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In spite of major concessions announced by way of an ordinance in October 2019, the Indian economy continued to dwindle in the backdrop of the global economic meltdown. The current economic situation necessitated bold steps from our Hon’ble Finance Minister (‘FM’) to present a simplified budget that would result in a quick economic turnaround. However, whether such a ‘Simplified’ budget really unlocked potential for an economic turnaround, remains a question. Some key amendments coupled with their challenges are listed below: Some key amendments: Personal Tax Regime (‘PTR’): In line with the Concessional Tax Regime (‘CTR’) introduced by the Hon’ble FM in October 2019 which focused solely on corporates, a PTR has been introduced which focuses on providing alternative lower tax rates to individuals/HUF. The aforesaid concessional tax rate is applicable subject to the following conditions: <ol><li>The Individuals and HUFs having various incomes would not be allowed to claim any deductions/incentives, them being - <ul><li>Certain business <keyword id="891931" type="PERSON" weightage="20" keywordseo="deductions">deductions</keyword> and deductions from other incomes</li><li>House property deduction</li><li>Salary deductions including standard deduction and professional tax</li><li>Major deductions under Chapter VI-A (i.e. deductions under section 80C, 80D, etc) and</li><li>Set-off/carry forward of losses in relation to the above </li></ul></li></ol><ol><li>Further, <keyword id="1064766" type="ORGANIZATION" weightage="20" keywordseo="alternative-minimum-tax">Alternative Minimum Tax</keyword> (‘AMT’) shall not be applicable to an individual/HUF opting for PTR. Consequently, carry forward and set off of AMT credit shall not be allowed.</li></ol>In view of the above amendments, an individual having salary income as a major source of income and making investments in various schemes/instruments (For example, LIC premiums, PPF, ELSS, etc.) may not consider opting for PTR. It needs to be seen whether such a scheme is welcomed by the taxpayers at large or not. Dividend Distribution Tax (‘DDT’) Abolition: The Finance Bill proposes to abolish DDT in the hands of domestic companies and tax the same in the hands of the recipient. Accordingly, domestic companies declaring dividends shall be required to deduct TDS @ 10% on dividends exceeding INR 5,000 per shareholder. Further, it has been proposed to provide a deduction of interest expense of upto 20% of dividend income received in the hands of the shareholders under income from other sources. Lastly, in order to remove the cascading effect of taxes, dividend distributed by companies for a particular year (subject to conditions) shall be allowed as a deduction from dividend income. The benefit of deduction has also been extended to companies opting for CTR. However, the amendment leaves certain areas which need to be addressed: <ul><li>No scientific mechanism exists to allow deduction of expenses to the shareholders and only an ad-hoc deduction of interest expense capped at 20% of dividend income is allowed</li><li>In view of the above, the Company vs LLP structure needs to be re-evaluated</li><li>In case of banks and NBFCs where dividend income is a major source of business income, no separate provisions have been carved out</li></ul>Though the above is in line with the longstanding demand of the corporate world, only time will be able to tell whether the objective of earning higher taxes is achieved by these amendments. The above amendments also open-up the question of selection of an offshore jurisdiction for investing in Indian companies. Other Key Amendments A. Start-ups – Rationalising tax provisions and ESOP Taxation With a view to rationalise the tax deduction provisions for start-ups, the following amendments are proposed: <ul><li>100% profit deduction for an eligible start-up for any 3 consecutive years out of 10 years; and </li><li>Threshold of turnover for an entity, to be eligible as a start-up, has been increased to INR 100 Crores </li></ul> Further, in order to ease the burden of tax payment for employees of eligible start-ups, it is proposed to defer the timing of taxation of ESOPs perquisites. The amendment proposes to tax ESOP at the earliest of the following event: <ul><li>Expiry of 5 tears from the end of the relevant financial year; or</li><li>Date of sale by individual taxpayer; or</li><li>Date of cessation of employment</li></ul>These are welcome steps that would go a long way in providing ease of doing business for start-ups. Existing companies in the technology space must evaluate the possibility of obtaining necessary approval to claim exemption. B. Tax withholding on e-commerce transactions TDS @ 1% shall be made applicable on payments by e-commerce operators (who own/operate a digital e-commerce platform) to e-commerce participants (who sell goods/providing services/both). Further, exception is provided for payments to such a participant who is an individual/HUF if the transaction value during a particular AY is less than INR 500,000 This amendment will not only add compliance obligation on the e-commerce platforms but would also bring larger population of service providers and goods suppliers under the tax net. C. Increasing Tax Audit Turnover Threshold The FM proposes to increase the turnover threshold for tax audit applicability to INR 5 Crores, provided that the aggregate cash receipts/cash payments by such taxpayer do not exceed 5% of the total receipts/payments respectively during the financial year. This move is again intended with a view to move towards a cashless economy. D. Stay by the Hon’ble Income-tax Appellate Tribunal (‘ITAT’) ITAT may grant a stay of demand for upto a maximum of 365 days on a condition that the taxpayer deposits not less than 20% of the amount of tax, interest, fee, penalty, etc. Though the law seems to have been proposed, it would need to be seen whether condition can be applied to the judicial power of adjudicating authority. Since taxpayers at various levels are now being provided alternative tax regimes, the same may lead to complication of the tax regime with minimal benefits. TDS levied on dividend payments to shareholders/payments by e-commerce operators shall only increase the TDS compliance burden of large companies and e-commerce MNCs respectively. The impact of such complications and compliances on ease of doing business need to be evaluated. 
 <div type="image" title="Pranay Bhatia" msid="73984955" hostid="261"></div> Disclaimer: This article is written by Pranay Bhatia, a Partner and Leader of Tax &amp; <keyword id="344310" type="COMPANY" weightage="20" keywordseo="Regulatory-Services">Regulatory Services</keyword> at BDO India. The opinions expressed are entirely that of the author.

A top tax expert decodes the new Income Tax regime changes announced in the Budget

New Delhi, Dec 1 () Foreign investors remained net buyers in the Indian capital market for the third straight month in November, putting in Rs 22,872 crore on net basis during the month, according to depositories data.
 Analysts said expectations of a trade deal between the US and China, and more relief measures as well as disinvestment drive by the government among other factors helped keep FPIs stuck on the capital markets. 
 A net sum of Rs 25,230 crore was flowed into equities by FPIs in November, the data showed. However, they pulled out Rs 2,358.2 crore from the debt segment, translating into a total net investment of Rs 22,871.8 crore by FPIs in November.
 FPIs had invested a net sum of Rs 16,037.6 crore in October and Rs 6,557.8 crore in September.
 "FPIs have been consistent net buyers in November mainly due to expectations of a trade deal between US-China, relief measures along with disinvestment drive by the government, hopes for a scrappage policy and a few others," said Umesh Mehta, head of research at Samco Securities.
 Besides, "tax reforms announced in September 2019 will now to be legislated. This takes away ambiguities on implementation of these reforms," said Pranay Bhatia, partner and leader tax and regulatory services at BDO India.
 The tax reforms and positive approach will go a long way in reducing the overall taxes for businesses, leading to greater liquidity and economic growth, he added.
 Also, "the improving rural consumption numbers along with expectations of better results by companies is aiding this inflow. The midcap space has a lot of attractive valuations at the moment," Harsh Jain said.
 However, going forward, "there is some nervousness surrounding the upcoming GDP numbers. Many don't have high hopes from it. A lower than expected GDP in this quarter might upset some FPIs for a short while," Jain added. SRS MR
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FPIs net buyers for 3rd month; invest Rs 22,872 cr in Nov

<ul><li>Babygogo and Travelkhana had ₹72 lakh and ₹33 lakh seized by the income tax deducted from their bank accounts respectively. </li><li>The DPIIT secretary Ramesh Abhishek had assured on February 4 that no coercive action would be taken over <keyword id="6406536" type="UNKNOWN" weightage="20" keywordseo="Angel-Tax">angel tax</keyword> notices. </li></ul>Just when startups in India thought they could soon get a breather from angel tax, India’s <keyword id="65338" type="ORGANIZATION" weightage="20" keywordseo="Income-Tax-Department">income tax department</keyword> has allegedly seized the bank accounts of two startups Travelkhana and Sheroes-owned Babygogo. Siddhartha Ahluwalia, co-founder of Sheroes and founder of Babygogo, told Business Insider he received a deduction SMS from the bank on Wednesday. “We had received no notification from the tax department or bank that this was going to happen,” claimed Ahluwalia, adding the company had been served a tax notice two months ago, to which it had responded by serving all the tax documents. “Yesterday, I received a SMS from the bank about the bank balance – ₹72 Lakh was deducted from the bank,” said Ahluwalia. “Thankfully, we had done the acquisition and all the stakeholders had got an exit and it was not an operational account which is why the balance went to negative ₹72 lakh and it was done by a demand draft.” However, things appear much more serious for Pushpinder Singh, founder of TravelKhana. Singh has gone on Twitter to say “The bank manager said that 4 IT inspectors came and forced the bank manager to make DDs from all accounts. The bank manager said that this is commonplace these days.” Singh claims The Central Board of Direct Taxes <a href="https://inc42.com/features/the-curse-of-angel-tax-travelkhana-left-with-zero-money-after-cbdt-seizes-inr-33-lakh-freezes-accounts/">seized</a> ₹33 lakh while also freezing TravelKhana’s bank accounts. Singh, who has called it out on Twitter as “tax terrorism,” has also tweeted about how this was investment money for which shares had been issued and filings done with Registrar of Companies and RBI. To be sure, according to Pranay Bhatia, tax partner, BDO India, the tax recovery officials are well within their rights to collect and even freeze bank accounts if taxes due haven’t been paid. "From the perspective of the tax officer or the tax recovery officer has no option,” said Bhatia. “With the financial year end coming up, there is a lot of pressure on tax officials to collect outstanding taxes.” However, Bhatia warned that under “principles of natural justice,” the companies should have received a one-week notice to pay or give an explanation as to why they haven’t paid, failing which their accounts could be seized.. According to him, this is why an amendment to the angel tax law is necessary to make the life of a startup easier. On February 4, the Department for Promotion of Industry and Internal Trade had held a meeting with stakeholders to discuss the angel tax issue assuring that solutions would be provided soon. Following that meeting, Ramesh Abhishek, Secretary of DPIIT had <a href="https://www.businessinsider.in/angel-funding-for-startups-to-get-tax-clarity/articleshow/67844987.cms">said</a> that no coercive action would be taken against startups that have received notices. Meanwhile, the CBDT chairman Sushil Chandra on Thursday morning <a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/cbdt-chairman-assures-quick-solution-to-startups-tax-issues/articleshow/67893656.cms">spoke</a> at a conference and assured that a solution to address the angel tax issue would soon be provided. See Also: <a href="https://www.businessinsider.in/angel-funding-for-startups-to-get-tax-clarity/articleshow/67844987.cms">Indian government to take a stand on angel tax within a week</a> <a href="https://www.businessinsider.in/indian-government-just-added-a-lot-more-red-tape-for-startups-while-trying-to-fix-the-devilish-angel-tax/articleshow/67572452.cms">Indian government just added a lot more red tape for startups while trying to fix the devilish ‘angel tax’</a>

Two Indian startups say the government broke their faith by raiding their bank accounts

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A top tax expert decodes the new Income Tax regime changes announced in the Budget

Pranay Bhatia

FPIs net buyers for 3rd month; invest Rs 22,872 cr in Nov

PTI

Two Indian startups say the government broke their faith by raiding their bank accounts

Sanchita Dash

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