21 Jan

How To Handle Tax Disputes In India?

Life would be very simple for the common men, the investors as well as the government, if there were good tax resolution strategies. Handling tax issues is one of the most challenging approaches due to continuous rise of uncertainties in the taxation field.

Reasons of Tax Disputes in India

With the developing economy in India, the courts and tribunals are constantly over-burned with disputes from each aspect of life and one among them are the taxation disputes, the main reasons for tax ligations reside in:

Absence of clarity in laws that makes it susceptible to various interpretations.
In a country like India, such issues have to pass through multiple appellate levels before attaining any certainty.
Difference in opinions of people handling such issues in various authorities.
Inexperienced tax administration staff tackling the tax disputes.

Resolution of Tax Disputes

Previously, India was also counted for scams, black money and other tax related issues but as time is changing, our country has elaborated the structure of dealing with tax disputes.

Some resolution mechanisms that can be undertaken to resolve tax disputes are:

Approach the five tier appellate hierarchy.
Pay 50% tax on junked currency deposited in bank post-demonetisation, a ‘come clean’ scheme proposed by the government.
Proper representation of documents, facts and arguments in a comprehensive manner before the tax and appellate authorities.
Approach offices that tackle these disputes in a speedy manner. Some such offices under the Indian government are:

AAR: the office is mainly for foreign companies and the non-residents.
APA’S: it is an agreement between the tax payer and the tax authority that is accepted globally, it is based on transfer pricing methodology.
Tax withholding certificate: it is an act to withhold/reduce/ tax on some taxable thing which a taxpayer/recipient believes is taxable at a lower rate. This can be done with prior consent from the tax authority.
Dispute resolution panel: these panels come under the Indian government and are strictly designed to solve stringent tax related disputes.
Mutual agreement Procedures: these are special agreement treaties that can be filed in-case a tax payer is of the view that double tax is being taken on his/her income. Here the tax payer gets an option to accept or reject the resolution given by the competent authorities.

Other remedies available to a tax payer where he/she can aggrieve an action of an accessing officer are:

Appellate remedy: here one can get their filling procedure re-accessed if they feel that the income chargeable to tax has escaped the original assessment.
Administrative remedy: here the tax payer can get the orders revised under section 263 and 264.
Other than this in certain rare cases a tax payer is given an opportunity to file petitions to the commissioner of Income Tax Department.

Avoidance of Tax Disputes

However a tax payer can remain free from all such tax disputes by: