Equalisation Levy 2020 E commerce Service Provider 2 percent cases

However, as of April 1, 2020, the Indian government has extended the scope of the equalization levy. The Finance Act, 2020, introduced a new provision – Section 165A – which mandates that non-resident e-commerce operators providing e-commerce supplies or services to Indian residents must remit an equalization levy.

This levy, set at a rate of two percent, is calculated based on the consideration received or expected from e-commerce supplies or services facilitated, provided, or delivered by the said operator.

But Note : This EL is NOT on the Indian Customer ( payer of money… ) 

BUT…. it is on the non resident Ecom operator

Non-Resident E-commerce Operators required to make compliances in India

Source 1 :https://www.india-briefing.com/news/equalization-levy-compliance-framework-for-non-resident-e-commerce-operators-in-india-29238.html/ 

Source 2 : https://www.rsm.global/india/sites/default/files/media/News%20Articles/2020/Aug%202020/4_tax_publishers_-_rsm_india_-_7_august_2020.pdf

 

Source 3 : https://icmai.in/TaxationPortal/upload/DT/Article/118_0811_23.pdf

Now, the equalization levy encompasses e-commerce transactions involving the sale of goods and services by non-resident operators to Indian customers. This levy stands at two percent and is imposed on the consideration received or expected by these non-resident e-commerce operators. This change showcases the government’s endeavor to adapt taxation norms to the evolving landscape of digital business operations.

In essence, the equalization levy represents a taxation mechanism applicable to:

(a) Designated services, as established by the Finance Act of 2016; and

(b) E-commerce supplies or services, as delineated under the Finance Act of 2020.

The term ‘e-commerce supply or services’ encompasses the following activities:

• Online retailing of goods owned by the e-commerce operator; or
• Online delivery of services by the e-commerce operator; or
• Assisting in the online retailing of goods or provision of services, or both, by the e-commerce operator; or
• Any combination of the aforementioned activities.

Exceptions and exemptions

The equalization levy does not come into play under the following circumstances:

• The e-commerce operator maintains a Permanent Establishment (PE) in India, and the e-commerce supply or services is directly linked to this PE.
• The consideration received has already undergone the six percent equalization levy due to engagement in online advertising and related functions.
• The e-commerce operator’s sales, turnover, or gross receipts from the e-commerce supply or services, whether made, provided, or facilitated, remain below INR 20 million for the fiscal year.

Income tax relief

Starting April 1, 2021, amendments to the income tax regulations introduce an exemption for income generated by an e-commerce operator already subject to the equalization levy. See Section 10(50)

Means : if the E commerce operator has paid the EL , then no need of income tax ??? to discuss.

Compliance obligations for the equalization levy on non-resident e-commerce operators

To fulfill the compliance requirements for the equalization levy, certain crucial deadlines and actions need to be adhered to by non-resident e-commerce operators. Specifically:

• Annual statement filing deadline: An essential task entails filing an annual statement within the timeframe of April 1 to March 31, with the submission deadline set on June 30 of the corresponding financial year. This procedure is imperative for maintaining compliance.
• Late payment implications: Timely payment of the equalization levy is paramount. Failure to meet the stipulated payment deadline invites the imposition of simple interest at a monthly rate of 1% on any overdue amounts. Additionally, a non-resident e-commerce operator that neglects to pay the levy faces a penalty equal to the levy’s amount, amplifying the importance of adhering to the payment timeline.
• Penalties for non-filed annual statements: Non-compliance with the requirement to file the annual statement carries its own set of consequences. An additional penalty of INR 100 per day is enforced for each day of non-compliance, calculated for the period during which the default persists.
• Role of Permanent Account Number (PAN): In the process of fulfilling the aforementioned obligations, non-resident e-commerce operators would necessitate a Permanent Account Number (PAN). This requirement is crucial for further progress, despite not being a prior necessity when their earnings were not subject to taxation within India.

Incorporating the above compliance measures is vital for non-resident e-commerce operators to ensure adherence to India’s tax regulations, fostering a climate of fair taxation and regulatory accountability.

This is meant for E commerce operators only. Those non residents only.

Apparently not applicable for Indian company ??? To check

Is Equalisation Levy applicable if your company pays subscription to a foreign website, or Foreign Service Provider – Current Situation, Facts

Source :https://www.india-briefing.com/news/equalization-levy-compliance-framework-for-non-resident-e-commerce-operators-in-india-29238.html/ 

AS THE END BUYER CUSTOMER… it is not applicable on you , sitting in India, as a subscriber in India.

 

 

Can a person be member of Multiple HUF’s ?

Is it safe to be part of multiple HUF’s ….. Watch this … for some judgements and views

Tax implication of Partial Partition of HUF

Section 171, as originally enacted, applied to total as well as partial partition. However, sub-section (9) inserted by Finance (No 2) Act, 1980 recognises only complete partition. A Partial partition took place after 31.12.1978 is not recognized under the Income Tax Act, 1961 (Section 179(9). Thus partial partition effected after this date is not given effect to by the Assessing Officer even though such partition may be legal as per Hindu Law.

Hence, for the purpose of income-tax assessment, the HUF shall be deemed to continue notwithstanding the partial partition and the income from all properties shall continue to be assessed in the hands of erstwhile HUF. Therefore even after the Partial partition, the income of the HUF shall be liable to be assessed under the Income-tax Act as if no partition had taken place.

Setting apart of certain assets of HUF in favour of certain coparceners on a condition that no further claim in properties will be made by them, is a partition under Income Tax Act

Setting apart of certain assets of HUF in favor of certain coparceners on the condition that no further claim in properties will be made by them, is nothing but a partial partition and not a family arrangement and not recognized in view of section 171(9) of the Act.

 

source 1 : Supreme Court Judgement : https://main.sci.gov.in/jonew/judis/31304.pdf

Source 2 : https://cavinaymittal.com/Blog/685/Income_Tax_Act_1961.aspx

Source 3: https://incometaxmanagement.com/Pages/HUF/23-Concept-of-Multiple-HUFs.html

 

Like to know the steps required for a amicable and systematic change in the Statutory Auditors … in your Private Limited Company ?

[Academic discussion only]

These are the Steps recommended for Change of Auditors in a Company

Change of Statutory Auditors Steps

Theory part : Resignation of Auditor

Under the Companies Act 2013, the resignation of an auditor of a company must be done in compliance with the provisions mentioned in Section 140 of the Act. According to this section, an auditor who wishes to resign must first inform the company’s board of directors and provide them with a written notice. The notice must contain the reason(s) for the resignation and the date on which the resignation will take effect. The auditor must also file a copy of the resignation letter in e form ADT-3 with the Registrar of Companies (RoC) within 30 days of resigning.

Let us know the steps required in case of a mid term resignation

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Resignation of the Existing Statutory Auditor ..

Letter to the Board of Directors giving brief reason and effective date.

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Board Meeting of the Company

a) Notice of Board Meeting

b) Attendance of the Board meeting

c) Shorter Notice of Board meeting.. its acceptance by all directors

d) Minutes of the Board Meeting

e) Extract of the Minutes of the Board meeting

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Extra Ordinary General Body Meeting of the Company

a) Notice of EGM

b) Attendance of the EGM

c) Shorter Notice of EGM (if required).. its acceptance by all shareholders

d) Minutes of the EGM

e) Extract of the Minutes of the EGM

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Communications of/with New Auditors

a) Invitation to New Auditors by the Board with request to give their consent letter and eiligibility

b) Letter of consent , cum letter of eligibility from the new auditors

c) Letter from Incoming Auditor to Old Auditor asking for “if there is any professional objection to acceptance from their side”

d) NOC and No dues certificate from old Auditors

e) Issue of Letter of Appointment ( by the Company to the “New” Auditors )

ROC Online Filings regarding auditors

a) ADT-3 : Notice of Resignation by the Auditor

b) ADT-1 : Appointment of New Auditor – intimate ROC

c) MGT-14 : Intimation of the EGM resolutions to the ROC

 

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It is important to note that the provisions related to the appointment of an auditor in a casual vacancy may vary depending on the specific circumstances and the type of company.

Example : Government Companies…There is a different Method. Listed companies, section 8 companies, Change due to Rotation, Change due to Untimely death, etc.. there could be different situations.

Therefore, it is always advisable to seek professional advice and refer to the relevant provisions of the Companies Act 2013 before proceeding with the appointment process.

Source 1 : https://www.mca.gov.in/MinistryV2/companyformsdownload.html

Source 2 : https://www.seedup.in/pages/change-auditor-process

Source 3 : https://www.professionalutilities.com/compliance-for-change-auditors-in-company.php

Contact us

So, this was the academic discussion and suggested SOP’s for a Small / Medium Pvt Ltd company, especially in the home grown MSME sector.  There the focus has been on the Change of Auditors in a Private Limited Company by mutual consent. And proper documentation in time.

 

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#Change of Auditors in a Private Limited Company by mutual consent #How to request and happily manage the change in Auditors in a Pvt Ltd company. Focus MSME Private Limited company

Gift from HUF to its members ? Taxes ? Status ? Legal position ?

Gifts permitted by HUF to its members satisfying to the conditions of Section 10(2) are exempt from Income Tax in the hands of recipients. It shall be taxable only if the value of the gift is above the threshold limit provided in the Section 56(2)(vii).

link : https://cs-india.com/gifts-to-and-from-huf/#:~:text=Gifts%20to%20Members%20from%20HUF,56(2)(vii).

 

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Gift from any relative :

Gift received from Relatives is fully exempted from the levy of tax and no income tax would be levied on such Gifts.

To remove any confusion regarding the classification of Relatives, the Income Tax Act has very clearly laid down that in case of individual, only the following will be treated as relative for the purpose of claiming exemption:

Spouse of the Individual

Brother or Sister of the Individual

Brother or Sister of spouse of the Individual

Brother or Sister of either of the parents of the Individual

Any Linear ascendant or descendent of the Individual

Any Linear ascendant or descendent of the spouse of the Individual

Spouse of the person mentioned above [w.e.f. 01.04.2021]

In case of HUF, all members would be considered its relative.

But as per Section 64(2), the income earn from this gifted property will be considered as income of  Donor. This is known as clubbing of income. HUF give gift to its member is exempt?

In this matter there are various judgments as under: Veenitkumar Raghavjibhai Bhalodia Vs. I.T.O.5(4) Rajkot ITA No 583 and 601/Rjt/2008 Asst.Yr. 2005-06 Ahd. Tribunal. Dated 17/05/2011

Brief fact is as under: The assessee has accepted gift  from Raghavjibhai Bhanjibhai Patel (Bhalodia) HUF. The A.O. was of the view that HUF is not covered in the definition of “ relative “ therefore HUF was held to be taxed. The CIT(A) confirmed the view of A.O.

Tribunal has observed that, though for taxation purpose, an HUF is considered as a single unit, rather an HUF is a “group of relatives”  as it is formed by the relatives. Therefore in considered view, the ‘ relative’ explained in Explanation to section 56(2)(vi) of the Act includes “relatives” and the assessee has received gift from his HUF which is “a group of relatives”, the gift received by the assessee from the HUF should be interpreted to mean that gift was received from the ‘relatives” therefore the same is not taxable under section 56(2)(vi) of the Act.

Gyanchand M. Bardia Vs. The Income Tax Officer (ITAT Ahmedabad) Appeal No 1072/Ahd/2016 Asst.Yr. 2012-13 Dated 21/02/2018 In this case the fact was same as in the case of Rajkot Tribunal, but the observations of members are different.

Their observation was, As per the provisions of the Act, gift from HUF to any member of the HUF is not exempt from taxable income. It is other way that the gift from member to the HUF is exempt from tax. The appellant contended that it is implied when gift from member to HUF is exempt from tax, same way gift from HUF to member is also tax free.

But the appellant forgets the difference that the Karta of the HUF manages the affairs of the HUF as trustee of the HUF on behalf of other members. When the Honorable Parliament brought amendment to the statute declaring gift from member to HUF is tax free, but it was not considered proper to make gift from HUF to member as tax free.  Both the cases are pending at high Court, wait and watch.

Read more at: https://taxguru.in/income-tax/gift-huf-member-considered-income-member.html
Copyright © Taxguru.in

link : https://taxguru.in/income-tax/gift-huf-member-considered-income-member.html

 

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Income tax implication of gift given by a member to own HUF

I am Karta of my HUF. In FY 2020 – 2021 I have invested my personal tax paid amount in my HUF account, which is generating interest income. What are the tax implications for me as well as for my HUF?- Anand Shah

The investment of individual member’s money in the name of HUF is generally treated as gift made unless the member intended it to be a loan.

Since this transaction only took place last year, you have the options to treat it either way in case income tax return for you and your HUF are pending.

source : https://www.livemint.com/money/personal-finance/income-tax-implication-of-gift-given-by-a-member-to-own-huf-11628399930718.html

 

Good News. Indian Government modifies Article 13 of DTAA for FTS.

This is relating to Royalties and Fees for Technical Services with Spain

The Central Government has modified the Article 13 of Double Taxation Avoidance Agreement ( DTAA )  relating to the royalties and fees for technical services with Spain by invoking Section 90 of the Income Tax Act, 1961.

Tax rate has been cut on FTS to 10%. ( from old DTAA rate 20%)

 

The DTAA amendment, is effective from the assessment year 2024-25. ( FY 23-24 )

Under the newly amended provision, royalties and fees for technical services, while being subject to taxation in the Contracting State where they arise and in accordance with its laws, will now carry a Max tax rate of 10% instead of 20% earlier.

 

Old para was

However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services the tax so charged shall not exceed :

(i)		in the case of royalties relating to the payments for the use of, or the right to use, industrial, commercial or scientific equipment, 10 per cent of the gross amount of the royalties;
(ii)		in the case of fees for technical services and other royalties, 20 per cent of the gross amount of fees for technical services or royalties.

 

and new para is

“2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed ten per cent of the gross amount of royalties or fees for technical services.”

This has been notified on 19-3-2024, Wednesday.

The Government of India (GoI) has issued Notification No. 33/2024 dated 19 March 2024 (Notification), by exercising its powers under the Indian Tax Laws (ITL), conferring lower tax rate benefit of 10% under the India-Spain Double Taxation Avoidance Agreement (DTAA) in accordance with the most favored nation (MFN).

Source 1: https://studycafe.in/cbdt-amends-fts-clause-in-india-spain-dtaa-298852.html

Source 2 : https://www.taxmann.com/research/income-tax/top-story/104010000000106534/govt-notifies-reduced-tax-rates-on-royalty-and-fts-with-spain-by-invoking-mfn-clause-cirnot

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So, now it is flat rate : 10% for all FTS

There is no change in the Personal independent services by Artists, Teachers etc ( That is Article 15 )

 

The paragraph 2 of Article 13 of the said Convention, as amended by this notification, shall be applicable with effect from the assessment year 2024-25.

 

Why is this Good News ? for whom ?

This is Nice for Indian companies with consultants in Spain. This reduces the cost. ( if the consultant pushes for grossing up).

 

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Questions to be solved 

1. Whether Income tax return to be filed by that Entity in India ? Yes.
2. As per the current law, income tax return is exempt, if Full Normal TDS rate is applied and deducted.
3. if an entity takes the benefit of DTAA, then it has to compulsarily file its ITR in India.
4. What will be the income shown in that ITR ? If an entity takes the benefit of DTAA, then it has to compulsarily file its ITR in India.
5. What about PAN in India ? That is also required
6. What about 10F online filing in India ? Yes Required
7. Can a 10F be filed now ? Yes
8. but this 10F will help in the past 11 month transactions ??? To be discussed.

Source of Government Notification : https://incometaxindia.gov.in/communications/notification/notification-33-2024.pdf