No change in gold seizure norms in proposed I-T Law amendments

NEW DELHI: There will be no seizure of gold jewellery and ornaments to the extent of existing guidelines during search operations, the government has clarified, allaying fears of possible action against household gold savings following the proposed amendments to the Income-Tax Act.

The proposed amendments also do not seek to tax inherited gold and jewellery as also those items that are purchased through disclosed or agriculture income, Central Board of Direct Taxes (CBDT), the apex direct taxes body, said in a statement on Thursday.

There will be no seizure of gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of a family during search operations, it said, reiterating existing guidelines.

The government has proposed amendments to the I-T Act through Taxation Laws (Second Amendment) Bill, which received Lok Sabha approval on Tuesday, seeking to impose up to 85 per cent tax and penalty on undisclosed wealth that is discovered by tax authorities during search and seizure.

This had triggered rumours that gold jewellery could be covered under the amended law. Dispelling such apprehensions, CBDT has clarified that no new provision had been introduced regarding chargeability of tax on jewellery.

"The jewellery/gold purchased out of disclosed income or out of exempted income like agricultural in-come or out of reasonable household savings or legally inherited, which has been acquired out of explained sources, is neither chargeable to tax under the existing provisions nor under the proposed amended provisions,"it said.

"Further, legitimate holding of jewellery up to any extent is fully protected,"it said.

The bill, which is currently under consideration of the Rajya Sabha, proposes to amend Section 115BBE of the Income-Tax Act to provide for 60 per cent tax and a 25 per cent surcharge on it — totalling 75 per cent — on black money holders.

Another section inserted provides for an additional 10 per cent penalty on being established that the undeclared wealth is unaccounted or black money, taking the total incidence of levies to 85 per cent.

CBDT said tax rate under section 115BBE is proposed to be increased only for unexplained income as there were reports that the tax evaders are trying to include their undisclosed income in the return of income as business income or income from other sources.

"The provisions of section 115BBE apply mainly in those cases where assets or cash etc. are sought to be declared as 'unexplained cash or asset' or where it is hidden as unsubstantiated business income, and the assessing officer detects it as such,"the CBDT statement said.

The bill also proposes to raise penalty under I-T Act for search and seizure cases to 30 per cent, from 10 per cent or 20 per cent currently, in a move aimed at deterring black money holders.

Once the amendments are approved by Parliament, there would be a penalty of 30 per cent of unaccounted income, if admitted and taxes are paid. This would take the total incidence of tax and penalty to 60 per cent.

The government has decided to retain the provision of levying penalty of 60 per cent of income in "any other cases" while proposing to amend Section 271AAB. This would raise the incidence of tax and penalty to 90 per cent.

In a separate decision, the government has done away with exemptions from countervailing duty of 12.5 per cent on imports of gold coins.

Source: Economic TImes

View: Why tax evaders will have to fall in line for their own good post demonetisation

By Uma Shashikant, Chairperson, Centre for Investment Education and Learning

Recent events have evoked a mix of emotions among Indians. The rich have bought expensive white goods and luxury items in a rush to consume whatever cash they had. Unscrupulous businessmen paid advance salaries, retired debt with old notes and wove schemes to whitewash as much cash as possible. The common household swung between smug satisfaction at having a wallet of credit and debit cards to despair while scrambling to pay for groceries, gas refills and the dhobi. The poor daily wage earner was left worrying about how to plug risks to his income.

There is no denying that the poor have been inconvenienced the most due to the shortage of cash. Not all of them have bank accounts, and not many are literate enough to deal with formal processes of the banking system. However, they do not have stocks of cash nor do they earn enough to pay taxes. Their problems will ease when there is enough money to go around. Hoarders, white-washers, money-mule seekers, cash mafias and exploitative employers can endanger restoring cash for the use of the unbanked poor. It is not clear if the government has the wherewithal to protect them while penalising the rich. The return of this segment to its cash dealing is critical to its wellbeing, and will not impact the macro objectives of demonetisation. This segment cares about the flow of cash, and not the stock of cash. It does not have enough to hoard.

The working class that earns a formal salary is already subject to TDS and is paying taxes where applicable. This segment is rightfully smug as it is business as usual for them with their wallet of cards and fearless use of post-tax money. The segment that works in informal sectors will have to demand payment through the bank, and learn to be compliant. Not very difficult, provided employers comply. They now have to learn the basics of dealing with a bank, pay taxes where needed, and protect their accounts and their money with the understanding about how the new system works.

Those who run small proprietary business, or earn from a profession are very used to dealing in cash. This is the segment with no service tax or business registration. It routinely bribes local politicians, police and other vested interests to stay in business. It employs people without following formal rules of engagement. It actively hides its earnings to reduce tax burden. It also suffers from lack of knowledge and expertise to set up firm accounting and finance systems.

The roadside vada-pav seller who makes Rs 2,000 a day, pays off too many people to care about paying taxes. The interior designer, the fashion boutique, the beauty salon, the small clinic, the catering contractor and so many such first-time entrepreneurs are all so used to dealing in cash that their business practices have to be modified in the new system. That will be a challenge and they will take time to rework their attitudes towards money and its accounting.

It is not unusual for many doctors, lawyers, accountants, hotels, restaurants, traders, jewellers, small businesses, shops, establishments, service providers, small-scale manufacturers, and so many such unlisted businesses to have two books of accounts. Many systematically under report revenue, using cash as the preferred medium that keeps their earnings away from the taxman. They also encourage customers to pay in cash, citing higher cost if taxes were added.

Many see themselves as hardworking business people and professionals, but they are tax evaders in practice. The thriving cash economy was something most took for granted. The argument that their hardearned money cannot be shared with the government is illegal, unlawful and indefensible. They have to begin cleaning up their finance and accounts. The law enables them to account for expenses, offers reasonable tax planning avenues, and they can bring their effective tax outgo down working within the framework of law. They have to switch from tax evasion to tax planning.

The benefits are immense. The revenue that is accounted for is in their books, enabling them to expand business with investments from other venture capitalists; they will be eligible for higher working capital limits from their banks; they will be able to borrow at lower rates based on the strength of their books; and they will be able to create assets that can be used in the future; they can pass on assets to heirs and others without any complications. If professionals and entrepreneurs are indeed smart business people, they will turn the leaf in the interest of their own business and wealth.

The rich, the super-rich and the obscenely and illegally rich including politicians are the class that is unable to make concrete future plans. The relatively small segment that has employed accountants and auditors, set up formal businesses with formal practices, and is therefore already tax compliant, is the one breathing easy. For the rest, not only has the demonetisation hit the cash hoards and sources of fresh cash but the uncertainty of the future and the fate of investments is a matter of grave concern. The looming threat of fresh government assault on their ill-gotten wealth and the lack of sympathy for their plight makes things worse. Without firm government action and policy on how these classes will conduct their affairs in future, the government risks its objectives being overturned by the devious ways of this class.

As a poor country that is chronically short of money for development, we cannot afford a system where a set of individuals decides to allocate large amounts of money to luxurious purchases. Demonetisation has delivered shock and awe. How the various segments align to the objective of eradicating black money will depend on government action and policy, the road map for which should be in the forthcoming Budget. Mainstreaming the earnings, collecting all taxes, and deploying the proceeds purposefully are all huge tasks in themselves. We have just begun and have a long road ahead.

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

Source: Economic TImes

Smart things to know about taxation of investment under PMGKY

1. Through the proposed Pradhan Mantri Garib Kalyan Yojana (PMGKY), the government wants to give people an opportunity to declare undisclosed income and pay taxes with penalties.

2. This scheme will allow people to deposit previously untaxed money by paying 50% of the total amount: 30% as tax and 10% as penalty on the undisclosed income, as well as 33% of the taxed amount as cess.

3. The declarant will also have to deposit 25% of undisclosed income in a deposit scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’.

4. If the declarant refuses the option of using the government deposit scheme, 85% of the amount will be deducted as taxes and penalties.

5. For money that is found in raids, taxes and penalties of nearly 90% of the amount will be levied, leaving a mere 10% with the owner.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

Source: Economic TImes

Here's how your employer can help you save tax

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)

(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

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.

“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

Source: Economic TImes

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

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.

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.

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.

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.

Also Read: 25 Budget ideas

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.

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.

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.

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.

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.

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.”

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