MM TAX CLUB

The Reserve Bank of India (RBI) is stepping up its efforts to address the ongoing cash crunch in the banking system by injecting $10 billion through a foreign exchange swap. This move comes as part of a broader strategy to ease liquidity pressures and stabilize short-term interest rates.

What’s Happening?

The RBI announced that it will conduct a three-year forex swap auction on February 28, 2025. Under this arrangement, the central bank will purchase US dollars from banks in exchange for rupees, while agreeing to sell the dollars back at a future date. This process directly increases rupee liquidity, making more cash available in the system.

Why is This Important?

“This is a net addition of liquidity and should help bring down short-term rates,” said Debendra Dash, a trader at AU Small Finance Bank Ltd. He further pointed out that March, being the fiscal year-end, is always a tough time for banks, and this move by the RBI will provide much-needed relief.

This is the second such forex swap in recent weeks. Just last month, the RBI had injected $5 billion via a six-month foreign exchange swap, underscoring the urgency of tackling the liquidity crunch.

What’s Causing the Liquidity Deficit?

Currently, the liquidity shortfall in the banking system is estimated at around two trillion rupees, making it one of the worst in over a decade. Several factors have contributed to this situation, including:

• The RBI’s aggressive dollar sales to shield the rupee from volatility.

• Global financial uncertainties, including US trade policies strengthening the dollar.

• End-of-year fiscal pressures that typically lead to cash shortages in banks.

Beyond Forex Swaps: RBI’s Broader Strategy

The RBI isn’t stopping at forex swaps. It has also been using other measures to boost liquidity, such as:

• Open market bond purchases

• Longer-term variable repo auctions

• Recent interest rate cuts – Earlier this month, the central bank cut interest rates for the first time in nearly five years, but analysts believe more liquidity measures are necessary to make rate cuts more effective.

Final Thoughts

The RBI’s $10 billion forex swap is a crucial step toward easing the current liquidity crunch. While short-term interest rates are expected to stabilize, the broader challenge of ensuring a smooth flow of credit to businesses and consumers remains.

With fiscal year-end pressures looming, banks and businesses will be closely watching how these liquidity measures play out in the coming weeks.

Stay tuned for further updates on India’s financial landscape!

The Central Board of Direct Taxes (CBDT) has extended the due date for filing the report of an accountant in Form 56F under the Income-tax Act, 1961. This extension has been provided to alleviate the difficulties faced by taxpayers and stakeholders in meeting the original deadline.

Background

As per the Income-tax Act, 1961, businesses operating in Special Economic Zones (SEZs) and claiming deductions under section 10AA are required to file a report of an accountant in Form 56F. This requirement is stipulated under sub-section (8) of section 10AA, read with sub-section (5) of section 10A of the Act.

Generally, the due date for filing this report is aligned with the specified date under section 44AB of the Act, which pertains to tax audits. However, considering the challenges reported by stakeholders, the CBDT has exercised its powers under section 119(2)(b) to grant relief by extending the due date.

New Due Date

The deadline for filing Form 56F for the Assessment Year (AY) 2024-25 has been extended from the originally specified date under section 44AB to March 31, 2025. This extension is officially notified through CBDT Circular No. 2/2025, dated February 18, 2025.

Implications of the Extension

• Additional Compliance Time: Businesses and professionals now have additional time to ensure proper filing and avoid penalties.

• Reduced Compliance Burden: The extension helps entities in SEZs streamline their documentation and reporting.

• Prevention of Last-minute Rush: By extending the deadline, the government aims to facilitate smooth compliance for taxpayers without unnecessary stress.

Official Notification

The official notification of this extension can be accessed through the Income Tax Department’s website and other government portals. The circular emphasizes the government’s commitment to addressing taxpayer concerns while ensuring regulatory compliance.

Conclusion

This extension provides much-needed relief to businesses and professionals who were struggling with the original filing deadlines. Taxpayers should take advantage of this extension to ensure accurate and timely submission of Form 56F to avoid any future complications.

For further updates, stay tuned to official notifications from the Income Tax Department.

This advisory serves to inform taxpayers about recent developments in the GST registration process. The following key points outline the new requirements and procedures:

Key Updates:

1. Amendment to Rule 8 of CGST Rules, 2017:

   • The rule has been revised to enable applicant identification through data analysis and risk parameters.

   • It mandates biometric-based Aadhaar authentication and a photograph of the applicant, along with verification of the original documents uploaded with the application.

2. Implementation of the New Functionality:

   • GSTN has developed this functionality, which was rolled out in Jharkhand and Andaman and Nicobar Islands on February 15, 2025.

3. Verification and Appointment Booking Process:

   • Upon submission of Form GST REG-01, applicants will receive an email with either:

     • (a) A link for OTP-based Aadhaar Authentication OR

     • (b) A link for booking an appointment at a GST Suvidha Kendra (GSK) for biometric-based Aadhaar authentication and document verification.

4. Procedure Based on the Received Email:

   • If the applicant receives a link for OTP-based Aadhaar authentication (as per point 3(a)), they can proceed with the existing process.

   • If the applicant receives an appointment booking link (as per point 3(b)), they must schedule a visit to the designated GSK using the provided link.

5. Appointment Confirmation:

   • Once the appointment is booked, the applicant will receive a confirmation email with details of the visit.

6. Required Documents for GSK Visit:

   • At the time of the visit, the applicant must carry:

     • A hard/soft copy of the appointment confirmation email.

     • Jurisdiction details as mentioned in the intimation email.

     • Original Aadhaar Card and PAN Card.

     • Original documents uploaded with the application, as communicated in the intimation email.

7. Biometric Authentication & Verification:

   • All individuals listed in GST REG-01 must undergo biometric authentication and document verification at the GSK.

8. Timeframe for Biometric Verification:

   • Applicants must complete biometric authentication within the permissible period specified in the intimation email.

   • ARN (Application Reference Number) will be generated only after successful biometric authentication and document verification.

9. GSK Operational Hours:

   • The operational days and hours of GSKs will be as per the guidelines issued by the respective state/UT administration.

For any further clarification, applicants are advised to visit the official GST portal or contact their nearest GST Suvidha Kendra (GSK).

Stay compliant and ensure a smooth GST registration process!