Saturday, December 3, 2016

Cap on employees share in Public Offer raised from Rs 2 lacs to Rs 5 lacs

SEBI has amended the ICDR Regulation enabling employees to apply for shares beyond the specified limit of Rs. 2 lakh under employee reservation quota. SEBI has raised the limit of maximum shares that employees can bid in their Company’s IPO to Rs. 5 lakhs from existing limit of Rs. 2 lakhs with a view to increase investor base in listed companies. The application for shares of the value in excess of Rs 2 lakh shall be considered only in the event of undersubscription in the employee reservation portion. Further, the value of total allotment to an employee under the employee reservation portion, including the additional allotment shall
not exceed Rs 5 lakh.

No restriction on deposits in current account; Fake RBI instruction circulating in social media

Fake Circular No. RBI/2016-17/166 provides that in case of genuine deposits in Current Account banks are advised to take certificate of cash balance as on Nov. 8, 2016 duly attested by tax authorities along with details of deposits from Nov. 10, 2016 till date.

Actual Circular No. RBI/2016-17/166 provides that banks should not rely on instructions issued on unofficial channels like social media and rely on instructions uploaded on RBI’s website.

Thursday, December 1, 2016

Taxation Second Amendment Bill, 2016: 11 things to know for disclosure of black money

The Government has announced demonetization of existing currency of Rs. 500/1000 with effect from the 9th November, 2016. However, concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 ('Act') could possibly be used for concealing black money. So, the Government has introduced Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha to amend the provisions of Income-Tax Act.

The Government has announced Pradhan Mantri Garib Kalyan Yojana 2016 (PMGKY) in the Taxation Laws (Second Amendment) Bill, 2016. As per this PMGKY black money deposited in banks or held in cash can be offered for taxation at 49.9% (i.e., 30% tax, 9.9% surcharge and 10% penalty).

The Revenue Secretary, Hasmukh Adhia said that Income-tax department will not ask for the source of funds deposited in banks if the entire income is declared under PMGKY. From bare reading of this statement of Revenue Secretary, doubts arise as to whether any corrupt official or corrupt member of political party or any criminal can also come clean by paying 49.90% tax under PMGKY. No, any criminal or corrupt person cannot avail of benefit of this PMGKY as he is specifically excluded from purview of PMGKY.

Taxation Second Amendment Bill, 2016: 11 things to know for disclosure of black money

The Government announced demonetization of existing currency of Rs 500/1000 as a step forward to curb black money with effect from the 9th November, 2016. However, concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (‘Act’) could possibly be used for concealing black money. It is, therefore, important to plug these loopholes within Act so as to prevent misuse of the provisions. Thus, the Govt. has introduced Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha which proposes to make some changes in the Act to ensure that defaulting assessees are subjected to tax at a higher rate with stringent penalty provision.

Disclosure of black money held in banks or cash

1.Black money deposited in banks or held in cash can be offered for taxation at concessional rate under Pradhan MantriGaribKalyanYojna, 2016 (‘PMGKY’). This income would be taxed at 49.9% (i.e., 30% tax, 9.9% surcharge and 10% penalty).

CBEC releases revised version of GST Model Law

The Draft GST model law was released on June 14, 2016.On Nov. 26, 2016 the CBEC has released the revised version of draft GST model law after considering the suggestions of the stakeholders. It has also released the draft law for compensating the States. The Central Govt. would compensate the States for the revenue loss in the first five years of GST implementation.

The Compensation payable to the States for any financial year would be the difference between actual revenue (i.e., SGST + apportioned IGST) and projected revenue. The GST compensation payable to a State shall be provisionally calculated and released at the end of every quarter, and shall be finally calculated for every financial year a􀁺er the receipt of final revenue figures, as audited by the CAG.

To fund this compensation, there would be a levy of GST compensation Cess on specified goods and services. However, no cess would be levied on assessees opting for composition scheme. We will shortly provide our viewers the detailed summary of new version of GST law.


Media reports: Proposal to tax demonetized notes at 60%! Whether legally sound?

There are news reports in media saying that Union Cabinet approved a proposal to amend section 270A of the Income-Tax Act,1961 to provide that unaccounted cash deposited in bank account during the demonetization period(09-11-2016 to 30-12-2016) would be taxed at 50% if voluntarily disclosed in income-tax return. The amounts so deposited and disclosed will have lock-in-period of 4 years.

If not so disclosed and the same is detected by the Income-Tax department, the amounts would attract 60% tax and penalty. There is no Bill or Ordinance or Press Release or CBDT Circular to this effect So to give credence to these news reports in planning one’s tax affairs may be risky. Secondly, assuming the proposal to be true, whether it is a legally and morally sound proposal?

Thursday, November 24, 2016

Demonetization: 8 new announcements to incentivize digitization and help farmers

The Economic Affairs Secretary, Shaktikanta Das, addressed the media on Government's move to demonetize High Denominations Notes (HDNs) of Rs 500/1000. He briefed the media about slew of measures proposed by Govt. to incentivize digitalization and provide relief to farmers. The Govt. has announced following measures to promote demonetization: 

1) Maximum limit for recharging e-wallets and other prepaid instruments has been increased from Rs 10,000 to Rs 20,000.

2) There will be no service charge for using any debit card and booking of online railways tickets till December 31, 2016.

3) A pilot programme is underway in 20 banks that are using a new Unified Payment Interface Mobile Application (App). This app will enable not just making payments but also getting payments, all instantly, in real time. The transaction limit for using this app is Rs 50,000.

Wednesday, November 23, 2016

Govt. puts riders on cash withdrawals for marriage celebrations

After demonetization of old notes of Rs. 500/1000, there is a chaos among people. Finally the Govt. paid heed to people’s feeling and it allowed up to Rs 2.5 lakhs withdrawals from wedding celebrations. Now, the Govt. put riders on such withdrawals. In order to ensure that only genuine people make such withdrawal. The Govt. has imposed following conditions for withdrawals:

I. The application for withdrawal shall be accompanied by following documents:

• An application in the specified format

• Evidence of the wedding, including the invitation card, copies of receipts for advance payments already made, such as Marriage hall booking, advance payments to caterers, etc.

• Evidence of the wedding, including the invitation card, copies of receipts for advance payments already made, such as Marriage hall booking, advance payments to caterers, etc.

• A detailed list of persons to whom the cash is proposed to be paid, together with a declaration from such persons that they do not have a bank account. The list should indicate the purpose for which the proposed payments are being made.

II. Withdrawals are permitted only from accounts which are fully KYC compliant.

III. Withdrawals can be made either by the parents or the person getting married.

Tuesday, November 22, 2016

Myth Buster: Receipt of cash in new currency on selling a property would also invite penalty

After the demonetization of old currency notes of Rs 500/1000 denominations on Nov. 8, 2016, there is chaos among people holding hefty amounts of cash. Many taxpayers are left with cash proceeds on sale of property which they have accepted in black from buyers. What are consequences if sellers deposit such receipts in bank account?
Section 269SS of the Income-Tax Act prohibits acceptance of Rs. 20,000 or more cash for any transaction of transfer of immovable property. The prohibition applies whether the sum is received as advance or otherwise. In terms of section 271D, violation of this prohibition attracts a penalty equal to the amount accepted or received.
Thus, if the seller deposits the black component of sale price (received in cash) in bank account and declares it in its return of income and explains it as consideration for sale of property, he is liable to pay capital gains tax with reference to total consideration including black. He will also be visited with a penalty under section 271D equal to the amount of cash accepted or received by him.
Editor’s comments: Any sale proceeds received in cash on or after Nov. 9, 2016 in demonetized notes is an invalid transaction. Even if someone has received new currency as sale proceeds, this will result in levy of penalty which shall be equivalent to amount so received in cash.

Click here to read full article

Monday, November 21, 2016

Judicial precedents on Demonetization of Currency

The Government has decided to discontinue with the legal tender character of High Denomination Bank Notes (HDNs) of Rs 500 and Rs 1,000 with effect from November 9, 2016. In other words, such notes will not be legal tenders from midnight of November 8, 2016. Old HDNs can be exchanged or deposited in banks till December 30, 2016.After announcing such demonetization, people have started worrying about the tax implications even in case of genuine savings deposited into bank account.

In order to provide clarity on this issue, we have analyzed judicial precedents wherein such issues have been discussed in the past.