Final Tax Regime

[Omeir]

I wish to know that is it possible that a company falling under FTR will based on their profit will not be considered under this regime?

The scenario is that a private ltd company falls under the final tax regime based on indenting commission, now is it possible that for e.g the indentiong commission is Rs 100,000; the tax would be 5% i.e Rs 5,000. Now if the company makes a profit of Rs 20,000; Will they have to pay any further amount of tax based on that 35% tax which is applicable on ltd companies based on their profits is Rs 7,000 (20,000*35%). Can anyone confirm this?

Secondly I am aware of this that a ltd company cannot make cash payment of any invoice of more than Rs 10,000. The payment has to be by cheque and crossed. Also that under one expense head such company cannot make a payment of Rs 50,000 in cash.

Please guide me in this regard as I find it quite bewildering.

[Omeir]

No one has any idea!!! It is surprising.

[LapTop]

Q1) Read S. 39 ITO

Q2) Read S. 21 ITO

[Nauman]

As for first question the question of FTR or NTR arises because of source of income if source of income falls under FTR then whatever tax deducted will be final irrespective of the amount of profit the company eventually earns. If that profit also contains some income which does not fall under the Final Tax Regime (i.e falls under Normal Tax Regime) then you have to pay tax at the rate of 35% on that portion of profit.

For that you need you need to apportion your business expenditures to income falling under Normal Tax Regime as per rule no. 13 of Income Tax Rules, 2002 and pay tax @ 35% on that taxable income.

[Bilal_JF]

if the whole income stream of a company is subject to FTR then can that company claim withholding tax on cash withdrawal in its return?

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Bilal_JF</i>
<br />if the whole income stream of a company is subject to FTR then can that company claim withholding tax on cash withdrawal in its return?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Every tax deduction has its own nature, viz, final, adjustable or minimum.
General Rule is that all tax deductions & collections are adjustable unless expressly stated as final/ minimum [s.168]

Suppose a person sells goods of Rs.1 Lac in a tax year on which final tax of Rs.3,500 has been deducted. Simultaneously, from his bank account Rs.100 have been withheld as tax on cash withdrawal.

Under s.168 he is allowed tax credit for tax collected on cash withdrawal. But as Rs.3,500 is a final tax so according to
s.168(3)"No tax credit shall be allowed for any tax collected or deducted that is a final tax".

Now what with the tax collected on cash withdrawal.
S.168(5) addresses this situation. "A tax credit...that is not able to be credited ... for the year <u>shall be refunded</u>."

So he may claim refund of Rs.100 collected as tax on cash withdrawal from bank.
In annexure B following entries shall be made
Rs.100 for tax deducted on cash withdrawal
Rs.3500 for tax deducted as final tax.
Total of Annexure B would be 3600


From there transfer this value of Rs.3600 to page 1 of Return. Tax Chargeable would be Rs.3500 (transferred from page 2). 3500 - 3600 = Tax Refundable = (100)

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Omeir</i>
<br />
Secondly I am aware of this that a ltd company cannot make cash payment of any invoice of more than Rs 10,000. The payment has to be by cheque and crossed. Also that under one expense head such company cannot make a payment of Rs 50,000 in cash.

Please guide me in this regard as I find it quite bewildering.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">Firstly, according to s.21(l), it is not only limited company but every business concern including individual that has to make payment through cross cheques, if such payments exceed in aggregate, Rs.50,000 under single account head.

Secondly,the second proviso is exception to this rule. It says that to payments below Rs.10,000 , this rule (clause l) shall not apply. Hence, I think, under one expense had, business concern may pay more than Rs.50,000, provided that each single transaction is below Rs.10,000. If one has incurred annual expenditure on petrol amounting to Rs.1 Lac. But all single transactions are below Rs.10,000, then he has not need to pay by cross cheque and his expense will not be disallowed

For the purpose of salary read clause m of s.21.