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The alley for Indian Chartered Accountants |
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The alley for Indian Chartered Accountants |
Budget approved: Rajya Sabha returns appropriation and finance Bills to Lok Sabha
New Delhi, August 9, 2024
The Upper House returned the Appropriation (No. 2) Bill, 2024, the Jammu and Kashmir Appropriation (No. 3) Bill, 2024 and the Finance (No. 2) Bill, 2024, which were passed by the Lok Sabha on Wednesday.
Parliamentary approval for the 2024-25 Budget was completed Thursday with Rajya Sabha returning the relevant pieces of legislation to Lok Sabha.
Rajya Sabha returned the appropriation and finance Bills for 2024-2025 after Finance Minister Nirmala Sitharaman responded to the Opposition’s attack that the Budget was anti-middle class, saying the government had reduced the burden on the middle class.
The Upper House returned the Appropriation (No. 2) Bill, 2024, the Jammu and Kashmir Appropriation (No. 3) Bill, 2024 and the Finance (No. 2) Bill, 2024, which were passed by the Lok Sabha on Wednesday.
This completes the Budgetary exercise for 2024-25.
Replying to the discussion on the three Bills, the Finance Minister said the effective capital expenditure this year would be `15.02 lakh crore, an increase of 18% from 2023-2024. She said the increasing capital expenditure since 2020 had a bearing on private investment, consumption and exports.
She added that the Centre was not doing that alone, but was giving states 50-year interest-free loans, “which eventually will be treated probably as grants”.
She said allocations of `22.91 lakh crore were estimated for states in 2024-2025, an increase of `2.49 lakh crore from last year.
She said the government has simplified taxation.
“Compared with very many developed economies, which have actually increased the tax rates, despite the pressure from Covid times, we have actually reduced the burden on the middle class substantially,” the Minister said.
Responding to demands from Opposition MPs, including TMC MP Dola Sen and DMK MP Dr. Kanimozhi NVN Somu, to withdraw 18% GST on health insurance premiums, Sitharaman asked if the MPs had raised the issue with the Finance Ministers of their states who are members of the GST Council.
She said the Finance Ministers of West Bengal and Tamil Nadu, among others, were members of the Fitment Committee. The matter is in the realm of the GST Council, she said. The Minister said every state imposed a tax on the premiums prior to the introduction of GST in 2017.
Sitharaman said all but one decision in the GST Council so far had been by consensus, when asked by TMC MP Derek O’ Brien why it was not rolled back given that the majority of the Finance Ministers in the GST Council were from the NDA.
Earlier, Congress MP Jairam Ramesh said private investment as a proportion of GDP was sluggish and that the atmosphere was not conducive to investors. He said while government investment had increased, private investment, consumption and wages had not grown much or were stagnant.
CPI(M) MP John Brittas raised concern over the increase in allocation for centrally-sponsored schemes, while Central sector schemes, which are fully funded by the Union government, saw a decrease in budget. Aam Aadmi Party MP Sanjay Singh said the government had waived loans of `3.53 lakh crore of companies, while not being able to scrap the Agniveer scheme and restore the earlier system of Army recruitment as demanded by the youth.
[The Indian Express]
Lok Sabha passes Finance Bill, amends LTCG tax provision on immovable properties
Aug 7, 2024
Synopsis
On Wednesday, the Lok Sabha passed the Finance Bill 2024, which includes a major amendment to the long-term capital gains (LTCG) tax on real estate. Originally proposed to be reduced to 12.5% without indexation (which adjusts for inflation), Finance Minister Nirmala Sitharaman introduced an amendment allowing taxpayers to choose between the new 12.5% rate without indexation or the old 20% rate with indexation for properties bought before July 23, 2024.
The Lok Sabha on Wednesday passed the Finance Bill 2024 after the central government relaxed the freshly-introduced new capital gains tax on real estate, allowing taxpayers an option to switch to a new lower tax rate or stay with the old regime that had higher rate with indexation benefit.
Union Finance Minister Nirmala Sitharaman in her Budget speech for 2024-25 proposed to lower the long-term capital gains tax on real estate to 12.5 per cent from 20 per cent but without the indexation benefit. Today, she moved an amendment to the bill to give the option.
The amendment came after the new provision was criticised for raising tax incidence and disincentivizing investments in the real estate.
What is Indexation benefit?
Indexation benefit allows taxpayers to arrive at the cost price of the property after adjusting for inflation.
What does the new amendment say?
The major amendment in the Bill relates to restoration of indexation benefit on sale of properties bought prior to July 23, 2024. Now, individuals or HuFs who purchased houses before July 23, 2024, can opt to pay LTCG tax under the new scheme at the rate of 12.5 per cent without indexation or claim the indexation benefit and pay 20 per cent tax.
The Lower House later approved the bill with 45 official amendments by voice vote.
Sitharaman on taxes and middle class:
Sitharaman also said that the FY25 Budget proposals were aimed at promoting investment and benefiting the middle class.
She said that the hike in tax exemption limit on long-term capital gains in listed equities and bonds to Rs 1.25 lakh from Rs 1 lakh will benefit the middle class investing in stock markets.
The Modi government, she said, has brought in a simplified taxation regime and eased compliance without drastically increasing taxes. The reduction in customs duty on various goods will promote trade and investment and generate employment, she added.
Bill to now go to Rajya Sabha:
The Finance Bill 2024 will now go to the Rajya Sabha for discussion but the Upper House does not have powers, as per the Constitution, to reject a money bill. It only can return such bills and if they don't do so within the stipulated 14 days, the legislation is considered as approved.
FM on GST:
Responding to demands for the removal of GST on health and life insurance premiums, Sitharaman said that 75 per cent of the GST collected goes to states.
Prior to levying 18 per cent GST on health insurance (premium), all states used to levy tax on insurance premiums. So when GST was rolled out, the tax automatically got subsumed into GST, Sitharaman said.
[The Economic Times]
Compute tax either at 12.5% without indexation or 20% with indexation on realty transactions: Govt proposes amendment
Aug 6, 2024
Synopsis
The proposed amendment offers taxpayers a choice between a 12.5% long-term capital gains tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024. This change followed Budget 2024's proposal to remove indexation benefits. Despite concerns, the Income Tax department described this development as advantageous.
In a big relief to taxpayers, Finance Minister Nirmala Sitharaman will move an amendment in the Finance Bill to let taxpayers select either 12.5% LTCG rate without indexation or 20% rate with indexation for property acquired before July 23, 2024.
The move of Centre will likely mean that transfer of a long-term capital asset, being land or building or both, by an individual or HuF, which is acquired before the 23rd day of July 2024, the taxpayer can compute his taxes under the new scheme [12.5% without indexation] and old scheme [20% with indexation] and pay such tax which is lower of the two.
The development comes after the government faced backlash by the real estate sector. The stakeholders cautioned the government that the proposal to remove indexation benefits for long-term capital gains in real estate will hurt the growth of the sector.
In Budget 2024 presented by Finance Minister Nirmala Sitharaman, the government proposed eliminating indexation benefits for homeowners.
Indexation rule in Budget 2024:
The proposed change means that homeowners who profit from selling their property will now have to pay tax on the entire profit amount, rather than on the inflation-adjusted profit. Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it.
Previously, indexation benefits allowed homeowners to increase the property's cost basis to account for inflation, thereby reducing the net profit and the associated tax liability.
The elimination of indexation has raised fears of a significant tax burden for taxpayers and the potential for increased illicit financial activities in property deals. However, the Income Tax department has refuted such claims and called the move 'advantageous'.
Earlier, ET had reported that higher tax rate with indexation or a lower rate of 12.5% without indexation, as well as some form of grandfathering for ancestral properties are proposed. The suggestions are being examined at the finance ministry and will be discussed with the Prime Minister’s Office, people familiar with the matter told ET.
The finance ministry held one round of discussions on the concerns raised in several quarters over the move, including a possible rise in black money transactions.
[The Economic Times]
New Budget 2024 rule: Why Income Tax Department is likely to issue a huge number of tax notices this month
Aug 1, 2024
Income Tax Notice on the way? According to the amended regulation announced in Budget 2024, the tax authorities can only go back a maximum of five years to reassess a taxpayer's records if the escaped income is at least Rs 50 lakh
Income Tax Notice on the way? The Income Tax Department is gearing up to send out a large number of notices in the coming month, as there are concerns that many taxpayers might escape the tax net due to the impending implementation of the new reassessment law on September 1, 2024.
According to the amended regulation announced in Budget 2024, the tax authorities can only go back a maximum of five years to reassess a taxpayer's records if the escaped income is at least Rs 50 lakh, and three years for an amount less than Rs 50 lakh.
Previously, they could reassess cases up to 10 years old.
According to an ET report, tax officials are now faced with the challenge of compiling and corroborating data on tax and income mismatches for the financial years 2013-14 to 2017-18 within the next few weeks, as these years will become time-barred for reassessment from September 1, 2024.
The I-T department relies on information from various sources, such as banks, property registrars, and search findings from the investigation wing, to build reassessment cases.
Taxing Times
A tax officers' body has raised concerns about the feasibility of issuing notices under Section 148 (or 148A) in a large number of cases within a single month, given the overburdened nature of the jurisdictional assessing officers and the time-consuming process of obtaining sanction from the chief commissioner, who is the specified authority for such notices.
Moreover, the law provides taxpayers with the right to explain their position before reassessment orders are finalized, a process that most believe cannot be completed by the end of August.
The Central Board of Direct Taxes (CBDT) has been urged by its officers to postpone the effective date of the proposed amendment. However, this suggestion is unlikely to be well-received by corporations and high net worth individuals.
"Capping the reassessment period at five years was a great decision as it would reduce hassles and litigation. But if the department fears there could be a genuine loss of revenue as it may not be possible to wrap up several matters by August 31, the government can think of strict parameters where time-bound cases can be selectively reopened - based on trails of steps taken in identifying escaped income," said Mitil Chokshi, partner at CA firm Chokshi & Chokshi.
"Taxpayers may expect a rush of reassessment notices in August 2024. These notices are likely to be for the AYs 2018-19 and prior to that. It is pertinent to note that the Bombay High Court in a recent ruling in a case of Hexaware Technologies has taken a view on a proviso introduced in 2021, which can be interpreted to mean that AY 2017-18 (and prior years) got time barred on March 31, 2024. These reassessment notices (for AYs 2017-18 and prior) are likely to rake up new interpretation issues in the already muddled reassessment provisions," said Ashish Mehta, partner at law firm Khaitan & Co.
The current situation is similar to the conflict between the Income Tax office and taxpayers in 2021. The reassessment law was amended in April 2021, allowing the tax office to reopen 10-year-old tax returns if the total undisclosed income exceeded Rs 50 lakh and reassess 4-year-old matters if the amount was less than Rs 50 lakh.
However, this change led to over 10,000 writ petitions being filed by companies, arguing that they were not given sufficient time to explain and that the notices were issued without considering the carve-out that cases which couldn't be reopened earlier couldn't be reassessed under the new law.
The Supreme Court invoked its extraordinary powers under Article 142 of the Constitution on May 4, 2022, to uphold all reassessment notices issued after March 31, 2021. However, the court left room for judicial proceedings based on the merits of each case, and several such matters are currently pending before the court.
[The Times of India]
Budget 2024: Why crypto F&O investors are happy - No STT, no TDS, no 30% tax
Jul 30, 2024
Synopsis
Budget 2024: Crypto future and options investors are happy because the budget did not impose any TDS, STT and neither section 115BBH (30% tax) provisions on it. While at the same time Budget 2024 increased STT on stock market future and options (F&O). Many now believe crypto F&O transactions are now more attractive than stock and index F&O.
Budget 2024 increased the Securities Transaction Tax (STT) on all futures and options (F&O) contracts traded on recognised stock exchanges. However, this is not applicable to cryptocurrency F&O transactions. Added to this, some crypto exchanges have taken the stance that no tax deducted on source (TDS) is to be levied on crypto F&O transactions. Investors might find crypto F&O transactions attractive because they might not be subject to the 30% flat crypto gains tax, there is no TDS in certain exchanges, and there is also no STT.
While the Budget 2024 introduced changes to the STT rates for F&O transactions in securities, these changes do not apply to crypto transactions. "While the Budget 2024 introduced changes to the STT rates for F&O transactions in securities, these changes do not apply to crypto transactions, as crypto transactions are categorised as commodities. Therefore, the rules for crypto F&O transactions regarding TDS and section 115BBH tax rate remain the same, and no STT is charged on these transactions," says CA Abhishek Soni, co-founder, Tax2Win.
When is TDS required to be deducted from crypto, VDA transactions
According to Section 194S, 1% TDS is deducted on all VDA transactions from July 1, 2022.
"A new section 194S was introduced in relation to TDS on payment while transferring VDAs via the Finance Act, 2022. By virtue of the said provision, any person making payments (exceeding the prescribed threshold) to any resident for transfer of VDAs shall be responsible for deduction tax at source at the rate of 1% of the value of the VDAs," says Deepa Sheth, Partner, Corporate Tax, Tax & Regulatory Services, BDO India.
However, there is an ambiguity in interpreting the law about TDS deduction on crypto F&O transactions. As per Nithin Kamanth's social media post on July 10, 2024, "On one side, SEBI is working on restricting F&O, but on the other side, this crypto F&O ad is on the front page (of a newspaper). By the way, all these platforms have taken the stance that the 1% TDS rule doesn't apply to crypto F&O. For regular crypto transactions, 1% of the transaction is deducted as TDS. Something for @nsitharaman and @FinMinIndia to check out."
"Crypto FNO is not allowed in India and if crypto FNO is taking place on a platform, trading platform, which is not based in India , is totally illegal as per RBI and will require penal action sooner or later," says chartered accountant Manoj Dembla who has over 30 years of experience in finance, accounting, taxation, and insolvency.
What is the possible reason behind TDS not being deducted from crypto F&O transactions?
"Derivatives (i.e., Futures and Options) are financial instruments with no intrinsic value and thereby derive their value from the performance of other financial assets such as index, interest rate, equity shares, cryptocurrency etc. Crypto derivatives does not fall within the purview of Virtual Digital Assets (VDAs) as it is not accompanied with a promise or representation of having inherent value, or functions as a store of value or a unit of account and the settlement is done by means other than actual delivery. As such, the provisions of section 115BBH as well as 194S may not apply. However, it is pertinent to note that such opinion is not supported by any clarification from the Income Tax Department and is based on the interpretation of the bare provisions as aforementioned," says CA (Dr.) Suresh Surana.
Sheth explains how a F&O crypto transaction works and why the specific some exchanges adopt no TDS stance. "TDS is applicable on transfer of VDAs. However, in the case of F&O, the trader speculates on the price movements of an underlying VDA without actually owning it and therefore some platforms have adopted a view that crypto F&O transactions, perpetual contract transactions or otherwise, are not subject to TDS," she says.
According to CA Amit Kumar Baid, Head of Tax, BTG Advaya, "The Indian tax landscape for crypto futures is quite nuanced. Currently, most of the exchanges across the world are taking a view that crypto futures (including perpetual futures), being a derivative instrument, should not be classified as VDAs. Crypto futures are financial contracts that reference VDAs and derive their value from them; they themselves are not classified as VDAs. Consequently, the 1% TDS applicable on transfer of cryptos under Indian regulations is not applied to crypto futures (including perpetual futures) by the exchanges."
Baid further explains the reason behind this stance of crypto exchanges. "Most exchanges that offer futures trading require margin payments to be made in USDT (a stable coin) rather than in cash. This means that transferring USDT for margin payments does attract TDS liability."
For reference purposes, USDT is a crypto stablecoin whose value is pegged to the United States Dollar in the ratio 1:1. You can read more about USDT here-https://tether.to/en/transparency/?tab=usdt
Crypto F&O are taxed as per business income, while normal crypto income is taxed at par with speculative income tax rate
The new ITR forms for FY 2023-24 consist of a separate section called Schedule - Virtual Digital Assets (VDA). This schedule must be used to report your gains from all virtual digital assets. However, crypto F&O transactions might not be classified as VDA, as per experts.
According to Nishant Shah, Partner, Economic Laws Practice (ELP):
A transaction in crypto is taxable at 30% rate pursuant to Section 115BBH if "any income is earned from transfer of VDAs".
Since, F&O does not involve transfer of crypto assets, gains from crypto F&O will be taxed as regular business income under the current slabs applicable for income tax.
"Section 115BBH imposes a flat 30% tax on income from transfer of VDAs (including cryptos). However, crypto futures are being distinguished from VDAs. Additionally, perpetual crypto futures involve only the exchange of initial and variable margins without the relinquishment or extinguishment of rights, which means they do not meet the transfer criteria outlined in Section 115BBH. As a result, crypto futures (including perpetual futures) may fall outside the scope of the stringent tax obligations such as the 1% TDS, the flat 30% tax rate, and the inability to offset losses," says Baid from BTG Advaya.
"Tax rate of 30% plus applicable surcharge and 4% cess was introduced by the Finance Act 2022 for taxpayers having any income from transfer of VDAs. The same may not include crypto F&O transactions since settlement in crypto F&O occurs through methods other than actual delivery. Consequently, the crypto F&O transactions may be categorised as business income," says Sheth from BDO India.
[The Economic Times]
No change in LTCG in medium term: Revenue secretary Sanjay Malhotra
New Delhi, July 31, 2024
Synopsis
Revenue secretary Sanjay Malhotra said the government had studied 1.05 million returns for 2023-24 that showed capital gains from land and building. The effective LTCG tax rate on these was 11.54% on real estate in 2022-23, he said. The budget announced removal of indexation benefits for LTCG on properties but slashed the tax rate to 12.5% from 20%, fuelling concerns over an increase in tax burden.
Revenue secretary Sanjay Malhotra on Tuesday ruled out any review of the long-term capital gains (LTCG) tax regime in the medium term.
"For the medium term, the LTCG tax rates will likely remain stable at current levels," Malhotra said at a post-budget session at the PHD House of Commerce and Industry.
He said the government had studied 1.05 million returns for 2023-24 that showed capital gains from land and building. The effective LTCG tax rate on these was 11.54% on real estate in 2022-23, he said. The budget announced removal of indexation benefits for LTCG on properties but slashed the tax rate to 12.5% from 20%, fuelling concerns over an increase in tax burden.
The budget raised the tax rate by 2.5 percentage points for listed equity to 12.5 %.
"It's a very small tax increase in LTCG on real estate," Malhotra said, adding that the measure was aimed at simplifying the capital gains regime.
He said similar apprehensions were expressed when the Centre introduced the new tax regime. "About 6 crore (ITRs) filed for last year and 70% is under the new income tax regime. The whole move has been towards simplicity, with the ultimate purpose to reduce the compliance burden," Malhotra said.
The Centre has collected Rs 2.78 lakh crore from LTCG alone in the last five years, it informed the parliament, adding that there is no proposal to roll back or abolish the long term capital gain tax. In the assessment year (AY) 2023-24, the centre collected Rs 98,682 crore from LTCG, Minister of State Pankaj Chaudhary told Rajya Sabha in a written reply. For 2022-23 AY, it had collected Rs 86,075 crore.
[The Economic Times]
Property owners will now have to pay more tax as Budget 2024 plugs loophole
New Delhi, July 29, 2024
Income arising from any kind of rentals from house property shall be taxed under the chapter "income from House Property" which allows specified deductions.
The Union Budget 2024 has introduced an important change in the taxation of rental income from residential property. To curb tax evasion, Finance Minister Nirmala Sitharaman has mandated that such income can only be declared under the 'Income from House Property' (IHP) head and not under the 'Profits and Gains from Business or Profession' (PGBP) category.
The deductions available under "Income from House Property" are different from those under "Profits and Gains from Business or Profession." Under IFHP, you can claim a standard deduction of 30 percent of rental income, property tax and interest on a home loan. Under PGBP, you can claim all expenses related to renting and managing the property, such as maintenance, electricity bills, employee costs and upkeep, without any limit
Previously, some taxpayers were exploiting a loophole by declaring their rental income as business income, which allowed them to claim additional deductions like repairs and depreciation, thereby reducing their taxable income. This practice has now been explicitly prohibited.
Understanding rental income taxation in India:
• If you own a property and rent it out, the rental income is generally taxed under the head "Income from House Property". This means there are specific rules and deductions applicable to this type of income.
• You can claim deductions like standard deduction (30% of gross rental income), municipal taxes, and interest on home loan against this income.
•If you run a business from your property (like a hostel), the income from the business is taxed under "Profits and Gains from Business or Profession." However, any residential portion of the property would still be taxed under "Income from House Property."
"Earlier, few taxpayers reported their income from residential property as business income instead of income from house property. Key difference being, tax regime for income from house property provides for fixed set of deductions as against business income, wherein one can claim any amount of expenses as deductions (so long as it can be justified). This leads to revenue loss for the government on account of higher deductions available to taxpayer offering such income as business income," said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
"When a tax payer has income from house property, then he is subject to some specific fewer deductions such as municipal taxes , a fixed percentage of standard deduction and interest on borrowed capital. However, for such rental income if the taxpayer uses the business income schedule, he could even benefit by taking some other additional deduction from this income such as repairs undertaken or even depreciation on furniture , fixtures etc, thereby reducing their taxable income," said Ritika Nayyar, Partner, Singhania & Co.
The amendment is effective from April 1, 2025, and will apply to the assessment year 2025-26 and subsequent years. Such income will only be allowed to be taxed only under the head of income from house property. As a consequence, taxpayers would be eligible for lesser deductions such as municipal taxes, standard deduction and eligible interest payment of loans.
This step, similar to an anti-avoidance measure, aims at reducing tax disputes arising from complexities and brings more clarity for individuals in adopting simplified tax treatments.
While this move aims to ensure fair taxation, it could lead to higher tax outgo for property owners as deductions under 'Income from House Property' are limited compared to those available under 'Profits and Gains from Business or Profession'.
[The Business Standard]
Tax certificate not mandatory for all travelling abroad: Finance Ministry
New Delhi, July 28, 2024
Applicable to those involved in serious financial irregularities, tax dues over Rs 10 lakh
The Union finance ministry on Sunday said a tax certificate was mandatory for Indians involved in serious financial irregularities or having substantial tax dues.
The clarification comes amid the stir over new rules that mandate Indians going abroad to obtain a tax-clearance certificate under the Black Money Act before leaving the country.
In the Finance Bill, 2024, it was proposed including the Black Money Act in the list of laws under which residents can clear their tax liabilities.
The ministry said a tax-clearance certificate was necessary only for individuals with significant direct tax arrears exceeding Rs 10 lakh if their case had not been stayed by any authority.
The rule, effective from October 1, has been introduced to combat tax evasion with respect to undisclosed foreign assets.
The ministry said a person could be asked to obtain a tax-clearance certificate only after recording the reasons for it and after taking approval from the principal chief commissioner or chief commissioner of income tax.
“The proposed amendment (Section 230 of the Income-Tax Act) does not require all the residents to obtain the tax clearance certificate,” the ministry said, citing a 2004 notification by the Income Tax Department.
A tax-clearance certificate is required only by those domiciled in India “only in certain circumstances”, the ministry underlined.
It has been further clarified that the I-T authority must issue such a certificate, stating that the person has no liabilities under the Income Tax Act; the Wealth Tax Act, 1957; the Gift Tax Act, 1958; or the Expenditure Tax Act, 1987.
This certificate will verify the individual has no tax liabilities or has made arrangements to settle dues before leaving India.
[The Business Standard]
Angel Tax scrapped: FM Sitharaman explains the rationale behind removing the decade-old tax
July 26, 2024
Synopsis
The Union Budget 2024 brought respite for venture investors as it abolished the decade-old Angel tax. When asked about the reason behind the move, Sitharaman said that it was one of the many steps Centre took to help Indian startups thrive. This move, however, leaves those pending to pay their previously due angel taxes in a tough spot. Sitharaman has stated that the government is working to 'sort this out'.
The Narendra Modi government's decision to scrap angel tax in the Union Budget was taken to remove the hindrances that startups face in the country, Union Finance Minister Nirmala Sitharaman revealed in an interview with The Economic Times on Thursday.
"Two years ago, we tried removing hurdles for the startups. One year ago, we said startups will not be included at all. So, every year since 2016, when startups have been given such impetus by this government, we've tried removing many hindrances that startups were facing and this was one of them," Sitharaman said as she revealed the rationale behind this move.
The Union Budget 2024 brought respite for venture investors as it abolished the decade-old Angel Tax.
Elaborating on the rationale further, Sitharaman said that it was one of the many steps Centre took to help Indian startups thrive. This move, however, leaves those pending to pay their previously due angel taxes in a tough spot.
Sitharaman revealed that the government is working to 'sort this out'.
"The Revenue Secretary said Wednesday we will try to sort it out. My approach would be to see how best we can sort this out. Because it can’t be that we’ve removed a tax but those litigations are going to hang fire. That cannot be a fair treatment. We will have to work out something," Sitharaman said.
Angel Tax was a crucial point of discussion amongst startup industry leaders, who have long argued that it placed an undue financial and compliance burden on young ventures. This tax deterred the growth of genuine risk capital for the fast-growing industry, experts had stated.
The tax was first introduced in the Union Budget of 2012 by former Finance Minister Pranab Mukherjee, under the UPA 2.0 regime, as a move to crackdown on money launderers. However, FM Sitharaman said that the measures are now already in place are enough to arrest launderers of money under the guise of businesses.
"We were confident that the PMLA (Prevention of Money Laundering Act) and the Black Money Act are adequate to sort this out, so we’ve just removed it," Sitharaman said.
The Manmohan Singh government's argument when it first brought Angel Tax into effect was that it would help distinguish between legitimate startups and those using the channel to funnel money through the system.
Under Modi 3.0, the strategy to combat such money launders has changed.
"What has changed is our attempt to remove those elements which were the pain points. We tried doing it. But now there is no other way in which you can make that law, that particular section, doubt-free," Sitharaman said.
"The provisions of PMLA and Black Money Act if invoked rightly are more than sufficient and you don't need this section in the IT Act," she added.
[The Economic Times]
Budget 2024: Govt mulls stringent norms for clearance certificate needed for residents leaving India
July 25, 2024
The 2024 Budget has introduced more stringent rules for obtaining clearance certificates required for leaving India. Starting October 1, they will need a clearance certificate confirming compliance with the Black Money Act, 2015.
Budget 2024: Finance Minister Nirmala Sitharaman has introduced more stringent rules for obtaining clearance certificates required for residents leaving India. Starting October 1, residents of India will need a clearance certificate confirming compliance with the Black Money Act for leaving India.
As per section 230 of the Income-tax (I-T) Act, any individual residing in India must obtain a certificate from tax authorities before departure. This certificate ensures that the person has no unpaid taxes or has made arrangements to settle any outstanding amounts.
This requirement extends to taxes under the Income-tax (I-T) Act, as well as the former Wealth Tax, Gift Tax, and Expenditure Tax Acts.
Tax experts anticipate that a forthcoming notification or rules will provide further clarification on these requirements, according to the Times of India.
Additionally, the 2024 Budget proposes eliminating the ₹10 lakh penalty under sections 42 and 43 of the Black Money Act for not reporting foreign assets (excluding real estate) if their total value is less than ₹20 lakh. This change will take effect from October 1, 2024.
The Economic Times reported that this exemption from penal provisions also applies to incorrect or non-reporting of these foreign assets.
Under the new provision, residents who are ordinarily residents of India must disclose all foreign assets, including investments like shares and securities, as well as any income from these assets when filing their Income Tax Return. Failure to report foreign income and assets or to submit the relevant ITR can result in a penalty of ₹10 lakh under sections 42 or 43 of the Black Money Act, irrespective of the asset's value. However, these sections do not apply to one or more bank accounts with a total balance not exceeding ₹5 lakh at any time during the previous year.
[Mint]
