS. There is no provision to deduct tax at source if the expenditures/payments made within the year are less than the threshold limit.
Q : Is a Chartered Accountant’s Certificate is compulsory for all foreign remittances (Form 15CB)?
ANS: No, Only when the remittance, or the sum of such remittances, reaches Rs.5,00,000 rupees during the Financial Year then it necessary to file Form 15CB (i.e., When Part C of 15CA is required to be filed).
Q : What is the Annual Performance Report (APR) that must be filed to the Reserve Bank of India (RBI)?
ANS: Every year, up to 30th June, an Indian Party (IP) / Resident Individual (RI) who has made an Overseas Direct Investment (ODI) must send an Annual Performance Report (APR) in Form ODI Part III to the Reserve Bank for each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India.
Q : Is it possible for a Liaison Office, a Branch Office, or a Project Office to purchase property for their operations?
ANS: A foreign entity’s Branch Office/Project Office, with the exception of a Liaison Office, is allowed to purchase property for their own use and to engage in permitted/incidental operations, but not to lease or rent it out. To purchase immovable property in India for a Branch Office/Project Office, companies from specific countries must first obtain Reserve Bank of India clearance. Branch Office, Project Office, and Liaison Office have broad authorization to conduct permitted/incidental operations from licensed land for a term of up to five years.
Q : Which corporations should file a Foreign Liabilities & Assets Return?
ANS: All Indian corporations who have obtained FDI (foreign direct investment) and/or rendered FDI abroad (i.e. global investment) in the previous year(s) including the current year, i.e. that have foreign Assets or Liabilities in their Balance Sheets, are required to submit the annual return on Foreign Liabilities and Assets (FLA).
CORPORATE ADVISORY
Q : What is the name of the company’s incorporation form? Is it different for various kinds of corporations? Is it possible to complete the whole incorporation process with only one form?
Ans: SPICe+ is the only method for incorporating all forms of businesses. Yes, it is adequate for the whole Incorporation process.
Q : What is the form for filing annual accounts with the Ministry of Corporate Affairs(MCA) for both Indian and foreign active companies?
Ans: Form MGT-7 and AOC-4 in the case of an Indian Active Company, and Form FC-3 in the case of a Foreign Company.
Q : According to the Companies Act of 2013, how many companies will an individual be a director?
Ans. An individual may be a director of a limit of 20 companies so that the total number of public companies of which a person can be a director does not exceed ten.
Q : Is a Share Valuation Certificate can be issued by an Internal Auditor?
Ans. An internal auditor cannot issue a Share Valuation certificate for the purpose of Rule 11UA (2).
Q : What are the distinctions between the International Financial Reporting Standards (IFRS) and the International Financial Reporting Standards (IND AS)?
The key distinctions between IND AS and IFRS are carve-ins and carve-outs. Carve-outs are deviations from IFRS caused by variations in the implementation of accounting standards and procedures as well as the economic conditions in India, while Carve-ins are additional guidelines provided in addition to IFRS.
Q : What is the digital signature certificate (DSC)?
DSCs (Digital Signature Certificates) are the digital (electronic) equivalents of tangible or paper certificates. Physical credentials include things like driver’s licenses, passports, and identification cards. Certificates act as evidence of an individual’s identification for a certain purpose; for example, a driver’s license marks someone who is permitted to drive lawfully in a specific nation.
A digital certificate may also be used to verify your identity, gain access to information or resources on the Internet, or digitally sign those documents.
INDIRECT TAXES
Q : What are the elements that aren’t subject to GST?
Ans. Alcohol for human use, electricity, and petroleum products such as crude oil, motor spirit (petrol), high-speed diesel, natural gas, and aviation turbine fuel, among others, are currently exempt from GST in India. However, these are taxed according to the system in place prior to the implementation of GST.
Q : What are the GST classifications for imports and exports?
Ans. Imports of goods and services will be viewed as inter-state suppliers, and IGST will be charged on their entry into the country.
Exports would be handled as if they were zero-rated supplies. There will be no levy on products or services exported. However, exporters will be eligible for an input tax credit, which will be available as a refund. The exporter would have the option of paying tax on the produce and claiming an IGST refund or exporting under bond without paying IGST and claiming an Input Tax Credit refund (ITC).
Q : Will supplies made without consideration be included in the GST definition of supply?
Ans. Yes, but only for the activities mentioned in Schedule I of the CGST Act/SGST Act. The said law has been incorporated into both the IGST and the UTGST Acts.
Q : What is the composite and mixed supply? How they are distinctive from each other.
Ans. A composite supply is one that consists of two or more taxable suppliers of goods or services, or both, or any mixture of the two, that are packaged in a natural course and delivered in tandem in the normal course of business, with one of the supplies being the principal supply.
A mixed supply is a mixture of several individual supplies of products or services, or any combination thereof, made in tandem at a single price that could otherwise be sold separately.
Q : What does mean by “reverse charge”?
Ans. In the case of notified categories of supply, it ensures that the purchaser of the supply of products and services bears the tax burden rather than the provider of such goods and services.
Q : What is the Limit for the tax-paying rate under the composition scheme?
Ans. The turnover requirement for the composition system is Rs. 150 lakhs in the previous financial year. The composition scheme’s value is available up to a turnover of Rs. 150 lakhs in the current financial year.
Q : Will a taxable individual with many registrations be able to use the composition scheme for just a few of them?
Ans. A composition scheme must be chosen for all eligible individuals with the same Permanent Account Number (PAN). Others become ineligible for the composition scheme if a registered individual chooses the regular scheme.
Q : Can unused ITC be refunded if products are exported outside of India and are subject to export duty?
Ans. As per the second proviso to Section 54(3) of the CGST/SGST Act, a refund of the unutilized input tax credit is not permitted in situations where products shipped out of India are subject to export duty.
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