Govt bets on new tax code to bring back black money
June, 07th 2011
The DTC is proposed to be implemented from April next year
With the growing pressure for steps to tackle unaccounted income hidden abroad, the government has identified the proposed Direct Taxes Code (DTC) as a significant tool in this regard.
The DTC is proposed to be implemented from April next year. A comprehensive strategy shared by the finance ministry at the highest level of the government last week outlines the DTC provisions to help tackle this problem.
According to the plan, for the purpose of levy of wealth tax, taxable assets have been defined to include deposits in banks outside India in the case of individuals, unreported bank deposits in the case of others, interest in a foreign trust or any other entity (other than a foreign company) and any equity or preferential shares held in a controlled foreign company.
Further, the General Anti-Avoidance Rule (GAAR) has been incorporated to deal with aggressive tax planning devises used to circumvent tax laws. Specific Controlled Foreign Company (CFC) rules have been incorporated to bring into the tax net all passive income earned by residents from substantial shareholding in companies situated in low tax jurisdictions.
A reporting requirement has also been introduced obliging resident assesses to furnish details of their investment and interest in any entity outside India.
As part of its ongoing exercise to gather information on black money from other countries, the income tax department has collected diverse information from countries with which India has signed Double Tax Avoidance Agreements of details of payments received by Indian citizens in various countries, besides information of LGT accounts.
The finance ministry says this information is being processed.
The ministry has also made around 175 requests to the treaty partners on specific taxpayers in 2010-11. It is also considering changes in transfer pricing norms to meet the challenges posed by the growing intangible economy and complex cost sharing arrangements.