Posts Tagged ‘Press Release’


Press release, dated 14.01.2013

A number of countries have provided for General Anti Avoidance Rules (GAAR) in matters relating to taxation. While tax mitigation is recognized, tax avoidance is frowned upon. International literature describes tax avoidance as the legal exploitation of tax laws to one’s own advantage and an arrangement entered into solely or primarily for the purpose of obtaining a tax advantage.

2. The principle of GAAR was incorporated in the Direct Taxes Code which was introduced as a Bill in Parliament on August 30, 2010.

3. Pending consideration of the Bill, the Income-tax Act, 1961 was amended by Finance Bill, 2012 to add Chapter X-A titled ‘General Anti-Avoidance Rule’. It became part of the law when the Finance Bill was passed by Parliament. Draft GAAR guidelines were also published. Under the current provisions, Chapter X-A would come into force with effect from April 1, 2014.

4. A number of representations were received against the provisions contained in Chapter X-A. Hence, on July 13, 2012, the Prime Minister approved the constitution of an Expert Committee on GAAR to undertake stakeholder consultations and finalize the guidelines for GAAR. Accordingly, an Expert Committee consisting of Dr. Parthasarathi Shome and three others was constituted on July 17, 2012 with broad terms of reference including consultation with stakeholders and finalizing the GAAR guidelines and a roadmap for implementation.

5. The Expert Committee submitted its draft report on August 31, 2012 which was placed in the public domain on September 1, 2012. After examining the responses to the draft, the Expert Committee submitted its final report on September 30, 2012.

6. The Government has carefully considered the report of the Expert Committee.

7. The major recommendations of the Expert Committee have been accepted, with some modifications, and the following decisions have been taken by Government:

(i) An arrangement, the main purpose of which is to obtain a tax benefit, would be considered as an impermissible avoidance arrangement.

The current provision prescribing that it should be “the main purpose or one of the main purposes” will be amended accordingly.

(ii) The assessing officer will be required to issue a show cause notice, containing reasons, to the assessee before invoking the provisions of Chapter X-A.

iii) The assessee shall have an opportunity to prove that the arrangement is not an impermissible avoidance arrangement.

iv) The two separate definitions in the current provisions, namely, ‘associated person’ and ‘connected person’ will be combined and there will be only one inclusive provision defining a ‘connected person’.

(v) The Approving Panel shall consist of a Chairperson who is or has been a Judge of a High Court; one Member of the Indian Revenue Service not below the rank of Chief Commissioner of Income-tax; and one Member who shall be an academic or scholar having special knowledge of matters such as direct taxes, business accounts and international trade practices. The current provision that the Approving Panel shall consist of not less than three members being Income-tax authorities or officers of the Indian Legal Service will be substituted.

vi) The Approving Panel may have regard to the period or time for which the arrangement had existed; the fact of payment of taxes by the assessee; and the fact that an exit route was provided by the arrangement. Such factors may be relevant but not sufficient to determine whether the arrangement is an impermissible avoidance arrangement.

vii) The directions issued by the Approving Panel shall be binding on the assessee as well as the Income-tax authorities. The current provision that it shall be binding only on the Income-tax authorities will be modified accordingly.

viii) While determining whether an arrangement is an impermissible avoidance arrangement, it will be ensured that the same income is not taxed twice in the hands of the same tax payer in the same year or in different assessment years.

ix) Investments made before August 30, 2010, the date of introduction of the Direct Taxes Code, Bill, 2010, will be grandfathered.

(x) GAAR will not apply to such FIIs that choose not to take any benefit under an agreement under section 90 or section 90A of the Income-tax Act, 1961. GAAR will also not apply to non-resident investors in FIIs.

xi) A monetary threshold of Rs. 3 crore of tax benefit in the arrangement will be provided in order to attract the provisions of GAAR.

xii) Where a part of the arrangement is an impermissible avoidance arrangement, GAAR will be restricted to the tax consequence of that part which is impermissible and not to the whole arrangement.

xiii) Where GAAR and SAAR are both in force, only one of them will apply to a given case, and guidelines will be made regarding the applicability of one or the other.

xiv) Statutory forms will be prescribed for the different authorities to exercise their powers under section 144BA.

xv) Time limits will be provided for action by the various authorities under GAAR.

xvi) Section 245N(a)(iv) that provides for an advance ruling by the Authority for Advance Rulings (AAR) whether an arrangement is an impermissible avoidance arrangement will be retained and the administration of the AAR will be strengthened.

xvii) The tax auditor will be required to report any tax avoidance arrangement.

8. Further, having considered all the circumstances and relevant factors, Government has also decided that the provisions of Chapter X-A will come into force with effect from April 1, 2016 (as against the current provision of April 1, 2014).

9. The final report of the Expert Committee has been put on the website of the Ministry of Finance today.

Source: Income Tax Department- India.

Advertisements

Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)*

Press release, dated 26-12-2012

Q.1. What is Permanent Account Number (PAN) Card?

Ans: Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department of India to any “person” to facilitate him in making tax payments filing, returns and claiming refunds. The number, along with other relevant details, is printed on a card called PAN card.

Q.2. Are QFIs required to obtain PAN Card to comply with tax norms in India?

Ans: Yes. Under the current provisions, QFIs would be required to obtain PAN card. The process of obtaining a PAN card is simple, and user friendly. An application can be filed by a foreign investor online and the process can be completed within 2 to 3 weeks.

Q.3. What are the benefits to QFIs of having a PAN Card?

Ans: QFIs who have a PAN card would be eligible for tax deduction at source (TDS) as per the rates applicable in the Double Taxation Avoidance Treaty (DTAA) of the country of which the QFI is a resident, if it is more beneficial than the rate prescribed under the domestic law. If a QFI has not obtained a PAN card it would be subject to a higher rate of tax deduction under Section 206 AA of Income Tax Act, 1961.

Q.4. How QFIs can apply for a PAN Card?

Ans: In order to facilitate QFIs in applying for a PAN as well as to comply with Know your Customer (KYC) norms of the Securities Exchange Board of India (SEBI), a combined form (FORM 49 AA) has been notified by the Central Board of Direct Tax (CBDT). Form 49 AA and detailed instructions regarding how it is to be filled up are available at :

http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/itr62form49 aa.pdf

http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/Not58_2011.pdf

Q.5. Can QFIs make an On-line application for PAN Card?

Ans: Yes, application for allotment of PAN can be made online through the Internet. Further, requests for changes or correction in PAN data or request for reprint of PAN card (for an existing PAN) may also be made through the Internet. Online application can be made either through the portal of National Securities Depository Limited (NSDL) (https://tin.tin.nsdl.com/pan/index.html) or portal of UTI Infrastructure Technology and Services Limited (UTITSL) (http://www.utitsl.co.in/utitsl/uti/newapp/new-pan-application.jsp). Supporting documents required to be submitted by QFIs to obtain PAN card are listed at the following link:

http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/Not58_2011.pdf

Q.6. What are the attestation requirements for a QFI for obtaining PAN card?

Ans: For a QFI who is an individual, Rule 114 of the Income Tax Rules, 1961 read with Form No. 49AA, requires a copy of the passport to be filed (without any attestation), this will be taken as both proof of identity and proof of residence. For QFIs other than individuals, the process requires filing of copy of certificate of registration duly attested by an “apostille” or at the Indian Embassy in that country.

In order to meet the know you client (KYC) requirements as prescribed by Securities Exchange Board of India (SEBI), the list of documents to be submitted by a QFI for KYC are available at:

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1340167306959.pdf

Q.7. What are the tax related responsibilities of Qualified Depository Participants (QDPs)?

Ans: In order to facilitate investments by QFIs, the QDPs have been assigned the responsibility to act as a single point of contact for QFIs for all purposes including tax. For tax purposes, a QDP will facilitate the QFI to obtain a PAN card. QDPs will be responsible for any withholding tax in India before making remittance to QFIs. QDPs will also be treated as a representative assessee/agent of the QFI. For this purpose QDPs would be required to submit a declaration that they have no objection to being treated as a representative assessee/agent of QFI. A QDP may ensure that the broker engaged by it for undertaking QFI transactions deducts and deposits tax at source failing which the QDP should deduct and deposit the tax on such transactions.

Q.8. Can QFIs claim refund from Income Tax Department in India?

Ans: Yes. QFIs can claim refund from Income Tax Department for which the QFI would have to file its return of Income in India for that year.

Q.9. Can a QFI carry forward losses over the years?

Ans: Yes. QFIs are allowed to carry forward losses over years provided the QFI files its return of income declaring the loss for the relevant year within the stipulated time limits.

Q.10. Whether profits earned by QFI from their investments in Indian securities market would be treated as Capital Gain or business income?

Ans: As per the Income-Tax Act, 1961, whether the profits earned from transaction in securities would be capital gains or business income will depend on facts and circumstances of each case like the number and frequency of transactions etc. Please refer to circular No.4/2007 dated 15/6/2007 issued by the Central Board of Direct Taxes.

Q.11. Whether QDPs should compute tax deduction at source (withholding tax) on QFI income for one settlement period on settlement basis or on transaction basis?

Ans: Currently, settlement on Indian stock exchanges is done at the end of every trading day. Tax deducted at source under the Income-tax Act, 1961 is to be deposited by the seventh day succeeding the end of each month. The withholding tax on QFI income will be computed on settlement basis and not on transaction basis since the stock broker would credit the net proceeds of all transactions to QFIs on settlement basis for one settlement period.

Q.12. For determining the tax deducted at source (withholding tax) liability, can QDPs set off losses of QFIs against profits earned on monthly basis in a given year?

Ans: As per TDS provisions, the deductor has to deduct tax either at time of payment of the amount or at time of credit of such amount (whichever is earlier). Therefore, any loss of current year available at such time of deducting tax would be eligible to be set off against the sum payable and the TDS shall be effected on net basis. However, TDS once effected cannot reduced by the deductor even if there is loss in subsequent transaction.

Example, in a given year, a QFI makes three settlements, it earns profit of Rs. 200 on day one settlement, incurs a loss of Rs. 250 on day two settlement and earns profit of Rs. 100 on day three settlement. The TDS would be deducted on credit of net profit of Rs 200 whereas, no TDS shall be effected against profit of Rs. 100 as at time of credit of Rs. 100 a loss of Rs. 250 is available for set off and net basis there is no amount chargeable to tax.

Q.13. For the purpose of computing tax deducted at source (withholding tax) Can QDPs set off in the case of QFIs, the profits earned in one security against losses earned in another security during a given year?

Ans: Yes. For computing tax deducted at source (withholding tax) QDPs can set off profits earned by the QFI in one security against losses earned in another security as long as these securities are subject to Securities Transaction Tax (STT). Therefore, this would not be applicable in case of QFI investments in bonds as bond transaction are not subject to Securities Transaction Tax Such setting off for computing tax deduction at source would therefore be permissible only in the case of listed securities and mutual fund Units and redemption by mutual funds as these are subject to STT. The set off would again be subject to the general principle that an earlier loss of current year can be set off against subsequent profit which is credited or paid to the QFI. However, if tax deduction at source (TDS) has already been effected for a particular credit or payment, it cannot be reduced by subsequent loss. A QFI is, however, eligible to claim refund of excess amount of tax deducted at source (withholding) by filing a return of income for the relevant year.

Q.14. For the purpose of computing tax deducted at source (TDS), can QFIs Set off of profits earned by a QFI in the current year against losses incurred in previous years?

Ans: No, A QDP cannot set off losses of a previous year of a QFI against profits earned in the current year by the QFI while computing the tax liability for deduction at source, which would therefore be based only on the profits of the year. However, QFIs can themselves set off their profits earned in the current year against losses incurred in previous years. For the purpose, the QFI would need to file its return of income within the time limits stipulated in the Income-tax Act, 1961. For this purpose, QFIs need to file return for the relevant year within the time limits stipulated in the Income-tax Act, 1961.

Q.15. What would be the applicable rates of taxation if a QFI comes from a jurisdiction with which India has a Double Taxation Avoidance Agreement (DTAA) as against one which comes from a non-DTAA Jurisdiction?

Ans: The applicable rates of taxation in the case of investment from a country will be at the rate provided in the Income-tax Act or the rate provided in the Double Taxation Avoidance Agreement, whichever is more beneficial to the investors.

Q.16. Whether the capital gains arising on sale of shares are computed in Indian currency or in other currency?

Ans: The capital gains arising on sale of shares shall be computed by converting the cost of acquisition, expenditure incurred and full value of consideration in the same currency, as was initially utilized for purchase of shares and the gains so computed shall be reconverted in India currency.

Q.17. Whether DTAA provisions will apply while deducting tax at source?

Ans: Yes. Also see answer to question No. 15.

Q.18. Will the QDPs be held responsible for withholding taxes against profits on mutual fund investments by QFI’s?

Ans: Income from investment from mutual fund may arise by way of distribution of profits by the fund or by way of redemption by the fund or by way of sale of units of the fund. In case of distribution of profits by the mutual fund, the mutual fund itself pays tax on distribution of profits. In case of sale of units of the fund, the QDP would be required to withhold tax if the buyer of the mutual fund units has not deducted tax. In case of redemption of units by the fund or sale of units of the fund, the QDP would be required to withhold the tax.

Q.19. If the QFI is no longer the client of the QDP, then can the QDP be called upon to make good the shortfall in tax and liable to interest and penalty having acted in bonafide and good faith?

Ans: QDP, being a deductor, shall be liable for any short deduction or non-deduction of tax even after the QFI ceases to be the client of QDP.

Q.20. What are the deductible expenses that may be incurred by QFI for purchase & sale of shares and Mutual Funds?

Ans: The deductibility of expenses would depend on the fact that whether the income on the sale of shares is treated as business income or capital gains. In general if the income is treated as capital gains expenses like brokerage fees would be allowed.

Q.21. Whether QDP should treat residence certificate as a sufficient proof of residence and beneficial ownership of the shares in India by the QFI?

Ans: Prima facie, the Tax Residency Certificate is evidence of residence in a particular country and the QDP may rely on such a certificate.

However, as per Explanatory Memorandum to the Finance Bill, 2012, the amended section 90 and 90A of the Income-tax Act makes submission of Tax Residency Certificate containing prescribed particular, as a necessary but not sufficient condition for availing benefits of the tax treaties.

Q.22. Whether the QDP is required to obtain an Income Tax Order under Section 195(2) of the Act for determining the income component (capital gains) on the sale of shares?

Ans: Central Board of Direct Taxes (CBDT) Circular No. 4/2009 dated 29/06/2009, clarifies that the term ‘payer’ also means a remitter. As the QDP is making the payment of the income to the QFI, the QDP could be considered as a ‘payer’ Under Section 195(2) of the Act, if any person responsible for paying any sum chargeable under the Act to a non-resident, considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer(AO) to determine the appropriate proportion to such sum on which tax is to be deducted (TDS).

The requirement of obtaining CA Certificate is only in the context of remittance of money outside India. It is not in the context of TDS liability. The QDP is custodian of all data in respect of transactions on which income has arisen to a QFI. It will also maintain the QFI account, wherein the QFIs’ income is determined. Therefore, the QDP is supposed to deduct tax on the basis of sum chargeable to tax. In normal situations such as working out the capital gains on a transaction, there would not be any difficulty and QDP can itself determine the amount chargeable to tax and deduct tax thereon or take help of Chartered Accountant in this behalf. However, in case there is complexity in determining such income the QDP should approach the Assessing Officer for determination u/s 195(2). Even for other deductees, it is not mandatory that in each and every case, they should obtain 195(2) order before deducting TDS. However, in case a complex issue, it is advisable to do so. This is because the liability to deduct proper taxes remains on the deductor (i.e. QDP).

Q.23. For the purpose of computing tax deduction at source (withholding tax), what is the proof and declaration that the QDP can rely upon for allowing the full time benefit of a DTAA to a QFI?

Ans: There is no standard set of documents on the basis of which the DTAA treaty benefit can be said to have been rightly allowed. It depends on the facts of each case. The treaty benefit is to be claimed by the person concerned before it can be allowed. For this purpose, the QDP should obtain the Tax Residency Certificate from the QFI.

Q.24. Having relied on the documentations and given the treaty benefits, if later the same is held not allowable by the tax officer, can the QDP be held responsible and called upon to pay for any shortfall in tax, interest and penalties?

Ans: The liability to deduct and pay proper taxes remains that of the QDP as a deductor. Therefore, for any shortfall in tax QDP can be held responsible. The responsibility remains both for non-deduction or short deduction of tax if it is found that the treaty benefit have been incorrectly claimed or considered.

Q.25. What is the maximum number of years in which an assessment can be done or reopened in case of TDS returns filed by the QDP?

Ans: As the payment would be made to QFIs, who are non-residents, the Act does not prescribe any time limit for scrutiny of transaction for TDS purposes under section 201 of the Act.

Q.26. Can the QDP be held responsible for withholding of tax at source in case of a QFI on sale considerations received under an open offer or buy back of shares where the purchaser of the shares is responsible for withholding tax and complying with the TDS filings under the Act?

Ans: Under the Income-tax Act, any person responsible for paying to a non-resident (not being a company) or to a foreign company, any sum chargeable under the provisions of the Act, has to deduct tax at the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier. The responsibility of tax deducted at source by the QDP in the case of sale consideration received by a QFI on account of an open offer or a buyback of shares would depend upon the facts of the case. In case the purchaser of shares is crediting the sum to the account of the QFIs or making payment to QFIs, the purchaser would be required to deduct the tax. However, if the QDP is crediting the sum to the account of the QFIs or making payment to the QFIs, the QDP would be required to deduct the tax. Please also refer to question no.

_________________________

* Disclaimer: These FAQs are prepared with a view to help QFI applicants to get generic understanding of the tax framework. These FAQs cannot be used in a court of law to interpret any circular, rules, regulations, statutes etc., one way or the other.

Source: Income Tax Department- India.


Initiatives Taken by the Government for Unearthing and Curbing Black Money: A Fact Sheet

Press Release, dated 10.08.2012

I. The Government of India has commissioned a study on unaccounted income/wealth both inside and outside the country bringing out the nature of activities engendering money laundering and its ramifications on national security. The study is being conducted by three national institutes viz. National Council of Applied Economic Research (NCAER), National Institute of Public Finance & Policy (NIPFP) and National Institute of Financial Management (NIFM), with inputs from various ministries/departments. The study will be completed by the end of 2012.

II. A Directorate of Criminal Investigation (DCI) has been created as an attached office of the Central Board of Direct Taxes (CBDT) to track financial transactions relating to illegal/criminal activities, including illicit cross-border transactions, from the direct tax angle and bring such activities to justice. Creation of DCI is also in line with FATF recommendations to exclusively deal with tax crimes, including direct taxes.

III. CBDT is coordinating with the Election Commission of India (ECI) for controlling political expenditure and verification of affidavits filed by candidates of political parties.

IV. In order to strengthen the existing laws relating to black money, the Government constituted a Committee under the Chairman, CBDT to examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia,

(a) Declaring wealth generated illegally as national asset;

(b) Enacting/amending laws to confiscate and recover such assets; and

(c) Providing for exemplary punishment against its perpetrators.

The Committee submitted its report to the Government on 29th March 2012. The report has been sent to different Ministries/Organisations and State Governments for necessary action.

V. Information received under DTAA – Information from Germany & France has been investigated. Tax evasion of more than Rs. 600 crore detected and taxes of Rs. 200 crore has already been realized. Prosecution proceedings have been launched in 17 cases pertaining to LGT Bank accounts. Assessment proceedings have been initiated in cases relating to HSBC accounts. Further information from outside the country is awaited in several cases. Information received from different countries under the automatic exchange of information arrangement is appropriately utilized for the purpose of investigation and assessment.

VI. Search & Seizure, Surveys – In the last three financial years, the Investigation wing of the CBDT has detected undisclosed income of over Rs. 32,000 crore besides seizing undisclosed assets valued at over Rs. 2,600 crore. The Income Tax Department (ITD) has further detected undisclosed income of Rs. 17,325 crore in surveys conducted at business premises.

VII. Tax Prosecutions – Out of 1,548 prosecution cases disposed of during the last three financial years, the ITD has obtained conviction in 97 cases besides fiscal compounding in 771 cases of admitted tax evasion, leading to a success rate of 56.1 percent.

Beside above, the Government has also taken the following steps to deal with the problem of Black Money under a five pronged strategy in last 3 years:.

.

.

.

.

.

.

Click here to view the complete text of the above Press Release- Press Release, dated 10.08.2012.

Source: Income Tax Department- India.

 

 

 


Press Release, dated 01.08.2012

Government of India and Government of Principality of Monaco have signed a Tax Information Exchange Agreement (TIEA) yesterday. The agreement was signed by the Minister of State for Finance, Shri S S Palanimanickam from Indian side and Counsellor of Government for Finances and Economy, Mr. Marco Piccinini from Monaco side. This is the ninth TIEA being signed by India.

Salient features of this agreement are

– It is based on international standard of transparency and exchange of information.

– Information must be foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes and tax matters covered by the agreement.

– The requesting State has to provide some minimum details about the information requested in order to justify the foreseeably relevance criteria.

– Information is to be treated as secret and can be disclosed to only specified person or authorities, which are tax authorities or the authorities concerned with the determination of tax appeal.

– It also provides for disclosure of information to any other person or entity or authority or any other jurisdiction (including foreign Governments) with the written consent of the competent authority of the requested Party.

– There is a specific provision that the requested Party shall provide upon request the information even though that Party may not need such information for its own tax purposes.

– There is a specific provision for providing banking and ownership information.

– There is a specific provision for Tax Examination Abroad where authorities of one State can present in the tax examination of taxpayer in the other State.

– Upon entry into force, the Agreement allows exchange of information forthwith.

Source: Income Tax Department- India.

 

 

 


Press Release [No. 402/92/2006-MC (20 of 2012)], dated 01.08.2012

A section of Media has reported that the Central Board of Direct Taxes has extended ‘due date’ of filing of returns to 31st August, 2012 in respect of only those returns which were to be e-filed by 31st July, 2012. It is clarified that the notification issued by the Board on 31st July, 2012 has extended the ‘due date’ of filing of all returns for the Assessment Year 2012-13 which were due to be filed by 31st July, 2012 to 31st August, 2012.

Source: Income Tax Department- India.