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Filing your income-tax return? Read this first to avoid mistakes

It is that time of the year, when income-tax returns are to be filed. This year the difference being that the tax filing deadline for taxpayers has been extended until November 30, 2020. Since there is more time to file tax returns this year, let us look at how the returns can be filed correctly by avoiding some common errors.
 
>>>>> SALARY INCOME FROM OUTSIDE INDIA –
We all are well aware that we get a Form 16 in respect of our salary income and we need to include this income in our tax return. However, what if a taxpayer has worked outside India for a part of the year and his employer was a foreign company? In such a case, the foreign company will not issue any Form 16 but the taxpayer needs to compute income from his foreign tax return / foreign payslips / foreign tax paid certificate and include the same in his India tax return (if he qualifies to be resident and ordinarily resident in India). If taxes have been paid outside India, then he may also claim foreign tax credit, on the basis of the tax return filed in the foreign country, subject to providing necessary documentation.
 
>>>>> HOUSE PROPERTY INCOME –
With effect from financial year 2019-2020, up to two residential house properties can be considered as self-occupied and hence, tax free. However, if a taxpayer owns more than two residential house properties that are not let out, the taxpayer will have to declare the additional house properties as deemed to be let out and offer notional rental income for those properties, to tax.
 
>>>>> CAPITAL GAIN –
A taxpayer typically peruses his bank statements to check and ensure that all income he has received during the year has been correctly captured in the tax return. While this is a good practice, it may not reflect income which has not been paid into the bank account but has been reinvested. For instance, the bank account will show the proceeds of mutual fund units redeemed during the year but the switch-outs from one mutual fund and switch-in to another mutual fund will not reflect in the bank statement. A switch-out is also a taxable event and the gain, if any, needs to be duly offered to tax, even though not received in the bank account.
 
>>>>> CLUBBING OF INCOME –
It is common practice for parents to invest funds in the name of their minor children or for a working individual to invest funds in the name of his/her spouse. Income from investments made out of a taxpayer’s funds in the name of his spouse or minor children is taxable in his hands. For instance, interest from fixed deposits or capital gains from sale of investments invested by the taxpayer in a minor child’s or spouse’s name, needs to be offered to tax in the tax returns of the taxpayer.
Moreover, any income earned by a minor child should be clubbed in the hands of the parent who earns a higher taxable income, unless the income earned by the minor child can be attributed to his skill, talent or specialised knowledge and experience. An exemption of Rs 1500 is available to the parent, per child, in respect of such clubbed income.
 
>>>>> FORM 26AS –
 
Form 26AS reflects details of certain income and the corresponding tax deducted at source thereon by payers of such income during a tax year. It also includes details of the advance tax / self-assessment tax paid by the taxpayer for that tax year. When a tax return e-filed by a taxpayer is processed electronically, the details submitted in the return are matched against the corresponding entries of income and taxes in his Form 26AS. If there is a mismatch between the income or tax reported in Form 26AS and the tax return, the tax authorities send a notice to the taxpayer seeking an explanation for the difference.
 
>>>>> FAILURE TO E-VERIFY / SEND SIGNED ITR TO CPC –
E-filing a tax return entails a two-fold process: uploading the return (i.e. the xml file) on the income-tax portal and e-verifying the tax return thereafter. E-verification can be done by using Aadhaar or net-banking based one-time passwords. Alternatively, the signed ITR-V can be sent to CPC Bengaluru. Failure to e-verify the tax return can lead to it being treated as null and void.
Not offering income to tax can lead to tax, interest and penal consequences. Hence, this extra bit of caution for certain items of income can save a lot of time in addition to interest and penalty.
DISCLAIMER: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author.
 
Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up or contact your Tax Advisor.
 

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  1. Last date for Re-Activation of your Cancelled GST Registration

    In this article, we will discuss regarding the Cancellation of GST registration by the proper officer, revocation of cancelled GST registration and the latest extended due dates for the same.
    1.) Cancellation of Registration
    As per section 29(2) of the CGST Act 2017, the proper officer may cancel the registration of a taxable person from such date, including any retrospective date, as he may deems fit in all the following cases:

    (a) a registered person has contravened such provisions of the Act or the rules made there under as may be prescribed; or

    (b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

    (c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

    (d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

    (e) registration has been obtained by means of fraud, willful misstatement or suppression of facts:
    2.) Revocation of Cancellation
    “Revocation of cancellation of registration means that the ‘decision to cancel the registration has been reversed’ and the registration is still valid”

    As per rule 23 of CGST rules, a registered taxpayer whose registration got cancelled due to non filing of returns since they did not had any business previously and his registration got cancelled can apply for the revocation in the manner stated below:
    A registered person, whose registration is cancelled by the proper officer on his own motion, may submit an application for revocation of cancellation of registration, in FORM GST REG-21, to such proper officer, within a period of thirty days from the date of the service of the order of cancellation of registration at the common portal.
    Provided that no application for revocation shall be filed, if the registration has been cancelled for the failure of the registered person to furnish returns, unless such returns are furnished and any amount due as tax, in terms of such returns, has been paid along with any amount payable towards interest, penalty and late fee in respect of the said returns.

    If the proper officer is satisfied with the reason, he may revoke the registration by an order under Form GST REG-22. However, if the grounds provided for revocation are not sufficient then the proper officer may reject the application for revocation after giving the applicant an opportunity of being heard.

    3.) Illustration:

    Let’s suppose Mr. Ajay is a registered taxpayer, whose GST registration got cancelled on 01st July 2020 due to Non filing of GST returns. So, he can apply for revocation of the cancellation order by 30th July 2020 after filing all the previous returns and payments of the taxes due (if any).

    Also, the returns for the period “from the date of order of cancellation of registration to the date of order of revocation” shall be filed by 30 days from the date of order of revocation of cancellation.

    4.) Extended Due Dates

    Earlier in the 39th Council meeting the govt. issued a press release dated 14th March 2020 which stated that where registration has been cancelled till 14th March 2020, the application for revocation can be filed up to 30th June 2020. The same was later on notified by Notification No. 35/2020 dated 03rd April 2020.

    Thereafter, in the 40th Council meeting the govt. issued a press release dated 12th June 2020 which states that where registration has been cancelled till 12th June 2020, the application for revocation can be filed up to 30th Sept 2020. However, it is important to note that under Notification No. 55/2020 Central tax dated 27th June 2020 which provides for the amendment of the previous notification i.e. Notification No. 35/2020 has only extended the timeline for filing the revocation of the cancellation till 31st August 2020 and not till 30th Sept 2020.

    Hence, in order to clear these confusions, the government has issued Removal of Difficulty Order No. 01/2020 – Central Tax dated 25th June 2020, which states that the registered person who were served the notice under clause (b) or (c) of sub-section (2) of section 29 where cancellation order has been passed up to 12th June 2020, the time to file the application for revocation of cancellation shall be 30 days from the later of the following dates:
    Date of service of the said cancellation order; or
    31st August 2020.
    For example: If Mr. Ajay registration got cancelled by the government on 10th June 2020 due to the reason of “non filing of return for a continuous period of 6 months” or “he took a voluntary registration but he did not commenced the business for a period of 6 months from the date of registration”.

    Then, Mr. Ajay can apply for the revocation of the cancellation of registration within 30 days from later of the 2 conditions mentioned above. Hence the last date would be 30th September 2020 i.e. 30 days from 31st August 2020.

    For any tax related issues/queries:
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