What is ‘e-invoicing’?

What is ‘e-invoicing’?

‘e-invoicing’ doesn’t mean generation of invoice by a Government portal.

Notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).


e-Invoicing was introduced aiming at machine-readability and uniform interpretation. To ensure this complete ‘inter-operability’ of e-invoices across the entire GST eco-system, an invoice standard is a must. By this, e-invoices generated by one software can be read by any other software, thereby eliminating the need of fresh/manual data entry.

Applicability

1st Oct 2020 – Aggregate T/o > INR 500 Crores in any preceding financial year from 2017-18 onwards

1st Jan 2021 – Aggregate T/o > INR 100 Crores in any preceding financial year from 2017-18 onwards

1st Apr 2021 – Aggregate T/o > INR 50 Crores in any preceding financial year from 2017-18 onwards

e-invoicing doesn’t apply in B2C transactions (i.e. supply of goods or services or both to an unregistered person)

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Non-Applicability

e-invoice doesn’t apply to the following category of persons irrespective of their turnover-

1. Special Economic Zone units (not SEZ Developers),

2. An insurer,

3. An NBFC,

4. A Goods Transport Agency,

5. A banking company,

6. A financial institution,

7. A person supplying passenger transportation services,

8. A person supplying services of admission to the exhibition of the cinematographic films in multiplex services.

e-invoicing is also not applicable on Import of goods/ services, ISD invoices, Nil-rated/ wholly exempt supplies.

Note:- e-invoicing apply to RCM transactions as well

What documents are presently covered under e -invoicing?

i. Invoices
ii. Credit Notes
iii. Debit Notes

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What supplies are presently covered under e -invoice?

• B2Bsupplies (includes supplies under same PAN),
• Supplies to SEZs (with/without payment)
• Exports (with/without payment)
• Deemed Exports
by notified class of taxpayers are currently covered under e-invoicing.

What are the benefits of e-invoicing?

1. One-time reporting of B2B invoices while generation, which reduces reporting in multiple formats.
2. Most of the data in form GSTR-1 can be kept ready for filing while using e-invoicing system.
3. E-way bills can also be generated easily using e-Invoice data.

4. There is minimal need for data reconciliation between the books and GST returns filed.
5. Real-time tracking of invoices prepared by a supplier can be enabled, along with the faster availability of input tax credit. It will also reduce input tax credit verification issues.
6. Better management and automation of the tax-filing process.
7. Reduction in the number of frauds as the tax authorities will also have access to data in real-time.
8. Elimination of fake GST invoices getting generated.

Haven’t received an Income tax refund yet? Follow these Steps

Haven’t received an Income tax refund yet? Do this

If there is a discrepancy between the information on the tax return and the information on file with the IRS, the refund may be delayed. Another reason for the delay could be if the bank account information provided is inaccurate.

Between April 2021 and October 4, 2021, the Central Board of Direct Taxes (CBDT) paid refunds of Rs 82,229 crore to over 53.54 lakh taxpayers. Tax refunds are usually paid within 20-45 days of the conclusion of ITR processing by the Centralized Processing Centre (CPC).

You should receive your refund within 30-45 days after your income tax return (ITR) has been submitted. However, there are a variety of reasons why your refund may be delayed.

Income Tax Refund can be claimed when:

  • You did not provide your company with all of the investment proofs. As a result, your employer’s tax deductions exceeded your actual tax due for the fiscal year.
  • On your interest income from bank FDs or bonds, excess TDS was deducted.
    The advance tax you paid on self-assessment exceeds your regular assessment tax liability for the corresponding FY.
  • If there is a case of double taxation,

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How to check Income Tax refund status:

On the National Securities Depository Ltd (NSDL) website, as well as the Income-tax Department’s e-filing portal, you can check the status of your income tax refund.

1. On the NSDL website, for starters.

Step 1: To trace your return, go to the NSDL website.
Step 2: A new window will open, displaying the following webpage. Fill in the required information, including PAN and AY, and then click ‘Proceed.’
Step 3: The status of your income tax refund will be presented, as shown in the figure below.

2. On the e-filing site:

Step 1: Go to the Income Tax Department’s e-filing portal by clicking here.
Step 2: Select View Returns/ Forms from the drop-down menu.
Step 3: Select ‘Income Tax Returns’ from the ‘My Account page. Submit the form.
Step 4: Select the acknowledgement number from the drop-down menu.
Step 5: A page showing your return details along with income tax refund status will appear.

Haven’t received an income tax refund yet? Reasons for delay

Tax refunds are usually paid within 20-45 days of the conclusion of ITR processing by the Centralized Processing Centre (CPC). If there is a discrepancy between the information on the tax return and the information on file with the IRS, the refund may be delayed. Another reason for the delay could be if the bank account information provided is inaccurate.

Reasons why the refund hasn’t reached you and what to do:

1. Your reimbursement request requires further evidence from the IT department: Contact the assessing officer as soon as possible by phone or mail, and send the needed paperwork. Obtain a written acknowledgement from the officer.

2. Request for a refund was denied. According to the IT department, you owe them the following taxes: The government may send you a notification detailing the amount of unpaid taxes. In this situation, double-check all of your paperwork and compute your tax liability and refund due. File a rectification to support your claim if the figures you entered in the returns form are valid.

If the returns filed is found to be incorrect, pay the outstanding tax demanded by the department within the time limit mentioned in the notice.

3. Refund request determined to be erroneous by the IT department: If the department determines that your refund request is incorrect, you will receive a note stating why. You can file a rectification to support your claim even if you receive the notice.

4. Forgot to add a tax break you’re entitled to: If your returns have not yet been processed by the IT department, you can go ahead and modify them to include the missing deductions.

5. The bank account information provided to the IT department for tax filing has changed: If your bank account information has changed, inform your assessing officer of the new account number and MICR code. The evaluating officer will advise the bank of this information and request that the money transfer process be updated.

If you haven’t still received your refund, do these things:

1. Review your ITR:

If there is a discrepancy between the information on your tax return and the information on file with the IRS, your refund may be delayed. So, go over your ITR to see if you made any mistakes. If you haven’t received your refunds or received any correspondence from the IRS in the last two months, the first thing you should do is review your ITR.

2. Additional information:

The Income Tax Department may require additional documentation to process your refund request in some situations. If the department requires more proof to complete your refund request, please contact the assessing officer as soon as possible by phone or mail and submit the needed documentation to ensure that your refund request is processed quickly and the cash credited as soon as possible.

3. Re-evaluate:

If there is an outstanding tax amount, refund claims may be denied, and you may receive a letter from the department specifying the overdue tax amount. If you find yourself in this scenario, go over all of your documentation and recalculate your tax liability and refund. File a rectification to support your claim if the figures you entered in the returns form are valid. If your ITR is discovered to be erroneous, you must pay the outstanding tax sought by the department within the time frame specified in the notice in order to get your refund.

 

Extended due dates of Income Tax Return and Tax Audit

4. Mistakes in ITR:

Your refund will be delayed if you select the incorrect ITR form, misspell important personal details, or provide incorrect information. Income tax refunds are now solely granted electronically, according to the tax department’s new method, which implies that refunds are credited directly to the taxpayer’s bank accounts. If the bank account number entered on the tax form is wrong, reimbursements will be delayed until the error is addressed. If you make this mistake, you can update your bank account information on the income tax department’s website. It is critical that you provide a bank account that is linked to a permanent account number.

If there are discrepancies between the data you provided last year and what you did this year, an IT official will extensively examine your records to see if you need to submit further information. You may receive a request from the IT department to provide additional information.

5. Income or tax amount mismatch:

If there is a discrepancy in income from different sources, the refund process may be delayed. This usually occurs when the information on Form 16 does not match the TDS information on Form 26 AS. When an ITR cannot be completed because of a proposed adjustment under section 143(1)(a) or because it is defective under section 139, the refund is also delayed (9). To ensure that your refund request is met, you will need to file an amended return.

6. Prevalidating the bank account:

The bank account must be prevalidated in order to get an income tax refund. You can access profile settings by going to the income tax department’s website and logging in with your PAN and password. You can easily find a prevalidation option for your bank account. Pre-validation will be done directly using an electronic verification code (EVC) and net-banking route if your bank is integrated with the e-filing portal. Your bank account number, IFSC code, mobile number, and email address associated with that account must all be provided.

It’s worth noting that if you make a mistake on your ITR and the department sends you a communication, you’ll only get it if you provided accurate communication information.

Foreign Tax Credit in Case of Income from United States (US)

Foreign Tax Credit in Case of Income from United States (US)

We frequently come across examples of double taxation on the same income in both the source and resident countries. This scenario is extremely typical from an Indian tax perspective in the case of ‘resident and ordinarily resident (ROR) individuals with investments abroad. Section 90 of the Income Tax Act gives relief in the case of nations with which India has a Double Taxation Avoidance Agreement in order to reduce the effects of double taxation (treaty).

In addition, Section 91 of the Act provides for relief if the other country does not have a treaty with the United States. In most cases, treaties provide relief in the form of an exemption or a credit. Only one country would be granted taxing rights under the exemption mechanism (generally, to the source country). However, in the case of the credit approach, the resident nation considers income taxed in the source country for determining the tax base, but the taxes paid in the source country are allowed as a deduction from its own taxes. Let’s take a closer look at how to calculate the foreign tax credit in the case of US source income, as well as some of the complexities involved.

Enabling provisions

India and the United States have a comprehensive tax treaty that addresses taxability and double taxation relief for numerous kinds of income. The treaty’s article 25 expressly addresses the overseas tax credit (FTC). Because there is a tax treaty in place, the provisions of Section 90 and Rule 128 would apply. The credit would be based on the lower of taxes paid in the United States or taxes calculated under the Income Tax Act of India.

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US Investment income

In the case of an Indian ROR with investments in the United States, the revenue generated by these investments could be multifarious. Interest, dividends, and capital gains are all examples of accretions. Some of these may be subject to special taxation in the United States. Because the special rates are often lower than the normal slab rates, computing FTC by using the average rate of tax may not be the best strategy for such incomes.

In the case of dividend income, the United States has a notion of qualifying dividends, which are taxed at rates ranging from 0% to 20%, depending on the slab rates applicable to the taxpayer’s usual income.
The same is true for long-term capital gains. These rates are frequently lower than the tax rates in India, therefore estimating FTC by using the average tax rate from a US return may result in inaccurate claims.

So, how do you figure out the tax rates that apply to these earnings in your US tax return?

In US tax returns, look for the ‘Qualified dividends and capital gain tax worksheet,’ which lists the tax rates that apply to such incomes.

Another example of such income is Capital gain distributions. These distributions are basically dividends from US mutual funds. For US tax purposes, if the fund meets certain criteria, the distributions are taxed as long term capital gains. For the purpose of FTC, you may apply the special rate of tax as discussed above. However, bigger challenge with such income is determining the right head of income from India stand point. Whether to be taxed as capital gain which is in line with US tax laws or go by the nature of that income i.e., dividend and tax it under the head income from other sources? One should take a conscious call and then decide.

Retirals and pensions

The taxability of government and private pensions is governed by Articles 19 and 20 of the India-US tax treaty, respectively. Aside from this, the United States offers other retirement options such as IRAs and 401(k)s. Both of these are defined contribution plans that allow the taxpayer to take money when they reach a specific retirement age. In the United States, periodic contributions to these funds are not taxable. With specific exclusions and penalties, early withdrawals are permitted.

What happens to these periodic accretions in terms of Indian taxation? Is it taxable or not?

According to the FAQ on the Black Money Act (Circular No. 15 of 2015 dated 03 Sep 2015), such accretions should be taxable in India.So, how would you claim foreign tax credit for such accretions? Since the periodical accretions are not taxable in the US, there are no taxes paid on the same in US.
However, these may be taxable in US at the time of withdrawal. There is a huge timing difference with respect to taxability and could result in double taxation. How to mitigate the double taxation in these cases?

Till 2020, there was no mechanism in place to mitigate this hardship. However, the budget 2021 proposed to prescribe the manner in which such income should be taxed from the specified retirement funds in India. The specific rules are still awaited in this regard. Hope, this will provide more clarity on the taxability and helps in mitigating the double taxation.

State/city income taxes in the US

State and local taxes are another distinctive features of US taxation. In the United States, income tax is imposed by the majority of states and certain localities.

Is it possible to claim FTC for these taxes on an Indian tax return?

If India and the other country have a tax treaty, the treaty will usually define the extent of taxes for FTC purposes. The term “taxes covered” does not include state and local taxes, according to the India-US DTTA standard. As a result, the FTC is not available for state and local taxes under the tax treaty. So there’s double taxation once more?

We have an interesting ruling by the Karnataka High Court (HC) in this regard (Wipro Ltd Vs. Deputy Commissioner Of Income Tax [382 ITR 179]). The HC ruled in favour of the assessee and held that credit for taxes paid at the state level is also available for credit u/s 91 i.e., where no tax treaty is in place. Since this is an HC ruling the applicability is limited to the state jurisdiction. Again a conscious call is to be taken if credit is availed based on this ruling.

The deadline for filing tax returns extended to December 31.

Net Investment Income Taxes (NIIT)

In the United States, a special charge known as NIIT is imposed on some investment income in addition to regular income tax. If your gross income exceeds a specific threshold, you will be subject to a 3.8 per cent tax. This is essentially a new income tax on investment income that should be available to FTC. The NIIT paid by a taxpayer is detailed on Form 8960 of a US tax return.

This will be included like other taxes on your US tax return, so keep that in mind when claiming FTC. This will almost always result in a larger tax credit on your India tax return.

I hope the following provides some insight into the problems of claiming FTC on US source income on an Indian tax return, as well as some guidance on how to avoid the negative consequences of such challenges.