Section 80JJAA: Deduction to businesses for employing new employees

by Income Tax

Eligibility:

  • Applicable to Assessees:
    • Indian companies or individuals, HUFs, partnerships, or other entities engaged in business.
    • Assessee must have income from business and must be liable for audit under Section 44AB (Tax Audit).
  • Eligible Business:
    • All businesses except businesses engaged in manufacturing or production of apparel, footwear, or leather products (for which separate provisions apply).

Quantum of Deduction:

  • Deduction Amount:
    • 30% of additional employee cost for three assessment years, including the year in which the employment is created.

Key Definitions:

  • Additional Employee:
    • A person employed during the financial year.
    • Excludes:
      • Employees whose total monthly emoluments exceed ₹25,000.
      • Apprentices under the Apprentices Act, 1961.
      • Employees working for less than 240 days in a year (150 days for businesses in the manufacturing of apparel, footwear, or leather products).
      • Rehired employees or employees transferred from another business.
  • Additional Employee Cost:
    • Total emoluments paid or payable to additional employees during the financial year.
    • For existing businesses: Only the increase in employee cost over the previous financial year is considered.
    • For new businesses: The total emoluments paid or payable are treated as additional employee cost.
  • Emoluments:
    • Wages paid or payable to employees but excludes:
      • Employer contributions to provident funds or other funds.
      • Perquisites as defined in Section 17(2).
      • Any lump-sum payments like gratuity or severance pay.

Conditions for Claiming Deduction:

  • Payment through Banking Channels:
    • Salary or wages must be paid through bank transfers or account payee cheques to qualify.
  • Statutory Compliance:
    • Employers must comply with statutory obligations like provident fund and employee welfare contributions.
  • Audit Requirement:
    • The deduction can only be claimed if the taxpayer’s accounts are audited, and the auditor certifies the details in the prescribed Form 10DA.
  • Threshold for Days of Employment:
    • Employees must work for at least:
      • 240 days in the financial year (general).
      • 150 days for businesses in manufacturing apparel, footwear, or leather products.

Exclusions:

  • Employees employed by a business in case of reconstruction or reorganization of an existing business.
  • Employees in cases where the business takes over another business.

Illustration:

  • Suppose a business employs 50 new employees, each with a monthly salary of ₹20,000.
  • The annual emoluments for these employees = ₹20,000 × 12 × 50 = ₹1,20,00,000.
  • Deduction: 30% of ₹1,20,00,000 = ₹36,00,000 (for 3 consecutive years).

Important Points:

  • Carry Forward of Unclaimed Deduction:
    • No provision exists for carrying forward this deduction if not claimed in the respective assessment year.
  • Applicability to Startups:
    • Startups also benefit from this deduction as long as they meet the criteria.
  • Misreporting or Non-Compliance:
    • Any misreporting in claiming this deduction may result in penalties or disallowance of the deduction.

For More Information you can contact us at Groomtax

Income Tax Provisions on Sale of Listed Equity Shares

by Income Tax
  • Income Tax Provisions on Sale of Listed Equity Shares:
    • Short-Term Capital Gains (STCG):
      • Applicable if shares are held for 12 months or less.
      • Tax Rate: 20% (under Section 111A) + surcharge + cess.
      • Condition: Sale must take place on a recognized stock exchange and attract Securities Transaction Tax (STT).
    • Long-Term Capital Gains (LTCG):
      • Applicable if shares are held for more than 12 months.
      • Tax Rate: 12.5% (under Section 112A) on gains exceeding ₹1,25,000 in a financial year, without indexation benefit.
      • Condition: Sale must take place on a recognized stock exchange and STT must be paid.
  • Exemptions Available Under the Capital Gains Head:
    • Under Section 54F:
      • Applicable if the entire net sale consideration (not just capital gain) is reinvested in a residential house property within the specified time limits:
        • Purchase: Within 1 year before or 2 years after the sale.
        • Construction: Completed within 3 years of the sale.
      • Conditions:
        • The taxpayer should not own more than one residential house (other than the new house) on the date of transfer.
        • Exemption is proportionate if only part of the sale consideration is invested.
  • Set-Off of Capital Gains:
    • STCG can be set off against any capital loss (short-term or long-term).
    • LTCG can be set off only against long-term capital loss.
  • Special Cases and Notes:
    • Non-Resident Taxation:
      • For non-residents, tax on LTCG and STCG is the same, but exemptions under Sections 54F and 112A may not apply unless specified in Double Taxation Avoidance Agreements (DTAAs).

If you need any clarification, you can contact us at Groomtax

Section 79-Carry forward and set-off of losses in Income Tax

by Income Tax

Section 79 of the Income Tax Act pertains to the carry forward and set-off of losses in case of certain companies, primarily addressing restrictions on carrying forward losses when there is a change in the company’s shareholding. Below is a summary:

  1. General Restriction:
    Losses incurred in prior years cannot be carried forward if there is a significant change in shareholding during the previous year. Specifically, shares carrying at least 51% of voting power must be held beneficially by the same persons on:
    • The last day of the year when the loss was incurred, and
    • The last day of the previous year.
  2. Exceptions to General Restriction:
    • Eligible Startups: For companies qualifying under Section 80-IAC, losses can be carried forward if all shareholders of the year in which the loss was incurred remain shareholders in the year of set-off.
    • Family Transfers: Changes due to death or gifts to relatives are excluded.
    • Foreign Subsidiaries: Changes due to the merger or demerger of a foreign company are exempt if 51% of shareholders remain in the merged company.
    • IB Code Resolution Plans: Changes in shareholding approved under the Insolvency and Bankruptcy Code, 2016, are exempt.
    • Government Intervention: Shareholding changes in companies under Central Government’s intervention due to mismanagement are excluded.
    • Strategic Disinvestment: Former public-sector companies continue to carry forward losses if 51% of voting power remains with the original government-linked ultimate holding company​.

For more information on the above income tax provision, visit Groom Tax.

Best FEMA Consultants in India in 2022

Best FEMA Consultants in India in 2022

by FEMA

In this article, we’ll get to know how GroomTax is acing the FEMA Consultants area and who are the best FEMA Consultants in India in 2022 but before that let’s just develop an understanding of what exactly FEMA is. The governmental agency that consolidates and updates legislation governing foreign exchange in India is known by the full name FEMA, which stands for “Foreign Exchange Management Act.” “Enabling external trade and payments and supporting the orderly development and preservation of the foreign currency market in India” was the FEMA act’s principal goal. The Foreign Exchange Regulation Act (FERA) of 1973 was replaced by FEMA, which was passed by the Indian Parliament in its winter 1999 session. To manage international commerce and exchange operations, the RBI proposed FEMA in 1999. The formal directive stated that FEMA will “consolidate and revise the foreign exchange (forex) law with the purpose of facilitating external trade and payments and for fostering the orderly development and preservation of foreign exchange market in India.” The first of June 2000 marked the official implementation of the Foreign Exchange Management Act. The Prevention of Money Laundering Act (PMLA) of 2002 was made possible by the entrance of the currency market in India, which the RBI now governs. FEMA was primarily implemented in India in order to de-regulate and establish an open economy. Best FEMA Consultants in India are often the ones to adhere to all the guidelines.

 

 

Objectives of FEMA

* Facilitating international trade and payments was the primary reason FEMA was implemented in India. FEMA was also developed in order to support the orderly growth and upkeep of the Indian currency market.

* All foreign exchange transactions in India must follow the rules and processes outlined by FEMA. Current Account Transactions and Capital Account Transactions are the two categories into which these foreign exchange transactions have been divided.

* According to the FEMA Act, the balance of payment is a record of transactions involving commodities, services, and assets between citizens of several nations. Capital Account and Current Account make up the majority of its divisions.

* All financial transactions are included in the capital account, whereas commerce in goods is included in the current account. Current Account transactions are those that include money moving into and out of a country or countries over the course of a year as a result of trading or providing goods, services, and income.

* An economy’s health is shown by the current account. As was already established, the balance of payments consists of both current and capital accounts; the capital account, which represents the movement of capital in the economy due to capital receipts and expenditures, makes up the remaining portion of the balance of payments. The capital account recognises both domestic and foreign investment in domestic assets.

 

Services of FEMA

We offer our broad perspective in the following FEMA advice services that we provide since our FEMA consultants have carved out their own distinct niche in the field of FEMA Consultancy. Here are a few services of FEMA:-

– Consultations for foreign exchange-related transactions

– Help with common issues affecting the interpretation of FEMA regulation

– Services for inward investment advisory.

– Consulting services for international investments.

– Aid in litigation and advocacy before authorities

– Help open liaison, branch, and project offices both inside and outside of India.

– Services for an expert business licence, such as CDSCO License and IE Code, etc.

– Services for filing annual returns.

– Assistance and certification with business valuation

– Help with submitting specific forms, such as FCGPR, FCTRS, etc.

 

Applicability of FEMA Act

The Foreign Exchange Management Act (FEMA) is applicable to all of India as well as to organisations and offices abroad (which are owned or managed by an Indian Citizen). The Enforcement Directorate is the name of FEMA’s headquarters, which is located in New Delhi. FEMA is applicable to:

– Foreign exchange.

– Foreign security

– Exporting goods or services from India to a nation outside of India.

– Importation of commodities and/or services from countries other than India.

– Securities as outlined in the 1994 Public Debt Act.

– Any form of purchase, sale, or exchange (i.e. Transfer).

– Services in banking, finance, and insurance.

– Any foreign corporation when at least 60% of the ownership is held by an NRI (Non-Resident Indian).

– Any Indian national living inside or outside the country (NRI).

 

According to the FEMA Act, the current account transactions have been divided into three categories, namely:

– Transactions that FEMA forbids,

– The Central Government must approve the deal,

– The RBI must approve the transaction.

 

Prohibition on Drawal of Foreign Exchange

– Any payment received as a result of winning the lottery.

– Any payments made from winnings from racing, riding, etc.

– Any payments made to purchase lottery tickets, football pools, sweepstakes, magazines that are prohibited or prescribed, etc.

– Commissions on exports are paid in exchange for equity investments by Indian companies in joint ventures and foreign wholly owned subsidiaries.

 

Penalties Under FEMA

There are a few things that we should keep in mind in order to avoid any penalties under FEMA. Any person who violates the terms of FEMA or any rule, direction, regulation, order, or notification issued thereunder is subject to a fine of up to Rs. 2 lakh, which is equal to three times the amount of the violation. For each day that the violation persists, the offender will be subject to a further penalty of up to Rs. 5,000 in the case of a continuing violation.

 

Now that we have a fairly good idea about FEMA and how GroomTax functions, it’s safe to say that we are the best FEMA Consultants in India in 2022. To know more, click here…