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ICAI President CA. Nihar N. Jambusaria said in a meeting held yesterday that GST Audit by the chartered accountant is not avoidable compliance as it ensures check and balances thus detecting the inconsistencies, errors, lapses, and ambiguities that creep in and rectifying the same. Moreover, ICAI submitted that Audit should be perceived as an investment rather than a cost. Furthermore, it saves the cost of litigation as it ensures a fool-proof mechanism.

The ICAI President also met with the key government functionaries for discussing the issues related to the contribution that the accounting profession makes and its increasing role in the economy was also emphasized. He also met Smt. Nirmala Sitharaman, Hon’ble Union Finance, and Corporate Affairs Minister to discuss the issue of removal of the requirement of audit and also on “certifying the reconciliation statement” done by a chartered accountant as per CGST Act.

He added that the GST audit by a chartered accountant also ensures checks and balances thereby identifying and removing inconsistencies, errors, lapses and ambiguities, if any, while complying with the provisions of the GST law.

Adding further, ICAI also consented that Audit should not be perceived as an expenditure. Rather it should be seen as an investment as it removes errors which if later recognised leads to heavier hidden costs like interest and penalties imposed. After an Audit by a chartered accountant, the taxpayer is in a position to take remedial action. So its benefits reap over a period of time.

Moreover, an Audit by a chartered accountant saves litigation expenses which may creep in as a result of unaudited accounts of GST and may lead to incurring of litigation expenses. CA Rajendra Kumar, Chairman, GST, and Indirect Taxes Committee also attended the aforesaid meeting. Furthermore, CA Babu Abraham Kallivayalil, Chairman, Professional Development Committee also met Finance Minister and Members in Parliament CA. Narain Dass Gupt, CA. Thomas Chazhikadan, and CA. Suresh Prabhu.

Finally, he added that these meetings provide us with the opportunity to meet and discuss professional matters with the dignitaries, and consequently; this reinstates our position as partnering in nation-building. Lastly, Two virtual meetings were also held with the Secretary MCA and Jt. Secretary MCA to evaluate the proposed amendments in the Industrial Training framework and the networking guidelines.

Introduction

• The Finance Act 2021 is unique by its own.
• More than 100 changes proposed in the Union Budget by Hon’ble FM.
• More than 100 other changes presented in the parliament for discussion and passed.
• Some amendments introduced in the Budget but did not finds place in the FA.
• Some changes are introduced to unsettle the settled law.

New Section introduced:

• Sec 2(29A) Meaning of liable to tax
• Sec 9B introduced relating to reconstitution and dissolution of Firm.
• Sec 144B regarding Faceless Assessment.
• Sec 194P regarding deduction of tax in case of senior citizen.
• Sec 194Q TDS on payment for purchase of goods.
• Sec 206AB TDS for non-filers of Income Tax Return.
• Sec 206CCA TCS on non-filers of Income Tax Return.
• Sec 245AA for Interim Board for settlement of cases.
• Sec 271K Failure to furnish statement

Sec 2(29A) Meaning of liable to tax

• Means,there is an income tax liability on such person under the law of that country “and” “shall” include a person who has subsequently been exempted from tax liability under the law of that country.

Sec 9B introduced relating to reconstitution and dissolution of Firm

• This section is applicable at the time of dissolution or reconstitution of firm, if the partner receives any capital assets or stock in trade,it shall be deemed that the firm has transferred such capital assets or stock in trade to the partner in the year the partner receives such capital assets or stock in trade or both.
• Any profit or gain on such deemed transfer shall be :
  • Deemed to be the income of the firm shall be chargeable to tax u/h “capital gain” for the transfer of capital assets and u/h “Business & Profession” on transfer of stock in trade.
• For consideration, the FMV on the date of receipt shall be the consideration.
• Reconstitution means:
  • If one or more partner ceases to be partner of the firm.
  • One or more partner admitted as partner in the firm.
  • All the partners are remain there but there is change in profit sharing ratio.

Sec 45(1B) Capital Gain on ULIP

• New Section inserted to Tax the gain on sale of ULIP where such ULIP is not satisfying the terms as mentioned in Sec10(10D) for claiming exemption u/s such section.

Sec 144B regarding Faceless Assessment

•  This section was inserted by Taxation and Other Laws (Relaxation and amendment of certain provisions) Act 2020 w.e.f 01.04.2021. This sections contains the complete procedure relating to faceless assessment. Like,under which sections assessments are covered in this section. How notice can be issued, how reply should be filed etc.

Sec 194P regarding deduction of tax in case of senior citizen

• Where an individual being a resident in India who is of the age of 75 years or more during the PY, having income from pension and no other income other than interest received form the same specified bank and has furnished a declaration to the bank.

Sec 194Q TDS on payment for purchase of goods

• Any person who is buyer responsible for making any payment to a resident seller on purchase of goods shall deduct TDS @ 0.1% when the aggregate value exceeds 50 lakh rupees.
• The buyer can deduct tax only when it’s turnover in the immediately preceding year exceeds 10 crore rupees.
• If the TCS has already been paid u/s 206C(1H) and 206C,this section will not apply.

Sec 206AB TDS for non-filers of Income Tax Return

• This section is applicable where the tax is required to be deducted u/c XVII-B, other than Sec 192, 192A, 194B, 194BB, 194LBC or 194N, the tax shall be deducted at the higher of the following rates:
• At twice of the rate specified in the relevant provisions of this Act.
• At twice of the rate or rates in force; or.
• At the rate of 5%.
• This section is applicable to the person “who has not filed the return of income for both of the two assessment years relevant to the two previous years in which tax is required to be deducted for which time limit for filing of Income tax return as per sec 139(1) has expired.
• The aggregate of TDS and TCS in his case is 50,000 or more in each of these two previous years.
• This does not include non-resident who does not have PE in India.

Sec 206CCA TCS on non-filers of Income Tax Return

• This section is applicable where the tax is required to be collected u/c XVII-BB, the tax shall be collected at the higher of the following rates:
• At twice of the rate specified in the relevant provisions of this Act; or.
• At the rate of 5%.
• This does not include non-resident who does not have PE in India.

The Central Board of Direct Taxes (CBDT) has notified income tax return (ITR) forms for the assessment year 2021-22 with minimum changes to reduce the compliance burden on taxpayers, especially individuals whose main source of income is salary.

The bare minimum changes in the ITRs relate primarily to the announcements made in the Finance Act 2020. To be sure, utilities for only ITR-1 and ITR-4 have been made available so far.

Let’s start the discussion – How will that affect the common taxpayer? 

Can I pick up any ITR form right away and start filling it?

Not actually. Although the government has notified all ITR forms, you still need to download the Utilities and fill in the details. At present, the CBDT has allowed the ‘Utilities’ facilities only for ITR-1 and ITR-4.

Here, you download the applicable editable income tax form (utility), save it on your computer, fill it and then upload it on the income tax website.

While earlier the utility forms were either in excel or java format, this year the CBDT has enabled ITR 1 and ITR 4 utilities based on new technology JSON (JavaScript Object Notation).

Utilities for other ITRs will be added in the subsequent releases. Besides that, a step-by-step guide has been issued, giving instructions about how to install and use it.

These forms that you download come pre-filled to a large degree as the taxman already capture a lot of your investment and spending-related information. But the form also allows you to fill in a lot of your income details, yourself.

Changes in line with the new tax regime

Though the new ITR forms notified aren’t much different from last year’s forms, this year marks the first time that individual taxpayers will have to choose between existing and new income tax regimes while filing their taxes, under Section 115BAC of the Income Tax Act, 1961.

The new income tax regime- that carried lower income tax rates provided the taxpayer would let go of a host of income tax deductions and rebates- was introduced in Budget 2020.

Taxpayers not opting for the new tax regime will be entitled to various exemptions but they will have to pay tax at comparatively higher rates.

Sahaj (ITR-1) and Sugam (ITR-4) explained

Consequent to the Finance Act, 2020, the CBDT has imposed some restrictions on the filing of the ITR-1 (Sahaj) and ITR-4 (Sugam), which are simpler forms and filed by the bulk of small and medium taxpayers.

The ITR-1, which is Sahaj, is required to be filed by an individual having income up to Rs 50 lakh and who receives income from salary, one house property, or other sources mainly interest.

Sugam (ITR-4) is filed by individuals, Hindu Undivided Families (HUFs), and firms having total income up to Rs 50 lakh and income from business and profession computed under the provisions relating to presumptive taxation.

Who cannot use ITR-1 and ITR-4?

ITR-1 shall not be available to a taxpayer in whose case the tax has been deducted on cash withdrawal under Section 194N. Further, return filing is also not allowed in ITR-1 or ITR-4 if the tax has been deferred in respect of ESOPs allotted by an eligible start-up.”

Under section 194N of the IT Act, tax is required to be deducted if the amount of cash withdrawn during the year exceeds Rs 20 lakh in case of certain non-filers of return and Rs 1 crore in other cases from any bank, banking institution, cooperative bank or post office.

Further, if payment or deduction of tax in respect of such ESOPs has been deferred, under Rule 12, then you cannot use either ITR-1 or ITR-4. For this, you will have to either ITR-2 or ITR-3; the utilities for these forms are yet to be made available.

The most significant change in the ITR forms is the enabling of the option to choose the new tax regime that was made applicable vide Finance Act 2020.

The new tax regime offers 6 slabs with low tax rates if taxpayers forego a set of exemptions and deductions available under income tax laws.

Part A (General) of the new ITR Forms 1 and 2 require the assesses to disclose whether the new tax regime is being opted for or not.

It is also noted that ITR 1 cannot be filed by an individual in whose case tax has been deducted at source under section 194N of the Income Tax Act, which necessitates every bank/post office/ cooperative bank to withhold tax in case of cash withdrawal by an individual, from one or more of his accounts, during the financial year exceeds Rs 1 crore (Rs 20 lakh in case of non-filers of return for three previous years).

So far, utilities for only ITR-1 and ITR-4, the most sought-after tax return forms, have been notified. Utilities for other ITR forms are expected to be notified soon. Watch this space.

The new utility is a user-friendly functionality for filing returns and will afford greater ease to the taxpayers. The utility itself provides help in the form of FAQs, guidance notes, circulars, and provisions of the law so as to enable hassle-free return filing.