Ultra-rich must declare cost price of expensive assets: CBDT

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

People with annual income of over Rs 50 lakh will have to disclose the acquisition cost of all the assets like land, building and jewellery in the Income Tax return forms for assessment year 2016-17.

The luxury items to be disclosed will also include utensils, apparels and furnitures studded with precious stones and ornaments made of gold, silver, platinum or any other precious metal or alloy.

“The amount in respect of assets to be reported will be the cost price of such assets to the assessee,” the Central Board of Direct Taxes ( CBDT) has said while issuing instructions on the new ITR forms.

In case the precious items had been received as gifts, the assessee will have to declare the cost of acquisition by the previous owner along with value additions.
“In case where the cost at which the asset was acquired by the previous owner is not ascertainable and no wealth-tax return was filed in respect of such asset, the value may be estimated at the circle rate or bullion rate, as the case may be, on the date of acquisition by the assessee as increased by cost of improvement, if any, or March 31, 2016,” the instructions said.

The assessee will also have to declare whether such items and their value were disclosed at the time of filing wealth tax returns earlier.

The tax department had in April notified the new ITR forms for assessment year 2016-17 and introduced a fresh reporting column in ITR-1, ITR-2 and 2A called ‘Asset and Liability at the end of the year’ which is applicable in cases where the total income exceeds Rs 50 lakh.

“There are only 1.5 lakh individuals whose total income would be above Rs 50 lakh. This schedule in ITR only applies to ultra-rich and will not affect the common man,” Revenue Secretary Hasmukh Adhia had earlier said.

As per the new schedule in ITR forms, individuals and entities coming under this total income bracket will have to mention the total cost of movable and immovable assets.

While immovable assets include land and building, movable assets to be disclosed were cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft etc.

ITR-1 can be filed by individuals having income from salaries, one house property and from other sources including interest. ITR-2 is filed by Individuals and HUFs not having income from business or profession. ITR-2A is filed by those individuals and HUFs who do not have income from business or profession and capital gains and who do not hold foreign assets.

Read Source:
http://economictimes.indiatimes.com/articleshow/52106652.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

Government looks to resolve 100 transfer pricing issues; seeks to sign more advanced agreements

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Income Tax,e-Filing- Individuals, Firms, Companies, India & International - Corporate updates | 0
Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies

In a significant move towards a more progressive taxation policy the revenue officials have set an aggressive target of resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people close to the development said.

The government, through the Central Bureau of Direct Taxes (CBDT), had signed a record 55 APAs with multinationals in 2015-16. In all, the Indian government has signed 64 APAs, including 62 in the last two years. Now the government is getting more ambitious and officials are confident about achieving the target.

“We are already working on about 175 cases (APAs), and the target is achievable,” said a person close to the development. “Also, the officers who are dealing with the issue have now got fair amount of experience and work would be faster going ahead.”

Samir Gandhi, partner at Deloitte Haskins & Sells LLP, said, “In last one year, we have seen that the government has been very active in resolving the transfer pricing cases through the APAs. Going forward it is very likely that we will see more number of cases being resolved.”

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations. In July 2012, the government introduced the APA programme, which allows companies and the revenue authorities to negotiate the rate at which tax is to be paid and avoid disputes. Of the total APAs signed last year, 53 were unilateral agreements while two were bilateral agreements.

A unilateral APA is an agreement between the tax payer and the tax authority of the country (CBDT). A bilateral agreement is signed by these two plus the tax authority of the country where the multinational is headquartered.

Industry trackers expect that some more “complicated” APAs would be signed this year. “Going ahead some of these cases (APAs) will involve relatively complex cases/transactions and also application of TP methodologies of profit split and TNMM (transactional net margin method),” said Gandhi of Deloitte. Industry experts said the shift from a time when India was considered to be one of the most aggressive in the world on transfer pricing to the current situation has happened in last two years.

“There are primarily two developments which have happened in last one year in the context of transfer pricing disputes,” said Rohan K Phatarphekar, partner and national head, global transfer pricing services, at KPMG. “One is the government’s agenda of having a non-adversarial tax regime and improving the ease of doing business, which has resulted in lesser amount of transfer pricing adjustments, and the other is the CBDT circular clearly laying out the guidelines as to when a case needs to be referred for transfer pricing assessment which has reduced the overall number of cases picked up for scrutiny,” he said.

Experts also pointed out that the government’s stance on liberal transfer pricing comes at a time when many multinationals face the prospect of increasing disputes across the world. Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies.

Companies and tax consultants said that not only is the Indian government going all guns to resolve old issues in last one year, but also there has been no major transfer pricing demand as officials did not take an aggressive stance. Currently there are about 650 pending cases in APA, according to a report by Deloitte.

Going ahead, a lot of disputes also set to be resolved due to mutual APAs signed between Indian authorities and their US counterpart. This is mainly because the US Internal Revenue Service (IRS) has started accepting bilateral APA applications with India from February 16, 2016, the Deloitte report said.

Source:
http://economictimes.indiatimes.com/articleshow/51886742.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NRIs with offshore bank accounts cannot escape investigation by tax authorities

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
Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders give their consent.

Even NRIs with offshore bank accounts cannot keep the taxman at bay by obtaining quick relief from the court of law. In order to prove their innocence, such persons will have to instruct the overseas banks to share information on the accounts with the Indian tax office.

And, only after the details released by the bank show that the money lying in the account does not belong to the person who has been pulled up (for hiding offshore assets), can he escape the glare of tax officials.

The Bombay High Court recently dismissed the writ petition filed by an NRI — an alleged beneficiary of a trust linked to an account with HSBC Geneva — after she refused to sign the “consent waiver” form to let HSBC share the information on the account. Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders gives their consent.

The court, in its order dated April 5, said, “In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds, a person would make available the documents which would put to rest all questions which seem to arise in the mind of the authorities.”

Since the court did not allow the withdrawal of petition, the order is likely to be used by the tax office which is trying to fish out bank account and transaction details from those it suspects to have accounts with HSBC Geneva.

According to the base note that the French government had shared with New Delhi, the petitioner Soignee R Kothari, along with six other individuals and two trusts, are beneficiaries of an account held by one White Cedar Investments with HSBC Geneva; the seven individuals in turn are beneficial owners of the two trusts.

As on 26 March 2006, the account had a balance of more than $44 million. The department had served Ms Kothari a notice to reopen assessment for the assessment year 2006-07.

She has later agreed (in a rejoinder before the court) to sign the consent waiver form with a modification — as ‘alleged beneficiary’ rather than ‘holder or beneficiary’ of the account in HSBC Geneva.

“With this, the Bombay High Court has precluded any alleged holder of overseas bank account from seeking alternative remedy by way of a writ. However, their right to contest any addition of income by the tax authorities would still survive. Thus, while NRIs can prove that they are outside jurisdiction of Indian tax authorities, they cannot wriggle out of investigation by virtue of being NRIs,” said senior chartered accountant Dilip Lakhani. The other six alleged beneficiaries of the trust are Arun Ramniklal Mehta, Russell Mehta, Viraj Russell Mehta, Rihen Harshad Mehta, Naina Harshad Mehta and Priti Harshad Mehta.

The court said that this bank statement if obtained from HSBC Geneva “would reveal and/or possibly give clues as to the source of amounts deposited in the Account No. 5091404580.” “If a person has nothing to hide, we believe the person would have co-operated in obtaining bank statements,” said

Source : http://economictimes.indiatimes.com/articleshow/51870910.cms

 

India signs 11 more APAs to reduce tax disputes

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

The Central Board of Direct Taxes (CBDT) has signed 11 more advance pricing agreements (APAs) with MNCs on Tuesday, taking the total number of such deals that would spare them from rigorous tax audits under certain conditions to 31 so far. Of this, 22 were signed this year. The department had earlier set an internal target of about 150 APAs for this year, mostly with US-based companies in the IT and ITeS sector to avoid future tax disputes. So far, it has covered about a fifth of this target. Experts expect that clearing all APA requests, applying their terms to similar past transactions and resolving disputes with foreign tax authorities under the Mutual Agreement Procedure would clear most of the accumulated cross-border tax disputes amounting to Rs 2.7 lakh crore. Till now about 45 tax disputes are resolved under the MAP procedure.

APA is an agreement between the tax authority and companies on the principles of valuation of certain transactions, which if adhered to will exempt the company from tax audits on cross-border deals. The tax disputes which the government may have with the companies on similar transactions in previous years too would be resolved by applying similar agreed upon value to past transactions. The move is part of the government’s efforts to reduce tax litigation.

According to sources, most of the APAs signed on Tuesday relate to service provider companies in the investment advisory and ITeS sectors. “The effort of the APA authorities is impressive. A lot of hard work has gone into analysing these cases and getting them to a closure,” said Vijay Iyer, Partner & National Leader for Transfer Pricing, EY which was involved in five of the 11 pacts on Tuesday.

While an APA between a company and the tax department will resolve a dispute in India, the possibility of double taxation would be fully addressed only when the tax authority in the company’s home country too becomes party to such agreement. America, which is home to many technology firms facing tax disputes in India, has recently started steps to implement such ‘bilateral APAs.’

Source: http://www.financialexpress.com/article/economy/india-signs-11-more-apas-to-reduce-tax-disputes/170136/

Govt to further simplify ITR forms, sets up committee

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

The government is looking to further simplify income tax return forms to help taxpayers fill them without seeking help from experts and the revenue department has set up a committee in this regard.

The committee, according to sources, will be headed by a joint secretary level officer and would include chartered accountants and tax experts.

“The tax department is trying to further simplify the return form so that no outside help is needed by those who want to file returns on their own,” a source said.

The effort would be to come out with a simple formula for indexation to help assessees compute capital gains on sale of assets, the source added.

“The Committee would also look into the possibility of reducing the number of pages in the return form,” the source said.

The Income Tax department had in June come out with a simplified tax return form for salaried class. Filers now have to disclose the total number of savings and the current bank accounts held by them at any time during the previous year (excluding dormant accounts).

The form also has space to fill up the IFSC code of the bank and in an additional feature, tax filers have been given an option to indicate their bank accounts in which they would want their refund credited. The ITR also has sought the Aadhaar number of filers.

The tax department had come out with simplified ITR after experts raised objections to the 14 page form which was notified earlier in the year.

The earlier form sought details of bank accounts and foreign visits and following controversy, the Revenue Department announced putting them on hold.

Source: http://www.business-standard.com/article/pti-stories/govt-to-further-simplify-itr-forms-sets-up-committee-115112200147_1.html