Entries from May 2016 ↓

Revised Procedure for non-dedcution of TDS against Form 15G / Form 15H

This is most relevant for entities which have borrowed monies from individuals who are not chargeable to tax. An example would be a loan to a private company by the individuals non-working parents or spouse.

Payee can now submit their self-declaration (Form 15G / Form 15H) either in paper form or electronically to the Payer / Deductor.

The Payer / Deductor will, based on this submission, not deduct tax at source (withholding tax) and is now required to allot a Unique Identification Number (UIN) to each self-declaration (Form 15G / Form 15H) received in a given financial year.The Payor / Dedector has to allot the UIN based on 3 fields –

  • 1st Field – Sequence Number: A 10 character alphanumeric (1 letter and 9 digits) sequence starting with “G” for Form 15G and “H” for Form 15H. The sequence number should restart at 1 for each financial year.
  1. Sequence number for 1st Form 15G should be – G000000001
  2. Sequence number for 1st Form 15H should be – H000000001
  • 2nd Field – Financial Year: This represents the financial year for which the Form 15G / Form 15H is submitted as follows 201516 (for financial year 2015-16) or 201617 (for FY 2016-17)
  • 3rd Field – The TAN of the Payer/ Deductor: i.e. the PAN person / entity responsible for deducting TDS (or not deducting TDS in this case).

Combining these three fields gives the UIN for the Form 15G / Form 15H declaration.

  1. UIN for 1st Form 15G of FY 2016-17 should be G000000001201617ABCD12345Z
  2. UIN for 1st Form 15H of FY 2016-17 should be H000000001201617ABCD12345Z

Points to Note:

  1. The payer/ deductor is required to upload all the declarations (paper and electronic) to the Income Tax Department website on a quarterly basis
  2. The payer / deductor is required to furnish the Form 15G / Form 15H declaration in their Quarterly TDS Return, even if no tax has been deducted for the quarter
  3. The PAN of the payee has to be mandatorily quoted
  4. If the payer has not reported the UIN in their Quarterly TDS Return or not uploaded the UIN to the Income Tax website, they have to file an exceptional report
  5. The payer / deductor is required to retain Form No.15G / Form 15H for seven years.

The last date for uploading the Form 15G / Form 15H for 2015-16 is 31st May 2016.

For Quarter 1 of 2016-17 (April to June 2016) the last date for uploading the Form 15G / Form 15H is 31 July 2016.

Full text of the notification is available here.

Unlisted shares held for 24 months or less to be now treated as short-term capital gains / losses

Gains / Losses from sale of unlisted shares would be treated as short-term capital only if the shares are held for 24 months or less, as against the earlier period of 36 months.

Thus, gains / losses from unlisted shares held for more than 24 months would classify as long-term.

This distinction is crucial, especially to investors in start-ups as the short-term meant income tax at the slab applicable, while long-term means a flat 10% income tax without the benefit of indexation on purchase cost or 20% income tax with the benefit of indexed cost of purchase.

Tax to be Collected by Seller of Goods / Provider of Services in certain cases

A seller of goods or provider of services is from 1st June 2016 required to collected tax at 1% from the buyer of goods / receiver of services, if whole or part of the payment is made is cash.

Luckily this is not a blanket provision and applies only to transactions / invoices of over Rs2 lakhs for goods (including bullion) and services and Rs5 lakhs for purchase / sale of jewellery.

The 1% tax is to be collected when the cash portion is received and the tax should be collected on the full value of invoice (and not only on the cash portion)

Do note that this Rule is applicable irrespective whether the buyer or goods / receiver of services is a manufacturer, trader or the purchase is for personal use.

Exception: The seller of goods / provider of services is not obliged to collect the tax, if the buyer has deducted the tax at source from the payment being made. IN other words, the seller of goods / provider of service is not required to collect tax if the buyer of goods / recipient of service has deducted tax at source.
For example: If M/s A rendered the services to Mr Z for Rs2 lakhs and Mr Z deducts TDS on this Rs2 lakhs before making the payment to M/s A, then M/s A is required to collect TCS from Mr B.

Change in Due Dates for TDS Return

From the first quarter of financial year 2016-17, i.e. April to June 2016 quarter, the due date for filing TDS returns has been revised. The new dates have increased from the earlier period by 15 days. The full annual schedule is below:

Revised TDS Return Due Dates

Quarter Ending Due Date to File Return
30th June 31st July
30th September 31st October
31st December 31st January
31st March (tax year end) 31st May

Form 12BB to be submitted by Employees to the Employer

A recent change in the Income Tax Act has now standardised the format in which all employees have to submit their tax, savings and investment declaration.

As an employer, you have to deduct TDS based on these declarations by the employee.

Briefly the employer needs to collect Form 12 BB along with the evidence as below:

Nature of Claims Evidence or Particulars
House Rent Allowance (HRA) Name, address and Permanent Account Number (PAN) of the landlord, where the aggregate rent paid during the previous year exceeds INR 1 lakh
Leave Travel Concession or Assistance (LTA) Evidence of expenditure
Deduction of interest under the head “Income from House Property” Name, address and PAN of the lender
Deduction under Chapter VI-A Evidence of investment or expenditure

The declaration is in Form 12BB and is available here in excel format (13kb) and here in pdf format (38kb).

Full Text of the Notification is available here.