ISSUE # 3
JANUARY
2014
FOR PRIVATE CIRCULATION ONLY
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Contents:
Page No.
Statutory Due Dates for January 2013
- 1
Form 15G & 15H of Income Tax Act, 1961
- 2
Bitcoins
- 6
Financial Predictions for 2014
- 9
Recap of Changes in Tax Laws in 2013
- 10
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Issue # 3 January 2014
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Issue # 3 January 2014
FORM 15G & FORM 15H -CA Manohar BV
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Form 15G:- Declaration under sub-sections (1) and (1A) of section 197A of the Income tax Act, 1961, to be made by an individual or a person (not being a company or a firm) claiming certain receipts without deduction of tax.
orm 15G and form 15H are used for avoiding the TDS deduction at source if the deductee expects his Income to be lower than the taxable limit. Form 15H :- Declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, to be made by an individual who is of the age of sixty years or more claiming certain receipts without deduction of tax.
Form 15G can be submitted by Individual who is below the age of 60 years and by Hindu Undivided family. The points applicable for 15H are applicable to the Form 15G as well, except that the Form 15H is applicable only for the senior citizens.
Form 15H can be submitted only by Individual above the age of 60 years. Estimated tax for the previous assessment year should be nil. That means he did not pay any tax for the previous year because his income is not coming under the taxable limit.
Form 15G should be submitted before the first receipt of interest on fixed deposits. Difference between form 15G and 15H:
One must need to submit form 15H to banks if interest from one branch of a bank exceeds Rs.10,000/- in a year.
1. Form 15G can be submitted by an individual below the Age of 60 Years while form 15H can be submitted by senior citizens i.e. individual’s above the age of 60 years.
This form should be submitted to all the deductors to whom one has advanced a loan. For example ‘A’ has deposit in three SBI bank branches Rs.1,00,000/- each. Then he must submit the Form 15H to each branch. He has to submit this Form before the first receipt of his interest. It is not mandatory but it will avoid the TDS deduction. In case of the delay, the bank may deduct the TDS and issue TDS certificate at the end of the quarter.
2. Form 15G can be submitted by Hindu Undivided families but form 15H can be submitted only by Individual above the age of 60 years. 3. 15G cannot be filed by any person whose income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of subsection (2) of section 80CCA exceeds maximum amount not chargeable to tax.
He needs to submit for 15H if interest on loans, advances, debentures , bonds or say interest income other than interest on bank deposits exceeds Rs.5,000/-.
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In a nutshell we can say that anybody whose tax on estimated income is not NIL and having income from interest on securities/interest other than “interest on securities” /units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax can not file DECLARATION u/s 15G. Note:- Maximum amount not chargeable to tax for Hindu Undivided family (HUF) and Individuals (below the age of 60 years) for A.Y. 2014-15 is Rs. 2,00,000/- . Senior Citizens who are eligible to file Declaration in Form 15H have no such conditions. They can submit Form 15H even if their Total Income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax (Rs. 2,50,000) but if tax payable by them is NIL. This is clear from point 4 of the form 15H, which reads as under:“ that the tax on my estimated total income, including *income/incomes referred to in the Schedule below computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on relevant to the assessment year _____________ will be nil” FREQUENTLY ASKED QUESTION ANSWERS ON FORM 15G AND FORM 15H Question 1:- I am 70 years old. I invested a sum of Rs 5,00,000 in January 2004, in GOI 8 per cent savings bonds (taxable), 2003, via a leading private bank. The bonds issued were on a cumulative basis with a maturity period of six years. The total interest payable at the time of maturity is Rs 3,00,500. I have declared the income from the bonds on an accrual basis y-o-y, and have been filing tax
returns since A/Y 2006/07. But the bank is not accepting Form 15H stating that the total interest payable on maturity is more than the threshold limit for senior citizens – Rs 2,40,000, and is insisting on my submitting Certificate u/s 197 from the IT office. What do I do? Answer 1:- The bank should have deducted tax at source. It seems the bank has not provided for the accrued interest and is therefore not accepting Form 15H. You can prove that the tax on your total income of the previous year in which the interest is to be received shall be nil, even after including the cumulative interest the bank should not resort to tax deduction at source. You can submit Form 15H for deduction of tax at source for A.Y. 201011. Question 2 :- I am a senior citizen having income liable for tax deduction at source in respect of my deposits with State Bank of Hyderabad. They asked me whether I would be filing declaration in Form 15G or 15H in the first week of March in respect of payments made during the year so that I am in a position to judge whether I have taxable income for the year or not and file declaration in Form 15H, if I have no taxable income. On the other hand, State Bank of India and, I understand, some other banks require form at the time of deposit itself. It may not be proper for the bank to act on such declaration made in one year for another year or for that matter act on a declaration which had become stale filed in earlier part of the year for payment towards the end of the year. What is the correct position of law? Answer 2 :- The doubt raised by the reader is a valid one. The law itself does not provide for any date on which the declaration is required to be filed as long
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“Schedule V”. as it relates to the income of the year and filed during the year. Since the deduction of tax at source has to be decided on the date of each credit or payment, deduction has to be made for each such credit or payment. Where an investor is not able to file the declaration in earlier part of the year in view of the uncertainty as to the prospect of his income crossing the exemption limit, he can probably inform the bank that deduction could be deferred till the end of the year. But then, the bank would like to have the declaration at the
iv). Item 2 in Form 15H reads as “that my present occupation is….” At 60 and above, many have no occupations at all.
time of payment so that the declaration may necessarily be filed before the first quarterly payment, if the interest is payable quarterly. The difficulty for the investor in ascertaining the income in advance in such cases cannot be avoided. Tax may have to be deducted and refund applied in due course in such cases.
the other schedules as in Form 15G have apparently been considered unnecessary, since there is no ceiling by way of limit for tax deduction at source, so as to require the split up of the different incomes. The fourth point made is that the Form 15-H contemplates occupation for everyone. It is really not a defect, since a person without occupation can also fill up the column as nil.
Question 3:- It is stated that 15H form is concessional for individuals aged 60 or more as this form, unlike 15G form, does not carry the restrictive declaration to the effect that the aggregate of eligible incomes will not exceed the maximum amount which is chargeable to income tax (Item No. 4 in 15G form) : i). Can it be interpreted, that there is no ceiling on the aggregate incomes/ amounts liable for tax deduction for senior citizens of the age of 60 or more? ii). It should be “not exceeding the maximum exemption limit” and not “not exceeding the minimum exemption limit”. iii). Form No. 15H in circulation at present states that the particulars of the amounts are as per the schedule below. But there is no such schedule at all. The one and only schedule is about “investments”. Of course, Form 15G carries this Schedule as
Answers 3 : As regards the first point, the limit for tax deduction for others is inapplicable for senior citizens, but the limit for statutory deduction under Sec. 80C, for example, is applicable. The second point made by him is correct. As for the third point, the omission pointed out in Form 15H, the schedule for withdrawal from NSS alone has been given, because
Question 4: What should I do if I am not liable to pay tax and TDS is not required to be deducted? Answer 4 :- To avail the benefit of deduction of tax at source at Nil/lower rate, you may submit any of the following documentation : Certificate from the Indian tax authorities: Certificate under section 197 of the Act issued by the Assessing Officer for nil / concessional rate of TDS can be submitted by any bondholder including companies and firms. The certificate should be submitted by the deductee to the deductor. Form 15G: If you are a resident person (other than a company, Co-operative society or a firm), you can submit Form 15G in duplicate to deductor. As per the
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provisions of section 197A of the Act, Form 15G can be submitted provided the tax on your estimated total income for the financial year computed in accordance with the provisions of the Act is NIL and the interest paid or payable to you does not exceed the maximum amount which is not chargeable to tax.
securities are owned by them or it has full beneficial interest in the same.
Question 5:- I am an account holder in a nationalised bank and I filed Form 15H. The bank authorities refused to give acknowledgment for the same, though I have given it in duplicate. What is more is that they have deducted tax though I have no taxable income. What is the remedy for the amount already deducted and to avoid such deduction in future? Answer 5:- Where tax has already been deducted and deposited by the bank, the only recourse for the assessee is to file a refund claim along with the return with the assessing officer and await the refund. It is possible for an assessee to seek remedy for deficiency of service in a consumer forum or to file a complaint with the Ombudsman asking for compensation for the trouble to which the reader has been put to. But then, the reader had failed to press for an acknowledgment. He should have complained about denial of acknowledgment at that stage to the concerned superior officers or should have sent it by registered post acknowledgment due for purposes of evidence for his case. In fact, it is not open to the bank official to refuse acceptance of any document sought to be served on the bank or refuse acknowledgment, where demanded.
Form 15H: If you are a senior citizen, i.e. if you are of the age of 60 years and above at any point of time during the financial year, you can submit Form 15H even if your income exceeds Rs.250,000 p.a. for the purposes of non-deduction of tax at source if your estimated total income for the financial year computed in accordance with the provisions of the Act is NIL. Entities exempt from tax as per CBDT Circular : For certain specified entities whose income is unconditionally exempt under section 10 of the Act and who are statutorily not required to file return of income as per section 139 of the Act, CBDT has vide Circular no.4/2002 dated July 16, 2002, granted blanket TDS exemption. Some examples of the specified entities are provident funds, gratuity funds, local authority, hospitals exempt under section 10(23C)(iiiac), educational institutions or university exempt under section 10(23C)(iiiab). Exemption for insurance companies: Certain entities such as Life Insurance Corporation of India, General insurance Corporation of India along with its four subsidiaries or any other insurer are eligible to receive interest on securities without deduction of tax at source, if such
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Bitcoins
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peer payment itcoin is a peer-to-peer system and digital currency introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto. It is a crypto currency, so socalled because it uses cryptography for security. Users send payments by broadcasting digitally signed messages to the network. Transactions are verified, time stamped, and recorded by participating and often specialized computers into a shared public transaction history database called the block chain. The operators of these computers, kno known as miners, are rewarded with transaction fees and newly minted bitcoins. Bitcoin has been a subject of scrutiny due to ties with illicit activity. In 2013 the FBI shut down the Silk Road online black market and seized US$28.5 million worth of bitcoins. However, the United States is currently considered to be Bitcoin friendly compared to other governments.[citation needed] In China, new rules mean bitcoins cannot be exchanged for local currency, and the European Banking Authority has warned that Bitcoin lacks consumer protections. Theft of bitcoins can occur, and chargeback are impossible. Commercial use of Bitcoin, illicit or otherwise, is currently small compared to its use by speculators, which has fueled price volatility. Bitcoin as a form of payment for products and services has seen growth, however, and merchants have an incentive to accept the currency beca because transaction fees are lower than the 2 2-3% typically imposed by credit card processors. Notable vendors accepting
bitcoin include OkCupid, Reddit, Red and Virgin Galactic "Bitcoin", capitalized, refers to protocol and transaction network "bitcoins", lowercase, refers to currency itself.
the but the
The Basics for a new user As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you u or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once. Balances - block chain The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions tions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block blo chain are enforced with cryptography. Transactions - private keys A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used d to sign transactions, providing a mathematical proof that they
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have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining. Processing - mining Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends. What are the advantages of Bitcoin? Payment freedom - It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money. Very low fees - Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Additionally, merchant processors
exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks. Fewer risks for merchants - Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks, and there is no need for PCI compliance. Merchants can easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets, and fewer administrative costs. Security and control - Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption. Transparent and neutral All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.
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What are the disadvantages of Bitcoin? Degree of acceptance - Many people are still unaware of Bitcoin. Every day, more businesses accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects. Volatility - The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small compared to what they could be. Therefore, relatively small events, trades, or business activities can significantly affect the price. In theory, this volatility will decrease as Bitcoin markets and the technology matures. Never before has the world seen a start-up currency, so it is truly difficult (and exciting) to imagine how it will play out. Ongoing development - Bitcoin software is still in beta with many incomplete features
in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance. In general, Bitcoin is still in the process of maturing. Why do people trust Bitcoin? Much of the trust in Bitcoin comes from the fact that it requires no trust at all. Bitcoin is fully open-source and decentralized. This means that anyone has access to the entire source code at any time. Any developer in the world can therefore verify exactly how Bitcoin works. All transactions and bitcoins issued into existence can be transparently consulted in real-time by anyone. All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted. -compilation from bitcoin.org
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Financial Predictions for 2014 Salary hike As companies fight it out to attract and retain talent in the country, employees are expected to get a double digit salary hike in 2014, according to a Towers Watson survey. Global management consultancy, Hay Group’s research reveals that the highest increases in pay will be seen in Vietnam and India at 11.5 percent and 10.9 percent respectively. Economy Prime Minister Manmohan Singh forecasts India’s economy to remain flat at 5 percent this year. But Credit Suisse lowered the country’s growth outlook to 5.3 percent from 5.7 percent and Goldman Sachs predicts it to grow at 5.5 percent in 201415. Rupee Rupee hit a record low of 68.85 per dollar in August and posted a 11 percent drop in 2013. Goldman Sachs expects rupee to depreciate gradually due to high inflation and policy makers hope to boost rupee forecast on Raghuram Rajan’s policy. Goldman Sachs’ outlook for rupee in 201415 is 65 per dollar. Gold The Reserve Bank of India imposed restrictions on imported gold when Indians bought over 15 tonnes of the precious metal in just three days. According to the World Gold Council, gold consumption in India dropped by about 50 percent, 310 tonnes in the second quarter to 148 tonnes in the third. Goldman Sachs predicts steep losses for the yellow metal and JP Morgan cuts gold forecasts by 10 percent for 2014.
Markets Sensex is predicted to scale new highs after India chooses its new government. A Reuters poll suggested that BSE Sensex will touch 22,625 by the middle of 2014 and 24,000 by the end of the year. India Inc With weak GDP growth expectations, Moody’s outlook for corporate India is negative. It predicted tight funding conditions and high borrowing costs for Indian companies. Moody’s also expects challenges for non-financial corporates to continue. Inflation The consumer inflation is estimated at 8.3 percent and the forecast for wholesale price index-based inflation is 6.3 percent for 2014-15, according to Goldman Sachs. Investment If investment is one of your financial resolutions you should take a fresh look at your income and diversify your savings. Some good profits can be earned with investment in equities this year. Systematic investment plans and bonds can help you make more money. Don’t hesitate to invest in gold. Expenses According to a personal finance portal, Fintotal, your household expenses will stabilize this year. Property Real Estate continues to be one of important investments channels this year. As location and price remain key factors, residential property values are expected to increase in the second half of the year.
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-Compilation from Yahoo Finance
Recap of Changes in Tax Laws in 2013 Direct Tax • No change in personal and corporate tax rates. Tax rebate of up to INR 2,000 per annum introduced for resident individuals, with total income up to INR 0.5 million per annum.
• Income of Securitisation Trust regulated by SEBI / RBI to be tax-exempt. Income distributed to bear distribution tax at 25 percent (Individual / HUF) and 30 percent (others) and be tax-exempt for investors.
• Surcharge introduced for individuals (10 percent if taxable income exceeds INR 10 million). Surcharge on domestic companies increased to 10 percent from 5 percent and for foreign companies increased to 5 percent from 2 percent if taxable income exceeds INR 100 million. Surcharge on DDT for domestic company increased to 10 percent from 5 percent. This Addition in / increase in surcharge to be in force only for one year.
• Tax to be deducted at 1 percent on sale of Land or building exceeding INR 5 million - Agricultural land excluded.
• Sunset date for being eligible to claim tax holiday by power generating, distributing or transmitting companies extended by one more year to 31 March 2014. • Investment allowance at 15 percent on investments made by a manufacturing company in new Plant and Machinery acquired and installed between 1 April 2013 and 31 March 2015 if the same exceeds INR 1 billion. • VCF / VCC registered with SEBI as Category I Alternative Investment Fund under the Alternative Investment Funds Regulations granted pass through status. • STT rates reduced and a new tax called CTT to be levied on commodities derivatives, other than agricultural commodities, traded in recognised associations.
• Consideration for transfer of land and building (being stock in trade) to be taken as per stamp duty value as on date of agreement for sale. • Transaction of Immovable property by an individual or HUF for inadequate consideration to attract taxation as per stamp duty valuation. • Tax return to be regarded as defective, inter-alia, if the tax and applicable interest are not paid by the date of furnishing the tax return (with effect from 1 June 2013). • GAAR provisions modified in line with representations and recommendations made to the government. GAAR to be effective from FY 2015-16 • Basic tax rate on taxable income by way of royalty and fees for technical services of non-residents enhanced to 25 percent. • Gross Foreign Dividends (where shareholding is 26 percent or more) received by the Indian Company taxable at lower rate 15 percent for one more year i.e. FY 2013-14. Cascading effect reduced by excluding them for computing DDT base if such dividends received from foreign subsidiary (more than 50 percent) and used
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in the same year for declaring further dividends. • Unlisted domestic company buying back the shares from shareholders subject to additional income-tax at the rate of 20 percent on distributed income. Income arising to the shareholder as a result of such buy back to be exempt from tax. • Retrospective clarification from financial year 2012-13 to state that submission of TRC necessary but not a sufficient condition for a non-resident to claim the tax treaty benefit. • The rate of tax on income distributed by all non-equity Funds to an individual or HUF increased to 25 percent from 12.5 percent. • Subject to conditions, an additional one time deduction of up to INR 100,000 introduced for individuals in respect for interest payable to a specified financial institution on housing loan sanctioned in FY 2013-14. The deduction available in FY 2013-14 and to the extent un-utilized in FY 2014-15. Indirect Tax • No announcement on likely timeline for implementation of GST
–– Excise duty on SUVs, mobile phones above INR 2,000, marble slabs or tiles etc. –– Effective Service tax rate on residential units above 2,000 square feet or where amount charged from the buyer for transfer of immovable property is more than INR 1 Crore • Efforts made to strengthen compliance/ enforcement: –– One-time amnesty for service providers by way of waiver of interest/ penalty and immunity from prosecution for the period October 2007 to December 2012, under the Service Tax Voluntary Compliance Encouragement Scheme –– Provision allowing for the imposition of a penalty for directors, managers, or other officers of a company who are knowingly involved in contraventions of the provisions of the service tax laws –– Automatic vacation of stay granted by Tribunal (on Excise and Customs matters) after 365 days (even if delay is not attributable to the assessee) • Baggage rules rationalized to allow duty free allowance for jewellery up to INR 50,000 and INR 100,000, for men and women, respectively • Relief given to branded ready-made garment industry by re-introducing zero Excise duty regime.
• Rates for Customs, Excise and Service tax remain unchanged
-Compilation from KPMG Budget Highlights 2013
• Limited broadening of tax base, such as introduction of Service tax on all air conditioned restaurants, on vehicle parking, etc. • Increase in duty/ taxes on luxury products: –– Customs duty on high-end vehicles, bikes, yachts, etc.
motor
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