Medical Expenses and Section 80D: What You Can—and Cannot—Claim for Your Family

Medical costs can place a significant financial burden on families. The Income Tax Act provides relief through Section 80D, which offers deductions for health insurance premiums and certain medical expenses. However, not all family members and expenses qualify. This post clears the confusion—especially around grandparents, uninsured dependents, HUFs, and whether claims are allowed under the new tax regime.

Scope of Section 80D: Who Qualifies?

Section 80D permits deductions in respect of:

1. Health insurance premiums

2. Preventive health check-up expenses

3. Medical expenditure for senior citizens without insurance

Eligible Persons:

For an individual assessee, deductions can be claimed for:

• Self

• Spouse

• Dependent children

• Parents (whether dependent or not)

For a Hindu Undivided Family (HUF), deductions are allowed for:

• Any member of the HUF

Not Eligible:

The following persons are not covered under Section 80D:

• Grandparents (for individual assessees)

• In-laws

• Siblings

• Other relatives

• Domestic staff

Even if they are financially dependent or senior citizens, expenses on such persons are not eligible under Section 80D if they do not fall within the defined relationship.

Quantum of Deduction Available Under Section 80D

The permissible deduction limits are as follows:

Nature of Payment	Family (Self, Spouse, Children)	Parents (any age)
Health insurance premium	₹25,000 (₹50,000 if senior)	₹25,000 (₹50,000 if senior)
Preventive health check-up	Included in above (max ₹5,000)	Included in above (max ₹5,000)
Medical expenses (if no insurance) – senior citizen only	₹50,000	₹50,000

Note:

• The preventive health check-up limit of ₹5,000 is not in addition, but within the above overall limit.

• Medical expenditure is allowed only for senior citizens without any health insurance.

Common Question: Can I Claim Medical Expenses for Grandparents?

No, individual assessees cannot claim medical expenses (or insurance premiums) for grandparents under Section 80D. The law permits such expenses only for self, spouse, children, and parents.

Even if:

• The grandparents are senior citizens

• They are financially dependent

• They are not covered by insurance

The deduction is not allowed, as Section 80D(2)(b) specifically states:

"A deduction shall be allowed in respect of the medical expenditure incurred on the health of a senior citizen, being a parent of the assessee."

Thus, grandparents are not included in the eligible category.

What About HUFs Claiming Medical Expenses?

If a Hindu Undivided Family (HUF) incurs medical expenses for a member who is a senior citizen and uninsured, the HUF can claim deduction up to ₹50,000 under Section 80D(2)(b).

This is useful in joint family setups where elders may be HUF members but not "parents" of the Karta individually.

Impact of the New Tax Regime

Under the new concessional tax regime (Section 115BAC), individuals and HUFs cannot claim deduction under Section 80D.

Hence, if you opt for the new regime:

• All Section 80D deductions (including for medical expenses) become inapplicable

• Tax planning should focus on whether total deductions, including 80C and 80D, justify staying in the old regime

Additional Clarifications and Strategic Tips

Can I claim if my parent has insurance and I also incur medical costs?

No, if the senior citizen is covered by a health insurance policy, the medical expense component is not allowed. Only premium can be claimed. Medical expense deduction is permitted only if no insurance exists.

Can medical reimbursement from employer be claimed?

No, medical reimbursements are taxed under the new regime and not separately deductible under Section 80D.

Can I claim preventive check-ups even if no insurance is taken?

Yes, even if no policy is purchased, preventive health check-ups up to ₹5,000 (within overall limit) can be claimed, but only under the old tax regime.

Tax Planning Tip: Combine Premium + Check-Up

If premium paid is less than the deduction cap, also claim for health check-ups to maximize the benefit. For example:

• If you pay ₹20,000 for insurance and ₹4,000 for preventive health check-ups, total claim can be ₹24,000—well within the ₹25,000/₹50,000 limit.

Summary Table – Eligibility Matrix for Section 80D

Person Covered	Health Insurance	Medical Expenses (If Uninsured Senior Citizen)	Deduction Allowed
Self	Yes	Yes	Yes
Spouse	Yes	Yes	Yes
Dependent Children	Yes	No	Yes (Premium only)
Parents	Yes	Yes (only if uninsured)	Yes
Grandparents	No	No	Not Allowed
HUF Member	Yes	Yes (if senior citizen and uninsured)	Yes (by HUF)
Sibling / In-law	No	No	Not Allowed

Conclusion

Section 80D is a powerful provision to ease the burden of healthcare costs, but the law draws clear boundaries. Medical expenses are deductible only in specific cases, primarily for senior citizens who are parents or HUF members and not covered by health insurance.

While the intention to support grandparents or other dependents is noble, the Income Tax Act does not permit such claims unless the person qualifies under defined relationships. Strategic tax planning—including choosing the right tax regime—is essential to make the most of available deductions.

For families with senior members uninsured due to age or pre-existing conditions, a proper Section 80D claim under the old regime can still offer relief up to ₹1,00,000 annually (₹50,000 for self/family + ₹50,000 for parents).

Interest Deduction under Sections 36(1)(iii) vs 57(iii): Legal Doctrine, Related Party Risks, and Judicial Guardrails

Introduction

The deductibility of interest on borrowed capital under the Income-tax Act, 1961 depends on the purpose and head of income under which it is claimed. Section 36(1)(iii) allows interest deduction for capital borrowed for the purposes of business or profession. In contrast, Section 57(iii) permits deduction of expenditure (including interest) incurred wholly and exclusively for earning income under the head "Income from Other Sources".

While both provisions operate independently, judicial scrutiny under Section 57(iii) is significantly stricter—especially when interest is claimed on borrowed capital that is lent onwards to related parties at concessional rates. The recent ruling of ITAT Mumbai in Jackie Mahesh Vora v. ACIT is a timely reaffirmation of this principle and draws a clear boundary on what qualifies as permissible deduction under Section 57(iii).

Section 57(iii) — Statutory Language and Interpretation

Section 57(iii) provides:

“Any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income” shall be allowed as a deduction.

Key Conditions for Allowability:

1. Wholly and exclusively incurred for the purpose of earning income;

2. Not capital in nature;

3. Direct nexus between expenditure and income;

4. No element of personal motive or non-commercial purpose.

This provision is narrower than it appears. Courts have repeatedly emphasised that even though income need not actually arise, the dominant intent of incurring expenditure must be income generation.

Judicial Evolution — From Rajendra Prasad Moody to Jackie Mahesh Vora

In CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC), the Supreme Court held:

Expenditure under Section 57(iii) is allowable even if no income results, as long as the intent is to earn income.

However, this principle has been interpreted conservatively in later rulings. Courts have clarified that where the transaction lacks commercial justification or involves a benefit to a related entity, deduction may be disallowed in part or whole.

This judicial limitation culminates in the ITAT’s latest decision in Jackie Mahesh Vora v. ACIT [2025] 176 taxmann.com 279 (Mumbai).

Key Ruling: Jackie Mahesh Vora v. ACIT

Facts:

• The assessee borrowed funds and paid interest exceeding ₹1 crore.

• He earned interest income by lending to both related and unrelated parties.

• He charged 8.5% to related parties and 12% to others.

Issue:

Was full deduction of interest paid on borrowed capital allowable under Section 57(iii), despite charging lower rates to related parties?

Findings of the Tribunal:

• Disallowed a portion of the interest under Section 57(iii).

• Held that lending to related concerns at concessional rates failed the exclusivity test.

• Cited the presumption of non-commercial intent when differential rates are applied.

• Distinguished the Moody ruling, clarifying that:

  “The benefit of Moody cannot be extended where the assessee departs from a commercially reasonable approach in related party dealings.”

Comparison with Section 36(1)(iii)

Particulars	Section 36(1)(iii)	Section 57(iii)
Applicable Head of Income	Profits and Gains of Business or Profession	Income from Other Sources
Nature of Allowance	Interest on capital borrowed for business	Any revenue expenditure to earn other income
Condition for Deduction	Capital must be used for business purposes	Expenditure must be wholly for earning income
Need for Income Result	Not necessary if funds used for business	Not necessary, but intent must be proven
Related Party Concessional Lending	Permissible with commercial nexus	Disallowed if exclusivity is compromised
Documentation Required	Books of account and audit trail	Strong evidence of intent and commercial purpose
Common Pitfall	Capital used for non-business purpose	Lending to relatives at concessional rates

Key Takeaways for Taxpayers and Professionals

1. Uniform Lending Rates are Critical
   Any differential in interest rates between related and unrelated parties may invite scrutiny and disallowance unless commercially justified.

2. Maintain Documentation of Commercial Intent
   Board resolutions, loan agreements, and fund flow statements must support the argument that funds were advanced solely to earn taxable income.

3. Avoid Transactions Appearing as Accommodation Entries
   Loans to relatives or group concerns without clear benefit to the lender may fail the deductibility test under Section 57(iii).

4. Burden of Proof is on the Assessee
   The Revenue is not required to prove personal benefit; it is for the taxpayer to establish the dominant income-earning purpose.

5. Scrutiny Risk in Related Party Loans is Higher
   Interest claims under Section 57(iii) involving related parties often attract detailed investigation or disallowance.

Conclusion

Section 57(iii) is not a fallback for every interest deduction claim outside business income. It demands that the expenditure be wholly and exclusively for earning income assessable under "Other Sources". Lending to related parties at concessional rates, without robust justification, falls afoul of this test.

The ruling in Jackie Mahesh Vora has restated the law: commercial rationale must override familial or group considerations. Otherwise, the interest claim will be disallowed to the extent it fails the exclusivity test.

Professionals advising on inter-entity lending or personal investments involving borrowed capital must evaluate whether their strategy would withstand scrutiny under Section 57(iii) — where intent, documentation, and commercial objectivity must align.

Private Family Trusts in India – Part 2

 Real-World Structuring Scenarios, Tax Optimization, Family Protection & Advisory Matrix

Protective Use-Cases – Real-Life Family Scenarios

Scenario A: Protecting Son’s Inheritance from His Own Family

Situation:
A mother wants to ensure her son enjoys the benefit of inherited wealth but is concerned about misuse by the daughter-in-law or family disputes.

Trust Structure:

• Settlor: Mother

• Beneficiary: Son only

• Type: Irrevocable Specific Trust or Discretionary Trust (if uncertainty in usage)

• Protection:

  • Property remains outside son's personal estate

  • Not attachable in marital disputes or insolvency

  • Son has no absolute claim; receives benefits at trustee's discretion

Tax:

• If specific → taxed at slab rate

• If discretionary → taxed at MMR (unless Will-based and meets Proviso)

Scenario B: Father Dies Leaving Assets Equally for Two Daughters – Can a Trust Be Created Now?

Yes. Two pathways:

1. Father Created a Will → Include trust clause (Testamentary Trust created posthumously)

2. No Will / Intestate → Daughters become legal heirs under Hindu Succession Act

 After inheritance, daughters can mutually transfer their inherited shares into a joint Inter Vivos Private Trust for:

• Succession continuity

• Income pooling

• Preservation from fragmentation

Stamp duty and gift tax not applicable when co-owners contribute jointly.

Scenario C: Grandparents Creating Education Trusts for Minor Grandchildren

• Type: Irrevocable Specific Trust

• Tax: Income clubbed under Section 64(1A) if parent has taxable income

• Exception: If trust created by Will for minor or disabled grandchild, clubbing does not apply

Scenario D: Disabled Dependent or Special Child

• Use Section 80DD read with Section 164(1) Proviso

• Irrevocable Trust under Will

• Taxed at slab rate

• Additional deduction of ₹75,000 to ₹1,25,000 under 80DD (if conditions met)

Trust vs. Will vs. Gift – Comparative Planning Table

Feature	Trust	Will	Gift
Effective From	Immediately (inter vivos) or post-death (Will)	Only after death	Immediate
Revocability	Can be revocable or irrevocable	Can be changed till death	Irrevocable
Control Over Use	High (through trustee)	No control after death	None
Probate Required	No (if inter vivos)	Yes	No
Tax Impact	Can optimize slabs, avoid clubbing	May face inheritance tax issues abroad	Subject to Section 56(2)(x)
Protection from Misuse	Yes	No	No

Tax Saving Insights – Strategic Advisory

Strategy	Tax Law Leveraged	Outcome
Will-Based Discretionary Trust	Proviso to Sec. 164(1)	Slab rate taxation
Trust for Non-Taxable Beneficiaries	Sec. 161(1) or Proviso to 164(1)	Avoid MMR
Corpus Transfer with Direction	Sec. 56(2)(x) + CBDT Circular	Not treated as income
Avoid Clubbing in Minor’s Case	Sec. 64(1A) Exception if Will-based trust	No income clubbing
No Business Income in Trust	Condition under Sec. 164(1) Proviso	Eligible for slab rate

Compliance Essentials – To Maintain Trust Integrity

Action	Requirement
PAN Application	In name of the trust (Form 49A)
ITR Filing	Use ITR-5 annually
Deed Execution	Stamp duty as per state + registration if immovable property involved
Books & Audit	If income crosses threshold u/s 44AB
Beneficiary Records	Maintain PAN, Aadhaar, and affidavits where needed
No Business Income	Essential to retain slab rate benefit

Advisory Notes – What Should Be Done

✅ For Wealthy Families

• Use irrevocable specific trust for asset control and tax transparency

• For post-death planning, embed trust in Will to avoid litigation and enable control

• Create one Will-based trust only, as multiple such trusts disqualify slab-rate relief

✅ For Parents with Vulnerable Children

• Create discretionary trust under a Will

• Assign a trusted sibling or professional as trustee

• Avoid giving absolute ownership to the child

✅ For Tax Optimization

• Avoid clubbing and MMR by keeping fixed shares

• Use specific direction and corpus gift documentation

• Do not mix personal and business income in the trust

Key FAQs

🔸 Q1. Can an NRI settlor create a trust in India?

✅ Yes. An NRI can create a trust in India for Indian assets, but FEMA and RBI guidelines on repatriation and gift must be followed.

🔸 Q2. Can a trust invest in mutual funds, shares?

✅ Yes, unless the deed restricts it. Trustees must act prudently. SEBI KYC for trust PAN is mandatory.

🔸 Q3. Can a Will-created trust own residential property?

✅ Yes. Stamp duty applies when asset is transferred post-probate, but no Section 56(2)(x) tax.

🔸 Q4. Can a discretionary trust escape MMR?

✅ Only if it meets all five conditions under the Proviso to Section 164(1) — otherwise MMR applies.

🔸 Q5. Can beneficiaries include unborn children?

✅ Yes. As long as they are ascertainable in the future and covered under the Indian Trusts Act.

Pros & Cons of Private Trusts – At a Glance

Pros	Cons
Legal control over succession and asset use	Trust cannot carry out business (in most family cases)
Protects from marital or creditor claims	Setup and legal documentation required
Can reduce tax impact with careful planning	MMR applicable in discretionary trust if not Will-based
Consolidates family wealth	Annual compliance (PAN, ITR, accounting) required
Ideal for minor/special beneficiaries	Improper drafting may lead to adverse tax outcomes

Closing Summary

A Private Family Trust is not merely a financial or tax planning tool — it is a safeguard of values, vision, and care, especially for vulnerable dependents. It must be:

• Legally drafted with precise intent and irrevocability

• Structured for maximum protection and tax efficiency

• Filed and administered with strict procedural discipline

• Reviewed periodically to match evolving family needs

• 
  
  
  

Cross-Border Services, No DTAA, and Section 195 TDS: A Complete Legal and Compliance Guide for Indian Businesses

 Introduction

In today’s globalised business landscape, Indian entities often engage foreign service providers for design, consultancy, marketing, technology, and support services. However, many compliance complications arise when payments are made to countries without a Double Taxation Avoidance Agreement (DTAA) with India. This post provides a legally exhaustive guide on how to deal with such payments — with clear interpretation of Section 195, judicial positions, practical procedures, and a global list of commonly dealt-with countries vis-à-vis DTAA status.

What the Law Says: Section 195 of the Income-tax Act, 1961

Section 195(1) – The Charging and Withholding Provision

“Any person responsible for paying to a non-resident… any interest… or any other sum chargeable under the provisions of this Act… shall, at the time of credit… or payment thereof… deduct income-tax thereon at the rates in force…”

• The obligation to deduct TDS arises only if the amount is “chargeable under the Act”.

• However, in absence of DTAA, you cannot claim a beneficial lower rate, and must deduct as per domestic rate.

When DTAA Exists – The Relief Framework

Where a DTAA exists (e.g., India–USA, India–UK), non-residents can claim a lower withholding rate if:

• The income is classified under specific articles like "Fees for Technical Services" (FTS) or "Independent Personal Services".

• The non-resident provides Tax Residency Certificate (TRC) and Form 10F along with no PE (Permanent Establishment) declaration, if applicable.

Such treaties override the Act under Section 90(2).

When No DTAA Exists – What to Do

If India does not have a DTAA with the country of the non-resident, the following rules apply:

a. Full TDS Deduction under Section 195

• TDS must be deducted as per domestic rates.

• No concessional treaty rates are available.

• Deduction is compulsory, regardless of amount, if sum is chargeable under the Act.

b. No Treaty Shield: Risk of Double Taxation

• In absence of DTAA, the foreign party cannot claim credit in their home country unless their local law allows for unilateral relief.

c. Rate of TDS

As per Section 115A, for services like design, consultancy, and technical services:

• TDS is 10% (plus applicable surcharge and cess).

• If PAN is not provided, Section 206AA mandates 20%.

d. Form 15CA/15CB Required

• Even in low-value transactions, Form 15CB by a Chartered Accountant is mandatory in most cases.

• Form 15CA (Part C) must be uploaded before remittance.

Interpretation by Courts: The Chargeability Principle

The Hon’ble Supreme Court in GE India Technology Centre Pvt Ltd vs CIT [(2010) 327 ITR 456 (SC)] held:

TDS under Section 195 is only required when the sum is chargeable to tax in India.

Therefore, examine whether the foreign party has a business connection or permanent establishment (PE) in India, and whether the service qualifies as taxable FTS under Explanation 2 to Section 9(1)(vii).

Common Services and TDS Implications (With or Without DTAA)

Nature of Service	Taxable u/s 9(1)(vii)	DTAA Required	TDS in Absence of DTAA
Logo Design from Nigeria	Yes – falls under FTS	No DTAA with India	10% under 115A + cess
Business Consultancy from Kenya	Yes – consultancy service	No DTAA with India	10% under 115A + cess
Software License from Colombia	Yes – Royalty/FTS	No DTAA with India	10% or higher
Training from USA	Yes – if technical	Yes – DTAA exists	15% or lower (Art. 12)
Cloud Hosting from UAE	Usually not taxable	Yes – DTAA exists	Nil (if no PE in India)

List of Key Countries and DTAA Status with India

Country	DTAA with India?	Remittance Planning Note
USA	✅ Yes	Art. 12 FTS – TDS @15%, TRC + 10F needed
UK	✅ Yes	FTS taxable, TRC + PE clause important
Nigeria	❌ No	Full 10%+ TDS u/s 195, no DTAA benefit
Kenya	❌ No	Apply domestic rate, mandatory 15CA/15CB
Colombia	❌ No	Royalty/FTS – 10%+ TDS
UAE	✅ Yes	Check PE and business connection – may be tax-exempt
Germany	✅ Yes	Art. 12 – FTS/royalty taxable unless excluded
Bangladesh	✅ Yes	FTS taxable – rate as per DTAA
Hong Kong	✅ Yes	Limited scope – check if service covered
Argentina	❌ No	Domestic law TDS – full deduction

What if You Fail to Deduct TDS?

• Disallowance under Section 40(a)(i): Entire expense can be disallowed while computing taxable income.

• Interest under Section 201(1A): For late deduction/payment of TDS.

• Penalty u/s 271C: For failure to deduct TDS.

• Prosecution under Section 276B: In extreme cases.

Best Practice Strategy in Absence of DTAA

✅ Step 1: Examine if the income is taxable in India under Section 9(1)(vii)
✅ Step 2: Verify if any exemption applies (no PE, business connection)
✅ Step 3: Collect basic documents from the payee:

• Invoice

• Passport copy

• Communication trail

✅ Step 4: Obtain Form 15CB and file Form 15CA (Part C)
✅ Step 5: Deduct TDS at 10% + cess or higher (if no PAN – 20%)
✅ Step 6: File TDS return and issue Form 16A

Conclusion

When no DTAA exists, Section 195 and Section 9 become your only guides — and their interpretation determines whether TDS applies. For services like logo design, consultancy, technical services, and digital services, taxability under Indian law is often assumed. In such cases, deducting TDS without fail is the safest approach, supported by proper documentation and Form 15CA/15CB filing.

For Indian businesses, proactive planning, maintaining compliance records, and understanding DTAA status country-wise is not just good practice — it is essential risk management.

IPO Resurgence 2025: Is Your Company Legally & Financially Ready

Introduction

After a muted phase between 2022–24, India is witnessing a sharp rebound in Initial Public Offerings (IPOs) and Special Purpose Acquisition Companies (SPACs). Key sectors such as renewable energy, semiconductor tech, electric vehicles, AI-driven SaaS, and infrastructure-enabling services are now attracting intense investor interest.

However, the regulatory landscape has also evolved. Companies seeking to list are now under greater scrutiny from SEBI, tax authorities, MCA, and investors alike. Compliance failures — even historical ones — are increasingly deal-breakers during IPO due diligence or DRHP vetting.

This article sets out a compliance-first roadmap to prepare Indian mid-market businesses for IPO success, with real examples and a legal checklist that is both comprehensive and practical.

Why IPOs Are Surging Again — And Why Compliance Now Matters More Than Ever

• India had 62 IPOs in Q1 2025, the highest globally by deal volume.

• Renewed market optimism, driven by strong GDP growth and retail investor participation.

• Lower interest rates and reduced global risk aversion have reopened capital markets.

• SEBI’s 2024 reforms mandate enhanced disclosures, promoter transparency, and ESG reporting.

Yet, many companies fail IPO scrutiny due to historical issues in taxation, related party transactions, FEMA non-compliance, ESOP errors, and promoter structuring — not just valuation or business model.

Real-World Examples of IPO Pitfalls

❌ Example 1: ESOP Missteps

A technology company lost investor interest mid-IPO due to incorrect ESOP valuations issued during early funding rounds, violating Rule 11UA and attracting Section 56(2)(viib) complications.

❌ Example 2: FEMA Non-Compliance

A D2C brand was denied DRHP clearance because of past foreign share subscription without proper RBI reporting, requiring compounding under FEMA. The delay led to investor exit.

Example 3: Clean-Up Before Listing

An infrastructure firm undertook a 2-year compliance audit across all past MCA filings, GST reconciliations, and tax positions before initiating the IPO — and successfully closed ₹800 crore funding at a premium valuation.

IPO Readiness: Comprehensive Compliance Checklist (India-Specific)

Below is the IPO Compliance Readiness Checklist prepared by Sandeep Ahuja & Co., specifically for Indian promoter-driven and mid-market companies (₹100–1000 crore turnover):

Corporate Legal & MCA Compliance

Item	Requirement
ROC Filings	Ensure Form MGT-7, AOC-4, PAS-3, and other forms are duly filed and error-free for the last 5 years.
Directors	DIN KYC, Form DIR-3 updates, and DPT-3 (if applicable) filed.
Shareholding Pattern	All equity and preference shares legally issued and recorded in the Register. No benami or oral arrangements.
Related Party Transactions (RPT)	Disclosures under Section 188 of Companies Act fully documented, and approvals in place.
Internal Audit & Secretarial Audit	Mandatory for certain thresholds. Check if appointed as per law.

Taxation Compliance

Item	Requirement
Income Tax	Past assessments, 143(3)/147 orders, appeals, and notices disclosed. No contingent liabilities undisclosed.
TDS/TCS	Verify clean TDS reconciliation across Form 26AS, books, and GST.
GST	No mismatches in GSTR-1 vs 3B, cross-charging, e-invoicing errors.
MAT/AMT/Deferred Tax	Adjustments correctly reflected in financial statements and deferred tax calculations.

FEMA & FDI Compliance

Item	Requirement
Past FDI	Proper allotment within 60 days; FC-GPR filed; valuation certified by CA or merchant banker.
ECB or Foreign Loans	Reporting of Form ECB, annual return (ECB-2), and compliance with end-use restrictions.
ODI Investments	Outbound investments recorded and compliance under RBI ODI rules ensured.
Compounding Applications	Initiated where non-compliance was found to avoid IPO delays.

Promoter & Group Structuring

Item	Requirement
Holding Company Structure	Avoid multiple layering; clear beneficial ownership.
Family-owned Concerns	Clearly defined related party disclosures, arms-length contracts, and succession planning.
Real Estate/Assets	Clearly accounted for; no unregistered or cash-driven asset transactions in the past 6 years.

ESOP & Share Allotments

Item	Requirement
ESOP Trust	Properly registered, with accounting and TDS compliance.
Valuation Reports	Form 56(2)(viib) valuation and FMV justified using Rule 11UA guidelines.
Bonus/Buyback/Right Issues	Proper minutes, filings, and legal vetting of past transactions.

Financials & DRHP Readiness

Item	Requirement
Statutory Audit	3-year audited financials in compliance with Ind-AS and SEBI guidelines.
Internal Controls	Evidence of strong internal controls over financial reporting.
Litigation	All past litigation (tax, commercial, labor, SEBI) disclosed.

Conclusion

The IPO journey is no longer just about raising capital. It is a full-spectrum compliance test. SEBI, merchant bankers, legal counsel, and even investors now look deeper into tax positions, related-party controls, FEMA compliance, and ESOP histories.

Exporting Catering Services from India: Incentives, Tax Benefits, and Legal Strategies

Indian businesses engaged in the export of goods often enjoy various incentives such as Duty Drawback, RoDTEP (Remission of Duties and Taxes on Exported Products), and RoSCTL (Rebate of State and Central Taxes and Levies). However, when it comes to exports of services, especially niche categories like catering services provided to foreign clients, there is significant ambiguity and a common query arises:

“Do catering service exports qualify for any of the same government incentives or remissions that are available for export of goods?”

Let us examine this with reference to law, relevant sections, interpretations, and practical implications.

Understanding the Nature of Catering Service Export

Catering services involve providing food and beverage arrangements, typically including service staff and event-based execution. When such services are rendered to a recipient outside India, and the payment is received in convertible foreign exchange, the activity may qualify as an ‘export of service’ under the IGST Act, 2017.

Legal Framework: What Qualifies as an Export of Service?

Section 2(6) of the IGST Act, 2017:

A service is treated as an export of service if it satisfies all the following conditions:

1. The supplier of service is located in India.

2. The recipient is located outside India.

3. The place of supply is outside India.

4. Payment is received in convertible foreign exchange (or in INR where permitted by RBI).

5. The supplier and recipient are not merely establishments of the same person.

Place of Supply in Service Transactions – Section 13 of the IGST Act:

For services provided to a foreign recipient, Section 13(2) generally provides that the place of supply is the location of the recipient, unless a specific provision applies.

In the case of catering or event-related services, however, Section 13(5) applies:

“The place of supply shall be the location where the services are actually performed.”

Thus, if the catering is performed in India, even for a foreign recipient, the service does not qualify as export, since the place of supply is within India.

However, if the catering service is performed outside India—for example, a company in India sends its team abroad to execute catering for an international event—then the place of supply is outside India, and all five export conditions may be fulfilled.

Can Catering Services Get Duty Drawback, RoDTEP, or RoSCTL?

Here is the key differentiation:

Scheme	Governing Law	Applicable To	Catering Service Exports?
Duty Drawback	Section 75, Customs Act, 1962	Export of goods	❌ Not applicable
RoDTEP	FTP and Customs Notifications	Export of goods	❌ Not applicable
RoSCTL	Textile Policy via Customs route	Textile goods export	❌ Not applicable

These schemes are exclusively meant for export of goods, designed to neutralize the embedded taxes and duties in goods manufacturing and logistics chain. Services do not suffer such embedded input taxes in the same manner, hence do not qualify.

The Foreign Trade Policy (FTP 2023) and respective CBIC notifications do not extend RoDTEP or Drawback schemes to services, including catering.

Are There Any Incentives for Export of Services?

Yes, but under different legal routes:

1. Zero-Rated Supply under GST – Section 16 of the IGST Act, 2017

Catering services exported under Section 2(6) can be treated as zero-rated if conditions are fulfilled.

This allows the exporter to:

• Claim refund of unutilized Input Tax Credit (ITC) under Rule 89 of CGST Rules

• Or export under LUT (Letter of Undertaking) without paying IGST and claim refund of ITC

However, if catering is performed in India, refund is not available as it is not export.

2. Foreign Trade Policy: SEIS (Historical)

Earlier, under the Service Exports from India Scheme (SEIS), certain services were rewarded with scrip-based incentives. However, SEIS was discontinued under the FTP 2023.

3. Special Economic Zones (SEZs)

If the catering unit operates from an SEZ and renders services to a foreign client, additional benefits may be available under the SEZ Act, 2005, subject to approval of the Development Commissioner.

What Is the Best Legal Strategy to Get Benefits?

1. Classify and structure the transaction properly:

• If your catering service is physically delivered abroad (e.g. wedding in Dubai served by Indian caterer), document evidence to show services were rendered outside India.

• Include performance location, travel invoices, event contracts, and foreign currency payment receipts.

2. Export under LUT for zero-rated supply:

• File Letter of Undertaking (RFD-11) with the GST department.

• Export without payment of IGST and claim refund of input tax credits.

3. Consider operating through SEZ if scale justifies.

4. Explore foreign collaboration or project catering models where actual delivery is offshore and qualifies under Section 13(5) as place of supply abroad.

5. Monitor future schemes:

The upcoming FTP and Budget announcements may reintroduce or redesign incentive structures for service exports. Industry associations are urging for a RoSSE (Remission of State & Central Taxes on Services Export) scheme similar to RoDTEP for services.

Conclusion

Catering services rendered to foreign clients may qualify as export of service only if they are performed outside India. However, they do not qualify for RoDTEP, Duty Drawback, or RoSCTL, which are strictly meant for goods.

The key legal incentive currently available is zero-rated status under Section 16 of the IGST Act, allowing GST refund of input credits. Exporters must ensure compliance with place of supply provisions under Section 13(5) and document foreign performance to legally claim these benefits.

Author’s Note:
As India’s services exports surge, especially in high-value experiential segments like destination catering, there is an urgent need for the government to extend a parallel tax remission scheme for services. Until then, exporters must structure operations to ensure legal export classification and claim refunds wherever eligible.

Unlocking the Land Lock: A Legal and Strategic Guide to Promoter-Held Land in Maharashtra Real Estate

The Ultimate Legal & Strategic Guide for Plot Buyers, Creditors, Developers & Insolvency Stakeholders

In Maharashtra, several real estate projects were launched on land held in the names of promoters or directors—while the actual project and RERA registration were in the company’s name. This gap has led to serious legal, regulatory, and practical issues when:

• Land is still agricultural,

• The company enters insolvency or CIRP,

• Buyers await registry and possession, and

• Resolution Professionals seek to monetize or revive the project.

This guide outlines the applicable laws, practical strategies, and resolution mechanisms for companies, promoters, homebuyers, RPs, ARs, and planning authorities.

Legal Background

Area	Applicable Law
Agricultural land ownership	BTAL Act, 1948 (Section 63)
NA Conversion	Maharashtra Land Revenue Code, 1966 (Section 42)
Land ownership records	Maharashtra Land Revenue Rules – 7/12 Extract
Layout planning	Maharashtra Regional and Town Planning (MRTP) Act, 1966
Unauthorized layouts	Gunthewari Act, 2001
Homebuyer rights	RERA Act, 2016
Corporate insolvency	IBC, 2016 (Sections 5, 18, 31, 60(5), 66)
Hidden ownership cases	Benami Transactions Act, 1988 and Indian Trusts Act, 1882

Understanding the 7/12 Extract

The 7/12 Extract (also known as Satbara Utara) is an official land record in Maharashtra that combines:

• Form 7: Records land ownership,

• Form 12: Shows the land use and crop pattern.

It helps identify:

• Whether the land is in the company’s or promoter’s name,

• Whether it is agricultural or non-agricultural,

• Whether there are encumbrances or mutation entries,

• Whether layout or NA conversion has been recorded.

If the builder’s name or company name does not appear on the 7/12 Extract, the land is not legally in their possession, and registry or RERA registration may not be valid.

Access it online at: https://bhulekh.mahabhumi.gov.in

Agricultural Land Requires NA Conversion

Under Section 42 of the Maharashtra Land Revenue Code, no development or sale is permitted on agricultural land unless it is converted to Non-Agricultural (NA) use.

NA Conversion Process:

1. Apply to the Collector or SDO,

2. Submit: 7/12 extract, registered title deed, planning NOC, architect sketch,

3. Pay conversion charges,

4. Obtain conversion order and update mutation entry.

Time: 3–4 months
Cost: Based on area and ready reckoner value

Legal Methods to Transfer Land from Promoters to Company

Method	When to Use	Stamp Duty
Gift Deed	Promoter transfers land without consideration	3%
Sale Deed	Company pays consideration for land	6%
Development Agreement	Promoter grants development rights	1%
NCLT Order	Promoter uncooperative; RP seeks order	Court-mandated
Benami Route	Land purchased with company funds	Declared company asset

All such transfers must be through registered instruments. Affidavits or MOUs alone do not transfer legal title.

Layout & RERA Registration

Once NA conversion and title transfer are complete, the company must:

1. Obtain layout sanction under the MRTP Act from local planning authority (CIDCO/MMRDA/TPA),

2. Register the project under RERA if area exceeds 500 sq.m. or number of plots exceeds 8,

3. Execute registered sale deeds with buyers post-RERA approval.

In Insolvency-  Steps for RPs, ARs, and Buyers

For Resolution Professionals (RPs):

• Identify ownership via 7/12 Extract and funding trail,

• Secure affidavits and registered transfer deeds from promoters,

• Apply for NA conversion and layout approval,

• Include land in asset pool under the resolution plan,

• If promoters obstruct, file under Sections 60(5) or 66 of IBC,

• Where applicable, initiate proceedings under Benami law.

For Authorised Representatives (ARs):

• Gather buyer information and claims,

• Engage with RP to ensure land inclusion in the resolution,

• Represent buyer interests before CoC and NCLT.

For Buyers:

• Demand documentary proof: 7/12 extract, NA order, layout sanction, RERA certificate,

• Insist on registered deeds only post NA conversion and legal layout,

• In CIRP, participate through AR and file claims,

• Where fraud or misrepresentation is suspected, file complaints before RERA/NCLT.

Practical Scenarios and Resolutions

Scenario	Legal Route
Promoter cooperates	Gift/Sale Deed → NA → Layout → RERA → Registry
Promoter allows DA	DA + GPA → Layout → RERA → Conditional allotment
Promoter uncooperative	RP approaches NCLT under IBC Sections 60(5)/66
Company funded land	Use Benami/Constructive Trust doctrine
Surplus land exists	Monetize via resolution plan with CoC/NCLT approval

Legal Checklist for Buyers and Creditors

1. Obtain and examine the 7/12 Extract,

2. Verify NA conversion order and mutation entry,

3. Insist on layout sanction under MRTP Act,

4. Check for valid RERA registration,

5. Confirm land is in the company’s name via registered deed,

6. Avoid registry of plots on unconverted/agricultural land,

7. Engage with AR/RP in case of insolvency or delays.

Strategic Insight

Promoter-held land is not merely a legal irregularity—it is often the only usable asset in stalled projects. If regularized early through proper title transfer and NA conversion, it can unlock RERA registration, project completion, and even resolution funding. If left unresolved, it stalls everything: registry, revival, and resale.

Legal Disclaimer

This guidance note summarizes laws applicable in Maharashtra as of July 2025, including the BTAL Act, Maharashtra Land Revenue Code, MRTP Act, RERA, IBC, and related regulations. Readers are advised to seek professional legal advice specific to their project and factual circumstances. This note does not constitute legal representation or opinion.