Exclude Income under Income Tax (Detailed Blog)

Exclude Income under Income Tax– Section 10

The different items of income referred to in the various clauses of section 10 are excluded from the total income of an assessee. These incomes are known as exempted incomes. Subsequently, such income will not enter into the calculation of taxable income.

Few of Income not taxable under Income Tax Act

AGRICULTURAL INCOME – SECTION 10(1)

Agricultural income is excluded under section 10(1).
However, agricultural income has to be aggregated with non agricultural income for calculating the rate at which non-agricultural income would be subject to tax, in case of individuals, HUF, AOP & BOIs etc., where the –
• agricultural income exceeds ` 5,000 p.a. and
• non-agricultural income exceeds basic exemption limit.
Below are the steps to be followed in calculation of tax –
Step 1: Tax on non-agricultural income plus agricultural income
Step 2: Tax on agricultural income plus basic exemption limit
Step 3: Tax payable by the assessee = Step 1 – Step 2
Step 4: Add Surcharge/Deduct Rebate u/s 87A, if applicable.
Step 5: Add Health and Education Cess@4%.

PARTNERS SHARE – SECTION 10(2A)

The partner’s share in the total income of the company or LLP is excluded from tax.

INCOME OF OFFICIAL OF AN EMBASSY, HIGH COMMISSION, ETC. – SECTION 10(6)

Remuneration received by a person, who is not a citizen of India, as an official of an embassy, high commission, legation, consulate or the trade representation of a foreign State or as a member of the staff of any of these officials would be excluded, subject to satisfaction of few conditions:

  1. These members of staff are subjects of the country represented and not engaged in any business or profession or employment in India else than as members of such staff.
  2. remuneration of corresponding officials of the Government resident for similar purposes enjoy similar exclusion in the other Country.

INCOME RECEIVED ON ACCOUNT OF ANY DISASTER – SECTION 10(10BC)

Compensation received or receivable from the Central Government, State Government or local authority by a person or his legal heir on account of any disaster is excluded except to the extent of loss or damage permitted as deduction under the Act.

SUKANYA SAMRIDDHI ACCOUNT – SECTION 10(11A)

Any payment from Sukanya Samriddhi Account

SCHOLARSHIP – SECTION 10(16)

The value of scholarship permitted to meet the cost of education would be excluded from tax in the hands of the recipient irrespective of the amount or source of scholarship.

DAILY ALLOWANCE – SECTION 10(17)

Daily allowance received by any Member of Parliament or of State Legislatures or any Committee thereof are excluded.

AWARDS – SECTION 10(17A)

Awards for literary, scientific and artistic works and other awards by the Government are excluded.

PENSION – SECTION 10(18)

Pension received by individual who has been in service of Central or State Government and has awarded “ParamVir Chakra” or “MahaVir Chakra” or “Vir Chakra” such other gallantry award as the Central Government notifies is excluded from tax.

SECTION 10(26)

Income from any source in the mentioned areas or States in which member of a Scheduled Tribe is staying or income by way of dividend or interest on securities is excluded in the hands of member of the Scheduled Tribe.

SIKKIM – SECTION 10(26AAA)

Income from any source in the state of Sikkim, dividend income and interest on securities is exempt in the hands of a Sikkimese person. This exclusion is not available to a Sikkimese woman who, on or after 1st April, 2008, marries a non-Sikkimese individual.

SUBSIDY FOR TEA – SECTION 10(30)

The amount of any subsidy received by any assessee engaged in the of growing and manufacturing tea in India through or from the Tea Board will be wholly exclude from tax.

SUBSIDY FOR RUBBER, COFFEE AND CARDAMOM – SECTION 10(31)

The amount of any subsidy received by an assessee engaged in the business of growing and manufacturing rubber, coffee, cardamom or other specified commodity in India from or through the Rubber Board, Coffee Board, Spices Board or any other will be excluded.

SECTION 10(35)

Any income received in respect of units from the Administrator of the specified undertaking/ specified company/ Mutual Fund shall be exempt. However, income originating from transfer of such units would not be excluded.

SPECIAL ECONOMIC ZONES (SEZS) – SECTION 10AA

Tax holiday for unit established in Special Economic Zones (SEZs), which has started or begins to manufacture or produce articles or things or provide any service on or after 1.4.2005 in any SEZ for 15 consecutive assessment years with respect of its profits derived from exports of such articles or things or export of services.

Amount of exemption = Profits of Unit in SEZ x Export turnover of Unit SEZ/Total turnover of Unit SEZ

100% of these profits would be excluded in the first five years, 50% in the next five years and in the last five years, 50% subject to transfer to SEZ Re-investment Reserve Account.

Enquire with Certicom Consulting in case of any further queries.

Goods and Services Tax (GST) Refunds on Export

In India, the export of goods and/or services has reduced as interstate supply and thus is subject to Integrated GST. However, as per the rules made under the IGST law, the exported goods and services are considered as zero-rated supplies, hence allowing the exporter to claim GST refunds on their export.

On the other hand, even though the supply of goods and services beyond national borders attract 0% GST, it is compulsory for an exporter to register under GST if his aggregate turnover exceeds GST threshold of 40 lakhs (20 lakhs for Special category states), as mentioned in notification number 10/2017- Integrated Tax.

Nevertheless, the mentioned provision has been included under IGST law to promote and facilitate the growth of export in India. But, for an exporter to be able to get these benefits, the benefits are subject to conditions as given below

Required Eligibility To Claim GST Refunds On Export

Any registered taxable individual, except Input Service Distributor (ISD), Compounding Taxpayer, TDS Deductor and TCS Collector, can claim a refund for the taxes paid on exports, if the supplied goods and/or services fulfills the following conditions:

  • Supplier is located in India.
  • Recipient and the place of supply are located outside India.
  • Payment for this service has been received by the supplier in convertible foreign exchange.
  • Supplier of service and the recipient of service are not merely establishments of a different person.

Exporting Goods And Services Under GST

In order to get the option of export without payment of IGST, the registered exporter is required to give a bond or Letter of Undertaking (LUT) before the export. The issuance of LUT validates the export process, establishing the export of goods within three months 15 days from the invoice date, when the payment for the same (in foreign currency) will be received within one year 15 days of the invoice date.

The exporter need to submit the bond, supported by a bank guarantee of an amount not exceeding 15 per cent of the bond amount on a non-judicial stamp paper for each and every export. The validity of a LUT is for one year and is to be submitted on the company letterhead.

GST Refund Process For Exporters

An exporter can claim IGST refund for export as per one of the two options mentioned below:

  • The supply goods and/or services is done under bond or LUT, without payment of IGST. In such case, the exporter can claim a GST refunds on export of the not utilized ITC available for CGST, SGST and IGST
  • The supply goods and/or services is done as per the given process, along with the IGST payment. In such case, the exporter can claim a refund for the IGST paid on the supply.

Also, the exporters monthly GST returns should show export details, as given below:

  • Form GSTR 1: Export details in Table 6A of GSTR-1, along with “shipping bill” details of the IGST paid.
  • Form GSTR-3B: Valid details, relevant to the export period.

By successful filing of these forms, the GSTN portal shares the received export details with the ICEGATE. For which, the details given in attached documents and GSTR 1 is validated by the ICEGate system and the refund process is started.

As per the IGST Act, 90% of refund processing is completed within 7 days of filing refund application. The acknowledgement of the same is shared with refund payment is directly done to exporters the refund payment is credited to the account of the taxpayers, the ICEGATE system will give the payment information with the GST Portal will send the details through SMS and e-mail with the taxpayers.

Documents Need To Attach For GST Refunds On Export

Shipping Bill:
For IGST refund claim, there is no need for the exporter to file any other refund application as the Shipping Bill (along with Export Manifest) is considered as a refund application.

Bank Realisation Certificate (BRC)/ Foreign Inward Remittance Certificate (FIRC):
The BRC or FIRC are very crucial documents that are required to support the refund claimed for the export of service. The exporter can get their BRC issued by their authorized bank on each invoice, while the FIRC is issued on any inward remittance received against an export. There is no need of any different application for refund of IGST paid on export of Goods.

Export General Manifest (EGM):
As per Instruction No. 15/2017-Customs, dated 09-10- 17, filing of an export manifest is must for treating shipping bill or bill of export as refund claim. The export report is filed in case of export by land and Export manifest is filed in case of export by air or sea. Export manifest is need to be filed u/s 41 and 42 of the Customs Act, prior to the departure of the conveyance carrying the goods. Commissioners have to ensure that export report/EGM is filed in given time limits.

Correction Made In Form GSTR -1

For any incomplete or erroneous filing of form GSTR 1, the exporter can file Table 9A – Amended Export Invoices in their subsequent GSTR 1 filing. In case of any missing invoice (in current GSTR 1), the exporter can report the same in Table 6A of Form GSTR -1 of the subsequent period.

Correction Made In Form GSTR -3B

As per the circular number 26/26/2017 issued by CBEC, corrections in Form GSTR-3B for a given tax period can be reported in subsequent GSTR-3B filing, as below:

  • The tax paid on exports, which are mentioned in table 3.1(a) or table 3.1(c) instead of table 3.1(b), in such case the needed corrections can be done in the coming month to the extent permitted.
  • The tax paid on exports has been mentioned as zero in table 3.1(b), the correct amount can be declared and offset during GSTR -3B filing of the subsequent month.
  • The tax paid on exports declared in table 3.1(b) is less than the return specified in the invoices filed under Table 6A, and Table 6B, of Form GSTR 1, differential amount of tax can be declared and offset during GSTR 3B filing of the subsequent month.

Contact us or email us at [email protected] for any further queries on GST filing and registration.

 

Introducing Online GST Refund Process in 2019 by GSTN

The GST Network (GSTN) has introduced an online GST refund process, as decided by the 37th GST Council. With this process, taxpayers will easily be able to file refund through form RFD 01, which can further be processed online by the GST officers. The online refund system is into effect from September 25, 2019, on the GST portal.

Major Points:

  • Taxpayers can now file refund application (in RFD 01 form) easily and tax officers can execute it online
  • All communications between taxpayers and tax officers will be online as well

GST Refund Process Of Previous Years

Till now, the refund processing for the Central GST (CGST) and State GST (SGST) was done by a single tax personal to whom the taxpayer was assigned administratively. However, the disbursement for this was done by different accounting authorities of central and state tax departments respectively. This makes a delay of sharing sanction order between accounting personals, before the GST refund could be processed to the applicant.

GSTN Refund Process 2019

The new GST refund system launched by GSTN has done away with multiple accounting authorities for sanctioning the disbursement of the refund amount. Under new refund system, when the tax officer completes processing, the sanctioned amount will get credited to the bank account of the Taxpayer through Public Fund Management System (PFMS). The new system is being introduced to provide a boost to the disbursement speed of refunds and also improve the GST compliance, hence making refund a seamless experience for the taxpayer as well as the tax officer.

However, it may be noted that all refund applications filed before September 26, 2019, will be processed manually as done under the old refund process.

Features Of The New GST Refund System

The unique features of the new refund system launched by GSTN are as below:

  • Single Authority based refund system
  • Stage-by-Stage tracking of the GST Refund process
  • SMS and Email Updates for Important stages
  • Online Reply Utility for Notices

Digitization Making GST Refund Process Simpler In The Coming Days

After-April 2020, with the enrolment of new GST returns, the taxpayer will be able to auto-populate the GST refund details from his sales records. These auto-populated fields will be derived from taxpayers ‘refund from sales to SEZ and Deemed Exports’ and ‘refund from sales to B2B, Exports and B2C’ records.

If the field for a refund from sales to SEZ and Deemed Exports is populated indicated ‘Yes’, the supplier will get the refund from such transactions else SEZ/Deemed Exporter.

Similarly, in case of transactions other than SEZ and Deemed Exports, if the document to be auto-populated to GST refunds is Yes then values will be auto-populated in refund form.

Contact us or email us at [email protected] in case of any queries related to GST registration.