A PROJECT REPORT ON ANALYSIS OF TAX PROJECT WORK SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE

DEGREE OF
MASTER OF MANAGEMENT STUDIES IN FINANCE SUBMITTED BY NAME: HEMANGI PRAMOD KHILARE UNDER THE GUIDANCE OF: PROF.ARUNA SONAWANE

AlamuriRatnamala Institute of Engineering & Technology

Affiliated to UNIVERSITY OF MUMBAI

Department of [Branch] Management Academic Year 2013 2014

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DEPARTMENT OF MANAGEMENT CERTIFICATE

This is to certify that the dissertation/project entitled ______________________________ submitted by Mr. /Ms. ___________________ bearing Pin No._______________ on this Day of______ 20__ in partial fulfillment of the requirements for the award Of the Degree of Master of Management Studies of University Mumbai, is Abonafide work to the best of my/our knowledge and may be placed Before the Examination Board for their consideration. ___

_____________________ Mr. / Mrs. _______________ Internal Examiner

____________________ Mr. / Mrs. _______________ External Examiner

______________________ Mr. NishantKaushik______________ _ Dean-Academics

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_________________

Mr. _______________ Director

Certificate of Undertaking

I, Hemangi Pramod Khilare hereby declare that project entitled Project Title Undertaken at AlamuriRatnamala Institute of Engineering and Technology by Hemangi P. Khilare Seat No. 1023in partial fulfillment of MMS (Management) degree (Semester III) Examination, is my original Work and the Project has nor formed the basis for the award of any Degree, associate ship, fellowship or any other similar titles, either in Mumbai University or any other University of India.

(Signature of the Student)

NAME OF THE STUDENT

ACKNOWLEDGEMENT

I express my sincere thanks to my project guide of prof. Aruna Sonawane Coordinator at ARMIET College for M.M.S section who has been guiding Force to my project on ANALYSIS OF TAX I am also thankful to my all professors to their Support and encouragement in finding out the appropriate data for this Project report, without their thankless support and efforts, making this support would have been impossible for me. I would also thanks the whole respondent who Provide me the best knowledge and for their help and cooperation throughout the project.

INDEX Sr. no. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. Content History Of VAT Necessity And Implementing Method Benefits Of VAT Slab Rates Business Liable For Vat And How Is It Charged Procedures Of VAT Obligation For Registration Criticism Variants Of VAT Tax Exemption Of VAT System Different Goods And Services And Their Vat Rate VAT Invoice Rates Of Taxes Merits And Demerits Of VAT Vat In Indian Context Central Value Added Tax Role Of Chartered Accountant Of VAT Audit Methods Of Computation Of VAT Icais Role Of VAT Tax-Payers Identification Number Bank Reconciliation Procedure Of E-Filling Of TDS Challan Correction Mechanism New Procedure Of Challan Correction By Bank NSDL E-TDS/TCS Return Preparation Utility (Rpu) E-Return Intermediary Income Tax Return ITR Forms TDS - Procedure For Deduction/Challan/Return/Certificates What Is Customer Identification Number Paper Filling E-Payment Of Taxes Assessment Penal Provision Authorized Signatories To The Return Of Income Role Of Accounting Profession Evolving
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History of VAT The Value Added Tax system was first introduced by Von Siemens in 1951.Ever since 1954, when the tax on value added was introduced in France it has spread to a large number of countries. This tax was proposed for the first time by Dr. Wilhelm von Siemens for Germany in 1919as improve turnover tax in 1921, VAT was suggested by Professor Thomas s. Adams for the United States of America who recommended sales tax with credit refund for taxes paid by the producer or dealer (as purchaser) on goods bought for resale or for necessary use in the production of goods for sales. VAT was also recommended by the shoup mission for the reconstruction of the Japanese economy in 1949. However the tax was not introduced by any country till 1953. France led the way in 1954 by adopting a VAT that covered the industrial sector alone and the tax was limited up to the wholesale level. The tax was limited to the boundaries of France until the fifties. VAT has however been spreading rapidly since the sixties. The Ivory Coast followed France by adopting VAT in 1960. The tax was introduced Senegal in 1961 and by Brazil and Denmark in 1967. The tax gathered further momentum as it was made a standard form of sales tax required for the countries of the European Union (European Economic Community) in 1968, France extended VAT to the retail level while the federal republic of Germany introduced in its tax system. The Netherland and Sweden imposed this tax in 1969 while Luxemburg adopted in 1970, Belgium in 1971, in 1972 Ireland and Italy, UK and Australia in 1973, many other European countries have adopted VAT. Similarly many countries in the north and South America, Africa, Oceania have introduced VAT. VAT has been spreading in the Asian region as well. The republic of Vietnam adopted VAT briefly in 1973 (VAT was abolished soon but it was reintroduced in 1999 in Vietnam). In Asia South Korea was the first Asian country, which in 1977 with the help of International Monetary fund (IMF), succeeded to implement the VAT in its taxation system, China in 1984, Indonesia in 1985, Taiwan in 1986, Philippines in 1988, Japan in 1989, Thailand in 1992, and Singapore in 1994, while Magnolia has been implementing this tax since 1998.

In the South Asian Association for regional co-operation (SMRC) region, VAT has been considered in great depth in India. In 1986, India introduced VAT in a different way under the name of Modified Value Added Tax (MODVAT) unlike the VAT system of other countries. The Indian MODVAT system was designed to cover manufacturing of goods by giving credit of excise duty paid in inputs. The scope of MODVAT has been extended over the years and since been renamed as Central Value Added Tax (CENVAT) which covers services also. Pakistan adopted VAT in 1990, Bangladesh in 1991,and Nepal in 1997, and Sri-lanka in 1998 as VAT is less distortive and more revenue productive it has been spreading all over the world, today about 130 countries have adopted the same. Meaning : Value Added Tax (VAT) is a modern and progressive form of sales tax. It is charged and collected by dealers on the price paid by the customer. VAT paid by dealers on their purchases is usually available for set- off against the VAT collected on sales. VAT in the form of CENVAT (Excise) is already in force in India for quite some time. Tax is one of the important sources of government revenues. Stability and continuity of the flow of tax collection, play an important role in the government plannings for providing variety of the required public services in different areas.

Change and reformation of national economy and, as a result, changes in the style of production and distribution of wealth and income; requires rethinking of the existing taxes and their methods of tax collection all over the world, shows the efficiency and acceptability of this new kind of taxation in providing a reliable source of incomes for governments. Implementation of the VAT with a fixed rate makes the forecast of government incomes possible resulting in possibility of better planning. On the other hand, the short term characteristic of collection of the tax, guarantees the continuity of the flow of income into the government's treasury. The Definition Of the Value Added Tax Value Added Tax is not only a simple taxation system, but also is the most common model used in the world today. So, before anything else,
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we should know the meaning of value added and Value Added Tax. From economic point of view, the value added is the difference between the worth of outputs and inputs. But in compilation of the law, it is defined according to the accounting standards and by relaying on invoice method. By considering the above point, the value added is defined as the difference between the value of the goods and services supplied and value of the goods and services bought by a person in a specific period of time. By considering the above definition, the value added tax is a kind of multiphase tax, which is calculated and collected according a percentage of value added of the goods and services produced and supplied in the process of production and distribution cycle. This tax in fact, is a kind of tax on multiphase sales, which exempts the purchase of intermediate goods and services from tax payment. Necessity of Implementing Value Added Tax As mentioned above, tax is one of the main sources of government's incomes, which is collected under different names. The tax incomes make an important portion of the government's budget. In democratic countries where the tax system is supported by a lawful and participatory system; more than of 60% of the government's income in the budget come from tax incomes. Implementation Method of the Value Added Tax According to the Value Added Tax system, every seller, at the time of selling of goods and services, will add the relevant tax on the invoice and collects it together with the price of goods and services from the buyer. The first seller pays the tax in whole to the government, but in the next stages, each seller pays to the State Tax Organization only an amount equal to difference (collected tax after deducting the tax which he has paid previously). This will take place within two month period according to the proposed bill. To clarify the procedure of the VAT, one should pay attention to the following paragraph: A car manufacturing company for producing its cars buys its required parts from domestic market (part producers) and from external market (import). If we suppose that the value of internal supplied parts is 10 million Rials and the value of importing parts is 6 million Rials, and if we suppose that the value added tax rate is 10%; this company should pay
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(10,000,000*10%= 1,000,000) when he buys from internal market and should pay (5,000,000*10%= 500,000) when he imports parts as value added tax to the State Tax Organization. Also, if this company sells its cars at 4o million Rials, when he prepares the invoice, must calculate the value added tax and is obliged to receive it from the buyer when he prepares the invoice ( 40,000,000 *10%= 4,000,000) . It is obvious that the price of the car for the buyer will be 44,000,000 Rials. The car manufacturing company must deduct its payment of tax in previous stages (tax paid on buying from internal market and importation (which was 1,500,000 Rials) from the tax collected (4,000,000 Rials), and pay the remaining amount which is 2, 5000,000 Rials with the tax declaration (return) form to the State Tax Organization. Tax received (tax paid to internal part producer + tax paid on import) =VAT payable 4,000,000 - (1,000,000 + 500,000) = 2,500,000 As we can see, total value added tax paid to the State Tax Organization is 4,000,000 Rials which is the sum of (1,500,000 + 2,500,000). Benefits of VAT It is simple, transparent and progressive. Business friendly system of taxation . Reduction in the effective tax rate for many good Elimination of Tax on Tax existing in the sales tax system.

Full set- off available for VAT paid on most business purchases simplification of tax forms and procedures Greater reliance on self assessment and voluntary compliance by dealers.

Value Added Tax is a methodology and way of thinking which shows a positive experience for many decades in different countries, and
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is recommended by majority of the economic and financial experts of the World Bank and International Monetary Fund. In many countries which have used this kind of taxation model, the VAT used as a new source of income generator for governments and resulted in more social equity than the other tax models , without any negative effects on investment and production motivation. Due to the fact that value added tax model is a self control system, which every tax payer plays the role of tax collector; the cost of tax collection is minimum. Due to the fact that in VAT, the tax payers, for getting the tax credit, are required to present invoice; the situation for automatic recognition of the amount of tax payers transactions will be prepared, and as a result a comprehensive information system including all the transactions will be generated which, in addition to transparency of transactions between business units, will facilitate implementation of other taxes such as tax on Value Added Tax is a reliable, consistent, and at the same time, flexible source of income. Due to the fact that VAT has a fixed rate, the time period for the tax to become definite is very short and it hasn't the difficulties of long time period of becoming definite in the cases of the tax on income and wealth. Due to the fact the VAT is a new and modern model, its implementation results in improvement of technology, productivity of taxation system and taxation

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SLAB RATES For Senior Citizen (Above 60 years)

Income Slabs

Rateof Tax

Up to Rs. 2,50,000

Nil

Rs.2,50,001 toRs.5,00,000

10%

Rs.5,00,001 to Rs.10,00,000

20%

Above Rs.10,00,000

30%

For Senior Citizen (Above 80 years)

Income Slabs

Rate of Tax

Up to Rs.5,00,000

Nil

Rs.5,00,001 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

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For Women (Below 60 years)

Income Slabs

Rate of Tax

Up to Rs.2,00,000

Nil

Rs.2,00,001 to Rs.5,00,000

10%

Rs.5,00,001 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

For Other Men

Income Slabs

Rate of Tax

Up to Rs.2,00,000

Nil

Rs.2,00,001 to Rs. 5,00,000

10%

Rs.5,00,001 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

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Types of Business Are Liable For VAT Importers Manufacturers Distributers Wholesalers Retailers Works Contractors Lessors How Is VAT Charged? All registered dealers, regardless of where they are in the chain of manufacture and production must charge VAT on their sales of taxable goods and collect it from their customers. Registered dealers must issue a tax invoice to other registered dealers showing the VAT amount being charged as a separate amount. Registered dealers who pay VAT on their purchases can normally claim a set-off for the VAT paid to their suppliers. As a result, VAT is not a cost to the dealers. Dealers must ensure that tax is charged separately in their purchases invoice in order to be eligible to claim set-off. Certain dealers who sell mainly to customer at retail level can opt for a simplified system of VAT calculation and payment under a composition schemed. Under the composition scheme, dealers will not issue a tax invoice or show VAT as a separate amount on a bill or cash memorandum. VAT PROCEDURES: Registration: Registration is the process of obtaining Certificate of Registration (RC) from the authorities under the VAT acts. A dealers registered under the VAT acts is called a registered dealer. Any dealer, who intend to carry on the business of purchase and sale, of goods in the state and is liable to pay tax, cannot carry on the business unless he is registered and holds a valid registration certificate under the act.

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Eligibility for Registration As per the provision contained in the white paper, registration of dealers with gross annual turnover above Rs.5 lakh will be compulsory. There will be provision for voluntary registration. All existing dealers will be automatically registered under the VAT act. A new dealer will be allowed 30 days time from the date of liability to get registered. An application for registration should be made to the VAT commissioner. The white paper specifies that registration under the VAT act will not be compulsory for the small dealers with gross annual turnover not exceeding Rs. 5 lakhs. However, the empower committee of state finance ministers subsequently allowed the states to increase the threshold limit for the small dealers to Rs. 10 lakhs with the condition that the concerned state would bear the revenue loss, on account of increase in limit beyond Rs. 5 lakhs. Generally a dealers means any person, who consequent to, or in connection with, or incidental to, or in the course of his business, buys or sells goods for a consideration or otherwise. All sales or purchases of goods made within the state except the exempted goods would be subjected to VAT. Compulsory Registration: If an assessee fails to obtain registration under the VAT act, he may be registered compulsorily by the commissioner. The commissioner may assess the tax due from such person on the basis of evidence available with him. In this event the assessee shall have to forth with pay such amount of tax. Further, failure to get registered shall result in attracting default penalty and forfeiture of eligibility to set off all input tax credit related to the period prior to the compulsory registration. Voluntary Registration: A dealer otherwise not eligible for registration may also obtain registration if the commissioner is satisfied that the business of the applicant requires registration. The commissioner may also impose any terms or condition that he thinks fit.

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Cancellation of Registration: The registration can be cancel on: 1. 2. 3. 4. Discontinuance of business; or Disposal of business; or Transfer of business to a new location; or Annual turnover of a manufacturer or a trader dealing in designated goods or services falling below the specified amount.

Obligation Of Dealers Registered For VAT? Dealers who are to be registered for VAT must: Charge and collect VAT on their sales of taxable goods Issue proper tax invoices Keep proper records and books of accounts Calculate the VAT due to government base on VAT charge on sales LESS any VAT available as a set-off on business purchases. File VAT return on a regular basis declaring their VAT liability. Pay any amount of VAT due to the Government with the VAT return Criticism: Opponents of VAT claim VAT is regressive and is paid by all consumers whether they are rich or poor, young or old. The poorest also spend a higher proportion of their disposable income on VAT than richest. An Office for National Statistics report showed that in 2009/10 the poorest 20% spent 8.7% of their gross income on VAT whereas the richest 20% spent only 4.0% of their gross income on VAT. Similarly, the poorest 20% spent 9.7% of their disposable income on VAT whereas the richest 20% spent only 5.2% of their disposable income on VAT. Supporters of VAT claim VAT is progressive as consumers who spend more pay more VAT. The zero rating of food and allowing businesses to reclaim input VAT means that the government in effect subsidies the food industry. Critics also argue that VAT is double taxation as consumers pay for goods and services using income that has already been taxed. It is also argued that VAT is an inefficient tax due to the numerous exemptions and concessions.

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It could also be argued that, compared to its predecessor Purchase Tax, VAT has encouraged the "throwaway society". Purchase Tax imposed high rates on new goods (especially luxury goods) but did not apply to repair services. VAT has increased the cost of repairs and encouraged consumers to replace goods rather than have them repaired. VAT also covers second-hand goods (which Purchase Tax did not) and has discouraged the re-use of goods through the second-hand market.

Variants of VAT

Gross Product Variant Tax is levied on all sales and deduction for tax paid on inputs excluding capital input is allowed

Income Variant

Consumption Variant Tax is levied on all sales with deduction for tax paid on all business inputs (including capital goods).

Tax is levied on all sales with set-off for tax paid on inputs and only depreciation on capital goods

Gross Product Variants: It allows deduction for taxes on all purchases of raw materials and components, but no deduction is allowed for taxes on capital inputs. That is, taxes on capital goods such as plant and machinery are not deductible from the tax base in the year of purchase and tax on the depreciated part of the plant and machinery is not deductible in the subsequent years. Capital goods carry a heavier tax burden as they are taxed twice. Modernization and upgrading of plant and machinery is delay due to this double tax treatment.

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Income Variant: The income variant of VAT on the other hand allows for deduction purchases of raw materials and component as well as depreciation on capital of goods. This method provides incentives to classify purchases as current expenditure to claim set-off. In practice, however, there are many difficulties connected with the specification of any method of measuring depreciation, which basically depends on the life of an asset as well as on the rate of inflation. Consumption Variant: Consumption variant of VAT allows for deduction on all business purchasing including capital assets. Thus, gross investment is deductible in calculating value added. It neither distinguished between capital and current expenditure nor specifies the life of assets or depreciation allowances for different assets. This form is neutral between the methods of production; there will be no effect on tax liability due to the method of production (i.e. substituting capital for labor or vice versa). The tax is also neutral between the decision to save or consume. Among the three variants of VAT, the consumption variant is widely used several countries of Europe and other continents have adopted this variant. The reasons for preference of this variant are: Firstly, it does not affect decision regarding investment because the tax on capital goods is also set-off against the VAT liability. Hence, the system is tax neutral in respect of techniques of production (labour or capital-intensive). Secondly, the consumption variant is convenient from the point of administrative expediency as it simplifies tax administration by obviating the need to distinguish between purchases of intermediate and capital goods on the one hand and consumption goods on the other hand. In practice, therefore, most countries use the consumption variant. Also, most VAT countries include many services in the tax base. Since the business gets set-off for the tax on services, it does not cause any cascading effect.

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Tax Exemptions in Value Added Tax System In general, some goods and services are exempted from taxation due to the following reasons: 1. Decreasing the regressive virtue of the Value Added Tax 2. Deceasing the effects of inflation and supporting low income groups 3. Decreasing the tax implementation and collection costs Different Goods and Services - And Their VAT Rate The following sections list different goods and services that are reducedrated, zero-rated, exempt or outside the scope of VAT. These rates may only apply if certain conditions are met, or in particular circumstances, depending on some or all of the following:

who's providing them or buying them where they're provided how they're presented for sale the precise nature of the goods or services whether you obtain the necessary evidence whether you keep the right records whether they are provided with other goods and services How to Find the Right VAT Rate for Particular Goods and Services It's important that you know the right VAT rate for the goods and services that you buy and sell. In some cases, the correct rate of VAT depends not just on the goods or services themselves, but also on other conditions and the circumstances of the sale. For some trade sectors there are special rules about how much VAT to charge or reclaim in particular circumstances

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VAT Invoice: Invoice is a document listing goods sold with price, tax charged and other details as may be prescribed and issued by a dealer authorized under the act. The whole structure of the VAT with input tax credit is founded on the documentation of a tax invoice, a cash memo or a bill. The white paper mainly provides for the following provisions, which are mandatory, and failure to comply with these attracts penalty: 1. Every registered dealer whose turnover of sales exceeds the specified amount shall issue to the purchaser a serially number tax invoice, cash memo or bill with the prescribe particular. 2. The tax invoice shall be dated and sign by the dealer or his regular employee, showing the required particulars. 3. The dealer shall keep a counterfoil or duplicate of such tax invoice duly signed and dated. Importance of VAT Invoice (Tax Invoice) Invoices are crucial documents for administering VAT. In the absence of invoices VAT paid by the dealer earlier cannot be claimed as set off. Invoices should be preserved with full care. In case any original invoice is lost or misplaced, a duplicate authentication copy must be obtained from the issuing dealer. 1. 2. 3. 4. 5. 6. A VAT invoice helps in determining the inputs tax credit. It prevents cascading effect of taxes Facilitates multi-point taxation on the value addition Promoted assurance of invoices Assists in performing audit and investigation activities effectively Checks evasion of tax

Contents of VAT Invoice: VAT legislation of all states provide for the contents of the tax invoice. By and large there would be no need for a separate tax invoice;a regular invoice can also be termed as tax invoice if it has the prescribed contents. Generally, the various legislation provides that the tax invoice should have the following contents: 1. The words Tax Invoice in a prominent place. 2. Name and address of the selling dealer.
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3. Registration number of the selling dealer. 4. Name and address of the purchasing dealer. 5. Registration number of the purchasing dealer (may not be required under all VAT legislation). 6. Pre-printed or self generated serial number. 7. Date of issue. 8. Description, quantity and value of goods sold. 9. Rate and amount of tax charged in respect of taxable goods. 10. Signature of the selling dealer or his regular employee duly authorized by him for such purpose. Other Invoices: Normally, a dealer is expected to indicate the rate of tax and the amount of tax charged in the invoice issued. However, in case of small dealers or if the sale is to end consumer, other invoices are permitted without the details of tax. Such invoices should contain the following particulars: 1. 2. 3. 4. 5. 6. 7. 8. Name and address of the selling dealers Registration number of the selling dealer Name and address of the purchasing dealer Registration number of the purchasing dealer Pre-printed or self generated serial number Date of issue Description, quantity and value of goods sold Signature of dealer or his /her representative

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Format of Tax Invoice Tax Invoice Original-Buyers Copy Sellers Name............ Address . .. Challan No. And Date Phone No. VAT Registration No. CST Registration No. S No. Quantity Description Price Of Goods Per Unit Value (Rs.) VAT Rate Tax Amt Total (Rs.) Buyers Name And Address ... Buyers VAT Registration No., If Any Tax Invoice No. ... Date:

Total Rupees In Figure E & O.E Signature (Of Selling Dealer Or His Authorized Employee)

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Rates of Tax: There are currently three rates of VAT: standard (20%), reduced (5%) and zero (0%). In addition some goods and services are exempt from VAT or outside the VAT system.

Standard (20%)

Reduced (5%)

Zero (0%).

Exempt From Outside VAT The VAT

Alcoholic drinks Biscuits (chocolate covered only) Bottled water (inc. mineral water) Calendars & diaries Carbonated (fizzy) drinks CDs, DVDs & tapes Cereal bars Chocolate Clothes & footwear (not for children under 14) Confectionery/s weets Delivery charges (postage & packaging) Electrical goods Electricity, gas, heating oil & solid fuel (business) Food & drinks

Children's car seats Electricity, gas, heating oil & solid fuel (domestic/re sidential/char ity nonbusiness) Energy saving materials (permanently installed in residential/ch arity premises) Maternity pads Mobility aids for the elderly Sanitary protection products Smoking cessation products

Aircraft Bicycle & motorcycle helmets Biscuits Books, maps & charts Bread, rolls, baps & pita bread Brochures, leaflets & pamphlets Building services for disabled people Cakes) Canned & frozen food ,Cereals Chilled/frozen ready meals, convenience foods Clothes & footwear (for children under 14 only) Construction & sale of new domestic buildings Cooking oil Donated goods sold at charity shops Eggs Equipment for disabled people
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Antiques, works of art or similar Burial or cremation (human) Commercial land & buildings (selling/leasing /letting) Cultural events operated by public bodies (museums, art exhibitions, zoos & performances) Education, vocational training, research Financial services (money transactions, loans/credits, savings/deposi ts, shares/bonds)

Goods & services sold outside the EU Goods & services supplied by unregistere d supplier Statutory fees & services (MOT testing, congestion charge etc) Tolls for bridges, tunnels and roads (operated by public authorities) Voluntary donations to charity

supplied for consumption on the premises (at restaurants, cafes etc) Hot take-away food & drinks (inc. burgers, hot dogs, toasted sandwiches) Ice cream Fruit juice & other cold drinks (not milk) Nuts (shelled, roasted/salted) Potato crisps Prams & pushchairs Road fuel (petrol/diesel) Salt (nonculinary) Stationery Taxi fares Tolls for bridges, tunnels & roads (priVATely operated) Water (industrial)

(inc. blind/partially sighted) Fish (inc. live fish) Fruit & vegetables Live animals for human consumption Meat & poultry Milk, butter, cheese Newspapers, magazines & journals Nuts & pulses (raw for human consumption) Prescription medicine Protective boots & helmets (industrial) Public transport fares (bus, train & tube) Salt (culinary) Sandwiches (cold) Sewerage (domestic & industrial) Shipbuilding ,Tea, coffee & cocoa Transport in a vehicle, boat or aircraft Water (household)

Funeral plan insurance Gambling (betting, gaming, bingo, lottery) Health services (doctors, dentists, opticians, pharmacists & other health professionals) Insurance Medical treatment & care Membership subscriptions Postage stamps Postal services (Royal Mail/other licensed operators) Sports activities & physical education TV license

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Merits and Demerits of VAT Merits: 1. No Tax Evasion: It is said that VAT is a logical beauty. Under VAT, credit of duty paid is allowed against the liability on the final product manufactured or sold. Therefore, unless proper records are kept in respect of various inputs, it is possible to claim credit hence, suppression of purchases or production will be difficult it will lead to loss of revenue. 2. Neutrality: The greatest advantage of the system is that it does not interfere in the choices of decision for purchases. The system is neutral with regard to choices of production techniques as well as business organization. All other things remaining same, the issue of tax liability does not vary the decision about the source of purchase. 3. Certainty: The VAT is a system base simply on transaction. Thus there is no need to go through complicated definition like sales, sales price, turnover of purchases and turnover of sales. The tax is also broadbased and applicable to all sales in business leaving little room for different interpretation. Thus, this system brings certainty to great extent 4. Better Accounting Systems: Since the tax paid in an earlier stage is to be received back, the system will promote better accounting systems. 5. Effect On Retail Price : A persistent criticism of the VAT form has been that since the tax is payable on the final sale price, the VAT form increases the prices of the goods However ,VAT does not have any inflationary impact as it merely replaces the existing equal sales tax. It may also be pointed out that with the introduction of VAT; the tax impact on raw material is to be totally eliminated. Therefore, there may not be any increases in the prices.

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6. Better Revenue Collection And Stability: The government will receive its due tax on the final consumer/ retail sale price. There will be a minimum possibility of revenue leakage, since the tax credit will be given only if the proof of tax paid at an earlier stage is produced. This means that if the tax evaded at one stage, full tax will be recoverable from the person at the subsequent stage or form a person unable to produce proof of such tax payment. Thus, in particular, an invoice of VAT will be self enforcing and will induce business to demand invoices from the suppliers. Another attribute of VAT is that is an exceptionally stable and flexible source of Government revenue. 7. Transparency: Under a VAT system the buyer knows, out of the total consideration paid for purchase of material, what is tax component. Thus, the system ensures transparency also. This transparency enables the state governments to know as to what is the exact amount of tax coming at each stage. Thus, it is a great aid to the government while taking decisions with regard to rate of tax etc. Demerits: 1. The merits accrue in full measure only under a situation where there is only one rate of VATand VAT applies to all commodities without any question of exemption whatsoever. Once concession likes differential rates of VAT, composition schemes, distortion are bound to occur and fundamental principle that VAT will totally eliminate cascading effects of taxes will also be subject to qualification. 2. In the federal structure of India in the context of sales tax, so long as central VAT is not integrated with the state VAT, it will be difficult to put the purchases from other states at par with the purchases. Therefore, the advantage of neutrality will be confined only for purchases within the state. 3. For complying with the VAT provisions, the accounting cost will increase. The burden of this increase may not be commensurate with the benefit to traders and small firms. 4. Another possible weak point in the introduction of VAT, which will have an adverse impact on it, is that, since the tax is to be
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imposed or paid at various stages and not on last stage, it would increase the working capital requirement s and the interest burden on the same. In this way it is considered to be non-beneficial as compared to the single stage-last point taxation system. 5. VAT is a form of consumption tax. Since, the proposition of income spent on consumption is a larger for the poor than for the rich, VAT tends to be regressive. However, this weakness is inherent in all the forms of consumption tax. While it may be possible to moderate the distribution impact of VAT by taxing necessities at a lower rate, it is always advisable to moderate the distribution consideration through other programmed rather than concession or exemption, which create complication for administration 6. As a result of introduction of VAT, the administration cost to the state can increase as the number of dealers to be administered will go up significantly

VAT In Indian Context: The Indian union is a federal structure under the constitution of India. The central government and the state government derive their powers through the instrumentality of the union list, the state list and the concurrent list. So far as powers of taxation are concerned there are clearly specified areas over which the central government and the states can exercise their jurisdiction While income tax, excise duty and customs duty constitute the major source of tax revenue to the central government, the states government substantially depends on sales tax as the main source of revenue. The central government undertook a series of reforms in indirect taxes, the major among which was the introduction of modified VAT, which is currently in operation as CENVAT. However, in view of the constitutional constraints, CENVAT applies to goods and services but not to sales tax and state-level VAT.

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Central Value Added Tax (CENVAT): At the central level, at the time of independence, India inherited a system of commodity taxes in which excise duties were levied on about dozen articles yielding a small proposition of total tax revenue to the center. Following independence, the rates were brought into its net. Over time, there was a speedy extension of excise duties. It was not only levied on finished goods but also covered raw. Role of Chartered Accountant in VAT: 1. Record Keeping : VAT required proper record keeping and accounting. Systematic records of input credit and proper utilization is necessary for the success of VAT. Chartered accountants are well equipped to perform such tasks 2. Tax Planning: In order to establish an efficient plan for purchases and sales, a careful study of VAT is required. A chartered accountant is competent to analyze the impact of various alternative sand choose the most optimum method of purchases and sales in order to minimize the tax impact. 3. Negotiation With Suppliers To Reduce Price : VAT credit alters cost structure of goods supplied as inputs. A chartered accountant will ensure that the benefits of such cost reduction are passed on by the suppliers to his company. However, if the buyers of his company make the similar demand, he must be ready with full data to resist the claims. 4. Handling The Audit By Departmental Officers: There will be audit wing in department and certain percentage of dealers Will be taken up for audit every year on scientific basis. Chartered accountant can ensure proper record keeping so as satisfying the departmental auditors. The professional expertise of a chartered accountant will help him in effectively replying audit queries and sorting out audit objections. 5. External Audit Of s Records : Under VAT system, trust has been reposed on tax payers as there will be no regular assessment of all VAT returns but only few
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returns will be scrutinized. In other cases, returns filed by dealer will be accepted. Thus, a check on compliance becomes necessary. Chartered accountants can play a very vital role in ensuring tax compliance by audit of VATaccounts.VAT laws of some states provide for audit by outside agencies. In Karnataka, audit report is required if turnover exceeds rs.25 lakhs. Andhra Pradesh VAT act provides for audit by chartered accountant, if audit is ordered by commissioner. Maharashtra VAT laws provide for audit chartered accountant if turnover exceeds Rs. 40 lakhs. Other states may also prescribe external audit, once they see the utility of audit reports finished by chartered accountant in ensuring tax compliance. Audit: In the VAT system considerable weight age is placed on audit work in place of routine assessment work. Correctness of self- assessment will be checked through a system of departmental audit. A certain percentage of the dealers will be taken up for audit every year on a scientific basis. If, however, evasion is detected in the course of audit, the previous record of the concerned dealers may be taken up for audit. Authorized officers of the department will visit the business place of the dealer to conduct the audit. The auditors will examine the correctness of the returns vis--vis the books of account of the dealer or any other information available with them. They will be equipped with the information gathered from various agencies such as suppliers, income tax department, and excise and customs department, banks etc. officers of the higher rank will supervise to ensure that the audit work is done in a free, fearless and impartial manner. Audit Provisions under VAT: Like majority of the developing economics our country is also facing the problem of lack of education and awareness about tax laws, more particularly amongst the trading community. Further, theVAT system of taxation is new to them. Since the trading community is not educated enough and equipped to understand the implication of the VAT system of taxation immediately, there is every possibility that they may not be in a position to arrange their business affair to fall in line with the
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requirement of the state-level VAT and calculate and discharge their exact tax liability under the VAT laws. On the other hand, the tax administrator i.e. the authorities in the taxation department also find themselves devoid of sufficient resources to educate the tax payers and inform them about the procedural and accounting changes that are necessitated by the implementation of VAT system. Further, under the VAT system a major thrust is to be laid on the self assessment i.e. the tax liability, calculated and paid by the tax payers through their periodical returns, will be accepted by and large and the tax payers will not be called to substantiate the tax liability shown by them in the return by producing books of account will be an exception. Therefore, there is a strong need to see that the tax payers discharge their tax liability properly while filling the return. This can be ensured only when the particularly furnished by the tax payers are verified by an independent auditor in minute details by: Going through the books of account and Analyzing and interpret the provisions of the state-level VAT laws and Reporting the under-assessment, if any, made by the dealer requiring additional payment or Reporting any excess payment of tax warranting refund to the tax payers. In most of the countries tax evasion is rampant under the existing tax system. In India too, evasion of excise and sales-tax is estimated to be very high. If no audit is prescribed under VAT law, the chances of evasion of VAT tax will increase causing revenue leakage for the government. It is therefore, essential that the audit of the proposed VAT system is attempted on a regular basis. However, it is not possible to conduct the audit of all the VAT dealers. Therefore, the criteria for audit can be the amount of turnover or the class of dealer dealing in specified commodities. The concept of audit is popular even in foreign countries where the system of VAT is in practice since long in the field of indirect taxation. In countries like France and Korea the audit has proved to be an effective tool to check the evasion of tax, which was mostly done by producing fake invoices etc.

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Since VAT is a new concept, some of the states want to keep the procedural formalities to the minimum. Hence, at the initial stage their law makers refrain from keeping any audit provision in their act and rules. Perhaps, this may be due to the initial stage of introduction of VAT. But most of the states, keeping in mind the importance of audit; have incorporated the audit provision since inception. Some states like the state of Maharashtra and state of Kerala have provided detailed particulars to be furnished by various dealers in respect of their VAT assessees.

Methods Of Computation Of VAT

ADDITION METHOD Aggregating all the factor payments and profit

INVOICE METHOD Deducting tax on inputs from tax on sales SUBSTRACTION METHOD

DIRECT SUBSTRACTION METHOD Deducting aggregating value of purchase exclusive of tax from the aggregate value of sales exclusive of tax

INTERMEDIATE SUBSTRACTION METHOD Deucting tax inclusive value of purchases from the sales and taxing difference between them

Addition Method: This method aggregates all the factor payments including profit to arrive at the total value addition on which the rate is applied to calculate the tax this type of calculation is mainly used with income variants of VAT. Addition method does not easily accommodate exemption of

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intermediate dealers. A drawback of this method is that it does not facilitate matching of invoices for detecting evasion. Invoice Method: This is the most common and popular method for computing the tax liability under VAT system. Under this method, tax is imposed at each stage of sales on the entire sale value and the tax paid at the earlier stage is allowed as set off. The most important aspect of this method is that at each stage, tax is to be charged separately in the invoice. This method is very popular in western countries. This method is also called the Tax Credit Method or Voucher Method. Subtraction Method: While the above stated invoice or tax credit method is the most common method of VAT, another method to determine the liability of taxable person is the cost subtraction method, which is also a simple method. Under this method, the tax is charged only on the value added at each stage of the saleof goods. Since, the total value of goods sold is not taken into account, the question of grant of claim for set- off or tax credit does not arise. This method is normally applied where the tax is not charged separately. Under this method for imposing tax, value added is simply taken as the difference between sales and purchases. ICAIs Role in VAT: The ICAI has rendered pioneering service in evolving the necessary accounting guidelines both for CENVAT as well as state level VAT. It has brought out guidance notes for accounting for CENVAT as well as state level VAT. These guidance notes address all the accounting issues in regard to CENVAT and state level VAT in India. Further the institute has brought out a comprehensive study on state on level VAT in India. It contains an elaborate discussion of the various general principles of VAT and state level VAT. These general principles have been incorporated in the various state level VAT legislations. Tax- Payer Identification Number: TIN number, you may hear this first time when you newly into business or otherwise you can know it from someone who already doing business
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within India. By reading this post, you can know that what TIN Number is? Who needs it and How to apply for TIN? What Are T.I.N No, CST No. and VAT NO.? TIN stands for Tax-Payer Identification Number, is unique number allotted by Commercial tax department of respective State. Its an eleven digit number to be mentioned in all VAT transactions and correspondence. TIN number is used to identify dealers registered under VAT. First two digits of TIN indicate the issued state code. However, Other 9 digit of TIN creation may differs by state governments. TIN is applied for both sales done within a state or between two or more states. Tin is also being used to identify dealers in the same way like PAN, to identification of assesses under income tax act. The registration number allotted to the dealers is popularly known as TIN i.e. Taxpayer Identification Number. This is an eleven digit number to be quoted in all VAT transactions and correspondence. The Tax Payers Identification Number (TIN) is new unique registration number that is used for identification of dealers registered under VAT. It consists of 11 digit numerals and will be unique throughout the country. First two characters will represent the State Code as used by the Union Ministry of Home Affairs. The set-up of the next nine characters may, however, be different in different States. TIN is being used for identification of dealers in the same way like PAN is used for identification of assesses under Income Tax Act. All the dealers seeking for new registration under VAT or Central Sales Tax will be allotted new TIN as registration number, however every State Commercial Tax Department have made provisions to issue new TIN to their existing dealers replacing old registration/ CST number. So In brief there is no difference in VAT number, TIN or CST number, now only one number is required for all type of sales i.e. TIN it may be called VAT number as it is used intra state sales and may be called CST number as same is required for CST number .TIN is being issued to all new dealers whether required for intra or interstate sales but for old
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dealer (interstate) CST number will be changed with TIN in phased manner and method adopted by each state is different. Who Needs TIN Number? Tin number registration is must for Manufacture/Traders /Exporters/Dealers. It comes to new registration under VAT or Central sales tax will be allotted new TIN as registration number. However, all state commercial tax department of India has stipulation to provide new TIN to existing Manufacture/Traders /Exporters/Dealers to replace their old registration / CST number. So, there is no difference in VAT/CST/TIN because these days only one number is needed for all type of sale you made. TIN number is called VAT number when it used for intra state sales. The same TIN number is being consider as CST number when it required. Which Documents Required Applying For TIN Number? 1. ID Proof / Address proof / PAN card of proprietor with 4 to 6 number of photographs 2. Address proof of Business premises; 3. 1st Sale / Purchase Invoice, copy of LR/GR & payment/collection proof with bank statement. 4. Surety/Security/Reference. Please check the applicability of each state How to Apply For TIN Number? Gone are the days standing in long queues to submit an application to Government Department. E- Government as swept all over India. This can be done by online. Need Help? Are you looking someone to help you to apply TIN number and calculating your Tax and file it behalf of you? Then, Reach Accountant is

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the right choice to do it with. Reach our Customer support @ 0-86955 94333 or Support@reachaccountant.com Bank Reconciliation Meaning: The cash Book and Pass Book are prepared separately. The Businessman prepares the Cash Book and the Pass Book is prepared by the Bank (here by cash book we mean three column cash Book). But as both the books are related to one person and same transactions are recorded in both the books so the balance of both the books should match i.e. the balance as per Pass Book should match to balance at bank as per cash book. But many a times these two balances do not agree then, it becomes necessary to reconcile them by preparing a statement which is called Bank Reconciliation Statement. Now, Automate the Process of Reconciling Bank TransactionsDid you know that you can now reconcile the banking transactions of your company for each cheque issued, and even print the payment advice and deposit slips, using Most businesses these days prefer to receive and make payments via their bank accounts. Typically, while transacting via the bank, an organization prepares a deposit slip to credit the payments received into the firms account, generates payment advice and tracks funds in order to always ensure that the bank account has the minimum funds required at all times. But as the number of transactions increase, it becomes a challenging task for organizations to prepare a large number of deposit slips, covering letters, and reconcile the bank ledger balance and the bank statements. Tally.ERP 9 Release 3.0 has made life simple, it allows you to effortlessly print cheques, reconcile the entries in books of accounts, and generate deposit slips and payment advice, whenever required. Bank reconciliation explains the difference between the bank balance shown in an organizations bank statement and the corresponding amount shown in the organizations accounting records, on a particular date.

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How Reconcile the Bank Statement Go to Gateway of Tally > Banking > Bank Reconciliation Select the name of the required bank The Bank Reconciliation screen appears: Match every transaction with the bank statement and record the transaction date in the Bank Date field Accept the screen to reconcile the bank ledgers as per the corresponding banking statement. On successfully reconciling, the 'Bank Reconciliation' screen appears as shown: Tally.ERP 9 also allows you to record the un-reconciled transactions based on the nature of transactions. Recording un-reconciled transactions Un-reconciled transactions can be entered by clicking U: Opening BRS or pressing Alt+U in the Bank Reconciliation screen. In this screen, the user can enter all transactions in which the cheques were issued but not presented, or when cheques were received but not presented. This will be useful under the following circumstances: When a company starts bank reconciliation in the middle of the financial year by setting an effective date in the bank ledger. Or when the opening balance of the bank account having unreconciled transactions is brought forward to the banks ledge recording transactions during reconciliation, some transactions like the banks charges, the interest paid by the Bank, etc., need to be recorded. These transactions can be recorded at the Banking screen by simply clicking C: Create Vouchers or pressing Alt+C in the Bank Reconciliation screen and choosing the required voucher. Generating deposit slips you can generate deposit slips for the payments received through cheques or demand drafts, which can be deposited to the bank later. To generate the deposit slip The Payment Advice screen for the selected ledger appears, as of the company.

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RECIEPT SLIP

State Bank Of India

Deposited In BranchMulund.. Date:08/07/2013 A/C Holders Name: Bhavanjibhai Gala.. Account Maintained WithMulund...Branch Type Of Account.. A/C Number.02459867112 Rupee: Twenty Five Thousand Rupees Only . Cheque/DD/Cash/Particulars Amount Rs. Ps Bhavesh Patel Chq No.12246 Scroll No. Total 25000/-

State Bank Of India

Deposited In BranchMulund.. Date:15/07/2013 A/C Holders Name: Bhavanjibhai Gala.. Account Maintained WithMulund...Branch Type Of Account.. A/C Number.02459867112 Rupee: Fifty Four Thousand Rupees Only Cheque/DD/Cash/Particulars Amount Rs. Ps

Swapnil Ukani Chq No.026992 Scroll No. Total 54000/-

Cash / Passing Officer

Cash / Passing Officer

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RECORD SLIP DATE 09/07/2013 13/07/2013 20/072013 23/07/2013 29/07/2013 CHEQU NAME OF E PAYEE 0000001 Self 0000002 Telephone Bill 0000003 Rajesh Shah 0000004 Self 0000005 Self WITHDRAWALS 10000 1500 5000 3000 9000 DEPOSITS BALANCE

PASS BOOK

Date 01/07/2013 03/07/2013 08/07/2013 09/07/2013 13/07/2013 15/07/2013 20/07/2013 23/07/2013 29/07/2013 31/07/2013

Cheque no.

Particular By Cash By Cash By Bhavesh Patel Self Telephone Bill By Swapnil Ukani Rajesh Shah Self Self Interest Credit

Withdrawals Deposits 5000 20000 15000 10000 1500 54000 5000 3000 9000 360

Balance 5000 Cr. 25000 Cr. 40000 Cr. 30000 Dr. 28500 Dr. 82500 Cr. 77500 Dr. 74500 Dr. 65500 Dr. 65860 Cr.

12246 0000001 0000002 026992 0000003 0000004 0000005

How to Prepare a Bank Reconciliation Statement (a) Compare transactions that appear on both Cash Book and Bank Statement (b) Update Cash Book from details of transactions appearing on Bank Statement (c) Balance the bank columns of the Cash Book to calculate the revised balance

complete a Bank Reconciliation Statement

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(a)Enter correct date of the statement (b) Enter the balance at bank as per the Cash Book (c) Enter details of UN presented cheques (d) Enter sub-total on reconciliation statement (e) Enter details of bank lodgments (f) Calculate balance as per Bank Statement Definition of Bank Reconciliation Statement BANK RECONCILIATION STATEMENT may be defined as a statement Showing the items of differences between the cash Brook balance and the pass Book balance, prepared on any day for reconciling the two balances. Need and Importance of Bank Reconciliation Statement The need and importance of the bank reconciliation statement may be given as Follows: 1. The reconciliation process helps in bringing out the errors committed either in cash Book or Pass Book. 2. Bank reconciliation statement may also show any undue delay in the clearance of cheques. 3. Sometimes the cashier may have the tendency of cheating like he may made entries in the Cash Book only but never deposit the cash into bank. These types of frauds by the entrepreneurs staff or bank staff may be detected only through bank reconciliation statement. So this way bank reconciliation statement acts as a control technique too. Causes for Differences A transaction relating to bank has to be recorded in both the books i.e. Cash Book and Pass Book but sometimes it happens that a bank transaction is recorded only in one book and not recorded simultaneously in other book this 221causes difference in the two balances. The causes for difference may be illustrated in detail as follows:
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Causes Cash Book and Pass Book 1. Cheques issued but not yet presented for payment Entry is made Balance=Decreased No entry is made till the cheques are presented for payment. Balance= Same as before 2. Cheques paid into the bank but not yet cleared. Entry is made Balance=Increased No entry is made till the cheques are cleared Balance = same 3. Interest allowed by the Bank No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = Increased 4. Interest and Expenses Charged by the Bank No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = Decreased 5. Interest and dividends collected by Bank No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = Increased 6. Direct payments by the bank No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = decreased 7. Direct payments into the bank by a customer No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = Increased 8. Dishonor of a bill discounted with the bank No entry is made till the pass Book is checked Balance = Same Entry is made Balance = decreased 9. Bills collected by the bank on behalf of the customer No entry is made till the Pass Book is checked Balance = Same Entry is made Balance = Increased 10. Errors committed either in Cash Back or Pass Book

Procedure for E-Filing of TDS Returns

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1. Objective: The basic objectives of computerization of TDS returns is to cut down the compliance cost for deductors, to correlate deduction of taxes made by deductors with the deposit of the deducted tax in the Government account in a designated bank/and correlate deduction of tax by the deductors with the corresponding credits claimed by the deductees. In phase-I of TIN it is proposed to receive the electronic TDS returns of corporate deductors and to digitize the paper TDS returns of other deductors. In Phase-II of TIN the work relating to dematerialization of TDS certificates will be taken up so that cross verification of deduction by the Deductors with the Claims of deductees can be carried out. Some of the issues pertaining to this Scheme are explained in the form of Frequently Asked Questions (FAQS) and are Available on this site. 2. Scheme For Electronic Filing Of TDS Returns: The scheme for electronic filing of TDS returns was notified on 26.8.2003. The Board Circular No.8 dated 19.9.2003 clarifies the procedure in this regard. The Procedure basically envisages that corporate deductors will prepare their TDS returns in the new TDS return Forms24, 26 or 27, according to the data structure notified by e-Filing Administrator. The E-TDS returns in the prescribed data structure stored on CD ROM and supported by a duly signed control chart inform27a in paper format will be submitted to an ETDS Intermediary appointed by the Board. 3. E-TDS Administrator And E-TDS Intermediary: The CBDT has appointed Director General of Income-tax (Systems) as E-TDS Administrator. Separately, M/s National Securities Depository Limited (NSDL), who are also the agency hosting TIN, have been appointed as E-TDS Intermediary. During the current financial year, NSDL will be opening their front offices at 42 stations throughout the country, for receiving E-TDS returns of all deductors. NSDL w.e.f. 19.01.2004 will set up their front offices called as TIN Facilitation Centre at 42 stations throughout the country, for receiving. TDS returns w.e.f. 19.01.2004. NSDL will set up their front offices at 65 stations more during the next financial year so that they will have presence at all stations where administrative CsIT are located. 4. Procedure For Allotment Of TAN:
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1) All deductors required to E-file their TDS returns have to quote their reformatted Tax Deduction Account Numbers (TAN) in their respective TDS returns. A large number of deductors have already obtained these re-formatted TANs which are unique countrywide. Wherever TAN has not been allotted or old TANs have not been reformatted, applications in Form 49B can be filed with NSDL. All old applications for allotment of new TAN/ reformatted TAN pending in the Department, will be disposed at the earliest 2) NSDL has also been authorized to receive applications (form 49B)for allotment of TAN at their front offices for fee of Rs.50/- to be paid by the applicant to them. The data in respect of such TAN applications will be entered by NSDL and sent to National Computer Centre (NCC) of Income-tax Department and the respective computer centers on-line. The allotment of TAN will be done by the IT department centers and communicated online to NSDL who will intimate the same to the applicant.

5. Preparation Of E-TDS Returns: 1) New forms of TDS returns in Form No.24, 26, & 27 (enclosed herewith), a control chart in Form 27Ahave been notified by the Board vide notification dated31.7.2003 consequent upon amendment to Rule 30 of IT Rules, 1962. The E-TDS returns have to be prepared in these new forms and according to the data structure prescribed by E-TDS administrator. This is necessary so that the data structure of E-TDS returns is compatible with the departmental application software for processing the same. 2) The prescribed data structure can be downloaded from this website as also of NSDL (http://tin.nsdl.com) this can also be obtained from the front offices of NSDL. While preparing the ETDS returns, the deduct or has to ensure that following mandatory requirements listed in Circular No.8 of CBDT dated 19.9.2003, are complied with : I. Tax deduction Account Number (TAN) of the deduct or is clearly mentioned in the TDS return as also on Form No.27A, as required by sub-section (2) of section 203A of the Income-tax Act. However,
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in cases where TAN is not available the E-TDS returns will also be accepted if the same is accompanied with an application inForm 49Bfor allotment or for reformatting. II. Full particulars relating to deposit of tax deducted at source, in the designated bank are correctly and properly filled in the table at item No.6 of Form No.24 or item No.5 of Form No.26 or item No.5 of Form No.27, as the case may be. The data in the E-TDS return is as per the data structure prescribed by the e-Filing Administrator. The Control Chart in Form 27A is duly filled in all columns, signed and enclosed in paper form with the return on computer media. (v) The Control Totals of the amount paid and the tax deducted at source as mentioned at item No.3 of Form No. 27A tally with the corresponding totals in the E-TDS return in Form No. 24 or Form No. 26 or Form No. 27, as the case may be. In case any of these mandatory requirements are not fulfilled, the E-TDS return will not be received by the E-TDS intermediary. The deductors should prepare their E-TDS return as per the above procedure, store the data on a CD ROM, enclose the control chart (Form 27A in paper format) and submit these at any of the front offices of NSDL. Although the scheme permits E-TDS returns to be prepared on a floppy, it would be preferable that these are prepared on a CD ROM to avoid any loss of data, viruses etc.

III.

IV.

V.

6. Filing of E-TDS Returns: I. The E-TDS return can be filed at any of the TIC Facilitation Centers offices being opened by NSDL at 42 cities. At the receipt stage, these front offices will carry out validation checks on the E TDS returns to ensure compliance with above five parameters, and a provisional receipt will be issued on successful validation. Section 139A (5 B) requires that PAN of the deductees should be mentioned in the TDS returns. Wherever PAN of deductees is not mentioned by a deductor in his E-TDS return, this fact will be recorded on the provisional receipt as deficiency, to be removed
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II.

by the deduct or. However, in such cases, NSDL will accept the e TDS returns. The deficiency can be removed by the deduct or within 7 days, failing which the E-TDS returns will be sent by NSDL to the Department indicating the deficiency therein for appropriate action by the concerned A.O.

7. Upload Charges: Since e-filing of TDS returns will reduce the voluminous paper work involved in filing of paper TDS returns and enclosures thereby significantly reducing the compliance cost of deductors, the e-intermediary i.e. NSDL have been authorized to collect service charges in respect of the various services being rendered by them to the deductors for upload of E-TDS returns at the following rates: Category of E-TDS return Upload charges Returns having records of up to 100 deductee records Rs.25/-Returns having records of 101 to 1000 deductee records Rs. 150/-Returns having records of more than 1000 deductee records Rs.500/Service tax if any will be payable by deductors in addition to the above. Challan Correction Mechanism Under OLTAS (On Line Tax Accounting System), the physical challans of all Direct Tax payments received from the deductors / taxpayers are digitized on daily basis by the collecting banks and the data transmitted to TIN (Tax Information Network) through link cell. At present, the banks are permitted to correct data relating to three fields only i.e. amount, major head code and name. The other errors can be corrected only by the assessing officers.

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New Procedure of Challan Correction by Banks (For Physical Challans): To remedy this situation, a new Challan Correction Mechanism for physical challans has been put in place. Under this mechanism, for income tax payments made on or after 1.9.2011, the following fields can be got corrected through the concerned bank branch. Assessment Year Major Head Code Minor Head Code TAN/PAN Total Amount Nature of payment (TDS Codes)

The Time Window For The Correction Request By Tax Payer Is As Follows: S.No Correction required in Field name Period of Correction Request (from Challan Deposit Date) 1. TAN/PAN 7 days 2. Assessment Year 7 days 3. Amount 7 days 4. Other fields (Major Head, Minor head, Nature of payment) within 3 months the time window for correction by the bank is 7 days from the date of receipt of Correction request from the tax-payer. NSDL E-TDS/TCS Return Preparation Utility (RPU) Since FY 2003-04, all corporate deductors should file Income tax returns for deduction of tax at source (TDS) only in electronic form. Further, from FY 2004-05, in addition to corporate deductors, filing of TDS returns in electronic form is mandatory for government deductors also. Extending the scheme of filing of returns in electronic form to tax collected at source (TCS), the ITD mandated that with effect from FY 2004-05, all TCSreturns filed by corporate and government collectors should be only in electronic form.
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ITD has notified revised file formats for preparation of TDS and TCS returns in electronic form. Deductors/collectors can prepare the ETDS/TCS returns as per these file formats using in-house software or any other third party software and submit the same to any of the TINFCs established by NSDL. Deductors/collectors can also directly upload the E-TDS/TCS returns through NSDL-TIN website. NSDL has developed software called E-TDS/TCS Return Preparation Utility (RPU) to facilitate preparation of E-TDS/ TCS returns. This is a freely downloadable MS excel based utility. Separate utilities are available for preparation of each type of return. RPU for Annual Returns: These utilities can be used to prepare ETDS/TCS returns up to FY 2004-05. These utilities can be used for preparation of original or revised annual returns. RPU for Annual Returns These utilities can be used to prepare E-TDS/TCS returns up to FY 2004-05. These utilities can be used for preparation of original or revised annual returns.

E-TDS RPU (ver. 4.80) for Form 24 E-TDS RPU (ver. 4.80) for Form 26 E-TDS RPU (ver. 4.80) for Form 27 e-TCS RPU (ver. 4.90) for Form 27E RPU for Quarterly Returns From FY 2005-06 onwards, TDS/TCS returns have to be filed every quarter (i.e. quarterly statements). The following utilities can be used to prepare regular quarterly statements:

NSDL RPU version 3.5 for quarterly E-TDS/TCS statements from FY 2007-08 Download RPU version 3.5

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Features Of RPU 3.5 Correction Statements Corrections required in the regular quarterly statements can be furnished by submitting a correction statement in the prescribed format. The following utilities can be used to prepare correction quarterly statements:

NSDL RPU version 3.5 for quarterly E-TDS/TCS statements from FY 2007-08 Download RPU version 3.5 Features of RPU 3.5 Feedback Form Guidelines for usage of these RPUs are provided in the respective utilities. The users are advised to read these guidelines carefully before the utility is used to prepare the returns. Users may ensure that they download the latest version of the utility at the time of preparation of return. Users must pass the E-TDS/ TCS return file generated using RPU through the File Validation Utility (FVU) to ensure format level accuracy of the file. This utility is also freely downloadable from NSDL TIN website. In case the E-TDS/TCS return contains any errors, user should rectify the same in the excel utility itself. After rectifying the errors, user should pass the rectified E-TDS/ TCS return through the FVU. This process should be continued till an error free E-TDS/ TCS return is generated. Disclaimer: These utilities have been developed by NSDL for small deductors/collectors and returns exceeding 20,000 deductee records should not be prepared using this utility. NSDL does not warrant any accuracy of the output file generated using any of these utilities. All users are advised to use latest FVU and check the format level correctness of the file before submitting the same to TIN-FC. In case FVU reports any error in the file, then the users are advised to rectify the same. Further, deductors/collectors are advised to ensure that the ETDS/TCS returns are filed before the last date specified by Income Tax
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Department. Non-functioning or non availability of this utility may not be considered as a reason for inability to file the return before the last date. E-Return Intermediary: Income Tax Department (ITD) has launched a new scheme for improving interface with the taxpayers. This scheme titled "Electronic Furnishing of Return of Income Scheme, 2007" enables authorized intermediaries to electronically file Income Tax returns on behalf of the taxpayers. This scheme is available to any taxpayer who is assessed or assessable to tax. Income Tax Department (ITD) has launched a new scheme for improving interface with the taxpayers. This scheme titled Electronic enables authorized intermediaries to electronically file Income Tax returns on behalf of the taxpayers. This scheme is available to any taxpayer who is assessed or assessable to tax. Under this scheme an eligible tax payer at his option furnish the income tax return in electronic form. Under The Scheme: Eligible Tax Payer Means: An eligible tax payer being a company or a firm referred to in clause (a) of provision to sub-rule (3) of rule 12 of the Income-tax Rules, 1962 or any other eligible person. Composition Scheme: The provision relating to tax invoice do not apply to a selling dealer who has opted to avail the composition scheme under the respective state VAT laws. Thus, a composition scheme dealer cannot issue a tax invoice.

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VAT Chain under Composition Scheme: I. Loss to the seller: If the composition is availed by a dealer then such dealer cannot avail input tax credit In respect of input tax paid. Hence the dealer will be losing the input tax credit on purchases made by him. He will not be able to pass on the benefits of input tax credit, which will add to the cost of the goods II. Loss to the purchaser: The purchaser shall not get any tax credit for the purchases made by him from the dealer operating under the composition scheme. Therefore, as soon as a dealer opts for the composition scheme, the VAT chain will be broken, and the benefits of tax paid earlier will not be passed on to the subsequent. Records: The following records should be maintained under VAT system: I. II. III. IV. Purchase record Sales record VAT account Separate record of any exempt sale

Further, the following records should also keep and produced to an officer: I. II. III. Copies of all invoices issue, in serial number Copies of all credit and debit notes issued, in chronological order All purchases invoices, copies of custom entries, receipts for payment of customs duty or tax, and credit and debit notes received to be filed chronologically either by date of receipt or under each suppliers name
48

IV. V.

Details of the amount of tax charge on each sale or purchases Total of the output tax and the input tax in each period and a net total of the tax payable or the excess carried forward, as the case may be, at the end of each month Details of goods manufactured and delivered from the factory of the taxable person Details of each supplies of goods from the business premises, unless such details are available at the time of supply in invoices issued at, or before, that time.

VI.

VII.

Failure to keep these records may attract penalty. All such records should be preserved for the period specified in respective state provision. No Declaration Form: Most of the declaration forms that existed before the introduction of VAT have been dispensed with. Use of declaration forms is expected to be stopped completely. Lots of time and energy is wasted by the dealer in getting declaration forms from the department .there is provision for concessional sale under the VAT acts since the provision for set- off makes the input zero-rated. Hence, there will be no need for declaration form. Returns: Under VAT laws there are simple forms of returns. Returns are to be filed monthly/quarterly/annually as per the provision of the state acts/rules. Returns will be accompanied with the payment challans. Some state have devised return cum challan.in these cases the returns along with the payment can be filed with the treasury. A registered dealer may be required to file a monthly/quarterly/annually return along with the requisite details such as output tax liability, value of input tax credit, payment of VAT etc. opportunity may be provided to lodge revised returns. Every return finished shall be scrutinized expeditiously within the prescribed time limit from the date of filing the return. If any technical
49

mistake is detecting on scrutinizing, the dealer shall be required to be pay the deficit approximately. How to Have Completed Your VAT Return You should have continued to receive and submit VAT returns in the normal way - monthly, quarterly or annually. The deadlines for submitting your VAT returns and making payments were unchanged. For return periods that covered both before and after 1 January 2010, you needed to add together the VAT on sales charged at 15 per cent and the VAT on sales charged at 17.5 per cent to work out the total VAT on sales to be included in box 1 of your VAT return. How to have corrected an error on your VAT return If you discovered that you made an error you could have corrected it in the normal way by making a voluntary disclosure or correcting it on your next return .If you made mistakes accounting for the change of rate on your first VAT Return after the change, HMRC will only seek an adjustment if there was likely to be an overall revenue loss Returns Filing Procedure Under VATLaws Are Designed With The Objective Of: 1. Reducing the compliances costs incurred by the businesses in completing and filing their returns. 2. Encouraging businesses to comply with their obligation to file returns and pay VAT through the application of penalties in case of late payment of VAT and late filling of returns. 3. Ensuring the efficient processing of the data included in the returns. Income Tax Return: Required to furnish under section 139 or clause (I) of sub-section (1) of section 142 or sub-section (1) of section 148 or section 153A of the Act or return of fringe benefits which he is required to furnish under subsection (1) or sub-section (2) of section 115WD of the Act for assessment year 2008-09 or any subsequent assessment year, through the above-mentioned authorized intermediaries.
50

Revise return of income under sub-section (5) of section 139 of the Act or fringe benefits under sub-section (4) of section 115WD of the Act for assessment year under this scheme if he has furnished a return of income or return of fringe benefit for that assessment year under this scheme. These entities that are authorized to file Income Tax returns in electronic form on behalf of taxpayers are called E-Return Intermediaries. E-Return Intermediaries are appointed by ITD. NSDL has been appointed as the Registrar for processing applications for registration as E-Return Intermediary by eligible entities. NSDL has setup a web-based facility for online registration of E-Return Intermediaries. The entities desirous of acting as E-Return Intermediaries may determine their eligibility and ensure that they have met the prerequisites required for submitting the application. The eligibility criteria and pre-requisites are prescribed by ITD.

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ITR FORMS:

1. ITR - 1

This form is applicable for individual having income from salary, pension and interest.

2. ITR - 2

This form is applicable for individual and HUF having income from other source which include income other than business salary, capital gains and house property. e.g. Lottery, house rising.

3. ITR 3

This form is applicable for individual or HUF having income for partnership for partners.

4. ITR- 4

This form is applicable for individual or HUF income from business and profession.

5. ITR- 5

This form is applicable for partnership for association of person and body of individual.

6. ITR- 6

This form is applicable for private LTD as well as public limited company

7. ITR- 7

This form is applicable for trust, charitable institution, educational institution, etc.

8. ITR- 8

IT forms for return for fringe benefits

9. ITR V

Where the data of the return income/fringe benefits in form ITR-1, ITR -2, ITR -3, ITR-4, ITR-5, ITR-6and ITR-8 transmitted electronically without digital signature.

52

Note:As per the guidelines issued by the Office of CCA, it is required to comply with the use of SHA-2 Hash Algorithm and 2048 bit RSA keys for digital signing. In view of the same, the following pre-requisites need to be followed: 1. JRE version : SUN-java 1.6_update29 or higher version (32 bit) 2. Client Operating system: Windows XP SP3, Vista Windows 7, Windows 2003 with patch for SHA-2. 3. I.E browser version supported: 7, 8 and 9. 4. Safe net or E-token drivers used should be the latest (if applicable) A Public Sector Company as defined in clause (36A) of section 2 of the Act or any other company in which public are substantially interested within the meaning of clause (18) of section 2 of the Act and any subsidiary of those companies which

has a valid Permanent Account Number (PAN) A Company Incorporated In India, Including A Bank, Having A Net Worth of Rupees One Croreor More Which

has a valid Permanent Account Number (PAN) A Firm of Chartered Accountants Which

has a valid Permanent Account Number (PAN) A Firm of Advocates Which

has a valid Permanent Account Number (PAN) A Firm of Company Secretaries Which

has a valid Permanent Account Number (PAN)

53

A Chartered Accountant Who

has a valid Permanent Account Number (PAN) An Advocate Who

has a valid Permanent Account Number (PAN) A Company Secretary Who

has a valid Permanent Account Number (PAN) Tax Return Preparers (Income Tax) Who

has a valid Permanent Account Number (PAN) A Drawing Or Disbursing Officer (DDO) Of A Government Department Who

has a valid Tax Deduction Account Number (TAN) His entity must have Digital Signature Certificate (Class II or Class III) from any of the licensed Certifying Authorities specified by NSDL (currently TCS, IDRBT, Safe Scrypt, MTNL, n code, e-mudhra and NIC) for the purpose of digitally signing the application and the returns uploaded online. The digital certificate must be in the name of the applicant. If the digital certificate is in the name of an employee / partner of the applicant, then an authorization letter by the applicant should be provided on the letterhead of the applicant to NSDL. Hardware Requirements

CPU > 500MHz or above RAM 256 MB or above A screen resolution of 800 x 600 pixels and display of 256 colures

54

20 GB free hard disc space exclusive for ITD UPS power backup for minimum 30 minutes CD writer / other backup devices like DAT drive Printer Software Requirements

Operating system - Windows 98 / Windows NT 4.0 Server or above Anti-virus Internet Explorer 6.0 or above / Netscape 5.0 or above Internet Connectivity

Dialup connection 56.6 kbps or above / ISDN / Leased Line The System Used To Log-On To the Computer System Of The ITD

Should have no resident/ running programs (other than what is allowed by ITD). Should have in place security procedure to ensure that there is no misuse. The entity should have necessary archival, retrieval and security policy for the e-returns that are filed through him. The entity should submit a due diligence certificate from a certified ISA or CISA professional in the prescribed format that it has the necessary computing infrastructure. The entity or its Principal / responsible officers, must not have been convicted for any professional misconduct, fraud, embezzlement or any criminal offence by any court in India or by any professional body, as the case may be.

55

The E-Return Intermediary Shall

Ensure that the assessee is an eligible person under this scheme; Ensure that the assessee has quoted a correct and valid permanent account number or tax deduction account number; Ensure that the particulars of advance tax, self assessment tax and tax deducted at source are in accordance with the documents enclosed; Ensure that the paper return of income has been properly filled in and duly verified by the assessee; Ensure accuracy of the data entry while transcribing the return of income and during its transmission; Ensure that the electronic portion of the return of income is transmitted on or before the due date for filing the return of income; Ensure that the Form-ITR-V, duly verified by the assessee, is filed with the assessing officer having jurisdiction over the concerned assessees; Retain for a period of one year from the end of the relevant assessment year the electronic data of the return of income and the information relating to the provisional receipts issued in respect of the returns filed through it; Provide to the assessee a paper copy of the e-return submitted by eintermediary and the acknowledgement receipt of Form ITR-V filed to the Assessing Officer; Maintain confidentiality of the information that comes to his possession during the course of implementation of this scheme and shall not part with any such information to anyone, except with the prior permission of the assessee or the assessing officer; Ensure that all his employees, agents, franchisees, etc., adhere to the provisions of this scheme; Promptly inform the Registrar of any change in the particulars given in the application filed by it for registration;
56

Abide by the instructions issued by the e-Return Administrator, from time to time, for proper implementation of this scheme.

Due dates for filing of TDS/TCS returns Due dates for filing of TDS/TCS returnsare as below: [Subject to Extension by the CBDT for specific quarters of a particular FY]

Quarters

Form Nos. 24Q & Form 26Q 27Q

No. Form 27EQ

No.

April to June

15 July

15 July

15 July

July to September 15 October

15 October

15 October

October December

to 15 January

15 January

15 January

January to March

15 May

15 May

15 May

Late Filing Consequences Fees for delay in furnishing the statements: (refer section 234E of Income Tax Act) Effective from 1st July 2012, any delay in furnishing the E-TDS statement will result in a mandatory fees of Rs. 200 per day, the total fees should not exceed the total amount of TDS made for the quarter. The late filing fee should be paid before filing such delayed E-TDS statement.

57

Penalty for failure to furnish statements and furnishing incorrect statements: (refer section 271H of Income Tax Act) Failure to file E-TDS statement delaying more than an year or furnishing incorrect details in the statement filed like PAN, Challan and TDS Amount etc, will result in a penalty ranging from Rs. 10,000 to one lakhs.

ITR Forms For 2008-09 AY: Central Board of Direct Taxes [CBDT] has notified new return forms for Assessment year 2008-09. The new return forms are continued to be termed as ITR and known to be Return of Income/Fringe Benefits. The notification NOTIFICATION NO. S.O. 752(E), DATED 28-32008 amended the earlier ITR forms and made the relevant changes in Rule 12 of Income Tax The ITR forms starts from ITR 1 to ITR 8. In the form, individuals and HUFs will be required to furnish information with regard to transactions that are reported through annual information returns (AIR). Large transactions like investment in real estate and mutual funds running into lakhs is automatically reported to the department by banks and other authorities using the investor's permanent account number (PAN). Similarly, large expenditure incurred by an individual is also reported to the department through AIR. Therefore, if an individual tries to hide his income he can be caught through AIR reporting from various agencies, a tax official said. What the new stipulation does is that it makes it mandatory for the tax assesses themselves to submit the same information to the IT department. A senior finance ministry official said that the earlier idea was to use the cash flow statement to get information both on the source of funds as well as expenditure. For individuals, the four forms, ITR-1, ITR-2, ITR-3 and ITR-4, will continue to remain. Companies also have the same two forms ITR 6 and 7. Either should be used as per applicability. The Firms, AOP and BOIs should go for only Form ITR - 5. This has made all earlier confusions on status to form relation ZERO. It has also kept ITR-8 as Exclusive Return on Fringe Benefits. But this should not be used by the assessees who
58

are eligible for ITR 5, 6, and 7.

TDS - Procedure For Deduction / Challan / Return / Certificates

1: Deduct Correct TDS 1. Salaries 2. Non Salaries 3. Consequences of not making Tax deduction 2: Make Correct Challan/Payment

4.

1. Points to be considered before making a payment 2. Steps to make a payment 3: Verify A Paid Challan 1. What is CIN? 2. If banks does not provide a Proper CIN? 3. Steps to verify the challan 4: Verify Deductee / Employee PAN 1. Verifying a PAN 2. Steps To verify the PAN 3. Letter to missing/Wrong PAN deductees 4. Consequences of wrongly quoting a PAN

59

5: Deduction-To-Payment Verification 1. Points to be noted while verifying Deduction-topayment 6: Prepare Correct Statement 1. Deductor 2. Deductee 3. Valid PAN Percentage 4. Deductions 5. Salary details 6. Challan Details 7. Challan and Deduction link 7: Submitting A Regular Return 1. What the law says? 2. Type of submission 3. Return not accepted by TIN FC 4. Form 27A 8: Due Dates For Filing Of TDS/TCS Returns 1. Late filing consequences 2. 9:Verify Submitted Returns 1. PRN or RRR number

60

2. Login 3. Verification 4. Action after verification 5. Analyzing the challan status and further action 10: Inconsistencies In TDS Returns 1. Notice from DGIT [Systems] 2. Content of Notice 3. How to verify the inconsistencies 11: Correction In Regular Return 1. Correction Statement 2. Types of Corrections 3. General Notes on Correction Statement 1. 12: Submit A Correction Statement 2. Procedure to submit 3. Return not accepted by TIN FC 4. Batches in the Correction 13: Verify A Correction Statement 1. Login 2. Verification 14: TDS Register Maintenance

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1. Types of registers

15: Issue TDS Certificate 1. TDS certificates 2. How it will be useful 3. Compulsion/Optional 4. Types of TDS certificates 5. Issuing the certificate 6. Covering Letter 16: Prepare ITR 1. ITR-1 2. ITR-2 3. Other ITR forms

How To Verify A Paid Challan

On receipt of the amount, receiving bank will upload the details in the Challan to Government via NSDL through its OLTAS (Online Tax Accounting System) return within 3 working days. Once deductor makes the payment, he should cross-verify the Amount and CIN that has been uploaded by the receiving Bank to NSDL. This should be cross-verified by the deductor, with either his TAN number or CIN number provided by bank against each challan. Steps To Verify The Challan:
62

1. Visit www.tin-nsdl.com and click on Challan Status Enquiry. 2. Here select either a. CIN Based View On entering CIN and amount (optional), deductor can view the following Details:

BSR Code Date of Deposit Challan Serial Number Major Head Code with description TAN/PAN Name of Tax Payer Received by TIN on (i.e. date of receipt by TIN) Confirmation that the amount entered is correct (if amount is entered)

b. TAN based View: By providing TAN and financial year, deductor can view the following details:

CIN Major Head Code with description Minor Head Code What Is CIN? Challan Identification Number (CIN) has three parts

63

1. Seven digit BSR code of the bank branch where tax is deposited 2. Date of Deposit (DD/MM/YY) of tax 3. Serial Number of Challan 4. Example of CIN: 000076202020832 CIN is stamped on the acknowledgement receipt to uniquely identify the tax payment. CIN has to be quoted in the return of income as a proof of payment. CIN is also to be quoted in any further enquiry. Therefore, you must ensure that CIN (comprising the above three parts) is stamped on the Challan by the bank. If any challan does not contain CIN, immediately contact the Bank and insist on CIN. If banks does not provide a Proper CIN?

The Reserve Bank of India has already passed an order dated April 1, 2004 making it compulsory for all tax collecting branches of banks to use a rubber stamp acknowledgement that carries CIN. A separate CIN is given for each challan deposited. If the Bank Manager concerned is unable to resolve the issue, you should address your grievance to the Bank's Regional Manager and the Regional Office of RBI Nature Of Payment If deductor enters the amount against a CIN, the system will confirm whether it matches with the details of amount uploaded by the bank.

3. On getting above details, deductor can consider the result obtained here, irrespective of what has been put in the challan by the bank. 4. If the entry is missing over here, after 3 working days [from the date of issuing counter foil], deductor should contact the Bank Branch to check the matter.

What The Law Says? 1. Section 206 [Annual returns]:

64

This section deals with, the deductions made before 1st April 2005 and asks the deductor to file the Annual returns of TDS in Form 24, 26 and 27. However for the current FY, this is not applicable. 2. Rule 31A [Quarterly Statements]: This Rule deals with termination of Section 206 and incorporation of Quarterly Statements of TDS/TCS from FY 2005-06. Type Of Submission 1. E-Filing: a. Mandatory: [refer Rule 31A] 1. From FY 2003-04, it is mandatory to all corporate deductors to file the TDS return electronically. 2. From 30-6-2005, e-filing is mandatory to Government deductors also. 3. From 01-09-2007, e-filing has been extended to 1. All deductors who are liable for audit under section 44AB of Income Tax Act {Tax Audit} in the immediate preceding FY. 2. All the deductors whose deduction records in a quarterly statement for any quarter of the immediately preceding financial year is equal to or more than fifty. b. Types: There are 2 Provisions for submitting a TDS return under this method 1. Electronic [TIN FC]: In this procedure, 1. Deductor should prepare the return in the FVU format and file it at the TIN FC in a CD/Floppy. 2. Deductor should also enclose a declaration letter in Form 27A. 3. Deductor should pay the submission charges to TIN FC, depending on the deduction records, as Rs. 25, Rs 150, Rs 500 for upto 100, upto 1000
65

and above 1000 deduction entries, respectively. Additional service taxes applicable. 2. Digital [online]: In this process, 1. Deductor should prepare the FVU file and upload online to www.tinnsdl.com, with his respective login. 2. Deductor should also have obtained a Digital Signature. 3. As a prerequisite, deductor should have got registered with NSDL, with nominal registration charges. 4. While registration, deductor should deposit the minimum advance of Rs. 1000/- and subsequently make the payments, minimum of 500/-. 5. The advance amount will be adjusted with each return upload as Metering Upload charges. 6. Metering upload charges will be same as that charged by TIN FC. 7. This facility can be used extensively by banks and organization having multiple branches with different TAN. All the branches can upload the return under single login. [Note: the Branch TANs should be registered with NSDL prior, for the same account] 2. Paper Filing: a. This provision is available for the deductors not falling under e-filing compulsion. b. The returns can be printed on paper in the format specified and submitted to TIN FC. c. The charges are applicable as for e-filing. Return Not Accepted By TIN FC: If any return is not accepted by TIN FC, deductor should collect the non Acceptance memo in paper, duly signed by TIN FC. This should be
66

taken for rechecking the regular return file. Fs This is the declaration being provided by the deductor for filing of electronic TDS return. This is also applicable for TCS returns filed for FY 2005-06 or later. Form 27A should be in paper Format manually signed by responsible person for the Deductor. [Refer Rule 31A]

Concept Paper E-Payment of Taxes Introduction: The optional scheme of electronic payment of taxes for income-tax payers was introduced in 2004. With a view to expand the scope of electronic payment of taxes, it is mandatory for the following categories of taxpayers: 1. All corporate assessees; 2. All assessees (other than company), to whom provisions of section 44AB of the Income Tax Act are applicable. The scheme of mandatory electronic payment of taxes for income-tax payers is made applicable from 1st April 2008. This is applicable for all payments, irrespective of the assessment year to which it belongs. That means, if any tax has to be paid for AY 2007-08, also then it has to through be e-payment. Taxes that can be paid are: 1. Advance Tax for Income Tax and FBT 2. Self Assessment Tax for Income Tax and FBT 3. Tax Deducted at Source 4. Tax Collected at Source NSDL offers the gateway for Taxpayers to make electronic payment of taxes through the Internet banking facility offered by the authorized banks. They will also be provided with an option to make electronic payment of taxes through Internet by way of credit or debit cards.

67

Pre-Requisites: 1. Valid TAN and PAN 2. Internet Banking Account 3. Good internet connection 4. In case TDS the amount of payment should be spilt based on: a. Type of Deductee( i.e deduction from Companies and from NonCompanies) b. Nature of Payment (i.e. For each section like 94C, 94J etc for Companies and From Non-Companies separately) 4. Sufficient balance in the bank to cover the amount of payment for immediate Transfer. Please avoid using browsing centers for making e-payments as there are Chances of fraud. Copyright: RelyonSoftechLTDSaralTaxOffice.com| Indian tax Software

68

Procedure [Flow Chart]:

Visit www.tin_nsdl.com

Select e-payment option

Select the challan: 1.itns-280 2.itns-281

Print/save the challan identification number

3.itns-283 4.itns-284

Confirm the payment

Enter the detail in the challan

Enter your online banking username and password

Select your bank name

List of Banks, Available For EPayment Of Taxes: Following is the list of bank, currently providing this facility. Tax Payer should have NetBanking account with any of these banks.
69

Allahabad Bank, ICICI Bank, State Bank of Indore, Axis Bank, IDBI Bank, State Bank of Mysore, Bank of Baroda, Indian Bank, State Bank of Patiala, Bank of India, Indian Overseas Bank, State Bank of Saurashtra, Bank of Maharashtra. Oriental Bank of Commerce. State Bank of Travancore, Canara Bank, Punjab National Bank, Syndicate Bank, Corporation Bank, State Bank of Bikaner & Jaipur, Union Bank of India, Dena Bank, State Bank of Hyderabad, Vijaya Bank HDFC Bank, State Bank of India, Copyright: RelyonSoftech LTDSaralTaxOffice.com| Indian tax Software. Step By Step Procedure for E-Payment: 1. Visit www.tin-nsdl.com 2. Click on the link for "e-payment: Pay Taxes Online" 3. Select the relevant challan i.e. ITNS 280, ITNS 281, ITNS 282 or ITNS 283, as applicable. 4. Enter its PAN/TAN as applicable. There will be an online check on the validity of the PAN / TAN entered. 5. If PAN/ TAN are valid the taxpayer will be allowed to fill up other challan details. I. II. Tax Collected from Companies or Non Companies Assessment Year Choose proper assessment year. Example, while making payment towards TDS /TCS of Financial year 200708, select assessment year 2008-09. Valid TAN Address where city, state and pin code is compulsory
70

III. IV.

V. VI. VII. VIII.

Type of Payment i.e. in case of TDS 200 (TDS/TCS payable by Tax payer) Nature of Payment Section Select your Bank Name Pl note, the amount of payment is not to be entered here, but it should be entered in the Bank website.

6. Click on Proceed to submit data entered. Now, a confirmation screen will be displayed. If the taxpayer confirms the data entered in the challan, it will be redirected to the net-banking site of your bank. If data needs editing, the user can do the same by clicking Edit. 7. In the Net banking site, the taxpayer should login to the net-banking site with the user id/ password provided by the bank for net-banking purpose and enter relevant payment details like basic tax, surcharge, cess, interest, penalty etc., Select the relevant bank account in case you have multiple accounts with internet facility for the same login. 8. On successful payment, a Challan counterfoil will be displayed containing CIN, payment details and bank name through which epayment has been made. This counterfoil is proof of payment being made. 9. Please note that for each Challan, a separate payment has to be made. 10. On paying against all Challan and obtaining the CIN details, log out of the bank web site 11. While it is mentioned that payment can be made either through credit card or debit card, the same is yet to be made available to the taxpayers. Assessment: The basic simplification of VAT is with references to assessment. Under VAT system, there is no compulsory assessment at the end of each year. The VAT liability is self-assessed by the dealer himself in terms of submission of returns upon setting off the tax credit, returns form etc. the other procedure are also simple in all the states.

71

Deemed assessment concept is a major feature of the VAT. If no specific notice is issued proposing departmental audit of the books of account of the dealer within the time limit specified in the act, the dealer will be deemed to have been self-assessed on the basis of the returns submitted by him.VAT pre-supposes that all the dealers are honest. Scrutiny may be done in cases where a doubt arises of under- reporting of transaction or evasion of tax. Honest dealers will be protected and fictitious or dishonest would be penalized heavily. System Of Cross Checking: In the VAT system more emphasis has been laid on self-assessment. Hence, a system of cross checking is essential. Dealers may be asked to submit the list of sales or purchases above a certain monetary value or to give the dealer-wise list from whom or to whom the goods have been purchased/ sold for values exceeding a prescribed monetary ceiling. A cross checking computerized system is being work out on the basis of coordination between the tax authorities of the state governments and authorities of central excise and income- tax to compared constantly the tax returns and set-off documents of VAT system of the states and those of central excise and income- tax. This comprehensive cross-checking system will help reduce tax evasion and also lead to significant growth of tax revenue. At the same time, by protecting the interests of tax complying dealers against the unfair practices of tax-evaders, the system will also bring in more equal competition in the sphere of trade and industry. Accounts To Be Audited In Certain Cases: Under the sales-tax laws, tax evasion is considered to be on a large scale. The sales-tax departments of various states have not been able to effectively check the menace of tax avoidance and tax evasion. Therefore, apart from the departmental audit many states have also incorporated the concept of audit of accounts by chartered accountants. The state of Maharashtra has prescribed an elaborate list of particulars to be furnished by the dealers. These particulars have to be verified by the VAT auditor. However, auditing for all types of dealers may not be necessary. The selection of cases for auditing has to be made in accordance with the
72

criteria of the size of dealers. In such a case, the returns supported by the audited statement can be accepted summarily. However, it might indeed be useful to cull out a fixed proportion of large and medium sized dealers for regularfor regular assessments on a regular basis. in Maharashtra and Rajasthan, the dealer whose turnover exceeds Rs.40 lakhs in any year is required to get his accounts audited in respected of such year. Penal Provision: Since VAT is purely a state subject, states will have incorporated penal provision as per their requirement. However, these are in general more stringent than those in the earlier sales tax laws. Since, the state taxation laws have allowed certain additional benefits in the form of input tax credit, which was not available earlier; they have introduced more stringent penal provision to discourage evasion of taxes. Authorized Signatories tothe Return Of Income (Section 140) This section specifies the persons who are authorized to signed and verify return of fringe benefits under section 115WD or return of income under section 139 of the act.

Assessee

Circumstances

Authorized Signatory

1.

Individual

I.

In the circumstances -The individual himself not covered under (ii),(iii),(iv) below

II.

Where he is absent -the individual himself from India. ;or - any person duly authorized by him in this behalf holding a valid power of attorney from the individual (such
73

power of attorney should be attached to the return of income)

III.

Where he is -his guardian ;or mentally incapacitated from -any other person attending to his competent to act on his affairs. behalf

IV.

Where, for any other reason, it is not possible for the individual to sign the return.

-any person duly authorized by him in this behalf holding a valid power of attorney from the individual (such power of attorney should be attached to the return of income)

2.

Hindu Undivided Family

I.

In circumstances not -the Karta covered under (ii)and(iii)below

II.

Where the Karta is -any other adult absent from India member of the HUF

III.

Where the Karta is -any other adult mentally member of the HUF incapacitate from attending to his affairs

3.

Company

I.

In circumstances not -the managing director covered under(ii) to of the company

74

(v) below

II.

(a) where for any -any director unavoidable reason company such managing director is not able to sign and verify the return; or (b) where there is no -any director managing director company

of

the

of

the

III.

Where the company -a person who holds a is not resident in valid power of attorney India from such company to do so (such power of attorney should be attached to the return)

IV.

(a)where the - Liqidator company is being wound up (whether under the orders of a court or otherwise);or (b)where any person has been appointed -Liquidator as the receiver of any assets of the company

V.

Where the -the principal officer of management of the company has been
75

taken over by the the company central government or nay state government under any law

4.

Firm

I.

In circumstances not -the managing partner covered under (ii) of the firm below

II.

(a) where for any -any partner of the firm, unavoidable reason not being a minor such managing partner is not able to sign and verify the return; or (b) where there is no -any partner of the firm, managing partner not being a minor

5.

Local Authority

-the chief executive officer of such party (whether he is known as secretary or by any other designation)

6.

Political Party [Referred To In Section 139(4B)

-any member of the association or the principal officer of such association

7.

Any Other Person

- That person or some other person competent to act on his behalf.

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Bibliography: Raj software technology (India) ltd Email: rstil@rajinfo.com URL: www.rajinfo.com www.google.com Taxation book Website: www.icai.org Email: bosnoida@icai.org Published by: the publication department on of CA. r. devrajan, additional director of studies (SG), the institute of chartered accountant of India Company Profile: Name of the Firm: Chetan P.Shah Accountant and Tax Consultancy Phone: 022 - 25348302 Mobile: 9323948302 Landmark: Near Shivsena Shakha Contact Person: Chetan P. Shah Address: No. 204 Royal Crown, Pokhran Road No. 1, Khopat Thane West, Mumbai -400601 Working Hours: Monday - Saturday: 10.30 AM - 7.30 PM Categories: Chartered Accountants

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Specialized In 1. 2. 3. 4. 5. 6. Auditors CA Statements for Visa Procedure Consultants Management Audit Services (Limited Company) Statutory Audit Services (Limited Company) Tax Consultants Tax Return Services

Also Deals with 1. 2. 3. 4. 5. 6.

Company Formation Company Secretarial Services Service Compliance Audit Service Indirect Taxation Service Internal Audit Service Risk Audit Service Experience: 10 to 15 years

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