Ministry of Finance

Clarification on applicability of Tax Deduction at Source on cash withdrawals

Dated: 30 AUG 2019

In order to discourage cash transactions and move towards less cash economy, the Finance (No. 2) Act, 2019 has inserted a new section 194N in the Income-tax Act,1961 (the ‘Act’), to provide for levy of tax deduction at source (TDS) @2% on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from one or more accounts maintained with it by the recipient. The above section shall come into effect from 1st September, 2019.

Since the section provided that the person responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year to deduct income tax @2% on cash payment in excess of rupees one crore,queries were received from the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019.

The CBDT, having considered the concerns of the people, hereby clarifies that section 194N inserted in the Act, is to come into effect from 1st September, 2019. Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to the TDS under section 194N of the Act. However, since the threshold of Rs. 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Act shall be counted from 1st April, 2019. Hence, if a person has already withdrawn Rs. 1 crore or more in cash upto 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS shall apply on all subsequent cash withdrawals.

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RM/KN
(Release ID: 1583707)

Ministry of Finance

CBDT consolidates Circulars for ease of compliance of Start-ups

Dated: 02 SEP 2019

In order to provide hassle-free tax environment to the Start-ups, a series of announcements have been made by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman in her General Budget Speech, 2019, and also on 23rd August 2019. To give effect to these announcements, the Central Board of Direct Taxes (CBDT) issued various circulars/clarifications in the matter from time to time. Vide Circular No.22/2019 dated 30.08.2019, CBDT has consolidated all the circulars/clarifications issued on this subject for the ease of compliance of Start-up entities. The present circular inter alia highlights the following:-

i) Simplification of process of assessment of Start-ups: Circular No. 16/2019 dated 7th of August, 2019 provided for the simplified procedure of assessment of Start-ups recognized by DPIIT. The circular covered cases under “limited scrutiny”, cases where multiple issues including issue of section 56(2)(viib) were involved or cases where Form No.2 was not filed by the Start-up entity. Detailed process of obtaining mandatory approval of the supervisory authorities for conducting enquiry was also laid down by this circular.

ii) Time limit for Completion of pending assessments of Start-ups: The time limit for completion of pending assessments was also specified by CBDT. All cases involving “limited scrutiny” were to be completed preferably by 30th September, 2019 and the other cases of Start-ups were to be disposed off on priority, preferably by 31st October, 2019.

iii) Procedure for addition made u/s 56(2)(viib) in the past assessment: Vide clarification issued on 9th August,2019 it was provided that the provisions of section 56(2)(viib) of the Act would also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Start-up had filed declaration in Form No. 2. The timelines for disposal of appeals before CsIT(Appeals) was also specified. Further, the addition made under section 56(2)(viib) would also not be pressed in further appeal.

iv) Income-tax demand: It has been reiterated time and again by CBDT that outstanding income-tax demand relating to additions made under section 56(2)(viib) would not be pursued and no communication in respect of outstanding demand would be made with the Start-up entity. Other income-tax demand of the Start-ups would not be pursued unless the demand was confirmed by ITAT.

v) Constitution of Start-up Cell: Vide order dated 30.08.2019, CBDT has constituted a Start-up Cell under the aegis of Member(IT&C), CBDT to redress grievances and to address various tax related issues in the cases of Start-ups. Grievances can also be filed online at startupcell.cbdt@gov.in.

The Circular No.22/2019 dated 30.08.2019 is available on www.incometaxindia.gov.in.

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RM/KMN

(Release ID: 1583888)

Ministry of Finance

CBDT constitutes Start-up Cell for redressal of grievances related to Start-ups 

Dated: 30 AUG 2019

One of the measures pertaining to taxation announced by the Hon’ble Finance Minister as part of the several measures to boost the economy, was the withdrawal of ‘Angel Tax’ provisions for Start-ups and their investors. As part of the measures for mitigating the genuine difficulties of Start-ups, it was decided that a dedicated cell would be set up under a Member of CBDT for addressing the specific problems of Start-ups.

In order to redress grievances and address various tax related issues in the cases of Start-ups, a Start-up Cell has been constituted by CBDT on 30.08.2019 with the following ex-officio members:

The Cell will work towards redressal of grievances and mitigate tax-related issues in case of Start-up entities with respect to administration of the Income-tax Act, 1961.

Grievances relating to Start-ups may be filed with the O/o Under Secretary, ITA-I, Room No.245A, North Block, New Delhi – 110001 as well as online at startupcell.cbdt@gov.in. The Cell will also be accessible telephonically on 011-23095479 /23093070 (F).

Start-up entities can approach the Cell for speedy resolution of their grievances. This initiative is the latest amongst the recent initiatives taken by CBDT to further ease the compliance issues pertaining to Start-ups.

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RM/HP/KMN

(Release ID: 1583692)

Ministry of Finance

CBDT clarifies differential regime between domestic investors (including AIF category III) and FPIs existed even prior to General Budget 2019 and was not creation of the Finance (No. 2) Act, 2019

Dated: 28 AUG 2019

The Central Board of Direct Taxes (CBDT) said today that an incorrect perception is being created in a section of media as if announcements made by Smt. Nirmala Sitharaman, Union Minister of Finance & Corporate Affairs, in a press conference on 23^rdAugust 2019, which brought in a number of responsive structural measures to boost up the economy, have created a differential regime between FPIs and domestic investors including AIF category III.

Dispelling this false impression being created in certain sections of media including social media, CBDT said that differential regime between domestic investors (including AIF category III) and FPIs existed even prior to the General Budget 2019 and was therefore not the creation of the Finance (No. 2) Act, 2019 or the announcement made by the Finance Ministry on 23^rd August 2019.

In this regard, CBDT has further stated that in case of Foreign Institutional Investors (FPIs), Income Tax Act, 1961 (the Act) contains special provisions [section 115AD read with section 2(14) of the Act] for taxation of income from derivatives. Under this regime, income of FPIs arising from derivatives was treated as capital gains and liable for special rate of tax as per section 115AD of the Act. However, income arising from derivatives for the domestic investors including Alternative Investment Funds (AIFs) category-III as well as for foreign investors who are not FPIs, has always been treated as business income and not as capital gains, and taxed at applicable normal income tax rates. The differential regime therefore already existed for FPIs through Section 115 AD. Therefore, to say that General Budget 2019 or FM’s announcement on 23^rd August 2019 created a differential regime between FPI and domestic investor is incorrect.

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RM/KMN
(Release ID: 1583205) 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 28th August, 2019

PRESS RELEASE

CBDT issues clarification on perceived differential taxation of FPIs and domestic investors

It has come to the notice of the Central Board of Direct Taxes (CBDT) that an incorrect perception was being created in a section of the media inasmuch as if the announcements made by the Hon’ble Finance Minister on last Friday, which brought in a number of responsive structural measures to boost up the economy, had created a differential regime between FPIs and domestic investors including AIF category III. 

Dispelling this false impression being created in certain sections of the media including social media, it is clarified that differential regime between domestic investors (including AIF category III) and FPIs existed even prior to the 2019 budget and was therefore not the creation of the Finance ( No 2) Act, 2019 or the announcement made by the Finance Minister on last Friday.

In this regard, it is further stated, that, in case of Foreign Institutional Investors (FPIs), Income Tax Act, 1961 (the ‘Act’) contains special provisions [section 115AD read with section 2(14) of the Act] for taxation of income from derivatives. Under this regime, income of FPIs arising from derivatives was treated as capital gains and liable for special rate of tax as per section 115AD of the Act. However income arising from derivatives for the domestic investors including Alternative Investment Funds (AIFs) category-III as well as for foreign investors who are not FPIs, has always been treated as business income and not as capital gains, and taxed at applicable normal income tax rates. The differential regime therefore already existed for FPIs through Section 115 AD. Therefore to say, that this year’s budget or FM‘s announcement of last Friday created a differential regime between FPIs and domestic investors is incorrect.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.