The B&B Regulatory Updates #9:CBDT issues draft rules , SEBI issues consultation paper & more

Bar & Bench will bring you the latest regulatory and policy updates from different ministries and regulatory authorities. In this edition of the Bar & Bench Regulatory Updates, we analyse the latest draft rules issued by the CBDT on foreign tax credit, SEBI’s consultation paper and RBI’s amendments to fraud account standards..Credit for tax paid abroad.Earlier this week, the Central Board of Direct Taxes issued the draft rules that will allow resident taxpayers to claim credit for taxes paid abroad. At present, such a facility is not available under the Income Tax Act, 1961. The draft rules are available for public comments till May 2, 2016..According to the draft rules:.An assessee will be allowed a credit for the amount of foreign tax paid by him in a country, with which India has an agreement for avoidance of double taxation as well as in other specified countries;Credit will be available against amount of tax, surcharge, cess and minimum alternate tax, but not in respect of any sum payable by way of interest, fee or penalty;No credit would be available in respect of any amount of foreign tax, which is disputed in any manner by the assessee..Companies claiming tax credit will have to submit proof of tax paid which will include (i) certificate from the tax authority specifying the nature of income and the amount of tax deducted; (ii) acknowledgement of online tax payment or bank counter foil or slip or challan for tax payment .However, carry forward of excess foreign tax paid by the assessee will not be permitted under the draft rules..Depositories to (maybe) manage cash benefits.The Securities Exchange Board of India (SEBI) has issued a consultation paper aimed at centralising the existing system of distribution of cash benefits by issuing companies. .SEBI has proposed that the issuing companies could transfer the total amount due to their clients to the depositories who will in turn distribute the same to beneficial owners..At present, apart from cash benefits, all other non-cash benefits are routed through the depositories. The consultation attempts to enlist all the issues which the investors have to face due to the extant practice of distribution of cash benefits by issuers and show the benefits that will accrue to the investors and the issuers as a result..Under the extant system, investors face a lot of difficulties such as:. difficulty in tracking receipt of benefits; inefficient delivery of information with respect to failure in credits; unawareness among investors with respect to cash benefit announcements. .Furthermore, there is no correlation in demat transactions since the debit is made from demats but the redemption amount may not have been received by the investor..By authorising depositories to handle the cash benefits as well, both the investors and issuers are to benefit:.For the investors, this move may come as a big sigh of relief, as now they won’t have to keep a separate track of all cash benefits; they will be entitled to timely delivery of information and; can now directly contact the depositories for all queries instead of having to approach the companies. The issuers in turn, will not have to maintain separate cash benefit information, which will reduce their workload and they may approach the depositories for any information as and when they need it..SEBI has also put a short list of question at the end of the consultative paper, which includes a provision for ‘any other comment’. The last date for receipt of suggestions is 5 May 2016..Provisions for bank frauds.The Reserve Bank of India (RBI) has tightened the disclosure norms for bank frauds. While the banks have to, now, provide for the entire due amount immediately on being detected, they may adjust financial collateral eligible under Basel III Capital regulations available with them with regard to the accounts declared as fraud account..But banks can spread them over a maximum of four quarters, commencing from the quarter in which the fraud has been detected..In cases where the provisioning spills over one year, banks must debit ‘other reserves’ by the amount remaining un-provided at the end of the financial year by credit to provisioning. However, banks should proportionately reverse the debits to ‘other reserves’ profit and loss account, in the subsequent quarters of the next financial year, RBI said. .0015953395Verus Advocates287398314.0 Normal0falsefalsefalseEN-USJAX-NONE /* Style Definitions */table.MsoNormalTable{mso-style-name:"Table Normal";mso-tstyle-rowband-size:0;mso-tstyle-colband-size:0;mso-style-noshow:yes;mso-style-priority:99;mso-style-parent:"";mso-padding-alt:0cm 5.4pt 0cm 5.4pt;mso-para-margin:0cm;mso-para-margin-bottom:.0001pt;mso-pagination:widow-orphan;font-size:12.0pt;font-family:Cambria;mso-ascii-font-family:Cambria;mso-ascii-theme-font:minor-latin;mso-hansi-font-family:Cambria;mso-hansi-theme-font:minor-latin;mso-ansi-language:EN-US;} .The RBI has reiterated that banks must ‘scrupulously’ adhere to the extant guidelines on classification and reporting of frauds.