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    Finance Act, 2017 has introduced few changes to TDS (‘Tax Deducted at Source’)/TCS (‘Tax Collected at Source’) provisions ranging from introduction of new sections, rate changes and extension of concessional rate TDS. This article summaries the changes which are applicable w.e.f 01-04-2017/01-06-2017.

     

    Section 194IB: - The Section provides that an Individual or HUF, other than one covered by Section 194-I1 , responsible for paying to resident any income by way of rent exceeding Rs. 50,000/- per month or part of the month thereof after 01-06-2017 would be required to deduct tax @5%.

     

    The tax is to be deducted at the time of credit of rent for the last month of previous year or last month of tenancy, if the property is vacated before the end of the previous year, to the account of the payee or at the time of payment, by cash, cheque or draft, whichever is earlier.

     

    In short, TDS should be deducted earliest of credit or payment of rent to the payee. Payer is not required to obtain TAN for complying this section.

     

    ‘Rent’ for this section means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other arrangement or agreement for the use of any land or building or both.

     

    FAQ: -

     

    1)  whether Rent for agricultural land is also covered?

     

    Ans: - Going by the definition of the term ‘Rent’ it has not provided any exception to the agricultural land. However, rent from agricultural land is exempted from tax U/S 10(1). If the payment is not income, TDS provisions are not applicable.

     

    • If the rent for few months is less than Rs. 50,000/- and for few months is more than Rs. 50,000/-, is TDS is required to be deducted for the aggregate rent?

     

    Ans: - TDS U/S 194IB is required to be deducted only if the rent per month or part of the month exceeding Rs. 50,000/-.so, TDS is required to be deducted from the month rent is more than Rs. 50,000/-

     

    3) Whether the section is applicable if the Payer is Non-resident? Ans: - Yes. Section is applicable even if the individual paying rent is Non-resident.

     

    • Whether the section is applicable if the Payee is Non-resident? Ans: - No. Section is applicable only if the Payee is Resident.

     

     

    1Who is subject to Audit U/S 44AB in the preceding financial year.

     

     

     

     

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    5) If the owner doesn’t provide his PAN, whether provisions of section 206AA are applicable?

     

    Ans: - Yes. However, the deduction shall not exceed the amount of rent payable for the last month or last month of tenancy. Ex: - If monthly rent is Rs. 55,000/- and the payee has not provided his PAN the TDS amount would be @20% (Sec 206AA) is Rs. 132000/- (Rs. 55,000*12= Rs. 6,60,000/- TDS @20% is Rs. 1,32,000). However, the TDS should not exceed Rs. 55,000/-.

     

    • Is Certificate for lower or nil rate of deduction be obtained U/S 197? Ans: - No.

     

    Section 194J: - The rate of TDS would be @2% in case of the payee engaged only in the business of operation of call centers. (w.e.f 01/06/2017)

     

    Section 194-IC: - Any person responsible for paying to resident payee, being individual or HUF with whom any specified agreement is entered, any sum by way of monetary consideration under specified agreement (Joint Development Agreement) referred to in section 45(5A) shall deduct tax @10%. (w.e.f 01/04/2017)

     

    The tax is to be deducted at the time of credit of such sum to the credit of account of payee or at the time of payment, whichever is earlier.

     

    FAQ: -

     

    • Whether TDS is required to be deducted if the payment is less than 50,00,000/-? Ans: - TDS is required to be deducted irrespective any amount.

     

    • In which year TDS credit can be adjusted?

     

    Ans: - TDS credit can be utilized in the year in which the capital gain is chargeable to tax U/S 45(5A)

     

    3)  Is advance payment before execution of the agreement is subject to TDS?

     

    Ans: - The agreement referred to in section 45(5A) should be registered to treat it as specified agreement. So, no TDS is required at the time of payment of advance before registration of agreement. However, TDS is required to be deducted when the agreement is registered or advance is adjusted. (Grossing may apply)

     

    • Is Certificate for lower or nil rate of deduction be obtained U/S 197? Ans: - No.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    TDS/TCS- Changes Brought in by FA 2017

     

     

     

    SBS Wiki

    www.sbsandco.com/wiki

     

    Other Changes: -

     

     

     

     

     

     

     

     

    Section

    Change

    w.e.f.

     

     

     

     

     

     

     

     

    Concessional rate of TDS @5% is available in relation to

     

     

     

     

    interest payment in respect of borrowings made on or after

     

     

     

     

    01/10/2014 but before 01/07/2020

     

     

    194LC

     

    01/04/2017

     

    Interest in respect of monies borrowed from a source

     

     

     

     

     

     

    outside India by way of issue of rupee denominated bond

     

     

     

     

    before 01/07/2020

     

     

     

     

     

     

     

    194LD

    Concessional rate of TDS @5% is available in relation to

    01/04/2017

     

     

     

    interest payment to FII/Qualified Foreign Investors payable

     

     

     

     

    on or after 01/06/2013 but before 01/07/2020 in respect of

     

     

     

     

    investment in rupee denominated bonds of Indian Company

     

     

     

     

    or Government Security.

     

     

     

     

     

     

     

    194D

    Self -declaration by Individual or HUF for non- deduction of

    01/06/2017

     

     

     

    TDS in form 15G/15H

     

     

     

     

     

     

     

    40(a)(ia)

    Disallowance for non-deduction of TDS from payment to

    01/04/2017

     

     

     

    Residents applicable to Income under the Head “Income

     

     

     

     

    from Other Sources”

     

     

     

     

     

     

     

    206CC

    Failure to furnish PAN to the person responsible for

    01/04/2017

     

     

     

    Collecting Tax at Source will attract TCS @twice the

     

     

     

     

    applicable rate or 5%, whichever is higher.

     

     

     

     

     

     

     
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    The Foreign Contribution (Regulation) Act, 2010 (for brevity ‘FC(R)A’), which has replaced the erstwhile Foreign Contribution (Regulation) Act, 1976 w.e.f 1st May, 2011 ,has been introduced with an objective to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit the acceptance and utilization of foreign contribution or foreign hospitality for activities detrimental to the national interest. FC(R)A is administered by Ministry of Home Affairs (for brevity ‘MHA’) under Government of India (for brevity ‘GoI’).

     

    The author earlier had drafted detailed article on FCRA and request the reader to refer the page no. 12 to

     

    15 of WIKI for February, 2016 and it is accessible at

    http://www.sbsandco.com/2016/06/15/february-2016-volume-19/

     

    In recent past many changes had been made in FC(R)A for close scrutiny of receipt and utilization and Foreign Contributions or Foreign Hospitality. Hence, in light of the tough regulations, it is very important for individuals, associations or companies who are in receipt of foreign contribution to be updated with the changes made to FC(R)A, more specifically areas pertaining to the registrations and filing of returns. Here is the glimpse of the few significant changes which need to be complied with by the individuals, associations or companies who are in the receipt of the Foreign Contribution.

     

    Registration & Related Matters:

     

    Every person having a definite cultural, economic, educational, religious or social programme shall not accept foreign contribution unless such person is registered with central government or granted prior permission for the receipt of the foreign contribution.

     

    Section 11 to Section 16 of FC(R)A read with Rules made there under deals with registration and related matters under the Act.

     

    Procedure for obtaining registration:

     

    Person intending to obtain registration shall:

     

    uMakeanonline application vide Form FC-3 with the requisite information and documents; uTheapplicant shall pay a fee of Rs 2,000/-

     

    Certificate of Registration:

     

    The certificate of Registration will be granted within 90 days from the date of the receipt of the application with a validity of 5 years from the date of its issue, which need to renewed upon the expiry of the validity period.

    Procedure for Renewal of CoI:

     

    Every person who need to renew the CoI have to make an online application vide Form-FC-3 before six months of the date of expiry with the application fee of Rs. 500/-.

     

    The renewed certificate of registration will be granted within 90 days from the date of receipt of application, if not the reasons for the same would be communicated to the applicant.

     

    Amendment: As per the Public Notice circulated by the MHA vide file no. II/21022/36(0207)/2015-FCRA-

     

    • dated 12th May, 2017 the registrations for which the Renewal is sought cannot be granted unless the pending Annual Returns from FY 2010-11 to FY 2014-15 are submitted by the defaulting organizations.

     

    Amendment: An opportunity have been given to the defaulting organizations by the MHA vide public notice dated 12th May, 2017 to submit the pending annual returns from FY 2010-11 to FY 2014-15 within period of 30 days from 15th May, 2017 to 15th June, 2017 and no compounding fee will be imposed on the returns submitted during the said period.

     

    Intimation of the Quarterly Receipts (w.e.f 03.03.2016):

     

    Every person receiving the Foreign Contribution shall place the details of the Foreign Contribution on its official website or on the website specified by CG, within 15 days of the last day of the quarter in which it is received, clearly indicating the details of the donors, amount received and date of receipt. Associations not having own official website can file the prescribed information of the receipts on the MHA’s Website.

     

    Filing of Returns:

     

    Annual Returns under FCRA:

     

    Every person registered under Section 12 of the Act, shall file an annual return in Form-FC-4 electronically at www.fcraonline.nic.in with the requisite documents specifying the amount, source of foreign contribution received and manner, purposes for which it has been utilized within 9 months i.e.,

     

    31st December from the closure of the financial year.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Recent Changes under FCRA

     

     

     

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    Levy of Compounding Fee for Late Filing or Non-Filing of Annual Returns under FCRA (w.e.f 16.06.2016):

     

    S.NO

    NON-FURNISHING OF RETURNS

    AMOUNT OF PENALTY

    OFFICER COMPETENT FOR

    COMPOUNDING

     

     

     

     

     

     

     

     

     

     

     

    1

    Upto 3 Months from due date

    2% of FC received during Financial

     

     

     

     

     

    Year

     

     

     

     

     

    Or

     

     

     

     

     

    Rs. 10,000/-

     

     

     

     

     

    (whichever is lower)

     

     

     

     

     

     

     

     

     

    2

    From 3 - 6 Months from due

    3% of FC received during Financial

     

     

     

     

    date

    Year

     

     

     

     

     

    Or

     

     

     

     

     

    Rs. 50,000/-

     

     

     

     

     

    (whichever is lower)

     

     

     

     

     

     

     

     

     

    3

    From 6 Months – 1 Year from

    4% of FC received during Financial

    The  Director

    or

    Deputy

     

    due date

    Year

    Secretary in charge of the

     

     

    Or

     

     

    FC(R)A  Wing

    of

    Foreign

     

     

    Rs. 2,00,000/-

     

     

    Division in MHA

     

     

     

    (whichever is lower)

     

     

     

     

     

     

     

     

     

     

     

     

    4

    From 1 - 2 Years from due date

    5% of FC received during Financial

     

     

     

     

     

    Year

     

     

     

     

     

    Or

     

     

     

     

     

    Rs. 5,00,000/-

     

     

     

     

     

    (whichever is lower)

     

     

     

     

     

     

     

     

     

    5

    From 2 – 3 Years from due date

    10% of FC received during

     

     

     

     

     

    Financial Year

     

     

     

     

     

    Or

     

     

     

     

     

    Rs. 10,00,000/-

     

     

     

     

     

    (whichever is lower)

     

     

     

     

     

     

     

     

     

     

    Annual returns under Lokpal and Lokayuktas Act, 2013:

     

    Any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not) in receipt of any donation from any Foreign Source under FC(R)A in excess of Rs. 10 lakh rupees in a year are required to furnish annual return of assets and liabilities till such time the entire amount of donation aforesaid received by such society or association of persons or trust stands fully utilized.

     

    Due date of filing:

     

    On or before 31st July of every year.

    Tags:
    MAY 2017 INTERNS DIGEST

    Key Topics Covered:

    • AUDIT

    Updates

    • COMPANIES ACT, 2013
    • FEMA

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    May – 2017 (Volume 34)

    Key Topics Covered:

    • INTERNATIONAL TAXATION
    • FEMA
    • DIRECT TAX
    • COMPANIES ACT, 2013
    • SECTORAL ANALYSIS
    • LABOUR LAWS

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    Tags: ,

    The Factories and establishments employing ten or more employees are covered under the Employees’ State Insurance Act in the notified areas. The employees working in such factories and establishments with a gross monthly wage of Rs. 21,000/- and below are required to be covered under the ESI Scheme and they are entitled to ( i ) Medical Benefit ( ii ) Sickness Benefit ( iii ) Maternity Benefit ( iv ) Disablement benefit ( v ) Dependents benefit ( vi ) Funeral expenses ( vii ) other benefits

     

    When an employees is covered under ESI Act and is entitled to benefits provided by the said Act, he or she shall not be entitled to receive any similar benefit admissible under the provisions of any other enactment [Section 61].

     

    In view of the above, employees covered under ESI Act are not covered under The Maternity Benefit Act, 1961 and Employee Compensation Act 1923.

     

    The Maternity Benefit Act is applicable to every factory, mine or plantation and to shops and establishments employing ten or more employees. In such factories and establishments, employees who are not covered under ESI Act employed directly or through any agency will only be covered under the Maternity Benefit Act.

     

    To become entitled for maternity benefit, the employee should have worked eighty days in the twelve months immediately preceding the date of her expected delivery in an establishment of the employer.

     

    The amendments to the Maternity Benefit Act have come inforce with effect from 1st April 2017 are summarised hereunder:

     

    1. The Act now mandates that the employer of the establishment should inform a women all benefits made available under the law, at the time of her appointment. Such information must be given in writing and electronically.

     

    1. Every establishment employing fifty or more employees shall provide crèche facilities within a prescribed distance and the woman should be allowed four visits to the crèche in a day. However, this includes her rest interval. However, this provision will come into force with effect from 1st July 2017.

     

    Whereas, creche is required to be provide and maintained only if a factory employs more than thirty women employees under Section 48 of the Factories Act. In view of the amended maternity benefit act, if the factory is employing fifty or more employees, they are required to provide crèche facility even though the number of women employees are thirty.

     

    1. After completion of the statutory maternity benefit period with wages, an employer can permit a woman to work from home, if the nature of work assigned permits her to do so for a duration that is mutually decided by the employer and the woman employee. Though it is not mandatory, the law made it open to the women employee to make a request in this regard.

     

    1. Now the Maternity Benefit Act provides leave up to twelve weeks for a woman who adopts a child below the age of three months. The period of leave will be calculated from the date the child is handed over to the adoptive mother.

     

     

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    1. In surrogacy, the surrogate mother carries a child for another person after an agreement made before conception of the child. The person wishing to adopt and foster the child is called the commissioning person/couple. The amended legislation provides leave up to 12 weeks for commissioning mothers also.

     

    1. The maximum period for which any woman shall be entitled to maternity benefit shall be twenty six weeks of which not more eight weeks shall precede the date of her expected date of delivery.Provided that the maximum period entitled to maternity benefit by a women having two or more surviving children shall be twelve weeks of which not more than six weeks shall precede the date of her expected delivery.

     

    Thus women employees having two or more children will continue to get the maternity benefit as earlier.

     

    1. Woman who have already availed 12 weeks of maternity benefit on or before 31st March 2017 will not be entitled to the enhanced benefits mentioned above. However, woman who are on maternity benefit of 12 weeks and the period of 12 weeks ends on or after 1st April 2017 will be entitled to the enhance maternity benefit of twenty six weeks in place of twelve weeks.

     

    It is essential to recognise that the act has not defined ‘employee’ and extended the benefits to ‘woman’.Thus the intent of the legislature is to cover all categories of personnel whether be it casual, temporary, outsourced, contractual, full time consultants, trainees, probationers etc.,

     

    When a woman absents herself from work in accordance with the provisions of the maternity benefit act, the employer is retrained from terminating her services during the said period. Over two decades ago, in 1991, the Supreme Court had ruled in favour of pregnant employees in the matter of Neera Mathur Vs Life Insurance Corporation of India. The facts of the matter are Ms. Mathur was appointed on September 25, 1989. She was put on probation for six months and during the probationary period she applied for maternity leave on December 27, 1989. On February 13, 1990, she was discharged from service during her period of probation. The reason cited for termination was that she had deliberately withheld the fact of being pregnant at the time of filling up a declaration form prior to being appointed. The court ordered her reinstatement. The apex court judgement further reinforces the fact that though the contract of employment provides for termination of employment during the probationary period, the employer will not be in a position to implement the same, if it is in violation of provisions of the applicable laws.

     

    Similarly, in accordance with the Section 73 of the ESI Act employer shall not dismiss, discharge or reduce or otherwise punish an employee during the period when he / she is in receipt of sickness benefit or maternity benefit and also during the period in receipt of disablement benefit for temporary disablement or is under medical treatment for sickness or is absent from work as a result of certified illness arising out of pregnancy or confinement. During the said period no notice of dismissal or discharge or reduction shall be served on an employee.

     

    In view of the amended legislation, the HR professionals are required to have a relook at their HR manual and also the contract of employment to comply with the amended maternity benefit act.

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