Regulations
Cabinet nod for more stringent bill on benami transactions
These provisions, however, were not to apply to any transaction entered into by an individual in the name of his mother, father, spouse, brother or sister
 
In another initiative to fight the menace of black money in the country, the union cabinet on Wednesday approved the introduction of a bill to amend the legislation that prohibits benami transactions, thereby seeking to make the original law more stringent.
 
"The bill provides for the attachment and confiscation of benami properties and also a fine with imprisonment. This is one more initiative to fight the menace of black money in the country," a communique said after a meeting of the cabinet presided over by Prime Minister Narendra Modi.
 
In the budget speech delivered on Feb 28, Finance Minister Arun Jaitley had outlined a number of steps the government intended to take to curb the menace of black money generated in the country -- both in terms of what is retained within the country and what is stashed away abroad.
 
"As regards curbing the domestic black money, a new and more comprehensive benami transactions prohibition bill will be introduced in the current session of the parliament," the finance minister had said.
 
"This law will enable confiscation of benami property and provide for prosecution, thus blocking a major avenue for the generation and holding of black money in the form of benami property, especially in real estate."
 
The Benami Transactions (Prohibition) Bill, 2011 had been introduced in the Lok Sabha by the Ministry of Finance on Aug 18, 2011. It was then referred to the standing committee that gave its report on June 12, 2012. But the bill, that would have replaced the 1988 act, lapsed.
 
"The fight against black money needs to be fought on two fronts, domestic and overseas. With the passage of the Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, the government is now consolidating its focus on the domestic front," said K.V. Karthik of Deloitte India.
 
"Often, assets obtained as proceeds of crime are held in the name of a 'benamidar'. The proposed bill will make such transactions illegal and, to that extent, will be a useful tool in the fight against black money."
 
The 2011 bill sought to prohibit a person from entering into a benami transaction and called for any such property held in another person's name to be confiscated by the central government, which shall also hold all its rights and title. 
 
With regards to penalties for benami transactions, the bill proposed a maximum punishment of two years imprisonment. It provided for the aggrieved party to move an Appellate Tribunal for the purpose and again the High Court within 120 days of the tribunal's order. 
 
These provisions, however, were not to apply to any transaction entered into by an individual in the name of his mother, father, spouse, brother or sister. 
 
The bill defined benami transaction as an arrangement where:
 
- The property is held by a person on behalf of another person who has paid for it
 
- The property has been bought in a fictitious name
 
- The the owner of the property is not aware of or denies knowledge of such ownership.
 

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`Come June/July, business unfriendly states to be named and shamed'

In his speech at the function, Kant said the slogan 'Make in India' is not for making a protective market but to make India a part of the global supply chain. He said the government is focused on making India an easy place to do business

 

Come June/July, the central government will name and shame state governments that do not ease up the process of doing business, a top government official said on Wednesday.
 
"We will name and shame the states that do not ease up the process of doing business, come June or July," Amitabh Kant, secretary, department of industrial policy and promotion (DIPP) in the commerce and industry ministry, told IANS.
 
"I hope Tamil Nadu is not in that list," he said.
 
Kant, who was here to participate in a function organized by Finnish Nokia Networks, said the central government has sent to the states 98 points on which action to be taken by the state governments towards ease of doing business.
 
The states have been given time till this month to comply.
 
The 98 points listed by the central government fall under domain of state governments like land and other things.
 
Kant said the foreign direct investment (FDI) has grown 56 percent increase till now as compared to the previous year's figure.
 
To a query by a reporter to name some of the investors who have brought FDI, he said the government is building confidence in the minds of investors and naming them would prevent the inflow of funds.
 
In his speech at the function, Kant said the slogan 'Make in India' is not for making a protective market but to make India a part of the global supply chain. He said the government is focused on making India an easy place to do business.
 

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Tax Tentacles – 1: An Overview
The Indian tax system is devilishly complex, extortive and a patchwork of various haphazard ideas. This is the first part of a multi-part series on the vexing Indian tax system and the path to genuine reforms, adapted from Justice S Rangarajan Memorial Lecture in Bangalore delivered recently 
 
Last year, Dr C Rangarajan closed his speech with this quotation: “The strength of our legal system depends on how quickly we respond to changing situations. As the philosopher Whitehead reminded us, the ‘art of progress is to preserve order amid change and to promote change amid order‘.” My endeavour is to explore how this can be done in the field of personal income tax. 
 
Before we talk of change, we must see what the present system is.
 
Income tax is a progressive tax on total income of the previous year but collected in advance - requires income recognition process and tax rate and rebates.
 
Taxpayers are classified as individual, Association of Persons (AOP), Body of Individuals (BoI), Hindu undivided family (HUF), companies and trusts
 
Income divided into heads - salary, property income, business and other sources
 
Total income concept subject to slab rates supposedly on progressive basis but leaves out dividends and taxes capital gains and lottery income at flat rates
 
Returns to be filed as the source of data for making assessments - at present data from deduction of tax at source as a supplement.
 
Assessment process - returns are to be processed, leading to disputes and ineffective or delayed and costly remedies
 
Collection complicated by tax deduction at source and cost of compliance escalation
 
Untaxed income is called black money tarnishing all genuine cash holdings and transactions.
 
This pattern of taxing total income had developed tentacles, which catch and squeeze the taxpayer in several ways. The aim of the taxing officer is to increase the total income in as many ways as possible - mainly by adding non-income receipts as income and by disallowing legitimate deductions apart from adding items that might have been omitted, deliberately or by oversight. Of course, the taxpayer also tries to minimise the total taxable income by tax planning schemes, which are sometimes dubious. 
 
The overreach goes to the extent of trying to capture transactions, which are not even in this country and not taxable, such as the Vodafone case. When the Supreme Court points this out, the revenue ups it with a retrospective amendment of the law. Therefore, the reaction is: “if I can’t win I will change the rules”. If one tentacle fails, it will grow more. 
 
Not surprisingly the new Finance Minister falls a victim to the ‘Yes, Minister’ sabotage and refrains from repealing an untenable provision, which has the unanticipated result of discouraging investment.  "The Opposition aren't really the opposition. They are only the Government in exile. The Civil Service are the opposition in residence". 
 
The problem of any tax department is the problem of power: its temptations, its dangers, and its tendency to corrupt. Administrative law, far from being a distinctive product of modernity, is thus according to Philip Hamburger the “contemporary expression of the old tendency toward absolute power – toward consolidated power outside and above the law.” In our country, the government servant is the Sarkar, to whom we have to make obeisance. 
 
One of the reasons for this rigid posture is the pressure from audit and vigilance departments. The audit thinks that if an untenable levy is cancelled, revenue is lost and vigilance thinks that there may be other considerations for giving relief. Even courts do not always wear the ‘veil of ignorance’ in deciding issues. "Going behind the veil of ignorance," means not to allow wealth and income to influence the outcome of litigation, to decide on principle and not on the amount involved.
 
(Justice TNC Rangarajan is a former judge of Madras and Andhra Pradesh High Courts. Earlier, for more than 20 years, he was a Judicial Member of Income Tax Appellate Tribunal.)

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COMMENTS

Davidson D

2 years ago

Let the govt. cancel entire income tax act and introduce 5% banking tax based on the credits to the account. On receipt of confirmation from corresponding bank about clear credit , net proceeds can be credited to the accountholders' account which would be final compliance of tax from the accountholders' point of view. The deduction should be attributed to the accountholders' PAN. Even if its cash, irrespective of the limit, 5% TDS has to be effected by the bank acting as a full compliance. There should be no filing of returns or advance tax. There should be no deductions or exemptions. No TDS certificates to be issued, no refunds to be claimed. This will considerably bolster the govt. revenue and also relieve the hapless taxpayer of the draconian provisions of the act. Lower rate of tax would act as incentive to the taxpayer to voluntarily disclose his/her income rather than pay tax @ almost 35% today. Higher disposable income can result in increasing indirect tax revenue thus aiding the govt from both the sides. I think this would be areal simplification. All litigations would be automatically eliminated.

CHANDU CHARTIST

2 years ago

vote diya aab note do 10 lakh wale aur mangane hey

Vijay Chandar

2 years ago

A very succinct prologue to an interesting subject. Waiting eagerly for the follow-up

Vishal Modi

2 years ago

Perhaps Sarkar can treat domestic investors the same way it bends backwards to placate disgruntled FPIs!

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