Restriction on Cash Transaction under Section 269ST of Income Tax Act, 1961

The Central Government is continuously working to curb and stop black money circulations in our country. In order to achieve their motto Central Government has introduced provisions of Section 269ST and 271DA in the Income Tax Act, 1961, with effect from 1st April, 2017. The main features are; 

1. The mode of transactions; Section 269ST: no person shall receive an amount of Rs. 2.00 Lakhs or more otherwise than by an account payee cheque or account payee bank draft or electronic clearing transfer system through bank accounts. These provisions will be applicable, whether the person is seller or service provider or transfer of capital assets. The limit of Rs. 2.00 Lakhs will be calculated as follows;

a) The aggregate amount received (other than by account payee cheque/bank draft/electronic transfer) from the same person in a day should not be more than 2.00 Lakh or more;

b) Amount received received (other than by account payee cheque/bank draft/electronic transfer) in a single transaction should not be more than 2.00 Lakhs or more;

c) Amount received received (other than by account payee cheque/bank draft/electronic transfer) in respect of a transaction relating to one event /occasion from a single person should not be more than 2.00 Lakhs or more;

Note: above restriction is not applicable when recipient is Central Government, Local Authorities, Bank, Financial Institutions, Post Offices, Co-operative banks and other person notified by the Government.

IN THE FOLLOWING CASES PROVISIONS OF SECTION 269ST IS NOT APPLICABLE;

a) Withdrawal from bank, post offices, c-operative banks according to Notification No. SO1057(E), dated 5th April, 2017;

b) CBDT has notified some person, who have exempted from receiving Rs. 2.00 Lakhs from the provisions of Section 269ST of the Income Tax Act, 1961. The CBDT has enlisted following entities;

i) The receipt by a business correspondence on behalf of a banking company or co-operative bank according to the guidelines of RBI;

ii) Receipt by White Label ATM Operator from retail outlet sources of a banking company or co-operative bank, in accordance with the authorisation of RBI;

iii) Receipt by an agent of an issuer of prepaid payment instruments in accordance with the authorisation of RBI;

iv) Receipt by a company or institution issuing credit cards against bills raised in respect of one or more credit cards;

v) Receipt pertaining to any award / reward which is no included in total income under Section 10(17A).

NOTE: CBDT has clarified that in case of repayment of loan from persons to Non-Banking Finance Companies/ Housing Finance Companies all instalments paid in cash shall not be aggregated, only single instalments should be considered. Suppose Mr. A is paying his Rs. 10,00,000/- loan from a Non-Banking Finance Company in cash and he has paid Rs. 25,000/- of instalments each month. Then in a year his payment will be Rs. 3.00 Lakhs and which violates provisions of Section 269ST in the hand of NBFC(s). Now in this case single transaction should not be more than Rs. 2.00 Lakhs and not all instalments in a year should be aggregated. [Circular No. 22/2017 dated 3rd July, 2017]. 

PENALTY [SECTION 271DA]:

Any person who has received any sum in contravention of thee provisions of Section 269ST shall be levied penalty equal to the amount of the sum received, provided that the penalty shall not be levied if he proves that he has not contravened the provisions. The penalty under provisions of Section 269ST shall be levied by the Joint Commissioner of Income Tax. 

Tax Planning- Save tax through your family

Its a fact that Your own parents as well as your own in-laws can become legal tools of tax planning for you and your family. If you want to achieve this dictum then all you are need to do is just to give away a portion of your funds, either as a gift or a loan, to your parents as well as your parents in law so that in years to follow your income tax burden becomes lighter as the income on funds transferred by you to them which would bring in income would be taxed in their hands.

Saving Tax through Family! Surprised! Yes, we can save tax through our family members i.e. Parents, Major Children’s and Wife. To Save Tax through Family members we needs to invest in way that our tax burden shifts to our family members and we can take the benefit of Income Tax Slabs.  Saving tax Through means not only saving in tax but also means Post Tax  higher returns on your Investment.

Here is how we can save tax through our family members.

Save tax through Through Parents:-

You can save tax through our own parents as well as through our Parent in-laws. To achieve this goal you needs to give away a portion of your funds, either as a gift or a loan, to your parents as well as your parents in law so that in years to follow your income tax burden becomes lighter as the income on funds transferred by you to them which would bring in income would be taxed in their hands.

Assuming that both the parents are senior citizens. Here’s how you go about it. Income tax deductions allow senior citizens a tax-free income of Rs 3 lakh. To exhaust this limit, say you gift Rs 28 lakh to each parent in cash. Of this, both can individually put Rs 15 lakh in a senior citizens savings scheme that earns a return of 8.3 per cent and pays interest every quarter. Each will get yearly interest of nearly Rs 1.2 lakh. If they invest the remaining Rs 13 lakh each in the State Bank of India’s (SBI) fixed deposit (FD) of eight-years (at an interest rate of 7.25 per cent) that pays interest each quarter, it will fetch them an income of nearly Rs 0.95 lakhs annually. That means both parents have earned Rs 2.4 lakh from the senior citizen saving scheme and another Rs 1.9 lakh from SBI’s five-year deposits each year. A total Tax savings on Income of Rs 4.3 lakh – the tax-free limit (Rs 3 lakh) that each parent enjoys. So, they don’t even need to file tax returns.

Same planning can be done for parents in laws.

Save tax Through Major Children:-

All your adult children are as solid as a rock to help you save your income tax. After October 1, 1998, the provisions relating to gift-tax have ceased to exist. Now you are free to gift away your money to your children without attracting gift tax. Investment made by Major Children out of the gift received by you will be  taxed in the hands of your children.  If for any reason you are inclined to make gifts to your major children, then you may give interest-free loans to your adult children so as to legally reduce your taxable income.

It is lawful to grant interest-free loans to adult children from your own funds.

Save tax Through Your wife:-

Married taxpayers can make a substantial saving of income tax by setting up two separate independent income tax files, one each for the husband and the wife.  If your wife is already filing Income Tax Return then she may continue filing the return with hew new surname and address or with her old surname and address.

Thus, as a result of marriage one should plan a separate income-tax file of the wife. However, care should be taken to ensure that no direct gift or transfer from husband is made to the wife as clubbing provision may get attracted.

Is the interest earned on NSCs taxed on annual or accrual basis?

The interest from NSC in the final year is not tax deductible as it is not reinvested further.

Query: I have invested in some National Savings Certificates (NSC) that will mature in 2022-23. The entire interest will be paid to me when the NSCs mature. Will I have to pay tax at the time of encashment or annually on accrual basis?

Ans: The interest on NSC is taxable annually on accrual basis. The interest accrued is deemed to be reinvested on behalf of the NSC holder each year and you need to declare this interest income under the head ‘income from other sources’. However, you can claim deduction for this accrued interest under Section 80C of the Income-Tax Act. Please note that the interest from NSC in the final year is not tax deductible as it is not reinvested further.

Query: My wife and I reside in a leased house provided by my employer. Rent to the landlord is paid partially by the employer and partially by me. Can my wife avail of HRA benefits, if she too contributes towards the rent payments?

Ans: Consultancy fee received by you will be taxed under the head ‘income from business and profession’. The income in dollars will have to be converted into rupees at SBI’s dollar buying rate as on 31 March 2018. You can pay tax on presumptive basis under Section 44ADA—50% of total income will be considered taxable. If the foreign company deducts tax before it pays you, you can claim tax credits for the same. You aren’t liable to pay GST as consultancy service to a foreign company is treated as an export, and exports do not come within GST’s purview.

5 smart things to know about tax breaks on education loan

1.To claim deduction, the loan should be taken from a bank or a qualified institution for higher education of self, spouse or children or the student for whom the individual is a legal guardian.

2. Higher education can be in any field after passing the senior secondary examination or its equivalent exam. It includes both the vocational courses and the regular courses. 

3. Only the total interest part of the EMI paid during the financial year is allowed as deduction. No tax benefit is allowed for the principal repayment.

4. There is no limit on the maximum amount that is allowed as deduction.

5. The deduction for the interest on loan starts from the year of repayment and is available only for eight years or until the interest is fully repaid, whichever is earlier.

Reverse Charge u/s 9(4) of CGST act applicability extended !

The awaited applicability of section 9(4) of CGST Act, section 5(4) of IGST Act & Section 7(4) of UTGST Act which was exempted earlier till 30.06.2018 has been now further extended again via  notification  given below till 30.09.2018.

The exemption contained in this notification shall apply to all registered persons till the 30th day of Sept, 2018. Thus via these notification the Government has by exercising the powers as conferred by Sec 11 of CGST Act & Sec 6 of IGST act respectively exempted the intra-state supply of goods or services or both as well as inter-State supply of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the CGST & IGST leviable thereon under the specified sections respectively.

Where can I invest sale proceeds from property to save capital gains tax?

If the residential property has been held for more than 24 months, your entire capital gain may be exempt subject to condtions.

Query: I live in Delhi, have two flats and a share in a residential property. This property is now being put up for sale.

Where can I invest the sale proceeds from this shared property to save capital gains tax?

Ans: If the residential property has been held for less than 24 months, you will be liable to pay short-term capital gains tax at the income tax slab rate applicable to you.

If the residential property has been held for more than 24 months, your entire capital gain will be exempt, if it is utilised for purchasing a house in India within two years from the sale of the shared residential property or for constructing a house in India within three years from the date of sale.

Alternatively, you can invest your long-term capital gains in certain bonds—issued by National Highway Authority of India, Rural Electrification Corporation, Indian Railway Finance Corporation and Power Finance Corporation. You can invest a maximum of Rs 50 lakh in these bonds and investment should be made within six months from the date of sale. These bonds have a lock-in period of five years.

Please note that if only a part of capital gains is utilised either for purchase/construction of house, or for investments into bonds, or both, then you will be liable to pay LTCG on the balance amount.

Query: I am a postgraduate medical student. I will be receiving a stipend of Rs 55,000 per month for three years. Will I be liable to pay tax?

Ans: Scholarships granted to students to meet their cost of education are exempt from tax, according to Section 10(16) of the Income-Tax Act. If the stipend received by you is not in the form of a scholarship, you will be liable to pay tax on it. Such stipend income should be reported under the head ‘salary’, if there is an employer-employee relationship, and as professional income if there’s no such relationship.

Goods Transport Agency under GST

Meaning:- GTA means any person who provides services in relation to transportation of goods by road and issue consignment note (builty) is a GTA.

Services by way of transportation of goods by road except the services of:-

-GTA

-COURIER

are exempt from GST vide ( E/N 12/2017 CT (R) dated 28/6/2017). So, it is clear that services by way of transportation of goods by road by GTA is taxable in GST.

Now there is another exemption to GTA’s which is if GTA provide services of transport in goods carriage of the following goods namely

1. Agriculture produce

2. Goods , where consideration charged for transportation of goods on a consignment transported in a single carriage does not exceed Rs. 1500/-

3. Goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs 750/-

4. Milk, salt, and food grain including flour, pulses and rice.

5. Organic manure

6. Newspaper or magazine registered with the registrar of newspaper

7. Relief material meant for victims of natural or man-made disaster, calamities, accidents or mishap or

8. Defence or military equipments

Further, if Goods Transport Agency under GST provides services by way of transportation of goods to any unregistered person than the services of GTA are exempt vide E/N/25/2017 CT (R) dated 28/6/2017.

So, the services of GTA will be taxable if it provides to the following person i.e.,

1) Any factory registered under or governed by factories act 1948 or,

2) Any society registered under the society registration act , 1860 or under any other law for the time being in force in any part of India

3) Any co-operative society established by or under any law for time being in force, or

4) Any body corporate established, by or under any law for time being in force, or

5) Any partnership firm whether registered or not under any law including association of person

6) Any casual taxable person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act.

Rate of Tax for Goods Transport Agency under GST

The Government has prescribed two rate of tax for GTA i.e.

(a) 5% (In case of Reverse Charge) – The rate of 5 percent is subject to the condition that service providers have not taken input tax credit (ITC) for the tax charged on the goods or services used in supplying the service.

(b) 12% (In case of Forward Charge)

Person liable to pay tax under GTA

The GTA has the option to pay tax under Forward Charge @ 12% or under Reverse Charge @ 5%.

If GTA opts to pay tax under Forward Charge then it is eligible to take the ITC, but if it opts to pay tax under Reverse Charge then it is not eligible to take the ITC.

The option to pay tax under either of the above stated mechanism will be opted at the beginning of the year and once the option exercise will remain applicable for whole of the year.

GTA under Reverse Charge Mechanism (RCM)

If GTA provide services in relation to transportation of goods to the following person located in taxable territory then there is an option to pay tax under RCM if recipient of such service is liable to pay freight.

1) Any factory registered under or governed by factories act 1948 or,

2) Any society registered under the society registration act , 1860 or under any other law for the time being in force in any part of India

3) Any co-operative society established by or under any law for time being in force, or

4) Any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act. Or,

5) Any body corporate established, by or under any law for time being in force, or

6) Any partnership firm whether registered or not under any law including association of person

7) Any casual taxable person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act.

Ways to save tax other than Section 80C

As the date 31st March comes closer tax assessees try to find different ways to save their hard-earned money from being taxed (of course in a Positive manner) and that’s why here  I am  for explaining various ways through which an assessee can save his/her tax lawfully.

Now whenever we talk about tax savings, we only think about LICs or Home loans or NSCs or FDs etc . and all these options come under Section 80C (quite popular) and that is why most of the assessees try to invest in these options only and limit their savings on investment upto Rs. 150000/- only.

But we need to think beyond section 80C, so that there might be an additional tax saving which might have been missed by many of us in earlier tax periods.

So here is the list of Investment options other than Section 80C which can help us save tax:

1. Section 80D: Popularly known as deduction for Mediclaim.

So as per this section an individual/HUF can insure his/her health both physically and financially.

As far as financial concerns, an individual/HUF can claim a deduction of Rs.25000/- for self, spouse and dependent children.

And additionally, Rs. 30000 for their parents too (if senior citizen; otherwise Rs.25000/-)

Note: The deduction for senior citizens has been increased to Rs.50000/- as announced in Budget 2018 (from FY 2018-19).

Note: payment should be made by any mode other than cash.

2. Section 80G: Popularly known as the donation deduction

It provided tax deduction if one has donated any amount to any NGO (Registered u/s 80G),

Or charitable trust or any Prime minister yojna etc.

There is a list mentioned on Income tax website.

Note: Payment should be made by any mode other than cash

Maximum deduction available would be 50% or 100% of the amount donated as per the case.

Please mention PAN of the Donee while claiming deduction.

3. Section 80GG: Popularly known as deduction for Rent paid

Usually people get HRA from their employers and get it deducted while filing ITRs. But in some cases when HRA is not a part of  the salary and rent is being paid for house then this deduction comes as a boon and one can easily claim a deduction here (some conditions need to be fulfilled)

Deduction shall be least of the following-

5000/- per month;25% of the total income (some exclusions are there)Actual rent paid less 10% of the total income (some exclusions are there)

4. NPS Scheme: This scheme offers you additional tax deduction for Rs.50000/- other than Section 80C.

5. Section 80E: Deduction for interest paid on Educational loan – Best part is that there is no maximum limit. This deduction is available only for an individual.

Note: No Tax benefit is allowed for the principal repayment. (Maximum deduction period is 8 years)

6. Section 80EE: This is available to an individual for the amount paid as interest on loan taken for the purchase of a residential property. The maximum deduction that can be claimed under this section is Rs 50,000 per annum.

There are a few conditions one has to fulfil to avail this deduction (eg. Loan period April 2016 to March 2017, loan amount less than Rs. 35 lakhs, house value less than Rs. 50 Lakhs, should be the only house property in assessee’s name).

7. Section 80TTA: This section is for deduction on Interest earned on savings a/c. The maximum deduction is upto Rs. 10000/-. But this is not meant for interest earned on Fixed deposits.

Penalty U/s. 271AAA cannot be levies if No search has taken place at assessee’s premises

Facts of the case, in brief, are that the assessee is a company and filed its return of income on 26th March, 2013 declaring total income of Rs.2,12,72,940/-. A search and seizure action u/s 132 of the I.T. Act was carried out at the business premises of M/s. Aggarwal Associates and Jainco Group of cases and their relatives on 19.10.2011.

DCIT Vs Jainco Developers (P) Ltd. (ITAT Delhi)

A perusal of the assessment order shows that no search had taken place in the case of the assessee on 19th October, 2011 and the assessment was completed by issuing notice u/s 153C of the I.T Act. We, therefore, find merit in the arguments of the ld. counsel for the assessee that the provision of section 271AAA are not applicable to the assessee since the said provision as applicable to cases where search has been conducted u/s 132 of the I.T. Act, 1961. We find the Assessing Officer in the instant case has recorded his satisfaction for initiation of penalty u/s 271AAA and thereafter levied penalty u/s 271AAA. We find in the assessment order, the A.O has categorically mentioned in Para 3 of the order that the assessee company has declared the amounts surrendered as miscellaneous income under the head income from other sources. A perusal of the assessment order shows that the assessee has surrendered the income, explained the manner in which it was earned and has paid the taxes due thereon. Therefore, the assessee has fulfilled all the conditions laid down in Section 271AAA for non-levy of penalty under the said provisions. Even otherwise also, it is an admitted fact that no search has taken place in the premises of the assessee and, therefore, provisions of Section 271AAA are not at all applicable