Income tax return query

akshat nagar (student ipcc) (22 Points)
Replied 25 July 2014

You should include ur income for the month of march in your return. Moreover service tax does not form part of your income hence you hav to show your income exclusive of service tax.

AmitD (MBA) (27 Points)
Replied 25 July 2014

Originally posted by : akshat nagar
	You should include ur income for the month of march in your return. Moreover service tax does not form part of your income hence you hav to show your income exclusive of service tax.

March i am including but what about the bill of March which was paid out in April - should i include that?

Also if i exlude service tax then the numbers will be different in 26AS and Return filed

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 25 July 2014

Dear Amit,

I would like to know the practice of accounting your are following for income tax. If you are followinf accrual basis, then you should show it as income of year ending march 2014, or else if receipt basis, then income of current year.

The above is theoritical aspect. Practicality is that, if you follow receipt basis and account in april, and deductor has deducted and deposited TDS for year ending March 2014, you will not get the credit. This is the system.

Hence my advice would be to show it as income of march 2014 and claim the TDS.

For service tax perspective, I am presuming that you are small service provider , and you services are upto Rs. 50 Lacs and you are paying it on Receipt basis.

Now, for bill raised in march, account it in march 2014. For service tax, payment received in April, which you have paid in QE 30.06.14, which is absolutely fine for service tax practice.

I hope it helps to some extent.

AmitD (MBA) (27 Points)
Replied 28 July 2014

Originally posted by : Himanshu Bansal
	Dear Amit, I would like to know the practice of accounting your are following for income tax. If you are followinf accrual basis, then you should show it as income of year ending march 2014, or else if receipt basis, then income of current year. The above is theoritical aspect. Practicality is that, if you follow receipt basis and account in april, and deductor has deducted and deposited TDS for year ending March 2014, you will not get the credit. This is the system. Hence my advice would be to show it as income of march 2014 and claim the TDS. For service tax perspective, I am presuming that you are small service provider , and you services are upto Rs. 50 Lacs and you are paying it on Receipt basis. Now, for bill raised in march, account it in march 2014. For service tax, payment received in April, which you have paid in QE 30.06.14, which is absolutely fine for service tax practice. I hope it helps to some extent.

Hi - Thanks a lot for your reply - if you can help me with the other query i asked too

- Given that the company showed the service tax as part of the fees in 26AS should i file my income minus the service tax or show the same number as 26AS and show service tax as an expense to ensure numbers match in my return and 26AS

- Also given you mentioned it, if my total fees in a year exceeds 50L then does it mean that i cannot follow receipt basis and will have to necessarily follow accrual basis?

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 28 July 2014

you should book service tax for the year ending 31.03.2014.

Entry should be made like :

Client Dr.

To Professional Receipts

To Service Tax Payable

Show Service tax Payable as a liability in your Balancesheet ending 31.03.2014

Now on receipt of payment in April,

Bank Account dr.

TDS dr.

To Client

&

Service Tax payable dr.

To Bank (When payment made for service tax liability of Quarer ending 30.06.14)

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 28 July 2014

All the individuals and partnership firm (including LLPs) serviceproviders whose turnover is Rs.50 lakh or less in the previous financial year, have an option to pay service tax on receipt basis upto Rs.50 Lakhs taxable value. Beyond 50 lakhs, service tax will have to be paid on the accrual basis on the basis of issue of invoice as per the Point of Taxation Rules,2011.

Hitesh Khanna (Accounting & Finance Taxation Company Law Audit ) (839 Points)
Replied 28 July 2014

1. I totally agree with the reply given by Himanshu regarding the first part of the question.

Regarding the Seccond Part I would just like to say that it is advised to keep the amount same as that of 26 AS in order to Avail the credit smoothly. One can also opt to show the actual thing which should have happen. Thje difference is in the first case you will fet through smoothly while in the second case you may be a bit busy writing letter and visiting the department.

2. Regarding the 50 Lacs issue, Himanshu has already given a full fledged extract.

AmitD (MBA) (27 Points)
Replied 29 July 2014

Originally posted by : Hitesh Khanna
	1. I totally agree with the reply given by Himanshu regarding the first part of the question. Regarding the Seccond Part I would just like to say that it is advised to keep the amount same as that of 26 AS in order to Avail the credit smoothly. One can also opt to show the actual thing which should have happen. Thje difference is in the first case you will fet through smoothly while in the second case you may be a bit busy writing letter and visiting the department. 2. Regarding the 50 Lacs issue, Himanshu has already given a full fledged extract.

Issue being that if i try to match the 26A/s number my tax liability goes up unless i show service tax paid as an expense to get back to the correct net income