Direct Tax Fastrack lec 23 CA CMA Inter | For May & Nov 24 | #cainter #caintertax

CA Vijay Sarda・2 minutes read

Individuals must pay advance tax based on estimated income four times a year, with specific due dates and payment percentages detailed by Diya. Clubbing of income and transfer of assets between spouses or family members can lead to tax implications and potential clubbing provisions, highlighting the importance of accurate income estimates and strategic asset transfers to minimize tax liabilities.

Insights

  • Advance tax is a mandatory payment made four times a year by individuals based on estimated income, with specific due dates and percentages for different categories, leading to potential errors if income is inaccurately estimated by the due dates.
  • Clubbing of income involves diverting income to another person, such as a spouse or minor child, leading to tax implications and potential clubbing provisions if income is generated from the transferred asset, necessitating careful consideration to avoid tax consequences.

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Recent questions

  • What is advance tax?

    Payment of tax based on estimated income.

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Summary

00:00

"Advance Tax Explained: Fast Track Topics"

  • Fast track topics have been completed, encouraging viewers to like the video.
  • Three targets for the day are advance tax, clubbing, and AMT.
  • Advance tax is explained as paying tax in advance based on estimated income.
  • Pay As You Earn Scheme involves paying a proportionate tax in advance.
  • Advance tax is mandatory for all individuals and is payable four times a year.
  • Payment of advance tax is done using challan number 280 online.
  • Agricultural income is also considered for advance tax calculation.
  • Casual income, capital gains, and online betting income are subject to advance tax.
  • Advance tax calculation involves estimating total income, deductions, and credits.
  • Due dates for advance tax payments are 15th June, 15th September, 15th December, and 15th March.

17:55

"Advance Tax Payment Challenges and Consequences"

  • Advance Tax: 44% AD Case One Time, 100% Other SSC four times a year in September, December, March at 15, 45, 75, 100
  • Payment Schedule: Persons under 44 AD ADA should pay Advance tax by 15th March, others by June, September, December, March at 15, 45, 75, 100
  • Calculation and Payment: Advance tax calculated as a percentage, due on specific dates, with different percentages for different categories
  • Issue Arises: Difficulty in estimating income by 15th March, leading to potential errors in tax payment
  • Sales Fluctuations: Sudden sales increase or decrease can impact tax estimation and payment
  • Business Challenges: Uncertainty in predicting future sales can lead to tax payment issues
  • Tax Amendments: Changes in tax laws regarding advance tax payment dates and amounts
  • Banking Holidays: Impact on due dates for advance tax payment, with provisions for online banking
  • Default Consequences: Failure to pay advance tax on time results in being treated as in default
  • Interest Charges: Interest levied under sections 234B and 234C for late or short payments of advance tax

40:18

Tax Estimation and Interest Charges Explained

  • The friend is filling on an estimate basis and is being charged interest.
  • The correctness of the estimate is crucial, as it determines the interest charges.
  • Withdrawal amount is dependent on the accuracy of the annual income estimate.
  • Safe Harbor concept in pricing involves maintaining a margin of 3.
  • Interest is charged if the payment is less than the estimated amount.
  • Advance tax must be paid in the first quarter, with specific percentages.
  • Interest is charged if advance tax is not paid in the specified quarters.
  • Advance tax is applicable to individuals with an estimated tax liability of 10,000 or more.
  • Clubbing of income involves diverting income to another person, leading to tax implications.
  • Negative income and losses are also clubbed, and clubbing is mandatory as per Section 60.

01:00:23

Tax Implications of Income Clubbing Strategies

  • Tax income under Pallavi's name; Diya explains the concept of Trans of Income without transferring assets, which will be taxed when the AO becomes aware.
  • Vijay instructs the bank to transfer FD interest to his son's account, leading to income clubbing if income is diverted without asset transfer.
  • Vijay makes a revocable transfer of property to his spouse, Pallavi, retaining the right to take it back with prior notice.
  • Transfer of income without asset transfer is explained, with Vijay's clever maneuver to avoid Section 60.
  • Income arising from a revocable transfer is taxable in the transferor's hands, with Vijay's attempt to save taxes through such transfers.
  • Minor's income is discussed, with details on who qualifies as a minor and how their income is clubbed.
  • Income from a minor's skill and talent is not clubbed, with specific rules on minor income clubbing and child allowances.
  • Parental marriage status determines income clubbing for minors, with details on minor married daughters and child allowances.
  • A practical problem is solved involving Pranav's income sources and minor children's income, with notes on clubbing rules for minor income.
  • Another problem is solved regarding Mr. Val and Mrs. Dal's income details, including minor children's income, disability, and cash gifts, with notes on clubbing rules for minor income.

01:25:42

Tax Benefits of Transferring Assets to Spouse

  • Homework Question Number Two Shall Be Transfer to Spouse for In Addict Consideration
  • Best route for diversion of income between husband and wife is wife
  • Earlier, diversion was done in the name of wife
  • Limit for basic age used to be higher for women
  • Transfer to wife without any consideration, like property, was common
  • Consideration transfer for addicts involved a 70 lakh flat, with 50 lakh transferred to wife
  • Capital asset transfer to spouse results in no capital gains tax for the giver
  • Capital gains section 47 exempts capital gains tax in such transfers
  • Clubbing provisions apply if income is generated from the transferred asset
  • Transfer to son's wife attracted clubbing provisions for tax purposes

01:43:50

"Clubbing Provisions in Asset Transfers Explained"

  • Transferring assets to an HUF without consideration leads to the consideration of income from real assets being clubbed with the transferor's income.
  • Business outcomes from gifted money are significant, with the importance of gifted money highlighted through a scenario involving siblings Mukesh and Neeta starting a business with a gifted amount of 12000 Crore.
  • In cases where a husband-spouse relationship exists, the provision of proportional clubbing applies, with profit calculated by dividing the gifted amount by total capital employed.
  • A practical example is provided with Vaibhav starting a proprietary business in 2022 with a capital of 5 Lacs, incurring a loss of 2 lakhs, leading to a discussion on capital reduction due to losses.
  • Another scenario involves Vaishali, a software engineer, gifting 5 lakhs immediately invested in a business, leading to the computation of the amount to be clubbed based on profit and total capital employed.
  • The concept of transfer and clubbing provisions is discussed, emphasizing the need for careful consideration when transferring assets to avoid clubbing provisions and the use of circuitous methods to avoid tax implications.
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