It is not for the first time that the government is allowing a few companies to raise funds through issuance of tax free bonds. The most recent permission given to seven central public sector enterprises (CPSEs), all engaged in crucial infrastructure activities, to collectively mop up Rs.40,000 crore is in line with the announcement made in the budget. Last year (2014-15) there were no such issues. So to an extent there would be a certain novelty factor this time.

The Central Board of Direct Taxes issued the notification on July 6. The intention is to enable these CPSEs to complete their fund raising exercise during the remaining 8 to 9 months of the year, The CPSEs, all big names in infrastructure are NHAI, IRFC, HUDCO, IREDA, REC, PFC and NTPC.

NHAI has been given the lion’s share, out of the total Rs.40,000 crore, it will mobilise Rs.24,000 crore (60 percent). IRFC will raise Rs.6,000 crore, HUDCO Rs.5000 crore, IREDA Rs.2,000 crore and the REC, PFC and NTPC Rs.1,000 crore each.

The rationale of this pattern of distribution is not clear. It is likely that what weighed with the government is the fact that CPSEs such as NTPC had access to equity and quasi equity in a way NHAI does not have as yet. That advantage, in turn, arises from the fact that NTPC and a few others had taken the long road to corporatisation earlier than the others.

It is also possible that investor perception of NHAI, what with the controversies over tolls and public private partnership in general, is not such as to attract many types of investors, Hence special sops, such as tax free status to their investors, will have to be given.

The government wants the CPSEs to go through the public issue route to an extent of 70 per cent, the balance to come from private placement.

Quite obviously from the overall perspective of public finance, the tax exempt bonds will be the exception and not the rule.

Will investors buy them? 

That brings us to the other important dimension to the bond issues, their relevance as an investment option. The tax exempt status is their unique selling proposition but that cannot be the sole reason for investing in them. It goes without saying classes of investors, retail, high networth individuals (HNI), corporates, and others will view these bonds differently depending on their circumstances. The immediate point of comparison will be with fixed deposits with banks and companies, and to a lesser extent with the fixed maturity plans (FMPs) of mutual funds,

The government notification details the features of this series of bonds, their tenure, how much (tax-free) interest they can pay. The return on specific bond issues will vary depending on who is the investor and the rating obtained. The issuer with a higher credit rating can offer less. Retail investors can get more compared to other categories.

In all cases the interest rate will be subject to a ceiling on the coupon rates based on the reference G-sec rate. So in a way the tax-free bonds are linked to market rates and can move up and down with the G-sec rate.

It has been clarified that the interest rates referred to above are on an annual basis. Half yearly interest options, wherever offered, will yield less to the investor.

Advantages and disadvantages 

Another reason these bonds will score over fixed deposits is that they have scope for capital appreciation. When interest rates fall the market value of these bonds will go up. The bonds should enjoy a fair amount of liquidity as they can be sold in the secondary market and because they have a high credit rating should enjoy investor confidence.

Unlike bank fixed deposits, tax free bonds have a longer tenure -10, 15 and 20 years. Investors can hope to avoid asset -liability mismatch by buying these bonds.

Despite so many attractive features the tax-free bonds will not appeal to all retail investors.

Contextually, interest rates are set to come down. The bonds to be issued will not offer the kind of interest previous issues offered. For retail investors the exit route is important, most of them will not be in a position to keep them till maturity, which at the minimum is 10 years.

Selling the bonds through the stock market is theoretically attractive but how many of the retail investors are savvy enough to take this route?

Interest payment once a year is definite disincentive. Most retail investors will prefer to receive interest at least once in three months.

For the pensioners and the salaried class about to retire, these bonds cannot be an option.

The above is not to deny the role tax free infrastructure bonds have in personal finance as much as in public finance.

crl.thehindu@gmail.com

Published – July 26, 2015 11:34 pm IST

Net direct tax collection grew 15.41% to ₹12.11 lakh crore between April 1 and November 10.

This include net corporate tax of ₹5.10 lakh crore and non-corporate taxes (including taxes paid by individuals, HUFs, firms) of ₹6.62 lakh crore. Other taxes (which include Equalisation Levy and gift tax) worth ₹35,923 crore were mopped up.

As per the Central Board of Direct Taxes (CBDT) data, the gross collection of direct tax stood at ₹15.02 lakh crore, up 21.20%, during April-November 10.

Refunds worth ₹2.92 lakh crore was issued during the period, a 53% jump over year-ago period.

After adjusting for refunds, net direct tax collection (which include corporate, non-corporate and other taxes) stood at about ₹12.11 lakh crore, a 15.41% growth over ₹10.49 lakh crore mopped up in the same period last fiscal.

The government has budgeted to collect ₹22.12 lakh crore in the current fiscal from direct taxes (personal income tax, corporate tax and other taxes), up 13% over previous fiscal.

Photo used for representation purpose only.
| Photo Credit: Getty Images/iStockphoto

As part of the comprehensive review of the Income Tax Act announced by Finance Minister Nirmala Sitharaman in the Budget, the Central Board of Direct Taxes (CBDT) on Monday (October 7,2024) invited inputs and suggestions from taxpayers and the public at large.

These ideas may be taken up by an internal committee of the Income Tax Department that has been formed to oversee the review of the 1961 law. “The goal is to make the Act concise, clear, and easy to understand, which will reduce disputes, litigation, and provide greater tax certainty to taxpayers,” the CBDT said about the remit of the review that is to be completed in six months as per the time line set in the July 23 Budget speech.

Public inputs, that can be submitted through the e-filing portal for taxpayers, have been sought under four categories – language simplification, litigation reduction, compliance reduction, and redundant or obsolete provisions.

The I-T department has seen a substantial rise in number of transactions. Photo: incometax.gov.in

The July 31 deadline for filing Income Tax (I-T) returns is unlikely to be extended. The Central Board of Direct Taxes (CBDT) has intervened to fix recent glitches and downtimes reported on the I-T portal by ramping up its back-end capacity to cope with a higher workload experienced this year.

Acknowledging taxpayers’ concerns about delayed generation of TDS (Tax Deduction at Source) and Form 16 certificates, and the “slowness” of the I-T portal, CBDT chairperson Ravi Agarwal told The Hindu these issues have now been resolved, and as many as 28 lakh tax returns were filed on Wednesday with no downtime reported.

“Even per-hour filings are now at an all-time high. So therefore, I think we can say with confidence that over the next six days, we should be able to take care of it. Most of the problems have been addressed and sorted out, and yesterday, there was no apparent reporting of any of these problems like downtime, and even today, there is no issue so far,” he said late Thursday afternoon.

The I-T department has seen a substantial rise in number of transactions reported this year, Mr. Agarwal said, and some of the government officials in charge of issuing such deduction certificates were also occupied with election duty, delaying some issuances.

“Then there was a report of slowness on the website and people were finding it difficult. So now, some corrective measures have been taken in terms of ramping up the hardware, and also putting those solutions in place,” the CBDT chief assured.

“There has been a 15% growth in TDS transactions and about 30% growth in third-party transactions, and that has to get populated in the pre-filled I-T forms and the corresponding TDS certificates also have to be issued. Now, what happened was that because of elections, the deductors from the government side were engaged in the election duty… so all that got delayed, and then all of a sudden, we got that filing in bulk as far as TDS statements are concerned.”

“To process those statements and convert them into TDS certificates, was taking time, and involved a lot of data. But we have been able to resolve that, and we are up to date on the issue of TDS certificates not being downloaded or not being made available,” Mr. Agarwal said.

Tax payers file their income-tax returns. As many as 7.41 crore I-T returns have been filed so far this year, which include 53 lakh first-time tax filers. File
| Photo Credit: The Hindu

India’s tax base has widened sharply since 2013-14, with individuals moving up the income ladder and the proportion of super-rich taxpayers’ incomes declining, the Central Board of Direct Taxes (CBDT) said on Thursday, days after the Congress cited income tax data to show widening income inequality in the country.

The overall number of income tax (I-T) returns filed by individuals has risen from 3.36 crore to 6.37 crore through assessment years 2013-14 to 2021-22, while there is also an increase in number of returns filed by individual taxpayers across various ranges of gross total income, the CBDT said in a statement.

“In the range of gross total income up to ₹5 lakh, the number of returns filed by individual taxpayers has increased from 2.62 crore in AY 2013-14 to 3.47 crore in AY 2021-22, registering an increase of 32%. This range of income includes individuals having income below taxable limit who may not be filing returns,” the board pointed out.

Migration to higher range

For higher income ranges of ₹5 lakh to ₹10 lakh, and ₹10 lakh to ₹25 lakh, the number of individual returns filed surged 295% and 291% individuals over the same period, respectively. “This indicates that individual taxpayers are showing a positive trend of migration to higher range of gross total income,” the CBDT said.

Digging deeper into the data reveals that the proportionate contribution of gross total income of top 1% individual taxpayers vis-à-vis all individual taxpayers has decreased from 15.9% to 14.6%, the board said, while the share of the bottom 25% taxpayers increased from 8.3% to 8.4% over the same period.

“The proportion of gross total income of middle 74% group of individual taxpayers increased from 75.8% to 77% in the above period,” the statement said, adding that the average gross total income for individual taxpayers increased from about ₹4.5 lakh to about ₹7 lakh over the nine-year period, representing an increase of 56%.

“The increase in average gross total income for top 1% individual taxpayers is 42% while that for bottom 25% individual taxpayers is 58%,” it added.

The data indicates “robust growth in the gross total income of individuals across different income groups subsequent to AY 2013-14”, the board emphasised, adding this was reflected in the increase in net direct tax collections from ₹6.38 lakh crore in 2013-14 to ₹16.61 lakh crore in 2022-23.

As many as 7.41 crore I-T returns have been filed so far this year, which include 53 lakh first-time tax filers.

New Delhi:

The Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta said the Income Tax Department will analyse the bank accounts of Indian nationals and organisations it received from Swiss Bank and will take action under the black money Act in case any tax evasion was found.

In an exclusive interview with ANI, Nitin Gupta, who recently got an extension for nine months in tenure, said, “We have received information about bank accounts of Indian nationals and organisations in the Swiss Bank as part of the annual automatic information exchange under which Switzerland has shared particulars of nearly 36 lakh financial accounts with 104 countries.”

The latest set of information shared by Swiss authorities as part of the annual automatic information exchange, was notably the fifth such tranche. The first such exchange with India took place in 2019.

“Our department (will) work on that information. If some Indian nationals have assets in foreign countries and had not informed the Income Tax department and are liable to pay taxes, we act against such persons under the black money act,” Mr Gupta added.

In October 2022, India received the fourth tranche of information on financial accounts from Switzerland since the two countries entered into an Automatic Exchange Of Information (AEOI) agreement in 2018, in order to improve tax discipline and avert potential evasion.

The annual exchange of information allows countries to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns.

The exercise by the Swiss authorities is strictly meant for “tax only” purposes. In India, the data is kept in the custody of and for action by the Central Board of Direct Taxes (CBDT).

In early January 2023, Switzerland’s ambassador to India Ralf Heckner had said he “almost heard nothing” on black money in the last two years of his tenure and that the matter was dealt with in a bilateral treaty between Switzerland and India by means of an automatic exchange of banking information between the two countries.

The Swiss envoy had said black money was “not an issue anymore.”

“I have been Swiss ambassador for more than two years and I almost heard nothing or hardly anything about black money. The black money issue has been dealt with by a bilateral treaty between Switzerland and India in 2018 on the automatic exchange of banking information between Switzerland and India (in both directions),” the Swiss ambassador had told ANI.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)