Updates

Issue no 1
Jan 2012

Accounts & Taxation Department

I
a

Direct Taxation:
Pan nos: Finance Act (2) of 2009 makes PAN compulsory in case of TDS eligible payments by introducing a new section 206AA into the Income Tax Act. As per this new section, Any Deductor making a TDS eligible Payment to an employee , who has not provided PAN, should make TDS at a higher rate. For such case, the rate of TDS should be determined at higher of the following: 1) TDS rate prescribed in the Act 2) Rate of Tax in Force 3) At 20%. The first condition states about the rate of Tax prescribed through Section 193 to 196. The second condition deals with Salaries (Section 192), where the tax should be calculated at Normal rates for Individuals. The third is a flat rate of 20%. Deductor has to determine the Tax amount for all the 3 conditions and apply the higher tax amount among these 3. To meet with the compliance and to ease the Deductor in collecting PAN, section 206AA makes it compulsory to quote PAN on all correspondences between Deductor and Deductee. PAN has to be quoted in bills, vouchers, Salary Slips, Letters (other than statutory which does not come under Income Tax), etc which is either issued by Deductee to Deductor or vice versa. Relevance to Afcons: a) In absence of PAN higher rate @20% is effected b) E TDS returns cannot be uploaded c) Wrong PAN nos creates problems in returns obtain photocopy of PAN card.

Understanding PAN: PAN was introduced to facilitates linking of various documents, including payment of taxes, assessment, tax demand, tax arrears etc. relating to an assessee, to facilitate easy retrieval of information and to facilitate matching of information relating to investment, raising of loans and other business activities of taxpayers collected through various sources, both internal as well as external, for detecting and combating tax evasion and widening of tax base.

A typical PAN is AFZPK7190K. First three characters i.e. AFZ in the above PAN are alphabetic series running from AAA to ZZZ Fourth character of PAN i.e. P in the above PAN represents the status of the PAN holder. P stands for Individual, F stands for Firm, C stands for Company, H stands for HUF, A stands for AOP, T stands for TRUST etc. Fifth character i.e. K in the above PAN represents first character of the PAN holders last name/surname. Next four characters i.e. 7190 in the above PAN are sequential number running from 0001 to 9999. Last character i.e. K in the above PAN is an alphabetic check digit. PAN can be verified online by filling out the core details mentioned in the PAN Card such as Name, Fathers Name and Date of Birth. Go to link mentioned below:https://incometaxindiaefiling.gov.in/portal/knowpan.do c Checking Tax credits:

Income Tax Department facilitates a PAN holder to view its Tax Credit Statement (Form 26AS) online. Form 26AS contains: Details of tax deducted on behalf of the taxpayer by deductors Details of tax collected on behalf of the taxpayers by collectors Advance tax/ self assessment tax / regular assessment tax etc deposited by the taxpayers (PAN Holders) Details of paid refunds received during the financial year Details of high value transactions in respect of shares, mutual funds, etc.

The tax credit statement(Form 26AS) are generated wherein valid PAN has been reported in the TDS statements. Tax credits statement (Form 26AS) can be viewed / accessed through 3 ways: a) View Tax Credit from https://incometaxindiaefiling.gov.in b) View Tax Credit (Form 26AS) from bank site through net banking facility c) View tax credit(Form 26AS) from TIN website

This can be used for TDS reconciliation as we can check the TDS filed by the client vis a vis the certificates available with us. [Relevance to Afcons: Employees can check their own TDS details and discrepancies if any can be settled immediately.] d Personal Tax: The Central Government has recently exempted certain class of persons from the requirement of furnishing a tax return vide a notification dated 23rd June 2011. As per the notification, an individual whose income for the relevant assessment year does not exceed INR five lakhs and consists only of Salary and interest of Savings bank account not exceeding INR 10000 is exempt from filing his or her income tax subject to satisfaction of the conditions. The exemption is available only in cases where the employee has declared his/ her PAN and details of other income to the employer and employer has deducted tax and issued Form 16 to the employee.

II Indirect Taxation:
a

Service tax Point of Taxation The Government introduced the Point of Taxation Rules (POT Rules) in the Union Budget to replace the traditional method of payment of Service tax on receipt basis. The concept of payment of Service tax has been changed from payment basis to an accrual methodology. This is in line with the implementation of GST to bring parity in the way goods and services are taxed. Rule 3 says that the Point of Taxation shall be earlier of the following : (i) Provision of Service (ii) Issue of Invoice (iii) Receipt of Payment In case of receipt of advance, point of taxation shall be the date of such receipt.

The rule has been amended to provide to specify that for services provision of which is completed on or before 30th day of June, 2011 or where the invoices are issued up to the 30th day of June, 2011, the point of taxation shall, at the option of the taxpayer, be the date on which the payment is received or made as the case may be.

. No.

Date of completion of service April 10, 2011 April 10, 2011 April 10, 2011 April 10, 2011

Date of invoice

Date on which payment recd.

Point of Taxation

Remarks

1.

April 20, 2011 April 26, 2011 April 20, 2011 April 26, 2011

April 30, 2011 April 20, 2011

Invoice issued in 14 days and before receipt of payment Invoice not issued within 14 days and payment received after completion of service Invoice issued in 14 days but payment received before invoice Invoice not issued in 14 days. Part payment before completion, remaining later

2.

April 30, 2011 April 10, 2011

3.

April 15, 2011 April 15, 2011

4.

April 5, 2011 (part) and April 25, 2011 (remaining)

April 5, 2011 and April 10, 2011 for respective amounts

Reverse Charge Mechanism In certain cases Government may shift the liability of payment of service tax to the receiver of service as a measure of administrative convenience. It is often referred to as reverse charge in common language. Reverse mechanism means wherein a service receiver is made liable to pay service tax (than a service provider). These principles are laid down u/s 66A of Finance Act. The reverse mechanism is applicable in the following cases, 1. Goods Transport Agency 2. Sponsorship Services 3. Import of Services 4. Insurance Auxiliary Services 5. Mutual Fund . The rules for imports of services and payment of service tax thereupon, it will continue to be based on payment basis. But, if an invoice is received and payment not made within 6 months, then service tax will have to be paid based on the date of invoice irrespective of the fact that payment has not been made.

[Relevance to Afcons: 1) This is applicable to sites where service tax is payable 2) In case of mobilisaton advance received POT is not at the time of raising invoice but when money is received 3) In case of monthly RA bills POT is at the date of raising RA bills. (Therefore we may explore the possibility of initially submitting a Provisional RA bill/ statement of work done to the clients and raise a proper RA bill once the money is received.) 4) Please note that all RA bills for service tax sites will have a Service tax bill with a serial no raised by Taxation Department as per current practice.]
b

Input tax credit -DVAT Input tax credit has been allowed on all eligible purchases made during the year (in Delhi) during the tax period effective from 1 October 2011. Earlier input tax was allowed only on eligible purchases offered for sale during the tax period. (notification no F 14(6)/ LA 2011 /lclaw / 193 dated 28 September 2011.

All about F forms under CST Act 1956 To constitute interstate sales, one of the basic requirement is that there should be sale. If a person sends goods outside from its state to its branch office in another state then it is not sale because you cannot sell goods to yourself. Similarly if a dealer sends goods to its agent in another state who stocks and sells goods on behalf of the dealer, such agent is called consignment agent and such stock transfer is also not considered as interstate sales since there is no sales involved in it, sales will take place when such agent will sell goods. But to prove such stock/branch transfer, F form is required to be produced as proof. F form required for stock transfer- F form is required to be produced as proof of stock transfer. As per section 6A(1) submission of F form is mandatory to prove stock transfer. Otherwise, the transaction will be treated as sale for all purposes of CST Act. F Form is issued by the branch office/consignment agent receiving goods as branch/stock transfer to its head office/principal who is sending the goods by way of stock/ branch transfer. The H.O./Principal produces such F forms to its assessing authority to prove such stock/branch transfer. One F Form for one month: First Proviso to Rule 5 of CST Rules 1957 provides that one F form covering receipts during the month can be issued. If space in F form is not adequate, a separate list may be attached as annexure to form F giving details, provided that the annexure is firmly attached to the form. The blank form has to be obtained from sales tax authority in which the transferee is situated, i.e. State where

goods were received. If the form is lost, indemnity bond has to be given and duplicate form clearly marked as Duplicate can be issued. [Relevance to Afcons: 1) F forms are to be collected for inter state transfer of Materials. 2) If not collected the transferor state is levied with 12.5% CST as if the transfer was Sale. 3) Transfer from Afcons to JV or vice versa or even from JV to JV is a Sale and F forms are not to be collected for such transfers but Sales invoices have to be prepared.]

III Accounts:
A XBRL
XBRL stands for eXtensible Business Reporting Language which can be used for electronic communication of business and financial data. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. XBRL makes the data computer-readable by applying unique tags to items of financial data and it is easily extensible, so companies and other organisations can adapt it to meet a variety of special requirements . XBRL has broad appeal because it can be utilized by investors to facilitate analysis of financial results, by companies to eliminate manual input and review of information passed through the financial reporting process, and by governmental entities to efficiently gather information from business. XBRL can drive business information sharing efficiencies in a variety of situations. The advantages of XBRL are: Automated data processing Regulated financial reporting Cost Savings Multi language capability Time savings Data Analysis

XBRL in India Ministry of Corporate Affairs (MCA) vide circular dated 7th June 2011 has prescribed mandatory filing of financial statements in XBRL form for following class of Companies for year 2010-11 onwards: All companies listed in India and their Indian subsidiaries; All companies having a paid up capital of Rs. 5 Crore and above All companies having a Turnover of Rs 100 Crore and above

However Banking Companies, Insurance Companies, Power Companies and NBFCs are exempted for XBRL filing, till further orders.

Change in Depreciation Rates of Plant & Machinery In Schedule XIV to the Companies Act, 1956, under the heading II PLANT AND MACHINERY, under item (ii) relating to special rates, in sub-item B.7, for the entries, the following entries shall respectively be substituted, namely :Schedule XIV Rates of depreciation Name of assets Single Shift Double Shift Triple Shift

W.D.V. S.L.M. W.D.V. S.L.M. W.D.V. S.L.M. 1 2 3 4 5 6 7

7. Mineral oil Concerns Field operations (above ground). Portable boilers, drilling 30 % tools, well-head tanks, etc. (NESD) 7A. Rigs (NESD) 10%

11.31 %

3.34%

IV Labour Laws
The Government has approved easing of labour laws to exempt establishments employing up to 40 workers (as in 20 workers earlier) from maintaining mandatory registers and submitting returns.The Government proposes to introduce a simplified form, which will give relief to employers of such establishments, who are currently required to maintain registers and submit returns under various labour laws.

V General
a) Maharashtra VAT Department has displayed List of Suspicious Dealers who has issued false bills without delivery of goods. You can download the list from the following link:
http://www.mahavat.gov.in/Mahavat/MyFold/WHATS%20NEW/Hawala_List_21_11_11.xlsx

b) Status of TDS/TCS statement submitted The status of the statement submitted can be checked at: https://onlineservices.tin.nsdl.com/TIN/JSP/tds/linktoUnAuthorizedInput.jsp You need to mention the TAN and PRN in the field provided. Details of the statement along with status whether accepted (displayed as Received by TIN) or rejected (along with reason for rejection) will be displayed to you. c) PPF Limit increased to 1 Lakh from 1.12.2011 and interest on loan against PPF will cost 2% extra (NOTIFICATION [F.No. 1/9/2011-NS-II], dated 25-11-2011) The following amendments have been made to amendment to the Public Provident Fund Scheme, 1968,:(1) The limit has been increased to Rs 100000/- from Rs 70000/-. (2) It hasl come into force on the 1st day of December 2011.

d) The CBDT has notified the cost inflation index for the financial year 2011-12 as 785 for the purpose of working out indexed cost of acquisitions for capital assets to compute capital gains. Notification no 35/ 2011 dated 23 June 2011.