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Gifts upto Rs. 50,000 from employer to employee exempted from GST

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GST on gifts

SHIMLA– Gifts and perquisites supplied by companies to their employees will be taxed under Goods Service Tax, informed the Finance Ministry of India. The slab for exemption has been decided at Rs 50,000 per year. In simple words gifts upto Rs. 50,000 per year from an employer to his employee will be outside the ambit of GST. However, gifts of value more than Rs 50,000 made without consideration will be subject to GST, when made in the course or furtherance of business, said the statement released by Ministry.

What Constitutes a Gift?

Gift has not been defined in the GST law. In common parlance, gift is made without consideration, is voluntary in nature and is made occasionally. “It cannot be demanded as a matter of right by the employee and the employee cannot move a court of law for obtaining a gift”, said the ministry.

Taxation of Perquisites

Another issue is the taxation of perquisites. Services by an employee to the employer in the course of or in relation to his employment are outside the scope of GST (neither supply of goods or supply of services).
The supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee will not be subjected to GST.

Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness centre [section 17 (5) (b) (ii)].

If such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer.

The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C).

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Nation

Trouble is brewing in the financial sector in India

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rouble is brewing in the financial sector in India

Shimla- All is not well in the financial sector in India. For the past few years, the  financial sector in India has been in the news for all the wrong reasons; be it the loan given to the liquor baron Vijay Malaya; the revelation of  Nirav Modi saga; ever mounting NPA amount in the public sector banks; payment default by  Infrastructure Leasing & Financial Services  (IL&FS); for weeks the RBI and the Government were at  the loggerheads- that culminated with the infelicitous resign of the Governor prior to his completion of term; or be it woes the various private sectors banks like ICICI, Bandhan Bank, Kotak  Mahindra Bank or Yes bank are facing.

All these incidents are not only disconcerting but can have a preponderant impact on the financial markets. Off late, banks stocks have been on the downslide because of the uncertainty and pessimism caused in the market by the series of such unwanted events. There have been rumors of liquidity crunch in the market for some time now, the credit growth has been bleak, impacting the investment and hence job creation. 

After the series of payment default by the Infrastructure Leasing & Financial Services (IL&FS), the Modus Operandi of non-banking financial companies in India is under serious scrutiny. The systematic risk associated with shadow banking in India might require a major relook. 

RBI has put 11 Public Sector banks under Prompt Corrective Action framework, and the majority of them are running in losses hence requiring a massive capital infusion. The problem of NPA is far from over in Public Sector Banks. 

The trouble with the private sectors banks will capitulate the demand for privatization of Public Sector banks, as these incidents have proved ownership of banks is not the root cause of the problems of Public Sector banks; moreover, these incidents proved private sector banks are not immune to troubles and changing ownership will not help much, as far as the problems of Public Sector banks are concerned. 

All this will have a bearing on India’s worldwide credit rating too, adversely affecting the investment ecosystem required for strong and stable economic growth. 

All this does not augur well for India’s development. The financial sector plays a critical role in the development of any nation. To reap the benefit of the economic potential, a robust and healthy financial sector with strong fundamental is required, along with an independent and accountable Central banker coalesced with a fair financial market regulator. 

At the moment there is a lot to cogitate for us. Our image, worldwide, has taken a dent, it needs to be restored. We cannot persist with the beleaguered financial system for too long. The financial sector is full of various risks, the key, however, is to infer the rumblings early and prepare to minimize such risks. 

We have a serious problem in our hands and we must act fast. If we don’t act in time, the problem may exacerbate further. And our Lehman Brother moment may not be far if we don’t manage these conspicuous risks. For a stable and sustainable growth, we need to put an end to these troubles brewing in the financial sector. It’s high time.

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Interim Budget 2019-20: Full tax rebate on Income upto Rs 5 Lakh Under Section 87A

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Income Tax reduction in budget 2019-2020

New Delhi- Individuals with yearly income up to Rs 5 lakh will get full tax rebate under section 87A, the Union Minister for Finance, Corporate Affairs, Railways & Coal, Piyush Goyal informed while presenting the Interim Budget 2019-20 in Parliament today.

In the Finance Bill, 2019 the maximum amount of tax rebate under section 87A of the Income Tax Act has been proposed to increase to Rs 12,500 from the existing Rs 2,500. This proposed tax rebate will be admissible to taxpayers having total income up to Rs 5 lakh instead of current Rs 3.5 lakh 

As a result, the Finance Minister added that persons having gross income up to Rs. 6.50 lakhs may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc. With additional deductions such as interest on a home loan up to Rs.2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax, Goyal said.

If your net taxable income after availing all the deductions under section 80C to 80U of the Income tax act does not exceed Rs 5 lakh, then you will not be required to pay any tax. However, if your net taxable income (after availing deductions under section 80C to 80U), exceeds Rs 5 lakh then taxes will be calculated as per the current tax structure. 

says the Economic Times explaining the decision

 STANDARD DEDUCTIONS RAISED

For salaried persons, Standard Deduction is being raised from the current Rs.40, 000 to Rs.50,000. This will provide an additional tax benefit of Rs.4, 700 crores to more than 3 crore salary earners and pensioners, the Finance Minister said.

 TDS THRESHOLD INCREASED

Tax Deduction at Source (TDS) threshold on interest earned on bank/post office deposits has been proposed to be raised from Rs.10,000 to Rs.40,000. 

RELIEF TO RESIDENTIAL HOUSES

It has been proposed to exempt the levy of income tax on notional rent on a second self-occupied house.  Currently, income tax on notional rent is payable if one has more than one self-occupied house.  

Further, the Finance Minister proposed to increase the benefit of rollover of capital gains under Section 54 of the Income Tax Act from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs. 2 crores. This benefit can be availed once in a lifetime.  For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e., to the housing projects approved till 31st March 2020. 

Finance Minister proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.

You can read the Budget Summary and Other Highlights of Interim Budget 2019-20 Here

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Fugitive Economic Offenders Bill, 2018 approved, will force offenders to return India and face trial, says Centre Govt

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Fugitive Economic Offenders Bill, 2018

New Delhi: Amid PNB fraud row, the government has come up with a Bill to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. The Union Cabinet has approved the proposal of the Ministry of Finance to introduce the Fugitive Economic Offenders Bill, 2018  in the Parliament. 

The Bill makes provisions for a Court (‘Special Court’ under the Prevention of Money-laundering Act, 2002) to declare a person as a Fugitive Economic Offender.

The cases where the total value involved in such offences is Rs.100 crore or more will come under the purview of this Bill.

Purpose of the Fugitive Economic Offenders Bill, 2018 Bill

The Bill is expected to include measures to compel the fugitive economic offenders to return to India to face trial for scheduled offences.

The government claimed it would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders.

It is expected that the special forum would be created for an expeditious confiscation of the proceeds of crime, in India or abroad. It would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law for their offences, claimed the government.

What does Fugitive Economic Offender mean

A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.

What are Scheduled offence

As per the government, a scheduled offence refers to a list of economic offences contained in the Schedule to this Bill. Further, in order to ensure that Courts are not over-burdened with such cases, only those cases where the total value involved in such offences is 100 crore rupees or more, is within the purview of this Bill.

Silent features of the FEO Bill, 2018 

  1. Application before the Special Court for a declaration that an individual is a fugitive economic offender;
  2. Attachment of the property of a fugitive economic offender;
  3. Issue of a notice by the Special Court to the individual alleged to be a fugitive economic offender;
  4. Confiscation of the property of an individual declared as a fugitive economic offender resulting from the proceeds of crime;
  5. Confiscation of other  property belonging to such offender in India and abroad, including benami property;
  6. Disentitlement of the fugitive economic offender from defending any civil claim; and
  7. An Administrator will be appointed to manage and dispose of the confiscated property under the Act.

Conditions

If at any point of time in the course of the proceeding prior to the declaration, however, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law.

All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.

Further, provision has been made for the appointment of an Administrator to manage and dispose of the property in compliance with the provisions of law.

There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings.

The absence of such offenders from Indian courts has several deleterious consequences – first, it hampers investigation in criminal cases; second, it wastes precious time of courts of law, third, it undermines the rule of law in India.

Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India.

The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.

 It may be mentioned that the non-conviction-based asset confiscation for corruption-related cases is enabled under provisions of United Nations Convention against Corruption (ratified by India in 2011). The Bill adopts this principle.

In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.

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