The Income Tax Department has raised the minimum threshold for filing appeals in tax disputes, streamlining the process for cases brought before the Income Tax Appellate Tribunal (ITAT), high courts, and the Supreme Court. According to a recent circular by the Central Board of Direct Taxes (CBDT), appeals can now be filed only if the disputed tax amount exceeds Rs 60 lakh for ITAT, Rs 2 crore for high courts, and Rs 5 crore for the Supreme Court.

Previously, in 2019, the thresholds were set at Rs 50 lakh for ITAT, Rs 1 crore for high courts, and Rs 2 crore for the Supreme Court. The revised limits are applicable to all cases, including those related to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Additionally, the CBDT has directed the withdrawal of pending appeals in the Supreme Court, high courts, and tribunals that fall below these new thresholds.

This decision is part of the government's ongoing efforts to manage litigation effectively. The CBDT emphasized that appeals should not be filed solely based on the tax amount involved; instead, they should be evaluated on the merit of each case. The objective is to reduce unnecessary litigation and offer taxpayers more certainty regarding their income tax assessments.

The Centre’s direct tax collection collections, net of refunds, rose about 16% on year to Rs 9.92 lakh crore till September 15, 2024 in the current financial year, sources said.

The direct tax receipts till September 15 were 45% of the FY25 target of Rs 22.07 lakh crore, broadly in line with annual trends.

Given that the going growth rate is higher than the required rate of growth was 12.8% to achieve the FY25 target, direct tax receipts is expected to exceed the target of Rs 22.07 lakh crore by a decent margin.

Gross direct tax collections, before refunds, stood at Rs 11.94 lakh crore till September 15 of FY25, up 21% on the year.

Direct tax refunds rose 65% to Rs 2.02 lakh crore till September 15 of the current financial year.

The slower pace of spending despite buoyant revenues will likely rein the fiscal deficit below 4.9% of GDP in the current financial year.

Spending on the new or revamped schemes like Pradhan Mantri Awas Yojana-Gramin (PMAY-G) and Urban (PMAY-U), scheme for the productization of Indian technology and employment-linked incentives will likely materialise in the second half of 2024-25.

Litigation with the tax department is often a last resort for businesses due to its resource-intensive nature, prolonging uncertainty and diverting focus from core business operations. The introduction of Vivad Se Vishwas (VsV) 1.0 was a milestone in resolving longstanding tax disputes, providing a much-needed breakthrough for taxpayers and the government alike.

Before VSV 1.0, a staggering 4.83 lakh direct tax appeals were pending across various appellate forums—from the Commissioner (Appeals) and ITAT to the High Courts and the Supreme Court—locking up an immense Rs 4.96 trillion in unresolved disputes. VSV 1.0 successfully resolved 1.46 lakh (30%) of these appeals, recovering Rs 0.54 trillion (11%) for the government - an admirable achievement.

Despite this success, over 5.44 lakh appeals are still pending at the Commissioner (Appeals) level alone, presenting an urgent need for action. The total direct tax disputes pending have multifolded to the tune of Rs 10.40 trillion, which is a staggering 5.6% of India’s GDP. VSV 2.0, while primarily focused on resolving these disputes, offers businesses a compelling reason to opt for settlement beyond tax implications. The following non-tax considerations highlight why businesses might choose to cut short litigation under VSV 2.0:

If you're an Indian taxpayer with foreign income, such as dividends from foreign stocks or earnings from the sale of shares/ESOPs of foreign companies, you can benefit from a lower tax rate under section 90 or 91 of the Income Tax Act, 1961. This tax relief is provided through the Double Taxation Avoidance Agreement (DTAA) provisions. If you are eligible for tax relief, section 90 applies under the DTAA provisions. However, if your country of residence has not signed a DTAA with India, then you can seek relief under section 91 of the Indian Income tax law.
"To claim either bilateral relief under a DTAA (section 90) or unilateral relief under Section 91, taxpayers must file an Indian income tax return and provide a tax payment or deduction certificate from the relevant foreign tax authority," says CA Abhishek Soni, co-founder, Tax2Win.

When do you need to claim tax relief under section 90?
According to CA (Dr.) Suresh Surana, Section 90- 'Bilateral relief' applies when a DTAA agreement exists between India and the other country. "This section applies when a DTAA exists. The taxpayer can claim relief based on the provisions of the DTAA, which may include lower tax rates or exemptions," he says.

While you may have filed your income tax return (ITR) and verified it also, it may not be sufficient to ensure that you get your tax refund on time as it may depend on many other factors.

Before the tax department issues a refund, certain checks and balances must be met. One such measure is the 'Risk Management System (RMS),' which the tax department employs to identify ITRs that may warrant further scrutiny. If your ITR has been identified by the tax department's RMS, then an intimation will be sent to your email address. You can also view this intimation on the e-filing portal (steps to view are given below).

Once the tax department's RMS has identified your submitted and verified ITR, it will not be processed until you fix the issue. In the worst-case scenario, if you decide not to take any action, then the tax department can issue you an income tax notice.

When can the tax department's 'risk management' system pause your tax refund process?
S Ramakrishnan, former Chief Commissioner of the Income Tax Department says that over the years, the tax department has identified bogus claims in tax returns and with a view to arrest such claims the "Risk Management System has been put in place consequent to which such emails are issued to taxpayers to confirm their claims before issue of refunds."

The Central Board of Direct Taxes (CBDT) has rolled out the e-Dispute Resolution Scheme (e-DRS) with an aim to reduce litigation and provide relief to eligible taxpayers. Section 245MA of the Income Tax Act also provides for the constitution of Dispute Resolution Committees (DRC).

What is e-DRS?
The e-DRS enables the taxpayer, who fulfils certain specified conditions as stipulated in section 245MA of the Income Tax Act, to file an application electronically for dispute resolution to the Dispute Resolution Committees (DRC) designated for the region of Principal Chief Commissioner of Income Tax having jurisdiction over the taxpayer. To this end, DRCs have been constituted in all 18 jurisdictional Pr. CCIT regions across the country.

How will e-DRS function?
As per e-DRS, a taxpayer can opt for e-Dispute Resolution against the ‘specified order’ as defined in clause (b) of the explanation to section 245MA of the Act, which includes an order in which the aggregate sum of variations proposed or made does not exceed Rs 10 lakh and returned income for the relevant assessment year does not exceed Rs 50 lakh. Further, such order should not be based on search/surveys or information received under an agreement referred to under section 90 or 90A of the Act.

The Central Board of Direct Taxes (CBDT) has launched the e-Dispute Resolution Scheme (e-DRS) for taxpayers to resolve matters related to Income Tax assessments. The scheme was notified in 2022 and will minimise litigation and provide a more efficient resolution mechanism.

Key features of the e-DRS

The e-DRS system enables taxpayers to electronically submit applications for dispute resolution to the Dispute Resolution Committees (DRCs) in 18 jurisdictions across India.

These DRCs will assist taxpayers in resolving disputes related to 'specified orders, providing an alternative to prolonged legal proceedings.

Applicable to orders where the aggregate sum of variations does not exceed Rs 10 lakh.

The returned income for the relevant assessment year should not exceed Rs 50 lakh.

Orders based on search/surveys or information received under international agreements are excluded.

Application process:

Taxpayers can file applications electronically through Form No. 34BC on the Income Tax department's e-filing portal.

The application deadline is within one month from the receipt of the specified order.
Pending appeals: For appeals already filed and pending before the Commissioner of Income-tax (Appeals), applications can be submitted until September 30, 2024.
Time-bound resolution: DRCs are mandated to pass orders within six months from the end of the month in which the application is admitted.

The recent wave of Show Cause Notices (“SCNs”) issued by the Directorate General of Goods and Services Tax Intelligence (“DGGI”) to several of the nation’s most prestigious educational institutions on research grants received, has sent shock waves in this sector. This is particularly concerning because these sectors, which may otherwise be availing GST exemptions, would be caught in the tax net if such grants are determined to be taxable. The potential taxability of such grants could also adversely impact the funds allocated to these institutions.

From a legal standpoint, the conundrum surrounding the taxation of grants and donations received by educational or charitable institutions has been a contentious issue even before the advent of the GST regime. Under the erstwhile Service Tax regime, an activity was taxable only when it was performed in exchange for a ‘consideration’. In other words, grants given for research where the researcher is under no obligation to carry out a particular research would not be a consideration for such research. However, the existence of a counter-obligation on the researcher, such as the grantor’s acquisition of intellectual property rights over the research conducted was sufficient to qualify the grant as a ‘consideration’ for provision of a taxable service. Conversely, general research grants, which did not impose any reciprocal obligations beyond proper usage of funds and furnishing of accounts, were not treated as ‘consideration’.

The Reserve Bank of India (RBI) has announced an early redemption for Sovereign Gold Bonds (SGBs) issued between May 2017 and March 2020. The redemption process will take place in two phases, starting from October 11, 2024, and extending to March 1, 2025.

Sovereign Gold Bonds have a maturity period of eight years, but investors have the option of premature redemption after 5, 6, and 7 years.

Premature redemption

Early redemption of SGBs gives flexibility and allows investors to access their funds if needed. However, it is crucial to consider the potential drawbacks of premature redemption, such as missing out on potential future gold price appreciation and the interest payments for the remaining years.

Tax implications if you hold the bonds until the end of the complete tenure

If you hold your sovereign gold bonds until maturity, there shall be no capital gains tax on gains on redemption, in case of individuals, due to the express exemption provided in the Income Tax Act. Therefore, the gains on redemption shall be tax free.

The Central Board of Direct Taxes (CBDT) has commenced a thorough examination and validation of specific high-value outward foreign remittances to identify any inconsistencies in their reporting in ITR and potential tax avoidance. Experts say that if you are among the identified taxpayers who have been found to have evaded taxes, then you may get a notice under section 133, and/or 131 (1A) and/or, 142(1) and/or, 143 (2), and/or 148, etc.

According to a report by The Economic Times, this comprehensive scrutiny and verification of high-value outward foreign remittances is for transactions above Rs 6 lakh. The reason behind this move is that CBDT has noticed many cases where foreign remittances and expenditures did not align with the income declared by individuals.

Highlighting the scale of the discrepancy in reporting, an official quoted in The Economic Times news report said an individual with a declared annual income of Rs 5 lakh has been found to have sent Rs 15 lakh abroad in the last three years using three different dealers so that these transactions do not attract the mandatory Tax Collected at Source (TCS).

An internal committee of the Income Tax Department will review the 1961 direct tax law to eliminate redundant clauses as well as adopt best global practices to simplify it for taxpayers for better compliance, CBDT chief Ravi Agrawal has said.
The panel, comprising income tax (IT) officials from across the country, has started working to identify areas of improvement in the Income Tax Act, 1961, he said and added that the exercise is being conducted under a central government-mandated comprehensive review of the law.

Central Board of Direct Taxes (CBDT) chairman Agrawal said the committee is looking at the best global practices that can be adopted as well as cutting redundancies in the existing law and finding those clauses that have reached their sunset, and hence, can be eliminated.

The Income Tax Department has processed 73.71% of all the verified income tax returns (ITRs) as of August 22, 2024, 1 pm. According to data available on the e-filing ITR portal, 7,13,00,901 ITRs were verified and 5,25,53,097 ITRs were processed as on date. This means 26.29% or 1,87,47,804 ITRs are yet to be processed (7,13,00,901 minus 5,25,53,097). If you fall in this 26% group, then you might be curious as to why your ITR has yet to be processed, as more than half of the ITRs have already been processed.

The Income Tax Department's Centralized Processing Center (CPC) processes ITRs digitally using automated systems. "Given that most tax returns were filed in the last week of July, near the due date, it is commendable that 70% of them have already been processed in just 20 days. The remaining returns are expected to be processed soon. Once an ITR is processed, taxpayers who claim a tax refund can expect it soon," says Ankit Jain, partner, Ved Jain & Associates. However, when we compare it with the recent data on average processing time coming down to 11 days in 2023 from 93 days in 2013, it appears that the IT department may be taking more time on the remaining ITRs.

Revenue Secretary Sanjay Malhotra on Wednesday said the income tax department has processed close to 4 crore ITRs for AY 2024-25 in 15 days.
Over 7.28 crore income tax returns for Assessment Year 2024-25 were filed till July 31, 2024.

About 4.98 crore ITRs (income tax returns) have already been processed by the tax department, and intimations sent to taxpayers. Of this, 3.92 crore ITRs were processed in less than 15 days.
"We have made strides in digitisation...About 4 crore returns were processed within 15 days..," Malhotra said at the 165th Income Tax Day celebration.
Malhotra said that in the last decade, the direct tax revenues have increased from Rs 5.59 lakh crore to Rs 20 lakh crore. Also, the tax-to-GDP ratio has increased to 6 per cent from 5.6 per cent over this period.

Finance Minister Nirmala Sitharaman on Wednesday asked tax officers to use simple language in income tax communications so that notices do not instil fear in the minds of taxpayers.
Advising the income tax officers not to take "disproportionate" action and use enforcement measures only, as the last resort, Sitharaman said tax officers should use "power judiciously".
"Taxpayers must not be subject to unnecessary harassment," she said, adding that tax authorities should mention the reason for sending tax notice and present their side of the story in a "crystal clear" way.

The task of reviewing the Income Tax Act of 1961 will be completed in the given timeframe of six months, CBDT Chairman Ravi Agrawal said on Wednesday. Union Finance Minister Nirmala Sitharaman, in her Budget speech last month, had announced that the direct tax law of the country would be reviewed to make it simple and the task would be completed in six months.

"We have an important task on hand and that is the comprehensive review of the Income Tax Act, 1961. This exercise is aimed to reduce litigation and provide tax certainty to taxpayers", Agrawal said during an event held here to mark the 165th Year of Income Tax in India.

He said that the board has taken up the assignment in mission mode and the task, though challenging and transformative, will be completed in the given timeframe.

Taxation of debt mutual funds was changed with effect from April 1, 2023. The indexation benefit in calculation of tax on long term capital gains was removed for debt mutual funds. Due to this, capital gains arising from the sale of debt mutual funds were made taxable at the income tax slab rate applicable to the recipient's income. Hence, from April 1, 2023, capital gains from debt mutual funds are no longer divided as short-term and long-term capital gains and same income tax rules apply to any capital gains on these funds. However, investments in debt mutual funds made on or before March 31, 2023, still remained taxable at 20% with indexation benefits for long-term capital gains (LTCG).

In the July 2024 budget, the government rationalised the capital gains taxation regime for all assets. From July 23, 2024, LTCG from selling an asset (listed or unlisted securities) are taxable at 12.5% without indexation benefit. However, capital gains on debt mutual funds will continue to be taxed at the income tax slab rate applicable to the recipient's income instead of the new LTCG tax rate of 12.5%.

The recent amendment to Section 230(1A) of the Income-tax Act, 1961, does not require all Indian citizens to obtain an income-tax clearance certificate (ITCC) before travelling to other countries, the Central Board of Direct Taxes (CBDT) has said in clarification issues in response to widespread misinformation.
According to CBDT, the amendment, introduced through the Finance (No. 2) Act, 2024, only incorporates references to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the 'Black Money Act').

"This insertion has been made to also cover the liabilities under the Black Money Act in the same manner as the liabilities under the Income-tax Act,1961 and other Acts dealing with direct taxes for the purpose of Section 230(1A) of the Income-tax Act,1961," said CBDT in the statement.

In a significant ruling, the Income-Tax Appellate Tribunal's (ITAT) Mumbai bench has held that a gift of Rs 20 lakh received by a taxpayer from his non-resident brother, based in the UAE, is not subject to tax.

This judgement underscores that Indian tax laws exempt certain gifts from being taxed, particularly those received from close relatives.

Under the Income-Tax Act, gifts exceeding Rs 50,000 are generally taxed as 'income from other sources' at the applicable slab rate, in the hands of the recipient.

The budget has significantly improved diversification of investment options, simplifying holding periods and taxation, and simplifying understanding across asset classes for investors. Budget 2024 makes a key modification to overseas investments by giving TCS credit (paid at the time of LRS) for TDS deducted from wages. This reduces the tax burden by shortening return delays and preventing excess cash outflow.

Girish Lathkar, Partner and CoFounder, Upwisery Private Wealth explains how Budget 2024 impacted TCS deduction while making overseas remittances with an example.

After budget 2023, LRS regulations required TCS (tax collected at source) at the rate of 20% for any remittances done above Rs. 7 lakhs in a financial year.

The overall LRS limit per individual stands at USD 250,000 (Rs. 2.07 crores approximately).

The finance ministry has exempted the income of Unique Identification Authority of India (UIDAI) from payment of income tax for five years till fiscal 2027-28.

Accordingly, grants/subsidies received from the central government; fees/ subscriptions, including RTI fee, tender fee, sale of scrap, PVC card; authentication, enrolment and updation service charges received; term/fixed deposits; and interest on bank deposits earned by UIDAI would be exempt from income tax.

A notification to this effect was issued by the Central Board of Direct Taxes (CBDT) under the Ministry of Finance.

"This notification shall be applicable for assessment year 2024-2025, 2025-2026, 2026-2027, 2027-2028 and 2028-2029," it added.