- The CBDT’s new guidelines will iron out procedural hurdles in claiming deductions.
Livemint | By Gireesh Chandra Prasad, New Delhi
PUBLISHED ON APR 03, 2021 03:51 AM IST
Companies and professionals can now revise their tax audit experiences, with the Central Board of Direct Taxes (CBDT) on Friday introducing new guidelines to iron out procedural hurdles in claiming deductions for sure spending.
In circumstances the place the taxpayer makes sure funds comparable to taxes, duties, or cess or provident fund contribution of workers after the tax audit report has been submitted in an evaluation yr, a revised audit report signed by the accountant may be given to say reduction for that spending or cost, CBDT mentioned in a notification.
The Revenue Tax Act disallows sure spending comparable to curiosity, royalty, or charge for technical companies as a deduction whereas computing the taxable earnings of an assessee if the tax isn’t deducted at supply and paid to the federal government. Additionally, spending comparable to provident fund contribution and go away encashment are allowed as an expenditure solely within the yr that it’s spent.
If any of the funds are made after the tax audit report has been filed, a recalculation of the extent of the spending eligible as a deduction from taxable earnings could turn out to be needed. The brand new rule makes it simpler for taxpayers who’re required to file tax audit experiences to say this deduction. This eliminates the necessity for the taxpayer to elucidate the mismatch between an audit report and the declare for deduction. The brand new rule is a reduction by way of administrative course of greater than a reduction by way of substantive regulation however is consistent with the federal government’s efforts to make it simpler to do enterprise.
“The notification permits revision of the tax audit report until the tip of the related evaluation yr. It removes an administrative issue and streamlines the process for claiming sure deductions whereas computing taxable earnings,” mentioned Pranav Sayta, nationwide chief, worldwide tax and transaction companies at EY.
Companies with gross sales of ₹1 crore or extra and professionals with earnings greater than ₹50 lakh should file tax audit experiences. Nonetheless, firms having as much as ₹5 crore gross sales needn’t file tax audit experiences if they don’t deal greater than 5% of their receipts and spending in money.