What is the information you required from clients to file income tax returns and Form 3CA and

3CB
1. Pan Card
2. Aadhar Card (linked with Pan)
3. Form 16 (Part-B) in case of Salaried Person
4. Bank Statement in case of Salaried Person
5. Books of Account with reconciliation of GST Portal in case of Business return.
6. In capital Gain income required purchase and Sale deed.
7. In House Property Head required rent agreement with tenant details.
Following Information Required for filling form 3CA & 3CB.
Details of the Assessee i.e., Name, Address and Permanent Account Number (PAN).
Date of the audit report. Annexure details (Balance sheet, Profit & Loss A/c, other documents, and Form 3CD)

Why Equalization levy Introduced?

Many online Advertisement portals are non-resident and do not have permanent establishment in
India. Many resident assessee make payment to this non-resident for advertisement and claim as
business expenditure u/s 37. Now India is losing its revenue since payer gets the deduction and
amount received by payee is not taxable, so Finance Act 2016 w.e.f. 1/6/16 introduced the concept of
equalisation levy
Background and Relevance of Equalisation Levy
The inadequacy of physical presence is based on nexus rules that are in place in tax treaties. Also, it
includes the flexibility of taxing payments as royalty or fees for technical services creating an ideal tax
terrain for dispute.
To clarify this direction, To make this clearer, the government has introduced in Budget 2016 the
Equalisation Levy to make one of the suggestions of the BEPS (Base Erosion and Profit Shifting) Action
Plan.
In the last 10 years, IT has gone through an explosive growth phase in India and worldwide.
In turn, this has resulted in a variety of new business models, in which the majority of businesses rely
on telecommunications and digital systems.
This has increased the supply and demand for digital services.

To clarify the situation in this area, the government announced in the Budget 2016 the equalisation tax.

Many companies that provide services online have their own country of registration where tax rates are
very low. They also pay very little tax on their worldwide income.
The Main Features of This Levy on Equalisation Are as Follows
The Equalisation Levy was introduced in Finance Bill 2016 in Union Budget 2016-17. Here are its
characteristics of it:
It is taxed to the digital commerce transaction conducted without regard for national borders.
Specific services refer to online advertisements and any digital advertising or any other facility/service
used for online advertising.
The Equalisation Levy is 6% of the value of the consideration paid for specific services received or owed
from a non-resident who does not have the permanence of a permanent establishment (‘PE’) in India or
from a resident of India who is engaged in the profession or business, or from a non-resident who has
a permanent establishment in India.

There is no levy if the total amount of consideration is not more than ₹1 lakh during any prior year.

Applicability of Equalisation Levy

Equalisation Levy is a tax directly which is withheld by the person who receives the service while paying
it. It applies to an Indian resident who is engaged in any profession or business or who has a
permanent business in India or if:
The money has been paid to a non-resident service company.
A service provider’s total annual remittances are greater than ₹1 lakh for a single financial year.
It will be inapplicable in the following situations:
The non-resident service provider concerned has a permanent office in India. Also, the requested
service is linked to that permanent establishment.
The total amount of the consideration to be paid for the specific service received or payable is less than
₹1 lakh.
The service described is not intended to be used to pursue work or profession
3. Roll back provisions in case of merger and demerger
“roll back” provisions refers to the applicability of the methodology of determination of ALP, or the ALP,
to be applied to the international transactions which had already been entered into in a period prior to
the period covered under an APA. However, the “roll back” relief is provided on case to case basis
subject to certain conditions.

Therefore, it is proposed to amend the Act to provide roll back mechanism in the APA scheme. The APA
may, subject to such prescribed conditions, procedure and manner, provide for determining the arm’s
length price or for specifying the manner in which arm’s length price is to be determined in relation to
an international transaction entered into by a person during any period not exceeding four previous
years preceding the first of the previous years for which the advance pricing agreement applies in
respect of the international transaction to be undertaken in future.

The agreement is between the Board and a person. The principle to be followed in case of merger and
demerger is that the person (company) who makes the advance pricing agreement(APA) application or
enters into APA would only be entitled for the rollback provision in respect of international transactions
undertaken by it in the rollback years. Other person (conpanies) who have merged with this person
(company) would not be eligible for the rollback provisions.

Example of merger

if A,B and C merge to form C and C is the APA applicant , then the agreement can only be entered into
with C and only C would be eligible for the rollback provisions. And if A and B merge to form a new
company C and C is the APA applicant , then nobody would be eligible for rollback provisions

Example of demerger
If A has entered into APA and subsequently demerges into A and B , then only A will be eligible for
rollback for international transaction covered under APA. As B was not in existence in rollback years,
availing of rollback to B does not arise
3CA and 3CB
Recent Judgements

Supreme Court’s Landmark Judgement on Income Tax Exemption for Profit Oriented Educational
Institutions (trust or societies etc.)

Supreme Court overruled two previous judgements – Profit Oriented Educational Institutions (trust
or societies etc.) can not Claim Income Tax Exemption u/s 10(23C)

New Noble Educational Society vs Chief Commissioner of Income Tax. (Hon. CJI Uday Umesh
Lalit, Hon. Justices S. Ravindra Bhat and Hon.Justice P S Narasimha)

SC held that educational trust or societies etc., which seek exemption under Section 10 (23C) of
Income Tax Act, should solely be concerned with education, or education related activities.

Where the objective of the institution appears to be profit-oriented such institutions would not be
entitled to approval.

Section 10(23c)(iiiab) provides that the Income received by any university or educational institution
existing solely for educational purposes and not for purposes of profit, and which is wholly or
substantially financed by the Government is fully exempt.

Section 10(23C)(iiiad) provides that the income earned by any university or educational institution
existing solely for educational purposes and not for the purposes of profit shall be exempt from tax,
if the aggregate annual receipts of such university or educational institution.
Andhra Pradesh High Court which held that Trusts which claimed benefit of exemption under
Section 10 (23C) of the Income Tax Act were not created ‘solely’ for the purpose of education and
therefore rejected their claim for registration as a fund or trust or institution or any university or
other educational institution set up for the charitable purpose of education.

Several Educational Trusts had approached the SC against the judgment of the Andhra Pradesh High
Court which held that these trusts which claimed benefit of exemption under Section 10 (23C) of the
Income Tax Act were not created ‘solely’ for the purpose of education and therefore rejected their
claim for registration.

Summarised Conclusions of the Supreme Court:-

It is held that the requirement of the charitable institution, society or trust etc., to ‘solely’ engage
itself in education or educational activities, and not engage in any activity of profit, means that such
institutions cannot have objects which are unrelated to education.

Where the objective of the institution appears to be profit-oriented, such institutions would not be
entitled to approval under Section 10(23C) of the Income Tax Act.

At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided
such surplus is generated in the course of providing education or educational activities.
The reference to ‘business’ and ‘profits’ in the seventh proviso to Section 10(23C) and Section
11(4A) merely means that the profits of business which is ‘incidental’ to educational activity – as
explained in the earlier part of the judgment i.e., relating to education such as sale of text books,
providing school bus facilities, hostel facilities, etc.

While considering applications for approval under Section 10(23C), the Commissioner or the
concerned authority as the case may be under the second proviso is not bound to examine only the
objects of the institution.

To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner
or other authority is free to call for the audited accounts or other such documents for recording
satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it
professes.

It is however clarified that their claim for approval or registration would have to be considered in the
light of subsequent events, if any, disclosed in fresh applications made in that regard.

As a result, it is hereby directed that the law declared in the present judgment shall operate
prospectively.

Case Name : Checkmate Services P. Ltd Vs CIT (Supreme Court of India) Appeal Number : Civil
Appeal No. 2833 of 2016 Date of Judgement/Order : 12/10/2022 Related Assessment Year : Courts :
Supreme Court of India

Checkmate Services Pvt ltd Vs CIT- I (Supreme Court)

Date -12th October 2022
Sub- Deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’
contribution to PF can not be claimed when deposited within the due date of filing of return even
when read with Section 43B of the Income-tax Act,1961.

This important decision was decided in favour of the department on 12th October, 2022 when the
Supreme Court was seized of a situation where Kerala and Gujarat high court were in favour of the
department whereas other high court including calcutta high court decided in favour of the assessee.
The court noted that is apparent is that the scheme of the Act is such that Sections 28 to 38 deal with
different kinds of deductions, whereas Sections 40 to 43B spell out special provisions, laying out the
mechanism for assessments and expressly prescribing conditions for disallowances. The scheme of
the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with
business, commercial or professional expenditure, under various heads (including depreciation).
Each of these deductions, has its contours, depending upon the expressions used, and the conditions
that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions,
dependent upon fulfilment of particular conditions, would qualify as allowable deductions: failure by
the assessee to comply with those conditions, would render the claim vulnerable to rejection.
Finally it was noted that the essential character of an employees’ contribution, i.e., that it is part of
the employees’ income, held in trust by the employer is underlined by the condition that it has to be
deposited on or before the due date. The court pointed out to the finer distinction between Section
43B and the non-obstante clause in that section by observing that the said clause could not be applied
to the deemed income u/s 36(1)(va) which was basically a money held in trust.
Recent amendment in sec 147

Sec 147 : Income escaping Assessment or Reassessment

If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing
Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the
depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections
148 to 153 referred to as the relevant assessment year).
Explanation: For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess
the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the
course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been
complied with.

For making an assessment u/s 147, AO bound to serve notice u/s 148 . Notice u/s 148 can be server after following procedure
given u/s 148A.
During the assessment u/s 147 if AO finds some other income escaped for same AY then AO can assess or reassess such
income also without issuing fresh notice u/s 148 & whithout passing order u/s 148A
What is Faceless Assessment
Faceless assessment means carrying out of income tax assessment procedure without human interface with the use of technolog
Cases shall be assigned to the department through automated allocation system. There will be no direct contact of A.O with ass
a) The provisions of the proposed Section 144B will apply to assessment, reassessment, or re-computation under Sections 143(3
147 of the Act.
b) The National Faceless Assessment Centre (NaFAC) will assign the case for faceless assessment to a specific Assessment Un

c) A notice under section 143(2) or 142(1) of the Act will be served on the taxpayer through NaFAC. The taxpayer may file his
to the said notice under Section 143(3) to the NaFAC, which will forward the reply to the AU. The response has to be filed with
date specified in such notice. If the AU requires further information, documents, or evidence from the taxpayer or any other per
may do so through NaFAC. NaFAC will serve appropriate notice or requisition on the taxpayer or any other person for obtainin
information, etc.
The AU may also make a request through NaFAC for conducting inquiry by Verified Unit (VU).
The AU may request for any technical matter by referring to the Technical Unit (TU) through NaFAC
The taxpayer or any other person will file his reply in response to the said notice to NaFAC, which will forward the reply to the
In case of failure by the taxpayer, NaFAC will intimate the same to the AU.
In such a case, AU will serve upon the taxpayer, through NaFAC, a Show Cause Notice under Section 144, providing him with
opportunity to explain why the assessment should not be completed to the best of its judgment. Further, any report received by
from VU or TU will also be forwarded to the AU.
d) The taxpayer will file his response to the show cause notice under Section 144 of the Act to NaFAC, which will forward it to
If the taxpayer does not respond, NaFAC will intimate the same to the AU.
e) The AU, after considering all the relevant material available on the record, will prepare an income or loss determination prop
where no variation prejudicial to the taxpayer is proposed and send the same to NaFAC.
If a variation is proposed, then a show cause notice – through NaFAC, will be served on the taxpayer stating the variations prop
be made to the income and asking him to submit why the proposed variation should not be made.
f) The taxpayer is required to file his reply to the said show-cause notice to NaFAC within the time allowed to him. NaFAC wil
the reply to the AU. If the taxpayer fails to respond within the specified time, NaFAC will intimate the same to the AU. After c
the taxpayer’s response or intimation from NaFAC of failure of the taxpayer to file a response, and all material available on the
the AU will prepare an income or loss determination proposal and send the same to NaFAC.
g) Upon receipt of the proposal, as above, with or without any verification proposed to the taxpayer’s income, NaFAC may, bas
guidelines issued by the CBDT, convey to the AU to prepare a draft order in consonance with such proposal. The AU will then
draft order or assign such proposal to a Review Unit (RU), which after conducting a review, will prepare a review report and se
NaFAC.
h) NaFAC will forward such review report to the AU. The AU may accept or reject the modification(s) proposed in such a revie
and prepare a draft order accordingly and send it to NaFAC. Reasons for rejection by AU of the modification proposed by the A
recorded in writing.
i) Such a draft order, where there is a proposal to make any variation, which is against the interest of eligible taxpayers under S
144C (1), will be sent to Dispute Resolution Panel (DRP). In any other case, NaFAC will convey to the AU to complete the ass
in accordance with such draft order. AU will pass the final assessment order and initiate penalty proceedings, if any, and send i
NaFAC. NaFAC will serve a copy of such final order, demand notice, etc., to the taxpayer.
j) Any eligible taxpayer, as referred to in Section 144C, upon receiving the draft order as served on him as above, will file his a
or rejection to the variation proposal with DRP under section 144C, and NaFAC, within specified time
k) In case the variation proposed as above are accepted by the taxpayer or not objected to within the aforesaid time, NaFAC wil
AU of the same. AU will then complete the assessment based on the draft order within specified time
l) Where the eligible taxpayer files objections with DRP, NaFAC will send such intimation along with a copy of such objection
AU. Upon receipt of directions received by DRP, NaFAC will forward such directions to the AU. AU will complete the assessm
within specified time. The AU will also initiate penalty proceedings, if any, in consonance with the directions issued by DRP. A
then send a copy of such order to NaFAC.
m) NAFAC, upon receipt of the final assessment order, etc., in the case of an eligible taxpayer, under Section 144 C or in any o
will serve a copy of such order, etc., on the taxpayer along with the demand notice.
n) NaFAC, after completion of the assessment, will transfer all the electronic records of the case to the AO having jurisdiction o
case for such action, as may be required under the provisions of the Income Tax Act.
Recent Changes in Assessment Procedures

As Amended by Finance Act, 2022 INTRODUCTION Finance Act, 2021 introduced major
changes to the provisions of reopening of assessment of an assessee for previous assessments
years. Erstwhile Sections 147 to 151 were replaced with amended Sections 147, 148, 148A,
149, 150 and 151 respectively, with effect from 1 April 2021.
Thus, any notice for re-opening of assessments issued after 1 April 2021 will be governed by
the new provisions contained in amended sections 147 to 151 as upheld by Hon’ble Supreme
Court of Indian in the matter of Union of India & Ors. Appellant (S) Vs. Ashish Agarwal.
Section 148A was introduced by Finance Act, 2022 requiring the Assessing Officer to conduct
inquiry, providing opportunity before issue of notice under section 148.

DISTINCTION BETWEEN OLD AND NEW PROVISIONS

Under the erstwhile regime, the Assessing Officer (AO) used to issue notices u/s 148,
requiring the assessee to file Income Tax Returns for a particular Assessment Year without
disclosing the reasons for re-opening of assessment. The assessee was obliged to file the
return in response to the said notice U/s 148 of erstwhile regime and thereupon they used to
file an application with the AO to ascertain the reasons for re-opening and satisfaction
recorded by the AO for re-opening of the Assessment Proceedings. The assessee used to file
objections against the reasons for re¬opening of assessment proceedings and satisfaction
recorded by AO (if any) and the AO was obliged to dispose-off the objections of the assessee
by way of a speaking order as stipulated by Hon’ble Supreme Court of India in the Case of
GKN Driveshafts (India) Ltd vs Income Tax Officer and Ors.
Lot of litigations used to take place on account of either non-supply of reasons for re-opening,
satisfaction notes and sanctions obtained u/s 151 by the Assessing Officer or Assessing
Officers making assessments without passing speaking orders in respect disposing the
objections filed by the assessee.
Hence, a new regime for re-opening of the assessment proceedings was envisaged in Finance
Act, 2021 whereby the section 148 was given a “New Avtaar”.
The legislatures amended the provisions of section 148 w.e.f 1 April 2021 making it
mandatory to follow the procedures as stipulated U/s 148A, prior to issue of notice U/s 148.
Under the new regime, an opportunity is provided by the revenue to the assessee by issuing a
notice u/s 148A, which requires the assessee to explain his case and to get the proceedings
dropped with the satisfaction of the AO.
Under the new regime, it is obligatory for the AO to Issue Notice U/s 148A(b) to the assessee,
containing the information alongwith adverse material purporting escapement of income,
which can be countered by the assessee by way material and evidences available with him.
This is a major change qua the old provisions in which this information (reasons for re-
opening and satisfaction recorded) was made available to the assessee after issuance of notice
U/s 148 of the erstwhile regime and filing of return of the Income by the assessee

DISECTION OF SECTION 148A

The provisions of section 148A as introduced by the Finance Act 2021 as amended by Finance
Act 2022 are reproduced as under;

Conducting inquiry, providing opportunity before issue of notice under section 148.

148A. The Assessing Officer shall, before issuing any notice under section 148,
(a) conduct any enquiry, if required, with the prior approval of specified authority, with
respect to the information which suggests that the income chargeable to tax has escaped
assessment;
b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show
cause within such time, as may be specified in the notice, being not less than seven days and
but not exceeding thirty days from the date on which such notice is issued, or such time, as
may be extended by him on the basis of an application in this behalf, as to why a notice under
section 148 should not be issued on the basis of information which suggests that income
chargeable to tax has escaped assessment in his case for the relevant assessment year and
results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice
referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee,
whether or not it is a fit case to issue a notice under section 148, by passing an order, with the
prior approval of specified authority, within one month from the end of the month in which
the reply referred to in clause (c) is received by him, or where no such reply is furnished,
within one month from the end of the month in which time or extended time allowed to
furnish a reply as per clause (b) expires:
insert a new section 148B to provide that no order of assessment or reassessment or
recomputation under the Act shall be passed by an Assessing Officer below the rank of Joint
Commissioner, except with the prior approval of the Additional Commissioner or Additional
Director or Joint Commissioner or Joint Director, in respect of assessments consequent to
search, survey and requisition to reduce avoidable inaccuracies.
Diff between DRP and CIT(A)

The DRP is an Alternative Dispute Resolution (ADR) mechanism for resolving disputes related to
Transfer Pricing in International Transactions. Appeal can be filed before CIT(A), when an assessee is
adversely affected by Orders passed by various Income tax authorities
the taxpayer, being a foreign company or facing TP adjustment (eligible taxpayer), has an option to opt
for either CIT (A) route or the DRP mechanism.
If DRP is opted: the assessing officer (AO) has to pass the draft assessment order. Within 30 days of
receipt of months from the end of the month in which the draft order is forwarded to the taxpayer.
Subsequently, final order is issued by the AO within 1 month.
If CIT (A) is opted: An appeal is to be filed within 30 days of receipt of final assessment order. No time
limit is prescribed for disposal of the appeal. However, CIT(A) may dispose of the appeal within 1 year
from the end of the financial year in which appeal was filed.
An appeal against the final assessment order (pursuant to DRP directions)/CIT(A)’s order may be filed
before the Income Tax Appellate Tribunal (ITAT) within 60 days of the date of communication of the
impugned order. ITAT is the final fact finding authority and further appeal before the High Court (HC)
and subsequent appeal before the Supreme Court (SC) against HC can only be filed on a question of
law.
The Income Tax Act, 1961 (“the Act”) mandates the DRP to pass its directions within 9 months from
the end of the month in which AO’s draft order is received. On the other hand, no time limit is laid
down in case of CIT(A). However, based on the practical experience an appeal is generally disposed of
within 2-4 years
What is DTAA
Double taxation means the same income getting taxed twice in hands of same assessee. Any country taxes income on baris of tw
rule
Double Taxation Avoidance Agreements is a treaty signed between two or more countries, through which the elimination of int
the exchange of goods, services, and investment of capital between the two countries.
Applicable in cases where a taxpayer residing in one country must earn his/her income from another country. This implies that
jurisdiction on specified kinds of incomes arising in one country to a tax resident of another nation.
DTAA can either cover all types of income or can target a specific type of income depending upon the types of businesses/hold
another
Sections 90 and 91 under the Income Tax Act 1961 offers specific relief to taxpayers to avoid double taxation. Section 90 deals
taxpayers who have paid tax to another country with which India has a DTAA. Section 91 is for those countries with which Ind
India provides relief to both types of taxpayers.
Difference between POEM and PE. What are types of PE?
Place of effective management” means a place where key management and commercial decisions that are necessary for
the conduct of business of an entity as a whole are, in substance made.
A “permanent establishment ” (PE) is a fixed place of business that generally gives rise to income or tax liability in a
particular jurisdiction.
Although a PE is a concept designed only for tax purposes, the tax administrations take this concept seriously, so a PE
must be duly registered, and it is usually taxed as a separate legal entity. The practical meaning of a PE is that it creates
a taxable presence for a company outside the company’s country of establishment.
The place of management, though considered a PE, requires existence of an office or similar facility in order to
constitute a PE and the management activities should be conducted through such fixed place. In other words, to
constitute a PE, the existence of physical presence is must.

Roll back provision in case of Merger and Demerger

The agreement is between the Board and a person. The principle to be followed in case of merger and demerger is that
the person (company) who makes the advance pricing agreement (APA) application or enters APA would only be
entitled for the rollback provision in respect of international transactions undertaken by it in the rollback years. Other
person (companies) who have merged with this person (company) would not be eligible for the rollback provisions.
Example of merger
if A, B and C merge to form C and C is the APA applicant, then the agreement can only be entered into with C and only
C would be eligible for the rollback provisions. And if A and B merge to form a new company C and C is the APA
applicant, then nobody would be eligible for rollback provisions
Example of demerger
If A has entered into APA and subsequently demerges into A and B , then only A will be eligible for rollback for
international transaction covered under APA. As B was not in existence in rollback years, availing of rollback to B does
not arise

Diff between Primary and Secondary Adjustment

a] Primary adjustment is defined to mean the determination of the transfer price in accordance with the arm’s length
principle resulting in an increase in the total income or reduction in the loss, as the case may be, of the taxpayer.
A “secondary adjustment” has been defined to mean an adjustment in the books of accounts of the taxpayer and its
associate enterprise (AE) to reflect that the actual allocation of profits between the taxpayer and its AE are consistent
with the transfer price determined as a result of primary adjustment.
Therefore, the provisions on secondary adjustment seek to target such cash or fund benefit by seeking repatriation of
such excess funds lying with the Associated Enterprise. Here, any funds not repatriated by the Associated Enterprise
will be termed as an “advance” given by the Assessee to the Associated Enterprise and notional interest rate, as
prescribed, will be added to the Total income of the Assessee by way of a secondary adjustment (Section-92CE).
b] In cases where the underlying transaction is held not to be at arm’s length, primary adjustments are made in order to
align the said transfer price with the arm’s length price (ALP) attained.
Secondary adjustments are designed to ensure that the cash profits of the taxpayer are in line with the tax profits
following a primary adjustment, which is an adjustment that is made to the transfer price where the price in an
intercompany transaction differs from what would be expected in a transaction between unrelated third parties.
Tax Evasion: Tax Evasion is an illegal way to minimize tax liability through fraudulent techniques like deliberate
under-statement of taxable income or inflating expenses. It is an unlawful attempt to reduce one’s tax burden. Tax
Evasion is done with a motive of showing fewer profits in order to avoid tax burden. It involves illegal practices such
as making false statements, hiding relevant documents, not maintaining complete records of the transactions,
concealment of income, overstatement of TDS credit or presenting personal expenses as business expenses. Tax
evasion is a crime for which the assesse could be punished under the law.

Tax Planning: Tax planning is process of analyzing one’s financial situation in the most efficient manner. Through
tax planning one can reduce one’s tax liability. It involves planning one’s income in a legal manner to avail various
exemptions and deductions. Under Section 80C, one can avail tax deduction if specific investments are made for a
specific period up to a limit of Rs 1, 50,000. The most popular ways of saving tax are investing in PPF accounts,
National Saving Certificate, Fixed Deposit, Mutual Funds and Provident Funds. Tax planning involves applying
various advantageous provisions which are legal and entitles the assesse to avail the benefit of deductions, credits,
concessions, rebates and exemptions. Or we can say that Tax planning is an art in which there is a logical planning of
one’s financial affairs in such a manner that benefits the assesse with all the eligible provisions of the taxation law.
Tax planning is an honest approach of applying the provisions which comes within the framework of taxation law.
Explain concept of Marginal Relief and how is it calculated . Is there a situation in which there is no marginal relief
The tax system is progressive in nature i.e., as the income increases, tax also increases.
Assessees having higher income than the prescribed limit are required to pay extra amount of tax in the form of Surcharge. Diff
been prescribed based on the total income and the type of assessees. For instance, if the assessee is an individual and his total in
surcharge is leviable @10%. While if the same individual earns more than ₹1 crore but less than ₹2 crore, the surcharge is levi
small increase in the total income of an assessee beyond threshold limit, surcharge would be applicable on the income-tax on to
relief has been provided in such cases.
There is no marginal relief in case of Section 87A. A person earning slightly more than ₹5.01 Lakhs would end up with lower t
earning ₹4.99 Lakhs (now this has become ₹7 Lakhs w.e.f AY2024-25)
Example of Marginal Relief:
According to the Income-tax provisions, a marginal relief will be provided to certain taxpayers up to the amount of the differen
payable (including surcharge) on the income above Rs.50 lakhs and the amount of income that exceeds Rs.50 Lakhs.
Suppose, an individual has a total income of Rs.51 Lakhs in a FY 2020-21.
He will have to pay taxes inclusive of a surcharge of 10% on the tax computed i.e., total tax payable will be Rs. 14,76, 750.
But, if he would have earned only Rs.50 lakhs, then the tax liability would have been Rs.13,12,500 only(excluding cess).
Isn’t it unfair for the individual? For earning an extra Rs.1,00,000, he will end up paying income tax of Rs.1,64,250. The indivi
reduced to avoid any such excess tax payable.
The individual will get a marginal relief of the difference amount between the excess tax payable on higher income i.e (Rs.14,7
Rs.1,64,250 ) and the amount of income that exceeds Rs. 50 Lakhs i.e. (Rs.51,00,000 minus Rs.50,00,000 = Rs.1,00,000).
The marginal relief will be Rs.64,250 (Rs.1,64,250 minus Rs.1,00,000).
Hence, income tax liability on income of Rs. 51,00,000 will be Rs.14,12,500.
Suppose, an individual has a total income of Rs.51 Lakhs in a FY 2020-21.
He will have to pay taxes inclusive of a surcharge of 10% on the tax computed i.e., total tax payable will be Rs. 14,76, 750.
But, if he would have earned only Rs.50 lakhs, then the tax liability would have been Rs.13,12,500 only(excluding cess).
Isn’t it unfair for the individual? For earning an extra Rs.1,00,000, he will end up paying income tax of Rs.1,64,250. The indivi
reduced to avoid any such excess tax payable.
The individual will get a marginal relief of the difference amount between the excess tax payable on higher income i.e (Rs.14,7
Rs.1,64,250 ) and the amount of income that exceeds Rs. 50 Lakhs i.e. (Rs.51,00,000 minus Rs.50,00,000 = Rs.1,00,000).
The marginal relief will be Rs.64,250 (Rs.1,64,250 minus Rs.1,00,000).
Hence, income tax liability on income of Rs. 51,00,000 will be Rs.14,12,500.
 W.e.f from July 2021 Sec 194Q was introduced where buyer will have to deduct TDS on high value purch

Do you know why such amendment has been made? Discuss regarding the provisions of th

The Finance Act, 2021, introduced Section 194Q of the Income-tax Act, 1961, which is related to Tax Deducted at Source (TD
the provisions of services.
This section applies to a buyer in the following cases:
A buyer whose turnover or gross receipt or sales in the immediately preceding financial year was more than Rs 10 crore, and
A buyer is responsible for making payment of a sum to the resident seller, and
Such payment is to be done for the purchase of goods of the value/aggregate of the value exceeding Rs 50 lakh
Example
For a financial year (FY) that ended on March 31, 2021, a buyer whose turnover was more than Rs 10 crore in that year needs t
seller on the purchase of goods above Rs 50 lakh in the current financial year 2021-22.
Rate of TDS
Tax is to be deducted at source at the rate of 0.1% on the amount exceeding Rs 50 lakh in a financial year from a seller from wh
worth more than Rs 50 lakh.
Calculation of TDS
Purchase above Rs 50 lakh in a financial year from a seller
TDS to be deducted after deduction of Rs 50 lakh from the total value of purchases
The threshold limit is Rs 50 lakh, which means a seller-wise deduction in every financial year
Example
Let’s say a buyer purchases goods worth Rs 20 lakh, three times each from a seller, meaning he bought total goods of Rs 60 lak
from the total value of goods purchased. The TDS has to be deducted only on Rs 10 lakh at the rate of 0.1%.
Applicability of Section 194Q
Section 194Q of the ITA is applicable from July 1, 2021. So, the TDS has to be deducted only on purchases after July 1, 2021.
purchase of Rs 50 lakh has to be taken into account from April 1, 2021.
Example
If a buyer has purchased goods worth Rs 80 lakh from a seller, then he has to deduct the first Rs 50 lakh from it as an initial ded
deduct the TDS on the remaining Rs 30 lakh at 0.1%. So, the TDS applicable in this case would be Rs 3,000.
Role of GST
Calculation of turnover: Excluding GST
Calculation of TDS at the rate of 0.1%: Including GST
When to deduct TDS
The TDS is to be deducted at a time when such amount is credited to the seller or paid to him, whichever is earlier.
In other words, if you have not paid any advance amount, then you have to deduct this TDS at the time of purchase of goods. H
payment, then you have to deduct TDS immediately.
Non-furnishing of PAN
In cases where a seller fails to furnish a Permanent Account Number (PAN) to a buyer, the TDS would be deducted at the rate o
It is important to note that without PAN information, the rate of tax applicable in other cases is 20%. In the case of Section 194
Exceptions
Section 194Q would not apply in cases where the TDS is to be deducted on the transaction of a purchase under any other provis
may be a case where a purchase transaction comes under Section 194O as well as Section 194Q, then TDS would apply as per S
on e-commerce transactions.
However, there is an exception in the case of Section 206C(1H), which provides for the collection of tax (TCS) by a seller for t
for the sale of goods if it is greater than Rs 50 lakh in any previous year.
If any transaction on purchase of goods attracts TDS under Section 194Q as well as tax collected at source under Section 206C(
apply in such a case.