Uncategorized
Cost plus method
COST PLUS METHOD (“CPM”)
Under Cost plus method, the arm’ s length price is determined by adding appropriate gross profit margin , also known as the cost plus mark up, (considering the function performed, return on capital and risk assumed by an entity) to the AE’s cost of producing goods/ providing services.
This method is most suitable in cases, where a manufacturer sells tangible goods to both related and unrelated parties.
As per the Organisation for Economic Co-operation and Development (OECD), Cost Plus Method is applicable when,
- Semi-finished goods are sold between Associated Enterprises,
- There are long term supply and purchase agreements between Associated Enterprises,
- Provision of services between Associated Enterprises,
- Agreements relating to contract manufacturing, between Associated Enterprises.
STEPS INVOLVED IN COST PLUS METHOD
STEP 1 : – Direct and indirect costs of production
Determine the direct and indirect costs of production in a tested party transaction.
STEP 2 : – Determine normal gross profit mark-up to such costs
Determine the amount of a normal gross profit mark-up to such costs, arising from the transfer or provision of the same or similar goods or services : –
- by the enterprise itself, (i.e., transfer of similar goods or services by the enterprise – Internal comparable), or
- by an unrelated enterprise to another unrelated enterprise (i.e., transfer of similar goods or services between unrelated parties) – External comparable,
in a comparable uncontrolled transaction, or a number of such transactions.
STEP 3 : –
The normal gross profit mark-up determined above shall be adjusted to account for the functional and other differences.
STEP 4 : –
The costs referred to in Step 1, shall be increased by the adjusted profit mark-up calculated in Step 3 leads to arm’s length price.
For details of other methods of Transfer Pricing, please click here https://arinjayacademy.com/transfer-pricing-methods/
CA Final International Taxation Notes Elective Paper 6C
CA Final International Taxation Notes Elective Paper 6C
Module 1 – Transfer Pricing
Module 3 – Authority for advance rulings
Module 3 – Double taxation relief
Module 8 – Anti Avoidance Measures
- Tax Avoidance
- What is Treaty Shopping
- Controlled Foreign Corporation (CFC) Rules and Thin capitalization – BEPS
Module 9
BOOK APPOINTMENT – INTERNATIONAL TAX
- CHOOSE YOUR REQUIREMENTS : –
-
- 15 MINUTES – RS. 5,999
- 30 MINUTES – RS. 9,999
- 45 MINUTES – RS. 12,999
- 60 MINUTES – RS. 14,9992.
2.PAY DESIRED AMOUNT AT https://rzp.io/l/xrkFzIL
3. EMAIL YOUR QUERY TO ARINJAY2019@GMAIL.COM AND WE SHALL CONNECT WITH YOU ON THE NEXT WORKING DAY
STEPS TO ASK YOUR QUERIES
STEPS – PAY RS. 49 / – AT THE FOLLOWING LINK – https://rzp.io/l/SHTsixo (MAXIMUM TIME 15 MINUTES OR ONE QUERY)
EMAIL YOUR QUERY TO ARINJAY2019@GMAIL.COM , ALONGWITH PHONE NUMBER
YOU ARE READY TO GO –
IMPORTANT NOTE – ALL QUERIES POSTED 9 PM SHALL BE RESOLVED AT NEXT DAY.
Equalisation Levy
A. MEANING OF EQUALISATION LEVY
Equalisation levy (sometimes written as Equalization levy) , means the tax leviable on consideration received or receivable for following services (termed as ‘digital advertisement services’) : –
- Online advertisement,
- Provision of digital advertising space, or
- Any other facility or service for the purpose of online advertisement.
- Any other service as may be notified by the Central Government (Till now no other service has been notified for equalization levy)
Note : –
Equalisation Levy is not a part of income-tax as it is introduced by way of separate chapter in the Finance Act, 2016. Like STT, it will remain a separate tax.
B. FEATURES OF EQUALISATION LEVY
Charged only on online advertisement services
Equalization levy shall be charged only on online advertisement services . It is not chargeable on other digital services like provision of online content, online data, provision of any facility or service for uploading, storing or distribution of digital content, etc.
Charged only for services
Equalization Levy is charged only for specified services . There is no equalisation Levy on goods sold by the non-residents through e-commerce companies. Thus, Equalisation Levy is not required to be deducted on goods purchased through E-commerce websites, like Amazon, Ebay, etc.
Advertisement service should be provided by the non-resident
Equalisation levy shall be charged only when advertisement services are provided by the non-resident. Equalisation levy seeks to cover only non-resident who earns advertisement revenue from India and avoid payment of income-tax (like Facebook, Google, Yahoo, etc.). Equalisation levy shall not be charged where the covered advertisement services provided by residents , as such person are already liable to pay income-tax on his global income.
Charged only on business to business (b2b) transactions.
Equalisation levy will be charged only on Business to Business (B2B) transactions. Any advertisement services taken by Individual for his personal purposes will not attract Equalisation levy. Such business may be carried on by a resident person or non-resident having PE in India . Thus, advertisement services taken by non-resident (having a PE in India) from another non-resident will also attract Equalisation levy.
CHARGE OF EQUALISATION LEVY – CONDITIONS FOR LEVY
Equalisation Levy is charged at the rate of 6% (w.e.f June 1, 2016) on payment for digital advertisement services (discussed above) provided all the following conditions are satisfied : –
- Consideration is paid or payable only for digital advertisement services;
- Consideration is paid or payable to non-resident person; and
- Consideration is paid or payable by a –
- Resident person carrying on business or profession ; or
- Non-resident having a PE in India.
EXAMPLE 1 : –
XYZ Pvt. Ltd. (Indian Company) has to make payment to a UK based company for accessing online content relating to industrial experience. Whether Indian company would be liable to deduct Equalization Levy while making payment to such foreign company ?
SOLUTION : –
Equalization levy shall be deducted only when payment is related to advertisement services. Thus, Equalization levy shall not be deducted on such transaction. However, Indian company has to ascertain whether such payment is liable for withholding tax under Income-Tax Act.
EXAMPLE 2 : –
ABC ltd. (Indian company) has placed an order to buy goods from an E-Commerce website, Amazon.com. Whether ABC ltd. is liable to deduct Equalization levy before making payment ?
SOLUTION : –
Equalisation levy is imposed only on advertisement services, and not on purchase of goods from E-commerce website. Thus, Indian company is not required to deduct Equalization levy on such transaction
EXAMPLE 3: –
An Indian company has booked an advertisement slot on Red FM 93.5, an Indian radio station. Whether it is liable to deduct Equalization levy while making payment for such services?
SOLUTION : –
Equalisation Levy shall be charged only when it is made for online or digital advertisements, and the service provider is non-resident. In the instant case Red FM is a resident. Thus, Equalisation levy shall not be deducted in this case.
EXAMPLE 4: –
Mr. A wants to publish advertisement in matrimonial column of New York Times newspaper. Whether he is liable to deduct Equalisation levy ?
SOLUTION : –
Mr. A is not liable to deduct Equalisation levy while making payment of matrimonial advertisement. Equalisation levy is deducted only on Business to Business (B2B) transactions. Advertisement in matrimonial column is not intended to serve any business purpose of Mr. A.
EXAMPLE 5: –
Alibobo (foreign company) makes payment of Rs 5 lakhs to another foreign company for online advertisement. Alibobo does not have any PE in India. Whether it is liable to deduct Equalisation Levy from such payment to the foreign company ?
SOLUTION : –
Foreign company is liable to deduct Equalisation levy for advertisement payments, only when it has PE in India. In this case Equalisation levy is not chargeable as Alibobo does not have any PE in India.
EXAMPLE 6: –
X International (foreign company) makes payment of Rs 5 lakhs to W International (another foreign company) for online advertisement. X International Ltd. has PE in India and such advertisement is relating to the operations of the PE in India . Whether X is liable to deduct Equalisation Levy ?
SOLUTION : –
Foreign company would be liable to deduct Equalisation levy for advertisement payments only when it has PE in India. In this case Equalisation levy is chargeable as X International has PE in India.
PERSON LIABLE TO DEDUCT EQUALIZATION LEVY -SECTION 166
The following person , who avails services which are liable to equalisation levy , are liable to deduct such levy : –
- Person who is a resident, and is carrying on business or profession; or
- Non-resident having a permanent establishment in India
The equalisation levy shall be deducted from the amount paid or payable to a non-resident , where such payments are made for digital advertisement services . Equalization levy shall be deducted at the rate of 6%.
WHOSE INCOME IS LIABLE FOR DEDUCTION OF EQUALISATION LEVY ?
Foreign internet companies (such as social media companies), search engines, media websites, that do not have any physical presence in India shall be liable to pay Equalization Levy.
However, Equalization levy shall not be charged if any of the following conditions are satisfied –
Non-resident providing advertisement service has a PE in India
Where the non-resident providing advertisement service has a PE in India and the advertisement service is effectively connected with such PE. Equalizationlevy intends to tax advertisement revenue of the non-residents, which escape from Indian income-tax. When advertisement revenue of non-resident is liable to income-tax in India due to existence of its PE in India, then there is no need to apply Equalisation levy on such income.
Aggregate consideration is less than the prescribed threshold
Where the aggregate amount of consideration for advertisement services received or receivable, from each of the non-resident is Rs 1 lakh or less during the year. Such threshold limit of Rs 1 lakh is specified for Equalization levy, so as to limit its impact and reduce the compliance burden on taxpayers.
Purpose of services is non business
Where the payment for the advertisement service is not for the purposes of carrying out business or profession. The intention of the legislation is to cover only only Business to Business (B2B) transactions under Equalization levy .
DUE DATE FOR PAYMENT OF EQUALIZATION LEVY
Equalisation levy deducted during any calendar month, is required to be paid to the credit of the Central Government by the 7th day of the month immediately following the said calendar month. For example, Equalization levy deducted in the month of April, 2018 shall be paid on or before May 7, 2018. Such levy has to be deposited to the credit of the Central Government by remitting it into the Reserve Bank of India or in any branch of the State Bank of India or of any authorised Bank accompanied by an equalisation levy challan.
RATE OF EQUALIZATION LEVY
Equalisation levy shall be charged at 6% of the amount of consideration paid or payable to non-resident person for digital advertisement services.
Note : –
The amount of consideration for digital advertisement, Equalization levy, interest and penalty has to be rounded off to the nearest multiple of Rs 10 [Rule 3 of Equalisation Levy Rules, 2016]
TDS Rate in case of no PAN – Section 194J
This post provides the TDS rate in case of no PAN is provided by the recipient .
TDS Rate in case of no PAN – Section 194J
TDS shall be deducted @ 20% in case payee has not furnished his PAN with the person responsible for deduction tax i.e. deductor.
Illustrations
Example 1:
A lawyer has rendered legal services to CVV India Pvt. Ltd. during PY 2018-19. He charged Rs. 15,00,000 for the services rendered by him. How much tax shall be deducted u/s 194J, if CVV India Pvt. Ltd. does not provide PAN to the lawyer ?
Solution:
While the regular TDS would have been Rs. 150,000, in the given case, TDS shall be deducted @ 20% on Rs. 15,00,000 i.e. Rs. 3,00,000
Section 192 of Income Tax Act – TDS on Salary Section
Section 192 of Income Tax Act – TDS on Salary Section
Applicability of TDS u/s 192
Any person responsible for paying any income chargeable under the head “Salaries” (hereinafter referred to as, “the Employer”) shall at the time of payment, deduct tax at source on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the FY in which the payment is made on the estimated income of the assessee under this head for that FY. [Section 192(1)]
Note :
- The person responsible for making the payment of salary may, at the time of making any deduction, increase or reduce the amount to be deducted for the purpose of adjusting any previous excess deduction or deficiency. [Section 192(3)]
- The Following points should keep in mind by the person responsible to paying salary, at the time of deducting tax at source:
-
-
-
- Average rate of Income tax means : Income tax calculated on total income
-
-
Total income
-
-
-
- Employer should consider the amount deductible u/s 80C, 80CCC, 80CCD, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, 80GG, 80GGA, 80TTA & 80U.
-
-
-
-
-
- The deduction in respect of donation given by the employee to a notified public charitable institute, shall not be given by employer. Tax relief in respect of such donation admissible u/s 80G will have to be claimed by the employee at the time of finalization of assessment.
- Exemption in respect of HRA shall be calculated by the employer according to limit provided u/s 10(13A). The details of rent paid, name of landlord, address of property and PAN of landlord (PAN is not required if rent paid is up to Rs. 1,00,000) should be submit by employee to the employer.
- For the purpose of tax deduction at source, CBDT has given exemption from production of rent receipt, if HRA is upto Rs. 3,000/- per month.
-
-
-
Tax liability : –
-
- Rate of Tax : Income Tax has to be calculated at the average rate of income tax has Tax is deductible at the rate applicable for the relevant FY.
- If the employee does not have PAN, tax is deductible at the rate:
- Normal rate;
- 20% .
whichever is higher.
-
- However, if the estimated salary of an employee does not exceed the maximum amount not chargeable to tax, tax shall not be deductible.
- Lower withholding Certificate: The employee may obtain lower withholding certificate, by submitting application u/s 197 in Form No. 13 to the AO.
- Employer shall issue TDS certificate in Form No. 16 shall be given to the employee annually on or before May 31 of succeeding FY.
- Payment of tax on non-monetary perquisites (without deduction) – Section 192(1A) & 192(1B) :
The person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in section 17(2), may pay at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of section 192(1). [Section 192(1A)]
For this purpose, tax shall be determined at the average of income-tax computed on the basis of the rates in force for the FY, on the income chargeable under the head “Salaries” (including the income referred above), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head “Salaries”. [Section 192(1B)]
- Person is employed by two or more employers – Section 192(2) :
Where a person is employed by 2 or more employers during the FY :
- In such a case, employee may furnish to one of the said employers, the details of salary due or received from the other employers and tax deducted thereon, in Form No. 12B.
- Employer to whom the Form No. 12B is submitted shall take into account the details so furnished and deduct tax on the basis of aggregate salary. [Section 192(2)]
- Relief under section 89 – Section 192(2A) :
In respect of salary payment made to employees of Government, Company, co-operative society, local authority, university, institutions, association or body, deduction of tax at source should be made after allowing relief u/s 89(1), if eligible. Employee shall submit the prescribed information in Form No. 10E to the employer, to avail the above benefit. [Section 192(2A)]
- Furnishing of particulars of other income of employee – Section 192(2B) :
Employee may submit to the employer, the details of his other incomes chargeable to tax for that FY.
The following may send to the employer:
- details of such other income and tax deducted thereon;
- loss under the head “Income from House Property” (not any other loss).
The employer shall take into account the above particulars while calculating tax deductible at source. [Section 192(2B)]
Note : Only loss under the head “Income from House Property” shall take into account by the employer (not any other loss).
- Furnishing of statement of particulars of profits in lieu of salary by employer to employee – Section 192(2C) :
Employer shall furnish to the employee, a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in Form 12BA. [Section 192(2C)]
Form No. 12BA (including the nature and the value of perquisite) is to be provided by the employer to employee if salary exceeds Rs. 1,50,000. The information shall be provided in Form No. 16, in other cases.
- Requirement to obtained supporting evidence for HRA/ LTC/ Interest on home loan/ deductions under Chapter VI-A – Section 192(2D) and Rule 26 : –
The person responsible for paying any income chargeable under the head “salaries” shall, obtain from the assesse, the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in the prescribed form and manner, for the purposes of :
- estimating income of the assessee ; or
- computing tax deductible thereon. [Section 192(2D)]
Rule 26 has been inserted w.e.f. June 1, 2016. According to this rule, an employee for the purpose of estimation of his income and tax deduction at source, shall require to furnish the supporting evidence in respect of the following in Form No. 12BB to the employer:
S. No. | Nature of claim | Evidence/ Particulars |
1 | House Rent Allowance | · Name & address of the landlord(s);
· Amount of rent paid/ payable;
· PAN of the landlord(s) if the aggregate rent paid during the PY exceeds Rs. 1 lakh. |
2 | Leave travel concessions or assistance | Amount and evidence of expenditure
|
3 | Deduction of interest on borrowing under the head “Income from House Property” | · Name, address and PAN of the lender;
· Interest paid/ payable to the lender. |
4 | Deduction under Chapter VI-A | Amount and evidence of expenditure or investment. |
- Salary Paid in Foreign Currency – Section 192(6) and Rule 26 :
For the purpose of deduction of tax on salary payable in foreign currency, the value of salaries in terms of rupees shall be calculated at the “telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted – [Section 192(6) and Rule 26]
Deduction of tax deduction at source from pre-mature withdrawal from employees provident fund – Section 192A :
Recognized Provident Fund (RPF) :
Under the Employee Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952), certain specified employers are required to comply with the Employees Provident Fund Scheme, 1952 (EPFS). In this scheme, Provident Fund (PF) is managed by the Provident Fund Commissioner and PF contributions of the employer and employees are transferred to the provident Fund Commissioner. Employees get payment from the trustee of Employees Provident Fund Scheme (EPFS), at the time of retirement.
Employers are also permitted to establish and manage their own private provident fund scheme (PPFS) subject to conditions given u/s 17 of EPF & MP Act, 1952. In this scheme, a provident fund trust is created by the employer and employees. Provident fund is managed by the trust and employees get payment from provident fund trust, at the time of retirement.
The provident funds established under a scheme framed under EPF & MP Act, 1952 or provident fund exempted u/s 17 of the said Act and recognized under Part A of the Fourth Schedule to the IT Act, 1961 are known as recognized provident fund (RPF).
- Pre-mature withdrawal from employees provident fund at the time of retirement or at the time of leaving job :
- In the following situations, the withdrawal of accumulated balance by an employee from the RPF is exempt in the hands of employee – Rule 8 of Part A to the Fourth Schedule :
- Employees have rendered continuous service with his employer for a period of 5 years or more;
- Entire balance of PF standing to the credit of the employee is transferred to his account under a NPS referred to in section 80CCD.
- Employee has been terminated because of certain reason which are beyond his control (e.g. ill health of the employee, completion of project for which the employee was employed, discontinuation of business by employer etc.)
- Employee has resigned before completion of 5 years but joined to the another employer who maintains RPF and PF amount with the current employer is transferred to the new employer.
Note : –
- For the purpose of calculating 5-year time limit, service rendered with the previous employer shall be included, if the previous employer also maintained recognized provident fund and the balance of provident fund of the employee was transferred to the current employer.
- In case, employees make withdrawal before continuous service of 5 years (other than the above cases), such withdrawal shall be treated as withdrawal from Unrecognized Provident Fund (UPF). UPF withdrawal (Employer’s contribution) is taxable (hereinafter referred to as “premature withdrawal”).
Rule 9 of Part A of the Schedule IV provides the manner of computation for determining tax liability of the employees in respect of such pre-mature withdrawal. Rule 10 of Part A of the Schedule IV provides that the trustees of the RPF, shall deduct tax, at the time of payment.
Rule 9 provides that the tax on withdrawal amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made.
Applicability and Rate of TDS u/s 192A :
Tax is deductible;
from accumulated lump sum payment (“taxable premature withdrawal”);
at the time of retirement or leaving job;
in case the employee has not rendered continuous service of 5 years; and
he does not fall in any of the above 4 cases;
at the rate of 10% of taxable pre-mature withdrawals.
Note :
- In case of recipient is non-resident, the rate of 10% will be increased by surcharge (if applicable) and health and education cess.
- Only amount includible in the total income of the employee is subject to tax deduction at source, out of lump sum payment.
- If the PAN of the recipient is not available, tax is deductible at the maximum marginal rate of tax (i.e. at 35.88 % for the FY 2018-19).
- Time of tax deduction at source :
Tax shall be deducted at the time of payment of accumulated balance due to the employee.
Who is deductor :
Tax is to be deducted by the trustees of Employees Provident Scheme, 1952 or any other person authorized under the scheme to make payment of accumulated sum to employees. Section 192A is not applicable, if payment is made by trustees of PPFS.
- Non-applicability of TDS u/s 192A :
No tax deduction is to be made if “taxable premature withdrawals” is less than Rs. 50,000.
- Declaration by an employee in Form No. 15G/ Form No. 15H :
An employee can submit a declaration in Form No. 15G (Form No. 15H in case of senior citizen) to the effect that his total income including taxable premature withdrawal from provident fund does not exceed the maximum amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted.
- Lower withholding certificate u/s 197 :
Lower withholding certificate cannot be obtained to get payment without deducting TDS or with lower TDS by submitting Form No. 13 to the AO, since section 197 has not been amended.
How to fill Form 15CB
Form 15CB – Purpose of Form 15CB
Form 15CB is the Form, in which a Chartered Accountant, is required to certify the tax that should be deducted from specified payments to the non-resident , which is the subject matter of such certificate (Section 195(6)). Such Form 15CB has to be obtained , before paying any sum to non-resident , whether or not the payment is chargeable to tax , and has to be filed online.
Relevant Factors to be considered in making decision on , which Part of Form 15CB needs to be filed are as under : –
- Whether remittance is chargeable to tax or is not chargeable to tax under Income Tax Act , 1961 ?
- Whether remittance is less than or more than Rs 5 lakhs ?
- Whether certificate of AO is obtained for nil or lower deduction of TDS ?
- Whether payments covered under Specified list ?
Once these items are identified, the Payor would be required to furnish Form 15CA/Form 15CB as per the following table : –
However, Form 15cb is not required to be obtained in the case of the following specified transactions : –
Step by Step Procedure to fill form 15CB ?
BASIC DETAILS – FORM 15CB
The Chartered Accountant needs to enter the name of payor and non-resident payee along with PAN / TAN of payor in Form 15CB .
NAME AND ADDRESS OF BENEFICIARY
The Chartered Accountant need to enter the name and address of non-resident beneficiary .
REMITTANCE DETAILS – FORM 15CB
1.Country to which remittance is made :- In this column, Foreign Country to which remittance is made should be entered
Currency :- In this column type of foreign currency should be reported in which payment is to be made (like US dollar, Pounds, etc.)
2.Amount payable :- In this column amount payable to non-resident as per invoice should be reported . The amount payable in foreign currency would be readily available from the invoice or agreement .
3.Bank details :- Details of banks should be reported from which payment is to be made to the non-resident
5.Proposed date of remittance :- Proposed date of remittance would be available from the bank advice sent by deductor to its bank for payment to non-resident .
6.Nature of remittance as per agreement :- In this column nature of remittance should be selected , i.e., whether remittance is made for royalty , short-term capital gains , professional services, etc. Nature of remittance as per service agreement or contract should be reported .
7.Relevant purpose code as per RBI :- After selecting the nature of service, list of RBI code relating to such service would appear in order to pin point and report relevant service .
8.Grossing-up :- Where withholding tax is borne by the deductor then ‘Yes’ option should be selected in this column .
8.Tax liability without considering DTAA :- In this column the tax liability will be computed without considering the impact of relevant DTAA .
- Remittance chargeable to tax India :- Where remittance is chargeable to Income Tax then the option of “Yes” should be selected from the drop down list . Where remittance is not chargeable to tax then there is no need to file Form 15CB and in such case Part D of Form 15CA should only be filed .
- Relevant section under which remittance is covered :- In this column we need to mention the relevant section under which such remittance is taxable or under which tax rate is prescribed. In case of Royalty / Fees for Technical Services Section 9(1)(vi)/ (vii) read with Section 115A should be mentioned
- Amount of income chargeable to tax :- In this column amount payable in INR which is reported in S. No 2 in INR should be mentioned in case of income taxable on gross basis (like, Interest , Royalty, Fee for Technical Services) . Otherwise net income should be computed after deducting expenditure and that net income should be mentioned in this column .
- Tax liability :- In order to compute tax liability, amount of income chargeable to tax should be multiplied with the rate of tax under Income Tax Act
9.If income is chargeable to tax in India and any relief is claimed under DTAA :- In this column the tax liability will be computed on the basis of relevant DTAA .
- Whether TRC is obtained from the recipient of remittance :- Where TRC is obtained from the non-resident payee then option of Yes should be selected . Where TRC is not obtained from the recipient then the withholding tax liability would be determined as per the Income Tax Act .
- Please specify relevant DTAA :- In this column we need to mention the relevant Article of DTAA . Generally in many DTAAs Article 10, Article 11 and Article 12 are mentioned for Dividend , Interest and Royalty and Fees for Technical Services, respectively . We also need to mention the relevant paragraph of Article in this column .
- Taxable income as per DTAA :- In case income of non-resident payee is taxable as per DTAA , then such amount of income should be specified in this column. In case of income taxable on gross basis, the grossed up amount should be mentioned here. However, if such income is not taxable under DTAA then nil amount should be mentioned here .
- Tax liability as per DTAA :- Amount of taxable income should be multiplied with the applicable rate under DTAA in order to determine the tax liability .
9.If income is chargeable to tax in India and any relief is claimed under DTAA :- In this column the tax liability will be computed on the basis of relevant DTAA .
- A. If the remittance is for royalties , fee for technical services , interest , dividend , etc. :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to royalties , Fee for technical services , interest or dividend .
- Article of DTAA :- In this column relevant article of DTAA should be mentioned, (i.e., Article 10 , Article 11 or Article 12 which is used for such income in most of the DTAAs)
- Rate of TDS required to be deducted in terms of such article of the applicable :- In this column rate of TDS given in DTAA should be mentioned .
9.If income is chargeable to tax in India and any relief is claimed under DTAA :- In this column the tax liability will be computed on the basis of relevant DTAA .
- B. In case remittance is on account of business income , please indicate :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to business income .
- Whether such income is liable to tax in India :- In this column relevant option ‘Yes’ should be selected if such income is taxable in India . Generally business income is taxable in India when non-resident payee has Permanent Establishment in India and such business income is connected with such Permanent Establishment .
- If not please furnish brief reasons thereof, specifying relevant article of DTAA :- Generally business income of non-resident is not taxable in India when NR does not have any Permanent Establishment in India or such business income is not connected with such Permanent Establishment in India . Thus, in the column, relevant paragraph of Article 7 of DTAA should be mentioned wherein requirement of Permanent Establishment is specified to tax business profits of non-resident in India .
REMITTANCE DETAILS
9.If income is chargeable to tax in India and any relief is claimed under DTAA :- In this column the tax liability will be computed on the basis of relevant DTAA .
- C. In case remittance is on account of capital gains , please indicate :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to capital gains .
- Amount of long-term capital gains :- In this column amount of long-term capital gains should be mentioned .
- Amount of short-term capital gains :-In this column amount of short-term capital gains should be mentioned .
- Basis of arriving taxable income :- In this column, relevant Article of DTAA should be mentioned as per which taxability of capital gains is determined .
REMITTANCE DETAILS
9.If income is chargeable to tax in India and any relief is claimed under DTAA :- In this column the tax liability will be computed on the basis of relevant DTAA .
- D. In case of other remittance not covered by sub-items A, B and C :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to other income. Other income would be selected where such income is not covered as dividend, interest, royalty, Fee for Technical services, capital gains .
- Please specify nature of remittance :- In this column nature of remittance of other income should be specified
- Whether taxable in India as per DTAA :- In this column ‘Yes’ option should be selected where other income is taxable in India
- If yes, rate of TDS required to be deducted in terms of such article of applicable DTAA :- Generally no rate of tax is specified for other income in DTAA . Thus, in such case tax rate of 40% given in the IT Act should be specified here .
- If not, please furnish brief reasons thereof, specifying relevant article of DTAA :- In numerous DTAAs , other income is taxable in the country of residence only . Thus, in such a case relevant para of Article of DTAA should be specified here .
REMITTANCE DETAILS
10.Amount of TDS :-
- In foreign currency
- In Indian Rs
REMITTANCE DETAILS
11.Rate of TDS :- There is an option in the drop down list to select rate of TDS as per the Income Tax Act or rate of TDS as per DTAA. Where the rate of TDS under the DTAA is beneficial , then the option of ‘As per DTAA’ should be selected .
12.Actual amount of remittance after TDS (in foreign currency) :- Where the withholding tax is borne by the payor, and the income of non-resident is taxable on gross basis (i.e, in case of dividend, interest, royalty, Fee for Technical Services), the grossed up amount should be reported . Where the withholding tax is not borne by the payor, the net amount should be mentioned after deducting TDS .
13.Date of deduction of tax at source, if any :- Where TDS is already deducted on credit basis, the date of such deduction of TDS should be mentioned .
Income Tax Calculator
Steps to use the Income Tax Calculator : –
An income tax calculator can be used to calculate taxes for different categories of taxpayers for different assessment year. Most of the income tax calculators require prior knowledge of income tax to calculate the right amount of taxes.
In order to use the income tax calculator, the following steps should be undertaken (See Link below for various Income Tax calculators) : –
- Select the relevant Assessment Year
- Select the category of the taxpayer . The following categories are provided : –
- Individual
- Hindu Undivided Family – HUF
- Association of person/ body of individuals
- Domestic company. These are further divided into two categories, namely, those who had turnover of of more than Rs. 250 crores, during FY 2017-18, and those who did not had turnover of of more than Rs. 250 crores, during FY 2017-18
- Foreign company
- Firms
- Limited liability Partnership
- Cooperative society
Use the income tax calculator at the following link : – https://www.taxmann.com/Tax-Calculator.aspx
3.Thereafter , the net taxable income of the assessee needs to be entered. Once this amount is entered, depending on the category of the taxpayer, and the relevant income, the calculator would give the following outputs : –
-
- Income tax
- Surcharge
- Health and education cess
- Total tax.
This calculator is a very handy tool, where a person knows the net taxable income. However to arrive at the net taxable income, one would need to know or compute, the total taxable income, for which all the relevant provision of the Income Tax Act need to be analysed.
Here are the links for some other income tax calculator : –
- https://cleartax.in/paytax/TaxCalculator
- https://www.incometaxindia.gov.in/pages/tools/income-tax-calculator.aspx
- https://www.taxmann.com/Tax-Calculator.aspx
Wish you a Happy and Lower Tax calculations.
GST reverse charge
GST reverse charge
GST reverse charge, means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;
Categories of goods subject to Reverse Charge
Goods like cashew nuts [not shelled/peeled], bidi wrapper leaves, tobacco leaves, supply of lottery, silk yarn, used vehicles, seized and confiscated goods, old and used goods, waste and scrap, raw cotton, etc. are taxable under reverse charge, i.e. recipient is liable to pay tax.
Categories of Services subject to Reverse Charge
Contributed by CA Amit Jain
Section 195 Certificate from AO and Validity of certificate
Section 195 certificate can be applied for by the Payor or the Payee.
- Section 195 certificate applied by Payor – Section 195(2)
- Payor may make an application to the Assessing Officer, for grant of certificate determining the appropriate portion of such sum, which will be chargeable to tax so that he may apply withholding tax on such portion only
- Such application would be made only when payer considers that whole of such payment to non-resident would not be income chargeable to income-tax
- AO cannot be approached to grant a certificate that no tax is payable on any gross sum payable by the Payor
2. Section 195 certificate of Nil withholding tax applied by NR Payee – Section 195(3)
Non-resident payee (non-corporate non-resident or foreign company)
may make an application to the Assessing Officer
for grant of certificate , authorizing him to receive
interest or other sum [on which TDS has to be deducted u/s 195(1)]
without deduction of tax thereunder.
NOTE : –
Where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom certificate is granted, shall make payment of such interest or other sum without deduction of tax at source under section 195(1), so long as the certificate in force.
Certificate of Nil withholding tax u/s SECTION 195(3) applied by NR Payee
CONDITIONS TO BE SATISFIED FOR APPLICATION U/S 195(3)
- Applicantis regularly assessed to tax in Indiaand has filed all the returns due before the date of application;
- He is not in default/ Deemed to be in default for any tax, interest or penalty payable under the Income Tax Act
- Additionally, for application made by non banking company, the person should have carried on business in India for a period of 5 yearsimmediately preceding the date of application
- The value of fixed assets in the books of accounts, for the last financial year, should exceed Rs. 50 lakh
- Application in : –
- Form 15C by foreign banking company
- Form 15D by any other person
Certificate for deduction of tax at a lower rate – Section 197 applied by NR Payee
- Application for lower deduction or Nil deduction of TDS can be made by non-resident payee in Form No 13 .
- Such application can also be made before commencement of Financial Year
- No certificate for lower deduction or nil deduction shall be issued, if the non-resident payee does not provide PAN .
- Where such certificate is granted by the AO , payor is required to deduct tax as per the rate given in such certificate .
NOTE : –
- Lower withholding tax or Nil withholding tax shall be deducted upto the limit of income specified in such form .
- Where payment to NR exceeds the amount mentioned in certificate , withholding tax shall be deducted as per normal rate on any excess payment.
Validity period of certificate for non deduction of wht – section 195(4)
Certificate of non-deduction of WHT issued u/s 195(3) shall remain in force till the –
- Expiry of the period specified therein ; or
- Cancellation of WHT certificate by AO.
Note :-
- Certificate for non-deduction of TDS is given on yearly basis . Thus, there is no auto-renewal of such certificate and payee needs to apply for it again in next year .