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GST on Notice Pay Recovery

If you are thinking about switching jobs and ditching the notice period – this article is just for you! The Gujarat Authority of Advance Ruling has come up with the decision to charge 18% GST on notice pay recovery. This essentially means that if an employee fails to oblige to the notice period duration or even doesn’t comply for the whole period, they will have to pay 18% GST on notice pay recovery. Let’s break this down and understand the significance of GST when it comes to serving the notice period.

What is Notice Pay Recovery? 

When an employee leaves the company without serving the required notice period as per their terms of employment, the employee has to pay the employer an amount equal to the unserved notice period.  This is called notice pay recovery. 

When an employee decides to leave an organisation, the company needs to look for its replacement or offload work so that there is no impact on production. Now if the employee decides to leave without serving the notice period, the company suffers a loss. In order to recover from this, the employee is required to pay the amount for whatever duration they did not oblige to the notice period. 

Applicability of GST on Employment Terms 

You might find yourself wondering, where does GST come in the picture between an employee and employer’s terms of employment. There was a lot of debate around the applicability of GST on notice pay recovery until now. So let’s break it down and understand how is GST applicable to employment services. 

Under the CGST Act, all supply of goods and services are subject to GST. Schedule I of the CGST Act includes transactions that are treated as supplies if they are made without consideration between two related parties but contributes to the business. Further, Section 15 of the CGST act includes employer and employee as related parties. That makes it pretty simple, right? Supplies made from an employer to an employee will attract GST. (excluding gifts up to Rs 50,000)

But wait, we did not mention Schedule III of the CGST Act which includes activities that can neither be treated as supply of services nor supply of goods. And yes, the act states that services by an employee to an employer do not fall under either supply of services or supply of goods. 

So from this, we understand that employee compensation is not subject to the goods and services tax. 

How Does GST Apply on Notice Pay Recovery?

So far, we have looked at different aspects of GST applicability when it comes to the employee-employer relationship. From the above-discussed points, we have established that employee remuneration does not attract GST. So how was the rule of 18% GST on notice pay recovery passed? 

Coming to Schedule II of the CGST Act, this act includes all the activities that will be treated as a supply of goods or services. One of these activities includes ‘Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation’.

So, when an employee joins or leaves an organisation, they are bound to certain terms of employment which also include serving the notice period which can be from 15 days to 3 months, depending on the role and the organisation. The act of refraining from serving the notice period can be concluded as tolerating an act by the employer which attracts GST according to Section II of the CGST Act. 

According to the Gujarat Authority of Advance Ruling, if an employee refrains to serve the notice period, they have to pay 18% GST along with paying the salary amounting to unserved notice period to the company.

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Are We Expecting Another ITR Due Date Extension?

We are thinking about the same thing that you are! After numerous ITR due date extensions for the FY 2019-20, can we expect another one now? Considering the roller-coaster 🎢 ride that the year 2020 has been, we don’t know what to expect anymore. 🤔

The initial date to file ITR (tax audit not applicable) was 31st July 2020 that was extended to 30th September 2020 which in turn was extended to 30th November 2020. Since the world was being controlled by aliens 👽(perhaps), obviously that was not enough. As a relief to the taxpayers, the due date was extended to 31st December 2020. Yet again, the thriller 😵 movie that we have been a part of was far from ending and the deadline had to be pushed to 10th January 2021. (if tax audit is not applicable)

Let’s look at the latest due date extensions that were announced on 30th December 2020, just a day before the former deadline. 😌(relief much?!)

With the ITD announcing due date extensions a day before the deadline, do you think it is bound to happen again? We are as clueless as you are! 😕

In retrospect, we almost had a year to ourselves just to file our ITR. With so many extensions it is normal for people to think another one might be on its way. But should we really be relying on what ifs?

As per the Income Tax Department statistics, a total of 6,21,680 ITRs have been filed on January 8, 2021, up to 4 PM. Further, around 1 Lakh ITRs were filed in just an hour’s time! Crazy, right?!

With only 2 days to go, it is time that we don’t hold our breath for ITR due date extension and act proactively. Do you think it is wise to wait till “tomorrow”? File your taxes in a jiffy and make the most out of your weekend!

Our weekend plans you ask? Depends on when you decide to file! 😛

File Your Tax Return

On Time , Online on Quicko.com

Open Your Account Today

File Your Tax Return

On Time , Online on Quicko.com

Open Your Account Today

We don’t need a year to file our taxes when taxes have been made so simple. Check that one thing off your list and act now!

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Income Tax Return Filing Due Dates for FY 2019-20 (AY 2020-21) Extended!

Extended Income Tax Return Filing Due Date for FY 2019-20 (AY 2020-21)

In view of the COVID-19 pandemic, states had filed their petitions requesting the Income Tax Department to extended the Due Dates to file Income Tax Return for FY 2019-20 i.e. AY 2020-21.

Just a day before the ITR filing due date of 31st December 2020, the Finance Ministry extend the due dates for Income Tax Returns, Tax Audit Report, and GST Compliances.

Also, 16,66,548 ITRs were filed on 30th December up to 8pm. And 1,58,168 ITRs were filed between 7pm to 8pm i.e. after the extension announcement was made.


The revised due dates are as follows:

FY 2019-20 (AY 2020-21) Extended From Extended To

ITR Filing due date when Tax Audit is not Applicable

31st December 2020

10th January 2021

Submission of Tax Audit Report 31st December 2020 15th January 2021
ITR Filing due date when Tax Audit is Applicable 31st January 2021 15th February 2021

Fun Fact: Almost 70% audience believed the ITR filing due date will be extended! Just like always 😉

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Taxes on the Income Received from Blogging

Today’s generation, also known as millennials, love working for themselves. They like being answerable to themselves, being accountable, and acting independently. For the same reason, blogging is widely gaining popularity among millennials.

In this digital age, this profession can be very lucrative, along with making you famous! Digital creators in India can earn lakhs every month. Yes, you read that, right! Lakhs! Blogging income is taxable under the Income-tax act and should be taken into account while deciding upon a career. To help make you an informed choice, we have covered all you need to know about taxes on the income received from blogging

What is Blogging?

The dictionary meaning of blogging is ‘a website containing the writer’s experiences, opinions or events in their life’. Recently, with the traction of YouTube in India, blogging has evolved to vlogging, which is nothing but a video format of a blog. So, the job of a blogger is to publish content regularly on their website to increase engagement and viewers. 

Sources of Income from Blogging

You might be thinking that I have a website, but how does that make me money? How do I monetise my blog? 

Your website is your primary business, and there are a couple of ways you can make money off of it. Listed below are a couple of sources that a blogger can make money from – 

Sponsored Ads:

Once a blogger has created an identity and an audience for themselves, interested brands pay them for endorsement of products. 

Affiliate Marketing:

Brands pay bloggers to promote their products. If a user buys the product through the blogger’s website, the blogger gets paid a certain mutually decided amount. 

Advertising:

Bloggers can sell spaces on their websites to advertisers to run ads. The process can be automated, where the advertiser with the highest bid wins the space.

Freelancing:

Bloggers can also do various freelancing services in which they can collaborate with others and get paid for the project. 

How to Calculate Taxes on the Income Received from Blogging

Since you need to file your taxes on the income from blogging, you need to know that this blogging income falls in the Income from Business/Profession section. According to the Income Tax Act, the taxpayers falling under this section must pay a tax on the income earned, excluding some allowable expenses. 

Coming to allowable expenses, yes, there are a couple of costs under this section which can help bloggers save money and the revenue falling under allowable expenses will be non-taxable. 

Allowable expenses while filing taxes on the income received from blogging- 

  1. Domain hosting expenses
  2. Salaries of employees
  3. Payments to freelance consultants
  4. Convenience charges
  5. Rent
  6. Utility expenses such as electricity, phone bill, etc.
  7. Depreciation * 

* Distributing the cost of the assets (which directly contribute to revenue generation) over the life of the asset is called Depreciation.

As a blogger, you must save the receipts and bills of payments that fall under allowable expenses. These payments must be such that they directly contribute to business and revenue. 

Let’s take an example of a blogger who goes by the name of Pearl. Pearl is a travel blogger whose gross annual income along with expenses is tabulated below.

Source of Income Annual Income
Travel Blogging 9,00,000 INR

Now let us look at Pearl’s annual expenses – 

Particulars Money Spent (Annually)
Rent 1,00,000 INR
Utility Expenses 1,50,000 INR
Domain Hosting Charges 25,000 INR
Payment to Freelance Consultants 40,000 INR
Depreciation (40% on 2 Lakhs) 80,000 INR
Net Taxable Income 3,95,000 INR

The net taxable income for Pearl is Rs. 3,95,000. The taxes need to be paid according to the tax slab Pearl falls in. On top of this, Pearl can also make other investments in mutual funds, PPF, etc. which are deductible under section 80C of the Income Tax Act. 

As a blogger, you need to file Advance Tax which means paying the income tax the same year in which income is earned. Apart from this, a blogger will be subject to taxes such as Goods and Services Tax (GST) and Tax Deduction at Source (TDS). 

FAQs

Q1. Is it mandatory for a blogger to register under GST?

A1. If a blogger has an aggregate turnover of 20 Lakhs or more, they need to get themselves GST registered. The aggregate turnover for North East and Hilly states is 10 Lakhs.

Q2. I have two separate websites. Do I need individual GST registrations for both?

A2. If both websites are under the same name, you need not have separate GST registrations. Both websites can be listed under the same name while registering for GST.

Q3. Is it okay to transfer all my Google AdSense money to my savings account?

A3. Yes, there is no limit to the amount that you can transfer to your bank account from Google AdSense. However, keep in mind that all these transactions should be mentioned while submitting your ITR.

Q4. I do blogging part-time. Do I need to share my secondary income while filing my ITR?

A4. You must show all your incomes while filing your income tax return. The primary source of income, i.e. your salary will come under the head ‘Salary from Income’ and the freelancing blogging money will fall under the head ‘Income from Business/Profession.’

Q5. What happens if I do not show my blogging income while filing my taxes?

A5. The blogging income is taxable by law, soo it is imperative that one should file their taxes for the income received from blogging. Income from blogging falls under the head ‘Income from Business/Profession’. If you fail to pay your Income Tax on time, you will be charged with a penalty as per Section 234F.

For FY 2019-20, a penalty of –

-> Rs 5,000 is applicable if the return is filed after the due date but by 31st December 2020.
-> Rs 10,000 is applicable if the return is filed after 31st December 2020 but by 31st March 2021.

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👌 Introducing Tax Dashboard - Simplifying Taxes for Zerodha Customers



Howdy folks! 👋

We hate spoilers, but we’d love to find out how 2020 ends.

Ah, did you know 31st December is the last day to file your taxes for F.Y. 2019-20? And you don’t want to end the year worrying about filing your ITR and possibly tax penalties and scrutiny that comes with it. That’s exactly where we save the day. 🦸

We’ve built the Tax Dashboardto simplify taxes so that you can have a 🎵 Merry Christmas and Happy New Year! 

To get you started, here’s a quick walk-through.

📩 Single Sign-on (SSO)

Login to Zerodha & navigate freely on Quicko. Authorize Quicko to import your trades, instantly set up your Tax PnL.

🤩 Kick-Start your Tax Filing

Setup your ITR in a jiffy with our easy onboarding. Enter your basic information, sit back, and relax while Quicko prepares your tax return.

📖 Easy Tax Summary & ITR Status

Easily move to-and-from Zerodha Console & Quicko’s Tax Dashboard. A quick view of your realised Profit/Loss, your tax summary, and your ITR status. 

🚀 Review and e-File

All set? E-file your taxes instantly from the comfort of your home. As promised – no more paperwork, no more hurried visits, no more hassle.

📅 What’s Next

Look out for the three upcoming features on the dashboard:

  1. Tax Planning

Choose New vs Old regime confidently for your personal financial situation

  1. Advance Tax 

Easily calculate Advance Tax on Capital Gains for investors and traders

  1. Tax Loss Harvesting

Maximize profits & minimize taxes using tax saving trading strategies




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