Faceless Assessment Scheme 2021

Introduction
The Central Board of Direct Taxes recently announced the Faceless Assessment (1st Amendment) Scheme, 2021.For honouring the honest taxpayers, the Prime Minister has launched a faceless tax scrutiny.

What is the faceless assessment scheme 2019?
The Central Government introduced the Faceless Assessment Scheme to supply greater transparency, efficiency and accountability in tax assessments.It aims to enhance the use of resources through economies of scale and functional specialization and suggest a team based determination of arms’ length price with dynamic jurisdiction.

What is the aim of bringing the Faceless Assessment (1st Amendment) Scheme, 2021?
This has been transfer in to bring the provisions of faceless assessment scheme 2019 at par with the provisions of section 144B of the tax Act.

Features of Faceless Assessment Scheme
Following are the features of faceless assessment scheme-
1. Selection of a Taxpayer only through system using data analytics and AI .
2. Automated random allocation of cases.
3. No physical interface, no got to visit the tax office.
4. Dynamic Jurisdiction to abolition of territorial jurisdiction.
5. Team-based assessment and team-based review.

NATIONAL E-ASSESSMENT CENTRE (NeAC)
1. It is one point to act as a Central cell between Taxpayer and therefore the tax Department.
2. It is located in Delhi and inaugurated on 7th October, 2019.
3. The centre is directed by the Principal Chief Commissioner of tax .
4. It promotes the conduct of e-assessment proceedings during a centralised manner.

REGIONAL E-ASSESSEMENT CENTRE (ReAC)
1. It comprises of Assessment unit, Review unit, Technical unit, and Virtual unit.
2. Each ReAC is headed by Chief Commissioner of tax (CCIT).
3. ReAC established in India are in Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, Pune, Bangalore and Hyderabad.

ASSESSMENT UNIT
1. It promotes the identification of points or issues material for the determination of any liability (including refund) under the Act.
2. Seeking information or clarification on points or issues so analysed.
3. Analysis of fabric equipped by the assessee or the other person, and such other functions as could also be prescribed for the needs of creating assessment.

VERIFICATION UNIT
The verification unit promote the conduct of e-assessment to perform the function of verification, which includes- 1. Enquiry,
2. Cross verification,
3. Examination of books of accounts,
4. Examination of witnesses and recording of statements,

REVIEW UNIT
Review of draft assessment order including-
Checking whether significant and material evidence has been brought on transcript.
Whether suitable points of fact and law are duly incorporated within the draft order.
Whether issues on which addition, rejection should be made have discussed in draft order,
Whether applicable judicial decisions are considered and affect in draft order,
Checking for arithmetical correctness of modifications proposed.

Technical Units
The technical units are established to assist with legal, forensic and accounting. Alike, information technology, data analytics, valuation, transfer pricing and other relevant technical requirements have also been well-established.

THE INTIAL PROCESS
STEP 1: Case selected for scrutiny.
STEP 2: Goes straight to the National e- assessment centre (NeAC).
STEP 3: NeAC issues case number and allot it to assessment unit of a ReAC on random basis.
STEM 4: Process of assessment starts through e-filling portal.
STEP 5: NeAC, then issue notice as finalised by assessment unit to assessee- electronically.
STEP 6: The Assessment unit studies financial and ITR and other documents and prepares notice under Section 143(2).

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Direct Taxation in India

 

Union Budget for FY 21–22 introduced several proposals to benefit depositors, investors, and taxpayers. Finance minister Smt. Nirmala Sitharaman said that the tax system should put a minimum burden on the taxpayers. Specific Direct Tax proposals were introduced, providing relaxation to individual taxpayers and startups to some extent. The Finance minister surprised taxpayers by not announcing any change in income tax slab rates. She also did not disclose the proposal to introduce much-hyped Covid cess. In a significant move, the limit for tax audits under section 44AB has been increased from Rs 5 crore to Rs 10 crore (where 95% of payments and receipts are digitized), providing relief to many corporate houses.

Proposed amendments

1. Exemption for LTC cash scheme
Under the prevailing provisions of LTA, the exemption is out there for the worth of travel concession received by an employee from his/her former employer, leave visit anywhere in India. thanks to the Covid-19 situation, it’s proposed to supply tax exemption to cash allowance within the area of LTC.

2. Reduction in time for IT proceedings
The budget proposed a depletion within the time-limit for reopening tax proceedings to 3 years from the present six years to decrease the compliance burden. Except in severe minimization cases, assessment proceedings within the remainder of the problems shall be continued only up to 3 years, against the sooner deadline of six years.

3. Constitution of discourse resolution committee for little and medium taxpayers
Vivad se Vishwas scheme was executed last year to settle the pending disputes. Hence, to supply early tax certainty to small and medium taxpayers, it’s proposed to introduce a replacement scheme for preventing recent conflicts and settling the problems at the initial stage. those that are evaluated with a taxable income of up to Rs.50 lakh (for small and medium taxpayers) and any disputed payment of Rs.10 lakh can approach this committee under section 245MA. it’ll prevent new controversies and settle the problems at the initial stage itself.

4. Faceless proceedings
The minister of finance promised on 1st February 2021 to simplify tax administration, ease compliance, and reduce litigation over the approaching year. Provision is formed for faceless proceedings before the tax Appellate Tribunal (ITAT) during a jurisdiction-less manner.

5. Tax incentives for startups
In her third budget speech, minister of finance Smt. Nirmala Sitharaman unrolled tax incentives for startups concerning capital gains. The tax holiday for startups has been prolonged by another year up to 31st March 2022 i.e. an extension has been proposed in eligibility for claiming tax holidays and capital gains exemption for investment in startups by one year to March 2022.

6. Relief from the hardship of double taxation
When Non-Resident Indians return to India, they need issues concerning their accrued incomes in their foreign retirement accounts. it’s usually thanks to a discrepancy in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions. there’s a scheme to notify rules for removing hardship for double taxation.

7. Employers to lose the deduction
In case the employee’s PF contribution was abstracted but not deposited by the employer, it’ll not be recognized as a deduction for the employer. it’s expected to place pressure on employers to deposit the employee’s Provident Fund contributions on time.

8. Increase within the Tax audit limit
The ‘Tax Audit’ limit under Section 44AB has increased from Rs.10 crores to Rs.5 crores, where 95% of business transactions are done digitally.

9. Section 44ADA Amendment
A scheme for presumptive taxation was initiated under section 44ADA from the FY FY 2016–17. Section 44ADA provides a simple method of taxation for little professionals. Section 44A claimed to all or any the assessees being residents in India. Now onwards, it claims only to the resident individual, Hindu Undivided Family (HUF) or a partnership firm aside from LLP.

10. Section 80EEA- Tax holiday extention
The tax holiday for reasonable housing projects has been extended until 31st March 2022. The tax exception has been granted for affordable rental projects.

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Presumptive Taxation Scheme under Section 44AD

 

Meaning of presumptive taxation scheme

As per Section 44, businesses and professionals are required to take care of the Books of Accounts under Section 44AA, once they fulfil certain criteria and obtain them audited under Section 44AB in every fiscal year for the aim of tax .

Particularly, to relax their burden of keeping Books of Accounts,

The small taxpayerscan avail simple tax payment scheme of ‘Presumptive Tax’ under Section 44AD, 44ADA and 44AE of tax Act 1961.

WhereBooks of Accounts and Auditing are Mandatory?
Conditions for Books of Accounts
As per Section 44AA of IT Act,Books of Accounts should be maintained by Businesses/Professionals (including those that are eligible under ‘Presumptive Tax Scheme‘), who fulfil these conditions:

Income quite INR 120000 in last three preceding years.
Total turnover/gross receipts of business/profession is quite INR 10,00,000 in any of the previous 3 years

Who are eligible for the applicability under Section 44AD?
The taxpayers are divided in two cases to form clear the eligibility criteria under this section for the scheme of presumptive taxation.

Individuals
The individual taxpayers who can avail the advantages of the scheme of presumptive taxation under Section 44AD are:
1. Any individual resident
2. Resident partnership firms ( apart from indebtedness Partnership Firms LLP)
3. Resident Hindu Undivided families (HUFs)

Businesses
The businesses who are eligible to realize the advantages of the scheme of presumptive taxation under the Section 44AD are:
1. Any business
2. The business whose annual turnover and therefore the gross receipts within the previous fiscal year doesn’t exceed the limit of Rs. 2 crores.

Taxpayers who are restricted to adopt the presumptive taxation
Some of the exceptions to the present scheme under the section 44AD are as follows:
1. Individuals who have claimed deductions under Section 10A, Section 10AA, Section 10BA, Section 10B, or other deductions in reference to individual incomes.
2. The companies involved in hiring, leasing goods carriages, agency business or playing referred in section 44AE.
3. Individuals or firms involved in any kind of profession, during which the income is earned in terms of commission or brokerage ( professionals can adopt the scheme of presumptive taxation under Section 44ADA).

Computation of income and presumption of rates of income under section 44AD
1. Under the scheme of presumptive taxation, the eligible taxpayer has got to compute his income on the idea of estimation. The presumptive income is calculated at the speed of 8% of the annual turnover or the gross receipts of the business of the last fiscal year .
2. However as per budget 2018,If the gross receipts or annual turnover is received through account payee cheque or draft or any device then the presumptive income are going to be calculated at the speed of 6% of the annual turnover of the last year. this is often through with the aim of promoting digital transactions. This special provision of reducing existing rate of calculation of presumptive income is completed to encourage small businesses to simply accept the digital payments and become organized and use the electronic clearing systems by a bank.

Presumptive Taxation Scheme to be opted for five years
If an assessee has opted or presumptive taxation under section 44AD, then he/she is required to choose an equivalent scheme for a continous period of 5 years. If, in any case, he/she did not do so,then he/she won’t eligible to choose the scheme for subsequent 5 years.

Maintenance of books of account under section 44AD
The major provision associated with presumptive taxation is to offer relief to small or medium sized taxpayers from maintaining books of accounts. The individual or firm who adopts presumptive taxation under section 44AD isn’t susceptible to maintain books of accounts. they’re also not required to urge their accounts audited under this scheme.

Payment of Advance Tax under Section 44AD
An assessee is susceptible to pay his or her advance tax during a single instalment on or before the 15th of March of each fiscal year if he or she opts for presumptive taxation under Section 44AD. For any default in paying the advance tax , the assessee are going to be charged interest under Section 234C.

What are taxable Profits and Gains?
As per the section 44AD an assessee who opted for presumptive taxation will compute his income as 8% of the entire turnover or gross receipts of the last year. An amount above the previously computed amount as presumptive income claimed by an assessee shall be termed as gains and profits of the business that’s chargeable to tax under the top “Profits and gains of business or profession”.Presumptive Taxation Scheme under Section 44AD

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What Is The IEC Application Format?

The Import Export Code is a crucial document for getting into international sales transactions. it’s acquired significance for it’s a government-specified pre-requisite before any commercial shipments are often imported or exported. during this post, we highlight the importance of import-export code and specify the procedure to submit your IEC application online.

Who is required to get an Import Export Code?
As per the Foreign national trading policy in India, no import or export are often avoided a legitimate IEC granted by the Director-General of Foreign Trade or a politician authorised by the Director-General. Thus, every importer or exporter of products (whether Indian or foreign firm) into India has got to obtain an Import Export Code.

The IEC could also be applied on behalf of a firm — which may be a partnership, LLP, Ltd. , trust, HUF or society. A firm needs a legitimate address, PAN (Permanent Account Number) and a checking account for applying for IEC.

Is IEC necessary just for goods and certain services?
No, your business would wish this not just for import or export, but there are other advantages linked to IEC. The IEC number is now necessary for availing advantages under schemes of the DGFT or Ministry of Commerce like duty drawback, credit , subsidies on import of capital equipment etc.

What documents are required for submitting an IEC application online?
Scanned Documents for Upload within the System
1. Proof of establishment/incorporation/registration of the Partnership, Registered Society, Trust or HUF
2. Proof of Address, which may be anybody of the subsequent documents:
3. Sale Deed, Rent agreement, lease deed, electricity bill, telephone landline bill, mobile, postpaid bill, MoU, Partnership deed
4. Further, other acceptable documents (for proprietorship only): Aadhar card, passport, voter id

Just in case the address proof isn’t within the name of the applicant firm, a no-objection certificate (NOC) by the firm premises owner in favour of the firm along side the address proof is to be submitted as one PDF document.
1. Proof of Firm’s checking account
2. Cancelled Cheque
3. Bank certificate

What are the other requirements for filing an IEC?
1. Digital Signatures Token
2. PAN
3. Mobile Number and Email ID.
4. Moreover, Address Details of Branch Office
5. Bank Account within the name of IEC Holder
6. Aadhar Card matching the small print with PAN Card

How to submit an IEC application online?
Step 1 — As a replacement user, you’d need to register on the web site of the Directorate General of Foreign Trade. this will be accessed at — https://www.dgft.gov.in/CP/. For this purpose, you’d got to enter your email address, mobile number, pin code, district, state and city. Further, you’d even have to settle on “Importer/Exporter” within the menu on the new user creation portal. You’d got to enter the OTP received on the registered mobile number.

Step 2 — After successful registration, the new details can apply for IEC. To do so, click on the “services” tab from the menu bar and choose “IEC”. Additionally, from this, choose the “Online IEC Application” tab.

Step 3 — Here, enter your PAN number, name, date of birth or details of incorporation as applicable. Further, you’d even be required to enter your registered mobile number and click on on “Generate OTP”.

Step 4 — At the landing page, enter the subsequent details — Branch details (if your business has multiple branches), details of directors and partners with their residential proofs and email IDS

Step 5 — Upload proofs of the above-mentioned documents, cancelled cheque or bank certificate. Likewise, please note that the IEC application system only accepts PDF format with files up to five MB only.

Step 6 — Click on the “Fee Payment” portal. you’ll make the requisite fee payment of ₹250 via net banking, debit or mastercard . Further, the portal also will generate a DGFT reference number to see the status of your IEC application.

Step 7 — Once the appliance is submitted after paying the fee, you’ll take a print of the appliance . Further, at this page, you would like to pick the “Submit and Generate IEC Certificate”

Format of the IEC certificate issued by the Ministry of Commerce is as follows –
1. User name
2. Address
3. Name and Designation of Applicant
4. Address of Branch, if any
5. IEC Number
6. Date of issue
7. PAN

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How to Register your own Company in India from USA

 

Wondering the way to register a corporation of your own in India while you’re in USA? during this article, we’ll mention the steps to register a corporation in India while you’re in USA, which all entities are you able to form and which documents are needed for the corporate registration process as a far off national in USA.

You might be staying in USA but have some brilliant idea and need to start out some business and register a corporation in India. the great news is that you simply can plow ahead and do this easily because the Companies act 2013 allows foreign residents to start out a corporation in India if they suits all the Indian laws.

How are you able to register a corporation in India from USA?
The first and foremost step is to make a decision on which business entity you would like to make consistent with the business model you’re planning. the choices are to register as a Partnership, an LLP, Private Ltd. etc. However, it’s best to register as a personal Ltd. or a indebtedness Partnership as these entities involve lesser compliances and legal formalities.

The pre-requisites for registering a corporation in India from USA
There are some pre-requisites that you simply must fulfill so on be ready to launch a corporation in India from USA. They are:
1. You need to possess a minimum of one Indian director who may be a resident of India and you want to even have all proper documents and KYC details.
2. It is also important to see the Foreign Direct Limit because just in case the sectors come under the automated Route process, you’ll not need RBI’s prior approval. But, just in case the world you select comes within the category of 100% FDI route, then you’ll need a previous permission of the relevant Ministry of Central Government or RBI to start out an enterprise. You then also need a reputation application for your company and steel oneself against MOA and AOA of your proposed company.
3. Lastly, make sure that you’ve got the needed documents for registration and every one the documents are notarized from required officials.

List of documents needed for registering a corporation in India from USA
You need to submit the subsequent documents:
1. A copy of your valid passport
2. A copy of driver’s license (DL) from the issuing country
3. Voter ID
4. Social Security Number
5. Bank statement of your bank
6. Photographs
7. A resident permit that’s issued by the Indian embassy
8. A copy of a legitimate Business visa that’s issued to the foreign national

The documents required just in case of a far off company trying to make a corporation in India:
1. A certificate of incorporation which proves that the corporate has been legally incorporated
2. A board resolution of the foreign company
3. Valid address proof

The steps of registering a corporation in India from USA
Recently, a replacement process has been introduced by the Indian Government in order that people can register a corporation in India from USA. the method states that:
1. The applicant should possess a User Account on the MCA Portal in India. Having an account enables you to directly proceed for company registration.
2. Then, you want to apply for DSC. For this purpose, you ought to directly attend the certifying authorities and carry all the legal documents along side the appliance for Digital Signature.
3. Then you would like to check in to the MCA Portal and attend the subsequent link to use for the name of the corporate by using the run form — http://www.mca.gov.in/mcafoportal/runService.do.
4.While trying to find a reputation , sign up the exiting database to verify if the name you would like is out there or not. you would like to submit the RUN Form along side the fee of Rs. 1000. MCA personnel at the Central registration Centre check for the name and if it comes bent be unique and not used previously, then it’s sanctioned.
5. Now subsequent step is to use for the DIN Number or Director number . For this, you would like to fill the SPICE Form. Here, you would like to specify the small print of the director who wants the Din to be allotted. The person also must submit his/her Pan Card and Passport copies.
6. After the above steps are done, you get a Certificate of Incorporation and your company is made in India from the USA.

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Difference between Preference Shares and Equity Shares

 

If anyone wishes to take a position their money in shares then they need to gain complete knowledge about the stock exchange before initiating any investment. Otherwise, there are huge chances that you simply might suffer unbearable losses. during this article, we discuss all the possible difference between preferred stock and equity shares.

The Definition
Equity shares and preferred stock are quite similar, yet different within the way they function and provide you with returns. once you own equity shares of a corporation , the dividends are subject to how the corporate is performing. And sometimes , you would possibly not even receive any dividends.

This is one major difference between equity shares and preferred stock . With preferred stock , the corporate is sure to pay you dividends, since the quantity is fixed but not with equity shares.

Preference Shares
Preferred Stocks also referred to as preferred stock are those shares which are given preference as regards to payment of dividend and repayment of capital. The term “preferred share” refers to the very fact that its holders receive preferential treatment over common stockholders within the event of liquidation and when dividends are paid but don’t enjoy normal voting rights. Therefore, preference in terms of dividend they need been named as preferred stock . also as, within the case of completing of the corporate or when the corporate went bankrupt, then payment of liabilities (like banks) are done first, then those with preferred stock & lastly equity shares. There are several points which create Difference between preferred stock and Equity shares. Therefore, the preferred stock get precedence over equity shares on all the matters.

Equity Shares
When you hear the word shares, people nearly always ask equity shares or common stock . With equity shares, a corporation offers you partial ownership and thus, involves tons of business risk. The members, who own equity shares, also acquire the proper to vote for critical decisions within the company. These decisions may include electing a replacement leader, acquisition, merger, etc. and that they play an important role in raising capital for the corporate . Equity capital forms the essential foundation of the corporate and its creditworthiness.

The dividends or payouts to equity shareholders predominantly depend upon the earnings of the corporate . Once the corporate has settled all other claims and expenses, it’ll pay its equity shareholders.

What Is The Difference Between Equity Share And Preference Share?
Both represent ownership capital and entitles you to possess a claim on the company’s profit within the sort of a dividend, announced by the company . When profit share is announced, preference shareholders have the primary claim. They receive their bonus at a hard and fast rate but don’t enjoy voting rights within the majority of companies like equity shareholders do.

When we mention investing in stocks, we usually ask equity shares, which also are called general shares. With this, a corporation offers you partial ownership within the company and thus , it involves high risk. Profit on equity shares depends on the company’s performance. And so, your dividend percentage also will fluctuate, which suggests you would possibly not receive any dividend sometimes . But with preferred stock , the corporate is sure to pay the dividend.

Secondly, risks of an equity shareholder are an equivalent as what the corporate experience. As compared to them, risk exposure of preference shareholders is nominal. So, they even have a preferential claim on receiving their capital back before the corporate settles its general shareholders.

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Source: Difference between Preference shares and Equity shares

Income Tax Assessment

 

Every assessee, who earns income beyond the essential exemption limit during a fiscal year (FY), must file a press release containing details of his income, deductions, and other related information. this is often called the tax Return (ITR). Once you as a taxpayer file the income returns, the tax Department will process it. There are occasions where, supported set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment.

The various sorts of assessment are as follows:

Self-Assessment
This type of assessment is mentioned in section 140A of tax Act,1961. In this, the assessee himself determines the tax payable. The tax department has made available various forms for filing tax return. The assessee consolidates his income from various sources and adjusts an equivalent against losses or deductions or various exemptions if any, available to him during the year. the entire income of the assessee is then received . The assessee reduces the TDS and Advance Tax from that quantity to work out the tax payable on such income. Tax, if still payable by him, is named self-assessment tax and must be paid by him before he files his return of income. This process is understood as Self-Assessment.

Summary Assessment
It is a kind of assessment administered with none human intervention. during this sort of assessment, the knowledge submitted by the assessee in his return of income is cross-checked against the knowledge that the tax department has access to. within the process, the reasonableness and correctness of the return are verified by the department. The return gets processed online, and adjustment for arithmetical errors, incorrect claims, and disallowances are automatically done. Example, credit for TDS claimed by the taxpayer is found to be above what’s available against his PAN as per department records. Making an adjustment during this regard can increase the liabilities of the taxpayer.

After making the aforementioned adjustments, if the assessee is required to pay tax, he are going to be sent an intimation under Section 143(1). The assessee must answer this intimation accordingly.

Regular/Scrutiny Assessment
This type of assessment is mentioned in section 143(3) of tax Act,1961. The tax department authorizes the Assessing Officer or tax authority, not below the rank of an tax officer, to conduct this assessment. the aim is to make sure that the assessee has neither understated his income or overstated any expense or loss or underpaid any tax.

The CBDT has set certain parameters supported which a taxpayer’s case gets picked for a scrutiny assessment.
1. If an assessee is subject to a scrutiny assessment, the Department will send a notice well beforehand . However, such notice can’t be served after the expiry of 6 months from the top of the fiscal year , during which return is filed.
2.The assessee are going to be asked to supply the books of accounts, and other evidence to validate the income he has stated in his return. After verifying all the small print available, the assessing officer passes an order either confirming the return of income filed or makes additions. This raises an tax demand, which the assessee must answer accordingly. An tax notice under Section 143(2) is issued if the tax officer wasn’t satisfied with the documents and knowledge that was submitted by the taxpayer. Taxpayers who receive notice under Section 142(2) are selected for an in depth scrutiny by the tax department and can need to submit additional information.

Best Judgement Assessment
This assessment mentioned in section 144 of tax Act,1961 gets invoked within the following scenarios:
1. If the assessee fails to reply to a notice issued by the department instructs him to supply certain information or books of accounts
2. If he/she fails to suits a Special Audit ordered by the tax authorities
3. The assessee fails to file the return within maturity or such extended deadline as allowed by the CBDT
4. The assessee fails to suits the terms as contained within the notice issued under Summary Assessment

After providing a chance to listen to the assessee’s argument, the assessing officer passes an order supported all the relevant materials and evidence available to him. this is often referred to as Best Judgement Assessment. The notice sent during this sort of assessment is Show Cause Notice, under section 144 only.

Income Escaping Assessment
This type of assessment is mentioned in section 147 of tax Act,1961. When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment, he has the authority to assess or reassess the assessee’s income. Some scenarios where reassessment gets triggered are given below.
1. The assessee has taxable income but has not yet filed his return.
2. The assessee, after filing the tax return, is found to possess either understated his income or claimed excess allowances or deductions.
3. The assessee has did not furnish reports on international transactions, where he’s required to try to to so.

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Source: Income Tax Assessment