- Newsletter, Oman
- March 16, 2020
New foreign investment law in Oman is all set to simplify and facilitate the processes for getting permits, licenses and approvals required by foreign investors.
Small businesses generally relate to the regular lifestyles of people. So, to make it easier for such businesses to find their foundation in Oman, the foreign investment law ratifications have been put in place. With this doing business in Oman has become easier for small entrepreneurs.
By way of the foreign investment law, small businesses have been exempted from 100% ownership. This new law is aimed towards improving the corporate climate of Oman and in making it more attractive for the entrepreneurs.
According to the law that has been introduced in Oman, Foreign investment will take place through companies or establishments in the form of the permitted activity. They will be the owner of invested foreign capital on the whole, or they will be making contributions to the same. Also, a license in regards to this activity will be issued by governing authorities. Hence, company formation in Oman shall no longer be a matter of great concern.
Nevertheless, in the best interest of the small-time businessmen in Oman, there has been an exemption of foreign ownership for 37 businesses. This includes photocopying solutions, translation, laundry, tailoring (for men and women), transportation, vehicle repairs, drinking water sale, recruitment and manpower solutions, salon and hairdressing services, fishing, driving instructions, rehabilitation homes meant for orphans, disabled and elderly and taxi services.
The Omani entrepreneurs have welcomed this move on the part of the government. Speaking on the subject, an entrepreneur from Oman put down, “Many Omanis are thriving on small-time local businesses that cannot withstand straight competition from the foreign investors”.
In his interview with the Observer, the entrepreneur further added, “It is also necessary to bring about a reduction in the prices of certain services to make them worth possessing by the common citizens. This would pave the door for small business growth which is not possible in the presence of the bigger giants in the market.”
While further clarity is being expected on the part of the common people and the small business owners in the future, there are some major developments confirmed in regards to the Foreign Investment Law.
Minister of Commerce & Industry will be issuing executive riles under this new law. The regulations added will include significant changes from the old Foreign Investment Law.
As per reports published in newspapers, the executive rules shall come to the forefront by 30th July 2020. A complete list of small business activities where foreign investment shall remain exempted is also likely to be introduced in no time.
The new Foreign Investment Law will not affect the existing laws concerning the GCC investments, Public Establishment for free zones and Industrial Estates and Special Economic Zone.
As per suggestions by the Minister of Commerce & Industry, the power of granting single approvals for the establishment, operation and management of strategic development assignments shall rest with the Cabinet.
All procedures and rules governing the approvals and the process of granting land for different investment projects shall be set out by the executive regulations.
While small businesses eagerly await the introduction of the executive regulations for clarifying some points in the new Foreign Investment Law, the law has indeed relaxed the foreign investment command in Oman to a considerable extent. Specifically speaking, it has boosted the atmosphere for business in Oman by granting 100% foreign ownership to the majority of the business activities.
It is believed that the new Foreign Investment Law will be marking tremendous liberalization in the Sultanate’s history. The law lays emphasis on creating an attractive and robust investment environment for foreign investors and businesses in Oman. The law will be spurring investment; driving economic growth and generating employment for sure.
- India, Newsletter
- March 16, 2020
MSMEs, which are also known as the micro, small, and also medium enterprises or companies, are all set to get great news by the Government. A huge boost-up is going to happen for all the micro-enterprises, small enterprises, and medium enterprises.
Recently, on a conference Nitin Gadkari, the Union Minister has stated one imperative fact addressing the entire MSMEs sector. He has stated that the Modi Government is going to give a huge boost to all the MSMEs across the country. He said all these to the people of the nation at the first-ever Bunts Star Achievers Awards of 2020. IBCCI or the Indian Bunts Chamber of Commerce & Industry was the main organizer of this programme.
The micro, small, and also medium enterprises account for almost forty-eight per cent of exports and take up nearly 11 crore people as well. Nitin Gadkari spoke a lot of noteworthy facts on Sunday, which is mainly great for those companies who are doing business in India. All of the small to medium and also micro-enterprises are going to avail a lot of advantages.
Apart from that, the MSME minister has also added one crucial fact that India requires a reliable and effective institute for all the enterprises and entrepreneurship too. But the major thing that the Government is thinking is how fast they can make their decision. Once they are ready with their decision, they will start executing this, and that would be considered as the hallmark of the Government as well. He has also claimed that despite the global economic downturn, India was known as the fastest developing and growing economy.
When it comes to India company incorporation, a few important things are crucial for stabilizing the environment as well as development. What mainly matters is the ultimate change of the knowledge to wealth and also waste to wealth, said Gadkari. But only thinking of development and environment is not enough because holistic thinking is crucial so that the entire infrastructure growth and expansion is not delayed.
In this conference, Sadananda Gowda, who is Union Chemicals and Fertilizer Minister, has stated that since BJP-led party NDA has come to power, the ease and simplicity of doing this business has enhanced to this World Bank global ranking counts 63, which was 134 initially. In this topic of the MSMEs sector, the former chief minister of Karnataka D. V. Sadananda Gowda has also pitched one crucial and major part. He said that recently GST had altered the entire scenario. The GST council is known as one of the autonomous bodies, and there was not a single event of dissent that happened in the last three years. Along with that, he has declared that by the end of 2025, some of the massive infrastructure projects are coming here. That is worth almost a hundred crores, which will be quite big and beneficial for the industries as well.
- Article, Singapore
- February 25, 2020
Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, delivered Singapore’s Financial Year 2020 Budget Statement on 18 February 2020.
GST TO REMAIN AT 7% FOR 2021
When the GST is raised, Singaporeans will be provided a S$6 billion Assurance Package. This S$6 billion will be set aside to cushion the impact of the GST increase. Households will receive offsets equivalent of 5 years’ worth of additional GST expenses incurred. Low-income households will receive offsets equivalent of 10 years’ worth of additional GST expenses incurred.
Singaporeans living in 1 to 3 room HDB flats will receive offsets equivalent to about 10 years’ worth of additional GST expenses incurred.
Helping Businesses With Their Cash Flow
S$8.3 Billion To Enable Transformation And Growth Efforts
Our start-up ecosystem is ranked in the top 15 for the global start-up ecosystem report. As part of deepening enterprise capabilities, the government will set aside an additional $300 million under the StartupSG equity.
The government expects to draw in more than $800 million of private funding in the next 10 years.
There are two packages as part of this transformation and growth efforts to help businesses:
Enterprise Grow Package
Enterprise Transform Package
Supporting Lifelong Learning With Skills Future Enhancements
(Enterprises) SkillsFuture Enterprise credit at $10,000 per enterprise
To encourage employers to embark on the upskilling of workforce. This will help companies defray up to 90% of transformation costs. Most of the companies that stand to benefit from this will be SMEs. The Productivity Solutions Grant will also be expanded.
The government plans to achieve this by:
Stabilisation And Support Package Of $4 Billion
A new cash grant will offset 8% of local workers’ wages for 3 months to help them stay employed amid the COVID-19 crisis. This will cost the government $1.3 billion and benefit all enterprises and their employees and will be given by the end of July 2020.
To help enterprises with cash flow, there will be a corporate income tax rebate for the year of assessment (YA 2020) at 25% of tax payable, capped at $15,000 per company. This is to benefit all tax paying companies, costing the government $4 million. The wage credit scheme will also be enhanced to support wage increases for Singaporean workers.
S$800 Million Support For Covid-19
Singapore’s economy grew by 0.7% in 2019 — recording the weakest growth since the 2008 financial crisis. Tourism and aviation are most directly affected by COVID including visitor arrivals and hotel occupancy. Affected supply chain created ripple effects on other sectors. The Ministry of Trade and Industry has downgraded GDP from 0.5-2.5% to -0.5-1.5%. Deputy Prime Minister and Minister for Finance Heng Swee Keat stated that Singapore must be prepared that the economic impact may be worse than predicted.
Helping Workers Stay Employed
The proportion of wages co-funded by the Government will also be increased by five percentage points to 20 per cent and 15 per cent, for 2019 and 2020 respectively.
Together with the Jobs Support Scheme, this will support employers in these sectors retain and train more than 330,000 local workers.
Tax Rebates For Aviation
There will also be assistance for ground-handling agents and rental rebates for shops and cargo agents at Changi Airport.
- Newsletter, Saudi Arabia
- February 13, 2020
The production of crude oil in Saudi Arabia has slowed down significantly last year, from 10,643 BBL/D/1K in December 2018 to just 9,890 BBL/D/1K in November 2019. Continuous plunge in crude oil production could be attributed to various factors like the attendant impact on output, and also the attacks on the Saudi Arabia’s oil fields.
Many reports suggested that Saudi Arabia has been trying to coax other OPEC member countries to slash down production by 400,000 barrels per day. But the Saudi government has not agreed to this. OPEC, which is one of the world’s biggest energy-focused coalitions, has reduced its production by 1.2 million barrels (each day) since January last year, which is going to be extended till March 2020. OPEC member nations intend to maintain more stable oil prices by cutting down production.
Saudi Arabia’s economy was able to face the growing pressures in the global oil market because of its diversification policies. The Saudi Arabian Riyadh Bank, which is one of the largest financial institutions located in the Middle East, recently said that they had invested a whopping $26.7 million in a Fintech start-up investment program.
Riyadh Bank CEO Tariq Al Sadhan highlighted the requirement to update the country’s financial and technology infrastructure, particularly with the latest developments that are taking place in the global Fintech industry. The continuing growth and development of this fund is important to the research and development (R&D) work for local start-ups.
Saudi Arabia’s Monetary Authority (SAMA) has supposedly issued over a dozen Fintech licenses especially for this experimental program.
Saudi Arabia’s National Wealth Fund (the Public Investment Fund, or PIF) has now become the key growth engine of the country’s economy. The PIF fund has collaborated with Japan’s Softbank Group by setting up a $100 billion investment fund in the year 2016 specifically for the technology industry. The partnership is only the first step, as the PIF fund has an intended (estimated) investment value of $2 trillion.
The firm has been planning to get a capital of $100 billion via a public sale of a trivial stake in Saudi Aramco, the nation’s energy company. The Saudi Arabian Aramco IPO was put on sale recently and spiked by almost 10% to $9.38, which moved the firm’s valuation to $1.88 trillion, and made it the world’s largest publicly listed company. The IPO was launched on the Saudi Arabian Tadawul, and it broke all previous records that were set by Chinese billionaire Jack Ma’s Alibaba IPO, which was valued at $25 billion in September of 2014.
The fund has now has an objective of supporting and enhancing the country’s economy, and even though it took almost 40 years to establish, the good part is that it has been growing very quickly.
The sovereign wealth fund had now grown to $300 billion in multiple assets (as of May 2019). Then, Saudi Arabia moved its focus to China for various promising business opportunities. Almost $50 billion has been invested in the American economy between 2018 and 2019, and now the country’s government is expecting stable growth and development because of these strategic investments.
Considerable investments in Saudi Arabia’s growing economy and international markets should enable the PIF fund to set up a commanding global presence with billions of dollars’ worth of planned and strategic deals done across the Middle East region, Europe, Asia, and North America.
The Public Investment Fund collaborated with Blackstone in the year 2017 for establishing a $100 billion investment in the space of US-based infrastructure. Approximately $20 billion in investments supposedly came from Saudi residents. But, Saudi Arabia’s alliance with SoftBank’s Vision Fund seems to have captured huger attention, as it’s aimed on Silicon Valley firms. The fund has apparently invested $3.5 billion in various Uber technologies in 2016.
So if you have a plan of doing business in Saudi Arabia and don’t know where to start or how to register a company in Saudi Arabia, do get in touch with us and we would be glad to assist you.
- Newsletter, Oman
- February 13, 2020
100 percent or complete foreign ownership is now possible in majority of Omani companies as per the new Foreign Capital Investment Law that came into effect in the Sultanate starting January 7, 2020. However, there was an exception of a small number of trades and services, in which this won’t be applicable.
There are 37 types of commercial activities that are prohibited for complete or 100 percent foreign ownership including translation and photocopying services, laundry, tailoring, vehicle and automotive repairs, sale of drinking water, transportation, manpower and recruitment services, taxi operation, hairdressing and salon services, fishing, rehabilitation homes meant for the elderly, or disabled, and orphans.
Leaving aside this blacklist, signifying an important but relatively smaller fraction of the Omani economy, the new law broadcasted by Royal Decree 50/2019 (FCIL) opens the doors for assuring new sectors for doing business in Oman or going for 100 percent foreign investment, as per a Muscat-based legal expert.
The Ministry of Commerce and Industry (MoCI) has taken some major steps in the new FCIL to enable a regulatory regime in Oman that is investment-friendly. They also plan to now permit 100 percent foreign ownership in most of the companies set up in Oman other than those conducting any activity out of the above-mentioned blacklist. This blacklist, which has 37 activities listed, currently does not include sectors which were earlier strict in their Omani ownership requirements like oil and gas, defence, and restaurants.
Emphasizing the significance of the new statute to Oman’s determination to foster foreign investment inflows, the FCIL is likely to place the Omani market in a more robust position to offer the foreign investors with a more welcoming, open, and vigorous regulatory framework in which they can conduct business.
If planning for foreign company registration in Oman, it is important to note that the FCIL does not specify a minimum share capital requirement. The MoCI has also relaxed its earlier practice of necessitating any company which has one or more foreign shareholders to begin with a minimum starting share capital of RO 150,000 (almost $390,000). Please note that the fee for registering such type of a company at the Ministry is higher than earlier and starts from RO 3,000 (almost equivalent to $7,800) and is subject to further increase depending on the anticipated share capital of the new company.
Any further clarity in terms of the specific provisions of this new law is likely to be available when the Executive Regulations would be issued later this year.
- Newsletter, U.A.E
- February 13, 2020
Enquiries for mortgage for lesser-priced properties in the U.A.E. has seen an increase by almost 59 percent between the year 2018 and 2019 because of lower property prices and also favourable interest rates. This trend is probably going to continue this year ensuing a potential upsurge in real estate transactions and a good time for doing business in U.A.E. in this sector.
“Marked by Dubai expo 2020 has the potential to become a very fruitful and interesting year with glaring achievements. Dubai will see a surge in tourist arrivals with almost 25 million expected to visit, increasing the investors’ appetite for the city’s real estate offerings,” Al Hammadi said.
As per the real estate visions and data platforms, Dubai has recorded a 20 percent rise in the volume of sales transactions of registered property in the year 2019 compared to 34,961 transactions recorded in 2018. There were over 45,000 units completed in 2019, which was the highest number of units that were completed in one year in the last five years.
“While we expect that the current supply will continue to put further pressure on prices, we will definitely witness a good year in terms of sales transactions,” he added.
Data also shows that there’s an 11 percent upsurge in the number of enquiries from clients who are earning a salary between 10,000 U.A.E. dirhams ($2,722) to about 12,000 U.A.E. dirhams per month between the year 2018 and 2019. The average property price that people in this income bracket consider is approximately 795,000 U.A.E. dirhams. Interest rate cuts in the year 2019 were surely a reassurance for probable real estate investors.
The U.A.E. Central Bank has slashed interest rates almost three times in the last year to be in tandem with the US Federal Reserve. In the year 2018, the average mortgage interest rate was about 3.99 percent. However, in last few months, it has decreased notably, with some rates going as low as 2.75 percent fixed for one year.
Therefore, when banks calculate affordability and perform stress tests today, those people who might not have passed these tests earlier, now have a better probability of doing so because a lower property prices and better interest rates result in lower monthly mortgage repayments.
This is definitely a buyers’ market because of the new real estate laws and regulations, and it’s good that some people who couldn’t buy previously have got a chance to invest in the property market and own their home now. So, if you are interested in buying your own home in the U.A.E. and can arrange for the down payment, then it is the best time to do so.
- India, Newsletter
- February 13, 2020
India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2020 and announced an array of schemes and steps for micro, small, and medium enterprises (MSMEs) and for small businesses. Budget 2020 proposes to give a push to the manufacturing of electronic equipment, mobile phones, and semiconductor packaging. The FM also said that this could also be utilized for uplifting the manufacturing of medical devices.
In Jan this year, the Union MSME minister Nitin Gadkari had mentioned that his department had a plan to establish five parks for manufacturing low-cost medical devices in India. A National Technical Textiles Mission has also been announced in the Budget 2020, which would have a four-year execution period with an outlay of Rs 1,480 crore. The FM said that a National Logistics Policy would also be soon released to form a single window e-logistics market and ensure that the MSMEs become competent. In addition, for achieving a higher export credit, soon a new scheme would be launched to offer higher insurance cover and lessen the premium particularly for small exporters. It would also ease the process of claim settlements.
The FM also stressed on the goal to make every district as an export hub. For this, she announced the launch of the Nirvik scheme to enable export tax disbursement, which has an objective of making loans simpler to access for exporters and also ease the lending procedure. The Commerce Minister Piyush Goyal announced Nirvik in September 2019, which is a New Export Credit Insurance Scheme (ECIS) by Export Credit Guarantee Corporation of India (ECGC). The ECGC offers credit guarantee of almost up to 60 percent loss, however, under Nirvik scheme, the insurance cover which is guaranteed would cover almost up to 90 percent of the principal, including the interest of loans, and would also include pre and post-shipment credit. Another announcement was that a unified procurement system will be created on public procurement portal Government e-Marketplace.
This declaration is not completely new as the Commerce Ministry earlier launched GeM in August 2016 with the aim of developing an open and transparent platform of procurement for the government. In September 2019, it was said that GeM is working towards a series of steps like creating a mechanism to ensure timely payment to all the registered small businesses and MSMEs, and a process for rating buyers and sellers for promoting its growth. Now in the Budget 2020, the FM said that a digital platform would be established for seamless process of application and capturing of Intellectual Property Rights (IPR). But, it was not clear if she was talking about the website and mobile application Learn to Protect, Secure and Maximise Your Innovation on Intellectual Property Rights (IPRs) that was launched in October 2019.
The website and app was developed by Cell for IPR Promotion and Management (CIPAM)-DPIIT in partnership with Qualcomm and National Law University (NLU), Delhi.
GST and Debt Funding
The FM also announced a scheme for subordinating the debt to MSMEs. She advised the banks to extend restructuring MSME NPAs for an additional year, which earlier had a timeline of March 2020.
She also said that an app-based product which will invoice financing loans would be launched to improve the challenge of delayed payments and also cash flow disparities for MSMEs. She assured that some amendments would be made to facilitate the NBFCs to offer invoice financing to MSMEs. In January 2019, the RBI had permitted the recasting of loans to MSMEs only under the pre-requisite that the total fund and the non-fund based exposure to the MSME borrowers is not exceeding the limit of Rs. 25 crore.
The FM also mentioned that the implementation of GST had helped MSMEs in a big way. However, leading up to Budget 2020, various MSMEs weren’t too happy with GST and voiced their expectations regarding GST. The streamlining of GST was one of the top challenges for the MSME sector, a section that is the backbone of the Indian economy as it contributes almost 29 percent of the nation’s GDP. MSMEs had anticipated the Union Budget 2020 to tackle the rationalising of GST slabs, enhancing the GST refunds system, and dealing with export issues caused due to GST. In Budget 2020, the FM allocated Rs 2.83 lakh crores particularly for agro and allied sectors comprising rural development, irrigation, and Panchayati Raj. The Agri credit target was proposed at Rs. 15 lakh crore.
The budget also recommended comprehensive action-plan and steps for water-stressed districts. Approximately 35 lakh farmers would be helped to set up their stand-alone solar pumps so that they can make a living even in their barren lands. The budget also concentrated on offering 152 million metric tonnes of warehousing facilities.
- Newsletter, Singapore
- February 13, 2020
As more and more organizations are turning to technology to enhance their operational efficiency and serve their customers better, South-east Asia comes up with new opportunities for Singapore companies who are looking at expanding in the region or doing company formation in Singapore.
According to a recent survey, 76 percent of organizations who wanted to expand were wishing to enter in the Asean region. The top three destinations for doing business as per the survey were Vietnam, Malaysia and Indonesia. Meanwhile, another report showed that Singapore companies opted for Indonesia as the second most significant growth market globally (16 percent), after China, in the coming three to five years, whereas Malaysia (15 percent) ranked third.
Growing interest in the region can be seen amid fast technological advancement which is rapidly changing the way consumers behave.
In the last four years, the number of people using Internet in South-east Asia has gone up by 100 million — out of which most are aged 15 to 19. “As more of these young, digital-savvy and mobile-first South-east Asians come of age over the next 15 years, they will further fuel the growth of the region’s Internet economy,” stated a survey report in 2019.
The report also projected that the region’s Internet economy is going to triple by 2025, reaching almost US$300 billion, with Indonesia and Vietnam as top players.
Fostering digital transformation
Riding this trend, regional companies are driving digital transformation to further enhance their operational efficiency and serve digital-first customers in a better way.
“Companies in retail, e-commerce, logistics and transportation have really felt the push to provide the best online experience for customers in comparison to other alternative services, and that has been a great impetus for them to change,” said Evan Tan, chief of staff, Holistics Software.
Holistics offers a data analytics platform for firms to prepare and manage their databases, said that more than 50 percent of its existing customers are from South-east Asia. It has assisted an Indonesian Artificial Intelligence (AI) chatbot company to get access to internal big data sources without needing a technical team, and thus, improving the organization’s operational efficiency.
This keenness to try new technologies by regional firms was not common few years ago.
Indonesia in particular is quite open to try new technologies and also has improved digital infrastructure and huge e-commerce potential. Being the biggest in the region, Indonesia’s Internet economy was projected at US$40 billion at its gross merchandise value in 2019. It is likely to further go up to US$133 billion in the year 2025.
“Singapore is a good place for us to do initial research and development, and prototyping,” ViSenze’s Mr Tan said. “But when you need to scale very quickly, you need big consumer markets.”
ViSenze announced a partnership with Samsung Electronics in February 2019 in South-east Asia and Oceania, which would enable Samsung consumers to find products online along with real-life images or current pictures via Bixby Vision Shopping.
Shobhit Shukla, who is the chief revenue officer and co-founder of Near, was quite surprised by the huge technological transformation in the region.
“South-east Asia actually completely skipped an entire generational development,” said Mr Shukla. “Connectivity by 4G and 5G and smartphones help them bypass the broadband (stage) into the smartphone (stage). Who would have thought that companies like Gojek would emerge in a developing economy?”
Near is a Singapore-based AI platform which is tasked with analyzing data to comprehend the real world behavior of consumers. Fascinatingly, though more brick and mortar firms in South-east Asia are beginning to start their journey into e-commerce, all established e-commerce players are also now building their offline capabilities.
These firms are eager to better gauge their consumers, and thus there is a growing requirement for data to join the dots between the consumers’ online and offline behaviour and to offer a 360 degree outlook of the consumers.
Available opportunities for logistics players
The logistics sector is also vigorously planning to utilize technology in its operations. Demand for new technology solutions have risen as Southeast Asia strives to enhance its connectivity to foster the mobility of manpower, other resources and technology, even as it is weighed down by an infrastructure gap.
Regional governments have also announced projects to enhance infrastructure and trade, for example, Thailand’s Eastern Economic Corridor (EEC) and the China-led Southern Transport Corridor that connects China to Asean.
These initiatives offer golden opportunities for various Singapore’s investment and logistics firms to back new establishments and manufacturing activities in this region and go for Singapore company incorporation.
The Vietnamese government is also encouraging investors to offer their technical expertise and experience in project management particularly in infrastructure projects for helping to speed up their development.
Indeed, YCH, a Singapore-based logistics giant, mentioned that after a memorandum of understanding was signed in 2018, it is collaborating with T&T Group, a Vietnamese multi-industry conglomerate, for building Superports in Hanoi, Ho Chi Minh City, and may be also in the Philippines this year.
These Superports, which would be connected to all major rail, road, and freight networks, are likely to use new technology for coordinating cargo movements and to build an effective network for distribution inside the cities and beyond.
The Superport project by YCH and T&T would enable promoting infrastructure development and in addressing the requirement for a chain of distribution centers located in the Southern Transport Corridor.
- Article
- February 11, 2020
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- Article, India
- February 7, 2020
After demonetisation, the banks have been told to levy charges on any cash transactions going over a specific limit. Additionally, RBI has made it compulsory to scrutinise cash transactions which are unusual as several malpractices were observed when people did cash deposits of Rs.500 and Rs.1,000 notes during demonetisation.
Recently, the Finance Ministry passed a circular explaining the standard operating procedure (SOP) for evaluation of officers, while handling such cases. There are specific scenarios in which a verification warrant could be released for your transaction:
1. Who can be scrutinised?
A scrutiny can happen in many scenarios. Some of them are mentioned below:
Cash deposited from previous income or savings
- People who deposit cash over Rs.2.5 lakh or senior citizens depositing cash over Rs.5 lakh could come under a scrutiny. Any amount that is within the stated limit would not be scrutinised as long as that the money is from cash withdrawals, household savings, previous income, etc.
- In case of individuals who do not have business income or deposits over the specified limits would be authenticated by the assessing officers (AO). Enterprises whose books of accounts reflect total savings that are above the closing cash balance as of 31 March 2016 (AY 2016-17) would surely be scrutinised.
- Bank accounts that are doubted of being exploited for money laundering or evading tax or entry operations in shell companies would have to go through a complete investigation.
Cash out of tax-exempt receipts
Any additional cash from tax-exempt receipts should be matching with the IT returns filed previously by the same individual. If otherwise, then the AO could call for applicable information.
Cash withdrawn from any bank account
Cash deposits which are not matching the person’s bank statements become suspicious even if he or she says that the money has been withdrawn from the bank account. The AO might ask for the bank statement copy to justify the cash deposits done and withdrawals taken from the bank account.
Cash taken from identifiable persons
When cash is received from recognizable individuals (with PAN card), the AO would not call for any further information. Rather, the AO would ask for information from the AO of such recognizable individual. In the scenario of a gift, the AO usually verifies if the same is taxable by the recipient as per section 56(2) of the IT law.
Cash received from unidentifiable individuals
In scenario of receipts from unidentified individuals (without PAN card), the AO would do a verification to find if the cash receipts are in compliance with the usual practices of the taxpayer’s business. In case the cash transactions are not in compliance with the usual practices of business, the AO may ask you to give documents like monthly sales summary, stock registers, etc. for verification. But for unidentifiable individuals, the AO would surely verify if the cash transactions are in compliance with the usual business practices as per the previous return of income.
The AO might even ask for information like monthly sales summary, applicable stock register entries, some bank statements etc. to identify examples of backdating of sales or any fabricated sales. To find any such examples, an AO may scrutinise:
- Any abnormal rise in the cash sales in the period of November-December 2016 or previous periods.
- Multiple deposits made in demonetised currency in end of December 2016.
- Non-availability of their stocks or efforts to inflate stocks.
- Transfer of any bank accounts that were not used earlier.
- The same process would be carried out for verifying donations and any such cash receipts.
Cash disclosed under PMGKY
If the taxpayer makes some cash known under Pradhan Mantri Garib Kalyan Yojana (PMGKY), the alleged cash transactions could be confirmed with disclosures made under PMGKY.
2. The e-verification process
The online verification is available on the e-filing portal which is usually matched with the internal verification portal of the IT department. Following are the portal’s features:
- Individuals under scrutiny don’t need to visit the IT office and are allowed to submit explanations online using their login on the e-filing portal. PAN-card holders can easily view this information by going on the ‘Cash Transactions 2016’ in the ‘Compliances’ section.
- An SMS and email is sent to all individuals under scrutiny guiding them to fill in their online responses on the e-filing portal. If anyone is not registered, then they must register immediately using the ‘Register yourself’ link. However, the registered taxpayers needs to update their mobile number and e-mail address on the portal to get communication from the department.
- People can refer to the guides and FAQs on the IT department’s website for submitting their responses.
- Low-risk cases could be closed centrally, but other cases are assigned to AOs for confirmation.
- AOs view all submissions and then ask to submit verification proofs online.
- In case the documents submitted are okay, then the AO closes the verification online.
3. What to do if you have any queries in the process?
If you have any sort of queries or challenge during the process, you can look for guidance in the ‘Help’ section of the portal. You could also refer to the FAQs and seek solutions for your questions. You could also read ‘Cash Transactions 2016 User Guide’ or ‘User Guide on Verification of Cash Transactions on ITBA-AIMS module’, which is a guidelines document that AOs refer to during verification.
4. Closure and approval process
AOs can close an individual’s records after verifying and getting due permission from the relevant authorities.
5. Non-compliance and penalty
If there is non-compliance, then the AO checks the ITS profile of the PAN-card holders and uses powers as per Section 133(6) with the approval of the relevant authority, survey action as per Section 133A, and more. However, the AO can also initiate penal process as per section 269SS or 269T of the Act.
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