Category: Income Tax

Circular No. 20/2023 dated 28/12/2023 issued, providing clarity on applicability of Section 194-O in a multiple e-commerce operator model framework.

The Circular is available at:
incometaxindia.gov.in/news/ciruclar-…

Details in the Press Release at:
pib.gov.in/PressReleaseIf…

ITR Filing analytics till 31st July 2023-Filing, processing, verification, query resolution

👉 New record of over 6.77 crore Income Tax Returns (ITRs) filed till 31st July, 2023; record growth of 16.1% Year-on-Year

👉 64.33 lakh ITRs filed on 31st July, 2023

👉 53.67 lakh ITRs from first time filers indicates widening of tax base

👉 5.63 crore ITRs already e-verified, with more than 3.44 crore (61%) ITRs for AY 2023-24 processed by 31st July, 2023

👉 New e pay tax payment platform- Over 1.26 crore challans have been received through TIN 2.0 payment system in the month of July, 2023 itself, while total challans filed through TIN 2.0 since 1st April, 2023 stands at 3.56 crore.*

👉 The e-filing Helpdesk team has handled approximately 5 lakh queries from taxpayers in the month of July, 2023

👉 E verification & processing

5.63 crore returns have been e-verified, out of which more than 5.27 crore are through Aadhaar based OTP (94%). Of the e-verified ITRs, more than 3.44 crore ITRs for AY 2023-24 have been processed (61%) by 31st July, 2023.

In the Finance Act, 2023, an amendment has been introduced to bring the consideration received from non-residents for issue of  shares within the ambit of section 56(2)(viib) of the Income-tax Act, 1961(the Act), which provides that if such  consideration for issue of shares exceeds the Fair Market Value(FMV) of the shares, it shall be chargeable to income-tax under the head ‘Income from other sources’.

Subsequent to this amendment, detailed interactions have been held with stakeholders. Based on the inputs , Rule 11UA  for valuation of shares for the purposes of  section 56(2)(viib) of the Act is proposed to be modified  and notification of entities to which the said provision shall not apply is also being issued separately.

Proposed changes in Rule 11 UA :

1. Rule 11UA currently prescribes two valuation methods with respect to valuation of shares namely, Discounted Cash Flow (DCF) and Net Asset Value (NAV) method for resident investors. It is proposed to include 5 more valuation methods, available for non-resident investors, in addition to the DCF and NAV methods of valuation.

2.Further,where any consideration is received by a company for issue of shares , from any non-resident entity notified by the Central Govt , the price of the equity shares corresponding to such consideration may be taken as the FMV of the equity shares for resident and non-resident investors subject to the following:

1.  To the extent the consideration from such FMV does not exceed the aggregate consideration that is received from the  notified entity and
2.  The consideration has been received by the company from the notified entity within a period of ninety days of the date of issue of shares which are the subject matter of valuation.         

On similar lines, price matching for resident and non-resident investors would be available with reference to investment by Venture Capital Funds or Specified Funds.

3. It is proposed that the valuation report by the Merchant Banker for the purposes of this rule would be acceptable, if it is of a date not more than ninety days prior to the date of issue of shares which are subject matter of valuation.

4. Further, to account for forex fluctuations, bidding processes and variations in other economic indicators, etc. which may affect the valuation of the unquoted equity shares during multiple rounds of investment, it is proposed to provide a safe harbor of 10 % variation in value.

5.The draft Rules on the above lines will be shared for public comments for 10 days, after which these will be notified.

Notification for Excluded entities

It is also proposed to notify certain classes of persons being non-resident investors to whom clause (viib) of sub-section (2) of section 56 of the Act shall not be applicable. This includes :

1. Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled by the Government or where direct or indirect ownership of the Government is 75% or more.
2. Banks or Entities involved in Insurance Business where such entity is subject to applicable regulations in the country where it is established or incorporated or is a resident.
3. Any of the following entities, which is a resident of a certain countries or specified territories having robust regulatory framework:-

1. Entities registered with Securities and Exchange Board of India as Category-I Foreign Portfolio Investors.
2. Endowment Funds associated with a university, hospitals or charities,
3. Pension Funds created or established under the law of the foreign country or specified territory,
4. Broad Based Pooled Investment Vehicle or Fund where the number of investors in such vehicle or fund is more than 50 and such fund is not a hedge fund or a fund which employs diverse or complex trading strategies.

For Investment in Start-ups

It is also proposed to modify Notification No. S.O 1131(E) dated 5th March, 2019 so as to provide that the provisions section 56(2)(viib) of the Act shall not apply to consideration received from any person by start-ups covered in para 4 & 5 of Notification dated 19.2.2019 issued by the Ministry of Commerce and Industry in the Department for Promotion of Industry and Internal Trade (DPIIT).

Press Release dated 19 May 2023

The Central Board of Direct Taxes (CBDT) has been releasing key statistics relating to Direct Tax collections and administration in public domain from time to time. In continuation of its efforts to place more and more information in public domain, the CBDT has further released Time-Series data as updated upto F.Y. 2021-22.

The key highlights of some of these statistics are as under:

(i)        Net Direct Tax Collections have increased by 121.18% from Rs. 6,38,596 crore in F.Y. 2013-14 to Rs. 14,12,422 crore in F.Y. 2021-22.

(ii)        Net Direct Tax Collections have increased by 160.17% from Rs. 6,38,596 crore in F.Y. 2013-14 to Rs. 16,61,428 crore (provisional) in F.Y. 2022-23.

(iii)       Gross Direct Tax Collections have increased by over 126.73% in F.Y. 2021-22, reaching a figure of Rs. 16,36,081 crore from Gross Direct Tax Collections of Rs. 7,21,604 crore in F.Y. 2013-14. 

(iv)       Gross Direct Tax Collections have increased by over 172.83% in F.Y. 2022-23, reaching a figure of Rs. 19,68,780 crore (provisional) from Gross Direct Tax Collections of Rs. 7,21,604 crore in F.Y. 2013-14.

(v)        Direct Tax Buoyancy at 2.52 in F.Y. 2021-22 is the highest Direct Tax Buoyancy recorded over last 15 years.

(vi)       Direct Tax to GDP ratio has increased from 5.62% in F.Y. 2013-14 to 5.97% in F.Y. 2021-22.

(vii)      The Cost of collection has decreased from 0.57% of total collection in the F.Y. 2013-14 to 0.53% of total collection in the F.Y. 2021-22.

The availability of the Time-Series data in public domain will be useful for  academicians, research scholars, economists and the public at large in studying long-term trends of various indices of the effectiveness and efficiency of Direct Tax administration in India. This time series data is available at www.incometaxindia.gov.in.

Ministry of Finance Press Release 13th April 2023

194C: Payments to contractors.

194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

 (i)  one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

 (ii)  two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,

of such sum as income-tax on income comprised therein.

(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum.

(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed.

Format of Declaration Under Section 194C(6) For Non – Deduction of Tax at Source (TDS) to be furnished by the Transporter.. NO TDS in case where such transporter owns ten or less goods carriages at any time during the previous year and furnishes a declaration to such effect, along with PAN.

DECLARATION

I, Name of vehicles owner, Proprietor/ Partner/ Director of M/s Name of the company or firm and address of the company, (hereinafter “The Contractor”) do hereby make the following declaration as required by sub section (6) of section 194C of the Income Tax, 1961 for receiving payments from the payer without deduction of tax deduction at source (TDS).

1. That name of party authorized to make this declaration in the capacity as proprietor/ partner/ Director.

 2. That the contractor is engaged by the payer for hiring or leasing of goods carriage for its business.

 3. That I have not own more than ten goods carriage vehicles as on date.

4. That if the number of goods carriages owned by the contractor exceeds ten at any time during the previous year 2022-23 (01-04-2022 to 31-03-2023), the contractor shall forthwith, in writing intimate the prater of this fact. 5. That the Income Tax permanent account number (PAN) of the contractor is …………………… A photocopy of the same is furnished to the payer along with this declaration.

Place:

Date :                                                                                           Declarant

Download declaration format

Income Tax Department initiated a Search & Seizure action on few groups engaged in the business of gold & diamond jewellery and real estate, on 17.11.2022. The searches were carried out at more than 30 premises spread over Patna, Bhagalpur, Dehri-on-Sone, Lucknow and Delhi.

During the course of the search, large number of incriminating documents and digital evidence demonstrating evasion of income have been found & seized.

In one of groups, engaged in the business of gold & diamond jewellery, analysis of seized evidence reveals that this group has invested its unaccounted income in cash purchase of jewellery, renovation of shops and immovable properties. This group has been found to have introduced unaccounted money of over Rs. 12 crore in its books of account, in the garb of advance from customers. Further, upon physical verification of stock, during the search action, unaccounted stock of more than Rs. 12 crore has been found.

In the case of another group engaged in real estate business, evidences of unaccounted cash transactions in purchase of land, construction of buildings and sale of apartments, have been found and seized. The evidence seized in the case of a prominent land broker has further corroborated the above unaccounted transactions. The quantum of such unaccounted cash transactions is more than Rs. 80 crore. The unaccounted income so earned by the key persons of the group has been invested in acquisition of many immovable properties including large parcels of land.

During the search operation, unaccounted cash and jewellery worth more than Rs. 5 crore have been seized. A total of 14 bank lockers have been put under restraint. So far, the search action has led to detection of unaccounted transactions exceeding Rs. 100 crore.

Further investigations are in progress.

At present, taxpayers are required to furnish their Income-tax Returns in ITR-1 to ITR-7 depending upon the type of person and nature of income. The current ITRs are in the form of designated forms wherein the taxpayer is mandatorily required to go through all the schedules, irrespective of the fact whether that particular schedule is applicable or not, which increases the time taken to file the ITRs.

The proposed draft ITR takes a relook at the return filing system in tandem with international best practices. It proposes to introduce a common ITR by merging all the existing returns of income except ITR-7. However, the current ITR-1 and ITR-4 will continue. This will give an option to such taxpayers to file the return either in the existing form (ITR-1 or ITR-4), or the proposed common ITR, at their convenience. The scheme of the proposed common ITR is as follows:

1.Basic information (comprising parts A to E), Schedule for computation of total income (Schedule TI), Schedule for computation of tax (schedule TTI), Details of bank accounts, and a schedule for the tax payments (schedule TXP) is applicable for all taxpayers.

2.
The ITR is customized for taxpayers with applicable schedules based on certain questions answered by the taxpayers (wizard questions).

3.
The questions have been designed in such a manner and order that if the answer to any question is ‘no’, the other questions linked to this question will not be shown to the taxpayer.

4
Instructions have been added to assist the filing of the return containing the directions regarding the applicable schedules.

5
The proposed ITR has been designed in such a manner that each row contains one distinct value only. This will simplify the return filing process.

6
The utility for the ITR will be rolled out in such a manner that only applicable fields of the schedule will be visible and wherever necessary, the set of fields will appear more than once.


As evident from the above, the taxpayer will be required to answer questions which apply to it and fill the schedules linked to those questions where the answer has been given as ‘yes’. This will increase ease of compliance. Once the common ITR Form is notified, after taking into account the inputs received from stakeholders, the online utility will be released by the Income-tax Department.

The draft common ITR, based on the above scheme, has been uploaded on http://www.incometaxindia.gov.in for inputs from stakeholders and general public https://incometaxindia.gov.in/news/common-itr.pdf. A sample ITR illustrating step by step approach for filing the ITR and two customised sample ITRs for firm and company have also been provided for illustration. The inputs on the draft ITR form may be sent electronically at the email address dirtpl4@nic.in with a copy to dirtpl1@nic.in, latest by 15th December, 2022.

The Income Tax Department carried out a search and seizure operation on 18.08.2022 on two prominent real estate groups of Kolkata.

During the course of the search operation, a large number of incriminating evidence including documents and digital data have been found and seized. There are evidences of out of books cash transactions and on-money receipts. Several documents and electronic data indicate routing of unaccounted money through shell companies. Further, some of the evidences found during the search operation indicate use of unaccounted funds in land acquisition.

The key persons admitted use of shell companies for infusion of unaccounted funds in the form of share capital, share premium and unsecured loans through sale of bogus investments.

The search action has, so far, led to a detection of a total unaccounted income of more than Rs. 250 crore. During the course of search proceedings, 16 bank lockers have been found which have been placed under restraint.

Further investigations are in progress.

The Income Tax Department carried out a search and seizure operation on 09.08.2022 on a business group primarily engaged in manufacturing and trading of ceramic tiles. The search action covered a total of 36 premises, spread across Rajkot, Morbi, Ahmedabad, Raipur, Guwahati, Gurgaon, and Kolkata. The search operation also covered persons engaged in providing finance.

During the course of the search operation, various incriminating evidences in the form of documents and digital data have been found and seized. The initial analysis of these evidences reveal that the group has been engaged in large scale tax evasion by adopting various methods, including, by way of unaccounted cash sales outside the books of account, under invoicing of sales and booking of bogus purchases. The group has also been found to be involved in layering of unaccounted sums through bogus unsecured loans from related parties and share capital from Kolkata-based shell companies.

Further, several evidences indicating the group’s involvement in routing of the unaccounted funds into the regular books of account using accommodation entries provided by a Gujarat based person engaged in providing finance, have also been found.

So far, the search action has resulted in unearthing of unaccounted transactions exceeding Rs. 300 crore including cash loans of more than Rs. 100 crore.

Further investigations are in progress.

The Income Tax Department carried out a search and seizure operation on 28.07.2022 on an ex-fund manager and chief trader of equities of a prominent mutual fund house along with related sharebrokers, middlemen and entry operators. The search action covered more than 25 premises, spread across Mumbai, Ahmedabad, Vadodara, Bhuj and Kolkata.

As a result of the search operation, various incriminating evidences in the form of documents and digital data have been found and seized. These evidences gathered during the search including sworn statements recorded from various persons have revealed the modus operandi. It has been detected that the said fund manager and chief trader were sharing specific trade related information with brokers/middlemen and persons located in certain foreign jurisdictions. These persons in turn, used such information for illicit gains in the share market by trading in such scrips either in their own account or account of their clients. These persons including family members of the fund manager have admitted in their statements that the unaccounted cash generated from the above operations was routed mainly through Kolkata based shell entities into their bank accounts. From these bank accounts, funds have been further diverted into the bank accounts of companies/entities incorporated in India and other low tax jurisdictions. The gleaning of seized evidences has exposed the nexus between the ex-fund manager, middlemen, share brokers, and entry operators.

Evidences of large-scale unaccounted investment in cash loans, fixed deposits, immovable properties and their renovation, etc. have also been found and seized. More than 20 lockers have been put under restraint. So far, unaccounted deposits exceeding Rs. 55 crore have been seized.

Further investigations are in progress.