Taxpayers should check their IT form

The ITAT (Income Tax Appellate Tribunal) of Mumbai dismissed the penalty imposed by the Income tax department on the taxpayers for the concealment of income. An online income tax filing portal that fills the tax form for the taxpayers made a mistake while filing, failed to report the income of the taxpayer in the income tax form. Thus the income tax department penalized the taxpayer. Then the ITAT investigated and found that the taxpayer did not intend to claim dubious or evade the tax.

The ITAT made sure to check the salaried employee column and analyzed whether the income tax officials have the complete details of the taxpayer in the database including the tax deducted at source filled by the taxpayer’s employer. The same way, the employer gives the employee form 16 that contains the information about the TDS, thus it is not possible for an employee to enclose fake details. Since Income Tax Appellate Tribunal is benevolent, they did not take action against the taxpayers, but the same action cannot be expected by the ITAT in other cases.

The Income tax department ordered the taxpayers to check the information they furnish while filing the tax form, because the taxpayers who have income of five lakh should file the tax return form. According to the statistic report from the financial department shows that more than twenty seven percent of the taxpayer filed the income tax return form online in 2014-15, while 4.43 crore taxpayers filed the online form in 2015-16.

Taxman to pay interest on TDS refund

An individual who delayed to pay the refund amount made on excess tax deduction at source (TDS)
According to the Supreme Court order on 2014, the Income tax department has to impose penalty on the individual who fail to pay the interest refund under TDS (Tax deducted at source), thus the Central Board of Direct Taxes issued an order in this regard to the assessing officials in the Income tax department. In general the employer deducts the tax deducted at source from the employee’s salary.

The officials of the Central Board of Direct Taxes said on April 26th, 2016 that if an individual is bound for the refund of tax according to the Income tax Act under the section 195, they have to refund the amount along with the interest under section 244A from the date of payment of the tax.The CBDT ordered the officials not to appeal any further petition regarding the same issue, and the past appeals will not be taken into account because it is a litigate and controversial issue. A senior official from the Income tax department said that there are black holes in the TDS category and those issues should be sort out, because is the place where the taxpayer is missing the litigation.On February 26th, 2014 the Supreme Court spoke in favor of the deductor, stating that payable amount to the assessee and the refund due is the debt owned and payable by the revenue.

Tax saving investment is not a last minute plan

Most people think of the tax saving investment only at the end of the financial year, because they do not want to plan block the money at the initial period of the year. But experts say that it is better to plan for tax saving investment at the start of the year. The early an individual saves money, it builds the wealth. The tax experts said that the initial tax saving investment would reduce the burden in the last quarter. If a person receives income in the beginning of the year, he would plan to spend it on the luxuries. But the best way is to save the additional income received. Investing it in the home loan EMI will decrease the loan issues and can seek tax benefits. And other schemes and bond that gives tax benefits are the Public Provident Fund, the new pension scheme, tax saving mutual funds or Insurance, Sukanya Samriddhi.

Investing the additional income in the savings plan will give the interest for a longer period. If an individual saves the money in the public provident fund, the interest income gets deposited in the account at the start of the month. Early investments in the fixed deposit investment schemes gain more income for the maturity period.Experts said that if an individual invest in the equity schemes like unit linked insurance plan or tax saving mutual funds, investing them at regular intervals would help purchase the averaged amount. Thus investments at regular intervals would give benefits during high market value. An individual should combine the financial plan of the year with the tax saving investments so that he can plan the basic expenditure of the whole year. This will also help in analyzing whether the individual crossed the basic limit. The common mistake made by many taxpayers is that, they either forget to submit the proof or they miss the due date for investment. So those taxpayers do not get benefit from the additional income to claim refund.

Taxpayers follow the old tax rates

The general body announced a hike in the rate of property tax for the financial year. But there seems to be a delay in the process.
Om Prakash Bakoria, the Municipal Commissioner directed the officials on April 4th to stay with the current rates, since the general body did not inform any procedure about the hike in the property tax. The tax commissioner said that there are many property tax owners who have not paid the tax, and the authorities of the property tax department are unable to reach out to them. If the civic body collected the tax according to the hike proposed by the general body, then the department would receive an increase in the total amount of tax collected.
The Municipal Corporation of Aurangabad recently asked for an increase in the property tax rate by twenty to twenty five percent in the committee. And on February 20th, 2016 they proposed the raised in the general body meeting. The BJP – Shiv Sena alliance which is the ruling government in the state agreed to the increase in the property tax rate, but due to other opposing sectors in the state the proposal was not in existence.
Ayub Khan, the Deputy Municipal Commissioner said that there was an uncertainty over the tax rates for the past four years, and it burdened the taxpayers. Now that they resolved the issue, the taxpayers can pay their taxes without any hesitation.
The ruling government rejected an increase in the tax in the previous year due to the election in April 2015, fearing that it may create a negative impression among the voters. Thus the Municipal Corporation followed the same tax rate of the previous year.

Retrospective amendment of the law was regrettable

The Income tax department sent a reminder notification to Vodafone company, on its due tax of fourteen thousand two hundred crore rupees. The acquisition of Vodafone became a major issue because, the entire investment was on the telecom company. The CGP had no balance sheet, because it did not have any account or any profit or loss. Hence the question arises on how it had this much amount of gross capital without an account.The former Planning Commission deputy Chairman Montek Singh Ahluwalia recently said that Vodafone’s tax issue was disappointing. When Pranab Mukherjee was the Finance Minister, the Vodafone’s tax issue began. As a Finance Minister, he decided to change the Income tax Act in a retrospective manner to nullify the Supreme Court’s judgment.

The Planning Commissioner said that, the retrospect tax is in many countries, and Pranab Mukherjee’s decision about the Vodafone issue was regretful. This case proves that they imposed the tax only to nullify the verdict from the Supreme court.The Supreme Court’s judgment in 2012 was in favor of Vodafone Company, about the tax issue. Hence the UPA government modified the retrospective Income tax law against the judgment. And the tax demand for the Vodafone telecom company was rupees seven thousand nine hundred and ninety crore.Montek Singh Ahluwalia said that if the government’s shares were not minimized below fifty one percent in the Public Sector Bank, the loan issue will still be on hold.

Government beats its own tax target

The government crossed its tax target for the year 2015-16 and gained additionally 5,000 crore. The indirect taxes collected by the government crossed its own target. There has been a increase of 33 percent in indirect taxes and a 10 percent increase in direct taxes.The government failed to attain its target in the year 2014-15 and this year has seen improvement. The government has been pro-active in sending notices to tax evaders and also introduced its name and shame policy. The government also introduced tax amnesty to encourage tax defaulters to file their tax on without any prosecution.

The tax amnesty is announced for the second year in 2016 despite being a failure the previous year.Government has also decided to plug-in the misuse of agriculture sector for tax evasion. The government expects a 40,000 crore additional revenue next year.This growth has been achieved without the GST bill being introduced. Once GST bill is introduced it will further increase the transparency and will get hold of tax evaders.Government is trying to increase the number of tax payers, decrease subsidies and increase the revenue gained.

USA supports Indian goods and services tax (GST) bill

Treasury undersecretary Nathan Sheets stressed the need for GST in India during his interview before the Carnegie Endowment for International peace event. He also underscored the tax ratio is at 10 percent of GDP in India which is low and the need to address tax policy and compliance. The undersecretary appreciated the efforts of government to bring the GST reform ahead of his meeting with the union finance minister of India Arun Jaitley.The Indian government at present is trying to pass the bill in the Rajya Sabha where the ruling government lacks majority. The bill managed to get through Lok Sabha, the house which consists of elected representatives.The bill is expected to bring down the double taxation, interstate taxes and combines various taxes to bring uniformity.

It will also bring down red tape in tax administration and foster growth in business.GST bill is helpful to foreign companies operating in India of which majority are US based. India and USA have signed agreement to implement Foreign Account tax compliance Act, FATCA. This is a mutual understanding between the countries to exchange information regarding financial accounts of their tax residents. This agreement comes in a time when Indian government is relentlessly trying to bring back black money stashed in foreign countries. This is helpful to get hold of tax evaders of both the countries. Bilateral pricing is also a part of the agreement which will ease the process of doing business across the Indo-US borders.

Need for stricter tax avoidance laws

Black money is used to name income gained through illegal activities or money gained by not paying taxes. Black money stashed in Indian banks can be traced by the Enforcement Directorate and the financial investigation unit. However black money transactions through cash can escape the directorate’s radar though it is not easy to erase the trail of high value transactions in bank from the directorates watch.The process of getting hold of these illegal transactions is harder when the money is stashed in foreign accounts.

Any Indian is allowed to hold bank accounts in foreign countries. The money remittance and transactions should come under the provisions of Foreign Exchange Management act (FEMA) of 1999. Even a NRI is liable to prosecuted under FEMA in case of non-payment or under-payment of taxes. Before FEMA it was Foreign Exchange Regulation Act (FERA) existed to regulate foreign accounts and foreign funds. FERA was diluted to facilitate for given investments in India. This change over happened at the time when the nation was severely lacking in foreign exchange. However there is even an easier to evade taxes with the help of tax heavens.

Tax heavens are countries with lower tax rate. The companies which operate in India can declare themselves as subsidiaries of parent companies in countries with low tax rate. Though these companies do not operate in the parent nation they pay taxes or no taxes in those tax heavens. This process requires a tricky amount of paper work to legalize the entire process. All this forces the government to come up with stronger laws to catch hold of tax evaders through foreign accounts.

Government wants to increase tax payers through GST

When the salaried class prays for lower tax rates and more exemptions the government is trying to increase the number of people paying tax. At present only 3 percent of the 1 billion people pay taxes. Goods and Services Tax (GST) is a measure by the government to bring more people into the tax net. GST will be levied on the value-added at every stage of production .GST will combine all service tax , sales tax and excise duty this means at the end only two types of tax exist income tax and GST.

Though the tax is applicable at every stage for manufacturer or retailer they will claim back through tax credit mechanism, in the end the customer bears the tax.Our present system does not allow a manufacturer or retailer to take tax credit and the customer also pays the tax, this leads to double taxation. On introducing GST the double taxation is avoided which leads to less expenditure for manufacturer and finally a reduction in the prices for the customer.

From governments perspective the system is more transparent and tax defaulters can be brought under the taxable population. Since there are only two types of taxes the GST tax and income any person paying a certain amount of GST tax can be indentified and right amount income tax can be imposed. The Government will be adopting dual model GST one by the center and the other by state government. This move by the government is expected to add 30-40 lakh tax payers per year.

Tax evasion through farm income

India has seen a sharp rise in the number of high income agricultural tax filings. This rise was seen during the years 2006 to 2016. However the agricultural sector has not seen any increase in the total cultivable area or agricultural production rate (remains 3 to 4 percent in the past decade). The agricultural income filed in the year 2010-11 was 20 times the GDP in India. There are around 2700 cases registered with more than one crore of income in agriculture. These figures have come into light after the Right to information (RTI) application filed by a retired IRS officer. These figures are of curiosity given the state of farmers in India and the fact that agricultural income in India is tax free.

In India 90 percent of land is cultivated by marginal farmers who do not file any income tax return. Only 2 percent of farmers declare agricultural income during tax assessment. But this small group of so-called farmers’ total income sums up to thousands of trillions.In view of this RTI details the applicant has filed a Public Interest Litigation (PIL) with the Patna High Court. The applicant has stated that these issues might be cases of tax evasion and money laundering. The Union Finance minister Arun Jaitley that the cases of agricultural income more than 1 crore will be probed. The Central Board of Direct Taxes (CBDT) has issued notice to assessing field officers to check for high agricultural income records and returns also eliminate if there was any error in data.