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

Suraj Nangia spoke at VDMA Mechanical Engineering Summit, Bengaluru

We are proud to be associated as Gold sponsor with VDMA Mechanical Engineering Summit held in Bengaluru last week. Suraj Nangia, Partner, Nangia Advisors (Andersen Global) had shared his bits of knowledge on Draft Direct Tax bill and German Investments in India where in more than 250  delegates constituting mainly the German companies in India available at the event. VDMA  is a network of more than 3,200 engineering industry companies in Germany making it…

Read More

Segregation of bad portfolio by debt fund – tax implications

Recent NBFC crisis and downgrading of corporate bonds have affected several mutual funds that invest in debt securities. Interestingly fund houses have reacted very differently. Many are writing down defaulting papers. Some have deferred repayment of maturity proceeds of their fixed maturity plans. One of HDFC mutual fund’s debt schemes sold its affected securities to its AMC thereby protecting investors. Kotak repaid its investors after deducting maturity proceeds attributed to…

Read More

Liaison Office – A taxable presence?

Introduction 1. An enterprise having established itself in its home country, usually tests its waters outside its domestic boundaries, with an endeavour to obtain its share in the universal pie of globalisation fruits. In its initial phase of establishment of its business in the host country, a multinational corporation (‘MNC’) conducts market research, develops strategies to explore the foreign markets, formulates plans, maintains liaison with the government officials, etc. Post-such preliminary…

Read More

Capital gains tax: Sold house? Now buy a new one in your name

Any property sale in India attracts capital gain tax on the gains arising therefrom under the Income Tax Act. Though the gains arising on sale of property get taxed as capital gains, relief against certain capital gains are provided upon satisfaction of the prescribed conditions. One of such reliefs is available under Section 54 of the Act, in respect of long-term capital gains arising on the sale of residential house…

Read More

I-T dept allows manual filing by resident, NRI taxpayers for nil/lower TDS certificate- Suraj Nangia

The income tax department on Monday allowed the manual filing of form by resident and NRI taxpayers wanting to apply for deduction of taxes at a lower or nil rate on total income. Suraj Nangia, Partner shares his views on aforementioned story for following publications: *   PTI (This news has been picked up by 34 other news publications including Economic Times, Business Standard, Financial Express, Business Today etc.) *   Hindu…

Read More

CBDT outlines recommended approaches to deal with rulings exchanged under BEPS Action 5

The main focus of the BEPS Action Plan 5 issues in October 2015 was on agreeing and applying a methodology to define the substantial activity requirement to assess preferential regimes, looking first at intellectual property (IP) regimes and then other preferential regimes. The work has also focused on improving transparency through the compulsory spontaneous exchange of certain rulings that could give rise to BEPS concerns in the absence of such…

Read More

Not filing a return in India will leave taxpayer in an incredibly vulnerable position

There has been tremendous growth in the number of foreign enterprises which work on short-term projects in India. As per the prevailing tax deducted at source (TDS) provisions, their entire income is subject to TDS at the applicable rates which fully covers their Indian tax liability. The question then arises as to whether filing of a tax return is necessary in India. Enterprises not well versed with the Indian tax…

Read More

Evolving tax reforms: Bane for exporters by Suraj Nangia

Rapidly changing domestic tax environment to get in sync with international tax developments like BEPS, could have some fall outs that may impact general business environment as a whole.  One such aspect is the changes sought in taxing regime both at the domestic tax as well as international tax front that could potentially interfere with the exports. Suraj Nangia, Partner and Neha Malhotra, Executive Director contributed an op-ed piece on…

Read More