Filing GSTR-9 and GSTR-9C for FY 2023–24: A Complete Guide

"Compliance is the bridge between responsibility and risk management."

What Are GSTR-9 and GSTR-9C?

1. GSTR-9:
   A comprehensive annual return consolidating data from all monthly/quarterly GST returns, detailing outward supplies, ITC claimed, and taxes paid during the financial year.

   • Applicability: Mandatory for all regular taxpayers, except:
     • ISD (Input Service Distributors)
     • TDS/TCS deductors
     • Casual taxable persons
     • Non-resident taxable persons

2. GSTR-9C:
   A reconciliation statement comparing GSTR-9 with audited financial statements, submitted along with the auditor’s certification.

   • Applicability: Aggregate turnover exceeding ₹5 crore in FY 2023–24.

Key Deadlines for FY 2023–24

• GSTR-9 and GSTR-9C Due Date: 31st December 2024
• Late Fee for Non-Filing:
  • ₹100/day under CGST and ₹100/day under SGST, capped at 0.25% of turnover.

Checklist for Filing GSTR-9 and GSTR-9C

Step	Action	Purpose
1. Ensure All Returns Are Filed	Verify GSTR-1, GSTR-3B, and other applicable returns.	Avoid gaps in data aggregation.
2. Reconcile Outward Supplies	Match sales data in GSTR-1 with GSTR-3B and books of accounts.	Ensure turnover accuracy.
3. Validate ITC	Reconcile ITC claimed in GSTR-3B with GSTR-2A/2B and purchase register.	Identify mismatches, reversals, or unclaimed credits.
4. Identify Additional Liabilities	Compare data in GSTR-1, GSTR-3B, and audited financial statements.	Capture missed liabilities and ensure timely payment through Form DRC-03.
5. Cross-Check Amendments	Include any rectifications from FY 2023–24 or adjustments made until 30th Nov 2024.	Avoid underreporting/overreporting of turnover or ITC.
6. Prepare Reconciliation Data	Gather audited financials, trial balances, and ledger-wise GST reconciliation statements.	Streamline GSTR-9C preparation and auditor certification.

Section-Wise Details for GSTR-9

Part	Details	Key Points
Part I: Basic Details	GSTIN, legal name, and trade name (auto-populated).	Review for accuracy.
Part II: Outward Supplies	Sales data including taxable, exempt, and nil-rated supplies.	Match with GSTR-1 and books; disclose debit/credit notes.
Part III: ITC Claimed	ITC details categorized into inputs, capital goods, and services.	Reconcile with GSTR-2B; reverse ineligible credits.
Part IV: Tax Paid	Total tax payable and paid, including CGST, SGST, IGST, and cess.	Cross-check payments made during the year; report unpaid liabilities separately.
Part V: Adjustments	Amendments/omissions from earlier periods but adjusted in FY 2023–24.	Include all corrections and justify with supporting records.
Part VI: Other Details	Information like demands/refunds, HSN summary, and late fees.	Ensure data consistency and adequate documentation.

Key Reconciliation Areas for GSTR-9C

I. Turnover Reconciliation

Item	Issue	Solution
GST turnover vs. Books of accounts	Variance due to timing or omitted invoices.	Reconcile adjustments (e.g., advances, credit notes).
Exports	Exports not captured under LUT/bond.	Declare taxable export turnover if conditions unmet.
Exempt Supplies	Exempt turnover mismatch between GSTR-1 and books.	Validate exclusions (e.g., SEZ, exempt categories).

Example:

• Turnover as per GSTR-9: ₹10,00,00,000
• Turnover as per books: ₹9,80,00,000
• Reason: ₹20,00,000 sales were interstate but wrongly categorized.
• Action: Report ₹20,00,000 in GSTR-9C with explanations and pay tax, if due.

II. ITC Reconciliation

Item	Issue	Solution
Claimed ITC mismatched with GSTR-2B	Supplier non-compliance or timing differences.	Reverse unmatched ITC and claim missed credits later.
Capital Goods ITC	Inaccurate classification as revenue ITC.	Reclassify and correct ITC bifurcation in books.

Example:

• ITC claimed in GSTR-3B: ₹5,50,000
• ITC auto-populated in GSTR-2B: ₹5,30,000
• Reason: Two invoices worth ₹20,000 were not filed by the supplier.
• Action: Communicate with the supplier and reverse unmatched ITC.

III. Tax Paid vs. Liability

Item	Issue	Solution
Underpayment	Missed liability due to unrecorded sales.	Pay additional tax via Form DRC-03 with interest.
Excess tax paid	Over-declaration in GSTR-3B.	Claim refunds under Form RFD-01.

Illustrative Examples for Common Scenarios

Scenario 1: Omitted Invoices

• Issue: A taxpayer forgot to include ₹2,00,000 in interstate sales in GSTR-1.
• Solution: Report in GSTR-9 Part V (Adjustments). Pay tax with interest before filing.

Scenario 2: Supplier Non-Compliance

• Issue: ITC worth ₹50,000 unavailable in GSTR-2B as the supplier failed to file GSTR-1.
• Solution: Reverse unmatched ITC and follow up with the supplier to correct their filing.

Scenario 3: Exports with LUT

• Issue: ₹5,00,000 export turnover reported but LUT not filed.
• Solution: Treat exports as taxable turnover, pay IGST with interest, and claim a refund later.

Common Errors to Avoid

1. Mismatch in Returns: Ensure GSTR-1, GSTR-3B, and GSTR-9 are aligned.
2. Unadjusted Credit Notes: Include all credit notes in outward supply reconciliation.
3. ITC Reversal Errors: Reverse ineligible ITC before filing GSTR-9.

Late Fees and Penalties

Aspect	Penalty/Fees
Late filing (GSTR-9)	₹200/day (₹100 CGST + ₹100 SGST), capped at 0.25% of turnover.
Errors in GSTR-9C	Audit objections and potential scrutiny by authorities.

Key Takeaways

1. Reconcile turnover, ITC, and liabilities meticulously.
2. Pay additional liabilities and reverse ineligible ITC via Form DRC-03.
3. Maintain clear documentation for audit trails and future references.

Decoding GST on Property Rentals

"Clarity in compliance is the cornerstone of financial prudence."

The taxation of property rentals under the Goods and Services Tax (GST) regime has undergone notable changes in recent years. These updates have significant implications for landlords and tenants, especially those operating in commercial and residential property spaces. Understanding these developments is crucial for ensuring compliance and leveraging the available tax benefits effectively.

This blog provides a professional and comprehensive overview of the GST framework on property rentals, focusing on key amendments and their practical implications.

Understanding the GST Framework for Rentals

1. GST on Commercial Property Rentals

• Tax Status: Always taxable under GST.
• Mechanism: Forward Charge Mechanism (FCM)
  • Responsibility: Landlord (supplier) discharges GST liability.
• GST Rate: 18%
• Input Tax Credit (ITC): Available to tenants for business purposes.

2. GST on Residential Property Rentals (Pre-July 18, 2022)

• Tax Status: Exempt from GST if rented for residential purposes.
• Legal Reference: Entry 13 of Notification No. 09/2017-Integrated Tax (Rate).
• Mechanism: No tax liability for either landlord or tenant.

Key Amendments and Implications

A. July 18, 2022: Introduction of Reverse Charge Mechanism (RCM)

1. Residential Property Rentals

   • Rentals to registered persons became subject to GST under RCM.
   • Tax Rate: 18%
   • Responsibility: The registered tenant (recipient) is required to discharge GST.
   • ITC Eligibility: The tenant can claim ITC for business-related rentals.

2. Commercial Property Rentals

   • Continued under FCM for transactions involving registered landlords.

B. October 10, 2024: Expansion of RCM Scope

1. Commercial Rentals by Unregistered Landlords

   • GST liability shifted to tenants under RCM.
   • Applicability: When the landlord is unregistered, and the tenant is registered.
   • GST Rate: 18%
   • ITC Eligibility: Available to tenants for business-related use.

2. Key Distinctions

   • RCM: Applies to specific scenarios where the landlord is unregistered, and the tenant assumes GST responsibility.
   • FCM: Continues to apply for transactions where the landlord is registered.

Summary of GST Applicability

Type of Property	Parties Involved	GST Mechanism	GST Rate	Responsibility	ITC Eligibility
Commercial Property	Registered Landlord → Registered Tenant	FCM	18%	Landlord	Yes
	Unregistered Landlord → Registered Tenant	RCM	18%	Tenant	Yes
Residential Property	Any Landlord → Registered Tenant	RCM	18%	Tenant	Yes
	Registered Landlord (Personal Capacity)	Exempt	NA	None	NA

Scenarios and Implications

Scenario 1: Commercial Property Rentals

Case 1: RCM Applicability

• Landlord: Unregistered
• Tenant: Registered
• GST Mechanism: RCM
• Action: Tenant discharges GST at 18% and claims ITC for business purposes.

Case 2: FCM Applicability

• Landlord: Registered
• Tenant: Registered
• GST Mechanism: FCM
• Action: Landlord charges GST at 18%, and the tenant claims ITC.

Scenario 2: Residential Property Rentals

Case 1: RCM Applicability

• Landlord: Any (Registered/Unregistered)
• Tenant: Registered
• GST Mechanism: RCM
• Action: Tenant pays GST at 18% and claims ITC for business-related use.

Case 2: Exemption

• Landlord: Registered (Personal Capacity)
• Tenant: Any
• GST Mechanism: Exempt
• Action: No GST liability arises.

Professional Insights and Compliance Checklist

1. Assess Rental Arrangement: Identify the registration status of both landlord and tenant.
2. Apply Correct Mechanism: Determine whether FCM or RCM applies.
3. Discharge GST Timely: Ensure compliance with GST payment obligations.
4. Claim ITC: Leverage Input Tax Credit wherever applicable for registered tenants.
5. Maintain Accurate Records: Keep documentation of agreements, invoices, and tax payments.
6. Monitor Legislative Updates: Stay informed about changes in tax laws.

Conclusion

The evolving GST framework for property rentals underscores the importance of understanding compliance intricacies. Stakeholders must remain proactive in aligning their operations with the latest provisions to avoid penalties and optimize tax benefits.

New Horizons in Tax Appeals: Empowering Taxpayers through Amendments to Section 251 Effective October 1, 2024

The Finance Act, 2024, effective October 1, 2024, introduces groundbreaking reforms to streamline the tax appeals process. These changes to Section 251 of the Income-tax Act, 1961 enhance the role of the Commissioner (Appeals), granting them the ability to remand assessments under Section 144 (best judgment assessments) to the Assessing Officer (AO).

This reform prioritizes fairness and efficiency, providing taxpayers with fresh opportunities to address issues in disputed assessments. The parallel amendment to Section 153(3) introduces strict timelines for resolving such remanded cases, minimizing delays and enhancing the overall efficacy of tax dispute resolution.

Key Highlights of the Amendments

1. Enhanced Powers of Commissioner (Appeals):

   • Before: Could only confirm, annul, or modify the assessment.
   • After: Can now remand best judgment assessments (Section 144) for reassessment by the AO.

2. Time-Bound Reassessments Under Section 153(3):

   • Specific timeframes prescribed for reassessments referred back by Commissioner (Appeals), ensuring quick disposal of cases.

3. Improved Safeguards for Taxpayers:

   • Taxpayers can now provide additional evidence or address gaps in earlier submissions.

Understanding Best Judgment Assessments (Section 144)

A best judgment assessment is invoked when:

• Taxpayers fail to respond to notices or comply with demands for information.
• Returns are not filed, or information provided is insufficient or inconsistent.

These assessments are based on available data and can often overstate a taxpayer’s income due to incomplete disclosures.

Key Improvements for Taxpayers

Aspect	Before October 1, 2024	After October 1, 2024
Scope of Commissioner (Appeals)	Confirm, annul, reduce, or enhance assessments.	Can remand Section 144 cases for fresh review.
Additional Evidence During Appeal	Limited to initial submission.	Taxpayers can provide new evidence for reassessment.
Timelines for Reassessment	Open-ended; prolonged delays.	Defined timelines under Section 153(3).
Dispute Resolution	Appeals often resulted in prolonged litigation.	Faster and more taxpayer-friendly resolutions.

Critical Implications for Taxpayers

1. Greater Opportunity for Fair Assessments:

   • Taxpayers can now submit missing documents, explanations, or evidence during appeals, ensuring accuracy in reassessment.

2. Streamlined Appeal Mechanism:

   • With the ability to remand cases, Commissioner (Appeals) ensures disputes are resolved at the AO level, reducing litigation time and costs.

3. Timely Disposal of Disputes:

   • The amendment to Section 153(3) addresses long-standing delays by mandating timelines for reassessments.

4. Enhanced Compliance Motivation:

   • Taxpayers are more likely to comply with initial notices, knowing the appeals process is structured and time-bound.

Illustrative Examples for Clarity

Example 1: Missed Response Results in Higher Tax Liability

• Scenario: Ramesh, a small business owner, failed to respond to an AO notice regarding discrepancies in GST filings. A Section 144 assessment estimated higher income, leading to an inflated tax demand.
• Impact Before: Limited recourse; Ramesh could only appeal without the ability to submit new evidence.
• Impact Now: Ramesh can present additional documents, leading the Commissioner (Appeals) to remand the case for reassessment.

Example 2: Genuine Misreporting Addressed through Reassessment

• Scenario: Meera, an artist, reported incorrect income due to errors in her bank statements. The AO issued a best judgment assessment with overestimated income.
• Impact Before: Misreporting could only be contested in a prolonged appeal.
• Impact Now: Meera can submit corrected bank statements to the Commissioner (Appeals), who can remand the case for accurate reassessment.

Taxpayer Benefits of the New Amendments

1. Second Chance for Compliance:

   • The remand mechanism allows taxpayers to rectify errors or omissions during appeals.

2. Reduced Litigation Costs:

   • Disputes resolved at the AO level minimize the need for further legal recourse.

3. Time-Sensitive Processes:

   • Prescribed timelines under Section 153(3) reduce uncertainty and expedite outcomes.

4. Fairness in Taxation:

   • Taxpayers are no longer penalized for procedural lapses or miscommunication.

Action Plan for Taxpayers

1. Respond to Notices Promptly:

   • Avoid Section 144 assessments by complying with AO requests for information.

2. Prepare for Appeals Strategically:

   • Compile all relevant evidence and explanations before initiating appeals.

3. Engage Professional Assistance:

   • Work with tax consultants to navigate the appeals process and present your case effectively.

Conclusion

The amendments to Section 251 and Section 153(3) are a significant step towards a taxpayer-friendly dispute resolution system. By granting the Commissioner (Appeals) the power to remand best judgment assessments, the reforms ensure that taxpayers have ample opportunities to present their case fairly and transparently.

Forward Exchange Contracts: Legal, Accounting, and Tax Implications with Practical Examples in INR

 "A contract is only as effective as its compliance with legal and financial standards."

Forward Exchange Contracts (FECs) are critical financial instruments for businesses dealing with foreign exchange. They mitigate risks from currency fluctuations while adhering to legal and accounting frameworks. Let’s explore the provisions, treatments, and examples in Indian Rupees (INR) to contextualize the practical applications.

Key Abbreviations and Glossary

Abbreviation/Term	Meaning
FEC	Forward Exchange Contract: Agreement to buy or sell foreign currency at a future date and fixed rate.
MTM	Mark-to-Market: Valuation of contracts at the prevailing market rate on a reporting date.
HPFT	Highly Probable Forecast Transaction: A likely but not yet contracted future transaction.
ICAI	Institute of Chartered Accountants of India.
AS	Accounting Standard, issued by ICAI.
Ind AS	Indian Accounting Standard, aligned with international standards.
ICDS VI	Income Computation and Disclosure Standard VI for tax computation of foreign exchange.

Purpose and Legal Uses of Forward Exchange Contracts

1. Hedging

Forward contracts hedge against adverse currency movements, ensuring cost predictability.

Example – Exports in INR:
Ashu, an exporter, sells goods worth USD 50,000 when the spot rate is ₹80/USD. His receivable is ₹40,00,000. Fearing a drop in the rate, he enters an FEC to sell USD at ₹79/USD in 3 months, fixing his receivable at ₹39,50,000.

Example – Imports in INR:
Vandana agrees to import machinery worth EUR 1,00,000. The spot rate is ₹90/EUR, but she fixes her cost at ₹91/EUR through a forward contract. Her liability is now ₹91,00,000, irrespective of market fluctuations.

2. Speculation

FECs may be used to speculate and profit from currency rate changes.

Example – Trading in INR:
Sandeep enters an FEC to sell USD 20,000 at ₹82/USD. If the market rate at the settlement date falls to ₹80/USD, he earns a speculative gain of ₹40,000 [(₹82 - ₹80) × 20,000].

3. Anticipated Transactions (HPFTs)

Used for hedging uncertain but likely transactions.

Example in INR:
Ashu anticipates needing USD 30,000 for project expenses in 6 months. He enters an FEC at ₹81/USD, fixing his outflow at ₹24,30,000.

Comparative Analysis of Accounting Standards for FECs

Aspect	AS 11 (Accounting Standards)	Ind AS 109 (Indian Standards)	ICDS VI (Tax Computation)
Premium/Discount	Amortized over the contract’s life.	Not accounted separately.	Amortized over the contract’s life.
MTM Valuation	Required for trading purposes.	Mandatory for all contracts.	Not permitted, except for recognized exposures.
Firm Commitments (FC)	MTM per ICAI Guidance Note.	MTM compulsory.	Settlement basis only.
HPFTs	Allowed with specific disclosure.	MTM valuation compulsory.	Recognized only on settlement.
Speculative Contracts	MTM gains/losses recognized.	MTM valuation compulsory.	Recognized only on settlement.

Illustrative Accounting Treatment in INR

1. Under AS 11 (Accounting Standards)

Example in INR:
Ashu locks in an FEC to sell USD 40,000 at ₹76/USD when the spot rate is ₹75/USD. The premium of ₹1/USD (₹76 - ₹75) totals ₹40,000, amortized over the contract period.

At the reporting date, the rate rises to ₹77/USD. The MTM loss of ₹40,000 [(₹77 - ₹76) × 40,000] is booked in the profit and loss account.

2. Under Ind AS 109 (Indian Standards)

Example in INR:
Vandana enters an FEC to buy EUR 50,000 at ₹88/EUR. On the reporting date, the market rate is ₹90/EUR.

• MTM Loss: ₹1,00,000 [(₹90 - ₹88) × 50,000].
• Recognized immediately in profit or loss as per fair valuation principles.

3. Under ICDS VI (Tax Computation)

Example in INR:
Sandeep locks in an FEC to sell GBP 20,000 at ₹100/GBP, while the current rate is ₹102/GBP.

• Premium is ₹40,000 [(₹102 - ₹100) × 20,000], amortized over the contract.
• No MTM adjustments unless the exposure is recognized in books.

Tax Implications

1. Recognized Exposures

Premiums, discounts, and exchange gains/losses are taxable in the year recognized.

Example in INR:
Ashu earns an exchange gain of ₹1,20,000 from an FEC settlement, included in taxable income for the year.

2. Firm Commitments or HPFTs

Recognized only upon settlement.

Example in INR:
Vandana incurs an MTM loss of ₹2,00,000 on an FEC to hedge imports. Tax treatment occurs on settlement.

3. Speculative Contracts

Taxable on settlement, regardless of MTM movements.

Example in INR:
Sandeep’s speculative gain of ₹50,000 is taxable in the year of settlement.

Critical Observations and Recommendations

1. Alignment with Purpose: Clearly document the intent of the FEC (hedging or speculation).
2. Accurate Accounting: Follow the prescribed accounting standard (AS 11, Ind AS 109, or ICDS VI) to ensure compliance.
3. Tax Reconciliation: Reconcile accounting treatments with tax computations to avoid discrepancies.
4. Legal Documentation: Maintain robust documentation for all FECs, including contract terms, MTM valuations, and settlement details.

Section 194N Exemption for Foreign Representations

The Central Board of Direct Taxes (CBDT), vide Notification No. 84/2024 dated November 27, 2024, has exempted certain entities from the provisions of Section 194N of the Income Tax Act, 1961.

The provisions of the notification will come into force from December 1, 2024.The Central Board of Direct Taxes (CBDT) has issued a notification exempting specific entities from the provisions of Section 194N of the Income Tax Act, 1961. This section requires TDS on cash withdrawals exceeding Rs. 1 crore (or Rs. 3 crores for co-operative societies) in a financial year.

Exempt Entities

The exemption applies to the following entities, provided they are approved by the Ministry of External Affairs (MEA) and are exempt from paying taxes in India:

• Foreign Representations
• Diplomatic Missions
• United Nations Agencies
• International Organizations
• Consulates and Honorary Consuls

Effective Date

This exemption will be effective from December 1, 2024.

Implications

1. For Exempt Entities: Streamlined operations without TDS deductions on cash withdrawals.
2. For Banks and Institutions: Necessary adjustments in compliance systems to exclude these entities.
3. For Other Taxpayers: Provisions of Section 194N continue unchanged.

Key Amendments of Income Tax for Asst Year 2025-26 - Key Changes and New Tax Regime Benefits

The Union Budget 2024 introduced a series of impactful changes to the Income Tax provisions that will come into effect from April 1, 2024, affecting the Assessment Year 2025-26. These amendments aim to simplify tax planning, enhance benefits for taxpayers, and incentivize savings. Here is an overview of the key amendments and provisions to look out for:

1. Additional Benefits for Taxpayers Opting for the New Regime

With the new tax regime becoming more popular due to its simplicity, the government has increased certain benefits for taxpayers opting for this regime:

• Standard Deduction: The standard deduction for salaried individuals has been increased from Rs. 50,000 to Rs. 75,000.

• Family Pension Deduction: The deduction limit for family pension has been enhanced from Rs. 15,000 to Rs. 25,000.

• Employer’s Contribution under Section 80CCD(2): The limit for employer’s contribution towards National Pension Scheme (NPS) under Section 80CCD(2) has been increased from 10% to 14% of salary and dearness allowance.

2. Benefits of the New Tax Regime

The newly implemented tax regime brings several advantages for taxpayers:

• Simplicity in Tax Filing: Taxpayers under the new regime no longer need to maintain a record of travel tickets, rent receipts, or other receipts to claim deductions, simplifying the filing process.

• No Need for Complex Tax Planning: The new tax regime eliminates the need for detailed tax planning, such as investment-based deductions, making it easier for salaried individuals to manage their taxes.

• Basic Exemption Limit: The basic exemption limit under the new tax regime has been increased from Rs. 2.5 lakhs to Rs. 3 lakhs. This change provides a larger tax-free income for taxpayers.

• Higher Income Tax Slabs: The highest tax rate of 30% will now apply only to income exceeding Rs. 15 lakhs under the new tax regime, providing relief to middle-income groups.

3. Changes in Surcharge Rates

The surcharge rate has been reduced under the new tax regime for high-income taxpayers:

• Reduction in Surcharge: The surcharge rate for individuals with income exceeding Rs. 5 Crores has been reduced from 37% to 25%. This applies only to taxpayers who choose the new tax regime.

4. Tax Reforms and Key Amendments (Assessment Year 2025-26)

These changes to the Income Tax provisions are specifically aimed at enhancing the ease of compliance and reducing tax burdens for a wide range of taxpayers. Below is a detailed breakdown of significant changes in the provisions:

Section/Provision	Current Provisions	Amended Provisions (Effective from April 1, 2024)	Key Impact
Standard Deduction	Rs. 50,000 for salaried individuals	Rs. 75,000 for salaried individuals	Increases the amount of income that can be claimed as deduction, benefiting salaried taxpayers.
Family Pension Deduction	Rs. 15,000	Rs. 25,000	Higher deduction available for taxpayers receiving family pension.
Employer’s Contribution under Section 80CCD(2)	10% of salary and dearness allowance	14% of salary and dearness allowance	More favorable contribution limits to encourage savings in NPS.
Basic Exemption Limit	Rs. 2.5 lakhs	Rs. 3 lakhs	Larger tax-free income, making the new regime more attractive.
Highest Tax Rate (30%)	Income above Rs. 10 lakhs	Income above Rs. 15 lakhs	Higher threshold for applying the highest tax rate, reducing the tax burden for many taxpayers.
Surcharge Rate	37% for income exceeding Rs. 5 crores	25% for income exceeding Rs. 5 crores (New Tax Regime)	Reduction in surcharge for those with very high income, lowering their overall tax liability.

5. Clarification on Tax Slabs for the New Regime (Assessment Year 2025-26)

Under the new tax regime, the following revised income tax slabs will apply from April 1, 2024:

Income Range	Tax Rate
Up to Rs. 3,00,000	Nil (Exempt)
Rs. 3,00,001 to Rs. 6,00,000	5%
Rs. 6,00,001 to Rs. 9,00,000	10%
Rs. 9,00,001 to Rs. 12,00,000	15%
Rs. 12,00,001 to Rs. 15,00,000	20%
Above Rs. 15,00,000	30%

This simplification in the tax slabs, along with the increased basic exemption limit, provides substantial relief for individuals in the lower and middle-income brackets, making the new tax regime an attractive option.

Conclusion

The Income Tax Amendments for Assessment Year 2025-26 focus on simplifying tax compliance and providing substantial relief to taxpayers, especially those opting for the new tax regime. These changes reflect the government’s commitment to promoting ease of living and enhancing financial inclusion. The higher exemption limits, reduced surcharge, and enhanced deductions will benefit both salaried individuals and retirees, making it an opportune time for tax planning.

TDS Amendments for FY 2024-25: Significant Rate Reductions and Key Changes

TDS Amendments Chart for FY 2024-25

Section	Transaction Type	Old TDS Rate	New TDS Rate	Threshold/Condition	Effective Date	Key Changes
194D	Insurance Commission	5%	2%	TDS applies on commission paid by the insurer to non-corporate agents.	April 1, 2025	TDS rate reduced from 5% to 2% on insurance commission.
194DA	Life Insurance Payouts (Taxable)	5%	2%	TDS on taxable portion of life insurance policy payouts.	October 1, 2024	TDS rate reduced from 5% to 2% on taxable life insurance payouts.
194F	Mutual Fund Redemption	20%	Removed	Applies to redemption of units of mutual funds or UTI.	October 1, 2024	TDS provision removed on mutual fund redemptions.
194G	Commission on Lottery Tickets	5%	2%	TDS on commission paid to lottery agents or distributors.	October 1, 2024	TDS rate reduced from 5% to 2% on lottery ticket sales commission.
194IB	Rent Paid by Individuals/HUFs	5%	2%	TDS on rent payments exceeding ₹50,000 per month made by individuals or HUFs.	October 1, 2024	TDS rate reduced from 5% to 2% for individuals/HUFs paying rent exceeding ₹50,000 per month.
194O	E-commerce Transactions	1%	0.1%	TDS on payments made by e-commerce operators to sellers for goods/services sold online.	October 1, 2024	TDS rate reduced from 1% to 0.1% for e-commerce transactions.
194IA	Purchase of Property	1%	1%	TDS on the purchase of immovable property exceeding ₹50 lakhs.	Continuous	No change in the rate.
194LB	Income from Investment in Securitization	10%	10%	Applies to income earned from securitization transactions by individuals or entities.	Continuous	No change in the rate.
194LBA	Income from Investment in REITs and InvITs	10%	10%	TDS on income paid by REITs and InvITs, including interest or dividend paid on units of these trusts.	Continuous	No change in the rate.

Key Insights on Significant Changes

1. Reduction in TDS Rates:

   • TDS on insurance commissions has been reduced to 2% from 5%, leading to a significant tax relief for non-corporate insurance agents.
   • TDS on life insurance payouts has similarly been reduced to 2% from 5%, easing the burden on policyholders receiving payouts.
   • Lottery commission also sees a reduction, with the TDS rate decreasing to 2% from 5%, which will benefit lottery agents and distributors.

2. Removal of TDS on Mutual Fund Redemption:

   • TDS on mutual fund redemptions (Section 194F) has been completely removed. Previously, 20% TDS was applied, now the redemption process is free of such deductions.

3. E-commerce Transactions:

   • The TDS rate on payments to e-commerce operators for transactions with sellers has been reduced to 0.1%, making it more favorable for online businesses and reducing the compliance burden.

4. Rent Payments by Individuals/HUFs:

   • TDS on rent paid by individuals and HUFs has been reduced to 2% from 5%. This amendment is a significant change for businesses making rental payments, as well as individuals managing their rental expenses.

PAN 2.0: Revolutionizing Taxpayer Experience with Unified and Eco-Friendly Solutions

The Ministry of Finance's PAN 2.0 Project, approved by the Cabinet Committee on Economic Affairs (CCEA) on November 25, 2024, is a landmark initiative aimed at transforming the issuance and management of Permanent Account Numbers (PAN) and Tax Deduction and Collection Account Numbers (TAN). This project focuses on efficiency, accessibility, and security while aligning with the Digital India initiative to provide seamless taxpayer services.

Key Features of PAN 2.0

1. Unified Portal

• Combines the services of the e-Filing Portal, UTIITSL Portal, and Protean e-Gov Portal into a single platform.
• Offers end-to-end services, including:
  • PAN/TAN applications.
  • Corrections and updates.
  • Aadhaar-PAN linking and validations.

2. No Fee for PAN Updates

• Issuance, corrections, and updates of e-PAN are free of cost.
• Physical PAN cards available for a nominal fee:
  • ₹50 for domestic addresses.
  • ₹15 plus actual postal charges for international delivery.

3. Enhanced Security

• PAN Data Vault for robust protection of taxpayer data.
• Dynamic QR codes on PAN cards for real-time validation and authenticity.

4. Eco-Friendly and Paperless

• Digital-first processes reduce paperwork and promote sustainability.

5. Integration with Government Systems

• Establishes PAN as the common business identifier for specified government agencies, simplifying compliance across sectors.

6. Duplicate PAN Detection

• Centralized mechanisms identify and deactivate duplicate PANs, ensuring compliance with the Income Tax Act, 1961.

Benefits for Taxpayers

• Simplified Processes: A unified platform reduces redundancy and delays.
• Cost Efficiency: Free issuance and updates reduce financial burden.
• Enhanced Grievance Redressal: Dedicated helpdesks and improved systems for timely resolution.
• Digital Compliance: Streamlined authentication, Aadhaar linking, and updates promote ease of business.

Benefits for the Government

• Operational Efficiency: Integration reduces administrative complexities.
• Better Compliance: Detecting and deactivating duplicate PANs enhances data integrity.
• Data Security: Advanced encryption and dynamic QR codes safeguard taxpayer information.

Key Innovations of PAN 2.0

Feature	Existing System	PAN 2.0 System
Platforms	Spread across three portals: e-Filing, UTIITSL, Protean e-Gov.	Single, unified portal for all PAN/TAN-related services.
Fee for Updates	Charged for corrections.	Free corrections and updates for e-PAN.
Security Measures	Limited protection for PAN data.	PAN Data Vault and dynamic QR codes for authenticity.
Duplicate PAN Handling	Manual or system-intensive processes.	Centralized mechanism to deactivate duplicates.
Grievance Redressal	Delayed and fragmented.	Dedicated helpdesk for faster resolution.

Aligning with the Digital India Vision

The PAN 2.0 Project is a progressive step toward a unified, efficient, and user-friendly system for managing PAN and TAN. By adopting cutting-edge technology, embracing eco-friendly practices, and offering free services, the initiative reflects the government’s commitment to a transparent, inclusive, and sustainable tax ecosystem.

Corporate Social Responsibility (CSR) Provisions under the Companies Act, 2013

The Companies Act, 2013 introduced a significant development in the field of corporate governance by making Corporate Social Responsibility (CSR) mandatory. As of April 1, 2014, India became the first country to legally mandate CSR spending for companies meeting certain criteria. The relevant provisions for CSR are laid out under Section 135 of the Companies Act, 2013, requiring companies to spend 2% of their average net profits over the last three years on CSR activities.

1. CSR Obligations under Section 135 of the Companies Act, 2013

The CSR provisions under Section 135 mandate that:

• Companies meeting the threshold criteria of net worth, turnover, or profitability must spend on CSR.
• The 2% spend must be directed towards activities listed under Schedule VII of the Companies Act, which includes areas like poverty alleviation, education, healthcare, environmental sustainability, and others.

If a company fails to meet this obligation, the reasons must be disclosed in the Board's report, with an explanation provided for the shortfall.

2. Unspent CSR Amounts for Ongoing Projects

Under the provisions of sub-section (5) of Section 135, if there are any unspent CSR amounts related to an ongoing project at the end of the financial year, the company is required to transfer these funds to a special bank account called the Unspent Corporate Social Responsibility Account.

• Time frame: The unspent amount must be deposited within 30 days from the end of the financial year.
• The account should be in a scheduled bank, and it will be designated specifically for the unspent CSR amount.

3. Provisions for Ongoing CSR Projects (Section 135(6))

Section 135(6) stipulates that:

• Any unspent CSR amount relating to an ongoing project must be transferred to the special account.
• The transferred amount must be utilized within three financial years from the date of the transfer for the same CSR project.
• If the amount is not spent within three years, it must be transferred to a Fund specified in Schedule VII within 30 days from the end of the third financial year.

Key Points:

• Ongoing projects: These are projects that are intended to be completed over more than one financial year.
• The CSR amounts that remain unspent in relation to these projects are to be kept in the special CSR account until utilized.

4. Penalty for Non-Compliance (Section 135(7))

If a company fails to comply with the provisions of CSR, particularly concerning the transfer of unspent amounts, the following penalties apply:

• Company penalty: The company is liable to a fine equal to twice the amount required to be transferred to the CSR account or the Schedule VII Fund, whichever is less, or a fine of up to one crore rupees, whichever is less.
• Officer penalty: Every officer of the company in default is liable to a fine of one-tenth of the amount required to be transferred to the CSR account or the Fund, or a fine of two lakh rupees, whichever is less.

5. Case Law: Impact of Default on CSR Obligations

In a notable case decided by the Registrar of Companies (RoC), Hyderabad, on February 22, 2023, non-compliance with CSR obligations was reviewed, focusing on the delayed transfer of unspent CSR funds to the Unspent CSR Account.

Case Summary:

• The company failed to deposit the unspent CSR funds into the required special account within the prescribed time frame of 30 days.
• As a result, the company faced penalties as outlined in Section 135(7).
• The company was directed to transfer the unspent funds immediately to the special CSR account and pay the required fines.

Consequences of Default:

• Reputational damage: Non-compliance with CSR obligations can harm a company’s reputation.
• Legal and financial penalties: The penalties imposed on the company and its officers highlight the importance of adhering to CSR regulations.
• Mandatory corrective action: Companies must act promptly to rectify the delay in CSR fund transfer to avoid further penalties.

6. Solution for Unspent CSR Amount

To ensure compliance with CSR regulations and avoid penalties, companies must adopt the following steps:

1. Transfer of unspent amount: Any unspent CSR funds related to ongoing projects must be transferred to the Unspent CSR Account within 30 days from the end of the financial year.
2. Utilization within three years: The amount should be utilized within the next three years for the same CSR activities, as per the company's CSR policy.
3. Compliance with Schedule VII: If unspent funds are not utilized within the three-year period, they should be transferred to a Fund specified under Schedule VII of the Companies Act.
4. Proper Documentation and Reporting: Maintain thorough records and disclose the reasons for any unspent CSR amount in the Board’s report.

In conclusion, CSR compliance is crucial not only for the reputation of a company but also to avoid legal repercussions. Timely and accurate transfer of unspent CSR funds is essential for maintaining regulatory compliance and promoting the company's commitment to social causes

GST Update: TDS on Metal Scrap and Resolution for Reporting Challenges

 A significant change has been introduced under Notification No. 25/2024-Central Tax requiring the deduction of TDS under Section 51 of the CGST Act, 2017, on transactions involving metal scrap. This compliance requirement applies to registered persons receiving supplies of metal scrap, specifically those classified under Chapters 72 to 81 of the Customs Tariff Act, 1975.

Key Highlights of the Change

TDS Deduction Applicability

• Who is Affected? Any registered person receiving supplies of metal scrap from another registered person, classified under Chapters 72-81 of the Customs Tariff Act, must deduct TDS as per Section 51 of the CGST Act.

Challenges Faced by Taxpayers

Following the introduction of this notification, several taxpayers have faced issues when attempting to file TDS returns for October 2024. The main reason for this difficulty was that many taxpayers who applied for GST registration in October 2024 did not have their registration approved until November 2024. The GSTN system does not allow filing returns for months before registration approval, leading to issues in reporting TDS for October 2024.

Resolution for Affected Taxpayers

To resolve this issue, the government has provided clear guidance:

• Consolidated Reporting: Taxpayers who were granted GST registration in November 2024, but deducted TDS for the period from 10th October 2024 to 30th November 2024, are required to report the total TDS deducted for this period in their GSTR-7 return for November 2024.

• Filing the Return: Taxpayers must ensure they file their GSTR-7 for November 2024 by the standard due date, 10th December 2024, to avoid penalties for non-compliance.

Step-by-Step Compliance Procedure

Here’s a simplified guide for taxpayers to ensure full compliance:

1. Confirm GST Registration Approval:
   Ensure your GST registration is approved. If approved in November 2024, proceed to report TDS for both October and November 2024.

2. Consolidate TDS Amounts:
   Review your records and calculate the total TDS deducted from 10th October 2024 to 30th November 2024.

3. File GSTR-7 for November 2024:

   • Log into the GST portal and select the GSTR-7 return for November 2024.
   • Report the total TDS amount for the period mentioned above.
   • Verify all details and submit the return by the due date (10th December 2024).

Compliance Summary

Action	Details
Effective Date	10th October 2024
TDS Applicability	Supplies of metal scrap (Chapters 72-81) between registered persons
Reporting Period	10.10.2024 to 30.11.2024
Return Form	GSTR-7
Filing Deadline	10th December 2024

Key Considerations for Compliance

To ensure seamless compliance, it is crucial for taxpayers to:

1. Accurately Consolidate TDS Data:
   Report the consolidated TDS amount for October and November 2024 in the November 2024 GSTR-7 return to ensure complete and correct reporting.

2. Timely Filing of GSTR-7:
   The GSTR-7 return for November 2024 must be filed by 10th December 2024. This will help avoid penalties or interest for late filing.

3. Maintain Proper Documentation:
   Ensure that all supporting records for TDS deductions are properly maintained, as these may be required for future audits or verifications.

Conclusion

With the introduction of Notification No. 25/2024-Central Tax, the government has mandated TDS deductions on metal scrap transactions between registered persons, effective from 10th October 2024. The provided clarification ensures that taxpayers who faced delays in their GST registration approvals in October 2024 will not face penalties for filing delays. By consolidating the TDS deducted during October-November 2024 in the November 2024 GSTR-7 return, taxpayers can ensure full compliance and avoid penalties. Adhering to these guidelines will ensure smooth operations and regulatory compliance moving forward.