Anti-avoidance tax rule to kick in from April 2017 

Tax anti-avoidance rule GAAR will kick in from April 1, 2017, the tax department said today. | Anti-avoidance tax rule to kick in from April 2017 Tax anti-avoidance rule GAAR will kick in from April 1, 2017, the tax department said today. In its 2016 year-end review, the Central Board of Direct Taxes, which is the apex policy making body of the I-T department, listed its major achievements. "Major achievements of CBDT in the current financial year 2016-17 so far include, among others, Enactment of The Benami Transactions (Prohibition) Amendment Act, 2016, Implementation of The Direct Tax Dispute Resolution Scheme, 2016 and of GAAR from Assessment Year 2018-19," an official statement said. In May last year, CBDT had started consultation with stakeholders asking them to give their views where they require clarity before GAAR is implemented. 

General Anti-Avoidance Rule (GAAR) was part of the 2012-13 Budget speech of the then Finance Minister Pranab Mukherjee to check tax evasion and avoidance. However, its implementation was repeatedly postponed because of the apprehensions expressed by foreign investors. GAAR, which was originally to be implemented from April 1, 2014, will now come into effect from April 1, 2017 (Assessment Year 2018-19). It contains provision allowing the government to prospectively tax overseas deals involving local assets. There have been fears that the government may use it to target P-Notes. Through the use of GAAR, government may try to tax P-Notes as indirect investments, which could attract a tax rate of up to 15 per cent, experts say. To avoid tax altogether under GAAR, an investor may have to prove that P-Notes were not set up specifically to avoid paying taxes. Finance Minister Arun Jaitley had in his Budget speech in 2015, deferred GAAR implementation by two years and also said that the investments made up to March 31, 2017 shall not be subjected to GAAR, which was to be applied on those claiming tax benefit of over Rs 3 crore

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FM: Apr-Dec direct tax collections up 12%; indirect tax up 25%

 Personal income tax collection up 24.6%; direct tax collected is 65.3 percent of the total budget estimate; refunds during April-December grew 30.5 percent Arun Jaitley, Finance Minister,  Aided by robust personal and corporate income tax, direct tax collection during the first nine months of the current financial year 2016-17 grew 12.01 percent on year to Rs 5.53 lakh crore. Indirect tax, which includes central excise, service tax and customs, collected during April-December indicate net revenue were Rs 6.30 lakh crore, up 25 percent on year, finance minister Arun Jaitley said on Monday. “…growth rate under Corporate Income Tax (CIT) is 10.7 percent while that under Personal Income Tax (PIT) (including STT) is 21.7 percent 

 However, after adjusting for refunds, the net growth in CIT collections is 4.4% while that in PIT collections is 24.6 percent,” finance ministry said separately in a release. The direct tax collected is 65.3 percent of the total budget estimates of direct taxes for financial year 2016-17. Refunds during April-December grew 30.5 percent on year to Rs 1,26,371 crore and have already been issued, the release said. Central excise net tax collections were Rs. 2.79 lakh crore during April-December, up 43% on year, while service tax during grew nearly 24 percent on year to Rs 1.83 lakh crore, he said, adding that net tax collections on account of customs during the first three quarters of 2016-17 stood at Rs 1.67 lakh crore, up 4.1 percent on year. The finance minister also said that overall indirect tax collection in December shot up of 14.2 percent on year, with central excise and service tax rising 31.6 percent and 12.4 percent, respectively.

 Custom duty, however, declined 6.3 percent owing to lower gold imports, Jaitley said, adding that most states reported a hike in value added tax (VAT) in November mostly because of tax collection in scrapped high-denomination Rs 500 and Rs 1000 banned currency, Jaitley said. Last week finance minister Arun Jaitley had said that direct and indirect tax mop-up for 2016-17 would be higher than the budgeted estimate. He had also said that the larger integration of informal economy with formal on the back of scrapping Rs 500 and Rs 1000 notes from November 8 would lead to higher revenue to the Centre, as well as the states

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Govt may issue advisory to I-T dept on cash deposit scrutiny 

The government is looking to issue an advisory to tax officials directing them to exempt investigating cash deposits below a threshold, in an attempt to curb harassment by officials probing deposits made | The government is looking to issue an advisory to tax officials directing them to exempt investigating cash deposits below a threshold, in an attempt to curb harassment by officials probing deposits made since November 10 — according to a report in The Times of India on Monday. The taxmen are busy estimating deposits of the demonetised Rs 500 and Rs 1000 notes deposited in bank accounts between November 10 and December 30, the report said. The government had earlier assured that cash deposits of about Rs 2.0-2.5 lakh made by housewives, and smaller traders would not be scrutinised. 

The renewed scrutiny comes amid deposits of Rs 30,000 and above made into Jan Dhan accounts which had been lying dormant before November 10, the report stated. Almost the entire 15 lakh crore worth demonetised currency has reportedly made its way back to the bank accounts. Of this amount, tax authorities suspect that nearly Rs 4 lakh crore worth cash deposits may be unnaccounted wealth. MoS for Finance Arjun Ram Meghwal on December 2 informed the Rajya Sabha that on November 8 there were 17,165 million notes of Rs 500 denomination and 6,858 million notes of Rs1,000 denomination. The demonetisation exercise prompted the government to routinely revise the cash deposit and withdrawal limits. The Reserve Bank of India had, in fact, asked banks to keep a record of the deposits made by account holders along with identity details.

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Source: PTI Tax dept keeps in abeyance circular on indirect transfer

 In a relief to FPIs who were fearing multiple taxation, the tax department today kept in abeyance its recent circular on indirect transfer of shares by foreign investors. | Tax dept keeps in abeyance circular on indirect transfer In a relief to FPIs who were fearing multiple taxation, the tax department today kept in abeyance its recent circular on indirect transfer of shares by foreign investors. The Central Board of Direct Taxes (CBDT) on December 21, 2016, came out with a notification giving 19 illustrations with regard to how the indirect transfer regulations would kick in and the tax impact.

 The illustration, particularly in the context of offshore PE/VC funds and FPIs, according to experts ignored the practical issues arising from indirect transfers. representations from various FPIs, FIIs, Venture Capital Funds and other stakeholders who said that the circular does not address the issue of possible multiple taxation of the same income. "The representations made by the stakeholders are currently under consideration and examination. Pending a decision in the matter the operation of the above mentioned circular is kept in abeyance for the time being," CBDT said. Nangia & Co Partner Amit Agarwal said FII/FPIs are highly sensitive breed of investments and the circular had brought in more apprehensions than clarity

"The withdrawal of the circular is indeed welcome. The consultative process adopted by the government too deserves appreciation," Agarwal said. The December 21 circular contained responses to questions raised by various stakeholders in the context of the applicability of the indirect transfer provisions under the Indian I-T Act. While the circular was intended to provide clarity on the circumstances in which the indirect transfer provisions are to be applied, it fails to address the concerns of various stakeholders, chiefly FPIs, with regard to issues like potential double and triple taxation, onerous compliance requirements, and lack of tax neutral foreign corporate restructuring. Section 9(1) of the I-T Act was amended by Finance Act 2012 with retrospective effect to provide for taxing the gains arising out of transfer of an asset, even if registered or incorporated outside India, which derives its value, directly or indirectly, substantially from an asset situated in India

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