Centre asks banks to restrict accounts of 2.09 lakh firms

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The finance ministry has advised all banks to take immediate steps to restrict transactions in bank accounts of more than 2.09 lakh companies, whose names have been struck off the Register of Companies.

Banks have also been advised to step up due diligence while dealing with all firms in general and been alerted that even if a firm is ‘active’ in the corporate affairs ministry database, it should be seen with ‘suspicion’ if it has failed to file statements or returns.

‘Not compliant’

“…Prima facie, the company is not complying with its mandatory statutory obligations to file this vital information for availability to its stakeholders,” the finance ministry has reasoned.

On July 1, Prime Minister Narendra Modi had first revealed the government’s decision to cancel the registrations of one lakh companies that had suspicious and questionable operations, identified on the basis of data mined from the deposit of bank notes following last November’s demonetisation of Rs.500 and Rs.1,000 notes.

The PM had promised more action would follow on two lakh similar firms and 38,000 shell companies. Tuesday’s statement reveals that progress has been made in scrapping another 1,09,032 firms under the Companies Act since then.

‘Directors barred’

“The existing directors and authorised signatories of such struck-off companies will now become ex-directors or ex-authorised signatories. These individuals will therefore not be able to operate bank accounts of such companies till such companies are legally restored under Section 252 of the Companies Act by an order of the National Company Law Tribunal,” the ministry said, disclosing ‘stepped up decisive action’ against errant companies.

“Since such ‘struck off’ companies have ceased to exist, action has been initiated to restrict the operation of [their] bank accounts. The Department of Financial Services has, through the Indian Banks Association, advised all banks … [to] take immediate steps to put restrictions on bank accounts of such struck-off companies,” the ministry said, adding that the list of firms had been put up on the corporate affairs ministry’s website.

In addition, the statement said that banks had been advised to go in for ‘enhanced diligence while dealing with companies in general.’

“A company… even having an active status on the website of the Ministry of Corporate Affairs but defaulting in filing of its due financial statement/s or annual return/s in particular of charges on its assets on the secured loan should be seen with suspicion…” the ministry has told banks.

Source: The Hindu

Attack on shell firms: MCA issues notices to errant NBFCs

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In yet another attempt to crack the whip on shell companies, the Ministry of Corporate Affairs has issued notices to companies which were supposed to act as non-banking financial companies (NBFCs) but have not registered with the Reserve Bank of India (RBI).

The ministry has taken this action to seek an explanation from these companies on their businesses within 10 days, a source said

If companies are found to be in the non-banking financial activities such as lending, investment or deposit acceptance as their principal business, without the RBI registration, the central bank can impose a penalty or even prosecute them in a court of law.

A similar attempt was undertaken by the RBI a few years back. In 2013, the RBI had clamped down on unregistered NBFCs after the Saradha scam. The central bank undertook such an exercise even in 2014. The pan-India figure of such entities back then was around 70,000. The number of non-registered NBFCs has risen since then, an official said.

The Securities & Exchange Board of India (Sebi) had recently put 331 companies on heightened surveillance. It also delisted entities it suspected of being shell companies. The Centre, too, has frozen bank accounts of 200,000 companies after these were struck off by Registrar of Companies. The directors of these firms were also banned.

The Centre and its agencies are not only taking corrective action but are also initiating pre-emptive steps to check the menace of dormant companies. It is working with Sebi to get all public unlisted companies to issue shares online. Experts said this would ensure greater transparency in these companies and bring down litigation.

After demonetisation, a number of shell companies were found to be operating with the same address, not directly contributing to the mainstream economy. It was then that the government sprung into action.

An NBFC is a company registered under the Companies Act, 1956, engaged in the business of loans and advances among other functions. It is also a company which receives deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, as its principal business.

 

Source: Business Standard

Over 2.09 lakh firms struck off, bank accounts frozen: Govt

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In a major clampdown against black money, the government on Tuesday directed freezing bank accounts of more than 2.09 lakh companies whose names have been struck off from the records and said action would be taken against more such firms.

Banks have also been asked to step up their vigil against those companies that are non-compliant with various regulations and not carrying out business activities for long, a senior finance ministry official said as authorities continue their crackdown against shell entities The official said banks have been directed to freeze the bank accounts of these deregistered companies.

While warning that action would be taken against erring firms, the official said the efforts would help in enhancing corporate governance standards as well as clean up the system that otherwise is prone to be misused.

The names of over 2.09 lakh firms have been struck off from register of companies for failing to comply with regulatory requirements

“The names of 2,09,032 companies have been struck off from the register of companies under Section 248 (5) of the Act. The existing directors and authorised signatories of such struck-off companies will now become ex-directors or ex- authorised signatories,” an official release said

Section 248 of the Companies Act – which is implemented by the corporate affairs ministry – provides powers to strike off names of companies from the register on various grounds including for being inactive for long.

According to the official, since these companies had ceased to be legal entities, there was no reason having active bank accounts which could be prone to misuse.

Once these companies become compliant, banks would activate their accounts, the official added. “Furthering our war against #BlackMoney, banks have been advised to immediately restrict bank accounts of struck-off companies,” Minister of State for Corporate Affairs P P Chaudhary said in a tweet.

The official said a detailed analysis has been initiated to check whether these deregistered companies were used as conduits for channelising unaccounted money into the system, especially during demonetisation.

Amid efforts against shell companies which are allegedly used as conduits for illicit fund flows and tax evasion, the government said the directors of deregistered firms would not be able to operate the bank accounts till these entities are legally restored

About the directors and signatories of the over 2.09 lakh firms, the government said they would not be able to operate bank accounts of such companies till these entities are legally restored. The restoration, as and when it happens, would be reflected in the official records by way of change in the status from ‘struck off’ to ‘active’. “Since such ‘struck off’ companies have ceased to exist, action has been initiated to restrict the operation of bank accounts of such companies,” the release said.

The Department of Financial Services, through the Indian Banks Association, has advised banks that they should take immediate steps to put restrictions on bank accounts of such struck-off companies. “In addition to such struck-off companies, banks have also been advised to go in for enhanced diligence while dealing with companies in general,” the release said.

A company even having an active status on the corporate affairs ministry website but defaulting in filing of its due financial statements or annual returns, among others, “should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations”. In another tweet, Chaudhary said the ministry is committed “in attaining @narendramodi ji’s vision of eliminating black money”.

Source:DD News

ITR filing date extended to October 31

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Tax payers who were supposed to file their income tax returns by September 30 now have some more time on their hands. The government has extended the deadline to file income tax returns for such tax payers until October 31.

“The ‘due-date’ for filing Income Tax Returns and various reports of audit prescribed under the Income-tax Act,1961 has been extended from 30th September, 2017 to 31st October, 2017 for all taxpayers who were liable to file their Income Tax Returns by 30th September, 2017,” Ministry of Finance said.

This time tax payers will have to quote their 12-digit Aadhaar number or the 28-digit Aadhaar enrolment number while filing the income tax return.

You will have to keep the Form 16, which you got from their employer handy. If you don’t have it, get it asap. Download the Form 26AS from the Income Tax e-filing website. Form 26AS is a consolidated tax statement which states tax credit statement of all taxes received by the Income Tax Department against your PAN number. You will need it to tally with your Form 16.

Availability of the detail of bank accounts in which the refund is to be credited is a precondition for direct credit of refund in bank accounts. Refund generated on processing of return of income is currently credited directly to the bank accounts of the tax-payers. Non-residents, who are claiming refund but do not have bank accounts in India may furnish details of one foreign accounts in ITR for issuance of refund.

Bank accounts details

A tax payer is also required to disclose his/her bank account number along with the IFSC code. However, dormant accounts which have been in use for the past three years or more need not to be mentioned.

Mandatory disclosure

According to the Income Tax Department now, tax payers have to disclose information of cash deposited in their bank account aggregating to Rs 2 lakh from November 11 to 30 December, 2016.

Ensure that ITR is compliant with amount deposited in bank accounts during the period of demonetisation

Besides that, if any assessee has any unexplained income or investments, he has to report such unexplained income in the new ITR forms and such amount will be taxable at the tax rate of 60 percent plus surcharge and cess.

Tax deductions

  • If you are claiming tax deductions under 80C, you should keep the following details handy:
  • Investment details (eg: LIC, PPF, NSC)
  • Home loan
  • LTA
  • Medical

Consequences of Late filing of Return

According to ClearTax, if there are any taxes which are unpaid, penal interest at 1 per cent per month or part thereof will be charged till the date of payment of taxes .Also Penalty of Rs 5,000 may be charged. The penalty is not levied in all cases and depends upon the circumstances of the case.

For returns of FY 2017-18 and onwards, penalty of Rs 5,000 will be charged for returns filed after due date but before 31st December. If returns are filed after 31st December, a penalty of Rs 10,000 shall apply. However, penalty will be Rs 1,000 for those with income upto Rs 5 lakh.
Who has to file?

Every person whose gross total income exceeds the taxable limit must file an Income Tax Return (ITR)

Who has to file?

Every person whose gross total income exceeds the taxable limit must file an Income Tax Return (ITR)

Who has to e-file?

  • Individuals & HUF having total income exceeding Rs 5 lakh or claiming any refund in the return (excluding individuals of the age of 80 years or more who are furnishing return in Form no. ITR-1 or ITR-2).
  • Individual or HUF, being a resident other than not ordinarily resident, having any foreign asset/income or claiming any foreign tax relief.
  • Persons filing ITR in Form no. 3, 4, 5 or 7.

 

Source: Business Today

 

 

I-T Department to focus more on e-assessment to reduce human interface

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The Income Tax Department will focus on widening of tax base and maximise e-assessment to cut down on human interface, according to an official statement.

The Income Tax Department will focus on widening of tax base and maximise e-assessment to cut down on human interface, according to an official statement. Also, efforts will be made by the Central Board of Direct Taxes (CBDT) to exceed the income tax collection target set for current fiscal by use of big-data analytics, said the statement after the end of the two-day annual retreat of central and state government tax officers. The conference also discussed strategies for widening of tax base, with special focus on verification of data collected during demonetisation and SFT (statement of financial transactions).

 “The CBDT aims to add a sizeable number of new taxpayers in the current fiscal,” an official statement said. Prime Minister Narendra Modi, while inaugurating the Rajaswa Gyan Sangam yesterday, had nudged tax officials to use data analytics to track undeclared wealth and fix clear targets for improving tax administration by 2022. He asked taxmen to clear pendency of cases and create an environment that instills confidence among honest taxpayers and uproots corruption.

Revenue Secretary Hasmukh Adhia said that revenue was a cross sectoral subject and required coordination between both the CBDT and CBEC. He encouraged that officers of both CBDT and CBEC to share best practices with each other regularly. The CBDT said that in the conference “it was decided that assessing officers be encouraged to maximise e-assessment in a phased manner and to ensure that work be completed online so that there is complete transparency”. As a step towards effective litigation management, CBDT aims to achieve the twin objectives of substantially reducing the number of appeals and the disputed demand before CIT (appeals), it said.

“The focus is to dispose off 70 per cent of smaller appeals and 30 per cent of high demand appeals including 100 per cent of appeals involving disputed demand of Rs 50 crore and above,” the CBDT said. Strategies for revenue maximisation were discussed at length especially since the CBDT has been tasked to collect revenue of Rs 9.80 lakh crore in the present fiscal. “The officers were urged to utilise data effectively such that the target for collection of Personal Income Tax should not only be met but also be exceeded,” it added. With regard to redressal of grievances, the CBDT said 85 per cent of grievances have been disposed off online through the e-nivaran portal. “There was emphasis on redressal of grievances for both CBDT and CBEC,” the statement said.

It said that special focus should be given to popularise the Operation Clean Money portal such that an environment of voluntary compliance can be created. The indirect tax wing – Central Board of Excise and Customs – discussed issues relating to ease of doing business, litigation management among others. “There was also a Sunshine session to highlight a formation’s initiative in improving taxpayer services or individual initiative outside of the regular area of responsibility,” the statement said.

Besides, Adhia underlined the importance of increasing efforts to garner revenue in light of the data that is available post demonetisation. He also stressed that genuine grievances of taxpayers should be disposed off on priority and taxpayers should be treated with courtesy.

 

Source: Financial Express

Record reserves turn costly cash pile for RBI

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As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum.

As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum. To keep the rupee stable and exports competitive, it is having to mop up inflows that’s adding cash to the local banking system. Problem is, banks are flush with money following Prime Minister Narendra Modi’s demonetization program last year, leaving them already struggling to pay interest on the deposits in an environment where loans aren’t picking up. The resulting need to absorb both dollar- and rupee-liquidity is stretching the Reserve Bank of India’s range of tools and complicating policy. Costs to mop up these inflows have eroded the RBI’s earnings, halving its annual dividend to the government. “The RBI would be paying more on its sterilization bills than it gets on its reserve assets, so it would cut into its profits,” said Brad W. Setser, senior fellow at New York-based thinktank Council on Foreign Relations. “Selling sterilization paper in a country with a relatively high nominal interest rate like India is costly.”

Governor Urjit Patel aims to revert to neutral liquidity in the coming months from the current surplus. Lenders parked an average 2.9 trillion rupees ($45 billion) of excess cash with the central bank each day this month compared with 259 billion rupees the same time last year. This peaked at 5.5 trillion in March. The surge in liquidity has pushed the RBI to resume open-market bond sales as well as auctions of longer duration repos besides imposing costs on the government for special instruments such as cash management bills and market stabilization scheme bonds. Meanwhile foreign investors have poured $18.5 billion into Indian equities and bonds in the year through June, during which period the RBI has added $23.4 billion to its reserves. Its forward dollar book has also increased to a net long position of $17.1 billion end-June from a net short $7.4 billion a year ago. “My guess is reserves over 20 percent of GDP would start to raise questions about cost – but that is just a guess,” said Setser. India’s reserves have ranged between 15 and 20 percent of GDP since 2008 global crisis — a level that’s neither too low to create vulnerability or too high indicating excess intervention, he said.

Consistent buildup in the forward book may have cost the RBI some 70 billion rupees, while total liquidity-absorption costs due to the demonetization deluge from November to June were 100 billion rupees, according to calculations by Kotak Mahindra Bank Ltd. The RBI paid another 50 billion rupees to 70 billion rupees to print banknotes, the bank estimates. A weakening dollar would also have led to losses due to the foreign-currency cash pile, which has traditionally been dominated by the greenback. The Bloomberg Dollar Index has fallen 8.5 percent this year. After all these expenses, the RBI transferred 306.6 billion rupees as annual dividend to the government, compared with 749 billion rupees budgeted to come from the RBI and financial institutions. More clarity will emerge with the RBI’s annual report typically published in the final week of August. “This disturbs the fiscal math for the year through March 2018,” said Madhavi Arora, an economist at Kotak Mahindra Bank. Assuming everything else stays constant, she estimates the budget deficit may come in at 3.4 percent of gross domestic product rather than the government’s goal of 3.2 percent.

Apart from the high costs, there’s another dimension to the surge in liquidity. The RBI could face a shortage of bonds it places as collateral with its creditors. It is said to be preparing a fresh proposal to the government for creation of a window — the so-called standing deposit facility — which doesn’t require any collateral. “As the excess liquidity challenge looks set to persist, the RBI will need more tools to manage this, such as the standing deposit facility,” economists at Morgan Stanley, including Derrick Kam, wrote in an Aug. 16 note. He predicts that at the current rate of accretion, foreign-exchange reserves will hit $400 billion by Sept. 8 from $393 billion this month.

Source: Financial Express

I-T plans to pursue property-holders who have never filed income tax returns

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The tax authorities now have the ability to analyse the data they get from multiple sources to identify evaders.

Income tax authorities plan to pursue those who have properties in their name but haven’t ever filed income tax returns on the suspicion that these may be benami holdings on behalf of people looking to conceal their wealth. The exercise is part of the government’s crackdown on black money.

The findings have emerged from the analysis of vast amounts of data that the government has collected. “We have a lot of data from various sources including on investments in property by people who have never filed returns,” said an income tax official. This information will be verified to ascertain the source of income used for the purchase of the properties and to see if these are being held by benami owners.

Enforcement action will be taken only in cases where there is concrete evidence, the official said. Otherwise, tax authorities will follow a non-intrusive approach. In some instances, the properties purchased exceed the income declared and in others, no income tax return has been filed.
The tax authorities now have the ability to analyse the data they get from multiple sources to identify evaders.

Spending and investment data are used to create profiles of individuals and matched with incomes declared in returns. Aside from this, more than 550,000 people have been identified for further probe as part of the second phase of Operation Clean Money for having deposited cash incommensurate with their declared income.

Besides this, some individuals reportedly carried out property transactions after demonetisation. The government had resolved to put in place a stringent framework to deal with black money soon after taking over in May 2014, in line with election promises. It has since taken a series of measures including the establishment of a special investigation team on black money and put in place a new law to deal with undisclosed overseas assets, apart from the benami legislation. Demonetisation of the Rs 500 and Rs 1,000 notes in November last year was also pitched as a battle against black money.

The income-tax department launched Operation Clean Money soon after the demonetisation exercise. It identified 1.8 million persons for e-verification of large cash deposits.

 

The department has now moved on to phase two of the operation, which also includes a crackdown on benami properties.

The Benami Properties (Prohibition) Act empowers the income tax authorities to confiscate and prosecute both the depositor and the person whose illegal money he or she has “adjusted” in their account. It attracts a heavy fine that could be as much 25% of the fair market value of the asset and rigorous imprisonment of up to seven years.

ET View: Bring Real Estate Under GST
Real estate is a sink for money laundering. The annual information returns, that identify potential tax payers by examining their spending patterns, is useful to track evaders. Property registrars also file information returns. As the department gets a mine of information, it must deploy big data analytics to analyse these transactions. The need is also to bring real estate under the ambit of the goods and services tax to curb benami deals.

 

Source: The Economic Times