Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Saturday, May 30, 2020

New 26AS Format - FY 2020-21 / AY 2021-22

The Annual Information Statement in Form 26AS will come into effect in its new form from 01-Jun-2020 and will disclose the following details.

1. Tax Credits
(i) TDS deducted on payments made to you
(ii) TCS collected on payments made by you

2. Specified Financial Transactions (SFT) as filed in Form No. 61A.
These are high-value transactions entered into by you during the year, such as:
(i) Purchased or sold immovable property
(ii) Bought shares, debentures or bonds of a company exceeding Rs. 10 lakhs
(iii) High value cash deposits or payments in an account as reported by banks
(iv) Credit card payments of Rs. 1 lakh or more made in cash
(v) Bought units of a scheme of mutual fund exceeding Rs. 10 lakhs
(vi) Bought or sold foreign currency exceeding Rs. 10 lakhs

3. Taxes Paid for the Year
(i) Advance Tax
(ii) Self Assessment Tax
(iii) Tax paid on Regular Assessment

4. Demands Outstanding & Refunds
(i) Demands outstanding for payment to the tax department
(ii) Refunds due but not received
(iii) Refunds paid

5. Pending Tax Proceedings
(i) Scrutiny assessments pending before the Assessing Officer
(ii) Appeals pending before the Tax Tribunal

6. Completed Tax Proceedings
(i) Tax Assessments
(ii) Appeals before the CIT(A)

Tuesday, May 26, 2020

Reduced PF Rates from 12% to 10%

Rate Reduction: The rate of PF contribution of both employer and employee has been reduced from 12% of basic wages and dearness allowance to 10%

Eligibility:
- All class of establishments covered under the EPF & MP Act, 1952
- Not applicable to Public Sector enterprises or any establishment owned/controlled by the govt.
- Not applicable to establishments eligible for PMGKY benefits

Period: Wages for three months of May, June & July 2020

Effect: the Employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees

Administrative Charges: No change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages), which continue to be payable by employers.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1625152

MSME: Guaranteed Emergency Credit Line (GECL Loan)

The GECL is a loan product announced by the Government as a measure to help fund business activities of the MSME sector during the months affected by the onset of the Covid-19 outbreak in India.

Salient Features

Type of Facility: Additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs) - such lenders are referred to as Member Lending Institutions (MLIs)

Limits: Up to 20% of the borrower’s total outstanding credit. Additional credit under the scheme to be capped at Rs. 5 crore.

Type of Borrower: Eligible MSMEs including business enterprises constituted as Proprietorships, Partnerships, Companies, Trusts, LLPs, and borrowers under PMMY.

Tenure: 4 years from date of disbursement

Moratorium: 1 year on the principal amount where interest is payable - Principal to be repaid in 36 months after moratorium

Guarantee/Collateral: 100% guarantee by National Credit Guarantee Trustee Company (NCGTC); no additional collateral to be given

Pre-Approved Loan: An offer will go out from the MLI to the eligible borrowers for a pre-approved loan which the borrower may choose to accept. If the MSME accepts the offer, it will be required to complete requisite documentation. An ‘opt-out’ option will be provided to eligible borrowers

Period of Disbursement: Applicable to all loans sanctioned under GECL from 23-May-20 to 31-Oct-20 up to a total sanctioned amount of Rs. 3 lakh crore

No. of Lenders: In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or multiple lenders

Eligibility Criteria

(i) Outstanding as on 29-Feb-20: MSME borrower accounts with combined outstanding loans across all MLI's of up to Rs. 25 crore

(ii) Turnover: Annual sales turnover of up to Rs. 100 crore in FY 2019-20

(iii) Existing Customer of Lender Bank: Borrower should be an existing customers of MLI

(iv) Non NPA Account: Borrower accounts should be classified as Regular, SMA-0 or SMA-1

(v) GST Registration: Borrower must be GST registered, if mandatory for it to register

Interest Rates

- For Banks and FIs, lending rate linked to one of the benchmark rates by RBI +1%
- The interest rate from Banks to not exceed 9.25% p.a.
- For NBFCs, the interest rate shall not exceed 14% p.a.
- No additional processing fee shall be charged
- No penal interest for prepayment


Wednesday, May 20, 2020

Significant Beneficial Owner (SBO) in Companies - Related Compliance (BEN-1, BEN-2)

Legal References

1) Section 90 of the Companies Act, 2013
2) Companies (Beneficial Interest and Significant Beneficial Interest) Rules, 2018
3) Companies (Significant Beneficial Owners) Amendment Rules, 2019 (MCA Notif. 08.02.19)

Important Concepts

Registered Owner: A person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares

Beneficial Owner: A person who actually holds the beneficial interest in the shares but whose name is not registered in the Register of Members is commonly called as the beneficial owner.

Wholly Owned Subsidiary: A wholly owned subsidiary is a company that is completely owned by another company. The company that owns the subsidiary is called the parent company or holding company.

Significant Beneficial Owner (SBO): SBO in relation to a reporting company means an individual who directly and/or indirectly through one or more persons such as companies, partnership firms or trusts possesses:

(i) No. of Shares: not less than 10% shares; or
(ii) Voting Rights: not less than 10% of the voting rights in the shares; or
(iii) Right to Dividend: right to receive or participate in not less than 10% of the total distributible dividend; or
(iv) Significant Influence or Control: has right to exercise significant influence or control in any manner other than through direct-holdings alone.

Significant Influence: Significant influence means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company.

Control: Right to appoint majority of directors or control management or policy decisions excercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of the shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Indirect Right or Entitlement: An individual shall be considered to hold a right or entitlement indirectly in the reporting company if he satisfies any of the following criteria:

(i) Body Corporate: where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a LLP, and the individual
(a) holds majority stake in such body corporate; or
(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;
(Majority stake means holding more than 50% of the equity share capital or 50% of the voting rights in the body corporate or having the right to receive more than 50% of the distributable dividend.)

(ii) HUF: where the member of the reporting company is a HUF and the individual is the Karta of the HUF;

(iii) Partnership: where the member of the reporting company is a partnership entity [either under the Partnership Act or LLP Act] and the individual:
(a) is a Partner; or
(b) holds majority stake in the body corporate which is a partner of the partnership entity; or
(c) holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.

(iv) Trust: where the member of the reporting company is a trust and the individual
(a) is a trustee in case of a discretionary trust or a charitable trust;
(b) is a beneficiary in case of a specific trust;
(c) is the author or settlor in case of a revocable trust.

(v) Pooled Investment Vehicle: where the member of the reporting company is
(a) a pooled investment vehicle; or
(b) an entity controlled by the pooled investment vehicle, based in member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions, and the individual in relation to the pooled investment vehicle is a general Partner or Investment Manager or CEO

Documents & Forms

BEN-1: Declaration to be filed by every individual who is an SBO in a reporting company

BEN-2: Return to be filed by reporting company with MCA in e-form on receipt of declaration from SBO. The e-Form can be downloaded with Instruction Kit from the MCA website here.

BEN-3: Register to be maintained by reporting company with details of beneficial owners

BEN-4: Notice given by a reporting company to an individual or other entity seeking for them to declare beneficial ownership in the company

Process for Reporting & Timelines

1) A company which has entities other than individuals as shareholders and has information and/or reason to believe that any such individuals may hold significant beneficial interest in the company, it may then give a notice to such individuals or entities in Form BEN-4 to declare its beneficial interest in such reporting company.

2) Every SBO is required to file the Declaration in Form BEN-1 within 90 days from the date of commencement of Companies (SBO) Amendment Rules (i.e. 08-May-2019), and within 30 days of change in SBO with the reporting company in which the hold beneficial interest.

3) Reporting company to file e-Form BEN-2 with ROC within 30 days of receipt of declaration in BEN-1 from the SBO.

4) Reporting company to maintain a register of SBOs in the format prescribed under BEN-3, which should be available for inspection to the members at its registered office.

5) The MCA had issued Circular 01 dated 01.01.2020 whereby the date of filing BEN-2 without late fee was extended up to 31st March, 2020.

Penal Provisions

Failure to make declaration by SBO in BEN-1:
(i) Imprisonment up to 1 year; or
(ii) Fine from Rs. 1 lakh up to Rs. 10 lakh; or
(iii) Both imprisonment and fine.

Failure to maintain Register in BEN-3:
Company and/or every officer in default may be fined from Rs. 10 lakh to Rs. 50 lakh

Willful furnishing of incorrect information:
Penalty under section 447 of the Companies Act, 2013


Tuesday, May 19, 2020

Method for Online Board Meetings & General Meetings up to 30th June

The Ministry of Corporate Affairs (MCA) has issued a clarification on passing of ordinary and special resolutions by companies during the Covid-19 outbreak, and on holding all Board Meetings as well as General Meetings (EGM/AGM) through online mode i.e. through Video Conferencing (VC) or Other Audio Video Mode (OAVM).

It issued two General Circulars No.14/2020 dated 8th April and 17/2020 dated 13th April, 2020 respectively. A brief on the same is as under. Kindly refer to the notifications for a detailed read. The relief was extended to holding of AGMs too, as per MCA Circular issued on 5th May, 2020.

The following procedure should be adopted for conducting BM/GM till 30th June 2020.

Companies Requiring E-Voting

Two Way Discussion: Provision should be made for two-way conferencing with facility to pose questions and participation by at least 1000 members (in case e-voting is allowed) on first come first served basis. Besides this, the promoters, chairman of audit committee nomination and remuneration committee, stakeholders’ relationship committee institutional investors, directors, auditors should be allowed to join.

Time Zone: While fixing the time of the GM, different time zones in which the members may be living shall be kept in mind. The meeting should happen during normal business hours of 9 am to 6 pm.

Instructions in Notice & Helpline: Notice shall provide instructions on how to participate in the meeting and also provide a helpline number.

Joining Time: The facility for joining the meeting shall remain open for at least 15 minutes before and after the starting time.

Attendance & Quorum: Presence of members through VC/OVCM to be counted.

Proxy: Appointment of proxies shall not be allowed.

Chairman: Appointed person as named in the Articles of Association. In other cases, if less than 50 members present, Chairman shall be appointed as per the provisions of the Act, otherwise, Chairman shall be appointed by a poll.

E-Voting: Facility of remote e-voting should be provided before the date of the meeting. Those members who are present at the e-meeting and have not cast their vote on resolutions through remote e-voting or those who are not barred, shall be allowed to vote.

Voting Facility: Chairman shall ensure that the facility of e-voting is available for purpose of conducting poll at the meeting. In case of less than 50 members, by way of e-voting/show of hands/ poll, and in other cases by way of e-voting.

Maintain Transcript: The transcript of the GM through VC/OAVM shall be kept in safe custody. It shall be uploaded on the website in case of a public company.

Filing of Resolutions: All resolutions passed shall be filed within 60 days of the meeting with the MCA in the prescribed form.

Companies Not Requiring E-Voting

Two Way Discussion: Provision should be made for two-way conferencing with facility to pose questions and participation by at least 500 members on first come first served basis.

Voting by E Mail: Vote can be cast by sending email on the designated email ID mentioned in the Notice. The confidentiality of password and due safeguards with regard to authenticity of email address shall be maintained by the company to ensure absolute transparent and honest governance.

Voting by Show of Hands: For less than 50 members present, voting can be by show of hands.

Remote E-Voting Not Necessary: Facility of remote e-voting before the meeting shall not be required.

All other conditions remain the same as mentioned above for E-Voting.

Our Suggestions on Software Requirements

Video Conferencing: You may try software products such as Zoom, Skype, Google Hangouts, Google Meet. We would recommend you keep an audio-video recording of the meeting along with the transcript. Also, put password login restrictions in these meetings to ensure entry by invite and legitimate access only.

Voting: You may also try voting by creating a poll through Google Forms.

Friday, May 15, 2020

Reduced TDS Rates FY 2020-21 (AY 2021-22)

The following table gives the reduced TDS rates in force from 14th May, 2020 to 31st March 2021.
S. NoSection of The Income Tax ActNature of PaymentExisting Rate
of TDS
Reduced Rate From May 14, 2020 to March 31, 2021
1193Interest on Securities10%7.5%
2194Dividend10%7.5%
3194AInterest other than
Interest on securities
10%7.5%
4194CPayment of
Contractors and sub-contractors
1% (individual/HUF)
2% (others)
0.75 (individual/HUF)
1.5% (other)
5194DInsurance Commission5%3.75%
6194DAPayment in respect of life insurance policy5%3.75%
7194EEPayments in respect of Deposits under National Savings Scheme10%7.5%
8194FPayments on account Of re-purchase of Units By Mutual Funds or UTI20%15%
9194GCommission, prize etc., On sale of lottery tickets5%3.75%
10194HCommission or brokerage5%3.75%
11194-I(a)Rent for plant and machinery2%1.5%
12194-I(b)Rent for immovable property10%7.5%
13194-IAPayment for acquisition
Of immovable property
1%0.75%
14194-IBPayment of rent by individual or HUF5%3.75%
15194-ICPayment for Joint Development Agreements10%7.5%
16194JFee for Professional or Technical Services (FTS), Royalty, etc.2% (FTS, Certain royalties, Call Centre) 10% (others)1.5% (FTS, Certain royalties, Call Centre) 7.5% (others)
17194KPayment of dividend by Mutual Funds10%7.5%
18194LAPayment of Compensation on Acquisition of immovable property10%7.5%
19194LBA(1)Payment of income by Business trust10%7.5%
20194LBB(i)Payment of income by Investment fund10%7.5%
21194LBC(1)Income by Securitisation trust25% (Individual/HUF) 30% (Others)18.75% (Individual/HUF) 22.5% (Others)
22194MPayment to commission, brokerage etc. by Individual and HUF5%3.75%
23194-OTDS on e-commerce participants1% (w.e.f. October 1, 2020)0.75%
 
The Tax Collection at Source (TCS) Rates for the same period are also reduced as under.
 

S. NoSection of The Income Tax ActNature of PaymentExisting Rate
of TCS
Reduced rate From May 14, 2020 to March 31, 2021
1
 
206C(1)Sale of
(a) Tendu Leaves5%3.75%
(b)Timber obtained under a Forest lease2.5%1.875%
(c) Timber obtained by any Other mode2.5%1.875%
(d)Any other forest produce Not being timber/tendu leave2.5%1.875%
(e) scrap1%0.75%
(f) Minerals, being coal or Lignite or iron ore1%0.75%
2
 
206C(1C)Grant of license, lease, etc. of
(a) Parking lot
2%1.5%
(b) Toll Plaza2%1.5%
(c) Mining and quarrying2%1.5%
3206C(1F)Sale of motor vehicle above 10 lakhs1%0.75%
4206C(1H)Sale of any other goods0.1%
(w.e.f October 1, 2020)
0.75%

Note:
- There shall be no reduction in rates of TDS or TCS, Where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.
- There is no reduction in TDS on payment of salaries.

Wednesday, May 13, 2020

Sovereign Gold Bonds - 15th May Closing

A good way for investors to capture the gold asset class is through Sovereign Gold Bonds (SGB). You can add small amounts in each tranche offered by the government.

The second tranche of gold bonds of FY 2020-21 is open till 15th May with the offer price for digital payments at Rs 4,540 per gram, about 1% lower than Rs 4,589 per gram for the previous tranche. To encourage digital payments, the government is offering a Rs 50 discount per gram. Investors using the physical mode will have to pay Rs 50 per gram more at Rs 4,590 per gram.

Here are a few FAQs on these bonds if you plan on investing: https://m.rbi.org.in/Scripts/FAQView.aspx?Id=109

TDS Reduction | Income Tax Dates | MSME Definition & Loans

The Finance Minister announced relief measures for businesses yesterday as part of the GoI's package for Covid-19 related relief to the economy. Here's summarizing a few relevant measures under Income Taxes, MSME Definitions & Loans, and PF.

A. TDS/TCS Rate Reduction - You may have to pay Higher Advance Tax

1) 25% reduction in existing TDS rates for specified non-salary payments which are made to residents. Payment for transactions like contract, professional fees, interest, rent, dividend, commission, brokerage, will be eligible for reduced TDS rates.

2) TCS rates for specified receipts have also been reduced by 25%.

3) These reduced rates will apply till the end of the financial year i.e. 31st March, 2021.

4) However, also note that if you are someone who would normally not be eligible for income tax refund as your TDS would not necessarily cover your entire tax liability, you are required to pay Advance Tax in four installments during the year, and there is no change in those provisions.

5) No TDS reduction on salary payments, so that will continue as is.

B. Income Tax Due Dates Extended - ITR Filing & Assessments

1) Due date for all Income Tax Returns (ITRs) for FY 2019-20 has been extended from 31st July and 31st October to 30th November 2020.

2) Tax Audit due date has been extended from 30th September to 31st October 2020.

3) Date of Income Tax Assessments getting barred on 30th September has been extended to 31st December. Similarly, assessments getting barred on 31st March 2021 are extended till 30th September 2021.

4) Window for making payments under ‘Vivaad se Vishwas Scheme' without any additional amount has been extended till 31st December 2020.

5) Immediate release of pending Income Tax refunds to charitable trusts and non-corporate businesses like sole proprietorships, LLPs and cooperative societies.

C. MSME Definition Change & Documents for Registration

1) The definitions of Micro, Small & Medium Enterprises have changed to:
Micro: Investment in P&M < Rs. 1 crore AND Turnover < Rs. 5 crore
Small: Investment in P&M < Rs. 10 crore AND Turnover < Rs. 50 crore
Medium: Investment in P&M < Rs. 20 crore AND Turnover < Rs. 100 crore

We would urge any manufacturer or service provider who has not taken an MSME Registration yet to obtain it at the earliest.

2) The documents required for MSME Registration are:
1. Adhaar Card of the Promoter
2. PAN of the Enterprise
3. Incorporation Document such as Partnership Deed, Certificate of Incorporation with Memorandum of Association, etc.
4. Address Proof
5. Bank account details
6. Gross Value of Plant & Machinery invested
7. Last financial year's sales turnover
8. Phone No. & Email ID for Registration
9. No. of Employees

E. Bank Financing Relief for MSMEs - Please Contact Your Bankers Immediately to Know Their Plan of Action on This (Preferably PSU Banks)

1) Emergency Working Capital Facility:
- Additional working capital finance of 20% of the outstanding credit as on 29th February 2020
- Disbursed in the form of a Term Loan at a concessional rate of interest
- Available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard (not defaulting in bank payments)
- No additional guarantee or collateral to be provided.

2) Subordinate Debt for Stressed Borrowers or NPAs (Defaulting):
- Banks are expected to provide debt to promoters of stressed and defaulting MSMEs
- Loan amount would be equal to 15% of promoter's existing stake in the unit 
- Maximum loan amount of Rs 75 lakhs only.

F. Provident Fund Relief

1) Government will contribute 12% of salary each on behalf of both employer and employee to EPF for another 3 months - June, July and August 2020.

2) Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.

The entire press release can be accessed here. We also recommend waiting for the release of the official Notification effecting such changes to clarify on areas of mixed or unclear interpretations.