Ind AS amendment for Financial Year 2020-21

Issued by Ministry of Corporate Affairs in consultation with the National Financial Reporting Authority 

On 24th July, 2020 the Ministry of Corporate Affair (MCA) vide notification dated 24th July, 2020 has exercised the powers conferred by section 133 read with section 469 of the Companies Act, 2013, the Central Government, in consultation with the National Financial Reporting Authority, hereby makes the following rules further to amend the Companies (Indian Accounting Standards) Rules, 2015. These amendments have been made keeping in view the current business environment caused by the pandemic. COVID-19 has not only affected the health of people across the globe it has also caused severe disturbances in the global economic environment which has consequential impact on financial statements and reporting. 

Read on to know more… 

National Financial Reporting Authority (NFRA)  

As these amendments and all other policies on accounting standard and auditing standards are now being recommended in consultation with NFRA. Let us know more about NFRA. 

It is an independent regulator to oversee the auditing profession and accounting standards in India under Companies Act 2013. It came on existence in October 2018. After the Satyam scandal took place in 2009, the Standing Committee on Finance proposed the concept of the National Financial Reporting Authority (NFRA) for the first time in its 21st report. Companies Act, 2013 then gave the regulatory framework for its composition and constitution. The Union Cabinet approved the proposal for its establishment on 1st March, 2018. It was constituted on 1st October, 2018 by the Government of India. The establishment of NFRA as an independent regulator for the auditing profession will improve the transparency and reliability of financial statements and information presented by listed companies and large unlisted companies in India. 

Further, let us understand about the new amendment, this is more of clarificatory in nature. Also very helpful in clearing the doubt of the industry. Several ambiguities were existed in these standards, for example in Ind AS 1 and Ind AS 8 on Materiality, Ind AS 116 Rent concession due to COVID-19 etc. 

SUMMARY OF THE RECENT AMENDMENTS PURSUANT TO NOTIFICATION : 

Ind AS 103 (Business Combinations): Have defined “business” in more detail, an optional test to identify concentration of fair value, element of Businesses and Assessing whether an acquired process is substantive. 

Ind AS 107 (Financial Instruments: Disclosures):  Disclosures for uncertainty arising from interest rate benchmark reform. 

Ind AS 109 (Financial Instruments): Temporary exceptions from applying specific hedge accounting requirements. 

Ind AS 116 (Leases): Due to the pandemic COVID- 19 – Related Rent concession, a clarification has been provided on accounting of Rent concessions, whether to treat as a lease modifications or not. 

Ind AS 1 and Ind AS 8 (Presentation of Financial Statements and Accounting Policies, Changes in Accounting Estimates and Errors): Change/modification in the definition of “Material”. 

Ind AS 10 (Events after the Reporting Period):  Definition for non – adjusting events and its effective date of application. 

Ind AS 34 (Interim Financial Reporting): Consequential of the above amendments. 

Ind AS 37 (Provisions, Contingent Liabilities and Contingent Assets): Consequential amendment and accounting of restructuring plan. 

Below amendments are explained in detail for more clarity. 

1. Amendment in Ind AS 103 Business Combination 

Sl. No Existing Ind AS Recent amendment 
1. In Appendix A, definition of business was Business: An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. In Appendix B B7 – A business consists of inputs and processes applied to those inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set to qualify as a business. Definition of term “business” has been substituted with  Business: An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities. Accordingly, providing goods or services to customers has been added. This amendment is necessary because every business involves providing goods or services to the customers. In Appendix B In paragraph B7, the following shall be substituted, namely: – B7 – A business consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. The three elements of a business are defined as follows (see paragraphs B8-B12D for guidance on the elements of a business): Consequently, the above changes have been made in the three elements of any business, such as input, process and output. Optional test to identify concentration of fair value For making the above amendment 3 paragraphs have been added after para B7. This is to permit a simplified assessment of whether an acquired set of activities and assets is business or not. An entity may elect to apply, or not apply, the test. An entity may make such an election separately for each transaction or other event. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Elements of a Business and Assessing whether an acquired process is substantive In the practical scenario of the industry, a lot of companies were facing the difficulty for the definition of business. After this amendment, evaluation for business acquisition will be easier. 

2. Amendment in Ind AS 107 and Ind AS 109 Financial Instrument 

Hedge accounting is a method of accounting where entries to adjust the fair value of a security and its opposing hedge are treated as one. Hedge accounting attempts to reduce the volatility created by the repeated adjustment to a financial instrument’s value, known as fair value accounting or mark to market. This reduction in volatility is done by combining the instrument and the hedge as one entry, which offsets the opposing movements. 

A hedge fund is used to lower the risk of overall losses by assuming an offsetting position in relation to a particular security. The purpose of the hedge fund account is not necessarily to generate profit but instead to lessen the impact of associated losses, especially those attributed to interest rate or exchange rate. This helps lower the perceived volatility associated with an investment by compensating for changes that are not purely reflective of an investment’s performance. 

The point of hedging a position is to reduce the volatility of the overall portfolio. Hedge accounting has the same effect except that it is used on financial statements. For example, when accounting for complex financial instruments, adjusting the value of the instrument to fair value creates large swings in profit and loss. Hedge accounting treats the changes in market value of the reciprocal hedge and the original security as one entry so that large swings are lessened. 

Hedge accounting is used in corporate bookkeeping as it relates to derivatives. In order to lessen overall risk, derivatives are often used to offset the risks associated with a security. Hedge accounting uses the information from the security and the associated derivative as a single item, lessening the appearance of volatility when compared to reporting each individually. 

Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognized in Profit or Loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. 

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized to Profit or Loss from that date. 

Interest rate benchmark reform: refers to the market-wide reform of an interest rate benchmark, including the replacement of an interest rate benchmark with an alternative benchmark rate. 

For hedging relationships to which an entity applies the exceptions set out the certain exception for Uncertainty arising from interest rate benchmark reform. 

In the Ind AS 109, the entity shall disclose: 

a) the significant interest rate benchmarks to which the entity ‘s hedging relationships are exposed; 

b) the extent of the risk exposure the entity manages that is directly affected by the interest rate benchmark reform; 

c) how the entity is managing the process to transition to alternative benchmark rates; 

d) a description of significant assumptions or judgements the entity made in applying these paragraphs (for example, assumptions or judgements about when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows); and 

e) the nominal amount of the hedging instruments in those hedging relationships. 

Following temporary exceptions have also being provided from applying specific hedge accounting requirements: 

a) For assessing highly probable requirement for cash flow hedges: For the purpose of determining whether a forecast transaction (or a component thereof) is highly probable as required by paragraph 6.3.3, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. 

b) Reclassifying the amount accumulated in the cash flow hedge reserve: For the purpose of applying the requirement in paragraph 6.5.12 in order to determine whether the hedged future cash flows are expected to occur, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. 

c) Assessing the economic relationship between the hedged item and the hedging instrument : For the purpose of applying the requirements in paragraphs 6.4.1(c)(i) and B6.4.4– B6.4.6, an entity shall assume that the interest rate benchmark on which the hedged cash flows and/or the hedged risk (contractually or non-contractually specified) are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, is not altered as a result of interest rate benchmark reform. 

d) Designating a component of an item as a hedged item: Unless paragraph 6.8.8 applies, for a hedge of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement in paragraphs 6.3.7(a) and B6.3.8—that the risk component shall be separately identifiable—only at the inception of the hedging relationship. 

In the simple words, Hedge accounting is an alternative to more traditional accounting methods for recording gains and losses. When treating the items individually, such as a security and its associated hedge fund, the gains or losses of each would be displayed individually. Since the purpose of the hedge fund is to offset the risks associated with the security, hedge accounting treats the two line items as one. Instead of listing one transaction of a gain and one of a loss, the two transactions are examined to determine if there was an overall gain or loss between the two and only the net impact is recorded. 

Due to this unprecedented situation like COVID-19, the risk of change in the fair value of Assets because of the frequent change in the interest rate is prevalent. Accordingly, the above exceptions have been provided in the current amendment. In this an entity has on option to apply the fair value as per the change in the interest rate. 

3. Ind AS 116 Leases 

Due to the COVID- 19, and thereafter the lockdown in India, many businesses have been shut or partially opened resulting into adverse impact on Revenue & Cash flow. Accordingly, the lease payment has been affected and the businesses are demanding the rent concession from their vendors. 

Now, the question arises how to account for this rent concession in the books of accounts, will it be treated as a lease modification or not? 

For the practical expedient, an amendment has been made and the businesses don’t have to treat this as a lease modification. But there are some conditions attached to it. If the below mentioned conditions are fulfilled, then we can treat the Rent concession without lease modification. 

But first of all we need to understand what lease modification is and how it is accounted for in the books of accounts. 

Ind AS 116 provides detailed guidance on accounting for lease modification, 

a) Lease modification is accounted for as a separate lease by lessee and lessor if the modification increases the scope of the lease by adding one or more right-of-use assets. 

b) If it is not accounted for as a separate lease, lessee re-measures the lease liability by discounting the revised lease payments using revised discount rate. 

Now, let us discuss the amendment in detail. 

As a practical expedient, a lessee may elect not to assess whether a rent concession that meets the conditions below is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the rent concession in the same way if the change were not a lease modification. 

The practical expedient applies only to rent concessions occurring as a direct consequence of the covid-19 pandemic and only if all of the following conditions are met: – 

a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; 

b) any reduction in lease payments affects only payments originally due on or before the 30 June, 2021 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before the 30th June, 2021 and increased lease payments that extend beyond the 30th June, 2021); and 

c) there is no substantive change to other terms and conditions of the lease. 

Disclosures in the financial statement. 

a) that it has applied the practical expedient to all rent concessions that meet the conditions in paragraph 46B or, if not applied to all such rent concessions, information about the nature of the contracts to which it has applied the practical expedient and 

b) the amount recognized in profit or loss for the reporting period to reflect changes in lease payments that arise from rent concessions to which the lessee has applied the practical expedient. 

4. Ind AS 1 and Ind AS 8 Presentation of Financial Statements and Accounting Policies, Changes in Accounting Estimates and Errors 

A new definition of material has been introduced by this amendment, this is more refined and also most expected by the industry, some of the examples of circumstances have also been provided for more clarity. 

Material: Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. 

Materiality depends on the nature or magnitude of information, or both. An entity assesses whether information, either individually or in combination with other information, is material in the context of its financial statements taken as a whole. 

Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information. The following are examples of circumstances that may result in material information being obscured: – 

a) information regarding a material item, transaction or other event is disclosed in the financial statements but the language used is vague or unclear; 

b) information regarding a material item, transaction or other event is scattered throughout the financial statements; 

c) dissimilar items, transactions or other events are inappropriately aggregated; 

d) similar items, transactions or other events are inappropriately disaggregated; and 

e) the understandability of the financial statements is reduced as a result of material information being hidden by immaterial information to the extent that a primary user is unable to determine what information is material. 

Assessing whether information could reasonably be expected to influence decisions made by the primary users of a specific reporting entity`s general purpose financial statements requires an entity to consider the characteristics of those users while also considering the entity ‘s own circumstances. 

The primary users to whom general purpose financial statements are directed. Financial statements are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyses the information diligently. At times, even well-informed and diligent users may need to seek the aid of an adviser to understand information about complex economic phenomena. 

Consequently, the above changes have been made in the Ind AS 8. 

5. Ind AS 10 Events after the Reporting Period 

A paragraph 21 of the Ind AS 10 have been substituted, in the amendment any non- adjusting events that could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements which provide financial information about a specific reporting entity have been added. 

Accordingly, the following disclosure to be provided 

a) the nature of the event; and 

b) an estimate of its financial effect, or a statement that such an estimate cannot be made. 

5. Ind AS 34 Interim Financial Reporting  

Consequential of the above amendments have been notified. 

6. Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets 

Consequential of the above amendments have been notified, and a paragraph below on accounting of restructuring plans have been substituted. 

A management or board decision to restructure taken before the end of the reporting period does not give rise to a constructive obligation at the end of the reporting period unless the entity has, before the end of the reporting period- 

a) started to implement the restructuring plan; or 

b) announced the main features of the restructuring plan to those affected by it in a sufficiently specific manner to raise a valid expectation in them that the entity will carry out the restructuring. 

Summary: 

Keeping in view the changing scenario of business, due to the pandemic COVID -19, the above amendments have been incorporated, primarily 9-10 standards are amended, essentially most of them tried to cover situations which have arisen due COVID- 19 and better financial reporting. 

ICAI, in its endeavor to remain converged with the globally acceptable International Financial Reporting Standards (IFRS Standards) issued by the International Accounting Standards Board (IASB). Also it endeavors to identify the emerging accounting issues that may warrant enforcement actions. 

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Amendment In Schedule III under Companies Act 2013

Amendment In Schedule III under Companies Act 2013

The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March, 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by the Company in its Financial Statement.

Purpose of Amendment:

By these amendments MCA increasing stringency in compliances and adding numerous additional disclosures in Financial Statement. The main purpose behind these amendments is more transparency.

Ministry has issues following Notifications:

S. No.Date of NotificationParticularPurpose (Amendment in)
i.24.03.2021[1]Amendment to Schedule III to the Companies Act, 2013Financial Statement

APPLICABILITY:

Above mentioned amendments shall come into force w.e.f. 01st day of April 2021.

Que: Financial year end on 31st March 2021. Balance sheet signed on 25th August 2021. Whether Company have to give effect of amendment in Financial Statement?

Ans: The above mentioned amendment shall be applicable on Companies for financial year start on or after 01st April 2021. Therefore, all these amendments shall effect the financial statement as on 31st March 2022 i.e. (f.y. 2021-22).

Therefore, one can opine that Financial Statement for financial year ending 31.03.2021 shall be same as per earlier disclosures.

Schedule III i.e. Financial Statement of Companies.

The Ministry of Corporate Affairs vide Notification dated 24 March 2021 has amended Schedule III to the Companies Act, 2013, which shall be effective from the 1st day of April 2021.

Schedule III divided into three parts:

  • Division I – Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006.
  • Division II – Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
  • Division III – Financial Statements for a Non-Banking Financial Company (NBFC) whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015

The notification incorporates various additional disclosure requirements while preparing the financial statements of an entity which are covered under the three divisions of Schedule III to the Companies Act, 2013.

Purpose of Amendment:

In recent years, there have been substantial changes in the reporting requirement by the auditors, but no such corresponding amendments were made in Schedule-III for the preparation of the financial statements. Thus, to align the company’s financial statements in accordance with the auditor’s reporting requirements, the following amendments have been discussed in this write-up. majority of the amendments to Schedule III to the Companies Act, 2013 have been undertaken in response to the amendments covered in the newly issued Companies (Auditors and Report Order) 2020 and the Companies (Indian Accounting Standards) Amendment Rules, 2020.

Brief on amendments to Schedule III Division I, to the Act (for Companies whose financial statements are required to comply with the Accounting Standards):

I. General Instruction for preparation of Balance Sheet:

Rounding Off: It is option to do rounding off of figures till financial year ended 31.03.2021. For the purpose of rounding off the figures appearing in the Financial Statements for financial year ending 31.03.2022 the total income of the Company shall be considered as the basis.

Total IncomeRounding Off
Less than 100 Crore RupeesTo the nearest hundreds, thousands, lakhs or millions or decimals thereof
100 Crore Rupees or moreTo the nearest lakhs, millions or crores, or decimals thereof

II. Additional Disclosure in Notes to Balance Sheet:

i. Shareholding of Promoter: The note on Share Capital in the Financial Statements shall mention details of the Shareholding of the Promotes along with changes, if any, during the Financial Year. The format of such disclosure shall be as follows:

Shares held by promotes at the end of the Year% Change during the Year
S. No.Promoter’s NameNo. of Shares% of total shares
Total

Note:

  • Here management shall give details separately for each class of shares.
  • percentage change shall be computed with respect to the number at the beginning of the year or if issued during the year for the first time then with respect to the date of issue.”

Ques:6 [2]What is the meaning of promoter under Companies Act, 2013?

ii. Trade Payable (Creditors) ageing Schedule: Companies henceforth be required to provide ageing schedule for trade payables due for the periodicity of 1 year, 1-2-year, 2-3 year & more than 3 years. These include trade payables to MSMEs, disputed dues to MSMEs, and other dues and disputed dues. Similarly, disclosures shall also be made where no due date of payment is specified. Information for unbilled dues is also required to be disclosed separately.

Trade Payables ageing schedule: (Amount in Rs.)

ParticularsOutstanding for following periods from due date of paymentTotal
Less than 1 yr.1-2 yrs.2-3 yrs.More than 3 yrs.
(i) MSME
(ii) Others
(iii) Disputed dues- MSME
(iv) Disputed dues- Others

iii. Trade receivables (Debtors) ageing Schedule: Companies will be required to disclose the ageing schedule of its trade receivables i.e. including undisputed and disputed trade receivables considered good and doubtful with ageing classified as less than 6 months, 6 months to 1 year, 1-2 years, 2-3 years and 3 years or more along with disclosures separate disclosure for information of unbilled dues. These undisputed and disputed trade receivables which are further categorized into good and doubtful.

Trade Receivables Ageing schedule: (Amount in Rs.)

ParticularsOutstanding for following periods from due date of paymentTotal
Less than 6 months6 months- 1 year1-2 yrs.2-3 yrs.More than 3 yrs.
(i)  Undisputed Trade receivables- considered good
(ii)  Undisputed Trade Receivables- Considered Doubtful
(iii) Disputed Trade Receivables considered good
(iv) Disputed Trade Receivables considered doubtful

iv. Title deeds of Immovable Property not held in name of the Company:  The Company shall provide the details of the immovable property (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the Company in the prescribed format.

If such immovable property is jointly held with others, details are required to be given to the extent of the Company’s share;

v. Disclosure on revaluation of Assets:  Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017.

vi. Disclosure on Loans/ Advance to Directors/ KMP/ Related parties:  disclosures shall be made where Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person, that are:

(a) repayable on demand or

(b) without specifying any terms or period of repayment

Type of BorrowerAmount of loan or advance in the nature of loan outstandingPercentage to the total Loans and Advances in the nature of loans
Promoters
Directors
KMPs
Related Parties

vii. Details of Benami Property heldIn case, any proceedings have been initiated or pending against the entity under the Benami Transactions (Prohibitions) Act, 1988, the corresponding disclosures shall be provided in the financial statements. The Company shall disclose the followings:

a. Details of such property, including year of acquisition,

b. Amount thereof,

c. Details of Beneficiaries,

d. If property is in the books, then reference to the item in the Balance Sheet,

e. If property is not in the books, then the fact shall be stated with reasons,

f. Where there are proceedings against the company under this law as an abetter of the transaction or as the transferor then the details shall be provided,

g. Nature of proceedings, status of same and company’s view on same.

viii. Details of BorrowingWhere the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following:-

a) whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.

b) if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed.

ix. Wilful Defaulter:  Where a company is a declared wilful defaulter by any bank or financial Institution or other lender, following details shall be given:

a. Date of declaration as wilful defaulter,

b. Details of defaults (amount and nature of defaults),

* “wilful defaulter” here means a person or an issuer who or which is categorized as a wilful defaulter by any bank or financial institution (as defined under the Act) or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.

x. Relationship with Struck off Companies:  Where the company has any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956, the Company shall disclose the following details:-

Name of struck off CompanyNature of transactions with struck-off CompanyBalance outstandingRelationship with the Struck off company, if any, to be disclosed
Investments in securities
Receivables
Payables
Shares held by stuck off company
Other outstanding balances (to be specified)

xi. Registration of charges or satisfaction with Registrar of Companies:  Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.

xii. Compliance with number of layers of companies Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies beyond the specified layers and the relationship/extent of holding of the company in such downstream companies shall be disclosed.

xii. Disclosure of Ratios

The amendment requires the companies covered under division I and II of schedule III to disclose the following ratios:

a. Current Ratio,

b. Debt-Equity Ratio,

c. Debt Service Coverage Ratio,

d. Return on Equity Ratio,

e. Inventory turnover ratio,

f.  Trade Receivables turnover ratio,

g. Trade payables turnover ratio,

h. Net capital turnover ratio,

i. Net profit ratio,

j. Return on Capital employed,

k. Return on investment.

Note: The company shall explain the items included in the numerator and denominator for computing the above ratios and an explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.

xiv. Details in respect of Utilization of Borrowed funds and share premium shall be provided in respect of:

a. Transactions where an entity has provided any advance, loan, or invested funds to any other person (s) or entity/ entities, including foreign entities.

b. Transactions where an entity has received any fund from any person (s) or entity/ entities, including foreign entity.

xv. Compliance with approved Scheme(s) of Arrangements: Where any Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013, the Company shall disclose that the effect of such Scheme of Arrangements have been accounted for in the books of account of the Company ‘in accordance with the Scheme’ and ‘in accordance with accounting standards’ and deviation in this regard shall be explainedof holding of the company in such downstream companies shall be disclosed.

III. Additional Disclosure in Notes to Profit & Loss Account:

i. Undisclosed Income (Reconciliation of Income Tax and Companies Act): The Company shall give details of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961, unless there is immunity for disclosure under any scheme and also shall state whether the previously unrecorded income and related assets have been properly recorded in the books of account during the year.

ii. CSR Disclosure: Where the company covered under section 135 of the Companies Act, the following shall be disclosed with regard to CSR activities: –

a. amount required to be spent by the company during the year,

b. amount of expenditure incurred,

c. shortfall at the end of the year,

d. total of previous years shortfall,

e. reason for shortfall,

f. nature of CSR activities,

g. details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR expenditure as per relevant Accounting Standard,

h. where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.

iii. Details of Crypto Currency or Virtual Currency:

iv. Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed: –

a. profit or loss on transactions involving Crypto currency or Virtual Currency

b. amount of currency held as at the reporting date,

c. deposits or advances from any person for the purpose of trading or investing in Crypto Currency/ virtual currency.

promoter” means a person—

(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

 Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;

CBDT notifies Cost Inflation Index for FY 2021-22

The cost inflation index (CII) for the financial year (FY) 2021-22 has been notified  by the Ministry of Finance. In a notification dated June 12, the finance ministry  stated that CII for FY 2021-21 has been set as 317. For the previous financial  year, CII was 317.  

This notification shall come into force with effect from the 1st day of April 2022,  and shall accordingly apply to the Assessment Year 2022-2023 and subsequent  years. 

CII number is important as it is used to arrive at the inflation-adjusted purchasing  price of assets and thereby long-term capital gains (LTCG). It is also important to  compute the long-term capital gains/long-term capital losses (LTCL) on the  assets which have been or are planned to be sold in FY 2021-22. There are two  things that people must keep in mind relating to the cost inflation index. 

Firstly, his number would be utilized to compute inflation-adjusted cost only for  those assets where inflation-adjusted (indexation benefit) is permitted. Thus, the  CII value could not be used to reach LTCG/LTCL on equity mutual funds.  

Secondly, this CII number would be necessary to compute LTCG for Financial Year  2021-22. The taxes on these gains would be paid by you while filing your income  tax returns (ITR) for Financial Year 2021-22 (AY 2022-23), that is, next year.  

The table below shows the CII of the last 5 years:



Financial Year 


CII Number
2021-2022 
317
2020-2021 
301
2019-2020 
289
2018-2019 
280
2017-2018
272

The Income Tax Department has launched its new e-filing portal on June 7

The Income Tax Department has launched its new e-filing portal on June 7, replete with new features which are expected to make the ITR process much easier and faster. However, several individuals have faced difficulties in the last few days while using the new income tax return e-filing portal. There are various glitches faced by the taxpayers namely DSC not getting registered or updated; New Incorporated companies or Firms are not able to register themselves on ITD Portal; Forget password option not working; ITR in PDF can’t be downloaded; IT acknowledgements in PDF can’t be downloaded; DIN Number not getting auto populated in new ITD website; Challan Numbers not getting validated; no tab for VSV tab; Unable to file TDS Returns; Unable to file 15CA/15CB; E proceedings tab not workings; Grievances registered on ITD website are deleted without addressing; Old demands outstanding not reflected 14. Old Grievances registered not reflected; Unable to file Income Tax Returns for FY 2021 16.

Accounts get locked, if we try to login and are not able to login due to non-operatibility of site; Unable to raise refund reissue request; Unable to view Form 26AS; PAN Number is not shown as valid 20. Mismatch in PAN Data is shown when technically there is no mismatch; JSON Utility not available 22 while filing Verification in ITR if we select ‘Self’ in capacity then Name disappeared n Shown in validation errors. 23. UDIN is also not able to update for last month’s audit and other certification; Rectification of return options not available; Return processed in March 2021 now shows under processing in view details. Moreover, additional glitches on new ITD portal are in respect of  Bank validation will take around 10-12 days; HUF has no option to register DSC; ITR filing not enabled for assessee having only income from other sources like Bank Interest and FDR interest; Registering as CA for filing TAR or other reports, no option to register DSC; For AOP PAN – no sub page/option for Registering DSC or updating DSC and Corporate – Directors and Shareholders information properly captured

Read More: https://www.taxscan.in/taxpayers-faces-25-glitches-in-new-income-tax-portal-2-0/118780/

Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic

26/05/2021 Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic Extension of time limits of c… 

May, 20th 2021 

Circular No. 9 of 2021 

F.No.225/49/2021 -ITA-II 

Government of India 

Ministry of Finance 

Department of Revenue 

Central Board of Direct Taxes 

New Delhi, 

Dated 20th May, 2021 

Subject: Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic 

The Central Board of Direct Taxes, in exercise of its power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) provides relaxation in respect of the following compliances: 

1) The Statement of Financial Transactions (SFT) for the Financial Year 2020 21, required to be furnished on or before 315t May 2021 under Rule 114E of the Income-tax Rules, 1962 (hereinafter referred to as “the Rules”) and various notifications issued thereunder, may be furnished on or before 30th June 2021; 

2) The Statement of Reportable Account for the calendar year 2020, required to be furnished on or before 31st May 2021 under Rule 114G of the Rules, may be furnished on or before 30th June 2021; 

3) The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21, required to be furnished on or before 31st May 2021 under Rule 31A of the Rules, may be furnished on or before 30th June 2021; 

4) The Certificate of Tax Deducted at Source in Form No 16, required to be furnished to the employee by 15th June 2021 under Rule 31 of the Rules, may be furnished on or before 15th July 2021; 

5) The TDS/TCS Book Adjustment Statement in Form No 24G for the month of May 2021, required to be furnished on or before 15th June 2021 under Rule 30 and Rule 37CA of the Rules, may be furnished on or before 30th June 2021; 

6) The Statement of Deduction of Tax from contributions paid by the trustees of an approved superannuation fund for the Financial Year 2020-21, required to be sent on or before 31st May 2021 under Rule 33 of the Rules, may be sent on or before 30th June 2021; 

7) The Statement of Income paid or credited by an investment fund to its unit holder in Form No 64D for the Previous Year 2020-21, required to be furnished on or before 15th June 2021 under Rule 12CB of the Rules, may be furnished on or before 30th June 2021;

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26/05/2021 Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic Extension of time limits of c… 

8) The Statement of Income paid or credited by an investment fund to its unit holder in Form No 64C for the Previous Year 2020-21, required to be furnished on or before 30th June 2021 under Rule 12CB of the Rules, may be furnished on or before 15th July 2021; 

9) The due date of furnishing of Return of Income for the Assessment Year 2021-22, which is 31st July 2021 under sub-section (1) of section 139 of the Act, is extended to 30th September 2021; 

10) The due date of furnishing of Report of Audit under any provision of the Act for the Previous Year 2020-21, which is 30th September 2021, is extended to 31st October 2021; 

11) The due date of furnishing Report from an Accountant by persons entering into international transaction or specified domestic transaction under section 92E of the Act for the Previous Year 2020-21, which is 31st October 2021, is extended to 30th November 2021; 

12) The due date of furnishing of Return of Income for the Assessment Year 2021-22, which is 31st October 2021 under sub-section (1) of section 139 of the Act, is extended to 30th November 2021; 

13) The due date of furnishing of Return of Income for the Assessment Year 2021-22, which is 30th November 2021 under sub-section (1) of section 139 of the Act, is extended to 318t December 2021; 

14) The due date of furnishing of belated/revised Return of Income for the Assessment Year 2021-22, which is 31st December 2021 under sub-section (4)/sub-section (5) of section 139 of the Act, is extended to 31st January 2022. 

Clarification 1: It is clarified that the extension of the dates as referred to in clauses (9), (12) and (13) above shall not apply to Explanation 1 to section 234A of the Act, in cases where the amount of tax on the total income as reduced by the amount as specified in clauses (i) to (vi) of sub-section (1) of that section exceeds one lakh rupees. 

Clarification 2: For the purpose of Clarification 1, in case of an individual resident in India referred to in sub-section (2) of section 207 of the Act, the tax paid by him under section 140A of the Act within the due date (without extension under this Circular) provided in that Act, shall be deemed to be the advance tax. 

 (Prajna Paramita) 

Director to the Government of India.

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MCA mandates Companies to use Software with Audit Trail of each Transaction

Auditing Software

The Ministry of Corporate Affairs (MCA) notified that every company
which uses accounting software for maintaining its books of account
shall use only such accounting software which has a feature of recording
audit trail of each and every transaction, creating an edit log of each
change made in books of account along with the date when such changes
were made and ensuring that the audit trail cannot be disabled.

The Government notified the Companies (Accounts) Amendment Rules, 2021
which seeks to amend Companies (Accounts) Rules, 2014.

In rule 3, in sub-rule (1), the proviso shall be inserted which says,
“Provided that for the financial year commencing on or after the 1st day
of April 2021, every company which uses accounting software for
maintaining its books of account, shall use only such accounting
software which has a feature of recording audit trail of each and every
transaction, creating an edit log of each change made in books of
account along with the date when such changes were made and ensuring
that the audit trail cannot be disabled.”

In rule 8, in sub-rule (5), after clause (x), the two clauses shall be
inserted.

Firstly, the details of an application made or any proceeding pending
under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the
year along with their status as at the end of the financial year.

Secondly, the details of difference between the amount of the valuation
done at the time of one time settlement and the valuation done while
taking loan from the Banks or Financial Institutions along with the
reasons thereof.”

The notification shall come into force with effect from the 1 April,
2021.