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CA Sanjiv Kumar
Enlightened
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  1. Advocate Dr Amit Dua Explainer

    Going concern concept is one of the accounting principles that states that a business entity will continue running its operations in the foreseeable future and will not be liquidated or forced to discontinue operations for any reason. In other words, a going concern is expected to have the followingRead more

    Going concern concept is one of the accounting principles that states that a business entity will continue running its operations in the foreseeable future and will not be liquidated or forced to discontinue operations for any reason.

    In other words, a going concern is expected to have the following things working in their favour:

    1. The business is capable of running the daily operations and has capital and raw materials to do so.
    2. A business has the ability to pay off the debt during the accounting period.
    3. There should be demand in the market for the products or services offered by the company.
    4. There should be no changes in the law governing the business.

    Importance of Going Concern Concept in Accounting

    Going concern concept is very important for the generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). The concept of going concern plays a significant role in the way assets are treated.

    The concept of depreciation and amortization are based on the assumption that a business will continue to perform its operations in the near future (this period is the next 12 months after an accounting period).

    Advantages of Going Concern Concept

    Following are some of the advantages of the going concern concept

    1.Companies during the formation years will be purchasing fixed assets that will be requiring expenditure upfront, but such assets will be providing the benefits spread over a long term, that is well beyond one accounting period. Therefore, the going concern concept provides a way to record the value of such assets.

    2. It is the basis on which the profits and losses of the business are recorded for the year to which it belongs.

    Disadvantages of Going Concern Concept

    Listed below are some of the disadvantages of the going concern concept:

    1. Financial statements are prepared at cost and not on the basis of current market value. In such a case, if the company in an event of liquidation, will have assets valued at the market value, and as such these values will be different from the value determined at cost.

    2. In the event of business being liquidated, the financial statements will be calculated on the on going concern basis, which can be misleading for the stakeholders.

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CA Sanjiv Kumar
Enlightened
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  1. Advocate Dr Amit Dua Explainer

    Where 85% of the income is not applied for charitable purposes, the NGO is required to accumulate or set apart such income for future application. The incomes so accumulated will not be included in the total income of the NGO if the following conditions are applied: Such trust or institution furnishRead more

    Where 85% of the income is not applied for charitable purposes, the NGO is required to accumulate or set apart such income for future application. The incomes so accumulated will not be included in the total income of the NGO if the following conditions are applied:

    • Such trust or institution furnishes Form No. 10 – notice of accumulation of income by charitable trust or institution electronically to assessing officer, on or before the due date for filing the return of income.
    • Mention the purpose for which income is being accumulated or set aside.
    • Income shall not be accumulated for more than 5 years and years in which income accumulated or set aside due to order or injunction of any court to be excluded in computing 5 years.
    • Money so accumulated or set aside is invested or deposited in specified mode as mentioned under section 11(5).

    Above such option is to be exercised in form 10 to be furnished electronically to the assessing officer with or without digital signature by the trust on or before due date of filing the return.

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CA Sanjiv Kumar
Enlightened
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  1. Advocate Dr Amit Dua Explainer

      Category of income Income subject to tax Taxability Donations/voluntary contributions Voluntary contributions with a specific direction to form part of corpus of trust or institution Exempt* Voluntary contribution without such specific direction Forms part of income from property held under tRead more

     

    Category of income Income subject to tax Taxability
    Donations/voluntary contributions Voluntary contributions with a specific direction to form part of corpus of trust or institution Exempt*
    Voluntary contribution without such specific direction Forms part of income from property held under trust
    Anonymous donations i.e., donations where donee does not maintain record of identity/any particulars of the donor Donation exceeding higher of:
    i) 5% of total donations received by trust or
    ii) Rs 1,00,000    		 Taxed at  30%
    Anonymous donation received by trust established wholly for religious and charitable purpose on Taxable in the same manner  as voluntary contributions (without specific direction) as above
    Income from property held under trust for charitable or religious purpose Income applied for charitable or religious purpose in India Exempt*
    Income accumulated or set aside for the application towards charitable or religious purpose in India Exempt* to the extent of 15% of such income. This means at-least 85% of income from property to be applied for charitable and religious purpose in India as above and balance 15% can be accumulated or set aside. [See below comment on 85%]
    Income from property held under trust created for charitable purpose which tends to promote international welfare in which India is interested CBDT either by general or special order has directed that such income shall not be included in the total income of trust Exempt*
    Capital gain from asset held under trust in whole Net consideration is utilised fully for acquiring another capital asset Entire capital gain is deemed to have been applied for charitable and religious purpose and hence is exempt*
    Net consideration is utilised partially for acquiring another capital asset Capital gain utilised in excess of cost of old asset transferred is considered to have been applied for charitable and religious purpose and is exempt*

    *Only Charitable/ religious trust or institution registered under Section 12AA enjoys the exemption

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. Advocate Dr Amit Dua Explainer

    To obtain registration under Section 12A, an application in Form 10A for registration of a charitable or religious trust or institution can be made. The application should compulsorily be made in the online mode. The application shall be addressed to the Commissioner of Income Tax along with the necRead more

    To obtain registration under Section 12A, an application in Form 10A for registration of a charitable or religious trust or institution can be made. The application should compulsorily be made in the online mode. The application shall be addressed to the Commissioner of Income Tax along with the necessary documents.

     

     

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CA Sanjiv Kumar
Enlightened
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  1. Advocate Dr Amit Dua Explainer

    ​​Exemption to a trust Income of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, Section 11, etc. Some of the exemptions allowed to a trust are as under: 1) Section 11 proviRead more

    ​​Exemption to a trust
    Income of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, Section 11, etc. Some of the exemptions allowed to a trust are as under:

    1) Section 11 provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.
    2) In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions).
    3) Any voluntary contributions received by an electoral trust shall not be included in its total income (subject to certain conditions).
    4) Income of an educational institute is subject to exemption under Sections 10(23C)(iiiab)/(iiiad)/(vi).
    5) Income of a hospital or other institution shall be eligible for exemption if it satisfies the conditions prescribed under Sections 10(23C)(iiiab)/(iiiad)/(vi).

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. Advocate Dr Amit Dua Explainer

    A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rigRead more

    A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rightful ownership in the Trust property, the preservation of the Trust property and channelising the income from the Trust property in accordance with the intentions of the creator of the Trust.

     

    For creating a private Trust, the foremost requirement is that the Author must express with reasonable certainty by words or acts, an intention on his part to create a Trust. Thus, a Trust may be declared either by words, spoken or written or by acts. Where a Trust is declared by words, the language used must be clear enough to show an intention to create a Trust. No formal language is required to constitute an effective declaration of Trust, but the language used must make it certain that:

    1. The Author intended to constitute a Trust binding in law on himself or the person to whom the property was given.
    2. The Author intended to bind definite property by the Trust.
    3. The Author intended to benefit a definite person or persons in a definite way.

     

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. Advocate Dr Amit Dua Explainer

    A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rigRead more

    A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rightful ownership in the Trust property, the preservation of the Trust property and channelising the income from the Trust property in accordance with the intentions of the creator of the Trust.

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. Advocate Dr Amit Dua Explainer

    Tax liability of AOP/BOI depends on whether or not share of members of AOP/BOI are known.​ 1) Where share of members are known Where individual shares of members in AOP/BOI are known then tax liability of AOP/BOI shall be determined as under: a. Where income of none of the members exceeds the maximuRead more

    Tax liability of AOP/BOI depends on whether or not share of members of AOP/BOI are known.​

    1) Where share of members are known

    Where individual shares of members in AOP/BOI are known then tax liability of AOP/BOI shall be determined as under:

    • a. Where income of none of the members exceeds the maximum amount which is not chargeable to income-tax (i.e., basic exemption limit)In this case income of AOP/BOI shall be taxable at a rate applicable to an individual.But if total income of any member of AOP/BOI is taxable at a rate higher than maximum marginal rate then income of AOP/BOI shall be chargeable to tax as follows:

      • – Portion of income attributable to such member shall be taxable at such high rate as applicable to that member.
      • – Balance portion of income shall be taxable at the maximum marginal rate of tax (i.e., 30% plus surcharge and HEC as applicable) .
    • b. Where income of any member of AOP/BOI exceeds the maximum amount which is not chargeable to income-tax (i.e., basic exemption limit)In this case income of AOP/BOI shall be taxable at maximum marginal rate of tax (i.e., 30% plus surcharge and HEC as applicable).But if total income of any member of AOP/BOI is taxable at a rate higher than maximum marginal rate then income of AOP/BOI shall be chargeable to tax as follows:

      • – Portion of income attributable to such member shall be taxable at such high rate as applicable to that member.
      • – Balance portion of income shall be taxable at the maximum marginal rate of tax (i.e., 30% plus surcharge and HEC as applicable).

    2) Where share of members are not known

    In such a case income of the AOP/BOI shall be taxable at maximum marginal rate (i.e., 30% plus surcharge and HEC as applicable). But if income of any member of AOP/BOI is taxable at a rate higher than maximum marginal rate then total income of AOP/BOI shall be chargeable to tax at such higher rate of tax.

    For the purposes of this section, the individual shares of the members of an AOP or BOI in the income of AOP/BOI shall be deemed to be indeterminate or unknown if such shares are indeterminate or unknown on the date of formation of such AOP or BOI or at any time thereafter.

    B. Alternate Minimum Tax:

    Tax payable by AOP/BOI cannot be less than 18.5 per cent (increased by Surcharge and HEC) of “adjusted total income” as per section 115JC . However, provisions related to alternate minimum tax shall not apply to an AOP or BOI whose adjusted total income does not exceed twenty lakh rupees

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CA Sanjiv Kumar
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    There is no condition for payment of interest under income tax. You can pay any amount of interest.  However, for getting deduction of this expenditure under income tax, you need to fulfill the following conditions of section 40b of act: Payment of Interest to a partner (working or non-working partnRead more

    There is no condition for payment of interest under income tax. You can pay any amount of interest. 

    However, for getting deduction of this expenditure under income tax, you need to fulfill the following conditions of section 40b of act:

    • Payment of Interest to a partner (working or non-working partner)
    • Interest must be authorized by the partnership deed
    • Only for the period of partnership deed.
    • The rate of interest should not exceed 12%. Excess of this is disallowed.
    • if Income is calculated on a presumptive basis under section 44AD or section 44ADA then it is not allowed.
    • If interest is paid to a partner on behalf or for the benefit of any other person then such interest is not disallowed under this section.
    • If the firm receives interest on drawings from a partner then it is taxable in the hands of the firm.

     

     

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CA Sanjiv Kumar
Enlightened
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  1. Advocate Dr Amit Dua Explainer

    There is not any direct interest on Late filling of ITR. (this may Impose Penalties) But, If you do not file income tax returns on or before the due date, you would be required to pay interest at the rate of 1% for every month, or part of a month, on the amount of tax remaining unpaid as per sectionRead more

    There is not any direct interest on Late filling of ITR. (this may Impose Penalties)

    But, If you do not file income tax returns on or before the due date, you would be required to pay interest at the rate of 1% for every month, or part of a month, on the amount of tax remaining unpaid as per section 234A.

    It’s important to note that one’s ITR cannot be filed if one hasn’t paid the taxes.

     

    Penalties :

    Late Filing Fees u/s 234F

    Effective from the FY 2017-28, a late filing fee will be applicable for filing your returns after the due date under section 234F. For instance after due date for FY 2020-21  which is 31st Dec 2021.

    The maximum penalty is Rs. 10,000. If you file your ITR after the due date (30th Sep) but before 31 December, a penalty of Rs 5000 will be levied.

    For returns filed later than 31 December of the relevant assessment year, the penalty levied will be increased to Rs.10,000.

    There is a relief given to small taxpayers – the IT department has stated that if the total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1000.

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