SECTION – 54GA CAPITAL GAINS ON TRANSFER OF ASSET FROM URBAN AREA TO SPECIAL ECONOMIC ZONE

SECTION – 54GA CAPITAL GAINS ON TRANSFER OF ASSET FROM URBAN AREA TO SPECIAL ECONOMIC ZONE

 

What is the nature of Capital Asset?

Section 54GA covers the transfer of industrial undertaking from Urban areas to Special Economic Zones

For the purpose of this section, industrial undertakings mean land, building, plant or machinery or right in land or building used for the purpose of business.

Here “Urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this sub-section.

 

Who can claim exemption under this section?

  • The benefit of section 54G is available to all the assessee.

 

What is the amount of exemption that can be claimed under this section?

Scenarios Amount of Exemption Cost of New Asset if sold within Lock-in Period*
Capital Gains < Amount Reinvested Full amount of Capital Gains shall be exempt Cost shall be reduced by the amount of capital gains for which exemption was claimed earlier.
Capital Gains > Amount Reinvested Difference between Capital Gains and amount reinvested shall be taxable under head Income from Capital Gains Cost of the new asset shall be NIL

 

*Lock-in period for New Property: The said property cannot be transferred for a period of 3 years after acquisition, transfer, construction or purchased.

 

What are conditions to be fulfilled for claiming exemption?

  • Purchased machinery or plant for the purposes of business of the industrial undertaking in the Special Economic Zone;
  • Acquired building or land or constructed building for the purposes of his business in the Special Economic Zone;
  • Shifted the original asset and transferred the establishment of such undertaking to the Special Economic Zone;
  • Incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government.
  • The transfer, purchase, acquisition or construction of new asset should be made one year before or three year after the date of such transfer.

 

What if the capital gain amount is not used in the year of sale before filing return?

  • Such amount should be deposited with the CGAS account.

 

What if the deposited amount is not utilized within the period given time period?

  • If the deposited amount is not utilized within the period of 3 years from the date of original transfer, such amount will be taxable as capital gain in the PY in which the 3 years’ time period expires.

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.

 

Section 54G – Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from Urban area to Non-Urban area

Section 54G – Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from Urban area to Non-Urban area

 

Nature of Transfer covered under Section 54G

The section 54G covers the transfer of a capital asset due to shifting from urban areas to a non-urban area.

For the purpose of this section, the industrial undertaking means, machinery, or plant or building or land or any rights in building or land which is used for the purposes of the business.

For this section, the phrase, “urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this sub-section.

 

Who can claim the benefit of the exemption?

The benefit of section 54G is available to all the assesses.

 

What should be the period of holding or usage of the property sold?

There is no precondition of holding the industrial undertaking for any specific time. Hence, it can be short term or long term.

 

What is the criterion for and amount of tax that can be exempted?

The criterion for exemption is reinvestment of capital gains from the sale proceeds of the residential house sold.

The amount of exemption shall be as follows:

Scenarios Amount of Exemption Cost of New Asset if sold within Lock-in Period*
Capital Gains < Amount Reinvested Full amount of Capital Gains shall be exempt Cost shall be reduced by the amount of capital gains for which exemption was claimed earlier.
Capital Gains > Amount Reinvested Difference between Capital Gains and amount reinvested shall be taxable under head Income from Capital Gains Cost of the new asset shall be NIL

 

*Lock-in period for New Property Purchased or constructed: The said property cannot be transferred for a period of 3 years.

 

What are the conditions for claiming this exemption?

The exemption will be available only when the assessee has within a period of one year before or three years after the date on which the transfer took place:

  • purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted.
  • acquired building or land or constructed building for the purposes of his business in the said area.
  • shifted the original asset and transferred the establishment of such undertaking to such area; and
  • incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section.

 

Concept of Capital Gains Account Scheme

In case you could not utilize the amount as per the prescribed conditions up to the date of filing the Income tax return under section 139 (1). You still have the option to get away with the capital gains by depositing the amount of capital gains in a specified account with the banks named as ‘Capital Gains Account Scheme’.

The purpose of keeping the money in this account is to ensure that double benefit should not be given to any assessee i.e. exemption as well as liberty to use money as per choice. The amount deposited in this account can only be used for the purpose prescribed. This money is to be utilized within a period of 3 years from the date of transfer of original asset. In case, there is any unutilized amount is there, the same shall be taxable as Capital Gains in the previous Year when the time of 3 years expires.

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.

 

Return of Income – Various Institutions

Return of Income – Various Institutions

 

  • Section 139(4A): Charitable & Religious Trust or Institutions

Liable to file ROI, if the total income exceeds the maximum amount not chargeable to tax. Here, total income means income before giving exemptions under Section 11 & 12.

If the return is filed after the due date specified in Section 139(1), the exemptions under Section 11 & 12 shall not be available for the Charitable or Religious trust.

  • Section 139(4B): Political Parties

Liable to file ROI, if the total income exceeds the maximum amount not chargeable to tax. Here, total income means income before giving exemptions under Section 13A.

If the return is filed after the due date specified in Section 139(1), the exemptions under Section 13A shall not be available for the Charitable or Religious trust.

  • Section 139(4C):

It covers following institutions:

  • Hospitals, medical institutions, schools, colleges and other specified institutions referred to in Section 10;
  • Investor protection fund;
  • Core Settlement Guarantee Fund;
  • Tea/ Coffee/ Rubber/ Tobacco/ Spices Board
  • Associations set up for regulation of profession of Law, medicine, accountancy, engineering or architecture
  • Infrastructure debt fund referred to in section 10(47), Mutual Fund, Securitization Trust, Trade Union;
  • Recognized Provident Fund, Approved Superannuation Fund and Approved Gratuity Fund

Liable to file ROI, if the total income exceeds the maximum amount not chargeable to tax. Here, total income means income before giving exemptions under Section 13A.

  • Section 139(4D): University, College or Institutions

Return of Income to be filed under this section, if it is not required to be filed under any other provision of section 139. Such return will be treated as a return filed under Section 139(1).

  • Section 139(4E): Business Trust

Return of Income to be filed under this section, if it is not required to be filed under any other provision of section 139. Such return will be treated as a return filed under Section 139(1).

  • Section 139(4F): Investment fund referred to in section 115UB

Return of Income to be filed under this section, if it is not required to be filed under any other provision of section 139. Such return will be treated as a return filed under Section 139(1).

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.

 

MSME Registration

What is MSME?

On the basis of the size of the enterprises it is classified into three categories i.e. Micro, Small & Medium enterprise, which is Known as MSME.

Classification of Enterprises          

The enterprises are classified on the basis of turnover & investment in plant & machinery.

There are 3 types of enterprises:

Enterprise Turnover Investment (Plant & Machinery)
Micro Less than 5 crore Less than 1 crore
Small Less than 50 crore Less than 10 crore
Medium Less than 250 crore Less than 50 crore

 

Composite criteria of Investment & Turnover 

  • A composite criterion of investment & turnover will apply for classification of enterprise into micro, small & medium.
  • It means that, if either of the criteria does not satisfy and exceeds the maximum limit. The enterprise ceases to be the part of that category and will fall in the higher category.
  • But, if any of the criteria go below the ceiling limit of the lowest classification, in that class enterprise will not fall under the lower category.
  • The investment & turnover values for the enterprises having GSTIN against same PAN shall be seen together for the criteria of micro, small & medium enterprise.

 

How to calculate investment in Plant & Machinery?

The term “Plant & Machinery” shall have the same meaning as in the Income tax Rules, 1962.

Status of Enterprise Calculation of Plant & Machinery
Existing In this case, the calculation of investment in plant & machinery or equipment will be linked to Income tax return of the previous years as files under the Income Tax Act.
New Enterprise In this case, the calculation of investment in plant & machinery will be based on self-declaration of the promoter. The purchase (invoice) price of the machinery will be taken into account excluding GST.


How to calculate turnover of the enterprise?

  • Export of services or both shall be excluded while calculating turnover of the firm.
  • Information regarding turnover or export turnover shall be linked to Income Tax Department or GSTIN.
  • Turnover figures of those firms not having PAN shall be considered on the basis of self declaration up to 31st March, 2021, and thereafter it is mandatory to have PAN and GSTIN.

 

Registration Process for New enterpriseClick here for Registration

  1. Fill the registration form provided in the Udyam Registration Portal.
  2. You don’t have to pay any fee for filing Udyam registration.
  3. Aadhaar card will be required for registration. (In case of proprietorship firm, aadhaar card of proprietor will be required; of the managing partner in case of a partnership firm; of Karta in case of a HUF).
  4. In case of a Company or LLP or Cooperative society or a Trust, the organization or its authorized signatory shall provide GSTIN and PAN along with its Aadhaar card.
  5. No enterprise shall file more than one Udyam Registration. Any number of activities including manufacturing or service or both shall be added in one Udyam registration.

 

Registration Process for Existing enterpriseClick here for Registration

  1. All the existing enterprises registered under EM-Part-II or UAM shall re-register on the Udyam registration portal or on after 1st July, 2020.
  2. The existing enterprises registered before 30th June, 2020, shall continue to be valid till 31st March, 2021. They will be re-classified in accordance with the notification dated 26th June, 2020.
  3. An enterprise registered with any other organization under the Ministry of micro, small or medium enterprises shall register itself under Udyam Registration.

On successful completion of registration, an e-certificate, namely, “Udyam Registration Certificate” shall be issued on completion of the registration process having a permanent identity number to be known as “‘Udyam Registration Number”.

Penalty for Misrepresentation

Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process shall be liable to such penalty as specified under section 27 of the Act.

  • For the first conviction, it may extend to Rs. 1,000
  • On second or subsequent conviction, penalty shall not be less than Rs. 1,000 which may extend up to Rs. 10,000.
  • In case of a contravention by a buyer, the fine shall not be less than Rs. 10,000

 

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Due Dates of Filing Income Tax Returns – Section 139

Who is liable to file return under this section?

Every company or a firm or a person other than a company or firm is obligated to file Return of Income under this section. However, a person other than a company or firm is obligated, only if, its total income exceeds maximum amount not chargeable to tax.

 

What is the due date for filing return?

There are different due dates for different person, gives as below:

  • 30th November of AY for any assessee who is required to furnish report of transfer pricing under Section 92E
  • 31st July of AY for any other person not covered in above 2 cases.
  • 31st October of Assessment Year (AY) for following:
    – Company
    – Audit required under Income tac Act or any other law
    – Partner of firm whose accounts are required to be audited

 

Penalty/Fee in case of failure of filing return before or on due dates

A person will be liable to pay fee under section 234F, if he defaults in furnishing Return of Income (ROI) under section 139 (1) [which includes Section 139(4A), 139(4B), 139(4C), 139(4D), 139(4E), 139(4F)].

The fee in the following case will be:

  • Rs. 5000, if the return is furnished on or before on the 31st December of AY
  • Rs. 10,000 in any other case.
  • However, this fee will not exceed Rs. 1,000 in the case of a person whose Total Income does not exceed Rs. 5 lakhs

A person is liable to pay penalty under Section 272A, if fails to file ROI under Section 139 (4A)/(4C)

The penalty will be Rs. 100 per day during which failure continues.

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.

Belated Return – Filing of Return after due date – Section 139 (4)

What is a Belated return?

A belated return is a return of income filed after the due date of filing of Income-tax return as prescribed in the Income-tax law.

Although the term ‘Belated Return’ is not defined in the Income-tax law. The law relating to belated return is given under sub-section 4 of section 139 of the Income-tax law. As per section 139 (4) of the Income-tax act says:

If a person has not filed his return of income within the time allowed under section 139 (1) then he may file, the return of income at any time:

  • Before the end of the relevant assessment year, or
  • Before the completion of the assessment

Whichever is earlier.

What is the meaning of the end of the Relevant Assessment Year?

Relevant Assessment Year (AY) means the assessment year for any Previous Year for which the return of Income is to be filed. For example:

If Mr. Gupta wishes to file his return for FY 2020-21 for which the relevant assessment year is AY 2021-22 and he could not file the same within the time allowed under section 139 (1) (i.e. the prescribed due date of filing an Income tax return). He can file his return up to the end of the relevant assessment year i.e. March 31, 2022.

Completion of Assessment

The phrase ‘Completion of assessment’ is not defined under the Income tax law. It derives its meaning from the various judgement by courts. In general, an assessment can be said to have been completed when the order of assessment is passed.

Other Frequently Asked Questions (FAQs) in relation to Belated Return

  1. If Mr. Gupta has made any mistake in the belated return filed by him, whether the same can be corrected by revising the belated return? Or

Whether a belated return can be revised?

Answer: Yes, a belated return can be revised. The time limits for the same are mentioned under section 139 (5) (Revised Return) which deals with the provisions of revising a return of income.

  1. Is Mr. Gupta required to pay any Interest if he is going to file a belated return?

Answer: Yes, interest under section 234A of the Income-tax act is required to be paid on the taxes unpaid or paid after the relevant due dates of payment of tax @1% per month on the simple interest basis. For the purpose of this calculation, part of the month will be treated as a full month.

In case, where Mr. Gupta has paid all the taxes in time, there is no requirement of payment of any interest under section 234A even when the return is filed as a Belated return.

  1. Is Mr. Gupta required to pay any penalty if he is going to file a belated return?

Answer: Yes, for the belated return filed, there is a fee to be paid under section 234F of the income tax act, which says the following:

  1. 5000, if the return is furnished on or before on the 31st December of A.Y.
  2. 10,000 in any other case.
  3. However, this fee will not exceed 1,000 in the case of a person whose Total Income does not exceed Rs. 5 lakhs

 

  1. Whether a refund can be claimed through a belated return?

Answer: Yes, a refund can be claimed through a belated return.

  1. Whether a loss is eligible to be carried forward if filed through a belated return?

Answer: No, a loss under head Profit and gains from business or profession and capital gains can not be carried forward if the return of income is filed after the due date.

However, the loss under head ‘Income from House property’ can be carried forward if return of income is filed after the due date.

Unabsorbed Depreciation can also be carried forward if the return of income is filed after the due dates as mentioned in Section 139 (1).

  1. Is set-off of losses carried forward from earlier years is allowed if the return is filed as a belated return?

Answer: Yes, the setoff of losses is allowed even if the return of income is filed after the due date.

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.