A rundown on Union Budget 2021

With the India’s economy already stalling before the COVID-19 crisis, the Union Budget 2021 has put  forward measures to return the economy to a high-growth track and tackle pressing issues in  relation to – health and wellbeing, capital productivity, infrastructure and governance. In spite of the  financial fallout from the pandemic, the Union Budget 2021 has proposed to maintain status quo on  tax rates. The Government intends to make allocations in all core areas of activity in order to  stabilise the Indian Economy. The Budget, therefore, proposes structural reforms that would  effectively address the issues of the Indian Economy thereby providing real growth impetus.  The Finance Minister proposed to enhance spending on healthcare and infrastructure to accelerate  growth. Moreover, increased FDI limit from 49% to 74% for insurance sector, introduction of IPO for  LIC and privatization of a few national banks would help address credit crunch in the post-pandemic  landscape.  Direct Tax Measures  On the direct tax front, the Finance Minister began by offering her pranaam to the senior citizens  and acknowledged their contribution in nation building. To ease compliance for resident senior  citizens of age 75 years or above, the Finance Minister proposed to provide relaxation from filing of  return of income, if such assessees derive income in the nature of pension or interest (from the  same bank in which they receive their pension income). Based on a declaration furnished by such  taxpayers, the paying bank will deduct tax at source on income computed after giving effect to  applicable deductions and rebate.  However, such relaxation is subject to a stipulated rider that relaxation shall only be available to the  persons having pension income or interest income on deposits from the same bank in which he/she  receives his/her pension income.  The government’s efforts so far have been a strong catalyst for India’s rapid digitization. As  technological advancements ramp up and connectivity becomes omnipresent, India’s economy is  essentially poised to transform. With the intent to enable greater ease of doing business, a slew of  measures were introduced to transform India into a digital India. For instance, the government has  offered incentive in the form of relaxation of threshold for applicability of tax audit. It has been  proposed to increase the threshold limit for a person carrying on business from INR 5 crores to INR  10 crores, where 95% of business transactions are done in digital mode.   Changing way of Dispute Resolution  Indian Tax Administration is also changing its ways. Driven by the principle of ‘minimum government  and maximum governance’, the tax department went for a ‘faceless e-volution’ only last year.  Resultantly, the entire chain of events- right from the filing of tax return to the dispute resolution has  gone digital. The Budget 2021 extended the faceless procedures for disposal of appeals before the  ITAT as well, on the same lines as the faceless appeals scheme. While the nitty-gritties in respect of  the new scheme are yet to be notified, it is felt that the government ought to have waited for the  successful implementation of faceless assessment and faceless appeal before hastily introducing  faceless ITAT. Notably, ITAT is the final fact finding authority, for the taxpayer to argue and counter  argue their tax position in light of differentiating facts. Digitising will change the litigation process.  Additionally, to provide early tax certainty for preventing new disputes and settling issues at initial  stage for small and medium taxpayers, constitution of DRC has been proposed. Established with the  power to reduce or waive any penalty or grant immunity from prosecution for any offence under the    Income Tax Act, the DRC shall only handle disputes where returned income is up to INR 50 lakhs  (where return has been filed) and aggregate amount of variation is up to INR 10 lakh. Further, orders  on account of cases of search, requisition, survey or information received under DTAAs, case of  detention, prosecution or conviction under various laws shall not be eligible to be taken up by the  DRC.   Even the Authority of Advance Rulings has been proposed to be restructured. Under the existing  provisions of the Act, the AAR consists of a Bench, including a Chairman who should be a retired  judge of Supreme Court or Chief Justice of a High Court. The Bench cannot function in the absence  of Chairman or Vice Chairman, which causes significant delays. To expedite the disposal of  applications, it is proposed to constitute a Board of Advance Ruling, which shall substitute the  existing structure. The Board would now consist of two members, not below the rank of Chief  Commissioner. The rulings given by the Board will not be binding on either applicant or department  and can be appealed before the High Court. Foreign investors might be reluctant to apply to a board  for advance rulings that is manned by commissioners, because they would fear that the decision is  going to be against them from the very beginning. Further, that fact that the ruling would not be  binding may act as a deterrent for foreign investors, considering the looming uncertainty of tax cost  of doing business in India.   Incentivising start-ups  Start-ups contribute to economic dynamism by inciting innovation and injecting competition.  Recently, start-ups have borne a huge burnt of economic devastation cause by the pandemic;  therefore, the Finance Minister extended the benefit of tax holiday and capital gain exemption upon  investment in a start-up. Entire profits and gains derived from an eligible business by an eligible start  up is allowed as deduction under section 80-IAC of the Income Tax Act, for three consecutive years  out of ten years at the option of Assessee. The deduction is subject to the condition that the eligible  start up is incorporated on or after April 1, 2016 but before April 1, 2021. It has now been proposed  to extend the outer date of incorporation by one year, to March 31, 2022. Additionally, to incentivise  investment in start-ups, it has been proposed to extend the benefit under section 54GB of the Act by …

Read More

Nangia Andersen LLP in News: Digital Taxes—A Quick Fix or a Detriment to Global Economies- Suraj Nangia

India has retrospectively eased eligibility conditions for investment funds set up by Category-I Foreign Portfolio Investors (FPIs) such as sovereign funds, pension funds, regulated entities including offshore banks, to avail tax benefits. Our partners, Suraj Nangia write an op-ed piece on Digital Taxes—A Quick Fix or a Detriment to Global Economies for Bloomberg Tax- US. Attached is link to the article https://news.bloombergtax.com/daily-tax-report-international/insight-digital-taxes-a-quick-fix-or-a-detriment-to-global-economies

Read More

Reit is excellent opportunity for investors, but with complex tax incidence – Suraj Nangia

The money paid to unitholders can be in the form of dividend, interest income or rental income Real estate is one of the vital sectors of the Indian economy. It’s the second largest employer in the country if you consider its four cornerstones – housing, retail, hospitality and commercial spaces. The sector is expected to be a $650 billion sector, and its share in India’s gross domestic product (GDP) is projected…

Read More

Domino’s Pizza case ‘encouraging’ for MNEs expanding into India – Suraj Nangia

Mumbai bench of the Income-Tax Appellate Tribunal in favour of the US multinational sets a precedent for the taxation of the franchise model good news for franchises of foreign brands that already operate across India. Foreign multinationals can expand their brand presence in India through a franchise agreement without suffering a higher tax burden imposed on permanent establishments (PE) following the Domino’s Pizza case Suraj Nangia, Partner shares his views on…

Read More

Nangia Advisors LLP – PERSONAL TAX – Ask THE EXPERT column by Suraj Nangia

Nangia Advisors LLP in a partnership with DNA newspaper  presents Ask THE EXPERT section on personal finance. In this segment, Our expert Suraj Nangia, Partner will respond to readers queries on weekly basis. Suraj Nangia, Partner answers the queries on personal tax for DNA readers  http://www.dnaindia.com/personal-finance/report-personal-tax-suraj-nangia-2625078

Read More

Impact of US BEAT on the Indian IT sector

The Indian Information technology (IT) and business process management (BPM) industry as we all knew till date was highly dependent on U.S. corporations offshoring the work to be conducted from India. This was primarily owing to the fact that India offers a 25-30 per cent cost savings to the U.S. Corporations offshoring the work to them. The cost saving offered by Indian IT-BPM industry is not only attributable to the…

Read More

Indian tax landscape changing for better

India is moving at a rapid pace on the path of economic growth and Indian tax landscape has witnessed multifarious changes in the recent past. Indian Government has been steadily working toward widening the tax base, addressing the menace of the parallel economy, improving the ease of doing business and strengthening the anti-abuse provisions. Past year was marked by some major reforms for multinationals viz. “One nation One Tax” –…

Read More

Suraj Nangia, Partner features in Virtual Round Table Series Tax Working Group 2018 conducted by IR Global – UK

This Virtual Series provides an update on CRS implementation from a range of jurisdictions in which IR Global tax experts are currently operating. This discussion involves IR Global members from India, Spain, Luxembourg, New Zealand and Lebanon. The discussion touches on whether CRS has caused any conflict or tension during implementation, given issues such as the LuxLeaks Scandal and Lebanon’s entrenched banking secrecy and also whether CRS has affected advice…

Read More

TAXATION ON BITCOINS

Bitcoins and all other crypto currencies have taken the front page of newspapers in the recent past. Bitcoins or cryptocurrencies are new buzzwords both for investors and tax authorities. While investors are fascinated by an exponential increase in its valuation over the past few years and find it as an alternative investment vehicle for multiplying their investments, profits from investments made in Bitcoins have attracted the attention of tax authorities…

Read More