Direct Tax Advisory Services

At SGA we are continuously endeavouring to help the clients achieve the desired results through customized and innovative solutions. We are focused on exploring opportunities and leveraging them to enhance the advantage to the clients in the form of significant tax savings.

We at SGA provide the following Direct Tax Advisory Services :

  • Corporate and Personal Tax Compliance
  • Tax Planning for Corporate and Individuals, Residents & Non-Resident Indians
  • Tax Planning for Overseas entities desirous of setting up a business in India
  • Transfer Pricing Audits U/s. 92 E (in select cases)
  • Tax Audit U/s. 44 AB of the Income Tax Act, 1961.
  • Certification for Form 15CB required by Residents and Non Resident Indians for remitting funds outside India.
  • Representation Services at various Tax Authorities

Today, Corporate and Individuals both are required to comply rigorously with numerous essential Income Tax Compliances. These time bound compliances require expert knowledge & experience, and are quite technical in nature.

Moreover, majority of the Income Tax & GST Compliances now-a-days are required to be completed on-line and need specialized knowledge and expertise. We at SGA , exclusively specialize in providing Time-bound and reliable Tax services to its numerous clients of diverse sectors.

Broadly taxes in India are divided into two categories :

  • Direct Taxes (Income Tax)
  • Indirect Taxes (Goods & Service Tax)

Taxation is an extremely complex subject and needs professional skill of the highest order and the consultant has to be constantly updated of frequent changes and modifications made in the Income tax laws and rules from time to time to be able to guide aptly in tax planning, documentation and represent the cases skilfully. Even a minor lapse can cost huge money to an assessee.

So we offer pragmatic solutions to manage the affairs in the most tax efficient manner. We at SGA have an aptitude for providing expert advice in tax planning.

As Indian taxation is prone to many changes, so decision making should be perfectly updated with new amendments. After conducting in-depth analysis of the changes we send reports which communicate the changes lucidly and in simple layman language for each comprehension.

Income earned in a financial year is liable to tax as per the rates prescribed for that year. A financial year runs from 1 April to 31 March of the following year. India follows a residence based taxation system. Broadly, taxpayers may be classified as residents or non-residents. Individual taxpayers may also be classified as ‘residents but not ordinary residents’.

An Indian company is always an Indian resident. Additionally, any other company whose affairs are wholly controlled and managed from India is also a resident. Any other company would be a non-resident.

Resident Companies :

In general Indian resident companies are liable to tax at 25% plus surcharge & education cess as applicable from the Financial Year 2018-19.
It is also important to note that from Financial Year 2020-21, Dividends distributed by the company are taxable in the hands of the shareholder.

Tax Rates for Corporates:

PARTICULARS FOR ASSESSMENT YEAR 2021-22
Total Turnover Or gross receipt during the previous year 2017-18 does not exceed RS 400 crore 25%
Companies opting for Section 115BA, provides that the income from business of a newly set up domestic company on or after 1st March 2016, engaged in business of manufacture or production of any article or thing and research in relation thereto, or distribution of such article or thing manufactured or produced by it, subject to conditions specified therein. 25%
Companies opting for Section 115BAA, when total income of the company is computed without claiming specified deductions, incentives, exemptions and additional depreciation. 22%
Companies opting for Section 115BAB, for the domestic companies, engaged in manufacturing activities and incorporated on or after 01-10-2019 15%
Any Other Domestic company 30%
Foreign Companies 40%

Non-resident Companies :

Non-resident companies are typically liable to tax at 40% plus surcharge & education cess as applicable. However, income from long-term capital gains is taxable at the rate of 20% plus surcharge & education cess as applicable.

A Tax Audit is an audit, made compulsory by the Income Tax Act, if the annual gross turnover/receipts of the assessee exceed the specified limit. Tax audit is conducted in Sec 44AB of the Income Tax Act by a Chartered Accountant.

Applicability of tax audit:

Business Sales / Turnover or Gross Receipt exceeds INR. 1 Crore (INR. 5 crore if the cash receipts and payments do not exceed 5% of the total receipts and payments respectively)
Profession
(For Ex. Architect, Advocate, Accountants, Doctors, etc.)
Gross Receipts Exceeds INR 50 Lacs
Business u/s 44AD If the Sales/Turnover or Gross Receipt is less than INR 2 Crore if such person is enrolled under the presumptive taxation scheme who claims that the profits of the business are lower than the profits calculated in accordance with the presumptive taxation scheme (presently this threshold limit is 8% profit on the sales / turnover or gross reciepts) would be required to obtain a tax audit report.
Profession u/s 44ADA Declaring the income at amount less than 50% of the gross receipts and whose income exceeds the basic exemption limit (which is Indian Rs 2.50 lacs at present) for relevant previous year but whose gross receipts are less than INR. 50 lacs.

If the assesses who is qualified under the presumptive taxation scheme but opts out of it after a specified period, he would lose the ability to revert back to the presumptive taxation scheme for a continuous term of 5 assessment years after the decision to opt out is taken.

30th September is the due date to filing tax audit report under Section 44AB of the Income Tax, 1961 in India for all the assesses.

If a taxpayer who is required to obtain tax audit does not get the accounts audited, before the due dates, then penalty could be levied under Section 271B of the Income Tax Act.

  • 0.5% of the total turnover/gross receipts of the relevant financial year.
  • OR
  • Rs. 1,50,000. Whichever is lower.

However, according to the section 273B, no penalty would be imposed on the person if valid reason for such failure is proved. Thus, tax audit is a very important requirement under the Indian Income Tax Laws who are required to undergo such an audit. Failure to comply with the income tax rules would attract penalty and those wishing to avoid any penalty should ensure full compliance with all the rules of the income tax audit.

In India, Chartered Accountantsholding Certificate of Practice issued by the Insititute of Chartered Accountants of India will audit the accounts and prepare the report as prescribed in Income Tax Act..

Form 3CA, 3CD

Audit Report Form in case where accounts of an assesses has been audited under any other law.

Form 3CB, 3CD

Audit Form in case accounts of an assesses are not being subject to audit under any other act except Income tax Act.

Transfer Pricing Audits

In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Transfer pricing provisions are applicable on international transactions and specified domestic transactions between associated enterprises (AE).

International transactions refers to transactions between two or more AEs involving one of the following activities:

  • The sale, purchase, or lease of tangible or intangible property;
  • The provision of services or cost-sharing agreements;
  • The lending or borrowing of money;
  • A transaction of business restructuring or reorganization with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets and/or
  • Any other transaction with a bearing on the profits, income, losses, or assets of such enterprises.

Relationships falling under the AE category include direct or indirect participation in the management, control, or capital of an enterprise by another enterprise. hey also cover situations in which the same person participates in the management, control, or capital of both the enterprises.

Safe harbour rules:

Safe harbour in tax parlance refers to the circumstances under which income-tax authorities accept the transfer price declared by the company, at which it transacts with its subsidiaries or an associated company, without any question.

On June 7, 2017, the Central Board of Direct Taxes (CBDT) in India revamped safe harbour rules to align safe harbour margins with industry standards and enlarge the scope of international transactions under it.

Methods to determine the arm’s length price

For tax purposes, companies are required to record the exchange of goods using the arm’s-length principal.
India’s Income-tax Act, 1961 prescribes the following methods to determine the arm’s length price between two affiliated companies:

  • Comparable Uncontrolled Price (CUP) Method;
  • Resale Price Method (RPM);
  • Cost Plus Method (CPM);
  • Profit Split Method (PSM);
  • Transactional Net Margin Method (TNMM);
  • Such other methods as may be prescribed.

Domestic transfer pricing

Till March 2013, the transfer pricing provisions were limited to international transactions alone. From April 2013 Transfer Pricing provisions have been extended to SDTs (Specified Domestic Transactions) and are applicable from the assessment year 2013-14.

Transactions which are covered under the Specified Domestic Transactions include:

  • Expenditures in which payment has been made or would be made to:
  • A director
  • A relative of the director
  • An entity where a director or the company has the voting interest exceeding 20%
  • The above transactions would be treated as Specified Domestic Transactions only if the aggregate value of such transactions exceeds INR 5 crore. However this threshold has been increased to INR 20 crores from AY 2016-17.

Transfer pricing documentation:

Taxpayers are required to maintain information related to international transactions undertaken with AEs.

The rules prescribe detailed information and documentation that must be maintained by the taxpayer. Such requirements can broadly be divided into two parts.

The first part includes information on the ownership structure of the taxpayer, a group profile, and a business overview of the taxpayer and AEs, including prescribed details such as the nature, terms, quantity, and value of international transactions.

The rules also require the taxpayer to document a comprehensive transfer pricing study.

The second part of the rules requires that adequate documentation is maintained to substantiate the information, analysis, and studies documented under the first part of the rule.

It also contains a recommended list of such supporting documents, including government publications, reports, studies, technical publications, and market research studies undertaken by reputable institutions, price publications, relevant agreements, contracts, and correspondence.

Taxpayers having aggregate international transactions below the prescribed threshold of INR 1 Crore and Specified Domestic Transactions below the threshold of INR 20 Crores are relieved and exempted from maintaining the prescribed documentation.

However, it is essential that the documentation maintained should be adequate to substantiate the arm’s length price of the international transactions or specified domestic transactions.

Companies to which transfer pricing regulations are currently applicable are required to file their tax returns on or before September 30th, following the close of the relevant tax year.

Address

Sachin Gujar & Associates,
Chartered Accountants
47/22, Erandwana, Law College Road,
Ekta Apts, 3rd Floor, Above Nirmitee Furniture,
Pune - 411004

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