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

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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.

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Govt to further simplify ITR forms, sets up committee

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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

Corporate tax exemptions phase-out may end MAT

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The Minimum Alternate Tax (MAT) could be phased out after some years, if and when all corporate tax exemptions and deductions are phased out.

This could take at least seven or eight years. If it happens, experts agree, it would reduce tax litigation.

A finance ministry official said MAT might become redundant in seven years or more and could be removed. “For now, it will remain in the Income Tax Act, even if it does not affect people. If there are no substantial deductions that reduce the income to below 18.5 per cent, MAT will not be applicable. In seven to 10 years, as MAT becomes redundant, it will be removed,” he said.

MAT THROUGH THE YEARS
  • 1987-88: Rajiv Gandhi introduces Section 115J in I-T Act to tax zero tax companies at at least 15% of book profits
  • 1990-91: Madhu Dhandvate Abolishes it
  • 1996-97: P Chidambaram re-introduces section 115 JA. MAT rate at 12.5% of total book profit.
  • 2000-01: Yashwant Sinha amends and makes  it 115 JB. Rate at 7.5%. Continues even today. Simplifies rules
  • 2006-07: 7.5%, but long capital gains taken into account to compute book profit
  • 2009-10: 10%
  • 2010-11: 15%
  • 2011-12: 18%
  • 2012-13: 18.5%
  • 2013-14: 18.5%
  • 2014-15: 18.5%
  • 2015-16: 18.5%


The government is also looking at setting a sunset date for most open-ended tax concession schemes, alongside a five percentage point reduction in the corporate tax rate in four years. The rate is 30 per cent, but is close to 23 per cent, on account of a large number of exemptions and deductions. The revenue forgone in 2012-13 on account of deductions in this regard was Rs 68,000 crore.

In the next financial year, the corporate tax rate might be around 29 per cent, after a cut, part of a plan to align Indian taxation levels to global standards. “As the government progressively reduces the rate to 25 per cent and phases out exemptions and deductions, the need for MAT goes away. It will simplify a lot of things,” said Sudhir Kapadia, national tax leader, EY.

The finance ministry will issue a discussion paper on phasing out the exemptions and deductions. It is likely to announce the road map in the Budget.

MAT is levied at 18.5 per cent and was meant for large companies that showed book profits but took advantage of legal provisions to avoid paying corporate tax, via dividend payments and other legal deductions to stated income. As of now, 38 corporate tax deductions apply to industry, including benefits for units set up in Special Economic Zones (SEZs), the northeast states, hilly states and so on. Besides, tax incentives are offered for expenditure on scientific research, funding charitable trusts and institutions and the like. Deductions are also offered to sectors such as power, telecommunications, and infrastructure.

“As the corporate tax rate is reduced to 25 per cent, MAT will also not make sense, as the two rates anyway come close,” said  Rajesh H Gandhi, partner, Deloitte Haskin and Sells.

Rahul Garg, leader, direct taxes, PwC, said the government should look at replacing corporate tax with MAT. The effective corporate tax was 23.4 per cent, he explained, while that of MAT was close to 22 per cent. “If the government simply increases the MAT rate by one percentage point, collections will go up. With this, the government could get rid of all disputes,” he said.

SEZs lost sheen after then finance minister Pranab Mukherjee in 2011-12 imposed MAT on the book profits of these developers and units inside one.

That and a dividend distribution tax of 10 per cent made these  enclaves unattractive. Only 192 of the 388 notified SEZs are operational, meaning at least one functional export unit. There are 588 approved SEZs.

Exports from SEZs fell 7.6 per cent in 2014-15. The department of commerce has been pressing the finance ministry for the withdrawal of MAT but the latter has not obliged. The Budget for 2015-16 has  exempted foreign portfolio investment from MAT and the government has also accepted the A P Shah panel recommendation to do away with past cases of MAT on foreign institutional investors. A change to the law is on its way, while tax officials have been instructed not to pursue notices, issued against foreign instituional investors. However, applicability of MAT on foreign companies without permanent establishment remains. A case relating to this involving Castleton Investments is pending in the Supreme Court.

Income Tax E-Filing Process – At a glance

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Steps for Income Tax E-Filing:

 

 

  1. Select appropriate type of Return Form – ITR and download appropriate Return Form from https://incometaxindiaefiling.gov.in/
  2. Fill your particulars of name, address. PAN Number, date of incorporation (date of birth, in case of individuals), sources of income and the amounts and other details in the ITR return offline and generate a XML file
  3. Register and create a user id/password. User id is always your PAN number.
  4. Login and click on relevant form on left panel and select “Submit Return”
  5. Browse to select XML file and click on “Upload” button
  6. On successful upload, acknowledgement details would be displayed. Click on “Print” to generate printout of acknowledgement/ITR-V Form.
  7. In case the return is digitally signed, on generation of “Acknowledgement” the Return Filing process gets completed. You may take a printout of the Acknowledgement for your records.
  8. Incase the return is not digitally signed, on successful uploading of e-Return, the ITR-V Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same.
  9. The e-verification can be done using Aadhar number or through online banking. A duly verified ITR-V form should be submitted with the local Income Tax Office within 15 days of filing electronically. This completes the Return filing process for non-digitally signed Returns.
  10. For any assistance in filing the paper copy of the return please contact the Public Relations Officer of the local Income Tax Office.