Golden chance to declare domestic black money at effective tax rate of 31%

The Govt. has given an opportunity to persons who have not paid full taxes on their income of earlier years to come forward and declare the undisclosed income under the 'Income Declaration Scheme' (IDS). They are required to pay tax of forty-five per cent of such undisclosed income. The IDS is effective from June 1, 2016 and will remain open up to September 30, 2016. The declarant is required to pay tax up to November 30, 2016. However, various queries have been received by CBDT on IDS. Thus, the CBDT had issued three sets of FAQs till date. In the recent tranche of FAQs issued on June 30, 2016 the CBDT has clarified that once the person had declared undisclosed income, no question will be asked from where such income or tax is coming from. This assurance in the lasts FAQs (Question 5) issued by dept. will bring down the effective tax rate from 45% to 31% on the undisclosed income. Let us understand this scenario with the help of illustration. Suppose Mr. A offers his undisclosed income of Rs. 290 crores under IDS. Now out of Rs. 290 crores he will declare his undisclosed income of Rs. 200 crores by paying tax of Rs. 90 crores (Rs. 200 crores × 45%). As per the clarification no questions will be asked from where such income of Rs. 200 crores has come. Similarly, the remaining income of 90 crores (290-200) from which he has paid taxes will also be treated as his legitimate income. Thus, ultimately Mr. A has paid tax of around 31% on undisclosed income of Rs. 290 crores. The dept. had also clarified that such information will not be shared with other law enforcement agencies. Thus, it is the golden opportunity for taxpayers to come clean by paying effective tax rate of 31%.

Transfer of shares of retail investors via fake demat accounts amounted to unfair trade practice: SC

SEBI’s investigations revealed that shares meant for Retail Individual Investor’s were cornered by the respondent through hundreds of benami/fictitious demat account holders in violation of the provisions of Section 12A (a), (b), (c) of the SEBI Act, 1992, However, SAT set aside order passed by SEBI without mentioning any strong and justifiable reason. Thus, impugned order of SAT was liable to be quashed

Facts:

a) In matter of IPO of two companies, it was brought to the notice of the SEBI that several serious irregularities/illegalities had been committed by respondents so as to corner shares of the said companies by adopting certain unscrupulous, immoral and improper

b) As a result, the respondents got undue benefit. They got the shares transferred from the so called demat holders by way of off market trading at a price which was less than the market price of the shares.

c) SEBI’s investigations revealed that shares meant for Retail Individual Investor’s were cornered by the respondent through hundreds of benami/fictitious demat account holders in violation of the provisions of Section 12A (a), (b), (c) of the SEBI Act, 1992 and Regulations 3 and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003

d) However, on appeal, the SAT set aside order passed by SEBI without mentioning any strong and justifiable reason.

SEBI to enable Portfolio Managers to act as Eligible Fund Managers

Introduction

1.0 Following the insertion of Section 9A in the Income-tax Act, 1961 ('Act, 1961') (popularly known as "Safe Harbour Norms"), SEBI has hailed to foreign fund management activity in the country and has come up with a consultation paper seeking comments from public for the amendments to the SEBI (Portfolio Managers) Regulations, 1993 wherein it is proposed that an existing or new SEBI registered Portfolio Manager maybe permitted to act as Eligible Fund Manager ("EFM") to manage Eligible Investment Funds ("EIFs").

Amendment to clause (b) of section 9A

2.0 The said amendment came in the backdrop of the amendment to clause (b) of Section 9A of the Finance Act, 2016 where the scope of the tax relief of funds is widened by including the words"is established or incorporated or registered in a country or a specified territory notified by Central Government in this behalf" which until now was limited to the countries with which India had entered into Double Tax Avoidance Agreement (DTAA) under Section 90 or the agreement between specified associations for double taxation relief under Section 90A (1). After the amendment, the funds established or incorporated or registered in a country or a specified territory notified by the Central Government shall also be treated as EIFs.