Update on PAN processing procedure

GKM would like to bring to your notice an important update on the changes that have been introduced in the PAN acceptance. The Central Board of Direct Taxes, Department of Revenue, Ministry of Finance has amended Rule 114(4) of the Income-tax Rules,1962 pertaining to acceptance of PAN applications w.e.f from 3rd February 2014.

Proof of Identity (POI)  The list has been modified to have only those documents having photograph in case of individual/ Hindu Undivided Family (HUF) applicants. Certain documents have been removed and certain new documents have been added in the list of documents provided under Rule 114(4).

Proof of Address (POA) Certain documents have been removed and certain new documents have been added in the list of documents provided under Rule 114(4). Validity period of certain documents has been revised from six months to three months.

Proof of Date of Birth (PODB): Earlier it was not collected from the applicant  Individual and HUF applicants would also be required to provide Proof of Date Birth (PODB) in addition to the POI & POA documents. The list of documents to be submitted as PODB has been prescribed in the amended Rule 114(4).

Hold Foreign Assets? Face up to stringent reporting requirements on your return form

The Central Board of Direct Taxes (CBDT) has issued new income tax return forms for those holding assets outside India, (Forms ITR-2, 3 and 4). The detailing requirements have been made more stringent.
To begin with, the wordings used in the Finance Bill or in the tax return to define ‘any asset’ is wide enough to cover all assets held by an individual outside India. “The schedule specifically requires the details of bank accounts, financial interest in any entity and immovable property. It also requires the assessee to furnish the details of any other asset and accounts where the individual has a signing authority,”

NOTE BOOK

Long-term capital gains with and without claiming indexation benefit to be reported separately In case of donation made, detailed primary information of the donor (name, address and PAN) For TDS income (other than salary), give TDS certificate number and the year in which TDS was deducted For business income, give detailed report of unabsorbed depreciation loss or loss claimed before calculating depreciation  Partnership firms should report capital investment and percentage share in the profit, apart from share of income

Following are the details you have to furnish if you hold assets abroad:
Bank accounts 
You will need to give the location of the country where you hold the account, name and address of the bank. Also, you will have to give the account holder’s name if you are a signatory to the account. And, the peak balance maintained in the account during the assessment year for which you are filing returns.
Financial interest 
If you have an interest in any entity abroad, the country name and code, name, address and nature of the entity where the interest is held, and the total investments made by you in the assessment year, need to be given.
Immovable property /asset
For home/land held abroad, you need to provide the name of the country where you hold it and its code, location of property/asset and total investment made in it till now. Co-ownership details also need to be given, such as the joint owner's name, Permanent Account Number (PAN) and share held in the property.
These rules apply even to signing authorities. Some say these are too many and bothersome details. Specially for those on long deputation abroad, like employees of information technology companies, as most of the money they earn is taxed by the employer. And, there are some who have very low balance in their foreign accounts.
These details may not be asked for long. Since this is the first year and there is the black money issue, these many details are required. Otherwise, it will not plug the loopholes like in case of e-filing. In e-filing, you are not required to furnish all details; many things are optional.

The Hindu Business Line article - Disclosure initiative with a twist

The Finance Bill, 2012, requires all residents to provide information on foreign assets for taxation, and this includes dividends.

Anubhav Sharma, a US resident, returned to India from USA after a fairly long stint of employment. He stayed abroad for approximately 10 years, and while he was in the US, he invested in mutual funds and shares via a brokerage account. The dividends were reinvested, and taxes were paid as necessary in the US, as he filed a resident US return. Anubhav returned to India a few years ago when he was deputed by his company to oversee their India operations, and he has been working here ever since. Anubhav didn't redeem funds in his brokerage account, and the account continues to yield dividends on his investments, though no fresh investment was made post his return to India.

Anubhav has filed his India tax returns as a resident, since he surrendered his green card. He hasn't reported these dividends on his India return, as dividends are exempt from tax in India, and he assumed that this rule would apply to foreign dividends as well. Anubhav recently came across an article which explained in detail the provisions of the Finance Bill 2012 with reference to assets held abroad.

NEW TAX RULES

Though the Bill is yet to be passed in Parliament, the CBDT (Central Board of Direct Taxes) has already notified the new tax forms for this fiscal. The new rules require all residents, including those who aren't ordinarily resident, to provide information on overseas assets owned by them.

Having filed resident returns in USA, Anubhav is quite familiar with the provisions of the Banking Secrecy Act and the FBAR — Foreign Bank Account Reporting in USA which requires all US citizens and resident return filers to disclose all foreign financial assets in excess of $10,000. In fact, 2011 onwards, US requirements have become more stringent in that all citizens must now also file an additional form along with the US tax return, which not only discloses the assets abroad, but also lists the income earned from these assets and the schedule of the tax return on which the said income is listed. There is, of course, a threshold limit for the disclosure. So now, the disclosure ties to the tax return and makes sure that foreign income doesn't escape the tax net.

The Indian government has now embarked on a similar initiative. All resident filers (including those who aren't ordinarily resident) must declare details of bank accounts, financial interest in any entity, immovable property, as well as any foreign account for which they have signature authority. So far, it seems to only be a disclosure or information-reporting requirement. While this move may seem stringent, especially to expats whose status isn't ordinarily resident, one must analyse the move from a wider perspective.

TAXABILITY OF DIVIDENDS

This move is an effort to curb black money and widen the tax net. On the face of it, expats may claim that the rule is hard on them, since they aren't permanent residents of India. However, it must be noted that the US disclosure rules are also similar — one may not be a permanent resident or citizen but if one files a resident tax return, then one falls under the purview of the disclosure rules. In this light, Anubhav will need to show his foreign assets, namely the brokerage account, and he may need to consider taxability of dividends based on the Double Taxation Avoidance Agreement.

The Finance Bill isn't through yet, but another one of its related provisions also states that tax assessments may be reopened for the previous 16 years, in case any concealment is detected. There is ambiguity in this, since the normal statute of limitations requires that income tax records be maintained by taxpayers for a period of six years only. A similar conflict also arose in the US disclosure programme. The statute of limitations in USA is 3 years, so any adjustments to taxes prior to that period need taxpayer concurrence.

The last Offshore Voluntary Disclosure initiative programme in the US covered a period of eight years from 2003 to 2010. The conflict due to the statute of limitations was simply resolved by getting taxpayers to sign an agreement to reopen assessments for the whole 8-year period, in return for a reduced penalty framework. One can only guess that something along similar lines is being contemplated in the Indian scenario as well.

According to the finance ministry, the provisions are aimed at residents whose global income must be taxed in India, but there is still some ambiguity, and the CBDT may need to be very explicit regarding the qualifying conditions and threshold limits which will be used to determine if someone falls under the purview of these rules.

(The author is a Coimbatore-based chartered accountant.)

http://www.thehindubusinessline.com/features/mentor/article3311677.ece

CBDT chief - meet targets & get ahead!

MUMBAI: The chairman of the Central Board of Direct Taxes (CBDT) has told senior officials that their career prospects would depend on their success in meeting targets for tax collection, emphasising the government's desperation to raise revenues to plug the rising fiscal deficit, but raising fears among the wealthy of harassment. Laxman Dass, the chairman of CBDT, has told 100 top officials that tax revenue targets are 'nonnegotiable'. 


The letter, dated February 7, admonishes his colleagues, officials of the rank of chief commissioners and director general, for their lack of success in bringing in money. "I have taken over as chairman at a time when revenue collections seem to be far away from the Budget target, with less then two months at hand." 


Dass outlines a carrot and stick policy to get the situation back on track. "Among the parameters of performance in your area, achievement of revenue collection target will obviously be given the highest weightage while writing your APAR and (it) will also be a major factor while considering placements during AGT 2012." APAR is the annual performance appraisal report and AGT is annual general transfer. 


The aggressive stance of the tax authorities has caused dismay among some experts. "India is the highest tax jurisprudence producing country in the world. Every day at least two or three international tax decisions are being taken by either the courts or the tribunals," said Daksha Baxi, executive director at Khaitan & Co, a law firm that provides legal counselling to corporates. 


A chief commissioner who does not want to be identified said: "Though it is a fact that one's performance is taken into account for promotions and transfers, a letter from the chairman is unprecedented." Dass declined to comment on the letter. 


Tax head of Deloitte India, Lakshmi Narayanan told ET that assigning collection targets to officers is not a practice in developed countries. He said the CBDT chairman's letter could result in "high-pitched" demands. 


"Officers are now compelled to make high-pitched demand on large corporates, which cannot be sustained at the appellate level. The excess demand get refunded next fiscal. What are they trying to do? Just deferring the problem, as it gets into litigation for five to six years." Under pressure from the top, tax officials often force assesses to pay tax - even if there is a dispute over it - threatening them with the prospect of a raid or its softer version, the so-called survey, many taxpayers complain. 

The tax department, going by the feedback from the ground and collections by way of tax deducted at source ( TDS), securities transactions tax (STT) and so on, is facing a likely shortfall of Rs 50,000 crore in tax collection. The government has raised its target to Rs 5.80 lakh crore, but in all likelihood the collection will border the original target of Rs 5.35 lakh crore, sources said. 


The letter from the chairman of the board is seen as a desperate step to meet the higher target, a senior tax official said. Another senior income-tax official said: "Authorities should know that tax collection is closely linked to the performance of the economy. If some sectors do badly, tax collection from the sector too will be affected." 


INCREASING UNCERTAINTY 


Baxi said the letter would only add to the air of uncertainty prevailing in companies. 


"Corporates are not sure about certain transactions because of the unpredictability of the tax department," says Baxi. "This is creating a lot of uncertainty. They are not comfortable in ploughing back profits while the GDP growth has slowed down. This is a major factor for the slowdown," she said. 


Baxi laments that tax officers refuse to acknowledge court orders. "What is increasingly been seen is the tax officer refusing to acknowledge the decisions or precedence of a higher body. They simply disregard the tribunal decisions or another jurisdiction which supports the views of the taxpayer," she said. 


There is also a drive to raise revenue from demands disputed at the appellate levels such as Commissioner, Income Tax, Appeals (CIT-A) and Income-tax Appellate Tribunal (ITAT). 


The CIT-A has the power to direct the taxpayer not to pay the tax until it decides on the correctness of the demand, or to direct him to pay 50-100% of the disputed amount, depending on the merit of the case. 


Though it is a quasi judicial body, the CIT-A is headed by an official of the Income-tax department, who will be promoted or transferred after his tenure ends. Taxpayers are complaining that the appellate commissioners too appear to be part of the drive to enhance tax collection. 


Senior chartered accountant TP Ostwal said, "Appellate commissioners are deliberately asking taxpayers to pay up at least 50% of the disputed tax. In several other cases they are asking taxpayers to pay the full amount. On the other hand, the assessing officers tend to make wrong assessments in order to meet the targets assigned to them. My clients have been affected by this unusual drive to meet the target."

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/meet-targets-or-face-music-cbdt-chief-tells-officials/articleshow/12191585.cms?curpg=2