Non-resident investors who do not provide permanent account number will no longer have to face higher tax deduction at source.
The income tax department has eased norms for non-resident investors, who will not be subjected to a higher rate of 20% tax deduction at source or TDS on their interest earnings, royalty or technical fee if they furnish some personal details and tax residency certificate from their home country and a few other easily available documents.
“Provisions of Sec 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset,” the Central Board of Direct Taxes said in a notification. Section 206AA of I-T Act provides that if an investor does not have permanent account number or PAN, he or she will be liable to withholding taxes on payments at the rate of 20% or as per tax treaty with the country where investor is resident, whichever is higher.
This clause forced non-resident investors to seek PAN, making investment process difficult.
Under the new rules 37BC, investors will instead need to provide their personal details such as e-mail and contact number, residential address and tax residency certificate from the government of their home country.
In case the country does not provide tax residency certificate, the investor can provide tax identification number or any other unique identification number issued by the country of residence. This will spare investors the hassles of securing PAN in India and attendant compliance that comes with having this number.
Finance minister Arun Jaitley had said in his budget speech in February that some concession would be provided in this regard. “Non-residents without PAN are currently subjected to a higher rate of TDS. It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply,” Jaitley had said, without spelling out the details.
Income Tax Department has asked its officers to make “all out efforts” to attract potential declarants under the domestic black money window by assuring them of confidential and hassle-free disclosures.
In order to give wide publicity, the CBDT has also suggested putting up posters about the Income Declaration Scheme-2016, at places frequented by potential declarants, like club houses, posh markets, showrooms of high end products.
The four-pronged strategy prepared by the CBDT for the success of the scheme, includes single point contact to ensure confidentiality, setting up of facilitation centres across the country, giving wide publicity and monitoring at the highest level.
Finance Minister Arun Jaitley in Budget had announced a four-month window under the Income Declaration Scheme 2016. The scheme, which opened on June 1, allows domestic black money holders to declare ill-gotten wealth and come clean by paying a tax and penalty totalling 45 per cent.
“All out efforts are to be made to ensure the targeted taxpayers are well informed about the scheme and are adequately guided and facilitated for filing declarations so that they can avail maximum benefits under the scheme, which is under highest consideration of the government during the coming months,” the CBDT said in an office memorandum.
In order to ensure confidentiality of the declarants, the Central Board of Direct Taxes (CBDT) has said only Principal Commissioner or Commissioner Income Tax should act as a “single point of contact” for interacting with the declarants.
“Such Pr CIIT/CIT should be the one and only point of contact with the respective declarant. The idea is to ensure the declarant is not exposed to multiple persons in the office so that his confidentiality is not compromised and he is able to file the declaration in a hassle free manner,” it added.
The detailed action plan for the success of black money disclosure scheme was discussed at the annual conference of tax administrators last week.
In its strategy, CBDT has asked Principal Commissioners and Commissioners to provide all “procedural facilities” at the time of disclosure so as to avoid additional interaction with anyone else in the office.
“All records related to IDS-2016 must be kept in the personal custody of the respective Principal CIT /CIT officer in a safe and secure manner,” it said, adding officer with “good inter-personal skills” be deputed as ‘Facilitation Officer’ to answer queries related to the scheme.
In every city where Principal Commissioner is stationed, a “facilitation centre” in the nature of help desk may be opened for disseminating information about the scheme.
The CBDT has also asked its senior officers to hold “frequent meetings” with trade and industry bodies and professional associations, besides organising town halls and seminars.
In order to step up publicity for the scheme at local level, tax officers should disseminate information through posters in regional languages, stalls at local fairs.
In order to ensure monitoring at the highest level, CBDT said ‘IDS Banner’ will become functional next week on its website where the officers would upload their meeting details.
This will help compare the progress made in organising the campaign.
Last year the government came up with a similar scheme for persons having unaccounted black money abroad. Disclosures during that window were charged with a total tax and penalty of 60 per cent.
A total of Rs 4,147 crore of undisclosed wealth was declared during the 90-day foreign black money compliance window that ended September 30. At 60 per cent (30 per cent tax and 30 per cent penalty), the government got a net tax of Rs 2,500 crore from the declarations.
Small businesses with a total turnover of up to Rs 2 crore will not be required to get their accounts audited if they opt for presumptive taxation scheme, the finance ministry said on Monday.
“The higher threshold (up to Rs 2 crore) for non-audit of accounts has been given only to assessees opting for presumptive taxation scheme under section 44AD,” the ministry stated.
Section 44AB of the Income Tax Act makes it obligatory for every person carrying on business to get his accounts of any previous year audited if his total sales, turnover or gross receipts exceed Rs 1 crore.
“However, if an eligible person opts for presumptive taxation scheme as per section 44AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed Rs 2 crore,” the statement said.
Finance Minister Arun Jaitley in the 2016-17 Budget had proposed to increase the turnover limit under the presumptive taxation scheme under section 44AD of the Income Tax Act to Rs 2 crore “which will bring big relief to a large number of assesses in the MSME category”.
Jaitley had said if the taxpayer opts for the presumptive taxation scheme, he has to remain in that scheme for 5 years.
Given the need for large chunks of equity capital to infuse new life into banks’ stressed assets, the government plans a new fund of “significant size” with this mandate, minister of state for finance Jayant Sinha said on Tuesday. A variety of other funds including the proposed National Infrastructure Investment Fund (NIIF) could help bolster the planned stressed assets fund, he added.
“We need an efficient resolution (of the issue of rising stressed assets) and recovery process for our banks,” Sinha said on the sidelines of a conference organised by rating agency Crisil on the deepening of corporate bond markets. He said a committee might be set up to take a look at what kind of haircuts would need to be taken by banks and what their sustainable levels of debt could be. While these could be commercial decisions taken by banks, the government would ensure the process is carried out with integrity, he emphasised.
Many state-owned lenders are facing a tough situation, having reported large losses owing to assets turning sour. Gross non-performing assets in the banking system at the end of March are estimated at Rs 5.7 lakh crore while the provisions set aside by banks in FY16 was Rs 1.43 lakh crore. Total losses of PSBs in FY16 was Rs 17,022 crore.
“We expect a variety of funds — distressed debt funds, special situations fund and NIIF — to participate in the equity investments in these stressed assets,” the minister said. The NIIF, intended to give a leg-up to the country’s efforts to find the elusive equity capital for its huge plans for infrastructure creation, is being set up with an initial corpus of Rs 40,000 crore, half of that from the government, which will remain a minority partner.
The NIIF, which will have several sector-specific sub-funds, is expected to catalyse financing of infrastructure projects by leveraging the corpus multiple times. Many global sovereign wealth funds including the Abu Dhabi Investment Authority, Singapore’s Temasek and Russian Direct Investment Fund have evinced interest in investing in the NIIF. The search for the CEO of the fund has reached the final stage, the minister indicated.
Sinha said: “There are also many other players who are looking to invest in the stressed assets of Indian banks. So we expect that there will be a vibrant market to be able to take these assets that are in need of equity capital right now.” On Tuesday, finance minister Arun Jaitley, on a visit to Japan, pitched for investments in the NIIF to Japanese investors.
While Sinha has indicated the NIIF’s participation in the proposed stressed assets fund, the former’s stated objective has been to maximise economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects if commercially viable.
The government on Friday unveiled the national intellectual property rights (IPR) policy to create a larger institutional framework to strengthen the IPR regime, with the slogan “Creative India, Innovative India”. While the policy focused on issues like expediting approval processes involving patents or trademarks and consolidating institutional mechanisms to create a robust IPR ecosystem, it refrained from suggesting any change to contentious provisions in the Patents Act, 1970, including Section 3(d) and compulsory licensing, despite concerns expressed by the US and Big Pharma.
Nevertheless, the policy provides for constructive engagement “in the negotiation of international treaties and agreements in consultation with stakeholders” and likely accession to some multilateral treaties that are in India’s interest. It also suggests tax incentives to boost R&D and the creation of a loan guarantee scheme to encourage start-ups and cover the risk of genuine failures in commercialisation based on IPRs as mortgageable assets.
The policy suggests making the department of industrial policy and promotion (DIPP) the nodal point coordinate for IPRs in India, even though the onus of actual implementation of the plans of action will be on the ministries/departments concerned in their sphere of work. So, for instance, the administration of the Copyright Act, 1957 (now under the department of higher education) and the Semiconductor Integrated Circuits Layout-Design Act, 2000 (under the department of electronics and information technology) will be brought under the DIPP.
This, it is believed, will lead “to synergetic linkage between various IP offices under one umbrella”. Interestingly, it seeks to protect traditional knowledge systems like Ayurveda, yoga and naturopathy — be it in oral or in codified form — from misappropriation, and also curb film piracy by suitably amending the Indian Cinematography Act, 1952.
Announcing the approval to the policy by the Cabinet, finance minister Arun Jaitley stressed that India’s IPR policies are WTO-compliant. He added that one must encourage invention of life-saving drugs and at the same time “we must also be conscious of the need to make it available at a reasonable cost so that drug cost does not become prohibitive as has become in some parts of the world”.
Responding to concerns expressed by developed countries like the US on Section 3(D) and compulsory licensing, Jaitley said: “We do believe that the balancing act which India has struck is responsible for lifesaving drugs available at a reasonable cost in India compared to the rest of the world. So, our model seems to be both legal, equitable and WTO-compliant.”
Section 3(d) prevents evergreening of drug patents. Apart from novelty and inventive step, the section provides for improvement in therapeutic efficacy a necessary condition for grant of patents when it comes to incremental inventions. Compulsory licensing allows domestic players to produce cheaper versions of patented drugs. The US and the EU have been pushing India to make appropriate changes to these provisions to boost innovation, R&D and foreign investment. Recently, releasing its annual 301 report, the US retained India on its priority watch list, citing “lack of sufficient measurable improvements” to the IP framework despite robust engagement and positive steps on intellectual property protection and enforcement by the Indian government in the last two years.
The finance minister said by 2017, trademarks can be registered within a month. Currently, in some cases, this process takes even a few years. According to Jaitley, there are seven objectives that guided the policy mechanism, which include IPR public awareness, stimulation of generation of IPRs, need for strong and effective laws and strengthening enforcement and adjudicatory mechanisms to combat infringements.
Hailing the move, industry body Nasscom said the new policy has captured issues, including difficulties that companies face in monetising intangibles like IPR, suitably and the proposal to create a “simple loan guarantee scheme to encourage start-ups” based on IPRs as mortgageable assets; financial support and securitisation of IPRs for commercialisation by enabling valuation of IP rights as intangible assets through of appropriate methodologies and guidelines, and enabling legislative, administrative and market framework are in the right direction.
The policy also puts a premium on enhancing access to healthcare, food security and environmental protection. It is expected to lay the future road map for intellectual property in India, besides putting in place an institutional mechanism for implementation, monitoring and review
Kept closely under wraps, a new project being readied by the Income Tax Department ahead of the upcoming Budget could provide fresh ammunition to the NDA government’s fight against domestic black money. Code named ‘Project Insight’, the scheme is focused on extensive data mining and the processing of the details available about the country’s 22.94 crore PAN (permanent account number) allottees, with the specific intention of monitoring fund flows across identities and accounts. The aim is to generate an actionable audit trail of high value transactions by way of sequenced transaction history of an individual or entity, where a PAN number has been quoted, in any part of the country.
Project Insight, according to officials involved in the exercise, is to be implemented in a phased manner during the three-year period spanning 2016-18. The upcoming Budget is likely to spell out details of the first phase of this project, which is likely to rank tax assesses based on the chain of transactions and the value undertaken by them on the basis of the quoted PAN number, so that the authorities could focus their efforts on going after the highest value targets first.
“The project will build on the capacity of the Income Tax Department to access information and apply technology driven-analytical tools to expose evasion, besides improving its ability to detect large cash withdrawals, or large cash transactions that enter the system. Project Insight aims to comprehensively mine the data collated,” an official said.
The finance ministry had last year floated a tender worth over Rs 150 crore to select a managed service provider for developing a data warehousing and business intelligence back end for implementation of ‘Project Insight’. This involved buying data analytics software and the peripheral infrastructure accompanying it.
The PAN is the unique identifier which is used by the tax department to link and analyse various transactions relating to the taxpayers and the income tax law mandates quoting of PAN for specified transactions above a threshold including purchase of immovable and movable property, bank deposits and financial assets.
The Finance Act 1998 made quoting of PAN compulsory for a number of transactions such as opening of bank account and deposit exceeding Rs 50,000. As a result, Section 139A of the Income Tax Act, read with rules 114B and 114C, makes quoting of PAN compulsory for certain transactions. The idea is that these transactions will contain PAN which can then be matched with the declarations made by the taxpayers.
However, the rules allow for persons not having PAN to file Form No. 60 and those having agricultural income to file Form No. 61. The CAG 2011 report found widespread misuse of this facility and even companies that are compulsorily required to file returns of income used these forms.
According to the a March 2015 report of the Tax Research Cell of the National Institute of Public Finance and Policy, a major part of the information remained unutilised and there was no uniform system to process these forms for follow up action. Subsequently, a Task Force on Direct Taxes set up by the finance minister had also reviewed the working of the information collection system of the CBDT and in that connection pointed out certain deficiencies that are pertinent even now.
In his last Budget, finance minister Arun Jaitley had proposed making quoting of PAN mandatory for all sale and purchase of over Rs. 1 lakh. Thereafter, under pressure from representations from legislators, trade and industry associations, against the proposed mandatory quoting of PAN for sale or purchase in excess of Rs. 1 lakh, on December 16, the Centre had made it mandatory to quote PAN for all transactions in excess of Rs.2 lakh, regardless of the mode of payment, to curb black money.
The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” he told reporters at the Indian High Commission in London.
Amid fears of the global economy edging close to recession, India and UK have agreed to open up trade and markets to support growth, carry out structural reforms and address issues related to cross-border tax evasion.
After talks between India’s Finance Minister Arun Jaitley and UK Chancellor of the Exchequer George Osborne, the two nation’s agreed to boost economic ties particularly in areas of infrastructure and financial services and renewed pledge for autonomical exchange of tax information from 2017.
“From the Indian point of view, we were extremely interested in having the British investors look at infrastructure investments in India for which various possibilities were discussed,” Jaitley said after the talks.
India, he said, is “extremely keen that large British companies, particularly involved in infrastructure financing, start investing in Indian infrastructure”.
The two nations will work together for developing an India-UK partnership fund under the umbrella of National Investment and Infrastructure Fund (NIIF) recently created in India.
“This fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure,” a joint statement issued after talks said.
The world’s fifth largest economy will work on development of smart cities in India. New Delhi is also looking at London for issuance of rupee-denominated bonds to get UK investors to fund its infrastructure projects.
“The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” Jaitely told reporters at the Indian High Commission here.
With the IMF warning of global economy being close to recession with 3.4 per cent growth this year, the two sides said they “remain concerned that global growth is falling short of expectations and that the risks to the global outlook have increased”.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies,” the joint statement said.
The joint statement talked about advancement of cooperation in a range of sectors including infrastructure financing, addressing issues of cross-border tax evasion/ avoidance besides opening up of the Indian legal sector to foreign lawyers.
“The UK and India share a common commitment to address cross-border tax evasion and avoidance. Both sides have committed to the Common Reporting Standards (CRS) on Automatic Exchange of Tax Information and will begin exchange in 2017,” the statement said.
“We call on other countries to meet the commitments they have made and to implement the new standard on time,” it said.
During the talks, which included senior representatives from Finance Ministries, Central Banks and key regulators of both countries, the two leaders discussed ways to strengthen the Indo-UK existing economic partnership in order to further boost trade and investment, and to build on the success of Prime Minister, Narendra Modi’s recent summit with his British counterpart David Cameron in the UK.
“Given the fact that even in a somewhat difficult global scenario, India is managing a reasonable growth rate, this is one of the better options that investors have and that kind of a sentiment gets really echoed in the meetings with the investors that we had. Of course, the investors are also keenly watching which way our reform process in India goes,” Jaitley said.
The two nations agreed to work together on building commercial and regualtor-to-regulator links that can underpin further fintech growth in both countries.
“The UK and India agreed to renew the existing mandate of the India-UK Financial Partnership, and building on the re-establishment of the CEO Forum,” the statement said, adding that potential areas of interest for the India-UK Financial Partnership could be reinsurance, international use of the rupee, role of financial technology, financial inclusion, investor protection and green finance.
“The global economy is facing serious challenges and therefore the estimates of global growth also have been repeatedly lowered. Compared to how various countries across the world have been doing, India’s growth rate despite these challenges is probably the highest in the world among major economies,” Jaitley said, in reference to his meetings with investors at Goldman Sachs and London Stock Exchange.
As a follow up on Prime Minister Modi’s announcement during his UK visit last November on the listing of Rupee bonds in London, the minister said, “the UK is very keen for these to be listed in London and broadly the economic and financial dialogue was carried further”.
During the dialogue, the two sides recognised that as the leading financial centre in the world and in the view of successful issuance of Masala bonds issued by the International Finance Cooperation last year, London will be an attractive location for issuance of rupee-denominated bonds.
“The bonds, which were first announced during the visit of Prime Minister Modi to the UK in November, illustrate the crucial role that the UK’s capital markets can play in an enhanced economic relations relationship with India, with UK investors providing financing for the transformation of India’s infrastructure and continued rapid economic growth,” the statement said.
India and the UK also agreed that the development of deeper markets in rupee-linked products, and the increasingly sophisticated relationship between the Indian and UK financial sectors, are important underlying factors in fostering an enduring economic and financial partnership.
Both sides agreed to continue working closely on the development of smart cities in India.
“We will continue to build on and further embed the existing Technical Assistance Partnerships that were announced during Prime Minister Modi’s recent visit to the UK, and to continue working together on research collaboration and other measures to support India’s 100 Smart Cities programme,” the statement said.
While noting the strength of the economic outlook for both countries, the two sides expressed concern that global growth is falling short of expectations and that the risks to the global outlook have increased.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies in order to raise living standards,” it said.
India and the UK also agreed to work together with the aim of developing an Indo-UK partnership fund under the umbrella of the NIIF. The fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure.
The working group to be established will report back within the course of 2016 on a proposed fund strategy and delivery approach, the statement said.
“As part of this, India and the UK also both recognise the importance of identifying the sector or sectors where there is greatest potential for developing sustainable project pipelines, and of developing a supportive institutional environment for investment and delivery,” it said.
Non-resident investors who do not provide permanent account number will no longer have to face higher tax deduction at source.
