GAAR - General Anti-Avoidance Rules

General Anti-Avoidance Rules is a tool of government which prevent the practice of  tax evasion....................

Indian Government is trying to give powers to income tax authorities as implementation of GAAR provides tremendous powers to deny tax benefit to an entity if a transaction has been carried with the sole intention of tax avoidance. Due to powers in the hand of taxmen, now innocents may be harassed by them.

FII & FDI money coming to India through Mauritius route will now become taxable.

Increased litigations.

To make it easier to understand GAAR; we can say that suppose a person or a company is setting up business in Gulf Country and its clear intention is to claim exemption from capital gains tax, in such a scenario Indian govt has the right to deny the legitimate claim for exemption provided under DTAA as it falls under tax avoidance and Indian govt is trying to plug the loopholes.

Foreign investors may be relieved over the controversial gaar tax proposals being pushed back by a year but another new taxation framework could make their India investments riskier and expensive. 
The proposals that are a part of the Finance Bill. They state that capital gains arising from the transfer of shares or interest in a non-Indian company -- in case the share or interest derives directly or indirectly its value substantially from assets located in India -- will be taxable in the country. 

by

ajay kumar

ajay.mrim@gmail.com

NPS - NEW PENSION SYSTEM

PENSION is a necessity of any person who will face old age. so, government has launched NPS i.e. new pension system.

Their is

Main Features and Architecture of the New Pension System

• The new pension system would be based on defined contributions. It will use the existing network of bank branches and post offices etc. to collect contributions. There will be seamless transfer of accumulations in case of change of employment and/or location. It will also offer a basket of investment choices and Fund managers. The new pension system will be voluntary.

• The system would, however, be mandatory for new recruits to the Central Government service (except the armed forces). The monthly contribution would be 10 percent of the salary and DA to be paid by the employee and matched by the Central Government. However, there will be no contribution from the Government in respect of individuals who are not Government employees. The contributions and returns thereon would be deposited in a non-withdrawable pension account. The existing provisions of defined benefit pension and GPF would not be available to the new recruits in the central Government service.

§         In addition to the above pension account, each individual can have a voluntary tier-II withdrawable account at his option. Government will make no contribution into this account. These assets would be managed in the same manner as the pension. The accumulations in this account can be withdrawn anytime without assigning any reason. 

• Individuals can normally exit at or after age 60 years from the pension system. At exit, the individual would be required to invest at least 40 percent of pension wealth to purchase an annuity. In case of Government employees, the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirement. The individual would receive a lump-sum of the remaining pension wealth, which she would be free to utilize in any manner. Individuals would have the flexibility to leave the pension system prior to age 60. However, in this case, the mandatory annuitisation would be 80% of the pension wealth.

• There will be one or more central record keeping agency (CRA), several pension fund managers (PFMs) to choose from which will offer different categories of schemes.

• The participating entities (PFMs, CRA etc.) would give out easily understood information about past performance & regular NAVs, so that the individual would able to make informed choices about which scheme to choose.

Source - www.pfrda.org.in

by

Ajay Kumar

ajay.mrim@gmail.com