Income Tax Act 1961 Current Affairs - 2019
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Both India and the US will sign an agreement to facilitate the exchange of country-by-country (CbC) reports filed by the ultimate parent corporations based in either of the countries.
Base Erosion and Profit Shifting (BEPS) has been at the focus of OECD to address Tax evasion. Multinational companies were accused of gaming tax systems to maximise profits, while potentially depriving tax authorities of revenue.
To address this issue one of the measures adopted by OECD is Country-By-Country Reports. The Country-By-Country Reports requires multinational companies to provide information about:
- The name of each country where it operates.
- The names of all its subsidiaries and affiliates in these countries.
- The performance of each subsidiary and affiliate, without exception.
- The tax charge in its accounts of each subsidiary and affiliate in each country.
- Details of the cost and net book value of its fixed assets in each country.
- Details of its gross and net assets for each country.
Section 286 of the Income-tax Act, 1961 requires Indian subsidiaries of multinational companies to provide details of key financial statements from other jurisdictions where they operate. This provides the I-T Department with a better operational view of such companies, primarily with regards to revenue and income tax paid.
The proposed agreement will enable both India and the US to exchange CbC Reports filed by the ultimate parent entities of International Groups in the respective jurisdictions. As a result, Indian constituent entities of international groups headquartered in the USA, who have already filed CbC Reports in the USA, would not be required to do local filing of the CbC Reports of their international groups in India and vice versa.
The government has relaxed the norms under the definition of Start-Ups. The changes brought in are:
- The investment limit of angel investors to seek exemption under the Income Tax Act, 1961 has been increased to Rs 25 crore from 10 Crore.
- An entity shall be considered a start-up up to 10 years from its date of incorporation/registration instead of the previous period of 7 years.
- An entity would be considered as a startup up to a turnover of Rs 100 crore as against the earlier limit of Rs 25 crore.
- A start-up cannot invest in a building or land unless it is for its business or used by it for purposes of renting or held by it as stock-in-trade.
- A start-up cannot offer loans or advances, other than those where lending money is part of its business.
- A start-up cannot make any capital contribution to any other entity or invest in shares, car, any vehicle or mode of transport that costs more than Rs 10 lakh.
These exemptions were brought in to allay the fears of CBDT that start-ups could be used for money laundering or receive investment from shell companies for tax evasion.
The relaxations are in line with the government’s vision to promote the culture of entrepreneurship and ease of doing business in India.