HRA Claim if you live with your parents.

As rental income is taxable for parents , one needs to consider Income Tax Slab of parents. One needs to sit down and workout whether paying rent to parents will actually help to save tax or not on net basis. You should save tax through transparent way. Any discrepancy in tax details may invite heavy penalty from income tax department. It is always advisable to consult tax consultant before claiming any tax exemption. Things that one has to consider while claiming HRA while living with parents are as follows:

• You must live in a rented accommodation.
• Parents must be the owners of the house. You can save tax only if you are paying rent to parent or parents who is owner of the property. If the property is jointly held by father and mother then rent should be paid to both of them.
• Documentation should be clear.You must have a rent agreement.
• Rent receipts: pay rent for the same through cheque/bank transfer. Get the Rent Receipts signed by your parents.
• Rental Income is taxable : They must show the rent received as rental income in their income tax returns.

Are you saving tax as a family when you claim HRA while living with your parents?

As mentioned earlier, Rental Income is taxable. The parent/parents must show the rent received as rental income in their income tax returns.  So you would be saving tax as family and complying with tax rules, if you and your parents are in different income tax slab.   When they are in a lower income bracket or they don’t have any income. Even when the house is jointly owned by both your parents, you can pay them rent proportionately, that will spread the rental income between them and may turn out to be more beneficial.  Your parents can invest this income in can be invested in their name  such as the Senior Citizens Saving Scheme, five year bank fixed deposits or tax saving equity mutual funds or other financial investments that can earn them a higher return based on their age.

If your parents are more than 60 years old (and less than 80 years old), they are not required to pay any tax on income up to Rs 2,50,000. And if they are more than 80 years old their income is exempt up to Rs 5,00,000.

Lets take an example.

• Say you are in 30% income tax slab.
• Your parents are retired and have no other source of income.
• They own the house.
• You live in the house.
• You pay Rs 32,000 a month, that is, Rs 3.84 lakh a year,
• Your parents can deduct 30% i.e 1,15,200 and have to pay tax on only Rs 2,68,800.
• For FY 2015-16, the amount that is over and above the basic Rs 2.5 lakh exempt limit  so you can invest in their name in tax free scheme such as PPF, tax free bonds, and bring down taxable income to 2.5 lakh.

You get a bigger benefit if the house is co-owned by your parents. Then they can split the earning from rent and show separate tax liability. The best part is you can decide how much rent you will pay to your parents provided rent is justified. It will help to save tax till optimum point. 

Rent Receipts 

To allow you exemption on HRA, it is mandatory for the employer to collect proof of rent payment ie rent receipt. The employer will give you exemption on HRA based on these rent receipts. TDS will be adjusted so you don’t have to pay tax on HRA. Your  tax liability will be calculated accordingly.  It would be reflected in Form 16.

Why Should You Outsource Your Bookkeeping Services?

As a small business enterprise you have many things taking up your time. You manage your clients, your accounts, marketing plans and employees. Managing your company’s accounting may seem like one of the easier things that you do, so you may not notice how much time you lose keeping track of income and expenses in a spreadsheet or worse, with pen and paper.

You can’t actually do everything:

There’s a myth that successful entrepreneurs need to be able to do it all. They need to be experts and have intimate knowledge of tax details, and detailed knowledge of the inner workings of every part of their company, which is very untrue.

In fact, no successful company can run this way. In the startup phase, many entrepreneurs do end up picking up a little bit of everything, but as a company grows and expands, one of the crucial steps that entrepreneurs must go through is learning to delegate to other people, so that they can focus on building and growing the company.

Improve performance in other areas:

Outsourcing bookkeeping services is just one way that an entrepreneur can take a set of tasks off their plate, freeing up time for other core business and work. Instead of spending time cutting and pasting into each separate invoice before emailing it out, accounting services manage the process for you.

Proper accounting is a big help to the company as this would provide financial information and standing of the company that will be helpful in making management decision

Don't wait for the tax return to find out how your company is doing:

Knowledge of accounting helps you understand financial records, such as the balance sheet and profit/loss statement, which reveal the worth of your company and whether it is profitable. This allows you to make decisions to correct or adjust any areas of financial concern in your business before you receive your annual tax return. If you wait until you receive your tax return, it may be too late to detect vital errors that could save your business. 

Skilled Worker with the desired knowledge:

Accounting firms, bookkeeping firms and staffing agencies train their employees with extensive testing and offer employees training so you know you are getting a skilled worker. You may not be able to afford to hire an individual with the level of ability you need, and it is also unlikely that you can afford to enhance your employee's skills with additional training. For this reason, outsourcing may offer you the opportunity to bring in a worker with a higher level of expertise than you would have been able to afford otherwise.

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Transactions reported to Income Tax Department

Under income tax laws  institutions are required to report the details of those transactions which you have entered into or registered with them. All the banks, mutual funds and companies issuing shares are required to submit the details. Besides, the office of the registrar where your sale and purchase transaction of immovable properties are registered, is also required to send the details of such transactions to the income tax department. These establishments have your PAN and other details, so there is virtually no way one can sneak past them. The following transactions are required to be informed to the Income Tax Department

1. Cash deposits aggregating to Rs. 1,000,000 or more in a year in any of your savings account in the bank.Banks also includes cooperative banks. Infact it applies any bank or banking institution which comes under the section 51 of Banking Regulation Act, 1949 (10 of 1949). Banks are not required to report in cases where cash exceeding Rs 10 lakh has been withdrawn from the savings account but the cash deposits have not crossed the threshold limit during the financial year.
2. The transaction of payments for credit card if the aggregate payment made during the financial year is Rs 2 lakh or more during the financial year.
3. Investments of Rs 2 lakh (200,000) or more in Mutual Fund
4. Investments of Rs 5 lakh (500,000) or more in bonds or debentures issued by a company or institution
5. Investments of Rs 1 lakh (100,000) or more in the shares issued by a company
6. Purchase or Sale of any immovable property valued at Rs 30 lakh (30,00,000) or more
7. Investments of Rs 5 lakh (500,000) or more in a year for investment in bonds issued by Reserve Bank of India

The values of the transactions mentioned above have to be considered as aggregate in a year and not per transaction.

“You cannot hide any longer …therefore, today the best policy is to admit your income and pay tax” Finance Minister  P Chidambaram had said in Mar 2013.  P Chidambaram said the tax department has information about people’s expenditure patterns and their financial transactions.We have issued notices to 35,000 people saying that on the basis of information we have, you should have filed your returns. Another 35,000 notices are going next week “No. In income tax there is no case for amnesty. Because now almost all returns are online except a small category which was exempt. We have a huge amount of data which is being mined. Therefore, there is no case for amnesty today”

Almost 23 crore of such high-value transactions are under the scanner and notices have already been dispatched to thousands of taxpayers. The notice typically asks the taxpayer to respond in writing. His personal presence is not required. If the system detects a mismatch in income, investments and expenses, it will automatically pick the return for scrutiny.

Interim Budget highlights

·         No change in direct taxes

·         Excise cut on capital goods cut from 12% to 10%

·         Excise duty cut on small cars reduced from 12% to 8%

·         Excise duty for SUVs cut from 30% to 24%

·         Excise duty for large and mid-segment cars cut to 20%

·         Excise duty on mobile handset will be 6 %with CENVAT credit 0r 1% without CENVAT Credit

·         customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at         7.5 percent.

·         To encourage domestic production of specified road construction machinery, withdrawal of the exemption             from CVD on similar imported machinery.

·         loading, unloading, packing, storage and warehousing of rice exempt from service tax.

·         services provided by cord blood banks are also healthcare services and be exempt from service tax. 

Section 87A – Income Tax Rebate

A new section 87A by Finance bill 2013 has been introduced for Income Tax Deduction of Rs. 2000/- for Assessment Year 2014-15.  This rebate can be availed Tax payer/Assessee under section 87A.

The proposed new section 87A seeks to provide that an assessee, being an individual resident in India, whose total income does not exceed Rs. 5,00,000/- , shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under Chapter VIII of the Income-tax Act) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of Rs. 2,000/- whichever is less.

Points:

1.   These amendments will take effect from 1st April, 2014 and will, apply in relation to the assessment year 2014-15 and subsequent assessment years.

2.   Rebate is available  only to individuals

3.   No rebate to Non Resident.

4.   If the total tax payable is less than Rs. 2000/-, rebate is restricted to “total tax payable”.

5.   Rebate benefit is not applicable to a super senior citizen, since he is already fully exempted up to Rs. 5 lakh.

Service Tax Amnesty Scheme (VCES – 2013)

Service tax amnesty scheme (VCES 2013) was introduced in Finance Act, 2013 and is effective from 10th may 2013. Tax payers can pay tax dues from October 1, 2007 to December 31, 2012 without interest and penalty.

Why VCES?

At present about 17 lakh taxpayers are registered under Service Tax. Of these only 7 lakh have been paying the levy; VCES is aimed at encouraging those who haven’t yet started paying service tax promptly.

Features of VCES

Based on Notification no 10 dated 13th May, 2013, circular no 169 dated 13th May, 2013 and circular no 170 dated 8th August, 2013, salient feature of are given below:

Eligibility

A person who was required to pay Service Tax under the Service Tax provisions for the period 1st October 2007 to 31st December, 2012, but remains outstanding as on 1st March, 2013 is eligible to get benefit of the scheme provided the same was not detected by Service Tax Department as on 1st March, 2013.
Scheme is available to people who have already registered under service tax. Those who are not registered can first get themselves registered under Service tax and then apply for amnesty scheme.

Benefits of the Scheme

• No interest to paid for delay in payment. Interest is normally levied up to 18% on delayed payments.
• No penalty will be levied, which normally may go up to 50% of the service tax.
• No matter shall be reopened thereafter in any proceedings under the Act before any authority or court relating to the period covered by such declaration

Payment of Tax Dues declared by the scheme

• 50 % of total dues declared in the declaration filed must be paid on or before 31st December, 2013. Amount paid under the scheme will not be refunded.
• If 50 % amount declared is not paid on or before 31st December, 2013, the declarant cannot get benefit of the scheme, and the amount may be adjusted against his service tax liability.
• Balance 50% is to be paid on or before 30th June, 2014.
• Balance amount, if any, as on 1st July, 2014 is to be paid on or before 31st December, 2014 with 18% interest.
• Balance amount, if any, as on 1st January, 2015 can be recovered by the dept as if it is Service Tax  due but not paid.

Rejection of the Declaration

• The dept may reject the declaration if it feels that the declaration is “substantially false”. In such case, the declarant may be required to revise upward  “Tax Dues” amount stated in the declaration filed by him.
• Otherwise, he may be required to pay Service Tax with Interest and Penalty.

Should you apply for VCES

Given the benefits of no interest and penalty, it is advisable to take the benefit of this scheme. Application should be made at the earliest with complete details in the prescribed format to avoid possibilities of rejection.

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Section 80EE: Additional Interest Deduction on House Property Loan

Finance Minister presented Union Budget 2013-14 in parliament. In the Union Budget 2013-14 a new Section 80EE inserted in Indian Income Tax, 1961 for additional deduction of interest on housing loan. An assessee able to take additional interest deduction on housing loan from Assessment Year 2014-15

Additional Interest deduction on house property loan will be allowed on only to new loan sanctioned for house property. The loan sanctioned for house property does not exceed from 25 lakhs. Loan has been sectioned from 01-04-2013 to 31-03-2014. If the loan has been sanctioned before 01 April, 2013 than assessee not able to take benefit of Section 80EE of India Income Tax, 1961

A Brief Summary:

1. Loan has been sanctioned for house by any financial institutions from 01 April, 2013 to 31 March, 2014.

2. Loan amount sanctioned for acquisitions house property does not exceed Rs. 25 Lacs.

3. There are no other house property on the date of sanction housing loan to assessee.

4. Value of house property not exceed of Rs. 40 lacs.

5. Buyer of house property is the first time buyer.

Note: - This is a brief disclosure on Addition Interest Deduction House Property Loan under Section 80EE and under Section 24 (b) of India Income Tax Act, 1961.

Section 194-IA : TDS on purchase of Immovable Properties

Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) for value Exceeding Rs.50 Lakhs.

The Finance Bill 2013 has introduced a new section 194-IA providing for TDS @ 1% to be deducted by purchaser. In case valid PAN of seller is not available , tax deduction will be at higher rate of 20%. This amendment is effective from 1st June, 2013. 

For reducing the further compliance burden on the transferee, it is also provided that a simple one 

page challan for payment of TDS would be provided containing details (including PAN) of transferor and transferee  and also certain details of the property. The transferee would not be required to obtain any Tax Deduction and Collection Account Number (TAN) or to furnish any TDS statement as this would be mostly a one-time transaction. 

The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS. 

The New Payment Challan for TDS requires the Property Purchaser to Furnish following details in the form for payment of TDS :- 

·         Permanent Account No. (PAN) of Transferee (Payer/Buyer) 

·         Permanent Account No. (PAN) of Transferor (Payee/Seller) 

·         Category of PAN of Transferee 

·         Category of PAN of Transferor 

·         Full Name of the Transferee 

·         Full Name of the Transferor 

·         Complete Address of the Transferee 

·         Complete Address of the Transferor 

·         Complete Address of the Property Transferred 

·         Details of amount paid/Credited 

Deposit of tax

Any tax deducted under section 194-IA will be

·         Deposited within 7 days from the end of month in which tax was deducted

·         Deposited by way of Challan-cums-statement in Form 26QB

·         Deposited electronically into RBI/SBI or any authorized bank. Director General of income-tax (Systems) will specify formats , standards and procedure for such electronic remittance

TDS Certificate

·         TDS Certificate in respect deduction under section 194-IA will be issued by deductor in Form No 16B

·         Form 16B has to be issued within 15 days from the due date of depositing tax

·         Form 16B will have to be downloaded from income tax web portal.

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Section 80E : Deduction for Interest on Education loan

Q. Who is eligible for deduction u/s 80E?

A. Loan should be taken by individual for pursuing higher education of self, spouse or his /her Children’s. Hence parents are also eligible to claim deduction of interest paid by them on loan taken for their children’s education. This deduction is not available to HUF.

Q. What is eligible amount?

A. Only interest paid on an educational loan is allowed as deduction u/s. 80E of The Income Tax Act, 1961, out of his/her income chargeable to tax i.e. Deduction will be allowed only when actual interest is paid.

Q. How much amount is deductible?

A. There is no limit for amount of repayment of interest. Unlimited amount of interest can be deducted under this section. However there is no benefit available on the repayment of principal amount of the loan. The assesse can claim the amount of interest in the initial assessment year & carry forward up to 7 assessment years.

Deduction is allowed for a continuous period of eight years, starting with initial assessment year in which the assessee  starts paying the interest on the loan or until the interest is paid in full whichever is earlier. 

Q. Can loan be taken for any education?

A. The loan should be taken for the purpose of higher education.

Q. Can higher studies be pursued outside India?

A. There is no condition that the course should be in India.

Q. Can loan be taken from relatives?

A. The loan should be taken from any financial institution or any approved charitable institution. Interest on Loan taken from relatives or friends will not be eligible for deduction under section 80E.


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Public Provident Fund (PPF): The Tax Advantage.

The Public Provident Fund Scheme has introduced by Central Govt. on 1st July 1961. PPF account cannot be opened in joint names or as company. It also prohibits NRI’s from opening an PPF account.

SUBSCRIPTION & FREQUENCY:

·         The minimum amount on has to deposit in financial year is 500/- not paid in instalment & in multiple of Rs. 5/- and the maximum amount on has invest in PPF is Rs. 100000/-** whether in his name or jointly with minors and in a maximum of 12 installments in that financial year.

·         A PPF account will be discontinued if minimum amount of Rs. 500/- not deposited in year but it can be restored with deposit of Rs. 50/- per year of default plus minimum subscription.

·         The account under this scheme can open in any branch of State Bank of India, and its subsidiaries, or in any Head Post Office or any Selected Post Office or any of Nationalized Bank.

TERMS:

·         The term/duration of PPF account is 15 years from the end of financial year in  which the account is opened but can be extended for one or more block of 5 years after 15 years

·         Subscriber can avail the withdrawal facility from the PPF account after the expiry of the 5 financial years from the end of year in which the initial subscription was made by applying in form C.

·         Only one withdrawal in a year is allowed.

TAX BENEFITS:

·         The interest recoverable against loan taken from PPF account shall accrue to the Central Government.

·         U/s 80C of Income Tax Act, 1961 investment in PPF is qualified for deduction. Investment in PPF account earns interest 8% per annum compounded annually.

·         The interest earned in PPF account is tax free U/s 10(11) of the income tax act

·         Deposits credit balance under in PPF account is free of Wealth Tax.

OTHER BENEFITS:

•    Loan can be taken after the expiry of one year from the end of the year in which initial subscription is  made but before expiry of five years from the end of the year in which initial subscription was made. Application for the same has to make in the form D.
•  Loan is allowed up to 25% of balance of PPF account including interest at end of second year immediately preceding the year in which the loan is applied.
• Subscriber can avail the withdrawal facility from the PPF account after the expiry of the 5 financial years from the end of year in which the initial  subscription was made by applying in form C

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Digital Signature (DSC) in India

A Digital Signature (DSC) is an electronic security mark.This certificate ensures that you will not be sending sensitive data to a hacker or imposer site the browser also makes sure the domain name matches the name on the CA and that the CA has been generated by a trusted authority like us. PKI based digital signature(DSC) is cost effective with low price compared to other digital signature in the world. Digital signature reduce paper consumption as well as costs of transmission and storage.

Why is Digital Signature Certificate (DSC) required?

Like physical documents are signed manually, electronic documents, for example e-forms are required to be signed digitally using a Digital Signature Certificate. Transactions that are done using Internet if signed using a Digital Signature certificate (DSC) becomes legally valid.

A Digital Signature Certificate(DSC) is not only a digital equivalent of a hand written signature it adds extra data electronically to any message or a document where it is used to make it more authentic and more secured. Digital Signature ensures that no tampering of data is done once the document has been digitally signed. A DSC is normally valid for 1 or 2 years, after which renewal is required.

What are the types of Digital Signature (DSC) -

• Class2 DSC - For Income Tax Returns e-filing, MCA 21 & ROC, LLP, TDS Certificates, VAT Returns.
• Class 3 DSC - For MCA21, ROC, Income Tax, DGS&D, Northern Railway, IRCTC, e-Tendering, Trade Mark,e-procurement and other departments & organisations. Digital Certificates shall be used to access the website and authenticate the vendors. Vendors like E-Tendering etc. Vendors shall have to procure legally valid Digital Certificate issued by a Licensed Registration Authority (LRA).
• DGFT - For Importers & Exporters.

What is the legal status of a Digital Signature? 

Digital Signatures are legally admissible in a Court of Law, as provided under the provisions of IT.

How much time do CAs take to issue a DSC?

The time taken by Certifying Authorities to issue a DSC may vary from three to seven days.

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INTIMATION U/S 143(1) OF THE INCOME TAX ACT

Finance act 2008, had introduced section 143(1) of the Indian Income tax. This is the new scheme of processing of returns. Suppose if the return is filed within the due date or if the return is not filed and the assessing officer issues notice to the assessee requiring him to file the return of income, then such return of income gets processed under section 143(1).

While processing such returns , following adjustments are made to the total income:
a. Total income is adjusted for any arithmetical mistake in the return or
b. An incorrect claim which they observe from the information given in the return.

Meaning of incorrect claim I am giving as follows:
a. Conflicting data at different places in the return
b. Difference in data specified in the return and the actual documents(evidence)
c. If the deduction claimed by the assessee exceeds the limit specified in the act/rules either in value or in percentage.

After adjusting the income for the above two adjustments( i.e arithmetical mistake and incorrect claim), the adjusted total income is arrived at.
On this adjusted total income, income tax authority calculates the tax which is further adjusted for tax reliefs and taxes already paid. Then the final output is either the tax payable or tax refundable.

We have to interpret the Intimation u/s 143(1) as follows:-

a. If “NET AMOUNT REFUNDABLE” mentioned in Intimation u/s 143(1) letter more than Rs 100, there is a tax refund due from income tax department to tax payer. Refunds amounting less than Rs 100 won’t be refunded. 

b. If “NET AMOUNT DEMAND” mentioned in Intimation u/s 143(1) letter more than Rs 100, there is tax amount due from tax payer. This will be treated as demand notice for the payment of income tax due. This Intimation letter encloses challan form to pay income tax if the due is more than Rs 100.

If “NET AMOUNT REFUNDABLE /NET AMOUNT DEMAND”  is less than Rs 100, you can treat this Intimation u/s 143(1) as completion of income tax returns assessment under Income Tax Act. It can be useful for the proof of Income/ Completion of income tax returns assessment.

Service Tax Applicability For Tour Operator.

Applicability of Service Tax on Tour & Travel Operator

Who is a “Tour Operator” under the Service Tax Laws?

Tour operator means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

What is the value of taxable service provided by a tour operator?

The value of taxable service provided by a tour operator to a client is the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour.

What are the rates of service tax applicable on various services provided by a tour operator?

S.No.	Taxable Service	Partial abatement/ Composition Scheme	Conditions	Statutory Reference
1	Accommodation booking service	10% of amount charged	1) No CENVAT Credit. 2) Invoice should be inclusive of cost of accommodation	S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
2	Package tours - wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided as part of the package	Tax is payable on 25% of gross amount charged	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for the tour.	S. No. 11(i) of Notif. No. 26/2012-ST dt 20.6.12
3	Tour operator – providing services solely of arranging or booking accommodation for any person in relation to a tour.	Tax is payable on 10% of  amount charged	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for such accommodation. 3)  This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.	S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
4	Tour operator – Other than abovementioned services	Tax is payable on 40% of amount charged.	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for the tour. 3)  The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.	S. No. 11(iii) of Notif. No. 26/2012-ST dt 20.6.12
5	Air Travel Agent	Option to pay service tax at flat rate on ‘basic fare’ @0.6% in case of domestic booking and 1.2% in case of international booking – plus E. Cess	No restriction on availment of CENVAT credit. Option, once exercised, will apply uniformly in respect of all the bookings of passage for travel by air made during the financial year.	Rule 6(7) of Service Tax Rules

Who is an Air Travel Agent? Are his services chargeable to Service Tax?

An “Air Travel Agent” is any person engaged in providing any service connected with the booking of passage for travel by air.

Any service provided or to be provided to any person, by an air travel agent in relation to booking of passage for travel by air is a taxable service.

How is the taxable value of service provided by an air travel agent to be computed? What are the specific inclusions or exclusions?

In case of air travel agent, the value of taxable service is the gross amount charged by such agent from the customer for services in relation to the booking of passage for travel by air, excluding the air fare but including the commission, if any received from airline in relation to such booking.

Thus, the value of taxable services will include the commission received by the travel agent from the airline. However, it will exclude the fare amount collected from the customer.

The air travel agents receive certain commission for domestic and international tickets from the airlines. The details of the commissions payable by the airlines is indicated in the agency agreement entered into between the airline and the air travel agent. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, fare collected and the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the airlines. This fortnightly return would be the basis for assessment of Service Tax in respect of air travel agents.

Can the air travel agent pay service tax under any composition scheme?

An option has been given to the air travel agents to pay the Service Tax under the composition scheme as follows:

·         For booking domestic tickets: @ 0.6% of the basic fare

·         For booking international tickets: @ 1.2% of the basic fare

The basic fare is defined as that part of the fare on which commission is payable by the airlines.

E. Cess and S. H. E. Cess @3% of the tax amount determined as above will be payable additionally.

Which are the specified categories of persons, providing services to whom are exempt from service tax?

Services provided to the following persons are fully exempt:

·         United Nations or any such specified International Organization

·         Office of a foreign diplomatic mission or consular post in India

·         Personal use or for the use of family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India

What is the place of provision of passenger transportation services?

The place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey.

What does a “continuous journey” mean?

A “continuous journey” means a journey for which:-

(i)                  a single ticket has been issued for the entire journey; or

(ii)                more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey.

What is the meaning of a stopover? Do all stopovers break a continuous journey?

“Stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued. Thus a travel on Delhi-London-New York-London-Delhi on a single ticket with a halt at London on either side, or even both, will be covered by the definition of continuous journey. However if a separate ticket is issued, say New York-Boston-New York, the same will be outside the scope of a continuous journey.

Whether service tax will apply on related fees/charges on journeys starting outside India, even if the transaction for related charges is made in India?

and

Whether service tax will apply on related fee charges on journeys starting in India, even if the transaction for related charges is made outside India?

As per Clarification given in Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012:

“According to Rule 11 of Place of Provision of Services Rules, 2012, the place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. Therefore, if place of embarkation of passenger is located within the taxable territory, service tax is leviable on the gross amount payable for such continuous journey, irrespective of where the ticket is booked and where fees/charges are collected. If the place of embarkation of a passenger on a continuous journey falls outside the taxable territory, service tax is not leviable, irrespective of where the tickets are booked and where fees/charges are collected. However, only such charge will be determined under Rule 11 of POP as are directly related to the continuous journey. The POP of other charges will be judged on their own merits.”

However, it is to be noted that as per Rule 8 of Place of Provision for Service Rules, 2012, where the service receiver and service provider are located in the taxable territory, the provision of service would be the location of service receiver irrespective of where the service is performed, delivered or consumed.

For determining “location of service” as above, if the service recipient has obtained service tax registration, it is the registered premises of the service receiver. However, if the service receiver is not registered under service tax, his location will be determined as follows:

1.       Location of business establishment

2.       Location of fixed establishment

3.       Where services are used at more than one establishment, the establishment most directly concerned with the use of service

4.       In the absence of above, the usual place of residence.