RAB Advisors

23/06/2024

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04/06/2024

Comparable Uncontrolled Price (CUP) Method:
This method compares the price charged in a controlled transaction to the price in a similar uncontrolled transaction.
Key Elements:
1. Controlled Transaction:
This refers to a transaction between two associated enterprises (related parties).

2. Uncontrolled Transaction:
This refers to a transaction between two independent enterprises (unrelated parties) under similar conditions.

3. Comparability
The success of the CUP method hinges on the comparability between the controlled and uncontrolled transactions.

Factors to consider include:

Product Similarity
Contractual Terms
Economic Conditions
Geographical Market

Steps in Applying the CUP Method

1. Identify Comparable Transactions:
Locate uncontrolled transactions that are comparable to the controlled transaction. These could be internal (within the same company but between different divisions) or external (between the company and independent parties).

2. Evaluate Comparability:
Assess the degree of comparability between the controlled and uncontrolled transactions.
Adjust for differences to ensure the transactions are as similar as possible.

3. Adjust for Differences:
Make adjustments for any material differences that could affect the price. This might include differences in product specifications, market conditions, or contractual terms.

4. Determine Arm's Length Price:
Use the price from the comparable uncontrolled transaction, adjusted for differences, as the arm's length price for the controlled transaction.

Example

Let's consider a hypothetical scenario to illustrate the CUP method:

Scenario:
- Company A (a subsidiary in India) sells a specialized chemical to its parent company, Company B (in the USA), for INR 500 per unit.
- Company A also sells the same chemical to an unrelated company, Company C, in India for INR 550 per unit under similar conditions.

Applying the CUP Method:
1. Controlled Transaction: Sale of the chemical from Company A to Company B for INR 500 per unit.

2. Uncontrolled Transaction: Sale of the same chemical from Company A to Company C for INR 550 per unit.

3. Comparability: The transactions are comparable since they involve the same product, similar contractual terms, and market conditions.

4. Adjustments: Assuming there are no material differences requiring adjustments, the price in the uncontrolled transaction (INR 550 per unit) serves as the benchmark.

5. Arm's Length Price: The arm's length price for the controlled transaction should be INR 550 per unit.

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Richa & Company
Chartered Accountants

18/05/2024

Greetings of the Day !!
Today's Tax Talk
Non-Resident Indian (NRI) taxation in India is governed by the Income Tax Act, 1961. Determining residential status is essential to understand taxation rules. The Act now includes a deemed residency concept in 2020. NRI's taxability in India depends on residential status. Income earned outside India is not taxable in India. NRIs can avoid double taxation through the Double Taxation Avoidance Agreement (DTAA). Tax rates, exemptions, and filing obligations differ for NRIs.

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Richa & Company
Chartered Accountants

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08/05/2024

Greetings of the Day!!

Today's Tax Talk

An NRI (Non-Resident Indian), you are eligible for certain tax deductions under the Indian Income Tax Act. Here are some common deductions available to NRIs:

1. **Section 80C Deductions**: NRIs can claim deductions under Section 80C for investments in specified instruments such as:
- Equity-linked savings schemes (ELSS)
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Tax-saving fixed deposits
- Life insurance premiums
- Repayment of principal amount on home loan, etc.

2. **Section 80D Deductions**: NRIs can claim deductions for premiums paid towards health insurance policies for themselves, spouse, children, and parents under Section 80D.

3. **Section 80E Deductions**: Deductions are available on interest paid on education loans for higher studies, including for self, spouse, children, or a student for whom the NRI is a legal guardian.

4. **Section 80TTA Deductions**: NRIs can claim deductions on interest earned on savings bank accounts up to a certain limit under Section 80TTA.

5. **Section 80G Deductions**: Donations made to specified charitable organizations qualify for deductions under Section 80G.

6. **Home Loan Interest**: NRIs can claim deductions on the interest paid on home loans for self-occupied or rented properties.

7. **Rent Paid Deduction**: NRIs who receive HRA (House Rent Allowance) can claim deductions on the rent paid for accommodation if certain conditions are met.

8. **Medical Treatment Expenses**: Deductions can be claimed on medical treatment expenses incurred for specified diseases for self or dependent family members under Section 80DDB.

It's essential to review the specific eligibility criteria and limits for each deduction to maximize tax benefits. Additionally, NRIs should consult with tax experts or financial advisors to ensure compliance with Indian tax laws and optimize their tax planning strategies.

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15/04/2024

Greetings of the Day !!

Today's Tax Talk

Tax deductions specified under Chapter VIA of the Income Tax Act will no be available to a taxpayer opting for the New Tax Regime u/s 115BAC, except for deduction u/s 80CCD (2), 80CCH (Deduction in respect of contribution to Agnipath Scheme), which will be applicable for New Tax Regime as well.

Section 80CCD(2)
Deduction towards contribution made by an employer to the Pension Scheme of Central Government

If the Employer is a PSU or Others group :

Deduction limit of 10% of salary

If the Employer is Central or State Government group :

Deduction limit of 14% of salary

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14/04/2024

Greetings of the Day !!

Today's Tax Talk

*How individual can switch from one tax regime to the other while filing ITR*

The notified ITR forms asks the individual "Do you wish to exercise the option u/s 115BAC(6) of opting out of new tax regime? *(default is No)"*

The individual *(having no Business Income)* shall select "Yes" to opt for *old regime*.

For person having *Business Income*

Shall file *Form No. 10-IEA* (in addition to above step)on or before the due date for filing the income tax return under Section 139(1) for such a year.

*Business persons have option to switch back to the new tax regime only once-in-a-lifetime* , so please choose your option wisely.

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Richa & Company
Chartered Accountants

14/04/2024

Happy Sunday

Today's Tax Talk,

*New tax regime is default tax regime from FY 2023-24*

From FY 2023-24, new tax regime is considered as default tax regime.

Employer will deduct tds as per new tax regime unless old tax regime is opted by employee.

However, an Individual can switch to old tax regime at the time of filing of ITR.

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*Richa & Company*
Chartered Accountants

09/04/2024

Great Morning

Today's Tax Talk

*Tax benefits available for senior citizens*

* *Enhanced Basic Exemption Limit:*

For the financial year 2023-24, the senior citizens opting for the old tax regime enjoy an enhanced basic exemption limit of *Rs 3 lakh and that for super senior citizens, it is Rs 5 lakh*.

* *Relief from Advance Tax Payment:*

A Resident senior citizen is exempt from payment of such advance tax even if their tax liability increases the said threshold(Rs.10k), provided they do not derive any income from business and profession.

* *Higher Threshold for Deduction w.r.t. Interest Income*

Under Section 80TTB, senior citizens can claim a deduction of up to ₹50,000.

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*Richa & Company*
Chartered Accountants

08/04/2024

Remission and Extinguishment of Demands

As per CBDT order F.No 375/02/2023-IT-Budget dated 13.2.2024,

Eligible outstanding direct tax demands have been remitted and extinguished.

a) Monetary limit for waiver of demand

Until AY 2010-11, demands up to Rs. 25,000 per entry are eligible for the waiver, whereas from AY 2011-12 to AY 2015-16, the waiver applies to demands entry up to Rs. 10,000.

b) Maximum ceiling of Rs. 1 lakh

Remission and extinguishment of eligible demands are capped at Rs. 1,00,000 per assessee, regardless of the total eligible amount across assessment years.

Please log into your account and follow the path Pending Action > Response to Outstanding Demand to check the status of ‘Extinguished Demands’ in your case.

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Richa & Company

Chartered Accountants

02/04/2024

Now micro enterprises with a turnover up to Rs 3 crore from earlier Rs 2 crore and certain professionals with a turnover up to Rs 75 lakh from earlier Rs 50 lakh will be eligible to be taxed presumptively provided their cash receipts are not more than 5 per cent of total receipts.