Income Tax Return filing deadline: Waiver on LTCG Tax to end on 31 March

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Tax liability on long term capital gains (LTCG) at the rate of 10% will accrue only when the shares or mutual funds are sold after April 1, 2018.

In the Budget 2018, Union Finance Minister Arun Jaitley had introduced long term capital gains (LTCG) on sale of equity and mutual funds, which will be taxed from April 1 onwards. One must remember that any capital gains arising out of sale of shares in this financial year (2017-18), which means prior to March 31 this year, will not attract any long term capital gains tax.

Seven Things To Know About Tax On LTCG Arising On Equity/ Mutual Funds Sale

1. Tax liability on long term capital gains (LTCG) at the rate of 10% will be charged only when the shares or mutual funds are sold after April 1, 2018.

2. The tax liability will not arise if the shares or mutual funds are sold, at whatever premium, before the beginning of April since the new legislation will come in force with effect from the next financial year, which is April 1.

3. For the tax on LTCG to get liable, there must be a difference of at least Rs. 1,00,000 between the cost of acquisition and the amount of sale.

4. The time period of one year will be calculated from the date of acquisition even if the time period falls in the previous financial year, which is 2017-18.

5. Any gains prior to January 31 are grandfathered. This means the capital gains will be zero if the sale price is more than the cost of acquisition but less than the value on March 31.

For instance, an equity share is acquired on January 1, 2017 at Rs. 100, its fair market value is Rs. 200 on January 31, 2018 and it is sold on April 1, 2018 at Rs. 150.

In this case, the actual cost of acquisition is less than the fair market value as on January 31, 2018. However, the sale value is also less than the fair market value as on 31st of January, 2018. Accordingly, the sale value of Rs. 150 will be taken as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).

6. The tax payer will stand to gain when the shares market price on January 31 was lower against the acquisition cost. Since the higher of two values is chosen (between the cost of acquisition and the price on January 31), the investor stands to gain. Sample this. An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 50 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150.

In this case, the fair market value as on 31st of January, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs. 100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 150 – Rs. 100).

7. When the selling price is lower than both cost of acquisition and price on January 31, then instead of the higher of the two values, one has to take the lower of two values for computing the capital gains. Sample this. An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 50. In this case, the actual cost of acquisition is less than the fair market value as on 31st January, 2018. The sale value is less than the fair market value as on 31st of January, 2018 and also the actual cost of acquisition. Therefore, the actual cost of Rs. 100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs. 50 (Rs. 50 – Rs. 100) in this case.

 

Source: NDTV

Deadline for filing revised or belated income tax return for past 2 assessment years is March 31

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The date you actually need to focus on is March 31, because that is the last day to file revised and belated income tax returns (ITR) for assessment years (AY) 2016-17 and 2017-18, with interest, if any, for late filing. This is not to be confused with the deadline for filing taxes for the current financial year, which is on or before July 31. Last year this deadline was extended till August, but the gesture may not be repeated.

So if you are yet to file older ITRs, “there’s still time” to “come clean” as a recent advertisement put out by the income tax department reminds folks. The ad goes on to exhort companies, firms, LLPs, trusts, associations and political parties (whose income prior to claim of exemptions exceeds the minimum chargeable to tax) to file taxes. Similarly, individuals earning over Rs 2.5 lakh have to pay income tax while the exemption limit for senior citizens (aged 60-80 years) is Rs 3 lakh and that for very senior citizens (over 80 years) is Rs 5 lakh.

“If you have deposited large amounts of cash in your bank account or made high value transactions, please consider the same while filing income tax returns,” says the communication, adding that “Non-filing or incorrect filing of return of income may result in penalty and prosecution”. The easy way to do it is online, either by logging into the tax department’s e-filing website (incometaxindiaefiling.gov.in) or the likes of Cleartax.com and Taxspanner.com, which are far more user friendly. Keep in mind that failure to file returns for the AY 2017-18 by March 31 means no second chances.

Belated filing, of course, poses serious drawbacks. Not only do you lose the opportunity to avail of select exemptions and carry forward losses (other than house property loss) for the assessment years for which ITR were not filed, you may have to shell out extra as interest under section 234A, perhaps even sections 234B and 234C, which deal with advance tax. The latter is applicable on all individuals with a tax liability exceeds Rs 10,000 after your employer has deducted the TDS.

For any defaults in filing your ITR, according to Cleartax, “you will be charged an interest amount of 1% per month (simple interest) on the tax amount outstanding. This interest will be calculated from the due date applicable to you for filing of return of the applicable year till the date that you actually file your return.”

Here’s an example. Assume your total tax outstanding is Rs 1 lakh and you forgot to file your return. Your tax liability will calculated at 8% (8 months late till the end of the assessment year on March 31) of Rs 1 lakh, or Rs 8,000, over and above the tax amount that you are due to pay in any case.

That apart, “a penalty of Rs 5,000 shall be levied under section 271F”, says the FAQ on the income tax website. With effect from AY 2018-19, a new section 234F will come into play, under which the penalty for ITRs furnished on or before December 31 is Rs 5,000, but double that amount for later filings. However, penalty “shall be levied @ Rs 1,000 if total income does not exceed Rs 5,00,000” and if the tax evaded “exceeds Rs 25 lakh the punishment could be 6 months to 7 years” adds the website.

Also keep in mind that silly mistakes often creep in when one is trying to beat a deadline, like erroneously leaving a mandatory field empty or forgetting to report interest income. So make sure no discrepancies creep in while filing your returns, else you could be staring at a demand notice from the taxman, which means extra paperwork for you.

Thankfully, at least this headache will disappear from the next assessment year on. Earlier this month the CBDT announced that demand notices won’t be issued in cases of a minor mismatch between a taxpayer’s ITR and the corresponding tax credit data collected from banks and other financial institutions.

Source: Business Today

Government sends tax notices to cryptocurrency investors as trading hits $3.5 billion

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– The government has issued repeated warnings against digital currency investments
– Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies

The government has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period, the income tax department said.

Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies, tax officials told Reuters after gathering data from nine exchanges in Mumbai, Delhi, Bengaluru and Pune.

Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March.

The government has issued repeated warnings against digital currency investments, saying these were like “Ponzi schemes” that offer unusually high returns to early investors.

But it has not so far imposed curbs on an industry estimated to be adding 200,000 users in India every month.

B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, said notices were sent following the survey to assess the penetration and patterns of virtual currency trade.

“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” he told Reuters.

The tax department has asked people dealing in bitcoin and other virtual currencies such as ethereum and ripple to pay tax on capital gains. They have also asked for details about their total holdings and the source of funds in the tax notice seen by Reuters.

“We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan said.

Bitcoin, the world’s biggest cryptocurrency, soared more than 1,700 percent last year, hitting a record high just shy of $20,000 as institutional and retail investors around the world snapped up the virtual currency.

Its huge gains have attracted the attention of global regulators tasked with protecting investors from fraud.

In recent weeks, Japan and China have made noises about a regulatory crackdown, while South Korean policymakers said they were considering shutting down domestic virtual currency exchanges.

REGULATION

An Indian finance ministry official said a federal committee was looking into the possibility of imposing restrictions on virtual currencies and that eventually parliament would have to legislate a regulatory regime.

Officials at Zebpay, India’s leading bitcoin exchange, said the industry was adding near 200,000 users every month with an estimated trade volume of about 20 billion Indian rupees ($315 million).

“Many of our customers are treating digital currency like gold,” said Zebpay co-founder Saurabh Agarwal.

Aman Kalra, marketing head of Coinsecure, a bitcoin exchange in New Delhi, said more than 150 bitcoins were changing hands every week through its platform. The company has 100,000 registered users and is now launching a platform to sell ethereum and other digital currencies.

“I don’t think anyone in the government should label our business as a ‘Ponzi scheme’, we are not doing anything illegal,” said Kalra.

Tax inspectors said they sought help from experts in blockchain, the technology that underpins bitcoin, to conduct the survey.

In some cases, tax officials themselves participated in the trade to identify loopholes after they found investors had poured in billions of dollars through unregulated exchanges.

Source: Times of India

Direct tax mop-up jumps 19% in FY18

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Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7% to Rs 6.89 lakh crore, the tax department said on Wednesday.

The collections till January 15, 2018 represent over 70% of the Rs 9.8-lakh-crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.

 

Gross collections (before adjusting for refunds) have increased by 13.5% to Rs 8.11 lakh crore during April, 2017 to January 15, 2018. Refunds amounting to Rs 1.22 lakh crore have been issued during this period.

Stating that there has been “consistent and significant” improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10% in Q1, to 10.3% in Q2, to 12.6% in Q3 and to 13.5% as on January 15, 2018.

Similarly, the growth rate of total net direct tax collections has climbed up from 14.8% in Q1, to 15.8% in Q2, to 18.2% in Q3 and to 18.7% as on January 15, 2018.

The growth in corporate tax collections has risen from 4.8% in the first quarter of current fiscal to 10.1% in Q3 and 11.4% as on January 15, 2018.

Similarly, the growth rate of net corporate tax collections increased from 10.8% in Q2 to 17.4% in Q3 and to 18.2% as on January 15, 2018.

 

Source: Times of India

Unexplained deposits in focus, taxmen ordered to go all out in the next three months

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About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee.

The income-tax department will in all likelihood go into overdrive in the next three months with the Central Board of Direct Taxes — the apex body — alerting all senior tax officials that their performance is being “monitored at the highest level.” It will also give a renewed push towards imposing and recovering tax on Rs 3 lakh crore deposit, which is suspected to be the quantum of unexplained cash parked with banks post demonetisation.

“There will be searches, surveys, information verification, and follow-ups. Explanations on ‘cash in hand’ amounts are being sought from different kinds of assessees, and not just from large establishments and jewellers… We will be knocking on many doors even if our respective targets are met,” a senior tax officer told ET.

This was broadly the message conveyed by the CBDT chief during a recent video-conference with tax officials.According to another person in the department, direct tax offices in various circles may be required to go full steam due to a drop in GST collection following cut in tax rates and refunds.

‘Dispose of Appeals Before March 31’
Till now many in the department were caught up with assessments pertaining to notices which were sent in September 2015 (for the financial year 2014-15) as these matters were getting time-barred in December 2017. Now, tax officers have the time to focus on recovery till March 31. “A possible slowdown in income tax refund, directing the CIT Appeal to dispose of appeals confirming the additions, investigating cases where assesses have deposited more than Rs 10 lakh in demonetised notes may push up gross collection. But does this really reflect the true state of tax collection in a slowing economy where the GDP growth rate is admitted to have come down,” said senior chartered accountant Dilip Lakhani.
In some of the large tax collection zones like Mumbai, the chief commissioner has written to several offices of the commissioner of income tax (Appeals), which is the first appellate authority, to dispose of many appeals before the close of the financial year.

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Tax authorities technically have the power to come down heavily on those who are unable to explain their cash deposit by slapping 60% tax and penalty – even though the process could take some time.

About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee. This was to tax the unaccounted cash that was deposited after demonetisation (of high denomination currency bills in November 2016) and subsequently regularised through a revised return and payment of tax on it at the normal rate of 30%.

However, the communique to tax officers guidelines were only suggestive in nature as the law allows filing of revised return due to various reasons including an intention to conceal income.

Here’s why India has decided to crank up its crackdown against Bitcoins

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I-T department issues notices to 4 lakh high networth individuals across the country who were trading in bitcoins on exchanges

Here’s why India has decided to crank up its crackdown against Bitcoins

The rising craze for bitcoin, a cryptocurrency that has rocketed to shocking highs, has come under the government’s lens. Bitcoin can be an easy way to evade tax or snare unsuspecting small investors in ponzi schemes. The government has begun a crackdown on illegal uses of this unregulated virtual currency.

Widening its probe into bitcoin investments and trade, the Income Tax (IT) department is set to issue notices to 4 to 5 lakh high networth individuals (HNI) across the country who were trading on the exchanges of this unregulated virtual currency, the PTI reported.

The move comes after the IT department conducted survey operations last week at major bitcoin exchanges across the country on suspicion of alleged tax evasion. These operations were undertaken for gathering evidence for establishing the identity of investors and traders, the transaction undertaken by them, identity of counter-parties and related bank accounts.Earlier this month, there was a spurt in the value of bitcoin. It rose from under $10,000 at the start of the year to close to $20,000, before a sharp 20 per cent plunge within hours.

In addition to financial risks—the value of bitcoins has seen huge falls within hours—the regulators are worried about their use for illicit and illegal activities, subjecting the users to an unintentional breach of laws against money laundering and terror finance.Concerns also emanate from some unscrupulous entities indulging in illicit money-pooling activities—commonly known as ponzi schemes—with the promise of huge returns from investment in bitcoins and other variants, which they claim are minted through blockchain, a distributed ledger technology that was created to mint bitcoins and comprises of extremely complex algorithms with several thousand nodes for each chain.

There is a suspicion that some so-called cryptocurrencies and bitcoin investments may actually have nothing to do with any blockchain-developed virtual currency and are just new ways devised by scamsters to ride the wave and what they may be offering could be ‘e-ponzi’ schemes.

The financial regulators are worried that a complete lack of regulatory regime for such cryptocurrencies may give rise to ‘e-ponzi’ schemes.

The financial sector watchdogs, including RBI and Sebi, as also various government agencies, will soon get into a huddle to prepare a framework to safeguard the gullible investors and to clamp down on the fraudsters who may try to manipulate the regulatory gaps, PTI reported, quoting a senior official.

There are quite a few proposals on the table and those include applying to cryptocurrencies the existing regulations aimed at checking the spread of ponzi schemes or illicit money-pooling activities, money laundering and black money generation and circulation, another official said.

The jury is still out on whether such virtual currencies should be allowed as legal payment tender or investments, though there are also suggestions from some quarters for allowing them with necessary checks and balances.

You can shift residence, fudge address but you can’t avoid income tax notice anymore

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Avoiding income tax notices by fudging addresses or shifting residence will now become difficult. Income tax rules have been amended that will allow the tax department to deliver notices to assessees at addresses given by them to banks, insurance companies, post offices etc in case the notice is undeliverable at the address supplied to the tax department.

The government issued a notification dated December 20, 2017 amending the Income Tax Rules to ensure that all notices, summons, requisitions or any other communication issued in your name is delivered to you either via post or e-mail.

As per the notification, in case the communication or notice to be served to the assessee cannot be delivered/transmitted to the available address, as per Rule 127 of the Income Tax Rules, the government may use the address mentioned in the following databases to deliver the communication:
a) Address given by you to the bank;
b) Address given by you to the insurance company;
c) Address given by you to the post office while investing in the Post Office schemes;
d) Address as available in government records;
e) Address available in the records of local authorities;
f) Address of the assessee as furnished in Form 61 to the income tax department under Rule 114D;
g) Address as furnished in Form 61A to the tax department under rule 114E.

As per the earlier norms, the communication to the assessee was sent through post or email at the any of the following addresses:

a) Address available in the PAN database;
b) Address available in the income tax return (ITR) to which the communication pertains to;
c) Address as available in the previous year’s ITR;
d) E-mail address available in the ITR for which communication pertains to;
e) E-mail address as available in the last ITR;
f) Any e-mail address available with the income tax authority.

The notification has been published in the Gazette of India by the Minsitry of India vide Notification No. 98/2017/F. No. 370142/36/2017-TPL

Link: Economic Times