What is HUF and Format for Declaration for Creation of HUF?

HUF or Hindu Undivided Family is a legal entity which can be formed by Hindu family by the family members coming together and putting together the assets. Other than Hindus, Sikhs, Jains and Buddhists can also form a HUF.

The roots of HUF go back into the Hindu Law. It consists of males of a family lineally descending from a common ancestor. The members of the family are not restricted just to sons but also includes unmarried daughters and the spouses of the sons. Because of its unique nature, the HUF’s relations merge from the status and not from any legal contracts.

Though HUF is automatically created at the time of marriage but businessmen use it for saving taxes and because of lesser requirements for compliance that help them with smoother working. Another important thing to note here is that a HUF is taxed separately from the members of HUF.

Prerequisites to Form HUF

Compliance with the understated requirements is must in order to have a HUF:

  • Name

It should have a name because HUF is a separate entity, it should have a name.

  • Capital

Ancestral property, assets received through will, assets gifted by friends or relatives can be used to form HUF because capital is an important prerequisite for setting up any business entity.

  • Members and Their Religion

Only a Hindu, Jain, Sikh or Buddhist married couple can form a HUF whose child or children will be integrated into it after the birth. There is a Karta (the male head with decision making responsibility), coparceners (who are entitled to share of property) and members. On death of sole male member in the family, the existing female members will continue with functioning of HUF. And an adopted child can become a member but not a coparcener.

  • HUF Deed

Formation of HUF doesn’t depend upon a legal deed but having a deed is a legal proof that the entity exists. It should include a declaration by family member along with name and authority of Karta, capital invested in forming HUF etc.

  • Separate PAN and Bank Account

Under Form 49A, application for PAN for HUF can be submitted. This requires HUF deed and is important for financial transactions, filing ITRs and claiming deductions. PAN and ITRs have signatures of Karta. Likewise, a separate bank account of HUF is must to maintain funds which must only be required for business purpose.

Use the format for Declaration for Creation of HUF to form your own HUF. Easy to download declaration for HUF in MS Word format for families to have a well-formed HUF which can be used for carrying out business and saving on taxes.

Click Here to Download Format for Declaration for Creation of HUF

 

Convert Residential to Commercial Property Letter

If you have a question that can a commercial property be converted into residential or vice versa then the answer is yes. If you have a residential property with commercial use then you can always convert it into a commercial property to make sure that it adds on to your earnings. To begin the process, you need to write a convert residential to commercial property letter to the municipal corporation of your city or area. Application to convert residential to commercial property must be precise and should include the reason for commercial property conversion.

Shared below is a sample Application of Conversion from Residential to Commercial Property. Use this letter for business in residential property without hassles.

Format for Converting Residential Property to Commercial Property

Date: November 13th, 2019

To,

The Municipal Officer

Jaipur Nagar Nigam

Jaipur

Sub: Application to Convert Residential Property to Commercial

Respected Sir,

I am writing this letter to request you to please accept my application for converting my residential building into a commercial one.

My building is located close to New Atish Market, Mansarovar, Jaipur. I had constructed this residential complex with an intention to have an additional income but due to increased commercial activities in that area, there are no residential buildings in proximity and no families are keen on staying in this area. Because this building is a residential one, there are hardly any occupants in the building. On the contrary, there are many companies interested to take a space on rent in the building for commercial purpose.

I am aware that in order to convert a residential property into a commercial one, there are some laws that are to be followed. Therefore, I am writing this application for conversion so that I can rent it out to companies for commercial use and have some income generating from it.

I request you to please consider my application and grant me a certificate for conversion. For any further details, please contact me at 9898989898. Please feel free to visit the building for inspection.

Thanking you.

Sincerely,

Amit Gupta

Click Here to Download Convert Residential to Commercial Property Letter

 

Latest Company Law Compliance for a Director to Know

Whether a person is a director in one or more company or simply holds a DIN, he is suppose to be aware of the newest compliances shared below which put the onus of compliance in association with the director or the company on his shoulders in a direct or indirect manner. Therefore, as the director, he needs to keep in mind the compliances stated below to stay safe from any complications later on.

Compliances Every Director Should Know

Here is the list of compliances a director has to be aware of:

1. DIR- 3KYC

  • Directors holding DIN as on March 31st, 2018 were needed to file the DIR- 3KYC form.
  • As per MCA, all the DIN holders are required to annually file DIR- 3KYC.
  • Presently, the DIR- 3KYC forms available on the portal do not cater to DINs.
  • You will be able to download revised forms shortly from the portal.
  • This form will be required to fill by all the DIN holders within duration of 30 days of deployment.
  • All the DIN holders will need to file KYC form.
  • All the DIN holders who fall under “Deactivated due to non-filing of DIR- 3 KYC” will also need to get their DINs activated.

2. ACTIVE e-form INC-22A

  • The date to file INC-22A was April 25th, 2019 earlier but later it was extended to June 15th, 2019.
  • All the companies which have been incorporated on or before December 31st, 2017 will need to fill INC-22A.
  • For companies who fail to fill ACTIVE or Form 22A before the extended date then that company will be marked ACTIVE non-complaint.
  • In this situation, company will not be able to bring about any changes such as Changes in authorized capital (Form SH-07); Amalgamation or Merger (INC-28); Changes in paid-up capital (Form PAS-03), Changes in Registered Office (Form INC-22), Changes in Director (Form DIR-12) (cessation would be allowed).

3. MSME Form

  • All those companies which are getting supplies from MSMEs in form of goods or services are suppose to report and file MSME form -1.
  • This form is required to be filled in case of the payment for procurement has exceeded duration of 45 days counting from the date of receiving the supplies.
  • This form was made available on the portal from May 1st, 2019 and the late date to fill this form will be May 31st, 2019.
  • In case of failure to fill the form, a fine of up to Rs. 25,000 will be required to pay by the company.
  • Directors may also have to face an imprisonment of 6 months and fine ranging from Rs. 25,000 to 3,00,000.
  • To avoid such a situation, companies must clearly state the status of their creditors and also report balances in MSME forms.

These are the three forms which every director should be aware of in order to avoid attracting any penalties.

 

8 common reasons for getting income-tax notices and how to avoid them

The usual reaction on receiving Income Tax Notices is of tension and stress because that is the last thing we would want to receive. As a matter of fact, we must not get panicked about the situation until and unless we have gone through the notice and understood its purpose. Always remember there are various other small reasons because of which you can receive Indian Income Tax Notices from IT Department.

In this post, we have covered all possible reasons for receiving an Income Tax Notice. But despite what the reasons are, always remember that you must never ignore income tax notices and respond to them as quickly as possible to avoid inviting any trouble or penalty.

Reasons For Receiving Income Tax Notices and How To Avoid Them

Here are some common reasons because of which you can end up receiving an income tax notice:

Error in TDS Value

Reason:

  • Mismatch in TDS in IT return due to delayed return filing by your employer or filing of incorrect returns.

Solution:

  • Ask your employer to review the TDS amount that has been credited to you.
  • Always match the TDS amount with that of your employer before filing for your return to avoid any hassles later on.

Reminder for Filing Tax Returns

Reason:

  • I-T department every year send notices to all those who have not filed the income tax returns.
  • These reminders can be for up to six previous years.
  • There can also be a penalty of up to Rs. 5,000.

Solution:

  • Respond to the notice by filing your return immediately.
  • Always make sure that you file your return on yearly basis to avoid such situations.

Reporting High Value Transactions

Reason:

  • If you have failed to report any kind of high value transaction.
  • This includes credit card purchase beyond Rs. 2 lakhs, cash deposit in bank beyond Rs. 10 lakh, sale or purchase of real estate beyond Rs. 30 lakhs or mutual fund investment beyond Rs. 2 lakh.

Solution:

  • Always report such transactions to the I-T department to avoid getting notices.

Discrepancy in Return

Reason:

  • If there is a problem in your return then you will get served with a notice.
  • In case you have forgotten to declare any of your income or you have provided incomplete information then you may get a notice.

Solution:

  • In such a case, submit information related with the discrepancy mentioned in the notice.
  • Always ensure that you have made all the income declarations.
  • Ensure that you have claimed deductions under right sections.
  • Information that you are providing is complete and correct.

Non-Disclosure of Income From Interest

Reason:

  • If you have failed to pay tax on income received from your saving bank accounts, fixed deposits or recurring bank accounts, you will certainly get a notice.
  • Deductions of up to Rs. 10,000 on interest on saving account are allowed.
  • Interest on FD and recurring accounts are completely taxable if the income from interest is beyond Rs.10,000.

Solution:

  • Always remember to include income from interest from bank accounts as well.

Scrutiny at Random

Reason:

  • The I-T Department randomly scrutinizes returns in order to enforce tax compliance.

Solution:

  • Respond to the notice after checking its validity in the allotted time period.

Documentation Review

Reason:

  • Sometimes the department may ask you to review some documents using which you have filed your I-T returns to have some clarity.

Solution:

  • You must quickly submit the required documents which have been asked for.

Investments Made in Family Members’ Names

Reason:

  • In case you have made any investments in the name of your family members in order to evade taxes then any income from these investments is going to be taxable.

Solution:

  • On receiving a notice, you must declare that income and have the error rectified by paying the tax you are liable to pay.
  • Also make sure that you declare all such kind of incomes when you are filing the return to avoid any notices in future.

These are the probable reasons which can lead be the reason for you receiving an Income Tax notice.

 

FAQ on E commerce under GST

In last couple of years, e-commerce has become the latest business trend not only across the world but also in India. Ecommerce platform helps sell all kinds of products and services digitally. That’s the reason the numbers in suppliers is increasing and so are GST FAQs in relation with GST application on selling of different goods and services across e-commerce websites.

In this post we have come up with GST Frequently Asked Questions which bother e-commerce suppliers. Read these latest FAQs on GST which provide clarity to an e commerce operator under GST. Read these GST FAQ 2019 to clear all your doubts.

Question 1. Who is an e-commerce operator?

Answer. A person who owns, manages or operates any digital or electronic platform in order to sell the products and services online will be termed as e-commerce operator. Some popular examples of e-commerce operators are Flipkart, Amazon, Myntra etc.

Question 2: GST Registration for e-commerce operators- is it mandatory or not?

Answer. GST registration is mandatory for every e-commerce operator irrespective of the turnover. This means that every e-commerce operator has to be GST registered no matter what is their supply because at present, there are no threshold exemptions available to them.

Question 3: Will a person who is supplying products or services over an e-commerce platform be entitled for threshold exemption?

Answer. NO. Irrespective of the supply value made by an ecommerce operator, he will not be entitled for any kind of threshold exemption. This means that all the e-commerce operators, whether big or small, will have to be registered under GST irrespective of the turnovers they have.

Question 4: Instead of supplier, will the liability of paying tax in relation with supply of goods or services made by ecommerce operator will lie on him?

Answer. YES. But ecommerce operator will be liable to pay tax only in cases which involve application of reverse charge mechanism. Under such cases, the liability of paying tax is on ecommerce operator if products or services are supplied through his ecommerce platform and all the provisions mentioned in the Act also apply to him because he is the supplier of the services and therefore, he is liable to pay the related tax.

Question 5: Return of goods is a very common practice with ecommerce customers. In such scenario, how are adjustments to return goods are made?

Answer. Tax is collected on the net value of taxable supplies that have been made. This means that the tax is calculated on aggregated supplies which are derived after deducting returns from supplies.

Question 6: What do we mean by Net Value of Taxable Supplies?

Answer. Net Value of Taxable Supplies is the aggregate value of supplies made during a month by the ecommerce operator.

Net Value of Taxable Supplies = Aggregate Value of Taxable Supplies of Goods/ Services for a month – Aggregate Value of Taxable Supplies Returned During a month.

Question 7: On behalf of actual supplier, is each e-commerce operator is suppose to collect tax?

Answer. YES. Each and every e-commerce operator has to make tax collections on behalf of the actual supplier.

Question 8. When are these tax collection required to be made by an e-commerce operator?

Answer. When a reasonable amount is collected from recipient, tax collection has to be made during a month.

Question 9. What is TCS or Tax Collection Source?

Answer. TCS is defined as the tax amount collected by e-commerce operator at one percent rate of net value of taxable supplies that have been made through the platform.

Question 10. What is the duration of time in which TCS is suppose to be remitted to Government by e-commerce operator?

Answer. After the end of the month during which the amount was collected, within a duration of 10 days it has to be remitted.