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Gold is one of the most preferred investment options in India, available in multiple forms such as physical gold, Gold ETFs, Sovereign Gold Bonds (SGBs), digital gold, and gold mutual funds. Each form has a different tax treatment under the Income-tax Act. This article explains the taxation on sale of gold in a simple and professional manner.
1. Physical Gold (Jewellery, Coins & Bars)
Physical gold includes jewellery, coins, and bars. Tax is applicable at the time of sale based on the holding period.
• Short-Term Capital Gain (STCG): If sold within 24 months, gains are taxed as per the individual’s income tax slab. • Long-Term Capital Gain (LTCG): If held for more than 24 months, gains are taxed at 12.5% without indexation. • GST paid at the time of purchase is not refundable and forms part of the cost.
2. Gold Exchange Traded Funds (ETFs)
Gold ETFs are paper gold investments traded on stock exchanges and backed by physical gold.
• STCG: Units sold within 12 months are taxed as per income tax slab rates. • LTCG: Units sold after 12 months are taxed at 12.5% without indexation.
3. Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India and are considered the most tax-efficient form of gold investment.
• If held till maturity (8 years): Capital gains are completely tax-free. • If sold on stock exchange: – Within 12 months: Taxed at slab rates. – After 12 months: Taxed at 12.5% without indexation. • Interest earned (around 2.5% annually) is taxable as per slab rates.
4. Digital Gold & Gold Mutual Funds
Digital gold and gold mutual funds offer convenience and flexibility but follow similar tax rules.
• STCG: If sold within 24 months, gains are taxed as per income tax slab. • LTCG: If sold after 24 months, gains are taxed at 12.5% without indexation.
Conclusion:
From a tax perspective, Sovereign Gold Bonds are the most efficient option for long-term investors, while Gold ETFs and mutual funds provide liquidity with moderate taxation. Physical gold, though culturally significant, is the least tax-efficient due to GST and higher holding period requirements.
India’s labour law landscape has undergone its most profound transformation in decades with the implementation of the four new Labour Codes, effective from 21 November 2025. This historic move rationalizes 29 existing labour statutes into a streamlined and modern framework. The aim is to simplify and streamline regulations, enhance workers’ welfare, align the labour ecosystem with global standards, and lay the foundation for a future-ready workforce, boosting employment and driving reforms for Aatmanirbhar Bharat.
The key provisions include universal minimum wages, standardized working conditions, broadened social security coverage, and simplified industrial dispute procedures.
The Four Pillars of Reform
The government has brought into force the key provisions of four consolidated codes:
1. Code on Wages, 2019: Focuses on wages, bonus, and equal remuneration.
2. Industrial Relations Code, 2020: Deals with trade unions, standing orders, and dispute resolution.
3. Code on Social Security, 2020: Expands coverage for benefits like PF, ESI, Gratuity, and includes gig workers.
4. Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020: Covers safety, health, and welfare, including rules for working hours and women’s employment.
The new framework introduces several themes designed to unify compliance across all establishments:
Theme
Summary of Change
Unified Definition of “Wages”
Wages comprise basic pay, dearness allowance, and retaining allowance minus specified exclusions. Exclusions are capped, meaning at least 50% of the employee’s Cost-to-Company (CTC) must be counted as wages for calculating benefits like PF, gratuity, and overtime.
Single Registration & Return
Establishments register once on the Shram Suvidha portal and file a consolidated return instead of multiple returns under different laws.
Inspector-cum-Facilitator
Traditional inspectors are re-designated as “facilitators” who advise employers on compliance. They conduct risk-based digital inspections and still hold powers to issue notices and inspect records.
Decriminalisation & Compounding
Many procedural offences have been decriminalized. First-time minor procedural offences can often be compounded by paying 50% of the maximum fine, promoting compliance over punitive action.
Digital Compliance
Employers are permitted to maintain registers and submit forms electronically, primarily through the Shram Suvidha portal.
Key Features of the Four Labour Codes:
The following table summarizes the core mandates and applicability thresholds for the four codes:
Code
Core Provisions and Features
Applicability Highlights
Code on Wages, 2019
National Floor Wage: Central government notifies a floor wage that states cannot set minimum wages below. Wages must be reviewed at least every five years. Equal Remuneration: Enforces equal pay for equal work irrespective of gender or transgender status. Overtime: Must be paid at double the ordinary wage for work beyond 8 hours/day or 48 hours/week. Final Settlement (FnF): Requires settlement of all wages and dues (including salary and leave encashment) within two working days of dismissal, retrenchment, removal, or voluntary resignation.
Applies to all employees in organized and unorganized sectors, covering factories, shops, IT/ITES, and gig workers.
Industrial Relations Code, 2020
Standing Orders: Mandatory for employers with 300 or more workers (covering service rules like classification, hours, and misconduct). Lay-off/Closure: Establishments with 300+ workers require prior government permission for lay-off (15 days notice), retrenchment (60 days notice), or closure (90 days notice). Grievance Redressal Committee (GRC): Mandatory for establishments with 20+ workers, requiring equal worker and management representation, including at least one woman representative. Dispute Resolution: Accelerated process through two-member tribunals; parties can approach directly if conciliation fails within 90 days.
Applicability threshold for certain provisions (like standing orders) is 300 workers. Extends the definition of “worker” to include sales promotion staff and supervisory employees earning up to about ₹18,000/month.
Code on Social Security, 2020
Gig & Platform Workers: Recognizes these workers; aggregators must contribute 1–2% of annual turnover (capped at 5% of payments to workers) to a social security fund. Gratuity: Fixed-term employees become eligible for gratuity after one year of service. Maternity Benefit: Retains 26-week paid leave and mandates crèche facilities for establishments with 50 or more employees. EPF & ESIC: Coverage is extended Pan-India and made voluntary for establishments with fewer than 10 employees, but mandatory for hazardous industries regardless of size.
Applies to all establishments, employees, and workers, including unorganised, gig, and platform workers.
OSHWC Code, 2020
Working Hours: Normal working day limited to eight hours. Employment of Women: Removes blanket prohibitions; women may work night shifts and in all types of establishments, including mines, with their consent and subject to safety conditions like safe transport and security. Health & Welfare: Mandatory annual health check-ups for workers aged over 40. Safety Committees: Mandatory in establishments employing 500 or more workers.
Covers factories (with revised thresholds: 20 workers w/ power or 40 w/o power), mines, plantations, contract labour, and migrant workers.
The reforms are designed to extend protections to vulnerable and non-traditional employment sectors:
Worker Category
New Benefit/Protection under the Codes
All Workers
Mandatory appointment letters to ensure transparency, job security, and formal employment. Statutory right to minimum wage and timely payment.
Gig & Platform Workers
Mandatory social security coverage and defined contribution model from aggregators. Aadhaar-linked Universal Account Number (UAN) for portable benefits.
Fixed-Term Employees (FTE)
Eligible for all benefits (leave, medical, social security) equal to permanent workers. Gratuity eligibility after only one year of continuous service.
Women Workers
Permitted to work night shifts and in all types of work (including underground mining) subject to consent and safety measures. Explicit prohibition of gender discrimination and guarantee of equal pay for equal work.
Inter-State Migrant Workers
Defined to cover self-migrated workers; receive annual travel allowance, portability of ration and social security benefits, and access to a toll-free helpline.
Practical Obligations for Employers:
The implementation of the Codes places greater responsibilities on employers, particularly concerning payroll and HR procedures. Employers must revise their operations to ensure compliance:
• Review Wage Structure: Salary components must be reworked to ensure that at least 50% of CTC is classified as “wages” to avoid penalties related to PF/bonus liability misclassification.
• Establish FnF Workflow: Companies should adopt a strict T+2 working day internal standard for full-and-final settlement upon an employee’s exit (resignation, termination, etc.).
• Update Registration: Register on the Shram Suvidha portal (Form II) to obtain a single Labour Identification Number (LIN).
• Maintain Records: Issue wage slips (Form V) and maintain statutory registers electronically, including those for fines (Form I), deductions (Form IV), employee details (Form VI), and attendance/wages/overtime (Form VII).
• Safety Compliance: Conduct periodic safety audits, provide free annual medical check-ups for workers over 40, and supply Personal Protective Equipment (PPE) and training.
Failure to Comply: particularly regarding non-payment of minimum wages or delayed remittance of contributions (PF/ESI), can lead to serious penalties, including fines up to ₹50,000 for first offences or imprisonment for repeat violations or serious negligence causing death.
The four labour codes represent a paradigm shift aimed at fostering a fair, safe, and productive work environment by simplifying the fragmented laws and expanding the social safety net.
Q&A: New Labour Codes
1. What are the New Labour Codes?
The Government of India has consolidated 29 existing labour laws into four major Labour Codes:
Code on Wages, 2019
Industrial Relations Code, 2020
Occupational Safety, Health and Working Conditions (OSH) Code, 2020
Social Security Code, 2020
2. When will the new labour codes come into effect?
The codes are scheduled to be implemented from 21 November 2025 across India.
3. Why were labour laws consolidated?
To:
Simplify compliance
Improve ease of doing business
Provide uniform definitions
Protect workers with updated standards
Enable digital and transparent systems
4. Who will be covered under the new labour codes?
The Codes apply to:
All establishments
All employees (skilled, unskilled, managerial, operational)
Contract labour
Gig and platform workers (under Social Security Code)
Inter-state migrant workers
5. What is the biggest reform introduced under the Code on Wages?
A universal definition of wages that applies across all labour laws—affecting PF, gratuity, leave encashment, and salary structuring.
6. What is the new definition of “Wages”?
“Wages” include basic pay + DA + retaining allowance, capped at a minimum of 50% of total CTC. Allowances cannot exceed 50%. If allowances exceed 50%, the excess will be added back into “wages”.
A Gilt Fund is a type of debt mutual fund that primarily invests in government securities (G-secs). These are bonds issued by the central and/or state governments to borrow money. As such, gilt funds carry zero credit risk, since they are backed by sovereign guarantee, but they are sensitive to interest rate movements.
Key Features of Gilt Funds:
Feature
Description
Underlying Securities
Government bonds (short to long-term maturity)
Risk Level
Low credit risk, but high interest rate risk
Return Expectation
Moderate returns, typically 5–7% p.a. over medium to long term
Investment Horizon
Ideal for 3–5 years or more
Liquidity
High, as most gilt funds are open-ended
Regulation
Regulated by SEBI
🔹 What is a Gilt Fund Account?
A Gilt Fund Account is a folio or investment account through which an investor can:
• Invest in one or more gilt funds
• Monitor NAV, holdings, and returns
• Redeem or switch between debt schemes
It may be referred to as a Mutual Fund Account with exposure specifically to Gilt Funds. Some platforms also offer direct gilt investments via RBI Retail Direct Gilt Account, allowing investors to buy G-Secs directly from RBI.
RBI Retail Direct’:
As part of continuing efforts to increase retail participation in government securities, ‘the RBI Retail Direct’ facility was announced in the Statement of Developmental and Regulatory Policies dated February 05, 2021 for improving ease of access by retail investors through online access to the government securities market – both primary and secondary – along with the facility to open their gilt securities account (‘Retail Direct’) with the RBI.
In pursuance of this announcement, the ‘RBI Retail Direct’ scheme, which is a one-stop solution to facilitate investment in Government Securities by individual investors is being issued today. The highlights of the ‘RBI Retail Direct’ scheme are:
i. Retail investors (individuals) will have the facility to open and maintain the ‘Retail Direct Gilt Account’ (RDG Account) with RBI.
ii. RDG Account can be opened through an ‘Online portal’ provided for the purpose of the scheme.
iii. The ‘Online portal’ will also give the registered users the following facilities:
Access to primary issuance of Government securities
Access to NDS-OM.
🔄 Gilt Funds vs Share Market – A Comparison
Particulars
Gilt Funds
Share Market (Equity Investment)
Nature of Investment
Government bonds (debt instruments)
Equity shares of listed companies
Risk Level
Low credit risk, high interest rate risk
High market, business & volatility risk
Returns
Moderate & stable (linked to interest rates)
Potentially high but volatile
Ideal for
Conservative or debt-oriented investors
Growth-seeking and risk-tolerant investors
Investment Horizon
Medium to long-term
Long-term (ideally >5 years)
Volatility
Low to moderate
High
Regulation
SEBI, RBI
SEBI, Stock Exchanges
Liquidity
High in open-ended funds
High for listed shares
Taxation (LTCG >2Y)
12.5% with indexation (for funds held >2 years)
12.5% LTCG on gains > ₹1.25 lakh
📈 Who Should Invest in Gilt Funds?
• Investors looking for safety of capital with moderate returns • Suitable during falling interest rate cycles (bond prices rise) • Ideal for diversification in low-risk portfolios
⚠️ Risks to Consider
• Interest Rate Risk: As rates rise, bond prices fall, affecting NAV. • No Credit Risk, but duration risk is higher in long-term gilt funds. • Not ideal for short-term parking due to volatility from rate changes.
📑 Source References:
1. SEBI – Mutual Funds Regulations: https://www.sebi.gov.in
2. RBI Retail Direct Scheme: https://rbiretaildirect.org.in
3. AMFI – Gilt Fund Details: https://www.amfiindia.com/investor-corner/knowledge-center/types-of-mutual-funds
Disclaimer: This article is solely for educational purpose and cannot be construed as legal and professional opinion. It is based on the interpretation of the author and are not binding on any tax authority. Author is not responsible for any loss occurred to any person acting or refraining from acting as a result of any material in this article.
Form 10-IEA is required to fill by individuals or HUFs those want to continue with the old tax regime in the present financial year ie FY 2023-24. The Budget 2023 proposes that from FY 2023-24, the new tax regime will be considered the default tax regime. By filling Form 10-IEA, taxpayers can choose the old tax regime. They must file the form on or before the due date prescribed for filing an income tax return. Let’s start with the detailed analysis of Form 10-IEA and go through its important aspects.
What is Form 10-IEA
In FY 2022-23 the old tax regime was announced as the default tax regime. Those taxpayers willing to choose the New tax regime must have to file Form 10-IE electronically. But in FY 2023-24 the new tax regime was announced as the default tax regime. And now those taxpayers willing to choose the New tax regime must have to file Form 10-IEA electronically and this action make Form 10-IE which was earlier employed to opt for the new tax regime has now been discontinued
Purpose of Filing Form 10-IEA
let’s understand the purpose of Form 10IEA.
Individuals and HUF’s having income from profession/business must file Form 10-IEA by adhering to the prescribed deadline under Section 139(1). Please note this revised procedure streamlines the process, enabling individuals without business or professional income to directly specify their preference while filing a tax return by selecting the preferred option.
The corresponding choice determines the rules and regulations that would be applicable to the assessee.
Filling Form 10-IEA requires individuals to provide all the necessary information like PAN number, assessment year, name, and current status. These details can be used to accurately categorise and identify taxpayer information.
How to File Form 10-IEA
Follow these steps for filing Form 10-IEA online:
Step 1: Login on the e-filing portal
Step 2: On the dashboard, click ‘e-File’ > ‘Income tax forms’ > ‘File Income Tax Forms’
Step 3: Scroll down to select Form 10-IEA. Alternatively, enter Form 10-IEA in the search box. Click on ‘File now’ button to proceed.
Step 4: Select the Assessment Year for which you are filing the return. For eg: If you are filing taxes for the income earned in FY 2023-24, then select AY 2024-25.
Step 5: After checking the documents required for filing the form click on ‘Let’s Get Started’.
Step 6: Select “Yes” if you have Income under the head “Profits and gains from business or profession” during the assessment year. Select the due date applicable for filing of return of income and click on continue.
Note: Use “help document” by clicking on help document hyperlink for the help for selecting the applicable due date.
Step 7: Click ‘Yes’ to confirm the selection of the regime.
Step 8: Form 10-IEA has 3 sections. Verify and Confirm each section. They are as follows:
i. Basic Information: In Basic Informationsection, your basic information will be pre-filled. If you are filing form for the first time then opting out option will be auto-selected and if system has valid form with opting out option, then re-entering option will be auto-selected. Click on ‘Save’ button.
ii. Additional Information: Fill the necessary details in Additional information section related to IFSC unit (if any) and click on ‘Save’.
If you are opting out of new Tax regime this Additional Information panel will be greyed off
iii. Declaration and Verification: Verification section contains self-declaration where you will be required to check the boxes and agree to the terms and conditions. Verify whether all the details are correct and save the information. Once done, click on ‘Preview’ to review Form 10-IEA.
Step 9: After reviewing all the information, ‘Proceed’ to e-verify’. You can e-verify either through:
Aadhaar OTP
Digital Signature Certificate (DSC)
Electronic Verification Code (EVC)
Step 10: After verification Click on ‘Yes’ to submit the Form.
Step 11: After successful e-Verification, a success message is displayed along with a Transaction ID and an Acknowledgement Receipt Number. Please keep a note of the Transaction ID and Acknowledgement number for future reference. You can also download the form and locate the acknowledgment number. To download the filed form, go to ‘e-File’ → ‘Income Tax Forms’ → ‘View Filed Forms’.
The new section 43B(h) will be applicable from April 1, 2024 (AY 2024-25), Section 43B(h) of the Income Tax Act introduces significant changes concerning expenses related to purchases or services from Micro and Small Enterprises. Please note this section is not applicable on Medium Enterprises.
43B(h) has been inserted as a Socio-Economic Welfare Measure to ensure timely payments to micro and small enterprises.
We all know that section Section 43B of the Act provides for certain deductions to be allowed only on Actual Payment basis.
Finance Bill 2023 has newly inserted a clause to this section which is as under:
Section 43B (h) of Income Tax Act says:
“any sum payable by the assessee to a MICRO or SMALL enterprise beyond the time limit specified in 15 of the Micro, Small and Medium Enterprises Development Act, 2006,”
The above clause indicated that, in order to be eligible to claim deduction of the sum payable to micro and small enterprises, the payment shall be actually made within the time limit specified in 15 of the MSME Act, 2006.
Section 15 of MSME Development Act, 2006 says:
“Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day*:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall not exceed forty-five days from the day of acceptance or the day of deemed acceptance”
It is very clear that, the buyer shall make the payment to the supplier as agreed between them, however the same cannot exceed beyond 45 days from date of acceptance or the day of deemed acceptance i.e., from the day of acceptance of the goods/service.
Section 2(b) of the MSME Development Act, 2006 says:
“Appointed Day” means the day following immediately after the expiry of the period of fifteen (15) days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.
Explanation—For the purposes of this clause-
(i) “the day of acceptance” means-
(a) the day of the actual delivery of goods or the rendering of services; or
(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;
(ii) “the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;
Section 16 of MSME Development Act, 2006 says:
“Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank”
Consequences upon Failure to make payment to Micro and Small Enterprises under Section 43B(h)
If the payment is made after 45 days or 15 days as specified – then expenses disallowed in the year and deduction will be available in the year in which the payment is made.
If the payment is due for more than 45 days or 15 days as specified but the payment is made before the end of the Financial Year – then in such case, the deduction of the expense will be available in the same year itself.
The classification of the enterprise as Micro, Small & Medium as defined in Micro, Small and Medium Enterprises Development Act, 2006 is hereby produced for your reference:
Section 92 of the Income Tax Act, 1961, deals with regulations of transfer pricing in India. It is a practice of determining the price of the transactions between associate enterprises and computation of Income from International transaction at Arm’s Length Price. This section has significant implications for Multi National Enterprises (MNE) operating in India and also on Specified Domestic Transaction (SDT).
Section 92E (Audit under Transfer Pricing):
Every person who has entered into an international transaction (IT) or specified domestic transaction (SDT) during a previous year shall obtain a report from an accountant (Chartered Accountant) and furnish such report on or before the “specified date” in the prescribed form (3CBE) duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed.
Prescribed form for report from accountant is Form No. 3CEB. Under proviso to rule 12(2) audit report shall be furnished electronically.
“Specified date” means the date one month prior to the due date for furnishing the return of income under sub-section (1) of section 139 for the relevant assessment year.[Section 92F(iv)] As due date for ITR in transfer pricing cases is 30th November of the relevant assessment year, specified date is 31St October. Report from accountant (CA) will have to be furnished on or before 31st October of relevant assessment year in Form 3CEB.
PENALTY ON ASSESSEE FOR FAILURE TO FURNISH REPORT UNDER SECTION 192E [SECTION 271BA]
If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees ie.Rs.1,00,000.
PENALTY ON AUDITOR FOR FURNISHING INCORRECT INFORMATION IN REPORTS OR CERTIFICATES
Section 271J of the Act provides for Penalty for furnishing incorrect information in reports or certificates. Section 271J provides that where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under the Income Tax Act, 1961, finds that an accountant has furnished incorrect information in any report or certificate furnished under any provision of Income Tax Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) [or Joint Commissioner (Appeals) may direct that such accountant (CA), shall pay, by way of penalty, a sum of Rs. 10,000 for each such report or certificate.
HOW TO FILE FORM 3CEB:
Form 3CEB can be filed online by following these easy steps
Step 1: You need to avail the services of a Chartered Accountant (CA) who will audit the business transactions. For this log in to your e-Filling portal account, navigate to the ‘My Chartered Accountants’ page and add a CA authorised by you.
Step 2: Once you select a CA from the list, you must assign Form 3CEB to him/her. You can assign the form by selecting the CA’s name, selecting the filing type and entering the assessment year.
Step 3: Once the form has been successfully assigned, the CA can find it in his/her work list in the ‘For Your Action’ section. He/she can either accept or reject the assignment. If the assigned CA rejects it, you must reassign the form.
Step 4: If the CA accepts the task, he will fill in all the necessary details in the form after proper assessment and auditing.
Step 5: Once done, you can find the form uploaded by the CA in the Taxpayer’s work list. You can click the ‘For Your Action’ button and find the form marked ‘Pending for Acceptance’. You can either accept or reject it after reviewing the form. Once you approve it, Form 3CEB will be filed.
Form 3CEB comprises three parts – Part A, Part B and Part C.
Part A contains basic details that need to be filled up.
Part B have a lot of information related to international transactions must be provided. It includes information about associate enterprises, nature and particulars of transactions.
Part C of the form is solely dedicated to specified domestic transactions. While Part B focuses on international transactions, Part C is on engagements with domestic enterprises.
Conclusion:
As per Section 92E of the Income Tax Act, which relates to international transactions and specified domestic transactions, filing Form 3CEB is mandatory for companies who are engaged in foreign or domestic business with associated enterprises. Taxpayers must strictly follow the requirements listed in Form 3CEB; otherwise, there are penalty rules which might be enforced.
Clause 44 It was added w.e.f 20th August 2018 but Reporting under this clause was deferred till 31st March 2019 vide Circular No. 6/2018 dated 17th August 2018, So reporting in clause 44 is started from AY 2019-20.
TheObjective for insertion of this Clause 44:
The main objective is to co-relate GST Data with Income Tax Data.
FAQ’s on CLAUSE 44
Q.1. Is reporting in this clause applicable only for Assessee who are GST registered?
Ans: No, Reporting is to be made by all assesses who are registered under GST or not.
Q.2. Interpretation of wordings “Breakup of total expenditure”? What expenditures are not Included?
Ans: Interpretation should be “broader” with reference to Capital Expenditure as well as Revenue Expenditure including Purchases.
But activities or transactions which those neither as a supply of goods nor a supply of services and thus expenditure incurred in respect of such activities need not be reported under this clause.
1. Salary not Included
2. Depreciation under section 32, deduction for bad debts u/s 36(1)(vii) etc. which are not expenses should not be reported under this clause.
3. Bad Debts written off etc.,
So we can say any expenditure that is incurred, wholly and exclusively for the business or profession of the assessee qualifies for the deduction under the Act.
Q.3. Tabular format for disclosure:
Sl. No.
Total amount of Expenditure incurred during the year
Relating to Goods or services Exempt from GST
Relating to entities Falling under Composition Scheme
Relating to Other Registered Entities
Total Payment to Registered Entities
Expenditure relating to entities not registered under GST
(1)
(2)
(3)
(4)
(5)
(6)
(7)
The format as per clause 44 of form 3CD requires that the information is to be given as per the following details:
A. Total amount of expenditure incurred during the year
B. Expenditure in respect of entities registered under GST
C. Expenditure related to entities not registered under GST
the expenditure in respect of entities registered under GST is further sub-classified into four categories as follows:
a) Expenditure relating to goods or services exempt from GST
b) Expenditure relating to entities falling under the composition scheme
c) Expenditure relating to other registered entities
d) Total payment to registered entities
Q.4. Colum 2 says “Total amount of Expenditure incurred during the year” so shall we report head-wise / nature wise expenditure?
Ans: The heading of the table which starts with the words “Breakup of total expenditure” and hence the total expenditure including purchases as per the above format may be given. It appears that head-wise / nature wise expenditure details are not envisaged in this clause.
However, it is recommended to take head wise/nature wise expenditure details as a part of working paper of the Audit.
Q.5. What are the Expenditure relating to other registered entities (column 5)?
Ans: The value of all inward supplies from registered dealers, other than supplies from composition dealers and exempt supply from registered dealers, are to be mentioned in this column.
Q.6. What is the meaning of “Total payment to registered entities (column 6)”?
Ans: The language used in sub-heading of column 6 is total’ payment’ to registered entities. The word ‘payment’ should harmoniously be interpreted as ‘expenditure’ as the combined heading of columns (3), (4), (5) is ‘Expenditure in respect of entities registered under GST’. Hence, the total expenditure in respect of registered entities i.e., sum total of values reported in columns (3), (4) and (5) should be reported in Column 6.
Q.7. Checks and Control while reporting?
Ans: There are some checks and control so auditor make sure on correctness on reporting.
Amount of Serial number 2 is equal to amount of serial number 6 PLUS Serial number 7.
Amount of Serial number 6 is equal to amount of serial number 3 PLUS Serial number 4 PLUS Serial number 5.
Total Value of Expenditure in P & L for the year
XXX
Add: Total Value Capital Expenditure Not Included in P & L
XXX
Less: Total Value Of non-cash Charges considered as expenditure
XXX
Less: Total Value of Expenditure Excluded For being Transactions in securities and Transactions In money
XXX
Less: Total value Of Expenditure Excluded by virtue of Schedule III to the CGST Act,2017
The Foreign Currency Exposure is a risk associated with the businesses and investors engaged in the activities (trade and investments) of dealing in foreign currency transactions. The entities involved in the activities of transactions in different foreign currency denominations and does not take steps to protect themselves from currency fluctuations.
This exposure arises when a company or individual holds assets, liabilities, or cash flows in a foreign currency without implementing any hedging mechanisms to mitigate potential adverse currency fluctuation.
Entities needs to hedge ourselves from foreign currency exposure in the market to avoid any risk of volatility in the exchange rates and Derivative hedging is the one of the best ways to hedge.
Unhedged foreign currency exposure (UFCE):
The RBI issues guidelines for banks to manage their foreign currency exposure either fund base or non-fund base, in an attempt to reduce the risk of unhedged exposure on the banking system during extreme volatility in forex markets.
Banks would be required to assess the unhedged foreign currency exposures of all entities to whom they have an exposure in any currency.
Accordingly, the banks were given advisory through the issuance of various directions, guidelines and circulars to develop a framework for regular monitoring of entities that do not have a hedge. Henceforth, the present directions dated 11th October 2022
Applicability of the Directions:
The provision pertaining to the current directions shall apply to all commercial Banks excluding Payments Bank and Regional Rural Banks along with the Overseas Branches and Subsidiaries of Banks incorporated in India.
These Directions shall come into effect from January 1, 2023.
Computation of UFCE:
Banks shall ascertain the Foreign Currency Exposure (FCE) of all entities at least on an annual basis. Banks shall compute the FCE following the relevant accounting standard applicable for the entity. For ascertaining the Foreign Currency Exposer, the banks shall also include all the sources of an entity’s exposure, including Foreign Currency Borrowings & External Commercial Borrowings.
UFCE shall be obtained from entities on a quarterly basis based on statutory audit, internal audit or self-declaration by the concerned entity. Moreover UFCE information shall be audited and certified by the statutory auditors of the entity, at least on an annual basis.
Provisioning and Capital Requirements:
The bank is required to calculate the total potential loss to the entity from Unhedged Foreign Currency Exposure. It shall be determined by using the data published by FEDAI on the annual volatility rate in the USD-INR exchange rate for the last 10 years and multiplying it with the UFCE of an entity.
The bank is required to ascertain the susceptibility of an entity towards adverse exchange rate movements. It shall be determined by computing the ratio of potential loss to the entity from UFCE and the entity EBID (Earnings before interest and depreciation).
In case if the bank is unable to gather information on UFCE and EBID of an entity due to restrictions on disclosure of information, then, in that case, the bank can compute the susceptibility ratio by using data that is immediately preceding the last four quarters.
In case of Unlisted Company if the information on EBID and UFCE is not available due to the non-availability of the last audited results of the last quarter, then, in that case, the bank shall undertake the latest quarterly and annual result. However, the EBID figure shall be for the last financial year.
The direction has determined the figure for computing the incremental provisioning and capital requirements which are as follows:
Potential Loss or EBID ( in Percentage)
Incremental provisioning Requirements
Incremental Capital Requirements
Up to 15 %
0
0
15% to 30%
20 BPS
0
30% to 50%
40 BPS
0
50% to 75%
60 BPS
0
More than 75%
80 BPS
Risk weight + 25%
Further, the bank is required to calculate the incremental requirements on quarterly basis.
For projects under implementation and the new entities, banks shall calculate the incremental provisioning and capital requirements based on projected average annual EBID for the three years from the date of commencement of commercial operations.
In the case of consortium arrangements, the consortium leader / bank having the largest exposure shall have the lead role in monitoring the unhedged foreign exchange exposure of entities.
Exemption / Relaxation (a) Banks shall have the option to exclude the following exposures from the calculation of UFCE:
(i) Exposures to entities classified as sovereign, banks and individuals.
(ii) Exposures classified as Non-Performing Assets.
(iii) Intra-group foreign currency exposures of Multinational Corporations (MNCs) incorporated outside India.
Provided that the bank is satisfied that such foreign currency exposures are appropriately hedged or managed robustly by the parent. (iv) Exposures arising from derivative transactions and / or factoring transactions with entities, provided such entities have no other exposures to banks in India.
Assessment of Unhedged Foreign Currency Exposure (UFCE):
The banks are further required to ascertain the UFCE by obtaining such information from the concerned entity on quarterly basis. Further, the information on UFCE supplied to the bank must be audited and certified by a statutory auditor of the entity.
Nostro and Vostro accounts are two types of bank accounts used in international banking transactions. These terms originate from Latin, with Nostro meaning “our” and Vostro meaning “your”. In this article, we will discuss the meaning and differences between these two types of bank accounts.
What is a Nostro account?
A Nostro account is a bank account that a bank holds in a foreign currency in another bank. These accounts are maintained by banks to facilitate their foreign currency transactions. Nostro accounts are used by banks to hold funds that belong to their customers in other countries. These accounts are denominated in the currency of the foreign country where the account is held. Banks use Nostro accounts to receive and make payments in foreign currencies.
For example, if Bank A in the United States has a customer who wants to make a payment to a supplier in Japan, Bank A would use its Nostro account in Japan to make the payment in Japanese yen. The funds would be transferred from the customer’s account in Bank A to Bank A’s Nostro account in Japan, and then Bank A would use these funds to make the payment to the supplier in Japan.
What is a Vostro account?
A Vostro account is a bank account that is held by a foreign bank in the local currency of the country where the account is held. Vostro accounts are maintained by banks to facilitate transactions with their international customers. These accounts are used by banks to hold funds that belong to their customers in the local currency of the country where the account is held. Banks use Vostro accounts to receive and make payments in local currencies.
For example, if Bank A in the United States has a customer who wants to receive a payment from a supplier in Japan, Bank A would give its Japanese partner bank permission to open a Vostro account with Bank A. The supplier in Japan would transfer the payment in Japanese yen to Bank A’s Vostro account in Japan. Bank A would then credit the payment to its customer’s account in the United States in US dollars.
Differences between Nostro and Vostro accounts
The main difference between Nostro and Vostro accounts is that Nostro accounts are held by a bank in a foreign country, denominated in the currency of the foreign country, and used to facilitate its transactions in that country. On the other hand, Vostro accounts are held by a foreign bank in the local currency of the country where the account is held, used to facilitate transactions with the bank’s international customers.
Another difference between Nostro and Vostro accounts is the ownership of the account. A Nostro account is owned by the bank that holds the account, while a Vostro account is owned by the foreign bank that opened the account.
A Nostro Account of one country can be a Vostro Account for another country, and vice versa
SEBI has been notified as the regulator of gold exchanges in the country. SEBI has come up with the ‘Framework for operationalizing the Gold Exchange in India’ vide Circular dated January 10, 2022 and has also declared the instrument for trading in Gold Exchange ,i.e., EGRs as ‘securities’ under Section 2(h)(iia) of the Securities Contracts (Regulation) Act 1956 dated December 24, 2021 vide Gazette notification. The SEBI Regulations, 2021’ provides that any person willing to carry on the business of providing vaulting services in relation to gold, i.e., storage and safekeeping of physical gold deposited by the depositor for the purpose of trading in EGRs may apply to SEBI and obtain registration to act as a Vault Manager. The Framework provides that stock exchanges willing to trade in EGRs may apply to SEBI and begin trading in EGRs in new segment. A structure of the transactions in respect of creation, trading and conversion of EGR into Physical Gold has also been defined.
PROPOSED AMENDMENTS
In line with these new developments, it is proposed to bring following amendments in the ITA to make the conversion of physical gold into EGR and vice versa tax neutral:
New provision, S. 47(viid), is proposed where under the conversion of physical gold (held as capital asset) into EGRs issued by a Vault Manager and vice versa, shall not be considered as ‘transfer’ within the meaning of S. 47 of the ITA. Hence, there would be no capital gain arising at the time of mere conversion.
Further, S. 2(42A) is proposed to be amended to include the period of holding of the converting asset in the period of holding of the converted asset. In other words, the period of holding of EGRs would include even the period for which the physical gold was held by the assessee prior to conversion into EGRs and vice versa. (Clause (hi) to Explanation 1 of S. 2(42A)).
Lastly, it is proposed that the Cost of Acquisition of EGRs shall be deemed to be the cost of gold in the hands of the person in whose name EGRs is issued. Similarly, where gold is released against an EGRs, the COA of the gold shall be deemed to be the cost of the EGRs in the hands of such person. (S. 49(10)).
These amendments will become effective from April 1, 2024 and shall accordingly, apply in relation to the AY 2024-25 and subsequent AYs.
CLARIFICATION REQUIRED
There is an ambiguity in relation to the indexation benefit. A clarification is also needed with regard to the classification of Electronic Gold Receipts (ECRs) as Short term or Long term, whether EGRs must be considered as a Capital Asset (36months/ 3 years) or as a Security (12 months/1 year).
