Vodafone vs Income Tax Dept, India

Vodafone is fighting a tax bill in India, which tax authorities say is more than $2.7 bn including interest.

Vodafone said on Friday it had filed a writ with the Bombay High Court defending itself against a new step by Indian tax authorities to treat the company as an agent of the seller in its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country.

Vodafone is fighting a tax bill in India, which tax authorities say is more than 120 billion rupees ($2.7 billion) including interest, on the $11.1 billion deal.

Tax authorities have said Vodafone's deal was liable for tax because most of the assets were based in India and buyers must withhold capital gains tax liabilities and pay them to the government. Vodafone has said Indian law did not require it to deduct tax and that the tax is usually paid by the seller.

In a statement on Friday, Vodafone said the tax office has now initiated a "different process", treating Vodafone as an agent of the seller and termed it an "unusual development."

Vodafone has appealed to the Supreme Court over the tax authorities' jurisdiction to tax the deal, after the Bombay High Court dismissed its petition and ruled that the tax office had jurisdiction.

The Supreme Court will set a date on Oct 25 for hearing Vodafone's appeal challenging the lower court ruling, the world's largest telecommunications operator by revenue said last month.

"Vodafone contends that the key issue of jurisdiction (as to whether the Indian tax office can tax the transfer of a foreign company's shares between two non-residents) is currently under appeal to the Supreme Court of India," the company said in Friday's statement.

"Hence any action which seeks to treat Vodafone as an 'agent' of Hutchison is misguided and premature," it said.

The Supreme Court had asked the tax office to determine potential tax liability by Oct 25, Vodafone said last month.

The company reiterated on Friday that it believed it had no tax liability on the transaction.

Direct Tax Code

The much talked about Direct Tax Code (DTC) bill was introduced today in the parliament by the finance minister Pranab Mukherjee. DTC bill was cleared by the cabinet and will know be subjected to the parliamentary committee for scrutiny. The scrutiny and replacement of the current tax norms is the need of the hour as India is marching to be the third largest economy. The purpose of the bill will be to modernise India’s direct tax laws, mainly its income tax act which is now nearly 50 years old, the government through the bill seeks to simply procedural laws and build a investor friendly atmosphere. It aims at phasing out multiple tax exemptions and deductions. The DTC bill proposed to raise the exemption limit on income tax from the current Rs1.6 (for male)lakh to Rs2 lakh. The bill seeks to fix corporate tax at the current 30% but without surcharge and cess. With surcharge and cess, the current tax liability on corporate comes to over 33%. The legislation also proposes to increase MAT from 18% to 20% of book profit of a company. It seeks to levy dividend distribution tax at 15%. The bill, introduced by finance ministry, seeks to widen income tax slabs to levy 10% rate on income between Rs2 lakh to 5 lakh, 20% on between Rs5-10 lakh and 30% above Rs10 lakh.

DTC bill was cleared by the cabinet and will know be subjected to the parliamentary committee for scrutiny. The legislation is expected to be taken up for discussion when the parliament reconvenes for the winter session in November. ‘The tax norm is also expected to update tax rates and administration for foreign institutional investors, for whom India is a top destination.

TAX Consultant

A person who is specialist in tax laws and is an expert in financial matters is known as a tax consultant. In some nations tax consultants are required to verify the balance sheets of firms so that it doesn’t cross certain limit.
Tax consultants are required for following
reasons:

• Teach and give basics about tax
• Help individuals to minimize taxation
  
• Accounting to reduce the tax of a person.
• In some cases the tax knowledge about the salaried employee
• Tax on clubbing of income

There are various categories of tax consultants. Depending on the tax applied on various things various tax consultants or tax consultant firms are available. The various kind of tax consultants are as follows:

1. Direct tax consultant:

If a person pays a certain amount to the government directly which was imposed on him then that tax is called direct tax. The various type of direct tax is income tax, corporate tax, transfer tax, gift tax, etc. This is a compulsion for all citizens because the amount paid is used by the residential government. The various tax consultants help in the calculations and tax planning for this kind of tax.

2. Indirect tax consultant:

An indirect tax is collected by the intermediary from a person who has used the services of the intermediary. The middleman later does the formality of filing the tax return and submits to government. The examples of indirect tax are Sales tax, Value added tax (VAT) or goods or service tax. There is no need for consultancy if there is normal hotel bill or small super markets or shopping bills but it is very important for big companies who takes services from other firms to have an Indirect tax planner.

These are further classified as:

1. Income tax consultant:

It is applied to an individual, corporations or other entities for their financial incomes. This is direct tax. The various consultants who help in income tax planning are:

2. Corporate tax consultant:

The income tax applied to a company, firm or a corporation is known as corporate tax. It is basically applied on profit made by the company.

3. Sales/Service tax consultant:

When a person uses a facility or purchase goods sales tax is applied. This tax can be included in the tax-inclusive price or else tax exclusive and later a person has to pay. The consultants in this case are usually for the sales concerned with a company or else the services used by company not for small sales or services i.e. if an individual has shop or visited hotel or bought an item then you don’t need a consultant. The various consultancies are:

4. VAT consultant:

Value added tax avoids the merger effects of the sales tax and this is done by adding the tax only at the stages of production.

Save Tax with Your Relationship!

A child and his parents share a unique and natural bond, across cultures, the world over. Parents take care of a child until she/he grows up and when the parents grow old the child takes care of them, thus making the cycle complete.

Even income-tax laws recognise this reciprocity and provides for tax benefits in respect of expenses incurred in taking mutual care.
In this article, I have touched upon some of the important provisions of the present income-tax laws affecting tax treatment of the amount spent while taking care of each other. For the purpose of claiming these benefits, the term ‘child’ also covers the ‘step’ child as well as the ‘adopted’ child.

Benefits available for the expenses incurred on bringing up a child.

* Leave Travel Assistance:
Any amount received from one’s employer as travel concession or assistance, popularly known as leave travel allowance (LTA), which is spent on journey undertaken with your child and spouse, siblings and parents is exempt from income tax two times in a block of four years is exempt from income tax.

* Education allowance:
Education allowance received from your employer is exempt up to Rs 100 per month for a maximum of two children. Moreover, any hostel allowance received for your children from your employer is exempt up to Rs 300 per month per child.

* Amount paid for life insurance, etc:
The Income Tax Act provides for an aggregate deduction of Rs 1 lakh from your income in respect of the following payments made for the benefit of your child under Section 80 C together with other amounts paid by you.

i. Any amount paid towards life insurance premium on the life of any child;
ii. Any amount paid for the purpose of buying deferred annuity plan on the life of any child;
iii. Any amount deducted from the salary of a government employee towards securing deferred annuity or for making provision for your child up to 20% of your salary;
iv. Any contribution paid for buying unit linked insurance plans in the name of your child;
v. Any amount paid towards tuition fee to any university, college, and school or to education institution located in India in respect of two children for the purpose of full-time education;
vi. Contribution towards Public Provident Fund account in the name of any child.

* Amount spent for taking medical treatment and health
insurance of your child:
The Income Tax Act also allows you a deduction up to Rs 15,000 from your income in respect of any amount paid for medical insurance for yourself together with your spouse and your dependent children u/s 80 D.

You can also claim deductions in respect of expenses incurred for medical treatment, rehabilitation or training of a child with special needs or for paying for life insurance in order to provide for maintenance of a child with special needs. The deduction available is for Rs 50,000. However, if the child is suffering from severe disability, the claim can go up to Rs 1,00,000.

In addition to the cost of purchasing medical health insurance and treatment of a child with special needs, the income-tax laws also allow you deduction in respect of amounts spent for medical treatment of your child for specified diseases. Deduction is available for up to Rs 40,000 under Section 80DDB

* Amounts paid in respect of interest on education loan for your child:
Income-tax laws also allow you a deduction of interest paid on a loan taken from specified institutions for your child, for pursuing higher education. This deduction, unlike other deductions mentioned above, is available without any monetary limits. Hence, the entire interest paid by you in respect of a loan taken by you for education of your child is tax deductible to you.

Now, for the payback.
Now your child is taking care of you and he too is getting tax deduction benefits for taking care of his parents.

Any amount of LTA money received from your employer for the purpose of travel of your dependent parents with you is exempt from income tax subject to certain conditions.

The major cost to be incurred by an earning child on his parents in addition to the day-to-day expenses is the cost in respect of medical care. The Income Tax Act provides for deductions in respect of various items related to medical expenses.

First of all, the Income Tax Act provides for a separate deduction in respect of amounts paid in respect of buying medical insurance for the parent or parents for Rs 15,000. This amount of deduction goes up to Rs 20,000 in case the parents are senior citizens.

The Income Tax Act also allows deduction in respect of any expenditure incurred on medical treatment, training and rehabilitation of parents with disability. Deduction is available for up to Rs 50,000. However, in case a parent suffers from severe disability, the deduction claimed can be up to Rs 1 lakh.

The tax laws also provide for deduction up to Rs 40,000 for medical treatment of parents who are suffering from specified diseases. The deduction goes up to Rs 60,000 in case the parents are senior citizens.

From the above discussion, it is clear that the income-tax laws recognize the need to support the parents as well as the child and grant tax benefits accordingly. The provisions of the proposed Direct Tax Code have not been discussed here since they are proposed to be introduced only from April 1, 2012 and may undergo a lot of changes by then.

Easy guide to filing your income tax returns!

It’s that time of the year again when all your income for the current financial year is in and you need to file your income tax returns. With July 31 just a few days away, here’s how you can do it without any hassles.

It is time to file your income tax returns. Filing of tax returns is compulsory for everyone whose gross total income exceeds the basic exemption limit, which is Rs 1.90 lakhs for women below 65 years of age, Rs 2.40 lakhs for senior citizens and Rs 1.60 lakhs for any other individual, for the financial year 2009-10 (for income earned between April 2009 and March 2010). The due date for filing the tax returns for financial year 2009-10 in case of individual tax payers is July 31, 2010. The current tax returns don't require any documents to be annexed.

The Income Tax Department has opened special counters for the purpose at Gayatri Vihar, Palace Grounds. The counters will remain open until July 31, the last day for filing returns. Walk in to the Palace Grounds and get all the assistance you need with your income tax returns, as the special counters will operate between 9.30 am and 5.30 pm. This time, the IT department is all set to put up nearly 90 counters at Palace Grounds.

Nearly 200 personnel from the department will be manning these counters. The idea behind this effort is that all those who seek help with filing returns find all they need at the location; they will then not have to seek anything beyond these premises — help desks, IT return forms, PAN verification counters, kiosks from where you can photocopy any documents that you need copies of — these will all be available to those seeking to utilize these services. But in case you plan to do it yourself, here’s what you need to know:-

Why should we file IT returns?
There is a misconception among some salaried individuals that because the employer has deduced tax at source, they are not required to file tax returns. Even though tax has been deduced and there is no other source of income, or liability to pay tax, you have to file income tax returns. It is necessary to file income-tax returns if the total income, before allowing any deduction, exceeds the exemption limit.

Even if your income is below the exemption limit, which is bound to happen at the beginning of one’s career, filing income tax returns will help in the documentation process if you are taking a loan or an insurance policy or when you are applying for a visa.

What documents are required?
All you need is Form 16 and 16A along with the summary of all your bank accounts. And of course your PAN Card number.

Which form to choose?
There are eight Indian Income Tax Return (ITR) forms. Depending on the various streams of income you earn, you have to select the return form accordingly. E.g. If you have income from salary, pension and interest income, then ITR-1 is the form for you. If you have capital gains or rental income or you’re paying off a home loan in addition to interest income and salary income, then you need to fill ITR-2. Make sure you select an appropriate form after taking into consideration, the flow of income from various streams.

How to file your returns?
There are two possible ways to file your returns—online and offline.

Though many are contemplating whether it’s worthwhile shifting from the old fashioned method of filing returns physically to a modern method i.e. e-filing which was introduced in the assessment year 2006-07, but the fact remains that with the last day for filing Income Tax returns coming close, whatever means you choose—offline or online, what matters is that it is done before its too late.

What is E-Filing of returns?
It means filing your Income tax returns electronically through the internet. It’s a simple, easy and convenient process. You can log on to www.incometaxindia.gov.in and file returns for free. However the process involved is complicated, which might be confusing for a lay man as it includes downloading of an XML file.

To save you of this complication, many websites like www.taxsmile.com, today offer easier online tax filing services which do not involve any downloads, but they do charge you a minimal amount varying from Rs 250-400.

You also can go to your Chartered Accountant and submit all required documents, paying a consultation fee, which could go up to as high as Rs 2500, varying from CA to CA. However, the online mode is said to be a faster, quicker and easier way to file your returns. The return form, along with copies of necessary supporting documents, has to be filed at the appropriate income tax office or special counters set up for this purpose by Income Tax Department of India.

E-filing of tax returns made mandatory for corporates

The Finance Ministry on Monday made it mandatory for all companies to file income tax returns electronically with digital signatures, a move that will facilitate faster filing of I-T returns by India. The ministry indicated that the online filing of income tax returns could touch one crore-mark in the current financial year from 55 lakh in the last fiscal year.

All business entities and Hindu undivided families (HUFs) with a business income of over Rs. 40 lakh per annum will also be required to mandatorily file income tax returns in the electronic format, but the digital signatures will not be mandatory. Under the Income Tax Act, the individuals and HUFs are required to get their accounts audited if the turnover or gross receipts from business exceeds Rs. 40 lakh (Rs. 60 lakh from assessment year 2011-12) or receipts from the profession exceeds Rs. 10 lakh (Rs. 15 lakh from assessment year 2011-12).

Although, e-filing of income tax returns has been getting momentum lately, a large number of Indian masses are unaware of its benefits. The best advantages of filing your income tax returns online is that you can file your returns anytime, anywhere, away from the prying eyes of others and within the confines of your own home.

At the same time you need to ensure you protect your personal information online as the identity theft rate related to tax return filing rises in keeping with the increasing popularity of online tax filing. The web links you get on your emain can be dangerous as the fraud links can steal your sensitive personal information, from PAN numbers to credit card account information. If you need to log in, do so independently and through the log-in Web page, not by clicking on a link. It should be kept in mind that the Income Tax Department will never request personal information via fax.

There are many web sites which do provide this service today. Taxsmile.com is one of such sties which offers free tax preparation to people up to 3 lakhs of income. People can then review their tax calculations instantly and proceed with filing their returns online without need to visit the income tax office. Taxsmile.com covers almost complete set of deductions allowed by income tax department so that tax payers who have invested in any approved schemes for tax savings can get the benefit of the same and prepare accurate returns. As part of their corporate social responsibility.

The government had introduced the system for mandatory e-filing of income tax returns by corporates from assessment year 2006-07. The due date for submitting income tax returns for assessment year 2010-11 is July 31, 2010.

Filing Return made a Little Easier

Inauguration of Income Tax Office at Raghunathgunj, Jangipur,
District Murshidabad, West Bengal by Honorable Union Finance Minister Shri Pranab Mukherjee on 10.07.2010.