In a step towards curbing black money, the government could agree to the recommendation made by the Supreme Court-monitored special investigation team (SIT) to ban cash transactions over R3 lakh.
“The SIT recommendations are under consideration. As far as the income tax department is concerned, we have put a 1% TCS (tax collected at source) on cash transactions, we have also made PAN quoting mandatory; all these aspects are also part of the SIT recommendations to stop the use of cash in the economy… R3 lakh and above is under consideration,” said Rani Singh Nair, Central Board of Direct Taxes (CBDT) chairperson, at an industry event organised by Assocham.
In July, the SIT headed by former justice MB Shah submitted its fifth report to the Supreme Court on steps needed to curb black money. “Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions, the SIT felt that there is a need to put an upper limit to cash transactions,” the SIT said in its report.
The CBDT head also said the government is holding discussions for the renegotiation of the India-Singapore tax treaty, which is co-terminus with the Mauritius treaty, which was recently amended. India on May 10 amended the 34-year-old tax treaty with Mauritius. After toiling for almost a decade to redraw the contours, India will start imposing capital gains tax on investments in shares held through Mauritius from April next, with the shift from residence to source-based taxation.
Following the revised agreement, short-term capital gains tax will be levied at half the rate prevailing during the first two-year transition from April 1, 2017 to March 31, 2019. The gains are taxed at 15% at present. The full rate will kick in from April 1, 2019.
The redrawn Mauritius treaty has prompted the government to go for a similar amendment in India’s tax treaty with Singapore.
“Now that we have renegotiated Mauritius, Singapore is under discussion. We are discussing it, we hope we will soon have a discussion with them as this is a bilateral treaty, so we have to take the concerns of both the countries and then we will sign (the amended treaty),” Nair said.
In the past two years, endeavour of the government and the CBDT has been to facilitate investments into India to ensure that the taxpayer pays his taxes with the ease of doing business because ultimately, the tax coffers will never be full if there is no business in India.
India and Singapore had entered a Double Taxation Avoidance Agreement (DTAA) on May 27, 1994. The bilateral tax treaty helps in avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.