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The deadline for e-filing of <a href="http://www.businessinsider.in/searchresult.cms?query=income+returns">income returns and audit reports</a> for a special category of taxpayers – assessed under <keyword id="3082496" type="UNKNOWN" weightage="20" keywordseo="section-44AB-of-the-Income-Tax-Act">section 44AB of the Income Tax Act</keyword> – has been extended by the government to 31st October of this year. 
 
Earlier, the taxpayers had to file their returns by 30th September. 
 The Central Board of Direct Taxes (<keyword id="128665" type="ORGANIZATION" weightage="20" keywordseo="CBDT">CBDT</keyword>) in a statement issued today has said, "In order to avoid discrimination between taxpayers residing in different jurisdictions and to be fair to all and also in view of paucity of time to approach Supreme Court by way of Special Leave Petition, government has decided that across the country all returns of income and <keyword id="650924" type="UNKNOWN" weightage="20" keywordseo="audit-reports">audit reports</keyword> under section 44AB which were due for e-filing by September 30, 2015, may now be filed by October 31, 2015." 
 As published in an Economic Times report, the apex policy-making body of the <keyword id="6354751" type="COMPANY" weightage="20" keywordseo="Income-Tax">Income Tax</keyword> department said that the issue of extension of last date for e-filing return of income tax and audit reports has been the subject matter of litigation in various High Courts across India. 
 
"While some High Courts have ruled in favour of the extension of due date, some others have ruled otherwise," it said. 
 
The move, as informed by the officials, has come after the Punjab and Haryana High Court had ruled against the I-T department on 28th September and asked the CBDT to extend the deadline. 
 The section 44AB of the <keyword id="570874" type="UNKNOWN" weightage="20" keywordseo="I-T-Act">I-T Act</keyword> talks about the provisions relating to those taxpayers who are required to get their accounts audited from a <keyword id="6358896" type="POSITION" weightage="20" keywordseo="Chartered-Accountant">Chartered Accountant</keyword> (CA). The audit under section 44AB aims to ascertain the compliance of various provisions of the said law. 
 
Image: thinkstock

E-filing date of income returns and audit reports of some taxpayers extended to 31st October

The cost <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> index (<keyword id="6358345" type="General" weightage="80" keywordseo="cii" source="Orion">CII</keyword>) for 2023-24 relevant to assessment year 2024-25 stood at 348, according to a notification issued by the <keyword id="121964" type="General" weightage="100" keywordseo="central-board-of-direct-taxes" source="Orion">Central Board of Direct Taxes</keyword> (<keyword id="128665" type="General" weightage="50" keywordseo="cbdt" source="Orion">CBDT</keyword>) on Tuesday. The income tax department notified the CII for calculating long-term capital gains which arise from sale of assets like immovable property, securities and jewellery. The CII number for 2022-23 was 331 and for 2021-22 it was 317. CII is notified under the <keyword id="472467" type="General" weightage="20" keywordseo="income-tax-act" source="Orion">Income-tax Act</keyword>, 1961 annually. It is commonly used for calculating 'indexed cost of acquisition' while calculating capital gains at the time of sale of any capital asset. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/environment/news/daphne-du-mauriers-the-birds-predicted-environmental-crisis-70-years-ago/articleshow/99398111.cms">Daphne du Maurier's The Birds predicted environmental crisis 70 years ago</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/amul-vs-nandini-how-the-dairy-giants-compare-in-terms-of-price-product-types-and-more/slidelist/99398670.cms">Amul vs Nandini: How the dairy giants compare in terms of price, product types and more</a>

Central Board of Direct Taxes notifies cost inflation index for 2023-24

<keyword id="770060" type="UNKNOWN" weightage="100" keywordseo="Indian-start-ups">Indian start-ups</keyword> are already worried because of funding prospects and falling valuations, but looks like the government has decided to add more woes to this list. 
 
If reports are to be believed, the government is planning to levy tax on those start-ups whose valuations have fallen recently, stating that the first premium was more than the firm's fair value. 
 
As per tax officials, Section 56 of the Income Tax Act gives them the right to charge tax on excess consideration, more than the fair value, against issue of shares. 
 
"Any consideration received by a company (start up) from a resident, against issue of shares, exceeds the fair market value of such shares, such excess consideration is taxable in the hands of the start-up, as an income," says the cited Section 56 (2) (vii) (b). 
 
In the recent past, we have seen several start-ups being valued lower because of concerns over profitability, growth and intense competition. This has led the tax officials to opine that start-ups should be valued on the basis of the last round of investment, which, if lower than the first round, means that excess premium, more than the fair value, is deemed to have been paid. 
 
However, this controversial move from the tax department will most likely affect only those investments made by funds that are not registered with SEBI and by angel investors. This means that a huge number of start-ups, which were funded by VC funds registered with SEBI will not get affected. 
 
Even though no formal notice has been sent, Indian start-ups have received requests from the Income Tax department, seeking detailed valuation reports for each round of investment. This has led them to smell the coffee, and they have already started to save themselves from the whims of this additional tax. 
 
"The industry was hoping that angel investors would also be exempted from the said tax. However, the lack of implementation of any such exemptions is acting as a major impediment for start-ups," said Archana Khosla, founder partner of Vertices Partners, a law firm specialising in working with the start-ups. 
 

	<a href="http://www.caseycheshire.com/wp-content/uploads/line-graph-down.jpg">Image source</a>

Double whammy: Start-ups might have to pay more tax if valuation falls

The government has relaxed provisions of <keyword id="19948097" type="General" weightage="20" keywordseo="tds" source="keywords">TDS</keyword>/<keyword id="19950203" type="General" weightage="20" keywordseo="tcs" source="keywords">TCS</keyword> in the event of the death of the deductee/collectee before the linkage of PAN and <keyword id="19898107" type="General" weightage="20" keywordseo="aadhaar" source="keywords">Aadhaar</keyword> card. TDS is Tax Deducted at Source and TCS is Tax Collected at Source in India. The Central Board of Direct Taxes (CBDT), has issued a circular dated August 5, in view of genuine difficulties being faced by taxpayers. Through the circular, the government said it has relaxed the provisions of TDS/TCS, as per the Income-tax Act, in the event of death of deductee/collectee before linking of PAN and Aadhaar. In order to redress the grievances of the taxpayers wherein instances have been cited, of demise of the deductee/collectee on or before May 31, 2024 and before the option to link PAN and Aadhaar could have been exercised, the circular provides that there shall be no liability on the deductor/collector to deduct/collect the tax under the relevant section of <keyword id="19936187" type="General" weightage="20" keywordseo="income-tax-act" source="keywords">income tax act</keyword>, pertaining to the transactions entered into up to March 31, 2024. On April 23, 2024, CBDT extended the date for linking of PAN and Aadhaar May for the taxpayers (for the transactions entered into up to March 2024) to avoid higher TDS/ TCS, as per the income tax act. Under the provisions of the Income-tax Act, 1961, every person who has been allotted a PAN as on July 1, 2017 and is eligible to obtain <keyword id="20030312" type="General" weightage="20" keywordseo="Aadhaar-Number" source="keywords">Aadhaar Number</keyword>, is required to intimate his Aadhaar to the prescribed authority, on payment of a prescribed fee. Failure to do so shall attract certain repercussions under the income tax act. As per government, the PAN of taxpayers who have failed to intimate their Aadhaar, as required, shall become inoperative and the consequences during the period that PAN remains inoperative will be as follows: 1. No refund shall be made against such PANs 2. Interest shall not be payable on such refund for the period during which PAN remains inoperative 3. TDS and TCS shall be deducted /collected at higher rate, as provided in the income tax act.

Provisions of TDS/TCS, in case of death of deductee or collectee relaxed by govt

The insurance sector that witnessed some major reforms under the <keyword id="2730532" type="UNKNOWN" weightage="20" keywordseo="NaMo-government">NaMo government</keyword> is keenly awaiting the Union Budget for the year 2015-16. In a huge relief to the industry players, the government raised the <keyword id="44528" type="ORGANIZATION" weightage="20" keywordseo="FDI">FDI</keyword> cap from 26% to 49%. With a decisive move such as this, the industry is hoping that the Centre will now announce policy reforms that will further attract investments in this staggering sector. 
	 “At various forums, Government of India has expressed its eagerness to boost the financial savings in the country and Insurance industry is one of the best placed to channelize long term financial savings,” said <keyword id="172230" type="PERSON" weightage="20" keywordseo="Deepak-Mittal">Deepak Mittal</keyword>, managing director and CEO of Edelweiss Tokio Life Insurance Company Limited. 
	 
	Promote pensions and annuity 
	 
	Often, while planning one’s retirement, pensions and annuities are a less preferred option among the many available security instruments. This is so because the current tax does not allow huge returns on the annuity offered by the insurance companies. According to Mittal, the government needs to make pensions and annuity a more attractive investment option by reforming the tax policy for these financial instruments. 
	 
	“One of the important customer needs which drives savings behaviour is Retirement planning. This becomes even more important in a country like India because of increasing life expectancy and inadequate social security measures. Insurance industry plays a very important role through pension and annuity products,” said Mittal. 
	 
	“The current tax laws adversely discriminate against pensions and annuities and thereby create a disincentive for retirement planning through these products. We expect that this long standing anomaly will be corrected and this will help customers in saving effectively for their retirement needs,” he added. 
	 
	Make tax deductions exclusive 
	 Insurance companies have always felt that they have been at a disadvantage because other financial securities such as People’s Provident Fund (PPF), mutual funds among others are provisioned for tax deductions under section 80C of the <keyword id="6370810" type="UNKNOWN" weightage="20" keywordseo="Income-Tax-Act">Income Tax Act</keyword>. Hence, this tax benefit makes insurance a less preferred security. 
	 
	Industry experts have demanded the government to make tax benefits under Section 80C exclusive for insurance products. “A large number of people exhaust most of this limit because of provident fund contribution. Thus, the amount invested in life insurance policies is quite less”, said a report by PolicyX, a policy comparison website. 
	 
	It further added, “This will ensure that people invest more in life insurance plans. This demand sounds good but at the same time, there is hardly any chance to introduce any such provisions during this budget”. 
	 
	Push for universal KYC and single de-mat account 
	 
	“Finance Minister Arun Jaitley in his maiden budget speech had announced the concept of Universal KYC and a single demat account across asset classes. This is a powerful idea and if implemented well will be a big ease to customers of financial products across BFSI sector. We look forward to further clarity and operationalization of this initiative,” noted Mittal. 
	 
	Revalue the sum assured to premium ratio 
	 
	It should be noted that the life insurance product become unattractive as the tax benefits offered on these policies are available only in cases where the sum assured to premium ratio is at least 10. “While this provision was made with the intention to increase the cover provided by life insurance companies, it also ends up making the policies unattractive for middle and higher age groups given that there is an exponential rise in the cost of mortality in later years. We look forward to some relaxation in these guidelines either in form of tax benefits linked to the tenure of the policy or lower multiples for higher age customers,” stated Mittal. 
	 
	Our view: 
	 
	Insurance is a key sector in the financial industry and measures need to be taken to boost the sector. While excluding mutual funds and other financial securities from tax deductions under Section 80C of IT Act is not feasible, the government must definitely look at making pensions and annuity more attractive by exempting them from taxes. 
	 
	Image: Indiatimes.com

Budget 2015:
Here’s why Govt needs to promote pension and annuity

After social media outrage over a Budget proposal making it mandatory to get <keyword id="22574399" type="General" weightage="100" keywordseo="tax-clearance-certificate" source="keywords">tax clearance certificate</keyword>s for going abroad, the government on Sunday clarified that the proposed amendment is not for all, and only those accused of financial irregularities or having substantial tax arrears need such clearance. The <keyword id="19955404" type="General" weightage="20" keywordseo="finance" source="keywords">finance</keyword> ministry, in the Finance Bill, 2024, has proposed to add the reference of the <keyword id="20961832" type="General" weightage="20" keywordseo="Black-Money-Act" source="keywords">Black Money Act</keyword>, 2015, to the list of Acts, under which any person should clear his liabilities to obtain the tax clearance certificate. "The proposed amendment does not require all the residents to obtain the tax clearance certificate," the ministry said in a statement. As per section 230 of the Income-tax Act, 1961, every person is not required to obtain a tax clearance certificate. Only in the case of certain persons, in respect of whom circumstances exist, which make it necessary to obtain a tax clearance certificate will be required to obtain such a certificate. The ministry said that the Income Tax department through a 2004 notification has specified that the tax clearance certificate may be required to be obtained by persons domiciled in India only in certain circumstances. These include - where the person is involved in <keyword id="22576180" type="General" weightage="20" keywordseo="serious-financial-irregularities" source="keywords">serious financial irregularities</keyword> and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or where the person has direct tax arrears exceeding Rs 10 lakh outstanding against him, which have not been stayed by any authority. The I-T department said that a person can be asked to obtain a tax clearance certificate only after recording the reasons for the same and after taking approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax. Such a certificate is required to be issued by the income-tax authority, stating that such person has no liabilities under the Income-tax Act, or the Wealth-tax Act, 1957, or the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987, it added.

After outrage, Govt clarifies: tax clearance certificate only for people with tax dues, high-value defaulters

The <keyword id="19900449" type="General" weightage="20" keywordseo="government" source="keywords">government</keyword> may relax the requirement of making payments to <keyword id="19910977" type="General" weightage="100" keywordseo="MSMEs" source="keywords">MSMEs</keyword> within 45 days of buying goods and services, to prevent large corporates from looking at other sourcing avenues, sources have noted. An announcement to this effect could be made in the Budget likely to be presented on July 23. The government is considering suggestions regarding changes to Section 43B(h) of the <keyword id="19936187" type="General" weightage="20" keywordseo="Income-Tax-Act" source="keywords">Income Tax Act</keyword> made by MSMEs during pre-budget consultations, sources said. The government, in last year's budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country. According to Section 43B(h) of the Income Tax Act, introduced through the Finance Act 2023, if a larger company does not pay an <keyword id="19990810" type="General" weightage="20" keywordseo="MSME" source="keywords" meta.keywordsubtype="org" meta.entityname="MSME" meta.hostid="261" meta.entityid="MSME">MSME</keyword> on time -- within 45 days in case of written agreement -- it cannot deduct that expense from its taxable income, leading to potentially higher taxes. MSMEs fear that due to this provision, large buyers could cold-shoulder MSME suppliers and start buying either from those MSMEs that are not registered with Udyam or from non-MSMEs. The amendment was brought in for MSMEs to get timely payment, but a lot of concerns were raised by them, sources said, adding that they feared that large corporate, in bid to safeguard their interest, can shift their sourcing requirement to bigger firms or ask their vendors to give up their MSME registration to do business with them. Earlier in May, Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> had said the changes, if any, to the rule will have to be done in the full Budget in July under the new government as per the representations submitted by MSMEs. The MSME sector accounts for 30% of the country's gross domestic product (GDP) and the second largest employer after agriculture. The share of <keyword id="35090" type="General" weightage="20" keywordseo="Exports" source="Orion">exports</keyword> from products specified for MSMEs constituted 45.56 % of the country's total exports.

Govt may relax 45-day payment rule for MSMEs in Budget 2024

Today is <keyword id="22458495" type="General" weightage="20" keywordseo="July-31st" source="keywords">July 31st</keyword>, 2024, the last day to file your income tax returns, without having to pay any penalties. And before you ask, the <keyword id="19903456" type="General" weightage="20" keywordseo="income-tax-department" source="keywords">Income Tax Department</keyword> has not come out with any notification informing the taxpayers of a deadline extension. That is why you should not delay filing your <a href="https://www.businessinsider.in/personal-finance/article/heres-your-ready-reckoner-for-itr-filing/articleshow/111402608.cms" data-type="tilCustomLink">income tax returns</a> anymore! The <keyword id="20171597" type="General" weightage="20" keywordseo="IT-department" source="keywords">IT department</keyword> noted that as of July 26th, 2024, over 5 crore ITRs had already been filed, marking an 8.5% increase from the number of ITRs filed during this period, last year. The IT department, in an X post, highlighted that last year, it had reached the 5-crore <keyword id="22083160" type="General" weightage="100" keywordseo="ITR-filing-deadline" source="keywords">ITR filing deadline</keyword> on July 27th. However, this year, it had breached the milestone a day earlier, i.e., on July 26th, 2024. Earlier, the All Gujarat Federation of Tax Consultants and Income Tax Bar Association had requested a deadline extension for AY 2024–25 from July 31st, 2024, to August 31st, 2024, citing issues and glitches in the tax filing portal. However, there has been no response from the finance ministry on the same. <h2>What happens if I don't file my ITR until July 31st? </h2>For AY 2024–25, you can file a <keyword id="6380232" type="General" weightage="20" keywordseo="belated-ITR" source="Orion">belated ITR</keyword> until December 31st, 2024. But remember, it comes with many disadvantages as well. Here's a snapshot of all the benefits you will have to forego: <h2>What are the penalties for late filing of ITR? </h2>1. You will have to pay a penalty of Rs. 1,000 if your total annual taxable income is below Rs 5,00,000. But if your taxable income exceeds this threshold, you will have to pay a penalty of Rs 5,000. 2. Even if you have to file a <keyword id="17933087" type="General" weightage="20" keywordseo="NIL-ITR" source="Orion">nil ITR</keyword>, you must do so before July 31st. This is because if you do not end up filing it on time, you will have to pay a fine of Rs 1,000. 3. According to Section 234A of the <keyword id="19936187" type="General" weightage="20" keywordseo="income-tax-act" source="keywords">Income Tax Act</keyword>, you will also have to pay interest on your outstanding tax amount at the rate of 1% per month, starting from the due date, i.e., July 31st. <h2>No carry forward of losses, old tax regime</h2>1. You will not be able to carry forward any losses, including those from your mutual funds or stock investments, business income, and other sources. You will only be allowed to carry forward your losses from house properties. This could significantly raise your total tax liability and lead to you incurring hefty losses. 2. After July 31st, 2024, you will not be able to opt for the old tax regime for tax calculation purposes. Starting August 1, the new tax regime, which offers significantly fewer deductions and exemptions as compared to the old regime, will be considered default for you. Also read: <a href="https://www.businessinsider.in/personal-finance/article/decoding-form-16-how-do-you-file-your-taxes-if-you-dont-get-form-16/articleshow/111529754.cms" data-type="tilCustomLink">Decoding Form 16: How do you file your taxes if you don't get Form 16?</a> <a href="https://www.businessinsider.in/finance/tax/article/wondering-which-itr-form-is-right-for-you-know-all-about-it-here/articleshow/111406215.cms" data-type="tilCustomLink">Wondering which ITR form is right for you? Know all about it here</a>

ITR Filing: Today is the last day to file your income tax returns, so file today to avoid penalties

Restriction on carry forward should be relaxed and tax losses should be set off under section 79 of Income-tax Act to reduce risk for promoters and investors in investor funded digital businesses, says a Snapdeal-PwC joint report released recently. 
 
The report highlights how the start-ups and digital businesses are facing problems around section 79 of the Income-tax Act, 1961 wherein they are unable to carry forward and set off the business losses that they typically incur in the initial years of their operations, because of the dilution of the original promoter shareholding beyond 49%, to other investors/VCs/PE players. 
 
The report titled “Rethinking section 79 of the Income-tax Act” –has some Key recommendations for the government: 1. <keyword id="6357097" type="COMPANY" weightage="20" keywordseo="venture-capital">Venture capital</keyword> funded businesses should be allowed to carry forward losses despite a change in shareholding pattern, till the time that the original promoters continue to remain shareholders and take part in management. 
 
2. Drawing from Same Business Test in countries like Australia, a company should be allowed to carry forward losses if it continues to remain in the same business and under same management, who were part of it before such change in shareholding. 
 
3. Given the huge upfront costs of digital businesses and online marketplaces, that the period of carry forward of business losses be extended from the current 8 years to 10–12 years in accordance with best international practices 
 
4. In line with the government’s Start Up India initiative, government may consider exempting the application of the provisions of section 79 to all start-ups, as defined under the start-up policy 
 Mr. <keyword id="219793" type="PERSON" weightage="20" keywordseo="Kunal-Bahl">Kunal Bahl</keyword>, Co-founder and CEO, <keyword id="541988" type="COMPANY" weightage="20" keywordseo="SnapDeal">Snapdeal</keyword> says, “India is the world’s fastest growing digital commerce market in the world with a 60% growth year on year. The impact of global technology trends and fast evolving consumer behaviour means rapid introduction of new business practices. It is imperative that regulation, policy and business evolve in sync and recalibrate often so that the rules of engagement are mutually clear, contemporary and relevant. The responsibility of this lies both with the government and the industry." 
 
India’s digital economy, the report highlights, is disrupting the current business landscape, given that the number of Internet users in India is expected to cross 790 million by 2020. Also, more than 80% of these users will get online through mobile phones. With improvements in network infrastructure, significant investor interest and foreign funding, India has emerged as one of the fastest growing bases of start-ups worldwide. Driven by the progressive technology-centric initiatives launched by the government last year—viz. ‘Digital India’ and ‘Start Up India’—one can expect that for sectors like eCommerce, Internet businesses, Fintech, etc., the best is yet to come. 
 
(Image credits: TOI)

Section 79 of the Income Tax Act needs a rethink in the digital age: Snapdeal-PwC report

<keyword id="20190045" type="General" weightage="20" keywordseo="Industry-body" source="keywords">Industry body</keyword> <keyword id="21568150" type="General" weightage="20" keywordseo="SME-Chamber-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="SME Chamber of India" meta.hostid="261" meta.entityid="SME Chamber of India">SME Chamber of India</keyword> has urged <keyword id="19956758" type="General" weightage="20" keywordseo="Finance-Minister" source="keywords">Finance Minister</keyword> <keyword id="19916618" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="keywords">Nirmala Sitharaman</keyword> to continue the 45-day <keyword id="21233021" type="General" weightage="100" keywordseo="MSME-payment-rule" source="keywords">MSME payment rule</keyword> for <keyword id="20008810" type="General" weightage="20" keywordseo="corporates" source="keywords">corporates</keyword> and other buyers. According to Section 43B(h) of the <keyword id="19936187" type="General" weightage="20" keywordseo="Income-Tax-Act" source="keywords">Income Tax Act</keyword>, introduced through the <keyword id="19955404" type="General" weightage="20" keywordseo="finance" source="keywords">Finance</keyword> Act 2023, if a larger company does not pay an MSME on time -- within 45 days in case of written agreements -- it cannot deduct that expense from its taxable income, leading to potentially higher taxes. The government in last year's Budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country. "We are pursuing not to change the 45-day MSME payment rules imposed by the Department under the pressure of corporates or multinational companies to save the life span of the MSME sector. Section 43B(h) of the Income Tax Act reinforces the importance of timely payments by mandating that companies settle payments to MSME vendors within 45 days to qualify for deductions," SME Chamber said in a statement addressed to Sitharaman. The industry body argued that this provision serves as a powerful incentive for companies to adhere to payment timelines, thereby supporting the financial health of MSMEs. "Many MSMEs are NPA victims of corporates, who are buying from them and not dealing through the TReDs platform. Most of the corporates and multinational companies are forcefully insisting to deregister from the Udyam Portal and insisting not to deal through the TReDs platform," SME Chamber stated. The industry body also urged the finance minister to consider providing Rs 5 crore loans under the "Differential Rate of Interest" scheme for micro and <keyword id="20569966" type="General" weightage="20" keywordseo="small-enterprises" source="keywords">small enterprises</keyword>. It suggested changing the NPA definition from 90 days to 180 days for the MSME sector. The chamber also sought the setting up of a task force to review various issues, hurdles, grievances and difficulties faced by MSMEs for availing credit facilities and the lack of approach by the financial institutions towards enhancement of credit flow to the MSME sector.

Continue 45-day MSME payment rule: Industry body to Finance Minister Nirmala Sitharaman

Mobile handset manufacturing giant <keyword id="6354716" type="CITY" weightage="100" keywordseo="Nokia">Nokia</keyword>, which has extensive India business, has alleged that India's tax claims against the Finnish firm’s subsidiaries don't comply with its bilateral pact with <keyword id="6374076" type="COUNTRY" weightage="60" keywordseo="Finland">Finland</keyword> and has threatened to file an international arbitration in case the issue is not settled amicably. 
 “India's decision to change tax laws with retrospective effect and substantial tax claims against Nokia subsidiaries don't comply with its obligations under the <keyword id="2241526" type="UNKNOWN" weightage="100" keywordseo="India-Finland-Bilateral-Investment-Treaty">India-Finland Bilateral Investment Treaty</keyword> (BIT), and hurt the Helsinki-based firm's investments in India,” Nokia said in a letter to the Prime Minister's Office. 
 
It has now asked for negotiations under Article 9(2) of BIT to settle the tax disputes involving its manufacturing plant in Chennai. The company has also sought an appointment with the government to begin talks. In the letter, Nokia has said if an "amicable settlement" is not reached, the company has the right to "submit claims to international arbitration." 
 
"The letter seeks amicable resolution of the current tax disputes,” a Nokia spokesperson added. 
 The letter, dated April 30, was sent by the law firm Allen &amp; Overy LLP. "The Indian government has recently made certain changes to its tax legislation. In particular, in the Finance Act (2012), India retrospectively amended Section 9(1) (VI) of the <keyword id="6370810" type="UNKNOWN" weightage="60" keywordseo="Income-Tax-Act">Income Tax Act</keyword> (1961). In addition, Indian tax authorities have raised substantial tax demands against Nokia and its subsidiaries, seeking allegedly unpaid taxes, imposed freezing orders on various Nokia assets and failed to comply with various other obligations owed to Nokia's subsidiaries," the letter said. 
 
Nokia might serve the arbitration notice within three months of sending the initial letter, a source informed. 
 
"These and other measures taken by India substantially alter the legal framework for the investments that Nokia has made in India. India's actions are not in compliance with its obligations under the BIT, and they have caused serious and substantial harm to Nokia's investments," it added. 
 
India alleged Nokia had evaded taxes on software downloaded on handsets, manufactured at its Chennai unit, and demanded more than Rs 21,000 crore. 
Image: Thinkstock

Nokia May Seek International Arbitration To
Resolve Multi-billion-dollar Tax Row In India

An internal committee of the <keyword id="19903456" type="General" weightage="20" keywordseo="Income-Tax-Department" source="keywords" meta.keywordsubtype="org" meta.entityname="Income Tax Department" meta.hostid="153" meta.entityid="Income Tax Department">Income Tax Department</keyword> will review the 1961 <keyword id="22868046" type="General" weightage="20" keywordseo="direct-tax-law" source="keywords">direct tax law</keyword> to eliminate redundant clauses, and adopt best global practices to simplify it for taxpayers for better compliance, <keyword id="19980145" type="General" weightage="20" keywordseo="CBDT" source="keywords">CBDT</keyword> chief Ravi Agrawal has said. The panel, comprising income tax (IT) officials from across the country, has started working on identifying areas of improvement in the Income Tax Act, 1961, he said, and added that the exercise is being conducted under a central government-mandated comprehensive review of the law, which was mentioned by FM Nirmala Sitharaman in the recent <keyword id="19936553" type="General" weightage="20" keywordseo="budget" source="keywords">budget</keyword> presented on July 23rd, 2024. <keyword id="19942037" type="General" weightage="20" keywordseo="Central-Board-of-Direct-Taxes" source="keywords" meta.keywordsubtype="org" meta.entityname="Central Board of Direct Taxes" meta.hostid="153" meta.entityid="Central Board of Direct Taxes">Central Board of Direct Taxes</keyword> (CBDT) chairman Agrawal said the committee is looking at the best global practices that can be adopted, as well as cutting redundancies in the existing law and finding those clauses that have reached their sunset, and hence, can be eliminated. "An internal committee of competent officers of the department from all across the country has been formed. They have started working on identifying areas of improvement. This is a work in progress," he told PTI on Wednesday during an event to mark 165 years of income tax in India. He said the committee is looking at the "problem statement" given to it in the recent Budget. It is trying to find the "best way forward" in giving the country a new direct tax law, Agrawal said. During the event, the CBDT chief assured Union Finance Minister Nirmala Sitharaman that the work of reviewing the Act will be done within the stipulated time-frame of six months, as announced by her in the Budget presented last month. The minister, during the Wednesday event, asked the I-T department to use simple language in its notices and communications with taxpayers, so that they are able to understand these quickly without getting intimidated. Agrawal said this factor is also a part of the I-T law review. The committee is trying to make tax communication simple and easy to understand to encourage compliance of rules by taxpayers, he said. The Income Tax Act, 1961, started its journey in 1922. It contains 298 sections and 23 chapters and other provisions in its current form of 1961. Sitharaman, while presenting the 2024-25 Union Budget, had announced a "comprehensive" review of the Income Tax Act. The purpose is to make the Act concise, lucid, easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to the taxpayers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months, she had said. Agrawal also said the CBDT will "put more officers" within the next 10-15 days to "expeditiously" clear the "substantial" number of appeals pending at the Income Tax Department level.

You Searched For "Income Tax Act" and got 12 results

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Nokia May Seek International Arbitration To Resolve Multi-billion-dollar Tax Row In India

BI India Bureau

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