Latest updates from RBI

1. Unchanged Repo Rate: On the basis of an assessment of the current and evolving macroeconomics situation, the monetary policy committee of RBI has decided to keep the policy repo rate unchanged at 6.25 %. [Press Release : 2016-2017/1442, Dated 07-12-2016]

2. Relaxed norms for card payment: RBI has decided to relax authentication norms for card payment up to Rs. 2000. [Circular no. DPSS.CO.PDNo.1431/02.14.003/2016-17, Dated 06-12-2016]

3. Additional Point of Sale Terminals: To expand the digital payments eco-system and facilitate the move towards cashless transactions, the Govt. has directed banks to install an additional one million Point of Sale terminals by March 31, 2017. [Press Release, Dated 06-12-2016]

4. Re-activate Dormant bank account: Many customer are approaching banks for reactivation of dormant bank account. Thus, RBI has directed bank to follow the due-diligence procedure while re-activating dormant account of the customers. [Circular no. DBR.AML.BC.No.44/14.01.001/2016-17, Dated 06-12-2016]

Income-Tax Dept. found Rs 1.64 cr. black money deposited in Jan-Dhan Accounts

The Income-Tax Department conducted investigation across India due to sudden surge in cash deposits in Jandhan accounts. Investigation revealed undisclosed moneys of approximately Rs.1.64 Crore deposited into Jan-Dhan Accounts. Such deposits have been made by persons who have never filed returns of income and whose income is below the taxable limits.

Such Jan-Dhan accounts have been detected at Kolkata, Midnapore, Ara (Bihar), Kochi and Varanasi. Rs. 40 Lakh has been seized from one such account in Bihar. Undisclosed income so detected will be brought to tax as per the provisions of the Income Tax Act, apart from other actions depending upon the outcome of investigations.

The CBDT has again urged the account holders not to consent to any kind of misuse of their accounts which would expose them to the dangers of being held responsible for the tax evasion by unscrupulous elements.

Currency Notes printed for RBI held as goods : Madhya Pradesh HC

Assessee was a company, engaged in the business of printing of currency notes for Government of India. The VAT department raised demand on assessee on the ground that currency notes were goods. The assessee filed writ before the High Court and argued that it was performing the sovereign functions of the Govt. of India and could not be said to be a dealer engaged in any business activities.The currency notes could not be termed as goods and the sale and supply of currency was out of the definition of goods.

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FAQs on Pradhan Mantri Garib Kalyan Yojana

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 Bill was also cleared in the Lok Sabha.

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).

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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.

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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.

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.

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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).

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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.

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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?

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