GST crashes even money lenders’ usurious rates

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Rates have dipped to a third to 6 per cent from 9-18 per cent about 6-9 months ago.

Interest rates that money lenders charged borrowers hardly budged for decades irrespective of policy decisions. But even that is collapsing faster than what it is in the formal banking system, thanks to the implementation of Goods and Services Tax.

Borrowing in the informal market is no more lucrative.

Lenders who fund small traders and merchants have lowered their rates to just a third of what they were charging, but still the demand is not showing up.

Rates have dipped to a third to 6 per cent from 9-18 per cent about 6-9 months ago, said two dealers aware of the market dynamics.

“Those businessmen have now limited options to run operations in cash especially after GST implementation and demonetisation,” said a textile business owner, who did not want to be identified.

“From a local politician to an industrialist or local trader whoever has additional unaccounted cash are normally the lenders in this informal loan market.”

A huge army of businessmen borrowed in an informal market from money lenders to avoid getting trapped by the banking system and the tax department. This was known as ‘Kachha Credit’ among practitioners.

With the implementation of GST which produces a chain of transactions till it reaches the ultimate consumer, merchants have little scope to escape accounting for their trades.

So, instead of funding their purchases through informal credit at high rates which was beneficial since it allowed escaping the tax net, they are choosing to fund businesses through formal credit. To keep businesses running, money lenders have lowered rates.

Since the tax department is keeping close watch on businesses, all traders preferred anonymity. This market is known as a plat form for lending and borrowing unaccounted or untaxed money without any collateral. Traders now shy away from availing such credit amid cash squeeze triggered by reform measures like GST and demonetisation. Sometimes, people take highly leveraged positions borrowing such money, which a bank would have declined.

A garment trader who may be eligible to borrow say, Rs 10 lakh in the absence of creditworthy balance sheet, can take a loan up to Rs 50 lakh due to personal knowledge of businesses, dealers said. The practice is prevalent in the garment industry.

Mumbai’s Bhiwandi, a business centre, used to be the hotbed of it. It has died down after the Central Value Added Tax, a central government tax levy introduced by Vajpayee led NDA, was introduced.

 

Source: Economic Times

 

Jurisdiction-free I-T assessment on the cards

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The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

To check corruption and harassment, the tax department will soon launch a pilot of “jurisdiction-free assessment” where a tax officer will not get to know identity of the assessee as allotment of cases will be done randomly by computers rather than on the basis of area.

The success of the pilot, to be first carried out in New Delhi and Mumbai, will determine if the plan has to be expanded all over the country, a senior revenue department official said.

The country is divided into 18 tax zones. Taxpayers are assessed by the officers of the region they are based in.

Under the new system, the assessment zones will be demolished and a special computer software will allocate a taxpayer to any officer anywhere in the country, he said.

The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

The tax department is working on a major reform initiative to make compliance taxpayer friendly and a 13- member committee of tax officers has been formed to look into implementation issues, the official said.

But before the country-wide launch, the pilot is being run to spot implementation issues.

“After you initiate jurisdiction-free assessment, a taxpayer might say he wants to meet the tax officer face to face and explain his case. What do we do in that case? Can we deny the taxpayer an option to meet his assessment officer (AO)? Say, we allow them to have video conferencing, then we will have to set up the facility in tax offices. These are issues we need to address,” he explained.

Among draft recommendations of a technical committee submitted to the CBDT, the apex policy-making body on income tax matters, the tax department wants to move to the jurisdiction-free I-T assessment where the taxpayer will not have to meet his assessing officer face to face.

The official also said the proposals were broadly reflected in the Prime Minister’s speech in Rajaswa Gyan Sangam earlier this month when he had said the relation between the tax department and an assessee should be that of an examiner and an examinee where either party does not know each other.

Modi, the official said, had also called for redrafting of the archaic income tax laws so that these become simpler. The humongous Income Tax Act has been in place since 1961 and the UPA government had proposed a Direct Tax Code to replace the Act.

However, since the government changed in 2014, the DTC could not be taken up.

I-T department goes after defunct companies for tax frauds

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It’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.

The tax office is reopening old records of many companies that have wound up and no longer exist in the books of the government — something the revenue department has rarely done in the past.

Former directors of such closely-held private companies, which have received tax notices along with the official liquidators, fear they could be suddenly saddled with unforeseen liabilities. While opening new private companies and shutting down old ones have often been a ploy to move unaccounted money, some of the companies set up to carry out bona fide businesses which subsequently failed have also come under the glare of the income tax department.

Till now, the department has typically stayed away from companies to which it had issued non-objection certificate prior to the winding process. But, it’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.”In case of private limited companies, the liability of directors continues even after liquidation. Here, these ex directors have to prove that any non-recovery of tax is not due to any gross neglect, malfeasance, or breach of duty on their part in relation to the affairs of the company,” said senior chartered accountant Dilip Lakhani.

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“But such reopening in case of companies which have been liquidated or struck off from the RoC (Registrar of Companies) records should be done very selectively — may be only in situations of tax fraud and not situations of plain vanilla income having escaped assessment,” said Mitil Chokshi, senior partner at Chokshi & Chokshi LLP.

The liquidator of a company going for ‘voluntary liquidation’ can approach the tax office to ascertain the outstanding tax liability, and set aside the amount before distributing the proceeds from asset sale to creditors and shareholders.

But even in such cases the department can (though rarely done) reopen old assessments if it later suspects fraud or fund diversion. The no-objection certificate, according to a senior tax official, is simply based on the outstanding tax claim on that date. According to him, if the department has to look into serious irregularities, then no NoC can be issued. “The provisions do provide powers to assessing officers to re-open and issue such notices,” said Chokshi.

“But is it really fair to re-assess based on some possible income having escaped assessment, especially when the companies are no longer in existence?” One of the closed companies to have received notice for reopening assessment was an outsourcing arm of a US bank. Some of the liquidated entities were engaged in marketing, realty and infrastructure development.

Significantly, even if the tax amount (approved by the I-T department) is set aside in the course of liquidation, former directors can be questioned if the company is ‘private limited’ in character. The companies have received reopening notices for assessment years 2011-12 and 2012-13.

The taxman can go back up to six years in reopening of old assessments. However, in covering undisclosed foreign assets — overseas bank accounts, properties etc — the I-T department can rake up 16-year old transactions in probing tax evasion. In the US, no-objection certificate from the Internal Revenue Service (the national tax collection agency) is required before final liquidation.

There are no provisions for reopening unless a tax fraud has been identified. According to another tax practitioner, while such a notice may be stayed by moving the high courts, the question is who will do it?”Liquidators were appointed for a limited period; erstwhile Indian directors may not have the authority, while foreign promoters and directors are least interested,” said the person.

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

CBDT signs 4 more APAs with taxpayers in August

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The Central Board of Direct Taxes (CBDT) signed four more advance pricing agreements (APAs) in August with Indian taxpayers as it looks to reduce litigation by providing certainty in transfer pricing.

The four APAs entered into during August, 2017 pertain to various sectors of the economy like telecom, banking, manufacturing and education, an official statement said today.

“Out of these four agreements, three are unilateral and one is a bilateral,” it said.

According to the statement, the bilateral APA is for international transactions between an Indian company and a UK-based company and this is the eighth bilateral APA with the United Kingdom and 13th overall (the other five being with Japan).

With the signing of these four agreements, the total number of APAs entered into by CBDT has reached 175, the statement said, adding, “this includes 162 unilateral APAs and 13 bilateral APAs.”

Besides, in the current financial year, a total of 23 APAs (2 bilateral and 21 unilateral) have been signed till date, the statement noted.

The APA provisions were introduced in the Income-tax Act in 2012 and the “rollback” provisions were introduced in 2014.

The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.

The statement pointed out that since its inception, the APA scheme has been well-accepted by taxpayers and that has resulted in more than 800 applications (both unilateral and bilateral) being filed so far in five years.

Noting that the progress of the APA scheme strengthens the government’s resolve of fostering a non-adversarial tax regime, the statement said the Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

 

Source: Times of India