18 September 2013
What is chargeability section of Income/incentive derived under FOCUS Market Scheme of India? Pleas give accounting treatment of the same for in case of Application and receipt of such incentive. Suggest Income tax rules about the incentives. In Which year Incentive will be taxable?
25 July 2024
The FOCUS Market Scheme (FMS) is a scheme under India's Foreign Trade Policy that aims to promote exports of products to specified markets. Under this scheme, exporters receive incentives or benefits for exporting certain products to designated countries or regions.
### Chargeability Section of Income/Incentive under FOCUS Market Scheme:
1. **Taxability**: The income or incentive received under the FOCUS Market Scheme is taxable under the Income Tax Act, 1961. The specific section that governs the taxability of such incentives would typically be Section 28 or Section 56 of the Income Tax Act, depending on the nature of the incentive received.
2. **Accounting Treatment**: - **Application Stage**: If the incentive is receivable based on achieving export targets or fulfilling other criteria specified under the scheme, it should be recognized as a receivable in the books of accounts as per the accounting standards applicable (such as Ind AS or AS). - **Receipt Stage**: When the incentive is received, it should be recognized as income in the books of accounts. The accounting treatment would involve crediting the incentive amount to the income statement or profit and loss account.
3. **Income Tax Rules**: - **Year of Taxability**: The incentive received under the FOCUS Market Scheme is typically taxable in the year of its receipt unless there are specific provisions under the Income Tax Act that defer or spread the taxation over multiple years (such as certain provisions for export incentives).
- **Tax Rate**: The income tax rate applicable to the incentive would depend on the nature of the entity (individual, partnership firm, company, etc.) and the total taxable income for that year.
### Conclusion:
In summary, incentives received under the FOCUS Market Scheme are taxable as per the Income Tax Act, typically in the year of their receipt. The accounting treatment involves recognizing the incentive as income when it is received, and ensuring compliance with accounting standards. It's advisable to consult with a tax advisor or chartered accountant for specific advice tailored to your circumstances and to stay updated with any changes in tax laws or policies related to export incentives.
CAclubindia
