Direct tax collections, net of refunds, for the April-November period grew just 1.6% against the required rate of 17.4% to achieve the budget estimate of Rs 13.35 lakh crore for the current fiscal. In the first eight months of the fiscal, the government collected Rs 5.56 lakh crore in direct taxes compared with Rs 5.48 lakh crore in the same period in FY19, Anurag Thakur, minister of state for finance, said in a reply in Parliament on Tuesday. The tepid growth is partly due to the economic slowdown and also on account of the deep corporate tax cuts announced by the government in September, which came into effect from the start of current fiscal. 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. Sources said another reason for low growth is the release of higher quantum of refunds in the first eight months of the current fiscal against the same period last year. The income tax department has processed refunds worth Rs 1.46 lakh crore till November 28, up 23% compared with the same period a year ago, a tax official said.

Recently, Uber restructured its operations and moved its entire India business to the Indian domiciled Uber India Systems. Earlier, Uber India was only engaged in providing marketing and support functions to Uber B.V., a company which was registered in Netherlands and had responsibility of performing core functions with respect to Uber’s operations in India, such as processing payments, etc. One of the primary reasons cited for the restructure was an issue encountered by Uber India, with respect to tax deduction of payments made to its foreign entity, Uber B.V.

For those who brave the treacle-like Bangalore traffic, the board outside the tax office near Chinnaswamy cricket stadium offers a chuckle as it says “TDS isn’t Tedious” in a dark maroon font. While it can be argued that it isn’t tedious, thanks to simplifications since its introduction in 2004 (or due to Stockholm Syndrome, as one chartered accountant wryly put it), it has slowly become excessive on various sections of businesses, especially professionals and services companies. The Tax Deducted at Source, or TDS, framework was introduced as a “pay as you earn” mechanism to help taxpayers clear their tax dues as they earn funds instead of having to grapple with a large payment in one shot.

The income-tax department has processed refunds worth Rs 1.46 lakh crore till November 28 this fiscal, a growth of nearly 23% compared with the same period a year ago, tax officials said. This involved 2.1 crore refunds compared with 1.75 crore a year ago. The department also expedited more refunds during this period with 68% of them being issued within 30 days from e-verification of the IT returns. In the same period last year, 57% of total refunds had been issued within 30 days. “100% of all 2.28 crore refunds issued by Centralised Processing Center (CPC) has been directly credited to the taxpayer bank account by ECS, eliminating paper cheque and ensuring faster, accurate and safer credit,” officials said. The pending refunds till November 29 amounted to just over 20 lakh or about 9% of total refunds. These are being currently being processed, officials said. At the same period last year, over 50% more refunds were pending.

Green shoots are already visible Finance Minister Nirmala Sitharaman said on December 2, asserting that the corporate tax cut would bring in fresh investments and generate jobs. When asked about reducing personal income tax to boost demand, Sitharaman said the government will "take action at an appropriate time" and added that tax benefits to individuals are reviewed periodically. "People are approaching the government for fresh investment which will help to generate more jobs as well as make India a manufacturing hub in the future," she said on the corporate tax reduction. On December 3, the finance minister said the government is open to further reforms for making India a more attractive investment destination.

The economic slowdown continues to impact Income Tax collections across the country with many states faring poorly. As per the latest figures, the all-India collections made by Income Tax department (from April 1 up to Nov. 23) for financial year 2019-2020 stand at a little over Rs 5.44 lakh crore, registering an all-India growth of 0.6%.

Finance minister Nirmala Sitharaman on Monday introduced the Taxation Laws (Amendment) Bill, 2019, in the Lok Sabha to replace an Ordinance slashing corporate tax rates to stimulate economic growth. The minister also introduced the International Financial Services Centre Authority Bill, 2019, to provide for a unified financial regulator for IFSCs. Notwithstanding its acute budget constraints, the government on September 20 unveiled a massive fiscal stimulus of Rs 1.45 lakh crore or 0.7% of the gross domestic product (GDP), in the form of surprise, more-than-asked-for tax cuts for the corporate India.

The Finance Ministry on Monday said that computer software, mining and three other business segments will not be eligible for the 15 per cent corporate tax rate. Now, it is clear that the new 15 per cent corporate regime is only for the new manufacturing businesses. Also, it has clarified that the losses on account of merger and amalgamation will not be taken into consideration for computing 22 per cent corporate tax for existing businesses. All these were part of new Taxation Laws (Amendment) Bill, which will replace an ordinance promulgated on September 20 to bring in effect a reduction in corporate tax.

Finance Commission chairman NK Singh on Monday stressed that the government must complete unfinished tax reforms to improve the woefully inadequate tax buoyancy witnessed in the past one-and-a-half years, while advocating that simple direct tax code should be implemented soon and that the GST Council ought to go to the drawing board to address compliance issues. Singh said that the tax buoyancy should at least be 1.2-1.3 for the country. However, according to an estimate by FE, if the revenue collection trend for the April-September period holds for the entire year, the buoyancy would only be 0.2. This would be the lowest tax buoyancy recorded at least since FY14. The buoyancy, which typically refers to the ratio of tax growth to nominal GDP growth, has been steadily declining from a high of 1.6 in FY16. However, Singh said that recent measures taken by the finance ministry would have multiplier effect in the long term. “We need to see healthy, robust tax buoyancy for which the finance ministry has announced major initiatives, including changes in the GST compliance, which I think will have a multiplier effect.

The government is working towards fully auto-populated income-tax returns. The modified form will likely include information on tax liability on gains from stock trade, dividends from mutual funds and interest earned from saving accounts, according to official sources. The income-tax department has had several rounds of meeting with depositories, mutual funds and banks to ascertain the feasibility of more comprehensive returns. Currently, some returns (ITR-1 and 2) are pre-filled, with information related to the taxpayer and employer, break-up of the salary into taxable component and tax deducted at source (TDS) through Form 16, and the final liability featuring among the entries. While the electronic form gets automatically populated with tax liability on fixed deposit interest as that bank deducts the tax at source, the assessee still has to manually fill in the liability regarding interest earned on saving account as there is no TDS on the same.

Software development is not manufacturing and will not be eligible for the 15% tax rate applicable to new manufacturing entities, a government official said.The government will table a Bill in Parliament in the upcoming winter session to clarify this and other related matters. The Bill will replace its earlier ordinance in September."The amendment Bill will clarify that 15% corporate tax rate is only for new manufacturing entities and that software development is not manufacturing," the official, who is privy to the development, told ET.The amendment comes after industry sought clarity on whether software development could be treated as manufacturing and be eligible for the reduced tax rate. 72101556 On September 20, finance minister Nirmala Sitharaman slashed the corporate tax rate to 22% for companies that do not seek exemptions or incentives, and to 15% — from the current 25% — for new manufacturing companies.

India and Switzerland have expressed satisfaction on the progress made over the past few years in the area of administrative assistance in tax matters, particularly the efforts made by this Alpine country in providing assistance in HSBC cases. This emerged at the meeting between Revenue Secretary, Ajay Bhushan Pandey, and the visiting Switzerland State Secretary for International Finance, Daniela Stoffel, in the Capital on Wednesday. Welcoming the first transmission of financial account information on automatic basis between the two countries in September 2019, the Secretaries reiterated their countries’ commitment to global tax transparency for tackling offshore tax evasion.

In the face of global outrage at the little or no tax paid by some of the world’s largest multinationals, the G20 appointed the Organisation for Economic Co-operation and Development (OECD) a few years ago to design alternatives to end these abuses. In response, on October 9, 2019, the OECD put forward proposals for a new international tax system that may be imposed on the world in the coming decades. We are talking about a major issue. In the US, for example, 60 of the 500 largest firms — including Amazon, Netflix and General Motors — paid no taxes in 2018 despite a cumulative profit of $79 billion. These misappropriations, often legal, are based on complex arrangements but derived from a simple principle.

India’s share of tax from multinational digital companies like Google and Facebook, among others, would be substantially lower than the current mop-up under equalisation levy if the taxation formula suggested in the OECD consultative paper is applied. The OECD formula seeks to distribute ‘residual profit’ among jurisdictions where taxability is established. The government collected about Rs. 900 crore in equalisation levy for FY19. India and other developing countries want that the entire profit of these companies should be in play for taxation. The portion of total profit liable for taxation in a given territory should be proportional to the sales made by the firm within the jurisdiction, an official said. But the consultative paper released by OECD said that the ‘residual profit’ should be apportioned among countries.

The government could boost its revenues by more than Rs 55,000 crore if it implements a task force report that calls for a complete rejig of income tax slabs and capital gains tax regime, two persons familiar with the content of the report said. “There could be an overall gain in revenues if the recommendations are implemented in full,” one of the persons said. The government has begun examining the report of the task force on direct taxes, and it is expected that some its recommendations may find place in the upcoming budget. The report, which is yet to be made public, has suggested a radical shift to taxation approach by suggesting no prosecution or reopening of assessment for people who declare and pay higher income tax for a past period of up to six years with interest and 50 per cent penalty. “It has been seen that taxpayers do not pay higher tax for a past period for fear of reopening of assessment and prosecution,” said the second person cited earlier.

India has sought changes in the Organisation for Economic Cooperation and Development (OECD) proposal on digital taxation, saying it would deny the country its proper share of taxes from multinationals such as Google, Facebook, Uber and Netflix, which generate substantial revenues locally. The government has proposed a more balanced principle for the taxation of such companies based on place of revenue generation. “We want a fair share in revenues that accrue to the company from the country,” said a government official aware of the development. India has submitted its concerns to the body. The OECD had on October 9 released a draft on taxing digital companies for public comment. Discussions on the proposal are to be held on November 21-22. All countries have to agree for the rules to be enforced.

India and the US on Friday committed to enhance cooperation in tackling money laundering and combating the financing of terrorism. In a joint statement issued after the seventh Meeting of the Economic and Financial Partnership (EFP), the two countries noted that their relationship has strengthened over time as both sides have developed a holistic approach on tackling money laundering and combating the financing of terrorism (AML/CFT), which are the issues of shared concern. The Indian delegation was led by Nirmala Sitharaman, Minister of Finance and the US side was led by Steven Mnuchin, the US Secretary of the Treasury. "Our cooperation includes but is not limited to, information exchanges to combat global terrorist financing and to support the designation of specific terrorist facilitators and financiers, coordinating on AML/CFT and maintaining the integrity of the Financial Action Task Force (FATF) global standards for AML/CFT," the statement said.

Abolishing dividend distribution tax, securities transaction tax and long-term capital gains tax on shares could burn a Rs 80,000 crore hole in tax revenue, making it difficult for the government to offer any immediate concessions. The government has already slashed corporate tax rates, foregoing Rs 1.45 lakh crore, and more tax concessions will have to be made up for by increasing income tax on the super-rich or cutting welfare spending, both of which are not feasible, a government official aware of the matter told ET. The benchmark BSE Sensex crossed the 40,000 mark on Wednesday, building on the big gains of Tuesday after reports that the government may abolish the three equity transaction-related taxes. There are limited options to absorb the revenue loss if these taxes are abolished, said the official, adding that welfare expenditure for schemes such as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and MGNREGS cannot be cut, given weak demand and rural stress. The Reserve Bank of India said the country’s GDP growth will slow to 6.1% this year from 6.8% last year.

The government is unlikely to moderate personal income tax rates for the rich due to fiscal stress on account of lower tax realisation amid slowdown in the economy, sources said.

Abolishing dividend distribution tax, securities transaction tax and long-term capital gains tax on shares could burn a Rs 80,000 crore hole in tax revenue, making it difficult for the government to offer any immediate concessions.