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News Direct Tax-Income Tax

  • Aug 23, 2019
  • Only startups with turnover of up to Rs. 25 cr eligible for tax holiday: CBDT

    Seeking to allay concerns on tax holiday for startups, the tax department on Thursday said only small startups with a turnover of up to Rs. 25 crore will get tax holiday on fulfilling certain conditions. It did not recognise the Rs. 100-crore turnover definition of a small startup put up by the Department for Promotion of Industry and Internal Trade (DPIIT). “Since the intention was to support the small startup, the turnover limit of Rs. 25 crore was considered reasonable for granting profit linking deduction,” the Central Board of Direct Taxes (CBDT) said in a statement. Startups broadly under Section 80 IAC of the Income Tax Act are allowed 100 per cent deduction of income for three years out of seven years from the year of its incorporation. “The CBDT has clarified today [Thursday] that small start-ups with turnover up to Rs. 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961, which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation,” it said in a statement.

  • Aug 22, 2019
  • Income tax disputes: Revised limit to be applicable to pending cases

    In a bid to remove any ambiguity over the withdrawal of direct tax-related litigation, the Central Board of Direct Taxes (CBDT) on Wednesday clarified that the revised higher threshold for filing appeals would be applicable to all pending cases as well. The Board directed the income tax department to withdraw all such pending cases where claim amounts fall below the revised limit from different appellant forums by October 31. Just a year after the CBDT had raised the monetary limit of claims for the income tax department to file appeals in higher judicial forums, the board on August 8 again raised the threshold ‘as a step towards further management of litigation’.

  • Aug 22, 2019
  • Small startups may not get promised tax holiday

    Indian startups with turnover in excess of Rs 25 crore may have to pay income tax even though they may be eligible for the three-year tax holiday announced by the government. That’s because under tax laws, the threshold for exemption remains at Rs 25 crore. It has not yet been enhanced to Rs 100 crore in line with the liberalised norms of the Department for Promotion of Industry and Internal Trade (DPIIT). Startups want the DPIIT and Central Board of Direct Taxes (CBDT) to remove ambiguity, said people familiar with the matter. “Clarity is needed urgently as the September 1 deadline to file returns is nearing,” said the chief financial officer of a tech startup. Startups exceeding the turnover threshold of Rs 25 crore stand to lose out on the tax holiday and may have to cough up tax with interest.

  • Aug 22, 2019
  • Tata Trusts face I-T queries over 'surrender' of registration

    The income tax department has served notices on a set of Tata trusts, seeking to reopen assessment and questioning their decision to ‘surrender’ registrations in 2015. The department, which sent the notices last month, is seeking to tax the accumulated income of the trusts for certain years. The department believes the trusts were not in a position to ‘surrender’ their registrations, which can only be ‘cancelled’ by the tax office, three persons familiar with the matter told ET. According to Section 115 (TD) of the Income Tax Act, a trust whose registration is cancelled is required to pay tax on its accumulated, or ‘accreted’, income. In this case, the tax will amount to at least Rs 1,800 crore, after considering the fair market value of the trusts’ total assets net of liabilities.

  • Aug 22, 2019
  • Taxing times: Compliance complexity a big challenge for businesses

    India’s tax challenge is not the rates per se, it lies in the complexity of compliance. This point appears to have been addressed by the Task Force report on revamping the Direct Tax Code. As reported in this newspaper on August 20, 2019, the recommendations are not yet public, but appear to be directed toward reducing tax rates, and changing the assessment and litigation management processes to simplify and share information among the various tax departments. While details of the report and the government’s responses are awaited, it is important to understand that the government is currently facing a constrained fiscal space and may not be eager to cut rates so easily. We have a tax conundrum on our hands.

  • Aug 22, 2019
  • Finance ministry amends PMLA Act to offer clarity on digital KYC

    The finance ministry has amended the Prevention of Money Laundering Act, 2002, to clarify the various modes of capturing customer details electronically, in what could potentially change the way regulated entities such as banks and telecom companies capture these details completely. PMLA is the means through which lenders, investment platforms and telecom companies are authorised to capture customer details before onboarding them on to their platforms. While the government has not spelt out video KYC through the amendment, the move clears the path for regulators like the Reserve Bank of India or others to come out with such guidelines, industry insiders said. Further, the changes in the Act will also enable customers to submit Aadhaar details to companies voluntarily, thereby paving the way for remote onboarding, which had stopped after a Supreme Court order last year.

  • Aug 21, 2019
  • Corporate tax cuts suggested by DTC panel can cost govt Rs 1.2 lakh crore in revenues

    The government may have to forgo as much as Rs 1.2 lakh crore in revenue a year if it were to cut tax rates in accordance with the recommendations the direct tax code (DTC) task force is understood to have made in its report submitted with finance minister Nirmala Sitharaman on Monday, analysts said. However, the potential revenue forgone could be substantially reduced if exemptions extended to both companies and individuals are fully withdrawn, they added. The Akhilesh Ranjan-led panel’s report is learnt to have proposed that the corporation tax rate be slashed to 25% across the board, including for foreign companies that currently pay about 40% tax. Any such reduction would essentially bring down rates for 0.7% of all firms that are currently paying taxes at 30%. However, these large companies contribute about 75-80% of total corporation tax collections, and a cut in their tax rate would bring down their contribution by an estimated Rs 90,000 crore annually.

  • Aug 21, 2019
  • CA bodies submit representation for ‘Acche Din’ for taxpayers to Finmin

    Chartered Accountants’ associations have met Minister of State of Finance, Anurag Thakur seeking a slew of reforms for ‘Acche Din’ in income tax and good services tax to benefit taxpayers. In a joint representation to the Finance Ministry on Monday, five Chartered Accountants associations have called for timely availability of income tax return forms, extending the due date for filing returns to August permanently, simpler refund norms and increasing the monetary threshold for launching prosecutions.

  • Aug 21, 2019
  • To create a business-friendly tax framework

    The government has introduced several measures to improve its tax delivery system and make it more business-friendly. Regular reviews of the delivery system and improvements to processes to reduce turnaround time demonstrate its commitment. One aspect of the journey towards ‘Tax 2.0’, however, that requires immediate attention is the process of granting lower withholding tax certificates. Businesses depend upon the Income Tax department to obtain a withholding tax certificate before making or receiving a payment.

  • Aug 20, 2019
  • Painless taxation: DTC panel proposes cut in income tax, corporation tax

    A substantial cut in personal income taxes to bring relief to India’s middle classes as also a lower corporation tax are understood to be among the major recommendations of the direct tax code (DTC) panel. The panel has also likely proposed that dividend distribution tax (DDT) be taxed only in the hands of recipient and not in the hands of companies as is the case today. Moreover, persons part of the consultations over the past year indicated there would be sops for start-ups and some changes relating to the taxation rules for foreign companies. Many of the recommendations deal with simplyfying the rules and procedures, and are aimed at making it easier for taxpayers. The Akhilesh Ranjan-led panel submitted its report to finance minister Nirmala Sitharaman on Monday.

  • Aug 19, 2019
  • ITR forms with pre-filled investment data soon

    Imagine not having to fill up any details of dividend from mutual funds or gain or loss on equities, and interest income in your income tax return! One may soon get all those details filled in advance in one’s I-T return form; just check the details, pay tax if due, and file it. Keen to take the prefilled return forms to the next level, the revenue department has initiated consultations with market regulator Sebi to explore the idea of getting details of investment returns of taxpayers a government official has said. “We are in talks with Sebi…we have had two rounds of meetings already,” the official said. This is part of the government’s initiative to bring about ease of living for taxpayers.

  • Aug 16, 2019
  • CBDT's procedure for pending angel tax assessment cases to provide safeguard to start-ups: Experts

    The government's recent decision to give relief to start-ups on assessment of angel tax notices would provide a safeguard to them and promote their growth, according to experts. Seeking to calm the nerves of start-ups worried about angel tax, the government last week assured that explanation given by them to a tax notice in a limited scrutiny case would be summarily accepted without any questions asked by the taxman. The Central Board for Direct Taxes' (CBDT) circular with this effect "brings in more safeguard by requiring assessing officers to procure his or her supervisor's consent before starting on any inquiry under the angel tax provision against a start-up company which has not got DPIIT approval," S. Vasudevan, Partner, Lakshmikumaran & Sridharan said.

  • Aug 16, 2019
  • Opinion | Axe those tax fears

    In his 15 August speech, Prime Minister Narendra Modi has sought to reassure honest taxpayers that they shall not be treated with suspicion. To uphold that promise, steps are already being taken. Come 1 October, manual notices sent by the income tax department will be a thing of the past. The Central Board of Direct Taxes has barred all such communication.

  • Aug 14, 2019
  • Finance ministry may consult Law ministry on FPI surcharge

    The finance ministry may soon consult the law ministry on how best to provide relief to foreign portfolio investors (FPIs) from the super-rich surcharge that was announced in the July 5 budget. The government is exploring various options and the one considered most effective and legally feasible will be taken up, said people with knowledge of the matter. The surcharge has taken effect after presidential assent to the Finance Bill. Among the options on the table are relief via a circular, an announcement to be followed up with an amendment later, or an ordinance to immediately amend the Finance Act.

  • Aug 13, 2019
  • Angel Tax: Its time this colonial hangover gets removed

    In Poetics, Aristotle described the Greek word Hamartia as “a fatal flaw leading to the downfall of a tragic hero or heroine.” Though used in the context of literary criticism, it can be easily be co-opted to describe Indian tax law—of how every notification of exemption that seems too good to be true always contains within it the seeds of its downfall. Nowhere is this art of the Achilles heel more prominent than in the “Angel Tax” notifications. The “Angel Tax”, or Section 56(2)(vii b), is a 2012 insertion by the then UPA government which taxes domestic capital invested into private Indian entities as income, if the investment was made above the ‘Fair Market Value’. This clause, a colonial hangover that discriminated against Indian investors in India, became a lightning rod over the past few years as it began to be indiscriminately applied towards Indian startup companies who raised the bulk of their funds from domestic sources. India has been a spectator in its startup story, with barely 10% of all funds raised by Indian startups coming from Indian sources, and a majority of that as seed or angel funding—the prime target of the “Angel Tax”.

  • Aug 13, 2019
  • I-T Dept moves to collect data on cash deposits during DeMon

    The I-T Department has spread its net wide and deep for catching those who have deposited unaccounted cash during demonetisation. In the latest directive to the officers, a 17-point checklist has been created, which has to be updated on a server for further action. The directive, which was issued on Friday is the ninth communication issued by the Finance Ministry through the Central Board Direct Taxes (CBDT). A senior I-T officer told BusinessLine that till date three Standard Operating Procedures, one FAQ and four other letters have already been issued but an exhaustive checklist, directing seven of the 17 tasks to be divided into further smaller tasks is unprecedented in the demonetisation cases. Uploading the checklist to a central server shows the micromanagement, which is being exercised from New Delhi. A copy of the checklist, which has been reviewed by the BusinessLine, seeks to collect details on whether the cash deposited in banks by the taxpayer between November 9 and December 31, 2016, has been disputed by the taxman.

  • Aug 12, 2019
  • CBDT extends angel tax relief to startups facing tax demands

    The government has exempted all registered startups that have received tax demand notices for selling shares at a premium from an anti-evasion provision in the Income Tax Act known as ‘angel tax.’ The move seeks to ensure that genuine entrepreneurs are not affected by the provision that allows the government to demand tax on share premium, treating it as income. Earlier, the Central Board of Direct Taxes (CBDT) had exempted registered startups from the purview of the angel tax provision except for those that have already received tax demand notices with the intent of granting them relief at the appeals stage. CBDT said on Saturday that it has now been made applicable to those that have already been issued a demand notice for the share premium.

  • Aug 09, 2019
  • Angel Tax: Summary relief for recognised start-ups

    In what would bring clarity to the start-ups that have been served with notices by the income-tax department under the so-called angel tax provision, the Central Board of Direct Taxes on Thursday said the department would ‘summarily accept’ contention of start-ups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), if the notices pertained only to the angel tax section.

  • Aug 09, 2019
  • CBDT raises monetary threshold limit for I-T dept for filing appeals

    Just a year after the Central Board of Direct Taxes (CBDT) raised the threshold monetary limit for the Income-Tax Department for filing appeals in higher judicial forums, the Board on Thursday raised the limit again “as a step towards further management of litigation”.The threshold now stands at Rs 50 lakh for appeals before the appellate tribunal in income-tax matter. Similarly, the threshold has been raised to Rs 1 crore for high court and Rs 2 crore for Supreme Court. Last year, the CBDT had raised the monetary limit for appeal in tribunal to Rs 20 lakh from Rs 10 lakh earlier. The threshold was more than doubled in case of appeal before high courts to Rs 50 lakh from Rs 20 lakh earlier. For appeal before the apex court, the limit had been raised four-fold to Rs 1 crore.

  • Aug 09, 2019
  • Taxman will need approval for unrecognised startups’ scrutiny

    Scrutiny of startups not recognised by the Department for Promotion of Industry and Internal Trade on the angel tax issue will be conducted only after sanction from higher authorities, the apex body for direct taxes said. The move follows finance minister Nirmala Sitharaman’s assurance in her budget speech that the Central Board of Direct Taxes (CBDT) will take steps to address issues faced by startups. “Special administrative arrangements shall be made by CBDT for pending assessments of startups and redressal of their grievances.

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