Tax collections in the current fiscal may fall short of targets by as much as Rs 2 lakh crore on faltering economy, leaving a very little room for Finance Minister Nirmala Sitharaman for offering any meaningful reduction in personal income tax rates. Sources with direct knowledge of the development said income and corporate tax collections are likely to miss FY2020 targets by as much as Rs 1.5 lakh crore while indirect taxes may fall short by about Rs 50,000 crore on drop in the Goods and Services Tax (GST) in a sluggish economy.

Expectations were that Sitharaman, who had in September last year cut the corporate tax rates to their lowest to boost economic growth, would announce similar sops for individual taxpayers, but lower than expected tax collections and government's missing disinvestment target by a wide margin would limit her largesse.

The exchequer was shaved off Rs 1.45 lakh crore as the government slashed corporate tax rates up to 10 percentage points, the biggest reduction in 28 years.

The income tax department has made a windfall gain of Rs. 10,000 crore from a scheme meant to avoid tax disputes, with multinational companies operating in India, a development that could give impetus to new schemes that will reduce litigation while adding to the government coffers.

The gain is from the advance pricing agreement (APA) programme that allows MNCs to negotiate how profit margins for India operations are to be calculated for tax purposes for five years in return for avoiding rigorous scrutiny of transaction details. Introduced in 2012, the scheme was tweaked in 2015 to allow such negotiated profit margins applicable for the past four years as well, allowing companies tax certainty for a total of nine years.

Your employer could soon start deducting 20 per cent of your salary in case you fail to provide your PAN (Permanent Account Number) and Aadhaar details to them. This latest rule of the CBDT (Central Board of Direct Taxes), which came into effect on January 16, will be applicable for all those who earn above Rs 2.5 lakh per annum.

With this rule, the CBDT aims to keep a close eye on TDS (Tax Deducted at Source) payments and revenue earned via this segment, which amounted to around 37 per cent of the total direct tax collection in FY19.

According to an 86-page circular issued by the CBDT, employees have to quote PAN and Aadhaar details compulsorily as per the Section 206-AA of the Income Tax Act. The circular reads, "Section 206AA in the Act makes furnishing of PAN or Aadhaar number, as the case may be, by the employee compulsory in case of receipt of any sum or income of amount,on which tax is deductible."

The circular states that in case an employee fails to provide the required details, the employer is responsible to make deductions either at the tax rate on the employee's salary or 20 per cent or above.

In case, your income is below Rs 2.5 lakh per annum, no tax will be deducted. After several deductions, if the salary attracts approx 20 per cent tax, the TDS rate of 20 per cent will apply. In case your salary attracts a 30 per cent tax rate, your employer will compute the average tax rate, i.e., employee's total tax liability divided by total annual income. If the average tax rate turns out to be 20 per cent, the TDS would be 20 per cent.

Chief Justice of India S A Bobde on Friday made a case for speedy resolution of tax disputes saying it will act as an incentive for taxpayers and free the funds locked in litigation.

Chief Justice said tax judiciary plays a very important role in resource mobilisation of the country and expressed concern over pendency of cases.

"A just and speedy dispute resolution is perceived as a tax incentive by the taxpayer. To the tax collector, an efficient tax judiciary assures that demands arising out of legitimate assessment are not strangled in delayed litigation," Bobde said at the 79th foundation day celebrations of Income Tax Appellate Tribunal.

The pendency of appeal cases related to indirect taxes in the Supreme Court, High Court and CESTAT has reduced 61 per cent to 1.05 lakh in almost two years.

According to official data, total pendency of appeals at the Supreme Court, High Court and CESTAT (Customs Excise and Service Tax Appellate Tribunal) as on June 30, 2017, was 2,73,591, whereas the same significantly came down to 1,05,756 as on March 31, 2019, a reduction of 61 per cent.

With regard to direct taxes, as many as 3.41 lakh cases were pending before commissioner (appeals), while 92,205 cases were pending before the Income Tax Appellate Tribunal (ITAT) as on March 31, 2019.

Asked about setting up more tribunals for reducing pendency in high court and lower judiciary, the Chief Justice said, "You have to be careful that we don't only transfer pendency."

India's corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials told Reuters, amid a sharp fall in economic growth and cut in corporate tax rates.

Prime Minister Narendra Modi's government was targetting direct tax collection of 13.5 trillion rupees ($189 billion) for the year ending March 31 - a 17% increase over the prior fiscal year.

However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast 5% growth for this fiscal year - the slowest in 11 years.

The tax department had managed to collect only 7.3 trillion rupees as of Jan. 23, more than 5.5% below the amount collected by the same point last year, said a senior tax official.

After collecting taxes from companies in advance for the first three quarters, officials typically garner about 30-35% of annual direct taxes in the final three months, data from the past three years shows.

But eight senior tax officials interviewed by Reuters said despite their best efforts direct tax collections this financial year were likely to fall below the 11.5 trillion collected in 2018-19.

OECD chief Angela Gurria on Thursday said the international body's plan to help solve digital tax problems has got support of 137 countries and new rules must be put in place to stop evasion worth hundreds of billions of dollars. OECD chief Angela Gurria on Thursday said the international body's plan to help solve digital tax problems has got support of 137 countries and new rules must be put in place to stop evasion worth hundreds of billions of dollars. "We need to establish new rules to avoid hundreds of billions of dollars not being paid in tax," he said. Some countries including France have postponed their own laws to give a multilateral solution a chance. Gurria said he is confident that the OECD's deal will be agreed, despite doubts expressed by some countries, including the US. "Are we on track? Yes," he said. "We have been working on this digital tax plan for 2-3 years. In the second half of 2020 we will go for implementation." "We believe it is possible to deliver this deal and gain the consensus we need. "The small and medium sized companies are captive in their borders and have to pay tax, where the biggest companies in the world pay 0.02 per cent," said Gurria.

In what amplified the worries over the government’s ability to stick to the fiscal consolidation path, direct tax collections till January 15 stood at Rs 7.3 lakh crore, down 5.2% from the year-ago period. There is no precedent of a contraction in direct tax growth at least in recent history. Gross direct tax collections — after refunds but before devolution to states — for FY20 is budgeted to grow at 17.4% to Rs 13.35 lakh crore. Many analysts have pegged the total tax revenue shortfall (net) for the current fiscal at upwards of Rs 2.5 lakh crore. There are reports that the government might try to boost collections in March quarter by unveiling an amnesty dispute resolution scheme for direct taxes, similar to the one implemented for indirect taxes. A steep contraction in corporate tax collections is partly attributable to the slashing of rates in September but the economic slowdown has accentuated the fall. Personal income tax collection grew 6.5% till January 15, as against 23.3% budgeted. The headline corporate tax rate was slashed to 22% from 30% earlier for regular firms while it was cut to 15% from 25% for new manufacturing units. The collection is further impacted by a slowing economy which is expected to grow 5% this fiscal.

Singapore might lose some of its allure for various foreign portfolio investors as a preferred destination to route their investments into India. With the Multi-Lateral Agreement (MLI) between the two countries set to come into force from April 1, fund managers in Singapore, who invest in India, could face a stiffer task of convincing local tax authorities that they have not set up shop in the island nation to avail the tax benefits. Investors based out of Singapore continue to avail several tax benefits for putting money in India. These include exemption from capital gains tax on derivatives and lower capital gains tax rate for equities. But, these exemptions will be applicable only if the Indian taxman are convinced that they are not in Singapore to avoid taxes. While the government has already implemented the General Anti-Avoidance Rules (GAAR) to curb tax avoidance, MLI comes with much stricter provisions and is believed to override GAAR, say experts. GAAR, implemented in 2017, requires foreign investors to prove that they are in a jurisdiction not just to take advantage of the tax treaty.

Several jewellers have been put under scrutiny by the income tax department in cases of alleged large and disproportionate cash deposits during the demonetisation period (November 9-December 30, 2016). In some cases, some of these jewellers have been found to have deposited nearly 1,000 times as much cash during this period compared to the year-ago period, sources said. Apart from large cash deposit not commensurate with income profile, the department scrutinised cases where taxpayers reported massive increase in unsecured loans during the year or loans fully paid involving huge amounts, the sources said. These jewellers under scrutiny have also not shown the cash so deposited in their return of income for the AY2017-18, which triggered the data analytics system of the department. “A Gujarat-based jeweller was found to have deposited cash of over Rs 4 crore during demonetisation against just over Rs 40,000 a year ago,” a tax official privy to the scrutiny said.

What does the taxman do when the money market dries up and businesses struggle? It tries to figure out a way to inch towards a punishing tax target that the government has set by giving a little breathing space to companies and businesses — the prime taxpayers. Mumbai, which accounts for the highest contribution to income tax in the country, is trying it out. Amid tight liquidity and a tough business environment, tax commissioners in the financial capital decided on Monday to allow “deserving” assessees pay in instalments the amount they are required to fork out after challenging a tax demand order. After receiving a demand order from the assessing officer of the Income Tax (I-T) department, a tax payer has to pay 20% of the demand within a month once the order is challenged before the Commissioner of Income Tax (Appeals), the first appellate authority. This amount can now be paid in multiple instalments till end March. “However, this will be on a case to case basis and is not part of any rule. Instructions have gone out to commissioners in Mumbai to consider genuine requests from assesses so that don’t have to pay the entire 20% at one go.

For the first time in the past one decade, direct tax collections from India’s commercial capital Mumbai witnessed a double-digit dip as it fell by about 13 percent by mid-January, according to Business Standard. The financial capital of the country contributes 37 percent to the total direct tax revenues. According to the report attributing to sources, the total direct tax collection figures in Mumbai have not even touched the nine-trillion mark so far. This leaves a gap of five trillion rupees, which will be needed to collect in another two months if Budget targets are to be achieved for 2019-20. The drop in total direct tax collections recorded in mid-January was followed by a decline of over 4 percent in December. The total collection from Mumbai up to December stood at Rs 2.20 trillion, 4.3 percent less than Rs 2.30 trillion in the same period in 2018. The fall further grew to double digits after the department released refunds on December 31, said the report citing an I-T official.

The tax department has started questioning the local subsidiaries of several multinational companies to ascertain whether they have foreign operations managed from India. In cases where this is established, the department wants them to pay tax here on their income from such operations. It has already issued notices to the subsidiaries of several MNCs. In the notices, details such as members on the board of directors, minutes of meetings, bank account statements and holding structures of their foreign units have been sought. In some cases, the department has also demanded tax, people with direct knowledge of the matter said. In one such notice, which ET has seen, the department states that the Indian subsidiary had effective control and management of certain foreign operations, and so revenue allocating to those businesses was taxable in India. Tax experts said in most cases, the notices did not mention the clause on place of effective management (POEM). Under POEM, overseas subsidiaries could be treated as domestic entities for tax purposes if they are controlled and managed from India.

If you are a tax payer, you might have received an email from the income tax department with a calendar containing important income tax-related dates. It would bode well for you if you create an alert for these dates or mark them on your personal calendar. Doing so may help you avoid penal consequences of late filing of income tax returns (ITR) or tax deducted at source (TDS) returns and also help remind you to collect your TDS or tax collected at source (TCS) certificates. For instance, TCS is applicable when you purchase a car worth more than Rs 10 lakh. What is more, from September 1, 2019, individuals have to deduct tax on the payments made to professionals, contractors and so on. Further, those paying monthly rent of Rs 50,000 or more are required to deduct tax, as per income tax laws. These dates will also help you keep a check on whether the TDS that has been cut from your income (salary or interest etc.)

Finance minister Nirmala Sitharaman said the government is taking various steps to simplify the taxation system and eliminate harassment of taxpayers. Addressing an event organised by the Confederation of All India Traders on Tuesday, she said the government is open to suggestions for the betterment of the Goods and Services Tax (GST) filing system. “Under the chairmanship of the revenue secretary, a committee has been constituted, which is working day and night to explore ways and means to simplify GST,” said Sitharaman. Based on suggestions received from various stakeholders, the government is taking steps towards simplification of taxation system, she said. The finance minister said the faceless e-assessment scheme was launched in October 2019 to eliminate interface between an assessing officer and a taxpayer to curb harassment of taxpayers.

With the deadline looming for the Sabka Vishwas dispute resolution scheme, about 87% of eligible taxpayers have opted for the scheme and committed to pay about Rs 35,000 crore as taxes to the government, officials said. This has come as a relief to the government, which is grappling with a huge shortfall in tax revenue this fiscal. Sabka Vishwas, Sabka Vishwas tax, Sabka Vishwas tax amnesty scheme, money However, about 23,000 (about 12.5% of the total) eligible taxpayers have not yet opted for the scheme. These are mainly large taxpayers and in 7,100 such cases, a total tax amount of Rs 1.7 lakh crore is under litigation, they added. “The vast majority of the smaller taxpayers have already opted for the scheme,” official sources said. When the scheme was announced in September, it was estimated that about 1.8 lakh taxpayers had legacy excise and service tax cases pending at different forums. The total tax revenue locked in these cases was Rs 3.6 lakh crore. The scheme expires on January 15. Sources said that one of the reasons for big taxpayers not opting for the scheme could be resistance from the vast array of intermediaries including tax consultants, lawyers, etc, employed by these taxpayers. “For obvious reasons, the immediate settlement of these long pending cases is not seen in the best interests of these intermediaries,” sources said.

In significant changes in income tax return filing forms, individual taxpayers owning house property in joint ownership and those who have paid Rs 1 lakh in electricity bills in a year or incurred Rs 2 lakh expense on foreign travel cannot file their annual income return using the simple ITR-1 form. The government, which usually notifies forms for filing income tax returns by individuals in April every year, on January 3 notified tax return forms for assessment year 2020-21 (income earning year April 1, 2019 to March 31, 2020). Returns in ITR-1 Sahaj can be filed by an ordinarily resident individual whose total income does not exceed Rs 50 lakh, while Form ITR-4 Sugam is meant for resident individuals, HUFs and firms (other than LLP) having a total income of up to Rs 50 lakh and having presumptive income from business and profession. According to the notification, two major changes in the ITR forms have been effected. First, an individual taxpayer cannot file return either in ITR-1 or ITR4 if he is a joint-owner in house property. Secondly, ITR-1 form is not valid for those individuals who have deposited more than Rs 1 crore in bank account or have incurred Rs 2 lakh or Rs 1 lakh on foreign travel or electricity respectively, it said.

A number of trusts set up in overseas tax havens using a complex maze of entities have come under the scanner of Indian and Swiss authorities for suspected tax evasion by parking of illicit funds in Switzerland-based banks, as per notices issued to those entities. In addition, several individuals who are suspected to have moved abroad after evading taxes back in India are also being probed and their banking details are in the process of being shared by the Swiss authorities with their Indian counterparts. As per the notices published in Switzerland's federal gazette over the past one month, these individuals, including some businessmen, as also trusts based in Cayman Islands and companies have been asked to appoint their nominees in case they want to appeal against sharing of their banking details with India. Trusts, especially those set up in jurisdictions like Cayman Islands, Panama and British Virgin Islands, have often been seen as routes for evading taxes.

The CBDT has extended till January 31 the last date for taxpayers to avail a "one-time" facility to apply for compounding of income tax offences, an order issued on Friday said. The earlier deadline was December 31, 2019. In I-T parlance, compounding means that the taxman does not file a prosecution case against the offender or tax evader in court in lieu of payment of due taxes and surcharges. The decision to extend the last date was taken "in view of references received from field formations, including requests made by ICAI (Institute of Chartered Accountants of India) chapters wherein it has been brought to the notice of the CBDT that the taxpayers could not avail the benefit of the one-time relaxation window due to genuine hardships," the order issued by the Central Board of Direct Taxation (CBDT) said. The order was accessed by PTI. Hence, the order stated, the date has been extended to give a final opportunity to such taxpayers and reduce the pendency of existing prosecution cases before the courts. Applications, as per the procedure of the scheme, are to be filed before the appropriate competent authority that is either a principal chief commissioner or a chief commissioner or a principal director general or director general of the Income-Tax Department "on or before" January 31, 2020.

While tax tinkering will continue to dominate the discourse at least till the Budget, one question hangs in the air: has ‘tax terrorism’ abated at all? As we survey the global economy, the two things that stand out is the evolution of digital economy, and the consistent tug-of-war between multinational corporations (MNCs) and tax authorities on the adequacy of taxes paid in each country they operate. Enhanced digital economies across the world have virtually created a borderless world where the physical presence of companies has lost relevant. The role of tax havens where servers can be located makes the task of a tax authority even more difficult.

About three-fourths of eligible taxpayers have settled their legacy excise and service tax disputes with the tax department after agreeing to pay Rs 30,627 crore under the Sabka Vishwas scheme till December-end. When the scheme was launched on September 1, 2019, the disputed amount under 1.83 lakh cases was as high as Rs 3.6 lakh crore. Pertinently, the total disputed amount involved in the cases of the 1.34 lakh people who have settled the disputes was Rs 69,550 crore, just a fifth of the total amount that was locked in disputes. The amount involved in still-unresolved disputes is a staggering Rs 2.9 lakh crore. Tax experts said cash crunch with many businesses could have a role in many large disputes remaining unresolved. Meanwhile, the Central Board of Indirect Taxes and Customs (CBIC) has extended the validity of the scheme to January 15. The Sabka Vishwas scheme was proposed in the budget with the objective of settling pending disputes of service tax and central excise. It is meant to be a one-time window for eligible persons to declare their tax dues and pay the same in accordance with the provisions.