Important Keyword: IFOS, Income Tax, Income Tax on Cashback.
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Income Tax on Cashback
Cashback is a monetary reward provided by businesses to stimulate customer purchases. It functions as a percentage of the amount spent on products or services, reimbursed to the customer either in cash or through other perks. However, if the total cashback received during the fiscal year surpasses INR 50,000, it becomes taxable income under the category of “Income from Other Sources” and is subject to income tax.
Types of Cashbacks
Instant cashback is provided immediately upon the completion of a transaction, reducing the payable amount instantly. For instance, if you purchase a movie ticket online for INR 500 with a 10% instant cashback offer, you’ll only need to pay INR 450 (500 – 10% cashback).
Deferred cashback, on the other hand, is a reward that can be utilized in subsequent transactions. For example, if you refer a friend while booking a movie ticket online and receive cashback, you can use it for your next purchase.
Income Tax on Cashback – Business Expense
Regarding income tax on cashback, it’s considered a form of income for businesses. If a business buys goods or services and receives cashback, it can either treat the cashback as a reduction in the purchase cost or report it as additional income.
For instance, if ABC Enterprises buys stationery online for INR 5,000 and receives an instant cashback of INR 1,000, they can either claim INR 4,000 as the net expense or report INR 5,000 as the expense and INR 1,000 as income.
Capital Expense for Business
If a business purchases capital goods and earns cashback, it can treat the reduced purchase amount as an asset and claim depreciation on it. Alternatively, the business can consider the entire purchase amount as an asset, report the cashback as income, and pay tax accordingly.
For instance, ABC Enterprises bought a laptop worth INR 50,000 and received a cashback of INR 5,000. They can record INR 45,000 as the net asset value and claim depreciation on it. Alternatively, they can list the full INR 50,000 as an asset, treat the INR 5,000 cashback as income, and pay tax on it.
Income Tax on Cashback – Personal Expense
Regarding income tax on cashback for personal expenses, if an individual receives cashback on personal purchases, it’s considered a gift as per Section 56(2) of the Income Tax Act. Cashback up to INR 50,000 in a financial year is exempt income, but any amount exceeding this is taxable under the head “Income from Other Sources” at slab rates.
For example, if Mr. Mehta receives a birthday gift worth INR 35,000 and earns cashback totaling INR 18,000 during the year, the aggregate amount of INR 53,000 exceeds the INR 50,000 limit. Therefore, the entire sum will be taxable under “Income from Other Sources.”
Important Keyword: Immovable Property, Tax Liability, Income Tax Returns.
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Tax Liability from Purchase of Immovable Property
In the realm of income taxation, addressing compliance queries regarding the purchase of immovable property is paramount for taxpayers. Here’s a simplified guide to understanding these processes:
Understanding Compliance Queries:
Taxpayers who have purchased immovable property from undisclosed income may receive queries on the compliance portal. According to the Income Tax Act, any unexplained investment is deemed as income for that financial year under sections 69 and 69B.
Key Aspects to Consider:
Valuation Discrepancies: If a person receives an immovable property without consideration or with disclosed consideration lower by more than Rs. 50,000, the difference will be considered as income in the hands of the purchaser.
Pre-Sale Agreements: If a sale has not been executed but an agreement of sale is prepared, provisions of section 50C and 56(2) will apply.
Encountering Verification Challenges:
Taxpayers may receive verification notifications from the Income Tax Department (ITD) via SMS, calls, or emails for various reasons:
Non-filing of Income Tax Returns (ITRs) for the given assessment year, potentially leading to pending tax liabilities.
Discrepancies between taxpayer-provided details and information received by the ITD for that assessment year.
Reporting of significant transactions during a financial year considered abnormal or out of line with the taxpayer’s profile.
Responding to Verification Issues:
Taxpayers facing verification issues must promptly submit a response on the compliance portal. This response should be submitted online by logging into the compliance portal.
Verification issue in the computation of tax liability on the Purchase of Immovable Property
Code
Description
Response
A1
Correct Information Value
Amount + Remarks
A2
Out of earlier income or savings
Amount + Remarks
A3
Out of receipts exempt from tax
Exempt income-wise list
A4
Received from identifiable persons (without PAN)
PAN wise list
A5
Received from identifiable persons (without PAN)
Person wise list
A6
Received from un-identifiable persons
Nature of transaction wise list
A7
Others
Amount + Remarks
A8
Unexplained amount
A1- (A2+A3+A4+A5+A6+A7)
In the intricate landscape of taxation, comprehending the intricacies of immovable property transactions is paramount for taxpayers. Here’s a simplified roadmap to help taxpayers navigate these processes:
A1- Total Investment: Declare the aggregate amount paid for the purchase of immovable property, encompassing the purchase price and associated expenses like stamp duty. In cases of co-ownership, specify one’s share of investment, providing details such as name, PAN, and share of other co-owners in the remarks section.
A-2 Out of Previous Income or Savings: If any portion of the investment or expenditure originates from prior income or savings, it must be disclosed along with the amount in this category. Appropriate remarks are essential in the remarks section.
A3- Expenditure from Tax-Exempt Receipts: Choose from available exemptions to determine the value of the receipt, including interest income, dividend income, long-term capital gains on shares, agricultural income, share in the total income of a firm/AOP, income not taxable in India, or others.
A4- Receipts from Identifiable Persons (with PAN): Detail any amounts received from identifiable persons holding a valid PAN, categorizing them based on transaction type such as sales, loan received, loan repayment, gift received, donation received, or other receipt. Specify transaction mode as ‘Cash’ or ‘Non-cash’, with suitable remarks provided.
A5- Receipts from Identifiable Persons (without PAN): Record amounts received from identifiable persons lacking a PAN, adhering to the transaction table format.
A6- Receipts from Unidentifiable Persons: Document amounts received from unidentifiable persons, following the prescribed table format.
A7- Miscellaneous Expenditures: Declare any amounts not fitting into the above categories in this section, ensuring suitable remarks are provided.
By mastering these concepts and accurately completing property transaction declarations, taxpayers can ensure compliance with tax regulations and foster a transparent tax environment. Diligent adherence to these guidelines is imperative to mitigate potential discrepancies or penalties associated with unexplained amounts.
Taxpayers are required to confirm whether they have filed their Income Tax Returns or not through the e-Campaign platform. This initiative targets individuals who have not yet filed their returns for a specific assessment year and may have potential tax liabilities or obligations to file. Here’s how to submit the response on filing your income tax return:
Navigate to the e-Campaign Non-Filing of Return section.
Follow the provided steps to submit your response regarding the filing of your income tax return.
By following these steps, taxpayers can fulfill their obligations and ensure compliance with tax regulations through the e-Campaign platform.
To submit confirmation on the filing of Income Tax Returns, taxpayers need to follow these steps on the compliance portal:
Access the compliance portal and locate the response column.
Under the response column, choose one of the following options from the drop-down list:
“Income Tax Returns has been filed”
“Income Tax Returns has not been filed”
If “ITR has been filed” is selected:
Provide the following details:
Mode of Filing
Date of Filing
Acknowledgment Number
Circle/Ward and City (applicable only if the mode of filing is paper filed)
If “ITR has not been filed” is selected:
Choose one of the following reasons from the drop-down list:
“Return under preparation”
“Not liable to file return of income”
Click the submit option to confirm the chosen reason.
After submitting the response:
Click on the “Back” option to return to the e-Campaign – Non-filing of return screen.
To complete the response, click on “Information Confirmation” to submit feedback against the provided information.
By following these steps, taxpayers can efficiently manage their responses regarding the filing of ITRs and ensure compliance with tax regulations through the compliance portal.
Important Keyword: E-Verify, Income Tax Compliance, Expenditure.
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Tax Liability on Expenditure
In the intricate world of income tax, expenditures serve as vital clues to an individual’s lifestyle and spending habits. From family celebrations to international travels and fine dining experiences, these expenses reflect how one utilizes their income. It’s imperative for taxpayers engaging in significant expenditures to provide their PANs for these transactions, as some expenses are also reported through AIR or SFT.
Notifications from the Income Tax Department (ITD), whether via SMS, call, or email, often signal potential verification issues in Income Tax Returns (ITRs). These notifications typically arise for three main reasons:
Non-filing of ITR: If a taxpayer fails to file their ITR for a given assessment year, especially when there’s a potential tax liability pending, notifications may ensue.
Discrepancies in Information: Mismatched details provided by taxpayers and received by the ITD for a specific assessment year can lead to verification inquiries.
Significant Transactions: Unusual transactions reported to the ITD during a fiscal year, which deviate from the taxpayer’s typical profile, may prompt verification queries.
Taxpayers facing verification issues must respond promptly by submitting their responses online through the compliance portal. This ensures compliance with tax regulations and helps mitigate potential tax liabilities.
Understanding the significance of expenditures and promptly addressing verification issues raised by the ITD is essential for taxpayers to navigate the complexities of income tax filing and ensure a smooth compliance process. By staying informed and proactive, taxpayers can effectively manage their tax obligations and maintain financial integrity.
Verification issue in the computation of tax liability from Expenditure
Code
Description
Response
A1
Correct Information Value
Amount + Remarks
A2
Out of earlier income or savings
Amount + Remarks
A3
Out of receipts exempt from tax
Exempt income-wise list
A4
Received from identifiable persons (without PAN)
PAN wise list
A5
Received from identifiable persons (without PAN)
Person wise list
A6
Received from un-identifiable persons
Nature of transaction wise list
A7
Others
Amount + Remarks
A8
Unexplained amount
A1- (A2+A3+A4+A5+A6+A7)
A1 – Total Investment Amount:
This section requires the taxpayer to provide the total amount paid for property purchase, inclusive of expenses like stamp duty. In cases of co-ownership, the taxpayer should specify their share of investment and provide details of other co-owners, including their names, PANs, and respective shares in the property, in the remarks section.
A2 – Investment from Previous Income or Savings:
If any part of the investment or expenditure is sourced from previous income or savings, it should be disclosed here along with the corresponding amount. Remarks explaining the source of funds are also necessary.
A3 – Investment from Tax-Exempt Receipts:
Taxpayers must select the relevant exemption from the dropdown list for investments made from tax-exempt receipts. The available exemptions include interest income under section 10, dividend income under section 10(34), long-term capital gains on shares under section 10(38), agricultural income under section 10(1), share in the total income of firm/AOP under section 10(2A), income not taxable in India, and others. Additional rows will be displayed based on the selected option, requiring further details.
A4 – Receipts from Identifiable Persons (with PAN):
Any amount received from an identifiable person with a valid PAN should be detailed in this section. The table includes transaction types such as sales, loan received, loan repayment, gift received, donation received, and other receipts. The mode of transaction (cash or non-cash) should also be specified. Suitable remarks must be provided.
A5 – Receipts from Identifiable Persons (without PAN):
Amounts received from identifiable persons without a PAN should be recorded in this section. Details of the transaction should be provided in the table format as per the instructions.
A6 – Receipts from Unidentifiable Persons:
If any amount is received from an unidentifiable person, the details should be documented in this section according to the provided table format.
A7 – Other Receipts:
Any amounts not covered in the above categories should be reported here. Appropriate remarks are required to provide additional context.
A8 – Unexplained Amount:
This section computes the total unexplained amount by subtracting the sum of A2 to A7 from A1. It represents the portion of the total investment for which no explanation has been provided.
Important Keyword: E-Verify, Income Tax Compliance, Investment in Securities, ITR.
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Investment in SecuritiesITR
When a taxpayer engages in securities investments, they incur tax liabilities on the income generated from these transactions. The classification of this income as either Business Income or Capital Gains depends on factors such as the nature of the security, the type of transaction, and the duration of holding. Here are some transaction types to consider:
Speculative Transactions: These transactions involve executing a contract for the purchase or sale of commodities or securities through alternative methods, rather than by actual delivery. Income from speculative transactions is treated separately and is subject to specific tax regulations.
Business Income: Income derived from trading in shares is categorized as business income. This applies to individuals engaged in frequent and substantial trading activities in the securities market.
Long-term Capital Gains: Profits from dealing in equity shares, equity-oriented mutual funds, or units of business trusts are considered long-term capital gains if the transaction is exempt under section 10(38) and subjected to Securities Transaction Tax. The tax rate for such gains is 20%. However, for listed securities, a reduced tax rate of 10% applies on gains computed without indexation. Short-term capital gains in these cases are taxed at a rate of 15%.
Short-term Capital Gains: For other short-term capital gains, tax is levied based on the taxpayer’s regular income slabs.
Understanding these distinctions is crucial for accurate tax reporting and compliance with relevant regulations.
When taxpayers receive notifications from the Income Tax Department (ITD) via SMS, calls, or emails, it often indicates potential verification issues in their Income Tax Returns (ITRs). These notifications typically arise for three primary reasons:
Non-filing of ITR: If a taxpayer fails to file their ITR for a specific assessment year, especially when there’s a potential tax liability pending, they may receive such notifications.
Discrepancies in Information: Sometimes, the details provided by taxpayers do not align with the information received by the ITD for a particular assessment year. This mismatch can trigger verification procedures.
Significant Transactions: If significant transactions are reported to the Income Tax Department during a financial year, which appear abnormal or inconsistent with the taxpayer’s profile, it can lead to verification queries.
Taxpayers who encounter such verification issues are required to respond promptly. This response must be submitted online through the compliance portal by logging in to their accounts. By addressing the raised issues in a timely and accurate manner, taxpayers can ensure compliance with tax regulations and avoid any potential penalties or complications.
Verification issue in the computation of tax liability on Investment in securities
Code
Description
Response
A1
Total receipts as per taxpayer pertaining to the above information
Amount
A2
Less: Amount relating to another year/PAN
PAN year-wise list
A3
Less: Amount covered in other information
Amount
A4
Less: Exemption/Deduction/Expenditure/ Set off of Loss
Exemption/Deduction wise list
A5
Income/Gains/Loss (A1-A2-A3-A4)
Computed
Section A1: Total Receipts
When computing total receipts from securities transactions, it’s crucial to include the gross value of each transaction. The final amount should be clearly stated to provide a comprehensive overview of the total value of securities dealings.
Section A2: Amount Relating to Other Year or PAN
If a portion of the gross receipts pertains to another individual’s PAN or is attributed to a different assessment year, it must be duly noted. Details of such receipts should be listed according to the PAN table provided, ensuring accurate reporting and compliance.
Section A3: Amount Repeatedly Covered
In the event of any duplicated entries, where an amount is mistakenly covered twice, it should be explicitly mentioned in the Remarks section of the preceding table. This corrective action nullifies any repeated income, gains, or losses, ensuring accuracy in financial reporting.
Section A4: Exemption, Deduction, Expenditure, Set Off of Loss
This section encompasses various allowances that are exempt from taxation. Taxpayers must select the appropriate category from the provided drop-down list, which includes:
Exempt Long-term Capital Gain on shares under section 10(38).
Cost of acquisition under section 48.
Expenditure incurred wholly and exclusively in connection with transfer under section 48.
Deductions from capital gains under sections 54EC, 54EE, or 54F.
Set off of Loss.
Others.
Details pertaining to each category should be submitted as per the expenditure table provided, ensuring thorough disclosure and compliance with tax regulations.
Section A5: Income, Gain, Loss
This section involves the self-computation of taxable securities transactions, calculated as A5 = (A1 – (A2 + A3 + A4)). If the computed income exceeds the minimum threshold of 2.5 lakh rupees, taxpayers are required to file their Income Tax Returns (ITRs). By accurately determining and reporting these figures, taxpayers fulfill their tax obligations and ensure compliance with regulatory standards.
