Government notifies simplified ITR forms; e-filing to start from April 1

by | posted in: Corporate Updates, Income Tax,e-Filing- Individuals, Firms, Companies | 0

The government today notified a simpler, one-page form for filing income tax returns while making it mandatory to quote Aadhaar number and disclose bank deposits of more than Rs 2 lakh post demonetisation.

The Income Tax Return Form-1 (Sahaj) will replace the 7-page form, removing a plethora of columns on deductions from income claimed.

Sahaj can be filed by an individual having income of up to Rs 50 lakh from salary, house property and interest.

Currently, SAHAJ (ITR 1) is filed by salaried employees and ITR 2 by individuals and HUFs whose income does not include income from business.

The government has done away with form ITR 2A (used by individuals & HUFs not having income from business or profession and capital gains and by those who do not hold foreign assets).

Sahaj makes quoting of 12-digit biometric identifier Aadhaar number mandatory along with Permanent Account Number (PAN) and also seeks details of cash in excess of Rs 2 lakh that was deposited in bank accounts in the 50-day post demonetisation window.

ITR 2 and ITR 3 have a Schedule AL requiring assessees to declare their assets and liabilities at the end of the fiscal.

Only 6 crore out of 29 crore persons having PAN file income tax returns at present.

The e-filing facility for ITR-1 is enabled from April 1 and ITRs can be filed till the stipulated deadline of July 31.

While the old ITR form too had column to quote Aadhaar, the government has through an amendment to the Income Tax Act this week made quoting it mandatory.

“The Central Board of Direct Taxes has notified Income- tax Return Forms (ITR Forms) for the Assessment Year 2017-18. One of the major reforms made in the notified ITR Forms is the designing of a one page simplified ITR Form-1 (Sahaj),” CBDT said in a statement.

In the new form, parts relating to tax computation and deductions have been rationalised and simplified for easy compliance.

Besides personal details, an income tax filer needs to disclose only his income from salary or pension, one house property and other sources like interest. Thereafter, deduction claims are to be stated, followed by computation of taxable income.

Bank details are to be filled in the column following that. Details of advance tax, self-assessment tax payments and tax deducted at source come next.

In the column for providing bank details, cash deposited in excess of Rs 2 lakh during November 9 to December 30, 2016 has to be mentioned.

The rationalised ITR will “reduce the compliance burden to a significant extent on the individual tax payer,” the CBDT said, adding that the move would benefit more than two crore tax-payers who will be eligible to file their return of income in this simplified Form.

Instead of 20 columns of deductions in the old form, only four deductions claims in respect of Section 80C, 80D, 80G and 80TTA need to be filled.

“Simultaneously, the number of ITR Forms have been reduced from the existing nine to seven forms. The existing ITR Forms ITR-2, ITR-2A and ITR-3 have been rationalised and a single ITR-2 has been notified in place of these three forms,” it said.

Consequently, ITR-4 and ITR-4S (Sugam) have been renumbered as ITR-3 and ITR-4 (Sugam) respectively.

There will be no change in the manner of filing of ITR Forms and all the returns are to be filed electronically.

However, where return is furnished in ITR-1 (Sahaj) or ITR-4 (Sugam), an individual of the age of 80 years or more, an individual or HUF whose income does not exceed Rs 5 lakh and who has not claimed any refund in the return of income, have an option to file return in paper form.

At the time of filing the form, the taxpayer has to fill in PAN, Aadhaar number, personal information and information on taxes paid. TDS will be auto-filled in the form.

Post July 1, as per amendments to the Finance Bill 2017 as passed by the Lok Sabha, it would become mandatory for an assessee to provide the Aadhaar number or the number showing that he has applied for Aadhaar in the ITR.

Also ITR 4 (filed by Individuals & HUFs having income from a proprietary business or profession) will now be known as ‘Sugam’ and ITR-4S will be substituted.

“Going forward for AY 2017-18, the benefit of using the simplest ITR form i.e. ITR-Sahaj shall not be available to the following category of taxpayers: those earning total income of more than Rs 50 Lakh, those earning dividend income of more than Rs 10 lakh and those whose total income includes cash credits, unexplained investments, unexplained money etc,” said Nangia & Co Partner Suraj Nangia.

Similarly, ITR 4 (Sugam) cannot be used by the following category of taxpayers — those earning dividend income of more than Rs 10 lakh, those whose total income includes cash credits, unexplained investments, unexplained money etc.

“Owing to the aforesaid changes, taxpayers earning income for these sources will have to file a more detailed form containing disclosure in respect of their assets and liabilities, bank accounts etc,” Nangia said.

I-T refunds rise by a whopping 41.5%, government issues 1.62 cr refunds worth Rs 1.42 lakh cr

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0
The income tax department has issued refunds to the tune of Rs 1.42 lakh crore so far this fiscal till February 10, 41.5 per cent higher than last year’s.

The income tax department has issued refunds to the tune of Rs 1.42 lakh crore so far this fiscal till February 10, 41.5 per cent higher than last year’s. The Centralised Processing Centre (CPC) of the tax department has already processed over 4.19 crore income tax returns (ITRs) and issued over 1.62 crore refunds during the current financial year up to February 10, 2017.

“The amount of refunds issued at Rs 1.42 lakh crore is 41.5 per cent higher than the corresponding period last year,” an official statement said. As much as 92 per cent of the refunds issued are below Rs 50,000 due to the high priority given to expeditious issue of refunds to small taxpayers.

Only 2 per cent of refunds less than Rs 50,000 remain to be issued. A majority of these cases relate to recently-filed ITRs or where the taxpayer’s response to the department is awaited.

The department also advised taxpayers to verify and update their e-mail address and mobile number on the e-filing portal to receive electronic communication.

“CBDT is committed to ensuring best possible taxpayer services through its e-governance programmes and increasing the coverage and scope of electronic filing and processing of various forms and applications,” the statement said.

As a result of emphasis on expeditious issue of refunds, 92 per cent of all I-T returns were processed within 60 days, demonstrating the Central Board of Direct Taxes’ (CBDT) commitment to faster and more efficient taxpayer service.

As many as 4.01 crore ITRs were e-filed till February 10, 2017, an increase of 20 per cent over the previous year.

Also, more than 60 lakh other online forms were filed with an increase of nearly 41 per cent compared with the previous year.

In April-January, the total direct tax collection grew 10.79 per cent to Rs 5.82 lakh crore led by robust collections in personal income tax.

CAs, Merchant Bankers face fine if assessees file wrong tax information

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
CBDT chairman Sushil Chandra addressing a CII interactive session on Union Budget 2017-18 in New Delhi on Monday.

From April 1, chartered accountants (CAs), merchant bankers and valuers can’t escape responsibility for filing of incorrect information in certificates or reports attached with income tax returns of assessees.

 

They will be fined Rs 10,000 for each such certificates or reports, according to a provision in the Budget for 2017-18.

 

For this purpose, the Budget has proposed to insert a new section, 271J, in the Income Tax Act.

 

“Under Section 271J… we have entrusted responsibility with chartered accountants, valuers and merchant bankers who files audit, valuation reports and other things…,” CBDT Chairman Sushil Chandra said at a post-Budget interaction with PHD Chamber of Commerce and Industry here. “So, if they file any incorrect information in the returns, they are also liable for a token penalty of Rs 10,000.”

 

The whole system is based on “a lot of faith on CAs and assessees and they have to be more responsible”, he said.

 

While there are many provisions to penalise the defaulting assessees, there was none to penalise CAs, merchant bankers and valuers.

 

A memorandum to the Finance Bill said: “In order to ensure that the person furnishing reports or certificates undertakes due diligence before making such certification, it is proposed to insert a new section (271J in the Act) so as to provide that if an accountant or a merchant banker or a registered valuer furnishes incorrect information in a report or certificate, the assessing officer or the commissioner (appeals) may direct him to pay a sum of Rs 10,000 for each such report or certificate by way of penalty.”

 

Chandra said the objective of the Budget was to improve tax compliance along with increasing tax base and improving ease of doing business.

 

Non-compliance level was high despite low tax, he said, adding that Indians named in various black money reports, including Panama Papers, were among the highest.

 

He pointed to high level of evasion of tax and tendency to export black money to foreign shores in spite of having global practices and standards, emphasising that this has to come down. “The department has done its bit, now it’s time for the taxpayers to show their respect to the law of land,” he said.

 

On long-term capital gains tax, he said the Budget has tried to plug gaps.

 

In the past few years, the tax department has detected Rs 80,000-crore sale consideration through the penny stock mechanism, the CBDT chief said, adding that this was used for conversion of black money into white.

 

However, “neither have we changed capital tax regime nor have we changed any law. So, whosoever was getting the benefit of long-term capital gains through ESOP, IPO and FPO is not going to change”.

 

Nothing is going to change except misuse, he clarified.

All I-T returns must be filed by March-end of assessment year

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

 

If the income exceeds Rs 5 lakh, a fee of Rs 5,000 shall be payable

With a view to expedite tax assessments, the income tax department proposes to make it mandatory for tax payers to file I-T returns as well as revised returns by March end of the assessment year (AY).

The department, in the memorandum to Finance Bill 2017, has also proposed a fee for delayed filing of income tax returns. In case of people whose total income does not exceed Rs 5 lakh, Rs 1,000 fee would be charged.

If the income exceeds Rs 5 lakh, a fee of Rs 5,000 shall be payable, if the return is filed after July but on or before December 31 of the Assessment Year (AY). A fee of Rs 10,000 shall be payable if ITR is filed after December.

“In order to expedite assessments of the Department, it is critical that the returns for an assessment year also freeze by the end of the assessment year. It is hence proposed to amend the provisions of sub-section (5) of section 139 to provide that the time for the furnishing of revised return shall be available up to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier,” said the memorandum to the Finance Bill 2017.

This effectively means that people filing Income Tax returns have to file it with the department by March end of the assessment year i.E return for fiscal 2017-18 has to be filed by March 2019.

CBDT Chairperson Sushil Chandra said: “Today we have 1 crore people below Rs 2.5 lakh income filing tax returns. So if they are filing ITR, we want them to file returns on time. So now timely filing of ITR is mandatory.”

So far assesses were permitted to file delayed income tax returns one year after the completion of the assessment year.

Source: http://www.business-standard.com/article/economy-policy/all-i-t-returns-must-be-filed-by-march-end-of-assessment-year-117020201119_1.html

Benami Act comes into play: I-T issues 87 notices; attaches assets worth crores

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0
The Income Tax department said it has issued 87 notices and attached bank deposits worth crores in 42 cases nationwide.
Initiating a stringent action against black money holders post notes ban, the Income Tax department on Monday said it has issued 87 notices and attached bank deposits worth crores in 42 cases nationwide under the newly enforced Benami Transactions Act which attracts a heavy penalty and rigorous jail term of a maximum 7 years.Post the demonetisation order of the government on November 8 last year, the department had carried out public advertisements and had warned people against depositing their unaccounted old currency in someone else’s bank account saying such an act would attract criminal charges under the Benami Property Transactions Act, 1988, applicable on both movable and immovable property, that has been enforced from November 1, 2016.“After in-depth investigations, the I-T department has issued 87 notices under section 24 of the said Act (notice and attachment of property involved in benami transaction). A total of 42 properties, largely monies worth crores in bank accounts and an immovable property, of benamidars have been attached,” officials said citing an analysis report, also accessed by PTI.The I-T department is the nodal department to enforce the said Act in the country.They said the taxman has issued numerous summons under the Benami Transactions Act and is in the process of issuing more.

The decision, they said, to slap the stringent provisions of the Benami Transactions Act was taken after analysing serious cases where the illegalities were blatant and suspect cash was deposited in either benami accounts or Jan Dhan or dormant accounts.

The taxman had initiated a nationwide operation to identify suspect bank accounts where huge cash deposits have been made post November 8 when the government demonetised the Rs 500 and Rs 1000 currency notes.

Officials said the Act empowers the taxman to confiscate and prosecute both the depositor and the person whose illegal money he or she has “adjusted” in their account.

“Such an arrangement where a person deposits old currency of Rs 500 and Rs 1000 in the bank account of another person with an understanding that the account holder shall return his money in new currency, the transaction shall be regarded as benami transaction under the said Act.

“The person who deposits old currency in the bank account shall be treated as beneficial owner and the person in whose bank account the old currency has been deposited shall be categorised under this law as a benamidar,” a senior official had explained earlier.

Source: http://www.hindustantimes.com/india-news/benami-act-comes-into-play-i-t-issues-87-notices-attaches-assets-worth-crores/story-d5idzriuNZtuuRQ0xyghQP.html

Tax avoidance rules: POEM norms to take effect from April, 2017

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

Confirming that India’s so-called POEM regulations — which are meant to ascertain the residential status of companies and use it to curb tax avoidance — will take effect from April 1, the Central Board of Direct Taxes (CBDT) on Tuesday issued the final guidelines in this regard. While the draft Place of Effective Management rules issued in December 2015 had caused a stir in the industry for being out of sync with transnational business realities (under pressure from businesses, Budget FY17 deferred POEM activation by one year), the new draft narrowed the scope of the tool and sought to allay most concerns of the investor community about its potential improper use/misuse.

The CBDT has made it clear that POEM’s intent is  not to target Indian multinationals, which have legitimate business activities outside India, but to pin down shell companies  and firms created for retaining income outside India although the real control is exercised from India.

In what would reduce the chances of an assessing officer invoking the POEM provision without proper evaluation, the new rules state that she will need approval of a three-member collegium of her senior officers for triggering the test. Also, it has now been clarified that POEM guidelines won’t apply to companies having turnover or gross receipts of Rs 50 crore or less in a financial year. The regulations, the CBDT said, would apply for assessment year 2017-18 (FY17) and further.

“The guiding principles issued by the CBDT seeks to address some of the practical issues which could arise in application of the POEM test. The guideline strikes the right balance between providing certainty to taxpayers as well as ensuring that offshore companies with no substance or activities, which are controlled from India, are subject to Indian tax jurisdiction,” Rajendra Nayak, tax partner, EY India, said.

The POEM principle — which has found traction with tax authorities in capital-exporting countries and the OECD — was included in India’s I-T Act via the Finance Act, 2015 with the express purpose of discouraging the creation of shell companies with Indian shareholders in foreign jurisdictions to avoid tax residency in India. If a company is treated as resident in India, its worldwide income is taxable here, while only the India-sourced income of foreign companies is taxed. Although the tax rate on foreign companies is higher (40% versus the marginal rate of 30% for domestic firms), subjecting worldwide income to taxation could potentially increase the tax liability of many MNCs with Indian stakeholders. In fact, the real reason behind POEM is the tax department’s intent to curb corporate structures allowing passive foreign income — royalty, dividend, capital gains, interest income and the like — of firms incorporated in foreign countries with Indian ownership, escaping the tax net here. Tuesday’s draft, analysts said, gives further guidance on “active business outside India” test especially with respect to determination of passive income, total asset base, number of employees and payroll expenses in India and outside.

The new norms provide that if board of directors delegates authority to make key management decision/commercial decision to the promoter or strategic/legal/ financial advisors, the place of effective management will be the place where such persons makes those decisions.

Rakesh Bhargava, director, Taxmann, said: “In the final guidelines the CBDT has provided adequate safeguards to ensure that POEM guidelines does not become an oppressive tool in the hands of revenue to harass genuine assessees. Now, assessing officer can ascertain the residential status of foreign company on the basis of POEM guidelines only after taking two-stage approval; first approval is required before initiating any proceedings and second approval is needed before giving any final finding on residential status of foreign company.”

Giving additional clarifications, the CBDT said the decisions made by shareholder on matters which are reserved for shareholder decision under the company laws are not relevant for determination of a company’s POEM. However, the circular added, the shareholder’s involvement can, in certain situations, turn into that of effective management. “Therefore, whether the shareholder involvement is crossing the line into that of effective management is one of fact and has to be determined on case-to-case basis only,” the circular said.

Furthermore, the guidelines stressed that day-to-day decisions taken by junior or middle management of a company wouldn’t be taken into account for determining POEM. However, in certain situations where the person responsible for operational decision is also the one responsible for the key management and commercial decisions, it will be necessary to distinguish the two type of decisions and assess the location where the key management and commercial decisions are taken.

Source: http://www.financialexpress.com/economy/tax-avoidance-rules-poem-norms-to-take-effect-from-april-2017/521170/

CBDT tightens screws on shell companies

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies, India & International - Corporate updates | 0

The Central Board of Direct Taxes (CBDT) on Tuesday issued the much-awaited “guiding principles” for determination of a Place of Effective Management (PoEM) of a company, scotching speculation that the Budget may see its removal from the statute book.

Put simply, PoEM means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.

The CBDT guidelines come barely two months before the end of fiscal year 2016-17, in which PoEM had become legislatively effective, giving little time for Indian multinationals to prepare for the new regime.

The main objective of introducing PoEM was to ensure that companies incorporated outside India but controlled from India do not escape taxation here. It also brings in the concept of residency of corporates with internationally accepted principles, say tax experts.

Girish Vanvari, National Head of Tax, KPMG in India, said that the guidelines stress on substance over form. “They attempt to differentiate between shareholder control, management control and routine decisions. Whilst the guidelines are comprehensive, they are subjective on substance and can be challenged for interpretation in many places,” he said.

Narrower application

Rohinton Sidhwa, Partner, Deloitte, Haskins & Sells LLP, said that what has been released has a narrower application than what was originally proposed. They are also supplemented with examples on isolated facts that will not lead to a PoEM as also illustrative interpretations. The legislative amendment was effective from April 1, 2016, whereas the guidelines are being released only today, Sidhwa pointed out.

Hitesh Sawhney, Partner — Direct Tax, PwC, said thatCBDT has clarified that the intent of PoEM provisions is to target shell companies/companies that are created to retain income outside India and not Indian MNCs engaged in business overseas.

Stress on substance

Aseem Chawla, Managing Partner, ASC Legal, a law firm, said that the finalised guidance relies on substance over form and that routine operational decisions shall not be relevant for PoEM determination.

“Also a panel of three commissioners is to affirm the proposed decision of the assessing officer on the PoEM of a foreign company. Hopefully, this will not impinge upon the right to appeal by the foreign company before a judicial forum,” he added.

Now that the final guidelines are out, will the government go ahead with a Controlled Finance Corporation (CFC) structure or not? Says Daksha Baxi, Executive Director, Khaitan & Co: “My personal view is that CFC is a better anti-avoidance provision, less prone to subjectivity and therefore less litigative.” It seems that at least for the current year, where PoEM is applicable, the government wants to ensure that the provision can be properly implemented, she said.

Rahul K Mitra, Head of Transfer Pricing & BEPS, KPMG in India, said: “With guidelines for PoEM out, it looks like they may not be introducing CFC.”

Jiger Saiya, Partner – Direct Tax, BDO India, echoed his thoughts, saying the “government seems inclined towards implementing the PoEM framework rather than introducing an alternative measure.”

Source: http://www.thehindubusinessline.com/economy/cbdt-tightens-screws-on-shell-companies/article9499358.ece