Real Estate Business – Practical Insights By CA Suresh Babu S Managing Partner M/s SBS and Company LLP [email protected] +91 9440883366
ROAD MAP ROAD MAP Over view of Accounting Aspects of Real-Estate JDA& Other Tax Real Estate Development & Revenue Income Tax issues under Business Recognition Direct Taxes Issues 2 www.sbsandco.com
Introduction (1/2) Real estate business is one of the most lucrative businesses in India. 2nd largest contributor to the Indian economy after Agriculture. 2nd largest contributor to India’s GDP – from 5 to 10.6% 2nd largest employer in the Country. Supports more than 350 Industries. Biggest contributor to the Indian Urbanization - Expected to increase from 26% in 2006 to 34% in 2026. The Indian real estate market is expected to touch US$ 180 billion by 2020. Strong Economic Growth. Huge Housing requirement. Progressive Investment climate. 3 www.sbsandco.com
Introduction (2/2) Key Operational Challenges faced by Real Estate Sector: High funding cost Stringent regulatory and tax framework Unclear policies Slow pace of infrastructure projects High inflation and fiscal deficit Non-availability of urban land (costly) Rising cost of construction Delay in approvals Relatively low transparency 4 www.sbsandco.com
Challenges Key areas for Planning & Structuring: Approvals Accounting & Audit Labour Laws Taxation • RERA • Statutory and • Minimum • Local • Accounting Tax Audits Wages; PF • Direct Taxes including EPF; Authorities • GST • ICDS ESI, Bonus, • Costing • Ind. AS Gratuity, Cess etc • Other Acts., Rules and Regulations 5 www.sbsandco.com
Introduction to real estate business REAL ESTATE BUSINESS Construction & Purchase & Sale Renting / Leasing (for Development of Land short or long term) (CADOL) Own Land / Entering JDA Own land Entering JDA Constructed Land Purchase /Purchase Property 6 www.sbsandco.com
Accounting & Taxation ACCOUNTING & TAXATION Builder / Developer Land owner 7 www.sbsandco.com
Methods for Revenue Recognition The revenue is recognised as per the AS-7 “Construction Contracts”. Methods of Revenue Recognition CCM PCM Costs are accumulated until the contracted Revenue and costs are recognised by work is completed and are finally matched reference to the extent of contracted with contract revenue to ascertain profit or work completed. loss. 8 www.sbsandco.com
Documents required for sale of property (1/2) General provision of computation of business income prescribed U/s 28 to 44DB of Income Tax Act shall be applicable. The following documents may be entered for sale of property: Agreement of Sale Sale Deed Construction / Development/ Supplementary Agreements Specified Agreements, if any 9 www.sbsandco.com
Limit on Cash Receipts & Cash Payments (1/2) Cash Receipts Section Conditions Cash Receipt Remarks Penalty (Limit) 269SS Cash deposit or Rs.20,000/- per 100% of such 269ST Cash loan or transaction receipt is levied Specified sum (related to Amount should u/s 271D land or building or both) be received by account No person should receive in Rs.2,00,000/- cheque/draft or 100% of such electronically receipt is levied cash in “Aggregate” from : through bank Single Person or Single transaction or account Applicable w.e.f Transactions related to one 01.04.2017 event or occasion 10 www.sbsandco.com
Limit on Cash Receipts & Cash Payments (2/2) Cash Payments Section Conditions Cash Payment Remarks Penalty (Limit) 32/43(1) No depreciation on Capital Rs.10,000/- per day No claim of 40A(3) 269T Expenditure incurred in cash Depreciation Amount should Applicable w.e.f be received by 01.04.2017 No cash payment in relation Rs.10,000/- per day account Dis allowance of cheque/draft or expenditure to expenditure electronically No Repayment of Rs.20,000/- per through bank 100% of such Loan or transaction account payment Deposit or u/s 271E Specified sum in cash 11 www.sbsandco.com
Meaning of Presumptive Taxation (1/3) NORMAL PROVISIONS Relief to small PRESUMPTIVE TAXATION tax payers To get relief to from this tedious work of Person engaged in business or profession are : maintenance of Books of accounts, a small taxpayer. required to maintain regular can opt for presumptive taxation under books of account and section 44AD, 44AE or 44ADA Upon satisfaction of the prescribed conditions. get accounts audited Deemed net profit will be as under: 1. Non Cash Sales (Receipts through if their gross turnover or income exceeds the prescribed Online Transfer, Account Payee Cheque/ limit. Draft, NEFT, RTGS) – Deemed Net Profit shall be 6% of Total Turnover or Gross Receipts. 2. Cash Sales – Deemed Profit shall be 8% of Total Turnover or Gross Receipts. To encourage non-cash payments through bank or digital channels 12 www.sbsandco.com
Presumptive Taxation - 44AD (3/3) Consequences if assessee opt 44AD: If an assessee opts for presumptive taxation under this section, then he is required to follow the same scheme for next 5 years. If assessee failed to do so, then presumptive taxation scheme will NOT be available for next 5 years. Any person opting for presumptive taxation scheme under section 44AD or 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year Failure to pay the advance tax attracts interest as per section 234B & 234C. Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year. 14 www.sbsandco.com
Capital Gains - Deemed Transfers (1/5) Conversion of Capital Asset into Stock in Trade (U/s 45(2)) : Full value of consideration : Fair market value as on date of conversion is treated as full value of consideration. Year of taxability : Capital asset is chargeable to tax in the year in which such stock-in-trade is sold. Business Income : The difference between Sale price and Fair market value as on the date of conversion is chargeable to tax under head “Profits and Gains of Business or Profession“. Other Points : If the converted asset is sold in various years, the section will apply in each year in which it was sold. In the year in which property is actually sold, full value of consideration shall be stamp duty value on date of transfer as per sec 43CA. 15 www.sbsandco.com
Example: (2/5) X acquires land on 01.06.1981 for Rs.6,00, 000. He converts his land into stock in trade of his real estate dealing business on 18.02.2017 where fair market value of land was Rs.70,00,000/-. Stock in trade was sold by him on 18.03.2017 for Rs.90,00,000/- In this case he would be liable to Capital gain in financial year (2016-17) as follows: Full Value of Consideration 70,00,000 Less : Indexed cost of acquisition (6,00,000*1125/100) 67,50,000 Long Term Capital Gain 2,50,000 Business Income would arise in year of sale (2016-17): 90,00,000 70,00,000 Sale proceeds of House Property 20,00,000 Less : Fair market value on date of transfer Business Income 16 www.sbsandco.com
Capital Gains - Deemed Transfers (3/5) Particulars Transfer of assets by way of Capital Distribution of assets on dissolution of Contribution Firm/AOP/BOI or otherwise Section 45(3) 45(4) Transferor Individual (member) Firm/AOP/BOI Transferee Firm/AOP/BOI Individual (member) Full Value of The value of capital asset as recorded Fair market value as on date of transfer Consideration in the Books of firm/AOP/BOI Year of In the year in which transfer took In the year in which transfer took place Chargeability place 17 www.sbsandco.com
Capital Gains - Deemed Transfers (4/5) Compulsory Acquisition under any law, C.G or R.B.I (u/s 45(5)): Full value of consideration : Compensation or consideration received. Year of taxability : Capital asset is chargeable to tax in the year in which such compensation / consideration is first received. Other points : Any subsequent enhancement of compensation or consideration shall be chargeable in the year in which such amount is received under head “Capital Gains”. Sec – 194LA : Any payment made to resident on account of Compulsory acquisition shall be subjected to TDS @ 10%.However no deduction shall be made where payment does not exceeds Rs.2,50,000/-. Any consideration received from Compulsory acquisition of Agricultural Land is exempt 10(37). 18 www.sbsandco.com
Joint Development Agreement (1/2) Meaning and some of the features of such agreements are as follows: a. It is a Specified agreement between the parties. b. The parties to this agreement do not form a Partnership firm or an AOP. c. The land owner does not contribute his land to any entity as there is no separate entity assessable to tax. d. The parties agree to share the Built up area or Revenue of the project. e. The arrangement entered between the parties is made known through the sale agreement to the prospective purchasers. f. Legal title, Control and domain over the property continues to remain with land owner till the completion of the project. g. The parties to the agreements are normally responsible for their respective actions under the respective enactments as per the terms of Development Agreement. h. The parties agree to file their respective Income Tax Returns separately in respect of income received or accrued to them. 19 www.sbsandco.com
Joint Development Agreement (2/2) Operations Benefit to Benefit to Developer Landowner Monetary Consideration No heavy initial Landowner with investment low technical Non-Monetary insights on real Consideration: Payment to estate consists of a share in landowner can be development can the land or building made as and when now reap the or both in the collections are made benefits of higher project from the customer consideration on or by sharing of the sale of developed built up area with estate than the landowner outright sale of land 20 www.sbsandco.com
Section 45(5A) – amendment (1/10) Objective of this amendment: EXISTING: \"Under the existing provisions of section 45, capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. The definition of 'transfer', inter alia, includes any arrangement or transaction where any rights are handed over in execution of part performance of contract, even though the legal title has not been transferred. In such a scenario, execution of JDA between the owner of immovable property and the developer triggers the Capital gains tax liability in the hands of the owner in the year in which the possession of immovable property is handed over to the developer for development of a project. 21 www.sbsandco.com
Section 45(5A)– amendment (2/10) Objective of this amendment: AMENDMENT: With a view to minimise the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer, it is proposed to insert a new sub-section (5A) in section 45 so as to provide that in case of an assessee being an individual or HUF, who enters into a specified agreement for development of a project, the Capital Gains shall be chargeable to income-tax as income of the previous year in which the Certificate of completion for the whole or part of the project is issued by the competent authority.“ In case of a JDA executed before 31-3-2017 but in respect of which the possession is given after 31-3-2017, that is, the transfer takes place after 31-3-2017, section 45(5A) would apply to the transferor. 22 www.sbsandco.com
Section 45(5A)– applicability (3/10) Applicability: The section 45(5A) applies if all the following conditions are fulfilled: S. No. Conditions (a) The Assessee is an Individual or HUF (b) Capital gains arise to the assessee from transfer of a capital asset (c) The capital asset is a land or building or both. Applies on any type of land whether residential or commercial or agricultural or non-agricultural (d) The transfer is made under a specified agreement (e) The consideration for the assessee includes or consists of a share in the land or building or both in the project (f) The assessee has not transferred his share in the project on or before the date of issue of the certificate of completion (\"CC\") for the whole or part of the project as issued by the competent authority. 23 www.sbsandco.com
Section 45(5A)– other points (4/10) Sec 194-IC. - Any person responsible for paying to a resident any sum by way of monetary consideration under JDA shall deduct tax @10 % (w.e.f 01-06-2017) Period of holding is reduced from 36 months to 24 months in case of immovable property, being land or building or both to treat it as short term capital asset; Base Year shifted from April 1st, 1981 to April 1st, 2001 for all assets including immovable property. Base Year Shift helps the investor as now prices are more realistically calculated accounting for inflation. Section 45(5A) does not apply to joint development agreements executed by two developers who are holding the land and buildings as stock-in- trade. 24 www.sbsandco.com
Section 45(5A)– other points (5/9) Only the year of charge of capital gains is postponed, However there is no change in the date of transfer/period of holding. Hence, whether the land or building is short term or long term would depend on principles laid out in section 2(42A) and not on the basis of postponement of taxation u/s 45(5A). This section states that the taxability for land owner will arise only in the year of receipt of completion (part or full) certificate for the real estate project irrespective of actual time of transfer of land, execution of agreement etc. This will determine the period of holding of the asset as well. Under JDA, Land owner receives few units of building as a consideration which might be sold further by land owner. In that case cost of acquisition would be deemed consideration as per section 45(5A). Likewise, the indexed cost of acquisition, which is linked with the year in which an asset is \"transferred\" will remain the same under the general provisions as well as under section 45(5A). 25 www.sbsandco.com
Section 45(5A)– Consideration (6/10) Under 45(5A): After fulfilling the conditions Stamp Cash CONSIDERATION Duty Value Example : • A, an individual enters into a JDA with a developer B on 21.05.2017. Under the agreement, A is to receive Rs. 12 lakhs from B and 1,00,000 Sq.ft. of developed area in Vishakhapatnam. • The COC of the project is issued in FY: 2018-19 & the stamp duty value of the developed area as on the date of issue of completion certificate is Rs. 5.04 crores. In such a case, • the full value of consideration received or accruing as a result of transfer would be Rs. 5.16 crores (Rs. 5.04 crores + Rs. 12 lakhs) • Capital gains shall be chargeable to tax in assessment year 2019-20 corresponding to the previous year 2018-19. 26 www.sbsandco.com
Section 45(5A)– Consideration (7/10) Non-Applicability of Section 45(5A): If the assessee has transferred his share on or before the date of issue of the completion certificate by competent authority Capital gains shall be deemed to be the income of the previous year in which such transfer takes place, Normal provisions will apply for the purpose of determination of full value of consideration received or accruing as a result of the transfer. For more clarification refer table below 27 www.sbsandco.com
Section 45(5A)– Consideration (8/10) What Should be the Consideration ??? • On Built-up Area (Total SFT to be received • On Land given to Developer (Developer Share) • On Land & Built-up area (As per Development Agreement) • On Total value of Land 28 www.sbsandco.com
Section 45(5A)– case laws (9/10) Dy. CIT v. Jai Trikanand Rao [2013] 37 taxmann.com 125 (Mum. - Trib.) The assessees were co-owners of property purchased by their ancestors in 1947. They entered a collaboration agreement with builders for developing land and getting flats built on it. Under the agreement, assessees got 56% of total built-up area and transferred 44% of land to builders. It was held that consideration for transfer of 44% land was cost of construction of 56% built-up area, which was to be incurred by builder. ITO v. N. S. Nagaraj [2014] 52 taxmann.com 511 (Bang. – Trib The Tribunal observed that full consideration was the cost of construction incurred by the builder on the assessee's share of constructed area, because the assessee would receive constructed area in lieu of the land share. Whatever is the expenditure incurred for constructing that area was a consideration in kind to the assessee. 29 www.sbsandco.com
Section 45(5A)– case laws (10/10) Prabhandam Prakash v. ITO [2008] 22 SOT 58 (Hyd. - Trib.) The promoter was to give 43% of built-up area to assessee in new complex and 57% of this area was to be owned by promoter. It was held that cost of construction of 43% of built up area was to be total sale consideration for assessee for transferring land and existing structure CIT v. Khivraj Motors [2015] 62 taxmann.com 305 (Kar.) The assessee arrived at consideration by taking cost of construction at Rs. 800 per sq. ft. which was agreed upon between parties. However, cost of construction at Rs. 800 per sq. ft. was substituted by the AO by project cost. It was found that builder paid non-refundable amounts to landlord and tenant to acquire vacant possession of property. Further, advertisement cost had been incurred by him. It was held that these amounts could not be taken as part of cost of construction. 30 www.sbsandco.com
Section 50C - Deemed Sale Consideration (1/3) Special Provision for Full value of Consideration : The very purpose of this section is that undisclosed income arising as Capital Gain should be taxed in the hands of the assesse. The section states that : • The asset is the Capital Asset (land or building or both) • Value is less than the value adopted by authority of a State Government for the purposes of section 48 the value shall be “The value so adopted or assessed by Stamp valuation Authority shall be the Full value of the Consideration received or accruing as a result of such transfer”. 31 www.sbsandco.com
Section 50C - Deemed Sale Consideration (2/3) The new proviso inserted by Finance Act 2016 w.e.f 01.04.2017 is a rationale step by Income Tax Simplification Committee (Easwar Committee) which removed the hardship of assesse. “Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer”. This amendment says stamp duty valuation of property on the date of execution of the agreement to sell should be adopted instead of the valuation on the date of execution of the sale deed if the agreement date and registration dates are different. 32 www.sbsandco.com
Section 50C - Deemed Sale Consideration (3/3) FMV by Valuation Officer is higher than the Stamp duty value : a. If the value of Land/building assessed by the Assessing officer (AO) is higher than the market value and the assessee object such value. The AO may refer it to Valuation Officer for valuation. b. The AO should take value of land/building as Stamp duty value assessed by himself or FMV assessed by Valuation Officer ,whichever is lower. Stamp duty value assessed is more than fair market value: a. If the assesse claimed before Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub section (1) exceeds the fair market value of the property as on the date of transfer, the AO that he may refer the valuation of capital asset to Valuation officer. 33 www.sbsandco.com
Section 50D Fair Market Value Deemed to be Full Value of Consideration: This section is applicable when there is “Transfer” of capital asset. Such transfer should be an absolute transfer under section 2(47) of the Income Tax Act, 1961. Applies to cases where consideration is present (received or accrued). But cannot be Determined Say for land and building consideration is unascertainable or cannot be determined. In such cases, Fair Market value of such land and building as on the date of transfer shall be deemed to be the full value of consideration. 34 www.sbsandco.com
Exemptions (1/3) PARTICULARS SEC 54 SEC 54F SEC 54EC Individual/ HUF Any Person Exemption to be claimed Individual/ HUF Capital Asset Long Term Long Term Long Term Eligible Specific Asset Residential HP Any LTA (other than Any LTA Residential HP) Type of asset should be Purchase within 1 year before transfer or 2 years after Within 6 Months from the acquire to get the benefit transfer or Construction within 3 years after the date date of Transfer of exemption of transfer Amount Exempted Investment in new asset Capital Gain*Amount Investment in new asset or capital gain whichever Invested/ Net Sale or capital gain whichever is lower Consideration is lower 35 www.sbsandco.com
Exemptions (2/3) PARTICULARS SEC 54 SEC 54F SEC 54EC Conditions or Exemption If the new asset is transferred a) Owns more than one If the new asset is transferred revoke in a subsequent within 3 years of its year acquisition. residential house property as or it is converted in to money b) on the date of transfer or a loan is taken on security c) Within one year before the of the new asset within 3 date of transfer of original years of its acquisition. asset, there is a purchase of other residential house property other than new house. Within two / three years of transfer of original asset, assesse had purchased / constructed another residential property other than new asset. 36 www.sbsandco.com
Exemptions (3/3) PARTICULARS SEC 54 SEC 54F SEC 54EC Exemption revoked- STCG LTCG LTCG taxable as LTCG/ STCG Yes Yes NO Scheme of Capital Gains One Account deposit is In India only Rs. 50L in NHAI or REC or applicable One any Notified Bonds by CG Investment Number of Properties Deemed sale Section 50C may apply Section 50C may apply Section 50C may apply consideration only in case of “Land” 37 www.sbsandco.com
Notional Income Where immovable property say land and building is received in form of Gift, the taxability is as follows : AfmpPvarwticiuwla-r3s wmmm ,l 56(2)(vii) 56(2)(x) On or after 01.04.2017 Provision in force Till 31.03.2017 Recipient Individuals and HUF All assesse TAXABILITY : If the asset is received Taxable Value : Without consideration i.e.,Stamp duty value > Rs. 50,000 • Stamp duty value With Consideration is less than stamp duty value by an • Stamp duty value of property as exceeds amount exceeding Rs.50,000 consideration as per the Act Gifts received from following are not taxable: Relative Under will / by Inheritance On occasion of marriage of individual Local Authority In contemplation of death of payer or donor Trust or Institution registered U/s12AA 38 www.sbsandco.com
Reporting Requirements Section 285BA read with rule114E To keep a watch on high value, the Income-tax Law has framed the concept of “Statement of Financial Transaction or Reportable Account” Under this statement the following is to be reported : Any Purchase/Sale of immovable property for an amount of Rs.30,00,000 or more or Valued by the stamp valuation authority at Rs.30,00,000 or more Other Points : Transaction is to be reported in Form 61A (under SFT- 012) Reporting Person : Inspector General or Sub Registrar (appointed under Registration Act) 39 www.sbsandco.com
Tax Deducted at Source (1/7) Particulars 194IB - Payment of rent by certain 194J - Fees for professional or technical individuals or HUF services Payer Individual / HUF Any Person Payee Resident Payee Resident (not an individual/HUF) Nature of Payment Rent Fees for Technical / Professional Services Remuneration or Commission or Royalty Sum referred to in clause (va) of sec 28 Rate of Deduction @ 5 per cent @ 10 per cent Threshold limit Rs.50,000/- per month Rs. 30,000/- Other Point to be Rent - Payment, made under any Assesses who are engaged in the business of considered lease, sub-lease, tenancy or any operation of call centre tax is to be deducted other agreement or arrangement @ 2 per cent Due date to deposit tax Within 30 days Government deductee: Same day of deduction Other deductee : Within 7 days Form 26QC 40 wCewrwt.isfbicsaantedcoo.fcodmeduction Form 16-C (to be issued by deductor)
Tax Deducted at Source (2/7) Particulars 194C - Payment to Contractors Payer Specified Person Payee Resident Contractor Rate of Deduction 1 % - In case of Individual or HUF 2 %- In case of any other person Threshold limit Single payment – Rs.30,000/- Aggregate of payments – Rs.1,00,000/- TDS in case of Transport Shall not Deducted provided : Contractor Contractor Furnishes his PAN & Does not own more than 10 goods carriage at any time during the p.y & provides declaration to that effect. Due date to deposit tax Government deductee: Same day of deduction Other deductee : Within 7 days Certificate of deduction Form 16-A on quarterly basis (to be issued by deductor) Any payment by Individual or HUF to resident contractor for per personal purpose is not subjected to TDS 41 www.sbsandco.com
Tax Deducted at Source (4/7) Particulars 194H - Commission or brokerage Nature of payment Any payment of commission or brokerage to a resident person (other than an individual or a HUF) Amount of Deduction @ 5 per cent Exception Where amount or aggregate of amount does not exceed Rs.15,000/- no TDS is deducted. Other Points : However, an individual or a HUF, whose Total sales/Gross receipts/Turnover from the business or profession carried on by him exceeds the monetary limits u/s 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, they shall be liable to deduct income-tax under this section. No deduction shall be made on any commission or brokerage payable by BSNL or MTNL to their public call office franchisee 42 www.sbsandco.com
Tax Deducted at Source (5/7) Particulars 194IA - Payment on transfer of certain immovable property Transferor Resident Transferor Transferee Any person Person liable to deduct Tranferee Nature of Payment Consideration for transfer of immovable property(Other than agricultural land) Rate of Deduction @ 1 per cent Threshold limit Rs.50,00,000/- Consequence of Non Tax is to deducted at higher of the following rates: furnishing of PAN the rate prescribed in the Act; at the rate in force, i.e., as mentioned in the Finance Act; or at the rate of 20 per cent Due date to deposit tax Within 7 days Form 26QB Certificate of deduction Form 16-B (to be issued by deductor) 43 wPwrowv.sisbisoanndscroe.cloamting to Tax Deduction and Collection Account Number, shall not apply.
Tax Deducted at Source (6/7) Particulars 195- Other Sums (TDS on Non-Residents payments Payer Resident Payee Non-Resident Nature of Payment Any sum paid (including for purchase of immovable property) Rate of Deduction At rates in force Threshold limit No threshold limit Due date to deposit tax Within 7 days Form 27Q (quarterly) returns Certificate of deduction Form 16-A Other Points : Payer should obtain TAN. The same can be obtained by applying in Form 49B electronically. He should have his own PAN number and PAN number of the NRI payee 44 www.sbsandco.com
Tax Deducted at Source (7/7) Section 197 – Certificate for deduction at lower rate If tax is deducted at source under section 192,193,194,194A, 194C, 194D,194G, 194H, 194I, 194J, 194LA & 195 1. • Assesse feels that no or lower rate of TDS should be there . 2. • Assessing Officer is satisfied with the same. Assessing Officer shall give him certificate so as to non-deduction of tax on any of the income received by the recipient. 45 www.sbsandco.com
Disallowances on payments made Particulars Disallowances – Non Residents Disallowances – Disallowances – Non 40a(i) Residents 40a(ia) Residents 40a(ib) Income Interest, Royalty, Fees for Any sum paid or Any consideration paid or technical services or Other sum payable payable for specified service Payable • Outside India or - - • In India to non-resident Tax Deductible TDS TDS Equalisation levy Violation • Such Tax has not been deducted • Having deducted, has not been paid on or before due date of furnishing the return Amount of 100 % of such sum 30 % of such sum 100 % of such sum disallowance under head “PGBP” Provided if such tax is deducted or paid in subsequent year the same shall be allowed as deduction in subsequent year. 46 www.sbsandco.com
Consequences for non payment of TDS Consequences for non payment of TDS S. No. U/s Description 1 40(a) Disallowance of expenses in computing taxable income of payer. Allowance in the year of deduction 2 201(1) Recovery of tax not deducted / deposited or short deducted / deposited 3 201(1A) Interest @ 1% / 1.5% per month or for part of the month 4 221 Penalty – not exceeding the amount of tax not paid 5 271C Penalty – not exceeding the amount of tax not withheld 6 276B Prosecution 47 www.sbsandco.com
Un-accounted income: IMPLICATIONS OF UNACCOUNTED INCOME TAX under 115 BBE of IT Act SEARCH u/s 132 (A) (B) (A.1) (A.2) (B.1) Income (B.2) Income Self-Declaration Detected By AO Admitted Not Total Tax = 107.25% Admitted Incl. Cess Total Tax = &penalty) 137.25% (incl. Cess & (A.1.2) Advance penalty) Tax Not Paid Total (A.1.1) Advance Tax Tax = 83.25% (+ Paid Total Tax Penalty =77.25% (60% Tax U/s.271AAC @ +25% sc+3% cess) 10% of Tax) 48 www.sbsandco.com
Disclosures in REAL ESTATE SECTOR Tax Audit Income Computation Disclosure Standards 49 www.sbsandco.com
Form 3CD – Part A Amendments in Form 3CD so as to present “True and correct \"view : Additions/Amendments in Nature of Item Response clauses Clause 4 “Whether the assesse is liable to pay • The tax auditor should get (Newly added) Indirect tax like excise duty, service tax, management representation sales tax, customs duty, etc. If yes, please from the assesse a list of taxes furnish the Registration Number or any applicable and obtain the copy other identification number allotted for the of registration certificates same.” available with assesse. • If the assesse has multiple registrations, then get the all the certificates for proper disclosure • If the assesse is liable but not registered, then this will come in qualification 50 www.sbsandco.com
Form 3CD – Part B Additions/Amendments Nature of Item Response in clauses Clause 11 Clause 11(a) • In case the books of accounts are kept Whether books of account are at more than one location then auditor prescribed under Section 44AA, if is required to mention the details of yes, list of books so prescribed address of each location along with the BOA maintained. Clause 11 (b) List of books of account maintained • Minutes and Statutory registers and and the address at which the books records should be maintained since of accounts are kept.(even if inception as these are principle maintained electronically) documents. Clause 11 (c) • The auditor should make a checklist of List of books of account and nature the details asked and hand it over to of relevant documents examined assessee for getting the data. 51 www.sbsandco.com
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