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News INCOME TAX

  • Jul 16, 2019
  • Higher I-T cess leaves India Inc a worried lot

    The increase in effective tax rate to 43% for those earning Rs 5 crore and more has spread disquiet in India Inc’s Csuite, raising the possibility of salary reviews, as the rise in tax will invariably push senior compensation levels higher with top talent demanding some offset, said HR heads. As per the latest records available, 144 executives of BSE 500 companies on average earned Rs 11.4 crore annually. Employee stock option plans (Esops) represent a significant proportion of compensa for several executives, said tax experts.

  • Jul 16, 2019
  • Tax on FPIs: Relief to less volatile investors not easy — here’s why

    While there is a thinking in some sections of the government that FPIs with investors not focused on profit maximisation could be exempted from the proposed higher surcharge on the super rich, tax experts have doubted the feasibility of the move. It would be difficult to define a special dispensation linked to the nature of beneficiary investors, as most India-focused funds are open-ended ones, where the investors keep changing, experts noted.

  • Jul 15, 2019
  • Government working on solution for FPIs facing higher surcharge

    The government is considering some manner of relief for foreign portfolio investors (FPIs) from the super-rich surcharge levied in the budget that has pushed the marginal tax rate for those earning over Rs 5 crore to nearly 43 per cent. One of the options is a carve-out for FPIs that are organised as trusts but pool the savings of investors such as pension funds, retirement pools or those not so well-off. “Issue is being examined,” said a government official.

  • Jul 12, 2019
  • Question of trust: Government seeks info on FPI origins from Sebi

    The government has sought information from the Securities and Exchange Board of India (Sebi) about the origins of those foreign portfolio investors (FPIs) that use the trust structure and the assets that they manage, said a person familiar with the development. It also asked for data on the tax liability of each of the structures employed by FPIs — trusts, companies and limited liability partnerships (LLPs). Sebi, which regulates FPIs, had asked custodians to provide the information, said the person cited above. “Custodians have provided all the information that was sought from them except for the tax part, which they said they don’t have,” said the official. Last week’s budget had proposed an increase in the surcharge on high-income earning foreign individuals and associations of persons (AoPs). A large number of FPIs in India will be impacted as they are structured either as trusts or AoPs.

  • Jul 11, 2019
  • Direct tax collection target fixed at Rs 13.35 lakh crore

    The government has re-calibrated and fixed the direct taxes collection target for this financial year at Rs 13.35 lakh crore, a task that the CBDT chief said is difficult but achievable. He also said that the government can only think of further "lowering" corporate tax rates once the exemptions and deductions in this sector are phased out. "In the last revised estimates, our target (for 2019-20 financial year) was fixed as Rs 13.78 lakh crore which appeared to be rather unrealistic because it was showing an increase of almost 24 per cent year-on-year. This is the submission we made while budget deliberations were going on," CBDT Chairman Pramod Chandra Mody told PTI.

  • Jul 11, 2019
  • Finance ministry may look into taxation of employee stock ownership plans

    India will review the taxation of employee stock ownership plans (Esops) to address issues that curb their effectiveness as a compensation tool, said a senior finance ministry official. This review will not be confined to startups, he added. A proposal by the Department for Promotion of Industry and Internal Trade (DPIIT) had been examined by the finance ministry in the run-up to the budget but the view was that the entire framework needed to be reviewed, and not just for startups. A key issue is whether stock options should be taxed only when an employee sells them and not again at the time of vesting. There are also issues with the valuation of the benefit in the case of unlisted companies.

  • Jul 10, 2019
  • FPI surcharge may stay, ‘trust route opaque’, feels government

    The Budget proposal to impose a higher surcharge on the super rich — also applicable on capital gains made by foreign portfolio investors (FPIs) so long as they use the preferred trust route — is likely to stay, as the government on Tuesday seemed averse to making any relaxations in this regard. Speaking to FE, senior tax officials justified the move saying scores of FPIs were apparently using the trust route to invest in India to circumvent the Sebi’s disclosure norms. Central Board of Direct Taxes (CBDT) chairman PC Mody said at a post-Budget event organised by industry body Ficci that, the board saw “no need to clarify the matter over and above what finance minister Nirmala Sitharaman had said on Monday.”

  • Jul 09, 2019
  • NRIs’ residential status comes under I-T lens

    The investigation wing of the income tax (I-T) department is going through the ‘residential’ status of non-resident Indians (NRIs) with a fine-tooth comb. Several NRIs have received notices from the department for reopening tax assessments of the past five to six years and were also told to share photocopies of their passports. A resident can attain NRI status by staying overseas for more than 182 days. The law also states that a person is a ‘resident’ if he has been in India for more than 60 days in the year in question and 365 days during the four years prior to that year.

  • Jul 08, 2019
  • After Budget 2019, more good news in works for startups

    There could be more measures in the offing for startups following the budget announcements. The government is working on another set of measures that could be rolled out soon to make it easier for them to do business in the country.

  • Jul 08, 2019
  • Foreign funds to feel the pinch of increased tax on mega rich

    Friday’s proposal to raise the tax burden on the mega-rich could also affect about 2,000 foreign funds that are legally equivalent to associations of persons (AOP), a class of income earners required to pay more taxes after new liability slabs were created in the federal budget. Many foreign portfolio investors (FPI) in India are structured either as trusts or AOP and would be affected by the new surcharges, said tax experts. Industry estimates suggest that at least 1,500 to 2,000 actively trading FPIs will come under the purview of the new tax proposals.

  • Jul 08, 2019
  • Taxman plans to go after new NRIs possessing undeclared foreign assets

    Tax authorities would soon start targeting undisclosed overseas assets of individuals, who had acquired those when they were residents in India but had since become non-residents. Changes proposed to the black money law as part of the 2019-20 budget are aimed at covering such non-residents who possess undeclared overseas assets, a government official said. The move comes amid reports of many high-net-worth individuals moving out of India and changing their residency status.

  • Jul 08, 2019
  • Change in I-T Act may lure buyers to IL&FS

    A key budget proposal will help sweeten the deal for any potential suitors of Infrastructure Leasing & Financial Services (IL&FS), which has been under the supervision of a government-designated board after defaulting on repayments in September last year. The proposed amendment to Section 79 of the Income-Tax Act will allow buyers to carry forward losses in companies where the government has seized control. Experts said this was aimed at resolving the IL&FS situation. A buyer will be able to set off historical losses in IL&FS and its subsidiaries against future profits, lowering taxable income.

  • Jul 08, 2019
  • Budget impact: Most FPIs stare at 14.25% peak LTCG

    The fine print of Finance Minister Nirmala Sitharaman’s Budget reveals more pain for stock market investors. The tax outgo for a large number of them, including foreign portfolio investors (FPIs), domestic and foreign individuals and companies, will increase by up to 19 per cent in terms of the long- term capital gains tax (LTCG) and the short-term capital gains tax (STCG).

  • Jul 05, 2019
  • Budget 2019: 'Faceless assessment' for tax filing gets thumbs up from Sitharaman

    Finance minister Nirmala Sitharaman proposed the introduction of "Faceless Assessment", which means that there will be no human intervention while scrutinising the tax return. The aim of a faceless assessment is to cut down the interaction between taxpayer and income tax officer. Faceless assessment or scrutiny means that the assessing officer will not know the identity of the tax payer and would use technology to scrutinise details of the tax payer. The government has handed the task of coming up with a framework to a high-level committee on dircet taxes.

  • Jul 04, 2019
  • Dismiss appeals on basis of merit, not absentia: Madras HC to ITAT

    The Madras High Court has asked the tax tribunal not to dismiss appeals merely because a taxpayer failed to make an appearance before its bench, and instead take a proper decision based on the merits of the case. Experts said the judgment will set a precedent in several cases as the Income Tax Appellate Tribunal (ITAT) currently dismisses almost all appeals against tax claims if the affected taxpayer is not able to present his case at the hearing.

  • Jul 03, 2019
  • India ratifies convention to check tax evasion

    The Central Board of Direct Taxes (CBDT) on Tuesday said that India has ratified the Multilateral Convention to Implement Tax Treaty Related Measures (MLI) to prevent Base Erosion and Profit Shifting (BEPS), which will pave way for amendments to double taxation avoidance agreements (DTAA) with the countries signatories to the convention to plug revenue leakages. “On 25th June, 2019, India has deposited the instrument of ratification to OECD, Paris along with its final position in terms of Covered Tax Agreements (CTAs), reservations, options and notifications under the MLI, as a result of which MLI will enter into force for India on October 1, 2019 and its provisions will have effect on India’s DTAAs from FY20-21 onwards,” CBDT said in a statement.

  • Jun 28, 2019
  • Circular on TDS worries expat directors of MNC subsidiaries

    The government’s move to tighten regulations that would serve as a deterrent for tax evaders has got the India heads of several multinationals worried. At the heart of the problem is a recent Central Board of Direct Taxes (CBDT) circular that gives additional powers to the taxman to initiate prosecution against those evading taxes. Prosecution notices make such cases equivalent to criminal offences and give income tax officers powers akin to those of the police, said experts,adding that taxpayers could seek relief only from a magistrate’s court in such instances.

  • Jun 28, 2019
  • India retains flexibility to have more provisions in its bilateral tax treaties to address tax concerns

    India has decided to retain the flexibility to have more stringent provisions its bilateral tax treaties to be able to curb tax abuse more effectively. This will allow New Delhi to negotiate limitation of benefit clause like the one it has in tax treaty with Singapore to restrict treaty advantages to genuine investors. Conditions such as a minimum level of investment, listing on the local stock exchange, ceiling on turnover and minimum expenditure, local residents on board, number of board meetings for carrying out operations in one of the contracting states can be imposed on investors to prevent tax abuse. Tax treaties have been used by third country investors to route their investments to lower tax liability or by local investors to round-trip funds.

  • Jun 27, 2019
  • Direct tax code panel to curb tax lawsuits, modify faceless scrutiny

    The new draft report on the direct tax code will modify five major procedures pertaining to tax litigation, faceless scrutiny, exchange of information, compliance, and financial transactions. The Central Board of Direct Taxes (CBDT) on Wednesday expanded the terms of reference (ToR) of the expert panel constituted to rewrite direct tax legislation. The new ToR include faceless and anonymised scrutiny assessment, reduction of litigation, and expeditious disposal of appeals from the Commissioner Income-Tax (Appeals), right up to the Supreme Court (SC).

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