The capital gains sphere has become increasingly complex as a result of isolated amendments to the laws governing holding periods and taxation of different asset classes over the years. The finance minister has put forward several changes to the capital gains sphere in order to rationalize the taxation of capital gains. Following our conversation about real estate and equity products, we will now delve into the proposed changes in the taxation of debt and bullion products.

Historical background
For a very long time all mutual fund schemes were classified into two categories of Equity and Non-Equity schemes which included debt funds of all variations as well as bullion ETF/Saving Funds. The long term capital gains on the first category were taxed at a flat rate of 10% over the initial one lakh which was taxed at zero rate. Short term capital gains on such category were taxed at 15%. This has changed from this year and has been discussed in another article.

The income tax department has said that more than 4 crore income tax returns (ITR) have been filed up to 22 July, 2024, which is less than 45% of all income taxpayers in the country who have filed for assessment year 2024-25. According to the IT department, this is 8% more compared to returns filed in the same period last year.

The IT department announced a few key milestones crossed. As of 16 July 2024, the number of ITRs filed per day had crossed 15 lakh filings per day. It is expected to increase significantly over the next few days as nearly 50% of taxpayers are yet to file returns by 31 July, which is the last date for filing returns. After that, there will be a maximum penalty of Rs 5,000 levied for delay in filing taxes, and this has to be filed before 31 December.

Taxpayers in India, who are filing returns under the new tax regime (which is about 66% of taxpayers), got a few relaxations in the Union Budget 2024 that was presented on 23 July 2024.

The Revenue Secretary in the Ministry of Finance, Sanjay Malhotra while addressing ‘FICCI’s interactive session on Union Budget 2024-25’ said that the government is working towards a comprehensive review of the Direct Tax Code.

It will be prepared by the internal committee and then shared for stakeholder consultation within the next six months. “We will have a consultation process and how it will happen that we will decide. We would like to have a collaborative approach for implementation,” he added.

The Revenue Secretary further stated that the efforts of the government will continue to provide a hassle free, simple and collaborative approach towards implementation of taxes. Malhotra said, “Our approach towards taxation has always been and will continue to be in the mode of collaboration and not confrontation. The purpose of our proposals, both on the policy side as well as on the implementation side, are to collect taxes from wherever they are due but do it in a manner that gives respect, trust to the taxpayers and collect them in a smooth and hassle-free manner.”

India will not sign a global corporate tax deal focused on highly profitable multinational firms unless its concerns on dispute resolution and the treatment of withholding tax are addressed, a finance ministry official said on Thursday.
The so-called "Pillar 1" arrangement, part of a 2021 global two-part tax deal, aims to replace unilateral digital services taxes (DSTs) via a new mechanism to share taxing rights on multinational companies, such as US tech giants Alphabet's Google and Amazon.com and Apple.

India is "constructively engaging" with all the countries for the successful conclusion of "Pillar 1", and was hopeful the deal would be finalised soon, Revenue Secretary Sanjay Malhotra, one of the top finance ministry officials, said.

"However, it cannot be at the cost of our own interests."
US Treasury Secretary Janet Yellen in May accused India of refusing to engage on issues important to US interests, noting that negotiations were stuck.

An amendment in the Black Money Act will give taxpayers relief from penalty in case they fail to disclose overseas assets worth Rs 20 lakh, Central Board of Direct Taxes (CBDT) Chairman Ravi Agarwal said, adding that however the obligation to report the transanction is not done away with.

The Black Money Act amendments in Section 42 and 43 will be a part of the Finance Bill.

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 aims to curb black money, or undisclosed foreign assets and income and imposes tax and penalty on such income. Currently under the Act, even if the taxpayers fail to disclose a foreign asset worth Rs 5 lakh, they have to pay a Rs 10 lakh penalty on it.

“At present if the taxpayer is holding any asset abroad, which is not declared in the income tax return then there is a penalty of Rs 10 lakh. An amendment in the Black Money Act is proposed that If the value of the overseas asset is up to Rs 20 lakh, and is not disclosed, there will be no penalty if it's a bonafide mistake on the part of the taxpayer,” Agarwal told Moneycontrol in an interview.

Corporate restructuring and reorganisations often involve transactions where assets such as shares of another company are transferred without consideration, typically regarded as 'gifts'. These transactions have historically enjoyed tax exemptions for the donating entity under section 47(iii) of the Income Tax Act, ToI reported. However, the recipient of the gift has been taxed under section 56(2)(x) of the Act. A new budget proposal seeks to limit these exemptions starting April 1, 2024, to only individuals and Hindu undivided families.

Currently, companies, firms, and trusts could give away assets without facing capital gains tax, considering these actions as gifts. However, the budget proposal changes this by specifying that the exemption under section 47(iii) will no longer apply to non-individual entities, such as companies and firms.

Deepak Joshi, an advocate at the Supreme Court, commented on the shift in the legal landscape.

A day after the Union Budget 2024-25 was tabled in Parliament proposing a slew of changes in the rates of different taxes, and heightened effort to ease compliance, Central Board of Direct Taxes (CBDT) chairman Ravi Agarwal spoke to Priyansh Verma on the rationale behind some of these measures. Defending the revamping of the capital gains tax regime, he said the government wanted to “normalise the exponential growth in transactions.” He also said as of now, “no discussion is on” regarding discontinuing the old personal income tax regime. Excerpts:

Q. What is the intended outcome of the proposed comprehensive review of the IT Act? How will it differ from the draft Direct Tax Code prepared by the government in terms of tax policies and procedures?

A. Simplification in terms of provisions, cutting redundancies, making the language simpler, and aligning it with technology are some of the aspects we’re looking at. The Direct Tax Code is a term, but what it essentially means, is coming up with regulations, which ease compliance burden of taxpayers, and subsequently reduces litigation.

Q. Experts have suggested use of Artificial Intelligence (AI) for resolving disputes…

A. We’re open to introducing AI, but it’s easier said than done. However, we’re working on it. At present, some provisions are already there in the Act, for instance, bunching of appeals on the same issue for simultaneous resolution. We are trying to take the help of AI for that purpose.

The 'Vivad se Vishwas' scheme announced in the Budget for settlement of pending direct tax appeals will be launched this year and its notification apart from relevant FAQs would be issued soon, CBDT chairman Ravi Agrawal said Wednesday.
Speaking to PTI during a post-Budget interview, the head of the direct taxes administration in the country said that a "substantial" number of income tax appeals are logged at the appellate stage in different forums and it is expected that a "reasonable" number of taxpayers will avail the new scheme.

The first 'Vivad se Vishwas' scheme for cases under the direct taxes or income tax category was brought out by the government in 2020 and, according to the CBDT chief, it was "quite successful" with about Rs 75,000 cr revenue being garnered and about a lakh taxpayers availing the scheme.

The Union Budget 2024 has proposed that there will only be two holding periods -- 12 months and 24 months -- for determining whether the capital gains are short-term or long-term, and tax rates have been rationalised and made uniform for majority of assets.

Further, the indexation benefit has been done away in Budget 2024, while raising the exemption limit of Rs 1 lakh for Long-term Capital Gains (LTCG) on these assets such as listed shares and mutual fund to Rs 1.25 lakh.

Short-term capital gains (STCG) tax has been increased to 20 percent, and LTCG tax is now 12.5 percent for specific assets. Additionally, the Securities Transaction Tax (STT) has been hiked from 0.1 percent to 0.2 percent for equity transactions.

Promoters and private equity investors who have sold their shares via the offer for sale route in IPOs face potential tax challenges as a result of a Budget clarification imposing capital gains tax on such sales.

The central government has actually plugged a key loophole in the capital gains tax rules. Many promoters and investors declared zero capital gains on the grounds that there was no explicit provision for calculation of capital gains in this specific scenario and hence. the sale of shares was exempt from taxes.

Now, the central government has plugged the loophole in the rules with retrospective effect from February 1, 2018, bringing the older deals under the ambit of the clarification.

“Historically, there existed a degree of uncertainty regarding the application of the rules to shares transferred under an OFS that were not listed at the time of transfer but were nonetheless subject to STT. To address this ambiguity, the Finance (No.2) Bill of 2024 proposes an amendment to extend the existing rules for cost of acquisition to include shares disposed of through an OFS during an Initial Public Offering (IPO) and provide for indexed cost of acquisition.”

“Have you filed your ITR yet?” – a common question this time of the year, as taxpayers gear up to file the income tax returns by the July 31 deadline. Yet the struggle is annual, and often left for the last moment.

According to the Income Tax department, only 4 crore returns were filed by July 22. It is not only the procrastination, but taxpayers also seem to be struggling with issues such as login failures, unresponsive pages, timeouts, and problems reflecting pre-filled data and uploading large files.

As per a survey by LocalCircles that received 38,000 responses from 311 districts, 49 per cent of taxpayers surveyed are yet to file their returns, while 29 per cent do not believe they would be able to meet the deadline.

Forty-three per cent of respondents came from Tier 1, 26 per cent from Tier 2 and 31 per cent from Tier 3 and 4 districts, the survey revealed.

Income Tax Return (ITR) filing on WhatsApp: Now income tax returns can be filed via WhatsApp, using the power of artificial intelligence (AI). ClearTax, India’s leading online tax-filing platform, has started this facility under which AI-driven service simplifies tax filing for blue-collar workers, especially drivers, delivery executives and home service providers.

Which ITR forms are supported by this service?
“The new solution harnesses the power of artificial intelligence to provide a seamless, chat-based experience directly through WhatsApp, making it accessible to a wide range of users,” according to a release by ClearTax. Currently supporting ITR 1 and ITR 4 forms, the service caters to the needs of most low-income taxpayers, it added.

The tax-filing portal is expecting millions of low-income Indians to benefit via a seamless, chat-based experience on WhatsApp and get TDS refunds.

Did you ever find yourself in a situation where you carefully selected and filled in the details in the income tax return (ITR) form but after submitting it you realised that some details were either missed to be reported or incorrectly stated? What are your options to rectify such mistakes? Prior to FY2022-23 (AY 2023-24), if you made such mistakes there was no way to change it - you had to verify the ITR which had incomplete or incorrect information and then file a revised ITR. However, now with the 'Discard ITR' option, you no longer need to follow the old process. You can discard (delete) the non-verified ITR even after filing it and file a fresh ITR.

What is a 'Discard ITR' option in the ITR e-filing portal?
'Discard ITR' is a functionality enabled by the Income Tax Department wherein you can discard (delete) the filled-up ITR form and start the process again. Imagine you type something in a draft email and then delete all the content before sending it to the intended recipient. You can write fresh content and send the email.

"Users can avail of this option only if the ITR status is 'Unverified'/ 'Pending for Verification'. There is no restriction on availing of this option multiple times. Precondition: 'ITR status' is 'Unverified'/'Pending for Verification', said the Income tax department on its website as of July 20, 2024.

In order to make the income tax systems work more reliably, the Central Board of Direct Taxes (CBDT) has awarded the Taxnet 2.0 project to Bharti Airtel. As per a press release by CBDT on July 19, 2024, this collaboration with Airtel is aimed at providing network connectivity, facility management services, and video conferencing solutions to the Income Tax Department.

Experts say that this project can make the e-filing ITR portal work faster, as currently it is plagued with various network-related glitches and issues.

"Recently many taxpayers faced issues while using the online facility for ITR filing as opening each page of the tab was taking substantial time. We can expect that in the next season of ITR, taxpayers may find the e-filing portal's interface to load at a faster speed," says Mihir Tanna, Associate Director-Direct tax, S.K Patodia & Associates LLP.

The Central Board of Direct Taxes (CBDT) has extended the tax relief for sovereign wealth funds (SWFs) and pension funds by a year to March 31, 2025, against the previous expiry of March 31, 2024.
With the changes, the funds can now enjoy exemption from tax on dividend income, interest income, or long-term capital gains tax arising from investments made in India.

Though the announcement was first made in the interim budget earlier this year, the tax authority notified the changes on July 18.

“While it's a move that will be welcomed by the infrastructure sector and infrastructure funds, given the long haul of these projects and India's long-term aspirations, the extension should have been considered for a longer duration as the investment needs are unlikely to be met in one year,” said Sunil Gidwani, partner - financial sector, Nangia Andersen LLP.

After an updation of tax-filing utility on the income tax portal this month, taxpayers are being forced to give up a valid rebate of up to Rs 25,000 under the new tax regime if they have booked short-term capital gains, which overrides the Income Tax Act, 1961.

A rebate is a waiver given on income tax to help low-income earners reduce their taxes, which ensures that they file their tax returns. As per the Union Budget 2023 change, individuals opting for the new tax regime are permitted to claim a rebate of up to Rs 25,000 if their taxable income is below Rs 7 lakh.

The anomaly is caused by a different perception of what is “total taxable income” and needs to be corrected as it affects hundreds of low-income earners, say chartered accountants.

The Income Tax return filing deadline is July 31, 2024. With the deadline just two weeks away, the rush to file ITRs has increased multifold. Many taxpayers have reported constant delays due to snags with the e-filing portal. Due to this, the Income Tax Department has started receiving requests from individual taxpayers and tax professionals for extending the ITR due date for AY 2024-25 beyond July 31.

After the Institute of Chartered Accountants of India (ICAI) and the Karnataka State Chartered Accountants Association, the All Gujarat Federation of Tax Consultants and Income Tax Bar Association have written to FM Nirmala Sitharaman about constant issues with the functioning of the Income Tax Portal and updates in AIS/TIS.

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Both have requested an extension of the deadline for filing Income Tax Returns for AY 2024-25 from July 31, 2024, to August 31, 2024.

In its letter to the finance ministry, Income Tax Bar Association noted: "It is to bring to your kind notice that after update in the ITR online utility post 5th July, the utility is not giving benefit of rebate u/s 87A for the tax on short-term capital gain on shares u/s 111A and other special rate incomes. Before 5th July, the same utility and calculator were allowing rebate u/s 87A against the tax on short term capital gain on shares u/s 111A and other special rate incomes other than long-term capital gain u/s 112A where such rebate is specifically barred by the sub-section (6) of the section 112A itself."

As the deadline of filing Income Tax Returns (ITRs) for the assessment year 2024-25 approaches, taxpayers continue to cite technical issues while filing returns with the e-filing portal, which was developed by Infosys.

Chartered Accountants (CAs) have expressed “dismay” over facing several difficulties during the ITR filing process on the income tax portal, which includes accessing essential forms, such as 26AS, Annual Information Statement (AIS), and Tax Information Summary (TIS); encountering mismatches in pre-filled data related to salary and interest income; and facing technical glitches while submitting the returns. The last date for filing the ITR for FY24 is July 31.

As of July 14, over 27 million ITRs were filed, which is 13% more compared to returns filed during the same period last year. The number of ITRs filed per day has crossed 1.3 million on July 13, and is increasing everyday as the due date of 31st July 2024 is approaching, the Income Tax Department said in a bulletin.

The last date to file income tax return (ITR) is July 31, 2024, which just a few weeks away. According to the Income Tax Department website, “over 2.7 crore ITRs have been filed as on 14 July 2024, which is 13% more compared to returns filed during the same period last year.”

Even though there are about three weeks left for the ITR filing deadline, many tax filers have been faced with major tech issues when using the Income Tax Department’s. These include basic glitches like logging into the e-filing portal to resetting the password to big ones like discrepancy in pre-filled data in ITR forms and difficulty in e-verification.
Chartered accountant associations have been writing to the tax department asking them to rectify these issues at the earliest.

"Taxpayers are experiencing mixed feelings while the Income Tax Department is sending reminders about due dates, the portal is behaving differently. With just 15 days remaining to file IT returns. The taxpayers face difficulty due to slowness in downloading reports and OTP for password reset We appreciate the ministry's efforts in addressing most of our recent concerns and hope that the latest representation from KSCAA will resolve this issue as well," said CA Sujatha G, president, Karnataka State Chartered Accountants Association (KSCAA).

Many taxpayers have reported facing glitches while filing their income tax returns on the Income Tax Department’s e-filing portal. As a reminder, the deadline to file income tax returns is July 31, 2024.

Most taxpayers become active in July to file their income tax returns, particularly salaried individuals who receive Form 16, a crucial document for tax filing, from their employer in late June each year.

This is not the first time such complaints have arisen from tax filers. In previous years, reports have surfaced about technical glitches causing delays in tax filing and even preventing some users from filing their returns.