Tax Column

Tax Queries By Jayesh Dadia Chartered Accountant

I am the CFO of a closely held company having more than 100 employees. The HR Department is evaluating a proposal to provide meal coupons or cards to the employees. As per their understanding, provision of such meal coupons or cards per month is exempt from tax. Thus, there will be tax savings for the employees as the meal coupons or cards will be part of CTC. Kindly confirm the above views and also advise further action.
 

Under the Income Tax Act, an employer can offer food allowance of ₹ 50 per meal during the working hours. If you decide to provide two meals during a day, then it comes to ₹ 100 per day. If the working days per month are 22, the food allowance would be ₹ 2,200 per month and annually ₹ 26,400. Meal coupons or cards up to ₹ 50 per day are exempt and not considered as perquisite. However, the company has to establish that they have provided one or two meals during a day, which is a precondition for exemption.
 

If the company’s working hours equal to eight per day, you can give a maximum of one coupon for one meal. Further, the company must ensure that meal coupons or cards are used exclusively for food and that too during the working hours, which of course is a difficult task. Therefore, my advice is to consider all these aspects and calculate the actual tax benefit to employees. And if the tax benefit is not much, then it is not worthwhile to carry out such a tax-saving exercise.
 

I am an individual and have recently sold my residential flat for a total consideration of ₹ 60 crore. The deal was done through a broker and therefore I have to pay ₹ 60 lakhs as brokerage. While doing so, should I deduct tax at source, particularly when I am an individual and not carrying out any business activity?
 

Section 194 M was added with effect from September 1, 2019 to the Income Tax Act, which makes an individual liable to deduct TDS on payment of brokerage or professional fees, etc. in excess of ₹ 50 lakhs. Since your payment is more than ₹ 50 lakhs you are liable to deduct TDS at 5 per cent at the time of making the payment. However, you need not apply for TAN and there will be no need not to file annual TDS return. Simply pay the TDS online through Form 26 QD.
 

Can you brief me about what the TCS is on foreign remittance and what is the amended provision?
 

Finance Act 2020 has introduced Sub-Section (1 G) in Section 206 C with effect from October 1, 2020 wherein it has provided for tax collection at source (TCS) at 5 per cent on remittance out of India under the Liberalised Remittance Scheme (LRS). There was a threshold of ₹ 7 lakhs and therefore a rate of 5 per cent TCS was applicable on any amount in excess of ₹ 7 lakhs. However, TCS was applicable only when the remittance was under LRS. If foreign remittance is not under LRS but through other means such as NRO or NRE account, business account, etc. then TCS is not applicable.
 

Further, TCS on remittance is applicable only to individuals. However, amendments were made vide Finance Act 2023 and now the rate of TCS has been increased from 5 per cent to 20 per cent for remittance made under LRS with effect from July 1, 2023. Further, under the amended provision, a threshold of ₹ 7 lakhs is restricted only to those cases where the remittance is for the purpose of education or medical treatment. Therefore, technically, TCS will now be at 20 per cent without any threshold for all purposes, except education and medical treatment. Also, under the amended provision, TCS will be applicable from July 1, 2023 on rupee transfer as well. Earlier, TCS was applicable only when the remittance was done out of India under LRS.
 

Under the amended provision, the term ‘out of India’ has been removed and therefore TCS is also applicable if the LRS is availed in making payment in rupees. The concessional rate of 0.5 per cent where the remittance is out of education loan remains the same even after this amendment. Under the amended provision, 20 per cent TCS is also applicable where the remittance is for the purpose of an overseas tour programme package. However, even under the amended provision, the individual can claim TCS as tax paid while fling his tax return. TCS is like an advance tax and therefore it is not a loss but adjustable against payment of taxes on other income or can be claimed as refund.
 

I am a trustee of a charitable trust. In the financial year 2017-18 the trust has earned substantial income but could not spend and sought accumulation of ₹ 1 crore under Section 11(2) to be spent within the next few years. The five-year period ended on March 31, 2023. Unfortunately, the trust did not spend the money. What will be the consequences?
 

The Finance Act has inserted a new clause in Sub-Section 3 of Section 11 with effect from April 1, 2023 wherein it has been clearly mentioned that income which is accumulated but not utilised for which it was accumulated shall be deemed to be the income of the trust in the last year of a five-year period. Therefore, the entire income of ₹ 1 crore, which was not utilised, would be the deemed income for the financial year 2022-23. A new Section 115 BBI was also inserted with effect from April 1, 2023 wherein it is provided that deemed income under Section 11 (3) would be taxed at a special rate of 30 per cent plus applicable surcharge and cess. The charitable trust has no option but to offer the amount of ₹ 1 crore as deemed income in financial year 2022-23 relevant to assessment year 2023-24 and pay the taxes and file the return.