international financial services centre Current Affairs - 2019
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Performance: India’s Ease of Doing Business (EDB) ranking under ‘Paying Taxes’ category jumped from 172 in 2017 to 121 in 2019. In past 5 years, Direct tax revenue increased by over 78% to Rs. 11.37 lakh crore
For companies with annual turnover of up to Rs.400 crore, Tax rate reduced to 25%
For individuals having taxable income from Rs.2 crore to Rs.5 crore and Rs. 5 crore and above, Surcharge to be increased
Tax Simplification and Ease of Living: Leveraging technology to make compliance easier:
- Interchangeability of PAN and Aadhaar– Those who don’t have PAN (Permanent Account Number is a ten-digit alphanumeric number) can file tax returns using Aadhaar. Moreover wherever PAN is required, Aadhaar can be used.
- Pre-filling of Income-tax Returns (ITR) for faster, more accurate tax returns- Pre-filled ITR with details of several incomes and deductions to be made available and regarding this information to be collected from Stock exchanges, Banks, mutual funds etc.
- Faceless e-assessment– with no human interface to be launched soon. Initially it is to be carried out in cases which require verification of certain specified transactions or discrepancies.
Other Direct Tax measures: includes Simplification of tax laws to reduce genuine hardships of taxpayers such as-
- Appropriate class of persons exempted from anti-abuse provisions of Section 50CA of Income Tax (IT) Act and Section 56 of IT Act
- Higher tax threshold for launching prosecution for non-filing of returns
Relief for Start-ups:
- Scrutiny: Funds raised by start-ups to not require scrutiny from IT Department.
- ‘Angel tax’ issue resolved- start-ups and investors filing requisite declarations and also providing information in their returns are not to be subjected to any kind of scrutiny in respect of valuations of share premiums
- Capital gains (a profit from sale of capital asset like property/investment/stocks) exemptions from sale of residential house for investment in start-ups extended till FY 2021
- Relaxation of conditions for carry forward and set off of losses
- e-verification mechanism so as to establish identity of investor and source of funds
- Special administrative arrangements for grievance redressal and pending assessments. In such cases no inquiry by Assessing Officer (AO) would be done without obtaining approval of Supervisory Officer.
- No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds (AIF). Category II AIF are funds which are allowed to invest anywhere in any combination but cannot take debts, except for day-to-day operation purposes
Affordable housing: For purchase of house which is valued up to Rs.45 lakh an additional deduction of up to Rs.1.5 lakhs proposed for interest paid on loans borrowed up to 31st March 2020. Overall benefit would be around Rs.7 lakh over loan period of 15 years.
Boost to Electric Vehicles: Additional IT deduction of Rs.1.5 lakh on interest paid on electric vehicle loans as well as customs duty exempted on certain parts of electric vehicles.
Non-bank financial institution (NBFCs): Interest on certain doubtful or bad debts by deposit taking and systemically important non-deposit taking NBFCs to be taxed in year in which interest is actually received
Securities Transaction Tax (STT): is restricted only to difference between settlement and strike price in case of exercise of options. STT (a direct tax) is levied on every sale and purchase of securities that are listed on recognized stock exchanges in India.
International Financial Services Centre (IFSC): Direct tax incentives proposed for IFSC are as follows-
- Exempting interest payment on loan taken from non-residents
- 100 % profit-linked deduction in any 10 year block within a 15-year period
- Exemptions on capital gain to Category-III AIFs (are funds that make short-term investments and then sell like hedge funds Category III).
- Exemption from dividend distribution tax from current and accumulated income to companies and Mutual Funds
Make In India: Custom Duty-
- Imposed– Basic Customs Duty (a duty/tax imposed under Customs Act 1962) increased on optical fibre cable, CCTV camera, auto parts, cashew kernels, PVC, tiles, marble slabs, etc.; 5% Basic Custom Duty imposed on imported books.
- Withdrawn– End use based exemptions on fatty oils, palm stearin withdrawn; Custom Duty Exemptions on certain electronic items now manufactured in India withdrawn; Exemptions to various kinds of papers withdrawn
- Reduced– on certain raw materials such as: Capital goods required for manufacture of specified electronic goods; Fuels for nuclear power plants and Inputs for artificial kidney and disposable sterilised dialyser etc.
- Exempted: Defence equipment not manufactured in India exempted from basic customs duty
- Increased: on gold as well as other precious metals.
Other Indirect Tax provisions
Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by Rs.1 per litre on both petrol and diesel
Export Duty rationalised on raw and Semi-Finished Leather
Legacy Dispute Resolution Scheme (LDSR) for quick closure of pending litigations in Central Excise and Service tax from pre-GST (Goods & Service Tax) regime
Tags: Category-II Alternative Investment Funds • Custom Duty • Direct Tax • Indirect Tax • international financial services centre
The Union Cabinet headed by Prime Minister Narendra Modi has approved setting up of a unified authority for regulating all financial services in international financial services centres (IFSCs) in the country. The government has approved a bill to set up a unified regulator.
The first IFSC in India was set up at GIFT City in Gandhinagar, Gujarat.
Promoting the Ease of Doing Business
IFSCs are set-up to bring back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches or subsidiaries of financial institutions (FIs) to India.
In order to ensure this, the business and regulatory environment must be comparable to other leading international financial centres in the world like London and Singapore. Currently, the banking, capital markets and insurance sectors in IFSCs are regulated by multiple regulators like the RBI, SEBI and IRDAI respectively.
For IFSCs to attain its objectives there is a need for inter-regulatory coordination. The establishment of a unified financial regulator for IFSCs will result in providing a world-class regulatory environment to market participants from the ease of doing business perspective.
For the setting up of a unified regulator, the Union cabinet has approved the International Financial Services Centres Authority Bill, 2019.