INDEX Direct Taxation Indirect Taxation Corporate and Other Laws International Trade

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2. INDEX • Direct Taxation • Indirect Taxation • Corporate and Other Laws • International Trade • Statutory Due Dates for July 2011 TM Newsletter – July 2011

3. DIRECT TAXATION Index • Tax return breather for salaried persons • The finance ministry has announced that salaried persons having total annual income of up to Rs.5 lakh would not have to file tax returns for the assessment year 2011-12. Notifying the decision, the Central Board of Direct Taxes (CBDT) said that individuals having total income up to Rs.5 lakh for financial year 2010-11, after allowable deductions and consisting of salary from a single employer and interest income up to Rs.10,000 from deposits in a savings bank account, were not required to file their income tax returns. “Such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No.16,” CBDT chairman Prakash Chandra said. • However, persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims, will not be covered under the scheme. Also, industry consensus reveals that returns may not be done away with easily as they are required by banks during loan processing, visa applications etc. • Dedicated cell to monitor earnings, spending and assets of HNIs proposed • Highnetworth individuals (HNIs), may soon be subject to intense year-round scrutiny by income-tax officials. A panel constituted by the Central Board of Direct Taxes, or CBDT, has proposed setting up a dedicated cell to monitor those earning over Rs.1 crore per annum or spending more than Rs.10 crore a year, or having assets in excess of Rs.100 crore. The panel has also suggested that the Income-Tax Department share information on these individuals with its overseas units to keep a close tab on their spending abroad. TM Newsletter – July 2011

4. INDIRECT TAXATION Index • Government extends DEPB scheme by 3 months, alternative being worked out • The government has extended the duty entitlement pass book (DEPB) scheme for exporters for three months, till September 30, as it is still working on an alternative plan. The DEPB scheme, the popular tax refund scheme for exporters that came in force in June 1997, was due to end on June 30 2011. Finance secretary, Sunil Mitra said that duty drawback would take it's place after DEPB is phased out. • "We have appointed a committee which we think will take a couple of months to decide on all India drawback rates for items under DEPB," he said. Planning Commission member Saumitra Choudhury is heading an expert panel to work out the duty drawback rates for all export products. Exports under the DEPB scheme currently account for a quarter of the total exports, of which engineering, textiles and chemical sectors constitute nearly 70 percent. The CII has welcomed extension of DEPB scheme by 3 months and the government's intention of developing a replacement for the DEPB scheme. "During its interactions with the Government, CII has strongly argued that higher cost of capital, lack of zero-rating for exports, high cost of containerized railway freight, high cost of power and the need for captive power make Indian exports less competitive when compared to other emerging countries. The DEPB is one such scheme which helps to reduce the impact of such higher transaction costs and therefore its extension is a move in the right direction," said Chandrajit Banerjee, Director General, CII.The rates in the alternative duty drawback scheme are fixed annually based on the changes in the duty structure in the budget and are lower than DEPB.The DEPB scheme was intended to neutralise the impact of basic and special customs duty on the import content of a product meant for export. TM Newsletter – July 2011

5. CORPORATE AND OTHER LAWS Index • From July 1, check your EPF account balance online • For the over 47.2 million members of Employees Provident Fund Organisation (EPFO), finding out the balance in their EPF account will just be a few clicks away from next month. • “The updation of accounts is currently on by all the 120 offices across the country and we are expecting that the subscribers will be able to view their account balance online from July 1 this year,” a senior EPFO official told Business Standard. He said in the first phase, members would be able to view their EPF balance of the previous financial year on the website by quoting their account number. “In the next phase, accounts will be updated to show the latest balance. This might take 3-4 months after the introduction of the facility in July.” • The initiative is expected to address major grievance of EPF subscribers as, at present, it is difficult to ascertain the exact amount in the EPF independently at a particular time. Once it is possible to view the account balance, the members will be able to put pressure on the concerned offices in case the contribution has not been deposited. • “This will bring a lot of transparency in the whole process of employers submitting EPF contributions in the accounts of employees. Ninety per cent of the grievances on whether the money has been submitted or not, would be over,” said the official. TM Newsletter – July 2011

6. INTERNATIONAL TRADE Index • Taxation of qualified foreign investors to rest with MFs • Mutual funds will be responsible for deduction of tax at source (TDS) on any profits made by qualified foreign investors (QFIs), a top Finance Ministry official has said. QFIs are new category of foreign investors who will be allowed to invest in equity schemes of Indian mutual funds. This category essentially comprises foreign individuals, companies and pension funds that are not separately registered as a foreign institutional investor (FII) or a non-resident Indian (NRI) with the Securities and Exchange Board of India (SEBI). All the existing provisions of taxation will apply to them when this scheme is brought into force, the official said, when asked if QFIs would be eligible for tax exemption if they come into India through the Mauritius route. Indications are that foreign investors, such as the FIIs, will be able to use treaty benefits and thereby avail themselves concessional tax treatment in certain cases. • A QFI could invest in Indian mutual funds through two routes – Unit Confirmation Receipt (UCR) route and the direct depository participant (DP) route. The first route involves the issue of UCRs while the second route involves opening of demat accounts by QFIs with DPs, which would hold mutual fund units on behalf of the foreign investors. All DPs intending to avail themselves of the opportunity to open demat accounts of the QFIs would have to be registered with SEBI for the purpose. DPs having paid-up capital of Rs 50 crore and above will only be eligible to open demat accounts of QFIs. • The DP route will be operated through separate pooled bank accounts to be maintained by DPs, according to Thomas Mathew, Joint Secretary (capital markets) in the Finance Ministry. One QFI can open only one demat account in any one of the qualified DPs. Also, DPs will have to report their QFI transactions and holdings in their QFI pooled account to SEBI in the form and according to the periodicity prescribed by SEBI. TM Newsletter – July 2011

7. STATUTORY DUE DATES FOR JULY 2011 Index • Statutory Due Dates Calendar for July 2011 TM Newsletter – July 2011

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