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Banks to move government on TDS on loan waivers

Synopsis

Slices of loans waived to lessen the strain on defaulting borrowers are being interpreted as 'benefits' that lenders are passing on to borrowers under the new provisions the government has come out on tax deducted at source (TDS).

Banks will soon move the government as they find themselves caught in the tax net while settling and rejigging loans to give distressed borrowers a second chance.

Slices of loans waived to lessen the strain on defaulting borrowers are being interpreted as 'benefits' that lenders are passing on to borrowers under the new provisions the government has come out on tax deducted at source (TDS).

Even though there is no transfer of cash from the bank to the borrower, the extent of haircuts taken by lenders is imputed as 'income' for the borrower.

For instance, if a bank cuts the loan outstanding from ₹100 crore to ₹40 crore as the borrower is unable to repay or arrange periodic interest outgo, the bank will have to pay a 10% TDS of ₹6 crore on the ₹60 crore which is written off from the full loan amount.

"This would put an additional burden on banks in the course of loan restructuring. We feel this particular TDS provision was inserted without adequate consultation and understanding of the consequences. It's a strange situation where the bank has to make a sacrifice on account of waiver as well as organise for TDS. We have decided to pursue the matter with the government," a senior banker told ET.

The tax implication was pointed out by a banker at a recent meeting, following which the industry body, Indian Banks' Association, decided at its managing committee meeting to send a representation to the government.

Multiple transactions are being included in the TDS provisions as this is the easiest manner in which the tax net can be widened as the payer is made liable for deduction as well as suffer the consequences for non-deduction.

According to senior chartered accountant Dilip Lakhani, "The scope of TDS seems to have been broadened. Prima facie, the provisions of Section 194R (dealing with TDS) may not apply to the banking industry when there is a settlement of loan with the borrower and a certain amount is written off in the process. However, the fear among bankers is probably emanating from the word 'benefit' in the new circular on TDS."

"Courts have held that if a borrower has borrowed funds specifically for the acquisition of plant or machinery or land or building for a project, then the remission of liability is not chargeable to tax. On the other hand, the circular deals with cases where the benefit is taxed as income. Also, if a bank deducts the tax, the issue of granting credit to the borrower will also be debatable if the said amount is not chargeable to tax," said Lakhani.

Lakhani and other tax experts believe that the Central Board of Direct Taxes, the apex body under the ministry of finance, should clear the fog on TDS arising from loan waivers and sacrifices - particularly because the economic stress may require a sizeable amount of loan restructuring and settlement by banks.

Government should also consider investing more resources and manpower in swiftly disposing of lower or nil withholding tax certificate requests, said Ashish Mehta, partner at the law firm Khaitan & Company. "Since in case of loan settlements, banks will pay the TDS out of borrowers' money, the latter should approach the tax department in making the request. This will ease the burden in cases where the parties are facing genuine hardships. And there will be added complication for banks if there is insufficient money in borrowers' accounts, and banks are required to ask the borrower for funds," said Mehta.

GST council expected to focus on improving revenue collections and plugging leakages

Synopsis

A group of ministers (GoM) headed by Maharashtra finance minister Ajit Pawar, which is scheduled to give its report on reforms on the GST system to the council, has recommended public disclosure of information of unregistered bogus traders and provision of information on transactions through Point of Sale (POS) by banks, among others.

The Goods and Services Tax (GST) council is likely to take up a proposal for stricter scrutiny and verification of highrisk taxpayers ahead of the next level of reforms in the indirect tax framework that completes five years of roll-out on July One.

A group of ministers (GoM) headed by Maharashtra finance minister Ajit Pawar, which is scheduled to give its report on reforms on the GST system to the council, has recommended public disclosure of information of unregistered traders and provision of information on transactions through Point of Sale (POS) by banks, among others.

The council meeting this week on June 28-29 in Chandigarh is expected to focus on ways to improve revenue collection and plug leakages as compensation to the states ends this month.

Last year the council had set up a GoM under Pawar to review IT tools and interface available to tax officers and suggest measures to make the system more effective and efficient, including changes in business processes. It was also asked to identify potential sources of evasion to plug revenue leakages.

The GoM recommended verification of physical addresses of high-risk taxpayers to prevent input tax credit fraud. It has also suggested making mention of electricity consumer registration number mandatory at the time of GSTN registration, certification of taxpayers’ bank accounts by National Payments Corporation of India (NPCI) and establishment of a feedback mechanism to detect suspicious transactions.

It has also made out a case for measures to prevent harassment from tax officials and improvement in process to claim input tax credit.

MINIMAL RATE REJIG
The council is expected to refrain from undertaking any significant increase in tax rates as part of rationalisation in view of inflationary concerns. "No major rate rejig is expected apart from some tweaks and clarifications. However, there will be a detailed discussion on improving the GST system, use of technology and better cohesion between the centre and stateto plug in leakages," an official said.

The fitment committee under the council has recommended status quo on tax rates for 215 goods and services.

The council is also expected to take up an interim report from the GoM on rate rationalisation, headed by Karnataka Chief Minister Basavraj Bommai, on pruning of exemptions under GST.

Exemptions such as for hotel rooms less than Rs 1,000 per night and non-branded food items could be taken up. Extension of this GoM by another six months to investigate a comprehensive rate rationalisation is also expected to be taken up by the council.

The council is expected to take final call on rates on casinos, horse racing and online gaming after the ministerial panel headed by Meghalaya Chief Minister Conrad Sangma suggested imposition of 28% GST on these activities.

The council is also expected to take up the GST on cryptocurrency. The Central Board of Indirect Taxes and Customs has favoured imposition of 28% on cryptocurrency transactions.

3 Income Tax employees siphoned off crores through fictitious TDS refunds; CBI probes

Synopsis

CBI has named three I-T officials -- Abhay Kant, Saurabh Singh and Rohit Kumar -- in connection with the case along with nine beneficiaries of the refunds. The tax department has alleged that the officials misused the RSA tokens of assessing officers to work out and authenticate generation of fictitious refunds payable to 11 assessee, on the system, and got the refunds worth over Rs 1.39 crore between August 1, 2020 and August 25, 2021 till the fraud was detected.

The CBI has started an investigation against three Income Tax department officials for allegedly facilitating fictitious refunds of TDS deducted for several assessee by misusing system access of senior officers, officials said on Sunday. The probe agency filed the FIR based on a complaint from Joint Commissioner of Income Tax, Muzaffarnagar against three group C officials of the Income Tax who allegedly managed to dupe the department by allegedly misusing RSA tokens of assessing officers to work out and generate fictitious refunds of Tax Deducted at Source (TDS).

RSA tokens are unique and time-synchronous solutions that automatically change a user's password every 60 seconds.

Following the FIR, the agency had carried out searches at multiple locations, they said.

The Central Bureau of Investigation (CBI) has named three I-T officials -- Abhay Kant, Saurabh Singh and Rohit Kumar -- in connection with the case along with nine beneficiaries of the refunds.

The tax department has alleged that the officials misused the RSA tokens of assessing officers to work out and authenticate generation of fictitious refunds payable to 11 assessee, on the system, and got the refunds worth over Rs 1.39 crore between August 1, 2020 and August 25, 2021 till the fraud was detected.

The scam surfaced when one of the assessing officers detected computation of refunds under section 154 of the I-T Act for assessees who did not belong to his range, they said.

Orders under the section are passed when any rectification to any order or processing is required either on the application of the assessee or by the assessing officer on its own when some mistake is to be corrected, which is apparent in records, it alleged.

These refunds were reported to be on AST (Assessment Information System), an old system, and not on ITBA (lncome Tax business application) on which the process has now been shifted since 2016.

"Out of the total amount siphoned off, nearly Rs 35 lakh was deposited back to government accounts by the accused officials as taxes against demand Rs 22 lakh was recovered by assessing officers by way of coercive actions against the beneficiaries," it alleged.

"A total recovery either by the staff involved in the scam or by the assessing officers by way of attachment of accounts of the assessees comes to Rs 57.31 lakh so far. The total amount still outstanding, including interest chargeable, is computed at Rs 94.39 lakh," the complaint alleged.

Form 26QE/Form 16E notified and Form 26Q, 26QB, 26QC AND 26QD amended

AMENDMENT TO RULE 30, 31, 31A AND FORM 26Q, 26QB, 26QC AND 26QD AND INSERTION OF NEW FORM 16E AND 26QE TO INCOME TAX RULES, 1962

Notification published by CBDT on 22nd June 2022, vide Notification No. 67/2022/F. No. 370142/23/2022-TPL] notifying Rules and Forms w.r.t TDS on Payment on transfer of Virtual Digital Assets applicable from 01.07.2022 and amendment to existing Forms 26Q/26QB/26QC and 26QD.

Click here for complete notification.

Revised Instruction for constitution and functioning of Local Committees to deal with taxpayers’ grievances due to high-pitched Scrutiny Assessment

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 16th June, 2022

PRESS RELEASE

Revised Instruction for constitution and functioning of Local Committees to deal with taxpayers’ grievances due to high-pitched Scrutiny Assessment

In line with CBDT’s policy and commitment towards providing enhanced taxpayers’ services and reduce taxpayers’ grievances, CBDT has issued revised Instruction for constitution and functioning of Local Committees to deal with taxpayers’ grievances arising out of high-pitched Scrutiny Assessment through F.No.225/101/2021-ITA-II, dated 23rd April, 2022.

This instruction also provides for initiation of suitable administrative action against the officer concerned, in cases where assessments are found by the Local Committee to be high-pitched or where there is non-observance of principles of natural justice, non-application of mind or gross negligence of Assessing Officer/ Assessment Unit.

The revised Instruction dated 23rd April, 2022 in F.No.225/101/2021-ITA-II is available on www.incometaxindia.gov.in at https://incometaxindia.gov.in/Lists/Latest%20News/Attachments/518/Instrution-225-101-2021.pdf

(Surabhi Ahluwalia)

Pr. Commissioner of Income Tax(OSD)

(Media & Technical Policy)

Official Spokesperson, CBDT

Net Direct Tax collections for the F.Y. 2022-23 continue to grow at a robust pace- CBDT

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 17th June, 2022

PRESS RELEASE

Net Direct Tax collections for the Financial Year 2022-23 have grown at over 45%

Net Direct Tax collections for the F.Y. 2022-23 continue to grow at a robust pace further fortifying the economic revival

Gross Tax collections for the Financial Year 2022-23 have grown at about 40%

Advance Tax collections for F.Y. 2022-23 stand at Rs. 1,01,017 crore which shows a growth of more than 33%

Refunds amounting to Rs. 30,334 crore have been issued in the F.Y. 2022-23

The figures of Direct Tax collections for the Financial Year 2022-23, as on 16.06.2022 show that net collections are at Rs.3,39,225 crore compared to Rs. 2,33,651 crore over the corresponding period of the preceding year, representing an increase of 45% over the collections of the preceding year. The net collection (as on 16.06.2022) in F.Y. 2022-23 has registered a growth of 171% over the corresponding period of F.Y. 2020-21 when the net collection was Rs. 1,25,065 crore, and a growth of 103% over the corresponding period of F.Y. 2019-20 when the net collection was Rs. 1,67,432 crore.

The Net Direct Tax collection of Rs. 3,39,225 crore (as on 16.06.2022) include Corporation Tax (CIT) at Rs. 1,70,583 crore (net of refund) and Personal Income Tax (PIT) including Security Transaction Tax (STT) at Rs. 1,67,960 crore (net of refund).

The Gross collection of Direct Taxes (before adjusting for refunds) for the F.Y. 2022-23 stands at Rs. 3,69,559 crore compared to Rs. 2,64,382 crore in the corresponding period of the preceding year, representing an increase of almost 40% over the collections of the preceding year. This includes Corporation Tax (CIT) at Rs. 1,90,651 crore and Personal Income Tax (PIT) including Security Transaction Tax (STT) at Rs. 1,78,215 crore. Minor head wise collection comprises Advance Tax of Rs. 1,01,017 crore, Tax Deducted at Source of Rs.2,29,676 crore, Self-Assessment Tax of Rs. 21,849 crore, Regular Assessment Tax of Rs. 10,773 crore, Tax on Distributed Profits of Rs. 5,529 crore and Tax under other minor heads of Rs. 715 crore.

The Advance Tax collections for the first quarter of the F.Y. 2022-23 stand at Rs. 1,01,017 crore against Advance Tax collections of Rs. 75,783 crore for the corresponding period of the immediately preceding Financial Year, showing a growth of more than 33%. This comprises Corporation Tax (CIT) at Rs. 78,842 crore and Personal Income Tax (PIT) at Rs. 22,175 crore. This amount is expected to increase as further information is received from Banks.

The TDS collections for F.Y. 2022-23 (as on 16.06.2022) stand at Rs. 2,29,676 crore against TDS collections of Rs. 1,57,434 crore for the corresponding period of the immediately preceding Financial Year, showing a growth of nearly 46%.

The Self-Assessment Tax collections for F.Y. 2022-23 (as on 16.06.2022) stand at Rs. 21,849 crore against self-assessment tax collections of Rs. 15,483 crore for the corresponding period of the immediately preceding Financial Year, showing a growth of more than 41%.

Refunds amounting to Rs. 30,334 crore have also been issued in the F.Y.2022-23.

(Surabhi Ahluwalia)

Pr. Commissioner of Income Tax(OSD)

(Media & Technical Policy)

Official Spokesperson, CBDT

Guidelines for removal of difficulties under sub-section (2) of section 194R of the Income- tax Act, 1961

Circular No. 12 of 2022 dated 16th June 2022 issued by CBDT containing Guidelines for removal of difficulties under section 194R.

Click here to download complete circular

Invoices being shown twice in GSTR2B for April and May 2022

Few taxpayers (recipients of supply) have reported that they have observed the same invoice twice in GSTR 2B i.e. April and May, 2022. Taxpayers are advised not to avail ITC on the same invoice twice. A solution to the issue would be implemented shortly as reported by GSTN Infosys.

Procedure relating to sanction, post audit and review of refund claims issued by CBIC

CBIC issued instruction number 03/2022-GST dated 14 June 2022 specifying procedure relating to sanction, post-audit and review of refund claims.

Click here to download instructions

Slices of loans waived to lessen the strain on defaulting borrowers are being interpreted as 'benefits' that lenders are passing on to borrowers under the new provisions the government has come out on tax deducted at source (TDS).

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