Income Tax Current Affairs

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Income Tax Department launches Operation Clean Money-II

The Income Tax department has launched the second phase of the ‘Operation Clean Money’ to investigate over 60,000 individuals with an aim to detect black money generation post demonetisation. The Central Board of Direct Taxes (CBDT), the policy-making body of the income tax department has detected flow of black money into the banks amounting to over Rs 9,334 crore between November 9, 2016 and February 28 this year.

Under the second phase of Operation Clean Money, more than 60,000 persons including 1,300 high risk persons has been identified for detailed investigation. The department has deducted more than 6,000 transactions of high value property purchase and 6,600 cases of outward remittances.

The first phase of ‘Operation Clean Money’ was launched on January 31, 2017. In the first phase, the department went through e-verification of large cash deposits into the banks after the demonetisation and had sent online queries and investigated around 17.92 lakh persons.

Significance

  • This operation will help in eliminating black money and widen the tax base.
  • The impact of the operations carried out by the income tax department has resulted in a 21.7% increase in the income tax returns in the financial year 2016-17. Also, 16% growth in the gross collection has been observed, which is the highest in the last five years. Besides, 14% growth in net collection has been realized, which is the highest in the last three years.

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Central Processing Centre (CPC) gets new Pin Code

The Department of Post has allotted a unique pin code for the Income Tax Department’s Central Processing Centre (CPC) based in Bengaluru so as to ensure that the letters and mails sent by taxpayers to the CPC are not lost or reach the centre late. The new pin code given to CPC is 560500. Earlier, the CPC was using the pin code 560100 which was marked for the entire city area of Bengaluru. The new pin code will cater exclusively to the CPC of the Income Tax department and will help in addressing the grievances of the taxpayers with respect to the issues of non-reaching of postal mails.

CPC

The CPC is the central database centre of the Income Tax department based in Bengaluru. It receives both e-filed and postal Income Tax Returns (ITRs), which it processes for issuance of refunds. It also deals with other tax related documents of a taxpayer.

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GAAR will be effective from April 1, 2017

The Union Finance Ministry has announced that the General Anti Avoidance Rule (GAAR) will be effective from the 1 April, 2017.

In this regard Income Tax (IT) department has issued a slew of clarifications on implementation of GAAR, seeking to address concerns of foreign investors over implementation of the anti-evasion measure.

GAAR seeks to prevent companies from routing transactions through other countries to avoid taxes. The rules are framed mainly to minimize and check avoidance of tax. India will be the 17th nation in the world to have laws that aim to close tax loopholes.  At present, GAAR is in force in nations like Australia, Singapore, China and the UK.

Issued clarifications
  • GAAR seeks to give the IT department powers to scrutinize transactions structured in such a way as to deliberately avoid paying tax in India.
  • It will not be invoked in cases where investments are routed through tax treaties that have a sufficient limitation of benefit (LOB) clause to address tax avoidance.
  • It should be noted that LOB clause in tax treaties generally requires investors to meet certain spending and employment criteria to avail the benefits of the treaty.
  • All transactions or arrangements approved by courts and quasi-judicial authorities like the authority for advance ruling and that specifically address the issue of tax avoidance will not be subject to the GAAR test.
  • GAAR will not be applicable on compulsorily convertible instruments, bonus issuances or split/consolidation of holdings in respect of investments made prior to 1 April 2017 in the hands of the same investor.
  • In order to prevent misuse of GAAR provisions by the IT department, adequate safeguards also have been put in place based on which GAAR will be invoked.
  • The proposal to apply GAAR first will be vetted by an officer at the level of the principal commissioner or commissioner of income tax and at the second stage by an approving panel headed by a high court judge.
  • GAAR will not apply on foreign portfolio investor if its jurisdiction is based on non-tax commercial considerations and the main purpose is not to obtain tax benefits.

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