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Category: Regulatory

E-Dispute Resolution Scheme – Income Tax – All you need to know
On 5 April 2022, the Central Board Of Direct Taxes (CBDT) issued the e-Dispute Resolution Scheme, 2022 by the Dispute Resolution Committee on applications made for dispute resolution under Chapter XIX-AA of the Act in respect of dispute arising from any variation in the specified order by such persons or class of persons, as may be specified by the Board.

Key features
- Assessee who fulfils the specified conditions may, in respect of any specified order, file an application electronically for dispute resolution to the Dispute Resolution Committee designated for the region of Principal Chief Commissioner of Income-tax having jurisdiction over the assessee.
- Application shall be filed in the Form No. 34BC referred to in rule 44DAB within such time from the date of constitution of the Dispute Resolution Committee, as may be specified by the Board, for cases where appeal has already been filed and is pending before the Commissioner (Appeals); or within one month from the date of receipt of specified order, in any other case;
- Application shall be submitted by email to the official email of the Dispute Resolution Committee alongwith proof of payment of tax on the returned income, if available and accompany a fee of one thousand rupees.
- The Dispute Resolution Committee shall examine the application with respect to the specified conditions and criteria for specified order;
- Upon such examination the Dispute Resolution Committee, where it considers that the application for dispute resolution should be rejected, shall serve a notice calling upon the assessee to show cause as to why his application should not be rejected, specifying a date and time for filing a response;
- The decision of the Dispute Resolution Committee that the application for dispute resolution should be allowed to be proceeded with or rejected, shall be communicated to the assessee on his registered e-mail address;
- the assessee shall, within thirty days of receipt of the communication that the application is admitted be required to submit a proof of withdrawal of appeal filed under section 246A of the Act or withdrawal of application before the Dispute Resolution panel, if any, to the Dispute Resolution Committee or convey that there is no aforesaid proceeding pending in his case, failing which the Dispute Resolution Committee may reject the application.
Conclusion

A good move aligned with the intention to create ease of doing business for taxpayers. The challenge lies in the implementation. Communicating with tax department over email has proven to be a constant challenge under the faceless assessment regime. It remains to be seen how well this E-dispute resolution scheme can be implemented.

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April 7, 2022
How to pay using UPI123Pay – Everything to know

The Reserve Bank of India (RBI) has launched Unified Payments Interface (UPI) service for feature phones called UPI123Pay.

At present, efficient access to UPI is available on smart phones. Considering that there are more than 40 crore feature phone (e.g. Nokia dabba phone) mobile subscribers in the country, UPI123pay will materially improve the options for such users to access UPI.

With this launch of new UPI for feature phones, Das added that it would help the National Payments Corporation of India (NPCI), an umbrella organization serving retail payments and settlement systems in India, reach its goal of processing a billion transactions a day.

UPI123Pay will also assist RBI to achieve its objective of a less-cash economy and financial inclusion.

Features:

Feature phone users will now undertake a host of transactions based on four technology choices. These include calling an IVR (interactive voice response) number, app functionality in feature phones, missed call-based approach, and also immediacy sound-based payments, the RBI stated.

Such users can make payments to friends and family, pay utility bills, recharge the FAST Tags of their vehicles, pay mobile bills, and allow users to check account balances. Adding customers will also link bank accounts and set or change UPI PINs.

Further, the 24×7 helpline ‘Digisaathi’ will assist the callers/users with their digital payments queries via the website and Chabot.

Users can visit www.digisaathi.info or call 14431 and 1800 891 3333 from their phones for their digital payments and grievances queries.

Distinct options:

App-based Functionality: App could be installed on the feature phones, allowing several UPI functions open on smartphones to be functional on feature phones.

Missed Call: By dialing a missed call on the number displayed at the merchant outlet, feature phone users will be capable of accessing their bank account and performing routine transactions such as receiving, transferring funds, regular purchases, bill payments, and so on. The customer will accept an incoming call asking them to verify the transaction by entering their UPI PIN.

Interactive Voice Response: UPI payment via pre-defined IVR numbers would necessitate users making a secure call from their feature phones to a pre-determined number and completing UPI on-boarding formalities before they could begin making financial transactions without the internet.

Proximity Sound-based Payments: This technology utilizes sound waves to permit contactless, offline, and proximity data communication on any device.

How to use UPI123Pay?

A shared server site library permits feature phone holders to use digital processes to transact.

The UPI123Pay feature does not require internet connectivity to transact online. Additionally, this service is available in various Indian languages.

The smartphone and feature phone users can now effortlessly transact digitally with the new facility.

UPI for feature phones is a three-step process call, choose and pay.

Before initiating to make the payment, it is required that the user links their bank account with the feature phone.

Further, using his/her debit card, they will be required to set a UPI PIN.

Once the UPI PIN is created, the user can use their feature phone for transactions just like a smartphone user.

The feature phone user needed to call on the IVR number and choose the phone relying on the service mandated such as money transfer, LPG gas refill, FasTag recharge, mobile recharge, balance check, etc.

To transfer the money, one will have to choose the phone number to whom money is to be transferred, add the amount, and enter UPI PIN.

To pay to a merchant, they can use an app-based payment method or missed call payment method.

They can also use the voice-based method to make digital payments.

Actual steps/ process for using UPI123Pay

#Dial the IVR number 08045163666 on your phone.

#On the IVR menu, select your preferred language.

#Now, choose the bank linked with UPI

#Press ‘1’ to confirm the details.

#Press ‘1’ to send money by using your mobile number.

#Enter the mobile number of the recipient.

#Confirm the details.

#Now, enter the amount that you want to transfer.

#Enter your UPI PIN and authorise the money transfer.

That’s it. That is how you use UPI123Pay!

Welcome to the new India.

March 17, 2022
IPO pricing by loss making companies – Reactive policymaking 101

Ever wondered how the shares of loss-making companies are priced?

Well yes, seems like SEBI has started wondering too.

But not before these huge IPOs have caused massive losses to the public.

Zomato is near its issue price, Paytm has eroded 2/3rds of investor wealth, so on and so forth.

Last Friday, the securities market regulator has come out with a consultation paper to tackle the issue of pricing of such IPOs.

First – what is currently being done?

At present, only few ratios like Earnings Per Share (EPS), price to earnings, return on net worth etc are required to be disclosed.

What is the problem identified by SEBI?

They say that these parameters are typically descriptive of companies which are profit making and do not relate to a loss-making firm.

What does the consultation paper propose?

In addition to the current ratios, additional disclosures of Key Performance Indicators (KPIs) to be made-

– relevant KPIs during the three years prior to the IPO and an explanation of how these KPIs contribute to pricing

– KPIs to be audited/ certified

– disclose all material KPIs that have been shared with any pre-IPO investor at any point of time during the three years prior to the IPO.

– Details of “immaterial” KPIs and their justification

– Comparison of KPIs with national/ global listed peers

It is far from being a law yet and is only open for the public comments.

Apart from KPIs, an issuer firm has been proposed to make disclosure of valuation of issuer company based on secondary and primary sale, in the 18 months prior to the date of filing of the DRHP/RHP.

This is subject to conditions where either acquisition or sale is equal to or more than 5 per cent of the fully diluted paid-up share capital of the issue firm in a single transaction or a group of transactions in a short period of time.

With reference to valuation of an issuer company based on secondary sale or acquisition of shares and primary or new issue of shares, Sebi has suggested disclosure of floor price and cap price being times the Weighted Average Cost of Acquisition (WACA) based on primary/ secondary transaction(s) should be disclosed in a tabular form.

SEBI also said that an issuer firm should offer a detailed explanation for offer price along with comparison of the issuer ‘s KPIs and financials ratios such as EPS, return on net worth and net asset value for the last two full financial years and the interim period, if any, included in the offer document.

This will enable the investors to have a comparative view of the KPIs and other financial ratios for the same period, as per SEBI.

This is another instance where the regulator has woken up after the public has been fooled.

Having said that, this is definitely a step in the right direction.

For any comments or queries, please reach out to us at contact@vprpca.com

February 22, 2022
The Budget and its tryst with startups

Does Budget 2022 do enough for startups?

The short answer is – No.

We saw the rise of 44 unicorns in India during the last calendar year itself. Studies have shown that raising funds for a startup in India has never been easier.

The Hon’ble Finance Minister used the words “digital”, “startups” and “technology” in historic proportions in Budget 2022. In one of the many firsts, the Speech also acknowledged that there are various on-ground challenges plaguing the startups and new businesses in India.

It was indicated that the Government will form an expert panel to look into the same and resolve those issues. This is a laudable move. Yet it gets us nowhere.

The tax and regulatory environment is not geared to handle the booming venture capital and private equity investment in Indian start-ups. It definitely helps to be officially recognized as a start-up which provides tax breaks, angel tax exemptions etc. under Income tax laws.

The official start-up recognition scheme is not completely inclusive as it requires the start-ups to be doing something “innovative” in order to qualify as a start-up. This has led to merely 54,000 registrations under the start-up scheme since past 6 years.

Mind you, over 1.5 lakh companies are incorporated each year alone in India. With a booming funding environment, investors are not selectively investing in “innovative” companies anymore.

Over the years, various round table discussions have been held with bureaucrats and even the Prime Minister and various industry representations have been submitted as well – all of which ask for widening the definition of a start-up.

The Budget 2022 was historic for start-ups but in many ways, it has actually done close to nothing.

February 2, 2022
Implications of India’s listing on global bond market indices

India is the world’s fastest-growing economy and yet there is no mention of the Indian debt market on global indices. Most major economies are listed since a long time.

“India has made significant strides in macroeconomic stability, and its government is more motivated than ever to encourage corporate-investment-driven growth,” says Chief India Economist Upasana Chachra.

“We think India will be included in two of the three major global bond indices in early 2022.”

Beyond the direct benefits of index inclusion—it could trigger $170 billion in bond flows over the next decade, lifting Indian bond prices while lowering borrowing costs—this milestone could have profound implications for the country’s currency, corporate bonds and equities.

A few implications of global-bond-index inclusion for India, and why it could signal the emergence of a new India.

1. Immediate Boost for Government Bonds

Major indices don’t simply track their respective markets—they influence them. When an index adds new constituents, portfolios pegged to those benchmarks must adjust their allocations accordingly. “India’s inclusion would trigger significant index-related inflows, followed by an allocation from active global bond investors,” says Min Dai, Head of Asia Macro Strategy.

2. Shrinking Deficit, Stronger Rupee

Index inclusion, while significant on its own, would also signal policymakers’ desire to support higher economic growth through investment. “This will push India’s balance of payments into a structural surplus zone and indirectly create an environment for lower-cost capital and, ultimately, be positive for growth,” says Chachra, adding that India’s consolidated deficit could shrink to 5% of its GDP by 2029, down from 14.4% for the 2021 fiscal year.

India’s currency would also feel the impact. The shrinking deficit could bolster the value of the Indian rupee by 2% a year against a basket of other major currencies, in exchange rate terms. While India’s long-term 4% annual inflation would imply a 2% depreciation in the value of the rupee in nominal terms, at around a 6% yield, Indian government bonds could offer investors medium-term returns of around 4% in dollar terms, “which is quite attractive for foreign investors,” says Dai.

3. Capital needs of Corporates

Inclusion in global bond indices could also help Indian corporations with their capital needs. When foreign capital flows into government bond markets, it lowers overall borrowing costs, improves debt sustainability and also drives demand for other—read corporate—fixed-income securities. That’s potentially good news for India’s domestic corporate bond market, which foreign investors have largely overlooked.

Foreign investors would gain access to a significantly larger pool of Indian corporate issuers.

4. Equities Buoyed by Better Growth

The opening of India’s sovereign bond market may also bode well for equities, which stand to benefit from lower borrowing costs and a healthier macroeconomic backdrop. Among these, large private banks could be the most obvious winners. Still, nonbank financials— such as those focused on mortgages, credit cards, insurance and asset management—could enjoy the spillover effects of a more robust bond market in India.

Sources:

1. Morgan Stanley research report

2. India’s global indices report

3. RBI Press Release dated 8 October 2021

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January 19, 2022
Card Tokenisation – A simple guide

There is a lot of buzz around “tokenisation” nowadays.

The word sounds complex but let us decode it in simple terms. A final verdict awaits you at the end.

The way we pay money through credit or debit cards on Amazon, Flipkart, Uber, Zomato etc, will not be the same anymore.

Current scenario

When we enter the card details for the first time, the website gives us an option to save the card details (Card number, name, expiry) for ease of future use.

Let’s face it, we all check that box for convenience. No one wants to enter the 16 digit card number and details again.

What is the need for change?

The card details are stored with the merchants and this leads to an issue – in case hackers steal your data (and data leaks are alarmingly increasing nowadays), your data is at risk.

Your money is not really at risk – the hackers cannot directly steal money from your cards since your CVV (Card Verification Value) pin is not stored in the data.

But even the details of your cards pose as a privacy threat and can be misused in combination with other data.

Welcome to tokenization!

The Reserve Bank of India brought in CoF (card on file) tokenization guidelines that mandate replacing actual card data with encrypted digital tokens to facilitate and authenticate transactions.

Tokenisation is nothing but replacement of actual card details with an alternate code called the “token”, which shall be unique for a combination of card and token requestor.

A tokenised card transaction is considered safer as the actual card details are not shared with the merchant during transaction processing.

Now what?

You would no longer need to (or allowed to) save the 16-digit card number and the card expiry date on the merchant website.

On the backend, the card’s CVV number will no longer be required for digital payments making the entire system safe and secure.

If you choose not to opt for tokenisation, you will have to manually enter your card details every time you transact.

How does card tokenization work?

On the end-user front, nothing changes. Users need to enter their card details and opt for tokenization while making online transactions at the check-out window of the shopping portal.

However, merchants will now need to forward the token to respective banks or the card networks. A token is produced and sent back to your merchant, which then, at that point, saves it for the end-customer. As customers, we don’t have to recall the token as the experience is not going to change for you while making digital payments.

Is the tokenization service free?

Tokenization is absolutely free for users, who can tokenize any number of cards. However, only domestic cards fall under the current guidelines.

Tokenization is not applicable to international cards as of now.

How will it benefit users?

Customers need safety and security at any place they shop. In this time where digital fraud presents dangers all through the economy, building trust and connection with clients starts with keeping their payment and other individual information safe.

Tokenization shields businesses from the negative financial impact of data theft as even if there is a breach, the merchant would not have important data that can be stolen.

Tokenization can’t shield your business from an information and data breach—yet it can diminish the bad outcomes of any possible breach.

When will it come into effect?

This was initially slated to come into effect from 1 January 2022. However, the payment systems are not yet geared to accept tokens. Hence, the Reserve Bank of India has extended the date to 1 July 2022.

Final verdict

Whenever a new compliance is mandated, we fear a new headache.

But this is an exception to the rule.

The tokenization will only make it easier for end-users to transact online. No need to remember those CVVs.

There is no effort from end users for tokenization except that we need to do it for the first time. Thereafter, the token will transact automatically.

As with any new rule, the effectiveness lies in its implementation.

We can hope that tokenization will be a smooth ride and make online transactions safer, faster and reliable.

Thank you for reading!

We would love to hear your views! Get in touch.

December 26, 2021