Income Tax department uncovers Rs 45,622 crore undisclosed income

The I-T department conducted searches on nearly 2,534 groups of persons in the last three financial years and the current one (up to January 2017) and unearthed undisclosed income of Rs 45,622 crore. “During the last three financial years (2013-14, 2014-15 and 2015-16) and the current financial year (up to January 2017), the I-T department conducted searches on about 2,534 groups of persons, which led to admission of undisclosed income of about Rs 45,622 crore apart from seizure of undisclosed asset (cash, jewellery etc) worth about Rs 3,625 crore,” Minister of State for Finance Santosh Kumar Gangwar said in a written reply to the Lok Sabha.

Gangwar further said, “Besides levy of taxes on the total income of those persons whose assessments were completed during the last three years and current financial year (up to to January 2017), the ITD filed prosecution complaints in 2,432 cases.”

He added: “During the same period, 4,264 compounding applications were also received from persons who had committed offence under the Act.”

Of the cases disposed of by criminal courts during the period, the minister said, “116 persons were convicted of offences committed under the Act.” In 3,218 cases, offences were compounded by the competent I-T authorities.

According to the minister, as part of enforcement measures and based on credible evidence of tax evasion and other serious violations of provisions, the income tax department (ITD) conducts searches in cases of various persons, including companies and individuals.

 

Elaborating, he noted that based on material recovered during searches, investigation is conducted by investigating officers and findings of such investigations are shared with the assessing officers concerned.

Such assessing officers initiate and complete assessment proceedings as per the provision of the Act with a view to assessing the income and taking other actions such as raising of tax demand, levy of applicable penalties, recovery of such demands and filing of prosecution complaints.

CAD may widen to 1.6% of GDP in 2017: Nomura

India’s current account deficit is expected to widen to 1.6 per cent of GDP in 2017 as domestic recovery is likely to further boost import growth, says a Nomura report. According to the global financial services major, despite the widening, the current account deficit remains within sustainable limits. “We expect India’s current account deficit to widen to 1.6 per cent of GDP in 2017 from a deficit of 0.5 per cent in 2016, as we expect the domestic recovery to further boost import growth, while rising protectionism could hurt invisibles inflows,” Nomura said in a research note.

The current account deficit (CAD) increased to USD 7.9 billion, or 1.4 per cent of GDP, in the October-December quarter of 2016 due to a fall in services exports. However, the current account deficit remains within sustainable levels, Nomura said, as net FDI inflows at around 2 per cent of GDP fully fund the deficit, leading to a stable basic balance of payments.

 

The CAD — the difference between the value of imports of goods, services and investment incomes, and that of exports — stood at USD 3.4 billion in the July-September quarter. On capital account, the report said with FCNR (B) redemptions now completed, the capital account surplus is likely to double in 2017, boosted by higher growth and ongoing economic reforms.

Some of the main risk to the external sector are sharp rise in oil prices and rising US protectionism, as the latter could further slow software exports and remittances, hurting the current account balance at the margin, it added.

India to attract significant capital from abroad: CBRE

India will attract significant capital from Singapore, China, the UK and the US, CBRE’s CEO, Asia Pacific, Steve Swerdlow said, adding that with greater transparency in the market, this is the beginning of their new journey in India. “Traditionally, Japan and Australia were important markets for CBRE, but India and China will overtake them in the next few years,” Swerdlow said.

For CBRE, Asia Pacific is the fastest-growing region and within this market, India is playing an important role, Swerdlow said.

CBRE Group is the world’s largest commercial real estate services and investment firm.

Anshuman Magazine, CBRE chairman, India & South East Asia, said traditionally investors from Japan and Singapore went to China, but now even China is looking closely at India, and this year a few investors from China are going to come to India in the real estate and infrastructure areas.

The flow of international capital coming to emerging markets has slowed down and India is competing with China, Indonesia and the Philippines. Flow of money to India will increase as they want to put in money where there is growth and India can provide that long-term growth for foreign funds, Magazine said. CBRE last year raised Rs 4,000 crore for developers and this was not just from FDI, but also from domestic institutions which had money with them but were not investing in the real estate segment in India. But now domestic money was coming into the Indian real estate market, he said.

Magazine said they are seeing an early sign of recovery across the country, especially with the push for affordable housing in the Budget. “There will be a big revival in the affordable side where demand is the highest. In the past there was some resistance among developers to look at the affordable segment, but in the remaining part of the year there will be a revival,” he said.

All the developers are looking to add the affordable housing segment in their portfolio and investor appetite for the affordable segment is growing, he added.

Swerdlow, who was in Pune recently to open a property fair, said Pune was among the rare cities in the Asia Pacific region where the property market was responding to demand rather than pushing supply into the market.

Government seeks closer engagement with Latin American nations

In a clear shift in its policy towards Latin American (LatAm) nations, the government now proposes more frequent political and economic engagement with smaller countries of the region to widen its influence and expand investment opportunities.

A large delegation comprising senior government officials and business leaders will be heading to El Salvador later this month to participate in an investor summit that will bring together businesses from across the globe. The summit is slated to be held in San Salvador from March 28-30.

The government plans to use this event not only to seek new investment opportunity for Indian companies, but also for building ground for a more lasting and stronger political relationship with the central American country. A similar engagement is also proposed later with Guatemala, Nicaragua, Honduras, Panama, Costa Rica, Belize and Bolivia.

 

Talking to FE, minister of state for external affairs VK Singh said, “We need to look at the LatAm region more deeply. Groupings such as the Community of Latin American and Caribbean States (CELAC) and Central American Integration System (SICA) are very important. And we must utilise our goodwill so that our influence increases in the region.”

“Each country has got certain strengths and it is up to us to tap them. Indian businesses should go to these countries and invest. Let’s look at the future,” the minister said in reply to a question about the coming investor summit in El Salvador.

“The initiative is organised by the Export and Investment Promotion Agency, PROESA, with the support of the Inter-American Development Bank and the ministry of foreign affairs, among other important collaborators,” Jose Felix Ulloa Alvarenga, chargé d’affaires, embassy of El Salvador to India, told FE.

“The summit will launch a country brand presentation and hold a conference with various high-level panel discussions to underscore the competitive advantages to choose El Salvador as a sound investment destination,” the envoy said.

India’s engagement has so far largely concentrated on the big countries of the region including Brazil, Colombia, Chile, Argentina and Peru. Investment flow has also been concentrated in larger economies. But it is now felt that bringing smaller countries to the fold would also be important, as it would help India gain their support on issues of interest in various international fora.

Also, some of these countries have rich natural resources that could become an area of cooperation for mutual gain.

The investor summit will target presidents, directors and CEOs of national and international companies for fostering trade and diversification with the aim to promote exchange of products and services with added value.

Among the target audience in the Asia Pacific region, India becomes of particular relevance and interest as it has emerged as the fastest-growing large economy in the world. The central American nation is seeking investments from India in manufacturing and services, specifically in the areas of textiles and apparel, offshore business services, energy, tourism, aeronautics, and light manufacturing.

Indian companies such as Aditya Birla Group, UPL, Glenmark Pharmaceuticals and Hero MotoCorp already have a presence in the region.

ONGC fields to be pushed into more production enhancement contracts

Following the sustained and steady fall in production from both onshore and offshore fields of oil major ONGC since 2006-07, the Directorate General of Hydrocarbons (DGH) plans to push the company into more production enhancement contracts (PEC).

“If for any field, it cannot increase yield, it should relinquish the acreage (without waiting for too long),” said a government official requesting not to be named. The official added that a large number of fields will be put under PEC and it is being decided which ones should taken up in the first round.

The DGH had been asked by the ministry of petroleum and natural gas to regularly monitor the national oil companies.

Data show ONGC’s production from major onshore fields have fallen from 4.84 million tonnes (MT) in 2006-07 to 2.79 MT by 2015-16, and that for major offshore from 15.43 MT to 11.77 MT during the same period. Interestingly, the production figures have shown a continuous fall.

However, according to the government official, the fields are not declining resource-wise but extraction has been poor.

 

Production from major fields of Oil India, which only operates onshore fields, has also been falling — from 1.139 MT in 2006-07 to 0.553 MT by 2015-16, although some years witnessed minor correction.

There are various dimensions to PEC. Some could be as simple as bettering some surface facilities such as separators, pipelines and tanks as often these get choked, corroded or starts leaking. Usually improving these surface facilities result in 3-5% improvement in production.

Indian Express on March 7 reported that the petroleum ministry has ordered a detailed review of the board of ONGC and functional heads as project delays are a norm and output has not increased. The DGH and the exploration arm of the ministry will be looking at some of the projects and submit a review.

The government is of the view that ONGC’s productivity is low and, according to the official, the number of wells it drills per annum is not adequate.

Falling production of the national oil companies does not augur well for the country which is striving to achieve energy security and plans to reduce its imports drastically by 2030. To this end, the NDA government has also announced that some of the oil companies will be merged to create integrated companies which will provide end-to-end services and have the financial muscles to compete with international firms such as Shell and BP.

“The DGH is figuring out how production enhancement can happen and there would be a few strategies. It (DGH) has the time series data to work with,” the official added.

Disinvestment: Narendra Modi government eyes Rs 18,000 cr from PSU buybacks

After raising a major chunk of disinvestment revenue from buybacks of shares by PSUs in 2016-17, the Centre may tap the route equally aggressively in the next fiscal as well, with a plan to raise at least R18,000 crore or 25% of overall disinvestment revenue estimate of R72,500 crore for the year. According to sources, the government has lined up a clutch of PSUs that will opt for buying back their own shares in 2017-18.

On May 27, 2016, the Centre had issued a capital restructuring order mandating every central PSU with a net worth above R2,000 crore and cash and bank balance of over R1,000 crore to exercise the option to buy back a portion of their shares with effect from 2016-17. The move, aimed at nudging the PSUs to utilise their idle cash to reward shareholders, has turned out to be a money spinner for the shareholders, particularly the government.

After the government mandated cash-rich PSUs to undertake buybacks like their private sector peers, the Centre is in the process garnering a record R19,500 crore or 43% of R45,500 crore disinvestment revenue estimate in 2016-17 from buybacks of seven PSUs including Coal India, Nalco, NMDC and NHPC.

 

Apart from the PSUs mentioned in the chart, separately, four Coal India subsidiaries have announced buyback of shares worth R5,060 crore, nearly 80% of which (R4,000 crore) will accrue to the Centre as dividend early next year, the sources added.

The government owns about 80% in the coal miner. On Monday, Coal India announced an interim dividend of R18.75 per share for 2016-17, down from R27.40 a year earlier, and the payout will cost the company R11,640 crore, according to Bloomberg.

While PSUs with significant capex plans can seek a waiver from buybacks, over a dozen PSUs qualify as per the criteria for buybacks. These also include ONGC, Power Grid, REC, SJVN and Indian Renewable Energy Development Agency, but these companies might not exercise the option in 2017-18.

The companies are usually asked to buy back shares to the extent they can by the amount equivalent to 25% of the aggregate of their fully paid-up share capital and free reserves. At end-March 2015, central PSUs had surplus cash of about R2.55 lakh crore.

The government is of the view that buybacks improve financial parameters of the firms and, thereby, investor interest in them, as the firms would cancel the shares bought from shareholders, enabling them to tap the market for funds when needed.

The government has set 2017-18 divestment target at R72,500 crore, a 60% jump from the estimate of R45,500 crore in 2016-17. Apart from buybacks of PSUs, sale of the government’s SUUTI stakes and further pruning of Centre’s stakes in certain big PSUs like NMDC and Nalco, IPOs of PSUs and a proposed new PSU ETF are expected to boost the disinvestment revenue next year.

Union Budget 2017 provides leeway to increase power demand, wanting in tackling stressed assets: Experts

The problem of subdued power demand ailing the thermal as well as renewable energy sectors was addressed by Union Finance Minister Arun Jaitley in his budget proposals for fiscal 2017-18 on February 1, but there is no “direct, head-on tackling of stressed power assets”, experts say. Jaitley said the country was well on its way to achieving 100 per cent village electrification by May 1, 2018, and proposed an increased allocation of Rs 4,814 crore under the Deendayal Upadhyaya Gram Jyoti Yojana in 2017-18.

The government has sustained its focus on infrastructure spending, which is budgeted at Rs 3.96 trillion ( billion) in 2017-18, an increase of 10.5 per cent over the previous fiscal. (Reuters)

“The progress towards 100 per cent rural electrification target by May 2018, as announced in the budget for the previous financial year, is on track and thus a higher level of funding support in the current budget is likely to gradually improve the energy demand, and the PLF (Plant Load Factor) levels for power generation entities to some extent,” Sabyasachi Majumdar, Group Head, Corporate Sector Ratings at ICRA, told IANS.

The government has sustained its focus on infrastructure spending, which is budgeted at Rs 3.96 trillion ($59 billion) in 2017-18, an increase of 10.5 per cent over the previous fiscal.

Allocations for power in the latest budget shows an increase of 51 percent, while that for road transport, railways and shipping have gone up by 31 per cent, 19 per cent and 16 per cent, respectively. These measures are expected to trigger higher industrial activity, thus translating into greater demand for industrial power.

“Moreover, an increased allocation for the infrastructure segment is likely to result in an increase in energy demand from the industrial sector, which has shown subdued demand in the past two-three years,” he added.

However, according to a report prepared by ratings agency Crisil, overall infrastructure investments will take longer to pick up, especially given the private sector’s inability to invest due to below-expectation performance.

“Investments have been steadily falling — to 29 percent of GDP in fiscal 2016-17 from 34 per cent in fiscal 2011-12,” the report said.

Interestingly, no specific measures have been highlighted in the budget to address the issue of stressed power assets.

“We would have been heartened to see a direct head-on tackling of stressed power assets. The latest Economic Survey ignited hopes by talking about a very innovative solution by creating a Public Asset Rehabilitation Agency (PARA).

“However, while the Finance Minister talked about recapitalising the banks to the tune of Rs 10,000 crore, the Budget was silent about a direct measure to address this big challenge facing the (power) sector. Maybe, we may see a post-budget follow-on around PARA,” KPMG (India) Partner and Head of Energy and Natural Resources Manish Aggarwal told IANS.

On the positive side, halving of the basic customs duty on LNG from five per cent to 2.5 per cent would support stranded gas power plants. It would also help ease FDI regulations with the proposed abolition of the Foreign Investment Promotion Board and extension of concessional withholding tax on ECBs (external commercial borrowings), enabling foreign investors to pump money into the energy sector, he said.

The Budget has also outlined measures to support the development of solar capacity such as taking up the second phase of Solar Park development for an additional 20,000 MW capacity and the plan for installation of 1,000 MW of solar capacity at railway stations.

“While these measures would support off-take from solar power, they would affect the demand for thermal power generation to some extent,” Majumdar said.

The Make in India programme in the solar sector, which was being affected by imports of cheap Chinese modules, has also got a fillip.

The significant rise in allocation under the Modified Special Incentive Package Scheme (M-SIPS) and the Electronics Development Fund (EDF), which provides capital subsidy of up to 25 per cent, is expected to benefit major domestic solar cell and module manufacturers, as well as foreign players planning to set up their manufacturing base in India, the Crisil report said.

However, Vinay Rustagi, Managing Director of solar consulting firm Bridge To India, said the 10-year tax holiday and GBI (generation-based incentive) for the wind sector, as expected, have been phased out.

“Reduction in corporate tax rates and MAT (minimum alternative tax) credit extension will help small- and medium-sized businesses. There is also some rationalisation of duty structure for components used in manufacturing solar modules to help domestic manufacturers,” Rustagi told IANS.

The experts said there was no big bang or material announcement in the budget.

“We wanted the Budget to address the issues of curtailments and payment delays that have increased substantially over the last one year for the renewable sector. A limited play guarantee fund only for renewables that can take care of payment delays to independent power producers beyond a defined timeframe of say three months would have gone a long way to get an exponential jump in investments from overseas investors, as well as domestic players,” Aggarwal said.

“We are disappointed that there is no funding set aside for new transmission schemes or any skilling and customer education initiatives,” Rustagi added.

Union Budget 2017: 4 things that can impact your savings and increase tax liability

  1. The government in the current budget announced an additional surcharge of 10% for salaried employees who are earning more than Rs 50 lakh and less than Rs 1 crore.
 Budget 2017, budget, arun jaitley, finance bill, savings, employees, income tax department, income tax act

Although the Budget 2017 was pro-poor and some tax sops were also announced keeping in mind the middle class, but still a few amendments will have a negative impact on people after the changes become effective within a few months. For instance, they will increase the tax liability of the rich people.

In his budget speech, the FM had said, “The present burden of taxation is mainly on honest taxpayers and salaried employees.” Keeping this in view, he tried to disperse the tax liability on everyone so that there is a uniformity in paying tax amongst all.

Introduction of additional Surcharge of 10%

The government in the current budget announced an additional surcharge of 10% for salaried employees who are earning more than Rs 50 lakh and less than Rs 1 crore. The taxpayers whose taxable income falls between Rs 50 lakh and Rs 1 crore will not benefit much because the imposition of a surcharge of 10% will not only wipe away the benefit of Rs 12,500, but also it will impose an additional tax burden on such taxpayers.

Reduction in rebate limit under Section 87A

Reduction in rebate from Rs 5000 to Rs 2500 under Section 87A has a slightly negative impact where the eligibility limit has been reduced up to 50%. Moreover, the taxable salary limit for claiming such deduction has also decreased from Rs 5 lakh to Rs 3.5 lakh.

Now, taxpayers who are earning taxable income between Rs 2.50 lakh and Rs 3.50 lakh will get a rebate of Rs 2,500 only under section 87A as against the earlier rebate of Rs 5,000 for the taxpayers whose taxable income was up to Rs 5 lakh.

Restriction on set off of loss being capped on the higher side

In the Budget 2017, section 71 of the Act relates to set-off of loss from one head against income from another. To have best practices, it is proposed to insert sub-section (3A) in the current section to provide that “set-off of loss under the head “Income from house property” against any other head of income shall be restricted to Rs 2 lakh for any assessment year,” as per the Finance Bill 2017.

One the biggest negative impacts will now be held against set off of loss for Income from House Property which now has been capped at Rs 2 lakh per F.Y with effect from 1st April 2018. Your income tax liability may increase because of this capping. Keeping other factors constant, suppose you are earning a rental income of Rs 2 lakh and paying interest of Rs 7 lakh towards the loan, this will result in loss of Income from House Property of Rs 5 lakh. Earlier, you could have set off the entire amount against income from the other heads.