| Earning ₹ 10 crore? Get ready for 35% income tax |
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New Delhi, 21 August The Union Cabinet might pave the way for imposition of a higher tax rate of 35 per cent on the ' super rich' — those with income of more than ₹ 10 crore a year — as it takes up the amendments to the Direct Taxes Code ( DTC) Bill, 2010, on Thursday. If the Cabinet gives its goahead, the much- awaited amendments could be tabled in the ongoing session of Parliament. The amendments seek to have four tax slabs for personal income. Taxpayers might not get any breather in the form of higher exemption limit, as the proposal of the standing committee on finance to widen tax slabs has not been incorporated. The Parliament panel had suggested raising the exemption limit to ₹ 3 lakh, from the current ₹ 2 lakh ( excluding senior and very senior citizens). The finance ministry's worry is that raising this limit will not only lead to loss of revenue but will take many people out of its scrutiny, thereby eroding the tax base, already low at 34 million. If the slab is increased to ₹ 3 lakh, 87 per cent of the taxpayers will escape tax net. The current slabs are ₹ 25lakh, ₹ 5- 10 lakh and ₹ 10 lakh & above. The standing committee on finance had suggested three slabs — ₹ 310 lakh, ₹ 10- 20 lakh and ₹ 20 lakh & above — and said these should move with inflation. But the proposed amendments are not likely to include that. The current rates of 10, 20 and 30 per cent on income- tax might not be changed. In Budget 2013- 14, Finance Minister P Chidambaram had imposed asurcharge of 10 per cent on those earning at least ₹ 1 crore in a year. He had said this was a one- time tax on the wealthy to help the economy tide over a difficult fiscal situation. There are only 42,800 people in the country who earn more than ₹ 1 crore; those earning over ₹ 10 crore ayear would be even fewer. Officials said the DTC Bill was likely to give an impetus to growth and investment by the corporate sector, but might not have much for individual taxpayers, because of the limited fiscal space available with the government. The finance ministry is learnt to have accepted more than 150 of the 190 recommendations of the committee, headed by BJP leader Yashwant Sinha. Finance Minister P Chidambaram has broadly gone with the 2010 version of the Bill, tabled in Parliament by his predecessor Pranab Mukherjee, instead of reverting to his own version of 2009. This means taxpayers might continue to enjoy exemption on maturity of some of their investments and industry could pay Minimum Alternate Tax (MAT) on book profits, instead of gross assets. Some of the provisions of the DTC Bill, such as the General Anti- Avoidance Rules and Advance Pricing Agreements, have already been incorporated in the Income Tax Act. When enacted, the DTC Bill, one of the two major tax reforms — the other one being Goods and Services Tax — will replace the Income Tax Act of 1961. BREAKING THE CODE The amendments to the DTC Bill, 2010, that Cabinetmay consider 35%: A higher income- tax rate for those earning more than ₹ 10 cr a year ₹ 2 lakh: The current exemption limit might be retained DDT: Additional dividend distribution tax on dividend income of over ₹ 10 crore Fast- track courts: For black- money cases Settlement commission: Body to resolve tax disputes may be done away with Threshold: Indirect- transfer shares on which capital gains tax is to be imposed may be defined Exemption: That from tax on maturity of some long- term saving instruments may continue MAT: May be retained on book profits, instead of gross assets Cabinet likely to pave way for the 'super- rich' tax today |
| I- T dept goes for tech upgrade to tighten tax net |
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New Delhi, 21 August To tighten the noose around tax evaders and expand the tax net, the finance ministry is rolling out seven- eight big- ticket technology projects that would significantly bolster its capabilities. The projects, at various stages of implementation, would enable the income tax department to carry out a complete profiling of taxpayers. The new capabilities would ensure seamless movement of information within the department. And, the business intelligence and trend analysis tools used to mine the data will make the department more " proactive than reactive" in nabbing tax dodgers. The department is also considering collecting transaction data from external sources such as the internet. "The country's tax base is not going up. If you look at our tax- to- gross domestic product (GDP) ratio, it is the lowest in the world," said a senior official with a technology firm working with the government on some of the projects. " We, as a country, specialise in how to evade taxes. That's the reason why the government is looking at using technology tools to check tax evasion in the country." There are about 35 million taxpayers in the country. In 2012- 13, the Centre's tax to- GDP ratio stood at 7.8 per cent. The ₹ 200- crore income tax business applications project aims at refreshing and significantly upgrading the department's entire existing technology. The department is also implementing a network project that would provide better connectivity across income tax offices, with higher speed bandwidth. A senior income tax official said currently, data didn't move seamlessly because modules added through the last 15 years such as e- filing, central processing centre for returns or for tax deducted at source (TDS) use different technology platforms . " Now, we are rebuilding everything and putting everyone under one structure." The human resources system was also being integrated to make details on postings and profiles of officers accessible, the official added. Similarly, the department's data warehousing project would store all the electronic data in one place and build business intelligence applications to organise the mammoth data. Another project, aptly named Tax 360, would profile taxpayers by monitoring their transactions such as foreign travel and high- value purchases. The letters in the last few months to 2,10,000 permanent account number card holders who didn't file their returns was a pilot of the data warehousing project which collects data from e- filing, TDS, and annual information return. "New technology tools will be used to help in the risk- profiling of taxpayers on the basis of their transactions, but in a non- intrusive manner. This would help widen the tax base," said another official. Recently, Finance Minister PChidambaram, who has been cracking the whip on tax evaders, said to increase tax collections, tax officials should target non- filers and stop- filers. "We are in favour of an intelligence and technology- based tax collection system that is both non- intrusive and nonevasive," he had said in May. Neel Ratan, executive director at audit and consultancy firm PricewaterhouseCoopers India, said various technology projects implemented by the government in the past had armed it with a huge amount of electronic data on taxpayers. "This is the foundation for the ongoing tech upgrade at the IT department and I think the department is ready to harness all the data available across different systems," he said. However, challenges related to such data sharing have already started emerging. In the case of the Tax 360 project, the sales tax department of the Maharashtra government had used the data available with various central agencies to get information on tax evaders. Now, this project seems stuck, as five more states ask the Centre to provide them data, as the I- T department isnt comfortable sharing certain information on this platform, said an official with the Central Board of Direct taxes. INCOME TAX BUSINESS APPLICATIONS Will uplift the existing software and hardware of the department to ensure seamless data movement between modules Status: Contract finalised but not announced Estimated cost: ~200 crore SHARPER TECH EYES Measures being taken by the Income Tax ( I- T) Department to check evasion NETWORK To increase bandwidth between I- T offices; Bharti Airtel was servicing the project Status: Project at re- bidding stage Value of previous contract: ~250 crore JUDICIAL REFERENCE SYSTEM To digitise and index past case records for easy reference Status: In advanced stages of finalisation Estimated cost: ~10- 15 crore DATA WAREHOUSING Business analytics tools to help in profiling of taxpayers Status: Request for proposal being finalised Estimated cost: ~20- 50 crore TAX 360 360- degree profiling of taxpayers by monitoring all transactions like foreign travel and high value purchases; pilot project done in Maharashtra Status: Five more states planning to roll it out ADVANCED PASSENGER INFORMATION SYSTEM ( APIS) Will enhance border security by providing officers with pre- arrival and departure data of passengers EXTERNAL PORTAL Upgrade of e- filing portal to help citizens understand I- T rules better Estimated cost: Between ~ 10 crore and ~ 15 crore |
| As demand for dollar rises, unlisted firms might get green signal for overseas IPOs |
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New Delhi, 21 August Faced with the sliding rupee, the government is considering allowing unlisted companies to launch public offers in foreign markets and raise funds in foreign currency. "The proposal to allow unlisted companies to list on overseas stock exchanges through initial public offering (IPO) is being considered," a senior finance ministry official said. Under the current norms, only those companies that are listed on the domestic stock exchanges are permitted to list on bourses overseas. The move is expected to help the companies meet their foreign exchange requirements and at the same time ease pressure on the domestic currency, which has been touching new lows over the past couple of months. " It would also help in reducing pressure on the the current account deficit ( CAD), as such companies will either bring in the foreign exchange or utilise the proceeds to meet their own requirements," the official added. The proposal will also help companies gain access to other markets at a time when the domestic stock market is witnessing massive sell- offs. The BSE 30- stock index, Sensex, has lost around 1,500 points in the last four trading sessions amid the weakening of the domestic currency. The rupee, which has been on a declining trend since June, touched all- time low of 64.49 against the US dollar in the intraday trade on Wednesday. A weak rupee, which can mainly be attributed to widening of the CAD, raises import cost and fuels inflation in addition to putting pressure on other macro economic parameters. The CAD, which is the difference between the inflow and outflow of foreign exchange, touched a record high of $ 88.2 billion or 4.8 per cent of GDP in 2012- 13. Finance Minister PChidambaram had last week said that CAD will be contained at $ 70 billion or 3.7 per cent in the current financial year. |
| NSEL auditor in the dock over stock positions |
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Mumbai, 21 August An association of brokers led by Motilal Oswal and Anand Rathi is planning to take the auditors of National Spot Exchange Ltd ( NSEL) to court for providing an incorrect picture of the exchange's stocks. It would also lodge a complaint with The Institute of Chartered Accountants of India. "We will take legal action against the auditor, as even after July 12, we were given auditors' certificates stating there were enough stocks to back the trades," said Motilal Oswal, chairman of Motilal Oswal Financial Services. This would be part of the action planned against NSEL promoter Financial Technologies and group chairman Jignesh Shah. Mumbai- based Mukesh P Shah & Co, the auditor of NSEL, had certified there were enough stocks at the company's godowns. When contacted, Shah, the auditing company's head, said the firm had certified stocks only till March 31 this year; it hadn't issued any certificate after that. " The exchange, by itself, did not have much stock as on March 31 this year. NSEL sold that stock after March this year and had realised funds," Shah said, asking, " Where is the question of blaming us?" The auditor's role in the payment crisis is important, as based on its certificates, investors were told there were enough stocks across the company's warehouses. This assurance by NSEL was maintained even after July 31, when all contracts were closed. Brokers say they were misled into believing there were enough stocks to back trades, and if defaulters didn't pay up, the stocks would be auctioned. "But till date, no action has been taken either to lock the stocks or secure the premises," said Oswal. Brokers say now, the stocks of defaulting companies were suspect and it would be difficult for the exchange to sell stocks to raise funds. The only way out, they say, is carrying out a forensic audit and identify the money trail. Kirit Somaiya, national secretary of the Bharatiya Janta Party and president of Investors' Grievances Forum, says the auditor would have to take responsibility for the missing stocks. He had visited the exchange's godowns in Delhi to ascertain whether there were sugar stocks, as claimed by the exchange. He said these warehouses had no stocks, adding the sugar stock announced by NSEL and the Forward markets Commission was bogus. The two companies, under which the warehouses were registered, belonged to two people--- Jag Mohan and Jai Shankar Shrivastav. Somaiya said one of the companies was formed on January 24 2013; its paid- up capital was a mere ₹ 1 lakh. "I found many of these godowns empty and the shocking facts are these godown sizes are 20,000 sq ft each--maximum capacity of storage is 50,000 bags," Somaiya said, adding, " I wonder what the basis was for the auditor's certificate on the stocks held." Somaiya said it was sad instead of taking criminal action, freezing bank accounts and seizing assets against NSEL, the United Progressive Alliance government was engaging in a coverup operation. IN A SPOT |Brokers, NSEL investors to move against auditors |Brokers to complain to ICAI |Brokers say auditors certificate was misleading |Auditor denies any wrong- doing |Auditor says certificate valid till March 31 |
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