Posted on

Proceeds of crime – Definition under the 2002 Prevention of Money Laundering Act

What is the Prevention of Money Laundering Act?

It lays the foundation of India’s legal structure to prevent money laundering. This law applies to all financial firms, banks (including the Reserve Bank of India), mutual funds, insurance firms, and their financial intermediaries. India passed the Prevention of Money Laundering Act in 2002. (Hereinafter referred to as PMLA). It defines money laundering as “any process or action involving the ‘proceeds of crime’ and presenting them as clean funds.” Section 3 of the Act defines money laundering as “anyone who explicitly or implicitly tries to engage in, purposefully assists, is a party to, or is engaged in any task or system involving proceeds of crime and the presentation of those proceeds as clean property shall be guilty of money laundering.”

As the term of ‘Money Laundering’ is fairly broad, any transaction involving ‘Proceeds of Crime’ (hence referred to as POC) is deemed a money laundering offence. Therefore, it is vital to comprehend the scope of POC in order to comprehend money laundering as defined by the Act.

2012 PMLA (Amendment) Act:

Adds the notion of ‘reporting entity,’ which encompasses banks, financial institutions, intermediaries, etc.

The PMLA of 2002 imposed a maximum punishment of Rs 5 lakh, however the amending legislation has eliminated this cap. It allows for the interim seizure and seizure of the property of anybody engaging in such actions.

Method of Money Laundry:

Money laundering involves three steps:

  • The placement of the illicit funds into the legitimate financial system is the first step.
  • In the second step, money pumped into the network is stacked and distributed over several transactions in order to conceal its tainted origin.
  • In the third and final step, money is integrated into the financial system in such a manner that its initial link with the crime is erased and it may be utilised by the offender as clean money.

Popular approaches of money laundering include:

Bulk Cash Smuggling, Cash-Intensive Businesses, Trade-Based Money Laundering, Shell Corporations and Trust, Round-Tripping, Bank Capture, Gambling, Real Estate, Black Salaries, Fictional Loans, Hawala, and False Invoicing.

Profits from Crime

The Finance Amendment Acts of 2015, 2018 and 2019 have amended the definition of “Proceed of crime” as stated in section 2(i)(u) in order to increase the effectiveness of the Enforcement Directorate’s investigations into Money Laundering.

The most difficult aspect of the Prevention of Money Laundering Act (PMLA)[1] has been the interpretation of this clause, since POC is the core of money laundering proceedings. If we ask every attorney who handles money laundering matters, “What is the greatest obstacle he or she faces under the PMLA?” The response would be a definition of “Proceeds of Crime.” Under the PMLA, the Enforcement Directorate may only seize property if it is classed as “Proceed of Crime.”

How may property be classified as “Proceeds of Crime”?

Simply said, if a person commits an offence included in the PMLA schedule as a scheduled offence or predicate offence, then any property gained or created as a result is referred to as proceeds of crime (POC). The profits of crime remain the proceeds of crime regardless of where they are kept: in the home, in a bank account, or with another person. Promoting them as “clean property,” which is the heart of the offence punished under Section 4 of the Act, requires providing an explanation for their acquisition and demonstrating that they have a legal source of income.

As an Example:

An individual is involved in the counterfeit of banknotes and has earned Rs5,000,000 as a result.

Mr. ‘A’ has violated section 489 A of the Indian Penal Code, 1860. Because the offences under the IPC are listed offences under the PMLA, the Rs 5,00,000 would be considered a POC.

Also, Mr. ‘A’ would be individually accountable for both the IPC and PMLA offences he committed and may be prosecuted for both at the same time.

The Finance Act of 2015 has broadened the term to include not just the proceeds of crime that are present in India, but also those that have been transported out of India to avoid accountability under PMLA. If a person transfers POC out of India, the equal value of property in India will be deemed POC in India. Prior to the amendment, the agency was powerless since the PMLA lacked cross-border authority.

In addition, the word ‘abroad’ was added to the definition of POC by the 2018 amendment. If the proceeds of crime from India are transmitted to a foreign state and the form of the POC is changed completely to conceal the origin of the proceeding, then any property of the accused equivalent to the value of POC abroad may also be considered POC under the definition of PMLA.

Subsequently, the Finance Act of 2019 included ‘explanation’ to the definition of ‘proceeds of crime,’ as well as assets that come under ‘proceeds of crime’ as a result of “any criminal conduct related to scheduled offence.”

Therefore, the aforesaid definition, with all of its revisions, has expanded the investigative agency’s ability to combat the scourge of money laundering under the PMLA.

Who has the authority to designate property as “Proceed of crime”?

The Enforcement Directorate (ED) is the principal investigative agency authorised to enforce the PMLA.

After getting the notification and investigating the case, if an officer of the ED not under the rank of Deputy Director has reasons to believe that a particular property is POC, then the ED records his satisfaction in the form of  ‘reasons to believe’ and provisionally attaches the property suspected to be POC.

The officer drafts a provisional attachment order (PAO) and attaches his “reasons” to it, designating the property as POC.

Confiscation and attachment of property

Under the PMLA, there is a comprehensive procedure of attachment and seizure of “Proceeds of crime.” The inquiry first starts with a “provisional attachment” of the property. This is the first phase, following which an adjudicating officer is appointed to conduct an inquiry and confirm the property as POC. Upon establishing the accused’s guilt, the POC is thereafter definitively confirmed. The three levels of property attachment are- “provisional attachment” under Section 5; (ii) “confirmation of attachment” under Section 8(3); and (iii) “confiscation” under Section 8(3). (b).

Confirmation of property attachment

Subsequently, upon the filing of a complaint, adjudicating personnel are expected to analyse all relevant case facts and determine whether or not the temporarily attached property is implicated in money laundering. Upon investigation, if the adjudicating official is certain that the item in question is Criminal Proceeds, he or she might issue an order “confirming” the attachment of property.

“Provisional attachment” of criminal process

According to section 5 (1) of the PMLA, if the director or any officer not under the position of deputy director has grounds to suppose that the property in question is POC and the individual engaged  in a scheduled offence, and such POC can be concealed or transferred, that would further frustrate the proceeding, the director or officer may order temporary attachment of material in possession for a period not to exceed ninety days from the date of the order, in accordance with the second schedule of the Income Tax Act.

No such order of attachment shall be issued unless the document of the scheduled offence has been relayed to a Court under section 173 of the Code of Criminal Procedure, 1973, or a claim has been filed by a person authorised to investigate a scheduled offence before a Magistrate or court having jurisdiction over scheduled offences.

Confiscation of possessions

At the end of the trial, the special court hearing the money laundering case is convinced that a money laundering offence has been committed. The court may then order the forfeiture of the contested property.

Conclusion

The phrase “criminal proceeds” is central to all instances of money laundering. Therefore, the Enforcement Directorate’s decision of POC must adhere to fair and reasonable legal norms. The language and spirit of the applicable section’s interpretation must be followed while evaluating the POC.

Posted on

NBFC and Fintechs expectations concerning the upcoming budget.

The current government introduces its third budget of the term in the upcoming 1st February 2022, several objectives of NBFC (Non-Banking Financial Companies) and Financial Technology (Fintech) start-ups have come across concerning easing of criteria related to taxation and assistance from the government in terms of giving low-cost liquidity to the retail NBFCs. 

Here are the expectations of the NBFC. 

  • Relaxing tax standards for fintech. 
  • NBFC Low-Cost Funding Expectations. 
  • Facilitate liquidity flows to NBFC and Fintech. 
  • Easing GST/TDS standards. 
  • Increased attention to MSMEs and rural development. 

Relaxing tax standards for fintech. 

The fintech industry expects the government to develop an ecosystem that is responsive to the growth of technology-driven launches in the fintech sector. The stalwarts from the Financial Technology industry announced that the expectation from the budget is towards motivating the lending NBFCs who are operating financial and technology grounded interventions to provide a boost to the underserved small and medium enterprises. 

They said the government should work to ease the tax standards for NBFCs and give them significant liquidity assistance. 

They also suggested that motivation should be given to female entrepreneurs by providing similar incentives to tax deductions, ease of access to loans, among others. 

NBFCs expectations for low-cost funding. 

The NBFC sector has raised a question to the government that the priority of the budget must be moved towards those Micro Small and Medium Enterprises (MSMEs) and small entrepreneurs who haven’t been suitable to generate loans at cheap rates and are in a way underbanked. This offer is expected to make the loan service process easier for them. 

NBFC estimates that the Pradhan Mantri Awas Yojana programme (1) should be extended to all rural and urban areas. Benefits must be provided to those in the affordable housing sector, which will help stimulate the economy. 

One of the advice is to facilitate the compliance framework for the NBFCs who are providing loans to the underbanked and unbanked small entrepreneurs and MSMEs so that they can be involved in the formal banking policy. 

They also believe that liberalised, low-cost financing for retail NBFCs is really important for growth in sub-banking sectors. 

Relaxation of liquidity flows to NBFCs and Fintechs. 

The economy is making efforts in response to losses due to the pandemic and has developed a growth path. The government’s efforts to recognise the enhanced operations blended with the effectiveness of the fintech to fulfil the lending requirements of the underserved 

and unserved sectors of society has given positive signs to the industry. 

The fintech industry is awaiting that these efforts made by both the government and the fintech industry are given further motivation in the upcoming budget by publicizing measures to ease the liquidity inflow to the NBFCs and the fintech. 

Still, with the right degree of regulation and liberalization of tax governance, it can also give the right ecosystem for the fintech to grow and give innovative credit results for the underserved and cash strapped borrowers, If the budget is suitable to deliver on the parameters of relaxation in the norms of liquidity. 

Easing GST/TDS standards. 

Fintech and the start-up industry grew phenomenally during the pandemic. These industries now expect the budget to keep them growing and keep investors confident. 

  • Buying Point of Trade (PoS) terminals requires tax exemptions. 
  • Exemptions from GST rates for rural banking agents who remit money between homes. 
  • Subsidies must be granted to offset the waiving of the Merchant Discount Rate (MDR). 

The benefits of digital payments have reached intelligent technology customers because of the gentle taxation in place for these independent digital customers. To ensure that the advantages of digital payments reach the lower-tech smart section of the community and accomplish the lofty goal of financial inclusion, there’s a want from the government’s side to introduce relaxations in GST and Tax Subtracted at Source (TDS) in the financial addition of services which are offered by the business outlets across India.

If the government provides the GST and TDS exemption in these services as well, it will lead to a reduction in the cost of providing financial services. 

Taking into account the phenomenal development of the launch-ups in times of pandemic, another suggestion from the business is to extend the scope of the Startup India Seed Fund Scheme so that the growth of acquainted startups are given financial contribution for exploration and development, prototype development and for products and service trials. 

Greater emphasis on MSME and rural development. 

The financial sector considers that the budget should focus on the revival of the financial sector through the development of the rural sector and the revival of MSMEs. This in turn increases the opportunities for livelihoods. To do this, the government has to increase loans to MSMEs. The expectations of NBFCs about increased lending to the rural sector require an adjustment of regulations for NBFCs and banks, particularly about tax and collection matters. NBFCs expect to be able to grant guarantees on the same basis as banks. Other expectations of NBFCs and fintech discriminate between lending to individuals and small businesses and lending to large companies. 

Conclusion 

The intentions of the NBFCs and Fintechs in this budget revolve around the topics of relaxations in tax standards for the fintech, funding for NBFCs at low cost, ease liquidity flow towards the NBFCs and Fintechs, relaxation in norms connected to GST, TDS, boosted Focus on MSMEs and Rural Development. To add up the expectations of NBFCs and Fintechs is the easing of the norms of lending and funding to the small-scale sector at lower tax rates and procedure of NBFCs at par with banks in periods of issuing guarantees as the banks perform.

Read More : income tax refund

Posted on

Tax Liability

In a recent case of the Director of Income Tax, New Delhi’s. M/s. Mitsubishi Corporation, the Supreme Court (SC) ruled that for times previous to the financial time 2012-13, the taxpayer is entitled to reduce the quantum of income duty that would be deductible or collectable at source (TDS or TCS) when calculating the advance duty liability, even though the taxpayer entered the full quantum without any deduction. As a result, the Supreme Court ruled that in similar cases, interest obligation for a space in advance duty payment (due to the incapability of the duty deductor to abate duty) would not crop. 

 Data of the case 

The taxpayer is a non-resident establishment formed in Japan that does business in India. Through its liaison services in India, it engages in trading conditioning in carbon crude canvas, LPG, ferrous goods, artificial ministry, mineral, non-ferrous essence and products, fabrics, vehicles, and so on. 

During Assessment Years (AY) 1998-99 to 2004-05, the duty officer, after rejecting the taxpayer’s contentions, calculated the income attributable to the taxpayer’s Indian operations and, as a result, levied interest for the space in payment of advance duty. About the duty of interest on space in the payment of advance duty, the taxpayer appealed with the Commissioner of Income- duty (Appeals) (CIT (A)). The CIT (A) determined that the taxpayer must pay advance duty indeed though no TDS was subtracted by the payer. As a result, it determined that interest would be applicable in the current situation. 

Following that, the Income Tax Appellate Tribunal (ITAT) (1) ruled in favour of the taxpayer, citing the Special Bench decision in the matter of Motorola Inc as well as earlier High Court (HC) opinions. The duty department brought the case to the High Court. The High Court addressed the legal question of whether the charge of interest for a space in TDS payment is needed and leviable automatically. It also addressed the question of “ when a payer fails to abate TDS in a sale and transfers the full consideration inclusive of TDS to the payee/ assessee, can the payee assessee abate the quantum, therefore, entered from the advance duty outstanding by it?” 

The High Court cited numerous High Court precedents to find that TDS should be disregarded/ barred when calculating the advance duty liability. Likewise, the High Court stated that a taxpayer can not be punished for a failure on the side of the duty deductor. The duty department has later taken the matter before the Supreme Court (SC). 

Contentions of the duty department 

The contentions made by the income duty department before the Supreme Court were as follows 

  • The responsibility to pay advance duty is distinct from the demand of the deductor to abate TDS. 
  • Interest is levied to repay the government for the detention in the recovery of levies. 
  • When there are two options for duty collection, one from the taxpayer and one from the duty deductor, the duty department’s decision can not be limited. 
  • It was claimed that the vittles concerned with interest calculation (under the Income Tax Act) are stand-alone. As a result, the language employed in laws dealing with advance duty calculation can not be incorporated into sections dealing with interest calculation. 
  • The Profit submitted that the term deductible would relate to the TDS that was d or collected and that the Payee/ Assessee would be entitled to abate TDS from the Advance duty only after the payer had transferred the proceeds of the sale to the Payee/ Assessee after abating the TDS. 
  • Amusement on this supposition, the Profit claimed interest from the assessee under Section 234B of the Act for short payment of advance duty. 

Contentions of the assessee 

The contentions of the taxpayer before the Supreme Court were as follows 

  • The taxpayer contended that the rules governing the manner of calculating interest under the Income Tax Act can not be interpreted in isolation from the vittles governing the calculation of advance duty liability. 
  • Away from the cases cited by the HC, the taxpayer reckoned on the Supreme Court’s decision in the matter of Ian Peter Morris. TDS and direct payment of duty, it was contended, are two distinct mechanisms of duty recovery under the Act. As a result, the taxpayer can not be punished for the failure of the duty deductor to misbehave. 
  • It was asserted that a prospective obligation to pay advance duty and a consequent failure to do so should be proved tourist liability. These prerequisites haven’t been met in this case. 
  • The Assessee contended that the term “ deductible” must be demonstrated literally, and hence whether or not the TDS was subtracted by the payer was immaterial. In any situation, the Payee/ Assessee would be allowed to abate sum from the advance duty liability of the assessee. 
  • The Assessee further claimed that under Section 201 of the Income Tax Act of 1961, the Profit might pursue the Payer for failure to abate TDS, and hence the Payee shouldn’t be obliged to pay any interest under Section 234B of the Income Tax Act. 

Compliances of the Supreme Court and its Judgement 

The Supreme Court said that the issue, in this case, rests around the meaning of the word deductible or collectable at Source.’

Under the before clauses of section 209 of the Income Tax Act, the quantum of advance duty liability is determined by abating the quantum of income duty that would be deductible or collectible during the financial time from income duty on estimated income. Hence, in the case where the taxpayer receives or pays any quantum (on which the duty was deductible or collectable) without the factual deduction or collection of duty, it has been ruled by the court that he’s not liable to pay the advance duty to the extent the duty is deductible from similar quantum. 

And toa taxpayer liable for payment of advance duty about income which has been entered or paid without the factual deduction or collection of duty, the Income Tax Act was amended to change the above-mentioned section to give that if an assessee has attained any income without deduction or collection of duty, also he’ll be liable to pay the advance duty in respect of similar income. 

The Supreme Court took notice of the correction made by the Finance Act of 2012. According to the said correction, a taxpayer who receives any income without TDS or TCS is needed to pay advance duty liability on similar income as well. The revision went into effect on April 1, 2012, and it applied to situations of advance duty payment in the financial time 2012-13 and posterior. 

In this situation, all of the times are from the forenamed correction. Therefore, counting on an earlier judgement, the Supreme Court emphasised that in dealing with construction issues, unborn legislation may be pertained to for correct interpretation when the earlier Act is vague or nebulous or readily able of further than one meaning. As a result, the Supreme Court ruled that if the income duty department’s interpretation is espoused and accepted in this case, the correction made by the Finance Act 2012 will be rendered empty. 

As a result, the SC held that, for the correction to have the willed effect, it must be understood that, for all times before hee financial time 2012-13, the taxpayer is entitled to reduce the quantum of TDS or TCS when calculating the advance duty liability, even though the full quantum without any deduction. 

The Supreme Court also rejected the argument of the duty department that vittles dealing with interest calculation must be read in isolation, holding that while the description of‘ assessed duty refers to duty subtracted or collected at source, the pre-condition for attracting interest must inescapably be met. 

The Supreme Court decided that the taxpayer couldn’t be held liable for dereliction in the payment advanced quantum of income duty that’s deductible or collectable at source may be subtracted by the taxpayer when calculating the advance duty liability. 

Conclusion 

This judgement gives important- demanded clarity on the calculation of interest obligation on a space in advance duty payments, where the whole quantum of income was chargeable for TDS. Given the variations made by the Finance Act of 2012, this case may not be useful for FY 2012-13 onwards, but it’ll go a long way towards resolving ongoing controversies about times previous to FY 2012-13.

Read More : investment

Posted on

ITR Form Capital Gains and Tax Exemptions.

Regardless of the amount obtained or lost, capital gains or losses must be disclosed when filing an income tax return. So, what exactly is capital gain, and how does one report capital gains on an ITR? In this post, we’ll discover out.The earnings made from the selling of capital assets are referred to as capital gains. There are two kinds of capital gains: short-term and long-term. Long-term capital assets are retained for at least 36 months, and short-term assets are held for a shorter length of time.

Capital gains occur when you sell a capital asset for a higher price than you paid for it. Capital assets are investment products such as mutual funds, stocks, or real estate products such as land, houses, and so on.

Capital gain refers to an increase in the value of these investment goods when they are sold. Similarly, capital loss is utilised when the asset’s value falls below its acquisition price. A realised capital gain occurs when an asset is sold for a higher price than it was originally purchased for.

Ways to calculate capital gains:-

  • Capital gains tax on short-term profit

The following formula is used for short-term capital gains:

Short-term capital gain = (cost of purchase + cost of improvement + cost of transfer) – full value consideration

  • Taxation of long-term capital gains

The following formula is used to calculate long-term capital gains:

Long term capital gain = full value of consideration received/acquired – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where indexed cost of acquisition = cost of acquisition x cost inflation index of transfer/cost inflation index of acquisition.Indexed cost of improvement = cost of improvement x cost inflation index of transfer year / cost inflation index of improvement year

  • The capital gains tax rate

The rate at which capital gains in ITR form are computed may differ from year to year. Individuals are taxed at a rate of 20.6 percent on long-term capital gains. There are no deductions available under capital gains tax. It should be emphasised that the short-term capital gains tax is levied based on the tax bracket into which an individual falls.

  • Gains on the sale of immovable property

Gains from the sale of immovable property within two years after acquisition are termed short term capital gains, whereas gains beyond two years are considered long term capital gains. Long-term capital gains are taxed at a rate of 20% with indexation, whilst short-term capital gains are taxed at the slab rate.

           Gold and bonds, as well as jewellery and bullion, are subject to capital gains tax regardless of how they were obtained—self-purchased, gifted, or inherited. If it is sold within three years of the acquisition date, the gains are considered short term capital gains; otherwise, the gains are considered long term capital gains.

           Short-term capital gains from the sale of gold are taxed at the slab rate, whereas long-term capital gains are taxed at 20% plus indexation. Gains from the transfer of shares and equity-oriented mutual funds within one year of acquisition are considered short-term capital gains, whereas gains beyond one year are considered long-term capital gains.

  •  Capital Gains Disclosure on ITR Form: Tax Exemptions

The government provides a number of exemptions that can be claimed on capital earnings generated. The list of exclusions that can be claimed with regard to capital asset gains is detailed below.

According to Section 54 of the IT Act[1,] a person is eligible to a tax exemption on profit made if the entire profit amount is utilised to acquire a property. The seller may buy a new house within two years after the sale of his old property, or he may build a new house within three years of the sale.

Section 54 EC exempts an individual from paying taxes if the whole capital gain is invested in bonds issued by the NHAI (National Highway Authority of India) or Rural Electrification Corporation. There is a limit to exemption under Section 54 EC.

Capital gains will not be taxed on the sale of property if the entire amount is invested in the formation of a small or medium-sized enterprise. To qualify for tax breaks, manufacturing tools and machinery must be bought within six months of the sale.

Capital losses can be used to balance the tax effect on capital gains in the computation of tax, although only long-term capital losses can be set off against LTG. Short-term capital losses can be offset against short-term and long-term capital profits.

Read More: sebi depository participant registration advantage

Posted on

What are the Ramifications of Not Filing GSTR 3B?

The GST bill was first introduced by the Union Government on 1st July, 2017. The Goods and Services tax was introduced as an indirect tax reform in India by amalgamating various indirect taxes into one tax. Under the GST law, a registered taxpayer is required to file a number of GSTR forms. In this article we shall discuss one such form called GSTR 3B and will also understand the ramifications of not filing the same.

What is GSTR 3B?

GSTR 3B is a form which should be filed by a regular GST taxpayer. This return form comprises a summary of details of the outward supplies made and the details of the input tax credit. Generally this form should be filed by 20 of the next month, but the government can extend its filing date if they want to. 

GSTR 3B- Consequences of not filing the GSTR 3B Form

  • Late Fees (Section 47 CGST Act 2017)

One of the consequences which can be faced by the taxpayer is levy of late fees penalty for not filing GSTR 3B. The late fees will grow each day until it reaches the capped limit. Further you are not allowed to file your return until you pay the late fees. 

  • Levy Of interest (Section 50)

In case the taxpayer is required to pay the tax within the stipulated given date and he failed to do so then interest at the rate of 18% shall be levied for such delay in payment. The interest shall be payable if you use cash ledger balance to pay tax. 

  • Restriction of E-way Bill Generation (Section 138E)

In case a person fails to furnish returns for a consecutive two tax period, then a restriction shall be placed on the generation of e-way bill for all types of outward supply of that person. When the return is filed then, such restrictions shall be removed. 

e-way bill restriction will cause restriction of outward supply valued more than 50k outside the state and outward supply of specific value notified by the State government inside the state.

  • Penalty of Not paying of tax amount collected within 3 months

In case of specified offenses, penalties are placed under the GST law. Penalty will be levied if tax is not paid even after 3 months from the due date. The penalty in such a case will be equal to the tax amount collected subject to a minimum of 20,000.

  • Suspension and cancellation of GST Registration (section 29(2))

In case a regular taxpayer fails to file the return for a period of six months continuously, then the gST registration of suc person shall be liable to be cancelled. However, before the registration is terminated, the officer will issue a notice requiring a clarification and such person must respond within 7 days by providing a reason that why his registration should not get cancelled. In case the offer is not satisfied with the reply then he will initiate the cancellation process and GSTIN will be suspended. 

  • Recovery Proceedings (Section 79)

Not filing form GSTR 3B can lead to initiation of recovery proceedings however, before such initiation, notices and reminders must be served. The following procedure is followed:

  1. The first reminder will be sent 3 days before the due date;
  2. The second reminder is sent immediately after the due date;
  3. A notice shall be sent 5 days after the due date asking the person to file return in 15 days;
  4. If, after the 15 days period, return is still not filed, then the officer can proceed for assessment. The officer will calculate the tax liability. An order would be issued in ASMT 13, and summary will be uploaded in Form DRC 07[1].
  5.  Once the order is served, 30 days after that, the officer shall initiate the recovery proceeding and actual recovery under section 79.
  • Restriction on Input Tax Credit Of Recipients

In order to claim input tax credit the payment of tax to the government by the supplier on supplies is required. If GSTR 3B is not filed then it may be assumed that the supplier is yet to pay taxes. However, there are exceptions to it.

Conclusion

GSTR 3B is a tax form which should be filed by a regular taxpayer. As a regular taxpayer one must file its return without fail. Hee are various forms which are needed to be filed by the taxpayer, that is it is always recommend to seek assistance of an expert who would help you in filing of GSTR form.

Posted on

Eligibility Requirements and the Application Process for an NBFC AA License

In 2016, the NBFC Account Aggregator framework was established, with account aggregators facilitating data allocation from various financial sector entities and acting as a consent broker. It entails the transfer of data between financial institutions, but only after the client’s agreement. The RBI had issued master instructions in this regard. Let’s go over the NBFC AA License in in detail.

The Need for an NBFC AA License Collecting disparate data, combining it, and submitting it to a financial institution while applying for a loan can be a time-consuming and perplexing task for an individual. As a result, the concept of NBFC AA was established to assist customers in obtaining a consolidated view of their financial holdings that are distributed across many financial sector authorities.

Account Aggregators are financial entities that allocate financial data from financial information providers to financial information users. The client’s permission is required.

Financial Information Providers– These are entities that give a customer’s financial information in response to a request from another entity.

Users of Financial Data

These are the organisations that acquire user information from providers in order to conduct market research, customer analysis, and so on. Both organisations and individuals are included in this category. These are governed by regulatory bodies such as SEBI, IRDA, RBI, and PFRDA.

What includes Financial Information?

As per the RBI master directions, financial information includes the following:

  • Different kinds of bank deposits 
  • Debentures
  • Equity
  • ETFs 
  • NBFC Deposits; 
  • Bonds; Real Estate Investment Trusts Units
  • Mutual funds units 
  • Units of AIFs
  • Tradable Government Securities.

How do I get an NBFC AA licence?

Requirements for Eligibility:

  • The company applying for NBFC Account Aggregator License should have a net owned fund of 2 crore rupees.
  • The company should have the resources required to offer such services;
  • The company should have adequate capital structure;
  • The company must be having fit and proper promoters;
  • The management of the company should be such that its general character must not be prejudicial to public interest;
  • An effective IT system plan should be laid by the company;
  • The leverage ratio of such company should not be beyond 7.

Procedure:

  • The company seeking an NBFC AA Licence should apply to the RBI[1]. Such an application should follow the guidelines outlined in Annex 1 of the RBI Master Direction.
  • Once the RBI is satisfied that the company meets the above-mentioned eligibility standards, it will give in-principle clearance.
  • The in-principle approval is valid for 12 months, during which time the company must set up a technology platform, enter into legal papers required for operations, and report compliance position to the Bank.
  • When the Reserve Bank is satisfied that the company is ready to begin operations and has met all of the registration requirements, 
  • When the Reserve Bank is satisfied that the company may begin operations and is in conformity with the registration criteria, it will issue the NBFC Account Aggregator Registration Certificate.

When is the NBFC AA License revocable?

The RBI has the authority to revoke the NBFC AA’s registration if any of the following conditions are met:

  • The company closes account aggregators’ business; 
  • Where the company is unable to satisfy any condition to which the certificate of registration has been issued;
  • In the case where the bank feels that the company can no longer hold COR;
  • The company breaches a condition mandatory for obtaining COR; 
  • Where the company fails to maintain accounts or issue information or disclose information as required by banks; 
  • Where the company fails to submit its books of accounts or other documents for assessment purposes.

What is NBFC AA’s responsibility?

The following are the responsibilities of NBFC AA:

It shall provide services to clients only with their consent; it shall not impede any customer transaction; and it shall not contract in any business other than the business of NBFC AA. It should be noted, however, that permission has been granted for the disposition of investible surplus in non-trading avenues; the information must be shared only with the customer who owns it or to other FIU as sanctioned by the customer according to the terms and conditions of the consent; and it shall have a citizens’ charter that protects customers’ rights.

Consent is required in the operation of an NBFC-AA. NBFC-AA cannot retrieve, share, or transfer any of the customer’s financial data without the customer’s consent. The notion of NBFC AA was created to assist customers in obtaining a consolidated view of their financial holdings that are distributed among many financial industry authorities. The credit approval and authorization process for lending becomes significantly more effective with an NBFC AA License.

Posted on

Global Initiatives to Prevent Money Laundering

Money laundering is the unlawful process of presenting “dirty” money as legitimate rather than ill-gotten and there is a die-hearted need to prevent money laundering. Money laundering is explained in Article 1 of the European Communities Directive and Convention on the Laundering, Search, and Confiscation of the Proceeds of Crime as the conversion of property knowing that certain property is derived from serious crime, concealing or disguising the illicit origin of the property, or supporting any person who is engaged in committing such offences. Money laundering may also be defined as the practice of making it appear as though significant sums of money gained through major crimes came from a lawful source. Money laundering is also specified in Section 3 of the Prevention of Money Laundering Act, 2002.

In India, money laundering is carried out via a traditional practice known as ‘Hawala.’ Hawala is an alternate system in which “financial services, historically functioning outside the normal banking sector, where value or assets are transferred from one geographical place to another” are provided. Transactions through Hawala take in effect without any governmental oversight, making it simpler for people to make deposits and withdrawals through ‘hawala dealers’ instead of financial organizations.

Impact of Money Laundering

  1. Throws away international investment
  2. creates financial crisis
  3. The impact on currency and interest rate volatility
  4. Promotes a culture of tax avoidance
  5. Give a boost to illegal activity
  6. Negative effects on the financial markets’ and institution’s image

Global efforts to prevent money laundering and terrorism funding

Money laundering is not a new phenomenon; instead, it is an international one. Many international agreements address money laundering, and various projects have been launched to address this global issue.

  • The United Nations Convention against Illicit Trafficking in Drugs and Psychotropic Substances, 1988 – The Vienna Convention

This event took place in December 1988 and was one of the earliest initiatives aimed to prevent money laundering. The primary goal of this convention is to establish efforts to counter money laundering by requiring member states to criminalise the laundering of money from drug trafficking (Article 6), as well as to promote international cooperation in investigations, prosecutions, and jurisdictions (Article 7) and to make extradition between member states possible (Article 6). Furthermore, it established a concept that local banking secrecy rules should not interfere with international criminal investigations.

  • The Basel Committee on Banking Regulation and Supervisory Practices

In December 1988, the Basel Committee on Banking Regulations and Supervisory Practices declared its intention to promote the banking sector to take a consistent approach to guarantee that banks are not used to hide or launder money obtained via illicit or unlawful activity. However, that statement does not limit itself to any drug-related money laundering; instead, it extends to laundering through financial systems, including deposit, transfer, and any form of concealment of money from drugs, terrorism, fraud, and so on. It also concentrates on the sector wherein the individual will not be permitted to utilise any financial system that is involved in any type of money laundering.

  • The council of Europe Convention

It creates a common policy on the subject of money laundering, provides a common description of money laundering, and provides means for dealing with it. It also establishes certain international collaboration among member nations, which may include governments not affiliated with the Council of Europe. The key objective of this agreement is to improve international cooperation in the areas of investigative assistance, search, seizure, & confiscation of the revenues of all sorts of criminal activity, including drug trafficking, terrorist crimes, and arms trafficking.

  • Financial Action Task Force on Money Laundering

FATF is an intergovernmental organisation was founded in 1989 at the G7 summit in Paris with the notion and goal of establishing high standards and promoting the efficient implementation of any legal, regulatory, and operational measures to combat the evil practise of money laundering and terrorist financing. FATF has acknowledged several suggestions that are recognised by international money laundering standards. In October 2001, 8 special recommendations were announced, and in October 2004, a 9th special suggestion was issued, discussing the improvement of international standards for fighting money laundering and terrorism funding. In 2012, the FATF Recommendations were revised.

  • Interpol

The International Criminal Police Organization was founded in 1923 and now has 194 members. With the mutual assistance of national police authorities worldwide, Interpol works to preserve global security. Interpol plays an essential role in tracking down criminals, conducting cooperative investigations, capacity development and training, and sharing and providing data access to governments. Interpol created the Interpol Money Laundering Automated Search Service (IMLASS) to aid anti-money laundering efforts by building a database and tracking, connecting, and identifying suspects and people from all countries, as well as tracking the flow of unlawful funds.

  • UN Global Program against Money Laundering

It was founded in 1997 with the goal of increasing the efficiency of all international measures to prevent money laundering via technical cooperation services provided to governments. The major objective of this programme is technical cooperation, which includes actions such as raising awareness and training and developing institutions. It also intends to aid in the creation of financial investigative services to ensure the effective operation of the laws.

Indian Legal Framework to prevent Money Laundering

  • Money Laundering Bill – India is a signatory to the United Nations Resolution, 1998, that calls on member states to take strict action against money laundering, the Indian government enacted the Prevention of Money Laundering Bill, 1999, that describes money laundering as the act of acquiring, owning, or possessing any proceeds of crime and intentionally entering into any transaction involving a crime listed in IPC, 1860. The act’s goal is to prohibit and regulate illicit financial operations involving drugs and narcotics, as well as other crimes.
  • Prevention of Money Laundering Act of 2002 – This Act was enacted in 2002 in order to prevent money laundering as well as to penalise those who benefit from it. This statute empowered our government or any other authorised public authority to seize property obtained through illicit earnings and money. In this legislation, the Financial Intelligence Unit examines all records to detect and identify any suspected transactions, and the Enforcement Directorate subsequently conducts an inquiry.
  • Prevention of Terrorism Act of 2002 – This is the Indian government’s first legal effort to combat terrorism and other connected issues. Under Section 8 of this Act, the Central Government is allowed to forfeit proceeds of terrorism regardless of whether or not the person whose possession it is seized or attached is prosecuted under the given act. It also strives to prevent terrorist operations in fact and implement seizure and blocking of cash for terrorism financing.
  • Financial Intelligence Unit – Although it is not a regulatory authority, the major function of this unit is to acquire all financial intelligence in collaboration with regulatory agencies such as the RBI, SEBI, and IRDA, as well as to monitor all suspicious transactions and report them. It is in charge of coordinating and enhancing all national and international intelligence.

Guidelines on Anti-money Laundering

SEBI Guidelines

  1. These regulations apply to SEBI-registered intermediaries.
  2. It imposes specific obligations on SEBI-registered intermediaries to implement policies and processes to support policies.
  3. It also discusses how to prevent money laundering, which will include the dissemination of anti-money laundering and illegal activity regulations, such as terrorism funding.
  4. It is in charge of customer account information, securities transactions, client acceptance policy, customer due diligence procedures, and record keeping.

RBI Guidelines

  1. These standards are applicable to all banking and non-bank financial firms regulated by the RBI.
  2. KYC Implantation (Know Your Customer).
  3. The major goal is to prevent people and businesses from misusing banks and non-bank financial institutions (NBFCs) for money laundering.

Other Initiatives to combat Money Laundering

  1. Bank Obligations – It is the legal responsibility of the banks to keep the details of consumers at the moment of creating a new account confidential as possible and to guarantee that all the details are in safe hands and that no one can misuse that information. It is also the legal duty of banks to make sure that the data sought and gathered from the customer is relevant to the perceived risk and must be sought separately with the consent of the customer.
  2. KYC Policy – The bank must create a KYC policy for each customer that includes certain fundamental aspects such as Customer Acceptance Policy, Customer Identification Procedures, Risk Agreement, and Transaction Monitoring.

Conclusion

Money laundering and terrorism funding represent a major danger to our financial well-being and also any country’s sovereignty. Terrorism funding is another big issue that appears to be nearly difficult to track down and capture because the majority of these transactions are in cash and no institutions are engaged in the process. The Prevention of Money Laundering Act, 2002 (PMLA) has been amended to include financing activities connected to terrorism. The RBI and the SEBI each has their own set of anti-money laundering principles. The FIU prefers to receive as many reports as possible in electronic form. Even though India has this PMLA Act and so many recommendations, it still has numerous high-profile money laundering instances; it just need to execute those rules and regulations appropriately in order to prevent money laundering.

Posted on

Brief Description For Online Bihar Business Tax Registration

In India, Professional tax is levied on persons working in the government and non-government sectors, or by the respective state governments in any profession such as chartered accounts, lawyers, doctors, etc. The tax levied in this manner differs from the state: the state due to the difference in tax rates set by the respective state governments. Professional tax collected from a salaried employee is considered a deduction under the Income Tax Act. This article explores various aspects of Bihar commercial tax.

Bihar State Government collects Bihar Professional Tax from persons earning from salary or occupations (e.g. Chartered Accountant, Lawyer etc.) or engaged in business or business, professional tax has to be paid. To pay professional tax, registration has to be done as per the rules laid down by the respective state governments. In this article, we will focus specifically on the registration process for professional tax.

Bihar Professional Tax Act, 2011

The Professional Tax Department, regulated under the Government of Bihar, is responsible for collection of professional tax arrears from professionals in the state. According to the provisions of the Bihar Professional Tax Act, 2011, a provision has been set to impose a business tax of 2500 (as maximum) and a yearly (minimum Rs. 1000) on persons associated with a business or profession.

In India, professional tax is regulated by the respective state governments on persons working in government and non-government sectors or from income from business or business or by profession such as professionals, company secretaries, chartered accountants etc. The professional tax levied on such persons varies. The amount recovered as professional tax from a salaried employee is considered a deduction under the Income Tax Act.

The Professional tax collected by the Bihar State Government is included under the Bihar Professional Tax Act, 2011.The Commercial Tax Department is responsible for collecting professional tax in Bihar. Maximum of Rs. 2500 and a minimum of Rs. 1000 per year can be collected as professional tax. The state government does not charge any application fee for professional tax registration.

Benefits of professional tax registration in Bihar

Benefits for professional tax registration are as follows:

  • It helps to comply with state laws.
  • It protects the interests of the employer and the employee or the person engaged in the business / business, or the practice of any profession.
  • The commercial taxes deducted are in accordance with the slab rates prescribed by the state government in accordance with the applicable regulations and act.

Documents Required for Professional Tax Registration in Bihar

Some essential documents have been prepared for professional tax registration in Bihar, which are as follows:

  • Filled application form
  • Address proof of the applicant (which includes telephone, electricity bill or driving license or copy of passport)
  • Applicant’s ID proof (which includes voter ID card or Aadhaar card or driving license or copy of passport)
  • PAN card copy or PAN of partner or proprietor or doer or PAN card of employer
  • Bank account details (including a passbook or copy of bank account details showing bank name and bank account number.)
  • Two passport size photos

Tax Slab Rate for Bihar Professional Tax

Professional tax slab rates in Bihar are determined according to the Businesses, Trades, Calling and Employees Act, 2011:

S.N.Class of TaxpayerTax Amount Payable
1.Salaried individuals have income between Rs 3 lakh to Rs 3 lakh per year and range between Rs 5 lakh and Rs 5 lakh per annum. Annual income of more than 10 lakh rupees per year1000 rupees per year 2000 rupees per year 2500 rupees per year
2.Dealer registered under Bihar VAT Act, 2005 or registered only under Central Sales Tax Act, 1956: Sales or purchase turnover is up to Rs 10 lakhs, with sales or purchases ranging between Rs 10 lakhs and Rs 20 lakhs. A turnover of Rs 20 lakh per year for sale or purchase, turnover of Rs 20 lakh and annual turnover of sale or purchase is up to Rs 40 lakh. Over 40 lakh rupees per yearNil (Rs. 1000 per year. 2000 per year. Rs. 2500 per year)
3.Holding is permitted for transportation under the Motor Vehicles Act, 1988, which can be used for fire or reward, where any person holds a permit for: Bus or truck like any taxi passenger car or any vehicleRs 1000 per year Rs 1500 per year
4Companies registered under the Companies Act, 1956 and engaged in any profession or business or callingRs 2500 per year

Process For Professional Tax Regulation in Bihar

Some steps have been made for registration of Bihar professional tax, these steps should be followed: 

Step 1: Visit the official website of the Commercial Tax Department of the Government of Bihar. 

Step 2: Under e-Services tab, click on e-registration. 

Step 3: After that the next page will appear, select the Commercial Tax option.

Step 4: Then the applicant has to fill all the required details and upload the related documents and then click on the add button. 

Step 5: Then click on submit.

Step 6: Acknowledgment receipt will be generated and the applicant will need to save the receipt for future reference. 

Once the registration is approved through the concerned authority, the applicant is notified via an SMS or email. The registration process is usually 15 days from the date of application and after filling the verification form. The deputy commissioner, assistant commissioner and commercial tax officer are designated as the authority to grant a professional tax registration certificate.

Track Professional Tax Registration in Bihar

The application registration status can be easily checked by visiting the official website and then selecting the registration type. Then enter the application number on the acknowledgment receipt.

Penalty in the case of Professional Tax in Bihar

If a taxpayer fails to pay the professional tax within the specified time, the assessing authority may impose a penalty of 2% of the tax amount for each month until the default continues.

Conclusion

Bihar Professional Tax is applicable to persons who are receiving salary from their employer or engaged in trade / occupation or practice any business. It is clear from the article above that state governments set the tax slab rate to levy professional tax.

Posted on

Registration Requirements for Web Aggregators

Who are Web Aggregators?

Web aggregators are insurance intermediaries who are registered with Insurance Regulatory and Development authority of India (IRDA). Web aggregators have registered websites on which they provide duly compiled information of all the insurance policies provided by different insurance companies. 

Who can be an Applicant?

Following are the persons who can apply for Insurance web aggregator-

  • Any company registered under Companies Act, 2013 or any of its previous versions.
  • Any LLP registered under Limited Liability Partnership Act, 2008. However, the following persons cannot be a partner in that LLP.
  • Non-resident entity.
  • Any LLP registered under Foreign laws
  • Any person resident of outside India as prescribed under Foreign Exchange Management Act, 1999 (FEMA)
  • Any person duly recognized by IRDA as an Insurance web aggregator.

Eligibility criteria for registration as an Insurance web aggregator

Minimum Capital Requirements

To apply for an insurance web aggregator, the applicant is required to meet the minimum capital requirement of Rs. 25 Lakh.

In case of a company, such capital must be issued in the form of subscribed capital

And in case of a Limited Liability Partnership then the contribution must be in the form of cash only.

Minimum Net worth Requirement

The minimum net worth requirement for insurance web aggregators is Rs. 25 Lakh.

For this purpose, they are required to review their Net Worth half yearly on 30th September as well as on 31st March every year. Along with these reviews, web aggregators are also required to submit a certificate from a Chartered Accountant to the Authority every year after the finalization of its accounts.

Application Fee

While submitting an application form for Insurance web aggregator the applicant is required to submit non-refundable application fees of Rs. 10,000/- plus applicable taxes on the same.

Application for Registration

For application form for Insurance web aggregators one has to fill and submit the Form A. format of Form A is provided in schedule I of the regulations. 

Validity of Certificate of registration

Once the certificate is issued to the applicant, it remains valid for a period of 3 years from the date of registration and issue of such certificate.

However, it can be cancelled or suspended by the authorities at any point of time before that in case of any non-compliance of the provisions stated in the regulations.

Conditions for Registration

There are certain conditions whale analysing the application and they are as follows-

  • The applicant is as per the person defined under regulation 2(k)
  • To make sure that the applicant is not registered as any other form of insurance intermediary as per the relevant regulations issued by the authorities. However, if any of its group entities is involved in any other kind of insurance intermediary business, registration can be granted after making sure that there are no conflicting interests.
  • The applicant must not be in kind of referral arrangements with any registered Insurer.
  • The applicant must have a registered website to undertake web aggregator activities.
  • The appointed Principal Officer must have specified academic qualifications as mentioned in Form C of Schedule I and has undergone the specified training and qualified the examination for the same.
  • Along with the principal Officer, the Authorized Verifier must also have completed the relevant training and passed the specified examinations.
  • All the officers of the applicant organization must qualify the fit and proper criteria specified in Form D of schedule I.
  • The Authority must check if in past one year any application for registration as a web aggregator is either rejected by the Authority itself or voluntarily withdrawn by the applicant.
  • The registration granted must be in favour of the policy holders.
Posted on

What are the functions of IRDA?

Insurance Regulatory and Development Authority also called as IRDA, is the supreme authority that authorizes the functioning of insurance business in India. It was established by IRDA Act, 1999. The primary purpose of IRDA is to safeguard the interest of policyholders and also to ensure the growth of the insurance company in the country. In this blog we will discuss the various roles and functions of IRDA.

Objectives of IRDA

Following are the objectives of IRDA-

  • To carry forward the interest of policyholders.
  • To uphold the development of the insurance sector.
  • Ensure quick resolution of claims
  • Prevent frauds and malpractices
  • To ensure fair conduct in the financial market when dealing with insurance.

Significance of IRDA Functions

IDA is an apex statutory body that regulates and develops the insurance sector in India. In India general insurance was first built in Kolkata in the year 1850. Since then various players in this market. Each organization rehearsed business on its own rates and rules. It made clients unreliable, which brought into question the validity of the insurance. With time the administration understood this reality and subsequently set up an autonomous administrative body called IRDA. After that new requests came out and the market was rushed and overflowed with he insurance products.

Functions of IRDA

Section 14 of the IRDA Act, 1999 gives the authority to ensure the regulation, development and promotion of the insurance business. Some of the essential functions of IRDA are as follows-

  • To provide applicants with the registration certificate, renewal, modification, withdrawal, suspension or cancellation of such registration.
  • To protect the interest of policyholders in case of assigning and nominating the policyholders, understanding insurance claims, insurable interests, surrender the value of the policy and other terms and conditions of the insurance contract.
  • To mention required qualifications, code of conduct and practical training for intermediary/ insurance intermediaries and agents.
  • To explain the code of conduct applicable to the surveyors as well as to the assessors.
  • To ensure the efficiency and proficiency of the conduct of the insurance business.
  • To levy charges in order to carry out the purpose of the act.
  • To call for information, undertaking, inspection, conducting enquiries and investigations, including the audit of insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business.
  • To regulate and control the rates, benefits, terms and conditions offered to the insurer pertaining to general insurance business not controlled and regulated by the tariff advisory committee under section 64U of the insurance act, 1938.
  • To specify the way in which the books should be maintained and the manner in which the statement of accounts is to be rendered by insurers and other insurance companies.
  • To maintain the investment funds by the insurance companies.
  • Regulation of the maintenance of margin solvency.
  • They decide the dispute among the insurers and the intermediaries of insurance intermediaries.
  • To administer the functioning of the tariff advisory committee.
  • Setting down the percentage premium income of the insurer of the finance scheme to promote and regulate the professional organizations.
  • To safeguard the interest of the policyholder in case of assigning and nomination of policyholders.
  • Setting out the percentage of life insurance business and general insurance business to be taken ahead by the insurer in the rural or social secor.
  • To regulate the insurance industry in a way that ensures financial soundness of the applicable laws and regulations.
  • To periodically frame laws to remove any scope of ambiguity in the insurance sector.
  • To take action where the appropriate standards are inadequate or not enforced effectively.
  • To grant, modify or suspend licenses for insurance companies.
  • To perform such other functions of IRDA as may be prescribed.

Conclusion

There are some roles of IRDA. in an Indian economy there are many insurance companies that are coming in the market. Here IRDA has some special role to play. In order to keep the pace of the development the functions of IRDA should be performed accurately enough to provide every player with a fair deal and also to make sure that the customers also have a variety of plans to choose from.