14 Tax thresh­old for re­tail­ers is at 8% of turnover now

DNA (Daily News & Analysis) Mumbai Edition - - FRONT PAGE - Tarun Ghia & Prad­nya Vairale

Is there any im­por­tant change in tax­a­tion law for a re­tailer fil­ing re­turn for FY 201011 com­pared with the pre­vi­ous year?

From the as­sess­ment year 2011-12 rel­e­vant to pre­vi­ous year ended on March 31, 2011, re­turns whereof are due in­ter alia by July 31, 2011, new pro­vi­sions re­lat­ing to tax­a­tion of small busi­nesses would have sub­stan­tial im­pact.

Ear­lier, as­sesses hav­ing gross re­ceipts upto 40 lakh in civil con­struc­tion busi­ness or sup­ply of labour for civil con­struc­tion busi­ness were cov­ered by pre­sump­tive tax­a­tion scheme u/s. 44AD, re­quir­ing them to ei­ther de­clare profit from such busi­ness at 8% or higher of gross re­ceipts and get im­mu­nity from main­tain­ing books of ac­count or de­clare profit less than such 8% and to main­tain books of ac­count and to get the same tax au­dited. Sim­i­larly, per­sons en­gaged in re­tail busi­ness hav­ing turnover upto 40 lakh were cov­ered by the pre­sump­tive scheme u/s. 44AF re­quir­ing them to ei­ther de­clare profit at 5% or higher of such turnover and get im­mu­nity from main­tain­ing books of ac­count or de­clare profit less than such 5% and to main­tain books of ac­count and to get the same tax au­dited.

New pro­vi­sions have been re­cast in sec­tion 44AD. First up, not only the civil con­struc­tion and re­tail busi­ness but all small busi­nesses, ex­cept spec­i­fied busi­ness of ply­ing, hir­ing or leas­ing goods car­riage hav­ing turnover or gross re­ceipts, upto 60 lakh are cov­ered in the pre­sump­tive scheme re­quir­ing them to ei­ther de­clare profit at 8% or higher of such turnover or gross re­ceipts, as the case may be, and get im­mu­nity from main­tain­ing books of ac­count or to de­clare profit less than such 8% and to main­tain books of ac­count and to get the same tax au­dited.

Thus, as far as re­tail­ers are con­cerned till the last year they were able to of­fer profit of 5% or higher, but now they are re­quired to of­fer prof­its of 8% or higher.

As far as part­ner­ship firm is con­cerned, out of such de­clared prof­its, it can claim fur­ther de­duc­tion for re­mu­ner­a­tion and in­ter­est to part­ners.

Small busi­ness would in­clude even the ser­vice providers ex­clud­ing pro­fes­sion­als. What is the con­se­quence if re­turn is not filed be­fore due date July 31, 2011 ?

Due date for fil­ing re­turn of in­come for as­sess­ment year 2011-12 for a non-au­dit as­sessee is July 31, 2011. How­ever, if the as­sessee is a work­ing part­ner in a firm, whose ac­counts are to be au­dited, then the due date is Septem­ber 30, 2011. If the as­sessee is a com­pany which has to file a re­port in Form No. 3CEB un­der Sec­tion 92E per­tain­ing to in­ter­na­tional trans­ac­tion(s) then the due date is Novem­ber 30, 2011. For all other au­dit as­sesses the due date is Septem­ber 30, 2011.

If re­turn is not sub­mit­ted on or be­fore due date, a be­lated re­turn can be sub­mit­ted on or be­fore March 31, 2013. How­ever, pe­nal in­ter­est would be­come payable. Fur­ther, if the re­turn is filed be­yond March 31, 2012, a penalty of 5,000 may be im­posed. If re­turn of loss is sub­mit­ted af­ter the due date a few losses can­not be car­ried for­ward. If re­turn is sub­mit­ted be­lated, de­duc­tion un­der sec­tions 10A, 10B, 80-IA, 80-IAB, 80IB, 80-IC, 80-ID & 80-IE will not be avail­able. Re­turn filed af­ter due date can­not be re­vised. I am de­vel­oper con­struct­ing a build­ing. For tax­a­tion of in­come from the pro­ject, do I have to show a per­cent­age of in­come ev­ery year or can I post­pone it till com­ple­tion of the pro­ject?

As a de­vel­oper, you are en­ti­tled to fol­low ei­ther per­cent­age com­ple­tion method of ac­count­ing or pro­ject com­ple­tion method for the pur­pose of of­fer­ing in­come un­der the pro­vi­sions of the In­come Tax Act, 1961. De­spite many changes hav­ing taken place in the re­cent years in ac­count­ing as- pects for real es­tate de­vel­op­ers, par­tic­u­larly in re­spect of their sales of units un­der con­struc­tion, there are no changes in tax­a­tion law. Fur­ther, in the State of Ma­ha­rash­tra, you can take added sup­port of the strin­gent pro­vi­sions of the MOFA, 1963 in favour of the flat pur­chasers to fol­low pro­ject com­ple­tion method. Tarun Ghia is a

char­tered ac­coun­tant and can be reached at

ghi­atarun@ red­iff­mail.com. Prad­nya Vairale is an ad­vo­cate and

can be reached at ad­vprad­nyag

@gmail.com

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