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TMI BlogSECURITIES TRANSACTION TAX FOR INSURANCE COMPANIESX X X X Extracts X X X X X X X X Extracts X X X X ..... SECURITIES TRANSACTION TAX FOR INSURANCE COMPANIES - By: - Mr. M. GOVINDARAJAN - Income Tax - Dated:- 25-1-2022 - - Securities Transaction Tax The concept of Securities Transaction Tax ( STT for short) was introduced by Shri P. Chidambaram, the then Finance Minister in the year 2004 vide Finance Act, 2004 , vide Chapter No. VII. The STT is levied on the taxable securities transactions. For the purposes of carrying out the provisions of Chapter VII of Finance Act, 2004 , the Central Government made Securities Transaction Tax Rules, 2004 vide Notification No. SO 1059 (E), dated 28.09.2004 . These rules came into effect from 01.10.2004. Unit Linked Insurance Policy The expression Unit linked insurance Policy ( ULIP for short) is defined by Section 97(13A) of Finance Act, 2004 as the meaning assigned to it in Explanation 3 of clause (10D) of section 10 of the Income-tax Act, 1961. The ULIP is a life insurance policy which has components of both investment and insurance and is linked to a unit, a specific portion or part of the underlying segregated Unit Linked fund which is representative of the policyholder s entitlement in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h funds. Who is to collect STT? The following are liable to collect STT- Every recognized stock exchange shall collect the securities transaction tax from every person, being a purchaser or a seller, as the case may be, who enters into a taxable securities transaction in that stock exchange. The prescribed person in the case of every Mutual Fund shall collect the securities transaction tax from every person who sells a unit to that Mutual Fund. The lead merchant banker appointed by the company in respect of an initial public offer shall collect the securities transaction tax from every person who enters into a taxable securities transaction. The lead merchant banker appointed by the business trust in respect of an initial offer shall collect the securities transaction tax from every person who enters into a taxable securities transaction. The Central Government vide Notification No. 09/2022, dated 18.01.2022 (came into effect from 18.01.2022) amended the Securities Transaction Rules, 2004. The Central Government through this amendment added the insurance company to collect and remit STT. Rate of STT The insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce company is to collect STT for the sale or surrender of a unit of an equity oriented fund to an insurance company, on maturity or partial withdrawal, with respect to unit linked insurance policy issued by such insurance company on or after the first day of February, 2021 @ 0.01%. Payment of STT The STT collected during any calendar month shall be paid by the prescribed person in the case of every insurance company to the credit of the Central Government by the 7 th day of the month immediately following the said calendar month. Any insurance company who fails to collect the tax shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government. The STT shall be paid to the credit of the Central Government by remitting it into any branch of the Reserve Bank of India or of the State Bank of India or of any authorized bank accompanied by a STT challan. The person responsible for collection and payment of STT in respect of an insurance company shall be the managing director or a whole-time director, duly authorized by the Board of Directors of such company in this behalf. Interest Every assessee who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fails to credit the securities transaction tax or any part thereof to the account of the Central Government within the period specified shall pay simple interest at the rate of 1% of such tax for every month or part of a month by which such crediting of the tax or any part thereof is delayed. Penalty If an assessee who- fails to collect the whole or any part of the STT, in addition to paying the tax or interest, if any, by way of a penalty, a sum equal to the amount of STT that he failed to collect; having collected the securities transaction tax, fails to pay such tax to the credit of the Central Government shall be liable to pay in addition to paying the tax and interest, by way of penalty, a sum of ₹ 1000/- for every day during which the failure continues, so, however, that the penalty shall not exceed the amount of STT that it failed to pay. Return Every insurance company within the prescribed time after the end of each financial year, prepare and deliver or cause to be delivered to the Assessing Officer or to any other authority or agency authorized by the Board in this behalf, a return in Form 2A and verified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner as indicated in the form and setting forth such particulars as may be prescribed, in respect of all taxable securities transactions entered into during such financial year in respect of all taxable securities transactions, during such financial year, being sale of units to such insurance company . The return shall be furnished electronically either under digital signature or electronic verification code, generated for the purpose of electronic verification of the person furnishing the return of income as per the data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems). The return shall be signed and verified and filed by the Managing Director or Whole Time Director duly authorized by the Board in this behalf. The return of taxable securities transaction entered into during a financial year shall be furnished on or before the 30 th June immediately following that financial year. Form 2A The following are to be furnished in Form 2A to be filed by an insurance company- Name of insurance company; Date of Registration/incorporation unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Companies Act, 2013 ; Permanent Account Number; Financial year for which transaction is being reported; Jurisdictional Assessing Officer; Number of equity oriented units; Value of taxable securities transactions; Total STT collectible; Total STT collected; Total STT paid; STT payable/refundable; Interest payable under section 104; Interest paid; Details of equity oriented funds with respect to ULIPs issued by the Insurance Company on or after 01.02.2021- Name of equity oriented fund; Unique client code of the fund; Folio number of person from whom units purchased; PAN of the person from whom units purchased; Value of taxable securities transaction; STT collectible; STT collected; (Details required may be given separately for each equity oriented fund set up by the insurance company and sub-total of each fund be also given); Month wise details of taxable transaction tax for the financial year- Month; Name of equity oriented fund; Unique client code of the fund; Value of taxable securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transactions; STT collectible; STT collected; STT paid; Interest payable under section 104; Interest paid under section 104; (Details required may be given separately for each equity oriented fund set up by the insurance company and sub-total of each fund be also given); Details of STT/interest paid- Tax/interest; Name of the bank branch; BSR Code of the bank branch; Date of deposit; Serial number of the challan; Amount; Verification. Failure to furnish return Where any assessee fails to furnish the return within the prescribed time, the Assessing Officer may issue a notice to such assessee and serve it upon him, requiring him to furnish the return in the prescribed form and verified in the prescribed manner setting forth such particulars within such time as may be prescribed. Any assessee who has not furnished the return within the time allowed or having furnished a return discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made. If an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee fails to furnish in due time the return or by notice given it shall be liable to pay, by way of penalty, a sum of ₹ 100/- for every day during which the failure continues. Assessment The Assessing Officer may serve on any assessee, who has furnished a return, a notice requiring him to produce or cause to be produced on a date to be specified therein such accounts or documents or other evidence as the Assessing Officer may require and may, from time to time, serve further notices requiring the production of such further accounts or documents or other evidence as he may require. The Assessing Officer, after considering such accounts, documents or other evidence, if any, as he has obtained and after taking into account any other relevant material which he has gathered, shall, by an order in writing, assess the value of taxable securities transactions during the relevant financial year and determine the amount of securities transaction tax payable or refundable on the basis of such assessment. No assessment shall be made after the expiry of 2 years from the end of the relevant financial year. Failure to comply with the notice If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer in the course of any proceedings is satisfied that any person has failed to comply with a notice, he may direct that such person shall pay, by way of penalty, in addition to any STT and interest, if any, payable by him, a sum of ₹ 10,000/- for each such failure. Refund Every assessee, in case any amount is refunded to it on assessment, shall, within 30 days, refund such amount to the concerned person from whom such amount was collected. Rectification With a view to rectifying any mistake apparent from the record, the Assessing Officer may amend any order passed by him within 1 year from the end of the financial year in which the order sought to be amended was passed. Where any matter has been considered and decided in any proceeding by way of appeal relating to an order, the Assessing Officer passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order in relation to any matter other than the matter which has been so considered and decided. The Assessing Officer may make an amendment on its own motion or if any mistake is brought to his notice by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the Assessing Officer concerned has given notice to the assessee of his intention so to do and has allowed the assessee a reasonable opportunity of being heard. Where any such amendment has the effect of reducing the assessment, the Assessing Officer shall make any refund, which may be due to such assessee. Where any such amendment has the effect of enhancing the assessment or reducing the refund already made, the Assessing Officer shall make an order specifying the sum payable by the assessee. Appeal Any assessee aggrieved by any assessment order passed by the Assessing Officer under or denying his liability to be assessed or by an order levying penalty, may appeal to the Commissioner of Income-tax (Appeals) within 30 days from the date of receipt of the order of the Assessing Officer in Form No. 4. An appeal against the order of Commissioner of Income Tax (Appeals) shall be made to the Appellate Tribunal in Form No. 5 within 60 days of the date of the order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Where the appeal is made by the assessee, the form of appeal, the grounds of appeal and the form of verification ap pended thereto shall be signed by the Managing Director or the Whole Time Director of the insurance company authorized by the Board in this behalf. False statement in verification etc. If a person makes a statement in any verification, or delivers an account or statement, which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with imprisonment for a term which may extend to three years and with fine. Such offence shall be deemed to be non cognizable. Such proceedings may be initiated with the permission of Chief Commissioner of Income-tax. Application of certain provisions of Income Tax Act The provisions of the following sections of the Income-tax Act, 1961 , as in force from time to time, shall apply, so far as may be, in relation to securities transaction tax as they apply in relation to income-tax- Section 120 Jurisdiction of Income Tax Authorities; Section 131 Power regarding discovery, production of evidence etc., Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 133A Power of survey; Section 156 Notice of demand; Section 178 Company in liquidation; Section 220 When tax payable and when assessee deemed in default; Section 221 Penalty payable when tax in default; Section 222 Certificate to Recovery Tax Officer; Section 223 Tax Recovery Officer by whom recovery is to be effected; Section 224 Validity of certificate and cancellation of amendment thereof; Section 225 Stay of proceedings in pursuance of certificate and amendment or cancellation thereof; Section 226 Other modes of recovery; Section 227 Recovery through State Government; Section 229 Recovery of penalty, fine, interest and other sums; Section 232 Recovery by suit or under any other law affected; Section 260A Appeal to High Court; Section 261 Appeal to Supreme Court; Section 262 Hearing before Supreme Court; Section 265 Tax to be paid notwithstanding reference etc. Section 266 Execution of costs awarded by Supreme Court; Section 267 Amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment of assessment on appeal; Section 268 Exclusion of time taken for copy; Section 269 Definition of High Court; Section 278B Offences by companies; Section 282 Service of notice generally; Section 288 Appearance by Authorized representative; Section 289 Receipt to be given; Section 290 Indemnity; Section 291 Power to tender immunity from prosecution; Section 292 Cognizance of Offences; Section 293 - Bar of suits in Civil Courts. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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