Mistakes committed by assessees noticed by CPC

Following are some of the common mistakes that has been identified by the Income Tax Department -CPC 

1. Gender Mismatch
2. Refund claim is more than Rs.25,000/- and the assessee has not filed any balance sheet or profit and loss account.
3. Audit Information not filled up
4. Brought Forward loss has been filled but Carried Forward details are not filled.
5. Wrong business codes in ITR 4S
6. Non filing of gross receipts in P&L Schedule but showing a positive figure during computation of income.

and so on.......

read more at http://220.227.161.86/27063ICAIDTC-ITDCPC.pdf

Family Arrangement

Family arrangement is a transaction between the family members for the benefit of the family. The term family has not been defined under any act, but a vast meaning is provided by the courts by way of judgement. It is an attempt to sink in the differences and settle without the interference of a court or a third party and to maintain the peace and prestige of the family. 

Why Family Arrangement?
Family arrangement is a compromise between the parties where everybody in the said family have a WIN-WIN situation. It saves a lot of time and money, and mainly restores the peace and reputation of a family.




So is it same as Partition of an HUF?
No, Partition of a HUF is different from that of the family arrangement. After a family arrangement the HUF might get partitioned or not, depends upon case to case.


Eg for Family arrangement but not partition of HUF: 
Mr.X is looking after an ancestral property. It was acquired by the government for expansion of road under compulsory acquisition. There is money now in the hands of Mr.X. The family also holds a number of other properties. A family arrangement can be entered into to share the cash received on compulsory acquisition and not to share the other properties. Hence, the HUF still isn't partitioned and holds the other properties. 


Whether family arrangement needs to be registered?
Again this depends from case to case. But one point to be noted is that the family arrangement can be even orally done. Remember the cinemas where the head of the panchayath gives a ruling on distribution of property and all the family member accept. As long as the family arrangement is done is good faith there is no requirement of it being registered.


Does a family arrangement lead to capital gains and in turn is tax needed to be paid to the government?
The term transfer defined in the income tax act does not include family arrangements, logically also there is no transfer of property though there is transfer of ownership. However, these transactions to be called family arrangement needs solid proof. and the transactions needs to be planned properly to save taxes. Ask a CA or a tax practitioner to help you in these cases.


One advice from our team is that if at all you have a family arrangement and get a share in the property by way of cash/cheque, open a bank account in the name of your HUF and deposit it there. Any investments again can be done from the account only to which you will be the karta. This will serve as a tax saving measure to all of you.


Suggestions and Queries welcome.


Contact us at mrpraveen@live.com or post your query on our facebook wall.

Build your own EMI Table in Microsoft Excel

Greetings reader,

This post explains you how to build your own EMI table in Microsoft Excel.

There is a formula in Excel called PMT - It will calculate the EMI payable per month. 

Screenshot 1.1 - Formula "PMT"

In the above screenshot you can see the requirements of the formula PMT

(1) RATE

• It is the rate of interest of the loan. 
• Rate should be per installment. i.e. if installment is payable monthly then rate must be rate per annum / 12 months. If rate of interest per annum is 12% then rate per  month is 1%.

(2) NPER

• Nper refers to the number of installments. 

(3) PV

• Present Value of money or the amount borrowed.

(4) FV

• In an EMI calculation generally the amount at the end of payment of all installments is '0'. If you want some balance to remain at the end of the tenure you need to type in such amount in the FV field.

(5) Type

Value	Explanation
0	Payments are due at the end of the period. (default)
1	Payments are due at the beginning of the period.

The screenshot below is an example by which you can create an EMI Table

The formulas used in the above screenshot are as follows

Hope you can now create your own EMI Table.

Rule of 72

Rule of 72, Rule of 70 & Rule of 69 are a few vedic mathematics techniques used to find out approximately when investment doubles at a given rate of interest.

The Rule of 72/70/69 are applied in the following manner:-
Numerator is always 72/70/69
Denominator is the rate of interest p.a.


But many of the financial wizards find the Rule of 72 most convenient as it can be divided by a number of small numerals like 2,3,4,6,8 & 9


For Example:-

You have a Principle of Rs.10,000.
Rate of Interest = 9% per annum
by applying rule of 72 we get 72/9 = 8 years
Actually it doubles at 8.043 years
so very close.

Further suggested reading about the RULE OF 72 Click on this link

Unique problem with unique TDS Certificate No.

People who have been filing the income tax returns for the AY 2012 - 2013 will all be facing this unique problem with the TDS certificate No.

If you notice in the income tax return we will have to specify the TDS Certificate No. in case of tax deducted at source other than on salary. i.e. in case of Form 16A.

Here we need to enter 8 digits whereas when receiving the Form 16A we get the forms with 6 digits.

The screenshot of the Income tax form and the TDS 16A Certificate is shown below

Picture courtesy: Simpletaxindia.net

Even in the schema for filing income tax return online we will have to specify 8 digits otherwise it shall not allow filing of returns.

So what is the solution for this problem?
Practioners are following this method to solve the problem, but we do not endorse this in our article. They are using 00 before the 6 digits to make it 8 digits.

In case you guys have any other alternatives please share with us.

CARO 2003: Applicability

We have observed that there is a big question on applicability of CARO in the minds of students and professionals esp. for a private company.


So we have decoded the applicability quotient in this article. By reading this I hope you will never forget when to apply CARO and when not to. In case you forget, you always know where to come searching right!!!

"This is what CARO 2003 says about applicability"

The first three clauses are very much self-explanatory and does not have much ambiguity in it. But the problem starts with the (iv) applicability for a private limited company.


Lets break this up further


So for a private limited company --> CARO will not be applicable --> when the following conditions are satisfied.


a) Paid up capital + Reserves are not more than Rs.50 Lakhs 
b) Loan outstanding from bank of financial institution is not more than Rs.25. Lakhs 
c) Turnover does not exceed Rs.5 Crores 


Now arises a question whether all the conditions must be satisfied?


Yes, the clauses are cumulative they have used the word 'and'  & not 'or'.

Hence, ALL THE CONDITIONS MUST BE SATISFIED FOR CLAIMING EXEMPTION
or EVEN IF ONE CONDITION ABOVE IS NOT SATISFIED CARO IS APPLICABLE.

HRA Calculator

   HOUSE RENTAL ALLOWANCE (HRA)

Dependent on the following factors: a)      Place of employment b)      Salary received c)       Rent Paid d)      HRA Received Calculation of HRA is as follows Least of: a)      Actual HRA received b)      50% of the salary (metros: Delhi, Kolkatta, Chennai, Mumbai) 40% of the salary (others) c)       Rent paid in excess of 10% of salary SALARY = BASIC PAY + DEARNESS ALLOWANCE                 Essentials for claiming the HRA Deduction a)      HRA should be a part of the salary b)      Rent must be paid by the employee ·         Rent receipts are required ·         If you are paying any amount to your parents and staying in their house not to worry you can show that as rent as well. (but consider taking an advice before taking this step) ·         If no rent is paid then no deduction

Excel Unused Formula No.2 Min & Max

This is in continuation to our first article Excel Unused Formula No.1 Concatenate

Thanks for the amazing support, we hope that this support continues to all our future posts as well.

Today we will see how minimum function and maximum function works

Minimum Function

We come across a number of clauses in the income tax act where we need to find the minimum amount. For E.g. Gratuity, HRA, 80GG, Leave en-cashment and so on..

We will see "how to automate these calculations in excel"

Here is a snapshot of the HRA Calculation

Figure 1: HRA Caclulator

We were able to make this calculation in 2.5 miniutes, don't believe then try it out yourselves

Minimum function is very simple just type MIN and then choose the data for which you require the minimum value.

Figure 2:Minimum Formula

Maximum Function

Maximum function is the reverse of minimum function. If under any circumstance if you want to find out the maximum value then use MAX and choose the values. You should have the maximum value without much pain.

TAX SAVING TECHNIQUES FOR SALARIED CLASS

 

We have a seen a number of salaried class people being bamboozled during the time of declaration of savings.

 This problem is faced as there is lack of proper knowledge within the organization as the companies are busy planning the company’s transactions over that of employees.

However, there are certain companies which conduct a seminar to all the employees every year helping them to understand the nuances in the area of taxation.

We have a feeling that the finance and accounts department in every organization must have a person who has the basic knowledge at least on the methods in which tax can be saved for employees.

We hope this article will be useful not only to the employees filing up their tax saving declarations but also to the people working the accounts and finance departments.

1.       CONVEYANCE

800 per month are allowed as deduction. Many companies have this standard deduction. In case you are not using it please first claim it.

2.       EDUCATION AND HOSTEL ALLOWANCE

100 per month per child (maximum of 2 children) is allowed as deduction for education & 300 per month per child (maximum of 2 children) is allowed as deduction if they are staying in a hostel. 8 of 10 cases we have found that this deduction has not been used.

3.       HOUSE RENTAL ALLOWANCE (HRA)

Dependent on the following factors: a)      Place of employment b)      Salary received c)       Rent Paid d)      HRA Received Calculation of HRA is as follows Least of: a)      Actual HRA received b)      50% of the salary (metros: Delhi, Kolkatta, Chennai, Mumbai) 40% of the salary (others) c)       Rent paid in excess of 10% of salary SALARY = BASIC PAY + DEARNESS ALLOWANCE                 Essentials for claiming the HRA Deduction a)      HRA should be a part of the salary b)      Rent must be paid by the employee ·         Rent receipts are required ·         If you are paying any amount to your parents and staying in their house not to worry you can show that as rent as well. (but consider taking an advice before taking this step) ·         If no rent is paid then no deduction.

Did you know?

Rent receipts need not be collected from the employees if the value of rent paid is less than Rs.3000/- However, if there is an assessment then rent receipts needs to be produced before the AO by the employee

4.       FOOD COUPONS

o   Food coupons up to Rs.60000 p.a. is allowed as deduction. o   Companies like Sodexho are providing these coupons. o   You can buy your daily groceries by using these coupons

5.       LEAVE TRAVEL ALLOWANCE

Within a block of 4 years one can make use of this twice allowance. If in the previous block you have not used the benefit then you have to option to carry forward the benefit to the next block. Only the travel expenditure is exempt all other expenditures are not allowed as deduction

6.       80C DEDUTIONS

·         You get deductions on certain savings and expenditure up to Rs.1,00,000/- p.a.

·         Some of the allowed payments are life insurance, tution fees (college and school fees, PF, PPF, ELSS or MF’s, NSC’s and so on….)

There are many more deductions available, which we will bring out in the next edition stay tuned for that.

We would also like to say that there are quite a few transactions that could be planned in such a manner that both the company and the employee can claim benefit of. There will be certain clerical work to done if you have plan such transactions.

Please leave your email id or telephone number if you want to know more about this.

Excel Unused Formula No.1 Concatenate

Excel is really a great gift from Microsoft, but are we making use the most of it? This is one question that might strike to all of us. Forget the macros, other than the macros you have a lot of formulae which could help you do your work in a much more simpler and timely manner.

UNUSED FORMULA # 1: CONCATENATE

Figure # 1: Screenshot of the formula concatenate when entered in excel

Concatenate formula helps you to join the contents of two or more cells (max 30) in to a single cell.

We can understand how concatenate can be used through an example.

Example 

I had to enter a list of invoices raised by a company in to excel. All the invoice numbers had a prefix “April”. The invoice numbers were as follows April/1, April/2…… April/100. This is how I used concatenate to reduce my work.

How to pay income tax online?

How to use VLOOKUP formula in excel?

How to use VLOOKUP formula in excel?

Through this article we will explain you “how Vlookup formula works?”

VLOOKUP

When you type ‘=Vlookup’ in your excel sheet you will find the formula help box which states the use of the formula. See Figure 1

Figure 1: The screen which you see when you are entering the formula Vlookup

 

What is VLOOKUP ?

Vlookup looks for a value in a given table, and then returns a value in the same row or column based on your requirements.

 

What is the use of this formula?

We have a small hypothetical database of a cricket team with 7 players in the form of Figure 2

Figure 2: A hypothetical database of a cricket team

We have chosen a small table for explanation purpose only. The real usage of a lookup formula is felt when the database is very large. Now if we were to search the name of the player using his unique sl no. this is how we can do by using the lookup formula

Now let’s learn the components of the formula

a) Lookup_value = It denotes the value you want to lookup it can be cell or the exact value which you want to lookup. In my example let’s say 5

b) Table_array = It denotes the table in which you want to search the values. Here you can select the table from Sl No. to 100, the complete table

c) col_index_num = It denotes the column no. in which you want the value. For example here if I want to find the name of the player 5 then I will say column no. 2 because it denotes name in our column.

d) [range_lookup] = It denotes whether you want exact match or approx match. Here we want exact match hence we will say the same in the formula

If you use the formula then you will get the required answer i.e. "VINAY"

Test for a few and you will learn the art of using the formula lookup.