Analysis of direct tax amendments proposed in Finance Bill

Finance Bill, 2019 announces scheme for faceless e-assessments, measures to promote digital transactions / payments, MAT relief for companies facing insolvency, relief for NBFCs for interest on bad loans, enhanced concession for IFSC; Also proposes expansion of the source rule u/s. 9 to include deemed accrual of gift made to a person outside India; Further proposes extending angel tax exemption to Category II AIFs, streamlines carry forward and loss set-off provisions of start-ups; Keeps slab rates intact for individuals, but substantially enhances surcharge levy where income exceeds Rs. 2 cr.

Click here to read the fine print analysis of Direct tax proposals.

Taxsutra Special : Key Takeaways from Taxsutra & Vaish Law Seminar on Union Budget 2019 - Clause by Clause Analysis!

We thank you for the overwhelming response to the Seminar on Union Budget, 2019 hosted by Vaish Law & Taxsutra on Monday, 8th July at The Lalit, New Delhi wherein the tax proposals of the Finance Bill, 2019 were dissected clause by clause. 

The discussion was led by Senior Advocate and Tax Stalwart Mr. Ajay Vohra alongwith Vaish Law Partners (Mr. Gaurav Jain, Mr. Neeraj Jain & Mr. Rohit Jain), with Taxsutra Group Editor Arun Giri moderating the panel deliberations. Decoding the fine-print by way of a 225 slides presentation, the panel highlighted important issues from the fine-print that may need further scrutiny.

Click here to read the key takeaways from the special event as also to download your copy of the 225 slides Vaish Law presentation!

Finance Bill proposes tweak to secondary adjustment provision, rationalizes ‘accounting year’ definition for CbCR

Finance Bill proposes to give Indian entity suffering primary adjustment an option to pay one time tax of 18% plus surcharge 12%; Proposes to grandfather APA concluded by March 31, 2017 and rationalize definition of ‘accounting year’ for CbCR; Also proposes to liberalize Section 9A offshore fund safe harbour regime, condition of ALP for remuneration of fund manager in India removed & Board to prescribe minimum remuneration: Budget fine print analysis.

Click here to read more.

CBDT Member Akhilesh Ranjan discusses direct tax policy thrust, ‘game changer’ faceless e-assessment, DTC and more ...

CBDT Member (Legislation) Akhilesh Ranjan, in an exclusive conversation with Taxsutra Group Editor Arun Giri, speaks on the big picture driving the budget’s direct tax proposals, the intent to simplify procedures, why the announcement of ‘faceless e-assessments’ would be a ‘game-changer’, Angel tax relief, where the new Direct tax Code stands and the tax policy thrust of the budget fine print.

Click here to read our detailed interview with CBDT Member Akhilesh Ranjan.

Finance Bill proposes to retrospectively expand scope of Black-Money Act to include NR, RNOR

Finance Bill proposes to retrospectively amend definition of “assessee” u/s 2 of the Black Money Act to also include a person being a non-resident or not ordinarily resident in India apart from person being resident in India; Accordingly, states that “assessee” shall mean a person being a resident in India within the meaning of Sec 6 of the Income-tax Act, in the previous year, or a person being a non-resident or not ordinarily resident in India u/s 6(6) of the Income-tax Act, in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates, or in the previous year in which the undisclosed asset located outside India was acquired; States that the amendment proposes to clarify the legislative intent behind enacting the Black Money Act, which was to tax such foreign income and assets, which were not charged to tax under the Income-tax Act; Also proposes to provide that previous year of acquisition of the undisclosed asset located outside India shall be determined without giving effect to Sec 72(c) of the Black Money Act; Clarificatory amendment is also proposed to be made to Sec 10(3)/(4) of the Black Money Act to include the expressions “re-assess” and “reassessment”; These amendments are proposed to take effect retrospectively from July 1, 2015; Finance Bill also proposes to prospectively amend Sec 84 of the Black Money Act to provide that the provisions of section 144A of the Income-tax Act shall be applicable to the BM Act with necessary modifications; Clarificatory amendment is also proposed to be made in Sec 17 of the Black Money Act to clarify that the Commissioner (Appeals) may also vary the penalty order so as to enhance or reduce the penalty; These provisions will take effect from September 1, 2019.

Taxsutra Note:

Section 72(c) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act) provides that where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly.

Sec 10(3) of the Black Money Act provides that the Assessing Officer, after considering such accounts, documents or evidence, as he has obtained under sub-section (1), and after taking into account any relevant material which he has gathered under sub-section (2) and any other evidence produced by the assessee, shall by an order in writing, assess the undisclosed foreign income and asset and determine the sum payable by the assessee.

Sec 10(4) of the Black Money Act provides that if any person fails to comply with all the terms of the notice under sub-section (1), the Assessing Officer shall, after taking into account all the relevant material which he has gathered and after giving the assessee an opportunity of being heard, make the assessment of undisclosed foreign income and asset to the best of his judgment and determine the sum payable by the assessee.

Sec 84 of the Black Money Act provides that the provisions of clauses (c) and (d) of sub-section (1) of section 90, clauses (c) and (d) of sub-section (1) of section 90A, sections 119, 133, 134, 135, 138, Chapter XV and sections 237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act shall apply with necessary modifications as if the said provisions refer to undisclosed foreign income and asset instead of to income-tax.

Sec 17 of the Black Money Act provides that Commissioner (Appeals) will inter alia have powers to impose penalty.

Details of 10+ key direct tax proposals in Budget fine print

Details of 10+ key direct tax proposals in Budget fine print.

Click here to read key direct tax proposals in Budget fine print.

Copy of Memorandum to Finance Bill, 2019

Click here to download copy of Memorandum to Finance Bill.

FM proposes angel tax relief, dispute resolution scheme for legacy indirect tax litigations

FM extends 25% tax rate to companies with turnover upto Rs. 400 Cr, enhances surcharge on individual taxpayers;  On Angel tax issue, proposes no scrutiny of start-up share premium on submission of requisite declaration; Introduces faceless e-assessment; Proposes a legacy dispute resolution scheme to allow quick closure of Pre-GST litigations; Proposes 2% TDS on cash withdrawals exceeding Rs. 1 cr in a year from a bank account

Click here to read Key proposals from FM's speech. 

Economic Survey focuses on "optimal tax policy", 'behavioural' change, red-flags amnesties

Economic Survey document for 2018-19 focuses heavily on taxation, highlights the need for an "optimal tax policy" and a tax system that can foster innovation, raise revenues efficiently and fairly while encouraging bonafide taxpayers and punishing malafide ones; Survey document makes a strong case for enhancing tax compliance through deployment of "behavioural insights" so as to modify the social norm from "evading taxes is acceptable" to "paying taxes honestly is honourable..."; Survey, citing research  across countries, drives home the point that tax evasion in large parts is driven by "tax morale" which in turn is driven by two factors : i) Vertical fairness ii) Horizontal fairness; Eco. Survey moots idea of creating exclusive membership of "clubs" that exude not only social status but also honour, by for example, naming roads, trains, hospitals, airports etc. after the highest taxpayers over a decade; Survey borrows from UK experience, suggests repeated sending of fairness driven and normative messages added to standard reminder letters that referred to the facts that (a) most people in your local community pay their taxes on time and (b) the person concerned was in the very small minority who had not yet done so; Cautions against "persistent public shaming" of individuals who don't pay taxes, also weighs in negatively on tax amnesty schemes, stating that such amnesties could decrease the govt.'s credibility as well as the taxpayers' intrinsic motivation to comply; Survey highlights prominently India's legal system, burdened by 3.5 crore pending cases as "the single biggest constraint" to doing business in India and therefore top priority ought to be given to legal sector reforms.

Click here to read the key excerpts relating to income-tax from the Economic Survey 2018-19 - Volume I.

Decade Gone By - Significant anti-Avoidance, anti-Abuse and anti-BEPS measures undertaken

India has been at the forefront in the battle against tax avoidance with Indian policy makers constantly strengthening the legal framework to counter mechanisms used for tax abuse & avoidance. India has already implemented several BEPS recommendations in domestic law, given effect to statutory GAAR and with the Multilateral Instrument soon going to take effect, one wonders, what's next on the tax plate? Will the Finance Minister go slow, take a step back, and present a 'popular' budget or will it step up its efforts on further crackdown?

Ahead of the budget to be unveiled on 5 July, 2019, Taxsutra presents a summary of significant anti-avoidance, anti-abuse and BEPS related measures implemented in the Income-tax Act in the last decade. A look-back on budget proposals of last 10 years showcases over 25+ such important measures taken by India, the key anti-abuse and anti-avoidance amendments including GAAR, POEM, indirect transfer taxation and introduction of Sec. 56(2)(viib) / 56(2)(x) provisions. The prominent BEPS related measures include introduction of Equalisation Levy, CbCR and Significant Economic Presence based concept.

Click here to access the compilation covering 25+ significant anti-Avoidance, anti-Abuse and anti-BEPS measures undertaken by India in last decade. 

Analysis of direct tax amendments proposed in the Interim Budget

In February, then-Finance Minister Piyush Goyal presented an interim budget for the year 2019-20. FM announced rebate for individual taxpayers having taxable income upto Rs. 5 lakhs and increase in standard deduction for salaried taxpayers. He enhanced TDS threshold for rent u/s 194I and interest u/s 194A. He also exempted levy of income tax on notional rent for second house property and enhanced capital gain exemption u/s 54. 

Click here to read the Taxsutra analysis of the direct tax amendments proposed in the Interim Budget 2019 Finance Bill. 

5 years of Modinomics - A deep dive into 'big ticket' amendments

FM Nirmala Sitharaman, India’s first full-time woman Finance Minister, is set to present her maiden Budget on July 5. In the run up to the first full budget of the Modi 2.0 Government, she has been holding intensive consultations with trade and industry bodies, besides other stakeholders. In this backdrop, it is worthwhile to look back and reminisce how the Government has performed on the tax scorecard, as against the promises they made 5 years ago! 

Despite the implementation glitches, no one can take away from the fact that GST was the biggest & most disruptive tax reform India has seen post-independence. While GST tops the list of reforms undertaken, some other big ticket tax changes undertaken were enactment of black money law, re-introduction of LTCG on stock market transactions, introduction of secondary adjustment in transfer pricing, phasing out of deductions, etc. India also kept up to pace with the dynamic changes in the international tax landscape, implementing several measures suggested in OECD’s BEPS Project like introducing the concept of ‘Significant Economic Presence’, CbC Reporting, limiting interest deductions etc. With unveiling of the Direct Tax Code Report on the anvil, this Govt. seems nowhere close to slamming the brakes on the reforms button!

Click here to catch up a quick recap of Modi Govt.’s tax scorecard in this special compilation titled, “5 years of Modinomics – A deep dive into the ‘big ticket’ amendments". 

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