The Income Tax Department and various investment platforms like bank, mutual fund houses, broker platforms, etc. have been discouraging cash transaction by tightening their rules for public in general in last few years.

The Income Tax Department may send notice to the violator now as days in case of slight violation as these institutions allow cash transaction to a certain limit.

Here are top 5 cash transactions that can attract income tax notice

-Bank FD (fixed deposit): Cash deposit in bank FD is allowed but it should not go beyond Rs 10 lakh. Violation of this Rs 10 lakh limit is also not advisable for a bank depositor making cash deposit in one's bank FD account.

The government has allowed hospitals to accept cash payment in excess of 2 lakh.

Exemption, applicable for a period between April 1-May 31, 2021, would be subject to providing the permanent account number or Aadhar number of the patient or of any other person making the payment on behalf of the patient and his relationship with the patient.

At present hospitals are allowed to accept cash payments up to 2 lakh under the Income Tax law.

The Central Board of Direct Taxes, the apex direct taxes body, issued a notification to this effect Friday.

The move comes following representations to this effect from multiple fora including tax practitioners. Exemption would be available to nursing homes and other covid care facilities.

India is currently battling a raging second wave of Covid 19 infections

Foreign hedge funds can now operate in International Financial Services Centres in the country without getting a permanent account number, or PAN. Foreign investors of category III alternative investment funds (AIFs) operating in IFSCs will not require PAN if they deduct tax from their income and provide details of investors’ name, address, country of residence and Tax Identification Numbers every quarter, the Central Board of Direct Taxes notified on Tuesday.

Category III AIFs include hedge funds. The board had already granted this exemption to foreign investors of AIF categories I and II. The move follows a representation by International Financial Services Centres Authority (IFSCA), an official said, adding, “This would pave way for a large number of category III AIF establishing a base in IFSCs.”

Share buybacks have made a strong comeback as tax considerations have once again made India Inc favour the route to reward their shareholders.

In 2020-21, India Inc offered to buy back shares worth Rs 39,295 crore (actual amount acquired stood at Rs 34,624 crore) - 97 per cent more than Rs 19,972 crore (actual amount acquired stood at Rs 17,843 crore) proposed in the previous financial
Furthermore, the share of buybacks in the total shareholder reward kitty (dividend + buyback) rose to 21 per cent in FY21 from 8.3 per cent in the preceding financial year, an analysis of data provided by Prime Database shows.

"Buybacks have emerged as a popular option for companies that have excess cash sitting on their balance sheets to reward shareholders who may be looking for an exit while at the same time allowing the company to recapitalise and improve the relative returns for existing shareholders,” said Karan Marwah, Partner and Head – Capital Markets advisory, KPMG in India.

India on Monday notified a revenue threshold of Rs 2 crore and a limit of 300,000 users for non-resident technology firms such as Google, Facebook, Netflix, to pay tax in India under new or revised bilateral tax pacts.

This is part of the Significant Economic Presence (SEP) principle, which was introduced in the Finance Bill 2018-19, and which widened the scope of ‘business connection’ to include provision of download of data or software, if aggregate payments from such transactions exceed a prescribed amount, or if a multinational's interaction is with a prescribed number of users.

“…the amount of aggregate of payments arising from transaction, or transactions of goods, services or property carried out by a non-resident, with any person in India…including download of data or software in India during the previous year, shall be Rs 2 crore…the number of users with whom systematic and continuous business activities are solicited or who are engaged in interaction shall be three lakh,” said the notification issued by the ministry of finance.

This will come into effect from April 1, 2022.

However, the existing double taxation avoidance agreements will not be covered under the proposed change, implying that in order to tax Facebook, Google and the like, India will require to renegotiate the tax treaty with the US.

The government on Saturday extended timelines for various income tax compliances, including the filing of belated or revised return for the 2019-20 fiscal, till May 31.

The Central Board of Direct Taxes (CBDT) said it had received representations from various stakeholders for relaxation on compliance requirements.
“In view of the adverse circumstances arising due to the severe COVID-19 pandemic and also in view of the several requests received from taxpayers, tax consultants & other stakeholders from across the country, requesting that various compliance dates may be relaxed, the Government has extended certain timelines today,” an official statement said.

The government on Saturday extended the deadline for making payment under the direct tax dispute resolution scheme Vivad Se Vishwas by two months till June 30 due to a severe COVID pandemic.

Also, it has extended the due date for issuance of notice for reopening of assessment by tax officers where income has escaped assessment and sending intimation of processing of Equalisation Levy till June 30.
“It has also been decided that time for payment of amount payable under the Direct Tax Vivad se Vishwas Act, 2020, without an additional amount, shall be further extended to 30th June 2021,” Central Board of Direct Taxes (CBDT) said in a statement.

The Central Board of Direct Taxes (CBDT) has issued detailed guidelines on how banks and companies will report information related to interest and dividend income of taxpayers.

Section 285BA of the Income Tax Act, 1961, and Rule 114E require “specified reporting person” to furnish a statement of financial transaction. According to the notification issued on Tuesday, banks will have to report the details of all those taxpayers whose interest income across deposits exceeds ?5,000 in a fiscal year.

The Union Cabinet on Tuesday gave ex-post facto approval to the official amendments to the Finance Bill, 2021, which were aimed at clarifying and rationalising tax proposals for 2021-22.

The amendments were essential to clarify and rationalise the proposals further and address stakeholders’ concerns arising out of the proposals enumerated in the Finance Bill.
The Finance Bill became the Finance Act, 2021 on March 28, 2021 after receiving the President’s nod. An official release said that the government’s amendments to the Finance Bill, 2021 tried to address the concerns of the stakeholders with regard to the tax proposals for the fiscal.

The amendments to the Finance Bill, 2021 were primarily aimed at generating timely revenue for the exchequer and addressing the issues flagged by taxpayers and other stakeholders.

Liberal terms and a wider scope helped the latest direct tax amnesty scheme Vivad se Vishwas (VsV) resolve 294% more cases and settled disputes worth over ?1 lakh crore compared to a similar scheme launched in 1998 that reconciled about 34,000 cases involving a mere ?739 crore, government data showed on Monday.
The Kar Vivad Samadhan Scheme (KVSS) launched on September 1, 1998, and closed on January 31, 1999, resolved 33,918 disputes involving ?738.74 crore as against 133,837 cases resolved under VsV, covering a disputed amount of ?1,00,437 crore, the data showed.

The income tax department had notified the launch of pre-filled returns for ease and accuracy of filing.

To facilitate this process, CBDT issued a circular on March 12, 2021, authorising various entities to report such transactions to the income tax department. These specified entities will be responsible for providing the details of capital gains transactions, dividend and interest income of the taxpayers.

Currently, section 285BA of Income-tax Act 1961 governs the reporting of some specified financial transactions (SFT) by specified entities to the income tax authority. The section provides a list of transactions, their nature and threshold limit of a transaction pertaining to a particular taxpayer, beyond which the transacting entity shall have to report its details to the income tax authorities.

The Centre collected a net amount of Rs 9.45 lakh crore as direct taxes in 2020-21, up Rs 40,000 crore or 4.4% from the revised estimate (RE) presented in the Budget on February 1, thanks to improved collections in the second half of the year, especially in the fourth quarter. Had the government not been liberal with refunds – up Rs 78,000 crore or 42% on year at Rs 2.61 lakh crore – the net collections would have been even higher.

This, coupled with revenue from ‘Union excise duties’ likely being higher than the respective RE by Rs 30,000 crore, would likely allow the Centre to rein in the fiscal deficit at a level slightly lower than the RE of 9.5% (RE) of the GDP, at the RE levels of expenditure and other revenue streams. The National Statistical Office in the second advance estimate predicted a narrower contraction in nominal GDP of 3.8% in FY21, against a 4.2% fall estimated earlier; if this holds true, it would have a further salutary effect on the fiscal numbers. Robust GST collections in recent months have brightened the prospects of the Central GST collections being higher than the RE.

Terming it “arbitrary and discriminatory”, the Supreme Court has partially struck down a provision of the income tax law that did not allow further extension of stay on assessment beyond 365 days even if the assessee was not responsible for any delay in hearing of appeals before a tribunal.

While upholding the Delhi High Court’s May 2015 judgment that ruled in favour of assesses, a Bench led by justice RF Nariman said that “…there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India”.
“We have already seen how unequal have been treated equally so far as assessees who are responsible for delaying appellate proceedings and those who are not so responsible, resulting in a violation of Article 14 of the Constitution of India. Also, the expression “permissible” policy of taxation would refer to a policy that is constitutionally permissible. If the policy is itself arbitrary and discriminatory,

Tax on an individual's income depends on its source and the residential status in India. The residential status of an Indian citizen needs to be determined individually for every financial year which may vary from year to year.

As per the residency rules laid down in the Income Tax Act, if an individual is determined to be a 'Non-resident', then they are liable to pay tax only on the income earned or accrued in India. In short, if any income received has a direct or indirect source of origination from India, then the income will be considered as accrued in India.
Till FY 2019-20, NRIs would include individuals of Indian origin who have visited India for less than 182 days in a particular financial year. However in Budget 2020, the residency period was reduced to 120 days for the NRIs whose Indian income is more than Rs 15 lakhs.

After the faceless assessment scheme was rolled out about a year ago, the Income Tax department has settled about 1.15 lakh assessment orders or 58% of the cases allocated for such resolution, Central Board of Direct Taxes (CBDT) chairman PC Mody said.

According to him, after the scheme was launched in August 2020, 57,985 legacy cases and 1,36,001 new cases were allocated in faceless assessment scheme. Out of these, 46,822 legacy cases and 59,552 new cases have been disposed of.
“Where there was a case to raise tax demand, it was done and where there was no need to raise demand, no tax claim was made,” Mody said.

The Centre’s tax resolution scheme ‘Vivad Se Vishwas’ has resolved nearly a third of all direct tax disputes and has netted Rs 54,005 crore in tax revenue, 51% of which are from the central PSUs, Central Board of Direct Taxes (CBDT) chairman PC Mody told FE.

Although the expectations regarding the scheme was much higher — the government had originally set a target to collect Rs 2 lakh crore by the end of March 2020, but the Covid-19 pandemic upset the calculations — the government still flags the scheme as a success, citing that a 1998 scheme could only mop up Rs 739 crore with a resolution of a few thousand disputes and another one in 2016 managed to resolve just 8,600 cases involving a tax demand of `631 crore.
“The numbers suggest that the scheme has been a “very successful” in terms of reduction of legacy disputes. With assessments happening in a fairer and objective manner now, disputes generation will be less going forward,” Mody said.

Under the Employees Provident Fund (EPF) scheme, an employer has to pay up to 12% of the basic monthly salary towards the fund and the employee has to make an equal contribution towards the fund. On retirement, the employee gets a lump sum amount along with interest for all the contributions made by both the employer and the employee.

Though the limit for contribution by the employer is 12% of the salary, the employee may make voluntary contributions under the scheme in excess of 12%. Till the year 2020-21, as per Section 10(11) of the Income Tax Act, 1961, the interest earned on the contributions made in the EPF scheme was tax-free.

The Central Board of Direct Taxes (CBDT) has come out with new income tax returns (ITRs), aligning them with the changes made in the Finance Act, 2020. However, the department has not changed ITRs significantly, considering Covid-19 crisis.

Naveen Wadhwa, expert at Taxmann, said one of the amendments carried out in the Finance Act, 2020, allowed to defer the payment of tax on Employees’ Stock Option (ESOPs) allotted by eligible start-ups.


Subsequently, rules were amended to provide that these assesses will not be eligible to furnish their returns of income in ITR-1 and ITR-4. Corresponding changes have been made to these two forms, Wadhwa said.

Introduction to ITR Offline utility
The assessment Year 2021-22
ITR-1 and 4

For those who have not filed their income tax return (ITR) but their income is liable for TDS deduction, there will be a levy of TDS at a higher rate. And, in case one does not have the PAN, the rate of tax deduction will even be higher. This new TDS rule will be effective from July 2021 as per the Budget announced by the Finance Minister. Archit Gupta, Founder and CEO, ClearTax explains the new TDS rule, whom it will impact and who all are excluded from it.