GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Phase 2 Implementation of the Standard in Practice

INDIA
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: India 2013
PHASE 2: IMPLEMENTATION OF THE STANDARD IN PRACTICE
November 2013 (reflecting the legal and regulatory framework as at May 2013)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: India 2013: Phase 2: Implementation of the Standard in Practice, OECD Publishing. http://dx.doi.org/10.1787/9789264202658-en
ISBN 978-92-64-20264-1 (print) ISBN 978-92-64-20265-8 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
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OECD 2013
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of India . . . . . . . . . . . . .11 Overview of India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 23 56 75
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 80 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 92 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 C.2. Exchange of information mechanisms with all relevant partners . . . . . . . 104 C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . 108 C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . 109
PEER REVIEW REPORT PHASE 2 INDIA OECD 2013
4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . .121 Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . 125 Annex 2: List of All Exchange of Information Mechanisms . . . . . . . . . . . . . . 126 Annex 3: List of All Laws, Regulations and Other Material Received. . . . . . 134 Annex 4: People Interviewed During the On-Site Visit . . . . . . . . . . . . . . . . . . 136 Annex 5: Handling of Incoming Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in India as well as the practical implementation of that framework. The international standard, which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information partners. The assessment of effectiveness in practice has been performed in relation to a three year period (July 2009 through June 2012). 2. India is Asias second-largest country by size and the second most populous country in the world. It is the worlds 10th largest economy by nominal GDP, and is engaged with many trading partners. As a member of the G20, in 2009 India committed to implement the agreed international standard for tax transparency and exchange of information and became a member of the restructured Global Forum on Transparency and Exchange of Information for Tax Purposes. 3. India has an extensive network of information exchange mechanisms that covers 111 jurisdictions, including all relevant partners. India has been actively engaged in exchanging information for more than 40 years. Information can be exchanged under Double Tax Conventions (DTCs), Tax Information Exchange Agreements (TIEAs), and multilateral exchange agreements, including the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. It is Indias policy and practice to exchange information to the international standards as reflected in its exchange of information instruments which provide for effective exchange of information, with the exception of a limited number of old DTCs. Exchange of information articles in Indias exchange of information instruments have confidentiality provisions in line with the international standards and Indias domestic legislation also contains confidentiality provisions. In addition, each of Indias exchange of information instruments ensures that information would not be shared which would disclose trade, business, industrial, commercial or professional secrets; be subject to attorney client privilege; or be contrary to public policy.
8 EXECUTIVE SUMMARY
4. Indias treaty policy is complemented by wide-ranging powers to request information, search premises and seize documents. There are no limitations e.g. domestic tax interest, limited to criminal tax matters, limited by de minimis threshold, limited to taxpayers currently under examination on the tax authoritys ability to use these information gathering powers. The full range of these powers is used in practice to respond to international exchange of information requests. They provide the ability to obtain information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees, as well as information regarding the ownership of companies, partnerships, trusts, and other relevant entities. Further, these powers include the ability to obtain accounting records from all natural and legal persons. 5. No bank or corporate secrecy provisions in Indias laws limit the ability of the competent authority to respond to an international exchange of information request. Similarly, the rights and safeguards that apply to persons in India do not unduly prevent or delay the effective exchange of information. 6. India allows for the formation of companies, partnerships including limited liability partnerships, trusts and cooperative societies. Information is available that identifies the owners of companies domestic and foreign and members of bodies corporate. Various declaration requirements pertaining to nominee owners of shares are in place. Registered companies are required to keep accounts which explain all transactions, enable the companys financial position to be determined and allow for financial statements to be prepared. Companies and co-operative societies are also obliged to keep related underlying documentation. 7. Information is available identifying the partners in general and limited liability partnerships in India and the partners in foreign partnerships which operate in India. The obligations for partnerships ensure that partners and persons in certain professions deriving income from the partnership keep accounts which explain transactions, enable the firms financial position to be determined and allow for preparation of financial statements. Partnerships are also obliged to keep underlying documentation for the accounting records. 8. Information is available that identifies the settlors, trustees and beneficiaries of express trusts and accounting records which must be kept for trusts. Persons assessed for the income of a trust are obliged to keep underlying documentation for the accounting records. The accounting records and underlying documentation kept by com9. panies, partnerships and trusts are required to be kept for at least five years and banks, financial institutions and financial intermediaries are obliged to maintain transaction records for ten years from the date of the transaction.
EXECUTIVE SUMMARY 9
10. In practice, ownership, accounting and banking information is available in India. 11. India received 97 requests over the period from 1 July 2009 to 30 June 2012. The requested information was provided within 90 days in 23% of the requests, between 91 and 180 days in 34% of the cases, between 181 days and one year in 22% of the cases and after a year in 21% of the requests. India is considered by its partners a very important and fully committed EOI partner. India has long experience in exchange of information and is an advocate for the further development of international EOI cooperation. Today, India has in place appropriate organisational processes and resources to ensure effective exchange of information. Indias EOI cell is headed by two Joint Secretaries of Foreign Tax and Tax Research Divisions who are authorised to act as Indias competent authority. EOI practice is organised in a decentralised way and requires the involvement of all levels of Indias tax administration. In the majority of cases, requests are forwarded by the EOI cell to local units or central divisions which gather the requested information and send it back to the EOI cell. The EOI cell monitors and coordinates the whole process in order to ensure that the information is provided on time and adequately. 12. Information obtained and peer inputs show that Indias processes led in a small number of cases to delays during the earlier part of the period under review, but the situation greatly improved during 2011 and 2012 when the dedicated EOI cell became fully operational. India should continue implementing the very positive measures recently taken to ensure that answers to EOI requests are made in a timely manner in all cases. 13. India has been assigned a rating 1 for each of the 10 essential elements as well as an overall rating. The ratings for the essential elements are based on the analysis in the text of the report, taking into account the Phase 1 determinations and any recommendations made in respect of Indias legal and regulatory framework and the effectiveness of its exchange of information in practice. On this basis, India has been assigned a rating of Compliant for each essential element. In view of the ratings for each of the essential elements taken in their entirety, the overall rating for India is Compliant. 14. A follow up report on the steps undertaken by India to answer the recommendations made in this report should be provided to the PRG within twelve months after the adoption of this report.
1.
This report reflects the legal and regulatory framework as at the date indicated on page 1 of this publication. Any material changes to the circumstances affecting the ratings may be included in Annex 1 to this report.
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of India

15. The peer review of India has been undertaken across two assessments: the 2010 Phase 1 Report, and the Phase 2 assessment. The assessment of the legal and regulatory framework of India and of the practical implementation and effectiveness of this framework was based on the international standards for transparency and exchange of information as described in the Global Forums Terms of Reference, and was prepared using the Global Forums Methodology for Peer Reviews and Non-Member Reviews. 16. The Phase 1 assessment of Indias legal and regulatory framework for the exchange of information was based on the laws, regulations, and exchange-of-information mechanisms in force or effect as at May 2010, other materials supplied by India, and information supplied by partner jurisdictions. 17. The Phase 2 assessment, performed in 2012, looked at the practical implementation of that framework, as well as any amendments made to the legal and regulatory framework since the Phase 1 review. The assessment was based on the laws, regulations, and exchange of information mechanisms in force or effect as at May 2013. It reflects Indias responses to the Phase 2 questionnaire, supplementary questions, information provided by India during the Phase 2 on-site visit that took place on 11-13 December 2012 in New Delhi, information supplied by partner jurisdictions, and other relevant information available from public sources. During the on-site visit, the assessment team met with officials and representatives of the Ministry of Finance, Central Board of Direct Taxes, Registrar of Companies, Registrar of Societies, Reserve Bank of India, Securities and Exchange Board of India (see Annex 4). 18. The following analysis reflects the integrated 2010 Phase 1 and Phase 2 assessments of the legal and regulatory framework of India in effect as at May 2013 and the practical implementation and effectiveness of this framework in the three-year review period of 1 July 2009 to 30 June 2012.
12 INTRODUCTION
19. The Terms of Reference break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information. This review assesses Indias legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding Indias legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are made concerning Indias practical application of each of the essential elements and a rating of either: (i) compliant, (ii) largely compliant, (iii) partially compliant, or (iv) non-compliant is assigned to each element. An overall rating is also assigned to reflect Indias overall level of compliance with the standards. 20. The Phase 1 and Phase 2 assessments were conducted by assessment teams comprising expert assessors and representatives of the Global Forum Secretariat. In 2010, the Phase 1 assessment team was composed of: Ms Yanga Mputa of the South Africa Revenue Service; Mr Gnter Dauben of the German Federal Central Tax Office; and Ms Rachelle Boyle from the Global Forum Secretariat. The assessment team examined the legal and regulatory framework for transparency and exchange of information and relevant exchange of information mechanisms in India. In 2012, the Phase 2 assessment team was composed of: Ms Yanga Mputa of the South Africa Revenue Service; Mr Tilo Welz, Executive Officer from the Federal Ministry of Finance, Germany; and Ms Gwenalle Le Coustumer and Mr Radovan Zidek from the Global Forum Secretariat. The assessment teams assessed the legal and regulatory framework and the practical implementation and effectiveness of this framework and relevant EOI arrangements in India. The ratings assigned in this report were adopted by the Global Forum 21. in November 2013 as part of a comparative exercise designed to ensure the consistency of the results. An expert team of assessors was selected to propose ratings for a representative subset of 50 jurisdictions. Consequently, the assessment teams that carried out the Phase 1 and Phase 2 reviews were not involved in the assignment of ratings. These ratings have been compared with the ratings assigned to other jurisdictions for each of the essential elements to ensure a consistent and comprehensive approach. The assignment of ratings was also conducted at a different time from those reviews, and the circumstances may have changed in the meantime. Readers should consult Annex 1 for information on changes that have occurred.
INTRODUCTION 13
Overview of India Economic context

22. The Republic of India (India) is Asias second largest country by size and has a population of 1.25 billion, 2 making it the second most populous country in the world. It is a multilingual society with 22 principal languages. Hindi is the national language and primary tongue of a large percentage of people, while English is the preferred business language. India shares borders with Pakistan and Afghanistan in the west; Bangladesh and Myanmar in the east; and Nepal, China and Bhutan in the north. 23. Indias 2012 Gross Domestic Product was USD 1 824 billion. 3 A balance of payments crisis in 1991 was the catalyst for a program of significant economic reforms including: liberalisation of foreign investment and exchange regimes; significant reductions in tariffs and other trade barriers; financial sector reforms; and significant adjustments in monetary and fiscal policies. Since that time, India has become an attractive destination for foreign capital, with net capital inflows increasing to 6.3% in 2011-12 compared to the previous year. 4 The services sector has become a major part of the economy, representing more than 50% of GDP. 24. India has a large number of state owned enterprises which are widespread at all three levels of administration: Central, State and Local. They continue to have significant impact on the Indian economy. State owned enterprises can take several forms. The most commonly used forms are government companies, public corporations, departmental enterprises and public sector banks. State owned enterprises are very important and represented 68% of the electricity, gas and water supply sectors in 2005-06 (down from nearly 90% in 1993-94). The largest equity values were ascribed to activities such as, in order of priority, the broader service sector; mining and minerals; electricity; and manufacturing. The share of state owned enterprises in the GDP declined from 17.5% in 1993-94 to 13.2% in 2006-07. 25. Exchange controls have been reduced over the past decade, particularly since enactment of the Foreign Exchange Management Act 1999. This act and the remaining exchange controls are oversighted by the Reserve Bank of India (RBI).
2. 3. 4.
IFS International Financial Statistics, International Monetary Fund. World Economic Outlook Database April 2010, International Monetary Fund. The External Economy, the Reserve Bank of India, 28 January 2010.
14 INTRODUCTION
General information on legal system

26. After a period of colonial rule India achieved independence from Britain in 1947. The 1950 Constitution provides for a parliamentary system with a bicameral parliament and three branches: the executive, legislative and judiciary. It has a federal system consisting of the Central Government and the State Governments. The Government exercises broad administrative powers in the name of the President, whose duties are largely ceremonial. The Parliament, the supreme legislative body of India, comprises the President and the two Houses: Lok Sabha (the lower house of the Parliament) and Rajya Sabha (the Council of States). All legislation requires the consent of both Houses of Parliament. For financial and related legislation, the will of the Lok Sabha prevails. The national executive power is centred in the Council of Ministers (the Cabinet), led by the Prime Minister. 27. There are also elected governments in the 28 States and in the 7 Union Territories. The States Chief Ministers are responsible to the legislatures in the same way as the Prime Minister is responsible to Parliament. Each State also has a Governor appointed by the President, who may assume certain broad powers when directed by the Central Government. The Central Government exerts greater control over the Union Territories than over the States, although some Territories have gained power to administer their own affairs. 28. The Indian legal system is based on common law. The division of powers into Union powers, State powers and concurrent powers can be found in a Schedule to the Constitution. If a power is listed as concurrent, the States are prevented from enacting laws that are inconsistent with Union laws. Any residual powers rest with the Union. Rules, Regulations, Orders, Declarations, Notifications, and Guidelines are issued under the authority of the relevant act and provide detail with regard to the statutory obligations. Rules, Regulations and Orders, published in the Government Gazette, have the force of law. Laws issued by the Parliament extend throughout the territory of India and those made by State legislatures generally apply only within the territory of the State concerned.
General overview of the financial sector

29. While the Indian financial markets can be divided into three main sectors banking and allied financial services, securities and insurance the Indian financial sector is dominated by bank intermediation. Financial institutions in India can be categorised as commercial banks (public and private), co-operative banks, regional rural banks and development banks. Non-bank financial institutions include finance companies, insurance companies, leasing companies and other institutions. All banks are governed by the provisions of
INTRODUCTION 15
the Banking Regulations Act, 1949. Private sector banks fall under the purview of the Companies Act 1956.
Type of institution Public sector banks Private sector banks Foreign banks Regional rural banks Local area banks Urban co-operative banks Non-bank finance companies (NBFCs) (not deposit taking) Deposit-taking NBFCs Primary dealers Development financial institutions Number of financial institutions (April 2013) 26 20 43 64 4 1 606 12 051 257 4 4
30.
India does not have Islamic banking institutions.
31. Foreign currency transactions may only be undertaken through banks, primary dealers and money changers so authorised by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act 1999. This act partly liberalised the foreign exchange markets in 1999, and replaced the criminal framework for breaches of the controls with administrative provisions and sanctions. 32. The securities sector in India comprises various intermediaries as registered under s. 12 of the Securities and Exchange Board of India Act 1992. In India, securities includes shares, stocks, debentures, bonds, passthrough certificates, and government securities and mutual fund units. India has a system whereby depositories function as the central accounting and record-keeping offices for securities admitted by issuer companies. 33. While stocks are traded on 20 exchanges across the country, the Bombay Stock Exchange and the National Stock Exchange account for nearly all equity and derivative transactions. Apart from investments by natural and legal persons based in India, money from abroad enters the capital markets through foreign institutional investors who are registered by the Securities Exchange Board of India (SEBI). 34. The insurance sector was opened for private participation in 1999 with the enactment of the Insurance Regulatory and Development Authority Act 1999 (the IRDA Act). The legislative framework for this sector is
16 INTRODUCTION
contained in the Insurance Act 1938 and the IRDA Act. Since 2000, the number of participants in the industry has increased from six public-owned insurers to 52 insurers/reinsurers providing life, general and re-insurance products. 5 35. Although India does not host offshore financial services in the traditional sense, it has made provision for offshore banking units (OBUs) to operate in the Special Economic Zones (SEZs). More than twenty OBUs have been set up in specific SEZs, although they can also provide services across all such zones. These units are prohibited from engaging in cash transactions and are restricted to lending to the SEZ wholesale commercial sector. They virtually function as foreign branches of Indian banks, but are located in India. OBUs are licensed and regulated prudentially by the RBI on the same lines as the domestic commercial banks. 36. India has six free trade zones namely: Kandla free trade zone; Santa Cruz Electronics Export processing zone; Falta Export processing Zone; Madras export processing zone; Cochin Export Processing zone; and Noida Export Processing zone. Section 10A of the Income-Tax Act provides complete tax exemption in respect of profits and gains derived from industrial undertakings set up in these zones for a period of five years and section 10B provides a complete tax exemption for any newly established 100% export oriented undertaking. These companies must nonetheless submit an annual tax return (ITA s. 139) and are fully subject to the Companies Law and the Income Tax Act. 37. In addition, Special Economic Zones (SEZs) are being established to promote export-oriented commercial businesses under the Special Economic Zones Act 2005. More than 300 such zones exist throughout India, providing both multi-sector and specialist access. The scope of activities includes manufacturing, trading and services (mostly information technology). The SEZs have defined physical boundaries, to which access is controlled by Customs officers. These zones are overseen by the Ministry of Commerce and Industry. While wide-ranging tax and customs incentives are offered to attract investment in the SEZs (ITA s. 10AA), companies operating there must submit annual tax returns (ITA s. 139) and are fully subject to the Companies Law and the Income Tax Act.
The taxation system

38. India has a well-developed tax structure with demarcated authority between Central and State Governments and local bodies. In accordance with Schedule 7 to the Constitution, the majority of laws relating to civil, criminal
5. April 2013.
INTRODUCTION 17
and tax jurisprudence are federal in nature. The Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), wealth tax, customs duties, central excise and service tax. Value Added Tax (VAT), 6 stamp duty, State excise, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities (e.g. water supply). The majority of the Indian population derives income from agriculture which is not taxed at the central level, and many States have chosen to not tax this income either. As a result, India counts 35 million taxpayers out of a population of 1.25 billion. India is also developing its civil registration system of the population, with half of the population having now a unique identity number, given at birth and including biometrical measures. 39. India follows a residence based system of taxation. An individual is considered to be tax resident in India, if he/she is in India in that tax year for periods amounting to 182 days or more; or if he/she has been in India for periods amounting to 365 days in the last four years and has been in India for at least 60 days in that year. A company is considered to be tax resident in India if it is a company set up under Indian law; or a company whose control and management is situated in India (ITA, s. 6). 40. India has a sliding scale for taxes on individuals and co-operative societies. For individuals, no tax is payable on annual income up to INR 200 000 (EUR 2 818), 7 or INR 250 000 (EUR 3 523) for senior citizens or INR 500 000 (EUR 7 046) for very senior citizens. Income of between INR 200 000 to INR 500 000 (EUR 6 995) is taxed at 10%. Income from INR 500 000 to INR 1 million (EUR 13 990) is taxed at 20%, and income beyond that threshold is taxed at 30%. There is a surcharge of 10% on income exceeding INR 10 000 000 (EUR 139 901). For co-operative societies, a tax rate of 10% is applied to income up to INR 10 000 (EUR 140), 20% for income between INR 10 000 and INR 20 000 (EUR 280) and a rate of 30% is applied to income over INR 20 000. There is a surcharge of 10% on income exceeding INR 10 million. 41. A flat tax rate of 30% is payable by firms, domestic companies and local authorities. Domestic companies must also pay a 7.5% surcharge if their total income for the year exceed INR 10 000 000 EUR 139 901) and a 10% surcharge if their total income exceeds INR 100 000 000. Foreign companies pay tax at the rate of 40% and in addition pay a surcharge of 2%
6. 7. Since 1 April 2005, most of the State Governments in India have replaced sales tax with VAT. According to the foreign exchange rate of 22 January 2013, INR 1 = EUR 0.014 and EUR 1 = INR 71.45, rounded off to the nearest whole number in EUR (source: www.xe.com/).
18 INTRODUCTION
of the tax if their total income for the year does not exceed INR 10 000 000 and a surcharge of 5% of tax if their total income for the year exceeds INR 100 000 000. 42. In the last 10 to 15 years, the Indian taxation system has undergone major reforms. The tax rates have been rationalised and tax laws have been simplified. 8 The process of rationalisation of tax administration is ongoing in India. Over the last five years the tax revenue has doubled. The main reasons for this increase can be seen in a widening tax base by the expansion of the use of information technology in the tax administration (e.g. integrating the commercial transaction database with the tax database), introduction of compulsory e-filing, increase of voluntary tax compliance, growth in Indias GDP, broad acceptance of a Permanent Account Number (PAN) as the unique identifier and overall improvement of the tax administrations effectiveness. These changes have also resulted in a large increase of the information available in electronic form with the Indian tax administration. 43. One of the major steps in the reforms of Indias tax administration was the introduction of PAN as a unique identifier (distinct from the civil registration system of the population). Over 170 million PANs were issued, covering 14% of the population. A PAN is compulsory for all 35 million taxpayers and for persons making certain types of financial transactions. A PAN is a required identifier by the tax administration and many institutions such as banks or government authorities and is widely used in economic activities. It is not possible to open a bank account in India or to enter into any significant financial transaction without providing a PAN. Therefore, even if the person is not actually paying taxes it has to have a PAN number and thus is registered with the tax department and consequently that person is easily identifiable by the Indian authorities.
Exchange of information for tax purposes

44. Exchange of Information for tax purposes is solely a power of the Central Government, which is empowered under the Income-tax Act 1961 (ITA) to enter into agreements for the exchange of information with other countries or specified territories (ITA, s. 90). In India, two Joint Secretaries (FT and TR-I and FT and TR-II) in the Department of Revenue, Ministry of Finance, perform the function of delegated competent authority of India for all matters relating to international tax matters. The Joint Secretaries are responsible for treaty negotiations and for exchange of information in accordance with such agreements. The competent authority may request information from the state tax authorities (s. 131, s. 133(6)).
8. Taxation System in India, the Indian Embassy in Washington, DC., accessed 6 February 2013 www.indianembassy.org/taxation-system-in-india.php#1.
INTRODUCTION 19
45. India established its first DTC in 1965. In 2009, India committed to implement the agreed international standard for tax transparency and exchange of information and became a member of the restructured Global Forum on Transparency and Exchange of Information for Tax Purposes. India is a member of the Steering Group and a vice-chair of the Peer Review Group of the Global Forum. 46. India received 97 EOI requests from July 2009 till June 2012 from 22 partners. Indias main EOI partners in respect of requests received are the United Kingdom, Ukraine, USA and Japan. On the other hand, India sent to its EOI partners 563 requests (of which 386 are from January till June 2012). India also participates in automatic exchange of information with more than 50 of its EOI partners (India transmitted about 2 million pieces of information in the years 2009-12) and exchanges information spontaneously without condition of reciprocity.
Recent developments
47. Companies Bill 2012, replacing the Companies Act, 1956, seeks inter alia to revise the provisions related to sanctions for companies which do not comply with obligations under that act. The bill proposes both minimum and maximum fines/imprisonment in relevant penal clauses, in addition to enhancing the quantum of level of fine/imprisonment from their current levels. Further, the bill proposes stricter penalties for repeat offences and for offences involving fraud. The bill was passed by the lower house of the Parliament in December 2012. It is presently under consideration in the upper house, and is likely to be become law in 2013. The Finance Act, 2012, came into force on 1 April 2012. The Act and 48. corresponding changes in rules for reporting income brings about the following relevant changes: the reporting mechanisms for assets and bank accounts abroad is strengthened by making the filing of returns on income mandatory for every resident having assets or a bank account located outside India even if he/she has no taxable income. The return forms have been modified whereby every resident is required to submit details of foreign bank accounts, financial interests, immovable property or other assets outside India. The time limit for reopening assessments in respect of undisclosed income from any asset located outside India has been extended from six years to sixteen years.
20 INTRODUCTION
49. From 2013, the electronic filing of tax returns has been made mandatory for all individuals (except charitable and religious trusts) having total income above INR 0.5million (EUR 6 993) per year, for resident individuals having any assets outside India, all taxpayers claiming relief under DTCs and for filing of the tax audit report under section 44AB of the Income Tax Act. 50. The return form has been further modified from 2013 obliging a resident person to provide information on the settlor, beneficiaries and other trustees of a foreign trust of which he/she is a trustee. Any false information in the return of income makes the person filing the return liable for prosecution. 51. Paragraph 2 was added in section 131 of the ITA June 2011 to ensure that all information gathering powers already provided by section 131 can be used for EOI purposes by the new EOI cell (see Part B.1). A similar amendment was made in section 133 giving power of calling for information to the EOI cell notified under s. 131(2). 52. In January 2012, the EOI cell, officially set up in October 2010 by decision of the Minister of Finance, became fully operational (see section B.1.1 and B.1.2). The dedicated EOI cell was created to facilitate effective exchange of information and demonstrate Indias commitment to exchange of information. The EOI cell administers all incoming and outgoing requests and ensures their quality. It consists of two directors, four under-secretaries and 12 supporting staff supervised by two Joint Secretaries. 53. In January 2013, the Central Board of Direct Taxes issued a Manual on Exchange of Information providing guidelines on handling EOI requests for local units and other field authorities. The manual compiles and substitutes various instructions and guidelines previously issued on this matter (see Part C.5). 54. The Prevention of Money Laundering Act, 2002, was amended in 2012 to provide a specific definition of beneficial owner which includes an individual who ultimately owns or controls a client of the reporting entity. The client is defined to mean a person who is engaged in a financial transaction or activity with a reporting entity and includes a person on whose behalf the person who engaged in the transaction or activity is acting (see section A.1.1 of the report).
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21
Compliance with the Standards
A. Availability of Information
Overview
55. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If the information is not kept or it is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report assesses the adequacy and implementation of Indias legal and regulatory framework on availability of information. 56. Information is available that identifies the owners of companies domestic and foreign and members of any bodies corporate. In addition, in accordance with anti-money laundering (AML) provisions, banks, financial institutions and financial intermediaries are obliged to verify and maintain the records of the identity of their clients. Directors and officers are not statutorily required to hold any ownership information in respect of the company or co-operative society, nor are other persons (such as company secretaries, lawyers or accountants not covered by AML obligations). Various declaration requirements pertaining to beneficial owners of shares are in place. 57. All companies are required to keep in India books of account which correctly explain all transactions, enable the companys financial position to be determined with reasonable accuracy at any time and which allow for
22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

financial statements to be prepared. Companies are also obliged to keep related underlying documentation. 58. Information is available that identifies the partners in general and limited liability partnerships in India, as well as foreign limited liability partnerships operating in India, both through information submitted in tax returns and in accordance with AML provisions that oblige banks, financial institutions and financial intermediaries to verify and maintain records of the identity of their clients including partnerships. Partners of limited liability partnerships are required to submit information to the Registrar whenever they alter their names or permanent addresses. There are no other persons required to hold any ownership information with respect to partnerships. 59. All types of partnerships are required to submit financial statements along with their tax return to Indias Income Tax Department (ITD) each year. In addition, the obligations for limited liability partnerships ensure that partners and persons deriving income from limited liability partnerships keep accounts which correctly explain transactions, enable the companys financial position to be accurately determined and allow for financial statements to be prepared. Limited liability partnerships are also obliged to keep underlying documentation for the accounting records. 60. Information is available that identifies the settlors, trustees and beneficiaries of express trusts. India allows for the creation of trusts and registration requirements exist for these types of legal arrangements. As for companies and partnerships, AML provisions oblige banks, financial institutions and financial intermediaries to verify and maintain records of the identity of their clients including trusts. Trustees, being intermediaries for the purposes of the Prevention of Money Laundering Act, 2002, hold information on settlors, trustees or beneficiaries. Accountants who are trustees or in any way manage trusts are obliged to keep accounts which correctly explain all transactions, enable the trusts financial position to be accurately determined at any time and which allow for financial statements to be prepared. Persons being assessed for the income of a trust are obliged to keep underlying documentation for the accounting records. 61. The ITD has wide-ranging powers to request information, search premises and seize documents. There are no limitations e.g. domestic tax interest, limited to criminal tax matters, limited by de minimis threshold, limited to taxpayers currently under examination on the competent authoritys ability to use these information gathering powers. There are no special procedures required to be invoked in order to exercise such powers. The competent authority also has the power to obtain, for tax purposes, ownership, identity and accounting information which is required to be held by anyone for AML purposes.
62. The accounting records and underlying documentation of companies, partnerships and trusts are required to be kept for more than five years. Documents must be retained by companies, limited liability partnerships and trusts for six or seven years (depending on the nature of the document). For companies and limited liability partnerships it is eight years. Underlying documentation is covered by all of these provisions. Accounting records are to be kept at the registered office of the company or at any other place in India as decided by the Board of Directors of the company. In case of other entities, in view of the fact that the books of accounts must be presented if requested by the relevant government authority and in view of the requirement of their being maintained at the principal place of business, in practice these records are maintained in India. Banks, financial institutions and financial intermediaries are obliged to maintain customer identification records and transaction records for ten years from the date of the transaction. 63. Overall, compliance with the requirements to maintain ownership, accounting and bank information obligations is good in India. Enforcement measures and monitoring activities are taken by the supervisory bodies to ensure availability of information. Based on the peer input received, India is capable of providing ownership, accounting and bank information. 64. In the years July 2009 through June 2012, India received a total of 97 requests, which related to companies, partnerships trusts and individuals. India received a total of 25 requests for identity or ownership information (related to companies, partnerships and trusts), as well as 55 requests on accounting information (related to companies, partnerships and trusts) and 13 requests on banking information. In all cases India provided the requested information which was available as was confirmed by peers. There was no case encountered during the period under review when the requested information was not available because of breach of any legal requirements.
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
Companies (ToR A.1.1)

65. In Indian law, the term company is used to refer to any company formed and registered under the Companies Act 1956 or formed and registered under any of the previous companies laws of India. The Companies Act 1956 s. 3 provides for the creation of private and public companies. Private companies which are subsidiaries of public companies are considered to be public companies. In addition, India has: companies with unlimited liability

(s. 12(2)(c)); bodies corporate (s. 2); producer companies (s. 581C); companies limited by guarantee and not for profit associations (s. 25); and foreign companies (s. 591):
Details Public limited companies Private limited companies Companies with unlimited liability Companies limited by guarantees and NPOs Foreign companies Number (31 March 2013) 62 430 738 331 428 3 956 3 191
Ownership information on domestic companies

66. Companies formed under the Companies Act 1956 are required to be registered with the relevant Registrar of Companies, and, under the ITA, they are required to lodge tax returns. 67. Section 33 of the Companies Act 1956 provides that the company must present the following documents to the Companies Registrar in the State in which its primary office is situated: the memorandum of the company; its articles, if any; the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager; and a declaration by a person who is engaged in the formation of the company 9 or by a director, manager or secretary of the company, that all the requirements of the Companies Act 1956, including registration requirements, have been complied with.
68. If the Companies Registrar is satisfied, s/he will retain and register these documents. Articles of association cover the rules and procedures for the routine conduct of the proposed company. The Memorandum of the company must include the name of the company, its nature (limited or unlimited liability), the Indian State in which the registered office of the company is to be situated (and the States in which it will carry out its activities), the main and incidental purposes of the company, the authorised share capital of the
9. This may be an advocate of the Supreme Court or of a High Court/an attorney or a pleader entitled to appear before a High Court, a company secretary, or a chartered accountant.
proposed company, and the names of initial subscribers to the company. In addition, the company must submit to the registrar a list showing the names, addresses and occupations of the company directors and the manager, if any, of the company (s. 568). For listed companies there is an additional requirement that they submit details showing the shareholding of each of the members (i.e. shareholders and any other persons listed in the company memorandum) of the company (s. 567, read with s. 41). 69. Thereafter, all types of companies are required to maintain a register of members (s. 150) containing: the name and address, and the occupation, if any, of each member; for a company having a share capital, details of the shares held by each member; the date at which each person became and, if relevant, ceased to be, a member.
70. While the Companies Act 1956 does not specifically provide a process for or the timeframe within which changes to the companys members must be incorporated in the register, s. 113(1) obliges companies to issue certificates of shares, debentures or debenture stock within two months of receipt of application for registration of a transfer of shares. In practice, issuance of the certificates involves including the new owner information in the share register. 71. Subsequent changes in ownership/shareholding pattern are required to be informed to the registrar through: return of allotments within 30 days of an allotment of shares (s. 75); and the annual return. The annual return must be submitted to the registrar within 60 days of the Annual General Meeting. The annual return details (s. 159 and s. 160, together with Part II of Schedule V) inter alia: the register of its members and indication of the names and addresses of the persons who were shareholders at the last annual general meeting, with the number of shares held by each existing shareholder including the details of shares transfer since the last meeting and the names and addresses of the new shareholders; the address of its registered office; the register of its debenture holders and indication of the names and addresses of the persons who were debenture holders at the last annual general meeting, with the number of debentures held by each existing debenture holder including the details of debentures transfer since last meeting and the names and addresses of the new holders;

its shares and debentures: a summary of shares for each class of shares including authorised share capital, number of shares issued, subscribed and paid up, and details of non-convertible, partly convertible and fully convertible debentures issued and outstanding; its directors, managing directors, managers and secretaries, past and present.
72. In addition, companies are also required to file a return of allotment with the Registrar within 30 days of every new allotment of shares, which includes among other information the date of allotment, name of allotee, address and occupation of allotee and equity shares allotted. 73. Companies with more than 50 members must also, unless the register is in such a form as to satisfy this requirement, maintain an index of members (s. 151), the purpose of which is to allow for identification of all entries on the register which relate to a particular member. Within 14 days after the date on which any alteration is made in the register of members, corresponding alterations must be made to the index. 74. Listed companies are also required to report to the Stock Exchange changes in shareholders on a quarterly basis and submit information on persons in control of the company at the end of each fiscal year as detailed in the listing agreement with the stock exchange (s. 21 Securities Contracts (Regulation) Act). 75. Section 187C of the Companies Act 1956 requires that shareholders who are not the beneficial owners of those shares submit a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in the shares. Similarly, persons who are beneficial owners of the shares must, within 30 days of becoming a beneficial owner, submit a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed. Whenever there is a change in the beneficial interest in such shares, the beneficial owner shall, within 30 days of the change, make a declaration to the company in such form and containing such particulars as may be prescribed. The company is required to make a note of such declarations in its register of members and is required to file, within 30 days from the date of receipt of the declaration, a return in the prescribed form with the Registrar of Companies. Neither the Companies Act 1956 nor the Companies (Declaration of Beneficial Interest in Shares) Rules 1975 define beneficial interest though Indian authorities have stated that this term is interpreted broadly to mean ultimate beneficial owners where there are layers in an ownership chain. 76. Under ITA s. 139(1), all companies in India must submit an annual tax return. Companies are required to lodge their tax returns using form
ITR6 (for companies not claiming exemption for charitable activity) or ITR7 (for companies claiming exemption for charitable activities). ITR6 requires information on the managing director, directors, secretary and principal officer(s) who have held the office during the previous year, and also requires information on persons who were beneficial owners of shares holding not less than 10% of the voting power at any time of the previous year. ITR7 requires information on: the author(s), founder(s) and address(es), if alive; the person(s) who was/were trustee(s)/manager(s) during the previous year(s); the person(s) who has/have made substantial contribution to the trust/institution in terms of s. 13(3)(b); relative(s) of author(s), founder(s), trustee(s), manager(s), and substantial contributor(s); and where any such author, founder, trustee, manager or substantial contributor is a Hindu undivided family, 10 the names of the members of the family and their relatives.
In practice
77. Registrars of Companies are vested with the primary duty of registering companies and ensuring that such companies comply with statutory requirements under the Companies Act. These offices are located in each State and Union Territory and are responsible for monitoring and ensuring that all companies operating in the respective State comply with the registration requirements and maintain information required under the Companies Act. The Central Government exercises administrative control over these offices through the respective Regional Directors appointed by the Ministry of Corporate Affairs. There are at present seven Regional Directors in India. 78. In 2006 India launched the MCA21 e-Governance Project providing a portal 11 for e-filing of all registry related documents, such as registration form, filing of annual returns, returns of allotment and other statutory filings under the Companies Act (with the exception of matters related to liquidation). It is mandatory for all companies, irrespective of their size, to file all statutory filings through the MCA-21 e-filing portal only. To register a company, a person representing the company needs to apply for a Director Identification Number (DIN) by filing the e-form for acquiring the DIN. Upon obtaining DIN, the person needs to acquire a Digital Certificate and register the same on the portal. As such, all filings done by companies under the MCA21 e-Governance programme are required to be done with the
10. 11. A family that consists of all persons lineally descended from common ancestors. See www.mca.gov.in/MCA21/ where about 100 registry related services are available, including name approval, incorporation of new companies, filing of Annual Statutory Returns, inspection of company documents (public records) and investor Grievance Redressal. Companies can file documents through certified filing centres.

use of digital signatures by the person authorised to sign the documents on behalf of the company. If the required information is not provided or is provided in the wrong format or is obviously incorrect, the registration e-form does not allow the application to be submitted. 79. The information provided is regularly monitored by the Registrars of Companies to identify any non-compliance with registration and reporting obligations. In cases of defaults, notices are automatically issued through the system (instead of previously existing warning letters) and the respective companies can file the documents after paying the fine. In cases of continuing default, prosecutions are filed before the Courts and penalties are levied. The portal allows public inspection of submitted documents and issuance of certified copies at any time, from anywhere. 12 The tax administration has access to the Registrars database, but when documents are required for domestic or EOI purposes requests are sent in writing to obtain stamped authenticated copies of the documents, which is usually done within a couple of days (for electronically filed documents). 80. Registrars of Companies and the regional directors appointed by the Ministry of Corporate Affairs undertake on-site inspections to verify companies compliance with their obligations under the Companies Act (e.g. ss. 163, 196, 209A, 230, 304). These inspections include checks on whether the company properly maintains a register of members and whether it has not failed in filing annual returns and accounting documents with the Registrar. If the annual return is not received, a reminder is sent after 3 months and the company is considered dormant after 6 months of delay (but can be revived afterwards). In years 2008-09, 2009-10, 2010-11 and 2011-12 the Registrars and the Ministry of Corporate Affairs conducted 207, 204, 190 and 80 inspections respectively. These inspections may result in application of fines and filing of prosecutions before Courts. However, prosecutions can be filed also without a preceding inspection (as detailed in section A.1.6). The total number of prosecutions during the period 2009-10, 2010-11 and 2011-12 were 9 021, 4 541 and 6 815 respectively. During these three years, the number of companies prosecuted was 3 196, 1 653 and 3 511 respectively (for one or more offences) which represents about 0.5% of all companies. The total fines imposed were INR 9 230 317 (EUR 129 672), 7 084 542 (EUR 99 534) and 7 079 498 (EUR 99 465) respectively. Based on the facts provided, supervisory and enforcement measures are applied adequately to ensure compliance with obligations to keep ownership information. 81. Compliance with obligations to maintain and provide ownership information under the tax law is monitored by the tax officer with respect to
12. The Registrar of Companies is available at www.mca.gov.in/DCAPortalWeb/dca/ MyMCALogin.do?method=setDefaultProperty&mode=16.
persons for which he/she is responsible with the support of the Directorate of Systems of CBDT, which can identify inconsistent or non-compliant filings. The Directorate monitors the filing of tax returns of all taxable entities. Since the income tax returns of companies are now electronically filed and the ownership information is mandatory, the information is monitored through the e-filing system. An e-filed return will not be accepted electronically until ownership information is provided. If cases of non-compliance are identified, this information is passed to the Assessing officer (tax auditor), having territorial jurisdiction over the case. The information provided is verified through other sources integrated to the tax database, such as Annual Information Reporting, CIB database (containing individual transaction information), TDS database (containing withholding tax reports). In case of non-compliance, notices are issued by the respective income tax comissionerate and fines are applied. 82. 78 A wide range of information is available within the tax administration. The tax database comprises several databases which integrate data from different sources. Databases can be divided into four groups: internal databases of the tax administration (i) PAN database (which contains information such as name, fathers name, address, nature of business or profession, sources of income, details of assessing officer); (ii) Income Tax database (income tax returns, profit and losses accounts, balance sheets, tax payments, transfer pricing documentation, recovery of arrears, appeals, penalties, information/ documents collected during tax audits, etc.), (iii) On-line Tax Account System database (reports on withholding tax information on salaries, interests, rents, work and service contracts, overseas remittances, etc.), (iv) Annual Information Report database (third party data from annual information reports such as cash deposits, bank account numbers, credit card transactions, transactions with immovable property, investments in securities, etc.), (v) STT database (information on share transfers), (vi) Central Information Branch database (individual transaction reports), (vii) Income Tax Data Management System (data collated locally from various sources like registrars of companies, vehicle registration, airlines for frequent flyers, credit card institutions, etc.), (viii) High Net Worth Individuals database; external databases (i) mobile phone databases (identity information, addresses), (ii) Registrar of companies database (registration data, identity of directors, etc.), (iii) GST database (VAT, excise and customs reporting), (iv) data received from enforcement agencies in India and abroad and (v) electoral database (individual addresses); local databases databases containing primarily information from local investigations ;

specialised databases databases containing intelligence on business ventures, trade and equity analysis reports, fiscal reports.
The e-filing system allows some cross-checks. Detected mismatches 83. indicate a risk and form the basis for undertaking further scrutiny or tax audits through a risk based system (Computer Aided Selection of Scrutiny). If the information provided by the taxpayer does not match with the information from a third party, a tax procedure is opened and the taxpayer needs to substantiate the information provided. The fact that there is robust third party reporting which allows matching with information filed by the taxpayer has also a deterrent effect and contributes to a better level of compliance. The number of tax audits carried out in 2009-12 was 406 000 per year on average. Compliance with third party reporting obligations is also backed up by various sanctions (e.g. s. 271FA, 234E, 271H of the Income Tax Act). 84. The Indian authorities indicate that a recent Income Tax Rules amendment will reinforce the possibilities of cross-checks: as per the return form revised for the current year, individuals having income above INR 2.5 million (EUR 34 520) have to furnish a statement of immovable assets (land, buildings) and movable assets (balance in bank accounts, shares and securities, insurance policies, loans and advances given, cash in hand, jewellery, bullion etc., archaeological collections, drawings, paintings, work of art, vehicles, yachts, boars, aircrafts), and the liabilities in relation to these assets. 85. Much of the information relevant for exchange of information for tax purposes is now gathered through e-filing (for around three years). In 2013, e-filing is compulsory for all companies, as well as for other entities and individuals having total income above INR 0.5 million (EUR 6 993) per year (except religious and charitable trusts), resident individuals having any assets outside India and all taxpayers claiming relief under DTCs. E-filing of income tax return requires the taxpayer to file identity information (name, address, date of birth, PAN), ownership information, details of taxable income, the profit and loss account including annexes, balance sheet including annexes, details of tax payments and withholding tax. The introduction of the e-filing system allows retrieving information more quickly than the former paper system. During the year 2011-12, more than 16 million tax returns out of a total of 35 million tax returns were filed electronically. In practice, ITD obtains ownership information from tax filing obligations, company registration or PAN registration. ITD only rarely asks the company to provide this information. There has been no case when the ITD has asked officers of a company to provide ownership information for EOI purposes. 86. The identification of taxpayers is mostly done through PAN. PAN has been compulsory for a growing range of activities since 2002 and since 2006 for all persons whose income is chargeable to tax, persons carrying on a business or profession whose total turnover exceeded INR 0.5 million
(EUR 6 919) in any previous year; for a charitable trust or other charitable institution or any other person desiring to own a PAN (ITA s. 139A). Over 170 million PANs have been issued. A PAN is required as an identifier in many transactions including communication with income tax authorities, but also opening a bank account, immovable property transfer or sale or purchase of a car (which explains that the number of PAN is higher than the number of taxpayers). The broad use of PAN as a compulsory identifier significantly improves the effectiveness of the tax administration. 87. The expansion of the use of information technology in the tax administration (e.g. integrating the commercial transaction database with the tax database) and the introduction of compulsory e-filing has led to a widening of the tax base. An increase in voluntary tax compliance has also been observed over the last few years and there is now a broad acceptance of the PAN as the unique identifier. These changes have resulted in a large increase in the amount of information available in electronic form with the Indian tax administration. These factors, coupled with the overall improvement of the tax administrations effectiveness and the growth in Indias GDP have led to the doubling of tax revenue over the last five years.
Ownership information on co-operatives

88. India also has co-operatives, which are associations of persons formed with the object of promotion of the economic interests of its members in accordance with co-operative principles (Co-operative Societies Act 1912). The liability of a society is limited unless the object of the society is the creation of funds to be lent to its members, and of which the majority of the members are agriculturists, and of which no member is a registered society. Where the liability of the members of a society is limited by shares, no member other than a registered society may: (i) hold more than 1/5 of the share capital of the society; or (ii) have or claim any interest in the shares of the society exceeding INR 1 000 (EUR 14). 89. Co-operatives must be registered with the Registrar of Co-operative Societies (s. 4). The registration application must attach inter alia a list of persons who have contributed to the share capital, together with the amount contributed by each of them, and the admission fee paid by them. Registration renders the co-operative a body corporate. 90. Under the ITA, societies which meet specified economic criteria are required to submit tax returns and in those returns disclose the names and addresses of the members of the co-operative.
In practice
91. Registrars of Co-operative Societies are responsible for registering co-operative societies and ensuring that such entities comply with statutory requirements under the Co-operative Societies Act. The number of co-operatives is not centrally available since co-operatives are required to be registered at the state level. The registration of co-operative societies is organised in a similar way as for companies. Registration cannot be granted until all the documentary requirements, including the provision of ownership information, are fulfilled. Registrars of Co-operative Societies also conduct inspections for verification of compliance based on s. 35 of the Co-operative Societies Act. A PAN is required as identifier also for cooperatives. Information on members who have contributed to the share capital must be included in an application for a PAN. Compliance with obligations to provide ownership information under the tax law is monitored by the tax officer responsible for the respective society and the Directorate of Systems of CBDT as in the case of companies. No EOI request was received during the review period concerning co-operatives.
Ownership information on foreign companies

92. Foreign companies are required to file documents with the Companies Registrar within 30 days of establishing their place of business (Companies Act 1956, s. 592) which include: the charter, statutes, or memorandum and articles of the company or other instrument constituting or defining the constitution of the company; a list of the directors and secretary of the company; and the name and address or the names and addresses of one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company.
93. The Companies (Central Governments) General Rules and Forms 1956 provisions, with respect to documents, include requirements in terms of certification and translation. Subsequent changes in any of this information must be informed to the registrar on or before 31 January of the year following the year in which the alteration was made or occurred (s. 593, read in conjunction with the Companies (Central Governments) General Rules and Forms 1956). 94. In addition, as with the domestic companies, foreign companies are required to maintain a register of members (s. 150), and those with more than 50 members must also maintain in index of members (s. 151). A foreign
company with control and management in India is required to fulfil all of its tax obligations in the same manner as an Indian company. The same information is required by the ITD, using the same forms, for domestic and foreign companies. 95. In practice, compliance by foreign companies with obligations to maintain and provide ownership information is monitored and enabled by the same measures and authorities as in the case of Indian companies.
Ownership information held by service providers

96. While most forms of service providers, e.g. lawyers, accountants and company formation agents, are not required to keep information on the owners of companies they provide services to, every banking company, financial institution and intermediary is obliged under s. 12(c) of the Prevention of Money Laundering Act 2002 (PMLA) and the PMLA Rules 13 to verify and maintain the records of the identity of all its clients in hard and soft copy for at least ten years from the date of cessation of the transactions between the client and the banking company or financial institution or intermediary. For the purposes of that act, an intermediary is a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under s. 12 of the Securities and Exchange Board of India Act 1992. 97. The PMLA Rules include more detailed know-your-customer obligations. Under Rule 9, as amended in November 2009, every banking company, financial institution and intermediary, must at the time of opening an account or executing any transaction with it verify and maintain the record of identity and current address or addresses including permanent address or addresses of the client, the nature of business of the client and his financial status. In addition, these financial institutions are obliged under Rule 9(1A) to identify the beneficial owner and take all reasonable steps to verify his identity. A 2012 amendment to the PMLA Act defines beneficial owner broadly, as being the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person This requirement was earlier contained in the PMLA Rules.
13. Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules 2005.

98. Similarly, s. 2.4(a) of the Reserve Bank of India Master Circular (Master Circular 2012) requires banks, in the case of customers that are legal persons or entities, to understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person. This section also references the need to take reasonable measures to verify the identity of the beneficial owner, and to establish the purpose and the intended nature of the banking relationship. Section 2.5(iv) states that banks should examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. 99. The Master Circular also addresses the issue of client accounts opened by professional intermediaries. It establishes that in the case of accounts held on behalf of a single client and pooled accounts, the financial institution must look through to the beneficial owners of the funds. Further, in June 2010, the Reserve Bank of India issued three circulars 14 clarifying this requirement and noting inter alia that this requirement applies with respect to accounts opened by professionals who are subject to secrecy provisions.
In practice
100. The compliance with obligations to keep ownership information by financial service providers is supervised by the Reserve Bank of India. RBI conducts periodical inspections to detect non-compliance. The RBI imposes supervisory and enforcement measures which include advisory notices and warning letters. In financial year 2011-12, the RBI conducted for AML purposes 45 on-site inspections, issued 68 advisory notices explaining actions that needed to be done, 51 show cause notices asking for explanation of procedures or actions taken by the service provider and 48 warning letters. 61 entities were penalised with a monetary sanction over the same period. The total amount of the monetary sanctions applied amounts to INR 21.3 million (EUR 297 068). The most common deficiency found during inspections is acceptance of improper identification documents. Based on the facts provided, supervisory and enforcement measures are applied adequately to ensure compliance with AML obligations to keep ownership information. However, the ITD primarily uses other sources of ownership information, and there has been no case when a service provider has been asked to provide information for EOI purposes.
14.
These circulars contain mandatory language and, in accordance with s. 45L and s. 45M of the Reserve Bank of India Act 1934, circulars issued by the Reserve Bank of India are mandatory and enforceable.
Ownership Information held by directors and officers

101. Directors and officers are not statutorily required to hold any ownership information in respect of the company. There is no requirement that an Indian company must have a resident director or officer. 102. In practice, ITD obtains ownership information from tax filing obligations, company registration or PAN registration. ITD only rarely asks the company to provide ownership information (see above). It does not ask the officers of the company individually as they are not obliged to maintain information in their personal capacity (although they can be sanctioned if the company does not respect the law, see section A.1.6 below).
Ownership information held by other persons

103. In India, practicing chartered accountants, company secretaries and lawyers undertake the work of company formation agents. None of these professions, when acting as company formation agents, are required to obtain or maintain information pertaining to the companies they have formed. 104. The Indian authorities indicate that although these professionals are not, in practice, the source of ownership information for ITD, the ITD has power to issue notice to produce the requested information under s. 131 of the ITA. If the information is not provided, sanctions and, in exceptional circumstances, search and seizure powers can be applied (e.g. if a person refuses to provide information otherwise).
Documentation retention requirements

105. The document retention requirements under the Companies Act 1956 are primarily found in s. 209(4A), which requires all companies to retain books of account, together with vouchers related to entries in the books of account, for at least eight years. In addition, s. 163(1A) empowers the central Government to make rules for the preservation and disposal of records. Accordingly, the Companies ( Preservation and Disposal of Records) Rules 1966 were established and these provide that all companies must preserve: the register and index of members permanently; the register and index of debenture holders 15 years after redemption; annual returns and certifications (under sections 159, 160 and 161) eight years from the date of filing with the Registrar.
106. Under the ITA, documents must be retained for a period of seven years from the end of the relevant year which may get extended until

completion of assessment if a notice for reopening of assessment is issued within this period. The retention period is not affected by possible subsequent events. 107. Under s. 12(c) of the PMLA, 15 documents related to the conduct of customer due diligence are to be maintained for a period of ten years from the date of the cessation of the transaction between the clients and the banking company or financial institution or intermediary, as the case may be. As the period of time is determined by the date at which the transaction occurred, the retention period is not affected by possible subsequent events. 108. The Companies Registrars keep information filed by companies within India. The registers themselves must be preserved permanently (Disposal of Records (in the Offices of the Registrars of Companies) Rules 2003, Rule 3). Particulars of company Directors and the Register of Directors must be kept for five years (Rule 5 and Schedule II). Registered documents of companies which have been fully wound up and finally dissolved together with correspondence relating to such companies are also kept for five years (Rule 4). For foreign companies which cease to have any place of business in India, the documents may be destroyed after three years from the date such company ceases to have any place of business in India (Rule 6). 109. Other information required to be kept under the PMLA or the ITA need not necessarily be kept within India, but must be available to the authorities when requested. 110. In practice, India has been able to provide requested ownership information, even in some instances where the retention period had passed or where a company was liquidated. In the latter case, if the information is not kept by the Registrar because the retention period elapsed, the ITD exercises its power under s. 131 of the ITA to compel the liquidator to produce the information requested by the foreign competent authority. No cases have been identified by peers where India was unable to provide ownership information because of a breach of the retention period.
Conclusion
111. In practice, overall compliance with the obligations to maintain identity and ownership information concerning companies is good. Availability of ownership information for EOI purposes is ensured mainly by tax filing obligations. If in a limited number of cases the information is not available within the tax administration the ITD asks the relevant person to provide the requested information or can ask for the information from the Registrar of Companies. This has been confirmed by the fact that India has provided
15. Read in conjunction with s. 10 of the PMLA Rules.
ownership information on companies in all 23 cases over the period under review (approximately 65% of the requests received by India concern legal entities). Also, Indias EOI partners have indicated that India provides the ownership information requested.
Bearer shares (ToR A.1.2)

112. India does not allow for the issuance of bearer shares. Registration requirements and obligations with respect to disclosures to the ITD have been discussed previously in this report. Large public limited companies can issue share warrants to bearer with the approval of the Central Government (s. 114 Companies Act). 113. The Indian authorities have confirmed that this approval has never been given, at least for the last 20 years, and no such application was ever received during this period. Further, there was no instance when the regulatory authorities came across a situation indicating the issuance of share warrants. The Companies Bill contains no provision on the issuance of bearer shares or share warrants to bearer. 114. The Indian authorities consider that, in any event, should share warrants to bearer be issued, the procedures in place would allow the identification of bearer share holders. Approval of the issuance of share warrants is conditioned by a number of criteria. The Indian authorities have confirmed that as per the Government of Indias Business Allocations Rules, the Ministry of Companies Affairs, which will give the approval, needs to mandatorily consult other wings of the Government of India, such as the Department of Revenue, the Department of Economic Affairs and the Department of Financial Services, which will either deny permission or ensure that the provisions of the PMLA, including the KYC norms, are complied with before the approval is granted. Based on section 115 of the Companies Act, the fact of issuing share warrants to a shareholder, a statement of shares specified in the warrant distinguishing each share by a number and the date of issuance of the warrant should be entered into the share register, and the name of the shareholder to whom warrants are issued is then struck out from the register but is historically available. The holder of a share warrant cannot attend the general meeting of the company unless his/her warrants are deposited at the office of the company (s. 41 Schedule I, Companies Act). Transfers of share warrants are regulated together with the transfer of registered shares in section 187C of the Companies Act (see above section on ownership information on domestic companies). In particular, section 187C requires the identification of the beneficial owners of all shares, including subsequent changes of owners of share warrants to bearer. Whenever there is a change in beneficial interest in shares, the beneficial owners need to make a declaration to the company, which needs to be recorded by the company in its share register and a return

has to be filed with the Registrar within 30 days of receipt of such declaration. If the beneficial owner or the company fails to do so fines up to INR 1 000 (EUR 14) per day or INR 100 (EUR 1.4) per day apply (s. 187C(5)). Further, any charge, promissory note or other collateral agreements entered into in relation to such shares would be void (s. 187C(6)). In addition, all listed public companies must, in practice, issue their shares in a digital form or convert physical certificates into digital certificates, information on which is kept by the depository. The Indian authorities confirm that there have been no instances of conversion of such share warrants into digital form. Finally, the ITA previously required companies to withhold tax from dividend payments but, during the last 15 years, the tax authorities have not come across any instance of a claim of credit of withholding tax by any person other than the person in whose name the shares were registered. Considering all the above elements, the existence of share warrants to bearer in India is not material and there are mechanisms to identify their holders. 115. India indicates that no request related to ownership information of a company that has issued share warrants to bearer has ever been received. However, in view of the fact that the issuance of share warrants to bearer is not excluded in the future, particularly before the enactment of Companies Bill, 2012, the situation should be monitored by India so that availability of ownership information of all public limited companies continues to be available.
Partnerships (ToR A.1.3)

116. General partnerships are regulated through the Partnership Act 1932, which is administered by the States. In this context, partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The relation of partnership arises from contract and not from status (s. 4). General partnerships are registered with State registrars and the number of such partnerships is not known. The number of general partnerships who filed tax returns in 2011 is 1.2 million. General partnerships mainly engage in small scale businesses, mostly retail trading, requiring small capital investment. 117. Limited liability partnerships are regulated through the Limited Liability Partnership Act 2008, which is centrally administered by the Ministry of Corporate Affairs. A limited liability partnership (LLP) is a body corporate formed and incorporated under the Limited Liability Partnership Act 2008. It possesses a separate legal personality from that of its partners (s. 3). As at 31 December 2012, there were 12 448 LLPs in India. 56% of LLPs operate in the Financing, Insurance, Real Estate and Business Services sector. LLPs in Business Services alone (including legal and professional services, research and development) accounted for over 43%. There is one foreign LLP registered in the Registrar of Companies of India.
Ownership information on partnerships

118. General partnerships, LLPs and foreign LLPs operating in India have to register and lodge tax returns (ITA s. 139(1)). While requirements under the Partnership Act 1932 and Limited Liability Partnership Act 2008 are different, under the ITA, the taxation requirements are the same for all types of partnerships. 119. The Partnership Act 1932, s. 58 provides that partnerships must register with the relevant Registrar of Firms. A copy of the partnership deed must be provided and that deed must, among other things, include the names, in full, and the permanent addresses of the partners. In addition, when there are important changes in the partnership, the details must be submitted to the Registrar. Section 62 provides that when any partner in a registered firm alters his name or permanent address, a notification of the alteration must be sent, within 90 days of the date of making such alteration, by the partner or by an agent of the firm to the Registrar, who will then make a note of this in the entry relating to the firm in the Register of Firms. Further, s. 63 provides that when a change occurs in the constitution of a registered partnership and where a partnership is dissolved, every incoming, continuing or outgoing partner, or the agent of every such partner or person specially authorised in this behalf must, within 90 days of the change or dissolution, notify the Registrar and the registrar will record this in the entry relating to the firm. 120. Section 11 of the Limited Liability Partnership Act 2008 requires LLPs to register with the Companies Registrar in their State. The names and addresses of each of the partners must be contained in the incorporation document which is submitted to the registrar. In practice these registrations now commonly occur online and are managed centrally by the Ministry of Corporate Affairs. 16 Section 25 provides that when any partner alters his name or permanent address, a notification of the alteration is to be sent within 15 days to the LLP and it in turn is to file a notice of the change with the Companies Registrar in their state within 30 days. A similar notice is to be filed for cessation of a partner or entry of a new partner. 121. Foreign LLPs must, within 30 days of establishment of place of business in India, file details with the Companies Registrar along with a copy of the certificate of incorporation, full address of the partnership, full address of its place(s) of business in India and a list of partners and designated partners (Limited Liability Partnerships Rules 2009, s. 34). Any alterations to the constitution of the foreign LLP, its principal office outside India, or to the partners or designated partner must be submitted to the Companies Registrar within 60 days of the close of the financial year in which the change occurred. Changes to the incorporation document, the details of the person
16. www.llp.gov.in.

authorised to accept service on behalf of the partnership or its principal place of business in India should be submitted to the Companies Registrar within 30 days of the change. 122. All partnerships are required to disclose the names and addresses of all the partners, including changes, in their tax returns (form ITR5). Not furnishing a tax return or providing false information in a return are subject to penalty and prosecution under the ITA. Any person who fails to furnish information in due time may be subject to a fine of INR 100 (EUR 1.39) per day for every day the failure to provide information continues (ITA s. 272A). If a person makes a false statement he/she may be prosecuted under ITA s. 277 and upon conviction imprisoned for a period from three months to six years. 123. Under ITA s. 44AB, an audited report is required to be filed by the taxpayer if his turnover during the year exceeds INR 6 million (EUR 83 925) from business or INR 1.5 million (EUR 20 981) from profession. 17 This report, using form 3CD, is required to be signed by an accountant. In the case of partnerships, the names of partners and details of changes in partners are required to be given under item 7(a) and 7(b) of this form.
In practice
124. Partnerships compliance with registration and filing obligations are supervised by Registrars of Firms (in respect of general partnerships) or Registrars of Companies (in respect of LLPs) located in each State in India. The administration of partnerships registration is organised in a similar way as for companies. A registration cannot be granted until all the documentary requirements including providing the ownership information are fulfilled. As in the case of other entities, supervisory measures taken by the Registrars include on-site inspections which among other things verify the availability of information on partners of the partnership. A PAN is required as identifier also for partnerships, and information on partners of the partnership must be included in application for a PAN. Compliance with the obligations to provide ownership information under the tax law is monitored by the tax official responsible for the respective partnership as in the case of companies, with the support of the Directorate of Systems of CBDT, which can identify inconsistent or non-compliant filings. In case of non-compliance, notices are issued by the respective income tax comissionerate and fines are applied. Partnerships compliance with tax filing obligations is ensured by suffi125. cient mechanisms being in place. Most of the income payments, such as income
17. The thresholds were raised to this level by Finance Act 2010, which was passed on 8 May 2010.
from contracts, services, rent and interest are subject to the withholding tax. It is in the interest of taxpayers to file tax returns to claim the credits on withheld tax. Further, no person can receive income payments subject to withholding tax until he has provided a PAN to the person applying the withholding tax. Consequently, non-filers of tax returns are identifiable from the PAN database. In addition, the ITD receives a large number of information from third parties, which acts as a major deterrent against non-compliance.
Information held by service providers

126. Every banking company, financial institution and intermediary is obliged under PMLA s. 12(c), to verify and maintain the records of the identity of all its clients. The PMLA Rules include more detailed knowyour-customer rules. Under Rule 9, as amended in November 2009, every banking company, financial institution and intermediary must at the time of opening an account or executing any transaction with it, verify and maintain the record of identity and current address or addresses including permanent address or addresses of the client, the nature of business of the client and his financial status. 127. Where the client is a partnership firm, under that rule it must submit certain documents to the banking company or financial institution or intermediary which include the registration certificate (if one exists) and the partnership deed (if one exists). In addition, Rule 9(1A) requires all banks, financial institutions and intermediaries to identify the beneficial owner and take all reasonable steps to verify his identity.
In practice
128. A large volume of ownership information is available to the service providers based on the provisions of the PMLA, 2002, and application of know-your-customer rules. The availability of such information is monitored by the RBI. RBI imposes the same supervisory and enforcement measures as in the case of monitoring compliance with obligations to keep ownership information on companies. However as the ITD primarily uses other sources of ownership information, there has been no case when a service provider has been asked to provide information for EOI purposes.
Information held by the partnership or partners

129. While there are no specific requirements that each partner hold information on all of the partners, partners in general partnerships are likely to know the names and addresses of the other partners. Section 58 of the Partnership Act 1932 makes it clear that all the partners must sign the

partnership deed, which contains the names in full and permanent addresses of all partners. Further, according to s. 31, no person may be introduced as a partner without the consent of all existing partners and under s. 32, a partner may only retire with the consent of all the other partners, in accordance with an express agreement by the partners, or where the partnership is at will by giving notice in writing to all the other partners of his intention to retire. 130. As noted previously, partners of LLPs are required under s. 25 to submit information to the partnership whenever they alter their names or permanent addresses. Annex C to the Limited Liability Partnership Rules 2009 requires that such documents be retained by the partnership for at least five years. There are no requirements that each of the partners in a LLP hold information on all of the partners. There have been no cases where the ITD has asked partners of a part131. nership to provide ownership information for EOI purposes.
Information held by others

132. In India charted accountants, company secretaries, cost accountants and advocates undertake the work of LLP formation. However there are no requirements that persons in these professions or other persons have ownership information on relevant partnerships. In practice, ITD has never asked such persons to provide ownership information for EOI purposes, since relevant information is already maintained by the tax administration or the Registrars.
Document retention requirements

133. Under Limited Liability Partnership Rules 2009, Annexures B and C, the incorporation documents, notice of situation of registered office, information with regard to LLP agreement or any changes made therein and information regarding notice of other address of any LLP at which documents to be served, are to be kept permanently. Other documents are to be maintained for periods ranging from five to eight years. 134. Under the ITA, documents must be retained for a period of seven years from the end of the relevant year which may get extended till completion of assessment if a notice for reopening of assessment is issued in this period. The retention period is not affected by possible subsequent events. 135. Under PMLA s. 12(c), 18 documents related to the conduct of customer due diligence are to be maintained for a period of ten years from the date of the cessation of the transaction between the clients and the banking company
or financial institution or intermediary, as the case may be. As the period of time is determined by the date at which the transaction occurred, the retention period is not affected by possible subsequent events. 136. Partnerships are not required to keep information on their partners within the country. In practice though, partnerships that (i) have income, deductions or credits for tax purposes in India; (ii) carry on business in India; or (iii) are formed under Indian laws, do keep such records in India in order to meet the various registration requirements. 137. In practice, no cases have been identified by peers where India was unable to provide ownership information of partnerships because of a breach of the retention period. India was requested on one occasion to provide such information and the information was provided.
Conclusion
138. In practice, supervisory and enforcement measures are applied by the Indian authorities adequately to ensure the availability of ownership and identity information on partnerships. India is able to provide ownership information on partnerships if requested, and has answered one request related to the ownership of a partnership during the three years under review. This has been confirmed by peers.
Trusts (ToR A.1.4)

139. India allows for the creation and operation of trusts. There are thousands of trusts operating in India, though the exact number is not known. Commonly, these are established with the assistance of a lawyer or an accountant. Trusts fall into one of four categories: private trusts: to benefit selected persons; charitable or public trusts (including religious trusts): to benefit the public at large; wakfs: for performing certain Islamic religious activities, or managing assets; those trusts established under foreign laws which have some activity in India.
140. The Trusts Act 1882 defines and governs the law relating to private trusts and their trustees. A variety of forms of private trusts, including express trusts, are recognised. An Indian trust must have one or more settlor, trustee and identified beneficiary. A trust in relation to immovable property is valid only if declared by a non-testamentary instrument in writing signed

by the author of the trust or the trustee (a trust deed) or by the will of the author of the trust. If however the trust property does not involve immovable property, it may be constituted by word of mouth (Trusts Act 1882, s. 5). Section 6 of the Trusts Act 1882 indicates that a trust is created when the author of the trust indicates orally or in writing with reasonable certainty, inter alia, the trustee and beneficiary. Read with s. 5, this requires that for trusts with underpinning deeds or wills, information on the beneficiary must be included in that deed. Public charitable trusts (which do not strictly require a written instru141. ment to be formed) can be established for a number of purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Indian public trusts are generally irrevocable. No national law (except the broad principles of the Trusts Act 1882, which governs private trusts) governs public charitable trusts in India, although many States (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have public trusts acts, e.g. the Bombay Public Trust Act 1950 which is applicable in the States of Maharashtra and Gujarat. These acts provide for inspection and supervision of the property belonging to public trusts registered under the act, as well as the proceedings of the trustees and books of accounts. 142. A wakf can be a charitable Islamic trust that involves the permanent dedication by a person professing Islam of any moveable or immoveable property for any purpose recognised by the Muslim law as pious, religious or charitable and is governed by the Wakf Act 1995. Wakfs can also be instituted for non-charitable purposes, such as family wakfs. Through a written deed, the settler appoints a manager for the administration of the wakf for certain property and once dedicated the trust is permanent, irrevocable and inalienable. 143. Article 1 of the Societies Registration Act 1860 provides that any seven or more persons associated for any literary, scientific, or charitable purpose, may, by subscribing their names to a memorandum of association, and filing the same with the Registrar of Joint-stock Companies 2, form themselves into a society under the act.
Information held by Government authorities

144. Private trusts holding immovable property are required to be registered (s. 5 Trust Act 1882). The trust deed of such a trust must be submitted to the respective Sub-Registrar of Assurances (Registration Act 1908). There is no registration requirement for other private trusts.
145. Registration requirements apply also to charitable trusts and wakfs, as detailed below. Registration of trusts is administered at the State level (and therefore no general statistics on the number of trusts are available).
Statute Trust Act 1882 Registration requirement Private trust in relation to immovable property is not valid unless registered under s. 5 Public trusts to which the act applies (public health, education relief of poverty) must register under s. 18. Every wakf must register at the Board of Wakf. A society is required to be registered. Charitable or religious trusts, societies and companies claiming exemptions under the s. 11 and s. 12AA are required to register. Any charitable trust, society, company, desirous of receiving any foreign contributions from foreign sources, is required to register under s. 6(1).
State Public Trust Acts e.g. Bombay Public Trust Act 1950 Wakfs Act 1954 Societies Registration Act 1860 Income Tax Act 1961
Foreign Contribution (Regulation) Act 1976
146. For public and charitable trusts that are required to register (as shown above), the applicable statutes have requirements relating to the information that must be provided and filed annually with the various statutory authorities. The registration application form must be accompanied by the original trust deed (or a certified copy of the trust deed) when the trust is created under an instrument; or documents evidencing the creation of the trust where it is created otherwise than under an instrument. For example, every wakf has to be registered at the office of the Board of Wakf (s. 36) and an application for registration must be accompanied by a copy of the wakf deed. If there is no deed, the application may instead be accompanied by full particulars, as far as they are known to the applicant, of the origin, nature and objects of the wakf. The register of wakfs contains inter alia: the wakf deed; the name of the mutawalli 19; and, the rule of succession to the office of mutawalli under the wakf deed or by custom or by usage. Further, the Wakf board must ensure
19. As per section 3(i), mutawalli includes any person who is a mutawalli of a wakf by virtue of any custom or who is appointed by a mutawalli to perform the duties of a mutawalli and any person, committee or corporation managing or administering any wakf or wakf property.

that all wakfs are properly maintained, controlled and administered and the income thereof duly applied to its intended objects (s. 32 Wakf Act). Based on s. 32(2), the Wakf Board is required to maintain a record containing information relating to origin, income, object and beneficiary of every wakf. 147. For the purposes of assessment under the ITA, trusts may be classified as either: (i) public charitable or religious trusts entitled to exemption from tax; or (ii) private trusts. ITA s. 139(1) requires all persons in India who have income over a certain threshold to submit an annual tax return. Trusts are considered to be associations of persons under the ITA and are assessed for tax on any income above a threshold of INR 160 000 (EUR 2 238). The relevant tax assessment form requires information on the names and addresses of author/founder/trustee/manager and the person who has made substantial contribution to the trust. It does not require identification of the beneficiaries. 119 378 trusts filed an income tax return in 2011. 148. A trustee is liable to be taxed under ITA s. 160 as a representative assessee in respect of income of the trust. Section 161 of ITA provides procedure for representative assessees. Every representative assessee, as regards the income in respect of which he is a representative assessee, is subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax is levied upon and recovered from him to the same extent as it would be leviable upon and recoverable from the person represented by him. 149. For charitable trusts, ITA s. 139(4A) requires every person in receipt of income derived from property held under trust or other legal obligation wholly or in part for charitable or religious purposes to submit an annual tax return. All charitable trusts and wakfs are required to disclose in their income tax returns (form ITR7 Schedule L) the names and addresses of author/ founder/trustee/manager and the person who has made substantial contribution to the trust. These returns do not need to identify the beneficiaries. 150. The ITD also holds information on charitable trusts due to the process these trusts observe when applying for tax exemptions. Income received by public charitable or religious trusts from property or by way of voluntary donations may be exempt from income tax if the income is applied to charitable or religious purposes (ITA s. 11-s.13). The exemptions are subject to a number of conditions, including the requirement that the trust is registered for these purposes, and are granted by the tax authorities on application with information about the trustees and administration requirements of the trust.
151. The tax return requirements are the same for trusts created under the laws of other jurisdictions that are administered in India or have a trustee resident in India, Section 6(4) of the ITA defines residency of persons (which includes trusts) for the purposes of the ITA very broadly as incorporating every person except where during that year the control and management of his affairs is situated wholly outside India. Information is submitted to the ITD in the annual tax returns of the trustees and others who derive income from the trust. All persons in India, including settlers, trustees and beneficiaries of trusts, who have a total annual income above determined thresholds (see Introduction) are required to submit ITR6 tax return form to the ITD. In addition, the Indian authorities indicate that should a foreign trust be administered from India, any transfer of assets to the trustee from abroad would have to be declared to the authorities: no person can receive foreign contributions without being registered under the Foreign Contribution (Regulation) Act. Such a person will have to apply for registration under this act by submitting at least three years statements of income and expenditure duly audited by a certified accountant, along with a PAN, current bank account details, banker certificate, etc. 152. While not an absolute requirement, commonly the beneficiaries are also identified on the income tax return as income related to trusts where the shares of the beneficiaries are unknown or indeterminate (and income of oral trusts) are taxed at the maximum marginal rate (s. 164 and s. 164A). In the case of an oral trust, the trustee needs to provide information on the purpose of the trust, trustees, beneficiaries and trust property to the assessing officer within three months of its creation so as to be treated as a trust created through a written instrument, and therefore be eligible to a taxation at a rate other than maximum marginal rate (s. 160(v)). Further, from 2013, the Indian resident trustee of a foreign trust is obliged to include in his/her income tax return information on the settlor, beneficiaries and other trustees of the trust.
In practice
153. The competent authoritys main source of ownership and identity information on trusts is information based on tax obligations (i.e. information provided upon tax registration, in tax returns) or directly from the trustee. E-filing is compulsory for all private trusts who are subject to compulsory tax audit, i.e. with turnover above INR 6 million (EUR 84 950), as well as for trusts whose income is above INR 0.5 million (EUR 6 993) per year. Compliance with obligations to file information under the tax law is mainly monitored by the Directorate of Systems of CBDT in the same way as in the case of other obliged entities. The information provided is verified through other sources integrated into the tax database such as Annual Information Reporting, CIB database (containing individual transaction information),

TDS database (containing withholding tax reports), etc. In cases of noncompliance, notices are issued by the respective income tax comissionerate. Further, a tax officer monitors compliance with registration and filing obligations of persons for which he/she is responsible. Registration obligations of private trusts holding immovable property 154. are monitored by the respective registrar having jurisdiction over the region in which the trust is to be registered. There are seven such trust registrars in India. A registration cannot be completed until all the documentary requirements are fulfilled. Compliance with registration requirements is ensured by application of the same supervisory and enforcement measures as in the case of other obliged entities. 155. A PAN is in practice compulsory for all domestic trusts and foreign trusts being managed from India. Information on settlors, trustees and beneficiaries of the trust must be provided together with the application for a PAN. A PAN is required as an identifier in many transactions, including communication with income tax authorities, opening a bank account and immovable property transfer. At the time of PAN registration, information such as name and address of the trustee is required to be provided to the tax administration. Further, it is mandatory to attach proof of identity and proof of address with the PAN application. In the case of a trust, proof of identity and proof of address is the copy of the trust deed as per Rule 114, read with Form 49A, of the Income Tax Rules, 1962 for application for a PAN. Thus in practice, every trust is required to file a copy of the trust deed at the time of PAN registration. The trust deed contains the details of settlors, trustees and beneficiaries (s. 6 Trusts Act 1882).
Information held by trustees and service providers

156. For private trusts (including oral trusts), s. 19 of the Trusts Act 1882 requires trustees to keep clear and accurate accounts of the trust-property, and at all reasonable times, at the request of the beneficiary, to furnish him with full and accurate information as to the amount and state of the trustproperty and to make those records available to a beneficiary for inspection (s. 57). A trustee of a private trust which has a trust deed or will is also entitled (though not required) to have in his possession that instrument and all the documents of title (if any) relating solely to the trust-property. 157. As private trusts are required to file tax returns, they are as a corollary required under the ITA to maintain records for tax purposes. These requirements relate to financial information. Nevertheless, information on the settlors, trustees or beneficiaries is in practice commonly included due to lower tax rates applied on trust income. There are no requirements that trustees or service providers of charitable or public trusts or wakfs or trustees of foreign trusts hold information on the settlors, trustees and beneficiaries.
158. However, such information is maintained in practice by trustees in order to be able to administer the trust. The Indian Trust Act puts various obligations on the trustee while administering a trust which require availability of information on the settlors and beneficiaries in the hands of the trustee. Such obligations include: The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract (s. 11 Trusts Act); Where there are more beneficiaries than one, the trustee is bound to be impartial, and must not execute the trust for the advantage of one at the expense of another (s. 17); The trustee is obliged to keep and maintain accounts and to furnish the same to the beneficiaries, if requested (s. 19).
159. Further, a civil suit for enforcement of the beneficiarys rights against the trustees or their legal representatives or for enforcement of trustees duties can be instituted in the event that the trustee fails to take a relevant matter into account in administering the trust. In the event of non-compliance with any of the provisions of the trust document, or discrepancies in the accounts, or fraud, etc, the beneficiaries can appeal to the court for the trustees to correct the matter. 160. The Charitable and Religious Trusts Act 1920 permits members of the public who have an interest in any charitable or religious trust to apply to a court to obtain an order directing its trustees to furnish information about the trust, including income and assets, and directing that the accounts of the trusts to be examined and audited. It appears such orders cannot be used to obtain information on the trusts settlors, trustees and beneficiaries. 161. Every banking company, financial institution and intermediary is obliged under PMLA s. 12(c), to verify and maintain the records of the identity of all its clients. The PMLA Rules include more detailed know-yourcustomer rules. Banking companies, financial institutions and financial intermediaries must, at the time of opening an account or executing any transaction with it, verify and maintain the record of identity and current address or addresses including permanent address or addresses of the client, the nature of business of the client and his financial status (Rule 9). 162. Where the client is a trust, it is required to submit to the banking company or financial institution or intermediary, as the case may be, a certified copy of: the registration certificate; trust deed; and an officially valid document in respect of the person holding an attorney to transact on its behalf. In addition, Rule 9(1A) requires all banks, financial institutions and

intermediaries to identify the beneficial owner and take all reasonable steps to verify his identity. Since the concept of intermediary as defined in s. 2(n) of PMLA includes also a trustee, the required information has to be available to him/her.
In practice
163. A large volume of ownership information is available to the financial service providers based on the provisions of the PMLA, 2002, and application of know-your-customer rules. The availability of ownership information on trusts held by service providers is monitored by the RBI. RBI imposes the same supervisory and enforcement measures as in the case of monitoring compliance with these obligations in respect of other obliged entities including periodical on-site inspections and application of sanctions (see section A.1.1). Based on the facts provided, supervisory and enforcement measures are applied adequately to ensure compliance with AML obligations to keep ownership information on trusts. 164. In practice, the Competent Authority relies on the tax obligations to obtain identity information on trusts. In the limited number of cases where the information is not filed with the tax authorities, the tax administration will ask the trustee to provide the requested information. The trustee maintains the information on the settler and beneficiaries in order to be able to administer the trust. Further, the trustee is required to produce all information relevant for the tax assessment (including assessment of the treaty partners tax see part B.1) (s. 131, 133-134 ITA). India received one request for ownership information related to a trust during the three years under review. The information was requested from a trustee of a foreign trust (who was also a chartered accountant) and the information was subsequently obtained by application of search and seizure powers (see section B.1.4 below).
Information held by other persons

165. Normally lawyers and accountants assist in creation of trusts in India. However there are no requirements that people in these professions, or others in India, hold information pertaining to the trust. In practice, ITD uses primarily other sources such as tax obligations to obtain the requested ownership information.
Documentation retention requirements

166. There are no document retention requirements contained in the Trusts Act 1882, the Charitable and Religious Trusts Act 1920, the Societies Registration Act 1860 or the Wakfs Act 1995. 167. Under the ITA (see in particular sections 44AA, 44AB and 271A), documents must be retained for a period of seven years from the end of the relevant year which may get extended till completion of assessment if a notice for reopening of assessment is issued within this period. The retention period is not affected by possible subsequent events. Further, the time limit for reopening of assessments in respect of undisclosed income from any asset located outside India has been extended from six years to sixteen years based on the Finance Act, 2012. 168. Under PMLA s. 12(c), 20 documents related to customer due diligence are to be maintained by banking companies, financial institutions and financial intermediaries for ten years from the date of the cessation of the transaction between the clients and the banking company or financial institution or intermediary, as the case may be. As the period of time is determined by the date at which the transaction occurred, the retention period is not affected by possible subsequent events. 169. Information pertaining to trusts is not required to be kept within India, but must be kept at the principal place of business and available when so requested by the ITD or by Indias Financial Intelligence Unit (FIU-IND). In practice these records are maintained in India. They must be presented upon request of the respective Indian authorities. 170. In practice, no cases have been identified by peers where India was unable to provide identity information related to a trust because of a breach of the retention period. In one case ownership information on a trust was provided even though it was related to periods not covered by the retention period.
Conclusion
171. In practice, there are sufficient mechanisms in place to ensure that overall compliance with obligations to maintain identity and ownership information on trusts is good. The main source of ownership information on trusts is tax e-filing which is monitored and enforced by the Directorate of Systems of CBDT and by the respective tax commisionerate. Further, information on settlors, trustees and beneficiaries of the trust must be provided together with the application for a PAN, which is in practice necessary for all trusts

and required for many transactions, including opening a bank account. Given the fact that a registration certificate is required by banks upon opening a bank account, over 90% of trusts are registered with the Registrar of Trusts. Identity and ownership information is also maintained by the trustee in order to administer the trust. A large volume of ownership information is available to the service providers based on the provisions of the PMLA, 2002, and application of know-your-customer rules. India was asked on one occasion to provide identity information related to a trust, and was able to provide the requested information, as confirmed by a peer.
Foundations (ToR A.1.5)

172. India does not have a separate category of foundations, however described. Non-profit organisations, which are called foundations from time to time, are created as companies or as trusts.
Enforcement provisions to ensure availability of information (ToR A.1.6)

173. Indias provisions to ensure the availability of information have been described previously in this section. They can primarily be found in the Companies Act 1956, the Limited Liability Partnership Act 2008, the Income-tax Act 1961, the Prevention of Money Laundering Act 2002 and the rules underpinning these acts. 174. Non-compliance with the provisions of the Companies Act 1956 is viewed seriously. Fines may be levied and penal action may in some instances be taken in accordance with Part XIII of the Companies Act 1956. Penalties are available for a wide range of forms of non-compliance by relevant individuals, Indian and foreign companies with provisions of the Act (e.g. s. 598, s. 628, s. 629, s. 631). Relatively low penalties are available for foreign companies which fail to comply with any obligations contained in the act; fines of INR 10 000 (EUR 140) plus INR 1 000 (EUR 14) per day. Indian companies (including their officers) which provide false or incomplete information when fulfilling their obligations under the act are subject to fines of INR 5 000 (EUR 70) plus INR 500 (EUR 7) per day plus imprisonment for up to two years. In 2009, the government proposed a new Companies Act to replace the Companies Act 1956 which, inter alia, establish both minimum and maximum fines and imprisonment and generally raise the quantum of the fines/imprisonment available for non-compliance with the act. The bill was submitted to the Parliament, passed by the Lower House and is still under consideration in the Upper House. 175. In practice, the total fines imposed under the Companies Act were INR 9 230 317 (EUR 129 672) in 2009-10, 7 084 542 (EUR 99 534) in
2010-11 and 7 079 498 (EUR 99 465) in 2011-12 (as stated in section in A.1.1). During these three years, number of companies prosecuted was 3 196, 1 653 and 3 511 respectively. The number of prosecutions for non-compliance with the obligation to file annual returns by companies having share capital was 3 818 in 2009-10, 1 472 in 2010-11 and 3 004 in 2011-12. The number of prosecutions for non-compliance with the obligation to file annual returns and balance sheets was 134 in 2009-10, 252 in 2010-11 and 299 in 2011-12.The number of prosecutions for non-compliance with a requirement by the registrar to provide information and explanation was 25 in 2009-10, 17 in 2010-11 and 23 in 2011-12. In 2011-12 there was one case of prosecution for not maintaining the register of members at the registered office of the company and one case of prosecution for providing false information to the Registrar. 21 176. Compliance of co-operative societies with the provisions of Co-operative Societies Act 1912 is mainly backed by a sanction under section 39 of the Co-operative Societies Act 1912 allowing the Registrar of Societies to dissolve the society which is not compliant with the Act. The number of cases in which a society was dissolved is not centrally available since co-operatives are registered at the state level. 177. Where false documentation is filed as part of registration of a LLP, in accordance with the Limited Liability Partnership Act 2008, fines ranging from INR 10 000 to INR 500 000 (EUR 140 to EUR 6 993) may be levied and prosecutions may be launched. The total number of cases in which fines have been levied were 9, 16 and 23 during 2009-10, 2010-11 and 2011-12 and the amount of fines paid was INR 502 500 (EUR 7 051), INR 2 367 550 (EUR 33 221) and INR 4 184 750 (EUR 58 724) respectively. A good range of penalties is thus available to authorities in these circumstances. However, non-compliance with the requirements to notify the Companies Registrar of changes in partners details may be subject to fines from INR 2 000 to INR 25 000 (EUR 28 to EUR 350). The total number of cases in which fines have been levied were 21, 47 and 76 during 2009-10, 2010-11 and 2011-12 and the amount of fines paid was INR 581 500 (EUR 8 161), INR 3 070 400 (EUR 43 089) and INR 6 372 900 (EUR 89 444) respectively. Low sanctions are applicable for non-compliance with obligations to provide information in respect of general partnerships. If the firm does not provide the requested information to the registrar within the prescribed period, the firm is liable to a penalty not exceeding INR 10 (EUR 0.14) per day (s. 69A Partnership Act, 1932). Provision of false information is sanctioned by imprisonment for up to one year or fine not less than INR 1 000 (EUR 14) (s. 70). The number of cases in which these sanctions were applied and the amount of fines levied is not centrally available since general partnerships are registered at the state level.
21. 56th Annual Report on Working and Administration of the Companies Act, 1956, www.mca.gov.in/Ministry/pdf/annualreport_03042013.pdf.

178. A public trusts failure to apply for registration, to keep accounting records or to report a change in information provided to the Registrar is subject to a maximum fine of INR 1 000 (EUR 14) (s. 66 of Bombay Public Trust Act 1950). A wakf is subject to a fine of INR 1 000 (EUR 14) under s. 41 of the Wakfs Act 1954 if a mutawalli inter alia fails to apply for the registration of a wakf; to furnish statements of particulars or accounts or returns as required by the Wakfs Act. The number of cases in which fines were applied and the amount of fines levied is not centrally available since trusts are registered on the state level. Under PMLA s. 13, the Director of the FIU-IND may call for records 179. and may make such inquiry or cause such inquiry to be made, as he thinks fit. If the Director, in the course of any inquiry, finds that a banking company, financial institution or an intermediary or any of its officers has failed to comply with the provisions under the act, then s/he may, by an order, levy a fine on such banking company or financial institution or intermediary which shall not be less than INR 10 000 (EUR 140) but may extend to INR 100 000 (EUR 1 399) for each failure. Over the last three years fines under s. 13 of the PMLA have been levied on two banks. The total levied fines amounts to INR 1.6 million (EUR 22 000) 180. Under the ITA, administrative penalties of small amounts apply to natural and legal persons who do not comply with requests for information. Any person who fails to furnish information in due time may be subject to a fine of INR 100 (EUR 1.39) per day for every day the failure to provide information continues (ITA s. 272A). Any person who fails to give evidence or produce books of account or other documents as required under summons under s. 131 or who omits to attend or produce books of account or documents as required under summons under s. 131, may be subject to a fine of INR 10 000 (EUR 140). In practice, such fines are rarely levied and noncompliance with a summons issued under s. 131 can lead to exercise of search and seizure powers under s. 132(1)(a). As taxpayers are aware of the possibility that a summons will be issued, this has dissuasive value (see section B.1.4 below for compulsory powers applied in practice). If a person makes a statement in any verification under the ITA or the 181. Income-Tax Rules 1962, or delivers an account or statement which is false, and which s/he either knows or believes to be false, or does not believe to be true, under ITA s. 277 s/he may be prosecuted. Similarly, wilful failure to submit a tax return which relates to payment of less than INR 100 000 (EUR 1 399) in tax is punishable by imprisonment of between three months and three years plus a fine. If the wilful failure relates to a tax liability above that threshold, it is punishable by imprisonment of between six months and seven years plus a fine. The income tax department filed 312 prosecutions in 2009-10, 244 in 2010-11 and 105 in 2011-12. The decreasing number of
prosecutions relates mainly to broader use of the e-filing system allowing effective monitoring of tax obligations. E-filing obligations are well respected in practice, with an overall compliance above 90%. Out of all prosecutions in about 48% of cases sentences were applied. 182. Since the commencement of computerisation in the ITD, a significant number of penalty/sanction orders is now being passed directly through the I-T system and in these cases, details of penalties levied by section are available. In practice, the number of cases in which a penalty for failure to produce books of accounts or other documents asked by the assessing officer (s. 271 ITA) was applied is 9 372 during the period of 2010-11 to 2012-13. The amount of these penalties applied during the same period was INR 537.6 million (EUR 7.55 million). The number of cases where a penalty for concealment of information during search and seizure (s. 271AAA) was applied was 260 through the period of 2010-11 to 2012-13. The application of this penalty resulted in INR 308.6 million (EUR 4.33 million) of additional tax levied. As all the penalty/sanction orders have not yet passed through the I-T system, the actual number of penalties/sanctions levied is higher. In addition, prosecution can be filed for various offences under the Income Tax Act (as referred above). 183. ITD officers also have wide-ranging powers, including compulsory powers, to obtain information from natural and legal persons, which are detailed below in section B of this report.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 Rating Compliant.
A.2. Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
General requirements (ToR A.2.1) Companies

184. Companies are required to keep at their registered offices or elsewhere in India if the Companies Registrar is so advised books of account detailing (Companies Act 1956, s. 209): all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place; all sales and purchases of goods by the company; the assets and liabilities of the company; and the costs of labour and materials (for companies engaged in production, processing, manufacturing or mining activities).
185. These books of account must give a true and fair view of the state of the affairs of the company or branch office, as the case may be, and explain its transactions (s. 209(3)). The Companies Act also prescribes the preparation of annual accounts and the standards to be followed in their preparation. A National Advisory Committee on Accounting Standards was set up in 2008 to lay down accounting policies and accounting standards and to ensure among other things, the preparation of final accounts in a standard format so that a true and fair picture of assets and liabilities of a company, as well as income and expenditure, is reflected in the annual statements. The accounts must be maintained by all the companies following the double entry system of accounting and on an accrual basis. This eliminates single entry accounting by companies and brings better transparency to accounts. 186. The books of account pertaining to branch offices, regardless of whether the office is within or outside India, are to be kept at that branch office, with the registered office holding quarterly summarised returns relating to the branch office (s. 209(2)). 187. These requirements under the Companies Act 1956 to keep accounting records are applicable to all companies registered under that act. Section 600(3)(a) provides that s. 209 of the act (which concerns the obligation to maintain books of accounts) applies to foreign companies. For foreign companies, such books of account must be kept at the principal place of business in India and must cover monies received and expended, sales and purchases made, and assets and liabilities related to the business in India.
188. The Companies Act 1956 goes on to provide that these books of account, and other books and papers, must be available for inspection by the relevant Companies Registrar, the Securities and Exchange Board of India or other officer as authorised by the Central Government (s. 209A(1)). Every director, officer and employee of the company is required to provide all assistance to such inspectors and to produce to the inspectors all books of account and other books and papers of the company in his/her custody or control and to provide any statement, information or explanation asked of him/her (s. 209A(2)-s. 209A(3)). The inspectors have broad powers to summons people, require production of documents, inspect documents pertaining to the company at any location. Penalties exists for non-compliance with an inspection; fines of at least INR 50 000 (EUR 699), imprisonment for up to one year and disqualification from holding office in any company for up to five years. 189. In addition to the requirements detailed in the Companies Act 1956, all persons carrying on a business or profession (including all companies) are obliged to compute their income in accordance with either the cash or mercantile system of accounting employed by the person in carrying out its activities (s. 145 ITA). Further, all companies are obliged to submit an income tax return in a prescribed for to the ITD (ITA s. 139), regardless of whether they have made a profit or not in the given year. Rule 12 of the Income-Tax Rules 1962 and tax return form ITR6 (for companies) require that the annual tax return include a balance sheet and profit and loss account. The required details are such that they enable the financial position of the company to be determined and they allow financial statements to be prepared. The information required in this form is not such that it would correctly explain the companys transactions, though this information is required to be kept by the company in order to substantiate information provided in the tax return. 190. ITA s. 44AA(2) requires that every person carrying on a business or profession from which it derives income exceeding INR 120 000 (EUR 1 678) or his/her total sales/turnover/gross receipts exceeds INR 1 million (EUR 14 160) in any one of the last three years to keep and maintain such books of account and other documents to enable the assessing officer to compute his/her total income in accordance with the provisions of the ITA. 191. Further, such accounting documentation must be kept by every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as notified by the Board in the Official Gazette (s. 44AA(1)). With respect to these specified professions, and also to any authorised representatives or film artists, the types of records to be maintained at the principal place of business are specified in Rule 6F of the Income-Tax Rules 1962. These are:

a cash book; a journal, if the accounts are maintained according to the mercantile system of accounting; a ledger; carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him (for sums of over INR 25 (EUR 0.35)); original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed INR 50 (EUR 0.69), payment vouchers prepared and signed by the person; and a daily case register and a stock inventory (medical professionals only).
192. In practice, the ITD considers persons carrying out these professions as largely compliant with the accounting obligations under the ITA and Income Tax Rules. The books of accounts prescribed in the case of specified professions are detailed so as to have proper checks and controls over their receipts and expenses. These professionals are assessed to tax in specially created assessment ranges. There has been no request related to accounting information maintained by a person of the specified profession. 193. ITA s. 44AB requires persons carrying on a business with turnover above INR 6 million (EUR 84 950) or a profession with turnover above INR 1.5 million (EU 21 236) to have their accounts audited annually by a chartered accountant and to provide a copy of the audit report to the ITD. This audit includes inspection of accounting books, accounting method used and whether accounting records represent a true and fair picture of the financial state of the company. 194. It is clear that all companies registered under the Companies Act 1956 are required to keep books of account which correctly explain all transactions, enable the companys financial position to be determined with reasonable accuracy at any time and which allow for financial statements to be prepared. In addition, the requirements of the ITA ensure that annual tax returns are filed which enable the financial position of the company to be determined and they allow financial statements to be prepared. Accounting information explaining a companys transactions is required to be kept by the company in order to substantiate information provided in the tax return. Also, certain professional persons (who may also have their professional
activities registered as companies) keep accounts which correctly explain all transactions, enable the companys financial position to be determined with reasonable accuracy at any time and which allow for financial statements to be prepared. 195. Section 594 provides that every foreign company is required to make out a balance sheet and profit and loss account and file with the concerned Registrar of Companies annually. Further, s. 600(3)(a) states that provisions of s. 209 (i.e. for maintenance of books of accounts) apply to a foreign company to the extent of requiring it to keep at its principal place of business in India the books of account, with respect to moneys received and expended, sales and purchases made, and assets and liabilities, in the relation to its business in India. 196. Section 271A of the ITA provides for a penalty of INR 25 000 (EUR 351) for failure to keep, maintain or retain books of account and documents as required under section 44AA of the ITA. In practice, this penalty was applied on all types of entities in over 800 cases in the period 2008-09 to 2011-12 and the amount of penalty applied was over INR 143.5 million (EUR 2 million). Further, Section 145 of the ITA provides that where the assessing officer is not satisfied about the correctness or completeness of the accounts of a taxpayer or where the assessing officer is not satisfied with the accounting method or accounting standards have not been regularly followed, the assessing officer may make an assessment based on his/her own best judgment.
In practice
197. The Registrar of Companies and officers of the Directorate of Inspection and Investigation of the Ministry of Corporate Affairs undertake inspection of the books of accounts and other records of companies which are prescribed to be maintained under the Companies Act. Inspections are generally ordered on the basis of complaints received in the Ministry, in its field offices or through MCA-21 e-portal, upon scrutiny of documents filed with the Registrar including auditors reports or upon receipt of references from other Government agencies. During inspections, the officers verify among other things (i) whether the companys accounts represent a true and fair picture of the companys finances, (ii) whether the companys funds have been siphoned off, utilised or diverted in breach of provisions of the Companies Act, (iii) whether there are acts of mismanagement which adversely affect the interest of company stakeholders, (iv) whether statutory auditors have carried out their duties properly while certifying true and fair view of the state of affairs of the company. There were undertaken 207 inspections in year 2008-09, 204 in 2009-10 and 190 in 2010-11. There were 1 653 companies prosecuted for breach of obligation under the Companies Act in 2010-11 and fines of total INR 7 million (EUR 97 932) were imposed.

198. The Directorate of Systems monitors the filing of accounting records of all taxable entities under the tax law. E-filing of tax returns and accounting information is compulsory for companies. Accounting information has to be entered in the online form to complete the requirements. The non-compliance with filing obligations is detected using information in the tax database gathered from various sources such as Annual information reports (e.g. cash deposits, bank account numbers, credit card transactions, transactions with immovable property, investments in securities etc.), CIB information (individual transaction reports), TDS modules (withholding tax information on salaries, interest, rents, work and service contracts, overseas remittances, etc.). Further, a tax officer monitors compliance with registration and filing obligations of persons for which he/she is responsible. In addition, the assessing officers verify the existence of proper accounting records in all audited cases and a risk based selection of cases is carried out based on filed data. In cases of non-compliance, notices are issued by tax officers in the respective chief comissionerates. The inability to justify any item of income or expense results in paying tax on enhanced income. The taxpayers must also pay concealment penalties in the range of 100% to 300% of additional tax demanded, and depending on the gravity of the case can be subjected to criminal proceedings. The number of cases where concealment penalties were applied was 22 292 in 2010-11 and 29 866 in 2011-12; the additional amount of tax levied was INR 20.4 billion (EUR 286 million) and INR 102 billion (EUR 1.43 billion) respectively. In cases where a suspicion arises that a taxpayer may not maintain proper books of accounts or accounting entries seems doubtful, business premises are visited for on-site inspections and in exceptional circumstances search and seizure action is ordered.
Co-operative societies
199. Co-operative societies which are engaged in specified economic activities are considered to be associations of persons under the ITA and are assessed for tax on a sliding scale (see Introduction on Taxation system). The ITA and the Income-Tax Rules 1962 (ITA Rules) provide that co-operative societies must submit detailed accounts as part of their annual tax returns. In addition, persons who gain income from a co-operative society are obliged to report this income in their annual tax returns. Accounting obligations under commercial laws can be prescribed by state governments and are different from state to state. 200. In practice, co-operative societies are required to file their income tax returns and accounting information through the e-filing system. Their compliance with accounting obligations is monitored by the Systems Directorate in the same way as in the case of companies.
Partnerships
201. As mentioned previously in this report, general partnerships are required to register as such, in accordance with the Partnership Act 1932. That act does not establish obligations with respect to maintaining accounting records. Section 9 does, however, require that partners render true accounts and full information of all things affecting the firm to any partner, his heir or legal representative. Further, all partnerships created under the provisions of the Partnership Act 1932 must register with the Registrar of Firms (s. 58) by submitting a copy of the deed of partnership, which normally prescribes in detail the accounting obligations of the partners and the profit sharing ratio. 202. Under s. 34 of Limited Liability Partnership Act 2008, books of accounts are required to be maintained at the registered office of the LLP. In addition, every year a statement of accounts and solvency is required to be filed with the Companies Registrar. This act also grants broad powers to the registrar to request information and conduct inspections. 203. Further, Rule 24 of the Limited Liability Partnership Rules 2009 provides that a LLP must keep books of accounts which show and explain the LLPs transactions, which disclose with reasonable accuracy, at any time, the financial position of the LLP at that time; and which enable the designated partners to ensure that any statement of account and solvency prepared complies with the requirements of the act. These books of account must contain: particulars of all sums of money received and expended by the LLP and the matters in respect of which the receipt and expenditure takes place; a record of the assets and liabilities of the LLP; statements of cost of goods purchased, inventories, work in progress, finished goods and cost of goods sold; and any other particulars which the partners may decide.
204. Foreign LLPs are required to file statements of account and solvency within 30 days of expiry of six months from the close of financial year. Section 34(4) of the LLP Act stipulates sanctions for non-compliance 205. of accounting obligations that range from INR 25 000 (EUR 351) to INR 500 000 (EUR 7 020) on the partnership and in the case of partners the penalty varies from INR 10 000 (EUR 140) to INR 100 000 (EUR 1 400). Sanctions for non-filing of annual report to the Companies Registrar vary from INR 25 000 (EUR 351) to INR 500 000 (EUR 6 995) (s. 35(2)). As per section 34(5) of the LLP Act, any limited liability partnership which fails to maintain books of accounts or to file an annual financial statement with the registrar is punishable with a fine of between INR 25 000 and INR 500 000

and every designated partner of such limited liability partnership is punishable with a fine of between INR 10 000 and INR 100 000. Further, under section 37, a false or incorrect statement shall be punishable with imprisonment for a term which may extend to two years, and or a fine which may range from INR 100 000 to INR 500 000. 206. Partnerships, including general partnerships and foreign partnerships, are considered to be firms for the purpose of the ITA and must therefore submit an annual return to the ITD (ITA s. 139(1)(a)). The required tax return form ITR5 requires submission of the balance sheet and also profit and loss account information. 207. Individual partners must also submit annual returns as every natural person in India whose total annual income exceeds determined thresholds (see Introduction) is obliged to submit an income tax return in a prescribed form to the ITD (ITA s. 139). Rule 12 of the Income-Tax Rules 1962 and tax return form ITR3 (for partners in a firm) require that the annual tax return includes a balance sheet and profit and loss account. The required details are such that they enable the financial position of the partner, but not the partnership, to be determined. The information required for this form is not such that it would allow the financial statements to be prepared, or correctly explain the companys transactions. 208. In addition, as noted under Companies, ITA s. 44AA requires that every person carrying on business or profession from which it derives income exceeding INR 120 000 (EUR 1 678) or his/her total sales/turnover/gross receipts exceeds INR 1 million (EUR 14 160) in any one of the last three years to keep and maintain such books of account and other documents to enable the assessing officer to compute his/her total income in accordance with the provisions of the ITA. 209. Further, such accounting documentation must be kept by every person carrying on legal, medical, engineering or architectural profession or accountancy or technical consultancy or interior decoration or any other profession as notified by the Board in the Official Gazette. This is further elaborated in Rule 6F of the Income-Tax Rules 1962, which requires these professionals, and also authorised representatives or film artists, to maintain inter alia: copies of bills wherever such bills are issued by the person, and copies or counterfoils of receipts issued by him (for sums of over INR 25 (EUR 0.35)); original bills issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed INR 50 (EUR 0.70), payment vouchers prepared and signed by the person; and
a daily case register and a stock inventory (medical professionals only).
210. Similarly, s. 44AB requires persons carrying on a business or a profession with turnover above a specified threshold to have their accounts audited annually by an accountant and to provide a copy of the audit report to the ITD as described above. 211. The obligations for LLPs under the Limited Liability Partnership Act 2008 and the requirements for all types of partnerships under the ITA ensure that firms and partners in firms or persons in certain professions deriving income from LLPs keep accounts in India which correctly explain all transactions, enable the companys financial position to be determined with reasonable accuracy at any time and which allow for financial statements to be prepared. 212. The same sanctions for non-compliance with accounting obligations under the tax law apply for partnerships as in respect of companies. Section 271A of ITA provides for a penalty of INR 25 000 (EUR 351) for failure to keep, maintain or retain books of account and documents as required under section 44AA of the ITA. In practice, this penalty was applied in over 800 cases in the period 2008-09 to 2011-12 and the amount of penalties applied was over INR 143.5 million (EUR 2 million). Further, section 145 of ITA provides that where the assessing officer is not satisfied about the correctness or completeness of the accounts of a taxpayer or where the assessing officer is not satisfied with accounting method or accounting standards have not been regularly followed, the assessing officer may make an assessment based on his/her own judgment.
In practice
213. Partnerships compliance with accounting obligations under the Partnership Act 1932 and Limited Liability Partnership Act 2008 is monitored by the Registrars of Firms in respect of general partnerships, Registrars of Companies in respect of LLPs and officers of the Directorate of Inspection and Investigation of the Ministry of Corporate Affairs. The same supervisory and enforcement measures are taken as in the case of companies. Each authority undertakes inspection of the books of accounts and other prescribed records. 214. Compliance with accounting obligations under the tax law is monitored by the Directorate of Systems and by a tax officer responsible for registration and filing obligations of the respective persons. E-filing of tax returns and accounting information is compulsory for partnerships. The same supervisory and enforcement measures as in the case of companies are applied.
Trusts
215. According to s. 19 of the Trusts Act 1882, a trustee is bound: (i) to keep clear and accurate accounts of the trust-property; and (ii) at all reasonable times, at the request of the beneficiary, to furnish him with full and accurate information as to the amount and state of the trust-property. In addition, the beneficiary has, under s. 57 of the Trusts Act 1882, a right, as against the trustee and all persons claiming under him with notice of the trust, to inspect and take copies of the instrument of trust, the documents of title relating solely to the trust-property, the accounts of the trust-property and the vouchers (if any) by which they are supported and the cases submitted and opinions taken by the trustee for his guidance in the discharge of his duty. Thus, it could be expected that trustees keep reliable accounting records in order to fulfil their role and their obligations to beneficiaries. 216. Trusts are considered to be associations of persons under the ITA and are assessed for tax on any income above a threshold of INR 160 000 (EUR 2 238). All trusts (including foreign trusts) receiving income above the threshold must file a tax return (ITR5) which includes a balance sheet and all profit and loss account items. Further, all trusts are obliged to withhold tax from all payments made by them (s. 190 to s. 195 ITA) and file TDS returns containing details of deductee(s) and details relating to deposit of tax to ITD. In addition, each natural person in India who has earned money related to the trust is obliged to file an income tax return in a prescribed form to the ITD if their annual income exceeds determined thresholds (see Introduction) is obliged to submit an income tax return (ITA s. 139). Rule 12 of the IncomeTax Rules 1962 and tax return forms ITR1 and ITR2 (for individuals) require that the annual tax return include information on all income, which should include income gained from a trust. The return is required even where the person expects to receive a tax 217. exemption on the grounds that the income is applied to charitable or religious purposes (ITA s. 11-s.13). Under s. 12A, income of a charitable trust (having income above the exempt threshold limit) is not exempt unless the accounts of the trust are audited and the audit report is submitted along with the annual tax return. 218. Again, ITA s. 44AA requires every person (including trusts) carrying on a business or profession from which it derives income exceeding INR 120 000 (EUR 1 678) or his/her total sales/turnover/gross receipts exceeds INR 1 million (EUR 14 160) in any one of the last three years to keep and maintain such books of account and other documents to enable the assessing officer to compute his/her total income in accordance with the provisions of the ITA.
219. Further, such accounting documentation must be kept by every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as notified in the Official Gazette. This is further elaborated in Rule 6F of the Income-Tax Rules 1962, which requires these professionals, and also authorised representatives or film artists, to maintain inter alia: copies of bills wherever such bills are issued by the person, and copies or counterfoils of receipts issued by him (for sums of over INR 25 (EUR 0.35); original bills issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed INR 50 (EUR 0.70), payment vouchers prepared and signed by the person; and a daily case register and a stock inventory (medical professionals only).
220. ITA s. 44AB further requires persons carrying on a business or a profession with turnover above a specified threshold to have their accounts audited annually by an accountant and to provide a copy of the audit report to the ITD as described above. 221. The ITA and the ITA Rules provide that trusts must submit detailed accounts as part of their annual tax returns. The requirements of the ITA ensure that trustees keep accounts which correctly explain all transactions, enable the companys financial position to be determined with reasonable accuracy at any time and which allow for financial statements to be prepared. Persons who gain income from a trust are obliged to report this income in some detail in their annual tax returns and are required to maintain such books of accounts and other documents to substantiate this income. Further, under s. 44AB of the ITA, the persons carrying on a business (including trusts) with a turnover above INR 6 million (EUR 84 950) have to have their accounts audited annually by an chartered accountant and to provide a copy of the audit report to the ITD. This audit includes inspection of accounting books, accounting method used and whether accounting records represent a true and fair picture of the financial state of the entity. 222. Section 12 of the PMLA and Rules 3 and 4 of the PMLA Rules, as amended by a Ministry of Finance Notification issued on 12 February 2010, oblige intermediaries including trustees to maintain records of all transactions. The records must contain information on: the nature of the transactions; the amount and type of currency of the transaction;

the date of transaction; and the parties to the transaction.
In practice
223. Trusts compliance with accounting obligations under the tax law is monitored by the Directorate of Systems as the e-filing of tax returns and accounting information is compulsory for trusts. The same supervisory and enforcement measures as in the case of companies are applied. Further, persons required under s. 44AB ITA to have their accounts audited annually by an accountant are obliged to file their audit report together with their tax return. Penalties are applied by the ITD if audit reports are not filed. 224. Obligations of certain professionals under s. 44AA and s. 44AB are in practice interpreted broadly and include acting as a trustee. A notification issued on 12 January 1977 defines the profession of authorised representative as a profession under s. 44AA and s. 44AB. An authorised representative is a person who represents any other person, on payment of any fee or remuneration, before any court or authority constituted or appointed by any law. The ITD considers persons carrying out these professions as compliant with the accounting obligations under the ITA and Income Tax Rules. In addition, the trustees obligation to maintain records of transaction under PMLA rules is monitored by the Reserve Bank of India (RBI). The RBI imposes supervisory and enforcement measures which include on-site inspections, advisory notices and warning letters.
Foundations
225. India does not have a separate category of foundations, however described. Non-profit organisations, which are called foundations from time to time, are created as companies or as trusts. The requirements pertaining to ownership information for these entities have been outlined earlier in this report.
Conclusion
226. In practice, overall compliance with obligations to maintain accounting records by companies, co-operative societies, partnerships and trusts is good in India. India has provided accounting information on companies in 55 cases over the period under review, on partnerships in four cases and on trusts in one case. The types of accounting information exchanged include ledgers/journals and underlying documentation such as invoices, contracts and correspondence. Availability of accounting information in India has been confirmed also by peers although the requested information might not have been provided in a timely manner in some cases.
Underlying documentation (ToR A.2.2) Companies

227. The Companies Act 1956 provides that the books of account which companies are obliged to keep must be accompanied by other books and papers. Section 2(2) of the act defines book and paper as a broad category including accounts, deeds, vouchers, writings and documents. As a result, companies are obliged to keep underlying documentation reflecting details of (i) all sums of money received and expended and the matters in respect to which the receipt and expenditure takes place; and (ii) all sales, purchases and other transactions; and (iii) the assets and liabilities of the company. 228. Section 224 (1) of the Companies Act, 1956 obliges all companies to have an auditor to audit its accounts. Pursuant to section 227 of the Companies Act, the auditor must examine the books of accounts and prepare an audit report certifying that the profit and loss account and balance sheet present a true and fair picture of the affairs of the company at the end of the financial year and must give an opinion as to whether proper books of account, as required by law, have been kept by the company so far as it appears from his/her examination of those books. Every company is required to file the auditors report together with the balance sheet and profit and loss account with the Registrar of Companies within 30 days of the conclusion of the annual general meeting of the company. 229. Further, ITA s. 44AA(1), obliges persons carrying on certain professions legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as notified by the Board in the Official Gazette to keep and maintain sufficient books of account as described in Rule 6F of the Income-Tax Rules 1962. Rule 6F of the Income-Tax Rules 1962 goes on to explain that these documents must include: a cash book; a journal, if the accounts are maintained according to the mercantile system of accounting; a ledger; carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him (for sums of over INR 25 (EUR 0.35));

original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed INR 50 (EUR 0.70), payment vouchers prepared and signed by the person; and a daily case register and a stock inventory (medical professionals only).
230. Section 44AA(2) of the ITA obliges every person carrying on business or a profession, other than specified professions mentioned above whose income from the business or profession exceeds INR 120 000 (EUR 1 679), to keep and maintain such books of account and other documents as may enable the Assessing Officer to compute total income in accordance with the provisions of the ITA. Books of accounts are defined under section 2(12A) of the ITA as including ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored on a disc, tape or any other form of electro-magnetic data storage device. Further, document is defined under section 2 (22AA) as including an electronic record as defined in clauses (t) of sub section (1) of section 2 of the Information Technology Act, 2000. 231. In addition, there are statutory audit obligations for companies and other persons under section 44 AB of the ITA and section 226 of the Companies Act. These audits include checks of compliance with the obligation to maintain underlying documentation. Maintenance of underlying documentation is also subject to tax audits. Each taxpayer is required to provide information enabling the computing of his/her income, which according to the Indian authorities, includes underlying documentation to substantiate the income.
Co-operative societies
232. Co-operative societies are required under the ITA to keep underlying documentation for the accounting records, such as invoices, contracts etc. detailing: (i) all sums of money received and expended and the matters in respect to which the receipt and expenditure takes place; and (ii) all sales and purchases and other transactions. Co-operative societies are obliged to use the form ITR5 when filing their income tax returns and this form seeks details of the assets and liabilities of the society. 233. Under the ITA, documents must be retained for a period of seven years from the end of the relevant year which may get extended till completion of assessment if a notice for reopening of assessment is issued within this period. The retention period is not affected by possible subsequent events. There is no requirement that these records be kept within India. However, if
asked by the ITD, documents must be produced in due time (ITA s. 272A). In view of this and the fact that books of accounts are required to be available for inspection by the Registrar, in practice they are available and there has been no case when requested information was not available because it was kept outside of India.
Partnerships
234. The Partnership Act 1932 does not establish obligations for general partnerships with respect to maintaining underlying documents. With respect to LLPs, Rule 24(1) of the Limited Liability Partnership 235. Rules 2009 provides: Every limited liability partnership shall keep books of accounts which are sufficient to show and explain the limited liability partnerships transactions and are such as to: (a) disclose with reasonable accuracy, at any time, the financial position of the limited liability partnership at that time; and (b) enable the designated partners to ensure that any Statement of Account and Solvency prepared under this rule complies with the requirements of the Act. 236. These rules do not clearly require that underlying documentation be kept, nor do they define books of accounts. The rules note that terms which are not defined take the same meaning as indicated in the Limited Liability Partnership Act 2008. That act does not define books of accounts but notes that terms which are not defined in the act take the same meaning as indicated in the Companies Act 1956. The Companies Act 1956 does not define books of accounts, but does define book and paper as a broad category including accounts, deeds, vouchers, writings and documents. Further, every LLP has to have its books of accounts audited as provided in the Limited Liability Partnership Rules 2009. The auditor has to check whether proper books of account have been kept by the partnership. An LLP has to file an audit report with the Registrar of Companies within six months of the close of the financial year. 237. In addition, as noted previously, sections 44AA(1) and 44AA(2) of the ITA and Rule 6F of the Income-Tax Rules 1962, oblige partnerships to keep underlying documentation for the accounting records, such as invoices, contracts etc. detailing: (i) all sums of money received and expended and the matters in respect to which the receipt and expenditure takes place; and (ii) all sales and purchases and other transactions.
Trusts
238. There are no requirements under the Trusts Act 1882 that trustees or others associated with a trust keep underlying documentation related to the assets and liabilities of the trusts such as invoices and contracts. 239. As for companies, co-operative societies and partnerships, sections 44AA(1) and 44AA(2) of the ITA and Rule 6F of the Income-Tax Rules 1962 oblige firms (including trusts) and persons being assessed for the income of a trust to keep underlying documentation for the accounting records, such as invoices, contracts etc. detailing: (i) all sums of money received and expended and the matters in respect to which the receipt and expenditure takes place; and (ii) all sales and purchases and other transactions. Trusts are obliged to use the form ITR7 when filing their income tax returns and this form seeks details of the assets and liabilities of the trust. 240. Under the ITA (see in particular sections 44AA, 44AB and 271A), documents must be retained for a period of six years from the end of the relevant year which may get extended till completion of assessment if a notice for reopening of assessment is issued within this period. The retention period is not affected by possible subsequent events. There is no requirement that these records be kept within India. However, if asked by the ITD, documents must be produced in due time (ITA s. 272A). In view of this, in practice, they are available in India. This has been confirmed by one case when India seized and provided accounting information related to a foreign trust administered in India to its treaty partner.
Foundations
In practice
242. Compliance with the obligations to keep underlying documentation under commercial laws is monitored by the respective Registrar and officers of the Directorate of Inspection and Investigation of the Ministry of Corporate Affairs. The Registrar and Directorate of Inspection and Investigation undertake inspections of the books of accounts and other records prescribed under the respective Acts. They undertook 204 inspections in 2009-10, 190 in 2010-11 and 80 in 2011-12. The total fines imposed were INR 9 230 317 (EUR 129 672) in 2009-10, 7 084 542 (EUR 99 534) in 2010-11 and 7 079 498 (EUR 99 465) in 2011-12. The number of companies
prosecuted was 3 196, 1 653 and 3 511 respectively. The compliance with the obligation to keep accounting records and underlying documentation for all companies is also checked by the auditors and they must report their findings in the audit report that is submitted to the Registrar of Companies. E-portal MCA 21 requires filing of annual reports and non-filers are 243. checked on-line by the authorities and in extreme cases physical inspections are carried out. Information on defaulting companies is publicly available on the MCA 21 websites. Shareholders of companies must be sent annual reports, including accounting information, and can complain online at the website of the MAC 21 if they do not receive them. Such complaints act as another level of checks on the companies. 244. The requirement of tax statutory audit under section 44AB of ITA ensures that an approved auditor verifies the existence of all the documents that support the transactions undertaken by the taxpayer. This audit is compulsory and an audit report must be filed with the tax return. Non-filing of an audit report or non-audit of accounts attracts penalties under section 271B of the ITA. If the auditor fails to carry out his duties diligently, he is subjected to disciplinary proceedings by the Institute of Chartered Accountants of India. Furthermore, compliance with obligations to keep underlying documen245. tation under the tax law is also monitored and checked during tax assessment audits. Every year, a large number of cases, selected through advanced risk based models are taken for detailed scrutiny or tax audit. The number of tax audits carried out in the years 2009-10, 2010-11 and 2011-12 were 409 197, 446 906 and 362 411 respectively. During these tax audits, a number of details relating to income and expenses, such as copies of contracts, invoices etc. are requested by the tax officials. If the taxpayer is not able to produce documents substantiating his/her expenses or purchases, the payment is not allowed as a deduction for tax purposes and additional tax and a penalty of 100% to 300% of the additional tax are applied. The number of cases where tax penalties were applied for concealment of income was 22 292 in 2010-11 and 29 866 in 201112. The additional amount levied was INR 20.4 billion (EUR 286 million) in 2010-11 and INR 102 billion (EUR 1.43 billion). In addition, there is a separate penalty for not keeping accounting information under section 271A of the ITA. This penalty was applied in over 800 cases in the period 2008-09 to 2011-12 and the amount of penalty applied was over INR 143.5 million (EUR 2 million). If the payments are substantial and indicate a case of tax evasion, a prosecution is launched. The number of prosecutions filed for non-compliance with any of the obligations under the Income Tax Act was 312 in 2009-10, 244 in 2010-11 and 105 in 2011-12. 246. Various payments, including for salary, contracts for work or services, rent, interest, payments to professionals and non-residents are subject to withholding tax (s. 190 to 195 ITA). The withholding agent, which could

be any type of entity or individual, after deducting the tax, must deposit the money in the government account and e-file withholding tax return every quarter. These returns contain information on the nature of payments, payee details, payee PAN, amount of payments and amount of tax withheld. The information on the withholding agent and payee is available in the TDS database of the tax department. It is necessary for every person (withholder and payee) to keep all the documents justifying payments and amounts of tax withheld in order to substantiate withholding and crediting of the tax. The payee receives e-credit of tax and must file tax return to claim such credit. 247. There are further authorities such as VAT Authorities, Indirect Tax authorities etc., which independently carry out inspections and verifications of underlying documentation. 248. As a result of the above mechanisms (filing requirements under commercial and tax law, statutory audits, statutory and tax assessment audits, withholding tax mechanisms and VAT requirements), the Indian authorities reported that they have experienced a very good level of compliance with record keeping requirements. 249. India has been able to provide underlying documentation in 28 cases over the three years under review. The types of accounting information exchanged include copies or authentication of receipts, invoices or contracts, proof of payment, information on the tax treatment of a transaction, and internal accounting related correspondence. Although the response provided was in some cases only partially relevant due to the lack of availability of the requested documentation, the availability of underlying documentation electronically has increased, thereby reducing retrieval time substantially. The information is sufficiently available in India.
Document retention (ToR A.2.3 and A.2.4) Companies

250. The accounting records specified in Companies Act 1956 must be retained in India for a period of eight years (s. 209(4)(a)). The retention period is not affected by the liquidation of the company or termination of a business relationship (see in particular s. 550). Accounting information and underlying documentation is required to be kept by the official liquidator of the company and is normally available in practice. 251. For certain legal persons involved in specified professions legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, authorised representative or film artist ITA s. 44AA and Rule 6F of the Income-Tax Rules 1962 require that books of account and other specified documents be kept and maintained for six years from the end of the
relevant assessment year. Rule 6F specifically requires that these books of account and other documents be kept by the person at the place where he is carrying on the profession or, where the profession is carried on in more places than one, at the principal place of his profession. As such, they are in most cases kept within India (see s. 209 and s. 600(3)(a)). 252. Where accounting information is required to be kept in respect of a company by a person other than a government authority, it is required to be kept within India.
Partnerships
253. Rule 24(3) of the Limited Liability Partnership Rules 2009, which is further detailed in Annexures B and C to the Rules, provides that LLPs must keep their books of account for eight years from the date on which they are made. As noted above, these rules do not clearly require that underlying documentation be kept, nor do they define books of accounts. The rules point to a definition of book and paper in the Companies Act 1956 which covers accounts, deeds, vouchers, writings and documents. Indian authorities rely on this definition as indicating that underlying documentation must be kept for LLPs for eight years from the date on which they are made. 254. Section 34 of the Limited Liability Partnership Act 2008, read with the Limited Liability Partnership Rules 2009, provides for preservation of statement of account and solvency at the registered office in India. 255. Under the ITA, the accounting books and underlying records must be retained. The books of account and other documents specified in Rule 6F of the Income-Tax Rules 1962 must be kept and maintained for six years from the end of the relevant assessment year. It is not specified whether this information must be kept within India.
Trusts
256. As for companies and partnerships, the ITA and Rule 6F of the Income-Tax Rules 1962 oblige trusts and persons being assessed for the income of a trust to keep accounting records and underlying documentation for the accounting records for a period of six years from the end of the relevant year, which may get extended till completion of assessment if a notice for reopening of assessment is issued within this period. These accounts would have to be maintained by the person assessed for the income. Normally, this would be the trustee, though in some cases it could be the beneficiary. 257. Trustees are further obliged to maintain records of transactions for ten years from the date of the transaction based on section 12 of the PMLA

and Rules 3 and 4 of the PMLA Rules, as amended by a Ministry of Finance Notification issued 12 February 2010.
Foundations
In practice
259. In practice, India has been able to provide requested accounting information which was maintained according to the retention period prescribed by the regulating law. If the company is liquidated or merged, the ITD exercises its power under s. 131 of the ITA to compel the liquidator to produce the information requested by the requesting competent authority. In one case a peer indicated that India was unable to provide full underlying documentation for a company that has been subject to merger. In this particular case, the request was sent in 2010 and the requested information related to years 2002 to 2004 thus extending beyond the retention period. Nevertheless, the ITD was able to identify the company and to provide partial documentation related to employment contracts. The peer considers that the ITD did all that was required to obtain the requested information. In another case, the ITD was able to gather information more than 10 years old (this took considerable time as none of the documents were digitalised) as there is no statute of limitation to the information gathering powers of the tax administration.
A.3. Banking information

Banking information should be available for all account-holders.
Record-keeping requirements (ToR A.3.1)

260. Every banking company, financial institution and intermediary is obliged under s. 12(c) of the PMLA, to verify and maintain the records of the identity of all its clients. The PMLA Rules include more detailed know-yourcustomer rules. Under Rule 9, every banking company, financial institution and intermediary must at the time of opening an account or executing any transaction with it, verify and maintain the record of identity and current address or addresses including permanent address or addresses of the client, the nature of business of the client and his financial status. 261. Section 12 of the PMLA and Rules 3 and 4 of the PMLA Rules, as amended by a Ministry of Finance Notification issued 12 February 2010, oblige all banks, financial institutions and financial intermediaries to maintain all transaction records for ten years. Underlying documentation must be kept for a minimum 5 years. These entities are further obliged to furnish such information to the Director of the FIU-IND. Where these transaction records are required, the records must contain information on: the nature of the transactions; the amount and type of currency of the transaction; the date of transaction; and the parties to the transaction.
Further, there are several obligations related to cross border financial 262. transactions. Banking and financial institutions are required to maintain records of all transactions of Indian entities with persons outside India. Such transactions are monitored by the Reserve Bank of India and, based on the Foreign Contract (Regulation) Act, all persons receiving foreign contributions from a person outside India are required to register with the Ministry of Home Affairs by submitting identification details. Such persons are required to file with the Ministry annual reports containing details of such transactions. In addition, details of all payments made to a person outside India are required to be filed with the Income Tax Department (reporting form 15CA).
In practice
263. In practice, financial institutions compliance with the record keeping requirements is monitored and ensured by the Reserve Bank of India. The RBI imposes supervisory and enforcement measures which include on-site

inspections, advisory notices and warning letters. The RBI also imposes monetary sanctions in cases of violation of the requirements. The monetary sanction may amount to twice the sum involved (where it can be quantified) or INR 0.5 million (EUR 6 997) (s. 47A PMLA). The sanctions are imposed against the entity as well as its directors, managers or other employees if they are found to be involved in allowing the non-compliance. In financial year 2011-12, the RBI conducted for AML purposes 45 on-site inspections, issued 68 advisory notices explaining actions that needed to be taken, 51 show cause notices asking for explanation of actions taken and 48 warning letters. 61 entities were penalised with monetary sanction over the same period. The total amount of the monetary sanctions applied amounts to INR 21.3 million (EUR 297 068). Supervisory and enforcement measures applied by the RBI are adequate to ensure compliance with record keeping requirements. 264. Further, banks provide to the tax administration reports on specified individual transactions and Annual Information Reports containing third party information on cash deposits, bank account numbers, credit card transactions, transactions with immovable property, investments in securities, etc. 265. No peer input indicates that the requested banking information was not available during the 5-year retention period. One peer indicated that in a few cases the requested bank information was provided after more than two years, due to the complex nature of the cases, involving identification of the owner of the bank account, third party inquiries and investigation in several banks located in different States. Further, the banking information requested in 2010 related to years 2002-06, which was beyond the retention period. Although the requested information from these periods is not available electronically it was retrieved from banks files and provided to the requesting jurisdiction in its entirety. In another case, the requested information could not be discovered, despite the fact that the competent authority had performed the necessary investigations. The requesting jurisdiction was informed of the result of this inquiry within two months of receipt of the request: the Indian competent authority explain that no information other than name and date of birth of the individual (who had been a taxpayer and citizen of the other country since the 1980s) was supplied (no address, name of bank or account number). The information was, therefore, insufficient to identify the person in the databases of the Income Tax Department. 266. The application in practice of Indias legal framework sufficiently ensures that banking information is available in India and the information is accessible by the ITD. Over the period under review India received 13 requests for banking information. With the exception of the one case referred to above, the requested information was located and provided.

COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 79
B. Access to Information
Overview
267. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Indias legal and regulatory framework gives the authorities access powers that cover the right types of persons and information and whether rights and safeguards would be compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. 268. Income Tax Department officers have wide-ranging powers, including compulsory powers, to obtain information from natural and legal persons. These powers are contained in Income Tax Act s. 131-s. 134. They provide the ability to obtain information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees of domestic or foreign trusts, as well as information regarding the ownership of companies, partnerships, trusts and other relevant entities including, to the extent that it is held by these persons, ownership information on persons in an ownership chain. Further, these powers include the ability to obtain accounting records from all natural and legal persons. 269. The powers may be exercised in response to an EOI request and in practice the Indian tax authorities have used a wide range of available powers for EOI purposes. If the information requested is not available in the tax databases, the various ITD offices can be involved. Most frequently, when obtaining the requested information requires getting information from the taxpayer, a third person or includes coordination between several authorities, the request is forwarded to the respective Directorate of Income Tax in charge of investigations. Otherwise, the request is forwarded to the respective local
80 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

office of the Income Tax Department in charge of assessments or investigation. Another possibility (not used to date), is to solicit the Directorate of Intelligence and Criminal Investigation (which has jurisdiction throughout India) in cases where local jurisdiction cannot be identified readily, or that require co-ordinated investigations. In practice, the main source of information for EOI purposes is the person to whom the request relates and access powers are exercised by the Directorate of Income Tax in charge of investigations. There is no requirement that the income be related to India, nor is there a requirement that the suspicion be of income concealed from the Indian government, either in law or in practice. No bank secrecy or corporate secrecy provisions in Indias laws limit 270. the ability of the competent authority to respond to an EOI request. The rights and safeguards that apply to persons in India are compatible with effective exchange of information as has been also evidenced in practice.
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).
The Indian competent authority

271. All Indias DTCs and TIEAs as well as the multilateral agreements to which it is a Party specify that the Minister of Finance or its authorised representative is the competent authority. The Minister of Finance has empowered two Joint Secretaries of the Central Board of Direct Taxes at the Ministry of Finance to act as Indias competent authority. The Joint Secretary of Foreign Tax and Tax Research Division I (FT and TRD I) and the Joint Secretary of Foreign Tax and Tax Research Division II (FT and TRD II) centralise all incoming and outgoing EOI requests. For the purpose of better administering exchange of information, an EOI cell was set up in October 2010 under the two Joint Secretaries. The EOI cell consists of two Directors, four Under Secretaries and 12 supporting staff. The EOI cell is split between both Joint Secretaries on a geographical basis (see chapter C.5.2 below on the Organisational process and resources). 272. The Joint Secretaries, as delegated competent authority, receive all EOI requests and forward them to the EOI cell. The EOI cell can directly answer simple requests asking for the verification of taxpayers or identification information on persons registered with the tax administration and/ or in the PAN database, which contains the taxpayers names and address.
During the period under review, the EOI cell had no access to the multiple tax databases that exist across the country and does not gather the requested information itself the collection of the information is done in a decentralised way (see Annex 5). 273. A wide range of information is already at the disposal of the tax administration based on filing and reporting obligations as well as information gathered during tax audits. All information obtained based on tax obligations is gathered in the paper and electronic tax databases, integrating an increasing variety of data from different sources (see section A.1.1). The databases contain information filed by taxpayers but also vast amounts of data reported by third parties, which enables the verification of the information provided and the checking of compliance with filing obligations. The main third party reporting obligations are reports on withholding tax and annual information reports. The online-Tax Account System database also covers information on salaries, interests on deposits and securities, rents, work and service contracts, payment for professional services (legal, accountancy, medical, etc.), overseas remittances, etc. Annual information reports include information on cash deposits, bank account numbers, credit card transactions, transactions in immovable property, investments in securities, etc. The electronic databases are maintained by the Directorate of Systems in a secure and confidential manner. During the period under review, the EOI cell had full indirect access to the paper files through the Assessment Departments and to the electronic databases through the Directorate of Systems, a technical department of the CBDT. 274. Despite this wide range of information already available within the tax administration, in the majority of cases the EOI cell requires the ITDs local units or other divisions within the CBDT to gather the requested information and send it back to the EOI cell, to ensure the comprehensiveness of the answer. The EOI cell monitors and coordinates the whole process in order to ensure that the information is provided in time and adequately.
Ownership and identity information (ToR B.1.1) and accounting records (ToR B.1.2)
275. The competent authority, when requested by a foreign counterpart, can seek information from the ITD, which has powers under the ITA to obtain such information. The field officers can rely on several provisions of the Income Tax Act to gather the information, depending on the source and particulars of the information requested. 276. Under s. 131(1) of the ITA, assessing officers as well as the Deputy Commissioner (Appeals), the Joint Commissioner, Chief Commissioner or Commissioner, and the Dispute Resolution Panel have the same powers as

vested in a Court under the Code of Civil Procedure 1908; that is, the powers of: discovery and inspection; enforcing attendance of and examining under oath any person (including any officer of a bank); compelling production of books of account and other documents; and issuing commissions. 22 Where documents have been produced, these ITD officials may impound them and retain them. In addition, additional specified senior staff of the ITD and authorised officers may use such powers when they suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within their jurisdiction (s. 131(1A)). 277. In addition, section 133, on Power to call for information, provides that the assessing officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals) may, for the purposes of the ITA, require any person, including a banking company or any officer thereof, to furnish information, or to furnish statements of accounts and affairs considered useful for, or relevant to, any enquiry or proceeding under the act. These powers may also be exercised by the Director-General, the Chief Commissioner, the Director and the Commissioner. Further, section 133A on Powers of Survey empowers the assessing officer and other specified senior tax officials to enter any business premises and inspect books of account and other documents, take copies thereof and impound and retain in their custody such impounded books of account for a specified period. Similarly, section 133B gives these senior tax officials the power to collect information by entering premises at which a business or profession is carried on and require the proprietor or any employee to furnish information. Finally, s. 134 empowers this same group of senior tax officials, or anyone authorised by them, to inspect and take copies of any register of the members, debenture holders or mortgagees of any company or of any entry in such register. (If an audit is ongoing, information can also be gathered for EOI purposes by using powers under sections 142 and 143 of the ITA). There are no limitations on these powers, other than due process and 278. the requirement that the ITD only exercise its powers in order to progress matters related to its functions. 279. In India, there is no distinction drawn between civil and criminal matters as far as taxation is concerned. Therefore, the relevant exchange of information article in double taxation conventions, TIEAs or multilateral agreements signed by India may be used to obtain information to look into
22.
By issuing commissions, an ITD officer located at one place can authorise another officer located at another location to exercise the powers on his/her behalf. If A issues commission to B, B is entitled to same power as A for the purpose of investigation, enquiry, recording statements, etc.
both civil and criminal tax matters. There is no need for India to have a domestic tax interest in the matter. 280. These powers can be used to obtain information from any natural or legal person in India, including for example from persons who are trustees for foreign trusts which are administered in India. 281. The ITD is not required to follow any special procedures in order to exercise these powers. Reference to a court or other authority is not required. 282. In 2011, a new paragraph 2 was inserted in section 131, providing that the powers of paragraph 1 (as described above) can be used by all officers of the rank of Assistant Commissioner and higher who are notified by the Central Board of Direct Taxes for the purpose of obtaining the requested information under an EOI arrangement. These powers can be used whether or not proceedings with respect to the person concerned are pending before any income-tax authority in India. A similar amendment was made in section 133 also relating to the power of calling for information. These amendments were made for the purpose of empowering, if necessary, the officers of the EOI cell to obtain information directly if a large number of requests are received. No notification of empowerment has been issued under s. 131(2) and 133 to date as the number of requests received is rather low and thus these provisions have not yet been tested in practice.
Gathering ownership and accounting information in practice The decentralised process of gathering information
283. Any of the officers specified in s. 131 or s. 133-s. 134 can be requested by the competent authority to obtain the information, and the said officer is bound by such direction. The competent authority is part of the Central Board of Direct Taxes, which until 2011, did not have power to obtain information directly. The ITA (s. 116) designates the income-tax authorities in India which have responsibility for administration of the act, including the Central Board of Direct Taxes, the Directors-General of Income-tax or Chief Commissioners of Income-tax; and the Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax (Appeals). Under ITA s. 119(1), the Board may issue orders, instructions and directions to other income tax authorities as it may deem fit for the proper administration of the Act, and such authorities and all other persons employed in the execution of the Act, must observe the orders, instructions and directions of the Board. As a result, the Board can direct other income-tax authorities who have power to obtain information to obtain such information for exchange of information purpose under agreements signed in accordance with s. 90 and s. 90A, as obtaining such information are for the purpose of the ITA and for

proper administration of the Act. The competent authority, being part of the Board, thus has the power to direct the officers of the ITD to collect information for providing to other jurisdictions with which there is an agreement under s. 90 or s. 90A. 284. In practice, the EOI cell uses the PAN database to determine the address of the information holder and which field tax office should gather the information (and answer basic questions on the confirmation of the registration of a person with the tax administration). There are basically five main sources, which the team uses to obtain the requested information, depending on the type of requested information and information provided by the requesting jurisdiction within the request: 1. If the information was e-filed, the requested information is retrieved from the Tax Database operated, since 2006, by the Systems Directorate of CBDT. During the period under review, this route was not much used since the databases were being populated and the EOI cell mainly used the alternate route of gathering information through the Directorate of Investigation. As databases are being increasingly filled in, the EOI cell now more frequently consults the Directorate of Systems. (The EOI cell can access these data, if required, by visiting the office of the Directorate of Systems.) This source of information is used in approximately half of the cases. 2. If the information was provided in a tax return or through other filing obligation but is not e-filed, or if the information was collected in assessment proceedings or assessment proceedings are ongoing, the request is forwarded to the competent local tax office (Commissionerate of Income Tax or Large Taxpayer Department) which retrieves the information from the tax files or obtains information from the person in possession of it. The reliance on local offices is decreasing in proportion to the increasing volume of data available in the central databases. 3. If obtaining the information requires an on-site investigation in relation to the taxpayer or a third party (e.g. obtaining underlying documentation or statement of a person), or gathering information from a non-taxpayer, or contacting other government or semi-government authority such as the Registrar of Companies, the Customs and Excise Directorate, the Securities and Exchange Board of India, the request is forwarded to the relevant Directorate of Investigation which will gather the information. The Directorate of Investigations
is by far the most solicited department. Requests to the Registrar are rare as the tax administration maintains most of the ownership information the registrar holds, but is sometimes necessary, when the information requested relates to an ongoing year or to the original documents submitted to the Registrar. 4. If the person to whom the request relates or the holder of the information cannot be identified or located so that the respective local unit cannot be identified, the request is forwarded to the Directorate of Intelligence and Criminal Investigation, established in July 2011, which has jurisdiction over all States in India. This Division was not solicited by the EOI cell during the period under review. 5. All requests for banking information are forwarded to the respective Tax Directorate of Investigation who serves notice to the bank to provide the requested information. 285. Over the three years under review, the requested information was obtained in most cases from the person to whom the request related (55 cases) but also from the Tax Databases (in 47 cases), and to a lesser extent from other government authorities (in 29 cases) and from banks or other third parties (in 13 cases). (Note that several sources of information have been used in some instances) The Indian authorities have advised that the EOI cell selects the most 286. appropriate route so that quality information is obtained in the shortest possible time. This means that, even if a wide range of information is already available within the tax administration, in the majority of the cases the EOI cell requires the ITDs local units or other divisions within the CBDT to also gather the requested information from outside sources to complement the one in the database.
The powers used in practice

287. In practice, the most commonly used powers for EOI purposes are the issuance of summons under s. 131(1) and the power to call for information under s. 133. The EOI cell does not intervene in the gathering of the information and does not interfere in decisions of the field offices to use one or the other provision. The tax officers are not requested to inform the person that the request relates to an EOI request, and in practice do not inform the person. When issuing a summons to the person in possession or control of the information, the investigating officer specifies in it only the requested information and gives the person up to one week to provide the information as is the case for domestic purposes.

288. The power of survey for inspection of business premises under s. 133A is used rarely for EOI purposes, when it is believed that the person will not provide the information based on the issuance of a summons or call for information. If the information is not provided, the Investigation Directorate will use the search and seizure powers under s. 132 (see below section B.1.4).
New powers for the EOI cell

289. The new paragraph 2 inserted in section 131 in 2011, providing that the powers of paragraph 1 (as described above) can be used by all officers of the rank of Assistant Commissioner and higher who are notified by the Central Board of Direct Taxes for the purpose of obtaining the requested information under an EOI arrangement, has not yet been used. A similar amendment was made in section 133 empowering the officers of the EOI cell notified under s. 131(2) to call for information directly. 290. The Indian authorities have introduced these new provisions in anticipation of a possible increase of the number of EOI requests, to allow the EOI cell to exercise these powers itself, particularly to provide quick response in simple cases. The EOI cell would then be directly dealing with the gathering of information. However, no official of the EOI cell has been notified and the new powers have not yet been used in practice, as it was felt that the ordinary procedure was sufficient and in some cases may be more efficient. Indian officials explained that India being a very large country, a taxpayer may be more inclined to answer a request for information received from the field office in charge of its tax affairs rather than an unknown tax office from faraway Delhi. Further, complex cases will continue to be handled by field officers having the required specialised skills in investigation and local knowledge. The new powers, if enabled, could also be used during some periods of the year, when the field offices of the assessment wing may be too busy to answer the requests of the EOI cell in a timely manner.
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
291. The ability to gather information from legal persons (ss. 131, 133-134, 142, 143) arises whenever the information is considered useful for, or relevant to, any enquiry or proceeding under the Act. EOI requests are classified as either enquiries or proceedings under this Act. 292. There is no requirement that the income be related to India, nor is there a requirement that the suspicion be of income concealed from the Indian government. Similarly, since EOI requests are assimilated to enquiries or
proceedings under the Act, there is no domestic tax interest limitation on the exercise of the power to gather information from any person (s. 133-s.134). 293. In practice, India uses all its domestic information gathering measures, regardless of a domestic tax interest, for the purpose of EOI and no peer has indicated otherwise.
Compulsory powers (ToR B.1.4)

294. As described above, the ITD has wide-ranging powers to compel the production of information from natural and legal persons. Section 133B gives senior tax officials the power to enter premises at which a profession is carried on and require the proprietor or any employee to furnish information. Section 132A enables senior tax officials to make requisition from other government authorities to deliver the books of account, other documents or assets to the requisitioning officer. Under section 134 the assessing officer or senior tax official may inspect and take copies of the register of members, debenture holders or mortgages of any company or of any entry in such register. 295. The ITD also has powers under s. 132 to search any building, place, vessel, vehicle or aircraft where it has reason to suspect that books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept therein. This provision also provides the ITD the powers of search of persons and seizure of documents, records and valuable items. The search and seizure powers under s. 132 may not be directly used to satisfy an EOI request as they may only be used when the officers of the ITD suspect that the relevant information/items has not been or would not be disclosed in accordance with the ITA. However, these search and seizure powers may be exercised whenever a summons issued under s. 131 has not been complied with. The s. 132 powers have been applied in the past to enforce a summons issued pursuant to an EOI request. 296. If a person refuses to provide the requested information, or provides false information, civil sanctions under the Income Tax Act (as described in section A.1.6) as well as criminal sanctions under the Penal Code can be applied. These sanctions include fine or imprisonment for up to seven years for providing false evidence (s. 193 Penal Code) and fine or imprisonment of up to six months for insult of the tax officer (s. 228). 297. In practice, the tax officers use the basic powers available under sections 131 or 133 of the Income Tax Act, as applicable, depending on the nature of the case, urgency of proceedings or nature of the information requested. When these powers do not result in obtaining the requested information, the powers of survey under section 133A are used. When even these powers fail or are likely to fail, search and seizure powers under section 132 are used. These powers were used twice for EOI purposes. In one of the

cases, a trustee of a foreign family trust was denying the existence of the trust and of the respective documents. The EOI cell consulted the requesting jurisdiction and received more details on the case. The Investigation Department then applied search and seizure powers and obtained the requested information the assistance of the police is not required since tax officers have quasi-judicial powers. However, the search and seizure powers are used only in exceptional situations. The tax administration uses in practice the full range of powers available, when necessary, and there was no case when the ITD was unable to exercise powers to ask for the requested information. 298. Apart from the one case where a trustee denied holding the information requested, no person has ever refused to provide the information requested by a tax official to answer an EOI request. No monetary sanctions or imprisonment have therefore been imposed. In the case of the trustee mentioned above, a domestic investigation has been opened as the documents seized during the search triggered suspicions of domestic tax evasion.
Secrecy provisions (ToR B.1.5) Bank secrecy

299. The scope of bank secrecy in India has generally followed the common law principles, though it is also specifically laid out in s. 45E of the Reserve Bank of India Act 1934, which prohibits disclosure of credit information held by banks except in the prescribed circumstances. Section 22 of the Credit Information Companies (Regulation) Act 2005 allows access to credit information in the possession or control of credit information company or credit information institution or specified user, if the access is authorised by any law currently in force. Since sections 131 and 133 of the ITA authorise income tax authorities to access credit information from any person, the ITA overrides s. 45E of the Reserve Bank of India Act. 300. In addition, through a circular issued to the banking sector on 11 February 2008, the Reserve Bank of India confirmed that the bankers obligation to maintain secrecy arises out of the contractual relationship between the banker and customer, and as such no information should be divulged to third parties except under circumstances which are well defined, such as: where disclosure is under compulsion of law; where there is a duty to the public to disclose; where interest of bank requires disclosure; and
where the disclosure is made with the express or implied consent of the customer. 23
301. The Securities and Exchange Board of India (SEBI) Circular issued on 8 November 2001 specifies that the agreement between a stock broker and his/her client must contain a clause to the effect that the member hereby undertakes to maintain the details of the client, as mentioned in the client registration form or any other information pertaining to client, in confidence and that he shall not disclose the same to any person/entity except as required under the law. As disclosure is allowed as required under the law, the ITD can use its powers to obtain this information from companies and individuals operating in the securities sector. 302. The Insurance Act 1938 does not specifically refer to obligations of secrecy concerning clients. Further, s. 33 of that act imposes an obligation on insurers to produce all such books of accounts, registers and other documentation when requested by an inspector from the Insurance Regulatory and Development Authority (IRDA). Thus, the ITD can use its powers to obtain this information from companies and individuals operating in the insurance sector, as there are no specific secrecy requirements that would override the access powers of the ITD.
Access to bank information in practice

303. In practice, banking information is normally obtained through issuance of a summons by the investigation wing officer to the bank, which then retrieves the information. 304. When asking banks for information, the ITD commonly includes in its request the name of the bank, the address of the branch, the name of the account holder and the relevant account number(s), if available, but not the fact that the request relates to an EOI request. For example, such a request for information can be successfully made to and answered by the relevant financial institution where the ITD has the details of the account number but not the name of the account holder. The address of the account holder may also be included in the request, though this is considered not necessary if all other details referred above are known and included. The ITD provides
23. Tournier v National Provincial and Union Bank of England [1924] 1 KB 461, sets out four areas where a bank can legally disclose information about its customer. These principles still hold good in many common law jurisdictions, including India, and are: (i) where the bank is compelled by law to disclose the information; (ii) if the bank has a public duty to disclose the information; (iii) if the banks own interests require disclosure; and (iv) where the customer has agreed to the information being disclosed.

such information to the bank which enables the bank to identify the account holder. On the basis of case law, the ITD cannot conduct roving enquiries (effectively fishing expeditions). 305. In cases where the EOI request received from the requesting jurisdiction does not include enough details to ask the bank for information, the EOI cell will first turn to the Directorate of Investigation to gather the required information. For instance, if the letter contains the bank account number but not the name of the bank or its branch, these details are usually retrievable as approximately 90% of banks accounts in India are lined to a unique bank account number (only cooperative banks are not part of the programme of unique national number). If the request relates to a bank account with no unique number, the Directorate will carry on an investigation to locate the account. 306. Generally, the bank provides the requested information in writing. Bank officers can also be summoned to attend the tax office. In urgent cases, an inspector brings the summons letter to the bank personally. If the requested information relates to periods after 2006, the banking information should be available in the operators digital database and immediately retrievable. In such cases the requested information can be provided to the officer immediately or during the next three to four days as prescribed in the summons. If the information is not digitally available then it can take some time (sometimes several weeks) to retrieve the requested information from the storage facilities of the bank. 307. No person has refused to provide information requested by the ITD because of bank, securities or insurance secrecy. As discussed in the previous section, reference to a court or other authority is not required to obtain the requested information. The ITD provided banking information in 13 cases over the three years under review. Further, there are no cases reported by peers showing that India has not provided the requested information because of bank, securities or insurance secrecy provisions in Indian domestic law.
Professional secrecy
308. The limits on information which can be exchanged that are provided for in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary are included in all of the DTCs concluded by India. That is, information which is subject to legal privilege; which would disclose any trade, business, industrial, commercial or professional secret or trade process; or would be contrary to public policy, is not required to be exchanged. In addition, the Evidence Act 1872 (see below) specifically allows the competent authority to decline to exchange information where the information is covered by attorney client privilege.
309. In India, practicing chartered accountants, practicing company secretaries and lawyers undertake the work of company formation agents. Ownership and identity information, and also accounting records, may therefore be held in India by such intermediaries and professional advisers. However, in practice these are additional, secondary, sources of information, as the vast majority of the information is available based on tax filing obligations or directly obtainable from the taxpayer. 310. A number of forms of professional secrecy exist in India which may be overridden as required by law. Important amongst these are the secrecy provisions in s. 140 of the Accountants Code of Conduct and Schedule 2 of the Company Secretaries Act 1980. As these may be overridden by law, the ITD can exercise its powers under ITA s. 131 and s. 133-s.134 to gain information from such professionals when so requested by the competent authority in order to satisfy an EOI request. 311. Unlike the professional secrecy in place for other professions in India, the secrecy provisions in place with respect to barristers, attorneys, pleaders, vakils and legal advisers are absolute and cannot be overridden by other laws (s. 126 of the Evidence Act 1872). s. 126. Professional communications No barrister, attorney, pleader or vakil, shall at any time be permitted, unless with his clients express consent to disclose any communication made to him in the course and for thee [sic] purpose of his employment as such barrister, pleader, attorney or vakil, by or on behalf of his client, or to state the contents or condition of any document with which he has become acquainted in the course and for the purpose of his professional employment or to disclose any advice given by him to his client in the course and for the purpose of such employment. Provided that nothing in this section shall protect from disclosure 1. Any communication made in furtherance of any illegal purpose, 2. Any fact observed by any barrister, pleader, attorney or vakil, in the course of his employment as such showing that any crime or fraud has been committed since the commencement of his employment. It is immaterial whether the attention of such barrister, pleader, attorney or vakil was or was not directed to such fact by or on behalf of his client.

312. The Indian authorities indicate that this provision applies only to legal advice provided by a barrister, attorney, pleader or vakil and not to other activities they conduct, such as company formation or any kind of financial activities. Where s. 126 refers to in the course and for the purpose of his employment as such barrister, pleader, attorney or vakil it is interpreted by the Indian authorities to refer solely to advice given as a legal professional, not other professional activities. Further, this privilege would not, for example, attach to documents or records delivered to a legal professional in an attempt to protect such documents or records from disclosure required by law. As a result, Indias ITD can exercise its powers under the ITA to gain information from these legal professionals, as long as that information does not relate to legal advice provided to clients. 313. In practice, information has not had to be gathered from lawyers for EOI purposes, but in one case search and seizure powers were used to gather information from an accountant and the information was obtained. No person has refused to provide information requested by the ITD because of professional secrecy. Accordingly, there are no cases reported by peers showing that India has not provided the requested information based on professional secrecy provisions in domestic law.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)

314. Under Indias law, there is no obligation to notify the subject of a request for information. Accordingly, there has been no case in practice of prior notification of the subject of a request. 315. The same information gathering procedures as for domestic purposes are followed for the purposes of EOI. The same type of information is provided to the holder of the information as in the letter of summons
issued for domestic cases. The holder of the information is not specifically informed that the information is requested for EOI purposes and he/she is not informed that the information obtained is provided to the requesting competent authority. 316. There are no specific appeal procedures against the tax administration in respect of its information gathering measures, whether for domestic or EOI purposes. However any action of a government authority can be challenged before the High Court under Article 226 of the Indian Constitution on the basis that the action is not authorised by law. The Indian authorities advise that, as the information gathering powers are authorised by law for purposes of administration of the Income Tax Act (including EOI), they do not see any possibility of any such challenges preventing or delaying the exchange of information. Accordingly, there has been no case where obtaining or providing information for the purposes of EOI has been appealed.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 95
C. Exchanging Information
Overview
317. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. In India, the legal authority to exchange information derives from bilateral mechanisms (double tax conventions) as well as from domestic law. This section of the report examines whether India has a network of information exchange that would allow it to achieve effective exchange of information in practice and Indias capacity to effectively exchange information in practice. 318. India has an extensive treaty network allowing for exchange of information for tax purposes, and is currently engaged in additional treaty negotiations as well as renegotiations of its older treaties. India currently has 88 double-taxation conventions (DTCs) and 14 TIEAs. India is also a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) and the Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters among members of the South Asian Association for Regional Cooperation 24 (SAARC Agreement). The EOI network of India covers a total of 111 jurisdictions. Almost all of Indias agreements meet the standards. India is encouraged to continue this work and successfully conclude agreements as part of the current round of treaty negotiations and to progress negotiations with additional partners. 319. Most of Indias DTCs and the SAARC Agreement provide for the exchange of information that is necessary for carrying out the domestic laws of the Contracting States concerning taxes covered by the agreements, which is interpreted by India as being equivalent to the term foreseeably relevant, in line with the commentary to Article 26 of the OECD Model Tax Convention. All of Indias agreements provide for exchange of information
24. SAARC countries are India, Pakistan, Afghanistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives.
96 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

with respect to all persons. India provides information under its EOI arrangements even when the information is held by a financial institution, nominee or person acting in an agency or a fiduciary capacity and when it relates to ownership interests in a person. India exchanges information without regard to whether the requested information is needed for its own tax purposes. There are no dual criminality provisions in Indias exchange of information agreements. Finally, there is no distinction drawn in Indias exchange of information agreements between civil and criminal matters as far as taxation is concerned. There are no restrictions in the exchange of information provisions in Indias agreements that would prevent India from providing information in a specific form, as long as this is consistent with its own administrative practices. In practice, India has taken appropriate measures to ensure that the confidentiality of the information exchanged is protected. 320. All exchange of information articles in Indias agreements have confidentiality provisions and Indias domestic legislation also contains relevant confidentiality provisions. These provisions do not draw a distinction between information received in response to requests or information forming part of the requests themselves. As such, they apply equally to all information and documentation forming the requests received by India as well as to responses received from counterparties, but these considerations have never been raised in practice. 321. Each of Indias exchange of information agreements ensures that the parties are not obliged to provide information which would disclose trade, business, industrial, commercial or professional secrets or information which is the subject of attorney client privilege or to make disclosures which would be contrary to public policy. 322. All EOI requests are received or sent by the competent authority to which the EOI cell reports. The EOI cell is headed by the Joint Secretary of Foreign Tax and Tax Research Division I (FT and TR I) and the Joint Secretary of Foreign Tax and Tax Research Division II (FT and TR II) who are authorised to act as Indias competent authority. FT and TR I and FT and TR II are part of the Central Board of Direct Taxes at the Ministry of Finance. 323. India received 97 requests over the period from 1 July 2009 to 30 June 2012. Although there are no legal restrictions on the ability of Indias competent authority to respond to requests within 90 days of receipt by providing the information requested or by providing an update on the status of the request, only 23% of requests were answered within 90 days, 34% of requests were answered in more than 90 days and less than 180 days, 22% in more than 180 days but less than one year and 21% of requests in more than one year. Updates within 90 days were provided during the period under review in some instances; however, it was not a common practice in India before June 2011. Indias competent authority does not gather information
directly but directs the income tax authorities to obtain information in order to answer an international request for information. Long response times may be attributed mainly to the complexity or difficulty of cases received, and to the vastness of the country when some cases require the involvement of several field offices spread all over India. However, in some instances, delays were noted, traceable to limited EOI performance monitoring in the process of handling EOI requests during earlier part of the period under review. India has therefore started to establish appropriate processes to be able to respond to EOI requests in a timely manner in all cases. It has taken measures to ensure that the competent authority is able to systematically respond to requests within 90 days of receipt by providing the information requested or providing an update on the status of the request. As a result, the situation has greatly improved in 2011 and 2012.
C.1. Exchange of information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
324. ITA s. 90 provides the power to establish agreements with foreign countries or specified territories with respect to taxation. Section 90(1) (c) specifically allows for establishment of agreements for exchange of information. (1) The Central Government may enter into an agreement with the Government of any country outside India or specified territory outside India, [(a) for the granting of relief, (b) for the avoidance of double taxation,] (c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country or specified territory, as the case may be, or investigation of cases of such evasion or avoidance, or (d) for recovery of income-tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. 325. India has been actively establishing exchange of information mechanisms and exchanging information for 40 years. The first of its 88 double-taxation conventions (DTCs) was signed with Greece in 1965. India continues to expand and update its treaty network. India has also recently started to enter into tax information exchange agreements (TIEAs) and has

so far signed 14 TIEAs, out of which 13 are in force. India has not received a request based on a TIEA during the period under review but has sent several requests to TIEA partners. (India received requests based on TIEAs after that period.) 326. India became signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012. The Convention entered into force in India on 1 June 2012. India is also a signatory to the SAARC Agreement. 25 The SAARC Agreement provides for administrative assistance between signatories including exchange of information. The agreement entered into force in India on 19 May 2010. India has started to make requests based on the Multilateral Convention, but not yet based on the SAARC Agreement. 327. In addition to EOI on request, India also exchanges information automatically and spontaneously. India considers automatic exchange of information as one of the most effective ways to improve voluntary tax compliance and that it decreases the incidence of tax evasion. In the years, 2009-12, India transmitted about 2 million pieces of information to more than 50 of its treaty partners through encrypted CDs. India also exchanges information spontaneously without any condition of reciprocity and has done so on a few occasions during the period under review. The Indian authorities indicate that since one of the purposes of the DTCs is to prevent fiscal evasion, thus the treaty partners should share the information available which has relevance for the prevention of fiscal evasion in the other country. Finally, some of Indias treaties also include a provision on the collection of taxes, which have been used on some occasions. Other forms of administrative assistance are provided for in some of Indias TIEAs but have not yet been implemented in practice, i.e. tax examinations abroad, simultaneous examinations and joint audits.
Foreseeably relevant standard (ToR C.1.1)

328. The international standard for exchange of information envisages information exchange upon request to the widest possible extent. Nevertheless it does not allow fishing expeditions, i.e. speculative requests for information that have no apparent nexus to an open enquiry or investigation. The balance between the two competing considerations is captured in the standard of foreseeable relevance which is included in Article 26(1) of the Model Tax Convention. 31 of Indias DTCs, its 14 TIEAs and the Multilateral Convention contain this wording and provide for exchange of information in line with the standard of foreseeable relevance. 59 out of
25. Signatories of the SAARC Agreement are India, Pakistan, Afghanistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives.
88 of Indias DTCs and the SAARC agreement provide for the exchange of information that is necessary for carrying out the provisions of the agreement or of the domestic laws of the Contracting States concerning taxes covered by the agreement. As such, these agreements meet the foreseeably relevant standard, as the term necessary is recognised in the commentary to Article 26 (Exchange of Information) of the OECD Model Tax Convention to allow for the same scope of exchange as does the term foreseeably relevant and India adheres to this interpretation. 329. The wording of this paragraph in the agreements with Bangladesh, Mauritius, Thailand and Zambia is different to that of Article 26 of the OECD Model Tax Convention in that there is also specific reference to exchange of information for the prevention of evasion of taxes. This wording does not go below the international standard. 330. Three of the DTCs with Austria, Germany and Greece provide for the exchange of information that is necessary for carrying out the provisions of the agreement, but do not specifically provide for the exchange of information in aid of the administration and enforcement of domestic laws. (However, Germany and Greece are also signatories to the Multilateral Convention.) Finally, India and Switzerland signed a Protocol to their DTC on 30 August 2010 which contains language akin to Article 26 of the OECD Model Tax Convention and came into force on 7 November 2011 to replace the previous DTC that did not meet the standard. 331. In practice, Indias authorities have advised that they have never declined any request for information received over the period under review on the basis that the requested information was not foreseeably relevant, as confirmed by peer inputs. India will ask for clarification only if there is not sufficient information to process the request. In these situations, the ITD will attempt to supplement the request with information at its disposal before asking for additional information. Requests for clarifications were made in two or three instances during the period under review.
In respect of all persons (ToR C.1.2)

332. All of Indias exchange of information agreements provide for exchange of information with respect to all persons. None of these agreements restricts the applicability of the exchange of information provision to certain persons, for example those considered resident in one of the States. 333. In practice, India is able to provide exchange of information with respect to all persons, resident or not in India, and no peer has pointed to any difficulties in this respect.
Obligation to exchange all types of information (ToR C.1.3)

334. Indias recent 29 DTCs, all TIEAs and the Multilateral Convention include the provision contained in paragraph 26(5) of the OECD Model Tax Convention, which states that a contracting state may not decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. 335. Article 27 of the treaty with Luxembourg does not contain this provision. However, the protocol to the treaty contains a most favoured nation clause which obliges Luxembourg to apply in its relations with India any exchange of information arrangement agreed in a tax treaty or protocol concluded by Luxembourg with an EU Member State that is more favourable or effective than the one agreed in the Luxembourg-India tax treaty. Luxembourg has in 2010 entered several EOI instruments with EU member states that contain paragraphs 4 and 5 and meet the standard. Therefore the India-Luxembourg EOI instrument now meets the standard. 336. The other 61 DTCs and the SAARC Agreement do not contain such a provision. While there are no limitations in Indias laws with respect to access to bank information, there may be such limitations in place in the domestic laws of some of its treaty partners. For instance, in Austria and Belgium the absence of a specific provision requiring exchange of bank information unlimited by bank secrecy will serve as a limitation on the exchange of information which can occur under the relevant DTC. India has written to all of these 61 partners and SAARC countries seeking renegotiation of the agreements, including to incorporate the language of paragraphs 4 and 5 of the OECD Model Tax Convention. 337. In practice, India has never declined a request because the information is held by a bank, other financial institution, nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. India has in practice provided information held by banks and trustees for instance. This has been confirmed by peers. Where the EOI instrument does not contain a provision similar to the one in Article 26(5) of the Model convention, India does not apply reciprocity in respect of EOI partners which do not provide such information. ITD is not required to follow any special procedures in order to obtain information in these cases. Reference to a court or other authority is not required.
Absence of domestic tax interest (ToR C.1.4)

338. Indias recent 30 DTCs, all TIEAs and the Multilateral Convention include paragraph 26(4) of the OECD Model Tax Convention. Its DTC with Canada includes a version of the provision contained in paragraph 26(4) of
the OECD Model Tax Convention. This provides that India and Canada may not decline to supply information solely because it does not, at that time, need such information: If information is requested by a Contracting State in accordance with the provisions of this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation was involved notwithstanding the fact that the other State does not, at that time, need such information. 339. Indias 60 other agreements including the SAARC Agreement do not contain such a provision. There are no domestic tax interest restrictions on Indias powers to access information, which require that the information be relevant to the determination of a tax liability in India (see section B.1 of this report). India is able to exchange information, including in cases where the information was not publicly available or already in the possession of the governmental authorities. 340. A domestic tax interest requirement may however exist for some of Indias agreement partners. In such cases, the absence of a specific provision requiring exchange of information unlimited by domestic tax interest may serve as a limitation on the exchange of information which can occur under the relevant agreement. Indias authorities have indicated that they do not apply reciprocity and therefore have never declined any request on the ground of domestic tax interest requirement even if such a domestic tax interest requirement exists in the partner jurisdiction. In addition, as noted above, India is currently seeking to renegotiate many of its treaties and the SAARC Agreement to ensure they incorporate the language of paragraphs 4 and 5 of the OECD Model Tax Convention. 341. In practice, India is able to use all its domestic information gathering measures, regardless of a domestic tax interest, for EOI purposes. India does not apply reciprocity in respect of EOI partners who require domestic tax interest for gathering and providing the requested information, i.e. the competent authority does not request its treaty partners to declare that they would be able to exchange of information in the absence of a domestic tax interest. No peer indicated that India requires domestic tax interest for gathering and providing requested information.
Absence of dual criminality principles (ToR C.1.5)

342. There are no dual criminality requirements in Indias agreements for exchange of information in tax matters. Accordingly, Indias authorities reported that no request has been declined on this basis as has been confirmed by peers. Exchange of information in both civil and criminal tax matters (ToR C.1.6)

343. There is no distinction drawn in Indias agreements for exchange of information between civil and criminal matters as far as taxation is concerned. Most of the DTCs are entitled Agreement for avoidance of double taxation and prevention of fiscal evasion with [name of counterparty]. In addition, the first paragraph of the exchange of information article in many of Indias DTCs specifically mentions that the information exchange will occur inter alia for the prevention of evasion or avoidance of, or fraud in relation to, such taxes. The relevant exchange of information article in double taxation conventions, TIEAs and multilateral agreements signed by India is used in practice to obtain information to look into both civil and criminal tax matters. 344. India does not require information from the requesting competent authority as to whether the requested information is sought for criminal or civil tax purposes as there is no difference in ITDs administrative procedures or information gathering powers in respect of EOI requests related to civil or criminal tax matters. No peer input indicated any issue in this respect. Provide information in specific form requested (ToR C.1.7) 345. There are no restrictions in the exchange of information provisions in Indias exchange of information agreements that would prevent India from providing information in a specific form, as long as this is consistent with its own administrative practices. Indeed, two of Indias DTCs include specific clauses to reinforce the need to provide information in the form requested: DTC with Canada, Article 26(3): If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall endeavour to provide information under this Article in the form requested, such as depositions of witnesses and copies of unedited original documents (including books, papers, statements, records, accounts or writings), to the same extent such depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes. DTC with the United States, Article 28(4): If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall provide information under this Article in the form of depositions of witnesses and authenticated copies of unedited original documents (including books, papers, statements, records accounts and writings), to the same extent such depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes. 346. Peer inputs indicated that India provides the requested information in specific forms, when requested and in general in a form that is adequate
to be used by the requesting jurisdiction. In addition, India issued an internal Manual on exchange of information in January 2013 for field officers collecting information that specifies that if the foreign tax authorities have requested the information in a particular format for evidentiary value, the specific forms for deposition of witnesses or the manner in which copies of original documents are to be authenticated, this should be done.
In force (ToR C.1.8)

347. Out of Indias 111 exchange of information relationships, only 8 are not in force. The DTCs with Colombia, Ethiopia and Uruguay, signed in 2011, have been ratified by India and await ratification by the treaty partners. The same occurs with four recent signatories to the Multilateral Convention (Costa Rica, Ghana, Guatemala and Tunisia; some other signatories have not yet ratified the Convention but are otherwise linked to India by a bilateral instrument). The TIEA with Liechtenstein was signed very recently, on 28 March 2013. It usually takes only 45 days to India to ratify signed treaties, as the Parliament has delegated this power to the Central Government Cabinet.
In effect (ToR C.1.9)

348. All Indias exchange of information agreements in force are in effect. Under ITA s. 90, it is the Central Government which may enter into agreements with the Government of any country outside India or specified territory outside India, for exchange of information for the prevention of evasion or avoidance of income tax. After negotiations have been successfully concluded, the agreement is sent to Cabinet for approval. Once this approval is obtained, India is ready to sign the agreement. Once signed, the instrument is ratified by the President of India which is normally done in one to two weeks and thereafter the agreement is ready to immediately enter into force in India; no further steps are required to bring it into force. Commonly, it has taken in the order of 1 year for Indias DTCs or TIEAs to come into effect, due to procedures required by the other party to the agreement.
C.2. Exchange of information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover all relevant partners.
349. India has EOI relationship with 111 jurisdictions through 104 bilateral and multilateral exchange of information agreements. These agreements are with a wide range of counterparties, including: all its neighbouring countries (Bangladesh, Burma, China, Nepal, Bhutan and Pakistan), especially since the signature of the regional EOI instrument of the South Asian Association for Regional Cooperation (with Afghanistan, Sri Lanka and Maldives); 9 of its 10 primary trading partners (Belgium, China, Germany, Saudi Arabia, Singapore, United Arab Emirates, United Kingdom, United States, Netherlands; but not Hong Kong China); 26 of the 30 countries which are home to the largest non-resident Indian populations (not including Fiji, Guyana, Suriname and Jamaica); 69 of the 120 Global Forum member jurisdictions; 29 of the 31 OECD member economies (agreements have not been established with Chileand the Slovak Republic); all of G20 members.
350. The Indian government has commenced work towards establishing TIEAs with 31 further jurisdictions. In addition, in August 2009, India said that it is revising its double taxation avoidance treaties, especially those which were concluded prior to 2004. One of its stated objectives is to renegotiate anti-abuse provisions. Since then, India has signed 9 protocols and 3 new DTCs to replace old ones. India has also signed 12 other new DTCs containing EOI provisions in line with the standard and 14 TIEAs. India has never declined any request to negotiate a TIEA. 351. It can be seen that India has an extensive treaty network allowing for exchange of information for tax purposes. India is encouraged to continue in its efforts to conclude or update agreements with all relevant partners, such as those in its region, economically important jurisdictions and those with clear financial and trade ties to India.

Phase 1 determination The element is in place. Factors underlying recommendations Recommendations India should continue to develop its exchange of information network with all relevant partners. Phase 2 Rating Compliant.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1) EOI arrangements
352. All exchange of information articles in Indias agreements have confidentiality provisions. While each of the articles might vary slightly in wording, overall, these provisions take one of two forms: Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes referred in the first sentence. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State. However, if the information is originally regarded as secret in the transmitting State, it shall be disclosed only to persons or authorities (including Courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Agreement. Such persons or authorities shall use

the information only for such purposes but may disclose the information in public court proceedings or in judicial decisions. 353. Both forms of the confidentiality article contain all of the essential aspects of paragraph 2 of Article 26 of the OECD Model Convention. 354. Indias recent DTCs contain provision allowing use of information also for non-tax purposes. The additional language states that the information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use. Such provision is foreseen by the Commentary to the OECD Model Convention (12.3) and fully is in line with the standard. India is also a party to the Multilateral Convention containing the same provision.
Domestic legislation
355. Indias domestic legislation contains relevant confidentiality provisions. Importantly, ITA s. 138 provides that ITD officers may provide information gained in the course of their duties to other civil servants performing functions under the tax or foreign exchange legislation, or if it is deemed to be in accordance with the public interest. This is detailed further in Notification SO2048 of 23 June 1965 which allows exceptions to the general confidentiality requirements, including where there the information is needed under court order or as part of a prosecution, where the information is needed by authorised officers for tax matters, where it is needed for foreign exchange or balance of payments work, and, importantly, where the information is to be shared with an authorised officer of the Government of any country outside India for the granting of relief in respect of, or for the avoidance of double taxation as may be necessary for the purposes of section 90 of the Act. All ITD officers must take an Oath of Secrecy at the time of joining the government service. If it is found that the officer has not handled information according to the secrecy rules the officer has to leave the government service and depending on the severity of the breach can be sanctioned under section 280 of the ITA, i.e. by a fine and imprisonment of up to six months.
Confidentiality in practice
356. In practice, information received or sent is stored in a secure manner and the access is restricted to the officers handling the request. Compliance with secrecy obligations is monitored by the superior of the respective officer, and no breach of confidentiality has been experienced in practice in relation to an EOI request.
357. ITDs internal guidelines (EOI Manual) incorporate recommendations contained in the OECD/Global Forum manual Keeping It Safe. Accordingly, all recommendations therein should be followed by the officers handling exchange of information cases. 358. All exchange of information files are kept separately from domestic files and sealed under lock and key. Authorisation to access exchange of information files is granted by the Joint Secretary, Chief Commissioner or Director General. All letters containing information provided by EOI partners are stamped with a warning to keep the information confidential. Normally, the letter of the requesting competent authority is not forwarded to the local units, but only the information contained in the request. The officer responsible for the specific file/request is directly responsible also for any unauthorised access to the information contained in the file/request. Information obtained electronically is kept in a dedicated EOI database which is separated from the domestic tax administration database and to which field offices have no access (i.e. the members of the EOI cell have two computers one linked to the general tax administration network, and one dedicated to the EOI cell, to avoid intrusions in the system). Access to the EOI database requires individual login and password which is issued upon the authorisation of the Joint Secretary. In July 2011, the Indian Supreme Court issued a decision 26 regarding 359. confidentiality of information exchanged under a DTC. The decision is still under judicial review. India had received information from a treaty partner about possible undisclosed bank accounts held in a third country by Indian tax residents. A number of private citizens in their petition claimed that, contrary to their fundamental rights, tax offences and other serious behaviour of a criminal nature stemming from the information were not being properly investigated. In its decision, the Supreme Court (i) gives an interpretation of the treaty on which basis the information was exchanged, in particular the provision on the disclosure of information to a court, (ii) ordered the constitution of an inter-disciplinary Special Investigation Team to investigate tax or other criminal cases linked to the information exchanged and (iii) ruled that information provided by Indias treaty partner could be disclosed in very limited circumstances. The Government of India submitted soon thereafter an application for 360. modification of this decision before the Supreme Court of India, seeking to change the order. The petitioners raised preliminary objections to this application and the matter is currently pending with the Chief Justice of India. 361. There has been no case in India when information received in relation to exchange of information was unduly disclosed or made public, as confirmed by peer inputs. Nevertheless, in view of the court decision under
26. Ram Jethmalani and ors. versus Union of India and ors. (WP (civil) No.176 of 2009.

judicial review and strong public interest in some EOI cases, India should monitor developments in this area and, if needed, take appropriate action to ensure confidentiality of the exchanged information.
All other information exchanged (ToR C.3.2)

362. The confidentiality provisions in the exchange of information agreements and in Indias domestic law do not draw a distinction between information received in response to requests or information forming part of the requests themselves. As such, these provisions apply equally to all requests for such information, background documents to such requests, and any other document reflecting such information, including communications between the requesting and requested jurisdictions and communications within the tax authorities of either jurisdiction. 363. As mentioned above, letters of request received from EOI partners are kept separately from domestic files, stamped as treaty protected and sealed under a lock in the EOI cell.
C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)

364. Each of Indias EOI instruments ensures that the parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or information which is the subject of attorney client privilege or information the disclosure of which would be contrary to public policy. This is supported by provisions in the Evidence Act 1872 which allow the competent authority to decline to exchange information where the information is covered by attorney client privilege. 365. India has never declined to provide the requested information because of any of these exceptions. Indias application of the legal privilege
is in line with the international standard, as discussed in section B.1 of this report. Further, from the answers provided by peers, there do not seem to have been any instances where the rights and safeguards of the taxpayers were not preserved by India.
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements in a timely manner.
Responses within 90 days (ToR C.5.1)

366. In order for exchange of information to be effective, it needs to be provided in a timeframe which allows tax authorities to apply the information to the relevant cases. If a response is provided but only after a significant lapse of time, the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. Article 5(6) of the OECD Model TIEA provides that: The competent authority of the requested Party shall forward the requested information as promptly as possible to the applicant Party. To ensure a prompt response, the competent authority of the requested Party shall: a) Confirm receipt of a request in writing to the competent authority of the applicant Party and shall notify the competent authority of the applicant Party of deficiencies in the request, if any, within 60 days of the receipt of the request; b) If the competent authority of the requested Party has been unable to obtain and provide the information within 90 days of receipt of the request, including if it encounters obstacles in furnishing the information or it refuses to furnish the information, it shall immediately inform the applicant Party, explaining the reason for its inability, the nature of the obstacles or the reasons for its refusal.

367. Indias TIEAs use the wording of the Model TIEA and there is a similar provision in the Multilateral Convention. There are no provisions in Indias laws or in its DTCs and SAARC agreement pertaining to the timeliness of responses or the timeframe within which responses should be provided. It may be concluded that there are no legal restrictions on the ability of Indias competent authority to respond to requests within 90 days of receipt by providing the information requested or by providing an update on the status of the request.
Response time in practice

368. India received 97 requests over the period 1 July 2009 to 30 June 2012. Split by year, India received 18 requests from 1 July to 31 December 2009, 30 requests in 2010, 30 requests in 2011 and 19 requests from 1 January 2012 to 30 June 2012, which shows a stable flow of incoming requests. India more frequently sends EOI requests to treaty partners and has intensified the use of EOI for domestic purposes: India sent 563 requests during the period under review, including 386 for the first six months of 2012. For the incoming requests, till 2012 (during the review period), India counted one request per letter received from the EOI partner. From 2013 onwards, India has been counting one request per person. For the outgoing requests, before 2011, India counted one request per letter. However, since the establishment of the EOI cell, India has been counting one request per person per country (in the Manual on EOI, clear instructions have now been given to the tax officers in India to make requests in separate Proforma per person, per country). 369. The competent authority answered the EOI requests within 90 days in 23% of the cases, within 180 days in 57% of the cases, within a year in 79% of the cases. It can be seen that there has been a marked improvement in response times in 2011 as compared to 2010 and 2009, and a further improvement in 2012. These can be attributed to the establishment of the EOI cell in October 2010 which become fully functional in January 2012.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 (July to December) 2010 2011 2012 (up to June) more than 365 days 180-365 days 90-180 days within 90 days
Jul-Dec 2009 nr. Total number of requests* received (a+b+c+d+e) Full response**: <90 days <180 days (cumulative) 1 year+ Declined for valid reasons Failure to obtain and provide information requested %
2010 nr. %
2011 nr. %
Jan-Jun 2012 Total Average nr. % nr. % 100% 23% 57% 79% 21% 0% 0% 0%
18 100% 30 100% 30 100% 19 100% 97 1 6% 2 7% 5 17% 14 74% 22 6 33% 12 40% 18 60% 19 100% 55 0% 0% 0% 0% 20 0 0 0
<1 year (cumulative) (a) 12 67% 22 73% 24 80% 19 100% 77 (b) 6 33% 8 27% 6 20% 0 (c) (d) 0 0 0 0% 0% 0% 0 0 0 0% 0% 0% 0 0 0 0% 0% 0% 0 0 0
Requests still pending at date of review (e)
* India counts each written request from an EOI partner as one EOI request even where more than one person is the subject of an inquiry and/or more than one piece of information is requested. ** The time periods in this table are counted from the date of receipt of the request to the date on which the final and complete response was received.
370. Generally, ownership information is provided in a timely manner, while response times are noticeably longer in the case of some requests for accounting information. Response time has started decreasing, as comments received from peers relate predominantly to 2009 or 2010 cases and indicate improvements since 2011 and 2012. 371. The most common reasons for long response times are that (i) the person in possession of the information or the person to which the request relates is not traceable at the address provided by the requesting jurisdiction, which requires a preliminary investigation to locate the person before gathering the requested information; (ii) information provided by the requesting jurisdiction does not allow the identification of the person from whom information is to be obtained and clarifications must be sought from the requesting competent authority, (iii) the requested information is of a voluminous or complex nature and requires investigation involving several local offices and entities located in different States in India (the geographical vastness of the country means that individual field officers have large territorial jurisdiction, sometimes in remote areas, which slows down the process when premises must be visited). 372. For instance, replies that take more than a year mostly relate to accounting underlying documentation, especially when the company has only paper files, or in one case when the company had been the subject of a merger

several years before the request. Other examples are cases of old banking information (information older than 5 years) which needs to be obtained by local offices located in different States in India. Some peers acknowledged that long response time were related to complex cases involving multiple entities. 373. Apart from the complexity of the cases, another factor impacting on response time is that there have been certain weaknesses in the process of handling EOI requests, notably a lack of monitoring, and a low level of awareness at the local level of the priority to be given to EOI and related timeframes (see further below Section C.5.2). Other reasons for delays include Indias commitment to provide quality information which requires conducting detailed investigations at multiple locations. The methods of gathering and checking information by the local office may therefore have slowed down the replies, and the balance between speed and quality is sometimes difficult to maintain. India has therefore taken several initiatives to reduce response times.
Indias initiatives to reduce response times

374. In January 2012, the EOI cell, officially set up in 2010 by decision of the Minister of Finance, became fully operational (see section C.5.2 on Handling of EOI requests below). The EOI cell was created to facilitate effective exchange of information and demonstrate Indias commitment to exchange of information. The EOI cell has dedicated offices and works exclusively for the purposes of exchange of information, dealing with both incoming and outgoing requests. 375. The EOI cell has already taken actions to reduce internal processing time. First, the number of persons involved in the handling and monitoring of EOI requests at the central level was doubled during the period under review (see below section C.5.2 on the Organisational process and resources). 376. Second, the EOI cell has put in place an electronic tracking and monitoring system, and issued internal guidelines containing deadlines for providing the requested information. The database is a software application deployed for automating the processing of requests, their digital storage and electronic transmission. The in-built Management Information System (MIS) allows for automatic monitoring of progress in the administration of the request. The MIS indicates the time limit for each stage of handling of a request and the EOI cell sets a deadline for providing the requested information by the local unit within the order letter, based on the complexity of the requested information. The EOI Manual issued in January 2013 also provides internally binding guidelines for handling EOI requests, including deadlines
(point 4.2.4) for requested tax offices to obtain and provide the requested information to the EOI cell as follows: within 15 days if the information is already available with the tax authorities (e.g. tax returns); within 30 days, if the information can only be obtained after carrying out outside enquiries. If there are obstacles in obtaining information or if there are deficiencies in the request, the local office (assessment department or investigation department) should inform the EOI cell within 30 days.
377. If the time limit is breached, a reminder letter is now automatically generated through the software and served to the local unit indicating the time limit for providing the requested information, and letters asking for status updates are also sent to the local offices. In addition, the transmission of order letters to local units or other organisations and any further communication is monitored by a file tracking system. The file tracking system ensures that every communication has its unique identification number, is dated and traceable. It is noted that communication, including requests for status updates, is carried out by letter. Requests for status updates could be handled more expeditiously if supported by telephone calls between the EOI cell and the local offices concerned, as direct communication could help the officials involved to fully understand a given situation. 378. The EOI database is monitored daily by the directors of the EOI cell. Outstanding requests are discussed during weekly meetings with the Joint Secretaries. Complex or long pending cases can be further discussed in monthly meetings of heads of the ITD which involve Joint Secretaries, Directors-General and Chief Commissioners of local units, or on a need basis. 379. A third measure recently taken by the Indian authorities to ease the gathering and timely exchange of information is the introduction of section 131(2) in the Income Tax Act in 2011, providing that some information gathering powers may be used by officers of the rank of Assistant Commissioner and higher (including the EOI cell) if notified by the Central Board of Direct Taxes for the purpose of obtaining the requested information under an EOI arrangement. As noted under Part B.1 of the report, the Indian authorities anticipate a possible increase in the number of EOI requests, and section 131(2) would allow the EOI cell, if necessary, to gather information, particularly in simple cases. However, this enabling power has not yet been used in practice, as the number of requests has not increased significantly and it was felt that the ordinary procedure was sufficient and in some cases may be more efficient. Indian officials explained that India being a very large country, a taxpayer may be more willing to co-operate with the field office

in charge of its tax affairs rather than an unknown tax office from faraway Delhi. It would also not be the best way to collect information when on-site visits or interviews are needed outside of the capital area. 380. The creation of the EOI cell and the implementation of the monitoring measures have reduced response times and India is confident that it is now providing information to its treaty partners in a timely manner in all cases (as the review period ended in June 2012, more recent progress could not be confirmed with peers). It is also expected that the newly adopted Manual on EOI will further raise the awareness of the tax officers to the importance of EOI (see Resources below).
Acknowledgement of letters and Status updates

381. The practice of India as concerns acknowledgement of EOI requests, status updates and interim replies has evolved since the establishment of the EOI cell. While receipt of a new request has usually been acknowledged within 15 to 20 days since 2010, peers and India agree that it was not the practice of India to send status updates in all cases before June 2011, when unable to obtain and provide the information within 90 days of receipt of the request, unless the treaty partner asked for such updates (no statistics exist for requests received before). 382. The new electronic tracking system of the EOI cell now allows it to monitor the handling of EOI requests. Acknowledgement letters are now generated automatically through the system and must be sent within 7 days of receipt of the request. The Indian competent authority usually uses sealed diplomatic bags, but is starting to use encrypted emails with partners who agree to do so. Status updates should now also be sent systematically. It is therefore recommended that the Indian authorities ensure that the newly established routine process to update requesting authorities on the status of their requests where the response takes more than 90 days operates effectively. 383. India is considered by its partners as a very important and fully committed EOI partner. To further improve relationships with its EOI partners, India organises bilateral meetings with its most important partners to discuss outstanding EOI requests. The Manual on EOI adopted in January 2013 also provides that feedback should now be provided to and requested from Indias treaty partners on the usefulness of the information exchanged. This is a useful way to further monitor the quality of the response. Furthermore, India has posted two officers in its Income Tax Overseas units in Mauritius and Singapore to facilitate effective exchange of information with these jurisdictions.
Organisational process and resources (ToR C.5.2) Resources

384. Indias delegated competent authority is the Joint Secretary (FT and TR) pursuant to an Administrative Order of the Minister of Finance. This functional role has been split into 2 positions: JS(FT and TR-I) and JS(FT and TR-II) which are part of the Central Board of Direct Taxes, which is the statutory body with functional responsibilities for the administration of the ITA. JS(FT and TR-I) and JS(FT and TR-II) are located at New Delhi. One Joint Secretary is responsible for North America, Europe, Japan and jurisdictions of Central America and the Caribbean region. The other Joint Secretary is responsible for all other jurisdictions. This geographical split of responsibilities has led to a situation where one mainly receives EOI requests, from Europe and North America, while the other one mainly sends requests, to Africa and Asia. However the situation should be more balanced in the future, considering the new instruments signed recently by India. 385. Each of the two Joint Secretaries is assisted by one Director and two Under Secretaries, along with support staff, all together forming the EOI cell of CBDT. As noted above, the number of officials in charge of EOI within the CBDT has doubled since the creation of the EOI cell in October 2010. Additional staff was posted to the EOI cell between February 2011 and June 2011. The EOI cell was moved to new offices by August 2011. Software for monitoring of EOI performance and other administrative purposes was prepared by the Systems Directorate in October 2011 and was tested in the next two months. In January 2012 the EOI cell became fully operational. All officers within the EOI cell are members of the Indian Revenue Service. Under-Secretaries deal with the daily administration of the requests under the supervision of the Directors. The Directors monitor progress of the individual cases via the EOI tracking system (see above). Outstanding cases are reported at weekly meetings with the Joint Secretaries. 386. All of Indias treaty partners are regularly informed in writing about the contact details of the competent authority (the last time in March 2012) and information is posted in the secure database of competent authorities of the Global Forum. 387. Officers in the EOI cell are well trained and have adequate expertise to effectively handle EOI requests. EOI is referred to within the course on international taxation during the general 18 month training provided to all tax officers when joining the tax administration. All new officers are also required to pass several expert exams which cover also the EOI field. The tax administration of India is therefore staffed with tax professionals, but, apart from on the job training for the members of the EOI cell, there is not yet a specific programme dedicated to EOI for officers at the local level that would ensure awareness of

the importance of EOI and its specific rules (such as deadlines and communication with the EOI cell). It is therefore important that India ensure that a proper sensitisation to EOI exists at all levels of the tax administration. 388. Action has been taken in this direction. India has adopted an EOI Manual in January 2013, as noted above. In addition, the Chairperson of the CBDT (the highest tax official of India) issued a letter in March 2013 to all local offices emphasising the importance of exchange of information and making requests to foreign jurisdictions if this would be helpful for the administration or enforcement of tax laws. The letter also affirms the priority accorded to incoming requests and emphasises that the timeline should be diligently followed. Considering the size of the country and the fact that EOI requests in practice do reach various States of India (and not just the biggest cities), a far-reaching programme has been planned by the tax administration to better sensitise all the persons that may be involved in EOI: Instructions have also been issued to the training institute of the Income Tax Department to organise regular training activities both at the central training institute and the regional training institutes to sensitise the officers of the ITD to the usefulness of the exchange of information, on guidelines for making requests to the treaty partners and necessity to provide quality information if a request is received. Local Chief Commissioners have also been instructed to organise seminars to be attended by officers of local units and EOI cell for exchanging views on making the process of exchange of information more effective. These recent initiatives are welcome, and even though primarily targeting outgoing requests, should have an impact on the handling of incoming requests. The Manual for instance stresses that gathering information and providing the same to a foreign tax authority should be given a very high priority by all officers in the field formations and all efforts should be made to immediately collect and send the information; and that EOI is bilateral as well as reciprocal in nature and if India provides the information, India will also be receiving the information from Indias treaty partners. India should ensure that these measures are properly implemented.
Handling of EOI requests

389. Since the EOI cell has been set up, the handling of EOI requests has been monitored at its level, and the 2013 EOI Manual sets the procedure to be followed. When the EOI cell receives a request from a requesting jurisdiction, it scans the request and the enclosed documents and enters the request in the EOI database. Subsequently, the EOI cell verifies the validity of the request. The Indian competent authority has never been faced with cases where the requested information could not be determined as foreseeably relevant (see section C.1.1). 390. The authority has asked the requesting jurisdiction for clarifications on two or three occasions, when the holder of the information or the person
concerned could not be identified or located using information at the disposal of the ITD (e.g. in one case concerning an individual no information other than a name was provided and the only allegation was that he might have carried a large amount of cash on a visit to India, deposited it in a bank and purchased immovable property). If part of the request can be dealt with without the missing information, the EOI cell proceeds with the rest of the request without waiting for the clarification. All EOI incoming or outgoing requests are handled by the ITD in English, which is one of the administrative languages in India. In the few cases when the competent authority has received requests in other languages it has sent them back to the requesting competent authority to be translated, which the other party has then agreed to do. 391. If the information is directly available to the EOI cell (i.e. information contained in the PAN database) the requested information is provided to the EOI partner directly by the EOI cell, but this type of simple request is exceptional. Normally the information needs to be requested from the respective local unit which will gather the information, or from another central department, as the EOI cell cannot directly use most of the information sources. This is for reasons of confidentiality of the information (e.g. the central tax database containing the income tax returns), or because information has to be certified by another authority (e.g. registrar of companies). They gather the information requested and provide it to the EOI cell. The EOI cell monitors the process and communicates with the local units in order to ensure that the requested information is provided in a timely manner and is of good quality. 392. The gathering of information is therefore organised in a decentralised way. As noted under Part B on Access Powers, under the ITA, various powers to obtain information are granted to income tax authorities. The Board does not have power to obtain information directly. However, under ITA s. 119(1), the Board may, from time to time, issue such orders, instructions and directions to other income tax authorities as it may deem fit for the proper administration of the act, and such authorities and all other persons employed in the execution of the act, must observe the orders, instructions and directions of the Board. As a result, the Board can direct the income tax authorities who have power to obtain information to do so in order to answer a request for information received under an EOI arrangement as obtaining such information is for the purpose of the act and for proper administration of the act. 393. Once the EOI cell has identified the local unit responsible for obtaining the information, it sends an order letter detailing the requested information to the director or commissioner heading the local unit or central department of the ITD. Once the order is received by the director or commissioner, it is forwarded to the relevant field officer who will gather the requested information. If a

request relates to several Indian States, the relevant parts of the request are sent to the respective competent local offices. All official communication between the EOI cell and local officers handling the request must go through these channels. The communication is normally by letter addressed to the relevant director or commissioner and transmitted by express post. The Indian authorities indicate that this communication takes a week. It is noted that not only the first order letter and answers are exchanged through express post, but also reminder letters and requests for status updates. Recently, communication channels have been diversified and possibilities for direct communication between the EOI cell and field officers have been developed, such as through telephone calls, email as well as meetings for important cases, but the use of postal communication remains prevalent. The EOI cell is also working on the possibility of sending the letters through encrypted emails, in order to further accelerate the process. 394. Once the information is gathered, the response to the order letter is sent back to the EOI cell. For much of the period under review, the local officers would usually wait to finish their investigations or information gathering before responding to the EOI cell and Indias competent authority did not systematically provide interim replies when only partial information was available (e.g. when it received information from only some of the offices involved). This practice changed towards the end of the review period. A regular practice of the tax authorities is to check the information available in the database to ensure the quality and comprehensiveness of replies. The Indian authorities have explained that this allows them to fully answer the request and provide spontaneously additional information that appears relevant to the foreign tax procedure. This practice demonstrates the seriousness with which the Indian competent authority handles the EOI requests received, but should be clearly explained to requesting authorities, and coupled with interim replies where relevant. 395. With the issuance of the Manual on EOI in January 2013, officers must now send the information using a proforma annexed to the Manual. This proforma must contain information on the foreign taxpayer and the names and addresses of the connected persons in India; the dates at which the officer received and responded to the letter from the EOI cell; whether the response is final or an interim one (in which case the likely date of the final reply should be mentioned); problems, if any, in gathering the information; details of the actions taken (e.g. surveys, taking statements, getting information from third parties); the results of the enquiry; the details of the documents attached and the form in which feedback is requested from the foreign competent authority. This proforma is then part of the reply sent by the EOI cell to the foreign competent authority. 396. All communication between the local officer and the EOI cell follows the procedures described above. Once the response to the order letter is received by the EOI cell, the EOI cell checks whether the gathered information answers the request and can be provided to the requesting jurisdiction.
If the information is incomplete or otherwise defective, the EOI cell asks the relevant Director/Commissioner for further information. Once the requested information is completed, the EOI cell prepares a response to the request based on the gathered information. All responses must be approved by the respective Director of the EOI cell and Joint Secretary. Although no relevant statistics exist for the period under review, the process of handling requests and communication has entailed some internal delays, which the EOI cell has been addressing since 2012 (see the discussion above under C.5.1 and below).
Conclusion
397. India is recognised by peers as a good EOI partner, and when response times have been long in the three years under review, this has often been because of the complexity of the cases. However, some improvements were needed in the handling of EOI requests and in the organisation of EOI in practice, and measures are being taken in this direction: The EOI cell has started monitoring the response times of the field offices and to send reminders more frequently. The better staffing of the EOI cell since June 2011 should facilitate monitoring of the handling of the requests, including response times. Monitoring could be further improved with enhanced communication between the EOI cell and the field offices. Direct communication (through emails or telephone, in addition to formal letters) between the EOI cell and the local office handling the request to discuss progress and issues in the gathering of information has already started to be used. Officers in the EOI cell are well trained and have adequate expertise to effectively handle EOI requests, but there is not yet any specific sensitisation programme dedicated to field officers who gather information in practice to answer EOI requests. The awareness raising and training programmes planned should assist in improving communication and response times, even though primarily dedicated to outgoing EOI, as raising awareness on outgoing requests symmetrically raises awareness on incoming requests. The letter issued in March 2013 by the Chairperson of the tax administration to all local offices is also a signal that top management is concerned with EOI. The adoption of the EOI Manual added to further training on EOI should improve the sensitisation of field officers in future.
Absence of restrictive conditions on exchange of information (ToR C.5.3)

398. There are no provisions in Indias laws or in its EOI arrangements which apply conditions to the exchange of information above those in accordance with Article 26 of the OECD Model Tax Convention and the Model TIEA.
Phase 1 determination This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 Rating Compliant. Factors underlying recommendations Indias processes led in a small number of cases to delays during the earlier part of the period under review, but the situation greatly improved during 2011 and 2012 with the creation of the dedicated EOI cell and the introduction of measures to streamline the process and reduce internal delays. During the three years under review, India did not always provide an update or status report to its EOI partners within 90 days when it was unable to provide a substantive response within that time. The monitoring of requests has nonetheless improved more recently, with the introduction of a new monitoring system. Recommendations India should monitor the implementation of the measures recently taken to ensure that answers to EOI requests are made in a timely manner in all cases.
India should monitor the new system put in place to provide status updates to EOI partners within 90 days to ensure it operates effectively.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 121
Summary of Determinations and Factors Underlying Recommendations
Determination
Factors underlying recommendations
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) Phase 1 determination: The element is in place Phase 2 rating: Compliant. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. Banking information should be available for all account-holders (ToR A.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2)
122 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.
Recommendations
Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The jurisdictions network of information exchange mechanisms should cover all relevant partners (ToR C.2) Phase 1 determination: The element is in place. India should continue to develop its exchange of information network with all relevant partners.
Phase 2 rating: Compliant. The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received(ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) Phase 1 determination: The element is in place. Phase 2 rating: Compliant.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 123
Determination
Recommendations
The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating: Compliant. Indias processes led in a small number of cases to delays during the earlier part of the period under review, but the situation greatly improved during 2011 and 2012 with the creation of the dedicated EOI cell and the introduction of measures to streamline the process and reduce internal delays. During the three years under review, India did not always provide an update or status report to its EOI partners within 90 days when it was unable to provide a substantive response within that time. The monitoring of requests has nonetheless improved more recently, with the introduction of a new monitoring system. India should monitor the implementation of the measures recently taken to ensure that answers to EOI requests are made in a timely manner in all cases.
India should monitor the new system put in place to provide status updates to EOI partners within 90 days to ensure it operates effectively.
ANNEXES 125
Annex 1: Jurisdictions Response to the Review Report 27

This annex is left blank because India has chosen not to provide any material.
27.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
126 ANNEXES
Annex 2: List of All Exchange of Information Mechanisms
Multilateral agreements
399. India is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The status of the multilateral Convention and its amending 2010 Protocol as at November 2012 is set out in the table below. 28 For multilateral instruments, the date of the entry into force in the table is the latest of the two dates of entry into force by the two partners. 400. India is a signatory to the Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in tax matters signed by the SAARC countries, that is, India, Pakistan, Afghanistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives. The SAARC Multilateral Agreement provides for administrative assistance between member countries including exchange of information.
Bilateral agreements
The table below contains the list of information exchange agreements (TIEA) and tax treaties (DTC) signed by India as of May 2013. For jurisdictions with which India has several agreements, a reference to all those EOI instruments is made.
No. 1 2 Jurisdiction Afghanistan Albania Type of EOI agreement Date signed SAARC Multilateral Agreement Multilateral Convention 13.11.2005 Signed Date in force 19.5.2010 Not yet in force in Albania
28.
The chart of signatures and ratification of the multilateral convention is available at www.oecd.org/ctp/eoi/mutual.
ANNEXES 127
No. 3
Jurisdiction Argentina
Type of EOI agreement Date signed Taxation Information Exchange Agreement (TIEA) Multilateral Convention Double Taxation Convention (DTC) DTC Protocol Multilateral Convention DTC Non-amended Multilateral Convention TIEA TIEA DTC Protocol SAARC Multilateral Agreement DTC DTC 21.11.2011 Signed 31.10.2003 25.07.1991 16.12.2011 Signed 08.11.1999 Signed 11.02.2011 31.05.2012 27.08.1991 16.02.2013 13.11.2005 27.09.1997 26.04.1993 Signed 07.10.2010 13.11.2005 04.03.2013 08.12.2006 26.04.1988 Signed 26.05.1994
Date in force 28.01.2013 01.01.2013 09.09.2004 30.12.1991 01.12.2012 05.09.2001 01.06.2012 01.03.2011 11.04.2013 27.05.1992 19.05.2010 17.07.1998 01.10.1997 01.06. 2012 (Protocol not yet in force in Belgium) 03.11.2010 19.05.2010
4 5 6 7 8 9
Armenia Australia Austria Azerbaijan Bahamas Bahrain
10 11
Bangladesh Belarus
12
Belgium
Multilateral Convention TIEA SAARC Multilateral Agreement DTC
13 14 15 16 17
Bermuda Bhutan Botswana Brazil Bulgaria
DTC DTC Multilateral Convention DTC
30.01.2008 11.03.1992 Not yet in force in Brazil 23.06.1995
128 ANNEXES
No. 18 19 20 21 22 23 24 25 Jurisdiction Canada Cayman Islands China Chinese Taipei Colombia Costa Rica Cyprus 29 Czech Republic Type of EOI agreement Date signed DTC Multilateral Convention TIEA DTC DTC DTC Multilateral Convention Multilateral Convention DTC DTC Multilateral Convention DTC Multilateral Convention DTC DTC DTC DTC Multilateral Convention 11.01.1996 Signed 21.03.2011 18.07.1994 12.07.2011 13.05.2011 Signed Signed 13.06.1994 01.10.1998 Signed 08.03.1989 Signed 20.02.1969 19.09.2011 25.05.2011 15.01.2010 Signed Not yet in force in Colombia Not yet in force in Costa Rica 21.12.1994 27.09.1999 Not yet in force in the Czech Republic. 13.06.1989 01.06.2012 30.09.1969 20.06.2012 15.10.2012 19.04.2010 01.06.2012 Date in force 06.05.1997 Not yet in force in Canada 08.11.2011 21.11.1994 12.08.2011
26 27 28 29 30
Denmark 30 Egypt (United Arab Republic) Estonia Ethiopia Finland
29.
30.
Footnote by Turkey: The information in this document with reference to Cyprus relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of United Nations, Turkey shall preserve its position concerning the Cyprus issue. Footnote by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus. Under a protocol, the DTC with Denmark is extended to apply in its entirety to the territory of the Faroe Islands.
ANNEXES 129
No. 31 32 33 34 35 36 37 38 39 40 France
Jurisdiction
Type of EOI agreement Date signed DTC Multilateral Convention DTC Multilateral Convention DTC Multilateral Convention Multilateral Convention TIEA DTC Multilateral Convention Multilateral Convention TIEA DTC DTC Multilateral Convention DTC Revised DTC Multilateral Convention DTC 29.09.1992 Signed 24.08.2011 Signed 19.06.1995 Signed Signed 01.02.2013 11.02.1965 Signed Signed 20.12.2011 03.11.2003 23.11.2007 Signed 07.08.1987 27.07.2012 Signed 06.11.2000 Signed 04.02.2011 29.01.1996 19.02.1993 Signed 07.03.1989 Signed 03.11.2011 20.04.1999
Date in force 01.08.1994 01.06.2012 08.12.2011 01.06.2012 26.10.1996 Not yet in force in Germany Not yet in force in Ghana 11.03.2013 17.03.1967 Not yet in force in Greece Not yet in force in Guatemala 11.06.2012 04.03.2005 21.12.2007 01.06.2012 19.12.1987 Not yet in force in Indonesia 26.12.2001 Not yet in force in Ireland 17.03.2011 15.05.1996 23.11.1995 01.06.2012 29.12.1989 Not yet in force in Japan 08.05.2012 16.10.1999
Georgia Germany Ghana Gibraltar Greece Guatemala Guernsey Hungary Iceland
41
Indonesia
42 43 44 45 46 47 48
Ireland Isle of Man Israel Italy Japan Jersey Jordan
Multilateral Convention TIEA DTC DTC Multilateral Convention DTC Multilateral Convention TIEA DTC
130 ANNEXES
No. 49 50 51 52 53 54 55 56 57 58 59 60 61 Kenya Korea (Republic of) Kuwait Kyrgyz Republic Liberia Libya Liechtenstein Lithuania Luxembourg Macau, China Malaysia Maldives Jurisdiction Kazakhstan Type of EOI agreement Date signed DTC DTC DTC Multilateral Convention DTC DTC TIEA DTC TIEA DTC Multilateral Convention DTC TIEA DTC SAARC Multilateral Agreement DTC 62 63 64 65 66 67 68 69 70 71 72 Malta Mauritius Mexico Moldova Monaco Mongolia Montenegro Morocco Mozambique Myanmar Namibia Revised DTC Multilateral Convention DTC DTC Multilateral Convention Multilateral Convention TIEA DTC DTC DTC DTC DTC DTC 09.12.1996 12.04.1985 19.07.1985 Signed 15.06.2006 13.04.1999 03.10.2011 02.03.1981 28.03.2013 26.07.2011 Signed 02.06.2008 03.01.2012 09.05.2012 Signed 13.11.2005 08.04.2013 Signed 24.08.1982 10.09.2007 Signed Signed 31.07.2012 22.02.1994 08.02.2006 30.10.1998 30.09.2010 02.04.2008 15.02.1997 Not yet in force in Malta 06.12.1983 01.02.2010 01.09.2012 01.06.2012 27.03.2013 29.03.1996 23.09.2008 20.02.2000 28.02.2011 30.01.2009 22.01.1999 10.07.2012 Not yet in force in Lithuania 09.07.2009 16.04.2012 26.12.2012 01.04.2011 19.05.2010 Date in force 02.10.1997 20.08.1985 01.08.1986 01.07.2012 17.10.2007 10.01.2001 30.03.2012 01.07.1982
ANNEXES 131
No. 73 Nepal
Jurisdiction
Type of EOI agreement Date signed DTC SAARC Multilateral Agreement DTC Protocol 27.11.2011 13.11.2005 30.07.1988 10.05.2012
Date in force 16.03.2012 19.05.2010 21.01.1989 02.11.2012 non-amended in force since 1 February 1997 amended convention not yet in force in NL 03.12.1986 Not yet in force in New Zealand 20.12.2011 01.06.2012 03.06.1997 19.05.2010 21.03.1994 26.10.1989 01.06.2012 30.04.2000 Not yet in force in Portugal 15.01.2000 14.11.1987 Not yet in force in Romania 11.04.1998 Not yet in force in Russia
74
Netherlands Multilateral Convention Signed
DTC 75 76 77 78 79 80 New Zealand Norway Oman Pakistan Philippines Poland Multilateral Convention DTC Multilateral Convention DTC SAARC Multilateral Agreement DTC DTC Protocol Multilateral Convention DTC 81 82 83 Portugal Qatar Romania Multilateral Convention DTC DTC Revised DTC Multilateral Convention DTC 84 Russia Multilateral Convention
17.10.1986 Signed 02.02.2011 Signed 02.04.1997 13.11.2005 12.02.1996 21.06.1989 29.01.2013 Signed 11.09.1998 Signed 07.04.1999 10.03.1987 08.03.2013 Signed 25.03.1997 Signed
132 ANNEXES
No. 85 86 87 88 89 Serbia Singapore Slovenia South Africa Jurisdiction Saudi Arabia Type of EOI agreement Date signed DTC DTC DTC DTC Protocol DTC Multilateral Convention DTC Multilateral Convention DTC 90 Spain Protocol Multilateral Convention DTC 91 92 93 Sri Lanka Sudan Sweden Revised DTC SAARC Multilateral Agreement DTC DTC DTC Protocol Multilateral Convention 94 95 96 97 98 99 Switzerland Syria Tanzania Tajikistan Thailand Trinidad and Tobago DTC Protocol DTC DTC DTC DTC DTC Multilateral Convention DTC 101 Turkey 102 Turkmenistan 103 Uganda Multilateral Convention DTC DTC 25.01.2006 08.02.2006 24.01.1994 12 Aug 2011 13.01.2003 Signed 04.12.1996 Signed 08.02.1993 26.10.2012 Signed 27.01.1982 22.01.2013 13.11.2005 22.10.2003 24.06.1997 07.02.2013 Signed 02.11.1994 30.08.2010 18.06.2008 27.05.2011 20.11.2008 22.03.1985 08.02.1999 Signed 31.01.1995 Signed 25.02.1997 30.04.2004 01.06.2012 29.12.1994 07.10.2011 10.11.2008 12.12.2011 10.04.2009 13.03.1986 13.10.1999 Not yet in force in Tunisia 01.02.1997 Not yet in force in Turkey 07.07.1997 27.08.2004 19.05.2010 15.04.2004 25.12.1997 01.01.2013 19.04.1983 Date in force 01.11.2006 23.09.2008 27.05.1994 1 Sep 2011 17.02.2005 01.02.2012 28.11.1997 Not yet in force in South Africa 12.01.1995
100 Tunisia
ANNEXES 133
No.
Jurisdiction
Type of EOI agreement Date signed DTC 07.04.1999
Date in force 31.10.2001 Non amended convention in force since 1 July 2009 (amended convention not yet in force in Ukraine) 22.09.1993 03.10.2007 26.10.1993 01.06.2012 18.12.1990 Non amended convention in force since 1 November 1996 (amended convention not yet in force in USA) 25.01.1994 20.07.2012 22.08.2011 02.02.1995 18.01.1984
104 Ukraine
Multilateral Convention
Signed
DTC 105 United Arab Emirates Protocol Protocol DTC 106 United Kingdom Protocol Multilateral Convention DTC
29.04.1992 26.03.2007 16.04.2012 25.01.1993 30.10.2012 Signed 12.09.1989
107 United States
Multilateral Convention
Signed
108 Uruguay 109 Uzbekistan 110 Virgin Islands (British) 111 Vietnam 112 Zambia
DTC DTC Protocol TIEA DTC DTC
08.09.2011 29.07.1993 11.04.2012 09.02.2011 07.09.1994 05.06.1981
134 ANNEXES
Annex 3: List of All Laws, Regulations and Other Material Received
Commercial Laws
Companies Act 1956 Companies Central Government Rules and Forms 1956 Companies (Donations to National Funds) Act 1951 Company Secretaries Act 1980 Co-operative Societies Act 1912 Disposal of Records Rules 2003 Insurance Act 1938 Limited Liability Partnership Act 2008 Limited Liability Partnership Rules 2009 Partnership Act 1932 Societies Registration Act 1860 Trusts Act 1882
Taxation Laws
Central Board of Revenue Act 1963 Gift Tax Act 1958 Income-tax Act 1961 Income Tax Rules Wealth Tax Act 1957
ANNEXES 135
Banking Laws
Banking Regulation Act 1949 Finance Act 2010 Foreign Exchange Regulation Act 1973 Reserve Bank of India Act 1934 Reserve Bank of India Circular RBI/2009-10/490, 10 June 2010 Reserve Bank of India Circular RBI/2009-10/504, 23 June 2010 Reserve Bank of India Circular RBI/2009-10/507, 25 June 2010 Special Economic Zones Act 2005
Anti-Money Laundering Act/Regulations

Notification 9, amending the AML Rules November 2009 Prevention of Money Laundering Act 2002 Prevention of Money Laundering Amendment Act 2009 Prevention of Money Laundering Rules 2005
Other
Constitution of India 1950 Official copies of tax treaties Wakf Act 1995
136 ANNEXES
Annex 4: People Interviewed During the On-Site Visit

Central Board of Direct Taxes Foreign Tax and Tax Research Division I (FT and TRD I) Foreign Tax and Tax Research Division II (FT and TRD II) Directorate of Income Tax (ITD Investigation Wing) Systems Directorate Directorate of Enforcement Reserve Bank of India Ministry of Corporate Affairs Registrar of Companies Financial Intelligence Unit India Securities and Exchange Board of India Institute of Chartered Accountants
ANNEXES 137
Annex 5: Handling of Incoming Requests
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

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Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, PHASE 2: INDIA

This report contains a Phase 2: Implementation of the Standard in Practice review, as well as revised version of the Phase 1: Legal and Regulatory Framework review already released for this jurisdiction. The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
Consult this publication on line at http://dx.doi.org/10.1787/9789264202658-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 2 Implementation of the Standard in Practice

ISBN 978-92-64-20264-1 (print) ISBN 978-92-64-20265-8 (PDF)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

ABOUT THE GLOBAL FORUM 5

About the Global Forum

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

Information and methodology used for the peer review of India

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

Overview of India Economic context

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

General information on legal system

General overview of the financial sector

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

India does not have Islamic banking institutions.

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

The taxation system

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

Exchange of information for tax purposes

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

PEER REVIEW REPORT PHASE 2 INDIA OECD 2013

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21

Compliance with the Standards

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A.1. Ownership and identity information

Companies (ToR A.1.1)

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24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Ownership information on domestic companies

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Ownership information on co-operatives

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Ownership information on foreign companies

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Ownership information held by service providers

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 35

Ownership Information held by directors and officers

Ownership information held by other persons

Documentation retention requirements