The Direct Tax Dispute Resolution Scheme, which seeks to resolve cases pending in various courts, tribunals, arbitrations or are in mediation under the Bilateral Investment Protection Agreement (BIPA), will take effect from tomorrow.
The scheme provides an opportunity for settlement of cases emanating from retrospective amendment of tax laws, by asking companies to pay the basic tax demand and get waiver on interest and penalty.
Experts view the scheme as a big step towards tax reform and hope that it would act as a breather for companies like Vodafone and Cairn, which have been facing multi-billion dollar tax liability following retrospective tax amendments made in 2012.
The one-time tax dispute resolution scheme "shall come into force on June 1, 2016 and declarations under this scheme may be made on or before December 31," said a finance ministry statement, adding that the Central Board of direct Taxes (CBDT) has notified the rules and forms on May 26.
Besides this scheme, the 6 per cent Equalisation Levy, which will apply on cross border digital transactions, too will come into force from tomorrow. The rules with regard to applicability of equalisation levy were notified by the revenue department earlier in the month, the statement said.
In order to provide a stable and predictable taxation regime, Finance Minister Arun Jaitley in Budget 2016-17 came out with this Scheme.
"In order to give an opportunity to the past cases, which are ongoing under the retrospective amendment, I propose 'One Time' scheme of dispute resolution for them in which subject to their agreeing to withdraw any pending case lying in any Court or tribunal or any proceeding for arbitration, mediation, etc under BIPA, they can settle the case by paying only the tax arrears in which case liability of the interest and penalty shall be waived," Finance Minister Jaitley had said in his Budget 2016-17 speech.
As regards Equalisation Levy, it will apply at 6 per cent on services pertaining to cross border digital transactions. The levy will only apply to business to business transactions.
At present, equalisation levy is leviable only on payments relating to online advertisements, said C A Gupta, Partner, Deloitte Haskins and Sells.
In order to tap tax on income accruing to foreign e-commerce companies from India, the Finance Act 2016 said a person making payment to a non-resident (who does not have a permanent establishment) exceeding in aggregate Rs 1 lakh in a year will withhold tax at 6 per cent of gross amount paid, as equalisation levy.
Adhia said Operation Clean Money will ensure there is no
physical contact between the assessee and the tax department officials as questions will be asked online.
"People have been fearing there will be Inspector Raj as tax department will have data about all the deposits. But, the new programing software will enable e-verification of all bank deposits during the period of demonetisation," he said.
The initial phase of the operation involves e-verification of large cash deposits made from November 9 to December 30, 2016.
"Initially this will cover 18 lakh tax payers whose data will be uploaded on e-filing portal. No source of deposit will be asked from small taxpayers who have genuine compliant savings," Chandra said.
Data analytics has been used for comparing the demonetisation data with information in databases. In the first batch, around 18 lakh persons have been identified in whose case, cash transactions do not appear to be in line with the tax payer's profile, CBDT said in a statement.
The tax department has enabled online verification of these transactions to reduce compliance cost for the taxpayers while optimising its resources.
A detailed user guide and quick reference guide has also been made available on the e-filing portal to assist the taxpayer in submitting online response.
In case of any difficulty in submitting online response, help desk can be reached at 1800-4250-0025, CBDT said.
Data analytics will be used to select cases for verification, based on approved risk criteria. If the case is selected for verification, request for additional information and its response will also be communicated electronically.
"The response of taxpayer will be assessed against available information. In case explanation of source of cash is found justified, the verification will be closed without any need to visit Income Tax Office," it added.
The verification will also be closed if the cash deposit is declared under Pradhan Mantri Garib Kalyan Yojna (PMGKY).
The tax amnesty scheme PMGKY provides for 50 per cent tax on income being disclosed and also parking of a quarter of such income in a zero-interest bearing bond for four years.
