Rupee appreciation reflected foreign capital inflows and central bank support, tempered by crude prices and geopolitical tensions. Rupee appreciation against the US dollar was linked to sustained foreign capital inflows and Reserve Bank support through dollar selling. Higher crude oil prices, a stronger US dollar and geopolitical tensions in West Asia constrained further gains. A slightly positive near-term rupee bias was associated with softer dollar conditions, dovish US monetary expectations, favourable global markets and improved foreign inflows, while geopolitical risks remained relevant. Domestic equity indices rose, foreign-exchange reserves increased, and fiscal-deficit data showed the central government's position against its full-year target.
India-UK trade agreement enables duty-free access and bilateral cooperation on investment, technology, and strategic partnership. The India-UK Comprehensive Economic and Trade Agreement provides zero-duty market access in the UK for nearly 99 per cent of India's exports and is intended to expand bilateral trade and investment opportunities. The governments committed to maximise its benefits through the Comprehensive Strategic Partnership, including cooperation on technology, innovation, security, clean energy, education and people-to-people links. Advanced technology collaboration, including artificial intelligence, is also contemplated.
Excise duty increases on cigarettes pressured profitability, while calibrated pricing and FMCG growth supported market resilience. Excise duty increases on cigarettes affected consolidated profitability, prompting calibrated pricing and portfolio measures to protect market share and limit migration to illicit trade. The cigarette portfolio was re-architected across price points through value-accretive offerings and staggered pricing actions. Non-cigarette FMCG growth was supported by demand for packaged foods, dairy and personal-care products. Input-cost inflation was mitigated through inventory cover, commodity hedging and price-volume rebalancing amid crude-price volatility, supply-chain disruption and imported inflation concerns.
One-Time Settlement Scheme offers final pre-GST tax dispute resolution relief before stricter recovery action against defaulters begins. The One-Time Settlement Scheme 2025 for pre-GST tax dues has been extended until September 30. Eligible taxpayers may resolve pending legacy tax disputes with full waiver of interest and penalties and slab-wise relief in principal tax. After the deadline, recovery action may be intensified under applicable tax laws and the Punjab Land Revenue Act, including property attachment, auction and freezing of bank accounts. The department also supports amicable settlement of tax disputes through the SAMADHAN initiative.
Bilateral trade agreement implementation supports expanded trade, investment and strategic cooperation through technology, security, clean energy and community links. The India-UK Comprehensive Economic and Trade Agreement was identified as a framework for expanding bilateral trade and investment opportunities following its operationalisation. The two governments proposed closer cooperation to use the agreement for shared prosperity, while advancing their comprehensive strategic partnership through technology, innovation, defence, security, clean energy, education and people-to-people links.
Sectoral bank credit growth reflects broad-based expansion across industry, services, agriculture and personal loans, with slower credit-card growth. Sectoral bank credit growth accelerated across non-food lending, agriculture, industry, services and personal loans. Industrial credit expanded across micro and small, medium and large enterprises, with strong lending to infrastructure, engineering, food processing, textiles, construction, metals, petroleum-related products and chemical products. Services lending was supported by non-banking financial companies, commercial real estate and trade. Vehicle and housing loans maintained double-digit growth, while credit-card outstanding growth decelerated.
Biometric identification of protesters through alleged fingerprint-Aadhaar linkage was described alongside criminal-background profiling and database creation. Biometric identification of protesters through fingerprints recovered from alleged stone-pelting evidence was publicly described as a proposed investigative method. A minister stated that fingerprints allegedly found on stones would be linked with Aadhaar numbers to identify participants and examine their prior records. The account also referred to analysis and categorisation of detained protesters' criminal backgrounds, creation of a separate database, and proposed action against participants described as anti-social elements or persons with criminal records.
Offshore hydrocarbon exploration support funds high-risk deepwater drilling, shared infrastructure and data acquisition to strengthen domestic energy production. The National Offshore Exploration Scheme provides public support for deepwater and ultra-deepwater oil and gas exploration, including seismic and offshore data acquisition, exploratory drilling in frontier basins, and common production and evacuation infrastructure. It addresses the high cost and geological uncertainty of offshore drilling and includes technology adoption, digital programme management, capacity building and collaboration measures. The scheme seeks to expand domestic hydrocarbon discoveries and production, attract investment across the exploration and production value chain, and reduce reliance on imported oil and gas.
Foreign exchange reserves increased as foreign currency assets and gold holdings rose, alongside measures to attract forex inflows. India's foreign exchange reserves increased during the reporting week, principally because foreign currency assets and gold reserves rose. Foreign currency assets, expressed in United States dollar terms, include valuation effects from movements in currencies such as the euro, pound and yen. Special Drawing Rights and the reserve position with the International Monetary Fund declined. Measures including the FCNR(B) measure were reported as efforts to attract foreign-exchange inflows following rupee pressure and dollar-sales intervention.
Digital marketplace access for women's self-help group products expands e-commerce opportunities while panchayat-level citizen services are strengthened. Digital marketplace access for women's self-help group products is proposed through a memorandum of understanding between CSC eStore and the Jharkhand State Livelihood Promotion Society. Products marketed under the 'Palash' and 'Adiva' brands are intended to be offered through an e-commerce network to widen market access, support rural women's income and entrepreneurship, and strengthen the rural economy. Digital panchayat services are also being expanded through Common Service Centres, including banking, e-governance and Aadhaar-related services.
Agricultural export facilitation expands market access for late-season mangoes through farmer aggregation and direct global market linkages. Agricultural export facilitation enabled an air shipment of late-season Neelam and Totapuri mangoes to an international market, expanding market access and extending the mango export season. Direct sourcing through a Farmer Producer Company supported organised aggregation, quality produce, and export-oriented supply chains. Direct procurement and export market linkages enabled participating farmers to realise higher returns than conventional market channels while promoting horticultural export diversification.
Cross-border digital payment integration enables real-time Favara transfers from Maldives mobile banking applications to UPI-enabled accounts in India. Cross-border digital payment integration between Favara and UPI enables individuals in the Maldives to make real-time person-to-person transfers to UPI-enabled bank accounts in India through mobile banking applications. Transfers are initiated in Maldivian Rufiyaa and credited in Indian Rupees. The initial service is available through participating Maldivian banks. Permitted remittances include family-maintenance transfers under foreign inward and outward remittance categories, and gift-related transfers under foreign outward remittance. Future phases are intended to introduce QR-based merchant payments and other digital payment services.
Procedural Fair Hearing in competition inquiries requires notice when the Commission departs from investigative findings before imposing action. Competition law procedure requires the Competition Commission to notify and hear an opposite party when departing from the Director General's findings. The penalty order concerning alleged abuse of dominance in viscose staple fibre supply was set aside because Grasim Industries was not given an opportunity to respond to the Commission's disagreement with the investigative findings. The matter was remanded for fresh, time-bound consideration without a finding on the merits.
Manufacturing contraction highlights weak domestic demand, property-sector pressure and continued reliance on technology-related exports for economic growth. Manufacturing activity in China contracted in July, as the official purchasing managers' index fell below the expansion threshold and new orders and production declined. Weak domestic demand, lower building activity and possible typhoon-related disruptions contributed to the slowdown. Consumer spending, investment and property-sector weakness continue to affect confidence, while technology-related exports support growth. Policy commitments include strengthening domestic consumption amid continued reliance on exports.
Public-private partnership airport development strengthens aviation, cargo logistics, export infrastructure and sustainable connectivity through an integrated international airport project. The Bhogapuram airport project is being implemented under a Public-Private Partnership through the Design, Build, Finance, Operate and Transfer framework. It has obtained required aerodrome, safety, fire and environmental clearances and includes infrastructure for domestic and international aviation, passenger processing and airport security. Cargo and cold-chain facilities are intended to support exports and logistics integration, while recycled-water use and LEED Platinum standards form part of the project's sustainability features.
Rupee appreciation against the US dollar continued as foreign inflows and lower crude prices supported domestic currency markets. Rupee appreciation against the US dollar continued in early trading, supported by foreign capital inflows and lower global crude oil prices. A stronger US dollar constrained further appreciation, while expectations of continued Reserve Bank of India intervention were cited as supporting the rupee. Declining Brent crude prices, gains in domestic equity indices and net foreign institutional investment in equities were also identified as relevant market factors.
Value-added Makhana exports expand international market access, support quality compliance, and improve farmer returns through processing and branding. Agricultural export facilitation supported the first sea shipment of value-added flavoured Makhana from Bihar to Canada. Processed and packaged to international quality and food-safety standards, the export demonstrates the role of processing, value addition and export-oriented manufacturing in expanding overseas market access. The initiative is stated to improve farmer returns through value addition, while capacity building, export infrastructure, quality compliance, market linkages and stakeholder collaboration support the agri-export ecosystem.
Market access for Indian pharmaceuticals remains central to bilateral efforts to promote sustainable trade and economic cooperation. Enhanced market access for Indian products, particularly pharmaceuticals, was raised in discussions aimed at strengthening bilateral trade and economic ties. The discussions addressed sustainable trade, and the sides agreed to increase mutual cooperation and communication. India continues to seek greater access to China's information technology, pharmaceutical and agricultural sectors, while pursuing increased pharmaceutical exports and Chinese investment. Bilateral trade increased, but India's trade deficit widened, reflecting an ongoing imbalance in trade flows.
Money laundering asset attachment targets overseas bank deposits linked to alleged loan fraud and fugitive economic offenders. Provisional attachment under the Prevention of Money Laundering Act was reported against Singapore bank deposits held by a company promoter and associated entities in an alleged loan-fraud and money-laundering investigation. The underlying case arises from allegations of fraud, criminal misappropriation, criminal breach of trust and cheating affecting a consortium of lending banks. Service of the attachment order was reported through mutual legal-assistance arrangements, and the promoters had reportedly been declared fugitive economic offenders.
Deposit interest rate uniformity requires equal rates for similar deposits, while allowing risk-based differentiation for bulk deposits. Banks must apply uniform deposit interest rates across branches and customers for similar deposit amounts accepted on the same date, without discrimination. Rates payable, including for bulk deposits, must strictly follow schedules disclosed in advance on bank websites. Bulk deposit rates must be published each business day at 10:00 am, subject to a short permitted delay. Differentiated bulk-deposit rates may be offered based on applicable differential run-off rates under the Liquidity Coverage Ratio framework.
Finance Minister, Shri Pranab Mukherjee announced the operationalisation of the income tax welfare fund which was pending since 1998. The fund has a corpus of Rs.100 crore and will be available for welfare activities of the employees of the income tax department. The finance Minister made this announcement while addressing the Annual Conference of Chief Commissioners and Director Generals of Income Tax, here today. The Finance Minister also announced that in order to upgrade the skills of the IRS officers, an advance mid-career training programme for them would be started during the current year. This will equip officers to face challenges dealing with complex international transactions and fight menace of tax avoidance schemes using tax havens and low tax jurisdiction. The Finance Minister also asked CBDT to ensure deployment of human resources in consonance with requirement of the tax laws. In this regard, he specifically asked for timely completion of exercise of cadre restructuring and hold regular departmental promotional committee (DPC) as per the DoPT calendar. The Finance Minister advocated the need to focus on preventive vigilance and adopt a strategy for zero tolerance for corruption. He asked CBDT to set up a Committee to examine the vigilance practices and procedures in few select countries. The experience of other countries can be used to streamline and strengthen the vigilance administration in Income Tax department. In order to provide the services to the taxpayers of desired quality, the Finance Minister stressed that the same become technology driven. For the current year, the Finance Minister asked senior officers of the income tax department to exceed the target of direct tax collection at Rs. 4,30,000 crore in the Budget estimates. He asked the department to adopt special strategy to monitor TDS compliance at the District level, State level and at Central level.
In the end, the Finance Minister expressed his concerns over the rising litigation with the taxpayers and the quantum of revenue locked in appeals. He stated that taxpayers should be encouraged to Mutual Agreement Procedure (MAP) which has emerged as a preferred alternate dispute resolution mechanism. He asked CBDT to come out with a comprehensive proposal to address the issue of unwanted litigation with taxpayers and also to realise locked up revenue in appeals.
Following is the complete text of the Finance Minister's speech:-
"Direct Taxes, now the major resource provider to the Central Government, have grown at an average annual rate of 24 percent in the last five years and have nearly trebled from Rs.1,32,771 crore in financial year 2004-05 to about Rs.3,78,000 crore in financial year 2009-10, increasing its share from 4.1 percent to 6.1 percent of the Gross Domestic Product (GDP). This tremendous growth has been made possible not only due to rationalisation of tax structure and improvement in tax administration leading to better tax compliance, but also persistent and unrelenting efforts of employees of the Income Tax department.
To improve compliance further, tax laws need to be simple, stable and robust; tax rates should remain moderate; and multiplicity of tax exemptions and deductions should be gradually phased out in order to widen and deepen the tax base. Tax administration needs to be further toned up by appropriate use of technology on the one hand, and improving professional competence and responsiveness of the employees on the other.
A major tax reform initiative has already been announced in the proposed 'Direct Taxes Code 2009' to simplify, rationalize and consolidate the laws and procedure, relating to direct taxes. Its draft is under revision, taking into consideration the areas of concern expressed by various stakeholders, and the discussion paper will be shortly in the public domain before introduction in Parliament in the forthcoming monsoon session. It will indeed be legislation for the 21st century, which will witness the emergence of an economically strong and vibrant India. I anticipate that the new code will usher in major changes in procedures and practices of Direct Tax. The Department, therefore, needs to draw a roadmap for administratively meeting the challenges and the changes that will be introduced by the new Code. The Human Resource Directorate of the Department should draw up plans for training in cooperation with tax training institutes for capacity building for implementation of the Direct Tax Code. The transition from existing law to DTC would require completion of delegated legislation in a time bound manner. CBDT should ensure smooth transition by planning the activities schedule well in advance.
Growth in international trade and commerce driven by globalisation is throwing up new and complex challenges. Globalization offers a global market for product and services but at the same time it also poses challenges. The recent financial crisis has shown how an economic difficulty of one country can get exported to other countries. Similarly, the development of tax shelter products and use of tax havens is another challenge which emanates from globalization. In our response to global challenges we have set up two Income Tax Overseas Units (ITOUs) within Indian Missions in Singapore and Mauritius to facilitate exchange of information. Eight more such units in USA, UK, Netherlands, Japan, Cyprus, Germany, France and UAE are also being created on similar lines. I am hopeful that these measures would result in seamless flow of tax related information from foreign tax jurisdictions and would strengthen our fight against menace of tax evasion using cross border transactions .
The department needs to improve its infrastructure to match global standards of delivery of taxpayer services. The effective roll out of Sevottam and Aayakar Sewa Kendra (ASK) would require adequate infrastructure. It is necessary to make the infrastructure state-of-the art to improve the working environment and to make a visit to the tax office a pleasant experience. Processing of tax returns, now done on the National Computer Network, has to be made more efficient. Towards this, two more Centralized Processing Centres (CPCs) at Pune and Manesar should be set up expeditiously. Efforts should be made to further popularise and increase electronic filing of tax returns and electronic payment of taxes to reduce paper-work and make taxpayer services environmentally friendly. The scope of Large Taxpayer Units (LTUs), presently operational in four metropolitan cities, needs to be expanded for deepening of tax base as well as for centralized services to large taxpayers.
While taxpayer services have improved there are still large numbers of taxpayer grievances, including grievances relating to tax refunds and credit of TDS, which need to be attended on urgent basis. At the systemic level CBDT should ensure that Directorate of Systems take immediate steps to streamline the issue of credit of TDS. Apart from systemic changes, the grievance redressal mechanism including Ombudsman need to be integrated and streamlined. A holistic approach needs to be developed to cater to the rising expectations of taxpayers. The CBDT should immediately come up with a comprehensive and net-based grievance redressal mechanism in line with the best global practices.
A number of services offered by the department have become technology driven. It may not be possible to deliver the services of desired quality in the existing structure of tax administration. CBDT may come out with a new structure, which leads to faster adoption of technology and innovation. The CBDT may, therefore, consider hiving off its technology driven taxpayer services to a Special Purpose Vehicle (SPV), which can better deliver such services in the public-private-partnership mode. This will lead to innovation in delivery of services to taxpayers and also involvement of public in delivering the services.
For the current financial year, the direct tax collection target has been fixed in the Budget Estimates at Rs.4,30,000 crore at a growth of 13.7 percent over the actual collection last year. We have deliberately called this conference in the beginning of the financial year to deliberate strategies and draw action plan to achieve this target. Apart from concentrating on big cities and towns, Department should also look to smaller towns and cities for widening of tax base. The smaller towns and centres have emerged as centres of growth due to inclusive growth agenda of Government. Department may also develop special strategies to monitor TDS compliance at the District level, state level and at Central level.
The GDP is poised to grow at 8.5 percent during 2010-11. Sectors of the economy performing well should be monitored for tax compliance and we should get our due taxes. The department should also make attempts to widen and deepen the tax-base further. It should improve utilization of information relating to high value transactions available through Annual Information Returns (AIR), Central Information Branches (CIB) and other sources. Using multisource data, Department should refine risk profiling of taxpayers and assessments and investigations should be carried out accordingly. Using this intelligence data department should develop credible deterrence for taxpayers, who are habitual tax evaders.
Skills of the personnel working in the department need constant up gradation in view of changing tax regulations, technology and global economic environment. Though I find that the CBDT has taken some steps in this direction through Knowledge Management by yearly publication of the book titled "Let us Share", containing the best orders and practices, yet further steps need to be expeditiously taken in its training and skill up gradation programmes adopting the best global practices. I understand that CBDT is already providing exposure to probationers at NADT about international practices through international attachments. This has to be taken forward by suitably designing mid-career training programmes for officers at regular intervals. This will equip officers to face challenges of dealing with complex international transactions and menace of tax avoidance schemes using tax havens and low tax jurisdictions. This will also help us in getting our due share of taxes especially from cross border transactions.
I am happy to announce that Advanced Mid-Career Training Programme (AMCTP) for IRS officers would be started during the current year.
A satisfied work force is the backbone and strength of an organization. We have modified the transfer policy for the Indian Revenue Service (IRS) officers to improve satisfaction levels and minimise unwarranted service litigation with our own employees. The Standing Committee on Finance, in its report for 2009-10, has expressed concern about shortages of manpower in the Department. This needs to be addressed urgently, especially in the face of the exponentially increasing workload, and the challenges of maximising revenue generation along with efficient taxpayer service. I am told that cadre restructuring of CBDT is pending for quite some time, which has adversely affected the implementation of core areas of work in the Income Tax department. The tax laws can be implemented effectively by aligning the tax administration with the intent of tax policy. If there is a mismatch, then it may be difficult to implement a tax policy, however good it may be. CBDT should ensure that deployment of human resources is in consonance with requirement of the tax laws and this should be ensured by completing the timely exercise of cadre restructuring and by holding regular departmental promotional committee (DPC) as per the DoPT calendar. In the long term, we should aim for Human Resource policy which is, conducive for specialisation, promotes administrative innovation, provides equal opportunity and keeps employees in high state of motivation.
In the last year's conference, I had emphasised the need for expediting vigilance matters. I find that though there is improvement, the progress is not at the desired levels. More focussed approach with proper adherence to prescribed time-lines is needed to expedite vigilance matters. I want to see that no charge sheets are filed against our own employees at the last day of retirement after more than 30 years of service to Government. We should ensure that guilty is punished but at the same time ensuring that those who have performed their duties and victims of frivolous complaints should be adequately protected. Department need to focus on preventive vigilance and adopt a strategy for zero tolerance for corruption. CBDT should set up a committee to examine the vigilance practices and procedures in few select countries. The experience of other countries can be used to streamline and strengthen the vigilance administration in Income Tax department.
The rising litigation with the taxpayers and the quantum of revenue locked in appeals is a matter of serious concern. The strengthening of Settlement Commission, setting up Dispute Resolution Panel (DRP) may address the litigation issues with the taxpayers to some extent. I am told that under mutual agreement procedure (MAP) negotiations under Indo-USA DTAA a tax demand of Rs.800 crore in 48 cases has been confirmed. This is a good development and tax-payers should be encouraged to invoke MAP, which has emerged as a preferred alternate dispute resolution mechanism. In spite of these efforts, we need to develop more strategies to reduce the litigation with the taxpayers. I would like CBDT to come out with a comprehensive proposal to address the issue of unwanted litigation with taxpayers and also to realise locked up revenue in appeals.
Before I close, I am happy to announce the operationalisation of the Income Tax Welfare Fund, which was pending since 1998. The Fund has a corpus of Rs.100 crore kept in interest-bearing deposit. The interest earned annually on this deposit, and other annual accruals to the Fund, will be available for welfare activities of employees of the Income Tax department. I am sure that CBDT will come out with innovative welfare measures, which will further motivate employees of the Department to excel in their area of work.
I wish this Annual Conference a great success. I would be looking forward to the outcomes of the deliberations."
Mutual Agreement Procedure encouraged to reduce taxpayer litigation and unlock revenue tied up in appeals.
The Finance Minister directed the CBDT to formulate a comprehensive proposal to reduce unwanted taxpayer litigation and to realise revenue locked in appeals, endorsing active use of Mutual Agreement Procedure as an alternate dispute resolution mechanism and recommending strengthening of the Settlement Commission and Dispute Resolution Panels to limit litigation and expedite recovery of contested tax demands.
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