Domestic tax-payers can now apply for an ‘advance ruling’ to understand tax liability on their transactions. The Central Board of Direct Taxes (CBDT) has enabled the facility, which till now was open only to non-resident Indians.
With this facility, taxpayers can get a view upfront on the taxability of transactions they intend to undertake or have undertaken during a financial year.
The CBDT has spelt out the minimum threshold on transaction value that would be eligible for an advance ruling, and has prescribed the format of the application required, along with the fee schedule. According to the norms, a resident can use the “advance ruling” facility in relation to tax liability arising out of one or more transactions valued at ₹100 crore or more (in aggregate).
Finance Minister Arun Jaitley had, while sharing the concerns of taxpayers in his maiden Budget, proposed the introduction of ‘advance ruling’ for resident taxpayers.
However, the latest CBDT specification has evoked mixed response, with some tax experts suggesting that the threshold limit to be on the high side and not in the true spirit of the intended facility.
Limit too high “While the Government has all along stressed on achieving a non-adversarial tax regime, the threshold limit of transaction value of ₹100 crore is on the high side.
Given that the Authority for Advance Ruling is an alternative forum for dispute resolution and that litigation costs are on the rise, one may only view the CBDT move with circumspection, as this option may not be available in general to all deserving taxpayers,” Aseem Chawla, Partner at law firm MPC Legal, told BusinessLine .
Partho Dasgupta, Partner, BDO India LLP, a professional services firm, said the threshold of ₹100 crore is a little high.
“It would be useful for all if the threshold limit is brought down to ₹50 crore from ₹100 crore,” Dasgupta told BusinessLine .
He felt that the advance ruling regime for residents was designed to provide large domestic corporates more flexibility and would have little impact on individuals. Very few high net worth individuals may opt for this facility at a threshold of ₹100 crore.
Interestingly, there is no minimum threshold limit for transaction value if a non-resident were to use the advance ruling provision.