GST AUDIT CIRCULAR GST SPECIAL PROCEDURES TO BE FOLLOWED :
1
Reconcile your GST Input Tax Credit Claimed with Online GSTR-2A. If the credit claimed does not match with credit available online. GSTR-2A online credit can be viewed now.
Excess : There may be some purchases and expenses which you have not accounted or ITC Claimed. Account and claim ITC.
Shortage : Your supplier may not have paid GST and not filed GST Return. Ask him to pay and file the Return. Even if your supplier filed return, he may not have correctly quoted your GST No. Ask him to correct it in the subsequent months return Before September, 2018, by way of Debit Note in your name by referring the old invoice Number.
What happens if not done : IF online credit is not available, then you have to pay the ITC as tax along with 24% interest p.a.
2
Similarly, while filing GSTR-1, we may also have wrongly quoted some of our customers GSTIN. Correct it before September, 2018 by Submitting online Debit note.
3
Any mistake if rectified before 30.09.2018 that will attract only 18% Interest . You can take ITC also. Any mistake if made after 30.09.2018 will attract 24% interest. No ITC Available.
4
Supplier Payment not made with 180 days : If payment to supplier is not made within 180 days from the date of bill, then ITC availed on it should be reversed in the monthly return when the 180 days expires (for July bill it is January return). With 18 % interest for 6 months. ITC can be again taken when payment to supplier is made later.
5
Stock Held with Jobworker As on 30.06.2017 : As per the GST Act, stock held with jobworker as on 30.06.2017 should have been declared in TRAN-1 Form. If Not declared, the subsequent receipt of goods from the jobworker will be treated as purchase from unregistered person and GST RCM has to be paid (upto 12.10.17). Now prepared a list of Goods and machinery held with jobworker as on 30.06.2017 (Details of jobworker and details of goods), with a covering letter submit to the Jurisdictional Assessing Officer (CTO) (by post). Goods held with jobworker as on 30.06.2017 should be received within 1 year from 01.07.17. Machinery held with jobworker as on 30.06.2017 should be received within 2 years from 01.07.2017. If received lately, that will be treated as purchase.
6
Quarterly Return for Job work details is Compulsorily required to be filed : The Form is ITC-04.
If this form is not filed, then the goods sent will be treated as ‘supply’ and GST has to be paid. If the goods from 01.07.17 is not received within 6 months, then that will be treated as ‘deemed supply’ and GST has to be paid. Similarly for Machinery sent. The time limit is 3 years.
7
Self Made Invoice for Reverse Charge Expenses. Every month consolidated self made invoice is required to prepared in the format for Reverse Charge Paid Expenses. Penalty leviable.
8
RCM on Import CIF. Vide Notification No.10/2017(IGST) 5% RCM is payable on Ocean Freight Paid on CIF purchase, for Import. 10% of CIF value is value of Ocean Freight. If we pay voluntarily before 30.09.18, then ITC available. If taxed later, No ITC. Interest 18%. Airfreight exempt.
9
Bank Charges : ITC on bank charges is available Only with Credit available Online and Bill Issued by Banker. If no bill issued by Banker then ITC cannot be taken. Get monthly bill from bank.
Inform your GSTIN to bank through a letter. Confirm online credit and monthly bill.
10
Tax Paid vs. Return Filed. Even If you paid the Tax. But if you have not filed the return. Then you will be required to paid 18% interest on the full tax till date of filing return.
11
ITC on Passenger Vehicle and Building Maintenance expenses : Since, ITC is not available on purchase of passenger vehicle and Building construction. (Should be reversed after 30.09.18 with 24% interest). ITC on repairs and maintenance of passenger vehicle and building maintenance is also doubtful. You can claim at your own risk.
12
Reverse ITC on Stock lost/ destroyed. When ever stock is lost, destroyed (fire accident), ITC availed on the purchase has to be reversed to that extent. Insure stock Cost + Tax value so that insurance can be claimed for full value .
13
Canteen and Other recoveries from employees Taxable. 01.07.17 to 17.02.18 12% GST with ITC. From 18.02.2018 5% GST without ITC. For other recoveries 18% GST. For free services without any recovery annual Rs. 5000 is exempted per employee. No ITC available.
14
From 01.10.18 Online Online Credit Only. System will not allow us to feed the ITC based on invoice
in hand. So from now ensure that your suppliers properly pay GST and file return. Reconcile and Rectify every month. From doubtful suppliers, keep pending the GST value until online credit is available. GSTR-2A available.
15
In the Income Tax Return we estimate some personal expenses in General Expenses, Telephone Expenses, Travelling Expenses. In the monthly return, on the ITC availed on these expenses 5% has to be reversed for personal expenses.
16
Turnover for the Purpose for Registration : Taxable Supplies, exempted supplies, export of goods and services. For Example an Individual is having Rs. 3,00,000 commission receipts (taxable), Rs. 5,00,000 commercial rent (taxable), Rs. 5,00,000 residential rent (exempt), Rs. 5,00,000 agricultural income (exempt) and Rs. 5,00,000. In total Rs. 23,00,000. They we have to register and pay tax on the taxable supplies.
17
Registered Persons having turnover below Rs . 20 lacs : If a person is already having registration under VAT and migrated to GST. But his aggregate turnover is below Rs.20 lacs. He has to pay tax on the taxable suppliers even if turnover is below Rs. 20 lacs. Every person having GST number is required to pay GST on taxable sales.
18
Registered Persons having turnover below Rs . 20 lacs but to pay RCM: (RCM on goods and services from unregistered persons (URP) from 01.07.17 to 12.10.17). Even if your total turnover is exempt. Even your aggregate turnover is below Rs. 20 lacs, but if you are having a GST Registration, then you have to pay Reverse Charge GST on taxable goods and services from URP.
19
Compensation from customers : Interest, penal charges, packing charges, transport charges, Reimbursement of Freight from customers in the course of sale of goods are taxable under GST.
20
Liquidated Damages : Liquidated damage charges received from contractors, suppliers is a taxable service under GST. If we deduct any thing from the payment made to contractor/ supplier, then we have to raise a tax invoice @ 18%.
21
Transactions among Related parties : (Group Concerns, firm to partners, business to relatives) Then these transactions may require valuation for deciding market value. One such risk is that, if a building is owned by one of your firm and the same building is the office for other firms, then your first firm will be required to pay GST on estimated rent. Common goods vehicles, Common work force, Machinery sale to group concern will required market value and notional value for tax.
22
Sales Return and Purchase Return : Under GST sale return and purchase return (under VAT period and under GST period) has special procedure to be followed. GST Reversal, Debit Note, Credit Note. Any omissions either by you or by your supplier should be corrected in return before 30/09.
23
Tax on sale of Used Motor Vehicles : Three types of taxes during the year. For vehicles during 01.07.18 to 12.10.2017, at full GST applicable on new vehicle (Example 43% depending on vehicle). For sale from 13.10.17 to 24.01.18, 65% of 43%. For Sales from 25.01.18, 18% on the excess sale value over Income Tax WDV. If the sale value is not above IT WDV, then no GST payable.
24
Assets sold within 5 years from the date of purchase : Any asset purchased on which GST input was taken, if sold within 5 years from the date of purchase, the GST should be reversed/ paid will be higher of tax on the actual sale value or 1/20 th of ITC taken on purchase, for each remaining period in the 5 years. Eg. If an asset was purchase for Rs. 100000. GST ITC taken Rs. 18000. If Sold after completion of 2 years. The remaining period in 5 years is 3 years (12 quarters). If sold for Rs. 30000. The GST reverse/payable on sale will be Maximum of, 18% on 30000 = Rs. 5400 or 18000/20*12 = 10800. Here Rs. 10,800 is the GST Payable.
25
Exporters Refund : Exporters may have purchases in some months but exports in other months only. They have an option to submit quarterly combined application. Club your purchases and exports in a period of continuous 3 months (quarterly), and submit refund application quarterly.
26
GST On advances paid to URP : During the period 01.07.17 to 12.10.17 Reverse Charge is there. GST is applicable on Advances received also. Similarly, for advance paid to Unregistered Persons also RCM is payable. Building construction advance, carpenter advance, section advance, Contractor advance. Depending on the nature of work ITC is available or not.
27
GST Is payable on Advances Received : As per the GST Act, GST is payable on the advances received. Advance Receipt in GST format has to be raised. The tax has to be adjusted in the monthly return when final invoice is raised.
28
Single Invoice, But multiple deliveries : A good or fixed asset may be purchased in a single invoice. But taken delivery in multiple delivery. GST invoice should be raised on the first despatch but ITC
can be taken only after receipt of the final despatch (when first delivery in one month and final delivery is in another month, then problem arises).
29
Place of Supply : Place of supply is another important aspect for deciding whether to charge IGST or CGST and SGST. When you sell to a registered person having GSTIN of another state, you have to Charge IGST even if you have delivery the goods to him within TN or delivered the goods to his factory or jobworker in TN. Similarly for sale to Unregistered person also if you sell goods quoting his address in another state in your bill, you have to charge IGST even if you have delivery the goods to him on hand on within TN.
Wrong payment of tax will be considered as tax not paid and will be required to pay against.
COMMON GST MISTAKES AND OMISSIONS IN ACCOUNTS : RETURN MISTAKE
1 Book vs GST return reconciliations
2 Non filing, Delay Filing.
WRONG ITC CLAIM
3 Non reversal of ITC on wastage, lost, samples, fire accident, etc
4 Taking ITC on blocked credit and not reversing the same:
passenger vehicle, food items, building material , life insurance.
5 Not reversing ITC on common expenses in proportionate to sales exempted,
6 Not reversing ITC when supplier payment is not made within 180 days. With interest.
7 ITC on composite dealer purchases.
PROCEDURES AND MISTAKES
9 Non maintenance of quantitative register, quantity reconciliations.
10 No payment of GST on used machinery sales, assets sales, vehicle sales, etc.
11 Non submissions of debit note and credit note for subsequent rate difference, quantity diff.
12 Non Reversal of ITC on Creditor Balance Write-Off.
13 Canteen recovery from employees, GST not paid ,
14 No GST number in purchase bills.
15 Actually selling one taxable goods but declaring under exempted goods. Eg. Registered Brand,
Packed Goods, Processed Goods, Cattle Feed,
16 Non payment of GST on industrial estimated buy products, waste production.
17 Regular to composition Change : stock declarations and payment of GST on the Stock.
18 Special issues of composition dealers transfer from regular to composition vice versa.
19 Non submissions of quarterly form ITC-04 form for jobwork movement details.
20 Non Declaration of Stock and machinery with Job workers as on 30.06.2017.
REVERSE CHARGE MECHANISAM
21 Not paying RCM on many 9(4)items. Building labour, Vehicle Maintenance, Rent, (URP)
22 Not paying RCM on 9(3) items advocate, govt services, freight.
23 Selling 100% exempted goods but not paying RCM U/s. 9(4), 9(3),
24 Not Taking ITC on RCM Paid.
25 Not Reversing ITC on RCM Paid on Blocked Credits (building material, labour, etc)
TAX OMMISIONS
26 Non disclosure of discounts , purchase returns in return.
27 No receipt of goods and assets sent on jobwork and returned within specified time 1 or 3 yrs..
28 In house jobworker have crossing 20lakhs and not having GST registration number.
29 Supplier/Service provider issues only bill but not paying GST and not submitting Returns.
30 Initially exempted items but subsequently taxed items but GST not paid. Eg. Cattle Feed.
31 Not Paying Tax on Canteen and Other Recoveries from employees.
CHECK LIST FOR GST RETURN PREPARATION (GSTR-1 and GSTR-3B) : FROM MAY 2018 DUE DATE FOR FILING GST RETURNS :
1. MONTHLY GSTR-1 (SALES INVOICE DEATILS) SHOULD BE FILED BEFORE 10 OF NEXT MONTH Eg. For May, 2018 month, GSTR-1 should be filed before 10.06.2018.
2. MONTHLY GSTR-3B (Consolidated Payment Return) SHOULD BE FILED BEFORE 20 TH. Eg. For May, 2018 month, GSTR-3B should be filed before 20.06.2018.
SALES :
1. Check Continuation of Sales Bill serial number from previous month. To check whether any additional bill is made last month after filing the GSTR1/3B of last month.
2. Check continuous serial number of sales bills this month. Any omissions in between. Cancellations, omissions in books has to be noted and handled accordingly.
3. Documents issued. Documents Cancelled.
4. Check correct rate of tax is applied. Based on customer GSTN whether correct tax IGST (for other
state GSTN) /CGST & SGST is charged.
5. Break up for registered and unregistered customers.
6. HSN Code of the product.
7. Quantity of the goods sold.
8. Any Exempted Sales. Verify whether it is actually exempted.
9. Whether Sales Tallied with P&L.
OTHER INCOMES :
1. Other Taxable incomes in P&L.
2. Other Taxable Incomes in Capital A/c and Memo of Income.
3. Vehicle Sales, Machinery Sales.
Compulsory RCM :
1. Lorry Freight, Advocate Fees, Etc.
2. If lorry transport is from other state, then Pay IGST RCM.
PURCHASE :
1. Correct GSTN and address in the purchase bill.
2. GSTN of the Seller.
3. Whether Purchases tallied with P&L.
4. Other Purchases and Expenses in the Profit and Loss Account.
5. Whether ITC is taken on all purchases and expenses.
6. ITC on Machinery and Vehicle Purchases in Balance Sheet.
7. Whether ITC Taken on RCM paid.
REVERSAL OF BLOCKED CREDIT :
1. ITC on Purchased used for exempted sales.
2. ITC on Building Material, labour, Passenger Vehicle.
3. ITC on Life Insurance, Food expenses,
4. Proportionate Reversal ITC on of Common expenses on Exempted Sales.
REVERSAL OF ITC ON PAYMENTS NOT MADE TO SUPPLIER WITHIN 180 DAYS :
1. In the suppliers ledger, Every Month check whether are unpaid Purchase more than 180 days.
2. If yes then reverse the ITC Tax (IGST, CGST and SGST correctly)
3. Calculate interest at 18% and
PAYMENT :
1. IGST, CGST, SGST, RCM (against IGST, CGST, SGST), Interest on late payment, late filing,
2. Interest on reversal of ITC on non payment to supplier.
.
============>
.
GST
1. *Gujarat AAR- Classification of cryo containers-* Cryo containers (Liquid Nitrogen containers used for preserving biological samples) is appropriately classifiable under Heading 9617 which covers 'Vacuum flasks and other vaccum vessels' and not covered by Heading 7613 which covers 'aluminium containers for compressed or liquified gas.'
*2018-VIL-84-AAR*
*Service Tax:*
2. *Works contract-* The contractor has availed the benefit of composition scheme and as such is barred from availing the facility of cenvat credit on inputs. When the Cenvat credit is not available to the contractor, the said Cenvat credit cannot be passed on to the appellant.
*2018-VIL-450-CESTAT-DEL-ST*
.
============>
.
Income Tax returns filing due date for non-auditable assesses is 31 July 2018. Kindly file it on or before otherwise a penalty will be livable on late filing.
Government has extended the exemption on intrastate and interstate supplies of goods and services or both received by a registered person from any supplier, who is not registered, from whole of the central tax livable under section 9(4) of the CGST Act, 2017 or integrated tax leviable under section 5(4) of IGST Act, 2017 till 30th September 2018.
No e-way bill in respect of movement of goods originating and terminating in the state of Delhi (i.e. intra state movement but without passing through any other state) shall be required where consignment value does not exceed Rs. 1,00,000.
SEBI enhanced the overseas investment limit of alternative investment funds and venture capital funds to USD 750 million from the current USD 500 million. The decision has been taken in consultation with the Reserve Bank of India, the Securities and Exchange Board of India (SEBI) said in a circular.
IBBI amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by a press release dated 4th July, 2018 . Supreme Court of India refused to overturn a RBI ban on lenders from dealing in crypto currencies, a move that effectively outlaws the nascent industry in Asia’s third-largest economy.
.
============>
.
*👉🏻RBI tightens Banks' Statutory Auditor rules*
(RBI tightened rules on banks' statutory auditors saying it reserved the right to not approve appointments of such auditors for a specified period if their audit quality was not found satisfactory)
👇🏻 👇🏻 👇🏻
https://goo.gl/3VYTig
*👉🏻MCA plans to frame tougher regulations for independent directors*
(MCA planning to frame rules to make independent directors more accountable for malpractice. Besides, it is also mulling action against 42 auditors that have resigned from companies)
👇🏻 👇🏻 👇🏻
https://goo.gl/SJLwRN
*👉🏻IBBI amends norms, notifies procedures for Homebuyers under IBC*
(IBBI has notified revised norms for the insolvency resolution process paving the way for homebuyers to seek relief as financial creditors, timelines to be followed by resolution professionals and permitting withdrawal of insolvency application)
👇🏻 👇🏻 👇🏻
https://goo.gl/pXwu8j
*👉🏻Auditors may have to compulsorily get registered with NFRA*
( Mandatory registration of auditors, powers to probe irregularities as well as recommend accounting and auditing standards are among the functions likely to be vested with NFRA)
👇🏻 👇🏻 👇🏻
https://goo.gl/Q6VVpC
.
============>
.
For Demat Account - *Nominee Supersedes The Will
*Shares:* The rules have been changed here by an Honorable Supreme court ruling in 2012. In a case of wife claiming the shares lying in a demat account where a nephew was a nominee, the Supreme Court ruled that "the wife had no right over the shares as the provisions of the Companies Act mandated that the nominee inherit them." This simply means that in a demat account the Companies Act overrules even a Will. So in all your demat accounts, the nominee will inherit the shares. I ..
Read more at:
economictimes.indiatimes.com/articleshow/45227408.cms
.
============>
.
J. J. Development Pvt. Ltd vs. CIT (Calcutta High Court)
*S. 68 Bogus share capital:* If the alleged share applicants do not appear before the AO pursuant to the s. 131 summons and the documentation is inadequate, it is a "completely bogus claim". The assessee cannot argue that the AO should have made inquiries from the AO of the share applicants as to their credit-worthiness
The appellant-assessee has referred to a judgment of this Court reported at 114 ITR 689 for the proposition that upon the identity of the person who has put in the money being established by the assessee, the onus is on the Revenue to discredit the explanation offered in terms of Section 68 of the Act. In the present case, there was no plausible explanation that was furnished by the assessee. At any rate, the identities of the alleged share applicants could not be established and the documents of the alleged share applicants carried by the assessee before the Assessing Officer did not reveal the investments that the assessee claimed such alleged applicants had made in the assessee .
.
============>
.
Madras HC Quashes Order rejecting Settlement Application for not Disclosing Refund granted due to failure of Chartered Accountant* [Read Judgment]
Read more at: http://www.taxscan.in/madras-hc-settlement-application-disclosing-refund-granted-failure-chartered-accountant/25438/
.
============>
.
Vora Financial Services P. Ltd vs. ACIT (ITAT Mumbai)
S. 56(2)(viia) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S. 56(2)(viia) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence s. 56(2)(viia) cannot be invoked in the hands of the assessee company
The provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of recipient and the shares shall become property of the recipient only if it is “shares of any other company”. In the instant case, the assessee herein has purchased its own shares under buyback scheme and the same has been extinguished by reducing the capital and hence the tests of “becoming property” and also “shares of any other company” fail in this case. Accordingly we are of the view that the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares
.
============>
.
CIT(A) should admit Additional evidence which are relevant and goes to root of matter: ITAT Delhi
Case Law Details
Case Name : Sh. Dharampal Tyagi Vs ITO (ITAT Delhi)
Appeal Number : ITA. No. 140/Del/2018
Date of Judgement/Order : 19/06/2018
Related Assessment Year : 2009-10
Courts : All ITAT (5103) ITAT Delhi (1142)
Download Judgment/Order
Sh. Dharampal Tyagi Vs ITO (ITAT Delhi)
https://taxguru.in/income-tax/sh-dharampal-tyagi-vs-ito-itat-delhi.html
.
============>
.
ITC is available on raw materials used for supplies made under concessional rate of 5% GST: AAR
July 5, 2018[2018] 95 taxmann.com 63 (AAR- TELANGANA)83 Views
CGST : Concessional rate of tax @ 5% as given under Notification No. 47/2017-Integrated Tax(Rate) dated 14.11.2017 is applicable only for Interstate sales i.e., on IGST and concessional rate of tax @ 2.5% CGST + 2.5% SGST is applicable for Intrastate supplies as per Notification No. 45/2017-Central Tax (Rate) dated 14.11.2017
.
============>
.
*Payment of Affiliation Fee paid to US Company not ‘ Royalty ’ as per DTAA: ITAT* [Read Order]
Read more at: http://www.taxscan.in/payment-affiliation-fee-paid-royalty-dtaa-itat/25461/
.
============>
.
*Income Tax Return efiling for AY2018-19: Inherited property?*
You must file in ITR form; Here’s how
Income Tax rules require the legal representative to pay tax and file ITR in case property is inherited from the deceased. This article discusses in detail the various tax compliances arising after the death of a person.
Income Tax law mandates paying taxes and filing an ITR in case of inheritance of property
Benjamin Franklin had said that “there are only two things which are certain in life: death and taxes.” But in this world, even death cannot save a person from paying taxes. It’s really hard to lose someone. If this truth was not bitter enough, paying taxes and filing income tax return added insult to injury.
After the death of a person, the legal heirs have to go through legal compliances like inheritance of deceased property, the filing of income-tax return on behalf of deceased, so on and so forth. If the deceased person had some capital assets they are devolved on the legal heirs. However, income from such capital assets or any other income earned by the deceased person during the year has to be reported in the income-tax return being filed by the legal heirs on behalf of the deceased person.
This article enumerates all tax compliances which may arise after the death of a person.
1. *Payment of tax on behalf of a deceased person*
As per section 159 of the Income-tax Act, 1961, in case of death of an assessee, his legal representative is deemed as an assessee who shall be liable to pay any sum which the deceased assessee would have been liable to pay had he not died. However, the liability of the legal heir to pay the Income-tax shall be limited to the value of assets inherited.
2. *Computation of income of the deceased*
Income earned on account of a deceased person during the year has to be bifurcated into two parts – Income earned before the date of death and income earned after the date of death. A legal heir has to file a return on behalf of the deceased person for the income earned till the date of his death and Income earned thereafter from the inherited asset shall be considered as legal heir’s own income.
Income earned during the period of April 1 to the date of death shall be considered as deceased person’s own income. However, the legal heir has to file the income-tax return on behalf of the deceased person and pay tax accordingly.
Income earned after the date of death till the end of the financial year shall be considered as income of legal heir and shall be disclosed in his personal income-tax return.
3. *Filing of income-tax return by the legal heir*
In order to file Income Tax return on behalf of the deceased person, a person has to first register himself as a legal heir on e-filing website www.incometaxindiaefiling.gov.in in following steps:
Step 1: Go to https://incometaxindiaefiling.gov.in and login into the account of legal heir
Step 2: From the main menu go to My Account> Add/Register as Representative
Step 3: On the landing page, you need to select the relevant options from the drop-down boxes, which are as under:
# Request Type: ‘New Request’
# Add/Register as Representative: ‘Register yourself on behalf of another person’
# Category to Register: ‘Legal Heir’
Step 4: Click on ‘Proceed’ and on the landing page fill up the following information:
# Name of Deceased Person
# PAN of Deceased Person
# Date of Death
# Upload the scanned copy of PAN card of both deceased and legal heir, a copy of death certificate and a copy of legal heir certificate or Registered Will or Family Pension certificate or letter issued by the bank confirming the nominee to the bank account.
All these documents are to be uploaded in a zipped folder. The maximum size of the zipped folder shall not exceed 1MB.
Step 5: Click on Submit. After submission, you will get an Acknowledgement from the Dept. with a transaction ID
After completing the above process, the department shall verify the request and once it is approved, the legal heir will be able to use all services for the deceased through his own E-Filing account.
After successful registration, the legal heir has to file the return on behalf of the deceased. The legal heir needs to log in to E-filing portal using his own credentials to upload the ITR of the deceased person. At the time of the filing of the ITR legal heir will be given an option to choose the PAN of the deceased through a drop-down list for uploading his ITR. It is to be noted that in income-tax return, the name of the assessee should be mentioned as <<Late Name of Deceased Assessee through Name of Legal Heir>>. Further, the legal heir should add his PAN in the verification part of the ITR Form.
4. *Carry forward and Set off of Deceased Person’s Business loss*
When an individual succeeds in the business of his predecessor by inheritance, the successor is entitled to carry forward the loss incurred by the predecessor. However, the total period of carrying forward cannot exceed 8 assessment years immediately succeeding the assessment year for which the loss was first computed.
5. *Tax on inherited property*
Inheritance-tax was abolished in the year 1986. Therefore, legal heirs are not required to pay any inheritance tax on the inherited property.
Though there is no inheritance tax, yet there are certain Income-tax provisions which one should know to understand the taxability of gifts or inherited property.
When any money or property is received by a person without consideration or for inadequate consideration, it is considered as residuary income of the recipient. However, this provision does not apply to any sum of money or any property received under a will or by way of inheritance. Hence, the legal heir shall not be liable to pay any income-tax on inherited money or property.
Further, any transfer of a capital asset under a gift or will or an irrevocable trust is not regarded as transfer for capital gain tax purposes. Hence, transfer of capital asset under inheritance will not be chargeable to tax in hands of deceased as well.
Though no tax implication shall arise either in hands of a legal heir or deceased at the time of inheritance, yet capital gain tax liability arises in hands of a legal heir in case of subsequent sale of the inherited property. In such case, the actual cost of acquisition of the inherited property to the deceased person shall be considered as the cost of acquisition to the legal heir. While determining the period of holding of inherited assets, the period of holding of the deceased person shall also to be taken into consideration. Vinay mittal
6. *Reporting in Income-tax return*
The Income-tax return being filed on behalf of the deceased person should be prepared in accordance with the following key points:
# Only income earned from April 1 of the financial year till the date of death shall be reported as income of a deceased person.
# Transfer of property of the deceased person to the legal heir by way of inheritance shall not be reported in the Income-tax return of the deceased person, because this transaction is not regarded as transfer for the capital gain purpose.
# Money or property received by legal heirs by way of inheritance shall not be reported in income-tax return because Section 56(2)(x) does not apply to money or property received by way of inheritance.
# Income earned from an inherited property after the date of death shall be considered as legal heir’s own income. It shall be reported in legal heir’s personal return.
# If the total income of legal heir, including the income of deceased person after his death, exceeds Rs. 50 lakhs, the user shall be required to provide details of all Assets and Liabilities held by him at the end of the financial year in Schedule AL. These details shall include all assets and liabilities including the assets acquired by way of inheritance.
# Sale of inherited property by legal heir shall be chargeable to tax as capital gain in hands of a legal heir and, accordingly is required to be reported under Schedule Capital Gains in ITR Forms.
If any refund of a tax has to be claimed in the Income-tax return of the deceased person, it is advisable to fill-up the details of the joint bank account as a convenient measure to receive the refund amount. If there is no joint account and legal heir fills-up the details of his bank account, then CPC shall ask the deceased person’s juridical Assessing Officer to verify the details of the legal heir. After verification, the CPC shall issue a refund in the name of the legal heir.
7. *Surrender of the PAN Card*
It is advisable to surrender the PAN Card of the deceased person after submission of his last income-tax return and payment of tax dues or receipt of a refund if any.
.
============>
.
*License Fee from Tenant is Business Income, not House Property Income: ITAT* [Read Order]
Read more at: http://www.taxscan.in/license-fee-tenant-business-income-house-property-income-itat/25455/
