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Project Report On Taxation News Analysis: Guided By: Prof. Anil Gor
Project Report On Taxation News Analysis: Guided By: Prof. Anil Gor
Project Report On Taxation News Analysis: Guided By: Prof. Anil Gor
Taxation News
Analysis
Guided by: Prof. Anil Gor
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Shivam Jain
Shweta Shinde
Hiral Shah
Roll No.358
Varun Baheti
Roll No.338
Nikita Nautiyal
Roll No.318
Apurva Kelkar
Roll No.348
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ACKNOWLEDGEMENT
We take this opportunity to express our deep and sincere
gratitude to Prof. Anil Gor for his valuable guidance and
encouragement in implementing the knowledge gained
through lectures in the form of a project. It is because of his
support that we could synchronize the efforts in covering the
manifold features of the project. We acknowledge the
infrastructural support provided by the organization.
Finally we are thankful to all our members of the
organization and friends who have given their full support in
collecting the required and continuous help during the
preparation of the project.
Kljkkjyjyyyyyyyy
\\\\\\\\\\\\\\
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Table of Contents:
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NEWS-01
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With the one page annual filing, tech businesses will get more time to accelerate and scale,"
People with knowledge of the proposals being discussed by the inter-ministerial group said,
there are moves to also ease the process of shutting down failed startups. "Certified' startups
will have the ability to shut down in a day, with submission of a single page form,' said one
source.
Every day nearly over two startups are set up in India. Industry members estimate that for every
hundred new ventures, at least eighty fail.
Currently, it takes a private limited company about 18-36 months to wind up completely.
Procedure involves taking a no-objection certificate from each creditor, getting approval of all
directors, including investors and submitting a court petition.
However a large number of technology startups own assets such as an intellectual property or a
website, the ministerial group is now discussing new rules that will help them shut down
speedily, if required.
Remarks.
1. This move of the government will make it easy to start a new company and also facilitate
winding up.
Charging less tax will also help fuel the growth of startups.
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News 02
Government mulls scrapping dividend tax:
Date:
Remarks.
1. Scrapping the dividend distribution tax would make Indian stocks lucrative to investors.
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News 03
Government changes excise duty structure on
branded diesel
The government has changed the excise duty structure on branded or premium diesel, shifting
from fixed rates to a combination of ad valorem and fixed duty.
Branded diesel will now be charged at 14 per cent of refinery gate price of the fuel plus Rs 5 per
litre or Rs 10.25, whichever is lower, according to notification issued by Department of Revenue
in the Finance Ministry. The duty shift will not result in any change in retail price.
The fuel, which is sold under brands 'XtraMile' by Indian Oil Corp (IOC), 'Hi speed Diesel' by
Bharat Petroleum Corp Ltd (BPCL) and 'Diesel Super' and 'Turbo Jet' by Hindustan Petroleum
Corp Ltd (HPCL), till now attracted a total excise duty of Rs 10.25 per litre.
The specific excise duty rates for unbranded or normal diesel as well as unbranded and
branded petrol have not been changed and they will
continue to be charged at specific rates.
Originally, excise duty on petrol and diesel was ad
valorem. This was changed into specific rates as with
every increase or decrease diesel in prices, the
incidence of duty also increased or decreased,
thereby impacting the pump rates.
With global oil prices slumping to near six year low of
about USD 44 per barrel, the government has raised
excise duty on both petrol and diesel on four
occasions since November to mop up an additional Rs 18,000-20,000 crore this fiscal without
impacting the consumer.
Currently, unbranded or normal petrol is charged with a total of Rs 16.95 per litre. This is made
up of basic cenvat duty of Rs 8.95 a litre plus Rs 6 special additional excise duty and Rs 2 per
litre additional excise duty which goes towards building highways.
Branded petrol, which is sold under brands at 'Premium' by IOC, 'Power' by HPCL and 'Speed'
by BPCL, is charged with a total excise duty of Rs 18.10 per litre (Rs 10.10 plus Rs 6 plus Rs 2)
Similarly, unbranded diesel today commands an excise duty of Rs 9.96 per litre (Rs 7.76 basic
excise and Rs 2 additional excise that goes towards building highways).
The same on branded diesel is made up of Rs. 10.25 a litre plus Rs 2 additional excise rate.
Remarks.
1. Change in the excise duty on Branded Diesel would not affect the consumers.
2. It will help reduce the fiscal deficit by 18 to 20 thousand cr.
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News 04
GST: 1% non-creditable tax on manufacturers miffs
industry
Date-
10th Feb
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Remarks.
1. It will result into complexities because interstate transfer of goods a same company will also
be taxed at 1%.
2. This Provision defeats the very purpose of GST.
News 05
Exemption in lieu of
80C tax benefits
Date-4th Feb
Source-Financial Express
In a bold move to simplify tax laws, the
finance ministry is considering a plan to
replace the tax benefits given to
individuals for investing in specified
savings instruments such as life
insurance and provident funds with an
upfront higher basic tax exemption limit.
If the proposal makes it into Union Budget for 2015-16, the current R1.5 lakh deduction from the
taxable income of individuals for investments in specified savings instruments under Section
80C of the Income Tax Act would be discontinued. Instead, the basic exemption limit would be
correspondingly enhanced.
That is, individuals income up to R4 lakh, or thereabouts, could be exempt from tax, up from Rs
2.5 lakh currently.
Most of the complexities that exist in the Income Tax Act is on account of using tax policy as a
tool for implementing certain genuine benefits and reliefs that the state wants to extend to
taxpayers. These benefits could rather be given as upfront exemptions from taxation or outside
the tax policy itself for the sake of simplicity, explained a source privy to the discussions.
Also, the ministry reckons that the stated purpose of Section 80C, that is, to encourage
household savings, is not efficiently achieved in the current model. It is practically difficult for the
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income tax department to verify that the investments are actually made by those seeking the
deduction, especially those not covered under the tax-deduction-at-source (TDS) net.
As per the latest data, household financial savings stood at R12.8 lakh crore in 2013-14,
accounting for 35% of the gross household savings of R20.65 lakh crore. Recent years saw
household savings rate dipping.
Sources, however, believe that the current system allows individuals to avail of the Section 80C
benefit without having made the required investments.
Most of the tax returns by individuals are processed by what is called a summary assessment,
under which an adjustment in the reported income is made only in cases of arithmetic error or of
a wrong claim that is apparent from the return filed. Officials do not ask questions or insist on
proof of investment while processing returns. Only in cases of scrutiny assessment and
assessment of income that has earlier escaped assessment, which are done in very few cases,
more information or evidence is sought to ensure that the reported income is correct.
Even in the case of salaried individuals, where the employer may insist on proof of investments,
the tax authorities do not. Besides, if a salaried individual wrongly claims in his return that
Section 80C investments have been made, the TDS by the employer and paid to the
department is refunded by the tax authorities without asking any questions. In the case of selfemployed, there is no check either by the employer or the taxman.
So the ministry feels that any individual who is actually interested in saving would anyway do it
and there is really no need to incentivize the same through the tax policy.
Savings entitled to tax benefit under Section 80C include payments towards life insurance,
deferred annuity, provident funds, National Savings Certificates, unit-linked investment plans of
LIC Mutual Fund, pension funds set up by mutual funds, equity-linked savings plans, deposits
with National Housing Bank and tuition free paid for education of children.
Remarks
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News 06
Tax net: Foreign portfolio investors caught in a bind
The tax department has asked a number of foreign portfolio investors (FPIs) to make available
their profit-and-loss (P&L) statements and balance sheets, though they are not required to do so
in the normal course of filing returns.
Typically, such statements are filed by companies.
The department's move is being seen by tax consultants as part of a larger push to levy
Minimum Alternative Tax (MAT) on FPIs. Usually, the tax is applicable only to companies.The
department has sought the financial statements of at least 200 FPIs structured as corporate
entities. They had been asked to re-file their returns for the financial year ended March 2014,
said a person familiar with the matter. The tax department levies MAT on companies to ensure a
minimum tax payment by those earning substantial incomes but escaping taxation due to
various exemptions. This levy works out to about 20 per cent of profits. Experts say if FPIs are
to furnish P&L statements, the tax department can calculate the MAT they could charge FPIs
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Remarks
1.
This would mean that foreign investors could end up paying higher tax on stock
market transactions than domestic investors.
2.
It will act as a deterrant for foreign portfolio investors to invest in indian capital
markets.
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News 07
MAT revision likely in Budget
In a move aimed at giving a push to its Make in India programm, the government could
introduce in the coming Union Budget a differential minimum alternate tax (MAT) rate for certain
segments of domestic manufacturing.According to those privy to the development, the Budget
makers are looking to give an impetus to Indian manufacturers, particularly the micro, small and
medium enterprises (MSMEs), special economic zones (SEZs) and those in the infrastructure
sector.
The government had introduced MAT to ensure no profit-earning company used exemptions
and incentives to avoid tax liability. The current rate for MAT is 18.5 per cent; the effective rate
goes up to 20 per cent after including surchange and cess. The rate for corporation tax, 30 per
cent at present, nearly touches 33 per cent with cess and surcharge.
Though the differential MAT has not yet been finalised, it is believed to be set in the range of five
per cent to 10 per cent.
Looking at ways to incentivise and promote domestic manufacturing, the commerce & industry
ministry had earlier this year made a pitch for lowering of MAT for domestic manufacturing. So
far, there is no specific provision in the income-tax Act to incentivise domestic manufacturing,
though certain relief is given to SEZs. The pitch is for restoring relief for SEZs and providing
SMEs with some leeway.
MAT credit can be carried forward for only 10 years almost corresponding with the holiday
period for SEZs. This 10-year restriction, coupled with the way MAT set off is allowed under the
existing tax provisions, results in permanent loss of a significant portion of the MAT paid.
The proposal to impose MAT on book profits of both SEZ developers and units in these
enclaves was announced in Budget 2011-12 by the then finance minister, Pranab Mukherjee.
Besides, DDT at almost 20 per cent was also imposed for dividend distributed to shareholders.
MAT came into effect from April 2012, amid severe protest from SEZ developers and units. It
was introduced through a proposal in the Finance Act, even as the SEZ Act specifically
mentioned a stipulated tax holiday be given to these zones.
Another measure specific to manufacturing companies, pressed for by industry and being
considered by the government, is allowing deduction of investment allowance for MAT
computation purposes.
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In the previous Union Budget, the government had reduced the threshold for claiming the 15 per
cent tax deduction of the actual cost of new plant and machinery by manufacturing companies
from Rs 100 core to Rs 25 core. This provided a fillip to the manufacturing sector and acted as a
catalyst for capital infusion. The investment allowance could be permitted as an adjustment for
MAT purposes.
Remarks
News 08
Union Budget: Fix realistic tax targets
Date-10th Feb
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Source-Financial Express
In the last few years, the finance ministry has been projecting higher tax revenue increases in
the Budget to keep the fiscal deficit target low. What this has meant, in effect, is the government
going for expenditure compression in a big way to make up for the gap between the actual tax
realisation and the estimates. This puts unnecessary pressure on the tax departments.
The mid-year review of the finance ministry pointed out that the Budget overestimated the tax
revenue by R1.05 lakh crore or 0.84% of the likely FY15 GDP, which is broadly the shortfall that
now looms ahead. The net direct tax collection growth during the April-December period was
just 7.4% as compared to the gross direct tax realisation target of 16%. Similarly, the growth in
indirect taxes in this period grew by 6.7% only while the target is 26%.
The estimation of the tax mop-up growth target for FY16to be announced in the Budget on
February 28therefore, will be keenly watched, especially because the government has
already planned to raise the tax-to-GDP ratio in the next two years to 11.2% from 10% in FY14.
This would in itself require an average tax growth of 17.7% in the next two years, on top of the
20% rise projected in FY15 over actual collections in FY14.
The new GDP series doesnt alter the situation. The Tax Administration Reforms Commission
(TARC) is slated to suggest a revenue forecasting model before the Budget, but it would be
probably too late in the day to take note of that for FY16 projections.
Remarks
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News 09
Tax relief for individuals and companies likely in
Budget 2015
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The 2015-16 Budget is likely to include major relief for individual taxpayers to boost savings as
well as for companies to encourage them to invest in the country.
The contours of the package are still being worked out but it is likely that tax slabs or
exemptions will be reworked for individuals and the corporation tax rate may be rejigged,
officials said. The corporation tax rate now stands at 30 per cent and the rate has remained
unchanged for the last seven years, tax experts said. Including surcharge and cess, the
effective rate is around 33 per cent. The surcharge on corporation tax was reduced last year
from 10 per cent to 5 per cent.
"There are several companies who are relocating their operations to other countries because of
the tax burden. Therefore, there is a need to provide some relief. Individual taxpayers also need
relief," said an official who did not wish to be identified. The government is keen to restart the
investment cycle and deepen the manufacturi ng sector as part of its Make in India campaign.
Therefore, it would prefer to have a predictable and easy tax structure that encourages firms to
invest in the country.
"The final call will be taken by the PM and the FM," the official said. The Narendra Modi
government, in its first Budget in July last year, had raised the personal income tax exemption
limit from Rs 2 lakh to Rs 2.5 lakh. For senior citizens, the limit was raised from Rs 2.5 lakh to
Rs 3 lakh.
Both Modi and finance minister Arun Jaitley have said that the government believes in a low tax
economy and does not want to burden the people with high taxes. But a tight fiscal situation has
prevented them from carrying out any big bang tax relief. Jaitley has earlier said that he is
against reducing exemptions to widen the tax net and that he would like to expand the ambit but
the tight fiscal situation was making his task difficult.
Officials say that the revenue department is concerned that if major tweaking of the tax slabs is
done then a large chunk of taxpayers may go out of the net. "This will have to be a political call,"
the official said, adding that there would be no significant dent to revenue receipts even if a few
thousand tax payers go out of the net. Tax experts backed the idea of relief for individuals and
companies.
Reforming the tax administration and the taxation structure has been a priority for the
government as it has moved to heal the wounds from the stinging impact of retrospective
taxation.
Friendly for tax payers and has laid down guidelines for the department's interaction with
companies and individual taxpayers.
Remarks
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