EPFO - TDS is compulsory on withdrawal of premature Provident Fund w.e.f. 01.06.2015

Friends,

Provident fund withdrawals before five years of completion of service will now attract income tax ranging between 10 per cent and 34.608 per cent.

A new provision in the Finance Act, 2015 that becomes effective from June 1 has mandated that premature withdrawals of retirement savings that exceed Rs 30,000 before completion of five years of service will be subject to tax deducted at source.

Tax would be deducted at the rate of 10 per cent if the subscriber provides the PAN number but the levy would go as high as the maximum marginal rate of 34.608 per cent if the subscriber does not provide his PAN number at the time of withdrawal.

The Employees Provident Fund Organisation (EPFO) is understood to be discussing the issue with the finance ministry to reconsider the issue but it has issued a notification and detailed guidelines to field offices on tax deduction.

“Income Tax shall be deducted at source… if at the time of payment of the accumulated PF balance is more than or equal to Rs 30,000, with service less than five years,” Sanjay Kumar, financial adviser said in a missive.

Exemption from TDS would be given to senior citizens and subscribers with no taxable income, provided they submit the required forms, the EPFO has said, adding that in these cases too tax would be levied if the amount withdrawn exceeds Rs 2,50,000 and Rs 3 lakh, respectively.

However, workers whose service has been terminated due to his ill health, contraction or discontinuance of business of employer or other cause beyond the control of the member will also be exempt from paying TDS on such premature withdrawals.

TDS would also not be levied on transfer of retirement savings from one account of the member to another.

Issue Online TDS Certificate u/s 195 - CBDT

Friends,

Income Tax Department has issued a notification regarding Section 195 to issu ONLINE Certificate under Section 195(2) and 195(3) be read as under :

SECTION 195 OF THE INCOME-TAX ACT, 1961 - DEDUCTION AT SOURCE - NON-RESIDENTS, PAYMENTS TO - ISSUANCE OF ONLINE CERTIFICATE UNDER SECTION 195(2) AND 195(3)

TDS INSTRUCTION NO.51

[F.NO.SW/TDS/02/2013/DIT(S)-II, DATED 4-2-2016

Request has been received from field formations and tax payers to provide functionality for issue of online certificate u/s 195(2) and 195(3) for lower/no deduction as manual certificates were not being considered during processing of TDS statements by CPC TDS.

2. In this regard, existing functionality to issue online certificate u/s 197 in ITD application has been enhanced to issue online certificate u/s 195(2) and 195(3) as under:

i.          Assessing Officers of International taxation charges who are authorized to issue certificate u/s. 195(2) and 195(3) may be assigned the role AR INT TAXATION in ITD application by respective Computer Centre through HRMS module, if not already assigned. The certificate type i.e. 197/195(2)/195(3) also needs to be specified.

ii.          For issue of certificate u/s 195(2) and 195(3), jurisdiction restriction of PAN has been relaxed. For issue of certificate u/s 195(3), TAN and Amount has been made optional.

iii.          As per existing procedure for issue of certificate u/s 197, certificates u/s 195(2) and 195(3) is required to be approved by Range officer through ITD application.

3. The above functionality may kindly be brought to the notice of AOs under your charge.

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Calculation of Interest u/s 234A of Income Tax - New Amendment to Calculate the Interest

Friends,

Income Tax Department has issued a circular regarding amendment in calculation of interest on defaults in furnishing Return of Income. Reas as under :

SECTION 234A OF THE INCOME-TAX ACT, 1961 - INTEREST FOR DEFAULTS IN FURNISHING RETURN OF INCOME - CHARGEABILITY OF INTEREST UNDER SECTION 264A ON SELF-ASSESSMENT TAX PAID BEFORE DUE DATE OF FILING OF RETURN OF INCOME

Interest under section 234A of the Income-tax Act, 1961 (hereinafter the Act) is charged in case of default in furnishing return of income by an assessee. The interest is charged at the specified rate on the amount of tax payable on the total income, as reduced by the amount of advance tax, TDS/TCS, any relief of tax allowed under section 90 and section 90A, any deduction allowed under section 91 and any tax credit allowed in accordance with the provisions of section 115JAA and section 115JD of the Act. Since self-assessment tax is not mentioned as a component of tax to be reduced from the amount on which interest under section 234A of the Act is chargeable, interest is being charged on the amount of self-assessment tax paid by the assessee even before the due date of filing of return.

2. It has been held by the Hon'ble Supreme Court in the case of CIT v. Prannoy Roy, 309 ITR 231 (2009) that the interest under section 234A of the Act on default in furnishing return of income shall be payable only on the amount of tax that has not been deposited before the due date of filing of the income-tax return for the relevant assessment year. Accordingly, the present practice of charging interest under section 234A of the Act on self-assessment tax paid before the due date of filing return was reviewed by CBDT.

3. The Board has decided that no interest under section 234A of the Act is chargeable on the amount of self-assessment tax paid by the assessee before the due date of filing of return of income.

4. This Circular may be brought to the notice of all officers for compliance.

Income Tax - Savings under section 80C

Friends,

The Financial Year 2015-16 (Assessment Year 2016-17) has with less than three months to go , investors are in a rush to save tax, and submit tax declarations to their accounts departments. Wealth managers say there is a general aversion to equity-linked tax-saving products among investors in the last-minute rush to invest because of the turmoil in the stock market. They say those averse to risk could opt for safer instruments such as public provident fund (PPF). One can invest up to Rs 1,50,000 in a financial year and save tax under Section 80C of the Income Tax Act. These and other options are illustrated below:

AVAILABLE TAX-SAVING OPTIONS

Income Tax - Deduction in respect of Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C)

Friends,

Here we will describe the savings u/s 80C for the financial year 2014-15

Section  80C,  entitles  an  employee  to  deductions  for  the  whole  of  amounts  paid  or deposited  in  the  current  financial  year  in  the  following  schemes,   subject  to  a  limit  of Rs.1,50,000/-:

(1)  Payment of insurance premium to effect or to  keep in force  an  insurance on the life of the individual, the spouse or any child of the individual.

(2)  Any  payment made to effect or to keep in force  a  contract for a deferred annuity, not being an annuity plan  as is  referred to in item (7) herein below on the life  of the individual,  the spouse or any child   of   the individual, provided that such contract  does not contain a provision  for the exercise by the insured of an option  to receive  a  cash  payment  in lieu of the  payment  of  the annuity;

(3)   Any sum deducted from the salary payable by, or, on   behalf   of   the Government to any individual, being  a  sum deducted  in accordance with the conditions of his  service for the purpose   of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary;

(4) Any contribution made :

(a) by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies;

(b) to  any  provident  fund  set  up  by  the  Central Government, and notified by it in this behalf  in the Official Gazette, where such contribution is to an  account standing in the name of an individual, or spouse or children;

[The   Central   Government   has   since   notified   Public   Provident   Fund   vide

Notification S.O. No. 1559(E) dated 3.11.05]

(c) by an employee to a Recognized Provident Fund;

(d) by an employee to an approved superannuation fund;

It may be noted that "contribution" to any Fund shall not include any sums in repayment of loan or advance;

(5) Any subscription :-

(a) to  any such security of the Central Government or  any  such deposit scheme as the Central  Government may, by  notification  in  the  Official  Gazette, specify in this behalf;

(b) to any such saving certificates as defined   under section   2(c) of the Government Saving  Certificate  Act,  1959  as  the  Government  may,  by  notification  in  the  Official Gazette,  specify in  this  behalf.

[The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05and National Saving Certificate  (IXth   Issue)  vide  Notification  .  G.S.R.  848  (E),  dated  the  29th November, 2011, publishing the National Savings Certificates (IX-Issue) Rules,

2011 G.S.R. 868 (E), dated the 7th December, 2011, specifying the National

Savings Certificates IX Issue as the class of Savings   Certificates F No1-

13/2011-NS-II r/w amendment Notification No.GSR 319(E), dated 25-4-2012 ]

(6) Any sum  paid as contribution in the case of  an individual, for himself, spouse or any child,

a.   for  participation  in the Unit  Linked  Insurance  Plan, 1971 of the Unit Trust of India;

b.   for  participation  in any  unit-linked  insurance  plan  of  the  LIC  Mutual Fund     referred  to  section  10  (23D)  and  as  notified     by     the  Central Government.

[The Central Government has since notified Unit Linked Insurance Plan (formerly known as

Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.]

(7)  Any subscription made to effect or keep in force a contract for such annuity plan of  the Life  Insurance  Corporation     or  any  other  insurer  as  the  Central  Government  may,  by notification in the Official Gazette, specify;

[The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New

Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No.

1562(E)  dated  3.11.05  and  Jeevan  Akshay-III  vide  Notification  S.O.  No.  847(E)  dated

1.6.2006 ]

(8) Any subscription made to any units of any Mutual Fund, of section 10(23D), or from  the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under  any  plan formulated  in  accordance with any scheme as  the  Central Government,  may, by notification in the Official  Gazette, specify in this behalf;

[The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]

The investments made after 1.4.2006 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C.

(9)    Any  contribution made by an individual to  any  pension  fund  set  up by any Mutual Fund  referred to in  section 10(23D), or, by the Administrator or the specified company defined in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central  Government may,  by notification in  the Official Gazette, specify in this behalf;

[The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]

(10)  Any subscription made to any such deposit  scheme of, or,  any contribution made to any such pension fund set  up by, the National Housing Bank, as the Central Government may,  by notification in the Official Gazette, specify in this behalf;

(11) Any subscription made to any such deposit  scheme, as the Central Government  may,  by notification in the Official   Gazette, specify  for   the   purpose of being floated by  (a)   public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes,  or, (b) any authority constituted in India  by,    or, under  any law,  enacted either for  the  purpose  of    dealing   with   and  satisfying   the  need  for   housing accommodation or for the purpose of planning,  development or improvement of cities, towns and villages, or for both.

[The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No.37(E), dated 11.01.2007, for the purposes of Section 80C(2)(xvi)(a)]. (12)   Any   sums paid by an assessee for the purpose   of  purchase   or construction of a residential house  property, the income  from which is chargeable to tax under the  head "Income from house property" (or which would, if it has not been   used  for  assessee's   own  residence, have been chargeable  to tax under that head) where such payments are  made towards or by way of any instalment or part payment of the amount  due under any self-financing or other scheme of any Development Authority,  Housing   Board  etc.

The deduction  will also be allowable in respect of  re-payment of loans  borrowed  by an assessee from the Government,  or any bank or Life Insurance Corporation, or National Housing Bank,  or certain other categories of institutions  engaged in the   business  of  providing   long  term  finance for construction or purchase of houses in India.   Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, or a public sector company,  or  a university established by law, or  a college affiliated  to  such university, or a local authority, or  a    cooperative  society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act.

The stamp duty, registration fee and other expenses incurred for the purpose of transfer  shall   also be   covered.     Payment   towards   the   cost   of   house property,   however, will not include, admission fee or cost of share  or initial deposit or the cost of any addition or alteration  to,  or, renovation   or repair   of   the   house property   which   is   carried   out after the   issue   of   the completion certificate by competent authority, or after the   occupation   of   the house by the assessee or after  it  has been  let out.  Payments towards any expenditure in respect of which the deduction is allowable under the provisions of  section  24 of the Act will also not be included in payments towards the cost of purchase or construction of a house property.

Where the house property in respect  of which  deduction has been allowed under these provisions is transferred  by the tax-payer at any time before the expiry of five  years from the end of the financial year in  which possession  of  such  property  is obtained by  him  or  he receives back, by  way of refund or  otherwise,  any  sum specified in section 80C(2)(xviii), no deduction under these provisions shall be allowed in respect of such sums paid in such  previous  year in which the transfer is made and  the aggregate amount of deductions of income so allowed  in  the earlier years shall be added to the total income of the assessee of such previous year and shall be liable to tax accordingly.

(13) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.

Full-time education includes any educational course offered by any university, college, school or other educational institution to a student who is enrolled full-time for the said course.  It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes.

It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature.

(14)  Subscription  to  equity    shares  or  debentures forming  part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution.

(15)  Subscription  to  any units of  any  mutual  fund referred  to in clause (23D) of Section 10 and approved   by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company.

(16)  Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes.

[The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006]

(17) Subscription to such  bonds issued  by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf.

(18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004.

(19) Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.

Income Tax - Penalty for failure in furnishing statements or furnishing incorrect information (section 271H)

Friends,

Here is some information about " Penalty for failure in furnishing statements or furnishing incorrect information (section 271H)"

If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) or furnishes an incorrect statement, in respect of tax deducted at source on or after 1.07.2012, he shall be liable to pay, by way of penalty a sum which shall not be less than Rs. 10,000/- but which may extend to Rs 1,00,000/-. However, the penalty shall not be levied if the person proves that after paying TDS with the fee and interest, if any, to the credit of Central Government, he had delivered such statement before the expiry of one year from the time prescribed for delivering the statement.

At the time of preparing statements of tax deducted, the deductor is required to:

(i) mandatorily quote his tax deduction and collection account number (TAN) in the statement;

(ii) mandatorily quote his permanent account number (PAN) in the statement except in the case where the deductor is an office of the Government( including State Government). In case of Government deductors “PANNOTREQD‖ to be quoted in the e-TDS statement;

(iii) mandatorily quote PAN of all deductees;

(iv) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be.

(v) furnish particular of amounts paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax u/s 197 by the assessing officer of the payee.

4.9.8 It may be noted that under the new TDS procedure, TAN of the deductor/ PAN of the deductee and receipt number of TDS statement filed by the deductor act as unique identifier for granting online credit of TDS to the deductee. Hence due care should be taken in filling these particulars. Due care should also be taken in indicating correct CIN/ BIN in TDS statements.

Circular of Deduction of Tax at Source - Income Tax Deduction from Salaries u/s 192

Friends,

CIRCULAR OF DEDUCTION OF TAX AT SOURCE – INCOME TAX DEDUCTION FROM SALARIES U/S 192 OF THE INCOME-TAX ACT, 1961 – FINANCIAL YEAR 2013-14

Compulsory filing of Statement by PAO, Treasury Officer, etc. in case of payment of TDS by Book Entry

1. Procedure of preparation and furnishing Form 24G at TIN-Facilitation Centres (TIN-FCs):

The Form 24G should be prepared by the PAO/DTO/CDDO (hereinafter referred to as AOs) as per the data structure (File format) prescribed by the DIT (Systems), Delhi which is available on TIN website www.tin-nsdl.com. The AOs can prepare Form 24G either by using in-house facilities, third party software or by using form 24G Return Preparation Utility (RPU) developed by NSDL e-Governance Infrastructure Limited (NSDL), which is freely downloadable from the TIN web-site www.tin-nsdl.com.

After preparation of form 24G, the AO is required to validate the same by using the Form 24G File Validation Utility (FVU) which is freely available on TIN website.

Once file is validated through FVU, ‗.fvu file‘ in CD/DVD/Pen Drive along with physical Statement Statistic Report (SSR) signed by the AO, to be furnished at TIN-FCs. On successful acceptance of Form 24G at the TIN-FC, an acknowledgement containing 15 digit Token no. is provided to the AO. The AO can view the status of Form 24G on TIN website.

Book identification Number (BIN) is generated for each ‗DDO record with valid TAN‘ reported in Form 24G, which is further disseminated to the AOs on email ID mentioned in Form 24G. AOs need to communicate the BIN details to respective DDOs. BIN is to be quoted by the DDOs in quarterly e-TDS/TCS statements. BIN consists of receipt number of Form 24G. DDO serial number and date of transfer voucher.

The AO is required to furnish Form 24G within ten days from the end of the month in respect of tax deducted by the deductors and reported to him for that month. Only one regular Form 24G for a ‗month-FY‘ can be submitted.

1.1 Correction in Form 24G:

AO can file a correction Form 24G for any modification or cancellation of Form 24G accepted at TIN central system. Preparation and validation of correction Form 24G is in line with regular form 24G. The validated Form 24G correction file (.fvu file) copied on a CD/pen drive is to be submitted along with the provisional receipt of original Form 24G and SSR to TIN-FC. On successful acceptance of correction Form 24G at the TIN-FC, an acknowledgement containing 15 digit Token no. is provided to the AO. The AO can view the status of Form 24G on TIN website.

2. Online upload of Form 24G at TIN websites:

For online upload of Form 24G at TIN website, the Accounts Office Identification Number (AIN) is a pre-requisite. For online AIN registration, AO need to file at least one Form 24G through TIN-FC. After AIN registration, AO can file Form 24G through AO Account at TIN website. Preparation and validation of correction Form 24G is in line with regular Form 24G (submitted at TIN-FC). The validated Form 24G correction file (.fvu file) is to be uploaded at TIN website. There is no need to submit SSR in online upload. For Form 24G accepted at TIN Central System an online acknowledgement containing a 15 digit token number is generated and displayed to the AO. The format of the acknowledgement is identical to the one issued by the TIN-FC.

No charges are applicable to AOs for online upload of Form 24G. On login, AO can also View/Download BIN details and update demographic details. No Digital Signature Certificate (DSC) is required for registration and online uploading of Form 24G.

2.1 Online uploading of correction Form 24G at TIN website:

AO can file a correction Form 24G for any modification or cancellation of Form 24G accepted at TIN Central System. Preparation and validation of correction form 24G is in line with regular form 24G. The validated Form 24G correction file (.fvu file) can be uploaded online through AO account at TIN website. For correction Form 24G accepted at TIN central system, an online acknowledgement containing a 15 digit token number is generated and displayed to the AO. The format of the acknowledgement is identical to the one issued by the TIN-FC. There is no need to submit SSR and provisional receipt of original form 24G in online upload.

3. For FAQs and further details, AOs are advised to log on TIN website www.tin-nsdl.com

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Deductions in respect of Rents Paid (Section 80GG)

Friends,

Section 80GG allows the employee to a deduction in respect of house rent paid by him for his own residence. Such deduction is permissible subject to the following conditions :-

(a) the employee has not been in receipt of any House Rent Allowance specifically granted to him which qualifies for exemption under section 10(13A) of the Act;

(b) the employee files the declaration in Form No.10BA. (Annexure X)

(c) The employee does not own:

(i) any residential accommodation himself or by his spouse or minor child or where such employee is a member of a Hindu Undivided Family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession; or

(ii) at any other place, any residential accommodation which is in the occupation of the employee, the value of which is to be determined under section 23(2)(a) or section 23(4)(a), as the case may be.

(d) He will be entitled to a deduction in respect of house rent paid by him in excess of 10% of his total income. The deduction shall be equal to 25% of total income or Rs. 2,000/- per month, whichever is less. The total income for working out these percentages will be computed before making any deduction under section 80GG.

Drawing and Disbursing Authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the employee. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent.