Clarification regarding defective notices issued to FII/FPIs

Background:

Finance Minister Arun Jaitley had in the 2015-16 budget exempted FIIs from payment of minimum alternate tax with effect from April 1, 2015. Further, an amendment will also be carried out in the Income Tax Act to exempt FIIs from payment of MAT on capital gains retrospectively as well.

However, the FIIs/ FPIs faced difficulties in filing of returns. The I-T Department had slapped notices on several FPIs for failure to furnish balance sheets and profit & loss accounts in the returns of income filed by them. Such investors largely were not required to maintain books of accounts in India as they did not have permanent establishments in the country.

Clarification:

1. Considering the above issue, the Central Board of Direct Taxes (“CBDT”), on 10th December, 2015 has clarified that incomplete or deficient returns filed by foreign institutional investors (“FIIs”) and foreign portfolio investors (FPIs) would not be treated as “defective” if the FIIs/ FPIs fulfill the following conditions:
   • FII/FPI is registered with SEBI,
   • FII/FPI has no Permanent Establishment/ Place of Business in India, and
   • FII/FPI has provided basic information required under section 139(9)(f) of the Income-tax Act, if there is business income.
2. The CBDT said returns for assessment year 2015-16 where the SEBI registration number had been provided by the FIIs/FPIs were being taken up for processing at CPC Bengaluru.
3. For previous assessment years, where the above information was not available in the IT Returns, FII/FPI might provide such details in their online response on its e-filing portal to the previously issued notice.

Simplification of the process of online rectification of incorrect TDS details

Background:

Earlier taxpayers were required to fill in complete details of the entire TDS schedule while applying for rectification on the e-filing portal of the IT Department. Errors due to incomplete TDS details in rectification applications were leading to delays in processing of such applications thereby causing hardship to the taxpayers.

Clarification:

To avoid the above inconvenience, a new facility has been provided for pre-filling of TDS schedule while submitting online rectification request on the e-filing portal to facilitate easy correction or up-dating of TDS details. This is expected to considerably ease the burden of compliance on the taxpayers seeking rectification due to TDS mismatch.