CBDT delays relief to taxpayers facing double taxation in India - Review of its recent Circular

The Pandemic induced strict lockdowns and border closures have given rise to anxiety and confusion amongst taxpayers regarding their tax residency position in India. The Indian Government recognizes the restrictions that the Pandemic has imposed on individuals’ movement to and from India. As a result, many people have been forced to spend more time in India than originally anticipated – thereby creating expensive changes in their residency and income tax status.
Continue Reading CBDT delays relief to taxpayers facing double taxation in India: Review of its recent Circular

Your mother should formally request the society for documents
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The Private Client team at Cyril Amarchand Mangaldas shares their comments and opinions shared in an article in the  following Q&A which was published by the Mint Newspaper on 03rd March, 2021 and the online edition of the same can be found here.

We are three brothers who inherited a freehold property in 2003 through a duly registered will. We got the property mutated in our joint names with the municipal authority for payment of annual property tax, jointly. We decided to rebuild it into three dwelling units. The Municipal Corporation of Delhi (MCD) sanctioned these plans, and we have obtained the completion certificate. We entered into written family agreements for the partition of our shares by draw of lots. However, some disputes arose before its enforcement, which were settled through the mediation and reconciliation centre (MRC) of the Delhi High Court. This memorandum of understanding (MoU) is the agreed settled ownership. We got our shares registered individually with the MCD and have been paying property tax.

To get our rights of individual titles, do we have to get it registered with the sub-registrar? If so, is stamp duty payable?

Where would the ownership records be available after our deaths if the property is not registered with the sub-registrar, but the registration has been done with the municipality?

—Subhash Kumar


Continue Reading Your mother should formally request the society for documents

 TO TRUST OR NOT TRUST - MUMBAI ITAT AFFIRMS EXCLUSION OF CORPUS FUND OF OFFSHORE TRUST FROM INDIAN WEALTH TAX

Background:

Creation of private trusts have been considered as a popular method by rich families for succession planning. Trusts are a legal arrangement whereby assets are placed into the care of an individual who manages them for the benefit of someone else. Trust can be further classified into specific or discretionary based on the scheme of distribution of the trust fund. However, in recent times, offshore trust structures are suspected to be more commonly used as a means of money laundering than lawful tax planning. Consequently, the Income-tax Department has been unveiling various private offshore trusts and imposing tax liability on the beneficiary owners. This has led to an increase in reassessment proceedings and dissatisfaction among the residents for being subjected to wrongful tax liability. Recently, the Mumbai Income-tax Appellate Tribunal (“ITAT”) provided relief to Mr. Yashovardhan Birla and held that offshore trusts are considered to be acceptable form of tax planning and a beneficiary of an offshore discretionary trust cannot be taxed on the entire corpus fund merely because he has been provided with the power to appoint/ reappoint trustee. The case is discussed in detail below:
Continue Reading To Trust Or Not Trust: Mumbai ITAT affirms exclusion of corpus fund of Offshore Trust From Indian Wealth Tax

Primacy of family settlements upheld

Family settlements and ensuing documentation have been a subject matter of litigation for various reasons. One such litigious issue is whether the documents pertaining to family settlements are required to be registered under the Registration Act, 1908 (“Act”). If a document, which was otherwise required to be compulsorily registered, has not been registered, then as per Section 49 of the Act, such document would not affect any immovable property comprised therein, or confer any power to adopt, or be received as an admissible evidence of any transaction recorded in the document. The consequential issue that has evolved is whether the documents recording family arrangements are required to be registered. Recently, the Supreme Court (“SC”), in the case of Ravinder Kaur Grewal & Others. v. Manjit Kaur & Ors.,[1] has held that a memorandum of family settlement, which merely records the terms of a family settlement already acted upon by the concerned parties, is not required to be registered.
Continue Reading Primacy of Family Settlements Upheld

I’m leaving on a Jet Plane (or maybe not!) CBDT clarifies tax residency for people trapped in India

John Denver famously sang these lyrics in his famous love ballad, “Leaving on a Jet Plane”:

“’Cause I’m leavin’ on a jet plane

Don’t know when I’ll be back again

Oh babe, I hate to go”

When John sang these iconic words in 1966, when flying was quite the luxury, he could not even have dreamed how aptly they can be applied to the terrifying ‘Severe Acute Respiratory Syndrome Coronavirus-2’ (“COVID-19”) virus. With India going into a harsh and strictly enforced total lockdown from March end till May 17, 2020 (likely to be substantially extended), all airports have been shut and flights grounded. No one is going anywhere, whether they like it or not. No emotional love ballads will be sung, no jet planes will fly off into the sunset. A few repatriation flights have started to bring Indians stuck overseas back to India as part of the world’s largest peacetime repatriation effort, and allow some foreigners to leave India for their home countries – but as of now it is still a trickle.
Continue Reading I’m leaving on a Jet Plane (or maybe not!): CBDT clarifies tax residency for people trapped in India

 India’s Finance Act 2020, COVID–19 & HNIs - An Update

The Finance Bill, 2020 (“Bill”) was presented as the Union Budget on February 1, 2020 (“Budget”) and then introduced in the Lower House of Parliament (Lok Sabha) – it was finally passed on March 23, 2020 with certain key amendments (“Amendment”). Interestingly, this was passed without any discussions in Parliament and received the presidential assent on March 27. Accordingly, the same will come into effect from April 1, 2020 (“Finance Act”).

The Finance Act needs to be seen in light of the ongoing COVID-19 pandemic being played out in India. As India undergoes a 21-day lockdown, post passing of the Amendment, the government is undertaking pro-active measures by way of press conferences to address the pressing needs of the society. To begin with, the government announced an extension of various statutory compliances for taxpayers (discussed below). Next, the Finance Minister (“FM”) announced a COVID-19 relief package for the poor, which primarily covers food security and direct cash transfers to them. Lastly, on March 27, Reserve Bank of India (“RBI”) Governor, Shaktikanta Das slashed the key lending rate by 75 basis points in an emergency move, to counter the economic fallout of the said lockdown. The RBI also permitted all commercial banks and lending institutions to allow a 3-month moratorium on loans. “Banks should do all they can to keep credit flowing,” Mr Das said.
Continue Reading India’s Finance Act 2020, COVID–19 & HNIs: An Update

Prosecution under Black Money Act for inherited foreign bank accounts

The scourge of ‘black money’ has been a persistent issue for India, becoming a major political issue in the recent past. The problem of black money leads to challenges on multiple fronts, greatest of them being denial of revenue to the Government. The parallel economy created by black money deprives the government of its due share of individual income tax, which in turn leads to reduced funds available for much needed government spending and stimulus. Socially, the problem of black money gives rise to further corruption and enhanced class inequality.

Since coming to power in 2014, the current Government has taken up the issue of black money as a major point of reform and has been gradually escalating its efforts to bring black money, both in India and abroad, to tax. Some of the major measures include establishing the multilateral mechanism for Automatic Exchange of Information, information exchange mechanisms with various countries under the respective tax treaties, the demonetisation drive, enactment of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BM Act) and the Fugitive Economic Offenders Act, 2018.
Continue Reading Prosecution Under Black Money Act for Inherited Foreign Bank Accounts

Over the past few years, many Indian business families have established estate planning structures, many of which comprise one or more family trusts. The main driver for these structures would have been tax driven considerations. Under the recent Finance Bill, 2017 (Finance Bill), there was a key amendment proposed to the Income-tax Act, 1961 (IT Act), which if passed would have had a significant impact on existing and future estate planning structures – by way of a ‘gift tax’ in respect of assets received by taxpayers without consideration or for inadequate consideration (Proposed Amendment).

Subsequently, the Proposed Amendment has been further amended by the Finance Act, 2017, as passed by the Parliament on March 30th, 2017 (Finance Act). In this article, we discuss the said amendment to the gift tax regime.

Under the IT Act, gifts received by individuals and Hindu Undivided Families (HUFs), were taxed, subject to tax certain conditions and exceptions. However, other tax payers, such as unlisted companies, partnership firms and limited liability partnerships were not subject to gift tax, except if they receive shares of unlisted companies without consideration or for inadequate consideration. However, certain exceptions, namely receipts from relatives, gifts on occasion of marriage, etc had been retained.

In order to remove this disparity, the Finance Act provided that the ‘gift tax’ regime shall apply equally to all tax payers post April 1st, 2017.


Continue Reading Update on Finance Act, 2017: A lucky escape for Trusts

On February 1st, 2017, the Indian Finance Minister, Mr. Arun Jaitley, presented the Government of India’s annual financial statement for 2017-18, commonly referred to as the Union Budget. As is tradition, the Budget was accompanied by proposals to amend the direct tax regime contained in the Indian Income-tax Act, 1961 (IT Act).

Two proposed amendments, in particular, will cause considerable angst to estate practitioners across the country as they are likely to have a significant impact on estate planning structures commonly used in India. Ultimately, it will be Indian families looking at undertaking their succession planning, who will suffer when dealing with the consequences of such amendments.

The first proposed amendment relates to a ‘gift tax’ in respect of assets received by taxpayers (assessees) without consideration or for inadequate consideration. The other pertains to an ‘additional dividend tax’ on dividend income received from companies in which the taxpayer holds shares.

Notably, neither of these proposed amendments introduces a new levy. Instead, they attempt to plug gaps in the IT Act, which presently exclude certain assessees from the ambit of existing taxes. But if these proposed amendments are passed in their current form – as it is likely they will be – they are expected to considerably reduce the fiscal efficiency, and consequently attractiveness, of trusts as estate planning tools.
Continue Reading Union Budget 2017: Impact On Estate Planning In India

During their electoral campaign in 2014, Narendra Modi and the Bharatiya Janata Party promised to ‘bring back’ black money stashed abroad within 100 days of coming to power. Though almost halfway through Modi’s term, this promise remained unfulfilled, with the Government’s efforts to address the issue of black money resulting in only occasional big bang actions. These efforts have ranged from setting up a ‘special investigation team’ for probing the problem of black money, to passing stringent anti black money legislation, and also the opening of two voluntary (but narrow) disclosure windows in relation to undisclosed foreign and domestic assets respectively. Actions also included increased scrutiny of filings, by the introduction of ‘annual information returns’ for high value transactions, and the disclosure of ‘aadhaar number’ and passport number in income tax returns. Our May 2016 blog article took you through the problem of black money and India’s response to the same.

However, the sudden decision to demonetise India’s highest-denomination currency notes took the entire nation by surprise. Since midnight on November 8th, 2016, notes in denominations of ₹500 and ₹1000 are no longer legal tender and have been withdrawn. The bold step taken by the Government has had not only financial, but also social and legal repercussions for citizens. This surgical strike against black money hoarders has plunged into fear and uncertainty millions of honest taxpayers and common citizens holding cash savings. Pursuant to the demonetization scheme, the Indian banking system is witnessing the deposit of large sums of unaccounted and untaxed money; which some foresee, may be diverted towards welfare schemes and used to inject more liquidity into the lending system. Also, as many citizens are in possession of huge amounts of undeclared and untaxed cash reserves, they are struggling to find legal ways to convert the same into the new currency, and yet escape scrutiny and surveillance by the authorities.
Continue Reading New Taxation Amendment Bill: Last Chance for Cash Hoarders to Come Clean