Compliances and Tax information: 2016

By Sudhir Kaushik, CFO and co-founder, Taxspanner.com

Over the next few weeks, companies across India will start collecting investment proof from employees to calculate the TDS on their salaries. This statutory obligation has become an annual ritual over time, and most companies treat it as a compliance cost. However, a company with a progressive outlook can easily turn this exercise into a practice to help their employees and boost employee loyalty.

Taxspanner analysed the income and tax details of salaried taxpayers and found that a vast majority pay a very high tax. This is either because they are unaware of tax rules, or their salary structure is not very tax friendly. As a result, they are not able to optimise their tax outgo and end up paying more than they should.

The perils of self-medicating
Our analysis showed that a lot of taxpayers manage their tax affairs themselves, without seeking help from an expert. Just as self-medicating is not advisable when we fall ill, the do-it-yourself approach can prove to be very costly for salaried people. We noticed that they missed out on several deductions and exemptions that a professional tax advisor could have saved for them.

Taxpayers tend to underestimate the real cost of paying too much tax. Even a modest saving of Rs 3,000 a month, if invested for retirement, can grow to a massive Rs 10.3 lakh in 10 years. In 20 years, it would become Rs 50.9 lakh and in 30 years it would reach Rs 1.95 crore. So, poor tax planning could be robbing you of a comfortable retirement. The bigger problem is that a person who does not fully understand the tax laws or hasn’t updated his knowledge with the new regulations can make errors in his returns. Some errors can even lead to a tax notice, penalties and, in extreme cases, even prosecution. On the other hand, a tax professional will offer accurate and updated advice based on latest rules and regulations.

What companies can do
Companies are forever trying to attract talent by offering the best pay packages. Indeed, apart from job profile and growth prospects, the financial part of the package is critical for employees. This is why some people even switch jobs for a marginal hike. However, many companies believe they can do little beyond offering a high CTC package. This is a misconception. Instead of spending crores on trying to acquire and retain talent, employers can redesign their pay packages so that the tax liability of the individual is reduced to the minimum. They can also arrange for tax planning sessions for employees where professionals counsel them on the best ways to reduce their tax liability. Some of these measures cost virtually nothing while others add barely a fraction to the total employee cost. But they can reduce the enormous waste of hard earned money that is deducted as TDS from the salaries of their employees every month.

Take for example, the inclusion of New Pension Scheme (NPS) benefit in the CTC structure. Up to 10% of the basic salary of an individual is fully tax deductible if put in the NPS under Section 80CCD(2). This means 10% of the basic salary becomes tax free if the company offers this benefit to its employees. This way, someone in the 30% tax bracket can effectively save tax equal to 3% of his basic salary, which is no small feat. For the company, this step requires minimal additional expense because the NPS Trust manages the entire back-end and record keeping.

Some companies don’t want to tinker with the pay packages or get involved in activities that are not part of their core operations. This is a blinkered view. Instead of letting them suffer a high TDS, companies should step in and help their employees optimise their tax.

Where to begin?
Employees submit the declaration of tax planning investments around June or July and give proof of these tax-saving investments around December-January. Their declaration of intent and proof of investments will show where they are going wrong and how the problems can be fixed.

It’s not that the tax rate in India is high or that there are not enough investment opportunities. The problem has more to do with misconceived notions and ignorance about tax planning. Some people may not be even aware of the various deductions they can claim or the exemptions they are eligible for. Others may know about tax matters but could be going wrong in their investment choices. So, this is the best time for a company to engage with its employees and help them optimise their tax planning.

Tax optimisation, not tax evasion
It is important to note that the tax saving and optimisation strategies are not in contravention of the law. Tax is the price we pay for civilised society. Indeed, the revenue collected by the government is the lifeblood of the nation.

We believe that paying tax is good, but that saving tax is better, and saving tax with expert guidance to reach one’s goals is best. So, the tax saving suggestions offered by tax experts should not be construed as attempts to evade tax.

(DISCLAIMER: Views expressed above are the author's own.)

Source: Economic TImes

How Mumbai based Mukherjee can reduce tax outgo by 34%

Ashutosh Mukherjee, 43, pays a very high tax because his compensation package is not very tax friendly. The good part is that his company lets its employees tweak their salary structure. Taxspanner estimates that the Mumbai based professional can reduce his tax by nearly 35% if he puts more into the NPS.

But his take home pay will also come down. Mukherjee should start by asking his company to put 10% of his basic pay in the NPS under Section 80CCD(2d). If Rs 49,092 is put in the NPS every year, his tax will reduce by nearly Rs 10,000. But this will reduce his take-home pay by almost Rs 3,250 per month. The NPS can reduce his tax further if Mukherjee puts Rs 50,000 in the scheme under Section 80CCD(1b). This will cut his tax by another Rs 10,300. Mukherjee should reduce the contribution to the PPF by Rs 50,000. The PPF offers only 8% returns and could see a further rate cut in December this year.

On the other hand, the NPS has given terrific returns due to the bond rally. Given his age, Mukherjee should allocate 33% in all three fund categories. He can also opt for the moderate lifecycle fund of the NPS, in which the exposure to equity comes down by 2% every year.

Income from employer
(All figures are in Rs)
How Mumbai based Mukherjee can reduce tax outgo by 34%

(By Sudhir Kaushik of Taxspanner.com)

Source: Economic TImes

View: Government should reinstate wealth tax in Budget 2017

Wealth Tax, which was in force since 1957, was abolished in the 2015 Budget. I think this was a big mistake and, therefore, the government should reinstate the wealth tax at the earliest, preferably, in the 2017 Budget itself.

"Ease of tax administration" was the main reason cited by the FM Arun Jaitley for the abolition. And to compensate the tax loss due to this, he has imposed an additional surcharge on high income earning assesses. This is totally against the concept of natural justice and amounts to taxing the same person again and again.

Some argue "why tax assets bought with post-tax income"? This is not a correct argument because we are now paying tax on all gains generated from assets invested out of our post-tax income.

For example, assume that we are investing in a bank's recurring deposit (RD) or fixed deposit (FD) from the post-tax salary income. The interest on RD or FD is taxable even though we already paid tax on the salary income.

More importantly, wealth tax was based on sound economic logic of "taxing unproductive assets". Why only unproductive assets? Because the income generated from productive assets are already taxed. In the above example, there will not be any wealth tax on the money deposited in the bank, because it is used for productive purposes.

Wealth tax would have been applicable, on the other hand, if someone decided to hoard currency notes at home (i.e. instead of depositing it in bank). And any cash held above Rs 50,000 would have been counted for computation of wealth tax.

Similarly, there will not be any wealth tax on residential or commercial property that is rented out, because it is meeting a basic economic need. Real estate properties that were not rented out, however, would have been counted for the computation of wealth tax. Real estate investors booking 10-15 flats in several buildings and keeping them under lock for years is a gross waste of national resources and, therefore, needs to be discouraged.

It is estimated that around 10% of the houses in Mumbai, which is reeling under severe housing shortage, are estimated to be locked up like this.

Gold, both in bullion and ornament form, is another unproductive asset that Indians hoard in large quantities and, therefore, was part of the wealth tax earlier.

Since gold is a major item in our import list and drains out more than Rs 2 lakh crore of foreign exchange every year, there is no need to treat this hoard with kid gloves. In addition to collecting tax, wealth tax also used to generate good data that was beneficial in preventing income tax evasions.

For example, it would have been difficult for someone to declare a wealth of a few crores and at the same time, not show any income. No, I am not asking to make a separate tax filing and collection department for this. This can be managed as part of the income return itself.

Some wealth tax details are now getting captured under income tax return. But as per the current structure, only persons with income above Rs 50 lakh are supposed to file "assets and liabilities".

That means the details of hoarders of unproductive assets, whose annual income is below this limit, is not getting captured now.

Since determining the cost of inherited or gifted assets, assets purchased long back, etc., will be difficult, it is better to keep physical threshold for these unproductive assets for reporting.

Source: Economic TImes

Penny stock investors on tax-man radar

9:12 AM 1 Comment

MUMBAI: Penny stock investment has become a contentious tax issue. Despite a ruling this year from the income tax (IT) tribunal that not all penny stock investments were bogus, the assessment officers are not convinced. The Mumbai IT has issued notices to assesses who showed income from penny stock investments as long-term capital gain and claimed tax exemption.

In June this year, the Mumbai IT tribunal had observed that "if payment is by cheque and delivery of shares is taken, then long-term capital gains tax cannot be treated as bogus."

The tribunal's ruling was on a case where the assessee had shown sale proceeds of shares in the scrip Ramkrishna Fincap as a long-term capital gain and claimed exemption. The assessee claimed to have purchased it at Rs 3.12 per share in 2003 and sold it for Rs 155.04 per share in 2005. Tax officials, however, found the scrip to be a penny stock and held capital gains only as 'accommodation entries.'

But the Tribunal said since payment was made by account payee cheque, delivery of shares was taken and contract of sale was complete as per the contract act, capital gains cannot be bogus just as the scrip was a penny stock and under regulatory scanner. The tribunal also observed that the assessee made investment in shares purchased on the floor of stock exchange and nowhere had the assessing officer alleged the transaction with the broker to be bogus.

“Presumption of fraud is not enough to say that penny stock investments were bogus and structured for tax exemption,” said Sandeep Parekh, former executive director, Sebi. “The IT officers will have to prove with particularity that transactions were bogus.”

“Tax notices cannot be issued to all and sundry for penny stock investments as trading or investing in penny stocks is legally allowed,” said Ram Upadhyay, senior advocate, who fought cases for the Mumbai income-tax department. Most tax officers are not concerned with actual tax collection but assessment demand raised as counts in their performance appraisals every year.”

An IT official told ET that they came across several assesses, mainly high net worth individuals, claiming long term benefit on investment in penny stocks that were being investigated by Sebi. The officer further that many even tried to adjust short term losses caused by trading in penny stocks with other business income. Offsetting other business loss or gain with short term capital gains or loss in stock markets is allowed. Penny stocks are mostly those which trade below their face-value.

Source: Economic TImes

Indirect tax collections rise by 23.1 per cent in November

NEW DELHI: Indirect tax collections have posted a robust growth in November from a year ago, data released by the government showed on Friday, suggesting that demonetisation may have had only marginal impact so far.

Net indirect tax collections grew 23.1 per cent in November from a year ago, data released by the finance ministry showed. Overall, net indirect tax mop-up was up 26.2 per cent in April-November from a year ago while net direct tax increased 15.1 per cent over this period.

Adjusting for additional resource moblisation such as higher duty on fuel the growth in net indirect taxes was a modest 8.0 per cent in the April-November period. Net indirect tax collection in November was down 13.9 per cent over October 2016 figures, the data showed.

There was a similar though lesser decline in November collections from October in FY16, which makes it difficult to ascertain the impact of demonetisation of Rs 500 and Rs 1,000 notes from November 8.

Total direct and indirect tax collections at the end of November stood at Rs 9.64 lakh crore, nearly 60 per cent of the budget target of Rs 16.26 lakh crore for FY17. Net direct tax collection added up to Rs 4.12 lakh crore over April-November while net indirect tax revenue was Rs 5.52 lakh over the same period.

Excise duty collections were up 43.5 per cent in April-November at Rs 2.43 lakh crore while service tax recorded an increase of 25.7 per cent at Rs 1.60 lakh crore. Customs mop-up during the 8-month period was at Rs 1.48 lakh crore, registering a growth of 5.6 per cent.

In November customs, central excise and service tax collections were up was 16.1 per cent, 33.7 per cent and 15.5 per cent respectively from a year ago. The gross corporate income tax was up 11.2 per cent in April-November, less than 22.4 per cent rise in personal income tax collection.

After adjusting for refunds, the corporate tax collection was up 8.75 per cent while personal income tax rose 23.9 per cent. Rs 1.05 lakh crore has been refunded during April-November 2016, up 17.35 per cent from a year ago.

Source: Economic TImes

5 smart things you should know about advance tax

1. Income tax that needs to be paid in installments during the year instead of lump sum payment at yearend is known as advance tax or “pay as you earn tax”.

2. If the total tax liability of any taxpayer is more than Rs 10,000 in a financial year then he is liable to pay advance tax during the year.

3. Advance tax applies to all tax payers, salaried, freelancers and businessmen. Senior citizens not having any business income are exempt from payment of advance tax.

4. Advance tax is payable in instalments with 15% on or before 15 June, 45% on or before 15 September, 75% on or before 15 December and 100% of needs to be paid on or before 15 March.

5. For individuals with salary as the sole income, advance tax is taken care of by TDS deducted by the employer at the time of crediting salary.

Content courtesy: Centre for Investment Education and Learning (CIEL)
(Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)

Source: Economic TImes

CBDT warns of penal action if I-T returns are 'drastically' changed

NEW DELHI: The income tax department has warned taxpayers against misusing the provision of revised tax returns in a bid to legalise their unaccounted income following the demonetisation of high-value old currency notes.

The Central Board of Direct Taxes (CBDT) has said those “drastically” altering the forms to revise income of past years will face scrutiny and penal action. Under Section 139(5) of Income Tax Act, a revised tax return can be filed for a previous year if an assessee discovers any omission or any wrong statement therein.

“The provision to file a revised return... has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income,” the CBDT said in a statement. It said post demonetisation, some taxpayers may misuse this provision to revise the return-ofincome filed by them for the earlier assessment year to show unaccounted income held in the form of demonetised currency as income for an earlier return.

“Any instance coming to the notice of the I-T department, which reflects manipulation in the amount of income, cash-in-hand, profits etc and fudging of accounts may necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty and prosecution in appropriate cases as per provision of law,” it said.

Amarpal Chadha, tax partner at EY, said, “It is a welcome move by the CBDT so that people do not take advantage of the revision provisions under tax law and revise the return of income filed for earlier assessment years for manipulating the income, cash etc.”

Source: Economic TImes

Government announces new income declaration scheme 'PM Garib Kalyan Yojana'

NEW DELHI: The government offered a “last window” to people with unaccounted wealth to come clean or face stringent penalties while inviting others to blow the whistle on those suspected to be holding black money as it launched the scheme that had been announced earlier.

Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016, will start on December 17 and remain open until March 31 next year. Those who declare cash deposits under this will be levied a charge of 50%, which breaks down into 30% tax, 33% surcharge and 10% penalty. In addition to this, 25% of the amount declared will go into the noninterest-bearing Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years.

PM Narendra Modi announced that Rs 500 and Rs 1,000 notes would cease to be legal tender on November 8. Later, the government said it would unveil one more window for black money holders after the Income Disclosure Scheme closed on September 30.

Declarations under PMGKY will be confidential and those taking advantage of it will escape prosecution. “The government has given a long window for the declarations because we want people to voluntarily come forward and make their declarations,” said Revenue Secretary Hasmukh Adhia while notifying the new scheme.
Government announces new income declaration scheme 'PM Garib Kalyan Yojana'
“We do not want inspector raj.” Part of PMGKY’s proceeds will be used for the benefit of the poor. Those who don’t take advantage of the scheme and are caught later will face up to 85% penalty, besides prosecution. Not declaring undisclosed cash or deposits in banks under the scheme now but showing it as income in the tax return form would attract a total of 77.25% in taxes and penalty.

The scheme was notified after the Taxation Laws Second (Amendment) Bill, 2016, came into force on December 15. The Bill was passed by the Lok Sabha but could not be taken up in the Rajya Sabha due to Opposition protests.

Adhia said most banks will have PMGKY scheme forms starting Saturday.“Only after payment of 50% tax and setting aside 25% of the remaining undisclosed amount for four years can a person avail the PMGKY scheme,” he said. In the recent Income Disclosure Scheme and other such plans, disclosures were made first and taxes recovered later.

The revenue secretary warned that the mere deposit of demonetised cash will not make it white, adding that the government was getting data from multiple sources and action will be taken accordingly.

The government has also set up an email address — blackmoneyinfo@ incometax.gov.in — where people can send information on those having black money and are trying to launder it. The email id will be monitored by a cell that will take immediate action based on tips.

CASH, JEWELLERY SEIZED
Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra said the government had seized cash amounting to more than Rs 316 crore, of which new currency was about Rs 80 crore, and jewellery worth Rs 76 crore. “We conducted 291search and seizures, 295 surveys and issued around 3,000 notices on the basis of deposits post-demonetisation,” he said and added that the concealed income is about Rs 2,600 crore based on credible information. In addition, 3,000 open enquiries have been made seeking details.

Chandra said CBDT is collecting information on all bank accounts and correlating this with existing income-tax data.

“So the assessees should know that their deposits in bank accounts are being watched. We are examining whether it is explained money or not. Therefore, they should come very, very clean under this scheme which is the last window available for anyone,” he said.

Adhia said banks will gather the permanent account numbers (PAN) of all accountholders except for Jan Dhan accounts within a month’s time. He said in 12 cases of “unscrupulous conversion” of old notes into new currency, the Central Bureau of Investigation (CBI) has filed first information reports while the Enforcement Directorate has filed 17 cases of money laundering. Common methods of laundering such as purchase of bullion, jewellery, backdating of cash transactions, depositing cash in multiple accounts just below Rs 2.5 lakh, depositing cash in Jan Dhan, dormant and shell company accounts and use of cash for repayment of loans were all under watch, he said.

Source: Economic TImes

Simple 2-page form to be filled for declarations under new income declaration scheme

NEW DELHI: A simple two-page form is all that needs to be filled for declaring unaccounted cash under the new tax evasion amnesty scheme which does not require one to reveal the source of such income.

For declaration under the PMGKY scheme, the only thing required is the details of bank and/or post office accounts where the cash has been deposited post the junking of old Rs 500 and Rs 1,000 notes.

One will, however, also have to furnish the payment details of 50 per cent tax -- a must for availing immunity from prosecution for hiding income.

Declarants will need to fill in personal details like office and home address, telephone numbers, email and PAN, according to the notification issued for The Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana (PMGKY) Rules, 2016.

The declaration to the Principal Commissioner/ Commissioner of Income Tax can be done electronically under digital signature or in print form. The Tax authorities will issue a certificate to the declarant within 30 days from the end of the month in which a valid declaration has been furnished.

After paying a total of 50 per cent tax, a quarter of the amount declared is to be deposited in a non-interest bearing deposit called Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 for four years, the notification said.

Such deposits will not be transferable except to nominee or the legal heir of the declarant in the event of death.

Quoting PAN is mandatory for the scheme.

"...if the declarant does not hold a PAN, he shall apply for a PAN and provide the details of such PAN application along with acknowledgement number," the notification said.

Also, no commission/agency bank charges will be paid to the banks for accepting deposits under the scheme or for servicing the declarants.

Offering one last window to black money holders, the government has come out with a scheme giving black money holders time until March-end to come clean by paying 50 per cent tax on bank deposits of junk currencies made post demonetisation.

Offering tax dodgers confidentially and immunity from prosecution under this new amnesty scheme, which commenced on December 17, Revenue Secretary Hasmukh Adhia has said that non-disclosure of unaccounted money deposited in banks after the Rs 500 and Rs 1000 notes were junked will attract stiffer penalties as well as prosecution.

Not declaring the black money under the scheme now but showing it as income in the tax return form would lead to a total levy of 77.25 per cent in taxes and penalty. In case the disclosure is not made either using the scheme or in return, a further 10 per cent penalty on tax will be levied followed by prosecution.

Source: Economic TImes

IT-consultant Nayar can cut tax outgo by investing more in NPS, getting pay restructured

He has a home loan, his company offers him NPS benefit and he has exhausted the Rs 1.5 lakh investment limit under Section 80C. So, Bangalore-based IT consultant Jitendra Nayar has very little scope to save tax. Taxspanner estimates that Nayar can bring down his tax by nearly Rs 23,000 if his company gives him a conveyance allowance and he invests more in the NPS.

Nayar should start by asking for reimbursements of expenses on conveyance. If he gets Rs 48,000 for conveyance, his tax will be down by almost Rs 9,900. Next, he should invest Rs 50,000 in the NPS under Sec 80CCD(1b). This will cut his tax further by Rs 10,300. Nayar is young so he should choose the auto-choice option that allows up to 75% exposure to equity funds. Keep in mind, however, that NPS locks up the money till retirement.

Another way to save tax is by switching from fixed deposits to debt funds. The interest from fixed deposits is fully taxable, while the gains from debt funds are taxed at a lower rate if the holding period exceeds three years. Moreover, unlike fixed deposits the tax is not payable every year but only at the time of withdrawal. Nayar can save almost Rs 2,500 this way.

INCOME FROM EMPLOYER
IT-consultant Nayar can cut tax outgo by investing more in NPS, getting pay restructured

Source: Economic TImes

Experts' suggestions on how Budget 2017 can cut your direct tax burden

Also Read: 25 Budget ideas

As North Block has begun work on the Finance Bill 2017, ET Wealth reached out to experts from the financial services industry to know what they want to see in the coming Budget. Here are suggestions from some experts for Finance Minister Arun Jaitley and his team on how the coming budget can help reduce the direct tax burden on the common man and also make tax compliance easier.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Abhishake Mathur, Head, Investment Advisory, ICICI Securities
Increase overall tax deduction limit to Rs 3.5 lakh
Demonetisation could drive more investments from real assets to financial assets. Currently, household savings are heavy on physical assets, with investments in shares and debentures accounting for less than 1% of GDP in the last financial year. The Budget should help channelise savings and investments into financial assets, specifically the capital markets. One expectation is an increase in the investment limits to Rs 3.5 lakh under Section 80C, 80CCC and 80CCD(1B), which is currently at Rs 2 lakh. The tax deduction limit should be made fungible and applicable to all products held in a tax shield account, to allow flexible asset allocation.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Vaibhav Sankla, Director, H&R Block India
NRIs trying to sell property located in India are subjected to harsh TDS provisions. The buyer often ends up deducting more than necessary, due to lack of clarity. The Budget should prescribe basic rules for the buyer to consider the seller’s acquisition date and cost, and provide reinvestment-based exemption.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Sudhir Kaushik, CFO and Co-founder, Taxspanner.com
Exempt senior citizens from TDS or raise the threshold
If interest income exceeds Rs 10,000 a year, banks deduct 10% tax at source. To avoid TDS, one can submit a Form 15G and 15H, but this poses difficulties for senior and super senior citizens. First, submitting the Form 15G requires a visit to the bank, and if tax has already been deducted, they have to await the refund. The Budget should either exempt senior citizens from TDS, or raise the threshold from Rs 10,000 to at least Rs 50,000 for them. Online submission of Form 15G and 15H should also be allowed, so that senior citizens don’t have to visit the bank branch. Further, in a scenario of declining interest, it is important to provide relief to senior citizens as they cannot afford to choose risky options to maximise their return. Also, under Section 80TTA, all taxpayers enjoy tax exemption for up to Rs 10,000 interest earned on the balance in the saving bank account. This exemption limit should be enhanced to Rs 1 lakh for super senior citizens (above 80) since they don’t want to lock up money in investments at this stage of life.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Anil Kothuri, President & Head of Retail Finance, Edelweiss Financial Services
Increase home loan interest deduction to Rs 5 lakh
More than 16 years ago, the Atal Bihari Vajpayee government announced tax deduction of up to Rs 1.5 lakh on interest paid for a home loan, boosting the middle class dream of owning a house. This limit remained unchanged for 15 years and was enhanced to Rs 2 lakh only two years ago. Over the same period, property prices trebled, but the deduction limit for interest paid increased only marginally. There is a strong case for raising the limit to Rs 5 lakh so that it keeps pace with inflation and rising property prices. This will ensure that those who have taken home loans of up to Rs 50 lakh pay an effective interest rate of 6%. Consequently, this will make home ownership affordable for the middle class, further enabling the ‘Housing for All’ agenda of the government.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Komal Agarwal, Chartered accountant
Higher basic tax exemption limit for female taxpayers
A report by Monster India says that the gender pay gap in India is as high as 27%. While men earned a median salary of Rs 288.68 per hour, women earned 27% less at Rs 207.85 per hour. The Finance Minister can set this right in the forthcoming Budget by introducing a higher basic exemption for female taxpayers. Till 2011-12, female taxpayers used to enjoy a higher basic exemption but the 2012 Budget removed this difference. If the basic deduction for females is Rs 20,000 higher, their tax outgo will be lower by Rs 2,060.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Kuldip Kumar, Partner and Leader Global Mobility Practice, PwC India
Extend the LTA benefit to international journeys
At present, tax relief for leave travel assistance (LTA) is restricted to two journeys performed in a block of four calendar years. Also, the relief is restricted to economy class airfare or first class rail fare, for traveling with family within India. Considering that there is now increased awareness about international travel and availability of cheap holiday packages, Indian families do travel abroad for their annual holidays. It would be good to extend the LTA benefit to international journeys and in addition to the airfare, other expenses such as boarding and lodging too should be eligible for exemption. Further, the tax benefit should be available on financial year basis rather than restricting it to two journeys in a block of four years.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Nitin Baijal, Director, Deloitte Haskins & Sells LLP
Clarify the rules of claiming foreign tax credit
Considering the large globally mobile workforce, the Budget should clarify rules relating to the foreign tax credit. Employers claiming foreign tax credit at the withholding stage is one area that needs consideration. Domestic tax laws are silent on this. In the absence of clear rules, the employer generally does not provide relief to the employee at the withholding stage, leaving the employee with no choice but to claim this benefit at the time of filing tax returns. Since credit is claimed only at the time of filing returns, it results in large refund situations thus impacting the overall fund flow of the individual.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Diwya Baweja, Partner, Deloitte Haskins & Sells LLP
Reintroduce standard deduction for salaried taxpayers
For a salaried taxpayer, tax laws do not allow deduction of any expenses incurred during the course of employment other than professional tax. Even this is not available in many states. Standard deduction should be reintroduced to give some relief to salaried taxpayers. It was scrapped nearly a decade ago when the basic exemption limit was raised to Rs 1 lakh. At that time, standard deduction was the lower of 40% of salary or Rs 30,000 for employees earning up to Rs 5 lakh a year and Rs 20,000 for others. The limit should be increased since this was almost a decade ago.

While broadening of tax slabs benefits all individuals, the introduction of standard deduction benefits only salaried taxpayers. It will increase the disposable income and bring some parity amongst salaried taxpayers and individuals running a business or profession.

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Sonu Iyer, Tax Partner, EY India
“The government should fully exempt tax on interest from fixed deposits for senior citizens. There should be reintroduction of standard deduction and replacement of all current tax exemptions like HRA and expense reimbursements like medical expenses, LTA etc.”

Experts' suggestions on how Budget 2017 can cut your direct tax burden
Anand Bagri, Head-Domestic Markets, RBL Bank
Make interest on bank FDs tax-free up to Rs 1.5 lakh a year
Most researchers and economists say the bulk of black money sits in the form of cash, real estate and gold (real assets). The government needs to focus more on ways to attack real asset holdings and incentivise investments in financial assets. Also, the average Indian investor’s allocation towards financial assets (fixed income or equity) is very low, and the finance minister should incentivise investments in financial assets too. Make interest on bank fixed deposits (FDs) for individuals tax free up to Rs 1.5 lakh per annum. This also helps senior citizens and savers who do not want to take equity risks on their portfolio. The government should also make interest on government securities tax free for individuals. This provision was earlier there under Section 80L but was repealed. The government should reintroduce it as it would help retail participation in government securities and also help individuals lock in to interest rates for longer maturities of 10-20 years.

Source: Economic TImes

More Clarifications on the Income Declaration Scheme, 2016

Circular No. 24 of 2016

F.No.142/8/2016-TPL

Government of India

Ministry of Finance

Department of Revenue Central Board of Direct Taxes

(TPL Division) ***

Dated 27th of June, 2016

Clarifications on the Income Declaration Scheme, 2016

The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all 45% of such undisclosed income declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the Rules’) have been notified. In this regard, Circular No. 17 of 2016 dated 20th May, 2016 issued by the Board provided clarifications to 14 queries. Subsequently, further queries have been received from the public about various provisions of the Scheme. The Board has considered the same and the following clarifications are issued.-

Question No.1: If only part payment of the tax, surcharge and penalty payable on undisclosed income declared under the Scheme is made before 30.11.2016, then whether the entire declaration fails as per section 187(3) of the Finance Act, 2016 or pro-rata declaration on which tax, surcharge and penalty has been paid remains valid?

Answer: In case of part payment, the entire declaration made under the Scheme shall be invalid. The declaration under the Scheme shall be valid only when the complete payment of tax, surcharge and penalty is made on or before 30.11.2016.

Question No.2: In case of amalgamation or in case of conversion of a company into LLP, if the amalgamated entity or LLP, as the case may be, wants to declare for the year prior to amalgamation/conversion, then whether a declaration is to be filed in the name of amalgamated entity/LLP or in the name of the amalgamating company or company existing prior to conversion into LLP? Answer: Since the amalgamating company or the company prior to conversion into LLP is no more into existence and the assets/liabilities of such erstwhile entities have been taken over by the amalgamated company/LLP, the declaration is to be made in the name of the amalgamated company or the LLP, as the case may be, for the year in which the amalgamation/conversion takes place.

Question No.3: Whether the Scheme is open only to residents or to non-residents also?

Answer: The Scheme is available to every person, whether resident or nonresident.

Question No.4: If undisclosed income relating to an assessment year prior to A.Y. 2016-17, say A.Y. 2001-02 is detected after the closure of the Scheme, then what shall be the treatment of undisclosed income so detected?

Answer: As per the provisions of section 197(c) of the Finance Act, 2016, such income of A.Y. 2001-02 shall be assessed in the year in which the notice under section 148 or 153A or 153C, as the case may be, of the Income-tax Act is issued by the Assessing Officer. Further, if such undisclosed income is detected in the form of investment in any asset then value of such asset shall be as if the asset has been acquired or made in the year in which the notice under section 148/153A/153C is issued and the value shall be determined in accordance with rule 3 of the Rules.

Question No.5: Whether a person on whom a search has been conducted in April, 2016 but notice under section 153A is not served upto 31.05.2016, is eligible to declare undisclosed income under the Scheme?

Answer: No, in such a case time for issuance of notice under section 153A has not expired. Hence the person is not eligible to avail the Scheme in respect of assessment years for which notice under section 153A can be issued.

Question No.6: As per Circular No.17 of 2016, question No.14, it is not mandatory to attach the valuation report. But Form-1 states “attach valuation report”. How to interpret?

Answer: It is necessary for the declarant to obtain the valuation report but it is not mandatory for him to attach the same with the declaration made in Form-1. However, the jurisdictional Pr. Commissioner/ Commissioner in order to ascertain the correctness of the value of the asset quoted in Form-1 may require the declarant to file the valuation report before issuing the acknowledgment in Form-2. In such a circumstance, it will be necessary for the declarant to make the report available to the Pr. Commissioner/Commissioner.

Question No.7: Is it mandatory to furnish PAN in the Form of declaration?

Answer: Yes, PAN is the unique identifier for all direct tax purposes. This is also necessary in order to claim the benefits and immunities available under the Scheme.

Question No.8: If any proceeding is pending before the Settlement Commission, can a person be considered eligible for the Scheme?

Answer: No, a person shall not be eligible for the Scheme in respect of assessment years for which proceeding is pending with Settlement Commission.

Question No.9: Land is acquired by the assessee in year 2001 from assessed income and is regularly disclosed in return of income. Subsequently in the year 2014, a building is constructed on the said land and the construction cost is not disclosed by the assessee. What shall be the fair market value of such building for the purposes of the Scheme?

Answer: Fair market value of land and building in such a case shall be computed in accordance with Rule 3(2) by allowing proportionate deduction in respect of asset acquired from assessed income.

Question No.10:Whether cases where summons under section 131(1A) have been issued by the Department or letter under the Non-filer Monitoring System (NMS) or under section 133(6) are issued are eligible for the Scheme?

Answer: Cases where summons under section 131(1A) have been issued by the department or letters for enquiry under NMS or under section 133(6) are issued but no notice under section 142 or 143(2) or 148 or 153A or 153C [as specified in section 196(e)] of the Finance Act, 2016 has been issued are eligible for the Scheme.

Question No.11: If notices under section 142, 143(2) or 148 have been issued after 31.05.2016 and assessee makes declaration under the Scheme then what shall be the fate of these notices?

Answer: As clarified vide Explanatory Circular No. 17 dated 20.5.2016 , a person shall not be eligible for the Scheme in respect of the assessment year for which a notice under section 142, 143(2) or 148 has been received by him on or before 31.5.2016. In a case where notice has been received after the said date, the assessee shall be eligible to make a declaration under the Scheme for the said assessment year. Such declaration shall be valid if it has not been made by suppression of facts or misrepresentation and the amount payable under the Scheme has been duly paid within the specified time. On furnishing by the declarant the certificate issued by the Pr. Commissioner/Commissioner in Form-4 to the Assessing Officer, the proceedings initiated vide notice under section 142, 143(2) or 148 shall be deemed to have been closed.

(Dr. T.S. Mapwal)

Under Secretary to the Government of India

Copy to:-

1. PS to FM/ OSD to FM/ OSD to MoS(R).

2. PS to Secretary (Revenue).

3. The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.

4. All Pr. Chief Commissioners/ Pr. Director General of Income-tax – with a request to circulate amongst all officers in their regions/ charges.

5. Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr. DGIT (L&R).

6. CIT (M&TP), CBDT.

7. Web manager for posting on the departmental website.

INCOME DECLARARION SCHEME, 2016 (FAQ) - PPT

INCOME DECLARATION SCHEME, 2016

RBI to accept pre-2005 notes only at select branches from July

The Reserve Bank today said it will accept pre-2005 banknotes only at its select branches from tomorrow as majority of the old series banknotes have been withdrawn.

RBI is pulling out the pre-2005 banknotes because of fewer security features compared to banknotes printed after 2005.

The central bank said it has observed that a major portion of the pre-2005 banknotes have been withdrawn from circulation and only a small percentage of these notes remains in circulation.

"On a review, therefore, the Reserve Bank has decided that from July 1, 2016 the facility of exchanging the pre-2005 banknotes will be available only at the select offices of the Reserve Bank," it said in a release.

The branches are: Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram and Kochi.

Reserve Bank in December 2015 had set June 30, 2016 as the last date for public to exchange pre-2005 banknotes at the identified bank branches and Issue Offices of the Reserve Bank.

RBI also clarified that these pre-2005 banknotes will continue to remain legal tender.

Further, RBI said it is a standard international practice that not to have currency notes from multiple series remaining in circulation at the same time.

Soliciting cooperation from public in withdrawing these banknotes from circulation, RBI has urged them to exchange pre-2005 banknotes at its mentioned offices as per their convenience.

"The Reserve Bank will continue to monitor and review the process so that the public is not inconvenienced in any manner," it said.

Read more at:
http://economictimes.indiatimes.com

INCOME DECLARATION SCHEME, 2016- PPT

Income declaration scheme

Cash payments to liquor dealers to maintain sufficient quantity of stock doesn't call forsec. 40A(3) disallowance

Where assessee, engaged in business of country liquor, had to make cash payments in excess of prescribed limits to two dealers in order to maintain sufficient stock of liquor as prescribed by Excise Department, exception provided in provisions of section 40A(3) with regard to business expediency was applicable to assessee's case and, thus, impugned disallowance made by Assessing Officer was to be deleted

Refer:[2016] 70 taxmann.com 319 (Kolkata - Trib.)

No rejection of books due to practice of not issuing sale bills of liquor as this practice prevalent in liquor trade

Where Assessing Officer rejected books of account of liquor business due to non-maintenance of sales records, since practice of not issuing bills was prevalent all over country in liquor trade, action of Assessing Officer was not justified

Refer:[2016] 70 taxmann.com 336 (Chandigarh - Trib.)

Applicability of Income Computation and Disclosure Standards (ICDS) deferred to Ass.Year 2017-18

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 6th July, 2016

Subject: Applicability of Income Computation and Disclosure Standards (ICDS) notified under section 145 (2) of the Income - tax Act, 1961.

Vide Notification No. SO 892 (E) dated 31st March, 2015, Central Government notified 10 Income Computation and Disclosure Standards (ICDS). These ICDS are applicable from 1.4.2015 i.e. previous year 2015-16 (Assessment Year 2016-17). Subsequent to notification of the ICDS, a number of representations were received which were examined by an Expert Committee. The Committee has recommended amendments to the notified ICDS and also issuance of clarification in respect of certain points raised by the stakeholders.

2. The revision of ICDS/issue of clarifications as recommended by the Committee, is under consideration. The revision of the Tax Audit Report is also being made for ensuring the compliance with the provisions of ICDS and for capturing the disclosures mandated by the ICDS.

3. Some of the tax payers might have filed their return of income and obtained Tax Audit Report without incorporating the compliance with the ICDS and related disclosures in the absence of the revised Tax Audit Report. Considering these facts, it has been decided that the ICDS shall be applicable from 1.4.2016 i.e. previous year 2016-17 (Assessment Year 2017- 18). The notification to this effect will be issued shortly.

(Dr. B. K. Sinha)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

I-T dept to scrutinise high value transactions, penny stock trade

9:10 AM Add Comment

Income Tax Department has asked its top officers to closely scrutinise high-value transactions and investments in penny stocks to identify potential black money holders who can avail the four-month compliance window ending September 30 to come clean.

In a communication to Principal Chief Commissioners in 18 regions across the country, the department has asked officers to look into Annual Information Returns (AIR), which do not contain valid PANs.

The database for 'Non-PAN AIR transactions' has already been disseminated to Principal Chief Commissioners based on the regions.

It has also made available list of cases related to penny stock transactions for Assessment Year 2009-10 to 2013-14 for identifying potential black money holders.

The department has also asked the officials to share data on penny stock transactions with field formations.

Principal Chief Commissioners have also been asked to scrutinise "non-filers" and those who have not submitted their response to the tax authorities about non-filing of returns.

The department, the communication said, is also developing a new functionality on e-filing portal, which will force the tax payers to own up non-PAN transactions.

According to sources there are around 60 lakh high value AIR transactions without PANs which can be mined through online tracking systems.

The Budget for 2016-17 announced a four-month compliance window, allowing domestic black money holders to declare their unaccounted wealth, by paying a tax and penalty of 45 per cent and escape prosecution and harsher punishment.
The window under the Income Declaration Scheme (IDS) 2016 will remain open from June 1 to September 30. Tax and penalty on income declared, as per the original scheme, is to be paid by November.

Read more at:
http://economictimes.indiatimes.com

Catching them young: Income tax deptt will now talk to your kids

Don't be surprised if your kids turn around one day and ask you whether you have paid your income tax. In an effort to catch them young, the income tax department will be visiting your kids in school to tell them why taxes should be paid.

As per the Central Action Plan chalked out by the Income tax department for 2016-17, talks by income tax officials in schools as well as visits of students, in batches, to income tax offices have been planned. As per the Plan, young tax officers are to be deputed to visit schools and talk to the children in morning assemblies or otherwise. The officials would be using power point presentations and historical stories to show how the concept of taxation is a very old one and also how/why it is relevant even today.

The officers should emphasize how a rupee gained/collected by way of taxes is utilized towards development of the country leading to nation building, says the Plan. The officers have been asked to discuss the importance of taxation and menace of black money/parallel economy.

Indicating the seriousness with which this endeavour is being planned, the document even specifies the periodicity of such talks: 1 visit per quarter per Principal Commissioner of Income Tax charge.

That's not all. Visits of students, in batches of 20 to 25, to income tax offices are also to be organised. The student age group targeted for this purpose is 16-18 years. Again the periodicity of such visits has been fixed.

Further, if you thought that these visits would be limited to government schools think again. The Plan clearly says that the income tax department should target different kinds of schools for this awareness campaign including public schools and convents. Commissioners of Income Tax are to select schools falling within their territorial jurisdiction to avoid overlap.

The Plan leaves no stone unturned to ensure that the campaign succeeds. The department has been instructed that frequency of visits can be increased considering the local requirements so that sizeable number of schools in each city are covered in this initiative. The aim of the campaign is to ensure that schools are selected such that students from all strata of of society are covered.

This Central Action Plan was discussed at the Annual Conference of Senior Tax Administrators of Central Board of Direct Taxes (CBDT) in June this year in Delhi.

Over the last few years the tax department has become more pro-active in its communication efforts. Several special efforts are being made to increase awareness about the recently opened Voluntary Income Disclosure Scheme 2016.
Read more at:
http://economictimes.indiatimes.com

Govt. ready to consider a new Financial Year

CONSTITUTION OF A COMMITTEE TO EXAMINE DESIRABILITY AND FEASIBILITY OF HAVING A NEW FINANCIAL YEAR

PRESS RELEASE, DATED 6-7-2016

The Government of India today constituted a Committee to examine the desirability and feasibility of having 'a new financial year'. The Committee headed by Dr. Shankar Acharya (former Chief Economic Adviser) has Shri K.M. Chandrasekhar (former Cabinet Secretary), Shri P.V. Rajaraman (former Finance Secretary, Tamil Nadu) and Dr. Rajiv Kumar (Senior Fellow, Centre for Policy Research) as other Members. The Committee will examine the merits and demerits of various dates for the commencement of the financial year including the existing date (April to March), taking into account the various relevant factors.

The details on the Composition and the Terms of Reference of the Committee are uploaded on the website of Ministry of Finance (www.finmin.nic.in). The Committee has been given time till 31st December, 2016 to submit its Report.

Refer:www.taxmann.com

Direct Tax Collection upto June, 2016 shows an Increase of 24.79%

In a press release dated 8th July 2016 Central Board Of Direct Taxes stated that The figures for direct tax collection upto June, 2016 indicates net revenue collection of Rs.1.24 lakh crore which is a growth of 24.79% over the corresponding period last year. The main reason for this increase is the change in the requirements for advance tax payment even in respect of individuals which has been made in the last year’s Budget. Earlier there were only three instalments of advance tax to be paid by individuals in the months of September, December and March. From the current year, individuals are also supposed to pay four instalments of advance tax at the rate of 15%, 30%, 30% and 25% in the months of June, September, December and March of every Financial Year. The collection upto June, 2016 indicates that 14.63% of the annual budget target of direct taxes has been achieved in the first three months of the F.Y. 2016-17.

In terms of growth rate for corporation tax and personal income tax, the trend in gross revenue of corporation tax is indicating an increase of 13.5% while that of personal income tax (including STT etc.) a growth of 29.8%. However, after adjusting for refunds, the net growth in corporation tax is at 4.43% while that of personal income tax (including STT etc.) at 48.75%.

Income Declaration Scheme 2016 - Relaxation of time schedule for making payments under the Scheme

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 14th July, 2016

PRESS RELEASE

Sub : The Income Declaration Scheme 2016 - Relaxation of time schedule for making payments under the Scheme

During the course of meetings and seminars held in different parts of the country, various stakeholders have expressed concern that the time period available under the Scheme up to 30th November, 2016 for making payment of tax, surcharge and penalty is very short, especially where funds in liquid form are not readily available with the declarants. It has also been mentioned that for making payment by 30.11.2016, the declarants may have to opt for distress sale of the assets.
Taking into consideration the practical difficulties of the stakeholders, the Government has decided to revise the time schedule for making payments under the Scheme as under:
(i) a minimum amount of 25% of the tax, surcharge and penalty to be paid by 30.11.2016;
(ii) a further amount of 25% of the tax, surcharge and penalty to be paid by 31.3.2017; and
(iii) the balance amount to be paid on or before 30.9.2017.
A Notification to this effect shall be issued shortly.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

The Income Declaration Scheme 2016 - Issue of further FAQs

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 14 th July, 2016

Sub : The Income Declaration Scheme 2016 - Issue of further FAQs

The Income Declaration Scheme, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets. The Board has issued three sets of clarifications in the form of FAQs. The fourth set of Frequently Asked Questions (FAQs) providing clarification on various issues are in the process of being issued and will be available on the official website of the Income Tax Department i.e., www.incometaxindia.gov.in later today.

Queries have been received from various stakeholders whether the payment under the Scheme can be made out of undisclosed income without including the same in the income declared, thereby bringing down the effective rate of tax, surcharge and penalty payable under the Scheme to around 31%. The fourth set of FAQs seek to set this issue at rest as follows:

“Question No. 6: With reference to Question No.5 issued vide Circular No.25 of 2016, wherein it has been stated that the department will not make any enquiry in respect of sources of income, payment of tax, surcharge and penalty, it may be clarified that whether the payment under the Scheme can be made out of undisclosed income without including the same in the income declared, thereby bringing down the effective rate of tax, surcharge and penalty payable under the Scheme to round 31 per cent?

Answer: It is clarified that the intent of the clarification issued vide Question No.5 of Circular No.25 of 2016 was limited to conduct of enquiry by the Department. It in no way intends to modify or alter the rate of tax, surcharge and penalty payable under the Scheme which have been clearly specified in the Scheme itself. Sections 184 & 185 of the Finance Act, 2016 unambigously provide for payment of tax, surcharge and penalty at the rate of 45 per cent of undisclosed income. This is illustrated by the following example—

In a case a person declares Rs.100 lakh as undisclosed income, being the fair market value of undisclosed immovable property as on 1st June, 2016 and pays tax, surcharge and penalty or Rs.45 lakh (30 lakh + 7.5 lakh + 7.5 lakh) on the same out of his other undisclosed income. In this case the declarant will not get any immunity under the Scheme in respect of undisclosed income of 45 lakh utilized for payment of tax, surcharge and penalty but not included in the declaration filed under the Scheme. To get immunity under the Scheme in respect of the entire undisclosed income of Rs.145 lakh (Rs.100 lakh being undisclosed income represented by immovable property and Rs.45 lakh being the payment made from undisclosed income) and pay tax, surcharge and penalty under the Scheme amounting to Rs.65.25 lakh i.e., 45 per cent of Rs. 145 lakh.”

Other queries related to revision of declaration, chargeability of capital gain and TDS on transfer of property from benamidar to beneficial owner etc. have also been dealt with in the circular.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

Income Tax Department to issue 7 lakh letters seeking Information in respect of High Value Transactions

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 21st July, 2016

Press Release

Sub : Income Tax Department to issue 7 lakh letters seeking Information in respect of High Value Transactions

Under the Annual Information Returns (AIR), various types of high-value transactions were being reported to the Income Tax Department. These include reporting of cash deposits of Rs.10,00,000 or more in a saving bank account, sale/purchase of immovable property valued at Rs. 30,00,000 or more, etc. Many of these transactions do not have PAN linked to it. The Department has details of about 90 lakh such transactions for the period 2009-10 to 2016-17. The Income Tax Department has with the help of in-house computer techniques, grouped such non-PAN transactions and identified 7 lakh high-risk clusters having around 14 lakh non-PAN transactions which are being scrutinized by the Income Tax Department closely.

The Department will be issuing letters to the parties of these transactions requesting them to provide their PAN number against these transactions. For the convenience of the parties to whom these letters are addressed, a new functionality on e-filing portal has been developed wherein they can own up transactions and provide structured response electronically. The parties can log-in to their e-filing website and by quoting a Unique Transaction Sequence Number provided in the letter sent to them, can link their transaction with their PAN easily. They will also be able to give a response to this letter electronically by choosing the option of either owning up the transaction or denying the transaction as their own. The responses received from such parties online will be examined by the Department. The Department will initiate further necessary action in those cases where no replies are received.
The members of public who receive such letters are requested to kindly cooperate in the matter. They may use the Departmental helpline to ask questions, as far as possible, instead of making direct contact with any officials of the Income Tax Department. Members of public are advised not to entertain any claims from unscrupulous elements who may offer their help in complying with such communication by falsely representing themselves to be the agents of Income Tax department in the matter.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

Individuals attaining age of 60 yrs on 1st April to be deemed as senior citizens in preceding FY

SECTION 119 OF THE INCOME-TAX ACT, 1961 - INCOME-TAX AUTHORITIES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES - CLARIFICATIONS REGARDING ATTAINING PRESCRIBED AGE OF 60/80 YEARS ON 31st MARCH ITSELF, IN CASE OF SENIOR/VERY SENIOR CITIZENS WHOSE DATE OF BIRTH FALLS ON 1st APRIL, FOR PURPOSES OF INCOME-TAX ACT

CIRCULAR NO.28/2016 [F.NO.225/182/2016/ITA.II], DATED 27-7-2016

Higher tax exemption limits have been prescribed under the past Finance Acts for resident senior citizen taxpayers who have attained the age of sixty years. Even in such cases, the exemption limit is still higher for very senior citizens who have attained the age of eighty years. A doubt has been raised about the attainment of the aforesaid qualifying ages for availing higher exemption in cases of the persons whose date of birth falls on 1st April of calendar year. In other words, the broader question under consideration is whether a person born on 1st April of a particular year can be said to have completed a particular age on 31st March, on the preceding day of his/her birthday, or on 1st April itself of that year.

2. The matter has been examined. Although specific provision does not exist in this regard under the Income-tax Act, 1961, the Hon'ble Supreme Court had an occasion to consider a similar issue in the case of Prabhu Dayal Sesma vs. State of Rajasthan & another 1986, AIR, 1948 wherein it has dealt with on the general rules to be followed for calculating the age of the person. In this judgment , Apex Court observed that while counting the age of the person, whole of the day should be reckoned and it starts from 12 O'clock in the midnight and he attains the specified age on the preceding, the anniversary of his birthday. The observation of Hon'ble Supreme Court in para 9 of the aforesaid judgment reads as under:

"9 ...........At first impression, it may seem that a person born on January 2, 1956 would attain 28 years of age only on January 2, 1984 and not on January 1, 1984. But this is not quite accurate. In calculating a person's age, the day of his birth must be counted as a whole day and he attains the specified age on the day preceding, the anniversary of his birthday. We have to apply well accepted rules for computation of time. One such rule is that fractions of a day will be omitted in computing a period of time is years or months in the sense that a fraction of a day will be treated as a full day. A legal day commences at 12 O'clock midnight and continues until the same hour the following night. There is a popular misconception that a person does (sic not) attain a particular age unless and until he has completed a given number of years. In the absence of any express provision, it is well settled that any specified age in law is to be computed as having been attained on the day preceding the anniversary of the birthday"

3. In view of the aforesaid judgment, the Central Board of Direct Taxes, in exercise of powers under section 119 of the Act, hereby clarifies that a person born on 1st April would be considered to have attained a particular age on 31st March, the day preceding the anniversary of his birthday. In particular, the question of attainment of age of eligibility for being considered a senior/very senior citizen would therefore be decided on the basis of above criteria.

4. The field authorities are directed to take note of above position for ascertaining the age while computing tax liability of a taxpayer falling in Individual' category, being resident in India.

DUE DATE FOR FILING INCOME TAX RETURNS EXTENDED TO AUGUST 5, 2016

The CBDT today released an order extending the due date to 5th August, 2016 for the of filing Income Tax Returns which are to be filed by 31st July, 2016. The said extension has been made in order to avoid inconvenience to the taxpayers considering the Bank Strike on 29th July, 2016 and the 31st of July (Sunday) being a bank holiday.

Click Here to view the original Notification

I-T Dept may write off small tax arrears of up to Rs 5,000