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Is money/property received without consideration chargeable to tax?
The key provision is Section 56(2) of the Act, which deals with transfers of property (including money) where consideration is not received or is less than the fair market value. The main points from this section include: Threshold Limit:If the aggregate value of gifts (money or property) received bRead more
The key provision is Section 56(2) of the Act, which deals with transfers of property (including money) where consideration is not received or is less than the fair market value. The main points from this section include:
Threshold Limit:
If the aggregate value of gifts (money or property) received by an individual or a Hindu Undivided Family (HUF) in a financial year exceeds ₹50,000, the entire amount is taxable as income under “Income from Other Sources.”
Exemptions:
The Act provides specific exemptions in this regard. For instance:
Gifts from Specified Relatives: Any gift, whether in money or property, received from a relative is fully exempt from tax.
Gifts on the Occasion of Marriage: Money or property received on marriage is exempt, with no upper limit.
Inheritance or Will: Any property or money received as inheritance, by way of a will, or in contemplation of death is not taxable.
Other Notified Exemptions: Certain gifts received from local authorities, approved trusts, or other specified entities may also be exempt depending on the conditions notified by the Government.
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What is the tax treatment of share premium received in excess of market value?
Under the Income Tax Act, 1961, any amount received on the issue of shares over and above their face value is credited to the Securities Premium Account. As a general principle, share premium is treated as a capital receipt and is exempt from tax under Section 10(34) of the Act. The entire share preRead more
Under the Income Tax Act, 1961, any amount received on the issue of shares over and above their face value is credited to the Securities Premium Account. As a general principle, share premium is treated as a capital receipt and is exempt from tax under Section 10(34) of the Act. The entire share premium—regardless of its quantum—is not included in the taxable income, provided it relates to the issue of shares and is properly credited in the accounts.
What Happens When Share Premium Exceeds Market Value?
Although the exemption under Section 10(34) covers the share premium in its entirety, issues arise when the premium received is significantly in excess of the fair market value of the shares. In such situations, tax authorities may examine the transaction under the following considerations:
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See lessGenuineness of the Premium:
The premium must reflect a genuine valuation based on the company’s prospects, underlying asset values, or market conditions. If the premium is inflated beyond the fair market value, it raises the possibility that the excess amount is not a true capital receipt but a means of channeling funds that should otherwise be treated as revenue.
Recharacterization Risk:
If it is found that the excess premium does not have a genuine capital character, the assessing authorities have the discretion to reclassify that portion as a revenue receipt. Depending on the facts and circumstances, such reclassification might result in the excess being treated as taxable income in the hands of the company. In extreme cases, if the inflated premium is used to disguise a dividend or to avoid dividend distribution tax, further tax implications under the concept of “deemed dividend” may arise.
Accounting and Disclosure:
The entire amount received under share premium must be maintained in a designated securities premium account. Any diversion of these funds to non-capital accounts (or expenditures not allowed as a set-off against capital receipt) might also trigger reclassification and taxation.
When salary to a partner is not allowed as deduction under the Income Tax Act?
Section 40(b) specifies that the remuneration to a partner may be allowed as a deduction if: It is provided for in the partnership deed or fixed as per a prior arrangement. It is calculated on a predetermined basis irrespective of the profits or turnover of the firm. The payment is made in advance oRead more
Section 40(b) specifies that the remuneration to a partner may be allowed as a deduction if:
It is provided for in the partnership deed or fixed as per a prior arrangement.
It is calculated on a predetermined basis irrespective of the profits or turnover of the firm.
The payment is made in advance or sanctioned for the relevant assessment year.
When Is Salary to a Partner Not Allowed?
The salary (or any form of remuneration) to a partner will be disallowed as a deduction under the following circumstances:
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See lessNot Provided for in the Partnership Deed:
If the partnership deed does not expressly authorize or specify the payment of salary to the partner, any such payment made by the firm is not in line with the agreed terms and, therefore, will not be treated as an allowable deduction.
Excessive or Arbitrary Payment:
Even if a salary is mentioned in the partnership deed, if the firm pays an amount that exceeds the rate or limits fixed by the deed (or as per the conditions prescribed under Section 40(b)), the excess portion of the salary will be disallowed. The Act expects the remuneration to be predetermined and not subject to arbitrary increases.
Non-Compliance with the Prescribed Formula:
The Act mandates that the salary should be computed on a fixed formula (or rate) as stipulated in the deed, without being linked to the fluctuating profits of the firm. If the payment deviates from this method – for example, if it is linked directly to profits, thereby possibly distorting the firm’s taxable income – the deduction may be disallowed to the extent of the deviation.
What is the definition of startup as per income tax act?
While the Income Tax Act, 1961 does not contain an explicit standalone definition of a "startup," the term is used in various tax incentives and regulatory provisions. For practical purposes—including the availment of certain tax benefits—the government relies on the criteria laid down under the StaRead more
While the Income Tax Act, 1961 does not contain an explicit standalone definition of a “startup,” the term is used in various tax incentives and regulatory provisions. For practical purposes—including the availment of certain tax benefits—the government relies on the criteria laid down under the Startup India Action Plan (issued by the Department for Promotion of Industry and Internal Trade, DPIIT).
Adopted Criteria (as per Startup India):
An enterprise is generally recognized as a startup if it meets these conditions:
Incorporation/Registration: It must be incorporated or registered in India on or after April 1, 2016.
Age of the Entity: It should be less than 10 years old from the date of incorporation or registration.
Turnover Limit: Its annual turnover must not exceed ₹100 crores in any financial year.
Innovation and Scalability: It should be engaged in innovative activities, development or improvement of products, processes, or services, or demonstrate a scalable business model with the potential for significant employment generation or wealth creation.
For tax purposes, when a business applies for startup-related benefits under various notifications (for example, schemes providing profit-linked incentives or tax exemptions), the tax authorities look to the recognition granted under the Startup India guidelines.
See lessWhat is e Invoicing system in GST, how to generate e-invoice?
1. What Is the e-Invoicing System in GST? e‑Invoicing is a system introduced under the GST regime that requires certain taxpayers to electronically authenticate their B2B invoices through a designated Invoice Registration Portal (IRP) before they are issued. Although the core GST Acts (such as the CRead more
1. What Is the e-Invoicing System in GST?
e‑Invoicing is a system introduced under the GST regime that requires certain taxpayers to electronically authenticate their B2B invoices through a designated Invoice Registration Portal (IRP) before they are issued. Although the core GST Acts (such as the CGST Act, 2017) do not explicitly mention “e‑invoicing,” the mechanism is established through subsequent notifications and rules issued by the Government of India. This mechanism is designed to:
Enhance invoice standardization and uniformity
Ensure real‑time, accurate capture of invoice data on the GST Network (GSTN)
Help in seamless integration with GST returns and e‑way bill systems
Strengthen tax compliance and curb tax evasion
Statutory Context:
Under Section 31 of the CGST Act, 2017, registered taxpayers are required to maintain proper records, including issuing prescribed tax invoices. The e‑invoicing system is a modern evolution of this requirement, ensuring that the data contained in invoices is validated and reported digitally. (While the Act itself does not use the term “e‑invoicing,” its record‑keeping obligations pave the way for the introduction of digital invoice registration by the government through subsequent notifications.)
2. How to Generate an e‑Invoice?
The e‑invoicing process involves several steps, which ensure that the invoice is digitally authenticated and assigned a unique identifier. Here’s the process:
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See lessInvoice Creation:
Generate the Invoice:
Prepare your B2B invoice using your accounting or billing software. The invoice must contain all the mandatory fields as prescribed (such as GSTIN, invoice number, date, details of goods/services, tax amounts, etc.).
Data Formatting:
Convert to JSON:
Your accounting software must export the invoice data in the JSON format conforming to the e‑invoice schema (commonly referred to as schema INV‑01). This schema defines the structure required for the Invoice Registration Portal (IRP) to understand your invoice data.
Submission to the IRP:
Upload the JSON File:
Log on to the authorized IRP (the list of which is available on the official e‑invoice portal) and upload the JSON file. This can be done via API integration or through the web interface provided by the IRP.
Validation and Generation of IRN:
IRP Processing:
The IRP validates the submitted data against the required schema and, upon successful validation, generates a unique Invoice Reference Number (IRN). It also digitally signs the invoice and generates a QR code.
Digital Signature & QR Code:
The digital signature ensures the authenticity of the invoice, and the QR code serves as a quick method for verification during audits or cash flow processes.
Receipt of e‑Invoice:
IRP Returns the e‑Invoice:
Once validated and signed, the IRP returns the e‑invoice (in a JSON format) back to your system, now containing the IRN and QR code.
Integration and Filing:
Share with Buyer & GSTN:
The digitally signed e‑invoice is provided to your buyer and is automatically transmitted to the GST Network. This facilitates smooth input tax credit claims and becomes part of your GST return filing process.
How may Ind AS have been issued till date?
As of the latest notifications, a total of 41 Indian Accounting Standards (Ind AS) have been issued. These standards are designed to converge with International Financial Reporting Standards (IFRS) and cover a wide range of topics: Ind AS No. Title of Standard Ind AS 1 Presentation of Financial StatRead more
As of the latest notifications, a total of 41 Indian Accounting Standards (Ind AS) have been issued. These standards are designed to converge with International Financial Reporting Standards (IFRS) and cover a wide range of topics:
What is the difference between Ind As and AS?
Below are the key differences between Ind AS and AS: Particulars Ind AS (Indian Accounting Standards) AS (Accounting Standards) Applicability Mandatory for specified companies (as per Companies (Ind AS) Rules) Applicable to other companies not required to follow Ind AS Objective Converged with IFRSRead more
Below are the key differences between Ind AS and AS: