Applicability Of 194Q In India

The Central Board of Direct Taxes ( CBDT) has issued a new Section 194Q under The Income Tax Act, 1961. effective from 1st July 2024, the buyer to deduct TDS on the purchase of goods from the resident seller under The Finance Act, 2024. It will be effective on any buyers who are responsible for paying An amount to resident sellers for the purchase of any goods of value exceeding or equivalent to fifty lakh rupees in any previous year. The buyer during crediting such amount to the account of the seller, or at the time of payment, whichever is earlier, is to deduct an amount equal to 0.10% as income tax when the sum of the amount is more than fifty lakh rupees.

Guidelines Of 194Q Income Tax Act

A buyer whose total sales or gross receipts or turnover from the business carried on by him exceeds Rs 10 crores during the fiscal year, immediately preceding the financial year in which the goods have been purchase. The person who is not considered as the buyer for this new section,  Central Government has authorized them to specify by notification in the Official Gazette.
The Central Board of Direct Tax(CBDT) has clarified the various representations for issuing guidelines to remove certain difficulties. In exercise of power containing under sub-section (3) of Section 194Q in Income Tax Act, the Board, with the approval of the Central Government, hereby issuing the following guidelines. CBDT guidelines tried to remove difficulties in implementing the provisions of Section 194-0 and sub-Section (I H) of Section 206C of the Act using power contained in sub-section (4) of section 194-0 the Act and sub-section (II) of section 206C of the Act.

Difficulties In Application Of Section 194Q 

There are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in section 194Q of Income Tax  Act in the case of certain exchanges and clearing corporations. Sometimes in these transactions, there is no one-to-one contract between the buyers and the sellers. In order to remove such difficulties, it is provided that the provisions of Section 194Q of the Act shall not be applicable in relation to:
Transactions in securities and commodities that are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre;  
Transactions in electricity, renewable energy certificates, and energy-saving certificates traded through power exchanges registered following  Regulation 21 of the CERC.

Calculation Of 194Q For The Financial Year 2024-25 

Section 194Q of the Income Tax Act is acknowledged from 1st July 2024. CBDT has provided detailed instructions on how the threshold of Rs 50 lakh, specified under the new Act is to be calculated, and on what terms the tax is required to be deducted in respect of the advance TDS paid before 1st July 2024 and the sum credited afterward. 

Since Section 194Q TDS Act mandates the buyer to deduct tax on the credit of sum in the account of the seller or on payment of such amount, whichever earlier, the provision of this subsection shall not apply on any amount credited or paid before 1st July 2024. In case either of the two events had happened before 1st July 2024, that transaction will not fall under the provisions of section 194Q of the Act. 

Since the threshold of Rs. 50 lakh is in respect to the previous year, calculation of TDS under section 194Q will be effective from 1st April 2024. If a buyer has already paid the seller an amount of Rs 50 lakh or more before 30th June 2024. All TDS under section 194Q will be applied on credits or payments during the previous year, or after 1st July 2024 to such seller. 

TDS On Purchase Of Goods Exceeding 50 Lakhs | 194Q Of Income Tax Act

Applicability: a person, being a buyer who is liable for paying any sum to any seller (being a resident) for purchase of any goods (including capital goods), where the worth or aggregate of such values, exceeds ₹50 lakhs in any fiscal year, shall deduct TDS. Effective from 1st July 2021.

Rate of TDS: 0.1% (5% just in case PAN isn't furnished) of the acquisition value exceeding ₹50 lakhs.

Explanation: the worth on which TDS shall be charged is that the sum left after deducting ₹50 lakhs from the entire value.

Time of Deduction: Earlier of the following:
• At the time of credit of such amount to the account (even if Suspense A/c) of the seller
• At the time of payment by any medium

Conditions for Deduction:
The tax shall be deducted only the subsequent conditions are satisfied:
• Purchase of goods from a resident seller
• Goods are purchased for a worth or aggregate useful exceeding ₹50 lakhs in any fiscal year
• The person buying shall fall under the meaning of buyer as provided for this section

Buyer: A buyer is a person whose total sales, gross receipts, or turnover from the business, is more than ₹10 crores during the financial year immediately proceeding the fiscal year when the goods have been purchased. Further, the Central Government may, by notification within the Official Gazette, specify the list of persons who shall not be considered as buyers for this matter.

Note: There’s no such clarification for the inclusion of GST in the total value of goods. Thus, for the aim of computing the entire turnover, GST will be included.

Role of Buyer/Seller:

Buyer: buyer will deduct TDS
 

Cash Transaction Limit For F.Y. 2024-25 | Income Tax Act, 1961

The income tax act, 1961 limits its cash transaction through several provisions for various reasons like;

- Encouraging transparency in business
- To stop money laundering and Tax evasion
- Creating a healthy environment for businesses to grow with transparency
- Creating a healthy environment for easy audits and investigations under IT Act, 1961.

 

The provisions for cash transactions can be summarised under: -

SECTION 269SS - ACCEPTANCE OF LOANS, DEPOSITS, AND SPECIFIED AMOUNT

- No person has the permission to accept any loans or deposits in cash if the aggregate amount is Rs. 20,000 or more.
- A specified amount is any amount receivable as advance or to transfer any immovable property.
- The aggregate sum must include any cash received or remaining unpaid earlier.

Exception in provision can be accepted by 

- The government
- Any banking organisations, post office
- Any organisation incorporated by Central or State or provisional act
- Any Govt organisation comes under section 2(45) of the Company act, 2013.
- Any Institution, association, or body of the association.

It is also not applied if both the parties, payer and receiver have an agricultural income source, as agricultural income does not come under the Income Tax Act.

The consequences of violation Under section 271D levies an equal amount of fine as a penalty, for the amount of cash taken violating the rules of IT act, 1961. 

SECTION 269ST - OTHER CASH TRANSACTION

- No person can receive an amount of Rs. 2,00,000 or more in cash;
- In total from a person in a day,
- In a single transaction
- Any transaction related to a single event or occasion from a person.

 Exception of the provision under section 269ST

(a) Receipts from govt or non-govt banking company, post office savings bank, cooperative bank
(b) Any nature of transactions under section 269SS
(c) Notified persons or receipts 

Consequences of violation comes under section 271DA, which is the violator will be subject to pay the same amount of violated sum as penalty money.

SECTION 269SU - ACCEPTING PAYMENT THROUGH ELECTRONIC MODES

Any person or organisation having turnover or profit of 50 crores or more than that in a fiscal year for the business are required to facilitate electronic mode of payment transactions. Failure to do so can end up with a penalty of rs. 5000 every day till the failure continues, under section 271DB.

SECTION 269T - REPAYMENT OF CERTAIN LOANS OR DEPOSITS

• No branch of a financial organization or a cooperative society and no other company or cooperative society and no firm or other person is permitted to repay any loan or deposit or any specified advance received by it in cash if such amount (or the combination amount) along with interest is Rs. 20,000/- or more.

• specified advance’ refers to any amount of cash within the nature of advance, name however you want to, in reference to the transfer of immovable property, whether or not the transfer has taken place.

• The aggregate amount shall include amounts held by the person in his own name or jointly with another person on the date of such repayment.
There are certain exceptions to this provision. these provisions shall not apply to repayment of any loan or deposit or specified advance taken or accepted from –

1. Government;
2. Any banking concern, post office savings bank, or co-operative bank;
3. Organizations established by a Central, State or Provincial Act;
4. Any Government organization defined in Section 2(45) of the companies Act, 2013.
5. Notified institution, association, or body or class of institutions, associations, or bodies.

Consequences of violation under Section 271E: Penalty for an amount adequate to the quantity of such loan or deposit or specified advance so repaid is going to be levied.

Disallowance of expenses incurred in Cash [Refer Section 40A(3)] & Deemed Income of business or profession if the expenditure is incurred in one year and payment is formed in taking advantage the next year [Refer Section 40A(3A)

• If an individual incurs any expenditure for his business or profession, in respect of which payment or aggregate of payments made to an individual during a day in cash exceeds Rs. 10,000/-, no deduction can be made in respect of such expenditure.

• If an allowance has been made in respect of any liability incurred by an individual for any expenditure, and later during any subsequent year the person makes payment in respect thereof, in cash, the payment so made is deemed to be Profits and Gains of business or profession and is chargeable to income-tax as income of the next year, if the payment or aggregate of payments made to an individual during a day exceeds Rs. 10,000/-.

• Exceptions to the above are provided in Rule 6DD of the tax Rules, 1962.

• Any payments if done for plying, hiring, or leasing goods carriages, then the limit is Rs.35000/-.as mentioned.

2ND PROVISION TO SECTION 43(1) - DISALLOWANCE OF DEPRECIATION 

In case any individual or business incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to an individual during a day in cash exceeds Rs.10,000/-, such expenditure is not included to determine the actual cost of such asset. This means that no depreciation benefits are going to be available on such costs incurred in cash.

SECTION 80D(2B) - DEDUCTION IN RESPECT OF HEALTH INSURANCE PREMIUMS

Section 80D offers deduction in respect of health insurance premiums. However, the payment must be made by any mode other than cash. The exception is provided in case of any amount paid on account of preventive health check-ups.

SECTION 80G(5D)

Cash Donations exceeding Rs. 2000/-
Section 80G offers deduction in respect of donations to certain funds, charitable societies, etc. No deduction is allowed under section 80G in respect of donation of any amount exceeding Rs. 2000/- unless such sum is paid by any mode apart from cash.

SECTION 80GGA(2A)

Cash donations exceeding Rs. 10,000/-for scientific research or rural development
Section 80GGA allows deduction in respect of certain donations for research projects or rural development. No deduction is allowed in respect of any amount exceeding Rs. 10,000/- (Rs. 2,000/- we.f. 01.06.2020) unless such amount is paid by any mode other than cash.

SECTION 80GGB & SECTION 80GGC

Cash contributions given to political parties
Section 80GGB allows a deduction to Indian Companies in respect of any sum contributed to any political party or an electoral trust. Similar deduction is allowed Under section 80GGC to other persons (except local authority and every artificial juridical person wholly or partly funded by the Government).

Though, no deduction is allowed in respect of any amount contributed by them in cash.

 

SECTION 194N - TDS ON PAYMENT OF CERTAIN SUM IN CASH

TDS @ 2% applied on cash withdrawals above Rs. 1 crore.

However, in the case of a person who has not filed returns of income for the last three assessment years relevant to three previous years for which the time limit to file return u/s 139(1) has expired the applicable TDS rate is 2% on cash withdrawals in excess of 20 lakhs and up to 1 crore and 5% on cash withdrawals above Rs. 1 Crore.

PROVISION TO SECTION 44AB(A):(THE THRESHOLD LIMIT FOR AUDIT OF ACCOUNTS INCREASED IF CASH TRANSACTIONS DON'T EXCEED 5%)

The threshold limit for Tax Audit has been increased from 5 Crores to 10 Crores provided that: –

The mixture of all cash receipts during the year doesn't exceed 5% of total receipts, and Aggregate to all or any cash payments during the year doesn't exceed 5% of total payment.

The mentioned provision is slated to be applicable w.e.f. the assessment year 2024-25.
 

 

10 Points To Invest In MF An Early Age

If you are planning to invest but are not aware of the right Age to start investing, let us guide you with our expert advice. Many surveys and studies show that the sooner you invest, the richer you get. The right time to take a position is during or after you complete your graduation, the age around 20s. Read more to know why!

By investing at an early stage of life, you understand a pattern of financial independence and discipline. An early investment teaches the important difference between investments and saving. Never think young age may be a barrier to creating an investment, as you're never too young to take a position. The Little amount of cash invested now will put extra money in your pocket within the future. You can seek an expert’s view to pick the proper avenues to form an investment.

 

Below mentioned reasons suggest that investment at an early age may be a great idea.

1.More time to recover losses:
If you invest early and incur a loss, you've got longer to form up for the loss on investment. Investing at a later stage in life will get less time to recover the losses. Thus, with early investments, your investment gets longer to grow in value.

2. More time to save money:
in the case of early age investments, you develop a habit of money management. The more you invest, the more you get in return for the future. To follow that thought process, you can save lots more by reducing unnecessary expenses and divert such saved money towards investment.

3. Improves risk-taking ability:
Studies show that young mutual fund investors have a more risk-taking attitude than late-age investors. late age investors are generally conservative and like stability, successively avoiding high-risk investment opportunities. The probability of earning greater returns at a young age gets enhances with high risk-taking ability.

4. Time value of money:
Early investments lead to compounding returns. The value of cash increases over time. regularity in mutual fund investments from early years can reap huge benefits at the time of retirement. Moreover, early investment facilitates your entry into the finance market early. Your money grows with time. Because of early investments, you'll afford things that others won't, at that age. This puts you before others preferring investing at a later stage of life.

5. Financially secured Future:
There will be times in life once you will need urgent money to satisfy unavoidable expenses. During such times, the investments made at an early age can convince be very handy and can assist you to get through the tough times all by yourself. The requirement for loaned money decreases drastically with early investments.

6.Opportunity to become a Creditor:
An early age investment is indeed useful. When you have surplus money invested, you'll never have a requirement to borrow money and become someone’s debtor. With money properly invested into the right mutual fund, you've got money to lend to others i.e., you become a creditor.

7.More time to study and understand the aspect of financial market:
Young people have more time to study about the market than older ones. Also, young people are more tech savvy and informative, they can research and evaluate better which mutual find is right for them, for better returns, which one is for long time tenure which one must fit for a short time investment etc.
 
8.Opportunity for employment: 
young minds, nurturing about investments, banking, etc are highly likely to end up finding employment in finance, be it as a mutual fund investment adviser, to full time stock market investors or agents, they might even end up making their own financial companies. 

9.Securing business capital:
Aspiring entrepreneur, business investors, and start-up company owners can secure their business investments and capital from an early age with mutual fund investments. So, when they finally began, they don't have to run around for loaned financial aids, or loaned capital.

10. Secure Your Retirement Plans:
investments at an early age increase the probability of reaching financial stability at young age. Saving for retirement from the age of 20s/30s instead of the age of 40s is usually a far better future plan. Life after retirement is difficult so planning for retirement now will cause a happier life after retirement.

Conclusion:
The earlier you begin, the better it's to create growth in wealth. Yes, you'll face some difficulties to take a position early in life as you don’t have enough money. however, you should not for the time when things get convenient for you. Start investing in smaller amounts with mutual funds. Give time to your money to mature. Investing at a young age is that the best decision one can absorb his or her life. contact your mutual fund investors to seek an expert’s view.
 

Registering a Public Limited Company in India

1. Acquire Digital Signature Certificates (DSC):
All directors and shareholders of the public Limited Company need to acquire a DSC. A DSC is a digital key used to sign electronic documents securely.

2. Apply for Director Identification Number (DIN):
Each proposed director of the Public Limited Company must have a Director Identification Number (DIN). The DIN can be obtained by applying through the MCA portal.

3. Check Name Availability:
Choose an appropriate name for the company and check its availability on the MCA portal. The name should be unique and conform to the naming guidelines.

4. Reserve the Company Name:
After selecting an available name for your company, reserve it through the MCA portal by filing Form SPICe+ Part A (Simplified Proforma for Incorporating Company Electronically Plus).

5. Prepare Incorporation Documents:
In the next step, you need to prepare the necessary documents for company incorporation. The documents required for that purpose are as follows:
a. Memorandum of Association (MOA)
b. Articles of Association (AOA)
c. Declaration of compliance
d. Consent of proposed directors
e. Identity and address proof of directors and subscribers

6. File Incorporation Forms:
File Form SPICe+ Part B along with the necessary documents on the MCA portal. This form includes:
a. Information about the company
b. Directors' and subscribers' details
c. Capital and share structure
d. Registered office address

7. Obtain Incorporation Certificate:
Upon successful filing and verification of the application, the Registrar of Companies (RoC) will issue a Certificate of Incorporation, which includes your Corporate Identification Number (CIN).
 
8. Apply for PAN and TAN: 
You will receive your company's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) along with the Certificate of Incorporation. 

9. Open a Bank Account:
Open a bank account in the name of the company using the Certificate of Incorporation, PAN, and other necessary documents.

10. Comply with Additional Requirements:
You need to obtain other necessary business licenses and registrations as per your business operations.
You need to hold the first board meeting within 30 days of incorporation and the first general meeting within 6 months. It is mandatory for you to maintain proper books of accounts and statutory records.

11. File Other Forms:
Depending on your business and industry, you may need to file other forms with the RoC such as Form INC-20A (Declaration for commencement of business) and others.
 

Benefits of Public Limited Company Incorporation:

Incorporating a public limited company (PLC) in India can offer you with several benefits. Here is the list of advantages that you can enjoy with a Public Limited Company Incorporation.

1. Limited Liability:
In a Public Limited Company, the liability of the shareholders is limited to the amount they have invested in the company. Their personal assets are not at risk in case of business debts or losses.

2. Ability to Raise Capital:
Public limited companies can raise capital by issuing shares to the public through an initial public offering (IPO) and subsequent stock offerings. This provides significant funding for business expansion and growth.

3. Increased Credibility and Transparency:
Public limited companies are required to comply with strict regulatory and reporting requirements. This increases credibility and transparency with customers, suppliers, and investors.

4. Perpetual Existence:
A public limited company has a perpetual existence, which is not affected by changes in ownership or management. The company continues to exist even if its founders or major shareholders change.

5. Transferability of Shares:
Shares in a public limited company can be freely bought and sold on the stock market. This allows the shareholders to easily transfer ownership.

6. Greater Visibility and Marketability:
A public limited company has greater visibility of the business and can improve its marketability. It has the potential to attract more customers, investors, and talented employees.

7. Access to Debt Financing:
Public limited companies have better access to debt financing options such as issuing debentures, commercial paper, or obtaining loans from banks and financial institutions.
 
8. Stock Option Plans: 
Public limited companies can offer stock options to employees, providing a way to attract and retain top talent while aligning their interests with the company's success. 

9. Growth Opportunities:
Public limited companies have access to larger pools of capital and the ability to expand operations, make acquisitions, and enter new markets.

10. Tax Benefits:
Public limited companies can benefit from various tax advantages and deductions available to businesses in India.

11. Corporate Governance:
Strong corporate governance practices are required for public limited companies. Thus, it can lead to better management and decision-making.
 

Regulatory Requirements for Public Limited Company:

Public limited companies in India are required to follow strict regulatory requirements as outlined by the Ministry of Corporate Affairs (MCA), the Securities and Exchange Board of India (SEBI), and other relevant regulatory bodies. Here are the key regulatory requirements for public limited companies:

1. Company Formation and Registration:
Public limited companies must be incorporated with the Registrar of Companies (RoC) by filing the appropriate forms and documents (e.g., SPICe+ forms) and obtaining a Certificate of Incorporation.

2. Corporate Governance:
Public companies must comply with the corporate governance guidelines, including the appointment of independent directors and the formation of committees such as the audit committee, nomination and remuneration committee, and stakeholders' relationship committee.

3. Board of Directors:
A public limited company must have a minimum of three directors. The board must hold regular meetings and maintain proper records of resolutions and decisions.

4. Disclosure and Reporting:
Public limited companies must provide regular disclosures and reports to regulatory bodies, shareholders, and the public. This includes annual reports, quarterly and annual financial statements, and corporate governance reports.

5. Prospectus and Public Offering:
When issuing shares to the public, companies must prepare and file a prospectus with SEBI and the RoC, outlining details such as the company's financials, business plan, and risks.

6. Statutory Meetings:
Public limited companies must hold an annual general meeting (AGM) each year and file the annual return with the RoC. They must also hold the first board meeting within 30 days of incorporation.

7. Share Capital and Dividends:
Public Limited Companies are required to stick to the rules regarding the issuance, transfer, and redemption of shares, as well as dividend distribution and shareholder rights.
 
8. Audits and Financial Statements: 
Public limited companies must undergo annual audits by a qualified auditor and file audited financial statements with the RoC. 

9. SEBI Regulations:
Public limited companies listed on a stock exchange must comply with SEBI regulations related to securities offerings, market disclosures, and trading.

10. Other Statutory Compliances:
Companies must comply with applicable laws and regulations such as the Companies Act, 2013, labour laws, tax laws, environmental regulations, and industry-specific regulations.

11. Maintaining Records:
Proper records must be maintained, including the minutes of board and general meetings, share registers, and statutory books.
 

12. Changes in Company Structure:
Any changes in the company's structure, such as changes to the Memorandum and Articles of Association, directors, or share capital, must be filed with the RoC. In case, a Public Limited Company fails to comply with these regulations, it might face penalties, fines and legal actions.