Today’s PT Capsule for the serious aspirant!
Tax Law for Unearthing Black Money
In the Union budget 2016 the government has come up with a scheme to open a one-time, four-month compliance window for domestic black money – holders. This gesture is intended to help them come clean by paying tax and penalty of 45 per cent.
It can be seen as a scheme for non compliant black money holder to become compliant. The limited-period compliance window will enable one to declare undisclosed income or income represented in the form of any asset, and clear up past tax transgressions by paying tax at 30 per cent, a surcharge of 7.5 per cent and a penalty of 7.5 per cent. This will add up to 45 per cent of the undisclosed income. The surcharge at 7.5 per cent will be called Krishi Kalyan surcharge, and the money thus raised will be used for agriculture and rural economy.
There will be no scrutiny or enquiry of money declared, either under the Income-Tax Act or the Wealth Tax Act. And the declarants will have immunity from prosecution. They will also get immunity from the Benami Transaction (Prohibition) Act, 1988, subject to certain terms. The compliance window, named Income Disclosure Scheme, will open on June 1. It will be open till September 20.
What is black money? – Black money is tax-evaded income. It can be earned both through legal and illegal means. Its legitimate source is that the income-earners do not reveal their whole income for tax purposes. For example, government doctors earning money by private practice even when they get non-practising allowance; teachers earning money through tuitions, examinations and book royalty and not including it in income-tax returns; advocates charging much higher fee than shown in their account books, and so forth.
Its illegitimate source is bribe, smuggling, black-marketing, selling commodities at prices higher than the controlled prices, taking pugree for house, shop, etc., selling house at a high premium price but showing it at much lower price in the account books, and so on.
What are instances of such schemes in the past? – Voluntary Disclosure of Income Scheme (VDIS) was an unconventional scheme launched by Central Board of Direct Taxes 18 June 1997.
It would give an opportunity to the income tax/ wealth tax defaulters to disclose their undisclosed income at the prevailing tax rates. This scheme would also ensure that the laws relating to economic offences will not be applicable for those defaulters. Over 350,000 people had disclosed their income and assets under this scheme, which bought revenue of more than Rs. 7000 crores to the exchequer.
Source: TheHindu, YourArticleLibrary
Some Important Legislative Initiatives from the Budget
1) The government stuck with its financial consolidation roadmap with fiscal deficit target of 3.5% of gross domestic product (GDP) for 2016-17, after achieving the 3.9% of GDP target in 2015-16.
Finance Minister has proposed the setting up of a committee to review the entire road map mandated by the Fiscal Responsibility and Budget Management Act of 2003 to study the possibility of having a target range instead of fixed numbers that would give the government the needed policy space to align a fiscal expansion or contraction with credit availability.
Analysis – There were some demands to loosen the fiscal deficit targets to provide a boost through public spending in a deflationary global environment. But the Finance Minister has stuck with rational spending.
2) The government proposed to amend the RBI Act for setting up of a Monetary Policy Committee (MPC) which will fix the benchmark interest rate of the central bank and set inflation targets.
Analysis – RBI has taken the role of inflation targeting. The target for 2016 is 6% which the RBI is all set to meet. But providing a statutory backing to the role with fix greater accountability on the part of RBI.
3) Government to give statutory status to Aadhar to provide legal backing to the ambitious project of direct cash transfer of the government.
Analysis – The statutory status will provide a legal foundation to Aadhaar for expanding its use for a range of developmental purposes. It has been suggested that all benefits, subsidies or services funded from the consolidated fund of India should be through Aadhaar platform.
Till date over 98 crore Aadhaar numbers have been generated. There is already a National Identification Authority of India Bill, 2010, pending in the Rajya Sabha.
4) Proposal for Amendment of Companies Act to register startups in one day. Would provide greater ease of doing business
Analysis – Start-ups have been known to create jobs and promote innovation in an economy, both of which are critical if India has to take a high growth trajectory.
Some Important new Cess from the Budget
Krishi Kalyan Cess – 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers.
Infrastructure cess – 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles.
However, three wheelers, electrically-operated vehicles, hybrid vehicles, hydrogen vehicles based on fuel cell technology would be exempt from the infrastructure levy.
Clean Energy Cess – levied on coal, lignite and peat renamed to â€˜Clean Environment Cessâ€™ and rate increased from 200 per tonne to 400 per tonne.
Oil Industries Development Cess – will be levied at the rate of 20 percent, instead of specific rate of Rs 4,500 per metric tonne. The amendment in the Oil Industry (Development) Act, 1974, will be effective from the date of assent to the Finance Bill, 2016.
In order to reduce multiplicity of taxes, associated cascading and to reduce cost of collection, abolishment of 13 cesses, levied by various ministries in which revenue collection is less than Rs 50 crore in a year.
While the Krishi Kalyan cess would make services more expensive, infrastructure cess would make cars costlier. Power producers, cement and metal manufacturers will bear the brunt of higher input costs as clean energy cess on coal stands doubled.
SLP for Setting up of National Court of Appeal
The Supreme court has admitted a Special Leave Petition that seeks to set up â€˜National Court of Appealâ€™ to hear routine appeals in civil and criminal matters from the High Courts. There has been a long standing debate on whether the apex court should be burdened with the responsibility of examining the correctness of every case decided by the High Courts, and whether it should not be allowed to devote its time entirely to settling questions of constitutional importance.
What is the resource problem Supreme court is facing? – Supreme court has been facing accumulation of backlog cases. Figuring out cases which require a substantial question of law is another issue. Another concern relates the oft-cited difficulties of litigants from different parts of the country for whom New Delhi may be too far.
The solutions put forward include dividing the Supreme Court into a â€˜Constitutional Divisionâ€™ and a â€˜Legal Divisionâ€™; having the principal Constitution Bench in Delhi and creating four regional Benches to hear appeals on High Court orders; and, third, creating a National Court of Appeal that will have four â€˜Cassation Benchesâ€™ for the adjudication of non-constitutional matters.
But successive Chief Justices of India have been against the establishment of Benches outside Delhi. Courts of Cassation are courts of last resort to reverse decisions of lower courts.
Sharing its SLP power – A key issue to be settled is whether it will be advisable for the highest court to share with a possibly inferior court of appeal its power under Article 136 to grant special leave to appeal on High Court orders.
Also, in recent times the Supreme Court has been conscious of its role as the interpreter of the Constitution, and holds a sitting of a Constitution Bench virtually every day. Even within the present structure, regional Benches may help address the problem of access to justice but not that of accumulation of cases. The idea of a National Court of Appeal requires consideration, but in a manner that would not undermine the undoubted authority of the Supreme Court of India.
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