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    CircularsService Tax
    How will the SBC be calculated for services under reverse charge mechanism?
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    Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on the amount of service ...
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    CircularsService Tax
    How will the SBC be calculated for services under reverse charge mechanism?
    Show AI Summary
    Swachh Bharat Cess reverse charge shifts liability to the service recipient, applying existing reverse charge notifications mutatis mutandis.
    Swachh Bharat Cess for services under reverse charge is payable by the service recipient: Chapter V provisions apply to SBC, and government notification makes the existing service tax reverse charge notification applicable to SBC mutatis mutandis, so recipients compute and discharge SBC under the same reverse charge rules.
    CircularsService Tax
    Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on the amount of service ...
    Show AI Summary
    Swachh Bharat Cess: not levied on service tax but imposed on the value of taxable services.
    The Swachh Bharat Cess is not a cess on service tax but is imposed as a separate charge measured on the value of taxable services, rather than being calculated on the amount of service tax as was done for Education Cess and SHE Cess.
    CircularsService Tax
    What would be effective rate of service tax and SBC post introduction of SBC?
    Show AI Summary
    Service tax plus Swachh Bharat Cess yields a combined rate after SBC introduction, affecting taxable services.
    The operative tax burden on taxable services equals the prevailing service tax rate plus the Swachh Bharat Cess, expressed in the FAQ as an additive formula (for example, service tax rate plus 0.5% SBC) to determine the overall effective rate after SBC's introduction.
    CircularsService Tax
    Whether separate accounting code will be there for Swachh Bharat Cess
    Show AI Summary
    Separate accounting code for Swachh Bharat Cess to be notified, creating distinct heads for collection, receipts, penalties and refunds.
    Separate accounting codes for the Swachh Bharat Cess will be notified in consultation with the Principal Chief Controller of Accounts, establishing distinct minor head classifications to record cess Tax Collection, Other Receipts, Penalties and Deduct Refunds with corresponding numeric codes for government accounting.
    CircularsService Tax
    Whether SBC would be required to be mentioned separately in invoice?
    Show AI Summary
    Swachh Bharat Cess must be shown separately on invoices and accounted for independently from service tax.
    Swachh Bharat Cess (SBC) is levied independently of service tax and must be charged, collected and paid separately; it should appear as a distinct line item on invoices (may be shown after service tax), be accounted for separately in books of account, and remitted under a separate accounting code, with treatment similar to education cesses.
    CircularsService Tax
    How will the SBC be calculated?
    Show AI Summary
    Swachh Bharat Cess calculation mirrors service tax and is levied on the identical taxable value.
    The Swachh Bharat Cess is computed using the same methodology as service tax and is levied on the identical taxable value applied for service tax, with no separate valuation base or distinct computation formula for the Cess.
    CircularsService Tax
    Where will the money collected under SBC go?
    Show AI Summary
    Proceeds of Swachh Bharat Cess credited to Consolidated Fund of India, usable after parliamentary appropriation for sanitation initiatives.
    Proceeds of the Swachh Bharat Cess are to be credited to the Consolidated Fund of India, and after parliamentary appropriation the Central Government may utilise such sums for financing and promoting Swachh Bharat initiatives or for related purposes.
    CircularsService Tax
    Why has SBC been imposed?
    Show AI Summary
    Swachh Bharat cess imposed to finance and promote sanitation initiatives, obliging service providers to collect and remit the levy.
    Imposition of Swachh Bharat Cess is a statutory levy on taxable services to generate revenue expressly for financing and promoting Swachh Bharat initiatives and related purposes, creating an obligation on service providers to collect and remit the cess so funds are available for the designated sanitation objectives.
    CircularsService Tax
    Whether SBC would be leviable on exempted services and services in the negative list?
    Show AI Summary
    Swachh Bharat Cess on exempted and negative list services is not leviable under the FAQ circular.
    The circular clarifies that Swachh Bharat Cess is not leviable on services which are fully exempt from service tax and on services covered by the negative list, limiting the cess's chargeability to taxable services only.
    CircularsService Tax
    What is the date of implementation of SBC?
    Show AI Summary
    Swachh Bharat Cess implementation date fixed as 15 November 2015 under notification appointing its commencement.
    The Central Government appointed 15 November 2015 as the date on which provisions of the Swachh Bharat Cess come into effect, by notification No.21/2015 Service Tax dated 6 November 2015.
    CircularsService Tax
    What is Swachh Bharat Cess (SBC)?
    Show AI Summary
    Swachh Bharat Cess applies as a service cess on taxable services, increasing service tax liability and compliance obligations.
    Swachh Bharat Cess is a statutory cess levied as a service cess under Chapter VI of the Finance Act, 2015, imposed on all taxable services and collected in accordance with the Act's levy and collection provisions, thereby increasing service tax liability and requiring compliance with service tax accounting and remittance rules.
    ManualsIncome Tax
    STEPS NEED TO BE TAKEN AFTER APPROVAL ADVANCE PRICING AGREEMENT(APA)?
    Show AI Summary
    Advance Pricing Agreement requires modified returns and extends reassessment deadlines for affected assessment years by tax authorities.
    Entry into an Advance Pricing Agreement fixing the arm's length price requires the taxpayer to file a modified return for each affected assessment year within three months from the end of the month in which the APA is executed. If an assessment was already completed, the Assessing Officer must reassess under the APA and complete that reassessment within one year from the end of the financial year in which the modified return is filed. If the assessment was pending, the Assessing Officer may complete it within an extended timeframe permitted for APA-related assessments.
    ManualsIncome Tax
    What is the limit of PANCARD regarding payment to Life Insurance company ?
    Show AI Summary
    PAN requirement for life insurance premium payments: quoting PAN mandatory when annual premiums meet statutory threshold.
    A payer must quote PAN when annual payments of life insurance premium to an insurer aggregate to Rs. 50,000 or more, the aggregation determining whether the PAN quoting obligation is triggered as a compliance mechanism for identification and reporting of premium payments.
    ManualsIncome Tax
    What is the basic monetary limit required for PANCARD for amount deposit in mutual fund and shares?
    Show AI Summary
    PAN requirement for mutual fund and share deposits triggers mandatory identification and reporting when payments reach the statutory threshold.
    Quoting a Permanent Account Number (PAN) is mandatory for deposits into mutual funds and for share purchases when the payment amount is fifty thousand rupees or more, under the PAN provisions and implementing rules governing income-return and reporting obligations.
    ManualsIncome Tax
    What is the basic limit for PANCARD for payment to foreign country?
    Show AI Summary
    PAN requirement for foreign travel payments: cash disbursements above prescribed limit require PAN for travel, tour, or currency purchases.
    A PAN must be furnished where a single-instance cash payment connected with travel to a foreign country exceeds the prescribed cash threshold; this covers cash payments for fare, payments to travel agents or tour operators, payments to authorized persons under foreign exchange law, and purchases of foreign currency, while excluding travel to neighbouring countries and specified pilgrimage locations.
    ManualsIncome Tax
    Whether PANCARD is require for opening account in bank?
    Show AI Summary
    Permanent Account Number requirement: PAN is mandatory for opening bank accounts under income tax rules with no monetary threshold.
    Permanent Account Number (PAN) is mandatory for opening a bank account under the income tax statutory framework and implementing rules; the requirement applies generally and the source does not specify any monetary threshold limiting the obligation, reflecting PAN's function as an identification and compliance mechanism in return of income and assessment procedure contexts.
    ManualsIncome Tax
    What is the limit of PANCARD for amount depositing in securities.?
    Show AI Summary
    PAN requirement for securities transactions mandates furnishing PAN for deposits exceeding prescribed threshold to enable identity verification.
    A PAN furnishing requirement applies to sale and purchase of securities: where consideration in a securities transaction exceeds the statutory high-value threshold, the person transacting must furnish their Permanent Account Number to the counterparty, implementing identity verification and enabling tax reporting obligations under the income-tax rules.
    ManualsIncome Tax
    Is PANCARD is required for time deposit exceed a time of ₹ 5 lakhs?
    Show AI Summary
    PAN requirement for time deposits: PAN must be furnished when a time deposit exceeds the prescribed regulatory threshold.
    A PAN must be furnished when a depositor makes a time deposit with a bank, banking company, or banking institution that exceeds the prescribed monetary threshold; this imposes an identification and reporting obligation under the income tax PAN provisions and rules.
    ManualsIncome Tax
    What is the Basic limit of PANCARD for sale purchase of immovable property?
    Show AI Summary
    PAN requirement for immovable property transactions: PAN must be furnished where property value meets the statutory threshold.
    A Permanent Account Number (PAN) must be furnished for sale or purchase of immovable property when the transaction reaches the statutory value threshold, as part of PAN-related obligations in return of income and assessment procedure; this requirement applies to parties to the transaction to ensure tax documentation and compliance.
    ManualsIncome Tax
    Is Permission is Required For Filing Of Revised Return?
    Show AI Summary
    Right to file revised return: no prior permission required and permission-application cannot substitute for revision.
    No prior permission is required to file a revised return; the assessee has a right to submit a revised return. An application framed as seeking permission to revise the originally filed return cannot be treated as, or substitute for, a valid revised return, and therefore does not meet the statutory mechanism for revision.

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      Rationalisation of provision of transfer of capital asset to partner on dissolution or reconstitution

      1 February, 2021

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      Budget 2021-22 + FINANCE Bill, 2021

      Rationalisation of provision of transfer of capital asset to partner on dissolution or reconstitution

      The existing provisions of section 45 of the Act inter alia, provides that any profits or gains arising from the transfer of a capital asset shall be chargeable to income-tax under the head Capital gains and shall be deemed to be the income of the previous year in which such transfer takes place. Further sub-section (4) of the said section, provides that the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society)or otherwise, shall be chargeable to tax as the income of such firm or other association of persons or body of individuals of the previous year in which the said transfer takes place. Further, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration for the purposes of section 48.

      In this regard, it has been noticed that there is uncertainty regarding applicability of provisions of aforesaid sub-section to a situation where assets are revalued or self- generated assets are recorded in the books of accounts and payment is made to partner or member which is in excess of his capital contribution.

      Hence, it is proposed to substitute the existing sub-section (4) of section 45 of the Act with a new sub-section (4) and also insert a new sub-section (4A) to this section.

      New proposed sub-section (4) of section 45 of the Act applies in a case where a specified person who receives during the previous year any capital asset at the time of dissolution or reconstitution of the specified entity. The capital asset represents the balance in the capital account of such specified person in the books of the specified entity at the time of its dissolution or reconstitution. In this situation, the profit and gains arising from the receipt of such capital asset by the specified person shall be chargeable to income-tax as income of the specified entity under the head “capital gains” and shall be deemed to be the income of such specified entity of the previous year in which the capital asset was received by the specified person. For the purposes of section 48 of the Act, the fair market value of the capital asset on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. The balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset.

      New proposed section sub-section (4A) of section 45 of the Act applies in a case where a specified person receives during the previous year any money or other asset at the time of dissolution or reconstitution of the specified entity. The money or other asset is required to be in excess of the balance in the capital account of such specified person in the books of accounts of the specified entity at the time of its dissolution or reconstitution. In this situation, the profits or gains arising from the receipt of such money or other asset by the specified person shall be chargeable to income-tax as income of the specified entity under the head "Capital gains" and shall be deemed to be the income of such specified entity of the previous year in which the money or other asset was received by the specified person. For the purposes of section 48 of the Act,

      • value of the money or the fair market value of other asset on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset; and

      • the balance in the capital account of the specified person in the books of accounts of the specified entity at the time of its dissolution or reconstitution shall be deemed to be the cost of acquisition.

      The balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account increase in the capital account of the specified person due to revaluation of any asset or due to self- generated goodwill or any other self-generated asset.

      For the purposes of these two sub-sections,-

      • specified person” is proposed to be defined as a person who is partner of a firm or member of other association of persons or body of individuals (not being a company or a cooperative society), in any previous year;

      • “specified entity” is proposed to be defined as a firm or other association of persons or body of individuals (not being a company or a cooperative society);and

      • “self-generated goodwill” and “self –generated assets” are proposed to be defined as goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.

      Consequential amendment is also proposed in section 48 of the Act to provide that in case of specified entity, the amount included in the total income of such specified entity under sub-section (4A) of section 45 which is attributable to the capital asset being transferred, shall be reduced from the full value of the consideration to compute income charged under the head “capital gains”. This is to be calculated in the manner to be prescribed later. This is to mitigate the double taxation which may have happened but for this provision in a situation where an asset which was revalued and for which income under the proposed sub-section (4A) of section 45 of the Act was brought to tax is transferred subsequently by the specified entity.

      These amendments will be effective from the 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.

      [Clauses 14 and 16]

       

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      Budget 2021-22 + FINANCE Bill, 2021

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      ActsIncome Tax
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