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Gone are the days where the figures as reported in the financial statements were not being reconciled with the GST/ VAT returns. If you still follow the same practice, you will land yourself in trouble.

As per the Memorandum of Understanding (MoU) signed between Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes (CBIC) on 21.07.2020, there shall be exchange of information between the two organization.

The results have started showing now. Income Tax department has revealed the information pertaining to the “Turnover as per GSTR-3B” in the PART-H of Form 26AS. The details contained in PART-H are:

GSTIN

Application Reference Number (ARN)

Date of Filing GSTR -3B

Return Period

Taxable Turnover

Total Turnover

Note: The GSTN data includes internal stock transfer as well.

Previously Form 26AS was only meant to check whether the deducted TDS is being shown on the PAN, advance tax payments, refund and interest thereon, TRACES default, Statement of Financial Transaction (SFT), etc. But now it includes Indirect Tax details as well. Here is how PART-H of Form 26AS look like:

At the time of filing Income Tax Return (ITR), one needs to ensure that the turnover as reported in GST return must match with the one as reported in the ITR. Any genuine mismatch should be properly reconciled and kept on record so that in case of any notice received from the department, you can promptly comply.

In case of mismatch, even CBIC may call for explanation or issue notices.

In all we can conclude that one needs to ensure:

Proper & correct filing of GST Returns.

Regular reconciliation of books of accounts with GST Returns.

Any error/ issue with respect to GST return in any month should be promptly rectified in the ensuing month.

Any genuine mismatch should be properly reconciled and kept on record.

At the time of filing ITR, don’t forget to see your Form 26AS even if there has been no TDS deduction.

“Do I need to maintain Books of Accounts for the purpose of Income Tax?” A question always being asked by Professionals, Freelancers or a business owners…

The Books of Accounts, generally referred to as “Accounts”, is the compilation of all the financial transactions done by you and helps in the quick drafting of your financial statements, i.e., Balance Sheet, Profit & Loss Account, Cash Flow, etc.

Myth: Only business owners have to do book keeping.

Fact: Other than the business owners, Professionals and Freelancers are also required to maintain the books of accounts (although there are some relaxations to it)

Section 44AA of the Income Tax Act deals with the provision of maintenance of accounts by various persons.

To have a clear understanding of the topic, one needs to understand the meaning of two terms, i.e., “Specified Profession” & “Non-specified Profession”

Specified Professions are Legal, Accountancy, Company Secretary, Medical, Engineering, Architectural, Information Technology, Interior Decorator, Film Artist, Technical Consultancy, Authorised Representative, or as notified by board.

Non-specified Profession is a profession other than “specified profession” as mentioned above.

Books of Accounts for Specified Profession

Every person carrying on the Specified Profession shall have to maintain the books of accounts for the purpose of Income Tax and ITR filing if:

the Gross Receipts from the profession exceeds ₹ 1,50,000 in all the three (3) years immediately preceding the current financial year: OR

the profession is newly set up in the current financial year and the gross receipts are likely to exceed ₹ 1,50,000 in that year.

The Specified Professionals have to maintain the following specified books of accounts as prescribed by rule 6F:

Cash Book;

journal, if mercantile basis is being followed;

ledger;

Carbon copies of bills and receipts issued where sums exceeds ₹ 25;

Original bills for expenditure exceeding ₹ 50.

In case of a person carrying on medical profession, he will be required to maintain the following in addition to the list given above:

Daily Cash Register in Form 3C.

Inventory records of drugs, medicines and other consumable accessories used for his profession.

Relaxation from maintaining the books of accounts for Specified Profession

In the following situations, the specified professionals are not required to maintain the books of accounts:

where the income has been declared on presumptive basis under Section 44ADA (50% of the gross receipts).

Books of Accounts for Non-Specified Profession and business

Every Individual/ HUF taxpayer carrying on any business or profession (other than the specified professions) shall have to maintain the books of account prescribed by the CBDT if:

The income from the business or profession exceeds ₹2,50,000 or the total sales turnover or gross receipts, as the case may be, in the business or profession exceed ₹ 25,00,000 in any one of three years immediately preceding the current financial year; OR

The business or profession is newly set up in the current year, if it’s income from business or profession is likely to exceed ₹250,000 or total sales turnover or gross receipts, as the case may be, in the business or profession are likely to exceed ₹25,00,000 during the current financial year

Note: For taxpayer other than Individual/HUF assessee, the above limit is ₹ 1,20,000 & ₹ 10,00,000.

Relaxation from maintaining the books of accounts for Non-Specified Profession and business

In the following situations, the taxpayer is not required to maintain the books of accounts:

Where the taxpayer declares the profit from business or profession which is equivalent or higher than the Deemed Profit under Section 44AE/ 44BB/ 44BBB; OR

Where the income has been declared on presumptive scheme under Section 44AD and the income does not exceed the maximum amount which is chargeable to Income Tax.

Conclusion

To sum up all, here is the tabular presentation with respect to the maintenance of books of accounts

Specified Profession

Category of TaxpayerGross Receipt (GR)Normal Section/ Presumptive SectionRequired to maintain Books of Accounts

Specified Profession (Old and running)GR > ₹1,50,000 (in all the 3 years immediately preceding current FY)NormalYES

Specified Profession (Newly set up in current Financial Year)If GR is likely to exceed ₹1,50,000 In current FY)NormalYES

Specified ProfessionGR <= ₹50,00,000Presumptive Scheme – Section 44ADANO

Non-Specified Profession/ Business (for Individual/ HUF)

Category of TaxpayerGross Receipt (GR) / SalesNormal Section/ Presumptive SectionRequired to maintain Books of Accounts

Business/ Non-Specified ProfessionIncome >₹2,50,000 (in any one of 3 years immediately preceding current FY)NormalYES

Business/ Non-Specified ProfessionGR/ Sales>₹25,00,000 (in any one of 3 years immediately preceding current FY)NormalYES

Business/ Non-Specified ProfessionIncome >₹2,50,000 (in current FY)NormalYES

Business/ Non-Specified ProfessionGR/ Sales>₹25,00,000 (in current FY)NormalYES

BusinessSales<=₹2,00,00,000Presumptive Scheme –Section 44ADNO

What is House Rent Allowance (HRA)?

How to calculate exemption in respect of House Rent Allowance (HRA)?

Paying House Rent but Salary component does not have House Rent Allowance (HRA)

Important point in House Rent Allowance (HRA).

1. What is House Rent Allowance (HRA)?

Salaried employees receive House Rent Allowance (HRA) as a part of their salary income. If the employee lives in a rented accommodation, tax exemption can be claimed by the employee. As such there are no fixed criteria for the HRA payment. It all depends on the Salary structure of the employee, city of his employment and so on.

2. How to calculate House Rent Allowance (HRA) Exemption?

Deductions on Contribution to Pension Funds of Insurance Company

Tax exemption calculation in respect of House Rent Allowance (HRA) is quite simple. If an employee receives House Rent Allowance (HRA), he can claim least of the following three points as reduction from the actual HRA received:

Benefit of HRA tax exemption is available only if the employee pays house rent.

If you miss out to provide the rent payment details to your employer at the time of making declaration, you can claim House Rent Allowance (HRA) exemption at the time of filing ITR.

If an individual opts for Alternative Tax Regime under Section 115BAC deduction under House Rent Allowance (HRA) is not available from assessment year 2021-22.

Actual House Rent Allowance (HRA) received, or

50% of Basic Salary + Dearness Allowance (DA) (In metro cities)/ 40% of Basic Salary + DA (Non metro cities), or

Actual Rent Paid Less 10% of Basic Salary + DA

Let us understand HRA by a simple example:

Mr. Abhinav resides in Mumbai. He pays monthly rental of Rs. 12,000 for accommodation for the full year. The following is the monthly pay slip

PaymentsAmountDeductionsAmount

Basic35,000PF1,800

HRA15,000Professional tax200

Other Allowance3,000

LTA4,000

Earnings57,000Deductions2,000

House Rent Allowance (HRA) tax exemption for Mr. Abhinav will be as under:

PaymentsAmount

HRA Received

(Rs. 15,000 X 12)180,000

50% of Salary – 50% of Rs. 420,000

(Rs. 35,000 X 12)240,000

Actual Rent Less 10% of Salary

(Rs. 12,000 X 12) minus 10% of 420,000102,000

Tax Exempt HRA (least of 3 figures)102,000

So, Mr. Abhinav will be eligible for tax exemption of Rs. 102,000 out of total HRA received of Rs. 180,000 and thus only Rs. 78,000 shall form part of taxable income.

3. If I am paying House Rent but not receiving House Rent Allowance (HRA)?

If the salary component does not include House Rent Allowance (HRA), then no question of tax exemption for HRA arises even though the house rent is being paid by the employee. But this should not dishearten the taxpaying employee. He can claim deduction for house rent payment under Section 80GG. For more details on Section 80GG click here

4. Few Important points in House Rent Allowance (HRA)

Benefit of HRA tax exemption is available only if the employee pays house rent.

If you miss out to provide the rent payment details to your employer at the time of making declaration, you can claim House Rent Allowance (HRA) exemption at the time of filing ITR.