Browse Month: June 2016

File your Income Tax Returns now – Do not delay it –Reasons & explanation

After every financial year ends, it is a good process to reflect upon the past year and make future outlook better.  Also, it is a time to set right all your financial details and file your income tax return (without waiting for the due date to reach close).

Many people procrastinate on this process, waiting until close to the July 31stdeadline to get going (and many people fail to do it even ater that, until and unless prompted by external factors like IT notice on non-filing, visa requirement etc).

There are many reasons why it’s a bad idea to wait to file your income tax returns.The intelligent and smart ones get going as soon as possible, and they reap the rewards of early filing.

If you are stuck in thought on whether you should take the steps to go ahead and file your income tax return or think of doing it later (cos you are busy busy busy), here are some negatives of procrastinating and a few reasons why it helps to file it soon…

  1. Mistakes often happen if you rush at the end moment

Think of the times that you have had to rush in doing some work and you have either messed it or not done your best with it. When you wait until the last minute, you will be working under pressure. You’ll be rushing to finish things, and you won’t have the time to go back and recheck or review the things that you need to recheck or review.

This leads to an increase in probability that you may make a mistake on your taxes.  You may forget to enter some important details, fail to disclose income, avail deduction etc.

If you start earlier, you will have a chance to go back, reflect and look at your Income Tax Computation workings with a fresh mind again.  You will ensure that it is all done properly & filed.

  1. Your Tax refund is your right – Why delay?

The Income Tax Returns can be filed by you as soon as the ITR Forms are available (mostly May starting).  The earlier the IT Filing is done, the earlier the returns can be processed by the IT Department.

People who wait to file till the deadline can have to wait for the refund as the processing may take longer (due to bulk inflow of IT returns).  Why delay filing when you can get your tax refund at the earliest?

  1. Opportunity loss as your money (refund) is not with you

In continuation of the last point, when you file your returns early, you get your tax refund sooner and you can use the same to make more wealth. Whether you putthat money in stock markets (risk and returns, both higher) or even keep it in the bank (where it grows a measly 4% to 7%), you have a chance to put that money to work for you.

The longer you wait, the longer you are lending your money to the Government of India without receiving any return. While impact may look smaller to you, this is a bad move in the long term, depriving you of the benefits of compound interest. Even if you’re not a stock market investor, it is useful to have the refund amount in your bank, as you can spend it on something you want or just keep it for safety and security.

  1. Professional help may be limited if filing returns closer to deadlines

A professional may give you more time when you approach him/her to file your returns.  Depending upon how complex your tax filing happens to be, you may benefit from more time with a professional who knows precisely what he/she is doing. If you wait until the last minute, you will have a difficultyin getting time with your accountant or tax expert.

If you start earlier, the professional can go through your data in order to ensure that you’ve availed all the possible deductions, exemptions, etc. This time can save you big money (and your time as well) over the long run.

  1. Waiting longer increases your chances of being noted in default lists

The IT department, with its increased technological push, is now starting to send default notices to people/ corporates/ PAN holders who have not filed their return of income.  The IT department can get hold of your transactions made (as PAN is now increasingly being used in various domains) and therefore, if IT return has not been filed, you may get a notice seeking explanation.

It is always wise to get a jump start on your tax filing. There is no reason to follow the crowd and waiting until the end of July 31 to file. The earlier you file, the better your chances of avoiding mistakes that could potentially cost you a lot of money in interest and penalties down the line. On top of that, you’ll have one less worry as you can concentrate to increase your wealth in current financial year.


Krishi Kalyan Cess – Have you treated it correctly? Applicability and impact on pending invoices/ payments as on June 1, 2016

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As you are aware that the effective rate of service tax has increased from 14.5% to 15% with the introduction of KrishiKalyan Cess (“KKC”) of 0.5% with effect from June 1, 2016.  In this regard, it is to be noted that if the payment is received on or after June 1, 2016, then the service provider will be liable to pay KKC to the Government as per Point of Taxation Rules, 2011.

The applicability of KKC, being a new levy for the first time on services, is governed as per Rule 5 of Point of Taxation Rule, 2011.  The explanation thereto. Rule 5 of Point of Taxation Rules, 2011 is as under:-

“Where a service is taxed for the first time, then –

  1. a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;
  1. b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time.

Explanation 1 – This rule shall apply mutatis mutandis in case of new levy on services.

Explanation 2 – New levy or tax shall be payable on all the cases other than specified above.”

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In lights of the above applicable provisions of the law and explanation thereto, any invoice which has been issued prior to 01-June-2016 for which the payment are made on or after 01-June-2016 shall attract the new levy KKC.

Krishi Kalyan Cess 4To illustrate, if an invoice is issued on May 30, 2016 with a service tax rate of 14.5% and the payment is received on June 2, 2016, then the service provider would be liable to pay KKC to the Government i.e. the effective rate would be 15%.  He will be required to either collect it from his customer or pay from his pocket.

We hereby request and advise you to make the payment on or before 31-May-2016 against invoice already issued. Without prejudice to the above, in the event, wherein, any invoice which remains outstanding as on 31-May-2016, it is necessary that an additional invoice be issued for levy of new tax KKC on such outstanding amount.

It may be further noted that the additional levy of KKC on such outstanding amount shall be eligible for CENVAT credit.

It is to be noted that if such payment is not made, then the service provider will be liable to pay interest and penalty on KKC not deposited based on the above provision.

In case of any clarifications you may contact us on or on +91-70222-51221.

Article Credit – CA Nitin Nahar & CA Mohit Bajaj