May 25, 2015

TRACES advice on correction of potential errors in TDS statement

12:19 PM 0
TRACES advice on correction of potential errors in TDS statement
As you may be aware, Centralized Processing Cell (TDS) intimates you of possible PAN Errors and Short Payment Defaults, through an Intermediate Communication, during processing of Original Quarterly TDS Statements. This change was incorporated in processing of TDS Statements, in view of feedbacks received from deductors, to avoid defaults that may arise due to inadvertent data entry errors.
The central point in the new process is identifying errors in challan/ PANs and facilitating their corrections before CPC (TDS) computes defaults in TDS statements. Following are the salient features of Intermediate Communication:

What is new?
Step 1: CPC (TDS) will first process Original TDS Statements till the stage of 26AS generation for deductees reported.

Step 2: Short Payments and PAN Errors will be identified in the preliminary check of the Original statements.

Step 3: The statements will be placed "On Hold" for further processing and an opportunity will be provided to correct potential defaults of Short Payment and PAN Error

When the statement is placed on Hold, CPC (TDS) will intimate you through following means:

e-mail at the Registered e-mail address at TRACES
SMS at Registered Mobile Number with TRACES
Message will be delivered to the Deductor's Inbox in TRACES


The above correction needs to be carried out by using Online Correction feature at TRACES after 24 hours of the receipt of the Intermediate Communication and must be availed within 7 days of receipt of such communication.

What are the advantages:
You would have preliminary information of potential Short Payments and PAN Errors, before the Original Statement is completely processed for Defaults and Intimations are generated.

Correction of above defaults using Online Correction can be submitted before final processing of statements.

Above action will facilitate avoidance of multiple Correction Statement filing later, after the defaults are identified CPC (TDS) and Intimations have been sent.

What actions to be taken:
Please take note of the Intermediate communication from CPC (TDS) and submit Online Correction for potential defaults in TDS statement within the stipulated time frame.

Only "Online Correction" facility can be used for correction of above Short Payments and PANs.

To avail the facility, you are requested to Login to TRACES and navigate to Defaults tab to locate Request for Correction from the drop-down menu. For any assistance, please refer to the e-Tutorial available on TRACES.

Please note that Digital Signature will be required to avail the benefit of complete correction features, including PAN Corrections.

PAN Verification facility on TRACES can be used for verifying the deductees. You are requested to navigate to Statement/ Payment to locate PAN Verification in the menu to download the file.

You can make use of the "Consolidated TAN - PAN File" that includes all the valid PANs attached with the respective TANs. To avail the facility, please navigate to Dashboard to locate Consolidated TAN - PAN File.

The action requires to be completed after 24 hours and within 7 days of Intermediate communication from CPC (TDS).

It is hoped that the deductors will avail of the time window to correct errors, if any. CPC (TDS) is committed to provide best possible services to you.

May 22, 2015

No PIN required for shopping with debit/credit card upto Rs. 2000

4:36 PM 0
No PIN required for shopping with debit/credit card upto Rs. 2000
Reserve bank of India relax rule of additional security feature for making payment to merchant with debit or credit card. Now upto Rs. 2000 PIN doesn't require to enter. Full RBI note is as under.

Reserve Bank has issued various instructions on security of card transactions and risk mitigation measures, including directions on online alerts as well as on additional factor of authentication. These measures have significantly increased customer confidence in using cards.

2. In the recent past, Reserve Bank has received requests for waiver of requirement of the additional factor of authentication (AFA) so as to foster innovative payment products / processes as also enhance the convenience factor in certain types of card transactions. After examining the trade-off between security and convenience in card transactions, Reserve Bank had placed for public comments a draft circular outlining the relaxation in the need for AFA in case of small value card present transactions using Near Field Communication (NFC) contactless technology subject to adherence to EMV standards.

3. The comments received on the draft circular have been examined. Accordingly, it has been decided to relax the extant instructions relating to the need for AFA requirements for small value card present transactions only using contact-less cards. In this regard, it is advised that -

(1) Relaxation for AFA requirement is permitted for transactions for a maximum value of Rs 2,000/- per transaction;

(2) The limit of Rs.2000/- per transaction will be the limit set across all categories of merchants in the country where such contactless payments will be accepted;

(3) Beyond this transaction limit, the card has to be processed as a contact payment and authentication with PIN (AFA) will be mandatory;

(4) Even for transaction values below this limit, the customer may choose to make payment as a contact payment, which has to be facilitated by both issuing and acquiring banks. In other words, customers cannot be compelled to do a contactless payment;

(5) Banks are free to facilitate their customers to set lower per-transaction limits. The responsibility for authorizing the contactless payment based on such card-based limits will lie with the card issuing banks;

(6) Suitable velocity checks (i.e., how many such small value transactions will be allowed in a day / week / month) may be put in place by banks as considered appropriate; and

(7) The contactless cards should necessarily be chip cards adhering to EMV payment standard, so as to be acceptable across the existing card acceptance infrastructure which are EMV compliant based on the earlier mandate in this regard.

5. Further, in the interest of customer awareness and protection the banks are also advised:

(1) to clearly explain to customers about the technology, its use, and risks while issuing such contact less cards;

(2) to create awareness among customers to look for / identify the “contactless” logo on the card (to distinguish them from other cards) as well as the merchant location / POS terminal (to identify that contactless payments are accepted at that location);

(3) to clearly indicate to the customers that they can use the card in contactless mode (without PIN authentication) for transactions upto Rs.2000/- in locations where contactless payments are accepted and to make customers aware that they are free to use the same card as a regular chip card (with PIN authentication) at any location irrespective of transaction value;

(4) to clearly indicate the maximum liability devolving on the customer, if any, at the time of issuance of such cards along with the responsibility of the customer to report the loss of such cards to the bank; and

(5) to put in place robust mechanism for seamless reporting of lost/stolen cards, which can be accessed through multiple channels (website, phone banking, SMS, IVR etc.).

6. It may, however, be noted that the above relaxations shall not apply to: ATM transactions irrespective of transaction value; and Card Not Present transactions (CNP).

7. This directive is issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007).

Draft scheme to determine ALP

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Draft scheme to determine ALP
Central board of direct taxes unveils draft rule to apply multi year's data and range concept to determine Arm's Length Price  of an International Transaction or Specified Domestic Transaction undertaken on or after 01.04.2014.

Section 92C of the Income Tax Act, 1961 (the “Act”) provides for computation of Arm’s Length Price (ALP) of an international transaction or specified domestic transaction.

2. The Finance Minister in his Budget speech, while introducing the Finance (No. 2) Bill 2014, had made an announcement that “range concept” for determination of ALP would be introduced in the Indian transfer pricing regime however, the arithmetic mean concept will continue to apply where the number of comparables is inadequate. Further, it was announced that use of multiple year data would be permitted for undertaking comparability analysis. Consequent to the announcement, section 92C (2) of the Act was amended by the Finance (No. 2) Act, 2015 to provide that where more than one price is determined by application of the most appropriate method, the arm’s length price in relation to an international transaction or specified domestic transaction undertaken on or after the 1st day of April, 2014 shall be computed in such manner as may be prescribed.

3. Therefore, the manner of computation of ALP is proposed to be provided through the amendment of Income-tax Rules. The proposed mechanism and conditions under which the multiple year data and ‘range’ concept would be used for determination of ALP shall be as under: -

A. Adoption of the Range Concept
i. The ‘Range’ concept shall be used only in case the method used for determination of ALP is Transactional Net Margin Method (TNMM), Resale Price Method (RPM) or Cost Plus Method (CPM).

ii. The following steps would be required to construct the range: -
a) A minimum of 9 entities are required to be selected as comparable entities of the tested party, based on the similarity of their functions, assets and risks (FAR) with that of the tested party;

b) 3-year data of these 9 entities (or more) would be considered and the weighted average of such 3-year data of each company would be used to construct the data set. In certain circumstances, data of 2 out of 3 years could also be used. Thus, the data set or series would have a minimum of 9 data points;

c) For calculating the weighted average, the numerator and denominator of the chosen Profit Level Indicator (PLI) would be aggregated for all the years for every comparable entity and the margin would be computed thereafter; and

d) The data points lying within the 40th to 60th percentile of the data set of series would constitute the range.

iii. If the transfer price of the tested party falls outside the range as constructed above, the median of the range would be taken as ALP and adjustment to transfer price shall be made. If the transfer price is within the range no adjustment shall be made. There shall not be two different data sets – one for testing and one for making adjustments.

B. Use of Multiple Year Data
i. The multiple year data would be used only in case determination of ALP is by Transactional Net Margin Method (TNMM), Resale Price Method (RPM) or Cost Plus Method (CPM);

ii. The multiple year data should comprise three years including the current year i.e. (year in which transaction has been undertaken) and its use for above mentioned methods shall be mandatory;

iii. In case of non-availability of data for 3 years for any of the following reasons: -
 Data of the current year of the comparables may not be available on the databases at the time of filing of returns of income by taxpayers;

 A comparable may fail to clear a quantitative filter in any one out of the three years; and

 A comparable may have commenced operations only in the last two years or may have closed down operations during the current year.
the use of data of two out of relevant three years shall be permitted.

iv. The data of the current year, however, can be used during the transfer pricing audit by both the taxpayer and the department if it becomes available at the time of audit.

C. Continued use of Arithmetic Mean
In cases where ‘range’ concept does not apply, the arithmetic mean concept shall continue to apply in the same manner as it applied before the amendment to section 92C (2) by the Finance (No. 2) Act 2014 alongwith benefit of tolerance range. Further, in cases where multiple year data is to be used, the same would apply whether “range” concept is used or arithmetic mean is used for determining the ALP. Therefore, in such cases the arithmetic mean of the multiple year data of comparable will be considered for computation of ALP.

4. The comments and suggestion of stakeholders and general public on the above draft scheme are invited. The comments and suggestions may be submitted by 31st May, 2015 at the email address (dirtpl1@nic.in) or by post at the following address with “Comments on draft transfer pricing rules“ written on the envelop: 

Service tax will be charged at 14% from I June 2015

4:18 PM 0
Service tax will be charged at 14% from I June 2015
Finance Minister has purposed increasing service tax rate in budget speech but not notified when it will be applicable. Department of revenue issued notification no. 15/2015 dated 19 May 2015 that new service tax rate which is 14% from the earlier 12.36% is applicable from 1 June 2015. Full notification is as under.

In exercise of the powers conferred by sub-section (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby appoints the 1st day of June, 2015 as the date on which the provisions of sub-clauses (a), (b) and (c) and item (A) of sub-clause (d) of clause (ii) of sub-paragraph (e) of paragraph 2 of the notification of the Government of India in the
Ministry of Finance (Department of Revenue), No. 05/2015 – Service Tax, dated 1st March, 2015, published in the gazette of India, Extraordinary, vide number G.S.R. 159(E), dated 1st March, 2015 shall come into force.

May 9, 2015

Banks will issue only chip based debit or credit card from 1 September 2015

2:24 PM 0
Banks will issue only chip based debit or credit card from 1 September 2015
Reserve bank of India issued a advisory note to banks to issue only chip based debit or credit card with effect from 1 September 2015 and not the magnetic strip card. Full advisory note is as under.

A reference is invited to our circulars DPSS.PD.CO.No.513 / 02.14.003 / 2011-2012 dated September 22, 2011 and DPSS (CO) PD No.2377 / 02.14.003 / 2012-13 dated June 24, 2013 on security issues and risk mitigation measures related to Card Present (CP) transactions read along with circular dated February 28, 2013 on security and risk mitigation measures for electronic payment transactions wherein various timelines were indicated for accomplishment of tasks for securing card and electronic payment transactions.

2. The Reserve Bank has adopted a phased manner of implementation of security and risk mitigation measures in card transactions as evident from the instructions issued from time to time. The acceptance infrastructure is getting geared to accept EMV chip and pin cards. However, in case of card issuance, while some banks have already moved to EMV chip and pin cards issuance, a large number of banks continue to issue Magnetic stripe cards. Thus, given the level of readiness of the card acceptance infrastructure at point of sale and also the implementation of PIN@POS for debit cards, the time is appropriate to move further along the path to migrate away from magnetic stripe only cards to chip and pin cards.

3. Accordingly, banks are advised that with effect from September 01, 2015 all new cards issued – debit and credit, domestic and international – by banks shall be EMV chip and pin based cards.

4. The migration plan for existing magnetic stripe only cards will be framed in consultation with stakeholders and timeline for the same will be advised in due course.

5. These guidelines are issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

May 7, 2015

Bombay high court grants stay on levy MAT on FIIs

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Bombay high court grants stay on levy MAT on FIIs
The Bombay High Court on 5 May 2015 has granted stay to one of the Foreign Institutional Investors ('FIIs') who filed a writ petition against the demand notice issued by the Income-tax department for payment of Minimum Alternate Tax (MAT) on capital gains arising from transfer of Indian securities.

The court has stayed the tax authorities' move till the case is next heard. The next hearing would be sometime in June, 2015.

This issue arose after an amendment proposed in the Finance Bill, 2015 that MAT would not apply to FIIs in respect of capital gains arising from transactions in securities.

The amendment was restricted only to capital gains earned by FIIs which might have resulted in levy of MAT on other income.The matter was considered by the Finance Minister and, accordingly, in the Finance Bill, 2015 as passed by the Lok Sabha an amendment is proposed that the exemption from MAT shall also be available to income arising from interest, royalty or fee for technical services, provided tax payable on such income is less than 18.5%

Since the amendment was proposed to be given prospective effect, demand notices were issued by the income-tax department to recover MAT from FIIs in respect of earlier years.

Tax authorities are relying on the ruling in the case of Castleton Investment Ltd., In re [2012] 24 taxmann.com 150 (AAR – New Delhi), according to which MAT is applicable to foreign entities. Whereas contentions of the tax experts (representing FIIs) are that MAT is applicable to companies that maintain books of account under Indian law and foreign investors don't do so.

Against said move by the Dept., the writ filed by one of the FIIs has been admitted by the Bombay High Court, however,on the technical grounds that the tax officer had directly issued a final order instead of a draft order since there was a variation between the income disclosed in the return of income and income computed in assessment order.

More details on the issue are awaited.

May 6, 2015

Progress on implementation of Pradhan Mantri Jeewan jyoti bima yojana and Pradhan Mantri suraksha bima yojana

5:04 PM 0
Progress on implementation of Pradhan Mantri Jeewan jyoti bima yojana and Pradhan Mantri suraksha bima yojana
Reserve Bank of India issued a circular no. 8/2015 dated 5 May 2015 about progress on implementation of Pradhan Mantri Jeewan Jyoti Bima Yojana(PMJJBY) and Pradhan Mantri Sukarsha Bima Yojana(PMSBY). Full circular is as under.

Modalities for implementation of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Government of India, Ministry of Finance intends to roll out Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) Scheme and Pradhan Mantri Suraksha Bima Yojana (PMSBY) from June 1st, 2015. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) Scheme offers life insurance worth Rs 2 lakhs at Rs 330 per annum while Pradhan Mantri Suraksha Bima Yojana (PMSBY) offers accident insurance worth Rs 2 lakhs at Rs 12 per annum. The schemes will be implemented by member banks in accordance with the preliminary rules and terms finalised by the Government, the copies of which are enclosed, for your information and necessary action. The rules, roles and responsibilities assigned to the banks for implementing the scheme are also mentioned therein.

2. As the schemes have to be implemented in a system driven IT mode, the UCBs in co-ordination with the insurance companies concerned would also be required to introduce the necessary module for this purpose in their CBS package and in the software for the handheld devices of BCs to enable on-line enrolment etc. The acknowledgement slip may be made into an acknowledgement slip cum certificate of insurance.

3. All Primary Urban Cooperative Banks not operating under directions u/s 35 A of BR Act,1949(AACS) with full CBS implementation and having capabilities to build necessary modules in the CBS/hand held devices software for banks and BCs for the roll out of these insurance schemes by May 31, 2015 may participate in these schemes. Such UCBs are advised to finalize MOUs with LIC/GIPSA or any other Insurance Companies of their choice who are willing to offer the product on similar terms with necessary approvals and tie ups with UCBs for this purpose as mentioned in the schemes.

4. UCBs may appoint a Nodal Officer for implementation of the schemes and furnish to our Regional Offices the full details such as name of the bank, address, name of the Nodal Officers with details of their telephone numbers, email addresses etc. for onward transmission to Ministry of Finance, Government of India.

5. The details of the schemes are available at website www.jansuraksha.gov.in/www.financialservices.gov.in.

Excise clarification on Cenvat Credit in transit sale through dealer

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Excise clarification on Cenvat Credit in transit sale through dealer
Central Excise department issued a clarification on cenvat credit in transit sale through dealer. Excise department issued a circular no. 1003/2015 dated 05 May 2015 on this clarification. Full circular is as under.

 Kind attention is invited to Notification No. 8/2015 – Central Excise (NT) dated 1-3-2015 amending Central Excise Rules, 2002 (CER). Representations have been received from trade regarding the scope and purpose of third and fourth proviso inserted in sub-rule (2) of rule 11 particularly with reference to procedural requirement after the amendment where an indenting or unregistered  dealer negotiates transit sale. For ease of reference these two provisos are reproduced below –

“ Provided also that if the goods are directly sent to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and the person as the consignee, and that person shall take CENVAT credit on the basis of the registered dealer’s invoice:

Provided also that if the goods imported under the cover of a bill of entry are sent directly to buyer’s premises, the invoice issued by the importer shall mention that goods are sent directly from the place or port of import to the buyer’s premises. “

2.  Clarification has also been requested by the trade regarding continued applicability of circular no 96/7/95-CX dt 13-2-1995, 137/48/95-CX dt 18-7-1995 and 218/52/96-CX dt 4-6-1996, in so far as these circulars pertain to availment of credit on strength of original manufacturer’s invoice where a dealer including an indenting dealer has procured order and has arranged direct transport of the goods from the premises of the manufacturer to the premises of the consignee. Further, clarification has also been sought regarding change in the requirement of registration for dealers consequent upon amendment in the rules.  

3.     The issue involved has been examined. It is clarified that the purpose of inserting the third
and fourth provisos in sub-rule (2) of Rule 11 of CER is to allow an additional facility for direct transport of goods from the manufacturer or the importer to the consignee where the consignee avails Cenvat Credit on the basis of the Cenvatable invoice issued by the registered dealer or the registered importer. This facility obviates the need for the goods to be brought to the premises of the registered importer or the registered dealer for subsequent transport of the goods to the consignee.

4.   It is further clarified that the provisions of the circulars on the issues referred in Para 3 would continue to apply as no amendment has been made in rule 9 of the Cenvat Credit Rules, 2004 which prescribes the document on the basis of which Cenvat Credit can be availed. No amendments have been made regarding registration requirements also.

5.   Various specific issues referred to by the trade are clarified as follows –

(i)   Where a registered dealer negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. In such cases no Cenvatable invoice shall be issued by the registered dealer in favour of the consignee though commercial invoice can be issued. Where a registered dealer negotiates sale of goods from the total stock ordered on a manufacturer or an importer to multiple buyers and orders direct transportation of goods to the consignees and the manufacturer or the importer is willing to issue individual invoices for each sale in favour of the consignees for such individual sale, the same procedure shall apply.

(ii)  Where a registered dealer negotiates sale by splitting a consignment procured from a manufacturer or a registered importer and issues Cenvatable invoices for each of the sale, it would now be possible for the dealer to order direct transport of the consignments as per the individual sales to the consignee without bringing the goods to his godown. This would save time and transportation cost for the dealer adding to ease of doing business. This is a new facility which flows from the amended provisions. Procedure as prescribed in the third proviso of rule 11(2) shall be applicable in such case.

(iii) Where a un-registered dealer negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. As the dealer is not registered, there is no question of issuing any Cenvatable invoice by him . Such dealers as in the past can continue to be un-registered.

(iv) Where goods are sold by the registered importer to an end-user (say a manufacturer) who would avail credit on the basis of importer’s invoice and the goods are transported directly from the port or warehouse at the port to the buyer’s premises, the amendment prescribes that for such movement the factum of such direct transport to the buyer’s premises needs to be recorded in the invoice.

6. It may be noted that the new provisos are meant to improve the ease of doing business by providing an additional facility to the registered dealer or importer for direct dispatch of goods from the manufacturer to the consignee, when he is issuing Cenvatable invoice,. They do not withdraw any past facility. These amendments should therefore be harmoniously interpreted with the existing rules and circulars in conformity with the legal provisions, keeping the intention of the Government in mind. Difficulty faced, if any, should be brought to the notice of the Board. Hindi version would follow.

LPG gas subsidy is not taxable as it is for welfare

4:54 PM 0
LPG gas subsidy is not taxable as it is for welfare
Certain doubts have been raised in a section of the media about the applicability of the official amendment moved in the Finance Bill, 2015 in the Lok Sabha on 30th April, 2015 with respect to definition of ‘income’.

Sub-section (2) of section 145 provides that the Central Government may notify Income Computation and Disclosure Standards (ICDS) for any class of assessees or for any class of income. The Central Board of Direct Taxes (‘CBDT’) notified ICDS on 31.3.2015 vide Notification number S.O. 892 (E) after wide consultations with the stakeholders for which the draft was placed in the public domain.
The ICDS is applicable to persons having income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and following Mercantile System of Accounting. This is not applicable to individuals not having any income chargeable under the head “Profits and gains of business or profession” and receiving LPG subsidy or any other subsidy which is for the welfare of the individual. The Finance Bill, 2015 proposes to align the definition of Income with that provided in ICDS for this purpose. To restate the position, the provision in the Finance Bill, 2015, will not affect the LPG subsidy and other welfare subsidies received by individuals.

May 5, 2015

New RPU version 1.1 in java platform

5:41 PM 0
New RPU version 1.1 in java platform
Tin.nsdl has launched latest return preparation utility version 1.1 in java platform for regular statements from financial year 2007-08 and onward. Regular RPU version 4.3 is the latest but this rpu 1.1 in java platform is easy to use and incorporated with FVU version 4.6. There are many new features added in java based RPU version 1.1 which are as under.

NSDL e-TDS/TCS Return Preparation Utility in JAVA platform.
 Preparation of Regular TDS/TCS Statement(s) for Form 24Q, 26Q, 27Q & 27EQ pertaining to Financial Year 2007-08 onwards (for all quarters).

Quoting of PAN of responsible person for deducting/ collecting tax.

Quoting of AIN mandatory only if the TDS/TCS has been deposited by book entry i.e., through transfer voucher.

Quoting of BIN mandatory only for the statements pertaining to FY 2013-14 onwards.

Reduction in the applicable list of “Nature of Remittances” (Applicable in case of Form no. 27Q).

NSDL RPU is a freely downloadable utility.

Incorporation of latest File Validation Utility (FVU) version 4.6 (applicable for TDS/TCS statements pertaining to FY 2010-11 onwards) and FVU version 2.142 (applicable for TDS/TCS statements upto FY 2009-10).

Download Latest RPU version 1.1 in java platform
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