Companies may face additional tax compliance burden

| Updated on: Sep 19, 2017
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CBDT to introduce voluntary reporting of estimated current income, advance tax liability

To get a better perspective of the likely reliable flow of tax revenues to the exchequer in a fiscal year, the Central Board of Direct Taxes (CBDT) has decided to usher in a self-reporting mechanism for corporates for their estimated incomes, tax payments and advance tax liability.

The proposed mechanism — to apply only on tax audit assessees, including companies — requires them to furnish on or before November 15, an intimation of estimated income and payment of taxes as on September 30 in a fiscal year.

A continuous flow of tax revenues throughout the year is critical for the government to meet various budgetary allocations such as welfare scheme, infrastructure development and defence expenditure etc.

A reliable and advance estimate of tax revenues would provide much needed perspective for planning and prioritising government expenditure, CBDT said.The CBDT has now come up with a draft rule specifying the format of the self-reporting mechanism and sought stakeholders comments and suggestions to be sent electronically by September 29.

Moreover, if the income estimated, as on September 30 of the previous year (as described under the income tax law), is less than the income of the corresponding period of the immediately preceding previous year by an amount of ₹5 lakh or 10 per cent, whichever is higher, then the assessee would be required to furnish an intimation of estimated income and payment of taxes as on December 31 of the “previous year” on or before January 31 of the previous year.

What tax experts say Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, a CA firm, said this seemed to be a mandatory compliance for companies and other taxpayers liable for tax audit.

“Pressure to increase revenue collections seems to have prompted this move and should lead to enhanced collections and more exchanges with the Government,” Maheshwari told BusinessLine .

Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, a law firm, said although CBDT mentions that the draft rule is intended to be voluntary, the text of the Rule 39A does not provide anything about its voluntary nature.

Singhania said the draft rule 39A, which is intended to create self-reporting mechanism for the current year income of corporates, will increase the compliance burden of companies. In addition, they are also required to state the reason for giving a lower estimate than previous year, he added.

Shalu Kedia, Associate Director, Nangia & Co LLP, a CA firm, said: “We are surely moving fast towards tax transparency, but additional compliance on India Inc may not go down well, when the corporates are already struggling with Ind AS and GST compliance.”

Published on January 10, 2018

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