Penal action against Companies for TDS errors

The income tax (I-T) department is planning to take penal action against organisations which do not file TDS (tax deducted at source) returns of their employees on time or make inaccurate entries in the TDS certificates. The department also said that names of such firms would be made public.

Currently, there are a large number of tax payers who don’t receive credit for the taxes deducted from their salaries by their employers. These taxpayers also don’t get their TDS certificate.

According to officials, the I-T department has found that the deductor in most cases was at fault for not filing TDS returns on time or making inaccurate or incomplete entries.

For the first time, the TDS statements were analysed by the department in an organised manner and defaults on various counts were communicated to the deductor community. This exercise has sent a very strong message to the tax professionals and the deductors. The deductors are found to be at fault for late payment (of taxes) which leads to the burden of penal interest on the taxpayer.

Deductors are required to prepare and deliver an quarterly return of tax deducted at source. The q4 return of TDS is to be delivered to the assessing officer before May 15 of the following financial year.

The official further said that laws relating to enforcement of TDS provisions need to be tightened as there are huge mismatches. In AY (assessment year) 2009-10, nearly 2.66 lakh tax payers quoted invalid tax deduction account number (TAN) in their income tax returns. Out of about 43 lakh TDS statements in FY 2009-10, nearly 6 lakh TDS statements were filed by more than 12 months from the due date. In FY 2009-10, invalid or no PAN were quoted in nearly 2.65 crore entries, involving R11,650 crore. TAN is a number allotted to the deductor of tax at source for the purpose of identification of every deductor.

The income tax department also found that some deductors had deducted TDS but had not deposited it in the government account.

“ Identification of non-filers of TDS statements and action against these non-filers has to be a priority area for the current year,” an official said.

According to Deloitte partner Homi Mistry, the employers should be careful while filing TDS returns of their employees and this should be done in the most timely and accurate manner. Besides this, employees should also check their TDS forms on quarterly basis to avoid any mistake.

The challenge for the revenue department is to get the due tax and ask the deductors to file correct TDS statements so that the government gets revenue and tax payers get proper credit for TDS.

Growth of TDS collection during the five-year period rose from R70,689 crore in 2006-07 to R1,66,687 crore in 2010-11, which constitutes 37.37% of total direct tax collection.

Is salary received in NRE account in India For services rendered outside India by a Non Resident taxable in India?

Let us take example of a Non Resident Indian who is giving services outside India and receives salary in his NRE account situated in India . The A.O tries to tax such salary on the ground that since salary has been received in India , it should be included in total income of assessee as per section 5(2) of the I t Act. Is the action of A.O correct ?
No, if the salary of a non resident person accrues outside India , such salary is not taxable under I T Act and as such is not includible in total income even if it is received in India later on. The reason is that salary payable is taxable at the place where it accrues. Only exception is salary received in advance which is taxable at the place where it is received.
Case laws to support this view are

1. Ranjit Kumar Bose vs ITO 18 ITD 230
Facts of the case was
The assessee an individual is a non-resident. During the relevant previous year which ended on 31-3-1983 the assessee was in the service of India Steamship Co. Ltd. and Highsea Steamship Co. Ltd. a foreign company based at Singapore. As the assessee was treated as a non-resident for the assessment year 1983-84, salary earned and received by him outside India was not included in his total income. The ITO was, however, of the view that moneys representing salary are received in India is taxable. The convention put forth on behalf of the assessee that the entire salary received from Highsea Steamship Co. Ltd. is to be excluded from the total income of the assessee was not accepted by the ITO. A sum of Rs. 56,000 received as salary from Highsea Steamship Co. Ltd., was included by the ITO in the total income of the assessee. This amount represented salary earned by the assessee outside India but received by him in India during the relevant accounting year from his foreign employer.
The decision by Kolkata Tribunal was

14. True, in this case, salary income accrued outside India, but was received in India in the same accounting year. It is clear that salary income could not have been brought to tax on accrual basis for the simple reason that it accrued outside India. The provisions of section 5(2) (a) are subject to section 15 which, inter alia, says that salary is chargeable to income-tax on due basis irrespective of the fact whether it has been received or not. So, salary income is not liable to be taxed in India on receipt basis under section 15. We are, therefore, clearly of the view that the salary received in India in this case was not chargeable to income-tax under the head ‘Salaries’ under section 15(a). As has also been pointed out above, this case does not fall either under clause (b) or clause (c) of section 15.

2. Prahlad Vijendra Rao in ITA No 1137/Bang/2008 dt 26-06-2009 . The Karnataka High Court dismissed departmental appeal against this order.
The High Court dismissed the departmental appeal against the order on following grounds

• • The criteria for applying definition of section 5(2)(b) of the I T Act would be such income which is earned in India for services rendered in India and not otherwise.
  • Under section 15 of Act even on accrual basis salary income is taxable i.e it becomes taxable irrespective of the fact whether it is actually received or not only when services rendered in India , it becomes taxable by implications. However, if services are rendered outside India , such income would not be taxable in India.

Get complete order of Karnataka High Court from here.
3. ITO vs Abhraham P Abraham ITA No.728/Bang/2010 (ITAT, Banglore)
The assessee is an individual. He is a Marine Engineer by profession and qualification. For the asst.year under challenge, the assessee filed a return of income admitting a total income of Rs.2,68,104/-. The return of income was processed u/s 143(1). The case was selected for scrutiny. In the course of scrutiny assessment proceedings, it was noticed by the Assessing Officer that the assessee was working as a Chief Engineer in a shipping company and he had received salary for the financial year relevant to the asst. year under appeal amounting to Rs.18,96,458/- through his NRE account No.SB/3/72 with Corporation Bank, Indiranagar Branch, Bangalore. Relying on the judgement of the Hon’ble Supreme Court in the case of Raghava Reddy and another v CIT 44 ITR 720 , the Assessing Officer directed the assessee to explain as to why the said amount of Rs.18,96,458/- received by the assessee in India during the financial year relevant to the asst. year under appeal, should not be brought to tax under the provisions of section 5(2) of the Act. 3.1 It was submitted by the assessee that he was an employee of a company engaged in the management of crew and vessels and that his income/salary had accrued outside India and also was received outside India on board the ship belonging to the said company. The Assessing Officer, however, rejected the explanation furnished by the assessee and concluded that the said income fell within the purview of section 5(2) of the Act.
CIT(Appeal) favoured assessee. When department approached , ITAT , Bangalore, it held as under

8. We have heard the rival submission and perused the material on record. This issue was considered by ITAT, Bangalore ‘B’ Bench in the case of ITO v Mr. Prahlad Vijendra Rao (ITA No.1137/Bang/2008 dated 26.6.2009) and in the case of ITO v Shri Ivan Benn (ITA No.1044/Bang/2009 dated 1/4/2010 = (2010-TII-104-ITAT-BANG-INTL). After considering the facts and applicable law, the Tribunal came to the conclusion that the salary income of the assessee could not be held as accrued or arisen in India u/s 5(2) of the I T Act, 1961. The Tribunal also relied on a decision of ITAT, Calcutta Bench in the case of Ranjit Kumar Bose v ITO reported in 25 TTJ 368 where again it was held that under similar circumstances, the salary would not be taxable.
8.1 Following the above orders of the Tribunal, we hold that the salary amount taxed in the hands of the assessee is to be exempted as the said amount cannot be treated as accrued or arisen in India. It is a foreign income in the hands of non-resident and not taxable in India. The CIT(A) is justified in his order.

4. ITO (International Taxation) Ward -1(3), Bangalore v. Lohitakshan Nambiar (Bangalore ITAT) (ITA No.1045/ Bang /2009)[2010-TII-201-ITAT-BANG-NRI]
Facts of the case
Mr Nambiar , a Non Resident in India , worked on board an ocean liner belonging to a Malaysan company. He was paid salary directly on board the ship.However , on his requested ,a certain portion of the salary paid to him abroad the ship was credited through telegraphic transfer by the employer company to be deposited in the assessee’s NRE account in a bank at Banglore.
CIT(Appeal) allowed the case . ITAT Bangore confirmed the decision by relying on its own decision in Prahlad Vijendra Rao case.

How to download Form 16A from TIN-NSDL

As Informed to you that from 01.04.2011, TDS certificate Form 16A is mandatory to be downloaded from TIN-NSDL website by all company and bank deductors. So every body is interested in How to download Form 16A from TIn-nsdl website. Step wise detail is given hereunder.

1. Register your TAN at tin-nsdl website(detailed procedure is given here)
2. Login at "Tan Login " in Tin -nsdl website
3. After Login click form 16A download .
4. Fill the Details Like "etds receipt number" one challan detail and corresponding deductee detail.
5. A file will be mailed to you in zip format.
6. That zipped file can be converted in Form 16A through PDF utility .
7. Pdf -converting utility is given at the link below

Procedure to covert Zipeed file to Form 16A through Utility is given here

Form 16A is a TDS certificate which is prepared and issued by the deductor to the deductee. Now Form 16A can be downloaded from TIN website from Financial Year 2010-11 onwards.Form 16A will be sent on the registered e-mail ID on successful confirmation of KYC for the particular Financial Year and Quarter. The nomenclature of the file will be TAN_AY_Quarter_Form 16A Reference Number_Part of file_of_Part of file.
For example: MUMA12345E_201112_Q1_FORM_16A_0000001717_0001_OF_0001.zip
In case transactions are large in number, it may not be possible to incorporate it in a single file. In such case, it will be split into parts owing to restriction of e-mail size.
The zip file is password protected, to open the file please use your TAN Registration Number.

Utility once downloaded can be used for converting PDF file as and when required for all future files.
The 'Form 16A PDF Converter Utility' is a Java based utility. JRE (Java Run-time Environment) [versions: SUN JRE: 1.4.2_02 or 1.4.2_03 or 1.4.2_04 or IBM JRE: 1.4.1.0 ] should be installed on the computer where the Form 16A PDF Converter is being installed. Java is freely downloadable from http://java.sun.com and http://www.ibm.com/developerworks/java/jdk or you can ask your vendor providing computer facilities (hardware) to install the same for you.
Procedure to convert zip file to PDF file:
1. The following software can be used for extraction of zip files:
	1.1 WinZip version 9.0 and above
	1.2 WinRaR version 3.90 and above
	1.3 7-Zip version 4.65 and above
2. Extract zip file by providing the password .i.e. TAN Registration Number.
3. Pass extracted text files through PDF Converter Utility.
4. To open 'Form 16A PDF Converter Utility' double-click on the 'Form 16A PDF Converter Utility.jar'. Utility will open as shown below 5. Form 16A Input File Name with Path: Click on browse and select the Form 16A input file; in case of multiple files select all the form 16A files 6. Form 16A Error/PDF File Path: Specify the path where 'error/PDF' file should be generated by the utility on completion of validation. The path can be same as the input file path or different. Do not specify any filename, provide the file path only. 7. Provide Details to be Printed on Form 16A: 7.1 Full Name: Provide full name of responsible person. 7.2 Father's Name: Provide father's name of responsible person. 7.3 Place: Provide place of the responsible person. 7.4 Date: Provide date in dd/mm/yyyy format. 8. Error File: 8.1 In case of an 'invalid file', an 'error file' will be generated. This will be a text file with the same filename as the input file with '.err' extension. Ex: If the input file is 'MUML00051C_201112_Q3_FORM_16A_0000001751_0001_OF_0001.txt' then, error filename will be 'MUML00051C_201112_Q3_FORM_16A_0000001751_0001_OF_0001.err'. The error file will contain details of erroneous records like Line no and error description. 9. PDF File: 9.1

in case the input file is valid, utility will be generated in a folder; nomenclature of the folder will be TAN_FORM16A_AY_Quarter_Date, which will contain PDF files of all the deductee PAN present in input file. The nomenclature of the PDF file generated is PAN_FORM16A_AY_Quarter.pdf.

Watch out for these tax filing errors!

Ignorance is never bliss, when it comes to calculating how much you need to shell out by way of taxes! When errors crop up due to lack of awareness you could end up evading tax unknowingly! That could turn out to be a costly mistake somewhere down the road! So be wise, get your tax facts right!

Here is a quick sample checklist for you!

1. Agricultural income and property

Avinash owns some land in Pollachi and earns an income of Rs. 20 L from farming and Rs 5 L from renting out the building situated on a part of this land on an average every year. Can he claim Rs. 25 L as agricultural income?

No, he cannot. As per the direct tax laws, he can only claim Rs 20 L as agricultural income. Rs 5 L has to be treated as income from house property.Moreover agriculture income is to be added for tax calculation purpose also.

Further, if someday Avinash sells the land and makes a net profit of Rs 2 crore, he cannot claim this as agricultural income but has to include it as part of capital gains and pay tax on it.

2. Keyman Policy

Maturity proceeds of a Life Insurance Policy are not extended to the proceeds of a Keyman Insurance Policy. (This policy is taken on the life of one person by another - e.g. Employer – employee).

When the policy matures and is assigned to the employee, it is taxable as part of the salary, unlike the exemption available under section 10 (10D) with respect to the LIC policy.

3. Gifts by Non relatives

Any sum of money or gifts received by non relatives is taxable when its value exceeds Rs 50,000.

E.g: Anush gets Rs 1 L from his parents and Rs 40,000 and Rs 15,000 from his friends Bharath and Craig.

As per tax laws, Rs 1 L is not taxable as it is a gift from relatives, on the other hand

Rs 55,000 from friends is fully taxable without any exemption.

However, this rule is not applicable on the occasion of marriage.read full details about gifts

4. Interest and loans

When an individual takes a loan against the security of a fixed deposit, interest on such a loan cannot be deducted from the interest income earned on the FD. However, it is allowed if the loan is taken to support a business.

Interest on saving account is taxable income without any exemption .

5. Lottery, betting, racing

Income from winning a lottery, crossword, horse race, gamble or bet is not exempt. Tax at the rate of 30% is applied.

Further, no expense allowance is possible against such an income. E.g. cost of lottery tickets purchased during the year cannot be deducted from the lottery winnings.

Also, no basic exemption limit and no benefit of carry forward and set off for loss is allowed against such gains.

6. Relatives(clubbing of Income funds given to wife)

From his funds, Satish takes an FDR for Rs 10 L ( earning an interest of 10% p.a payable half yearly) in the name of his wife. An interest of Rs 1 L earned was invested by her in a business, which resulted in a profit of Rs 1.6 L for the year.

In the above case, the Rs 1 L interest earned needs to be clubbed with Satish’s income and is taxable. However, the profit of Rs. 1.6 L needs to be taxed in the hands of Satish’s wife.

7. Jewels and paintings

If a person sells personal jewels (made of platinum, gold and other precious metal) and paintings, they are subject to capital gain tax.

E.g. If Lekha sells jewels made of platinum and paintings worth Rs 10 L for Rs 45 L she is subject to a capital gains tax of Rs 35 L.

It is worth a mention here that the term ‘jewellery’ is not just used to describe ornaments. Almost all items containing gold, silver or any other precious metal would be considered jewellery. Thus, furniture or clothes with precious stones embedded on them would be regarded as jewellery!

New Batches of CA IPCC/PCC Cost + FM, Accounts, Advance Accounts for Nov. 2011 attempt

Dear Students,

I am glad to announce my next batches for CA IPCC for following subjects:

Subject                                Time                    Days         No. of Seats    Fees
Accounting                  3.15pm to 4.30pm     Mon to Fri         20             Rs.5,000/-

Cost Accounting          4.30pm to 6.00pm    Mon to Fri         20              Rs.6,000/-
& FM

Advance Accounting    6.00pm to 7.15pm    Mon to Fri         20              Rs.5,000/-

Batch Starting Date: 06/06/2011 Duration 3.5 months

Classes at:  1639 Duplex Flat, First Floor, Sector - 40B, Chandigarh.

Call for Registration: 09216408902, 09814622848.

Faculty:   CA Naveen Kumar Agrawal. (09216408902)
Address: # 385, First Floor, Phase - 2, Mohali [Pb] PIN - 160055

P.S. : Feel free to contact for any query. (10.00am to 8.00pm)

Trail of Speak Asia

Moneylife investigation reveals that the mysterious trail of Speak Asia runs through several India companies and the money is being remitted to purchase 'survey software' from a company linked to the shadowy promoters

Some new, worrying details about Speak Asia, the flashy survey company that has ensnared millions of gullible Indians over the past few months, are now available from a Moneylife investigation.

It now appears that Speak India Network Marketing P Ltd is a company registered in Mumbai, with Indian directors. This company and Speak India Online are collecting money from survey panelists and have accounts in ICICI Bank, ING, State Bank of India and a dozen others. Each bank has remitted Rs50 crore to Rs180 crore. About Rs1,000 crore has already been transferred abroad. The money remitted to these accounts are pooled into a company called Tulsiateck, which is also registered in Mumbai.

Our sources tell us that Tulsiateck remits funds to buy "survey software" from a company called Haren Ventures Pte of Singapore owned by Harender Kaur, who sometimes appears as a promoter of Speak Asia at mega events such as the glitzy conference recently held in Goa. The money from Haren Ventures in Singapore may or may not be going to Speak Asia Singapore, the company in whose name this massive 'survey' company has enrolled 19 million panelists. Haren Ventures is the distributor of e-zine "Surveys Today". Interestingly, it is also into trading in coal from Kalimantan mines in Indonesia, for China and India, shows a Google search.

We now learn from the banks that some of the accounts of Speak India have been frozen for possible legal violations. If banks take a tough stand, Speak Asia may fold up as quickly as it grew.

For months together there has been no clarity about Speak Asia's business model and no information has been forthcoming as to who owns Speak Asia and how it makes money. It appeared to be another chain-marketing scheme, which was distributing liberal patronage to the Indian media, hiring expensive advertising and public relations firms, even as it was spreading its tentacles at lightening speed.

After the banks have frozen the accounts for possible foreign exchange violations, it should now become an issue that has to be investigated by the Enforcement Directorate, which has clearly been sleeping on its job. The pooling of funds and the import of bogus software is in the jurisdiction of the Enforcement Directorate.

Strangely enough, at the press conference Speak Asia held on Monday, company officials neatly evaded all issues, saying it was collecting Rs11,000 as a deposit from panelists. It claimed that this money was the subscription price for the spectacularly expensive magazine called "Surveys Today".

The Ministry of Finance and the Ministry of Corporate Affairs have done nothing so far to follow the trail of the large sums of money raised by this company and its modus operandi. Right from the growth of Speak Asia, Moneylife has been warning the public about this company. Recently, two TV channels also telecast detailed reports on the issue.

Source:moneyline