Introduction

People classified as Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution residing in a Sixth Schedule area are exempted from paying income tax under Section 10(26) of the Income Tax Act of 1961.

Simplifying the above statement, the schedule tribes can avail this tax exemption if they reside from the specific regions to which this exemption has been made available. That basically means 0 tax. Intrigued? Lets dig in and understand the scenarios where the above mentioned people are exempted from paying income tax.

Provisions under Income Tax Act 1961

Section 10(26) of Income Tax Act 1961: In the case of a member of a Scheduled Tribe as defined above or in the  States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura] or in the areas covered by Notification No. TAD R 35 50 109, dated the 23rd February, 1951 , issued by the Governor of Assam under the proviso to sub- paragraph (3) of the said paragraph  as it stood immediately before the commencement of the North- Eastern Areas (Reorganisation) Act, 1971 (18 of 1971 )], any income which accrues or arises to him,-

(a) from any source in the areas ⁹ or States] aforesaid, or

(b) by way of dividend or interest on securities;

The Explanation

A complex statement always needs an explanation. So here it is:

The above statement means that the exemption is given in relation to income arising from the specified areas to the specific people who satisfy the criteria that are mentioned in the provision can claim this exemption u/s 10(26). We will discuss the criteria in the later stages of this blog.

Also, as per clause (b) mentioned above, a person can receive dividends from companies that are not based from these specific regions. So that would mean that they can not avail this exemption on such income right? Wrong. Dividend and securities though not accrued in the required regions, shall still be available for exemption as per the provisions.

Criteria for claiming Exemption u/s 10(26)

First off, exemption from paying income tax by STs which comes u/s 10(26) of the IT Act 1961 gives three conditions for fulfilment for getting this exemption:

1. The individual has to belong to a Scheduled tribe
2. He/she has to be residing in a Sixth Schedule Area
3. Income should be generated while living in a Sixth Schedule Area

So at the outset it is clear that a majority of the STs living in India (other than locations mentioned above) will not get tax exemption simply because they belong to a scheduled tribe.

Reason for the above is that the primary objective of exemption is to provide protection to the ‘weaker sections’ of society. Members of the Scheduled Tribes who are enterprising and resourceful enough to move out of the seclusion of the tribal areas and successfully compete with their Indian brethren outside those areas and rise to remunerative positions in service or business, cease to be ‘weaker sections’.

How to Avail this Exemption?

The eligible person can claim tax-free income in his ITR, and for non-deduction of TDS, he/she can get a certificate from his Jurisdictional ITO u/s. 197 of IT act.

Conclusion

Recently there have been various attempts by the Income Tax department to spread awareness regarding the specific exemption available to Scheduled Tribe people. Persons fulfilling all the above mentioned criteria can claim the exemption u/s 10(26), however one needs to be careful while claiming the exemption as there have been instances where the exemption is claimed and the same was denied because the criteria weren’t fulfilled satisfactorily. 

Investments, stocks, portfolios-these seem to be quite the buzzwords on social media these days. And now the option of being able to invest in foreign stocks has made investment an even more alluring choice. Investment in foreign stocks could be a good option to diversify an individual’s portfolio and to get better returns. Keep in mind that RBI guidelines are applicable to individuals if they plan to invest in foreign stocks.

How to buy foreign stocks?

Individuals can acquire foreign stocks either by direct investment or via purchase. You can purchase foreign stocks under the

• Liberalised Remittance Scheme (LRS).
  It allows all resident individuals to freely remit up to USD 2,50,000 per financial year, subject to RBI and FEMA Guidelines.
• Investments under the Overseas Direct Investment (ODI) route.
• Additionally, individuals can also acquire foreign stocks via the Employee Stock Options Plan (ESOP) of the employer.

Taxes on Income from foreign stocks

For ordinary Indian residents, the total income you earn from investing in foreign stocks or your global income so to speak is taxable in India subject to DTAA. However, for NRIs income earned and received outside India is generally not taxable.

A little confused about your Residential status? You can check out the Residential status calculator.

When it comes to Indians investing in foreign stocks, the US clearly wins the race. So let’s talk a bit about the taxability of US stocks in India. An investor gets generally two types of income from foreign stocks:

1. Dividends
   When an resident individual receives dividend from an US stock, it will be taxed at the rate of 25% , the rest will be given to the shareholder. Now that earning will also be taxed by the Indian government according to the prevailing tax rates. However, owing to the DTAA signed between India and the US, the tax that has been deducted in the US can be claimed as foreign tax credits against the tax liability in India.
2. Capital Gains
   However, when it comes to capital gain from US shares, no taxes are levied on profit or gain incurred at time of selling stocks in US. But contrary in India, capital gain income will be taxable as per Indian tax laws.

Taxation of Shares Purchased under ESOP

An increasing number of companies are giving stock options to their employees.  Apple, Netflix, Spotify are a few of the companies offering ESOPs

When it comes to ESOP, things are a little bit more nuanced as the taxation happens at two stages:

1. At the time of allotment of shares
   The income is determined based on the difference of the fair market value (FMV) of shares on the date of allotment and the amount paid to acquire such shares. This income is treated as perquisite and taxed as part of salary income at the applicable slab rates.
2. At the time of sale of shares
   During the time of sale of shares, the income is taken as the difference between the sale proceeds and the cost of acquisition of shares (i.e. FMV). The individual would need to pay tax on such capital gain.

However, there are other considerations too when it comes to taxation on ESOPs

• Tax residency of the individual at the time of allotment of shares
• Tax residency of the individual during the vesting period i.e. grant to vest dates
• Cost of acquisition
• Challenges in claiming double-taxation relief/foreign tax credit under a Tax Treaty owing to the differentiation in nature of income from ESOP i.e. as employment income or capital gain

Mode of Tax payment

Tax on salary income in the case of ESOP shares is subject to tax withholding by the employer. For capital gain on foreign shares, the tax needs to be submitted by the individual by way of Advance Tax or Self-assessment Tax.
However, under the LRS scheme, if the amount transferred abroad exceeds INR 7 lakh then TCS @5% on the excess amount is applicable and individuals can get the refund on filing the income tax return in India.

Reporting of foreign incomes

In case of capital gain income during FY 2020-21, individuals need to file Form ITR-2 or ITR-3.
The reporting it in your ITR would be as below for foreign stocks:

• Schedule CG for Capital gain
• Schedule OS for Dividend income
• Schedule FSI and Schedule TR for claiming foreign tax credit in case of double taxation relief
• Schedule Foreign Assets: Details of holding of foreign shares/securities 

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Investing in foreign stocks is a comparatively new phenomenon in India. The taxability when it comes to income from foreign shares often gets complicated. India has different DTAA with different countries and the clauses of the DTAA may also get updated from time to time. To put in other words, not only will taxability on foreign income differ from country to country but it may also differ for the same country from one time period to the other.

The New IT portal has been in the news constantly for a lot of reasons. The responsibility to build this portal was given to Infosys through an open tender published on Central Public Procurement.

The New IT Portal was launched on 7th June 2021 and the main promise of this portal was a better and smoother user experience. However, the road to achieving this aim had quite a lot of hiccups  on its way

What were the hiccups?

Right from its launch, taxpayers were witnessing certain difficulties on the portal. While some said they were unable to log in, other faced difficulties while trying to update their personal details on the portal. Taxpayers took to social media platforms to express their grievances. This did not go unnoticed by The Finance Minister who time and again urged Infosys to work on the glitches to provide a smooth user experience to the taxpayers.

On 21st August 2021, the portal went under emergency maintenance and wasn’t accessible to taxpayers for two days. . The Finance Minister summoned Mr Salil Parekh, CEO of Infosys on 23rd August to discuss the glitches on the portal. Post the meeting, Infosys was given a deadline of 15th September to fix all the ongoing glitches.

Considering the fact that this would leave a relatively narrow window for taxpayers to file their ITR, the government has extended the ITR filing due dates. Take a look at the revised dates

Income Tax Filing due dates for FY 2020-21 (AY 2021-22)📅

Putting a whole lot of speculation and doubts to rest, the @IncomeTaxIndia and @FinMinIndia just extended the due dates for Income Tax Return filing🕑 pic.twitter.com/7zS6uk6XHP

— Quicko (@HowToQuicko) September 9, 2021

What’s the status now?

Infosys has been continually working to bring the New Portal up to pace and there has been a sustained improvement in the portal. Infosys said that over 3 crore users have successfully used the portal to carry out various transactions. Further, ITR filing has also picked up pace with the portal facilitating over 2.5 lakh returns daily. 

Infosys has also stated that several important statutory forms like 15G, 15H, 10IE along with TDS returns are also being filed in large numbers. And as the portal’s capacity continues to increase, these numbers are expected to go up

Infosys has acknowledged that some taxpayers may continue to face glitches on the portal. However, they are actively working to make the portal fully functional for everyone.

With the new IT Portal, ITD has given enhanced capabilities to ERIs as well.

Where do ERIs come in?

ERIs are authorized intermediaries who are eligible to file income tax returns and perform other tax-related services on behalf of taxpayers.
 

What can ERIs do?

Create and manage your Income Tax Profile: You can create and manage your IT profile via ERIs like changing or updating your address, link documents, and so on.

Submit Statutory Forms: You can submit statutory forms like Form 10 IE & more via ERIs.

Manage Refund Bank accounts: You can add and select your bank accounts for receiving refunds through ERIs.

Track IT refund: ERIs make it simple for you to track your IT refund.

Submit refund reissue request: ERIs also helps you submit refund reissue request to the ITD.

E-file and E-verify: Most importantly, ERIs makes it super simple for you to file and verify your ITR.

We at Quicko are committed to making taxes simple for you. So, we are coming up with something exciting that will not only offer these services but much more. So stay tuned!

You can download the IIFL Tax P&L Report from Quicko’s tax planner on the tax P&L tab. The report includes details of segment-wise trading – scrip name, buy value, sell value, and trading expenses. Segments included are – Equity Shares, Mutual Funds, Equity Intraday, Futures and Options.

Income Head

Capital gain covers gain or loss from the selling of Equity Shares (except intraday transactions), Mutual Funds (MF), Restricted Stock Units (RSU), Equity Traded Funds (ETFs), and Employee Stock Option Plans (ESOPs).

Business Income Head covers Equity Intraday transactions, Futures and Options. This Tax P&L Report can be used to prepare P&L A/C to report it in the Income Tax Return.

However, the trader must take care of the following things where the treatment as per Income Tax may differ.

Expenses

The Tax P&L Report covers buy and sale side transfer expenses that are directly related to trading transactions.

The transfer expenses  (such as brokerages, STT, and other transaction charges, etc.) are separately given in the tax PnL report for equity, intraday, and F&O segments. However, in mutual funds, transfer expenses are included in buy and sale value. 

In the case of Intraday and F&O, you can also claim other expenses – such as internet expenses, legal fees, subscription expenses, depreciation, etc. which are not covered in the Tax P&L Report.

Calculation of Long Term Capital Gains under Section 112A

LTCG on the sale of securities (on which STT is paid), bought on or before 31st January 2018 should be calculated using the Grandfathering Rule. As per this rule, the Cost of Acquisition is computed after considering the FMV as of 31st Jan 2018 as per Section 112A.

For equity and mutual funds transactions, long-term capital gain is computed after taking into FMV as of 31st Jan,2018. 

• Corporate Actions: 
  • Buyback Gains: When a company buys back shares issued by it from an existing shareholder, it results in capital gains for the shareholder. Such buyback gains would not be included in the Tax P&L Report.
  • As per a recent amendment in Budget 2019, the gains from buy-back are exempt in the hands of the individual since the company is now liable to pay the buyback tax under Section 115QA. This amendment is applicable to all the buybacks after 5th July 2019. Therefore, buyback gains before 5th July 2019 are taxable for the trader, and the ones after 5th July 2019 are exempt

• Dividend: Dividend transactions would not be included under the Equity segment in the Tax P&L.

• Transfer In/Out: If you moved your portfolio from another broker to Angel Broking or vice versa, your brokers will have partial data (either buy-side or sell-side depending on transfer in or out). Most of brokers let traders enter such missing data. However, there are high chances of missing out on Capital Gains arising out of such transfers. 

• Calculation of Trading Turnover:
  • There are two different methods to calculate turnover for Intraday and Futures & Options:

• Scripwise Method:
  • You calculate the turnover by collating all trades on the particular scrip for the financial year, find the average buy/sell value, and then determine the turnover.
• Tradewise Method:
  • You calculate the turnover by summing up the absolute value of profit and loss of every trade done during the year.

You can learn more about scripwise and tradewise trading turnover calculation. 

Intraday

Trading in the stock market on a same-day basis. Thus, it would mean buying and selling on the same day itself.

Turnover 

For all intraday transactions, the aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover.

Profit/Loss

Gross P&L is generally calculated by summing up the overall sales amount reduced by the buy amount.

Net P&L = Gross P&L – Transfer expenses.

Futures & Options

In the Tax P&L report, F&O turnover and P&L are computed by considering the following trade segments:

• Equity Futures & Options
• Commodity Futures & Options 
• Currency Futures & Options

Turnover

For Futures transactions, Turnover = abs(sell value – buy value).

For Options transactions, Turnover = abs(sell value – buy value).

*abs() stands for absolute value. 

Profit/Loss

Gross P&L is generally calculated by summing up the overall sales amount reduced by the buy amount.

Net P&L = Gross P&L – Transfer expenses

All of the above conditions are considered when you file your Tax Return using Quicko. However, reporting may vary depending on your specific situation, hence it’s always advisable to consult a tax professional when in doubt.

Have you received a notification from the Income Tax department regarding the payment of Advance Tax? Well, fret not, you are not the only one. The ITD has been sending these notifications as a reminder to taxpayers who have paid Advance Tax in the last Financial Year.

The communication also states that the department is maintaining a database to monitor the compliance of the taxpayers. It also contains the details of the Advance Tax paid by the assessees in the last Financial year. 

What is Advance Tax?

Advance Tax is a “pay-as-you-earn” scheme for the periodical payment of your yearly tax in advance. It needs to be paid if your outstanding Tax Liability is INR 10,000 or more. Advance Tax can be paid in 4 equal instalments at an equal time gap.

The following table shows the due date of paying Advance Tax for each quarter

Due Date of Installment	Amount Payable
On or Before 15th June	15% of the Advance Tax
On or Before 15th September	45% of the Advance Tax
On or Before 15th December	75% of the Advance Tax
On of Before 15th March	100% of the Advance Tax

The due date to pay the second instalment of Advance Tax is quite near and the ITD had sent this notification as a reminder for people to pay the second instalment of Advance Tax.
Wondering how to calculate Advance Tax? Check out our Advance Tax Calculator

Who has to pay Advance Tax?

Any individual having an outstanding Tax liability of INR 10,000 or more is liable to pay Advance Tax.

Individuals having only salary income usually don’t have to pay advance tax, since their employers deduct TDS. However, what is often overlooked is the fact that if a salaried individual has income from other sources like trading, investment, rent then that person may be liable to pay Advance Tax as well. In other words, having any sort of non-salaried income may make one eligible for paying Advance Tax. 

Advance Tax for Investors & Traders

Traders are liable to pay Advance Tax for their realised profits & gains. However, given that the income of traders keeps changing every month (every day…actually😅), it can be quite difficult to pay the accurate amount of Advance Tax every quarter. So, they can go for either of the following options

Option 1: Estimate incomes for each quarter

Traders can pay Advance Tax at the end of each quarter by estimating their trading income. If they pay more than their actual liability then they can claim a refund while filing their ITR. If they pay less than the actual Tax Liability, an interest of 1% per month or part thereof on the differential amount has to be paid u/s 234C

Option 2: Pay pending Tax on or before 31st March.

Capital gains can be difficult to estimate. Hence, taxpayers can pay Advance Tax on the realised profit for that quarter. However, later on, if the tax liability is more than what they have paid, they can clear up all their dues on or before 31st March to avoid any interests.

Where does Quicko come in?

Calculating and remembering to pay advance Tax can be quite a task. That’s why our Tax Planner is here to help you out.

• Log in with your broker
• Add other Incomes & Tax credits
• Navigate to Planning & then click on Advance Tax
• Check out how much Advance Tax to pay, due dates & other details
• Click on Pay

Yep, that’s it. We have made it that easy for you to calculate and pay Advance Tax😎

Need help with Advance Tax? Well, let our experts guide you through.

Want to know more? We would love to hear you out. Just drop in your contact details & message. We will get back to you with applicable plans, discounts and more in light’s speed (okay that might be an exaggeration, but we promise to get back to you fast enough)