India Regulatory Brief: Aadhaar Mandatory for Tax Returns, CBDT Waives Interest Liability in Retrospective Tax Disputes

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Aadhaar mandatory for filing tax returns from July 1

Providing your Aadhaar number for filing income tax returns (ITR) will be mandatory from July 1. Individuals who do not have an Aadhaar card can file their tax returns by furnishing their Aadhaar enrollment number. Tax authorities have given until June end for people to link their Aadhaar number with their Permanent Account Number (PAN). This means that an ITR where the PAN is not linked with Aadhaar will be considered an invalid filing.

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The change in law will be implemented via amendments to the Finance Bill 2017 that was passed on March 22 as a money bill, causing uproar among the opposition. A money bill does not require approval from the Rajya Sabha (upper house of parliament) where the ruling NDA coalition does not have a majority.

The government has defended its 40 amendments in the bill, labelling them as ‘incidental’. Other controversial amendments include the reduction in the maximum cash transaction allowed from US$ 4609.68 (Rs 300,000) to US$ 3073.12 (Rs 200,000), increased arbitrary powers for income tax officials, and the merger of eight tribunals.

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Income declaration scheme PMGKY ends March 31

The income declaration scheme – Pradhan Mantri Garib Kalyan Yojana (PMGKY) – launched on December 17, in the aftermath of demonetization, will end on March 31. Tax authorities have issued stringent warnings across public media asking individuals to declared their undisclosed assets or face intense scrutiny and heavy penalties.

Those declaring cash deposits under this scheme will be subject to a levy of 50 percent that breaks down into: 30 percent tax, 33 percent surcharge, and a 10 percent penalty. Additionally, the declarant will have to deposit 25 percent of the declared amount into the zero-interest Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 for a lock-in period of four years.

These schemes are part of the government’s overarching Operation Clean Money that seeks to expand the government’s tax net, track and eradicate black money, and retract the parallel market thereby formalizing a bigger section of the market economy.

No interest liability in retrospective tax disputes, under conditions

The Central Board of Direct Taxes (CBDT) issued new guidelines on March 24 announcing the waiver of interest liable to be paid by companies involved in disputed tax cases under various scenarios. Importantly, the tax department will waive interest liability if the principal demand of the capital gains tax is paid by the firm. This is important for companies like Cairn India and Vodafone who have been subject to vast tax liabilities as a result of the government’s imposition of retrospective tax demands.

The new guidelines follow the Direct Tax Dispute Resolution Scheme, which expired on January 31; the scheme had been announced on February 28, 2016 as part of the previous fiscal budget.

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India lifts temporary ban on imports from Vietnam

India lifted its temporary ban on six commodities imported from Vietnam: coffee beans, bamboo, black pepper, cinnamon, cassia, and dragon fruit. The ban was imposed since March 7 after Vietnam suspended the import of five commodities – pods and seeds of peanuts, seeds of cassia, cocoa, bean, and fruit of tamarind – from India. While Vietnam cited phytosanitary concerns for its ban, India justified its ban by stating the ‘interception of quarantine pest in cargoes’.

Vietnam lifted its ban on March 21 following which India lifted its own ban on March 22.

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