Satbir Singh & Associates

Satbir Singh & Associates Income Tax, Vat Tax & Service Tax

10/12/2018

GSTR 1 Due Dates Turnover up to INR 1.5 Crore

Period (Quarterly)
Revised Last Dates

October – December 2018
31st January 2019

January – March 2019
30th April 2019

April – June 2019
31st July 2019

GSTR 1 Due Dates Turnover More Than INR 1.5 Crore

Period Revised
Last Dates

November 2018
11th December 2018

07/12/2018

Cash Transaction –
Limit & Penalty –
Income Tax
In Indian economy, cash transactions has always played a major role and been a reason for black money. The Government has now initiated various measures to curb cash transactions and boost digital payments. In this article, we look at cash transaction limit under the Income Tax Act along with penalty for transacting in cash over and above a certain threshold.

Cash Transaction Limit –
Section 269ST
The Finance Act 2017, took various measures to restrain black money and as an outcome of which, a new section 269ST was inserted in the Income Tax Act. Section 269ST imposed restriction on a cash transaction and limited it to Rs.2 Lakhs per day.

Section 269ST states that no person shall receive an amount of Rs 2 Lakh or more:

In aggregate from a person in a day; or
In respect of a single transaction; or
In respect of transactions relating to one event or occasion from a person.
However, the Central Board of Direct Taxes (CBDT) has clarified that this cash withdrawal limit does not apply for withdrawals from Banks and Post offices.

Thus the provisions of section 269ST will not apply to:

Cash received through an Account Payee Cheque or an Account Payee Bank draft or use of electronic clearing system (ECS) through a bank account.
Any receipt by the Government, any banking company, post office savings bank or co-operative bank.
Transactions of nature referred to in section 269SS.
Such other persons or class of persons or receipts, which the Central government may, by notification Official Gazette, specify.
Withdrawal from Post Office
Post offices under the Department of India Post facilitate drawings from Post Office savings account along with ATM facility.

The limit of cash that can be withdrawn in a single day from a post office or ATM is Rs.25,000 and is limited to Rs.10,000 per transaction. It permits five free transactions per month including financial and non-financial transactions (balance enquiry, statement request). Beyond the free transactions, Rs.20 with GST is charged.

Withdrawal from other bank ATMs is admissible wherein it is upto 3 free transactions in metro cities while it is five free transactions in non-metro cities. A fee of Rs.20 with GST is charged for transactions above the free transactions.

Withdrawal from Banks
The amount deposited can be withdrawn from both savings account and current account using a chequebook/withdrawal slip or using automated teller machine through a debit card.

Cash withdrawal limit varies from bank to bank and also depends on the type of card being used. It varies from 10,000 to 50,000 per day based on the bank. However, the transaction details notified by the State Bank of India is furnished below.

Withdrawals using chequebook has been restricted to 60 withdrawals per half year by most of the banks.
The amount of money that can be debited from current account is limited to Rs.1,00,000 per week whereas an overall of Rs.24,000 can be drawn per week from the savings account.
ATM withdrawals allow Rs.10,000 to be drawn per day and permits unlimited free transactions for salary account whereas 3 transactions from other ATMs with a fee of Rs.20 plus GST per month.
Cash Transaction Limit under Income Tax
The following are the main income tax sections that pertain to cash transaction limit:

Section 40A(3) and Section 43 – Pertains to Cash Payment
Section 269SS and Section 269ST – Pertains to Cash Receipts
Section 269T – Pertains to Repayment of Certain Loans / Deposits
SECTION 40A(3) of Income Tax
Section 40A(3) of the Income Tax Act pertains to cash transaction limit for expenditure made in cash. Under Section 40A(3), if payment for any expenditure of over Rs.10,000 is made in cash, then the expenditure will be disallowed under the Income Tax Act.

Hence, its important for all taxpayers to make any payment for expense over Rs.10,000 through banking channels like debit card, account transfer, cheque or demand draft.

SECTION 43 of Income Tax
Under section 43 of Income Tax Act, if a payment of more than Rs.10,000 is made by a taxpayer for acquisition of an asset by cash, the expenditure would be ignored for the purposes of determination of actual cost of the asset. Hence, its important for all taxpayers acquiring assets to make all payments to the seller through banking channels.

SECTION 269SS of Income Tax
Section 269SS prohibits a taxpayer from taking/accepting loans or deposits or a sum of more than Rs.20,000 in cash. All loans and deposits of more than Rs.20,000 must always be taken through a banking channel.

Section 269SS of the Income Tax Act is however not applicable when accepting/taking loan or deposit from a person or entity mentioned below:

Government;
Any banking company, post office saving bank or co-operative bank;
Any corporation established by a Central, State or Provincial Act
Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
Institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette.
Finally, if the person from whom the loan or deposit is taken and the person by whom the loan or deposit is accepted, are both having agricultural income and neither have any income taxable under Income Tax Act, then the provisions of Section 269SS will not apply.

Penalty under Section 269SS
Failure to comply with provisions of section 269SS could lead to a penalty equal to the amount of loan or deposit or specified sum accepted.

Section 269ST of Income Tax Act
Section 269ST of Income Tax Act provides that no person can receive an amount of INR 2 Lakhs or more in cash:

In aggregate from a person in a day;
In respect of a single transaction; or
In respect of transactions relating to one event or occasion from a person.
Provisions of Section 269ST are not applicable, when cash of more than Rs.2 lakhs is received from following person:

Government;
Any banking company, post office saving bank or co-operative bank;
Institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette.
Penalty under Section 269ST
As per section 271DA, in case of failure to comply with provisions of section 269ST, penalty amount equal to the amount of receipt is payable.

Section 269T of Income Tax Act
Section 269T provides that any branch of a banking company or a co-operative society, firm or other person cannot repay any loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit, if:

The amount of the loan or deposit together with interest is INR 20,000 or more; or
The aggregate amount of loans or deposits held by such person, either in his name or jointly with other person on the date of such repayment together with interest is INR 20,000 or more.
Provisions of section 269T are not applicable, when loan is repaid or deposit taken or accepted from below mentioned person:

Government;
Any banking company, post office saving bank or co-operative bank;
Any corporation established by a Central, State or Provincial Act
Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 5. Institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette.
Penalty under Section 269T
As per section 271E, in case of failure to comply with provisions of section 269T, penalty amount equal to the amount of loan or deposit repaid is payable.

30/01/2015

Prime Minister Narendra Modi has Launched Sukanya Samridhi Yojna’ (girl child prosperity scheme) with the vision to provide for Girl Child Education and Her Marriage Expense. Sukanya Samriddhi Account Scheme is a small deposit scheme for girl child, as part of ‘Beti Bachao Beti Padhao’ campaign, which would fetch yearly interest rate of 9.1 per cent and provide income tax deduction Under section 80C of the Income Tax Act,1961.

In this article we have discussed Provisions of this Scheme alongwith tax and other benefits :-
Date of Commencement of Scheme- Sukanya Samriddhi Account Scheme is been notified by Ministry of Finance vide Notification No. G.S.R.863(E) Dated 02.12.2014. Shceme become operational by notification of rules namely ‘Sukanya Samriddhi Account Rules, 2014’.
Depositor- For this scheme Depositor is an individual who on behalf of a minor girl child of whom he or she is the guardian and deposits amount in account opened under this scheme.
Who can be ‘Guardian’ under this Scheme – In relation to a minor girl Child Guardian means

(i) either father or mother; and

(ii) where neither parent is alive or is incapable of acting, a person entitled under the law for the time being in force to have the care of the property of the minor.

One Girl One Account- Depositor cannot open multiple or more than one account in the name of a Girl Child.Can be opened for Maximum two girls – Natural or legal guardian of a girl child allowed to open one account each for two girl children’s.

Account opening for third Girl – Under this scheme natural or legal guardian of the girl child shall be allowed to open third account in the event of birth of twin girls as second birth or if the first birth itself results into three girl children, on production of a certificate to this effect from the competent medical authorities where the birth of such twin or triple girl children takes place.

Age Restriction for Opening of Account-
The account may be opened by the natural or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of ten years and any girl child, who had attained the age of ten years, one year prior to the commencement of these rules shall also be eligible for opening of account under these rules. Scheme is been commenced from 02.12.2014.

Documents to Open the Account- Birth certificate of a girl child in whose name the account is opened shall be submitted by the guardian at the time of opening of the account in post office or bank along with other documents relating to identity and residence proof of the depositor.

No Fixed Interest Rate- Under this scheme Interest rate is not fixed and Government will declare on yearly basis the Interest on accounts opened under these rules. For the Financial Year 2014-15 Govt. has declared Interest Rate of 9.10% vide Notification F.NO. 2/3/2014.NS-II, DATED 20-1-2015.

Interest Compounding Monthly/ Yearly
Interest will be compounded yearly and will be credited to account till the account completes fourteen years from the date of opening.
In case of account holder opting for monthly interest, the same shall be calculated on the balance in the account on completed thousands, in the balance which shall be paid to the account holder and the remaining amount in fraction of thousand will continue to earn interest at the prevailing rate.

Where one can open account?- At any post office in India doing savings bank work and Branch of a commercial bank authorised by the Central Government to open an account under ‘Sukanya Samriddhi Account Rules, 2014’.

Maximum and Minimum Deposit- The account may be opened with an initial deposit of one thousand rupees and thereafter any amount in multiple of one hundred rupees may be deposited subject to the condition that a minimum of one thousand rupees shall be deposited in a financial year but the total money deposited in an account on a single occasion or on multiple occasions shall not exceed one lakh fifty thousand rupees in a financial year.

Term Period – Deposits can be made till completion of fourteen years from the date of opening of the account. The maturity of the account is 21 years from the date of opening of account or if the girl gets married before completion of such 21 years.
Regularisation of irregular account – Where minimum amount of Rs. 1000/- a year has not been deposited than such irregular account may be regularised on payment of a penalty of fifty rupees per year along with the minimum subscription of Rs. 1000/- for the year (s) of default any time till the account completes fourteen years.

Mode of Deposit – Deposit can be made in cash; or by cheque or demand draft. Where deposit is made by cheque or demand draft, the date of encashment of the cheque or demand draft shall be the date of credit to the account.

Who can Operation the account?
(1) The account shall be opened and operated by the natural or legal guardian of a girl child till the girl child in whose name the account has been opened attains the age of ten years.
(2) On attaining age of ten years, the account holder that is the girl child may herself operate the account. however, deposit in the account may be made by the guardian or any other person or authority.
Premature closure of account –
(1) In the event of death of the account holder. the account shall be closed immediately on production of death certificate issued by the competent authority and the balance at the credit of the account shall be paid along with interest till the month preceding the month of premature closure of the account , to the guardian of the account holder.
(2) Where the Central Government is satisfied that operation or continuation of the account is causing undue hardship to the account holder, it may, by order for reasons to be recorded in writing, allow pre-mature closure of the account only in cases of extreme compassionate grounds such as medical support in life‑ threatening diseases, death, etc.
Pass book
(1) On opening an account, the depositor shall be given a pass book bearing the date of birth of the girl child, date of opening of account, account number, name and address of the account holder and the amount deposited.
(2) The pass book shall be presented to the post office or bank. as the case may be, at the time of depositing money in the account and receiving payment of interest and also at the time of final closure of the account on maturity.
Transfer of account to other place – The account may be transferred anywhere in India if the girl child in whose name the account stands shifts to a place other than the city or locality where the account stands.
Pre-Mature Withdrawal- To meet the financial requirements of the account holder for the purpose of higher education and marriage withdrawal up to fifty per cent of the balance at the credit, at the end of preceding financial year shall be allowed but such withdrawal shall be allowed only when the account holder girl child attains the age of eighteen years.
Closure on maturity or before maturity due to Marriage of Account Holder- The account shall mature on completion of twenty-one years from the date of opening of the account but in case marriage of the account holder takes place before completion of such period of twenty-one years the operation of the account shall not be permitted beyond the date of her marriage. In such closure of accounts accountholder have to give an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of account.
Payment of Interest and Principal on Maturity- On maturity or pre maturity withdrawal due to marriage of girl child, the balance including interest outstanding in the account will be paid to the account holder on production of withdrawal slip along with the pass book.
Tax Benefit – The amount deposited towards Sukanya Samriddhi Account is deductible under section 80C of Income tax Act,1961 upto Rs.1.5 lakhs as notified by Notification No. 09/2015 dated 21.01.2015. Amount deposited in this account will be counted in overall limit of Rs. 1.50 Lakh under section 80C. Interest earned in this scheme is taxable, but maturity amount is exempt.
Comparison with PPF in respect of Tax Benefit- under PPF Scheme interest earned is tax free but interest earned on Sukanya Samriddhi Account deposit is taxable. Investment in Both PPF & Sukanya Samriddhi Account is eligible for deduction under section 80C of the Income Tax Act, 1961.

Drawback of the Sukanya Samriddhi Account Scheme-
High Lock in Period
Limitation on No. of Account
Tax on Interest Income
Scheme do not provide for online transfer of Amount in this account. It allows only payment by Cash, Cheque and Demand Draft.
No Clarity on Future Interest Rate for this account.
No Clarity on Taxability of Maturity Amount.

Conclusion - It’s a good scheme started with a good purpose by the Government but again a halfhearted effort as government should have exempt Interest earned on this scheme or should have provided separate deduction for amount deposited in this scheme instead of including it in Overall Deduction Limit of Section 80C of the Income Tax Act, 1961.

25/01/2015

In order to tax individuals on basis of their earnings (higher tax bracket for high income group and lower tax bracket for lower income group)
income tax department levies income tax on individuals on basis of certain range. This range is known as “income tax slab rates” wherein the individual has to pay tax depending on his earning capacity. Current slab rate for FY 2014-15 is mentioned below for reference:
Income falling between Tax rate @

Rs. 0 – Rs. 250,000 Nil

Rs. 250,000 – Rs. 500,000 10% of income above Rs. 2.5 lacs but less than Rs. 5 lacs

Rs. 500,000 – Rs. 10,00,000 20% of income above Rs. 5 lacs but less than Rs. 10 lacs

Above Rs. 10,00,000 30% of income above Rs. 10 Lacs.

For Example:
A person has a gross income of INR 5.6 lacs during the year. His income tax can be computed as below:
Income range Breakup of income earned Tax on income
Rs. 0 – Rs. 250,000 Rs. 250,000 Nil

Rs. 250,000 – Rs. 500,000 Rs. 250,000 10% = Rs. 25,000

Rs. 500,000 – Rs. 10,00,000 Rs. 60,000 20% = Rs. 12,000

Above Rs. 10,00,000 Rs. 0________ 30% = Rs. 0_____

Rs. 5,60,000/- Total tax = Rs. 37,000

Now, as per above example tax liability of the assessee comes to Rs. 37,000/- on gross income of Rs. 5.6 lacs.

To further lower the tax burden and encourage savings amongst the individuals tax department offers individuals to do savings. If they do so, tax department further grants them an exemption of the amount of savings in a particular year from being taxed. That is to say, if an individual makes any savings in a particular year, he can avoid paying taxes on such income.

As per Section 80C of Income tax act, an individual can make use of this provision to the extent of INR 150,000 in a particular year. In other words, an individual can claim exemption from income to the extent of Rs. 150,000 or actual investment made, whichever is less.

To understand this better, lets continue with the example above. In this case suppose an individual makes his investments as mentioned under:
Gross Income (as mentioned above) = Rs. 5,60,000
Investments made u/s 80C = Rs. 70,000
Net taxable income = Rs. (5,60,000 – 70,000) 4,90,000

Tax liability as per above mentioned slab rates can be calculated as below:
Taxable income = Rs. 4,90,000
Taxable Income range Income taxable Tax@slab rates
Rs. 0 – Rs. 250,000 2,50,000 0

Rs. 250,000 – Rs. 500,000 2,40,000 10% of 2,40,000 = Rs. 24,000

Rs. 500,000 – Rs. 10,00,000 0 0

Above Rs. 10,00,000 0 0

4,90,000 24,000
Thus, it is clear from the above example, tax burden of the individual has come down from Rs. 37,000 (as calculated previously) to Rs. 24,000 due to investment of Rs. 70,000.

The primary rationale of the provision can be seen as, although individual has to spend Rs. 70,000 at once out of his pocket to save tax of Rs. 13,000, yet this is beneficial as investment amount of Rs. 70,000 stays with the individual and on maturity he receives this money back with interest over 5 years. This can also be seen as forced investment.
Possible Investment options
After having discussed the rationale of investments for tax saving, next question which comes to mind is what are the investment options available where one can invest and which is more beneficial out of several options available.

Few Investment options at a glance

Life Insurance Premium

All premiums paid towards life insurance policies are eligible for income tax deduction u/s 80C I-T Act. Premiums paid for or on behalf of others like your parents/ in-laws is not eligible for deduction.

Unit linked insurance plans

ULIPS are combinations of Life Insurance and Equity Investments. All ULIPS qualify as life insurance policy and the premiums are exempted from income tax benefit.

Pension Fund

Under Section 80CCC, you can invest up to Rs. 1.5 lakh in a Pension Fund of LIC of India or any other private insurer. Any premium paid towards any annuity plan, whether deferred or immediate will give you tax relief in that financial year. Contribution towards pension funds is under a Sub Section of 80CCC which is also a part of the 80C Rs. 1.5 lakh limit.

ELSS (Equity Linked saving Scheme)

ELSS offers to youngsters the potential to earn high returns; albeit with higher risks. Lock in period for 80C purpose is 3 years and dividends and capital gains are tax exempt. Not all mutual funds can provide 80C deduction. Some common examples of ELSS are–SBI Magnum Tax Gain, HDFC Tax Saver, Fidelity Tax Advantage, Franklin India Index Tax Fund, etc. If you invest for long term then, ELSS has potential to give handsome return.

Provident Fund (PF)

For salaried employees PF is a default investment which qualifies for deduction u/s 80C. While employer’s contribution is exempt from tax, employee contribution (i.e., employee’s contribution) is counted towards section 80C investments.

Home Loan Benefit

Home loan benefit is available in two parts – principal and interest. Principal component is exempt and counted under section 80C investment. Interest component is exempt under section 24 of the income tax act depending whether the property bought with home loan is self occupied or let out. This can be a very effective tool to reduce the tax burden.
Home loan benefit is available in two parts – principal and interest. Principal component is exempt and counted under section 80C investment. Interest component is exempt under section 24 of the income tax act depending whether the property bought with home loan is self occupied or let out. This can be a very effective tool to reduce the tax burden.

Tuition fees deduction u/s 80C

This is an avenue most people are not even aware of. Any amount paid as tuition fee for the education of the first two children of the employee / tax payer is eligible for deduction u/s 80C of I-T Act.

National Savings Certificate

NSC is a good medium term investment option. NSC can also be pledged as security against a loan to banks. NSC VIII Issue has maturity period is five years, while NSC IX Issue has tenure of 10 years. Trust and HUF cannot invest.
Bank Deposits
Investment in fixed deposits of scheduled bank with tenure of 5 year is entitle for section 80C deduction.

Tax Rates For A Y 2015-16
13/01/2015

Tax Rates For A Y 2015-16

Income Tax Rates for A Y 2014-15
10/01/2015

Income Tax Rates for A Y 2014-15

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Mohali
140603

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