Penalty on late filing of Income Tax Return

Penalty on late filing of Income Tax Return

Govt has announced major income tax changes on the new financial year, this includes a penalty on late filings of ITR, Medical, and transport allowance. 

Penalty on late filing of income tax 

If you failed to file your Income Tax Return on due date i.e. 31st July but before 31st December, you will have to pay the penalty of Rs 5,000, post-December you need to pay penalties of Rs 10,000.

Timeline of revising your ITR

As you know earlier taxpayer was allowed to revise his return till two years from the end of the financial year but from now if you make mistake while filings then you would have time till 31st March to revised return.

Medical reimbursement and transport allowance to become taxable

If your salary includes medical reimbursement and transport allowance, then these two items will become fully taxable in your hands from April 1. The proposal was announced in Budget 2018.

Hike in Education and Health Cess on tax liability

Starting from FY 2018-19, hike in Education and Health Cess by 1% to 4%, replacing the current 3% education cess. This will impact when TDS is deducted from salary and tax liability.

Levy of LTCG tax on shares and equity-oriented mutual funds

LTCG from the sale of shares and equity-oriented mutual funds will attract tax at a flat rate of 10 percent. Indexation benefit (adjusting the purchase cost with respect to inflation) will not be available. Further, LTCG up to Rs 1 lakh in one fiscal will be exempted from tax.

DDT introduced for equity mutual funds

Dividends declared in equity-oriented mutual fund schemes will come under the purview of dividend distribution tax (DDT) with effect from April 1. The tax will be levied at 10 percent and will be deducted by the fund house before paying dividends.

Tax-free withdrawal for NPS account holders

Self-employed and professionals will now be able to withdraw 40 percent of their National Pension System (NPS) corpus tax-free when they close or opt out of it. Salaried employees are already allowed to withdraw 40 percent of their NPS corpus tax-free.

Senior citizens to get more benefits

Starting from 1 April, interest income earned up to Rs 50,000 a year by senior citizens will be available for deduction. This includes interest income earned from savings bank/post office accounts, fixed deposits (FDs) and recurring deposits (RDs). This tax benefit is available to them under the newly inserted section 80TTB of the Income tax Act. TDS will be deducted only if interest income is more than Rs 50,000 in year.

Senior citizens who do not have health insurance can also avail this benefit for medical expenses incurred

Foreign Company’s Subsidiary in India

With a population of over 1.2 billion people, India is the largest democracy and one of the most promising emerging markets in the world. Therefore, there is immense interest among international businesses to tap the emerging opportunities in India and be among the early movers into the rapidly growing market.

Any foreign company can incorporate a wholly owned subsidiary company in India. In India, private limited companies are the most popular form of business structure and therefore the most obvious choice of foreign companies. In an Indian private limited company, there can two shareholders and two directors and at least one Director should be resident in India.

Setting up a Subsidiary Company

Foreign Subsidiary will be formed as Private Limited/Public Limited Company and the holding foreign holding company will fund the shareholding. It may be noted that holding company can have 100% to have wholly owned subsidiary including shareholding of nominee shareholders who will be the beneficial shareholder of the company.

Documents Requirements: Apostle and Notarized Signed Documents are required for foreign Shareholders and Directors. For companies it will be :

Board Resolution duly passed for entering and forming Company in India and in case of Individuals

Passport Copy, Driving Licence and

Current Address proof in the form of Bank Statement is required.

Obtaining Digital Signature of Directors

Obtaining Director Identification Number of Director

Application for Approval of Name of Company, this must be unique Preparation of Incorporation Documents

Foreign Company Compliance in India

Foreign companies registered in India are required to maintain various additional compliance under the Companies Act, 2013.

Form FC-1

Foreign companies registered in India are required to file Form FC-1 within a period of thirty days of the establishment of its place of business in India. The application must be supported with an attested copy of approval from the Reserve Bank of India under the terms of Foreign Exchange Management Act or Regulations, and too from other regulators, if any, the sanction is necessary.

Financial Statements

All foreign companies registered in India are required to organize financial statement of its Indian business operations in an agreement with Schedule III of the Companies Act, 2013. So foreign companies are required to furnish the following information/statements together with the financial statements of the company to be filed with the Registrar of Companies:

Mandatory Compliance checklist for Private Limited

Receipt of MBP-1 

As per Section 184(1) of Company Act 2013, Every Director of the Company in First Meeting of the Board of Director in each Financial Year will disclose his interest in other entities under (Form MBP-1)

Receipt of DIR- 8 

As per Section 164(2) of Company Act, 2013 Every Director of the Company in each Financial Year will file with the Company disclosure non-disqualification.

Receipt of MGT-7

As per Section 92 of Company Act 2013, Every Company will file its E-form: Annual Return within 60 days of holding MGT-7 Annual General Meeting. Annual Return will be for the period 1 st April to 31st March.

Receipt of AOC-4

As per Section 137 of Company Act 2013, Every Company is required to file its Balance Sheet along with the statement of Profit and Loss Account and Director Report in this form.

Mandatory Compliance –  within 30 Days.

1. Appointment of First Auditor.

2. Preparing and printing Share certificate

3. Quarterly Compliance (After Every 90 Days)

4. Holding the Board Meeting

5. Drafting the notice of Board Meeting

6. Preparing minutes thereof

7. Preparation of attendance sheets of the board meetings,

8. Preparing the directors’ disclosures of interest in other concerns.

Quarterly Compliance (After Every 90 Days)

1. Holding the Board Meeting

2. Drafting the notice of Board Meeting

3. Preparing minutes thereof

4. Preparation of attendance sheets of the board meetings.

Annual Compliance (Financial Year)

1. Annual Compliance (Financial Year)

2. Obtaining the financials from Auditor;

3. Drafting the minutes for the pre ­AGM board meeting

4. Auditor’s Appointment Document has to be prepared;

5. Drafting of Director Report

6. Preparation of Annual General Meeting Minutes

7. Filing of AOC 4, ADT 1, MGT 7 Filing of Company Income Tax Return

How to calculate TDS for Professional Fees

What is TDS?

TDS is simply Tax Deducted at Source.  As per the Income Tax Act – persons responsible for making payments are required to deduct tax at source at prescribed rates. Instead of receiving tax on your income from you at a later date, the govt wants the payers to deduct tax beforehand and deposit it with the govt.

What is the rate of TDS for Professional & Technical Fees (Section 19J)

S. No	Nature of Payment	TDS Rate if PAN available	TDS Rate if PAN not available
1	Payment / Credit to any resident Company/Professional	10%	20%
2	Payment/Credit to any resident person individual / HUF	Not Applicable	Not Applicable
3	Payment/Credit to Call Centre	2%	20%

Note: In case of payment not exceed of Rs 30,000 or aggregate payment during the financial year does not exceed Rs 1,00,000 then no need to deduct the TDS.

Issue of TDS certificate

The Person who deducting TDS he also needs to issue Form 16A & 16B issued on a quarterly basis. The Details for TDS Deposited can be view by a person whose TDS has been deducted by checking Form 26AS.

The certificate is to be issued by the following dates:

Quarter	The due date for Non-Government deductor	The due date for Government deductor
April to June	30th July	15th August
July to September	30th October	15th November
October to December	30th January	15th February
January to March	30th May	30th May

What is the procedure for refund of TDS?

There is no specific refund process or form to claim TDS refunds. You must file your income tax returns in the normal manner. The excess of TDS over what you are supposed to pay as tax in the year will be the refund amount due, and this needs to be shown in the returns filed.

What is the penalty for late filing of TDS return? 

• Late filing fee (if you do not file by the deadline)

Rs 200 per day (two hundred) until your return is filed

• Interest (if you do not deposit the TDS amount in time)

Nondeduction of tax at source, either in whole or in part then 1% & After deduction of tax, non-payment of tax either in whole or in part then 1.5%

• Penalty (if TDS is not filed within one year of the due date)

Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10,000 which may extend to Rs.1,00,000.