CBDT notifies foreign tax credit rules, corporates to gain

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To provide relief to corporates with income abroad, the tax department has notified ‘Foreign Tax Credit’ rules allowing companies to claim credit for taxes, surcharge and cess paid overseas. The rules, which come into effect from April 1, 2017, allow taxpayers to claim credit of foreign tax under dispute once it is finally settled.

Foreign tax credit (FTC) will be available against tax, surcharge and cess payable under the Act, including minimum alternate tax (MAT) but not in respect of interest, fee or penalty.

The rules also provide that disputed foreign tax will be allowed as credit for the year in which the income is taxed in India, subject to certain conditions.To avail of the credit, the taxpayer will have to furnish evidence of settlement of the dispute and evidence of payment of the foreign tax. The taxpayer is also required to provide an undertaking that no refund, directly or indirectly, will be claimed for this foreign tax.

“The rules are progressive and provide much-needed clarity as well as certainty in claiming FTC,” said Rakesh Nangia, Managing Partner, Nangia & Co.

Taxpayers claiming FTC shall now be required to file a Statement of Income from a foreign country with details of tax paid in the prescribed Form 67.

“Rules also provide for situations of carry backward of loss of the current year resulting in refund of foreign tax,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP.

The Central Board of Direct Taxes (CBDT) has also allowed tax payers to give self-certified statement, giving the nature of income and the amount of foreign tax deducted or paid accompanied with the counterfoil or acknowledgment of taxes paid and/or proof of taxes having been deducted at source, for claiming FTC.

“This process is much simpler than the complex and difficult procedure involving obtaining a certificate from a foreign tax authority,” Nangia said.

The tax credit, the rule said, “shall be the aggregate of the amounts of credit computed separately for each source of income arising from a particular country or specified territory outside India”.

Source:  http://economictimes.indiatimes.com/articleshow/52986969.cms

CBDT clears the air on tax collection at source

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate Updates, Income Tax,e-Filing- Individuals, Firms, Companies | 0

The Central Board of Direct Taxes (CBDT) has made it clear that the 1 per cent tax collection at source (TCS) — introduced in this year’s Budget — will apply only to the cash component and not the entire sale consideration. This has been conveyed in a clarificatory circular issued by the CBDT on Friday.

To curb the cash economy, Budget 2016 had introduced a provision in income tax law requiring the seller to collect 1 per cent tax at source from the purchaser on the sale in cash of certain goods or provision of services in excess of ₹2 lakh.

Q&A format

The circular — in the form of question and answer — has been issued to clarify the applicability of the provision where the sale consideration received is partly in cash and partly in cheque

TCS will be applicable only on the cash component of the sales amount, and not on the whole of sales consideration, the CBDT circular said.

For instance, if goods worth ₹5 lakh are purchased for ₹2 lakh in cheque and ₹3 lakh in cash, 1 per cent tax will be levied only on ₹3 lakh.

Also, in cash-and-cheque transactions where the cash component is less than ₹2 lakh, there won’t be any TCS, the CBDT clarified. Further, TCS will not be levied if the cash receipt does not exceed ₹2 lakh, even if the sale consideration exceeds ₹2 lakh, said the circular.

Amit Maheshwari, Partner at CA firm Ashok Maheshwary & Associates, said the CBDT has rightly restricted the 1 per cent TCS to the cash component. This is in line with the Centre’s objective to curb the cash economy and target the expenditure side of black money, he noted.

Rahul Jain, Partner, Nangia & Co, said the Centre’s constant efforts to clarify the law and avoid possible disputes are heartening. In the absence of clarification, various local trade associations, head offices of stores selling high value items, etc had taken a conservative position.

“While it is excellent to see the Centre pulling all stops to nip disputes in the bud, one wishes the law was drafted better to avoid confusion in the first place,” he added.

Source: http://www.thehindubusinessline.com/economy/policy/cbdt-clears-the-air-on-tax-collection-at-source/article8775966.ece

Taxmen told to step up efforts for black money window success

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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.

Source: http://www.financialexpress.com/article/economy/taxmen-told-to-step-up-efforts-for-black-money-window-success/294763/

Presumptive taxation: No audit for turnover up to Rs 2-cr

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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.

Source: http://www.business-standard.com/article/economy-policy/presumptive-taxation-no-audit-for-turnover-up-to-rs-2-cr-116062001050_1.html