- An insight into

Snippets of changes proposed in the Finance Bill, 2017 are given below:

1) Threshold limit prohibiting cash payments reduced

In order to reduce generation and circulation of domestic black money the Finance Bill, 2017 had imposed a prohibition on receipt of cash payments of rupees three lakhs and above under new section 269ST. Any contravention of the aforesaid provision would invite penalty on the recipient under Section 271DA which shall be equivalent to the amount of cash received. However, there would be no penalty if there is good and sufficient reasons for contravention of such provision.

The Finance Bill, 2017 originally presented on February 1, 2017 has proposed to amend the threshold limit of cash payments from rupees three lakhs to two lakhs.

2) TCS on cash transactions scrapped

The existing provision to collect 1% TCS on cash sale of jewellery above five lakh rupees has been proposed to be omitted. After omission of such provision the TCS liability would attract on any cash transaction for goods or services above rupees two lakhs.

Now the TCS provision on cash payments has been proposed to be omitted. So, any cash receipt of rupees two lakhs or above would only invite penalty on seller as per provisions of Section 269ST. In that case there would be no liability to collect TCS from buyer on such payment.

3) Mandatory quoting of Aadhaar Number

The Finance Bill, 2017 as passed by Lok Sabha introduced a new section 139AA which provides that every person who is eligible to obtain Aadhaar Number is required to quote Aadhaar Number in :-

   a) PAN application form;

   b) Return of income.

Person can quote the Enrollment ID of Aadhaar application form in case he does not possess the Aadhaar Number.

Every person who has been allotted PAN shall intimate his Aadhaar Number to the authority which will be notified by the Central Govt. In case of failure to intimate the Aadhaar Number to such authority, PAN allotted shall be deemed to be invalid and it shall also be deemed that the person had not applied for allotment of PAN.

It is a welcome move by the Government. It will put curbs on instances of issuing multiple PAN to a single individual. Further, quoting of Aadhaar number would restrict granting of subsidies to only those individuals who are eligible to claim it.

4) Cap on political donations removed

As per the existing provisions of the Companies Act, 2013, companies can donate only up to 7.5% of their average profits to political parties. Now such limit has been proposed to be removed. So, companies will now have liberty to donate huge sums to political parties.

A new provision has also been proposed which mandates donation to political parties via account- payee cheques or bank draft or through electronic mode. Further, a provision has been made for funding of political donations through any notified instrument. Now Govt. would get powers to notify electoral bonds for funding of political parties.

Govt may reduce proposed cash transaction limit of 3 Lakh to 2 Lakh:

Revenue Secretary Dr Hasmukh Adhia tweeted on 21.03.2017 that In the official amendment to Finance Bill 2017  Govt has proposed that limit of 3 lakhs for cash transaction, beyond which it is illegal, be reduced to 2 lakhs. The penalty for violating this is a fine equivalent to the amount of transaction.

The above move is  to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money.

Aadhaar to be mandatory for income tax returns and PAN

Union government has proposed making Aadhaar mandatory for filing income tax returns and for obtaining Permanent Account Number (PAN) through proposed  amendments to the finance bill 2017.

The government on 21.03.2017 proposed making Aadhaar mandatory for filing of income-tax returns as well as for obtaining and retaining the PAN.

According to the amendments, from 1 July 2017, every taxpayer will have to quote Aadhaar while applying for a PAN and while filing income-tax returns. Further, existing PAN holders will have to disclose their Aadhaar numbers to the government by a date that will be specified later. Aadhaar enrolment number while filing ITR could also be accepted. In case of failure to intimate the Aadhaar number, the PAN allotted to the person shall be deemed invalid.

The move is likely to roil activists who say the Aadhaar programme – the enrolment to a national database with biometric information such as fingerprints and iris scans – is meant to be voluntary, as declared by the SC in September last year.

The government’s move to link Aadhaar will help in finding tax evaders who have multiple PANs. Though the income-tax department has been seeding PAN with Aadhaar for the last few years, the pace of the linkage has not been very good.

The finance bill carries an unprecedented 40 amendments, according to PTI, and will also impact other laws such as RBI act and representation of people act. Political parties hit out at the tweaks, saying they were being done as ‘backdoor entry’.

The finance bill 2017 is expected to receive the Lok Sabha’s approval on Wednesday (22.03.2017).

Income Tax

CII base year has been changed from recent budget.

Following are the latest applicable cost inflation index:

Cost Inflation index base year 1-4-2001
Financial Year.          C.I.I.
2001-02 - 100
2002-03 -  105
2003-04 -  109
2004-05 -  113
2005-06 -  117
2006-07 -  122
2007-08 -  129
2008-09 -  137
2009-10 -  148
2010-11 -  167
2011-12 - 184
2012-13 -  200
2013-14 -  220
2014-15  - 240
2015-16 -  254
2016-17 -  264

Proposed amendment in section 44AD in case of transaction other then cash:

In order to achieve the Government’s mission of moving towards a less cash economy and to incentivise small traders / businesses to proactively accept payments by digital means, *it has been decided to reduce the existing rate of deemed profit of 8% under section 44AD* of the Act to 6% in respect of the amount of total turnover or gross receipts received through banking channel / digital means for the financial year 2016-17. However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in cash.

Legislative amendment in this regard shall be carried out through the Finance Bill, 2017. Link of this information is as below-

Govt opens window for declaring black Money under PMGKY from Dec. 17, 2016 to 31st March,2017
The Government has given around 3.5 month’s period for filing declaration under Pradhan Mantri Garib Kalyan Yojana (‘PMGKY’) from December 17, 2016 till March 31, 2017. All declarations under PMGKY shall be furnished to Principal Commissioner or the Commissioner, in any of the following modes:
i) Electronically under digital signature, or
ii) Electronically through EVC, or
iii) In physical Form
Government has also notified ‘Form 1’ for declaring unaccounted income in the form of cash or bank deposits. Declarant needs to specify the following details in Form 1:
a) Name, address and PAN;
b) Status of declarant (whether resident, Non-resident, individual, HUF, Firm, etc.)
c) Amount held in cash and bank deposits.
d) Details of taxes paid before filing of declaration (i.e., date of deposit, Challan Number, etc.)
e) Details of amount deposited in PM Garib Kalyan Deposit Scheme (i.e., minimum deposit amount is 25% of unaccounted income)
An option is also given to revise the declaration till March 31, 2017 if there is any omissions or wrong statement. After filing of declaration, the Principal CIT or CIT shall issue a certification in Form-2 to the declarant within 30 days from the end of the month in which declaration has been furnished.

I-T dept rejects declarations of over Rs 2 lakh crore by ‘suspicious’ people:

The government will not take into account two high-value disclosures under an amnesty scheme for tax dodgers — Rs 2 lakh crore by a Mumbai family of four and Rs 13,860 crore by an Ahmedabad-based real estate businessman.

The Union finance ministry said the declarations were rejected as these were “suspicious in nature, being filed by persons of small means”.

According to the income tax department, the family’s case was rejected because three of the four PAN numbers were originally in Ajmer, which were migrated in September 2016 to Mumbai, the place of declaration.

Likewise, Gujarati realtor Mahesh Shah’s case looked fudgy too. He had threatened to disclose names of politicians and businessmen for whom he was allegedly acting as a front.

Shah, who declared unaccounted for income of Rs 13,860 crore before going “missing” and then surfacing on TV on Saturday, faced questions from taxmen through the night before being allowed to leave for a day.

“The 67-year-old is a heart patient,” an officer said.

The realtor, whose business interests are mostly in Mumbai, was “missing” after he defaulted on the first tax instalment of over Rs 1,500 crore on the amount he had disclosed. He was supposed to pay the instalment by November 30 as a part of the amnesty, called the income declaration scheme (IDS).

Shah alleged he was offered a commission to make the declaration, but the real owners of the money backed out before the first instalment was to be paid.

In Mumbai’s Bandra, residents of Jubilee Court, Linking Road, woke up on Sunday to see a media scrum outside their building. The reason: A family, the Sayeds, in the building declared an income of Rs 2 lakh crore.

The residents say they have never heard of the Sayeds living in flat number four as claimed by the official government release. They claim the flat has been vacant for several years.

A resident said: “Around a decade ago, Shailesh Hingorani owned the flat and he used to run a beauty parlour. Before that, RR Vaid lived there and sold the flat around 15 years ago.”

Like Shah’s, the income tax department rejected the family’s declaration. But in both cases investigations are on.

The finance ministry revised the “black money” disclosed under scheme to Rs 67,382 crore, which will fetch a little over Rs 30,000 crore in direct taxes.

Source: Hindustan Times 05.12.2016

Proposed Salient Features of New Income Disclosure Scheme for disclosing #black money held as #cash

1. Applicable for undisclosed income in the form of Cash or deposits held in in bank accounts or in Post Office (Section 199C)

2. Income Tax @ 30% of Cash + Surcharge @ 33% of Tax + Penalty @ 10% of Cash i.e. aggregating to 49.90% of undisclosed income (cash) (Section 199D & 199E)

3. The declarant shall 'deposit' minimum 25% of Cash in a Deposit Scheme to be notified by the CG in consultation with RBI. (Section 199F)

4. The 'deposit' shall be interest free and shall have a lock-in period of 4 years from the date of deposit [Section 199F(2)]

5. Income Tax + Surcharge + Penalty + Deposit i.e. 74.90%  has to be paid to the treasury before making the declaration and the proof of payment is to be attached with declaration.(Section 199H)

6. The amount of undisclosed income (cash) shall not be included in the total income of any assessment year of the declarant. (Section 199I)

7. The undisclosed income may have been earned at any time before 01-04-2017.

8. The declaration made under the scheme shall not be admissible in evidence against the declarant for the purpose of any proceedings under any act except those mentioned in Section 199O (like the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002, etc.)

9. If a declaration has been made by misrepresentation or suppression of facts or without payment of 74.90% of cash as per scheme, such declaration shall be void and shall be deemed never to have been made under this Scheme.

10. If a person fails to make declaration as per above scheme, but file IT Return for AY 2017-18 (i.e. for Financial Year 2016-17) declaring any unexplained income/investment, cash credit, etc. under section 68, 69, 69A, 69B, 69Cor 69D (say unexplained income) he shall be liable to pay income tax @60% of such unexplained income. But, if the same is not included in IT Return, then additional Penalty u/s 271AAC @ 10% of tax payable is leviable.

11. If any person admits of any unexplained income during a search conducted under section 132, he shall be liable to pay penalty @30% of unexplained income admitted in addition to tax.

12. If any person refused to admits any unexplained income during a search conducted under section 132, he shall be liable to pay penalty @60% of unexplained income in addition to tax.


One-time 60% penalty for voluntary cash disclosure
The government has devised a two-track approach towards disclosure of unaccounted cash in excess of the Rs 2.5 lakh threshold announced by PM Narendra Modi by setting a moderate penalty for voluntary action but imposing stiff fines on tax evaders caught trying to beat demonetisation.

Those who come forward with disclosures will be asked to pay a penalty of 60% of the amount. This will ensure that the cash that remains with them becomes "white", providing a legal alternative as opposed to illegal parking slots like gold, real estate or offshore accounts.

The new penalty is higher than the 33.9% tax levied on current (high) income. However, those detected trying to squirrel money into multiple accounts+ or converting it into other assets will face the full force of the law, a senior government source said.

The 60% penalty option is seen as income declaration scheme part 2 with a rate that is higher than the 45% fine in the just concluded IDS 2016. The funds collected through fines will be placed in a "PM Garib Kalyan Kosh" planned by the Centre - a measure intended to underline the government's claim that demonetisation is a pro-poor measure.

The 60% penalty (35% tax Fines To Go To PM's Welfare Fund For Poor plus 25% fine) is seen as an incentive for individuals and entities who might have baulked at the 200% fine on tax due as per the current law. It is intended to close the loophole in the existing law which could have helped those making unusual deposits in their accounts since November 9 and paying the standard 33.9% tax provided for income exceeding Rs 10 lakh annually.

Many tax experts have said that those declaring significantly higher deposits can declare the income in their tax returns for the current financial year. The returns have to be filed in the next financial year and so there is room for those with previously undisclosed income by paying a lower fine.

Though government officials did not spell out what the fine for evaders will be, it is likely to be not much less than the 200% set for "misreporting of facts" as set out in an official release on the 2016-17 Union Budget.

The dual approach, described as two schemes by the source, was cleared by the Cabinet on Thursday night. The details have not been officially announced yet, perhaps due to Parliament being in session. The schemes envisaged by the government will require amendment of theincome tax laws that require passage by Parliament.

black money holders might escape with a normal tax rate or face a very prohibitive fine. The penalty rate is higher than the 45% for the recently concluded income declaration scheme but not so high as to be a severe disincentive.
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