More Clarifications on the Income Declaration Scheme, 2016

More Clarifications on the Income Declaration Scheme, 2016

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                                                                                                                   Circular No. 24 of 2016
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.
RBI to accept pre-2005 notes only at select branches from July

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

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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.

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

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

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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] 70 319 (Kolkata - Trib.)
Applicability of Income Computation and Disclosure Standards (ICDS) deferred to Ass.Year 2017-18

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

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Government of India 
Ministry of Finance 
Department of Revenue 
Central Board of Direct Taxes 


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

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

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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.

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

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

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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.
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Govt. ready to consider a new Financial Year

Govt. ready to consider a new Financial Year

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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 ( The Committee has been given time till 31st December, 2016 to submit its Report.
Direct Tax Collection upto June, 2016 shows an Increase of 24.79%

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

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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

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

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Government of India 
Ministry of Finance 
Department of Revenue 
Central Board of Direct Taxes 
New Delhi, 14th July, 2016

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

The Income Declaration Scheme 2016 - Issue of further FAQs

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Government of India 
Ministry of Finance 
Department of Revenue 
Central Board of Direct Taxes

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., 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

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

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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

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

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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.


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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

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

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The idea is to cut litigation, lower the cost of collection and prioritising of bigger defaulters

For the first time ever, the income tax department is thinking of writing off tax arrears in each case where the dues are up to Rs 5,000.

The idea is to cut litigation, lower the cost of collection and prioritising of bigger defaulters. Though writing off will mean the government could lose up to to Rs 600 crore, many of these accounts are anyway not recoverable. There are four million tax arrear cases of under Rs 5,000, older than three years.

Initially, what is being considered is writing off 1.8 mn arrear cases with dues under Rs 100 each. "(This could) then be expanded to cover arrears under Rs 5,000. This will ease a lot of hassle that tax payers go through, beside de-cluttering our database of arrears, which might not even be recoverable," said an official. About 2.2 mn cases are between Rs 100 and Rs 5,000.

"Since these are old cases, they are not even being followed up by the department. In some cases, the defaulter cannot be tracked. The cost of recovery is higher than the pending tax amount in many cases," another official added.

Meanwhile, the government has decided to expedite refunds of up to Rs 5,000 and also for cases where the arrear amount is up to Rs 5,000. In a circular issued recently, the department has said: "The refund pendency data has revealed that there are a large number of pending claims of refunds up to Rs 5,000 ?for assessment years 2013-14, 2014-15 and 2015-16...the assessing officers be directed to issue refunds expeditiously, without making any adjustment of arrear demands..."

In 2014-15, the Central Board of Direct Taxes issued 13 mn refunds worth a combined Rs 26,663 crore.
Senior officers to suggest circumstances justifying waiver of fee for delay in filing TDS returns: CBDT

Senior officers to suggest circumstances justifying waiver of fee for delay in filing TDS returns: CBDT

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LETTER F.NO.275/27/2013-IT(B), DATED 2-8-2016
The Board is examining the desirability and expediency of prescribing situation/circumstances under which levy of fee under section 234E may cause genuine hardship to the taxpayers, so as to prescribe guidelines for waiver of such fees by virtue of the powers of the Board under section 119(2)(a) of the Income-tax Act, 1961.
2. In this connection, I am directed to request you to kindly forward your suggestions and recommendations for conditions/circumstances which justify waiver of fee under section 234E for an assessee or a class of assessees. These may kindly be furnished by 31-8-2016.
Rajya Sabha clears GST; releases Constitutional Amendment Bill, 2016

Rajya Sabha clears GST; releases Constitutional Amendment Bill, 2016

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On Aug 3, 2016, Rajya Sabha discussed amendments to Constitution Bill for Goods and Service Tax i.e. Constitutional (One Hundred and First Amendment) Bill, 2016 and finally the most crucial bill passed in Rajya Sabha.GST will be introduced in the country after a long journey of 13 years as it was first discussed in the Kelkar Task Force report on indirect taxes in 2003.
This amendment bill was cleared since Government agreed to drop 1% additional tax and gave assurance that it will compensate States for any revenue loss incurred due to GST rollout. There will be a huge impact of GST on common man. Goods like Small Cars, Two wheeler, Movie Tickets, Electronic Items, etc., will be cheaper. But Air Travel, Insurance, Textile, Jewellery, Mobile Calls, Cigarettes will be costlier.
RBI launches 'Sachet' portal to check illegal money collection

RBI launches 'Sachet' portal to check illegal money collection

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The Reserve Bank of India (RBI) on Thursday launched a portal to curb illegal collection of money by companies.

The URL of the website is

This website will enable public to obtain information regarding entities who accept deposits, lodge complaints and also share information regarding illegal acceptance of deposits, said RBI Governor Raghuram Rajan while launching 'Sachet' here.

"Initiating quick follow up and taking cases to logical conclusion by punishing the guilty is paramount to deterring entities in future from carrying out unlawful activity. I hope 'Sachet' would help regulators in doing this as much as it would help members of public in depositing their hard earned money with genuine companies by giving them timely information about them," Rajan said.

The website would also help enhance coordination among regulators and state government agencies.

Explaining the features of the website, Deputy Governor S.S. Mundra said, people can file and track a complaint on this website if any firm has illegally accepted money from them or defaulted in repayment of deposits.

People can also share information regarding any such entity on this portal, Mundra said.

The website also incorporates regulations prescribed by all financial regulators that one has to follow.

'Sachet' also has a section for closed user group for State Level Coordination Committee (SLCCs) wherein they could share market intelligence and other information about their activities as well as agenda and minutes of meetings across the country in real time.

All states have SLCCs comprising of various regulators, including RBI, Securities and Exchange Board of India (Sebi), National Housing Bank (NHB), Insurance Regulatory and Development Authority (IRDA), Registrar of Companies (ROC) and concerned state government departments, such as, home, finance, law and various police authorities.

Mundra hoped that the website will act as a 'force multiplier' and go a long way in making the SLCCs more effective in curbing the menace of unauthorised money raising activities.
Lok Sabha passes GST Bill with Rajya Sabha amendments

Lok Sabha passes GST Bill with Rajya Sabha amendments

9:08 AM Add Comment
Parliament approved biggest overhaul of indirect taxes on Monday after the lower house ratified a constitutional amendment Prime Minister Narendra Modi called a major step to make doing business easier.

The proposed goods and services tax (GST) is one of the most significant reforms since India opened its economy 25 years ago and the revamping of the tax system since the country's independence in 1947.

The measure will harmonise a mosaic of state and central levies into a national sales tax, creating a single customs union widely expected to reduce business transaction costs, with potentially significant long-term growth benefits.

The upper house, where the measure was stuck for months, passed the bill last week.

Modi hailed the passage of the bill as a "great step by team India, (a) great step towards transformation, great steps towards transparency".

"Today, an important move to free the nation from tax terrorism has begun," he told lawmakers in the lower house of parliament.

The advancement of the new sales tax is the biggest legislative victory for Modi, who swept to power in 2014 promising to nurse India's then faltering economy back to health.

His plans to simplify rules for land sales got scuttled in parliament last year. Similarly, political opposition forced him to put on hold proposed legislative changes aimed at making it easier for companies to hire and fire workers.

It has been 13 years since the tax was first mooted, but forging a political consensus has been a bruising process, as the measure would curb the powers of Indian states.

Ironically, the GST is getting closer to the finish line under Modi, who while running the state of Gujarat vehemently opposed it - a fact that drew criticism from opposition benches.

Modi defended his stance, saying his experience as a provincial chief helped him better understand and address states' concerns.

"Lots of flaws have been overcome as far as the GST is concerned," he said. "A trust between the centre and states has developed."

Under the new regime, companies will get offsets for taxes paid at different stages of the supply chain, mitigating the dangers of double-taxation.

The finance ministry aims to roll out the GST from next April. Meeting the self-imposed deadline, however, will be a race against time, tax experts say.

The bill now needs the approval of half of India's state legislatures and federal and state legislatures must pass three laws to implement the tax.

Read more at:

Dy. Director of Income Tax isn't empowered to lodge complaint for prosecution against taxpayer

Dy. Director of Income Tax isn't empowered to lodge complaint for prosecution against taxpayer

9:08 AM Add Comment
In view of restrictive preconditions imposed by Section 195 CrPC, Deputy Director of Income Tax is not a competent authority to whom appeal would ordinarily lie from decisions/orders of ITOs involved in search proceedings under Income-tax Act so as to empower him to lodge complaint for prosecution under Sections 109/191/193/196/200/420/120B/34 IPC

Where a single and combine search operation under Income-tax Act had been undertaken simultaneously both at Bhopal and Aurangabad for same purpose, alleged offence can be tried by courts otherwise competent at both aforementioned places; jurisdiction could not be confined only within territorial limits to Court at Aurangabad and Trial Court at Bhopal is also competent to try complaint

Refer:[2016] 73 32 (SC)
Income tax queries answered by Dilip Lakhani, Senior Chartered Accountant

Income tax queries answered by Dilip Lakhani, Senior Chartered Accountant

9:08 AM Add Comment
Every week, an expert selected by ET answers queries from our readers on income tax:

Q. I booked a commercial space which is under construction based on a stamp paper agreement (not registered) with the developer in Sept 2012. I received allotment letter mentioning the space number in Oct 2012 when it was still under construction. Before receiving any possession letter from the developer, I transferred my right and relinquished my interest in July 2016 to a third-party by a registered deed of conveyance where I became a confirming party. The gain was around Rs 22 lakh. Is this a long-term or short-term capital gain? Please mention the section of I-T Act or circular number of CBDT for the support. —SK BENERJEE

A. Since the period of holding is more than more than 36 months before the date of transfer of the rights in immovable property, the resultant gain will be chargeable to tax as long-term capital gains. Section 2(14) of the Income Tax Act,1961, defines the word 'capital asset'. The right in an immovable property falls within the definition of capital asset. You will be entitled to the benefit of indexation also and the difference between the sale consideration and the indexed cost of acquisition will be chargeable to tax as longterm capital gains.

Q. My mother purchased a house along with servants' quarters in South Delhi in 2013 for Rs 1.8 crore. She expired in 2015. As per her duly registered will, I and my deceased sister's husband are joint owners of above immoveable property. We have received an offer for purchase of the property for Rs 2.75 crore. The sale consideration will be shared equally between both of us. Kindly clarify whether there would be capital gains tax on the sale consideration? Steps to avoid such tax? —VINITA SRIVASTAVA

A. You and your sister's husband will be liable to pay tax on capital gains individually in the same proportion in which you share the sale consideration of the property. Around 50% of the acquisition cost of your mother will be deemed to be the cost in your hands for the purpose of computing capital gains. If the property is held by you for more than 3 years from the date of purchase by your mother, then benefit of indexation of cost will be available and the resultant long-term capital gains will be chargeable to tax at 20%. Otherwise the resultant capital gains will be short-term capital gains chargeable to tax at 30%. You may claim exemption by investing into a new residential house u/s.54 or investment in specified bonds u/s. 54EC of the I-T Act, 1961 subject to conditions specified in the respective sections against the long-term capital gains chargeable to tax on the sale of the property at South Delhi.

Source: Economic TImes
Government expects tax revenues to increase after GST roll-out

Government expects tax revenues to increase after GST roll-out

9:08 AM Add Comment
NEW DELHI: The government expects its tax buoyancy to increase after the goods and services tax (GST) is rolled out, a sharp contrast to many experts warning of disruptions in tax machinery and slower revenue growth in the initial years of this tax reform.

In the medium term expenditure framework released last week the government expects higher economic growth, GST and other policy measures to help lift gross tax revenues to 10.9% of gross domestic product (GDP) in FY18 and 11.1% of GDP in FY19. The Centre's tax-to-GDP ratio was 10.7% in FY15, almost same as projected 10.8% for the current fiscal.

With plan and non-plan distinction being done away with from next financial year, the government expects to bring more attention to capital spending. It wants to set aside more funds for capital spending and expects to show a higher allocation from next fiscal.

"The larger issue on the expenditure side that remains to be tackled relates to the revenue-capital expenditure imbalance," the government said in its statement, promising to lift total capital spending to 15.6% of total spending in FY19. "It is presumed that with the focus shifting to capital and revenue expenditures with the merger of plan and non-plan from Budget 2017-18, government will take proactive measures for enhancement of the capital component within its total expenditure," it said. The government also sees total spending decline from estimated 13.1% of GDP in FY17 to 12.2% of GDP by FY19 by curtailing the growth in non-developmental expenditure.

Government expects tax revenues to increase after GST roll-out

The government said it will need more to cover its seventh pay commission liability — both for pension and salaries — as the amount set aside may not be enough. To absorb complete impact of pay revision in 2016-17, "salary provision made in BE 2016-17 will require some enhancement in RE 2016-17" the statement said. Spending on salaries is projected to increase 12% in FY18 and 8% in FY19. Similar increase in pensions is suggested that are set to increase 10% in FY18.

The government has planned a less ambitious disinvestment target in the years ahead. This year, disinvestment is estimated to fetch .Rs 56,500 crore (including.Rs 20,500 crore from strategic disinvestment). "Over the medium-term framework, the target of disinvestment receipts are kept flat on conservative side, at .Rs 40,000 crore both for 2017-18 and 2018-19," the government said in the statement.

The government also said subsidies reforms will continue over the next two years. Subsidy spending is expected to decline to 1.5% of GDP in FY17 from 1.8% in FY16. "It is expected that with active policy reforms including better targeting, the incidence will progressively reduce," the government said, pegging it at 1.3% of GDP in FY19. Once the biggest burden on finances, the fuel subsidy is now seen at Rs 21,500 crore in FY19. The biggest subsidy now is food subsidy that is expected to cost Rs 1.45 lakh crore in FY19 compared with Rs 1.34 lakh crore in the current fiscal.

ET view: Rational exuberance
The government's assessment is not unrealistic. Indeed, GST will drive investment, growth and tax revenues. That's because companies will be able claim credit for all input taxes paid across the production chain. It will cut out the cascade of taxes and make production more efficient. The government's goal should be to double the current tax/GDP ratio of about 16% (combined states and Centre) to close in on the average for OECD members. This, in turn, will give welcome fiscal space to raise public investment in a big way.

Source: Economic TImes
Luring taxpayers with unusual incentives may help make GST Bill a success

Luring taxpayers with unusual incentives may help make GST Bill a success

9:08 AM Add Comment
By Dhirendra Kumar

When it comes to solving problems that require behavioural change among a large number of people, there seems to be a widespread belief that exhorting people to do the right thing is enough. We see this in many areas -- in fact, almost all of socalled public service advertising is an example -- but there are many others.

Take the simple case of buying term insurance. If there is a nobrainer in personal finance, then this is it. Anyone who has dependants should have term insurance, and yet there is deep resistance among people against buying something that doesn't return anything. A lot of this behaviour may have been taught by insurance agents but it's real. How can this be changed?

The generally acceptable answer is that someone should educate people about insurance, the idea being that those who refuse to buy insurance do so out of ignorance and if one fixes ignorance then the problem can be fixed.

Maybe this happens to a small proportion of people but such attitudes are often deep set. Changing the psychology of savers may need a psychological trick. Here's one that, long ago, would get people to buy insurance. In the late nineteenth century, when insurance companies were first trying to get people to buy their products, there used to be a form of annuity called a 'tontine'.

In a tontine, a group of people of similar age would buy what would effectively be a single, joint annuity. They would each get their share of the income that was generated by the annuity amount. Except that if when any member died, his share would go back to a common pool. The total income stream from the annuity remained constant. It was paid out to all survivors, divided equally between them.

This made the product very interesting. As time went by, those who were long lived got a higher income. When only a handful survived (tontine groups had 20-50 members), then the income was enormous compared to what it had been in the beginning. When the final members died, the insurance company got full possession of the deposited amount. In effect, buying a membership of a tontine was a bet on your own longevity, but with an added potential bonanza that's not there in a normal annuity. The longer you lived, the more financially comfortably you were.

Then tontines were banned because of some scams. Or perhaps members started murdering each other, I don't know. Anyhow, I think that there's a reasonable chance that a tontine-like annuity would encourage more retirees to buy annuities. Here's another example of an unusual money-related trick that could come in useful for the government in the near future. Since 1951, Taiwan has had a national lottery system whose tickets are invoices that are issued for purchases.

The entire country follows a unified invoice system with a common numbering system and on the 25th of every oddnumbered month, lottery winners are announced.
The prizes are substantial, ranging from a single first prize of NT$10 million (about Rs 2.1crore) down to numerous NT$200 ( Rs 420) prizes. The PM has spoken of making 'kachcha' bills a thing of the past. There's some sort of a gradation system which makes a connection between the size of the purchase and the level of prize that one is eligible for.

However, I'm sure our traders are determined to keep stealing on taxes as they mostly do now. The one thing that could force them to go pukka would be if the final buyers insist on proper billing because the invoices are also tickets to a lucrative lottery. The cost of the prizes would be trivial compared to the tax revenue. I think finance ministry should start googling 'Taiwan Uniform Invoice lottery' if they want to make GST a success.

(The writer is CEO of Value Research)

Source: Economic TImes
What is the actual post-tax return on different investments? Find out

What is the actual post-tax return on different investments? Find out

9:08 AM Add Comment
The actual annualised returns of financial instruments vary from the quoted rates due to different methods of calculations involved and taxation rules. ET Wealth examines some popular investment options and works out the post-tax returns, assuming an investment of Rs 1 lakh in each product.

Investment options without 80C benefits
While bank FDs offer rates fixed periodically, future market situations will determine returns of debt and equity mutual funds.

1-year bank fixed deposits
Interest rate: 8.0%
Annualised return: 8.24%
Post-tax (30.9%) return: 5.7% (Rs 5,696)
Quarterly compounding ensures a higher annualised return than quoted rate.

Debt income fund
Historical returns: 9.07%
Annualised return: 9.07%
Post-tax (20% after indexation) return: 8.8% (Rs 8,796)
Based on 5-year category average return. Can vary significantly in future.

Diversified equity fund (large-cap)
Historical returns: 12.7%
Annualised return: 12.7%
Tax-free returns: 12.7% (Rs 12,700)
Based on 5-year category average return. Can vary significantly in future.

Returns get enhanced with added tax sops
Taxability of returns varies between 80C products. Though risk is higher, ELSS could generate better returns in the long-term.

Interest rate: 8.8%
Annualised return: 8.8%
Return 8.8% (Rs 8,800); 12.74% after 80C benefit
Interest rate may be revised downward in future.

Interest rate: 8.1%
Annualised return: 8.1%
Return: 8.1% (Rs 8,100); 11.72% after 80C benefit
Interest rate is for current quarter. It may be revised downwards in future.

Historical returns: 15.8%
Annualised return: 15.8%
Return: 15.8% (Rs 15,800); 22.87% after 80C benefit
Based on 5-year category average. Can vary significantly in future.

Retirement planning and insurance-based options
Compulsory annuity, taxable withdrawal at maturity and mixing investment & insurance make calculating returns complicated.

Historical returns: 11.62%
Annualised return: 11.62%
Return: 11.62% (Rs 11,620); 16.82% after 80C benefit
Based on 5-yr category average return. Calculations assume 50% investment is in equities and 25% each in corporate and govt debt.

Historical returns: 14.92%
Annualised return: 14.92%
Return: 14.92% (Rs 14,920); 21.59% after 80C benefit
15 year policy. Premium allocation charge of 20% for first year, 5% for each remaining years assumed. Admin charge Rs 500 and Rs 3,000 for insurance cost.

Historical returns: 3.27%
Annualised return: 3.27%
Return: 3.27% (Rs 3,270); 4.73% after 80C benefit
For 15 year policy with 4% annual bonus. Rs 3,000 considered as annual cost of insurance. Bonus rates of 3% and 4% may come down in future.

Source: Economic TImes
'Avail scheme, resolve your tax dispute': I-T department to send emails to 2.59 lakh taxpayers

'Avail scheme, resolve your tax dispute': I-T department to send emails to 2.59 lakh taxpayers

9:08 AM Add Comment
NEW DELHI: Keen to bring down the number of tax litigations, the I-T department will soon write to over 2.59 lakh taxpayers asking them to avail the one-time dispute resolution scheme to settle their cases.

And to cut down on communication time, the Central Board of Direct Taxes (CBDT) will use email to communicate with the appellants.

"We have estimated that each Commissioner of I-T (Appeal) would have about 300-400 litigations pending before them. We will send these assessees emails informing about the benefits of the dispute resolution scheme," an official said.

The Direct Tax Dispute Resolution Scheme, introduced from June 1, seeks to address the issue of pending litigation before Commissioner of I-T (Appeal). The scheme is open till December 31.

As per I-T department data, there were 73,402 appeals with tax effect above Rs 10 lakh and 1,85,858 appeals with tax effect below Rs 10 lakh which are pending before CIT (Appeal) as on February 29. Thus, 2,59,260 appellants are eligible for the benefit of this scheme.

"The publicity drive will not be as massive as the IDS. Since we know who our target assessees are, we will send them pamphlets and also emails. Also we will paste some pamphlets outside the CIT (Appeals) office," the official added.

Armed with a Rs 100-crore budget for advertisement of Income Disclosure Scheme (IDS) and Disputes Resolution Scheme, the tax department will now launch a publicity drive for entities which are locked in a litigation.

Besides, the CBDT will soon come out with over two dozen FAQs based on the queries it has received from various stakeholders, including chartered accountants and industry chambers.

As per the scheme, a taxpayer who has an appeal pending before the CIT (Appeals) can settle his/her case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of cases with disputed tax up to Rs 10 lakh will be levied.

For cases exceeding Rs 10 lakh, 25 per cent of penalty would be levied and any pending appeal against a penalty order can also be settled by paying 25 per cent of the minimum of the imposable penalty.

"Litigation is a scourge for a tax-friendly regime and creates an environment of distrust in addition to increasing the compliance cost of the taxpayers and administrative cost for the government," Finance Minister Arun Jaitley had said in his Budget speech.

In a first-of-its-kind nationwide publicity drive, the I-T department had tied up with seven airlines including Air India and Vistara to publicise one-time black money compliance window by printing the scheme's details on the back of boarding passes.

Source: Economic TImes
CBDT plans to reduce the need for taxpayers to interact with officials with the use of technology

CBDT plans to reduce the need for taxpayers to interact with officials with the use of technology

9:07 AM Add Comment
NEW DELHI: A kind, gentler tax department — that's what Rani Singh Nair has in mind. "The challenge of the tax department is that it has to collect taxes but with a smile," said the new head of the Central Board of Direct Taxes (CBDT).

Even Prime Minister Narendra Modi recently referred to the consternation that strikes most Indians at the mere mention of the taxman. "Middle class, upper middle class used to be hassled with I-T officers, more than police," he said in his Independence Day speech. "I have to change this situation, I am working on it and will make the change happen." The Modi government has often cited the need to put an end to so-called tax terrorism in order to encourage investors.

Apart from getting tax officials to be less aggressive, the department is aiming to reduce the need for taxpayers to interact with officials through the use of technology. "Our attempt is to reduce footfall of a taxpayer into tax office," she said.

"We are looking at removing the touch points where the department really interacts with tax payers."

She also wants to improve department morale by ensuring that career progression isn't blocked. "Issues of infrastructure, promotions and vigilance that have been pending for long — let's close them and take quick action," she said. "There is no point to let things fester so I hope I would be able to deliver on these as well." To this end, Nair has met representatives of all associations. The National Academy of Direct Taxes has already started courses to enhance soft skills.

"The old image of a bureaucrat needs to be rewrapped and repackaged into a new image of a facilitator," Nair said.

In the last two years, the department has worked to adopt a nonadversarial tax regime through initiatives like e-fling, e-transfer of refunds, e-assessment and a My Account section where taxpayers can log in and send a query.

"Entire department is now moving towards a hands-off approach," she said. "Now 99% of tax payers do not have to interact with the department. That leaves only less than 1% that comes for scrutiny." From this year onward, the taxpayer is being told why he's been summoned, be it a limited scrutiny or a complete one.

"So by empowering the tax payer, by giving him information using technology, we will to a large extent help remove this fear in his mind he has to go to tax office or meet an officer," Nair said. But perceptions built over years can't be altered quickly.

"A lot has been done by the tax department," she said, pointing to the numerous clarifications that the department has issued to set taxpayers' minds at rest and remove ambiguities. "But somehow our image is not changing."

Being non-adversarial doesn't mean getting lax on collections, especially when the government faces big fiscal challenges. The more vigilant that field formations are, better the tax collections, she said, adding that the focus on third -party data has begun to pay off. "We keep getting third-party data and are now linking it with returns," she said. "We launched ESahyog last year where if we found a mismatch between the data of a taxpayer and his return, the latter is informed electronically and asked to revise return or correct the data."

This is another supposedly nonthreatening way to reach a tax payer as there's no penalty or prosecution involved. On the other hand, this also means that it's less easy to slip through the cracks. "Earlier they thought nothing happens. Now they are realising that bits of information that are coming are getting connected," she said.

For the first time, the department was this year able to connect the dots even without permanent account numbers (PAN).

"Some people feel, either through oversight or genuinely or consciously thought, that if you do not give PAN to a third party then the transaction would remain under the radar and not be linked to your return," Nair said. "So this time we picked up non-PAN data and started working on it."

Letters and SMS messages were then sent to taxpayers asking them to append their PAN.

"People have begun to respond and are putting their PAN," she said. "The moment they put their PAN, we can link it to their return."

The department has got data relating to 7 lakh high-value purchases and investments without PAN and is working on resolving these, then checking if these are errors of omission or commission.

"Where it has been done deliberately, we are going to reach those people and they either come in IDS or normal provisions of income tax act would apply. We will reach them," she said. IDS or Income Disclosure Scheme is the government's black money amnesty window that closes September 30.

Source: Economic TImes
I-T department to 'name and shame' chronic crorepati defaulters

I-T department to 'name and shame' chronic crorepati defaulters

9:07 AM Add Comment
NEW DELHI: As part of its 'naming and shaming' policy to curb tax evasion, the Income Tax Department may soon go on to publish names of even those taxpayers who have a 'chronic' default of Rs one crore and above.

Officials said the policy framework for putting the names of such entities in public domain has been in the making for quite sometime and the proposal is now being vetted by the Central Board of Direct Taxes (CBDT).

An action plan in this regard was also discussed during the Tax Administrators conference held here a few months ago and once the CBDT approves the policy, the names would be published in leading dailies and could possibly also be displayed on the department's official web portal, they said.

"The subject will be discussed by the CBDT with senior I-T brass in the next few days after which a final decision will be made. The proposal is that cases of chronic default of over Rs one crore would also be publicly named, on the lines of a similar step taken against large tax defaulters beginning last year," a senior official said.

The I-T department had began publishing the names of tax defaulters in leading national dailies last year and has so far named 67 such big defaulters from across the country, with their vital details like addresses, contacts, PAN card number and shareholders in case of companies, being published.

While the earlier exercise was restricted to people with huge defaults to the tune of about Rs 10-20 crore, the new measure is aimed to target the category of taxpayers which has "chronically" defaulted a tax payment of Rs 1 crore or more.

"It has been decided to 'name and shame' all category of taxpayers, including personal and corporate taxpayers, who have a default of Rs 1 crore and above by March, 31 which is the end of 2016-17 financial year.

"The names will be published before July 31 next year," the CBDT had earlier said as part of a proposal in this regard.

The aim of the new exercise, the official said, is to inform the public at large about such tax evaders whom the taxman has not been able to lay their hands on despite using various investigative and enforcement tools.

The I-T Department has provided a list of 67 big tax defaulters on its official web portal.

Source: Economic TImes
Check these 7 tax savers before you invest again

Check these 7 tax savers before you invest again

9:06 AM Add Comment
Only a few days have gone by since the income tax return filing due date, but the tax saving exercise has already begun for the financial year 2016-17 (assessment year 2017-18). After all, it is better to plan your tax saving moves in advance than make wrong moves at the fag end of the FY.

Of the many tax saving avenues, the most popular are the tax benefits under Section 80C of the Income-tax Act. Let's first see how Section 80C helps in reducing tax liability. Under Section 80C, an amount equal to the investment that you make in specified instruments, or if you incur any expense specified under the section up to a maximum of Rs 1.5 lakh in a financial year reduces your gross total income (GTI) by the same amount. This, in effect, reduces your taxable income and thereby reduces tax liability. For example, if your GTI is Rs 10.5 lakh and you make an investment of Rs 1.5 lakh in any specified instrument, the GTI gets reduced by Rs 1.5 lakh and stands at Rs 9 lakh. The taxable income becomes Rs 9 lakh now, on which tax has to be paid.

When it comes to reducing tax liability, Section 80D and Section 24 also come in handy. While the former relates to premium paid for health insurance, the latter deals with home loan.

The areas available under Section 80C include benefits for expenses incurred as well as for investments made. The investment-related tax breaks are only on specified investments such as five-year notified tax saving bank deposits, life insurance premium, Employees' Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizens' Savings Scheme (SCSS) and Equity-linked Savings Scheme (ELSS) from mutual funds (MFs). Repayment of the principal on home loan and payment of tuition fees also qualify for tax benefits under Section 80C.

But before you start looking for tax saving investments under Section 80C, do a small exercise to determine how much you have already committed towards it. You may not have to make additional tax saving investment under Section 80C this year. Here's how:

EPF: Involuntary
As a salaried individual, an employee contributes 12 per cent of his basic pay towards the EPF account, which qualifies for tax benefit under Section 80C. The employer is supposed to match the employee's minimum contribution of 12 per cent of the basic pay but the employee is not entitled to take tax benefit on it. Currently, contributions earn 8.8 per cent tax free interest. Of the employer's contribution, 8.33 per cent (on a maximum salary of Rs 15,000, i.e., Rs 1,250) is diverted towards EPS and the balance of 3.67 per cent moves into the employee's PF account each month. Check your total contributions for the year (assuming basic remains same) and count it towards Section 80C benefit.


Life insurance premium: Existing or new commitment
Irrespective of age, if one has financial dependents, owning a life insurance is a must. If you already have one, keeping it active by paying renewal premiums is sacrosanct. Renewal premiums also qualify for tax benefit under Section 80C. If your policy lapses, revive it by paying unpaid premiums, but only if the policy is worth it. You would be eligible to claim tax benefit under Section 80C on the entire premium paid (including the previous unpaid premiums) subject to the limit of Rs 1.5 lakh. All life insurance plans, including pure term insurance, endowment, Ulips and money-back plans qualify for this benefit.

EPF+Life insurance premium+......

Home loan principal repayment: Outflow
If you have a home loan, the principal repaid qualifies for tax benefit under Section 80C. The EMI of the home loan constitutes both principal and interest. You may ask your home loan lender to issue a statement showing the provisional break-up of principal, interest for the entire year. Even partial or full principal repayment made during the year qualifies for tax benefit.

EPF+Life insurance premium+Home loan principal repayment+......

Home loan interest payment: Outflow
The interest component in the EMI can be claimed as deduction from "income from house and property" under Section 24. The maximum tax deduction allowed under this section is Rs 2 lakh for self-occupied property for which the loan is taken, and if the property is not self-occupied, there is no maximum limit.

And if the construction is still on, the benefit is delayed. After possession, provided it happens within five years, the pre-construction (pre-completion) interest can be claimed from the year when the construction is complete and after getting possession, in five equal instalments.

EPF+Life insurance premium+Home loan principal repayment+Home loan interest payment......

Tuition fees: Outflow
Parents can also claim a deduction for tuition fees for a maximum of two children within the overall limit of Rs 1.5 lakh under Section 80C. However, any payment towards any development fees or donation to institutions is excluded. When both spouses are taxpayers, the situation may be tricky. Archit Gupta, Founder and CEO,, explains, "Deduction for tuition fees can be claimed by the parent who has made the payment. Say, if A made the payment for his daughter's school fees of Rs 1.7 lakh in FY 2016-17, he can claim Rs 1.5 lakh in his return under Section 80C (maximum limit of Section 80C is Rs 1.5 lakh). The remaining amount of Rs 20,000 cannot be claimed by A's wife. However, if A has another child, he and his wife can plan to pay school fees of the two kids between them. A can pay for child 1 and his wife can pay for child 2. This way the payment made can be claimed by both separately in their tax returns. The one making the payment can claim the amount paid in his/her tax return."

EPF+Life insurance premium+Home loan principal repayment+Home loan interest payment+Tuition fees+......

Health insurance A must-have
It is often suggested by financial planners to initiate one's financial planning process by buying a health insurance cover. Buy adequate coverage for self and family members and, if already bought, even renewal premium qualifies for tax benefit under Section 80D.

On the premium towards self, spouse, children and parents, the maximum deduction that can be availed is capped at Rs 25,000 a year, provided the age of the individual is not above 60. If the premium paid by individual is towards health policy for a parent (senior citizen with age 60 or more), the maximum is capped at Rs 30,000. Illustratively, if someone in the 30 per cent tax slab pays Rs 10,000 premium, the tax liability reduces by about Rs 3,000 and there's a health cover to meet medical expenses.

And yes, if you are waiting to undergo a health check-up, go for it. A maximum of Rs 5,000 spent on preventive health check up can be availed as deduction under section 80D , but this limit is within the overall cap of Rs 25,000 or Rs 30,000 (whichever is applicable) and is not exclusive of it.

EPF+Life insurance premium+Home loan principal repayment+Home loan interest payment+Tuition fees+Health insurance premium+......

Educational loan: Outflow
The interest paid on an education loan for self, spouse, children, or for a student under your guardianship qualifies for tax benefit. Loans taken for siblings and relatives do not qualify. The amount paid as interest in a financial year is eligible for deduction from GTI without any limit, thereby reducing one's total taxable income and thereby the tax liability. Only the interest portion qualifies for tax benefit and not the principal amount repaid.

To claim this deduction, make sure that the loan is taken for higher education, i.e., any course pursued after completing 12th standard. This deduction is available for eight years, starting from the year in which the interest payment began. One will get the full amount of interest paid as the deduction for eight years from the date of taking the loan or until the interest is paid in full (whichever is earlier).

To get I-T benefits under Section 80E, you must take the education loan from any of the scheduled banks in India or from the two notified financial institutions Credila Financial Services and HDFC.

EPF+Life insurance premium+Home loan principal repayment+Home loan interest payment+Tuition fees+Health insurance+Educational loan......="Tax" saving with no fresh investment

Before you think of investing in any of the Section 80C tax savers, make an approximation of your income for FY 2016-17. Find out your tax liability based on the assumed yearly income. Thereafter, factor in various existing commitments as seen above that would get deducted from the GTI. This leaves you with a reduced tax liability and also gives you a better picture of how much more to invest to further bring the tax burden down. Remember, link your fresh investments to a long-term goal and not merely focus on reducing taxes.

Source: Economic TImes
How not to let tax hit NPS redemption

How not to let tax hit NPS redemption

9:06 AM Add Comment
The National Pension System (NPS) provides numerous tax benefits to its subscribers. Apart from providing tax benefits of up to Rs 1.5 lakh along with under instruments under Section 80C, NPS has an exclusive window of Rs 50,000 under Section 80CCD (1).

Employers can also contribute upto 10% of the salary (basic + dearness allowance) to your NPS account.Under Section 80CCD (2), this will not be treated as taxable income in your hand, so this is an additional tax-saving window. It has a few other advantages such as low-cost fund management and ability to change asset allocations in the middle without tax incidents.

However, NPS follows the EET regime, which stands for exempt, exempt, tax. What this means for investors is that while you get tax benefit at the time of an investment and also at the time of accumulation (there will not be any tax incidence for the returns earned in the middle), the final withdrawal will be taxable. In other words, you are not saving tax, but only deferring it.

The government has recently sugarcoated NPS in the last budget by making 40% of the final corpus tax-free in your hand. So we can say that NPS is now a mixture between EET (60%) and EEE (40%).

Now let us consider strategies to reduce the tax incidence on the 60% of accumulated corpus. And the first strategy (ie most commonly used now also) is to use this to buy annuities. And as per current PFRDA regulations, you have to compulsorily use 40% of the accumulated corpus to buy annuities, so the decision here is only about the remaining 20%.

Though you save immediate tax on this 20% corpus, the annuity you receive in future will be taxable."Though annuity is taxable, its impact will be lower because the annuity amount will be lower compared to the one time receipt," says Anil Lobo, India Business Leader - Retirement, Mercer.

Second strategy is to delay buying of annuity and also withdrawal of remaining money . This makes sense because it is natural that the tax slab usually comes down post retirement.

For example, if your tax slab falls from 30% to 10% after retirement, you are saving 20% tax on this accumulated corpus. By doing that, investors can also decide the specific financial year (one with very low other income) in which they want to receive this corpus. Since insurance companies pay higher annuity rates for people with higher age, you should delay it as much as possible.

However, there is some restriction on how much you can delay the annuity-buying part.

"Though subscribers can delay lump sum withdrawal till 70, they have to buy annuity before 63 as per current PFRDA rules," says Sumit Shukla, CEO, HDFC Pension Funds. "Hope PFRDA will allow annuity buying also till 70."

Third strategy is to split the withdrawal to different years (instead of lump sum). "You can reduce the tax liability on 20% taxable corpus by splitting them into 10 equal instalments of 2% each," says Lobo. Since each of these instalments (2% each) will be small, the tax hit from that will also be low. "You can also smartly use the 25% early withdrawal facility for this," points out Manoj Nagpal, CEO, Outlook Asia Capital.

As per amended rules, NPS investors are allowed to with investors are allowed to withdraw upto 25% of their contributions (not that by companies) for defined needs like children's higher education or marriage, construction or purchase of first house, treatment of critical illness for self, spouse, children or parents.

Assume that your NPS account is a personal one and you have withdrawn 25% for this purpose.

First question, will this amount be taxable in your hand? No, say experts.

"While withdrawing 25% from NPS, subscriber is neither closing his NPS account nor is he opting out of scheme. Therefore, there will be no taxation at the time of partial 25% withdrawal, as the taxation rule under Section 80CCD (3) is applicable only at the time of exit," says Suresh Surana, founder, RSM Astute Consulting Group.

Since 40% of the final corpus (75% now after the partial withdrawal of 25%) is also tax free, the next 30% will also be tax free.

This means that the total tax exempted withdrawal goes up to 55% (25% + 30%) from 40%. Similarly , the hit because of compulsory annuity will also come down because that restriction is based on this reduced final corpus. "40% annuity buying restriction is based on the corpus at the time of retirement," says Shukla.

From superannuation to NPS
The government allowed one-time shifting of superannuation funds into the NPS in the previous Budget and experts say you should opt for it. "Investors should consider shifting superannuation funds to the NPS because it offers several advantages," says Shukla.

What are these advantages? First, you have to buy compulsory annuity of 67% in superannuation, while it is only 40% for the NPS. Second, while only 33% of the accumulated amount is tax-free in superannuation, it is 40% in the NPS. While you have to pay 1.4% service tax while buying annuity using superannuation funds, but you don't have to pay any service tax while using the NPS funds. Insurance companies usually offer better annuity rates when you contribute a higher amount, so clubbing of both corpuses will also be useful.

Source: Economic TImes
Tax queries answered by Dilip Lakhani, Senior Chartered Accountant

Tax queries answered by Dilip Lakhani, Senior Chartered Accountant

9:06 AM 1 Comment
Every week, an expert selected by ET answers queries from our readers on tax .

I have been investing in shares every month and after holding for 2-3 years, I sell them at decent profit. As I have come to know from various articles that long-term capital gain is tax exempted, will I qualify for LTCG? If yes, should I show this income in my I-T (income tax) return? If yes, under which column? Raman Madan
I understand that you have made investment in the shares of listed companies in India. If the said investments are held for more than 12 months from the date of purchase and are sold on the floor of the exchange by paying Securities Transaction Tax, the resultant long-term capital gains will be exempted under section 10 (38) of I-T Act, 1961. While filing the return of income, you can show the same in the schedule of exempt income against the item `Long-term capital gains from transactions on which Securities Transaction Tax is paid'.

I am staying in a house where the interest on home loan is higher than the interest on housing loan of my second house which I have given on rent and claiming rental income in my I-T return. In such a case, can I claim the interest on the rented house under the staying house category (cap of Rs 2 lakh) and the interest at staying house under full exemption as a second house? Is there a provision to do so? I am told that what is important for I-T Department is to ensure that the claimant declares both the properties clearly. Manoj Kabre
In respect of the property which is actually let out, the interest payable on the capital borrowed for acquiring the property shall be deducted while computing income under the head `Income from house property'. In respect of the property used for self occupation, the deduction of interest payable on the capital borrowed for acquiring the property shall be restricted to Rs 2 lakh. You will have to identify the amount borrowed which is utilised for acquiring a property which is let out or self occupied and interest payable on such borrowing can be deducted from the annual value of the respective properties. You cannot adjust the interest payable on the amount borrowed which is utilised for acquiring self occupied property against the rental income.

(Please send your queries on tax to

Source: Economic TImes