The Central Board of Direct Taxes (CBDT) has issued Circular No. 21/2024, extending the due date for filing belated and revised income tax returns for Assessment Year 2024-25.
The CBDT has extended the due date for determining the amount payable under the Vivad Se Vishwas Scheme from 31st December 2024 to 31st January 2025.
This extension applies to cases where the declaration under the scheme is filed on or before 31st January 2025, providing taxpayers with additional time to settle disputes and ensure compliance.
Action Required: File your declaration and determine the payable amount before the new deadline to avoid penalties and enjoy the scheme's benefits.
Foreign Tax Credit (FTC) prevents double taxation on income earned abroad and taxed in India. Governed by Sections 90, 91, and Rule 128 of the Income Tax Act, 1961, it requires adherence to timelines and documentation, including mandatory filing of Form 67. Non-compliance or concealment of foreign income can have severe consequences, including penal taxation under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and other provisions of the Income Tax Act.
| Particulars | Consequences |
|---|---|
| After 31st December 2024 | Treated as undisclosed income under the Income Tax Act or UFIA provisions. |
| Tax Rate on Undisclosed Income | Taxed at 75% of the total undisclosed income. |
| Penalty | Additional penalty of 10% of undisclosed income under Section 271AAC. |
| Prosecution | Imprisonment ranging from 3 months to 10 years under Section 276C of the Income Tax Act. |
| Step | Details |
|---|---|
| Login to Portal | Access the Income Tax e-filing website with PAN credentials. |
| Access Form 67 | Navigate to "Form 67" under the "E-File" menu. |
| Enter Details | Provide taxpayer details, foreign income, tax paid, and DTAA provisions (if applicable). |
| Upload Proof | Attach foreign tax payment receipts, tax returns filed abroad, and proof of income. |
| Submit Form 67 | File electronically before ITR filing to validate FTC claims. |
| File ITR | Ensure Form 67 is filed and acknowledged before filing the income tax return. |
| Country | Income Earned (₹) | Foreign Tax Paid (₹) | Indian Tax Liability (₹) | FTC Claimed (₹) | Net Tax Payable in India (₹) |
|---|---|---|---|---|---|
| Germany | ₹50,00,000 | ₹8,00,000 | ₹12,00,000 | ₹8,00,000 | ₹4,00,000 |
| Canada | ₹60,00,000 | ₹9,00,000 | ₹12,00,000 | ₹9,00,000 | ₹3,00,000 |
| Activity | Timeline |
|---|---|
| Income Earning | During the financial year (April to March). |
| Foreign Tax Payment | As per foreign jurisdiction's tax regulations. |
| Form 67 Filing | On or before the ITR due date (31st July for individuals). |
| ITR Filing | Post Form 67 submission. |
| Disclosure of Income | Before 31st December 2024 to avoid penal consequences. |
Foreign Tax Credit (FTC) is a vital relief mechanism for taxpayers with global income. Adherence to procedural requirements, timely filing of Form 67, and full disclosure of foreign income are crucial to avoid harsh penalties. While judicial precedents allow leniency for genuine cases of procedural delay, non-disclosure of foreign income attracts severe consequences, including a 75% tax rate, penalties, and possible prosecution. Ensuring compliance with statutory provisions and maintaining robust documentation is essential for seamless FTC claims and avoiding adverse legal outcomes.
For ultra-high-net-worth (UHNW) families, establishing a family office is a crucial step toward managing wealth, preserving assets, optimizing investments, and navigating tax complexities. A family office not only provides personalized wealth management but also ensures long-term financial security and smooth succession planning. However, selecting the right jurisdiction for setting up a family office is paramount. Different countries offer distinct advantages in terms of investment opportunities, tax planning, residency and passport options, and overall setup costs. This article presents a comparative analysis of the family office setup across five key global jurisdictions—United States, Switzerland, Singapore, United Arab Emirates (UAE), and United Kingdom—with a focus on investment, passport acquisition, tax planning, ease of setup, and associated costs.
The United States remains the largest market for family offices, providing unmatched investment opportunities, access to diverse markets, and a rich wealth management ecosystem. However, it is also characterized by a highly complex tax environment, which requires detailed planning for wealth preservation and growth.
Switzerland is known for its wealth management expertise, offering a secure and stable environment for UHNW families to manage and grow their assets. It stands out for its tax benefits, privacy laws, and legal protections for wealth.
Singapore has become a central hub for family offices, particularly for those in Asia and the Middle East. The country’s favorable tax regime, stable political environment, and strategic location make it an ideal choice for managing wealth and making investments in Asia.
The UAE, particularly Dubai, has emerged as a top destination for global wealth management due to its tax-free environment, strategic location, and ease of doing business. It is increasingly attracting UHNW individuals looking to preserve and grow wealth in a tax-efficient jurisdiction.
The UK, particularly London, is a traditional center for family offices, offering access to global financial markets and a comprehensive range of wealth management services. However, it comes with a relatively high tax burden, particularly on inheritance and capital gains.
| Jurisdiction | Time to Set Up | Initial Setup Cost | Annual Operating Cost | Ease of Setup | Conditions/Requirements | Taxation | Illustration |
|---|---|---|---|---|---|---|---|
| United States | 3 to 6 months | $500,000 - $1,000,000 | $250,000 - $500,000 | Moderate | U.S. citizenship/residency requirements, complex regulations, state-specific tax rules. | High estate taxes (up to 40%), capital gains tax, progressive income tax. | High taxes but access to diverse investment opportunities. |
| Switzerland | 3 to 6 months | CHF 200,000 - CHF 500,000 | CHF 100,000 - CHF 300,000 | Easy | Requires long-term residency for citizenship, easier permanent residency (C Permit). | Lump-sum taxation, no inheritance tax, low corporate taxes. | Ideal for privacy and wealth protection. |
| Singapore | 1 to 3 months | SGD 100,000 - SGD 250,000 | SGD 150,000 - SGD 400,000 | Easy | Requires investment of SGD 2.5 million for Permanent Residency. | No capital gains tax, no inheritance tax, low personal income tax rates. | Highly tax-efficient, especially for families with ties to Asia. |
| UAE | 1 to 3 months | AED 100,000 - AED 300,000 | AED 250,000 - AED 600,000 | Very Easy | Investment for Golden Visa or long-term residency. | No taxes: no personal income tax, no capital gains tax, no inheritance tax. | Best for tax-free wealth preservation. |
| United Kingdom | 3 to 6 months | £250,000 - £500,000 | £200,000 - £500,000 | Moderate | Tier 1 Investor Visa requires £2 million investment. | High inheritance tax (40%), capital gains tax (up to 28%), but tax planning strategies are common. | Ideal for families with ties to Europe, despite high taxes. |
Conclusion
When selecting the right jurisdiction to establish a family office, UHNW families must balance various factors such as tax planning, residency benefits, investment opportunities, and operational costs. The U.S. offers vast investment opportunities but comes with a complex tax environment. Switzerland and Singapore provide tax-efficient solutions with privacy and wealth protection. The UAE stands out as the most tax-friendly option, while the UK offers deep access to European markets but with a higher tax burden. By analyzing these factors carefully, families can make an informed decision that aligns with their financial goals and long-term wealth management strategy.
Every year, the Income Tax Department provides online utilities for filing income tax returns. However, a system update implemented on 5-7-2024 inadvertently disabled taxpayers from claiming the rebate under Section 87A. This change meant that many taxpayers, who were eligible for the rebate, could not claim it due to technical issues created by the update.
In response, The Chamber of Tax Consultants (petitioner) filed a writ petition with the Bombay High Court, requesting the court to direct the Income Tax Department to modify the system for the 2024-2025 assessment year so taxpayers could fully benefit from the Section 87A rebate.
The Court explained that under the Income Tax Act, 1961, taxpayers are required to self-assess their income, calculate their tax liability, pay the tax, and file their returns. However, due to the system change on 5-7-2024, many taxpayers were unable to compute the rebate under Section 87A, especially when their income was subject to special tax rates under the new regime. As a result, some taxpayers may end up paying more tax than necessary because they could not claim the rebate.
The Court also clarified that taxpayers who had already filed their returns could file a revised return to include the Section 87A rebate and possibly receive a refund. Additionally, the last date to file a belated return, as per Section 139(4), is 31-12-2024, allowing taxpayers who missed the original deadline some extra time.
The Court emphasized that the Section 87A rebate is based on a taxpayer’s total income and tax liability, and it is the responsibility of the tax authorities to ensure that eligible taxpayers can claim this rebate. Changes to the system or technical issues should not prevent taxpayers from exercising their statutory rights. Any action or oversight by the tax authorities that limits taxpayers' ability to claim the rebate is unfair and goes against the principles of justice and the rule of law. Taxpayers should not be penalized due to administrative errors or procedural issues.
The Court further noted that statutory benefits like the Section 87A rebate must be provided to taxpayers in line with the lawmakers' intentions. Procedural hurdles that deprive taxpayers of these benefits must be addressed through judicial intervention to protect taxpayers' rights.
As a result, the Court directed the Central Board of Direct Taxes (CBDT) to issue a notification under Section 119, extending the deadline for e-filing income tax returns from 31-12-2024 to at least 15-1-2025. This extension ensures that taxpayers eligible for the Section 87A rebate can exercise their right to claim it without facing unnecessary technical difficulties, promoting fairness and transparency in the tax system.
The GST Council has introduced significant updates for taxing old and used vehicles to ensure simplicity, fairness, and uniformity. These rules distinctly address transactions involving individuals and registered businesses.
Uniform GST Rate:
Margin-Based Taxation:
Applicability Based on Seller Type:
Simplified Compliance:
| Aspect | Individual Sale (No GST) | Business Sale (GST Applies) |
|---|---|---|
| Nature of Seller | Unregistered individual selling for personal purposes. | GST-registered business engaged in resale of vehicles. |
| GST Applicability | No GST on individual-to-individual transactions. | GST applies to the margin of sale. |
| Depreciation Relevance | Not applicable. | Essential for calculating taxable margin. |
| Example 1: Negative Margin | Individual sells a car for ₹5,00,000. No GST applies. | Purchase Price: ₹10,00,000; Depreciation: ₹6,00,000; Selling Price: ₹4,00,000. GST: ₹0 (Negative Margin). |
| Example 2: Positive Margin | No GST applies, regardless of margin. | Purchase Price: ₹15,00,000; Depreciation: ₹5,00,000; Selling Price: ₹12,00,000. Margin = ₹2,00,000. GST = ₹36,000 (18% of ₹2,00,000). |
| Compliance Requirements | No GST registration or filing obligations. | GST registration and filing mandatory. |
| Electric Vehicles (EVs) | Treated as conventional vehicles; no GST applies. | Same GST rate (18%) applies to EVs and other vehicles. |
These updates provide a clear distinction between GST-exempt individual sales and margin-based taxation for businesses. The reforms promote simplicity, fairness, and sustainability while ensuring a smoother experience for businesses engaged in the resale of old and used vehicles.
In a landmark ruling, the Jodhpur Income Tax Appellate Tribunal (ITAT) has provided significant clarity regarding the tax treatment of Bitcoin (cryptocurrency) under Indian tax law. The Tribunal ruled that Bitcoin qualifies as a capital asset under Section 2(14) of the Income Tax Act, 1961, before the introduction of specific Virtual Digital Asset (VDA) provisions by the Finance Act, 2022. This ruling establishes that long-term capital gains (LTCG) from the sale of Bitcoin can qualify for exemptions under Section 54F, which offers tax relief for reinvestment in residential property.
Section 2(14) of the Income Tax Act defines a capital asset as “property of any kind” held by an individual, except for specific exclusions like stock-in-trade, personal effects, etc. Although cryptocurrencies were not explicitly mentioned in the Act before the Finance Act, 2022, the Tribunal interpreted Bitcoin as a capital asset, as it constitutes intangible property with inherent value and associated rights.
The Tribunal relied on Section 2(47), which defines the transfer of a capital asset, including sale, exchange, or extinguishment of rights in the asset. The Tribunal affirmed that the sale of Bitcoin met these criteria, thus aligning the taxation of Bitcoin with that of other capital assets, rather than classifying it as income from other sources, as contended by the revenue.
Section 54F provides an exemption on long-term capital gains if the proceeds from the sale of a capital asset are reinvested in a residential property. The taxpayer in this case had reinvested the proceeds from the Bitcoin sale, and the Tribunal ruled that he was eligible to claim the exemption under Section 54F.
This ruling by the Jodhpur ITAT is a milestone in the development of cryptocurrency taxation in India. By affirming Bitcoin’s status as a capital asset under Section 2(14) and confirming the eligibility for Section 54F exemptions, the Tribunal has provided much-needed clarity and guidance on the tax treatment of cryptocurrencies before the enactment of specific VDA provisions in 2022. This judgment not only resolves long-standing ambiguities but also offers taxpayers a legitimate route for tax planning and exemptions for Bitcoin-related transactions.
Effective tax compliance extends beyond the mere filing of income tax returns (ITR). After filing, taxpayers may encounter demand notices issued by the Income Tax Department or may identify errors in their originally filed returns. Addressing such situations promptly and accurately is critical to ensuring compliance, avoiding penalties, and maintaining financial integrity.
This guide outlines the process for responding to demand notices and revising income tax returns for Assessment Year (AY) 2024-25, with the final deadline for revisions being 31st December 2024.
A demand notice is issued when discrepancies are identified between the taxes declared in the return and those paid. Responding efficiently requires a structured approach.
Access the Notice
Choose the Appropriate Response
Submit and Monitor
The Income Tax Department has revised its rectification filing process to enhance clarity and efficiency. Rectification requests are now categorized as:
For rectifications related to CPC orders:
Rectifications are limited to non-material errors, such as statistical inaccuracies, typographical errors, or other discrepancies that do not affect taxable income or tax liabilities.
Section 139(5) of the Income Tax Act permits the filing of a revised ITR if material errors are identified in the original filing. This includes corrections to taxable income, tax liabilities, or any other key details. The final date for filing a revised return for AY 2024-25 is 31st December 2024.
Access the Portal
Update the Return
Submit and Verify
Timely action is paramount when responding to demand notices or filing revised returns. Promptly addressing discrepancies ensures compliance, minimizes penalties, and safeguards financial integrity.
The 31st December 2024 deadline for AY 2024-25 revisions offers taxpayers an opportunity to rectify errors, whether statistical or material, in their original filings. Engage with the process proactively, and consider professional advice for complex cases to ensure error-free compliance. By doing so, you can uphold the accuracy and credibility of your financial records while avoiding unnecessary complications.
The Hon'ble Allahabad High Court in Tata Aldesa (J.V.) vs. State of UP (judgment dated 2nd December 2024) has ruled that taxpayers are entitled to interest on delayed GST refunds under Section 56 of the CGST Act, 2017. This judgment reinforces the importance of timely refund disbursements and holds tax authorities accountable for non-compliance with statutory timelines.
The taxpayer filed for a refund under GST, but despite instructions to the authorities, the refund was not credited within the statutory 60-day period. The taxpayer sought relief in the form of interest for the delay.
The High Court held:
This decision strengthens taxpayer protection under GST law, ensuring timely refunds and reinforcing accountability among tax authorities. Refund delays, which can strain working capital for businesses, particularly exporters and high-refund claimants, must now be compensated with interest, reducing the financial burden on taxpayers.
Taxpayers should monitor refund applications closely and assert their rights to interest in case of delays while maintaining thorough records of all related communications and filings.
The 55th GST Council Meeting held on December 21, 2024, introduced impactful decisions to streamline the GST regime, focusing on rate rationalization, exemptions, and sectoral facilitation. Below is a comprehensive overview highlighting the changes, reasons behind them, and their anticipated impacts.
| Category | Key Changes | Impact |
|---|---|---|
| GST Rate Changes | - Fortified Rice Kernels: Reduced to 5% (from 18%). - ACC blocks (>50% fly ash): Reduced to 12% (from 18%). - Used Cars: Increased to 18% (from 12%). | - Nutrition affordability, green construction, and parity in vehicle taxation. |
| Sectoral Exemptions | - Defense: Exemption for Long-Range Surface-to-Air Missile systems. - Life-Saving Drugs: Exemption for gene therapy medicines. | - Reduced procurement costs for defense and affordable advanced treatments. |
| Hospitality GST Simplification | - Actual Value Basis: GST to apply on actual room rates, not declared tariffs. - 18% GST (with ITC): Option for restaurants in hotels. | - Transparent billing and improved cash flow for hospitality businesses. |
| Reverse Charge Mechanism (RCM) | - Corporate Sponsorship Services: Shifted to forward charge. - Excludes small renting services. | - Simplified compliance for small taxpayers and clear taxation for sponsorships. |
| Exemptions for Agriculture & Digital Payments | - Agricultural Goods: Exemption for farmer-sold goods like green pepper and raisins. - Digital Payments (<₹2,000): Exempt from GST. | - Financial support for farmers and promotion of cashless transactions. |
| Trade Facilitation | - Track and Trace Mechanism: Introduced for evasion-prone goods. - SEZ Alignment: Taxation aligned with customs rules. | - Reduced tax evasion and consistency for SEZ entities. |
The reduction in GST for fortified rice kernels from 18% to 5% is aimed at promoting affordability and accessibility for government nutrition programs such as mid-day meals, directly benefiting underprivileged populations. Similarly, the rate cut for ACC blocks containing more than 50% fly ash encourages the adoption of sustainable construction practices, aligning with environmental objectives and making green building materials more accessible. Conversely, the increase in GST on used cars from 12% to 18% eliminates rate arbitrage between new and used vehicles, ensuring fair competition and better alignment with market practices.
Exemptions granted for defense systems like long-range surface-to-air missiles and life-saving drugs such as gene therapy medicines reflect the Council’s focus on national security and healthcare priorities. These exemptions reduce procurement costs for defense and enhance the affordability of critical medical treatments for severe diseases.
The hospitality sector benefits from two major changes: GST now applies on actual room rates rather than declared tariffs, resolving inconsistencies in billing and enhancing consumer confidence. Additionally, allowing restaurants in hotels to opt for an 18% GST rate with input tax credit recovery improves liquidity and reduces tax costs for businesses in the hospitality industry.
Shifting corporate sponsorship services to a forward charge mechanism and excluding small renting services from RCM simplifies compliance, particularly for smaller taxpayers. This change reduces administrative burdens and ensures clarity in taxation for corporate sponsorships.
The GST exemptions for agricultural goods sold directly by farmers and digital payments below ₹2,000 support rural economies and encourage the adoption of digital transactions, respectively. These measures are expected to bolster financial stability for farmers and promote cashless transactions, fostering economic growth in rural and urban areas alike.
The introduction of a track-and-trace mechanism for evasion-prone goods demonstrates a robust move toward curbing tax evasion and improving transparency across supply chains. Aligning SEZ taxation with customs rules simplifies operations for entities in special economic zones, ensuring compliance consistency and operational efficiency.
Deferred decisions, such as bringing aviation fuel under GST and imposing a calamity cess, highlight the Council’s cautious approach to balancing industry demands with revenue considerations. Broader consultations on these topics will likely ensure stakeholder-friendly outcomes while addressing critical policy goals.
When it comes to selling a jointly owned property, one common complication arises around the claim for Tax Deducted at Source (TDS), especially when the entire TDS is deposited under one party’s name. The recent ruling by the Mumbai Income Tax Appellate Tribunal (ITAT) in the case of Rahul Dinesh Bajpai vs. Deputy Director of Income-tax (2024) provides valuable insights into how TDS credit should be allocated in such situations.
In this case, the assessee (Rahul Dinesh Bajpai) and his wife jointly sold an immovable property. They declared capital gains arising from the sale equally. However, the entire TDS was deposited solely in the name of the assessee (Rahul), rather than being split between him and his wife. As a result, the assessee claimed the entire TDS credit in his return.
When the Centralized Processing Centre (CPC) processed the return, it granted the TDS credit only in proportion to the capital gains declared by the assessee. The balance of TDS that had been deposited in Rahul’s name alone was disallowed. The Commissioner of Income-tax (Appeals) upheld this decision, prompting the assessee to appeal to the Mumbai ITAT.
The Tribunal emphasized that the key issue was the fact that TDS was deposited solely in the name of the assessee. Although the property was jointly owned and the capital gains were declared equally by both parties, the ITAT noted that TDS credit should follow the person who the tax was remitted under, not automatically split just because the property was jointly owned.
The Tribunal clarified that the entire TDS credit could be claimed by the assessee if his wife did not claim any portion of the TDS herself. It directed the Assessing Officer to verify whether the wife had made any claim for her share of the TDS. If she had not, the assessee was entitled to claim the entire credit.
This decision reinforces an important principle: TDS credit is linked to who the tax is paid under, not just ownership or the declared capital gains. In this case, since the TDS was deposited in the name of the assessee and his wife did not claim any credit, the assessee was entitled to the full TDS benefit.
The ruling also underlines that joint property ownership does not automatically lead to a proportional TDS credit split. Instead, the actual claimant’s records and TDS remittance details must be considered for an accurate claim. The assessing authorities should ensure that both parties' claims are properly verified to avoid unjust TDS allocation.
The Mumbai ITAT’s ruling provides clear guidance on TDS credit in cases of joint property ownership. If TDS is deposited under one party’s name, that party can claim the entire TDS credit, provided the other party does not make a claim for it. This highlights the importance of accurate documentation and clear claims when dealing with TDS, especially in joint property transactions.
The Skill Online Games Institute (SOGI), backed by real-money gaming firms, has presented a compelling demand for the Indian government to revise its Goods and Services Tax (GST) policy on the burgeoning online gaming industry. Ahead of the 55th GST Council meeting in Jaisalmer, Rajasthan, SOGI’s advocacy for levying 28% GST on platform fees instead of player deposits highlights critical challenges and opportunities for both industry stakeholders and policymakers.
The online gaming sector in India is at a pivotal juncture, as articulated by Amrit Kiran Singh, President of SOGI. Despite its immense potential for job creation and GDP contribution, the sector faces significant hurdles due to taxation policies. As of October 1, 2023, a 28% GST is levied on deposits made on gaming platforms and casinos, a sharp increase from the previous 18% on platform fees. This change, intended to streamline tax collection, has led to unintended consequences:
Shift to Offshore Platforms:
83% of Indian players’ expenditures on online gaming now flow to offshore platforms, predominantly Chinese operators offering tax-free services.
Offshore platforms exploit the higher tax burden on Indian platforms, advertising GST- and TDS-free gaming during high-profile events such as the Cricket World Cup and IPL.
National Security and Revenue Concerns:
The surge in Indian players migrating to offshore platforms exacerbates revenue loss and raises national security concerns.
Efforts like media advisories, platform blocking, and mandatory registration for offshore operators have been largely ineffective due to practices like domain farming.
Industry Stagnation:
Current tax policies hinder the growth of Indian gaming companies, pushing the market towards illegal and unregulated entities.
SOGI has advocated for a Gross Gaming Revenue (GGR) tax model, which has proven successful in fostering online gaming sectors worldwide. Key benefits of the GGR model include:
Sustainability: Tax rates typically range between 15-20%, striking a balance between government revenue and industry growth.
Compliance: Encourages legal operations while disincentivizing migration to offshore platforms.
Higher Revenues: Countries using GGR have reported increased tax compliance and revenue compared to deposit-based models.
GGR is defined as the total revenue earned by gaming companies from bets, minus payouts to winners. Adopting this model could mitigate the adverse effects of deposit-based taxation.
Given the unlikelihood of revising GST slabs exclusively for online games, SOGI has proposed a practical compromise:
28% GST on Platform Service Fees:
This approach aligns taxation with the value-added by gaming platforms.
Reduces the tax burden on deposits, encouraging players to use domestic platforms.
Government-Industry Collaboration:
Joint initiatives to address addiction and other negative aspects of gaming.
Strategies to harness the sector’s potential for economic growth while ensuring ethical practices.
SOGI’s recommendations underscore the need for targeted policy interventions to:
Address Tax Arbitrage: Mitigate the appeal of offshore platforms by aligning Indian taxation with global practices.
Strengthen Enforcement: Enhance measures to compel offshore operators to register with Indian authorities.
Promote Domestic Platforms: Support local gaming companies through a conducive tax regime, fostering job creation and innovation.
The online gaming industry represents a unique opportunity for India to boost its economy, create employment, and establish itself as a global leader in the sector. However, current GST policies risk undermining this potential. SOGI’s appeal for a shift to platform fee-based taxation is a pragmatic step towards addressing these challenges. It is imperative for the government to engage constructively with industry stakeholders to chart a sustainable and mutually beneficial path forward.
India’s online gaming industry is experiencing unprecedented growth, with the potential to significantly boost the economy, generate employment, and drive innovation. However, recent tax policy changes have presented substantial challenges, threatening the industry’s sustainability and security. This note examines the issue, explores global best practices, and offers actionable recommendations to foster growth while ensuring regulatory compliance.
1. GST Hike on Deposits: As of October 1, 2023, the Goods and Services Tax (GST) on online gaming has increased from 18% on platform fees to 28% on deposits. While this change aims to enhance tax revenue, it has led to:
Player Migration to Offshore Platforms:
83% of gaming funds from Indian players are now spent on offshore platforms, leaving only 17% with Indian operators.
Offshore platforms, particularly those from China, offer GST and TDS-free options, especially during major events like the Cricket World Cup and IPL.
Revenue and Security Concerns:
Offshore platforms bypass Indian taxes and regulations, resulting in significant revenue losses.
These platforms pose national security risks, with ineffective blocking mechanisms due to domain farming, where operators continuously switch domains to evade bans.
Challenges for Domestic Platforms:
The deposit-based tax model discourages players and reduces the profitability of Indian gaming companies, making them less competitive globally.
Successful gaming markets worldwide rely on the Gross Gaming Revenue (GGR) model. This approach taxes the difference between total bets and payouts at rates ranging from 15-20%. Key benefits of the GGR model include:
Supporting sustainable industry growth.
Encouraging compliance from operators.
Ensuring consistent tax revenue.
1. Shift to Taxing Platform Fees:
Replace the 28% GST on deposits with 28% GST on platform service fees.
This would align India with global best practices, reducing the tax burden on players and enhancing the competitiveness of domestic platforms.
2. Government-Industry Collaboration:
Collaborate with industry stakeholders to address issues such as gaming addiction.
Unlock the sector’s potential for job creation and economic growth through strategic partnerships.
3. Regulate Offshore Platforms:
Deploy advanced monitoring tools to effectively block illegal gaming sites.
Mandate registration and compliance for offshore platforms, leveraging global partnerships to ensure adherence to Indian laws.
The current GST framework inadvertently benefits offshore platforms, resulting in tax revenue losses and undermining India’s domestic gaming sector. Urgent reforms, such as adopting the GGR model or taxing platform fees, will:
Level the Playing Field: Enable Indian companies to compete effectively with offshore platforms.
Retain Domestic Players: Encourage more players to choose Indian platforms, boosting local revenues.
Strengthen Regulation: Enhance the government’s ability to monitor and regulate the industry.
India’s online gaming industry stands at a pivotal moment. Revisiting the GST policy and adopting pragmatic, globally validated solutions will:
Enhance the competitiveness of the domestic industry.
Secure consistent and higher tax revenues.
Create a safer and more regulated gaming environment.
Reforming the tax structure is essential to transforming online gaming from a sector burdened by challenges into a thriving industry. With the right measures, this sector can become a significant contributor to India’s economy while addressing critical concerns of fairness, security, and compliance.
Section 54F of the Income Tax Act, 1961, provides a significant tax exemption for reinvestment of capital gains into residential property. However, the phrase “a residential house” has sparked numerous debates, particularly when taxpayers purchase multiple residential units. This article examines the recent Delhi High Court ruling in Mrs. Kamla Ajmera v. Principal Commissioner of Income-tax (2024) and juxtaposes it with other notable judgments to provide clarity on the scope of Section 54F and its implications for taxpayers.
The Delhi High Court in Mrs. Kamla Ajmera v. Principal Commissioner of Income-tax dealt with the purchase of two non-adjacent flats using the proceeds from the sale of a plot of land. The issue revolved around whether these flats, located on different floors of the same tower, could be considered “a residential house” under Section 54F.
The court ruled that only one flat qualified for the exemption, as the other did not meet the criteria of being part of a singular, unified residence.
While the Kamla Ajmera case adopted a strict interpretation, earlier rulings demonstrated varying approaches based on facts and circumstances:
| Case | Facts | Exemption Ruling | Reasoning |
|---|---|---|---|
| Gita Duggal (2013) | Adjacent flats, functionally unified | Exemption for both flats | Functional integration outweighed physical separation. |
| Anwar Ali (2007) | Adjoining flats, used as one unit | Exemption for both flats | Proximity and practical use as one residence. |
| R. Sridharan (2008) | Non-adjacent houses in the same locality | Exemption denied | Lack of functional and structural integration. |
| P. R. Ramesh (2019) | Flats in the same complex, unified use | Exemption for all flats | Intent and practical use demonstrated cohesive residential use. |
The legislative framework of Section 54F underwent a critical change with the Finance Act, 2014, which replaced the term “a residential house” with “one residential house.” This amendment clarified the legislature’s intent to restrict the exemption to a single residential property.
Courts consistently emphasize that proximity and usage determine whether multiple units qualify as a single residential house. Properties on different floors or separate blocks are unlikely to meet this criterion unless specifically designed for integration.
Agreements, layout plans, and correspondence with builders can substantiate the intent to create a single residential unit. Taxpayers must document their intention to integrate units, if applicable.
While earlier rulings allowed flexibility based on practical use, post-amendment scenarios demand stricter adherence to the term “one residential house.” Taxpayers must align their investments accordingly to claim exemptions.
To minimize disputes, taxpayers should seek professional advice when reinvesting capital gains. Detailed planning and compliance with Section 54F’s provisions are essential for smooth exemption claims.
The Kamla Ajmera judgment underscores a shift towards a stricter interpretation of Section 54F. While earlier rulings like Gita Duggal offered some leeway, the legislative amendment in 2014 narrowed the scope to one residential house, aligning with the intent of the provision.
For taxpayers, understanding the interplay between judicial precedents and legislative amendments is critical to making informed investment decisions. Professional guidance and meticulous documentation can ensure compliance and maximize tax benefits under Section 54F.
A recent Bombay High Court ruling has provided significant relief to taxpayers who were denied the Section 87A rebate due to software restrictions in the Income Tax Department’s e-filing system. This decision reinforces the precedence of statutory provisions over procedural mechanisms and paves the way for affected taxpayers to claim their rightful benefits.
Section 87A allows a rebate of up to Rs. 25,000 for individuals whose taxable income does not exceed Rs. 7 lakh. However, systemic flaws resulted in the unjust denial of this rebate, particularly for individuals whose taxable income included special-rate incomes such as capital gains under Sections 111A, 112, or 112A.
Issue
The tax filing software disallowed the Section 87A rebate for taxpayers with income below Rs. 7 lakh if their income included elements taxed at special rates.
Petition
A writ petition was filed, challenging the e-filing system's restrictive interpretation. The petition highlighted that Section 87A does not impose any conditions regarding the composition of income.
Court’s Decision
Plain Reading of Section 87A
The provision unequivocally grants the rebate if the taxable income does not exceed Rs. 7 lakh, without specifying exclusions based on income composition.
Administrative Accountability
The Court ruled that procedural deficiencies in the tax department’s systems cannot override statutory entitlements.
Protection of Taxpayer Rights
Upholding taxpayer rights, the judgment emphasized that administrative tools should aid compliance, not hinder lawful claims.
The ruling provides an opportunity for taxpayers who were wrongfully denied the Section 87A rebate to claim relief. This applies to:
| Scenario | Action to Take | Timeline | Details |
|---|---|---|---|
| Taxpayer paid excess tax | File Revised Returns under Section 139(5). | By January 15, 2025 | Ensure proper computation and attach evidence supporting your claim. |
| Original filing time limit expired | Submit a Rectification Request under Section 154. | As soon as possible | File the rectification application on the Income Tax Portal. Ensure proper documentation. |
| Taxpayer yet to file a return | Use the extended deadline to file returns. | By January 15, 2025 | Use the updated utility software that incorporates the corrected rebate calculation. |
| Refund due to denial of rebate | Claim refund by filing revised or rectified returns. | Upon filing | Monitor refund status via the Income Tax Portal. Use e-Nivaran for grievances, if necessary. |
| Delay or incorrect refunds from the department | Submit grievances through the e-Nivaran system or escalate to the jurisdictional assessing officer. | As required | Provide all supporting documents and correspondence history for quick resolution. |
The Bombay High Court’s judgment is a landmark decision reaffirming that statutory provisions must prevail over procedural deficiencies. Taxpayers are encouraged to utilize the extended timelines and prescribed mechanisms to rectify their filings, claim rebates, and recover any excess taxes paid.
This judgment not only provides immediate relief but also sets a precedent for administrative accountability, ensuring that compliance frameworks align with legislative intent. By taking timely and informed action, taxpayers can safeguard their rights and avoid future disputes
The Supreme Court of India, in the case of Rajendra Kumar Barjatya And Another vs U.P. Avas Evam Vikas Parishad & Ors (2024 INSC 990), delivered a decisive verdict against unauthorized constructions. By emphasizing that such structures, regardless of investments made or duration of occupancy, cannot be regularized, the court has set a precedent reinforcing strict compliance with urban development laws. This ruling is particularly significant for professionals in urban planning, legal advisory, and real estate, offering lessons in regulatory compliance and accountability.
Background:
The dispute arose from unauthorized commercial construction on a residential plot in Meerut, Uttar Pradesh, in violation of zoning norms and building regulations. Despite multiple notices and a demolition order from the competent authority, local resistance and lack of enforcement allowed the illegal structure to persist.
High Court and Supreme Court Decisions:
Core Judgments by the Supreme Court:
For Developers and Builders:
For Property Buyers:
For Government Officials:
For Financial Institutions:
The Supreme Court supplemented its judgment with specific instructions to prevent unauthorized constructions:
This landmark judgment underscores the Supreme Court's commitment to ensuring lawful urban development and holding violators accountable. For professionals across real estate, law, and urban planning, it is a reminder that adherence to regulations is paramount.
The ruling is a clarion call for all stakeholders to prioritize compliance, accountability, and sustainable development. Urban governance must transition from reactive enforcement to proactive planning, ensuring the collective welfare of cities and their residents.
Introduction: The Hidden Pitfalls of GST Compliance for Charitable Organizations
Navigating GST compliance is a critical aspect for charitable organizations, especially when dealing with sponsorship services. A recurring issue arises when GST is mistakenly charged and deposited by the charitable organization, despite sponsorship services being taxable under the Reverse Charge Mechanism (RCM).
This blog provides a step-by-step guide, legal interpretations, and best practices to help organizations rectify such errors, recover excess GST paid, and maintain compliance integrity.
Section 9(3) of the CGST Act, 2017:
Notification No. 13/2017-Central Tax (Rate), dated June 28, 2017:
Section 34(1) of the CGST Act, 2017:
Section 54 of the CGST Act, 2017:
Rule 89 of the CGST Rules, 2017:
Section 56 of the CGST Act, 2017:
Scenario:
Issue:
Solution:
Legal Basis: Section 34(1) of the CGST Act, 2017.
Actions:
Legal Basis: Section 54 of the CGST Act, 2017 and Rule 89 of the CGST Rules, 2017.
Procedure:
Legal Basis: Section 49 of the CGST Act, 2017.
Procedure:
File Refunds Timely:
Reconciliation of Records:
Maintain Robust Documentation:
GST compliance for charitable organizations can seem challenging, but proactive measures can prevent errors and ensure smooth rectification when mistakes occur. By leveraging legal provisions, organizations can:
"Compliance is a journey, not a destination. Every step taken toward rectification strengthens the foundation of trust and financial discipline."
The Goods and Services Tax (GST) regime is structured to ensure tax efficiency in India, but there are exceptions and unique provisions for certain goods and services. One of the most important exclusions is liquor for human consumption, which is not taxed under GST and instead is regulated by state excise duties. This professional guidance note provides an in-depth analysis of the Input Tax Credit (ITC) reversal mechanism related to liquor sales under GST. The note covers detailed explanations of the law, its interpretations, applicability, exemptions, and case law, offering step-by-step guidance for businesses dealing with liquor to make informed decisions.
Section 17(2) of the CGST Act specifies that businesses making both taxable and exempt supplies cannot avail of ITC on goods or services used to produce or provide exempt supplies. Since liquor for human consumption is excluded from the GST regime and remains subject to state excise duties, businesses in this sector cannot claim ITC on any inputs or services used in its production, sale, or distribution.
Provision:
"Notwithstanding anything to the contrary contained in sub-section (1), the amount of credit shall be restricted to the credit attributable to the taxable supply, if a taxable person makes taxable as well as exempt supplies of goods or services."
Interpretation: When businesses deal with both taxable and exempt supplies, they must reverse the ITC related to the exempt supply, which in this case is liquor. Liquor is excluded from GST and remains subject to state excise duties.
Under Section 2(47), an exempt supply is defined, which includes liquor. Since liquor is excluded from GST, any inputs, input services, or capital goods used in producing liquor or in services related to liquor are not eligible for ITC claims.
Provision:
"Exempt supply" means a supply of any goods or services or both which attract nil rate of tax or which may be wholly exempt from tax."
Interpretation: The law explicitly excludes liquor from the scope of GST, thereby prohibiting any input tax credit claims on transactions related to its sale or production.
For businesses involved in the production, sale, or distribution of liquor, ITC reversal must be performed in accordance with the proportion of taxable versus exempt sales. Businesses must calculate how much ITC they can rightfully claim and how much should be reversed.
Rule 42 of the CGST Rules, 2017 mandates that if a business is involved in both taxable and exempt supplies, it must reverse ITC in proportion to the value of the exempt supply. This is critical for ensuring compliance when businesses engage in both activities.
Example:
Let’s assume a business has the following details:
To calculate the ITC reversal:
Thus, the business must reverse ₹3,00,000 of the total ITC, as it is attributable to the exempt supply of liquor.
The reversal of ITC also applies to input goods, input services, and capital goods if they are used for the production or sale of exempt goods, i.e., liquor.
| Type of Goods/Services | Reversal of ITC |
|---|---|
| Input Goods | ITC must be reversed on goods used to manufacture, package, or label liquor. |
| Input Services | ITC on services such as marketing, transport, and warehousing must be reversed. |
| Capital Goods | ITC on machinery or equipment used for liquor production must be reversed. |
Example: If a business purchases raw materials (bottles, labels, etc.) worth ₹5,00,000 to manufacture liquor and ITC of ₹50,000 is claimed on these goods, then the business must reverse the ITC corresponding to the exempt supply of liquor.
Since liquor for human consumption is excluded from GST, it remains under the control of state excise duties. This exclusion has a direct impact on the ITC mechanism and the businesses that deal with liquor.
Liquor is explicitly excluded from the definition of taxable supply under GST and is categorized as an exempt supply. As a result, businesses involved in the sale, production, or distribution of liquor cannot avail of ITC on the purchases related to liquor sales.
Liquor is taxed under state excise laws and not under GST. Each state in India has its own excise duty rates, and businesses are required to comply with these laws.
Certain ancillary products and services related to liquor sales may be subject to GST, such as:
While these inputs may be subject to GST, the ITC on them must be reversed if they are used for the production or sale of liquor, as liquor itself is an exempt supply.
Several important case laws provide judicial clarity on how ITC reversal applies to liquor-related transactions.
For businesses dealing with liquor, accurate ITC reversal is essential to ensure compliance with GST and state excise laws. Below are some best practices to help businesses make informed decisions:
| Best Practice | Action |
|---|---|
| Maintain Detailed Records | Keep distinct records of taxable vs. exempt supplies. |
| Ensure Proportional ITC Reversal | Apply Rule 42 to calculate ITC reversal accurately. |
| Review ITC Claims Regularly | Periodically assess and adjust ITC calculations. |
| Document Ancillary Expenses and Services | Keep track of GST paid on services related to liquor. |
| Stay Updated on Case Laws | Review recent case laws for changes in judicial views. |
The ITC reversal on liquor sales is a complex area under the GST regime, primarily due to the exclusion of liquor from GST and its regulation under state excise laws. Businesses engaged in the sale or manufacture of liquor must comply with the provisions laid out in Section 17(2) and Rule 42, ensuring proper reversal of ITC related to exempt supplies. By following proportional ITC reversal mechanisms, staying updated on legal precedents, and maintaining accurate documentation, businesses can navigate the complexities of GST compliance and avoid potential legal issues.