Part 1 - Direct Taxes

Amalgamation and Demergers 1.129 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XI. Amalgamation and Demergers Amalgamation under section 2(1B) of Income-tax Act, 1961 is defined as follows: Amalgamation means merger of either one or more companies with another company or merger of two or more companies to form one company in such a manner that: • All the property/liability of the amalgamating company/companies becomes the property/ liability of amalgamated company. • Shareholders holding minimum 75% of the value of shares in the amalgamating company (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company. The demerger under Section 2(19AA) of Incometax Act, 1961 is defined as follows: Demerger means the transfer of one or more undertakings to any resulting company pursuant to a scheme of arrangement under Sections 391 to 394 of the Companies Act, 1956 (now Sections 230 to 232 of the Companies Act, 2013) in such a manner that: • All the property/liability of the undertaking becomes the property/liability of the resulting company. • All the property/liabilities are transferred at book value (excluding increase in value due to revaluation). However requirement of recording property and liabilities at book value by the resulting company shall not be applicable in a case where the property and liabilities of the undertakings received by it are recorded at a value different from the value appearing in the books of account of the demerged company immediately before the demerger in compliance to the Indian Accounting Standards as per Companies (Indian Accounting Standards) Rules, 2015. • The resulting company issues shares to the shareholders of demerged company on a proportionate basis, except where resulting company is a shareholder of the demerged company. • Shareholders holding minimum 75% of the value of shares become shareholders of the resulting company (other than shares already held therein immediately before the demerger by, or by a nominee for, the resulting company or its subsidiary). • The transfer of an undertaking is on a going concern basis. • The demerger is in accordance with the conditions notified under section 72A(5) of IT Act, 1961. Undertaking: Includes any part of an undertaking or a unit or division of an undertaking or a business activity taken as a whole, but excludes individual assets or liabilities or combination of both not constituting a business activity. Demerged Company: Means the company whose undertaking is transferred to a resulting company pursuant to a demerger. Resulting Company: Means one or more companies (including wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority or public sector company or a company established, constituted or formed as a result of demerger. Provisions applicable to company Capital Gains (Sections 47(vi) and 47(vid)) • Gains arising on transfer of a capital asset in a scheme of amalgamation/demerger to the amalgamated/resulting company being an Indian Company is exempt.

Direct Taxes 1.130 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Carry forward of accumulated loss and/or unabsorbed depreciation (Section 72A) • Accumulated loss and unabsorbed depreciation of an amalgamating company can be carried forward by the amalgamated company for set-off against its profits, in case of: — Amalgamation of company owning an industrial undertaking or a ship or a hotel with another company; or — Amalgamation of a public sector company or companies with another public sector company or companies or — Amalgamation of an erstwhile public sector company with one or more company/companies if the share purchase agreement entered into under strategic divestment restricted immediate amalgamation of the said public company and the amalgamation is carried out within 5 years from the end of the previous year in which the restriction ends. Such loss and unabsorbed depreciation to be carried forward by amalgamated company shall not be more than the loss and unabsorbed depreciation of the public sector company as on the date on which the company ceases to be a public sector company. ‘Strategic disinvestment’ has been defined in the Explanation for clause (iii) to section 72A(1)(d). — Amalgamation of a banking company with a specified bank Amalgamated company has to fulfil the following conditions to avail the benefit: a. It continuously holds 3/4th of the book value of the fixed assets acquired in a scheme of amalgamation for at least five years from the date of amalgamation b. It continues to carry on business of amalgamating company for at least five years from the date of amalgamation c. It achieves at least the level of 50% of the installed capacity before the end of 4 years from the date of amalgamation and maintains that level till the 5th year Amalgamating company has to fulfil the following conditions: a. It was engaged in the business in which the accumulated loss has occurred or the unabsorbed depreciation remains unabsorbed for three or more years. b. It has continuously held 3/4th of the book value of fixed assets held by it two years prior to amalgamation. • Accumulated loss and unabsorbed depreciation of a demerged company can be carried forward by the resulting company for set-off against its profits (section 72A(4)): — Where it is directly relatable to undertaking transferred, it should be such relatable amount. — Where it is not directly relatable to the undertaking transferred, it should be apportioned in the ratio of assets retained by the demerged company and transferred to resulting company. Carry forward of accumulated loss and/or unabsorbed depreciation of the banking company in a Scheme of amalgamation with banking institution (Section 72AA) In a Scheme of : • Amalgamation of one or more banking company with –

Amalgamation and Demergers 1.131 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication — any other banking institution under a scheme sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 or. — any other banking institution or a company subsequent to a strategic disinvestment, wherein the amalgamation is carried out within a period of five years from the end of the previous year during which such strategic disinvestment is carried out; or • Amalgamation one or more corresponding new bank or banks with any other corresponding new bank under a scheme brought into force by the Central Government u/s. 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,1970 or u/s. 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 or both. • Amalgamation one or more Government company or companies with any other Government company under a scheme brought into force by the Central Government u/s 16 of the General Insurance Business (Nationalization) Act, 1972. Reorganisation in case of firm/ proprietorship to company and private company/unlisted public company to LLP (section 72A(6)) • In cases where a firm/proprietary concern is succeeded by a company fulfilling all conditions laid down u/ss. 47(xiii)/47(xiv), accumulated losses and unabsorbed depreciation of the firm/proprietary concern can be carried forward by the company for set off against its profits. • In case conditions specified in sections 47(xiii)/(xiv) are not complied with, any set off of business loss or allowance for depreciation claimed by the successor company will be deemed to be the income of the successor company in the year in which such conditions are not complied with. • Similar provisions are also applicable to private company or unlisted public company succeeded by a limited liability partnership fulfilling conditions laid down u/s. 47(xiiib). Allowability of expenditure relating to amalgamation/demerger (section 35DD) • An Indian company will be allowed a deduction of 1/5th of the expenditure incurred for the purposes of amalgamation or demerger for five years from the year in which amalgamation/demerger takes place. Depreciation in the year of amalgamation/ demerger (fifth proviso to section 32(1)) • Depreciation to amalgamated company and amalgamating company in the year of amalgamation and depreciation to demerged company and the resulting company in the year of demerger shall be apportioned in the ratio of the number of days for which the assets were used. Written Down Value (‘WDV’) (Sections 32 and 43(6)(c)) • WDV in the hands of amalgamated company shall be the WDV of the block of assets in the hands of the amalgamating company immediately before amalgamation. • WDV in the hands of the resulting company shall be the WDV of transferred assets of the demerged company immediately before demerger. • WDV in the hands of the demerged company shall be the WDV of the block of assets before demerger less WDV of assets transferred to the resulting company. Provisions applicable to Shareholders • Capital Gains arising on transfer of shares of amalgamating company in exchange of shares of amalgamated company, being an Indian Company is exempt (section 47(vii)). • Acquisition of shares of the resulting company by the shareholders of demerged company pursuant to demerger will not be

Direct Taxes 1.132 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication taxed either as capital gains or deemed dividend. (sections 47(vid) and 2(22)(v)). • Period of holding of shares of the amalgamated/resulting company will include the period for which the shares in the amalgamating/demerged company were held by the shareholder. (sections 2(42A)(c) and 2(42A)(g)). • Cost of acquisition of shares of: – The amalgamated company will be the cost incurred for acquiring shares of amalgamating company. (section 49(1)) – The resulting company in case of demerger will be the (section 49(2C)): Original cost of shares of demerged company X net book value of assets transferred to resulting company/net worth of the demerged company before demerger Net worth = Paid-up Share Capital + General Reserve as per books of demerged company immediately before demerger – The demerged company will be the original cost of shares of demerged company as reduced by the cost of shares of the resulting company as computed above (section 49 (2D)). 2

Minimum Alternate Tax (MAT) 1.133 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XII. Minimum Alternate Tax (MAT) Minimum Alternate Tax (MAT) 1. In the case of companies, if tax payable on its total income as computed under the I.T. Act, 1961 in respect of any previous years, is less than 18.5% of its “book profit”, then such book profit shall be deemed to be the total income of the company and tax payable as MAT shall be at 18.5% on such total income. (W. e. f. A.Y. 2020/21, MAT is payable @15%) The profit and loss account should be prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. The Accounting Policies, the Accounting Standards adopted for preparing such accounts and the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts and laid before the company at its AGM. From Assessment Year 2013-14 onwards, section 115JB will be applicable even to companies that are not required under section 211 of the Companies Act, 1956 to prepare their profit and loss account in accordance with Schedule VI of the Companies Act, 1956. The profit and loss account prepared in accordance with Regulatory Act governing such companies, would be taken as basis for computing book profit under section 115JB. 2. “Book Profit” means the net profit as shown in the profit and loss account, as increased by – a. The amount of income-tax paid or payable, and the provision therefor; or b. The amounts carried to any reserves, by whatever name called other than a reserve specified under section 33AC; or c. The amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or d. The amount by way of provision for losses of subsidiary companies; or e. The amount or amounts of dividends paid or proposed; or f. The amount or amounts of expenditure relatable to any income to which section 10 [other than the provisions contained in section 10(38)] or section 10A or section 10B or section 11 or section 12 apply; or fa. The amount or amounts of expenditure relatable to income, being share of assessee in the income of an association of persons or body of individuals, on which no income tax is payable as accordance with the provisions of section 86; or fb. The amount or amounts of expenditure relatable to income accruing or arising to a foreign company from: i. Capital Gains on securities, or ii. Interest, dividend, royalty or FTS chargeable to tax as per specified rates fc The amount representing notional loss on transfer of shares or a special purpose vehicle to a business trust in exchange of units allotted by that trust etc. fd. The amount of expenditure relatable to income by way of royalty in respect of patent chargeable to tax u/s 115BBF. g. The amount of depreciation; h. The amount of deferred tax and provision therefor; i. The amount or amounts set aside as provision for diminution in the value of any asset (w.r.e.f. Assessment Year 2001-02); j. The amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, (w.e.f. Assessment Year 2013-14); k. The amount of gain on transfer of units referred in clause (xvii) of section 47 computed by taking into account the cost of

Direct Taxes 1.134 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication shares exchanged with units referred in the said clause or carrying amount of shares at the time of exchange where such shares are carried at value other than cost through profit and loss statement, as the case may be. If any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by – i. The amount withdrawn from any reserve or provision, if any such amount is credited to the profit and loss account subject to the proviso stated in the section; or ii. Incomes exempt under any of the provisions of section 10 [other than the provisions contained in section 10(38)] or section 10A or 10B or section 11 or section 12 apply, if any such income is credited to the profit and loss account; or iii. The amount of depreciation debited to profit and loss account (excluding the depreciation on account of revaluation of assets); or iv. The amount withdrawn from revaluation reserve and credited to profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or v. The amount of income, being share of assessee in the income of an association of persons or body of individuals, on which no income tax is payable in accordance with the provisions of section 86, if any such amount is credited to profit and loss account; or vi. Amount of income accruing or arising to a foreign company from a. Capital Gains on securities, or b. Interest, dividend, royalty or FTS chargeable to tax as per specified rates vii. The amount representing a. Notional gains on transfer of shares/SPV to a business trust b. Notional gains on carrying amount of said units, or c. Gains on transfer of units u/s. 47(xvii) viii. The amount of income by way of royalty in respect of patent chargeable to tax under section 115BBF ix. The aggregate amount of unabsorbed depreciation and loss brought forward a) In case of a company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (w.e.f. AY 2018-19) b) In case of a company, and its subsidiary and the subsidiary of such subsidiary where the Tribunal, on an application moved by the Central Government under section 241 of the Companies Act, 2013, has suspended the Board of Directors of such company and has appointed new directors nominated by the Central Government, under section 242 of the said Act (w.e.f. 1-4-2020) x. The amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account in case of a company other than a company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating authority under section 7 or section

Minimum Alternate Tax (MAT) 1.135 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (w.e.f. AY 2018- 19) . However, for the purpose of this clause – a. The loss shall not include depreciation; b. The provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil. xi. Amount of loss on transfer of units u/s. 47(xvii) in certain circumstances; xii. The amount of profits of sick industrial company during the years in which such company has become sick industrial company under the provisions of Sick Industrial Companies (Special Provision) Act, 1985. xiii. The amount of deferred tax, if any such amount is credited to profit and loss account. “Income tax” as referred to in (a) above will include: 1. Any tax on distributed profits under section 115-O or on distributed income under section 115R 2. Any interest charged under the Act 3. Surcharge, if any, levied by the Central Acts from time-to-time 4. Education Cess on income tax, if any, levied by the Central Acts from time-totime 5. Secondary and Higher Education Cess on income tax, if any, levied by the Central Acts from time-to-time] 3. Provisions shall not affect carry forward of depreciation and losses under the applicable provisions mentioned in sub-section (3) of section 115JB. 4. Profits of an Entrepreneur in SEZ or developer of SEZ liable for MAT from Assessment Year 2012-13. 5. The provisions of this section shall not apply to: a. Any income accruing or arising to a company from life insurance business referred in section 115B b. A person exercising option referred u/s 115BAA or 115BAB 6. Tax paid under section 115JB for A.Y. 2006- 07 and any subsequent year would be allowed as a credit from the normal tax payable for any subsequent year in accordance with the provisions contained in section 115JAA for 7 assessment years (up to Assessment Year 2009- 10), 10 assessment years from assessment year 2010-11 and fifteen assessment years from AY 2018-19. From A. Y. 2020/21, no tax credit available if a company opts for taxation u/s. 115BAA/115BAB. 7. Foreign tax credit in excess of amount of tax credit calculated as per other provisions of Act, shall be ignored while calculation of credit as per MAT. 8. A report in prescribed form (Form No. 29B, Rule 40B) from an accountant as defined in section 288 shall be furnished along with the return of income. 9. In case of conversion of a private company or unlisted public company into Limited Liability Partnership, MAT credit of erstwhile company will not be allowed to the successor Limited Liability Partnership. 10. MAT provisions shall not be applicable to and shall be deemed to have been never applicable to a foreign company a. which is a resident of a country with whom India has entered into a Double Taxation Avoidance Agreement or Tax Information Exchange Agreement or the Central Government has adopted any agreement entered into by a specified association and the foreign company does not have any permanent establishment in India; or b. which is a resident of a country with whom there is no such agreement referred to

Direct Taxes 1.136 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication above, and the foreign company is not required to seek registration under any law for the time being in force relating to the companies. c. where its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in those Sections (w.r.e.f. AY 2001-02). 11. From Assessment Year 2017-18, in respect of a unit located in an International Financial Services Centre which derives its income solely in convertible foreign exchange, MAT will be @ 9% instead of 18.5% 2

Alternate Minimum Tax (AMT) 1.137 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XIII. Alternate Minimum Tax (AMT) • Applicability (Sections 115JC, 115JD, 115JEE, 115JF, Rule 40BA, Form No. 29C) a. Limited Liability Partnership claiming deduction under section 10AA, from section 80H to section 80RRB (excluding section 80P) and 35AD* (w.e.f. FY 2011-12). b. Individual, HUF, AOP, BOI Artificial Juridical Person claiming deduction under section 10AA, from section 80H to section 80RRB (excluding section 80P) and 35AD* having adjusted total income (ATI) exceeding ` 20 lakh (w.e.f. FY 2012-13). (deductions u/ss. 80C to 80GGC are not to be considered). * Deduction u/s. 35AD (w.e.f. FY 2014-15) c. From A.Y.2021-22 provisions of section 115JC and 115JD are not applicable to persons who has exercised option u/s 115BAC or 115BAD Steps in computing AMT Step 1 Step 2 Step 3 Step 4 Step 5 • Compute total income without giving effect to the provision of AMT • Compute Adjusted Total Income (ATI) • For determining ATI certain deduction not to be considered. Refer infra • Compute tax on total income as determined in Step 1 and • Compute tax on ATI as determined in Step 2 at specified rate • In case tax on total income is equal or more than tax on ATI, AMT is not applicable. • In case tax on ATI is more than tax on total income, ATI would be deemed to be Total Income and it would be liable to tax at the specified rate of 18.5% plus Cess/ Surcharge (9% in case of unit located in an International Financial Services Centre w.e.f. 01 April 2019) (15% in case of cooperative societies w.e.f. 01 April 2023) • If provisions of AMT are applicable, obtain report of accountant in Form No. 29C certifying computation of ATI and AMT. (irrespective of fact whether AMT is payable or not)

Direct Taxes 1.138 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Computation of Adjusted Total Income (Referred Step 2 Supra) Limited Liability Partnership, Individual, HUF, AOP, BOI, Artificial Juridical Person Total income (without considering provision of AMT) as increased by following deductions a. Income based deductions claimed under any section of Chapter VI-A Part C i.e. from section 80H to section 80RRB (excluding section 80P); b. Deduction claimed under section 10AA i.e. units established in Special Economic Zones; and c. Deduction claimed under section 35AD in excess of the amount of depreciation allowable under section 32. In case of Individual, HUF, AOP, BOI, Artificial Juridical Person, if ATI is below ` 20 lakh, AMT is not applicable. Tax Rate – 18.5% + SC + H&EC (as applicable) or 9%+SC+H&EC (as applicable) in case of unit located in an International Financial Services Centre and derives income solely in convertible foreign exchange (w.e.f. AY 2019-20) or 15%+SC+H&EC (as applicable) in case of a cooperative society (w.e.f. AY 2023-24) Tax credit Amount of AMT paid over the normal income tax payable for that year is allowed as tax credit. Such tax credit shall be allowed to be carried forward up to 10 subsequent assessment years. E.g. • Tax at normal rate ` 1,00,000; • AMT ` 9,00,000 • Tax Credit ` 8,00,000 [9,00,000 – 1,00,000] Set off of tax credit Set off of tax credit is allowed in the assessment year in which normal tax payable by such noncorporate assessee exceeds AMT. Set off of tax credit would be, up to the amount of tax which is in excess of AMT and balance of the tax credit which remains unabsorbed would be allowed to set off in subsequent years. It is provided with effect from the F.Y. 2014-15 that the credit of AMT would be allowed irrespective of the fact whether provisions of AMT is applicable to the assessee in such year or not. E.g. • Tax at normal rate ` 10,00,000; • AMT ` 9,00,000 • AMT Credit available ` 8,00,000 • Set off Tax Credit ` 1,00,000 [10,00,000- 9,00,000] Balance credit of ` 7,00,000 can be carried forward for unexpired period. Foreign tax credit in excess of amount of tax credit calculated as per other provisions of Act, shall be ignored while calculation of credit as per AMT. Other points Tax on total income would be reduced by AMT credit for the purpose of calculation of interest u/s. 234A – late filing of return of income, u/s. 234B interest for default in payment of advance tax and u/s. 234C deferment of advance tax. It is specifically provided that all other provisions of the Act shall apply to such non-corporate assessee liable for AMT. 2

Search & Seizure - Do’s and Dont’s 1.139 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XIV. Search & Seizure - Do’s and Dont’s ‘Search’ means a thorough inspection of the building, place, vehicle, vessel, aircraft and of the person. ‘Seizure’ means taking possession under the authority of law. 1. Powers in exercise of search The Income-tax Act gives very wide powers to an authorised officer to carry out the search and also to seize documents and unaccounted assets. The authorised officer has the power to: • Enter and search any building, place, etc. where he has reason to suspect that books of account, other documents, money, bullion, jewellery or other valuable article or thing representing undisclosed income is kept; • Break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising powers mentioned in (a) above , where the keys thereof are not available; • Carry out personal search of the person who is suspected to have secreted some item as mentioned in (a) above; • Require any person who is in possession of books or other records to afford facility to inspect such books and other records; • Seize the items as mentioned in (a) above; • Place marks of identification and take extracts or copies of the books of account and other documents; and • Make a note or inventory of the valuables found during the search. The authorised officer is also permitted to pass orders placing prohibition on the person in possession or control of the valuable article or thing from removing, parting with or otherwise dealing with such article or thing without prior permission. The authorised officer also has the right to demand the services of any police officer or any officer of the Central Government. The authorised officer cannot seize stock-intrade of a business, he can only make a note of inventory of such stock-in-trade. Any material held as stock -in-trade of business by the person searched cannot be seized. Also, bar on seizure applies irrespective of whether the person searched is able to explain the source of acquisition of such stock; in common parlance, whether stock is disclosed or undisclosed is immaterial and the same cannot be seized in any circumstance. However, restriction on seizure of stock-in-trade applies only to valuables and not cash. Unaccounted cash, even if forming part of stock-in-trade of business for an assessee, say carrying on money lending business, can be seized, if other conditions are satisfied. 2. Circumstances in which search can be carried out The powers of search can be exercised when the authorised officer has reason to believe that: • Any person has omitted or failed to produce books of account or documents as required by any summons or notice issued, • Any person to whom, when so summoned to produce the books of accounts, documents, etc., will not or would not produce them, • Any person is in possession of money, bullion, jewellery or other valuable article or thing representing, income or property which has not been disclosed or would not be disclosed for purposes of the Income-tax Act. 2.4 Who can authorise search The authorisation to carry out the search can be given by the Principal Director General, Director General, Principal Director of Income Tax, Director of Income Tax, Principal Chief Commissioner of Income Tax, Chief Commissioner of Income Tax, Principal Commissioner of Income Tax or Commissioner of Income Tax only.

Direct Taxes 1.140 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2.5 Authority who can execute and carry out search However, the search warrant can be executed by any Additional Director or Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income Tax Officer and they can be authorised to carry out actual search and seizure. Such officers are referred to as authorised officer. 2.6 Adjustment of Assets seized u/s. 132 or requisition u/s. 132A Section 132B provides that the asset seized u/s.132 or requisition u/s. 132A may be adjusted against the amount of existing liability under the Income-tax Act, Wealth Tax Act etc. and the amount of liability determined on completion of assessment. 2.7 Guidelines for seizure of jewellery and ornaments in course of search The CBDT has vide instruction No. 1916 dated 11th May, 1994, issued guidelines for seizure of jewellery and ornaments in course of search as under: • In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized. • In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized. • The authorised officer may, having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorising the search at the time of furnishing the search report. • In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes. 3. Power of Survey – Section 133A Extent of powers of survey An Income Tax Authority can exercise following powers during survey: • To inspect books of account and other documents, • To place marks of identification on books of account or documents examined, • To make extracts or copies of books of account or documents, • To impound books of account or other documents. However, the same cannot be retained beyond fifteen working days without prior approval of Chief Commissioner of Income Tax or Director General. Though the survey party can visit during survey only a place of business, but if the party surveyed states that any books or other things relating to business are kept at a place other than place of business, then power to visit and survey such place is also available to the officers carrying out survey. Income Tax Authority can enter after sunrise and before sunset any office or any other place where business and profession is carried on where books of account or documents are kept to inspect such books of account or other documents and to furnish such information as may require in relation to such matter. Whether books, cash, valuables, etc. can be seized or impounded during survey By Finance Act, 2002, law has been amended to empower the Income Tax Authority to impound and retain in his custody books of account or other documents inspected by him during survey, after recording his reasons for doing so. The power to impound is restricted to only books and documents and does not extend to cash,

Search & Seizure - Do’s and Dont’s 1.141 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication valuables and other assets found and it cannot be retained beyond fifteen (exclusive of holidays) working days without obtaining prior approval of the PCIT or CCIT or PDG or D G or PC or Commissioner or the Principal Director or Director. Presumption in respect of seized/found books of account, documents, etc. According to S. 292C of the Act, where any books of account, other documents, money, bullion, jewellery or other valuable articles are found in the possession of any person during a search, it is presumed that such documents, etc. belong to that person. This section provides that such presumption will also apply in respect of books of account, documents, etc. in the possession or control of any person in the course of survey operation u/s. 133 and also extended to books of account, documents etc. delivered to the requisition officer u/s. 132A. 3.5 Authority who can carry out survey In a case where information has been received from such authority as may be prescribed, an Assessing Officer or a Tax Recovery Officer or an Inspector of Income Tax or Assistant Director or a Deputy Director cannot carry out a survey without obtaining prior approval from the Joint Commissioner or the Joint Director. In any other case, an Assessing Officer or a Tax Recovery Officer or an Inspector of Income Tax or Assistant Director or a Deputy Director cannot carry out a survey without obtaining prior approval from the Director or Commissioner, as the case may be. It is important to note that neither under the provisions of search nor of survey, there is power to arrest the assessee for offence, if any, of concealment of income. Recording of statements u/ss. 131 and 132(4) The authorised officer has the right to examine on oath any person who is found to be in possession of books of account, etc. or valuable article or thing. A statement on oath may be used as evidence in any proceedings under the Act. 4. Charter of Rights and Duties of Persons Searched The following is the Charter of Rights and Duties of Persons Searched which has been reported in [1994] 208 ITR (St) 5. 4.1 Rights of the Persons searched • To see the warrant of authorisation duly signed and sealed by the issuing authority. • To verify the identity of each member of the search party before the start of the search and on conclusion of the search. • To insist on personal search of ladies being taken only by a lady, with strict regard to decency. • To have at least two respectable and independent residents of the locality as witnesses. • A lady occupying an apartment being searched has a right to withdraw before the search party enters, if, according to custom, she does not appear in public. • To call a medical practitioner in case of emergency. • To allow the children to go to school, after checking their bags. • To have the facility of having meals, etc., at the normal time. • To inspect the seals placed on various receptacles, sealed in course of search and subsequently at the time of reopening of the seals. • Every person who is examined under section 132(4) has a right to ensure that the facts so stated by him have been recorded correctly. • To have a copy of the panchanama together with all the annexures. • To have a copy of any statement that is used against him by the Department. • To have inspection of the seized books of account, etc., or to take extracts therefrom

Direct Taxes 1.142 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication in the presence of any of the authorised officers or any other person empowered by him. • To make an application objecting to the approval given by the Commissioner of Income-tax for retention of books and documents beyond 180 days from the date of the seizure. 4.2 Duties of the person searched • To allow free and unhindered ingress into the premises. • To see the warrant of authorisation and put signature on the same. • To identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles to the authorised officer. • To identify and explain the ownership of the assets, books of account and documents found in the premises. • To identify every individual in the premises and to explain their relationship to the person being searched. He should not mislead by impersonation. If he cheats by pretending to be some other person or knowingly substitutes one person for another, it is an offence punishable under section 416 of the Indian Penal Code. • Not to allow or encourage the entry of any unauthorised person into the premises. • Not to remove any article from its place without notice or knowledge of the authorised officer. If he secretes or destroys any document with the intention of preventing the same from being produced or used as evidence before the court or public servant, he shall be punishable with imprisonment or fine or both, in accordance with section 204 of the Indian Penal Code. • To answer all queries truthfully and to the best of his knowledge. He should not allow any third party to either interfere or prompt while his statement is being recorded by the authorised officer. In doing so, he should keep in mind that – • If he refuses to answer a question on a subject relevant to the search operation, he shall be punishable with imprisonment of fine or both, under section 179 of the Indian Penal Code. • Being legally bound by an oath or affirmation to state the truth, if he makes a false statement, he shall be punishable with imprisonment or fine or both under section 181 of the Indian Penal Code. • Similarly, if he provides evidence which is false and which he knows or believes to be false, he is liable to be punished under section 191 of the Indian Penal Code. • To affix his signature on the recorded statement, inventories and the panchanama. • To ensure that peace is maintained throughout the duration of the search, and to co-operate with the search party in all respects so that the search action is concluded at the earliest and in a peaceful manner. • Similar co-operation should be extended even after the search action is over, so as to enable the authorised officer to complete necessary follow-up investigations at the earliest. 5. Do’s and Don’ts for assessees • Return of income should be filed within the time limit prescribed. • Copies of returns of income filed should be properly documented. Though your tax representative may be having and maintaining complete tax records, it is necessary that a copy of income tax and wealth tax returns filed are kept at office premises and in case of individuals, it should also be maintained at residence for all family members.

Search & Seizure - Do’s and Dont’s 1.143 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Books of account are maintained properly and up-to-date. • One may be called upon to explain any document, loose papers, etc. found during search or survey. As such, care should be taken to maintain papers in proper manner. • Investments made in assets should be properly accounted and supporting evidence should be available to substantiate the investment made. • Ornaments belonging to different members of the family should be kept separately. It is advisable to maintain list of the ornaments of each person and also where the ornaments are kept. Valuation report of a jeweler can be obtained. Also, Tax records substantiating such ownership should be available at residence. • Statements recorded at the time of search are very crucial. The person making a statement is advised to state truly, correctly, fully and completely. Reply should not be vague or evasive. One should be very cautious and careful while answering the question and the person should not panic. • Further, necessary co-operation should be made with the authorised officers. As per amendment made by the Finance Act, 2002, if a person who is required to afford the authorised officer the necessary facility to inspect the books of account or other documents maintained in electronic form, fails to afford such facility to the authorised officer, he shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine. 6. The Survey Party to give details of Senior Officers to the assessee before start of Survey Operation The Survey Party is required to give name, address and phone numbers of the Principal Chief Commissioner of Income Tax, the Chief Commissioner of Income Tax, Commissioner of Income Tax, Additional Commissioner of Income Tax to the assessee who is under Survey. This transparency will enable the party to speak to senior officer in case of any pressure or coercion during the survey. 2

Direct Taxes 1.144 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XV. Co-operative Society – Taxation 1. Rate of Tax • Income up to ` 10,000 = 10% • Income ` 10,001 up to ` 20,000 = 20% of income exceeding ` 10,000 + ` 1,000 • Income ` 20,001 onwards = 30% of income exceeding `20,000 + ` 3,000 For A.Y. 2023-24 & onwards Surcharge applicable will be 7% of tax if the total income exceeds ` 1,00,00,000/- but does not exceed ` 10,00,00,000/- and 12% of tax if the total income exceeds ` 10,00,00,000/-. Marginal Relief is available. Health and Education Cess is 4% of Income Tax and Surcharge. Alternative Minimum Tax Tax payable by a co-operative cannot be less than 15% (Surcharge + EC + SHEC) of “adjusted total income” as per section 115 JC w.e.f. A.Y. 2023-24. (earlier 18.5%) Option of reduced tax rate applicable form A.Y. 2021-22 onwards – Section 115BAD • Tax at the reduced rate of 22%, if specified conditions are satisfied. • Where the co-operative society fails to satisfy the specified conditions, the option shall become invalid in respect of all assessment years following and other provisions of the Act shall apply, as if the option had never been exercised. • The above option to be exercised on or before the due date of filing return of income u/s. 139(1) • Once the option is exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. • Conditions specified for availing the option u/s 115BAD by a resident co-operative society: — Income is computed without deductions / exemptions under S.10AA, S.32(1) (iia), S.32AD, S.33AB, S.35(1)(iia)/ (iii), S.35(2AA), S.35AD, S.35CCC or provisions of Chapter VI-A except Sec. 80JJAA — Income is computed without claiming set-off of any loss carried forward or unabsorbed depreciation, if the same is attributable to above deductions / exemptions. Any such loss or depreciation shall be deemed to have been given full effect to and no further deduction of such loss or depreciation shall be allowed for any subsequent year — Income is computed by claiming depreciation, if any, other that under S. 32(1)(iia), in such manner as may be prescribed. — Deduction u/s 80LA in respect of a unit in International Financial Service Centre (IFSC) shall be available subject to fulfilment of conditions contained in that section. Note: Provisions of S. 115JC pertaining to Alternate Minimum Tax shall not apply to cooperative societies exercising the above option u/s. 115BAD. Concessional tax rate for the manufacturing co-operatives from AY 2024-25 • Section 115BAE has been inserted by Finance Act, 2023 to provide that income tax payable in respect of the total income of a new manufacturing co-operative society resident in India in respect of assessment years commencing on or after 1st April 2024 shall, at the option of such society, in respect of manufacturing income of the society, be computed at the rate of 15%, if specified conditions are satisfied.

Co-operative Society – Taxation 1.145 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Conditions for availing the option u/s 115BAE by a resident co-operative society : — The co-operative society has been setup and registered on or after the 1st day of April, 2023, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024. — The business should not formed by splitting up, or the reconstruction, of a business already in existence. — The co-operative society does not use any plant and machinery previously used for any purpose. Exceptions : Imported old machinery : if previously not used in India at any time, and such machinery has been imported in India from country outside India and No deduction on account of depreciation has been allowed or allowable in respect of such machinery. Value of old previously used plant and machinery does not exceed 20% of total value of plant and machinery. — The co-operative society is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it. It is clarified that manufacturing includes generation of electricity, but does not include business listed in explanation to section 115BAE(2)(b). — Other conditions similar like 115BAD. • Provided that the income from activity other than manufacturing (as specified) and if no specific rate is mention under this chapter will be taxable at rate of 22% and no deduction or allowance in respect of any expenditure will be allowed. 2. Compliances • Due date for filing return of income under the Income-tax Act, 1961 is 31st October. • No deduction under Part C of Chapter VIA of the act shall be allowed if the return of income is not filed within the due date as specified u/s 139(1). 3. • Tax audit is compulsory if turnover of society (engaged in business) is more than ` 1 crore. However, the applicable turnover limit will be ` 10 crore, where aggregate amount received including sales, turnover or gross receipts and aggregate of all payments made including expenditure in cash or other than account payee cheque does not exceed five percent of such turnover etc. or expenditure as the case may be. Tax Audit provisions is generally not applicable to societies which do not carry on any business. For example, housing societies in years of construction of building premises and redevelopments of their properties, provisions of section 44AB would not apply as there is no business activity.

Direct Taxes 1.146 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 4. Deduction available to co-operative society – Section 80P Section Society engaged in business of Nature of Income Amount deductible Applicability & Conditions 80P(2)(a) (i) Carrying on the Business of Banking or Providing credit facility to members Entire profit from such business • Deduction not available to co-operative bank. • Primary co-operative agricultural & rural development bank & chit funds can claim deduction. • Providing credit facility means providing loans & other credit facilities. Does not include selling goods on credit/hire purchase. 80P(2)(a) (ii) Cottage Industry Entire profit from such business For qualifying as cottage industry – • Business is to be carried on in a small scale, with limited capital, workers & turnover. • Business is carried on by members of society (shareholders) & their families. • Business must involve activity of manufacture, production or processing and not merely in trade. • It is not required to be registered under Factories Act. 80P(2)(a) (iii) Marketing of Agricultural Produce Entire profit from such business Grown by its members 80P(2)(a) (iv) Purchase of Agricultural Implements, seeds, livestock, other articles intended for agriculture Entire profit from such business If it is for the purpose of supplying them to its members. 80P(2)(a) (v) Processing Agricultural Produce of Members (without aid of power) Entire profit from such business —

Co-operative Society – Taxation 1.147 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Society engaged in business of Nature of Income Amount deductible Applicability & Conditions 80P(2)(a) (vi) Collective Disposal of labour of its members Entire profit from such business • Deduction is available only when earning of society is through the utilisation of the actual labour of its members • Deduction is available provided the rules & bye-laws of the society restrict the voting rights to following class of members – • Individuals who contribute their labour • Co-op. credit societies which provide financial assistance to the society • State Government 80P(2)(a) (vii) Fishing & Allied Activities Entire profit from such business • It includes catching, curing, processing, preserving, storing or marketing of fish or purchase of materials & equipment in connection therewith for supplying them to its members • Deduction is available provided the rules & bye-laws of the society restrict the voting rights to following class of members – – Individuals who carry on fishing or allied activities – Co-op. credit societies which provide financial assistance to the society – State Government 80P(2)(b) Primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members Entire profit from such business • Milk, oil seeds, fruits or vegetables are grown or raised by its members • Milk, oilseeds, fruits or vegetables are supplied to a federal co-op. society (engaged in similar business), Government or local authority, Government company or a statutory corporation (engaged in similar business) 80P(2)(c) Engaged in any other activity ` 1,00,000 for consumer cooperative society ` 50,000 for others — 80P(2)(d) Interest income/ Dividend income Entire amount of such income • Such income is received from investment in any other co-operative society

Direct Taxes 1.148 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Society engaged in business of Nature of Income Amount deductible Applicability & Conditions 80P(2)(e) Letting of godowns/ warehouses Entire amount of income derived from such business • Godowns/warehouses are let for storage, processing or facilitating the marketing of commodities 80P(2)(f) Interest on securities & Income from House property chargeable u/s. 22. Entire amount of such income • Benefit not available to housing society, urban consumers society, society carrying on transport business, society engaged in manufacturing operations with aid of power • Gross total income of such society does not exceed ` 20,000. 2

Statement of Financial Transactions, Annual Information System and Taxpayer Information Summary 1.149 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XVI. Statement of Financial Transactions (SFT) and Annual Information System (AIS) Taxpayer Information Summary (TIS) Statement of financial transactions or reportable account annual information return (Section 285BA, Section 285BB, Rule 114E) 1. Section 285BA Annual Information Return has been renamed as Statement of Financial Transaction or Reportable Account (the statement). 2. Rule 114E Rule 114E, substituted by the Income-tax (22nd Amendment) Rules, 2015 with effect from 1st April, 2016 vide Notification No.95/2015 (F.No.142/28/2012-(SO)TPL/SO 3545(E)) dated 30th December, 2015, prescribes the nature of the transactions and the threshold value on or above which information has to submitted in the statement. Tabular Summary Nature and Value of transactions to be reported in Statement of Financial Transaction : Sl. No. Nature of Financial transaction Aggregate Value in a financial year ` Reporting Person 1 a Cash Payments for purchase of bank drafts or pay orders or bankers cheques 10 lakh or more Banking company/institution, Co-operative Bank b Cash Payments for purchase of pre-paid instruments issued by the RBI 10 lakh or more Banking company/institution, Co-operative Bank c Cash deposits or cash withdrawals (including through bearer’s cheques) in or from one or more current account of a person 50 lakh or more Banking company/institution, Co-operative Bank 2 Cash deposits in one or more accounts (other than current account and time deposit) of a person 10 lakh or more Banking company/institution, Co-operative Bank, Post Office 3 One or more time deposits (other than renewal) of a person 10 lakh or more Banking company/institution, Co-operative Bank, Post Office, NBFC, Nidhi 4 a Payments made by any person, otherwise than by cash, against Acts raised in respect of one or more credit cards issued 10 lakh or more Banking company/institution, Co-operative Bank or any other company/institution issuing credit card b Payments made by any person, in cash, against Acts raised in respect of one or more credit cards issued 1 lakh or more Banking company/institution, Co-operative Bank or any other company/institution issuing credit card

Direct Taxes 1.150 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sl. No. Nature of Financial transaction Aggregate Value in a financial year ` Reporting Person 5 Receipts from any person for acquiring bonds or debentures (other than renewal) 10 lakh or more Company or institution issuing bonds or debentures 6 Receipts from any person for acquiring shares (including share application money) issued by the company 10 lakh or more Company issuing shares 7 Buy-back of shares from any person (other than shares bought in the open market) 10 lakh or more Listed Company 8 Receipts from any person for acquiring units of one or more schemes of a Mutual Fund (other than transfer from one scheme to another scheme of a Mutual Fund) 10 lakh or more Trustee or authorised person of a Mutual Fund 9 Receipts from any person for sale of foreign currency including credit of such currency to foreign exchange card or expense in such currency through a debit card or credit card or through issue of traveller's cheque or draft or any other instrument 10 lakh or more Authorised Dealer in Foreign Exchange 10 Purchase or sale by any person of immovable property 30 lakhs or more Registrar, Sub-Registrar or Inspector-General 11 Receipt of cash payment for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule) Exceeding ` 2 lakhs Any person who is liable for audit under section 44AB of the Act 12 Cash deposits during the period 9th November, 2016 to 30th December, 2016 aggregating to :- (i) ` 12,50,000/- or more, in one or more current account of a person; or (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); ` 2,50,000/- or more, in one or more accounts (other than a current account) of a person Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898)

Statement of Financial Transactions, Annual Information System and Taxpayer Information Summary 1.151 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sl. No. Nature of Financial transaction Aggregate Value in a financial year ` Reporting Person 13 Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl. No. 12 (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898) 3. Manner of computing the value of the transactions to be reported – Rule 114E(3) While aggregating the amounts for determining the threshold amount for reporting in respect of any person : a. all the accounts of the same nature maintained in respect of that person during the financial year shall be taken into account. b. all the transactions of the same nature recorded in respect of that person during the financial year shall be aggregated. c. where the account is maintained or transaction is recorded in the name of more than one person, attribute the transaction to all the persons. d. apply the threshold limit separately to cash deposits in current account or cash withdrawals from current account to be reported under Sl. No.1(c) of the above table. The above rule shall not be applicable to a reporting person mentioned at Sl. No. 9 i.e., an Authorised Dealer in foreign exchange. 4. Form No. of Statement – Rule 114(E)(4) Statement of Specified Financial Transactions is to be furnished in Form No. 61A through online transmission of electronic data under digital signature of the person specified in sub-rule (7). However in case of a reporting person is a Post Master General or a Registrar, Sub-Registrar or Inspector-General the said statement may be furnished in a computer readable media, being a CD or DVD, along with verification in Form V on paper. The Principal Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data. 5. Authority for accepting statement – Rule 114E(4) The statement is required to be furnished to the Director or Joint Director of Income-tax (Intelligence and Criminal Investigation). 6. Time Limit of Filing Statement – Rule 114E(5) Statement of Specified Financial Transactions is to be furnished on or before 31st May,

Direct Taxes 1.152 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication immediately following the financial year in which the transaction is registered or recorded. 7. Information relating to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income – Rule 114E(5A) Sub-rule (5A) inserted by the Income-tax (4th Amendment) Rules, 2021 with effect from 12th March, 2021, prescribes the information relating to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income which has to reported in the statement of financial transactions. Sr. No. Nature of Transaction Reporting person Period and due date for reporting 1 Capital gains on transfer of listed securities or units of Mutual Funds (reporting person is required to follow guidelines issued) (i) Recognized Stock Exchange; (ii) Depository (iii) Recognised Clearing Corporation; (iv) Registrar to an issue and share transfer agent. The statement of financial transactions relating to Financial Year 2020-21 shall be furnished on or before the 31st May 2021. Thereafter, the statement of financial transactions relating to the quarter ending 30th June, 31st September, 31st December and 31st March shall be furnished on or before 25th of July, October, January and April respectively. 2 Dividend income A Company The statement of financial transactions shall be furnished on or before the 31 st May, immediately following the financial year in which the transaction is registered or recorded. 3 Interest income (i) A banking company/ institution or a cooperative bank ; (ii) Post Master General; (iii) Non-banking financial company. The statement of financial transactions shall be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded. 8. Manner of Filing Statement – Rules 114E(6) & (7) 8.1. Registration Number to be obtained Every reporting person shall communicate to the Principal Director General of Income-tax (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer and obtain a Registration number. 8.2. Income-tax Department Reporting Entity Identification Number (ITDREIN) The person filing the statement is required to quote his Income-tax Department Reporting Identification Number (ITDREIN) in para 1.2 of Part A of Form 61A. ITDREIN is a 16 character identification number where the first 10 characters is the PAN or TAN

Statement of Financial Transactions, Annual Information System and Taxpayer Information Summary 1.153 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication of the reporting entity and the last 6 digits is a sequentially generated number. The reporting entity may use a dummy number (PAN+99999 or TAN+99999) till the ITDREIN is communicated. 8.3 Signing and Verification of statement Under sub-rule (7) the statement of financial transaction has to be signed, verified and furnished by the Designated Director specified in sub-rule (6). If the reporting person is a non-resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director. Designated Director, means a person designated by the reporting person to ensure overall compliance with the obligations imposed under section 285BA of the Act and rules 115B to 114E and includes. i. The Managing Director or a whole time Director duly authorised by the Board of Directors in case of a company. ii. The managing partner in case of a partnership firm. iii. The proprietor in case of a proprietorship concern. iv. The managing trustee in case of a trust. v. A person or individual who controls and manages the affairs of the reporting entity in case of an unincorporated body or a body of individuals or any other person. Principal Officer means a officer designated by the reporting person. 9. Penalty for failure to furnish Statement Section 271FA provides that if the specified person fails to furnish the statement within the time prescribed, then the prescribed Income-tax Authority may impose a penalty of ` 100/- for every day during which the failure continues. Where in pursuance of a notice issued under section (5) of section 285BA there is a failure to furnish the SET within the period specified in the notice issued then the penalty payable shall be ` 500/- for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the AIR expires. The penalty shall, however not be levied if there is a reasonable cause for the failure to furnish the AIR within the prescribed time. 10. Penalty for furnishing inaccurate information 10.1 Penalty under Section 271FAA(1) : Section 271FAA inserted by the Finance Act, 2014 w.e.f. 1-4-2015 provides that if a person referred to in section 285BA(1) provides inaccurate information in the statement and where: a. The inaccuracy is due to failure to comply with the due diligence requirement prescribed u/s. 285BA(7) or is deliberate. b. The person knows of the inaccuracy at the time of furnishing the statement but does not inform. c. The person discovers the inaccuracy after furnishing the statement and fails to inform and furnish correct information within the time specified u/s. 285BA(6) then the penalty payable shall be ` 50,000/-. Earlier penalty was applicable to only prescribed reporting financial institution. Now it has been widened to cover all the persons filing SFT. 10.2 Penalty under Section 271FAA(2) In section 271FAA sub section (2) has been inserted by Finance Act, 2023, w.e.f 1-4-2023 providing that where a prescribed financial institution which is required to furnish a statement under section 285BA relating to reportable accounts, provides inaccurate information under such statement and the inaccuracy in such statement is due to false or inaccurate information furnished by the holder or holders of the relevant reportable account or accounts, such financial institution shall be liable to additional penalty of ` 5,000 for every inaccurate reportable account. The financial institution shall be entitled to recover such amount from the holder of such account.

Direct Taxes 1.154 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 11. Defective return, notice, compliances 11.1 Section 285BA (4): Notice for defective return Where the prescribed Income-tax Authority considers that the AIR is defective, he may intimate the defect and give him an opportunity of rectifying the defect within a period of one month from the date of such intimation or within such further period, the authority may grant on an application in this regard. If the person fails to rectify the defect within the time allowed, the Authority will treat the return as invalid and all the provisions of this Act shall apply as if such person has failed to furnish AIR. 11.3 Section 285BA(6): Furnishing of correct information on discovery of inaccurate information If the person who furnished the statement discovers any inaccuracy in the statement, he shall inform the Income-tax Authority and furnish the correct information 12. Section 285BB Section 285BB has been inserted by Finance Act 2020 with effect from 1st June 2020. Under Section 285BB, the prescribed Income tax authority or a person authorized by such authority shall upload an Annual Information Statement in the e-filing account of the assessee in such form and manner, within such time and along with such information, which is in possession with the IncomeTax authority, as may be prescribed. 2 Annual Information System (AIS) Taxpayer Information Summary (TIS) 1. What is AIS? • The AIS is an exhaustive statement containing all the details of financial transactions done by the assessee during the previous year. AIS can be accessed by clicking on the link “Annual Information Statement (AIS)” under the “Services” tab on the new Income tax e-filing portal. • The transactions in AIS will reflect the data based on the transactions reported by various reporting entities. AIS is a comprehensive statement as compared to Form 26AS. • AIS shows both reported value and modified value (i.e. value after considering taxpayer feedback) under each section (i.e. TDS, SFT, Other information) 2. Objectives of AIS • Display complete information to the taxpayer with a facility to capture online feedback • Promote voluntary compliance and enable seamless prefilling of return • Deter non-compliance 3. What is the Difference between AIS and Form 26AS • AIS is the extension of Form 26AS. Form 26AS displays details of property purchases, high-value investments, and TDS/TCS transactions carried out during the financial year. • AIS additionally includes savings account interest, dividends, rent received, purchase and sale transactions of securities/immovable properties, foreign remittances, interest on deposits, GST turnover, GST purchases.

Statement of Financial Transactions, Annual Information System and Taxpayer Information Summary 1.155 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • AIS also provides the taxpayer the option to give feedback on the transactions reported. Further, the aggregation of transactions on information source level is also reported in TIS. 4. What are the components of AIS AIS is divided in two parts i.e. Part A and Part B. • PART A- General Information Part-A displays general information pertaining to you, including PAN, Masked Aadhar Number, Name of the Taxpayer, Date of Birth/ Incorporation/ Formation, mobile number, e-mail address and address of Taxpayer. • PART- B Part B will contain details of Financial transactions. Part B will majorly cover below mentioned financial transactions depending upon the assessee • Part B1 – Information relating to tax deducted or collected at the source. • Part B2 – Information relating to Specified Financial Transactions – Dividend Income received during the year. – Sale and Purchase of Securities and units of mutual funds – Interest on Securities and Term Deposits • Part B3 – Information relating to Payment of Taxes i.e., Advance Tax, SelfAssessment tax, and Tax on Regular Assessment. • Part B4 – Information relating to Income Tax Demand and Refunds. • Part B5 – Information relating to pending proceedings. • Part B6 – Information related to completed proceedings. • Part B7 – Any other information in relation to Sub Rule (2) of Rule 114I. This part contains details of GST Turnover and GST purchases done during the previous year. 5. Format of AIS for Downloading AIS can be downloaded in PDF, JSON and CSV format. 6. Option of Giving Feedback for variation in data • If the taxpayer feels that the information is incorrect, relates to other person/year, duplicate etc., a facility has been provided to submit online feedback. • Feedback can also be furnished by submitting multiple information in bulk. • An AIS Utility has also been provided for taxpayers to view AIS and upload feedback in offline manner. • The reported value and value after feedback will be shown separately in the AIS. • In case the information is modified/denied, the information source may be contacted for confirmation.

Direct Taxes 1.156 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • CBDT has issued a separate utility for providing Feedback. • There may be other transactions relating to the taxpayer which might not get reflected in Annual Information Statement. 7. Procedure of providing feedback • Assessee can submit feedback on active information displayed under TDS/ TCS Information, SFT Information or Other information by following below mentioned steps: – Step 1: Click on “Optional” button mentioned in the Feedback column for relevant information. You will be directed to ‘Add Feedback’ screen. – Step 2: Choose the relevant feedback option and enter the feedback details (dependent on feedback option). – Step 3: Click “Submit” to submit the feedback 8. Is there any limit on the number of times I can modify a given feedback? Currently, there is no limit on the number of times you can modify previously given feedbacks. 9. Reliance in case of variation in data • In case there is a variation between the TDS/TCS information or the details of tax paid as displayed in Form26AS on TRACES portal and the TDS/ TCS information or the information relating to tax payment as displayed in AIS on Compliance Portal, the taxpayer may rely on the information displayed on TRACES portal for the purpose of filing of ITR and for other tax compliance purposes. 10. What is TIS? • Taxpayer Information Summary (TIS) is an information category wise aggregated information summary for a taxpayer. TIS shows two types of values. • It shows processed value (i.e. value generated after deduplication of information based on pre-defined rules) and derived value (i.e. value derived after considering the taxpayer feedback and processed value) under each information category (e.g. Salary, Interest, Dividend etc.). • The derived information in TIS will be used for prefilling of return, if applicable • TIS in short is will contain a summary of all the transactions reported in AIS. • If the taxpayer submits his reply for any information in any AIS, then the derived value in TIS will be updated on a real-time basis. 11. Advisory It is advised to reconcile the information appearing in AIS while filing the Return of Income. Proper feedback should be given for Any information reflecting in AIS which is not pertaining to the assessee. 2

Return of Income 1.157 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XVII. Return of Income Obligation to file Return of Income u/s. 139 of the Income Tax Act, 1961 Sr. No. Assessee Conditions 1. Firm (including LLP) Every Firm irrespective of earning income or incurring loss 2. Company Every Company irrespective of earning income or incurring loss 3. Assessee other than Company or Firm If his or its total income during the previous year exceeds maximum amount not chargeable to tax (see note below for Maximum Amount not chargeable to tax for A.Y. 2024-25), without considering deduction under sections 54, 54B, 54EC, 54F, 54G, 54GA and 54GB. 4. Charitable or religious trust If the total income in the previous year exceeds the maximum amount not chargeable to tax without giving effect to section 11 and section 12 5. • Research Association under section 10(21) • News Agency under section 10(22B) • Association/Institution referred under sections 10(23A) and 10(23B) • Universities/Hospitals/Medical institutions referred under various sub-clauses of Section 10(23C) i.e.. (iiiad) or (iiiae) or (iv) or (v) or (vi) or (via) • Mutual Fund referred under section. 10(23D) • Securitisation Trust referred under section. 10(23DA) • Venture Capital Company or Venture Capital Fund under section 10(23FB) • Trade Union referred under sections 10(24)(a) and 10(24)(b) • Board/Trust/Commission referred under section 10(46) • Infrastructure Debt Fund referred under section 10(47) • Fund referred under section 10(23AAA) • Investor Protection Fund referred under section 10(23EC) or 10(23ED) If the income exceeds maximum amount not chargeable to tax without considering exemptions under respective provisions of section 10

Direct Taxes 1.158 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Assessee Conditions • Core Settlement Guarantee Fund referred under section 10(23EE) • Board or Authority referred under section 10(29A) 6. University, college or any other institution referred to under section 35(1))(ii)/(iii) Required to furnish return of income/loss even if not required to furnish return of income under any other provisions 7. Business Trust and Investment Fund Required to furnish return of income/loss even if not required to furnish return of income under any other provisions 8. Political Party Total income in the previous years without giving effect to section 13A exceeds the maximum amount not chargeable to income tax 9. Every person To whom notice under section 142(1) or 148 is issued 10. Any resident person other than not ordinary resident Who has any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India 11. Any person a. Who has deposited amounts exceeding ` 1 crore in one or more current accounts maintained with a bank b. Who has incurred expenditure of an amount or aggregate of the amounts exceeding ` 2 lakh for himself or any other person for travel to a foreign country c. Who has incurred expenditure of an amount exceeding ` 1 lakh towards consumption of electricity No Obligation to File Return of Income • No obligation is incurred on the assessee referred in sections 115A(1), 115AC(1), 115BBA or 115D to file Return under section 139(1), if the person derives no other income other than those specified in the above Sections. Further, tax deductible at source should be deducted thereon from such income. • Resident senior citizens of the age of 75 or more have been exempted from filing of return of income w.e.f. A.Y. 2022-23 subject to fulfilment of below conditions: — Such senior citizen should have only pension income. Additionally, such senior citizen may also have interest income from the same bank in which he/ she is receiving the pension; and — Such senior citizen will be required to furnish a declaration to the specified bank.

Return of Income 1.159 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Due Dates for filing Return of Income for A.Y. 2023-24 Sr. No. Nature of Assessee Due Date 1. a. Every assessee who is required to furnish Transfer Pricing Audit Report under section 92E in respect of international and specified domestic transactions b. Any partner of the Firm which are subjected to audit under section 92E (Transfer Pricing Audit) c. Spouse (governed by Portuguese Civil Code u/s 5A of the Act) of partner, being a partner in a partnership firm subjected to audit under section 92E (Transfer Pricing Audit) 30th November 2023 2. a. Company other than company who is required to furnish Transfer Pricing Audit Report under section 92E b. Every assessee who is required to get accounts audited under Income-tax Act/any other laws (other than those assessee who is required to furnish Transfer Pricing Audit Report under section 92E) c. Any partner of the Firm (including partner of LLP), where accounts of such firm are subjected to audit under any law d. Spouse (governed by Portuguese Civil Code u/s 5A of the Act) of partner, being a partner in a partnership firm subjected to audit under any law 31st October 2023 3. Other assessee not referred above 31st July 2023 4. Filing of Belated return for all assessee 31st December 2023 5. Filing of Revised return for all assessee 31st December 2023 6. Updated Return 31st March 2026 Return of Income to be verified by Sr. No. Nature of Assessee Return of Income to be verified by 1. Individual • Individual himself • In case individual is not within India – by himself or by any other person authorised through power of attorney • In case individual is mentally incapacitated from attending of his affairs – by his guardian or any person competent to act on his behalf • For any other reason individual is unable to sign/verify return — by any person authorised through power of attorney

Direct Taxes 1.160 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Nature of Assessee Return of Income to be verified by 2. HUF • Karta • In case Karta is not within India or is mentally incapacitated from attending the affairs – by any other adult member of such family 3. Indian resident Company • Managing director • In case managing director is not able to sign/verify for any unavoidable reasons or where there is no managing director – by any other director or any other person as prescribed under the Rules • In case company is being wound up – by Liquidator • In case management has been taken over by the Central or State Government – by Principal Officer of the company • In case of company whose application for Insolvency resolution has been accepted – then by Insolvency Professional appointed by such adjudicating authority 4. Non-resident Company • By any person holding valid power of attorney from a company to sign/verify 5. Firm • Managing partner • In case managing partner is not able to sign/verify for any unavoidable reasons or where there is no managing partner – by any other partner, not being a minor 6. LLP • Designated Partner • In case designated partner is not able to sign/verify for any unavoidable reasons or where there is no designated partner – by any other partner or any other person as prescribed under the Rules 7. Local Authority • Principal Officer 8. Political Party • Chief Executive Officer 9. Any other Association • Any member of Association or the Principal Officer 10. Any other person • By that person or some person competent to act on his behalf

Return of Income 1.161 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Forms for Return of Income for A.Y. 2023-24 ITR Applicable to ITR 1 SAHAJ An individual (ordinarily resident in India) whose total income for the assessment year 2022-23 includes: • Income from Salary/Pension • Income from One House Property (excluding brought forward and carried forward losses). • Income from Other Sources (excluding winning from lottery and income from Race Horses or losses under this head) Other conditions: • Not having assets (including financial interest in any entity) located outside India or signing authority in any account located outside India • Has not claimed any relief u/s. 90 or 90A or has not claimed deduction u/s. 91 • Not having agriculture income in excess of ` 5,000/- • Not having income from any source outside India • Other than person claiming deduction under section 57 from income taxable under the head other sources (other than deduction allowed from family pension) • Total income not exceeding ` 50 lakh • Not for an individual who is either Director in a company or has invested in unlisted equity shares • Not owning a house property in joint-ownership with two or more persons • Not required to furnish a return of income under seventh proviso to Section 139(1) • Has not received a notice u/s 153A or 153C for the relevant year • in cases where TDS has been deducted u/s 194N • if income-tax is deferred on ESOP ITR 2 For individuals and HUFs not having Income from Business and Profession and are not partners in any firm. ITR 3 For individuals and HUFs having Income from Business and Profession and are partners in any firm ITR 4 Sugam For Individuals, HUFs and Firms (other than LLP) being a resident : • having total income up to ` 50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE] • Not for an individual who is either Director in a company or has invested in unlisted equity shares or if income-tax is deferred on ESOP or having agriculture income in excess of ` 5,000/- ITR 5 For firms (including LLPs), AOPs, BOI, Business trust and Investment fund and other persons not being HUF, company or persons filing ITR 7 ITR 6 Companies other than companies claiming exemption u/s. 11 ITR 7 For persons including companies required to furnish return u/ss. 139(4A), 139(4B), 139(4C) and 139(4D)

Direct Taxes 1.162 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Return of income claiming certain deductions or certain loss • Return furnished after due date, the deductions/benefits may not be available— — Deductions under sections 10A, 10B, and section covered under Part C of Chapter VIA of the Act. — Allowability of losses incurred under business (other than unabsorbed depreciation), capital gains and/or from owning and maintaining race horses. However, Carry forward of losses under the head House property and unabsorbed depreciation is not affected even if the return is not filed within due date. — Losses of specified business (Sec. 35AD) and Speculation Business. • Where any loss has been duly carried forward in accordance with the provisions of section 139(3) in earlier years, there is no obligation to file the intermediary return in which the benefit of set off is claimed or loss is required to be carried forward, to be filed within the due date. • Section 119(2)(b) empowers the CBDT to authorise any Income Tax Authority to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified under the Act, to avoid genuine hardship in any case or class of cases. The claim for carry forward of loss in case of a loss return is relatable to a claim arising under the category of any other relief available under the Act. Refer Cir. No. 9/2015 DATED 9-6-2015. Belated return • Return can be filed belatedly before three months from the end of the relevant assessment year or before completion of assessment, whichever is earlier. • In case return, as required by sections 139(4A) (Trusts)/139(4C) (specified Trusts, Institutions, Political Parties, etc.) is not filed on or before due date (31st July in case income before claiming exemption under section 11 exceeds maximum amount not chargeable to tax or 31st October where accounts are subject to audit), penalty of ` 100/- per day may be imposed under section 272A(2)(e). Revised return • Return can be revised anytime within three months from the end of assessment year or before completion of assessment whichever is earlier. • Even Belated Return can be Revised. Defective return • S. 139(9) lays that return of income would be defective in case not accompanied by the relevant annexure. W.e.f. 1-6-2013. A return which has been filed without payment of selfassessment tax along with interest shall be treated as a valid return. • However annexure less return scenario, return would be treated as defective in case return is not filed completely in the manner specified in the return form. • If the assessee fails to rectify the defects in the return of income within 15 days of intimation of defects by the Assessing Officer or specified period, the return will be treated as invalid return and the provisions of Income-tax Act will apply as if the assessee has failed to furnish the return. Updated return • With effect from 1st April 2022, an updated return of income u/s 139(8A) can be furnished by a person for any assessment year whether or not the return of income has already been furnished for such assessment year under any provision of section 139.

Return of Income 1.163 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Such updated return can be furnished at any time (after the expiry of the time limit for furnishing a belated or revised return of income) within 24 months from the end of the relevant assessment year. • Further, it is subject to the condition that the person filing such updated return shall pay additional income-tax as applicable depending upon when such return is being filed. Date of filing of updated return Additional income-tax payable After the expiry of the time available for filing return under sections 139(4) or 139(5) but before completion of a period of twelve months from the end of the relevant assessment year 25% of aggregate of tax (including surcharge and health and education cess) and interest payable as computed above After the expiry of twelve months from the end of the relevant assessment year but before completion of the period of twenty-four months from the end of the relevant assessment year 50% of aggregate of tax (including surcharge and health and education cess) and interest payable as computed above • Tax payable on filing of updated return shall be paid along with interest for default (234B) or deferment in payment of advance tax (234C). • An updated return cannot be filed in certain situations as enshrined in first, second and third proviso to section 139(8A). Modified return Section 170A provides that in case of business reorganization involving amalgamation or demerger or merger of business of one or more persons, where a return of income has been filed by the successor prior to the order of the tribunal or court as the case may be, for any assessment year relevant to previous year to which the order applies, the successor shall furnish a modified return of income, within 6 months from the end of the month in which such order was issued. 2

Direct Taxes 1.164 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XVIII. Taxation of Virtual Digital Asset Virtual Digital Assets have gained tremendous popularity in recent time. The Finance Act 2022 introduced new scheme for taxation of virtual digital asset. It provided for the computation mechanism and tax liability with respect to income earned through transfer of any virtual digital asset. Virtual Digital Asset has been defined in section 2(47A) of the Income Tax Act, to mean any information or code or number or token generated through cryptographic mean whose value is exchanged through digital mode and is stored, transferred or traded electronically. The definition also include non-fungible token of similar nature. Subsequently, the government also through notification in the official gazette specified the token which will be not covered under nonfungible token and the virtual digital assets. The government through notification no.74 & 75 of 2022 provided asset which will shall be excluded definition of virtual asset. The asset to be excluded are gift card/vouchers used for obtaining goods/services, discount on goods/ services, certain mileage /reward points, loyalty card, subscription to websites/platform/application, non-fungible token whose transfer can result into transfer of ownership of underlying intangible assets. Income earned from transfer of any virtual digital asset shall be chargeable to tax at flat rate of 30% percent as per section 115BBH. Further, no deduction or allowance in respect of any expenditure incurred other than the cost of acquisition shall be allowed in computing the income from transfer of virtual digital asset. Further, the income earned is not allowed to be set off against any loss incurred by the assessee under any provisions of the act. Also, if there is any loss incurred by the assessee from transfer of any virtual digital asset then the same is not allowed to be setoff against any income computed under any provision of the Act, nor is it allowed to be carried forward to subsequent assessment year. In addition to above, TDS u/s. 194S shall be deducted by any person responsible to pay any consideration to a resident on account of transfer of any virtual digital asset, at the time of credit of such sum or at the time of payment, whichever is earlier, deduct TDS at the rate of one percent of total consideration. Further if the consideration for transfer of virtual digital asset is in kind or partly in cash and partly in kind, then the deductor shall ensure that the TDS liability is paid before releasing the consideration. Penalty and prosecution provisions are applicable in case of failure to pay or ensure payment of TDS. The provisions of tax deduction and collection account number and higher deduction for non-filer of income tax return shall not apply. The liability to deduct TDS shall not apply wherein the value or the aggregate value of consideration payable by specified person to the deductee does not exceed ` 50,000 during the financial year and in case of any other person, other than specified person, the value or the aggregate value of consideration payable to the deductee does not exceed ` 10,000. The specified person has been defined to mean an individual or HUF whose turnover or gross receipts from business does not exceed ` 1 crore or from profession does not exceeds ` 50 lakh during the previous year immediately preceding the financial year in which such virtual asset is transferred or an individual or HUF not having any income under the head business or profession. The government has issued following guidelines with respect to deduction of TDS on transfer or virtual asset vide Circular No.13 of 2022 dated 22/06/2022 and Circular No.14 of 2022 dated 28/06/2022. i) A return in Form 26QE for specified person and in form 26Q for other than specified person shall be furnished for TDS deducted on virtual digital asset. ii) If VDA is transferred on or through stock exchange and the VDA is owned by person

1.165 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Taxation of Virtual Digital Asset other than stock exchange, then TDS shall be deducted by the stock exchange. iii) If VDA is transferred on or through stock exchange and the VDA is owned by stock exchange, then TDS shall be deducted by the buyer. There are practical issues wherein the buyer may not know whether the stock exchange is owner or not. Hence to overcome the difficulty, the buyer may enter into an agreement with stock exchange wherein the TDS with respect to all the transaction of VDA shall be deducted by the stock exchange. The stock exchange is liable to file form 26QF for all such transaction. iv) Once TDS is deducted u/s. 194S no other provision of TDS of the Act for said transaction shall apply. v) The consideration for the purpose of TDS shall be net basis excluding GST vi) To compute the limit of rupee Fifty thousand and rupee ten thousand for the purpose of TDS deduction, transaction of the whole year, including the period from 01-04-2022 to 30-06-2022 shall be considered. 2

Direct Taxes 1.166 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XIX. Interest Section Circumstances under which payable Amount on which payable Rate of Interest Period of interest A. PAYABLE BY THE ASSESSEE 115P Failure to pay the whole or any part of the tax on distributed profit Amount payable as tax on distributed profit 1% p.m. or part thereof comprised in the period of default From due date on which such tax was payable, to the date on which it is actually paid 115QB Failure to pay whole or any part of tax on distributed income u/s. 115QA Amount payable as tax on distributed profit 1% p.m. or part thereof comprised in the period of default From due date on which such tax was payable, to the date on which it is actually paid 115S Failure to pay the whole or any part of the tax on income distributed by UTI/Mutual funds Amount payable as tax on income distributed 1% p.m. or part thereof comprised in the period of default From due date on which such tax was payable, to the date on which it is actually paid 115TB Failure to pay whole or any part of tax on income distributed by a Securitisation Trust u/s. 115TA Amount payable as tax on distributed profit 1% p.m. or part thereof comprised in the period of default From due date on which such tax was payable, to the date on which it is actually paid 115TE Failure to pay whole or any part of tax on accreted income of the trust or institution u/s. 115TD Amount payable as tax on accreted income 1% p.m. or part thereof comprised in the period of default From due date on which such tax was payable, to the date on which it is actually paid 201(1A) Failure to deduct tax, wholly or in part (w.e.f. 1-7-2010) Amount of tax not deducted 1% p.m. or part of a month From the date on which tax was deductible to the date on which such tax is deducted 201(1A) Delay in payment of tax deducted at source (w.e.f. 1-7-2010) Amount of tax deducted and paid after the due date 1.5% p.m. or part of a month From the date on which tax was deducted to the date on which such tax is actually paid 206C(7) Failure to collect, or delay in remitting tax collected from the business of trading in alcoholic liquor, forest produce, scrap, authorized dealers, tour operators, prescribed sellers, etc. Amount of tax not collected or if collected paid after the due date 1% p.m. From the date on which tax was collectible to the date on which the tax is actually paid

Interest 1.167 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Circumstances under which payable Amount on which payable Rate of Interest Period of interest 201(1A) and 206C(7) In cases where an order is made by the Assessing Officer for the default u/s 201(1) or 206C Interest shall be paid in accordance with such order 220(2) Failure, or delay in payment of any amount other than advance tax, as demanded u/s. 156 Amount specified in the demand notice issued u/s. 156 1% p.m. or part thereof comprised in the period of default From the day immediately following the end of the period mentioned in S. 220(1) up to the date of payment 234A Defaults in furnishing return of income u/ss. 139(1), 139(4), 142(1) Tax on total income as d e t e r m i n e d u/s. 143(1) or on regular a s s e s s m e n t , as reduced by advance tax paid, TDS or TCS, relief u/s. 90 & 90A & deduction allowed u/s 91, tax credit allowed to be set off u/s. 115JAA/115JD (for purpose of interest payable u/s. 140A, the tax on total income as declared in the return) 1% p.m. or part thereof or comprised in the period of default From the date immediately following the due date [specified u/s. 139(1)] to the date of furnishing of the return or as the case may be, the date of completion of the assessment u/s. 144 234B Defaults in payments of advance tax where: 1. No advance tax is paid u/s. 208, or 2. Advance tax paid u/s. 210 is less than 90% of the assessed tax [i.e., for purposes of interest Assessed tax, or as the case may be, the amount by which the advance tax paid falls short of the assessed tax 1% p.m. or part thereof comprised in the period of default From 1st day of April of the relevant A.Y. to the date of determination of total income u/s. 143(1) or regular assessment

Direct Taxes 1.168 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Circumstances under which payable Amount on which payable Rate of Interest Period of interest payable u/s. 140A, the tax on total income declared in the return of income and for other purposes, the tax on total income as determined u/s. 143(1) or on regular assessment (as reduced by TDS or TCS)] 234C Failure to pay/deferment of advance-tax a. Shortfall/ Nonpayment of prescribed instalments b. Shortfall of a d v a n c e tax paidup to 15th March from tax (one month) due on returned income 1% p.m. or part thereof comprised in the period of default. 1% p.m. or part thereof for one month Three months in either case. If capital gains arises after any of due dates of instalments of advance tax, capital gains tax shall be paid in instalments falling due subsequent to date of gain. It is not necessary to pay entire tax on or before due date immediately following the gain Shortfall not applicable in case of dividend income as defined in section 2(22) except clause (e) thereof. 234C Failure to pay/deferment of advance tax in case of eligible assessee referred to in section 44AD or 44ADA Shortfall of advance tax paidup to 15th March from tax due on returned income 1% w.e.f. 1-6-2016 234D Interest on excess refund (w.e.f. 1-6-2003) Amount refunded u/s. 143(1) exceeds amount r e f u n d a b l e on regular assessment 0.50% p.m. For every month or part of month from the date of grant of refund to date of regular assessment

Interest 1.169 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Circumstances under which payable Amount on which payable Rate of Interest Period of interest 234E Default/delay in filing E-TDS statements within time prescribed u/ss. 200(3) / 206C(3) Levy of fees not to exceed tax deductible/ collectible ` 200 per day From the due date till the date the default continues 234F Default/delay in filing return of income u/s. 139 Levy of feesa. ` 1000 (If the total income is upto ` 5,00,000) b. ` 5,000 (If the income exceeds ` 5,00,000) CBDT is empowered to issue such orders or instructions as deemed fit, relaxing the provisions of section 234F so that fees need not be imposed for a default by certain classes of persons filing their return of income due to circumstances beyond their control 234H Default in intimating the Aadhaar Number under Section 139AA(2) Fee, as may be prescribed, not exceeding ` 1,000 B. RECEIVABLE BY THE ASSESSEE 244A up to 31st May 2016 Refunds arising on account of excess payment of advance tax or TDS or TCS or refund arising on appeal, refund of fringe benefit tax, etc. Amount of refund due, provided it is not less than 10% of tax determined u/s. 143(1) or 115WE(1) or on regular assessment 0.67% p.m. or part thereof w.e.f. 1-6-2002 0.50% p.m. or part thereof w.e.f. 8-9-2003 From the 1st of April of the relevant assessment year to the date on which refund is granted or from the date of payment of taxes or penalties to the date on which refund is granted as the case may be 244A w.e.f. 1st June, 2016 Where the return of income is filed on or before the due date of filing the return of income Amount of refund due provided it is not less than 10% of tax determined under section 143(1) or on regular assessment 0.5% p.m. or part thereof From 1st April of the assessment year till the date of grant of refund Where refund arises as a result of application u/s 155(20), from the date of such application till the date of grant of refund.

Direct Taxes 1.170 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Circumstances under which payable Amount on which payable Rate of Interest Period of interest Where the return of income is filed after the due date of filing the return of income As stated above 0.5% p.m. or part thereof From the date of filing of return till the date of grant of refund Where refund arises as a result of application u/s 155(20), from the date of such application till the date of grant of refund. Where refund is arising out of self-assessment tax paid As stated above 0.5% p.m. or part thereof 0.5% from the date of furnishing of return of income or payment of self-assessment tax wherever is later, till the date of grant of refund 244A (1A) Refunds arising on account of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 Amount of refund calculated in the order. In addition to regular interest as stated above, additional interest @ 3% p.a. w.e.f. 1-6-2016 From date of expiry of time allowed u/s. 153(5) to the date of grant of refund Period beginning from withholding of refund by the AO u/s 245(2) ending on date of completion of assessment/ reassessment, shall be excluded while computing additional interest. 244A(1B) Refunds arising on account of giving effect to an order under section 250 or section 254 or section 260 or section 262 (paid to the credit of the Central Government) Amount of refund calculated in the order. In addition to the said amount simple interest @ 0.5 % p.m. or part thereof From the date on which claim for refund is made in prescribed form to the date on which the refund is granted. Notes : Procedure for calculating interest (Rule 119A) 1. Where annual rate is provided, the fraction of the month is to be ignored. 2. Where monthly rate is provided, the fraction of the month is to be considered as full month. 3. Principal amount of tax, penalty or other sum must be rounded off to nearest of ` 100/- and any fraction of ` 100/- shall be ignored.

Interest 1.171 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 4. Where interest is charged for any period under section 206C(7) on the tax amount specified in the intimation issued under section 206CB (1), then, no interest shall be charged under section 220(2) on the same amount for the same period. 5. In respect of assessment completed under section 147 or section 153A interest under section 234B is to be computed from the 1st day of April next following the relevant financial year (for which assessment has been completed) to the date of determination of total income under section 147 or section 153A as the case may be. 2

Direct Taxes 1.172 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XX. Penalties Section Nature of Default Quantum of Penalty 140A(3) Failure to pay wholly or partly – a) Self assessment taxes or b) Interest or c) Fees under section 140A(1) Such amount as AO may impose but not exceeding tax in arrears 158BFA(2) Determination of undisclosed income of block period Min. 100%; Max. 300% of tax leviable in respect of undisclosed income 221(1) Failure to pay tax; i.e., non-payment of tax required by notice u/s. 156 (Refer Note 1) Not to exceed total amount of tax in arrears 270A (applicable from AY: 2017-18) Under-reporting or misreporting of income Under-reporting of income – 50% of tax payable on under-reported income Under-reporting of income resulting from misreporting of income – 200% of tax payable 271(1)(b) (Up to assessment year 2016-17) Non-compliance with notice u/s. 142(1) or sec. 115WD(2) to file return of income or return of fringe benefits or to produce documents required by assessing officer u/s. 143(2) or 115WE(2) or to produce evidence on which assessee relies or u/s. 142(2A) to get accounts audited (Refer Note 4) ` 10,000/- for each failure in addition to tax, if any, payable 271(1)(c), 271(1)(d) (Up to assessment year 2016-17) Concealment of particulars of income or particulars of fringe benefits, or furnishing inaccurate particulars thereof (Refer Note 4) Minimum – Amount of tax sought to be evaded Maximum – 3 times the minimum – in addition to tax, if any, payable 271A Failure to keep, maintain or retain books or documents u/s. 44AA ` 25,000/- 271AA Failure to keep and maintain information and documents u/s. 92D, failure to report transactions and maintaining or furnishing of incorrect information/ document 2% of value of each International transaction or specified domestic transactions Failure to furnish the information and the documents as required under Section 92D(4) ` 5,00,000/-

Penalties 1.173 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Nature of Default Quantum of Penalty 271AAB Search under Section 132 on or after 1st July, 2012 — Undisclosed income of the specified previous year, and assessee admits during the search and satisfies other conditions — 10% of undisclosed income (if search initiated before 15-12-2016) — 30% of undisclosed income (if search initiated on or after 15-12-2016 — Undisclosed income of the specified previous year, and assessee admits in the return of income filed after the search and satisfies other conditions — 20% of undisclosed income (if search initiated before 15-12-2016) — 60% of undisclosed income (if search initiated on or after 15-12-2016 — Not covered by either of the above situations — 60% of undisclosed income 271AAC On income returned to in sections 68, 69, 69A, 69B, 69C or 69D, in excess of income already discussed in the ROI and taxes paid in accordance with S. 115BBE 10% of tax payable under section 115BBE(1)(i) on such excess 271AAD False entry in books of account or omission of any entry which is relevant for computation of total income, to evade tax liability 100% of the aggregate amount of such false or omitted entry 271AAE Penalty in case any income is applied by a trust / institution for the benefit of a specified person as envisaged in section 13 – 100% of such income in the case of such benefit being first noticed – 200% of such income for each further violation 271B Failure to get accounts audited or furnish Tax Audit Report as required u/s. 44AB 0.5% of total sales, turnover or gross receipts or ` 1,50,000/- whichever is less 271BA Failure to furnish a report as required u/s. 92E ` 1,00,000/- 271C Failure to deduct the whole or part of the tax as required by or under Chapter XVII-B (Ss. 192 to 196D) or failure to pay the whole or part of tax u/s. 115-O, or second proviso to section 194B Equal to the amount of tax failed to be deducted/paid 271CA Failure to collect whole or part of tax as required by or under Chapter XVIIBB (Section 206C) Equal to the amount of tax the person has failed to collect 271D Contravention of the provisions of S. 269SS; i.e., by taking or accepting any loan or deposit or specified sum otherwise than by modes specified therein Equal to the amount of loan or deposit or specified sum so taken or accepted

Direct Taxes 1.174 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Nature of Default Quantum of Penalty 271DA Contravention of the provisions of S. 269ST; i.e., receipt of an amount of ` 2,00,000/- or more – a. In aggregate from a person in a day b. In respect of a single transaction: OR c. In respect of transaction relating to one event or occasion from a person otherwise than by digital modes Equal to the amount of such receipt 271DB Non facilitation of prescribed electronic modes of payment referred to in section 269SU ` 5,000/- for every day during which the failure continues 271E Contravention of S. 269T; i.e., repayment of any loan or deposit or specified advance (otherwise than by modes specified therein Equal to the amount of loan or deposit or specified advance so repaid 271F (up to 1st day of April, 2018) Failure to furnish Return of Income u/s. 139(1) before the end of the relevant Assessment Year ` 5,000/- 271FA (w.e.f. 1-4-2018) Failure to furnish statement of financial transaction or reportable account under Section 285BA(1) ` 500/- for every day during which the failure continues 271FA (w.e.f. 1-4-2018) Failure to furnish statement of financial transaction or reportable account within the period specified in the notice issued under Section 285BA(5) ` 1,000/- for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the statement expires 271FAA(1) Furnishing of inaccurate information by prescribed financial institution due to failure to comply with prescribed due diligence requirement Failure to inform the prescribed authority about inaccuracy at the time of furnishing the statement of financial transaction or reportable account Failure to inform about inaccuracy after discovering such inaccuracy and failure to furnish correct information within the time specified ` 50,000/-

Penalties 1.175 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Nature of Default Quantum of Penalty 271FAA(2) Furnishing of incorrect information by holder(s) of reportable account(s) to reporting financial institution required to file report u/s 285BA ` 5,000/- per inaccurate reportable account 271FAB Failure to furnish statement/information/ document by eligible investment Fund under section 9A(5) ` 500,000/- 271FB Failure to furnish Return of fringe benefit under section 115WD(1) ` 100/- for every day during which the failure continues 271G Failure to furnish information or document u/s. 92D(3) (Refer Note 6) 2% of value of International transaction or specified domestic transaction for each such default 271GA Failure to furnish information/document by an Indian concern as required under newly inserted section 285A 2% of the value of transaction which has effect of transferring directly or indirectly management/control of Indian concern ` 500,000/- in any other case 271GB Failure to furnish report or furnishing inaccurate report under section 286 in respect of international group ` 5,000/- for every day during which failure continues and period of failure does not exceed 1 month or ` 15,000/- for every day during which failure continues and period of failure exceeds 1 month Failure to produce information and documents pursuant to a notice within prescribed period ` 5,000/- for every day during which failure continues beginning from the day following the day on which the prescribed period expires Failure to comply with order directing payment of penalty under Section 286(1) or (2) ` 50,000/- for every day during which failure continues beginning from date of service of order Providing inaccurate information in report in spite of knowledge of same or furnishing of inaccurate information or document in response to notice ` 5,00,000/- 271H Failure to furnish TDS statements by due date or furnishing incorrect information in the TDS statement (with effect from July 1, 2012) From ` 10,000/- to ` 100,000/-. 271-I Failure to furnish or furnishing of inaccurate information in respect of payment of any sum to a non-resident or to a foreign company whether chargeable or not ` 100,000/-

Direct Taxes 1.176 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Nature of Default Quantum of Penalty 271J W.e.f. 1st April, 2017, failure to furnish or furnishing of inaccurate information in reports or certificates by an accountant or a merchant banker or a registered valuer. ` 10,000/- for each such report or certificate. 271K Failure to deliver a statement or failure to furnish a certificate as required under Section 35 or 80G From ` 10,000/- to ` 100,000/-. 272A(1) Failure to answer questions, sign statements, attend summons u/s. 131(1) or failure to comply with the notice u/s. 142(1) or u/s. 143(2) or failure to comply with direction issued under section 142(2A) ` 10,000/- for each failure 272A(2) Failure to: 1. Comply with notice u/s. 94(6) – furnishing information regarding securities 2. Give notice of discontinuance of business — Section 176(3) 3. Furnish in due time returns, statements, or particulars u/s. 133, 206 or 285B 4. Allow inspection of any register(s) — Section 134 5. Furnish returns u/s. 139(4A) or 139(4C) 6. Deliver in due time a declaration mentioned in Section 197A 7. Furnish a certificate u/s. 203 8. Deduct and pay tax u/s. 226(2) 9. Furnish returns/statements/ certificate u/s. 206C 10. Furnish a statement of particulars of perquisites and profits in lieu of salary u/s. 192(2C) 11. Deliver in due time a declaration referred to in Section 206C(1A) 12. Deliver in due time, quarterly return specified in Section 206A(1) 13. Deliver in due time, a statement referred to in Section 200(2A) of 206(3A) ` 500/- for every day during which the failure continues. However, amount of penalty for point Nos. 3, 6, 7, 9, 11, 12 and 13 shall not exceed amount of tax deductible or collectible

Penalties 1.177 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Nature of Default Quantum of Penalty 272AA Failure to furnish the prescribed information required u/s. 133B (refer to Form No. 45D) Up to ` 1,000/- 272B(1) Penalty for failure for non-compliance under section 139 ` 10,000/- 272B(2) Penalty for failure in quoting PAN or Aadhaar number ` Penalty 10000 for each such failure 272BB(1) Failure to apply for Tax Deduction Account Number (TAN) (Section 203A) ` 10,000/- 272BB(1A) Failure to quote Tax Deduction/ Collection Account Number or quoting of false number in challans, certificates, statements or other documents referred to in Section 203A(2) ` 10,000/- NOTE: 1. No penalty shall be levied u/s. 221(1) if the assessee proves that the default was for good and sufficient reasons. 2. No penalty is imposable for any failure u/ss. 271(1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FB, 271FAB, 271G, 271GA, 271H, 271I, 271J, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BBB(1), 272BB(1A)(b), 273(1)(b), 273(2)(b) or (c) if the person or assessee proves that there was a reasonable cause for such failure (S. 273B). 3. Penalty u/s. 271 can also be levied by Commissioner. 4. Penalty u/s. 271(1) can be levied even if no tax is payable on the income assessed. 5. From 1st October, 2014, Transfer Pricing Officer as referred to in section 92CA is also authorised to levy penalty under section 271G. 6. Sections 271AAB, 271AAC and 271AAD empower the Assessing Officer as well as the Commissioner of Income-tax (Appeals) to levy penalty if undisclosed income is found during the search, incomes referred to in sections 68, 69, 69A, 69B, 69C or 69D and for falsification or omission of entries in the books of account. 7. Faceless Penalty Scheme, 2021 has been notified vide Notification dated 12 January 2021. All pending and new penalty proceedings w.e.f. 12.1.2021 will be covered by the Faceless Penalty Scheme, 2021.

Direct Taxes 1.178 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XXI. Audit reports under the Income-Tax Act Section Rule For Whom In Form No. 10(23C) 16CC Fund, trust, institutions, university, educational institution, hospital or medical institution 10BB 12A(1)(b) 17B Public charitable or religious Trusts or Institutions whose income exceeds ` 250,000/-. 10B 33AB(2) 5AC Assessees growing and manufacturing tea or coffee or rubber, claiming deduction in respect of special deposits made u/s. 33AB(1) 3AC 33ABA(2) 5AD Assessees claiming deduction in respect of Deposits under Site Restoration Fund Account/Scheme 3AD 35D(4) 6AB Assessees other than Cos. or Co-op. Societies claiming amortisation of certain preliminary expenses 3AE 35E(6) 6AB Assessees other than Cos. or Co-op. Societies claiming deduction for expenditure on prospecting, etc. of certain minerals 3AE 44AB 6G Assessees carrying on business/profession whose Turnover/ Gross Receipts exceeds the threshold limit [` 1 crore or ` 10 crore, as the case may be, in case of business], [` 50 lakh for professional] or profit & gains are deemed to be u/s. 44AD/44AE/44AF/44ADA and assessee has claimed lower profits than specified in those sections 3CA, 3CB, 3CD 44DA 6GA Special provisions for computing income by way of Royalties, etc. in case of non-residents 3CE 80-I(7)/ 80-IA(7)/ 80-IB 18BBB Assessees having an industrial undertaking or business of hotel or an enterprise for Infrastructure Facility, Telecommunication Services 10CCB 80-IC 18BBB Undertakings or enterprises in certain special category states 10CCB 115VW(ii) 11T Companies engaged in the business of operating qualifying ships and which have opted for Tonnage tax scheme 66 142(2A) 14A Special audit at the instance of the Assessing Officer 6B 13B 17CA Audit Report of Electoral Trust 10BC