In a significant development, the Finance Ministry has decided to raise the Dearness Relief (DR) rate for Central Government pensioners and family pensioners. This increase, as per a notification dated 27th October 2023 from the Department of Pension & Pensioners’ Welfare (DoPPW), raises the DR rate from the existing 42% to 46% of the basic pay/family pension. The enhanced DR comes into effect from 1st July 2023.
Beneficiaries of the Increased Relief
The increased dearness relief will benefit various categories of pensioners, including civilian Central Government pensioners and family pensioners, Armed Forces pensioners and family pensioners, civilian pensioners and family pensioners paid from the Defence Service Estimates, All India Service pensioners and family pensioners, Railway pensioners and family pensioners, pensioners receiving provisional pension, and Burma Civilian pensioners and families, among others. The notification also addresses the pensioners/families of displaced Government pensioners from Burma/Pakistan.
Rounding Off Fractional Payments
The notification specifies that Dearness Relief payments involving fractional rupees shall be rounded up to the next higher rupee to facilitate smoother disbursements.
Regulations and Provisions
The DoPPW clarified that regulations for the payment of Dearness Relief to employed family pensioners and re-employed Central Government pensioners would be governed by Rule 52 of CCS (Pension) Rules, 2021, and the Department’s OM No. 45/73/97-P&PW (G) dated 2.7.1999, as amended over time. It further stated that provisions concerning the regulation of DR for pensioners receiving multiple pensions would remain unchanged.
Retired Judges’ Relief
The Department of Justice will issue necessary orders separately for retired Judges of the Supreme Court and High Courts.
This increase in Dearness Relief will bring financial relief to a significant section of pensioners, reflecting the government’s commitment to supporting retirees during periods of inflation and rising living costs.
Investors in commercial real estate in India need to be aware of the tax implications when dealing with long-term capital gains (LTCG) and short-term capital gains (STCG). The classification of gains as long-term or short-term plays a critical role in determining the tax treatment.
Long-Term vs. Short-Term Capital Assets
Commercial property is considered a long-term capital asset if held for over 24 months; otherwise, it is treated as a short-term capital asset. This classification affects the applicable tax rates.
Section 54F: Tax Relief for Investors
Section 54F of the Income Tax Act provides a significant tax exemption for individuals and Hindu Undivided Families (HUFs) on capital gains arising from the transfer of a long-term capital asset (excluding residential houses). To benefit from this exemption, investors must reinvest the sale proceeds in one residential house in India.
Key Conditions for Section 54F Exemption
The investor should not own more than one residential house on the date of the commercial property transfer.
The new residential house must be held for at least 3 years from the date of purchase or construction.
No other residential house should be purchased or constructed within 1 year (or 3 years, in certain cases) after the property transfer.
Section 54EC Bonds for Tax Exemption
Investors selling commercial property in India can also claim tax exemption by investing in specified bonds issued by entities like NHAI, REC, and PFC. The exemption is capped at INR 50 lakhs. Investment in these bonds must be made within 6 months of the property transfer and held for 5 years.
Capital Gain Account Scheme (CAGS)
For investors unable to reinvest proceeds immediately, CAGS offers a solution. The sale proceeds can be deposited in this scheme with a specified bank or institution before the income-tax return due date. The deposited amount should be utilized within a specified timeframe, or unutilized funds will be taxed as capital gains.
2023 Finance Bill Amendments
Recent amendments restrict the tax exemption under Sections 54 and 54F for investments in residential houses to a maximum of INR 10 crore. These changes are aimed at preventing high-net-worth individuals from claiming exemptions for expensive residential properties. This amendment may lead to higher tax burdens for such investors and potentially impact their incentive to invest in residential real estate. Investors should carefully consider these amendments and plan their real estate investments accordingly.
The Income Tax department has taken steps to address common queries and challenges related to the use of Digital Signature Certificates (DSC) for e-verification. It is crucial for taxpayers to stay informed and take specific actions to avoid last-minute hurdles in the e-Verification process. Here, we delve into the FAQs provided by the Income Tax Department, shedding light on the significance of DSCs and the steps taxpayers must take for smooth e-Verification.
Checking DSC Expiry Date
The Income Tax Department emphasizes the importance of regularly checking the expiry date of your Digital Signature Certificate. This proactive measure ensures that your DSC remains valid and reliable for e-Verification purposes. An expired DSC could lead to complications during the e-Verification process.
Registering DSC with the e-Filing Portal
To utilize a DSC for signing Income Tax Returns or verifying responses to notices issued by the Income Tax Department and refund reissue requests, taxpayers must first register their DSC with the e-Filing system. The DSC acts as an electronic proof of identity, much like a physical certificate would for an individual or organization. This step is crucial for seamless authentication of electronic documents in the online environment, similar to how a handwritten signature authenticates a physical document.
The Role of DSC in e-Verification
Digital Signature Certificates play a pivotal role in the e-Verification process. They act as a secure and trusted method for confirming the identity of the individual or entity electronically. DSCs are instrumental in e-Verifying returns filed by taxpayers and are mandatory in specific cases, adding an extra layer of security and authenticity to the tax-filing process.
By adhering to these guidelines and addressing the FAQs provided by the Income Tax Department, taxpayers can ensure that their e-Verification process is smooth and efficient. Regularly checking DSC expiry, registering it with the e-Filing portal, and understanding the critical role of DSCs can help streamline the tax-filing experience and enhance the security of electronic transactions in the realm of income tax.
In a significant move to promote financial activities in the Gujarat International Finance Tec-City (GIFT)-IFSC, the Indian Finance Ministry has made a pivotal amendment to the Income Tax Rules. This amendment exempts non-resident individuals and foreign companies from the obligation to furnish a Permanent Account Number (PAN) when opening a bank account within the International Financial Services Centres (IFSC) in GIFT City.
Form 60 Declaration Replaces PAN
Under the newly revised rules, non-residents and foreign companies are now required to file a declaration in Form 60 instead of providing a PAN when establishing a bank account in IFSC Gift City. Importantly, this declaration is subject to the condition that the account holder must not have any outstanding tax liabilities in India. This change simplifies the account opening process for foreign entities, making it more accessible and efficient.
Promoting GIFT-IFSC as a Tax-Neutral Enclave
GIFT-IFSC has been strategically positioned as a tax-neutral enclave for the financial sector. With this exemption from PAN requirements, GIFT City is poised to become an even more attractive destination for foreign companies, non-resident Indians (NRIs), and other non-residents seeking to open bank accounts. This development is expected to have a positive impact on both the liability and deposit aspects of banks operating within GIFT City. Furthermore, it is likely to stimulate growth in the retail banking segment of the IFSC, fostering greater economic activity and investment in this unique financial hub.
Industry Insights
Financial services experts, such as Sunil Gidwani, Partner at Nangia Andersen LLP, have praised this relaxation in regulatory requirements. According to Gidwani, this move is a game-changer for foreign companies, NRIs, and non-residents looking to establish banking relationships within IFSC banks. It is expected to streamline the process, boost confidence, and encourage more entities to take advantage of the unique opportunities available in GIFT-IFSC. In the long term, this change is likely to enhance the financial ecosystem within GIFT City and contribute to its continued growth and success.
The Reserve Bank of India (RBI) has introduced a significant change in the rules governing fixed deposits, allowing premature withdrawals on term deposits up to Rs 1 crore. This decision modifies the earlier guidelines, which permitted banks to offer term deposits without a premature withdrawal option for amounts of Rs 15 lakh and below.
Types of Fixed Deposits:
Banks offer two types of term or fixed deposits – callable and non-callable. In callable deposits, premature withdrawals are permitted, whereas in non-callable deposits, they are not allowed.
Revised Rules:
Under the revised rules, the RBI has increased the minimum amount for offering non-callable fixed deposits to Rs 1 crore. This means that all domestic term deposits accepted from individuals, up to an amount of Rs 1 crore, shall now have the facility for premature withdrawal.
Applicability to NRE and NRO Accounts:
The RBI’s decision also extends to Non-Resident (External) Rupee (NRE) and Ordinary Non-Resident (NRO) deposits. NRE/NRO term deposits without a premature withdrawal option are permitted, provided that all such term deposits accepted from individuals (held singly or jointly) for amounts up to Rs 1 crore also have the option of premature withdrawal.
This change in the rules is expected to provide more flexibility and accessibility for depositors, allowing them to withdraw their fixed deposits up to Rs 1 crore prematurely, as per their financial needs and requirements.
The Supreme Court has directed all Indian state governments to expedite the filling of longstanding vacancies in their respective Information Commissions. A Bench led by Chief Justice of India DY Chandrachud emphasized that the persistence of such vacancies undermines the purpose of the Right to Information Act (RTI Act), potentially rendering it ineffective.
Immediate Action Required:
The Court’s directive stressed that all states must promptly initiate the selection process for the State Information Commissioners, unless these steps have already been undertaken. The Additional Solicitor General of India, Aishwarya Bhati, was tasked with compiling the responses of the states regarding this matter.
Background and Context:
This decision followed a plea submitted by RTI activist Anjali Bhardwaj, which raised concerns about the vacancies within both the Central Information Commission and several State Information Commissions. Advocate Prashant Bhushan, representing the petitioner, highlighted that certain states, like Telangana, had nearly inactive state information commissions, and some states were not even accepting appeals in such cases.
Prior Court Interventions:
Earlier in the month, the Supreme Court had directed all state information commissions to establish a hybrid system for addressing complaints and appeals under the RTI Act. This system would allow parties the option of participating in hybrid hearings and provide video links on the cause list. Furthermore, the Court ordered that electronic filing be made accessible and efficient for all litigants.
Long-Standing Issue:
This issue of vacant positions within the Information Commissions has persisted for some time, and the Court’s recent directives emphasize the need for immediate action to uphold the effectiveness of the RTI Act, which is crucial for transparency and accountability in government actions.
In a climate where the consumption sector has faced significant challenges over the past two years, asset management companies are introducing consumption funds to provide retail investors with a chance to tap into India’s consumption potential. These open-ended funds are designed to offer long-term capital growth by actively managing an equity portfolio of companies poised to benefit from consumption-related activities. Kotak Mutual Fund, for example, has recently launched the Kotak Consumption Fund, focusing on sectors like fast-moving consumer goods, financial services, automobiles, and consumer durables. The subscription period for this fund closes on November 8.
Favorable Conditions Ahead:
With elections in five states approaching next month and general elections on the horizon next year, experts anticipate increased public spending that will stimulate consumption. Growth stocks are expected to be the driving force in the consumption sector, making this an opportune time to consider investments in consumption funds.
Investor Appetite for Consumption Funds:
India’s domestic consumption market has always been considered robust, and the shift from unorganized to organized sectors and premiumization are compelling investment themes. The launch of consumption funds underscores fund houses’ optimistic outlook on the consumption sector, driven by confidence in India’s resilient consumption story. Investors see these funds as gateways to participate in this evolving narrative, with expectations of attractive returns from companies serving end consumers.
Valuation Challenges:
The lofty valuations in the consumption sector pose a challenge for fund managers aiming to generate alpha. Although certain segments of the market, especially mid-caps and small-caps, have valuations exceeding their long-term averages, fund managers rely on stock selection and allocation strategies to deliver alpha.
Hold for the Long Term:
Consumption funds, like other equity-oriented funds, are more likely to provide higher returns over an extended period. This approach allows investors to withstand market volatilities, capitalize on the compounding effect, and navigate economic cycles while mitigating short-term market fluctuations. Experts recommend holding consumption funds for at least five years to maximize their growth potential.
Considerations Before Investing:
Individuals interested in consumption funds should assess their risk tolerance since these funds are sector-specific and can be volatile. It’s essential to understand the fund’s investment philosophy, the targeted sectors, and the associated costs, including the expense ratio, to ensure that expenses do not erode potential returns.
Investing in consumption funds can be a strategic move, provided investors carefully evaluate their financial objectives and time horizon, considering the dynamic nature of the sector.
PFRDA explicitly stated that in cases of penny drop verification failure by CRAs, regardless of the reason, no requests for exit/withdrawal or modification of subscriber’s bank account details will be allowed. In such instances, the CRA will collaborate with the relevant nodal office or intermediary to rectify and update the subscriber’s bank account details.
Effective Communication:
To ensure transparency, the PFRDA requires CRAs to establish efficient systems for penny drop verification within one month. In situations where subscribers’ withdrawal amounts could not be credited due to unsuccessful transactions, the funds meant for subscribers remain with the Trustee Bank until the correct details are obtained from the subscriber.
This move by PFRDA aims to enhance the accuracy and efficiency of NPS fund withdrawals while also minimizing potential issues related to erroneous or incomplete bank account details.
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a significant change, making ‘penny drop’ verification mandatory for subscribers of the National Pension System (NPS) when withdrawing funds. This measure is aimed at ensuring the swift and accurate transfer of money to subscribers. Under the ‘penny drop’ process, Central Recordkeeping Agencies (CRAs) perform a crucial verification step by checking the active status of the savings bank account and cross-referencing the name in the bank account with the name in the Permanent Retirement Account Number (PRAN) or as per the submitted documents.
Wide Applicability:
These provisions will be applicable not only to NPS but also to the Atal Pension Yojana (APY) and NPS Lite, covering all types of exits, withdrawals, and modifications in subscribers’ bank account details.
Importance of Verification:
The account’s validity is confirmed through a ‘test transaction’ where a small amount is transferred into the beneficiary’s bank account, and the name is matched based on the response received from the penny drop process. Successful penny drop verification with name matching is a prerequisite for processing exit/withdrawal requests and modifying the subscriber’s bank account details, as per a recent circular from PFRDA.
No Exception for Failure:
PFRDA explicitly stated that in cases of penny drop verification failure by CRAs, regardless of the reason, no requests for exit/withdrawal or modification of subscriber’s bank account details will be allowed. In such instances, the CRA will collaborate with the relevant nodal office or intermediary to rectify and update the subscriber’s bank account details.
Effective Communication:
To ensure transparency, the PFRDA requires CRAs to establish efficient systems for penny drop verification within one month. In situations where subscribers’ withdrawal amounts could not be credited due to unsuccessful transactions, the funds meant for subscribers remain with the Trustee Bank until the correct details are obtained from the subscriber.
This move by PFRDA aims to enhance the accuracy and efficiency of NPS fund withdrawals while also minimizing potential issues related to erroneous or incomplete bank account details.
The shop and establishment license is an essential business registration that governs various aspects of employment, including wages, leaves, work hours, and more. This license is mandatory for all shops and commercial establishments operating within a specific state or union territory. Regulated under the Shop and Establishment Act of each state, it applies to various types of businesses, from retail shops and offices to restaurants, hotels, and entertainment venues.
Why You Need It:
The shop and establishment license is crucial for businesses to ensure compliance with labor regulations. It regulates employment conditions and helps maintain fair practices for workers. Additionally, this license serves as proof of your registered business entity, making it easier to secure bank loans and open bank accounts.
Businesses operating from home or engaged in online and e-commerce activities (excluding factories regulated under the Factories Act) are also required to obtain this license, usually within 30 days of commencing operations.
Procedure to Obtain the License:
The process to obtain a shop and establishment license may vary slightly from state to state, depending on the respective labor department’s guidelines, required documents, and fees. However, there are common steps and documents that typically include the establishment’s ID proof, owner’s ID proof, PAN card, employment details, and more.
For an example of the online procedure, let’s look at how to obtain the shop and establishment license in Delhi:
**Visit the Delhi government’s labor department website at laborcis.nic.in and click on ‘Online Registration.’
**Fill Form A Part-I with establishment details such as name, category, address, contact information, and shop-specific details like the employer’s name and nature of business. Then, click ‘Continue.’
**Complete Part-II with employee details, including the number of employees, establishment start date, and details of family members working in the business. Click ‘Register.’
**Your registration certificate will be generated with a certificate number, titled ‘Registration Certificate of Establishment.’
Notably, this certificate is issued free of cost and does not require any document submissions. In Delhi, the certificate’s validity is 21 years. The shop and establishment license not only ensures legal compliance but also promotes fair labor practices in businesses across various sectors.
In light of recent amendments to the CGST/SGST Act, IGST Act, and CGST/SGST Rules, it is now mandatory for any person located outside the taxable territory who provides online money gaming services to individuals within the taxable territory to register for GST and fulfill tax obligations. This implies that every entity situated outside the taxable territory offering online money gaming services to individuals in India must register or amend their existing registration in accordance with the proposed Row (iia) in Form GST REG-10. Additionally, they are required to provide information regarding these supplies in the proposed Tables in Form GSTR-5A.
Development in Progress:
The GSTN is currently working on the functionality to accommodate these new registrations and registration amendments. In the interim period before this functionality is available on the GST portal, a temporary solution is recommended.
1. Registration (Form GST REG-10):
a) Persons engaged in the provision of online money gaming services should identify themselves as such in Form GST REG-10, as per the proposed amendments. New registrations for such services may be necessary, and applications for these registrations can be filed in the existing Form GST REG-10. When applying for registration, the ‘Type of Supply’ should be declared in Row (iia) of Form GST REG-10.
b) As a workaround, individuals offering online money gaming services who are required to register based on recent amendments can use the existing Form GST REG-10 for their registration application. Along with the application, they should upload a PDF copy of the information provided in Row 2(iia) of the amended Form GST REG-10 in the ‘Documents Upload’ section within Part -A of Form GST REG-10, following the provided format.
2. Return (Form GSTR-5A):
a) Suppliers of online money gaming services are obligated to report the details of these services in Table 5D and 5E of Form GSTR-5A.
b) Until Tables 5D and 5E are incorporated into Form GSTR-5A on the GST portal, those involved in supplying online money gaming services are encouraged to report these details in the existing Tables 5 and 5A within Form GSTR-5A.
This procedure is recommended to be followed until the changes are fully integrated into the GST portal, ensuring compliance with the new regulations concerning online money gaming services.
