The rapid growth of the digital economy has fueled a need to devise a globally acceptable, consensus-based mechanism to effectively tax the ‘digital economy’. While efforts for a global consensus are underway by the OECD, many countries such as France, Turkey, Italy, Austria, United Kingdom etc., have either proposed, announced or implemented, a Digital Service Tax (‘DST’) as an interim unilateral measure to tax digital companies.

Taking a cue from the G20 / OECD BEPS Action 1, India also introduced Equalisation Levy in 2016 (‘EL 1.0’) at the rate of 6% on non-resident companies engaged in online advertisement and related activities. The Indian government further expanded the scope of EL in Finance Act, 2020 to include a levy of 2%, effective from 1 April 2020, on consideration received by an ‘e-commerce operator’ from ‘e-commerce supply or services’ (‘EL 2.0’).

The first instalment of EL 2.0 was due on 7 July 2020. The stakeholders expected the government to defer the levy for some time, considering the COVID-19 crisis and to release clarifications on the scope of the levy. On the other hand, the United States Trade Representative also initiated an investigation, famously known as ‘the Section 301 investigation’ against India, the European Union and host of other nations on the unilateral levy of digital tax.

India’s Finance Ministry is considering an amnesty program for residents with illicit stash of gold, as part of an effort to crack down on tax evasion and cut its dependence on imports, according to people with knowledge of the matter.
Under the proposition made to Prime Minister Narendra Modi, the government plans to ask people with unaccounted holdings of the metal to declare it to tax authorities and pay levies, penalty, the people said, asking not to be identified citing rules on speaking to the media. The proposal is at an early stage and authorities are seeking feedback from concerned officials, they said.

Modi unveiled three state-backed plans in 2015 to try to tap the world’s largest private gold stash of about 25,000 tons held by households and institutions to trim physical demand, and reduce imports by providing people with alternative avenues for investment. The programs failed to generate interest as a section of the people didn’t want to part with their gold, usually in the form of jewelery and worn on special occasions, while others feared being penalized by tax authorities.

Consumers who declare their hoard will need to deposit some of the legalized gold with the government for a few years, they said. The administration had planned a similar program last year, the Mint reported on Oct. 30. The tax office had denied any plans for an amnesty then.

The Income Tax Appellate Tribunal (ITAT) has said there is no justification to deny drug companies deduction of expenses incurred on providing freebies to doctors on the basis of a CBDT circular and the Indian Medical Council regulations.

A bench comprising judicial member Ravish Sood and accountant member G Manjunatha ruled that a Central Board of Direct Taxes circular and the IMC’s regulations could not be relied upon to disallow a drug company’s expenditure claims. The IMC’s code of conduct applies only to medical practitioners and doctors and not to pharmaceutical companies and the healthcare sector, it said.

The Central Board of Direct Taxes (CBDT) has extended the last date for filing ITR for AY 2019-20 (FY 2018-19). The date has been extended from July 31 to September 30, 2020. In a tweet from its official handle, Income Tax department today said, “In view of the constraints due to the Covid pandemic & to further ease compliances for taxpayers, CBDT extends the due dt for filing of Income Tax Returns for FY 2018-19(AY 2019-20) from 31st July, 2020 to 30th September, 2020, vide Notification in S.O. 2512(E) dt 29th July, 2020.”
Taxes paid before the new extension will be treated as advance tax. An official notification of CBDT said: “in case of an individual resident in India referred to thes ub-section (2) of Section 207 of the Income Tax Act, 961 (43 of 19610, the tax paid by him under section 140A of that Act within the due date (before extension) provided in that Act, shall be deemed to the advance tax.”

Since March 2020, the government has extended various tax-related deadlines and relaxed terms and conditions of certain post office investment schemes. This was done to help the common man tide over financial problems caused due to the coronavirus pandemic.

Many of these extended deadlines end on July 31, 2020.

Here is a look at seven money-related tasks you should complete by July 31.

Last date of paying self-assessment tax for FY 2019-20
If your self-assessment tax for FY 2019-20 exceeds Rs 1 lakh, then you should pay it before July 31, 2020 to avoid levy of penal interest. As per a CBDT press release dated June 24, 2020, individuals whose self-assessment tax liability exceeds Rs 1 lakh, the last day to pay self-assessment tax without any penal interest is July 31, 2020. If such tax is paid after the date, then penal interest at the rate of 1 per cent per month will be levied.

End of reduced EPF contributions
To provide relief to employers and to provide higher take home pay to employees, the government reduced the Employee's Provident Fund (EPF) contribution for three months (for May, June and July, 2020). Therefore, from next month when your employer pays you salary, the deduction for your contribution to your EPF will be made at the normal rate of 12 per cent instead of the reduced 10 per cent.

The Income Tax Department will sign an MoU with counter-terrorism platform National Intelligence Grid (NATGRID) to facilitate automatic exchange of information linked to bank accounts, PAN, tax returns and any other “mutually agreed” information with 10 agencies — Central Bureau of Investigation, Directorate of Revenue Intelligence, Enforcement Directorate, Central Board of Indirect Taxes & Customs, Cabinet Secretariat, Intelligence Bureau (IB), Directorate General of GST Intelligence, Narcotics Control Bureau (NCB), Financial Intelligence Unit (FIU), and National Investigation Agency (NIA).

In a separate order, the Central Board of Direct Taxes (CBDT) also notified four agencies — Cabinet Secretariat, IB, NCB and NIA — for disclosure of any information regarding tax assesses under Section 138 (1) of the Income-tax Act. At present, the Income Tax Department already shares information on tax assessees with over 50 notified agencies, including Registrar of Companies, Director of FIU, officers of the rank of Joint Director and above dealing with Foreign Exchange Management Act and Prevention of Money Laundering Act in the Enforcement Directorate, and Securities and Exchange Board of India.

The Income Tax (I-T) department is ready to crack the whip on evaders, following the gradual lifting of the lockdown.

It will act on information received from whistle-blowers and informers for the first half of 2020 (H1CY20).

The move will help the department shore up revenue, clear backlogs, and resume probe in pending matters.

People in the know said the Central Board of Direct Taxes (CBDT), in a recent communication, directed officials to start scrutinising information from tax evasion petitions (TEPs), and take them up on a priority basis.

“Investigations in various tax evasion matters were kept on hold because of the outbreak.

"However, the department has resumed work on pending matters, which could lead to further inquiry in potential cases,” said a tax official.

With Covid-19 infections crossing a million last week, and the virus spreading to new regions, India’s pandemic challenge is bound to become more difficult. Unless daily cases start coming down, business and consumer sentiment is unlikely to recover. This has also raised some doubts about government finances, especially revenue collections. A look at the available numbers suggests that indirect taxes might end up accounting for an even larger proportion of total taxes this year than they typically do.

This is more than just an economic curiosity and has an important political economy implication for India, where governments have traditionally guarded against being seen as levying taxes on the poor.

Direct taxes are progressive in nature – the rich pay at a higher rate than the poor – and a fall in share of direct taxes in total revenue entails retrogression in the tax burden. A person earning Rs 10 lakh per year faces a lower income tax rate than someone who earns Rs 1 crore per year. Indirect taxes do not make this distinction. Petrol is sold at the same rate whether it is meant for a motorcycle or an expensive car.

India’s political economy landscape has two basic contradictions. Agriculture produces less than 15% of the GDP, but employs more than 40% of workers. And just a little over fifty million of India’s 400 million workers pay income taxes.

These two numbers are often used to caution against any radical redistribution in favour of the ‘have-nots’, at the cost of the ‘haves’ in the economy.

The direct and indirect tax boards have entered into an agreement for data exchange between them, the government said on Tuesday. The pact will facilitate data sharing between Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) on an automatic and regular basis.

In addition to regular exchange of data, CBDT and CBIC will also share with each other, on request and spontaneous basis, any information available in their respective databases which may have utility for the other organisations. The agreement comes into force from the date it was signed and is an ongoing initiative between the two organisation, the government said.

It added that the memorandum of understanding (MoU) supersedes the one signed between CBDT and the erstwhile Central Board of Excise and Customs (CBEC) in the year 2015. “Significant developments have taken place since the signing of earlier MoU in 2015 including introduction of GST, incorporation of GSTN and change in the nomenclature of Central Board of Excise and Customs (CBEC) to Central Board of Indirect Taxes and Customs (CBIC). Changed circumstances, including advancements in technology, are duly incorporated in the MoU signed today,” the government said.

The MoU was signed by Pramod Chandra Mody, chairman, CBDT, and M. Ajit Kumar, chairman, CBIC, in the presence of senior officers from both the organizations.

The Central Board of Direct Taxes (CBDT) chief P C Mody has asked the income tax officers to communicate with taxpayers only through e-mails and give priority to recovery of arrears, news agency PTI today reported an official source as saying. During a meeting with principal chief commissioners via video conferencing, Mody also emphasised on giving high priority to grievance redressal and ensuring that complaints are resolved within 30 days, the report said.

The Income Tax department is moving towards faceless scrutiny assessment. Because of this, PTI reported that the top tax official has told field offices to do all communications with the assessees through e-mail only. In cases where personal attendance is necessary, approval of principal commissioner of I-T would have to be obtained.

According to the report, the CBDT chairman has also directed immediate disposal of pending appeals and rectification applications. He also said that recovery of arrears should be top priority of officials.

Mody has asked principal chief commissioners to identify the demands where the appeals in various tribunals/courts have been decided in the department’s favour, and steps should be taken for collection of the tax amount, the source said.

On Monday, the Income Tax department said there was no need to meet the local Income Tax Department officers in case one receives a scrutiny notice.

Given the encouraging initial results of the faceless assessment process for income-tax returns, the Central Board of Direct Tax (CBDT) is convinced that it is going to be the norm in future. Speaking to FE, CBDT chairman Pramod Chandra Mody said the strength of the new system lies in inherent anonymity of the taxpayer it allows and objectivity of the process.

However, he hastened to add that no decision has been taken on extending the process to all e-returns filed every year, 6 crore at last count.

The income-tax department had selected about 58,000 cases for faceless assessment in October last year. So far, about 8,000 cases have been disposed of without making any addition to taxpayers taxable income. However, review is required in about 300 cases on whether additions have been missed or undue additions have been made.

Further, Mody said that new form of team-based assessment process would also bring down litigation and compress the time-frame of concluding a dispute. He was responding to a question on whether the new process would help in expediting black money cases, unlike the recent case involving a Swiss bank account holder, in which income tax department received a favourable order from the tribunal after 6 years despite having clinching information since 2014.

The income tax department will soon start sharing data related to depreciation, sales and gross turnover of micro, small and medium enterprises with the MSME Ministry.

The Central Board of Direct Taxes (CBDT) has directed Principal Director General of Income Tax (Systems) to share information with the MSME Ministry.

Section 138 of Income Tax Act empowers income tax authorities to share information/ details of its taxpayers with other government agencies, as may be notified.

The information to be shared include depreciation on plant and machinery as reported in ITR3, 5 and 6, sales/gross receipts of business as reported in ITR-3, 5 and 6; and gross turnover/gross receipts as reported in ITR-4.

"To facilitate the process of furnishing information, Principal Director General of Income-tax (Systems) would enter into a Memorandum of Understanding ('MoU') with Notified Authority of Ministry of MSME, Government of India which inter-alia would include the mode of transfer of data. Maintenance of confidentiality, mechanism for safe preservation of data, weeding out after usage etc," the CBDT order dated July 14 said.

Amid the on-going row over digital taxation, Finance Minister Nirmala Sitharaman on Saturday said that a consensus-based solution on the issue should be simple and inclusive based on a robust economic impact assessment. The minister was speaking at the 3rd G20 Finance Ministers and Central Bank Governors (FMCBG) meeting held at Riyadh (Saudi Arabia) through video conferencing.
Referring to the issues concerning international taxation and challenges related to digital taxation, Sitharaman said, “It is imperative that this consensus-based solution should be simple, inclusive and based on a robust economic impact assessment.”

Recently India defended the 2 per cent equalisation levy on non-resident e-commerce companies, saying it is non-discriminatory in nature and its purpose is to tax businesses that have a close nexus with the country’s market through their digital operations.
In a six-page written submission to the United States Trade Representative (USTR), India said the levy is applicable only for companies with annual revenues in excess of Rs 20 million (about USD 267,000), which is a low threshold aimed at exempting very small e-commerce operators globally.

The Income Tax Department will be beginning with an e-campaign from Monday for taxpayers who are “either non-filers or have discrepancies/deficiency in their returns for the FY 2018-19,” Ministry of Finance said in a statement on Saturday. The 11-day campaign, which would end on July 31, 2020, will help taxpayers to validate their tax or financial transaction information online with the tax department particularly in order to “promote voluntary compliance, so that they do not get into notice and scrutiny process etc.”
Identified taxpayers will get an email or text message for verifying their financial transactions-related information with the IT department sourced from Statement of Financial Transactions (SFT), Tax Deduction at Source (TDS), Tax Collection at Source (TCS), Foreign Remittances (Form 15CC) etc. Information is also received with respect to GST, transactions in securities, derivatives, commodities, exports, imports, mutual funds, etc.

The tax department based on the data analysed identified certain taxpayers with high-value transactions who didn’t file returns for AY 2019-20 (FY 2018-19). Apart from these non-filers, the department has also identified filers whose high value transactions “do not appear to be in line with their Income Tax Return,” the ministry said.

The Income Tax department has disposed of 7,116 cases under the first phase of faceless assessment system, an official source said. Since its launch on October 7, 2019 and implementation of first phase, faceless scrutiny assessment scheme has provided for assessment of income tax in electronic mode, where taxpayers need not see face-to-face any tax officer or visit an I-T office and can e-file reply on the income tax portal.
The source said in the first phase of faceless assessment, a total of 58,319 cases were assigned in an automated way randomly and these were kept away from the geographical jurisdiction of the case, based on computer algorithms.

Out of this, 7,116 cases as on date have been disposed of with assessment orders issued without any additions, and?291 cases, wherein additions are proposed to be made,?have been submitted to Risk Management unit, sources said.
He said that in all the cases, the grievances?of over-pitched assessment or harassment of taxpayers/tax professional have been almost eliminated.
The taxpayers have been advised to check their registered e-filing accounts/email ids for notices or updates.

As India introduced an equalisation levy at 2%, many companies may be staring at the possibility of double taxation on digital transactions such as buying software or equipment.

Currently, many of them pay a 10% royalty withholding tax on purchases from multinationals located outside India.

India has brought in new regulation effective April 1 whereby the 2% tax could be levied on any purchase by an Indian or India-based entity through an overseas ecommerce platform.

Tax experts say lack of clarity around the levy means different companies were interpreting it in a different way. Some companies are being cautious and paying 12% on these transactions — royalty withholding tax plus the equalisation levy. Others are opting for either 10% or 2% tax.

India has defended the 2 per cent equalisation levy on non-resident e-commerce companies, saying it is non-discriminatory in nature and its purpose is to tax businesses that have a close nexus with the country’s market through their digital operations. In a six-page written submission to the United States Trade Representative (USTR), India said the levy is applicable only for companies with annual revenues in excess of Rs 20 million (about USD 267,000), which is a low threshold aimed at exempting very small e-commerce operators globally.
“It does not discriminate against companies based in the United States as it applies equally to all non-resident e-commerce operators not having permanent establishment in India, irrespective of the origin of such companies,” India has said.

The Income Tax Department has issued refunds worth Rs 71,229 crore to over 21 lakh taxpayers during April 8 to July 11.
This includes personal income tax (PIT) refunds of Rs 24,603 crore issued to 19.79 lakh individuals and corporate tax refunds amounting to Rs 46,626 crore to over 1.45 lakh taxpayers during this period.

“It is further emphasised that all the refund related cleaning up of the tax demands is being taken up on priority and is likely to be completed by August 31, 2020,” an official statement said.
It said that the government has laid great emphasis on providing tax related services to the taxpayers without any hassles and is aware that during these difficult times of COVID-19 pandemic, many of the taxpayers are waiting to see that their tax demands and refunds reach finality as quickly as possible, the statement added.
The Central Board of Direct Taxes (CBDT) further asked taxpayers to provide immediate response to emails of the department for quick processing of their refunds.

Non-resident Indian citizens are liable to pay tax in India only on India income, but they may still not be completely impervious to being asked to pay tax in the country on their global income, if they had, at some point, filed tax return in India as a resident. This is an intriguing prospect for a country with an exceptionally diverse diaspora, including a galaxy of billionaire corporate honchos.
The Income Tax Appellate Tribunal (ITAT) in Mumbai has recently affirmed an order issued by the relevant commissioner-appeal, asking an 81-year old woman, claiming to be a US resident post-FY06, to pay tax in India on Rs 196.5 crore purportedly held by her in the financial year 2005-06 in a now-disbanded Swiss bank account (HSBC Private Bank (Suisse) SA, Geneva), which she refuses to own.

The Central Board of Direct Taxes (CBDT) on Saturday informed that from this Assessment Year (2020-20201), taxpayers will see an improved Form 26AS which would carry some additional details on taxpayers' financial transactions as specified Statement of Financial Transactions (SFTs) in various categories.

Central Board of Direct Taxes announces improved Form 26AS: What changes
CBDT said Form 26AS relating to a PAN earlier used to give information regarding tax deducted at source and tax collected at source besides certain additional information including details of other taxes paid, refunds and TDS defaults.
Now it will have Statement of Financial Transactions (SFTs) to help the taxpayers remind all her/his major financial transactions so that s/he has a ready reckoner to enable her/him while filing the ITR.