Income tax - Provisions

a resident partner or shareholder is compulsory in most cases when a foreign citizen or OCI wants to set up a business in India. But the requirement depends on the structure (Company vs LLP) and the type of foreign investor . ✅ 1) Private Limited Company (Foreign Shareholders) Resident Director Requirement For a private limited company , at least one director must be an Indian resident . 📌 Resident Director Rule: Must be a resident of India Resident means: Stayed in India ≥182 days in the previous financial year Shareholder Requirement Resident shareholder is NOT compulsory Company can have 100% foreign shareholding But at least one resident director is mandatory ✅ 2) LLP (Limited Liability Partnership) Resident Designated Partner Requirement For an LLP, at least one Designated Partner must be an Indian resident . 📌 Resident DP Rule: Resident = stayed in India ≥120 days in the previous financial year Partner Requirement Resident partner is NOT mandatory But resident designated part...

 SUMMARY TABLE — SPECIAL RATES FOR NRI Category      Section Rate Dividend 115A 20% Interest (general) 115A 20% Interest – IDF Bonds 115A 5% Interest – FCCB/FCEB 115AC 10% NRE Interest 10(4)(i) Exempt FCNR Interest 10(15)(iv)(fa) Exempt Royalty/FTS 115A 10% LTCG Equity 112A 10% STCG Equity 111A 15% LTCG (other assets) 112 20% LTCG on unlisted shares 112 10% LTCG on foreign exchange asset 115E 10% Investment income (forex assets) 115E 20% GDR LTCG 115ACA 10%

Income Tax Transfer Pricing (TP) rules , the total value of your international transactions in a financial year determines whether detailed TP compliance is required , regardless of individual shipment size. Let me explain: 1️⃣ Thresholds for TP Documentation (India) TP Requirement Applicable Transaction Value Notes Local TP documentation (Form 3CEB/Local File) International transactions > ₹2 crore in a FY Required even for small exporters if total exports to related parties exceed this limit. Master File (Global TP documentation) Total international transactions > ₹10 crore in a FY Only large exporters need to maintain Master File. No TP documentation Transactions ≤ ₹2 crore in a FY Arm’s-length principle still applies, but formal documentation not mandatory. Important: These thresholds apply to cumulative international transactions with related parties , not to individual shipments. 2️⃣ Key Implications Small individual shipment: Even ₹...

simple eligibility checklist for furnishing a LUT under GST to make sure you don’t risk rejection: ✅ LUT Eligibility Checklist (GST) GST Registration Must be a registered person under GST . Exporter should have valid GSTIN . Financial Year LUT is valid for one financial year . Must be renewed or re-submitted for the next financial year. Prosecution / Conviction Should not be prosecuted for tax evasion involving any amount exceeding ₹2.5 crore . Must not be convicted under GST or any previous tax law. Default Status Should not have any outstanding dues from previous LUT or bond (if required). Must not have been denied LUT earlier by GST authorities. Ineligibility under Notification No. 37/2017-Central Tax Certain exporters (like those with criminal prosecution for tax fraud or evasion above the threshold) cannot furnish LUT . In such cases, the exporter must submit a bond instead. Compliance with Export Rules Exports m...

🏢 GST on Rent – When Property Has Joint Owners When two or more persons jointly own a commercial property , GST implications depend on whether they are treated as separate suppliers or as an association of persons (AOP) under the GST Act. Let’s look at both scenarios clearly: 1️⃣ Separate Owners (Most Common Case) If each joint owner: Receives rent separately , and Has a separate agreement with the tenant , and Their individual rental income share is below ₹20 lakh per year , ➡️ Then each joint owner is treated as a separate supplier under GST. ✅ GST registration is NOT required for any joint owner whose individual share of rent is below ₹20 lakh per year (₹10 lakh in special category states). Example: A commercial property is owned jointly by A and B. Total rent: ₹60 lakh per year A’s share: ₹30 lakh (50%) B’s share: ₹30 lakh (50%) If A and B receive rent separately , each exceeding ₹20 lakh → both must register and charge GST on rent. If each ...

✅ Best Practices for Joint Owners of a Rented Commercial Property To avoid confusion and unwanted GST liability , joint owners should take the following steps: 1️⃣ Separate Lease Agreements Each co-owner should ideally execute a separate lease or rent agreement with the tenant for their respective share of the property. The agreement should clearly state: The portion (e.g., 50%, 25%) owned and rented by each owner. The rent amount payable to each co-owner separately. The separate bank account to which rent is credited. 🟢 Effect: Each owner’s rental income is considered separately for GST threshold (₹20 lakh), even if the tenant is the same. 2️⃣ Separate Rent Invoices / Receipts Each owner should issue their own invoice or rent receipt for their share of the rent. If an owner is registered under GST, they must: Use their own GSTIN , and Charge 18% GST on rent, File GST returns for their share. 3️⃣ Separate Bank Accounts Ideally...

  🧾 Scenario: A house property (say a building, office, or commercial space) is jointly owned by two or more persons. One of the co-owners is registered under GST , and the property is rented out to a client. 1️⃣ Determine the nature of supply Renting of commercial property is a supply of service under GST. (If residential property is rented for residence, it is exempt .) 2️⃣ GST registration and responsibility Case Who should charge GST Remarks All co-owners are jointly renting Each co-owner is treated as a separate supplier for their share. Each co-owner must register separately if their individual rental income exceeds ₹20 lakh (₹10 lakh in special category states) . One co-owner is GST registered and others are not The registered co-owner will issue a GST invoice for their share of rent only. The unregistered co-owner cannot charge GST on their portion. They can issue a normal (non-GST) receipt. 3️⃣ How to invoice the client (tenant) Let’s assume: Total r...

Purpose Codes in detail — especially P0104 (Export of goods) — which are required for foreign remittances under FEMA/RBI regulations. 🏦 1. What is a Purpose Code? A Purpose Code is a standardized code prescribed by the Reserve Bank of India (RBI) to identify the nature of a cross-border transaction — whether it’s for exports, imports, services, loans, investments , etc. These codes are used by Authorized Dealer (AD) Banks to report every foreign exchange transaction to the RBI through: EDPMS (Export Data Processing and Monitoring System) for exports, and IDPMS (Import Data Processing and Monitoring System) for imports. 🌍 2. Purpose Codes for Export Transactions When you receive a foreign inward remittance against an export, your AD Bank must enter the correct Purpose Code while reporting the transaction. Here are the most common export-related purpose codes 👇 Purpose Code Description (as per RBI) Used For P0104 Export of goods For physical ex...

reconciliation of export proceeds with the Authorized Dealer (AD) Bank using shipping bill details , when foreign buyer payments are received from abroad . This is a very important compliance process under Foreign Exchange Management Act (FEMA) and also linked to GST refund eligibility for exports. Let’s go step by step 👇 🌍 1. Background When an exporter makes a shipment, two parallel reporting systems are involved: System Purpose Key Document Customs (ICEGATE) Records export shipment Shipping Bill Bank (AD Bank) Records inward foreign exchange receipts Foreign Inward Remittance Certificate (FIRC) / Bank Realisation Certificate (BRC) These two datasets — Shipping Bill (customs) and FIRC/BRC (bank) — must match to prove that: The export declared in customs has been realized (i.e., payment received in convertible foreign exchange). The remittance belongs to the correct export shipment . 💰 2. When You Receive Payment from Abroad When your o...

one of the core reforms in the Central Goods and Services Tax (Third Amendment) Rules, 2025 (Notification No. 13/2025-Central Tax, dated 17 Sept 2025, effective 22 Sept 2025) is the mandatory separate disclosure of ITC reversals under specific rules — namely Rules 37, 37A, 38, 42, and 43 . 🔹 1. Rule 37 – Non-payment to supplier within 180 days What it covers: If payment (value + tax) to supplier not made within 180 days, ITC earlier availed must be reversed . New requirement: The amount so reversed must now be specifically reported under the “Rule 37” head in GSTR-9 / 9C. Any re-availment upon subsequent payment also to be shown distinctly. Impact: Enables tax officers to track “re-claimed” credits separately and match them to supplier payments. 🔹 2. Rule 37A – Supplier failed to file GSTR-3B What it covers: Introduced in 2022; if supplier doesn’t file GSTR-3B by 30 Nov following the FY, recipient must reverse the ITC claimed earlier. New require...

  Section 18(4) of the Central Goods and Services Tax (CGST) Act, 2017 deals with the reversal of input tax credit (ITC) when a registered person switches from regular scheme (taxable supply under Section 9) to the composition scheme (under Section 10), or when they become exempt from payment of tax. ✅ CGST Act – Section 18(4) – Summary : Section 18(4) : Where any registered person who has availed input tax credit opts to pay tax under Section 10 (Composition Scheme) or, where the goods or services become wholly exempt , then such person shall pay an amount , by way of debit in the electronic credit ledger or electronic cash ledger , equivalent to the credit of input tax in respect of: Inputs held in stock , and Inputs contained in semi-finished or finished goods , and Capital goods (reduced by prescribed percentage), on the day immediately preceding the date of such switch (composition/exemption). After payment of such amount, the balance of input tax ...

powers of the Assessing Officer (AO) under Section 145(3) of the Income Tax Act, 1961 in a clear way. 📌 Powers of AO under Section 145(3), Income Tax Act, 1961 1. Scope of Section 145 Section 145(1): Income chargeable under “Profits & Gains of Business/Profession” or “Income from Other Sources” shall be computed in accordance with: Cash or Mercantile system of accounting regularly employed by the assessee , and ICDS (Income Computation & Disclosure Standards) notified by CBDT. Section 145(2): CBDT can notify accounting standards for compliance. Section 145(3): If AO is not satisfied with the correctness/completeness of accounts, or with accounting method/standards, he may reject the books . 2. Powers Vested in AO u/s 145(3) The AO has the power to: a. Examine Books of Account Scrutinize purchase/sale invoices, stock register, vouchers, ledgers, bank statements. Verify compliance with notified accounting standards (ICDS). b. Reject Boo...

comprehensive checklist that a small/medium business in India should maintain to safely discharge the burden of proof under Income Tax & GST laws . The department does not have to prove that the expense is false — it’s the assessee who must prove that it is genuine . ⚖️ Judicial Support CIT v. Calcutta Agency Ltd. (1951) – The Supreme Court held that the onus is on the assessee to prove the claim of expenditure. 📑 Checklist of Documents to Justify Expenses 1. Purchases & Raw Materials Tax Invoices from suppliers (with GSTIN, HSN/SAC, description). E-way bills for movement of goods (if applicable). Goods receipt notes, delivery challans. Payment proof → bank transfer/cheque/UPI records. Supplier agreements / purchase orders. 2. Sales & Revenue Sales tax invoices with GSTIN. E-way bills for dispatch. Customer agreements / work orders. Proof of receipt of payment (bank statement, UPI, etc.). 3. Labour & Wages Wage regist...

partner remuneration under the Indian Income Tax Act for Assessment Year (AY) 2026-27 , i.e., the financial year 2025-26: 1. Remuneration Limits Under Section 40(b) – New Higher Ceiling Effective April 1, 2025 (FY 2025-26; applicable for AY 2026-27): The allowable deduction for remuneration paid to working partners has doubled . Revised limits under Section 40(b) : On the first ₹6,00,000 of book profit (or in case of loss): higher of ₹3,00,000 or 90% of book profit. On the rest of the book profit : 60% of book profit. Previously , this limit was: On the first ₹3,00,000: ₹1,50,000 or 90% of book profit (whichever higher) On the balance: 60% of book profit. 2. Introduction of Section 194T – Mandatory TDS on Partner Payments Also effective April 1, 2025 : A new section, Section 194T , mandates 10% TDS on payments to partners when total annual payments exceed ₹20,000 . Applies to payments like salary/remuneration, commission, bonus, interest . ...

  തൃശൂർ ജ്വല്ലറി ഹബ്ബിൽ നടന്ന റെയ്ഡുകൾ ജിഎസ്ടി ഒഴിവാക്കലിൻ്റെ അപകടസാധ്യതകളും സുരക്ഷാ രീതികളും ഉയർത്തിക്കാട്ടുന്നു. തൃശൂർ, കേരളം – ഓഗസ്റ്റ് 2025: കേരളത്തിന്റെ സ്വർണ്ണ തലസ്ഥാനം എന്നറിയപ്പെടുന്ന തൃശൂർ, 16 ആഭരണ വ്യാപാരികളുമായി ബന്ധപ്പെട്ട 42 സ്ഥലങ്ങൾ ലക്ഷ്യമിട്ട് സംസ്ഥാന ജിഎസ്ടി ഇന്റലിജൻസ് ആൻഡ് എൻഫോഴ്‌സ്‌മെന്റ് വിംഗ് ഓപ്പറേഷൻ ആർക്കൻസ്റ്റോൺ നടത്തിയപ്പോൾ ഒരു വലിയ എൻഫോഴ്‌സ്‌മെന്റ് നടപടിക്ക് സാക്ഷ്യം വഹിച്ചു. ഈ റെയ്ഡിൽ 100 ​​കോടി രൂപയുടെ വിൽപ്പന അടിച്ചമർത്തൽ കണ്ടെത്തി, കണക്കിൽ പെടാത്ത 36 കിലോഗ്രാം സ്വർണ്ണം പിടിച്ചെടുത്തു , നികുതിയും പിഴയും ആയി 2 കോടിയിലധികം രൂപ കണ്ടെടുത്തു. നികുതി ബാധ്യതകൾ കുറയ്ക്കുന്നതിന് വിൽപ്പന അണ്ടർ-റിപ്പോർട്ട് ചെയ്യൽ, സ്റ്റോക്ക് രജിസ്റ്ററുകളിൽ കൃത്രിമം കാണിക്കൽ, വ്യാജ ഇൻവോയ്‌സുകൾ നൽകൽ തുടങ്ങിയ രീതികൾ ഉപയോഗിക്കുന്ന ജ്വല്ലറി മേഖലയിൽ ജിഎസ്ടി വെട്ടിപ്പ് തുടരുന്ന പ്രശ്‌നത്തിലേക്ക് ഈ പ്രവർത്തനം അടിവരയിടുന്നു . ജിഎസ്ടി ഒഴിവാക്കലിലെ അപകടകരമായ രീതികൾ മനസ്സിലാക്കൽ വിൽപ്പനയുടെ വ്യവസ്ഥാപിത അടിച്ചമർത്തൽ യഥാർത്ഥ വിൽപ്പനയേക്കാൾ മനഃപൂർവ്വം കുറഞ്ഞ വിൽപ്പന രേഖപ്പെടുത്തൽ. ...

business loss (non-speculative) can be set off against capital gains (both short-term and long-term), subject to restrictions under Section 71 : ✅ Allowed Business loss (other than speculative loss) can be set off against income under any head (except salary). So, if you have a business loss and a taxable capital gain, you can adjust the loss against that gain. 📌 Example: Business loss = ₹4,00,000 LTCG (u/s 112A) = ₹3,00,000 ➡ Net taxable income = ₹(4,00,000 – 3,00,000) = ₹1,00,000 (loss carried forward if return filed in time). ❌ Not Allowed Speculative business loss → can be set off only against speculative business income (not capital gains). Loss from specified business u/s 35AD → only against specified business income. Capital loss → cannot be set off against business income (only against capital gains). 👉 So the direction is: Business Loss → Capital Gain ✅ Capital Loss → Business Income ❌

 the ruling you are referring to was delivered by the SMC Bench of ITAT, Ahmedabad . 📌 Case: Jayshreeben Jayantibhai Palsana vs. ITO 📌 Bench: ITAT Ahmedabad – SMC Bench 📌 Date of Order: 12 August 2025 (some references mention 13 August 2025, but 12 Aug 2025 is the official pronouncement date) 📌 Issue: Whether rebate u/s 87A is available against tax payable on short-term capital gains (STCG) u/s 111A under the new regime u/s 115BAC(1A) . 📌 Finding: The Bench held that Sec. 87A, as applicable for AY 2024–25, does not exclude STCG u/s 111A ; hence, if the total income ≤ ₹7 lakh , rebate is allowable.

!! Academic Purpose only 🔎 How Auditors Detect / Trap Cash Siphoning 1. Related-Party Transactions (Sec. 40A(2), AS-18 / Ind AS-24) Check disclosures in notes to accounts for related-party names. Verify pricing : Compare payments to related parties vs. market rates. Audit Trail : Match invoices with actual delivery/benefit received. Trap : If related parties are paid more than fair value (inflated expenses), auditor questions management & reports under CARO/Tax Audit (Form 3CD, Clause 23/31). 2. Inflated Expenses Analytical procedures : Compare expense ratios (advertising, consultancy, repairs) vs. past years/industry average. Vouching : Verify supporting bills, contracts, and third-party confirmations. Cash flow check : Expense shown in P&L but no matching service/goods delivered. Trap : Fake vendors or repetitive round invoices without actual service. 3. Round-Tripping of Funds Bank reconciliation : Unusual high-value transactions flowing...