The Prime Minister's Office (PMO) has reportedly asked the Finance Ministry to quickly review the tax proposal on FPIs and come out with a solution that reduces the impact of new taxation on the these institutional investors. A proposal to grandfather all income generated by FPIs till the presentation of the Union Budget on July 5 is being considered that will reduce the impact of the new taxation by almost 33%. The ministry may announce the changes this week after the monetary policy review by RBI on August 7.
Tax authorities are planning to move ahead and complete the income tax assessment of V G Siddhartha, the Cafe Coffee Day founder who committed suicide, on the basis of his sworn statement in which he had allegedly admitted to “unaccounted income” of over Rs 658 crore. While dismissing any suggestions of putting pressure on Siddhartha, tax officers said the tax liability will devolve on companies and heirs of the stock broker who set up India’s most visible coffee chain.
Receipts from life insurance policies are taxable if the premium paid exceeds 10% of the sum assured. TDS of 1% is deducted by the insurance company on payment where the maturity proceeds are taxable and the amount exceeds Rs 1 lakh. The government in Budget 2019 has amended TDS rules on receipts from life insurance policies. The TDS rate shall be 5% on the ‘income’ portion and not on the entire amount. The income portion will be the maturity proceeds less the total premiums paid. Receipts from LIC policy paid on the death of a subscriber remain exempt from tax.
Foreign portfolio investors (FPIs) looking for concessions to convert themselves into companies from a trust structure in order to avoid paying a higher surcharge may have to wait until the next budget. The government will have to amend a host of provisions in the income tax to make such conversions tax-neutral. The government had raised the surcharge to 25% from 15% for people with taxable incomes between Rs 2-5 crore, and to 37% for those earning over Rs 5 crore. This covers FPIs that are structured as trusts and associations of persons (AoPs). Those structured as corporates are exempt.
The Hindu Undivided Family (HUF) has long been a preferred entity for its provision of various tax-saving tools for assesses under income tax (I-T). It has however lost popularity after the courts ruled that daughters are entitled to inheritance. Wealthy families and middle-class ones don’t prefer to form HUFs now as the courts have ruled that daughters continue to be an equal partner of their father’s HUF even after marriage. They fear that when a daughter continues to be a member, it can lead to legal complications such as the rights of her children in her father’s HUF.
The CBDT on Friday said that it has extended the deadline by another two months till September to complete the final assessment of about 87,000 entities across the country who made suspicious deposits post-demonetisation. The CBDT said the extension of time is being granted after considering "various difficulties being faced by assessing officers related to completion of assessments in Operation Clean Money (OCM) cases" by July end. CBDT had asked the assessing officers to use the 'best judgement assessment' procedure as stipulated under Section 144 of the I-T Act to finalise these 87,000 cases.