Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: TDS :: cpt :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: articles on VAT and GST in India :: VAT RATES :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment
 
 
Indirect Tax »
 Only genuine farm income must be exempt from tax’
 CBEC rechristened Central Board of Indirect Taxes and Customs
 Income tax department to challenge ITAT relief to Cairn Energy in HC
 5 crucial ways how doing business will be different under GST
 What is the lowdown on the Goods and Services Tax
 Ineligible Input Tax Credit Under Gst Regime
 What is GST, how is it different from now: Decoding the indirect tax regime
 Indirect tax collection can fall short of FY’17 target
 GST in last lap: What's in it for businesses, firms and most importantly, you?
 Indirect tax collection: All you want to know about stuck cases and rejected appeals
 Government achieves revised tax collection target

Income Tax sleuths can use it to question pay packages that help in reducing tax
April, 23rd 2012

Tax avoidance rules proposed in the budget, whose impact on foreign investors has caused an uproar, can potentially also be used to target individual taxpayers.

Tax authorities could use the rules, known as the General Anti-Avoidance Rules, or GAAR, to question the manner in which salaries have been structured if they come to the conclusion that the intent is to reduce tax outgo, industry experts said.

The anti-avoidance rules, part of Budget 2012, can be invoked to deny tax benefit if officials feel the sole purpose of an arrangement is to save tax. They apply to every resident who is a taxpayer in India, including individuals, Indian companies or foreign investors, said tax experts.

Income-tax officers can thus disallow conveyance claims, car lease arrangements or book allowances by dubbing them arrangements to avoid tax, and even levy interest & penalty.

"There is no carve out so GAAR will apply to anyone whether individual, partnership or a firm. If any structure or arrangement is viewed as synthetic or motivated for tax purpose, GAAR can be invoked," said Shefali Goradia, partner, BMR Advisors.

Many Indian companies design compensation packages to include cash reimbursements for various expenditure. Many salaries include reimbursement for conveyance, payments for books, and arrangements in which cars are leased by the company and used by the employee.

Experts said the tax department could come to the conclusion that the sole purpose of these structures is to reduce tax liability of employees and there is no economic benefit from these arrangements.

Car leases, which are widely used, are particularly at risk as the vehicle is effectively owned by the employee though it remains on the company's books. The employee gets to save on some tax as the loan is deducted from his salary.

The only silver lining is that this will apply from the fiscal year beginning April 1, 2012, and past claims will not be opened.

"Introduction of GAAR provisions could also have an unintended impact on individuals enjoying tax breaks under perquisite rules," said Pranay Bhatia, associate partner, Economic Law Practice.

An income-tax official said these rules were aimed at deterring avoidance by companies so salaried taxpayers had nothing to fear. But tax experts said the I-T department needs to frame rules carefully as these could result in harassment.

"GAAR, if allowed to be applied indiscriminately, may impact revenue department's trust-building objective. Therefore, it requires not only careful and precise guidelines but also a good framework for identifying high-risk cases among individuals," said Garg.

HR experts said companies will be forced to tweak compensation packages. "Tax windows have been progressively narrowing...companies' approach would be to move to simple compensation structures that don't get them on the wrong side of the law," said E Balaji, MD & CEO, Ma Foi Randstad India.

Tax officials could also go after companies that facilitate such arrangements rather than picking on individuals who benefit from such arrangements. "GAAR would be relevant in these cases as well, though companies are now moving to flat compensation structures," said Rahul Garg, leader (direct tax), PwC India.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions