Interest on PF to Attract Tax

Employee Provident Fund (EPF) is quite common among all of us. If an employee’s contribution to the EPF account is more than INR 2.5 lakhs, then the interest earned on the excess amount will attract tax. For such EPF members, the government will open a new EPF account, in which the excess amount and the related interest get credited.

The new regulation is applicable to the PF contributions made in the previous financial year, i.e., FY 2021-22. However, all the contributions up to INR 2.5 lakh will remain tax-exempt, and the interest on the same will be credited to the same EPF account. A new EPF account will be opened for contributions exceeding INR 2.5 lakhs in the previous FY. The interest credited on the excess amount in the new account attracts tax and is payable by the employee.

For government employees and for those not having an employer’s contribution, the threshold is INR 5 lakhs. 

Chance to File Missed IT Returns 

According to the new subsection 139 (8A) of the Income-tax Act, a taxpayer can file an updated income tax return (ITR) in case of any missed filings or errors in the previous filing. 

An updated return can be filed within 3 years from the end of a financial year. Irrespective of whether or not an individual filed an original or belated ITR, the updation can be made. However, a penalty of 25% to 50% on the additional tax will be charged for such corrections. 

Income from Virtual Digital Assets is Taxable

Another new section has been introduced to the Income-tax Act, section 115BBH, according to which any income from virtual digital assets (VDA), including bitcoin, cryptocurrency, non-fungible tokens, dogecoin, etc., is taxable.

The new taxation is effective from the current financial year, FY 2022-23. A flat 30% will be levied on gains from such virtual assets along with 1% TDS, which will come into effect from 1st July 2022. 

For individuals/HUFs, the threshold limit for TDS would be INR 50,000 a year. Also, the cryptocurrency or any other VDAs received as gifts also attract tax in the hands of the receiver. Further, the government also clarified that income from one VDA cannot be used to set off against the losses from other assets. 

No Interest Subsidy on Affordable Home Loan Interest

The affordable housing scheme under the Pradhan Mantri Awas Yojana (PMAY), which provided an interest subsidy on housing loans up to INR 2.67 lakhs is not extended to the current financial year. Only the home loans sanctioned on or before 31st March 2022 under section 80EEA are eligible for the scheme. 

Therefore, taxpayers who are planning to buy affordable homes in the current fiscal will no longer be eligible for any interest subsidies. However, they can still avail of the subsidies on home loan interests under section 24 for a maximum of up to INR 2 lakhs.

Tax Benefit on the National Pension System (NPS) 

As per Section 80CCD(2), state government employees can now claim a tax benefit on the NPS made by the employer. They can avail of a tax benefit of up to 14% of their basic salary and dearness allowance. 

Higher TDS if ITR is not filed

As announced in the latest Budget 2022-23, if an individual fails to file income tax returns for one year, he will be charged with higher TDS and TCS in the next financial year. The higher TDS will be deducted from dividend income, interest income, etc. However, the TDS will not be applicable to salaries and provident fund accounts. 

Senior Citizens Exempted from ITR filing

Senior citizens aged 75 years and above are exempted from filing IT returns starting this financial year. However, besides providing a declaration to the bank, the seniors also need to meet certain criteria to become eligible for the exemption. 

All the above-mentioned regulations become effective from 1st April 2022. 

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For Exporters and SEZ suppliers

Need to apply for the Letter of Undertaking (LUT) for the financial year 2022-23 in form GST RFD 11 under rule 96A. Through the LUT, the exporter declares that all the requirements prescribed under GST are fulfilled while exporting without making IGST payment. 

For business below INR 5 Crore Turnover

Need to select return filing frequency. If businesses wish to opt-out from the QRMP Scheme for the 1st quarter ending June 2022, the last date is 30 April 2022.

For GST registered buyers

To avail of missing ITC for the financial year 2021-22, GST registered buyers need to file the returns before the due date. 

For sellers

Need to issue credit notes related to the previous financial year, 2020-21, before the due date, which is 30 November 2022. 

Input Tax Credit (ITC) Related Activities for 2021-22

• Avail unclaimed ITC in GSTR3B and reconcile ITC according to the account books. 
• Check for any missing ITCs that are to be claimed and are populated in GSTR 2A or 2B
• Ask the suppliers to include transactions in GSTR 1 for them to get populated in your GSTR 2A/2B
• Make sure all the ITCs availed are eligible for the claim. Any ITC availed on a blocked input tax credit or ITC on exempt supplies need to be reversed along with interest. 
• Make sure all the pending payments to the suppliers beyond 180 days from the date of supply are cleared. If any ITC is availed without payment in the stipulated time, then such ITCs need to be reversed along with 18% interest. 
• If any supplier is registered under the Composition scheme and collected GST. You need to reverse ITCs availed on such suppliers along with interest. 
• Send notifications to all suppliers whose registration is cancelled for non-filing of returns or non-payment of taxes. 

Outward Supplies Related Activities for FY 2021-22

• Reconcile taxable, exempt and non-GST supply turnover with accounting books and make sure GSTR 1 and GSTR 3B are filed. 
• Check for any missed invoices and e-way bills. 
• For all the B2B, export invoices and debit, credit notes requiring e-invoice provision, check if IRN is generated.
•  Find out any credit and debit notes and report them.
• Make tax payment, if any missed or short paid, and pay it along with interest. 
• Make adjustments to GST paid in advance and report the same in GSTR 1 and GSTR 3B.
• Make sure to pay GST on all other income and sale of vehicles, property, etc.
• Prepare self invoice for the payment made for RCM D.
• Double-check if the business location is correctly reported in the GST registration certificate. 
• Ensure the disclosures on various invoice documents, including sales invoice, delivery challan, self-invoice, and others, comply with GST laws. 
• Also, check if the account books are maintained as per GST norms. 

Make sure everything related to your business is taken care of to be in compliance with the GST norms. Doing it would allow you to have a smooth closure of the financial year. 

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The post Things Businesses Need to do Before the Financial Year End 2021-22 appeared first on MyBillBook.

With a large number of small businesses and MSMEs still struggling to get back to normalcy due to the ongoing pandemic, the Union Budget 2022-23 assumes great significance to them. 

The finance ministry itself asked the trade bodies from the industry for the recommendations on the taxation. Based on their suggestions and the expectations from industry experts, below are some important reforms, policy changes and other measures that the finance government is likely to announce during the current budget. 

Budget 2022: Live Updates

Budget 2022 Expectations For Small Businesses

• Online Business Without GST Registration: Small online businesses with an annual turnover of less than INR 40 lakh are expected to be exempted from GST registration. This would encourage most self-employed women, artisans and other home-based businesses to sell their products online.

• Reduce Compliance to Ease Business: Simplifying GST compliance requirements and others like licencing, audit, loans, etc., is expected to encourage small businesses to go online and contribute to the country’s digital economy. 

• Better Infrastructure to Support e-Commerce: Facilitating better infrastructure in terms of roads, highways, railways, shipping ports, cold storage, warehousing, which form a critical part of the e-commerce supply chain, would help e-tailers serve more customers and also encourage more people to start an e-Commerce business.  

• Other Expectations
  • Reduction in taxes considering the increasing petrol and diesel prices.
  • Tax SOPs for mergers and acquisitions in the retail and service industries.
  • Improving digital infrastructure to encourage small online businesses. 
  • State-wide incubators to encourage innovation.
  • Incentives and support for inventory management. 
  • Budget allocation for digital literacy, cultural employment, and the linguistic ability for small businesses and direct to consumer (DTC) companies. 

Budget 2022 Expectations For SME’s and MSMEs

• GST Rationalization: The GST on manufacturing for MSMEs is expected to be revised from 18% to 12% to help small manufacturers sell their products at competitive prices.

• Tax Benefit on R&D: The tax advantage on research and development is expected to be returned to its previous 200% from 150%.  

• Resolve Delayed Payments: Despite the launch of MSME SAMADHAAN – Delayed Payment Monitoring System in 2017, the issue of delayed payments is still troubling the MSME sector. The Budget 22-23, is expected to implement measures that would expedite the process. 

• Easy Access to Capital: More capital availability would help MSMEs cope-up from the loss incurred during the pandemic situation. Fast tracking the Fund of Funds scheme, restructuring the loans, moratorium, and providing special incentives are some of the expected measures to ease the access to capital. 

• Other Expectations
  • Extension of Emergency Credit Guarantee Scheme for six more months.
  • Empowering bank credit managers with the discretion of relaxing the credit norms for 3-6 months.
  • Appointing baning ombudsman to address the issues like credit rejection from the bank managers. 
  • Amendment of the Insolvency and Bankruptcy Code (IBC) for better recovery of dues from MSMEs.
  • Incentives for using digital banking practices.
  • Paper-less approvals
  • Bringing down the cost of raw material.
  • Strengthening export infrastructure. 

Budget 2022 Expectations For Start-Ups

• Special Financing Schemes: To support the start-up ecosystem some specially formulated financing schemes are the need of the hour. 

• Framework to Regulate Crypto Currency Start-ups: A directional clarity on the framework to regulate the usage of crypto currencies and the associated start-ups.

• Rationalising taxes on Consumer Durables: The consumer durables sector is expecting more products to be brought under the 18% slab. It is also looking forward for  some incentives and promoting R&D. 

• Tax Incentives for Women-led Firms: Standard deduction and ease of access to capital are the expectations of women-led start-ups. 

• Effective implementation of National Logistics Policy is one of the major demands of logistics start-ups.

• Fashion start-ups are looking for reduced GST on readymade garments, easier compliance, and simplified taxation process. 

• Digital lending start-ups expect the government to develop digital infrastructure and to provide tax incentives to MSMEs. 

Click here for Budget 2022 live updates

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