Thursday March 28 2013
Need to widen tax base to bring down tax rates: Revenue Secretary
Thesynergyonline Economics Bureau
NEW DELHI, MARCH 27 :
THE government is making efforts to widen the tax base on both direct and indirect taxes front to possibly bring down tax rates, revenue secretary, Mr Sumit Bose said at an ASSOCHAM event held in New Delhi.
“We are using advertisements, technology, sending out letters and are getting encouraging results as the number of returns filed are actually showing an increase,” said Mr Bose while inaugurating a ‘Post-Budget Conference’ organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“We had sent about one lakh letters of about 12 lakh cases of high value transactions we have come across but didn’t find evidences of tax returns being filed,” said Mr Bose. “We have seen an increase in the number of returns after we had sent out letters and we expect to able to encourage non-filers and stop-filers in service tax to come and pay their due share of taxes well before December.”
Hailing the union budget 2013-14, the top Finance Ministry official said, “Major achievement of the budget has been to contain the fiscal deficit to 5.2 per cent and it must be seen in the context of everything that happens in an economy across both central and state governments.”
“Fiscal deficit impacts growth, private industry, inflation and very importantly impacts country’s ability to take countercitrical measures when actually the economy doesn’t do well,” said Mr Bose. “We are able to give a boost to the growth only if we are able to reduce fiscal deficit and the fact that we need to reduce fiscal deficit because it also empowers us to take actions when economy doesn’t do well also needs to be recognised.”
The Revenue Secretary also emphasised upon the need for growth to get taxes. “Without growth there won’t be taxes and that reiterates how industry must act as partners with tax administration agency as growth is inter-linked with taxes.”
Highlighting the issue of arrest, Mr Bose said that government doesn’t intend to use such provisions indiscriminately. “The effort is to ensure that those getting away by must pay their share of taxes and these provisions must be seen in that context.”
Earlier, while addressing the ASSOCHAM Post-Budget conference, Ms Praveen Mahajan, chairperson of the Central Board of Excise and Customs (CBEC) said that government has targeted a very modest increase in both customs and central excise and this should provide some comfort to the business and industry.
“There is a very clear realisation that taxes come largely from growth and we have to collectively work on getting back to high growth path as witnessed in the past and it is not easy particularly as the global demand is suppressed terribly,” said Ms Mahajan.
On the issue of arrest, the CBEC chief said, “The arrest will be effective only when a considerable amount i.e. Rs 50 lakh is involved and only when it has been collected as service tax but has not been paid to the government as that would practically be a breach of trust.”
She further said that CBEC would be coming up with strict guidelines and arrest would be made at the level of commissioner, so there is no likelihood of anyone coming across an unwarranted harassment.
On the issue of input tax credit which has been pending for over 1.5 years, Ms Mahajan said that she will meet the industry representatives in April and assured of being able to find a solution to it in April itself.
“The budget proposals contain additional proposals for resource mobilisation, however this do not impinge on the growth prospects of the industry,” said Dr. Poonam Kishore Saxena, chairperson of the Central Board of Direct Taxes (CBDT) while addressing the ASSOCHAM Post Budget Conference.
“It is in the interest of the department that industry grows at a higher growth level as both are partners in the growth of the nation and we need to jointly dispel any impediments in the path of India’s success,” said Dr. Saxena.
50 % income tax rebate on road
safety donations to lure firms
Thesynergyonline Economics Bureau
NEW DELHI, JANUARY 27 :
THE Union government has allowed income tax exemption on 50 per cent of the amount that people/ entities contribute for road safety activities. The road transport and highways ministry notified this recently. This has been done at behest of request made by Punjab Chief Minister Parkash Singh Badal to Prime Minister Dr Manmohan Singh. This is likely to motivate people to donate generously for such activities.
As per circular issued by the Ministry of Finance the Income tax exemption is allowed exemption to "donors of funds/ institutions carrying out road safety programmes through engineering measures; enforcement, education and emergency care." It further says that once a fund or institution is set up for carrying out such road safety programme, it may seek registration under Section-12AA (charitable or religious trust) and approval under 80G of the IT Act, which provides for tax exemption of 50 per cent on the amount invested for this purpose.
Expressing concern at growing number of fatal road accidents in the country and Punjab, State’s Chief Minister Parkash Singh Badal had written a letter to Prime Minister Dr Manmohan Singh requesting income tax exemption for industry , corporate houses, NGO’s and media investing in the road safety programmes approved by the government in the forthcoming Union budget for the Financial year 2012-13. PM had Forwarded his request to the Ministry of Finance.
Chief Minister Mr Badal in his letter had urged the Prime Minister to forward suitable directions to Ministry of Finance to include Income tax exemption for road safety investments for improving road designs and a focus on pedestrian safety, safer vehicles, motorcycle helmets, seat belts, action on drink driving, driver training and licensing and tackling speed, better road engineering, regular road audits, making road safety part of school curriculum can help reduce fatal road accidents.
Mr Badal had lauding the role of International Road Federation (IRF) promoting road safety world wide and supporting the United Nation’s Decade of Action plan for Road Safety across the world aiming to reduce road fatalities by 50 per cent by the year 2020 urged the PM to also direct the planning commission to include the UN programme in the 12th Five year plan for urgent implementation and putting in place a strong monitoring mechanism to check road deaths.
International Road Federation (IRF) Chairman, K.K.Kapila, first Indian to be elected to head the Geneva based global body appreciated Mr Badal’s concern for road fatalities said Punjab is first government to take such initiative in India.
"We had approached the CM to pursue our case and he had sought full exemption on the lines of concessions extended to companies for spending on promotion of family planning, HIV-AIDS prevention. But a good beginning has been made. We will be pursuing for 100% exemption. This will motivate more and more people to come forward to contribute for road safety. Companies should put parts of their fund kept aside for corporate social responsibility for saving lives," K K Kapila chairman of International Road Federation (IRF) said.
The latest road accident report prepared by government put the total fatalities over 1.42 lakhs in 2011 and number of injured persons is almost 400 per cent more.
Revenue Heads of BRICS identify
seven areas of tax policy
Thersynergyonline Economics Bureau
NEW DELHI, JANUARY 18 :
AFFIRMING their continued commitment to promote closer coordination and cooperation in the area of tax administration, the Heads of the Revenue of the BRICSi.e. Brazil, Russia, India, China and South Africa, identified seven areas of tax policy and tax administration, for extending their mutual cooperation. This was contained in the joint communique issued here on Friday at the end of two day meeting of the Heads of Revenue of BRICS . The mutual cooperation includes contribution to development of international standards on International Taxation and Transfer Pricing taking into account the aspirations of developing countries in general and BRICS Countries in particular.
The other areas of cooperation are strengthening the enforcement processes, sharing of best practices and capacity building, sharing of anti-avoidance and non-compliance practices and promotion of effective exchange of information.
The communiqué expresses the concerns of BRICS at the erosion of the tax base by practices that involve abuse of tax treaty benefits, incomplete disclosure of information and fraudulent claims and makes a commitment to address these concerns by preventing the base erosion and profit shifting through mutual cooperation.
The communiqué also expresses an agreement amongst BRICS Countries for working together towards capacity building, improvement of systems and sharing of resources, knowledge and best practices and emphasizes the spirit of cooperation and solidarity that underlies the BRICS partnership and aims at extending it to the area of tax administration in a way that will benefit the people of BRICS Countries.
The Heads of Revenue of BRICS earlier met in New Delhi on January 17-8 ,, 2013 and held discussions on issues relating to International Taxation, Transfer Pricing, Prevention of Cross-border tax evasion and avoidance, exchange of information, sharing of best practices in tax system administration and resolution of disputes. The meeting was inaugurated by Finance Minister of India on 17th January and was concluded on 18th January, 2013 by the Revenue Secretary Shri Sumit Bose.
This was the first meeting of the Heads of Revenue and on conclusion of the meeting, a joint communiqué was issued in which the Revenue heads of BRICS agreed to develop greater cooperation among their tax administrations on various issues of mutual interest and concerns. The communiqué recognizes the importance of the economic and commercial links amongst BRICS and the need to contribute to the strengthening of these links.
Call for better cooperation among
BRICS in tax administrastion
Thesynergyonline Economics Bureau
NEW DELHI, JANUARY 17 :
THE Union Finance Minister Mr P.Chidambaram emphasises the need for greater cooperation among (Brazil, Russia, India, China and South Africa
(BRICS) in the area of tax administration.
The Finance Minister reiterated the commitment of the Government of India to a stable tax regime, moderate tax rates, non- adversarial tax administration and a fair mechanism for dispute resolution.
He added that India has been modernizing its tax administration in a way that will minimize transaction costs and maximize taxpayer convenience, without compromising the deterrence factor.
Mr Chidambaram was addressing the participants after inaugurating the meeting of the heads of the Revenue Departments of five BRICS countries, i.e., Brazil, Russia, India, China and South Africa here today.
He stated that tax administrations are faced with new challenges that include providing quality taxpayer services to take care of taxpayer expectations, protecting and increasing domestic tax revenues, and allocation of taxing rights and sharing of taxable income from cross border dealings between countries.
This two day meeting, the first of its kind, aims at enhancing the co-operation among tax administrations of BRICS countries. The respective country delegations are being led by Mr. Carlos Alberto Freitas Barreto, Secretary, Federal Revenue of Brazil, Mr. Aleksey Overchuk, Deputy Commissioner, Federal Tax Service of Russia, Mr. Xiao Jie, Commissioner of State Administration of Taxation, China, Mr. Oupa Magashula, Commissioner, South Africa and Shri Sumit Bose, the Revenue Secretary of India.
Dr Poonam Kishore Saxena, Chairperson, CBDT, Ms. Promila Bhardwaj, Director General (International Tax), Shri K. Ramalingam and Shri Sanjay Kumar Mishra, Joint Secretaries are part of the Indian delegation.
Addressing the participants, the Finance Minister Mr P Chidambaram further observed that during the last two or three decades, the global economy has been undergoing significant transformations, and BRICS countries have been at the centre of this economic change.
He stated that it would be a good idea to hold deliberations and even try to come out with agreed stands on issues of mutual concerns so that BRICS countries can play a more proactive role in modifying and developing existing international standards on international taxation and transfer pricing in order to safeguard their tax revenue interests.
He felt that this meeting can help in developing a roadmap for such coordination. During the two day meeting, the participants are likely to deliberate on issues of mutual concerns related to tax administration, including those pertaining to international taxation, transfer pricing, cross border tax evasion and avoidance, tax dispute resolution mechanisms. The meeting is being hosted by India, which presently holds the chair of the BRICS group.
Concern over tax assessments
(ASSOCHAM wants correction as FM
begins pre-budget consultations)
Thesynergyonline Economics Bureau
NEW DELHI, JANUARY 06 :
SHOWING a grave concern over the fact that notices for reopening of assessments by the tax authorities are being issued in thousands in recent times, ASSOCHAM said returns should not be re-opened beyond three years.
As Finance Minister P Chidambaram has started his pre-budget consultations with different stakeholders, the ASSOCHAM has submitted a detailed memorandum to the Finance Ministry seeking changes in Sections 147/148 of the Income Tax Act . These sections relate to the tax re-assessment on matters already examined or in a blanket manner.
“In recent times, tax reopening notices under sections 147/148 have become a very common occurrence and such notices are being served in thousands across the country, the ASSOCHAM memorandum said. It appears that there is no consideration in following the principles on the subject laid down by the Supreme Court and High Courts over the years, it added.
Simple audit observations, even on points of law, are frequently being used as grounds for re-opening leading to “extreme harassment of all assesses. In fact, the position has become so bad that even for legislations which have become obsolete, like Interest Tax (withdrawn in Finance Act,2001), reopening are being done for very old years since the relevant law permitted reopening without any time limit”, added ASSOCHAM paper.
ASSOCHAM president Rajkumar N Dhoot said the provisions relating to reopening of tax assessments are being misused in different locations, particularly for salaried assesses, where scrutiny assessment is not possible as per the CBDT (Central Board of Direct Tax) guidelines. This has become a breeding ground for corruption and harassment.
“It is suggested that a new proviso to Section 147 should state tall matters which have been examined in the original assessment should not be reassessed,” said Mr Dhoot. He also said the annual income tax assessment/reassessment procedure should be normal and routine and should not provide for excessive powers to harass assesses.
In another recommendation, the chamber has suggested removal of levy of dividend distribution tax (DDT) which has a cascading effect in a multi-tier corporate structure.
“It is recommended that the cascading effect be removed by allowing credit of DDT-borne dividends in all cases of dividends received including those from non-subsidiaries or mutual funds”, added Mr. Dhoot.
The removal of DDT will infuse a huge confidence in the stock market, which will then pave way for several corporate burdened with huge debts to deleverage their balance-sheets through raising of capital in the markets.
Despite some of the successful follow-on offers in the market in the recent few weeks, the retail investors have not fully participated in the rally which is mainly driven by liquidity in the global markets prompting the foreign institutional investors to infuse big funds and sending the Sensex to near 20,000 level.
TDS accounts for 55% and 46% of total direct tax collections from India ,Delhi
Thesynergyonline Economics Bureau
NEW DELHI, DECEMBER 11 :
THE tax deduction at source (TDS) currently accounts for about 55 per cent of the overall direct tax collections from across India and about 46 per cent of the direct tax collections of the Delhi 0region, Ms M Sailo, chief commissioner income tax, Delhi-1 said at an ASSOCHAM event held in New Delhi ON Tueasday .
“With the changes in the law and mandatory processing of TDS statements, the TDS administration has become an integral part of our overall organisational setup,” said Ms Sailo while inaugurating a national seminar on TDS organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“Looking closely at the revenue growth, we see the importance of TDS, for instance, currently the all India collection of direct taxes stands at over Rs 2.82 lakh crore out of which TDS accounts for Rs 1.54 lakh crore which is as of today is 55 per cent of total collections,” said Ms Sailo. “In Delhi charge itself out of the total collection of over Rs 43,000 crore so far, TDS alone accounts for about Rs 20,000 crore i.e. 46 per cent of total collections of Delhi region.”
The TDS collections in Delhi is growing at a healthy rate of about 17-18 per cent, said Ms Sailo while hoping for the growth to continue at the same rate during the remaining financial year.
The chief commissioner income tax, Delhi-1 also acknowledged the effective role played by the deductors in the success of TDS.
Ms Sailo further said that success of TDS administration is an example of effective holding of tax administration under deductor assessee in the partnership to collect taxes. “We need to continuously explore further ways to strengthen this partnership and also promote voluntary tax compliance.”
The tax deductors with a strong tendency of holding back taxes deducted deprives the government of its much needed taxes, said Ms Sailo while informing that the Central Board of Direct Taxes (CBDT) has taken serious note of such tax deductors and has ordered the officers to launch prosecution in fit cases.
“The CBDT has taken serious view of non-filers and has incorporated a new section 234E in the Act which levies a fee of Rs 200 for everyday of delay and the system does not accept the TDS statement until the delay fee has been paid,” said Ms Sailo. “Further a new penalty, section 271 H has been introduced specifically for failure to file TDS statements.”
Talking about the computerisation of processes, Ms Sailo said that administration is facing the teething problems and will come across various glitches and there is a need to remain patient during this course of transition.
“In the TDS charge all the work is done over the system and the processing often leads to a mismatch as particulars filed do not match the payment particulars,” said the chief commissioner income tax, Delhi-1.
Talking about the errors made by deductor assessee while filing the TDS statements, Ms Sailo said, “Deductors are urged to file the collection returns and clear the demands which may be due to errors or they can approach the AO-TDS for giving credit to challans available, however, the balance demands have to be paid up.”
“For the current remaining financial year the field officers of TDS would continue with their work of processing the TDS statements and attending to rectification,” said Ms Sailo while talking about the Central Processing Centre which is being set up.
The Local Standing Committee on TDS looks after resolving the various practical problems faced by the deductors, said Ms Sailo. “Such committees are present in each of the 18 TDS commissioneraites spread all over India.”
Ms Sailo also urged the industry and other stakeholders to take immediate steps to resolve the mismatches and to continue with the statutory functions cast upon us as the collection of taxes by way of TDS is one of the ways of contributing towards the sovereign function of the state.
CBDT notifies guidelines for advance pricing agreements
Thesynergyonline Economics Bureau
NEW DELHI, AUIGUST 31 :
THE Central Board of Direct Taxes (CBDT) notified operational,guidelines for Indian advance pricing agreements (APA) and necessary forms on Friday. This is in a bid to to prevent transfer pricing disputes .
A bare reading of these rules suggests that they broadly conform to the practices followed in other counties.
The rules will guide companies on pricing cross-border movement of goods and services in advance for the purpose of calculating taxes, within group entities.
These rules lay down the following.
• APA can be filed for ongoing transactions before the commencement of the financial year or proposed transactions.
• Bilateral and multilateral agreements, apart from unilateral agreement.
• Pre-filing meetings / consultations with the authorities could be either on named basis or anonymous basis.
• The filing fee is in the range of INR one million, 1.5 million and 2 million where the international transactions value is not exceeding INR 1000 million, INR 2000 million and above INR 2000 million, respectively.
• The applicant can choose the tenure of the agreement not exceeding 5 years.
• The rules provide for withdrawal of application at any point before conclusion of negotiation. However, the rules are silent about using the information for audit purpose upon withdrawal.
• The applicants have to file annual compliance reports within thirty days of the due date for filing the tax return or within ninety days of entering into the APA whichever is later.
• The transfer pricing offer having jurisdiction will carry out compliance audit to ensure satisfaction of critical assumptions and correctness of the supporting data and information, apart from confirming the consistency in application of transfer pricing method.
• These rules provide for revision, renewal. Further, the rules also provide for cancellation by either of the parties in the circumstances specified in the rules.
• Until the conclusion of APA agreements, the applicants are expected to comply with the regular compliances including filings and audit.
With rules available and the necessary teams in place, it is now possible for multination enterprises to use the APA mechanism to get certainty on their transfer pricing. Success of the APA mechanism would depend a lot on how the authorities entrusted with implementation of this mechanism will carry the negotiation.
The rules prescribe minimum filing fee of Rs 10 lakh per application for all international transactions up to Rs 100 crore.
For international transactions between Rs 100 crore and Rs 200 crore, the fee is Rs 15 lakh. For transactions above Rs 200 crore, the filing fee has been pegged at Rs 20 lakh.
On entering into advance pricing agreements the company is absolved of future litigation and slew of compliance procedures.
Accordin to Mudigonda Vishweshwar, Senior Director, Deloitte in India, "
The long awaited advance pricing agreement (APA) rules have been notified a little while ago and these rules are in the expected lines. These rules are exhaustive and provide for bilateral and multilateral arrangement. Every company which is proposing to enter into an APA has to necessarily attend a pre-filing consultation with the Income Tax Authorities. This pre filing consultation can also be on a no name basis if the company is not willing to share all the details at this stage. "
This pre filing consultation would help the companies to understand the approach to be adapted by the authorities actually before entering into the agreement. Once the company is comfortable to take it forward, then it can file an APA application with the authorities. Further, they can withdraw the application at any time before it is signed. These rules also provide for other procedures such as cancellation of agreement, renewal of agreement, etc, he said .
Any company proposing to enter into the agreement has to provide a lot of information to the authorities and also need to provide critical assumptions relating to its future business. The rules also provide for change or amendment to the agreement, if there is any change in the assumptions or change in the business scenario submitted earlier at the time of negotiation of the APA, he added.
Once the company enters into an agreement, it is absolved from the future litigation and also lot of compliance procedures. However, the taxpayers need to file an annual compliance report every year within a month from the date of filing the Income Tax Return. The Income tax Officer has to complete the audit of this report within six months from the date of filing. If implemented with a right spirit of negotiation, APA will eliminate unnecessary litigation.
Success of APA would depend on how the authorities negotiating the APA would deal with the applicant especially during the pre-filing meeting and also in the initial period of filing an APA .
"APA rules will not only help reduce transfer pricing litigation but also prevent disputes, especially in Indian situation when adjustments are relatively higher and appeal process is longer," according to Samir Gandhi, Partner, Deloitte, Haskins & Sells.
Salaried employees in India can save more than 4 to 10% taxes
Thesynergyonline Economics Bureau
NEW DELHI, JULY 30 :
ACCORDING to the "Tax Ratio Report 2012" released by TaxSpanner.com, India's largest Government accredited intermediary for filing of tax returns, salaried employees in India can save more than Rs. 15,000 on average in taxes every year with careful and efficient tax planning. Tax Ratio is the percentage of gross salary paid as tax.
Says CA Sudhir Kaushik, CFO, TaxSpanner,* "With some careful optimization, you can pay the minimal amount as tax. All it takes is investing in the right things, like buying a house, getting your family insured, educating your children and planning for your retirement. Improve your quality of life and tax laws give you benefits in terms of deductions."
The study covered employees from over 500 corporates in major cities, including the Delhi NCR, Mumbai, Chennai, Bangalore and Hyderabad. A questionnaire was administered to the employees in these companies.
*TOP 5 REASONS WHY YOU COULD BE PAYING MORE TAX THAN YOUR PEERS:*
REASON 1: IGNORING HRA EXEMPTION - Around 27 percent of salaried employees do not claim HRA exemption.
Anil and Karan may be getting the same salary, but one of them may outsmart the other. Both Anil and Karan live with their own parents. Anil pays household expenses to his parents on a monthly basis. Karan simply makes this payment as rent to his parents who (being older) fall in a low-income-tax-slab. And, Karan claims HRA exemption against this. Now, that's tax optimization- tax saving, the smart way.
As per the report Salaried individuals having income more than Rs 10 lakh are less likely to claim HRA exemption than taxpayers in the lower salary brackets. It is possible that many of them are not aware that both HRA and home loan benefits can be claimed simultaneously.
REASON 2: NOT CLAIMING MEDICAL INSURANCE PREMIUM DEDUCTION - About 74 percent employees do not claim deduction under Section 80D.
Given how Anil keeps falling sick every now and then, he would have saved a lot of money. How? All he needed to do was buy himself a mediclaim policy.
Let the insurer bear the medical expenses. The premium paid for the policy can be claimed as deduction.
The report reveals that while 38 percent of filers in Bangalore have taken medical insurance (the maximum in any city), only 13% of NCR filers have claimed this deduction. This indicates how 80D claim is underutilized in general.
Only 19 percent of those with income upto Rs. 5 Lac take medical insurance, when they are the ones who can benefit the most from it in case of any emergency.
REASON 3: FAILING TO CAPITALIZE ON HOME-LOAN TAX BENEFITS - About 81 percent of employees do not own a house, despite having an average salary of Rs. 5 lakh p.a.
Anil tries to save every rupee of his salary that he can, hoping that
someday he'll be able to buy his dream home. But, property prices in the metro kept him from owning one. Karan also has a dream to buy a house. He made it come true. After making a decent sum of money, he took a loan and bought a home in his hometown. That's not all. He is getting a regular rental income out of it and claiming home-loan tax benefits.
REASON 4: NOT INVESTING IN TAX SAVING INSTRUMENTS - About 65 percent employees have invested less than the exemption limit under Section 80C.
Anil always wondered why his TDS was more as compared to Karan, when he and Karan earned the same salary. On some probing, Anil found that while he kept his extra earnings lying idle in the savings account, Karan invested them in tax saving Fixed Deposit. This way, Karan not only saved a significant amount of tax but also earned a higher return. Karan was also
able to have a long term investment, against which he could raise a loan in case of emergency.
REASON 5: NOT REPORTING INCOME FROM OTHER SOURCES- Almost 94 percent of employees, who are liable to pay more than 10% of their taxable income as tax, do not report income under the head "Other Sources".
The Income Tax Department sent Anil a notice. What had happened was that Anil made the mistake of not reporting his income from bank interest. He assumed that he did not need to declare this income as the bank had already deducted TDS on it. The bank had deducted TDS at 10 percent . However, Anil fell in
the 20 percent income tax slab. Thus, he had to pay tax apart from TDS. The Income Tax Department discovered this on scrutiny and sent Anil a notice, asking for a penalty of 300 percent of the tax evaded.
Karan made it a point to report income from all sources, including bank interest, dividends, prize winnings, etc. while filing his tax returns. As many as 87 percent salaried individuals having income more than Rs 15 lakh do not disclose interest income earned on their savings bank account.