Service charge not distributed to workers by restaurants liable to income tax - CBDT
PrintListen to this Article
The CBDT has said wherever it is found that the service charge receipts have not been passed on to the staff or there is some under-reporting or non-reporting of receipts, it should be duly brought to tax.
“While framing assessments or carrying out verification under provisions of the Income Tax Act, 1961, in case of hotels and restaurants it is necessary to examine whether there is any under-reporting or non-reporting of additional income collected in the name of service charge,” it said in a circular.
Service charge is supposed to be in the nature of ‘tips’ for hotel or restaurant staff and is sought to be collected on their behalf. But there have been reports of some restaurants and hotels not passing it to their staff. Service charge is not taxable and the amount of service charge levied is entirely at the discretion of restaurants and hotels. Usually, the rate is 10% and it is mentioned on the menu.
This follows a clarification by the department of consumer affairs in April 2017 that service charge levied by restaurants and hotels is ‘voluntary’ and customers can refuse or pay according to their wish.
Subsequently, minister of consumer affairs, food and public distribution Ram Vilas Paswan had tweeted on September 12, 2017: “in view of the seriousness of issue, department of consumer affairs has written to CBDT to consider inclusion of service charge while assessing tax”. #casansaar (Source - Economic Times)
Category : CBDT | Comments : 0 | Hits : 502
The Central Board of Direct Taxes (CBDT), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 (the ‘Act’) upto 30th June, 2024. CBDT had earlier extended the due date for filing Form 10A/ Form 10AB by trusts, institutions and funds multiple times to mitigate genuine hardships of the taxpayers. The last such extension was made by Circular No. 06/2023 extending the date to...
Certain instances of mismatch of information as filed by the taxpayer and as available with the Income Tax Department have come to the notice of the Department as part of its routine exercise of verification of data. In such cases, the Department has alerted the taxpayers to enable them to take corrective action. However, some posts on social media, as well as articles in the media, have highlighted enquiries initiated by the Central Board of Direct Taxes (CBDT) in cases where employees have mad...
The Central Board of Direct Taxes (CBDT) has said the Income Tax department can file appeals irrespective of monetary threshold in cases relating to TDS/TCS, undisclosed foreign income, or information received from investigating agencies like ED and GST Intelligence. As per the present rules, tax authorities are allowed to file appeals before the ITAT, High Court and Supreme Court, if the disputed tax demand exceeds Rs 50 lakh, Rs 1 crore and Rs 2 crore, respectively. These thresholds were fi...
Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in specified sub-clauses of section 10 (23C) of the Income-tax Act, 1961 (the ‘Act’) or any trust or institution registered under section 12AA/12AB of the Act is exempt, subject to fulfilment of certain conditions specified under various sections of the Act. One of the conditions required to be fulfilled by the tru...
Central Board of Direct Taxes (CBDT) on Monday ordered withdrawal of small tax demands that finance minister Nirmala Sitharaman had announced in her FY25 budget speech to improve ease of living. CBDT said that tax demand up to ?25,000 for assessment year up to 2010-11 and demands up to ?10,000 from the next year up to assessment year 2015-16 will be extinguished. However, any criminal action initiated or planned under any law will not be dropped. Any tax demand raised against taxes collect...
Comments