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Krishna, New Year 2015 is celebrated everywhere with joy and enthusiasm. But why is New Year different in Financial and taxation world? What is its significance?
Happy New Year!! But is it for the Taxpayers??
CA Umesh Sharma
Arjuna (Fictional Character): Krishna, New Year 2015 is celebrated everywhere with joy and enthusiasm. But why is New Year different in Financial and taxation world? What is its significance?Krishna (Fictional Character): Arjuna, according to western culture, a calendar year has 12 months, 1st January to 31st December. According to Indian culture, the New Year begins from Padwa. It means there are various definitions of a "Year". For e.g. Calendar Year, Seasonal Year, Academic Year, Financial Year, etc. Generally in India Financial Year is considered from April to March. But in various Taxation Laws "Year" is defined in different manner and its importance is being explained accordingly. Learn about it.
Arjuna: Krishna, How is a "Year" defined in the Income tax Act and what is its importance?
Krishna: Arjuna, In Income Tax Act there are two types of years i.e. "Assessment Year" and "Previous Year". According to section 2(9) "Assessment Year" is 1st April to 31st March. According to Section 3, "Previous Year" means the year in which the Income is earned. Income earned in Previous Year is taxable according to tax rates of Assessment Year. E.g. Income earned in Previous Year April 2013 to March 2014 is taxable in Assessment Year 2014-15 means 1st April 2014 to 31st March 2015. If new Business or Profession is started then previous year begins from that date and ends on 31st March. That means first previous year may be of less than 12 months. According to Income tax, Taxpayer should consider income and expenses in the year in which it incurred. Further Income Tax Return should be filed before due date otherwise taxpayers cannot carry forward the loss to the subsequent year.
Arjuna: Krishna, How is a "Year" defined in Companies Act 2013 and what is its importance?
Krishna: Arjuna, According to section 2(41) of Companies Act 2013, Financial Year means the period up to 31st March. Following are three exceptions to this:
1) According to Companies Act 1956, Financial Year is defined in different parameters based on which a Company is able to decide its Financial Year. But now this is not possible with New Companies Act 2013. Hence, Companies have been given time to make appropriate changes. Companies not having Financial Year up to 31st March have to change their Financial Year before 1st April 2016 and will be required to make it to 31st March.
2) The Financial Year of Newly incorporated Company is considered from the date of its establishment to 31st March. E.g. if Company is established on 6th January 2014 and its Financial Report is made on 31st March 2015 then this will be considered as its Financial Year. With Previous approval a company can keep its first financial year of 15 Months and second financial Year must be from April to March i.e. of 12 Months.
3) In Foreign Countries, generally Financial Year is Calendar Year itself means Year from 1st January to 31st December. If Holding or Subsidiary company is incorporated outside India then they may prepare their books with different Financial Year for Indian company. But for this the company has to take prior approval of National Company Law Tribunal.
Arjuna: Krishna, How is a "Year" defined in VAT and Profession Tax and what is its Importance?
Krishna: Arjuna, according to section 2(K) of MVAT Act, a "Year" means period from 1st April to 31st March. And according to section 2(K) of Maharashtra State Profession Tax Act, financial year is from 1st April to 31st March. But for deciding periodicity of returns of VAT and Profession Tax, department calculates tax liability considering the year from March to February. Under MVAT, if Refund amount exceeds Rs. 5 lakhs then it cannot be carried forward to the next year. The Set off of the tax paid is available in the year in which the purchases are accounted. That's why the definition of year is important in various Acts.
Arjuna: Krishna, what one should learn from the various definition of "Year"?
Krishna: Arjuna, as can be seen, there are various definitions of a "Year". The New Year may begin from 1st January or on Diwali Padwa or from the 1st day of Chaitra Month or from the Birthdate. But as mentioned in Law the year should be considered accordingly. Likewise in Life, the mistakes did in past should not be done in future. The same rule applies in Laws. In this financial year for tax planning 9 months have already gone and only 3 months are left. So taxpayers should make investments accordingly in these 3 months. Further salaried employees should give their details of investment to employer so that lesser tax will be deducted. The New Year for the Taxpayers begins from 1st April, hence happy new financial year for him from 1st April and Happy New Year from 1st Jan.
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Happy New Year!! But is it for the Taxpayers?? Krishna, New Year 2015 is celebrated everywhere with joy and enthusiasm. But why is New Year different in Financial and taxation world? What is its signif... | |||||||
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