No tax scrutiny of big transaction if it matches income

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I-T department gathered a huge amount of data as part of Operation Clean Money, which followed demonetisation, and is subjecting it to analytics to detect patterns and discover attempts at tax evasion.

If you splurged on something really expensive or made an enormous investment recently, rest assured your accounts won’t be opened up for scrutiny by the income tax department as long as these can be squared with your declared income.

“Scrutiny will be based on specific information,” a senior income tax official told ET. In other words, big transactions will no longer automatically qualify a person for scrutiny. The income tax department will only start asking questions if it has clear information that calls for an investigation, sparing honest taxpayers.

This was the outcome of a high-level meeting held by the Central Board of Direct Taxes (CBDT) last week to review the conditions for scrutiny. Such cases are currently picked up through computer-based criteria related to transactions above a certain ceiling. This idea is to ensure that regular taxpayers such as salaried employees don’t face unnecessary hassle and to allow tax authorities to focus their energies on high-risk individuals or entities where information of possible wrongdoing is available.

The department’s multiple data sources include the tax authorities of other countries and high-value transactions in India that will likely be the basis of any scrutiny.

Those identified under the department’s Operation Clean Money as having made large cash deposits in banks and bought costly items after demonetisation was announced could also face scrutiny if they have not explained their transactions satisfactorily.

The department gathered a huge amount of data as part of Operation Clean Money, which followed demonetisation, and is subjecting it to analytics to detect patterns and discover attempts at tax evasion. It has already identified 60,000 individuals, who will now face closer investigation.

But there is a conscious effort to make a shift towards quality rather than quantity to ensure the effectiveness of the exercise. The focus will be on limited scrutiny based on information with the department rather than a general one. Roving enquiries won’t be permitted and a limited scrutiny can only be converted to a general one after following adequate procedures.

Source: http://economictimes.indiatimes.com/news/economy/policy/no-tax-scrutiny-of-big-transaction-if-it-matches-income/articleshow/58689453.cms

High-value transactions by doctors, lawyers under income tax lens

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Salaried individuals are not required to file the newly introduced statement of financial transactions (SFT).

Senior tax officials are reaching out to chartered accountants and CFOs to drive home the point that by May 31 business establishments, various financial institutions and professionals, including doctors, lawyers and architects, will have to report a slew of high-value transactions such as cash deposit, credit card payments, share sale, property deals, debentures and mutual fund units among others.

Salaried individuals are not required to file the newly introduced statement of financial transactions (SFT). Entities that will have to report are banks, professionals, fund houses, forex dealers, post office, nidhis, non-banking finance companies, property registrars, companies issuing bonds and debentures, and listed companies buying back shares from specific persons.

“Many are not fully aware of the new requirement. Under the modified rules, the earlier requirement of filing annual information return (AIR) has now been replaced by SFT. The changes have created new classes of first time filers who have to file SFT of specified transactions for FY 2016-17,” said Jai Raj Kajla, Director of Income Tax (Intelligence & Criminal Investigation) while addressing tax practitioners here on Friday.

The nature of transactions includes cash payment for purchase of demand drafts or pay orders of Rs 10 lakh or more in a year; cash payment of Rs 10 lakh or more for purchase of pre-paid RBI instruments, cash deposit or withdrawal of Rs 50 lakh or more from current account; one-time deposit of Rs 10 lakh or more with banks, nidhis, NBFCs and post offices; payment of Rs 1 lakh or more in cash and Rs 10 lakh or more by other mode against credit card bill issued to a person during the year; and property registrars for deals worth Rs 30 lakh or more.

Kajla and his colleagues met close to 300 tax practitioners and corporate CFOs to explain the new rules, which would require the reporting entity to register online with the tax office. SFTs have to be filed in separate form and not along with the regular Income tax returns.

“The Directorate is conducting workshops to address various categories of reporting entities like bullion dealers, stock brokers, and dealers of automobiles and luxury goods,” said Anu Krishna Aggarwal, Additional Director of Income Tax (I&CI).

As per the new requirements, apart from specific filers like banks which used to file similar AIR returns, SFT regulations would cover any person who is liable to audit under Section 44AB of the Income Tax Act, 1961. The particular section relates to audit of businesses and professions.

The purpose of the workshops was to spell out the rules to the chartered accountants who in turn can assist taxpayers in ensuring timely and accurate SFT compliance.

Laxman Singh Gurjar, Manpreet Singh Duggal, and Aastha Madhur – all deputy directors of Income Tax – and Vishnu Agarwal, chairman of the western India council of ICAI, participated in the discussions which also dealt with the finer points of compliance ..For instance, while reporting an entity will have to take into account all the accounts of the same nature maintained in respect of a person during a financial year; also, while attributing the entire value of the transactions to all the persons in cases where the account is maintained or transactions recorded in the name of more than one person.

Filing of inaccurate information will attract penalty of Rs 50,000.

Source: http://economictimes.indiatimes.com/articleshow/58651349.cms

No more rejection for start-ups seeking tax sops

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Companies will be given a chance to amend and re-submit proposals, says DIPP

In what could be a morale booster for start-ups, the government has decided to do away with the practice of rejecting applications for tax sops.

Instead, start-ups will get an opportunity to apply again after making changes to the proposal based on the explanation given to them on the initial one.

Supportive policy

The Department of Industrial Policy and Promotion is also reworking the qualification criteria for start-ups for non-tax benefits, a government official told Business Line.

“Instead of dismissing proposals that do not meet the mark for tax-sops with a simple ‘rejected’, the inter-ministerial group examining it will give details of where they fell short. This will give the start-ups an opportunity to rework their proposals, and apply again for tax benefits,” the official said. “There has been no change in the criteria of judging whether a start-up qualifies for tax benefits. It still depends on how innovative the idea is.”

In the last meeting of the Inter Ministerial Group (IMG) on startups which met on May 1, about a dozen applications were approved.

The change in the Central government’s stance has been triggered by a general sense of dissatisfaction among start-ups with the new policy, as only about 10 proposals had qualified for tax sops till last month out of the 140 proposals vetted by the inter-ministerial group since the policy was announced last year. “The DIPP has decided to be a bit more empathetic while dealing with start-ups. After all, what good are tax sops if very few are able to benefit from it,” the official said. The 130 applicants for tax apps, who were rejected over the past year, will also get a detailed note on why their cases did not pass the test. As per the existing rules, start-ups (companies and Limited Liability Partnerships or LLPs) can get income tax exemption for three years in a block of seven years, if they are incorporated between April 1, 2016, and March 31, 2019.

Expanding definition

An IMG, including officials from the Department of Bio-technology, Department of Science and Technology and the DIPP, examine the proposals on the basis of innovation and use, and determine whether they qualify for tax sops or not.

“An official from the Ministry of Electronics, IT and Technology has been added to the IMG from May 1,” the official said.

The DIPP will come up with a new set of rules over the next few weeks, tweaking the definition of a start-up that will result in more companies and LLPs coming under in the category.

Source: https://www.pressreader.com/india/the-hindu-business-line/20170508/

As Narendra Modi government gets set to crack GST whip on tax evaders, India Inc voices concern

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According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits.

Many functionaries from corporate India and tax experts have voiced concerns over the government’s plan to give unprecedented teeth to the country’s indirect tax administrators by making tax evasion above `5 crore a “cognizable and non-bailable offence” in the upcoming Goods and Services Tax (GST) regime. According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits or refunds above the same threshold, treating it as a cognizable and non-bailable offence, where the police have the authority to arrest the person concerned without warrant.

While non-remittance of tax deducted at source could lead to non-bailable warrant under the Income-Tax Act, this has been sparingly used – one recent instance was that of the Bengaluru High Court denying a request of the I-T department to issue a non-bailable warrant against the beleaguered businessman Vijay Mallya.  The punitive provisions under indirect tax laws have, however, been less biting.

The service tax department had invited the Delhi high court’s ire last September for arresting a senior executive of travel portal MakeMyTrip for failing to deposit tax after collecting it from those who booked hotel room nights via the portal. Disturbed over the fact that the arrest took place without even issuing a show cause notice to the firm and giving it an opportunity to defend itself, the court awarded costs to the travel portal and asked the taxman to refund the service tax collected after the arrest. The tax department went in appeal against the court’s decision and the matter is now before the Supreme Court.

“It may be reasonable to make “collection of tax but non-payment to government’ a non-bailable offence, as there is very little room here for interpretation in such case. But availing tax credits through wrong invoices or obtaining higher-than-admissible refunds are subject to technical interpretations in the early days of GST and it would be extremely stringent to make these non-bailable offences,” Bipin Sapra, Indirect Tax partner at EY said. Echoing the view, Anita Rastogi, partner-indirect tax, PwC India said the country’s indirect laws have never had such tough provisions against tax evasion.

Section 132 of the CGST Bill also spells out the punishment for tax evasions above Rs.1 crore: if the amount evaded exceeds Rs. 5 crore, imprisonment up to five years is possible along with fine, Rs. 2-5 crore evasion could lead to imprisonment extending to three years and fine, Rs.1-2 crore evasion could invite up to 1-year jail term and fine.

Source: http://www.financialexpress.com/economy/as-narendra-modi-government-gets-set-to-crack-gst-whip-on-tax-evaders-india-inc-voices-concern/613908/