Nandhakumar & Sundaran

Firm of Indian Chartered Accountants

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With the rollout of the goods and services tax (GST) about two weeks away, the government machinery is stepping up preparatory efforts. TheCentral Board of Excise and Customs(CBEC) has written to field officials to beGST ready and ensure a smooth transition to the game-changing tax reform when it’s rolled out on July 1.  In a communication to field formations sent on June 12, CBEC chairman Vanaja Sarna has listed a number of action points that include assisting businesses to migrate to the new regime.  The note follows a detailed stocktaking meeting on GST preparedness by Prime Minister Narendra Modi last week. “GSK (GST Suvidha Kendras) should be a one-stop solution for taxpayers seeking advice/information on GST, including assistance in real-time registration, payment,” Sarna said in the letter.  As many as 25 states have passed SGST (state GST) legislation and some more are expected to do so soon. The Centre has completed migration of 82.74% of its taxpayers to GSTN (GST Network). The enrolment window has been reopened from June 1 to 15. It had originally been open from November 8 last year to April 30.  Sticking to Schedule The government is no mood to delay GST with industry having begun stock planning for the switchover. While some industry sections want it deferred, others favour a July 1start. “Industry has begun planning its stocks now… Any delay would now create issues,” said a government official.  The Confederation of All India Traders (CAIT), a key grouping of retailers, backed a July 1 rollout but with an interim period in which traders will not be penalised. “We support implementation from July 1… However, an interim period should be provided in which traders will not be penalised for lapses,” said Praveen Khandelwal, secretary general, CAIT.  Key procedures such as raising invoices, availing input credit, integration of goods and services, compulsory rating of each entity registered under GST are entirely different from the current value-added tax (VAT) regime, CAIT said.  “Till the time traders across country are equipped with technology, some in-between measures need to be adopted to help the traders with compliance of GST through digital technology,” Khandelwal said, adding that CAIT and its member associations can act as facilitation centres. Khandelwal said traders were still facing issues in migrating to the new system from VAT. Efforts by the states, which wanted to keep the administration of small taxpayers under GST with themselves, are yet to match the Centre’s efforts in reaching out to small traders.  The Centre is attempting to reach out to businesses and industry through special townhall meetings by the revenue secretary. The next meeting is proposed to be held in Uttar Pradesh, which has a large small taxpayer base.  A finance ministry official said that to ensure small taxpayers don’t face much trouble under the new regime, the GST Council had on Sunday raised the threshold of the composition scheme to Rs 75 lakh from Rs 50 lakh annually. This scheme allows manufacturers, traders and restaurants to pay tax at 1%, 2% and 5%, respectively, with lesser compliance. [ The Economic Times ]

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GST rates finalised but industry frets over unpreparedness, infrastructure concerns

With not even three weeks left for implementation of GST, India’s biggest tax reform, there still seems to be a lot of uncertainty over the manner in which it will be implemented. While the government has said multiple times that the reform will noticeably reduce the compliance cost for taxpayers and harmonise the tax structure across states, integrating all taxes levied on goods and services into one regime is easier said than done. Ridham Desai, MD, Morgan Stanley, said in an interview with CNBC-TV18, that in the short term, goods & services tax (GST) could trigger some correction in the market. He said that Morgan Stanley recently conducted a survey of micro and small manufacturing and services companies, wherein almost half of the firms surveyed said that they are not prepared for GST launch on 1 July. In fact, 90 percent of them expressed the need for training. Hence, there is a possibility that when GST get launched, we face some amount of disruption on growth. Here are some of the challenges to a smooth implementation of GST: Race against time The GST rules have been finalised and notified only last month and some states are yet to notify their laws. With hardly few weeks left before the rollout of GST, there is still confusion about the manner of implementation. Apart from the legislative bodies involved, many companies are yet to put new systems and softwares in place, while some organisations are still in the process of floating tenders for hiring financial consultants. Infrastructure GST is a technologically-driven system where every transaction – from invoicing to the payment of tax – has to be done digitally. Although the government has invested heavily in building a technological ecosystem, the taxpayers – companies and individuals – will still need to purchase proper Enterprise resource planning (ERP) and other business process management softwares or hire third-party software providers. The companies will also need to capture input tax credits on their own before reconciling the same with suppliers’ returns as the tax credits will get blocked in case of any mismatch. So these businesses will have to hire additional manpower as well. Technological move GST being a fully IT-enabled platform, its success hinges on the fact that how well taxpayers adapt to it. Many small traders/entities still file tax returns manually and for such taxpayers, the shift from offline to online alone will be a big hindrance apart from the increased number of returns they’ll have to file under GST. Input credit woes Although the limit on input tax credit without excise payment receipts on items with tax rates at 18% and above has been increased to 60% against excise payments from 40%, for items in lower tax slabs the limit remains the same. This loss of input credit will force wholesalers and dealers to destock inventories leading to temporary shortages. [The Financial Express]

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From July 1, Aadhaar 'must' for filing tax returns, obtaining new PAN: CBDT

New Delhi, June 10, 2017 This means every person must quote either Aadhaar number or enrolment ID number for ITR, PAN card The Central Board of Direct Taxes (CBDT) on Saturday made it clear that Aadhaar will be a "must" for the filing of Income Tax Returns or for obtaining a new PAN from July 1. The policy-making body of the Income Tax Department issued a statement stating that the Supreme Court, on Friday, had only given a "partial relief" to those who do not have an Aadhaar or an Aadhaar enrolment ID, and the taxman, hence, will not "cancel" their Permanent Account Number (PAN). The CBDT issued a three-point "effect of the judgement" of the apex court statement saying. From July 1, 2017, onwards every person eligible to obtain Aadhaar must quote their Aadhaar number or their Aadhaar enrolment ID number for the filing of income tax returns as well as for applications for PAN. "Everyone who has been allotted permanent account number as on the 1st day of July 2017, and who has Aadhaar number or is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to income tax authorities for the purpose of linking PAN with Aadhaar," it said. It explained what will happen in a case of "non-compliance" or where a person does not possess Aadhaar. "Only a partial relief by the Court (SC) has been given to those who do not have Aadhaar and who do not wish to obtain Aadhaar for the time being, that their PAN will not be cancelled so that other consequences under the Income Tax Act for failing to quote PAN may not arise," the CBDT said. If the PAN is cancelled, then a person cannot do his normal banking and financial operations and hence this relief is given. But, it has been made clear that for the filing of ITR or to obtain a new PAN, Aadhaar will be mandatory from July 1, a senior I-T official explained. Senior officials said the apex court's order given yesterday was "studied" by a high-level team of authorities from the Law Ministry, Finance Ministry, CBDT and the Income Tax Department after which this clarification has been issued. [The Business Standard]

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Now, Aadhaar made mandatory for pension, kerosene subsidy

June 4, 2017 Deadline for enrolment for pensioners fixed as Sept 30 The Aadhaar card has now been made mandatory for government subsidy on purchase of kerosene and benefits of Atal Pension Yojana. Those availing kerosene subsidy or contributing for the pension scheme will now be required to furnish proof of possession of Aadhaar number or undergo the enrolment process to get the benefits, officials said today. The last date to get the Aadhaar or enrolment for getting it will be September 30, in case of Kerosene subsidy. For the Atal Pension Yojana, the deadline for getting the Aadhaar is June 15, they said, quoting an official order. However, till an Aadhaar card is obtained, ration card, driving licence, voter identity card, Kisan passbook with photo, job card issued under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and a certificate issued by a gazetted officer or a tehsildar will be considered as proof of identity for the benefits. It has been also decided to link the Aadhaar number with the ration card issued to households availing the benefits or with the bank account for cash transfer benefit. The Ministry of Oil and Natural Gas has introduced Direct Benefit Transfer through which subsidy is transferred directly to the bank accounts of the beneficiaries, who purchase the PDS kerosene at non-subsidised rate. The decision to make Aadhaar mandatory for these two schemes will prevent leakages of subsidies and ensure that the beneficiaries get their due. For this, the central government has invoked Section 7 of the Aadhaar Act, 2016, which mandates that when the government gives subsidy, benefit or service from the Consolidated Fund of India (CFI), an individual can be asked to undergo authentication or furnish proof of possession of Aadhaar. The Centre allocates subsidised kerosene to the states and Union Territories as affordable cooking fuel for domestic use, mainly to those living below the poverty line. Under the Atal Pension Yojana, which is available to all the citizens in the age group of 18-40 years, a subscriber would receive a minimum guaranteed pension of Rs 1,000 to Rs 5,000 per month, depending upon his contribution, from the age of 60 years. The same pension would be paid to the spouse of the subscriber and on the demise of both the subscriber and the spouse, the accumulated pension wealth is returned to the nominee. [The Business Standard]

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Black money fight: Shell companies directors to face up to five-year disqualification

June 4, 2017 Directors of companies that have not been carrying out business for a long time are set to be disqualified from holding directorship in any registered firm for up to five years, as part of the government’s intensified efforts against the black money menace. Shell companies are dubious entities that are generally used for laundering illegal wealth. With nearly three lakh companies already under the scanner, the government is preparing to initiate stringent steps against the erring entities, including striking off their names and taking action against directors concerned, according to sources. Apart from serving show cause notices to companies that have been not submitting their financial statements under the Companies Act for a long time, the Corporate Affairs Ministry is in the process of preparing a database of shell firms which would further help in curbing illegal business activities. Sources said that action would be taken against the directors of the defaulting companies including, disqualification of directors under the provisions of the Companies Act, 2013. As per Section 164 of the Act — which is implemented by the ministry — a person shall not be eligible to hold directorship on various grounds including that he was a director of a company that has not filed financial statements or annual returns for continuous three financial years. Already, the ministry has identified 2.96 lakh companies which have not submitted their financial statements for a continuous period of two or more financial years. Prima facie, these entities have been found to not be conducting any business activities. By way of show cause notices to various companies, the ministry has sought to know why their names should not be struck off and strict action would follow in case the responses are not satisfactory. After completing the due process, regulatory action would start from this month onwards, sources had said. The Registrars of Companies (RoCs) in various states and union territories have issued notices to more than two lakh firms under the Companies Act, 2013, according to information available with the ministry. These notices have been issued under Section 248 of the Act. This section pertains to striking off names of companies on certain grounds. RoC can seek explanation from a company if the latter has not commenced business within one year of getting incorporated under the Act. Notice is also issued if a particular company has not been carrying out business for at least two continuous financial years and has not applied for dormant status. There are nearly 16 lakh registered companies in the country. [The Financial Express]

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GST roll-out: Tax refund on stocks without invoice may go up

40% relief may be made 60% at Council meet on June 3

In some relief for business, the goods and services tax (GST) Council might on Saturday enhance the refund limit for input taxes already paid on existing stock with traders without an invoice, up from the 40 per cent decided earlier.

This comes after strong demand from companies. The latter have argued that a partial credit refund will adversely impact the supply chain, as most distributors would like to get into the GST regime with zero heldover inventory. Business’ demand for enhancement of the refund limit ranges between 60 and 100 per cent.

“We will address the concern. We have proposed enhancing the limit from the current 40 per cent to somewhere close to 60 per cent. But, we also have to balance our revenues. We cannot give out more refunds than the tax revenues. We will give 100 per cent refund if the invoice is furnished,” said a government official, who did not wish to be named.

Under GST, tax paid on stock transfers is fully available as input tax credit. However, in the current system, dealers do not get any input tax credit on excise duty paid.

The government is also likely to propose a mechanism or guideline for high-value items where substitute documents could be furnished in the case of unavailability of bills to avail of full credit refund.

The draft transitional credit rules provide for some respite by way of 40 per cent deemed credit on the Central GST portion. “We want the industry to get 100 per cent refund for taxes already paid on inputs. So, we will also mention supporting documents that could be declared if the invoice is not available. Maybe proof from the buyer company will do,” said another official.

With about four weeks to go for the GST roll-out from July 1, the Council meeting (chaired by Union Finance Minister Arun Jaitley, with state counterparts as members) is expected to finalise rules for the transition and returns.

“Industry has demanded an increase in this 40 per cent limit as this is not sufficient to offset the loss traders might incur on transition stock, particularly where the GST rate is 28 per cent (as against the current value added tax of 13-14 per cent),” said Pratik Jain, leader, indirect tax, PwC India.  

If the limit is increased, he added, it would be good news, being needed relief for companies which have seen a dip in sales over the past couple of months due to the apprehension regarding loss of tax.

Other items

The Council will also take up the structure of the anti-profiteering body under the GST regime. And, rates for the remaining seven items where these have not been finalised — gold, textiles, footwear, handicrafts, agricultural implements, etc.

“Approval of amendments to the draft GST rules and related forms are also on the agenda, among others,” went an official statement on Friday.

And, the Centre is likely to propose an anti-profiteering body under the Central Board of Excise and Customs (CBEC), with both central and state officials. It seems likely to be headed by someone of the rank of chief commissioner. CBEC has been favoured due to its reach and personnel, which bodies like the Competition Commission of India (CCI) or Consumer Forum lack.

The proposed body would act on its own initiative against erring companies or on information from any source.

Various sections have also lobbied for a review of the rates decided earlier by the Council. In the fast-moving consumer goods sector, for instance, there is a demand for jams and pickles to be put in the 12 per cent tax bracket, as against the decision on 18 per cent. The argument is that small and medium enterprises will be otherwise hit. The Union food processing ministry has recommended a review of the rate proposed on products such as pickles, murabbas and papads.

The ministry has also forwarded Coca-Cola India's request to not include fizzy drinks in the 'sin goods' category.

Automobile makers want a lower rate for hybrid cars, at the current incidence level of 30.3 per cent, as against the 43 per cent (28, plus 15 per cent cess) decided by the Council. Union Roads Minister Nitin Gadkari has said that he will take up the case on hybrid cars with the finance minister.

The Union is likely to make a case for two different rates on biscuits, depending on their prices. And, a proposal to tax gold at five per cent.

[The Business Standard]

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Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961 - Exemption thereof.

CIRCULAR No. 18 /2017

F. No. 385/01/2015-IT (B)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

******

North Block, New Delhi

29th May, 2017

Subject: Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961 - Exemption thereof.

The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 which laid down that in case of such entities, whose income is unconditionally exempt under Section 10 of the Income-tax Act (the Act) and who are also statutorily not required to file return of income as per Section 139 of the Act, there would be no requirement for tax deduction at source (TDS) from the payments made to them since their income is anyway exempted from tax under the Act. The issue of whether exemption from TDS can be extended to more entities on these principles and whether the exemption is needed to be withdrawn in respect of some of the exempted entities was examined by the Board.

2. Examination of the eligibility of entities for exemption from TDS on the principle of unconditional exemption and no requirement to file return revealed that Circulars No. 4/2002 and 7/2015 are required to be updated to make the following changes:

Entities that meet both the above mentioned conditions but are not mentioned in the aforesaid Circulars need to be included in the list of exempted entities.

Entities that are mentioned in Circular No. 4/2002 but their exemption from income tax has since been withdrawn need to be removed from the list of exempted entities.

Entities that are mentioned in Circular No. 4/2002 but because of subsequent amendment they are now required to mandatorily file their returns of income u/s 139 need to be removed from the list of exempted entities.

3. In view of the above, a revised list of entities exempted from TDS has been drawn by adding entities in the first category listed above to the entities mentioned in Circular No. 4/2002 and Circular No. 7/2015 and removing entities in second and third categories from the list of existing entities eligible for exemption from TDS.

4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Boards or bodies, by whatever name called, referred to in section 10 of the Income-tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source, since their income is anyway exempt under the Income-tax Act -

(i) "local authority", as referred to in the Explanation to clause (20);

(ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA);

(iii) Fund, by whatever name called, set up by the Life lnsurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB);

(iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB);

(v) Body or authority referred to in clause (23BBA);

(vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC);

(vii) lnsurance Regulatory and Development Authority referred to in clause (23BBE);

(viii) Central Electricity Regulatory Commission referred to in clause (23BBG);

(ix) Prasar Bharati referred to in clause (23BBH);

(x) Prime Minister's National Relief Fund referred to in sub-clause (i), Prime Minister's Fund (Promotion of Folk Art) referred to in sub-clause (ii), Prime Minister's Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (iiia), Swachh Bharat Kosh referred to in sub-clause (iiiaa), Clean Ganga Fund referred to in sub-clause (iiiaaa) of clause (23C);

(xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognized provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25);

(xii) Employees' State Insurance Fund referred to in clause (25A);

(xiii) Agricultural Produce Marketing Committee referred to in clause (26AAB);

(xiv) Corporation, body, institution or association established for promoting interests of members of Scheduled Castes or ScheduIed Tribes or backward classes referred to in clause (26B);

(xv) Corporation established for promoting interests of members of a minority community referred to in clause (26BB);

(xvi) Corporation established for welfare and economic upliftment of ex-servicemen referred to in clause (26BBB);

(xvii) New Pension System Trust referred to in clause (44).

4. This circular supersedes earlier Circulars on this issue e.g. Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 with effect from the date of issue of this Circular.

5. Hindi version shall follow.

(Sandeep Singh)

Under Secretary to the Govt. of India

Tele: 2309 4182

Email: [email protected]

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SECTION 5 INCOME TAX - CONCEPT OF REAL INCOME

Interest : Where on two borrowers' inability to pay interest, Board resolution was passed to waive interest so as to ensure realisation of principal amount, and thereafter, no interest was credited in books, as there was no linkage or nexus between assessee and these two borrower, no interest income would be said to have accrued to assessee - [2017] 81 taxmann.com 262 (Calcutta)

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CBDT issues clarification on furnishing statement of financial transactions.

May 26, 2017 The Central Board of Direct Taxes (CBDT) on Friday issued a clarification on furnishing statements of financial transactions. It said that Section 285BA of the Income Tax Act, 1961, requires furnishing of a statement of financial transaction (SFT) for transactions prescribed under Rule 114E of the Income-tax Rules, 1962. The due date for filing such SFT in Form 61A is May 31. In case there are reportable transactions for the year, the reporting person/entity is required to register with the Income Tax Department and generate Income Tax Department Reporting Entity Identification Number (ITDREIN). The same can be generated by logging-in to the e-filing website (http://incometaxindiaefiling.gov.in/) with the log in ID used for the purpose of filing the Income Tax Return of the reporting person / entity. Entity having PAN can take only PAN based ITDREIN. Entity having TAN can generate an ITDREIN only when such TAN’s Organisational PAN is not available. The registration of reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable. A functionality “SFT Preliminary Response” has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. Detailed procedure of ITDREIN registration and upload of Form 61A is available under the “Help” section and Form 61A utility and Schema are available under the download section ofhttp://www.incometaxindiaefiling.gov.in andhttp://www.cleanmoney.gov.in. Online filing of form 61A requires a valid class 2 or 3 digital signature certificate of person responsible for filing the same. The general public can refer to the “DSC Management Utility” manual under the help section to know how to generate the signature file, attaching the XML with signature and uploading of XML with signature file in e-Filing portal, the CBDT said in its statement. [The Financial Express]

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RBI asks taxpayers to pay dues in advance

May 15, 2017 The Reserve Bank today issued an advisory asking taxpayers to pay their dues well on time to avoid last-minute rush. In a statement, the central bank said it is observed that the rush for remitting income tax dues through the RBI has been far too heavy towards the end of June every year. Consequently, the people are required to wait in queues for long periods unnecessarily, the apex bank said, adding this happens despite providing additional counters to the maximum extent possible for the purpose. “To obviate the inconvenience involved, assesses are advised to avoid last minute rush by remitting their income tax dues sufficiently in advance of the due date,” the RBI said. In addition, taxes can be paid at select branches of 29 banks at Mumbai and a large number of these banks have also provided facilities for online payment of dues, it added. “The assesses may take advantage of these arrangements for their convenience,” the central bank said. The due date for first instalment of advance tax for the assessment year 2018-19 is June 15. The due date for filing return in respect of securities transaction tax for the financial year 2016-17 is June 30. While, July 31 is the due date for filing annual return of income for the assessment year 2017-18 for all assessees other than corporates and partnership firms. [The Financial Express]

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BS-III ban does not apply to tractors, harvesters, CEVs, says Supreme Court

The Supreme Court on Monday clarified that manufacturers of farming vehicles like tractors and combine harvesters and construction equipment vehicles (CEVs) can continue to sell BS-III tractors. A bench headed by Justice M B Lokur, while stating that the March ban order on BS-III (Bharat Stage III emission norms) order applies only to commercial goods carriers and passenger vehicles, also said farming vehicles don’t fall under the two banned categories as they have different emission norms.The Supreme Court had on March 29 banned the sale and registration of all BS-III vehicles, including two-wheelers, three-wheelers, four-wheelers and commercial vehicles, after March 31. Source : http://www.financialexpress.com/economy/bs-iii-ban-does-not-apply-to-tractors-harvesters-cevs-says-supreme-court/659990/

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Good news for subscribers, EPF deposits may get 8.65 per cent returns in 2017-18 too

Deposits on employees’ provident fund may continue to fetch 8.65% returns for the second year in a row in the 2017-18 fiscal, labour minister Bandaru Dattatreya told FE. “It is very difficult to speak on the interest rate for the current fiscal. But I hope the 8.65% rate could be maintained,” Dattatreya, who’s also the head of Central Board of Trustees (CBT), the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), said.At 8.65%, returns on savings on EPF is its lowest in four years. However, it still remains the most attractive fixed-income investment option. The minister’s take on the possible interest rate is important as he had to keep aside the finance ministry suggestion, considering the falling income of the retirement fund body on its investments, of lowering the rate fixed by CBT for second successive year. Source : http://www.financialexpress.com/economy/good-news-for-subscribers-epf-deposits-may-get-8-65-per-cent-returns-in-2017-18-too/659952/

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Now, you can withdraw EPF money for treatment without doctor certificate April 27, 2017 Physically challenged members can seek advance for purchasing equipment Over four crore members of the retirement fund body EPFO can now withdraw funds from their EPF account for the treatment of illness and purchasing equipment to deal with handicap without medical certificates. The Employees' Provident Fund Scheme 1952 is amended to do away with the requirement of submission of various certificates and proformas for seeking advance for the treatment of illness and purchasing equipment required in case of physical disabilities. Now, the subscribers can seek fund withdrawal from their EPF account on various grounds by using a composite form along with a self-declaration. "The Labour Ministry has amended the clause 68-J and 68-N of the Employees Provident Fund Scheme 1952 for enabling members to take non-refundable advances from their account for the treatment of illness and buying equipment to minimise the hardship on account of handicap," a senior official said on Thursday. At present, the Employees' Provident Fund Organisation (EPFO) subscribers can seek advance under Para 68-J of the EPF Scheme for their and their dependents' treatment for illness. Besides, the physically challenged member can seek advance for purchasing equipment to deal with a handicap under Para 68-N. The official further said the Labour Ministry issued a notification with regard to the amendment on April 25, 2017. Under the Paragraph 68-J, the members can seek an advance from the fund for treatment of illness in certain cases including hospitalisation lasting for one month or more, or major surgical operation in a hospital, or in case they are suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailment. The advance under this Para 68-J was granted on only after receipt of a certificate from employers or employees that the member or his dependent is not covered under the Employees' State Insurance Scheme facility and benefits. Besides, the members were required to submit a certificate from a doctor of the hospital that the member or his dependent has been hospitalised or requires hospitalisation for one month or more, or that a major surgical operation had or has become necessary. Now after the amendment, a member would no longer be required to submit any medical certificate or any other certificate or document or any proforma whatsoever to avail advance under paragraph 68-J. Under Paragraph 68-N, the physically handicapped member can seek advance to purchase equipment to minimise hardship on account of handicap. The withdrawal under this clause was allowed only after submission of the medical certificate from a competent medical practitioner or an officer authorised by the EPFO. Under Para 68-J and 68-N, the amount advanced shall not exceed the member's basic wages and dearness allowance for six months or his own share of contributions with interest thereon or the cost of the equipment, whichever is lower. [The Business Standard]

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CBDT removes Cyprus from NJA with retro effect from Nov 2013

New Delhi, April 22, 2017 India had blacklisted or in other terms specified Cyprus as a notified jurisdictional area in 2013 for not sharing tax information. Specifying the time from which Cyprus will be excluded from the list of ‘notified jurisdictional area’, the tax department on Friday said that the removal will be with retrospective effect from November 1, 2013, providing relief to investors and Indian companies that have raised capital from the island nation. “For removal of doubts, it is hereby clarified that Notification No. 86/2013 has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus jurisdictional area with retrospective effect from November 1, 2013,” the Central Board of Direct Taxes (CBDT) said. India had blacklisted or in other terms specified Cyprus as a notified jurisdictional area in 2013 for not sharing tax information. It had classified the island nation as a notified jurisdictional area (NJA) by way of Notification 86/2013 on grounds that Cyprus was not providing information requested by tax authorities under the taxation treaty. Following the notification attracted a 30 per cent withholding tax and Indian entities receiving money from there were required to disclose the source of funds. Then, following the revision of bilateral tax treaty between India and Cyprus last year, India had removed the island country from the notified jurisdictional area list. In some cases, however, a view has been taken by the Income-tax authorities that the rescission of notification No. 86/2013 was not with retrospective effect from November 1, 2013, the CBDT circular said. Therefore, the CBDT has now come out with this clarification. India and Cyprus had on November 18, 2016, signed the revised bilateral tax treaty under which capital gains tax will be levied on sale of shares on investments made after April 1, 2017, bringing the island nation at par with Mauritius and Singapore in terms of tax treatment. However, unlike the revised Mauritius tax treaty, the revised Indo-Cyprus DTAA did not have any Limitation of Benefit and did not provide a concessional window for capital gains tax, as was provided in the revised treaty with Mauritius. [The Indian Express]

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Journalists, politicians, judges can't accept foreign money under FCRA

Journalists, politicians, judges can't accept foreign money under FCRA April 21, 2017 Business Standard looks at FCRA and compiles information about people who can take foreign funding On Wednesday, the Union home ministry cancelled the Foreign Contribution Regulation Act (FCRA) licence of the Public Health Foundation of India (PHFI), the country’s largest public health advocacy group, on the premise that the organisation was diverting funds and was involved in lobbying with politicians and the media. This is not the first time the ministry has cancelled FCRA license of a non-profit organisation. It has prohibited NGOs like Sabrang Trust, Lawyers Collective and Greenpeace in the past on similar grounds. According to information laid in Parliament, registration certificates of more than 10,000 NGOs have been cancelled from 2014-15 to 2016-17 for violation of FCRA. The government said the FCRA registrations were cancelled mainly on account of non-filing of annual returns as mandated in the Act. It is believed that around 20,000 NGOs have lost their FCRA licences under the new regime. Business Standard looked at the Act and compiled information about people who could take foreign funding and under which circumstances they were allowed to spend this money. Who can receive foreign contribution? Any individual, Hindu Undivided Family, association or a company registered under Section 25 of Companies Act 1956 (Now Section 8 of Companies Act, 2013) can receive foreign contribution, subject to the following conditions: a) It must have a definite cultural, economic, educational, religious or social programme. b) It must obtain the FCRA registration/prior permission from the Central Government c) It must not be prohibited under Section 3 of FCRA, 2010. Who cannot receive foreign contribution? As defined in Section 3(1) of FCRA, 2010, the following are prohibited to receive foreign contribution: (a) a candidate for election; (b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper; (c) Judge, government servant or employee of any Corporation or any other body controlled on owned by the Government; (d) member of any legislature; (e) political party or office bearer thereof; (f) organisation of a political nature as may be specified under sub-section (1) of Section 5 by the Central Government. (g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (i) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication; (h) correspondent or columnist, cartoonist, editor, owner of the association or company referred to in point (g). (i) individuals or associations who have been prohibited from receiving foreign contribution. What is a foreign source? Foreign source, as defined in Section 2(1) (j) of FCRA, 2010 includes:- (i) the Government of any foreign country or territory and any agency of such Government; (ii any international agency, not being the United Nations or any of its specialized agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf; (iii) a foreign company; (iv) a corporation, not being a foreign company, incorporated in a foreign country or territory; (v) a multi-national corporation referred to in Section 2(g) sub-clause (iv) of FCRA, 2010; (vi) a company within the meaning of the Companies Act, 1956, and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:- a. the Government of a foreign country or territory; b. the citizens of a foreign country or territory; c. corporations incorporated in a foreign country or territory; d. trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory; e. Foreign company; (vii) a trade union in any foreign country or territory, whether or not registered in such foreign country or territory; (viii) a foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory; (ix) a society, club or other association or individuals formed or registered outside India; (x) a citizen of a foreign country;” NOTE – A few bodies/ organisations of the United Nations, World Bank and some other International agencies/multilateral organisations are exempted from this definition, and are not treated as foreign source. Hence, the funds received from them are not considered as foreign contribution. List of such bodies/organisations, which are not treated as ‘foreign source’, are available on the website fcraonline.nic.in What are the conditions to be met for the grant of registration and prior permission? In terms of Sec.12 (4) of FCRA, 2010, the following shall be the conditions for the grant of registration and prior permission: (a) The 'person' making an application for registration or grant of prior permission- i. is not fictitious or benami; ii. has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another; iii. has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country; iv. has not been found guilty of diversion or misutilisation of its funds; v. is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends; vi. is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes; vii. has not contravened any of the provisions of this Act; viii. has not been prohibited from accepting foreign contribution; ix. the person being an individual, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him. x. the person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him. (b) the acceptance of foreign contribution by the association/ person is not likely to affect prejudicially – i. the sovereignty and integrity of India; ii. the security, strategic, scientific or economic interest of the State; iii. the public interest; iv. freedom or fairness of election to any Legislature; v. friendly relation with any foreign State; vi. harmony between religious, racial, social, linguistic, regional groups, castes or communities. (c) the acceptance of foreign contribution- i. shall not lead to incitement of an offence; ii. shall not endanger the life or physical safety of any person. [The Business Standard]

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No tax on notice period pay cut*

*No tax on notice period pay cut* Mumbai, April 21, 2017 The Income-tax Appellate Tribunal (ITAT) which adjudicates Income-tax (I-T) disputes, has held that an amount deducted by an employer for not serving out a notice period cannot be brought to tax. In this case, two companies while settling dues had deducted salary for the notice period which the person had not served, but this deduction was not taken into account during tax assessment. However, ITAT (Ahmedabad bench) in its order dated April 18, said only salary received would be taxable, and not portions which were deducted by a company for not serving out a notice period. Under the I-T Act, salary income is taxable on a due basis, regardless of whether it has been actually paid to an employee or not. And typically, when an employee resigns but does not serve out the notice period (provided for in the employment agreement), the employer deducts salary attributed to this period. However, I-T authorities do not consider such deductions and seek to tax entire salary due (that is, salary before allowing for such deduction). Hence, the latest order acquires significance. "The ITAT has recognized the concept of real income, which is well accepted under I-T laws. It held that the salary against which notice pay was adjusted had not become due, as the net amount was paid by the employer. The employee had no right to receive the portion of the salary that had been deducted, under the terms of employment. Thus, the deducted amount could not be held as taxable salary income," said Gautam Nayak, tax partner, CNK & Associates. In this case, which pertains to financial year 2009-10, N. Rebello, had resigned from two companies, viz: Reliance Communication and Sistema Shyam Teleservices. Both companies had deducted a notice pay of Rs. 1.10 lakh and Rs. 1.66 lakh respectively and handed balance salary dues to Rebello. Accordingly in his I-T return, Rebello claimed as a deduction Rs. 2.76 lakh from gross salary income, as this amount was not received by him. I-T authorities, in the course of assessment, denied such deduction. Commissioner (Appeals), which is the first level of appeal for a taxpayer, also upheld the action of the I-T authorities. The Commissioner (Appeals) pointed out that under section 15 of the I-T Act, tax is triggered when the salary becomes due, irrespective of whether it is paid or not. Secondly, section 16 of the Act does not provide for any deduction made by the employer for the notice period. Thus, the deduction of Rs. 2.76 lakh claimed by Rebello was not upheld. This led to Rebello filing an appeal before the ITAT, which decided in his favour. [The TImes of India]

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The CBDT has clarified that the said cash transaction limit of Rs 2 lakh will not apply to withdrawal from banks, cooperative bank and post offices

The CBDT has issued a press release dated 5th April 2017 by which it has provided important clarification regarding the restriction imposed on cash transaction by sections 269ST & 271DA inserted by the Finance Act 2017 to the Income-tax Act. These sections provide that no person (other than those specified therein) shall receive an amount of two lakh rupees or more (a) in aggregate from a person in a day; (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account..