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National InstitutionforTransforming India (NITI)Aayog is in favour of keeping the threshold for the income tax(I-T) exemption intactatRs. 2.5 lakh.Instead,they want to extend the tax(10percent)on theRs.5lakh slab toRs.7 lakh.Officials said that the Aayog favours expansion of the tax base to enable more people too paytaxes,ratherthan expandingtheexemptionlimits. Finance Minister Arun Jaitley had raised the threshold for income tax exemption to Rs.2.5lakh from Rs.2lakh in his very first Budget for2014-15. At present, there are three slabs — 10 per cent for annual income between ~2.5 lakh and ~5 lakh, 20 per cent on annual income from ~5 lakh to ~10 lakh, and 30 per cent on income above ~10 lakh. The Aayog also advocated job creation being the central theme of the Budget. In its appraisal of the Twelfth Five-Year Plan (201213 and 2016-17) — the last such exercise before Plans winds up — the Aayog also wanted the government to curb discretionary powers of the tax officials and a...

The Union Budget is expected to provide relief to companies which come under them inimumal ternate tax (MAT). Sources who attended a presentation made by the finance ministry last month said the current tax framework has made MAT aredundant levy. “While the government has already promised to lower the corporation tax rate further,it has also started work on ending tax rebates and tax holidays for companies.If foreign institutions canbe exempt from such a tax,even domestic companies should get a similar benefit,”the sources said. There ducing gap between corporation tax and MAT is one of them a in reasons for the government to consider such a step. While the current MAT rate is 18.5 percent, corporation taxes have come down to 29 percent from 35 percent earlier.And this gap will narrow further as the government has promised to bring the tax down to 25percent by 2019. Punit Shah, partner, Dhruva Advisors,said according to the road map laid down by the government,the corporation t...

The Association of Mutual Funds in India (AMFI) has said it expects a significant spike in Know Your Customer (KYC) rejections and failures in opening accounts till fund houses adapt to the new Central Know Your Customer (CKYC) system. The sector body recently wrote to the Ministry of Finance saying the CKYC data requirements and uploading processes are far more stringent and complicated compared with the current Securities and Exchange Board of India KYC Registration Agency (KRA) Regulations. Switching over to the new system would require extensive training for investors, distributors and staff in all mutual funds and their registrar and transfer agents (RTAs). Regulators have instructed all financial institutions to use the CKYC registry, managed by the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) for new customers. The new KYC record-keeping agency is jointly promoted by the government and public sector banks. The CKYC regis...

India will not extend the March 31 deadline for other countries to renegotiate their investment agreements and align them to a new investment framework, commerce and industry minister Nirmala Sitharaman said on Tuesday. Further, investments from countries that fail to renegotiate investment protection agreement by April 1will not get complete benefit under any treaty With only three months left for India’s Bilateral Investment Treaty (BIT) to come into force, not many countries have approached the government to renegotiate their existing investment pacts based on the model BIT text. “We had given one year’s time for countries with whom we have investment agreements to come and renegotiate them… We are waiting for them to come and talk,” the minister said There will be a hiatus between the expiry of old pacts and the inking of new ones during which investors will not get the same level of treaty protection. The European Commission (EC) has raised concerns over negotiations for...

With bond yields falling to multi-year lows,a section of the bond market says it could be time the government enables in t he Budget state-owned infrastructure and in rafinance companies to raise enormous amounts of tax-free bonds. The government doesn’t  raise tax-free bonds directly.It instead allows state-owned institutions to raise these bonds.The bonds raised by these companies are over and above the government’s borrowings.The government is committed to borrowing with in a particular limit.For 2016-17, the borrowing was limited to 3.5 percent oft h e gross domestic product,which was later reduced byRs.18,000crore in the firstweek of January this year. “The government for goes only asmall amount on taxes on tax-free bonds,but it largely helps the infrastructure sector. Given the government has good taxbuoyancy,whatwith direct and indirect taxes expected to be good after demonetisation,itmay allowafairamountof tax-freebondsthistime around,”saidJoydeep Sen,anindependent financ...

Four  Bharatiya Janata Party- ruled states— MadhyaPradesh,Gujarat and Chhattisgarhand Rajasthan —are leading the race ins hifting those who pay the value-added tax(VAT) to the goods and services tax network (GSTN),with more than 70 percent of the dealers enrolled. Despite the uncertainty over the GSTroll-out,theGSTN,which stands for the platform aswellas the body administering it,is in the process of being made ready on April1. The GSTN plans to move most of  the eight million tax payers to the portal by the end of January. Withtheenrolmentdrivestartinginall statesandUnionterritoriesinphases fromNovember8,roughlyhalftheVAT dealersinthecountryhaveregistered withtheGSTNportal.Of5.8million uniqueVATpayers,2.6millionhave listedthemselveswiththeGSTN. “Our idea is to complete the enrolment process by end-January.We are on course to providing backend support by April1,” said a GSTN executive. MadhyaPradesh and Gujarat have reported the most robust response,with78.3percent...

A Deloitte survey shows 58% of respondents want exemption limit to be raised to Rs 5 lakh from Rs 2.5 lakh Finance Minister Arun Jaitley should double the basic income tax exemption limit to Rs.5 lakh per year and raise the ceiling for claiming deduction under Section 80C to Rs.2.50 lakh, according to a survey by tax consultant Deloitte. Almost all respondents want the I-T exemption limit to be raised substantially while 58% of the respondents were in favour of raising it to Rs.5 lakh. “It will place more money in the hands of consumers resulting in increase in demand pick-up. Also, the increase in the slab limit will kick-start savings which will ultimately lead to increase in investment in the system,“ stated a Pre-budget Expectations Survey Report by Deloitte. It said that 71% respondents want the limit of the Section 80C to be increased to Rs.2.50 lakh, from Rs.1.50 lakh. “Given the increase in income levels and inflation, the existing limit is low.Increase in limit will ...

Investment strategy being reworked due to Singapore tax treaty, GAAR arrival from FY18 As the Indian government amended the Singapore treaty to give clarity on taxation, many foreign portfolio investors (FPIs) and private equity firms are exploring new structures and routes for Indian investments, people in the know said. The new routes or structures being explored by the investors are also in the context of GAAR (general anti-avoidance rule) -the direct taxation regulation that is set to come into force from April 1 this year. Many FPIs are taking a relook at their investment strategy in the context of these two main changes, and whether they need to or could change the way they invest to save on some taxes. “There are several recentim pending tax developments that investors will have to look at, including amended tax treaties, GAAR and also, what offshore transactions amount to indirect transfer of shares. In relation to private equity firms, given grandfathering of investmen...

DIPP proposes tax concessions on ESOPs, unlisted securities and convertible instruments Prime Minister Narendra Modi's key Startup India programme may get a boost in the upcoming budget with the industry department drawing up a list of tax concessions on employee stock options, unlisted securities and convertible instruments. The union budget is expected to be announced on February 1. The push comes amid concerns that the startup movement in India was losing steam and there hasn't been a significant improvement in ease of doing business. The Department of Industrial Policy and Promotion (DIPP) has proposed that ESOPs for startups be taxed at the time of sale, when they have greater liquidity to pay taxes and the instruments get a fair valuation. DIPP has also said that the period of long-term capital gains for unlisted securities be reduced from the current limit of 24 months, keeping in mind that investing in startups is risky and subject to a higher rate of tax. “We are...

May put names involved in suspect transactions on website, making explanations mandatory Anyone who has deposited cash or purchased highvalue items after the November 8 demonetisation not in line with income declared in tax returns may have reason to worry as the authorities sift through tonnes of data generated in the past two months or so. They are also using data analytics to parse for points of similarity to see if any attempt has been made to split up transactions to avoid suspicion. The income tax department is likely to put such names on its website soon, making it mandatory for them to explain such transactions. Armed with information on deposits and purchases in the wake of demonetisation, the tax department is pursuing presumed wrongdoing with unprecedented intensity. “We are working on a new online mechanism whereby names of those whose deposits or trans actions do not match will be put up and information be accessed via permanent account number (PAN) of the indivi...

The country’s largest bank State Bank of India (SBI)announced a steep interest rate cut in several years on Sunday,by reducing its marginal cost of funds based lending rate(MCLR)by 90 basis points(bps)across all maturities. With this cut,SBI has passed on benefit of 200 bps since January 2015 to customers,which is more than 175 bps reduction in the Reserve Bank of India’s(RBI)policy rate cut in the same period. The new rates come into force from today.SBI’s one-year MCLR stands reduced to eight percent from 8.9 percent,while the rate on overnight loans is now 7.75 percent,against 8.65 percent. Banks are flush with funds after the note ban, with Rs.12.4 lakh crore having been deposited with banks till December 10.SBI chairman Arundhati Bhattacharya said, “There is huge liquidity with the bank due to the large flow of deposits. This has driven us to reduce lending rates,which, hopefully,will kick-start credit demand and growth.” Two other public sector lenders — Punjab National B...