cnk budget analysis 2016

8/20/2019 CNK Budget Analysis 2016

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CNK & Associates LLP

“Knowledge Based Solutions With Personalized Services”

Finance Bill, 2016- An Analysis



2CNK & Associates LLP Finance Bill, 2016

Contents

Particulars Pg No.

Foreword 5

Budget Highlights 6-7

Income Tax Proposals:

• Income Declaration Scheme 2016 9-10

• Direct Tax Dispute Resolution Scheme,2016 11-12

• Equalisation Levy 13-14

• Country by Country Reporting 15-16

• Income Tax Rates 17-19

• Residential Status of a Company 20

• Presence of Fund Manager in India 21

• Charitable Trusts 22

• Salary Income 23-24

• Business Income 25-30

• Capital Gains 31

• Income from Other Sources 32

• Deduction under Chapter VIA 33

• Minimum Alternate Tax (MAT) on Foreign Companies 34

• Business Trust (REIT and InvIT) 35




Contents

Particulars Pg No.

• Securitisation Trusts 36

• Alternate Investment Funds (AIF) 37

• Tax Incentive for Start-ups 38-39

• Taxation of Income from Patents 40

• Procedure of Assessment 41-45

• Collection and Recovery of Tax 46-50

• Incentives for Promoting ‘ Housing for All ’ 51-52

• Penalty Provisions 53-54

• Miscellaneous Amendments / Observations 55-56




Contents

Particulars Pg No.

Service Tax: 57

• Legislative Amendments 58-60

• Abatement 61

• Exemptions 62-63

• Reverse Charge 64

• Service Tax Rules 65

Customs: 66

• Legislative Amendments 67-69

• Baggage Rules 70-71

• Tariff Amendments 72-73

Excise: 74

• Legislative Amendments 75

• Central Excise Rules 76

• Non-Tariff Amendments 77-78

• Tariff Amendments 79-81

Interest 82

Miscellaneous Amendments 83

CENVAT Credit Rules 84-86

The Indirect Tax Dispute Resolution Scheme, 2016 87

Other Amendments 88

Glossary 89-90




Foreword

Dear Reader,

This budget was presented against the backdrop of collapsing oil prices and global economic gloom, contrasted by “India shining”

as the fastest growing economy of the world. In that light the budget missed the opportunity to be transformational and capitalise on

the unique economic advantage in which India is placed.

The budget rightly focuses on rural economy and infrastructure development. Particularly commendable is the fiscal prudence

exercised by sticking to the planned reduction of fiscal deficit to 3.5% of GDP in the face of enormous pressure to postpone this

target.

The budget has welcome provisions for improvement in tax administration and has introduced provisions to make the tax officers

accountable. A rare initiative indeed! The measures to facilitate “Ease of doing Business” in the indirect tax proposals and to give

fillip to the “Make in India” campaign are laudable. However, the inability to build political consensus on the road-map to GST

implementation is a huge dampener.

Phasing out the incentives was inevitable, but any meaningful reduction in corporate tax rates still remains a distant promise.

Increasing the tax on the rich is understandable, but with no change in the tax threshold or tax rates, the neglected minority (middle

class tax payer) has little to cheer. In fact the proposal to tax EPF has created an uproar forcing the Government to contemplate

roll back.

The budget has also introduced a scheme to forgive past tax transgressions by paying 45% tax. It is to be seen whether this will

attract the errant taxpayer.

The tax provisions in the budget are like a chakravyuh; difficult to understand and decipher. This presentation is the “CNK KEY” to

guide you through this maze……Happy Reading !

March 3, 2016




Budget Highlights

Direct Taxes

Tax rates for Individual, HUF, Firm , AOP, BOI and Artificial juridical person remains unchanged subject to increase insurcharge from 12% to 15% for individuals, HUF, AOP, BOI with income exceeding 1 crore. For companies with turnoverless than 5 crores, tax rate marginally reduced to 29%.

10% additional tax proposed on individuals, Hindu Undivided Family (HUF) and firms on receipt of dividends exceeding INR10 lakh from domestic companies

Declaration of undisclosed income / asset up to FY 2015-16 by paying 45% of the fair market value in the form of taxes,surcharge and penalty. The scheme to provide immunity from other laws.

New dispute resolution scheme to be introduced with no penalty for disputed tax upto INR 10 lakh and 25% minimum

penalty for tax exceeding INR 10 lakh

Introduction of equalisation levy @ 6% on payment made to a non-resident towards online advertisement/digital advertising,except where such non-resident has a permanent establishment in India

100% deduction of profits for 3 out of 5 years for startups setup during 1.04.2016 to 31.03.2019 but MAT to apply

Determination of residency of foreign company on the basis of POEM to be deferred by one year.

CBCR following OECD’s report on BEPS from FY 2016-17 onwards for Indian-headquartered Multinational Enterprises withglobal consolidated revenues exceeding 750 million Euro

GAAR to be implemented from 1.04.2017

Tax on accreted income of Charitable Trusts in certain circumstances.

Contribution made by employer in excess of 12% or INR150,000 whichever is less to be taxed in the hands of the employee

Presumption taxation @ 50% for professionals where the gross receipt does not exceed 50 lakh.

Shift from EEE TO EET in case of retirement product EPF




Budget Highlights

Indirect Taxes:

“Mum” is the word on GST – a clear indication that the political "lokjam" over GST is far from over

A flurry of simplification measures announced to facilitate ease of doing business

A slew of measures announced for mitigating potential tax litigations and for settlement of existing tax disputes

Series of changes made in Customs/Excise Tariffs to support the Government's "Make in India" initiative- benefittedsectors include IT, Hardware, Capital Goods, Defence Production, Textiles, Mineral Fuel/Oils, Chemicals andPetrochemicals, Paper and MRO of aircrafts and ships

Infrastructure Cess ranging from 1% to 4% introduced on different types of motor cars

No change in the peak rate of Basic Customs Duty @ 10% and Excise Duty @ 12.5%

Service tax increased marginally from 14.5% to 15%, with the introduction of a New Cenvatable Cess, Krishi Kalyan Cess(@ 0.5% on value of all taxable services)

Peak interest rates applicable for service tax defaults mercifully brought down from 30% p.a. to a more realistic rate of15% p.a. (24% p.a. in case of tax collected but not paid)

Rationalisation of CCR to smoothen credit flows, reduce compliance burden and mitigate litigation with regards to reversalof credit attributable to exempted services

Rationalisation of indirect taxes relating to the IT Software Industry




INCOME TAX

Note: Unless otherwise stated the amendments referred to in this e-publication are effective from AY 2017-18 onwards.




A limited period compliance window is introduced for those having undisclosed income/undisclosed assets in India to comeforward and declare the same by paying income tax, surcharge and penalty aggregating to 45% of such declared income

within 2 months of declaration.

The scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to a notified date.

Declaration can be made in respect of undisclosed income chargeable under the Act or income represented in the form ofasset for any FY upto 2015-16

The following cases shall not be eligible for the scheme:

where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C or

where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of the Act has not expired, or

where information is received under an agreement with foreign countries regarding such income

cases covered under the Black Money Act, 2015, or

persons notified under Special Court Act, 1992, or

cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988

If the declaration is made in the form of any investment in an asset, the fair market value (as per Rules to be prescribed) ofsuch asset as on 1st June 2016 shall be deemed to be the undisclosed income

The declarations made under the scheme shall be exempt from wealth-tax in respect of assets specified in declaration.

It is also proposed that no scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in respect ofsuch declarations. Further, immunity from Benami Transactions (Prohibition) Act, is also proposed for such declarations.

Income Declaration Scheme 2016




Income Declaration Scheme 2016

Introduction of such scheme clearly shows the intent of the Government to deal with the menace of black money. In theprevious budget, black money outside India was targeted and this year black money generated in India is given emphasis.

The scheme is similar to the Voluntary Disclosure Income Scheme, 1997. However, on a PIL filed before the SC, the thenGovernment reportedly came up with an affidavit in the SC stating that the 1997 VDIS scheme would be the last and theGovernment would not bring about any such schemes in future. Thus, whether the scheme shall stand the test of law is tobe seen.

Cumulative tax of 45% is payable on the fair market value and not on cost at which the asset is acquired.




New chapter X is inserted in order to reduce the pendency of litigation where a declaration can be

filed with respect to tax arrear and specified tax.

The salient features of the scheme are as follows:

A. Tax Arrear

”Tax arrear" is defined as the amount of tax, interest or penalty determined under the Income Tax Act or the Wealth-tax Act, in respect of which appeal is pending against the assessment order or a penalty order before the CIT(A) or theCWT(A) as on 29th February, 2016

In case of appeal pending in relation to tax and interest wherein disputed tax exceeds INR 10 Lakhs, the declarant isrequired to pay 25% of minimum penalty leviable, along with tax and interest up to the date of assessment. If disputedtax does not exceed INR 10 lakh, no penalty shall be levied.

Filing of such declaration would amount to deemed withdrawal of the pending appeals before CIT(A) or CWT(A)

In case appeal is pending only against the penalty order, 25% of minimum penalty leviable shall be paid along with taxand interest up to the date of assessment irrespective of the tax demand earlier paid

The declarant shall get immunity from prosecution and imposition of any further penalty or interest.

B. Specified Tax

“Specified tax“, means tax determined as a consequence of amendment in the Income Tax Act or Wealth Tax Act with

retrospective effect and relates to the period prior to the date of enactment of such amendment and a dispute inrespect of which is pending as on 29th February 2016.

The declarant is required to pay tax at the applicable rate.

For availing the aforesaid scheme, the declarant shall be required to withdraw any writ petition or any appeal filedagainst such specified tax, and any claim in proceedings for arbitration, conciliation or mediation and also furnish anundertaking in the form to be prescribed waiving the right to pursue any remedy or claim in relation to specified tax.

The declarant shall get complete immunity from prosecution and imposition of penalty and also waiver of Interestlevied under the Income Tax Act or Wealth Tax Act

Direct Tax Dispute Resolution Scheme, 2016




C. General Provisions

The aforesaid scheme will be applicable from 1st June, 2016

Declaration shall be made to the designated authority not below the rank of Commissioner

The amount paid under the scheme shall not be refunded under any circumstances

On declaration by the assessee, the designated authority has to pass the order within 60 days from the date ofdeclaration and thereafter the assessee has to make the payment within 30 days from the date of receipt of such order

The scheme is not applicable to the following persons:

o Cases where prosecution has been initiated before 29 th February 2016.

o Search or survey cases where the declaration is in respect of tax arrears

o Cases relating to undisclosed foreign income and assets

o Cases based on information received under Double Taxation Avoidance Agreement

o Person notified under Special Courts Act, 1992

o Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention ofCorruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

Direct Tax Dispute Resolution Scheme, 2016

The aforesaid scheme will help in reducing litigation and uncertainty in cases where assessee is of the opinion that hischances of succeeding at CIT(A) stage is limited.

It will provide certainty to the assessee in determining its cash flow

This scheme for specified tax is introduced so as to allow entities such as Vodafone etc who have been saddled with taxliability due to retrospective amendments to pay the tax liability and get complete waiver from interest and penalty andimmunity from prosecution.




Chapter VIII of Finance Bill 2016 – taxation of digital business

The chapter introduces the concept of ‘Equalisation Levy’ and contains the following provisions which will be effective fromnotified date.:

Equalisation Levy at the rate of 6% shall be charged on the consideration in respect of specified services provided by anon-resident to the following persons (service recipient):

- a person resident in India and carrying on business or profession; or

- a non-resident having a Permanent Establishment (PE) in India.

Specified services are services in the nature of online advertisement, digital advertising space or any other facility or

service for online advertisement and would include any other service notified by the Central Government. Following services are exempt from Equalisation Levy:

- Non-resident providing the specified service through a PE (fixed base) in India;

- Consideration paid by a person does not exceed INR 1 lakh in a previous year;

- Where the specified services are not for carrying out business or profession.

The service recipient shall deduct the equalisation levy from the amount paid/payable to the non-resident in respect of thespecified services. The levy to be paid by service recipient irrespective of whether deduction is made or not.

Equalisation levy deducted during any calendar month shall be paid to the Central Government by 7th of the next month.

The chapter also contains provisions for annual statements, processing of annual statements, interest, penalty andprosecution . It also contains provisions relating to appeal against levy of penalty and for recovery and collection of levy

Powers have been conferred on the Central Government to make rules to operationalise these provisions

Equalisation Levy




In order to avoid double taxation, income received from specified services which has already been subject to Equalisation

Levy is exempt from tax u/s 10. Expenses towards specified services shall not be allowed as a deduction in computation of total income if the assessee

fails to deduct and deposit Equalisation Levy before the due date of filing return of income

This is a step taken by the Government to meet the challenges of taxing digital transactions where business is carried outthrough virtual place of business rather than physical presence and is in line with OECD recommendation under Actionplan 1 of BEPS project.

Earlier, persons carrying on business in digital domain located outside India were not covered under the purview of theIndian tax regime. Now, with this amendment, entities across the world providing online advertising services through digitaland telecommunication network will come under the purview of Equalisation Levy.

This levy will not form part of Double Taxation Avoidance Agreement.

The onus to pay tax and comply with the procedures laid down will cast an additional burden on service recipient, as theNon-resident service provider may not commercially agree to bear the same.

There is no provision for grossing up of the levy.

Equalisation Levy




Change in Transfer Pricing Reporting Requirements – s. 92D & 286

It is proposed to amend s. 92D to provide that constituent entity which is part of an international group shall also berequired to maintain such information and documentation as to be prescribed in respect of the international group.

A newly inserted s. 286 provides for such documentation which are required to be maintained in respect of an internationalgroup.

In order to facilitate exchange of information, provisions of country by country reporting have been introduced via s. 286.The new documentation and reporting requirements are as follows:

Every constituent/group entity (i.e. an entity which is a part of an international group) resident in India, the parent entity ofwhich is not a resident in India, will have to notify information regarding the parent entity/alternate reporting entity and itscountry of residence in the prescribed form and manner to the income-tax authority

If the parent entity/alternate reporting entity is a resident in India, it will have to furnish a report to the prescribedauthority, containing details of profits, taxes, revenue, capital, accumulated earnings, tangible assets, number ofemployees, nature of business activity etc of each entity in the group, before the due date of f iling the return of income, inthe form and manner to be prescribed.

The above mentioned detailed report on all group entities will also have to be furnished by the constituent entity residentin India if the parent entity of the group is a resident of a country with which there is no arrangement for exchange ofinformation, the country of residence of the parent entity has violated/persistently failed to automatically exchangeinformation/reports with India

U/s 271GB of the Act, various penalty provisions have been introduced for default in reporting as required u/s 286.

S. 286 may not apply if the total consolidated group revenue as appearing in the consolidated financial statement does notcross a certain threshold as may be prescribed

Country By Country Reporting




Change in Transfer Pricing Reporting Requirements – s. 92D & 286

Country By Country Reporting

Section 286 has been inserted in line with the OECD report on Action Plan 13 of the BEPS Project. It is a measure towardsstandardising transfer pricing documentation across countries. This will increase reporting requirements immensely andwill also open doors to more litigation since each country will now be aware about details of each group entity and a mis-match in reporting done in various countries will attract immediate attention of the tax authorities

Forms for reporting are yet to be notified.

Threshold limit of EURO 750 million was recommended under BEPS. Threshold limits may be prescribed by the Rules.

Since various penalty provisions have also been introduced for non-reporting or mis-reporting, accurate reporting will bevery important




Income Tax Rates

There is no change in the rate of tax, education cess and higher education cess. However the rate of surcharge has beenincreased by 3% for Individual, HUF, AOP & BOI having taxable income exceeding INR 1 crore.

Particulars INDIVIDUAL, HUF,AOP & BOI, CO-OP. SOCIETY, FIRM

(including LLP)

A.Y. 2016-17 A.Y. 2017-18 A.Y. 2016-17 A.Y. 2017-18

Income upto INR

1 Crore

Rate of surcharge NIL NIL NIL NIL

* Effective Tax rate 30.90% 30.90% 30.90% 30.90%

Income above INR

1 Crore

Rate of surcharge 12% 15% 12% 12%

Effective Tax rate 34.608% 35.535% 34.608% 34.608%

A) For individuals HUF, AOP, BOI, Cooperative Societies and Firms

* In case of Individuals and HUFs the effective tax rate would be slightly lower due to threshold exemption and lower slabrates upto INR 10 Lacs.

Increase in surcharge to 15% from existing 12% for income above INR 1 Crore will also impact the AMT payable bypersons other than companies (Section 115JC). This will increase the existing tax rate from 21.341% to 21.913%.




Income Tax Rates

Particulars DOMESTIC COMPANY

(Having a Turnover

upto INR 5 Crore for

FY 2014-15)

DOMESTIC COMPANY

(Having a Turnover above

INR 5 Crore for FY 2014-15)

FOREIGN

COMPANY

A.Y.

2016-17

A.Y.

2017-18

A.Y.

2016-17

A.Y. 2017-18

(No Change)

A.Y.

2016-17

A.Y. 2017-18

(No Change)

Income upto

INR 1 Crore

Rate of

surcharge

NIL NIL NIL NIL NIL NIL

Effective Tax

rate

30.90% 29.87% 30.90% 30.90% 41.20% 41.20%

Income above

INR 1 Croreand up to INR

10 Crore

Rate of

surcharge

7% 7% 7% 7% 2% 2%

Effective Tax

rate

33.063% 31.961% 33.063% 33.063% 42.024% 42.024%

Income above

INR 10 Crore

Rate of

surcharge

12 12 12% 12% 5% 5%

Effective Tax

rate

34.608% 33.454% 34.608% 34.608% 43.26% 43.26%

B) For Companies (Other than companies mentioned in the newly inserted s. 115BA)

The rates for domestic companies having turnover / gross receipts of INR 5 crores and above and for foreign companies hasremained the same.




Residential Status of a Company

Deferment of provisions relating to Place of Effective Management (POEM) – Section 6(3)

The concept of POEM was introduced by Finance Act 2015 and was effective from AY 2016-17. The residential status of a

foreign company was to be determined on the basis of its POEM.

The Finance Minister has recognised that before introducing this concept its ramifications need to be analysed.

Accordingly the implementation of POEM has been deferred by one year and POEM will now be applicable from AY 2017-

18.

It is proposed to insert a new section 115JH to empower the Government to issue notification to provide detailed transition

mechanism for companies incorporated outside India, which due to implementation of POEM, for the first time would be

assessed to tax in India.

Further the notification to be issued will also bring clarity on issues relating to computation of income, treatment of

unabsorbed depreciation, set off or carry forward of losses, applicability of transfer pricing provisions, etc. applicable to

such foreign company deemed to be resident in India.

.




Current Proposed

Presence of Fund Manager in India

Presence of fund manager not to constitute business connection in India – s. 9A:

The above changes are relatively insignificant and the number of conditions to be fulfilled are still too onerous and rigid.

Clause (b) of sub section 3 provides that the fund shouldbe a resident of a country with which an agreement unders.90 or 90A has been entered into.

Further, clause (k) of sub section 3 places a restrictionthat the fund should not carry on/ control or manage anybusiness in India or any business from India either directly

or indirectly.

In addition to the existing countries with which agreementhas been entered into, the clause provides that the fundmay be registered or incorporated in a country or aspecified territory notified by the Central Government.

The condition of fund not controlling and managing anybusiness in India or from India is restricted only to theactivities in India.




Tax on accreted income A new Chapter XII-EB containing provisions relating to accreted income of Charitable Trusts registered u/s 12AA has been

introduced The term ‘accreted income’ refers to the amount by which the aggregate fair market value of the total assets of the trust or

the institution, as on the specified date, exceeds the total liability computed in accordance with the Rules to be prescribed.

In the following cases, a charitable trust registered u/s 12AA shall be liable to pay tax at maximum marginal rates i.e. 30%plus applicable surcharge and education cess on the accreted income in addition to the income tax chargeable on the totalincome of the trust:

i. Trust converts into any form which is not eligible for registration u/s 12AA. This conversion is triggered even whenregistration u/s 12AA has been cancelled or the trust has adopted or undertaken modification of its objects which do

not conform to conditions of registration and it has not applied for fresh registration u/s 12AA or its fresh applicationhas been rejected.

ii. It merges into an entity not having similar objects and not registered u/s12AA

iii. Non-distribution of assets on dissolution, to any charitable institution registered u/s 12AA or approved u/s 10(23C)within a period of 12 months from date of dissolution

The tax on the accreted income by the trust shall be treated as the final payment of tax in respect of accreted income andno further credit shall be claimed by the trust or by any other person in respect of the amount of tax so paid.

For the purpose of recovery of tax and interest, the Principal Officer or the Trustee and the trust shall be deemed to beassessee in default and all provisions related to the recovery of taxes shall apply. Further, the recipient of assets of thetrust, which is not a charitable organisation, shall also be liable to be held as assessee in default in case of non-payment oftax and interest. However, the recipient's liability shall be limited to the extent of the assets received.

Charitable Trusts

These amendments will take effect from 1st June, 2016.

While the above amendment seems to be justified, it could result in extremely harsh consequences in case of withdrawalof registration u/s 12AA for any reason by the commissioner.




Current Proposed

Salary Income-Tax treatment in Pension Plans

Recognized Provident Funds, Pension Funds and National Pension Scheme – S. 10(12), 10(13), 80CCD

& 17

Accumulated balance due and becoming payable to anemployee in a RPF is exempt from tax subject tofulfillment of certain condition as specified.

Payment from an approved SAF made to an employee inlieu of or in commutation of an annuity or on his retirementat or after a specified age or on his becomingincapacitated prior to such retirement is exempt from tax.

As per the provisions of s. 80CCD any payment from NPSto an employee on closure of account or his opting out ofthe scheme is chargeable to tax.

Withdrawal of accumulated balance due and becomingpayable to an employee earning wages not exceeding INR15000 p.m. will continue to be exempt from tax.

Withdrawals attributable to any contributions made on orafter 1st April, 2016 by an employee earning wagesexceeding INR 15000 pm, will be exempt only upto 40%

Any payment in commutation from an annuity purchasedout of contribution made on or after 1st April, 2016 whichexceeds 40% of the annuity shall be chargeable to tax.

Transfer from SAF to NPS will be exempt from tax.

S. 10(12A) is inserted whereby any payment from theNPS to an employee on closure of the scheme referred toin s. 80CCD to the extent it does not exceed 40% of the

total amount payable at the time of closure or opting out ofthe pension scheme shall not be taxable. However theamount received by the Nominee on the death of theassessee shall be fully exempt from tax.




Current Proposed

Salary Income-Tax treatment in Pension Plans

Contribution made by employer in excess of 12% or INR 150,000 which ever is less shall now be chargeable to tax in thehands of the employee.

There is no change in the tax treatment of PPF

Amount invested from NPS in Annuity would be exempt from tax

All contributions to EPF and interest accrued thereon before April 1, 2016, will not attract any tax on withdrawal

The proposed amendment will benefit assessees investing in NPS

Rule 6 to Part A of the Fourth Schedule provides thatcontribution made by an employer to the credit of theemployee participating in a RPF in excess of 12% ofsalary to an employee is liable to tax in the hands of anemployee.

Exemption limit for employer’s contribution to SAF is INR100,000 p.a.

Rule 6 to Part A of the Fourth Schedule is proposed to beamended so as to provide the limit of employerscontribution to RPF to INR 1,50,000/- or 12% of the salarywhich ever is less, without attracting tax.

This limit has been enhanced to INR 150,000 p.a.

Recognized Provident Funds, Pension Funds and National Pension Scheme – S. 10(12), 10(13), 80CCD

& 17




Current Proposed

Business Income

Investment Allowance- s.32AC

This is a welcome provision for the manufacturing industry since it will do away with the hardship caused by the dual

compulsory condition of acquisition and installation of the assets in the same previous year, in order to avail the said15% benefit under Investment Allowance.

Investment Allowance at 15% is allowed as deductionon investment made in new assets (plant andmachinery) exceeding INR 25 Crore in a previous yearby a company engaged in the manufacturing orproduction of any article or thing provided new assetsare acquired and installed in the same previous year

The twin conditions of acquisition and installation ofthe new assets in the same year have beenrelaxed. It has been proposed that deduction isallowable if acquisition of the assets is done in theprevious year and installation of these assets isdone in the subsequent year upto 31st March 2017.In such cases, deduction would be allowed in the

year of installation of the asset.

`




Business Income - Measures to phase out deductions

Proposed phase out plan of Profit linked deductions/weighted deductions :

Section Incentive currently available in the

Act

Proposed phase out measures

S.10AA - Special

provision in respect of

newly established

units in Special

economic zones(SEZ).

Currently, profit linked deductions are

available for units in SEZ for profit

derived from export of articles or

things or services is available

No deduction shall be available to unitscommencing manufacture or production of articleor thing or start providing services on or after 1stday April,2020. (from previous year 2020-21onwards).

S.35AC- Expenditure

on eligible projects or

schemes

Presently, deduction for expenditure

incurred by way of payment of any

sum to a public sector company or a

local authority or to an approvedassociation or institution,etc. on

certain éligible social development

project or a scheme.

No deduction under the said section shall be

available from FY 2017-18 (AY 2018-19) onwards.





Proposed phase out plan of Profit linked deductions/weighted deduction :

Section Incentive currently available in the Act Proposed phase out measures/Amendment

S. 80IA; 80IAB,

and 80IB

Presently, 100 % profit linked deductions

are available for a specified period in

respect of profits derived from a)

development, operation and maintenance of

an infrastructure facility (80-IA), (b)

development of special economic zone (80-

IAB), (c) production of mineral oil and

natural gas [80-IB(9)]

No deduction shall be available if the specified

activity commences on or after 1st day April, 2017.

(i.e. from previous year 2017-18 and subsequent

years).





Proposed phase out plan of accelerated depreciation/weighted deduction incentive w.e.f.

AY 2018-19:

Section Incentive currently available in the

Act

Proposed phase out measures/Amendment

S. 32 read with rule

5 of Income-tax

Rules, 1962-

Accelerated

Depreciation

Accelerated depreciation is provided to

certain Industrial sectors in order to

give impetus for investment. The

depreciation under the Income-tax Act

is available up to 100% in respect of

certain block of assets

It is proposed to amend Rule 5 of Income-taxRules, 1962 to restrict the highest rate ofdepreciation under the Income-tax Act to 40% forall the assets (whether old or new) falling in therelevant block of assets with effect from 1.04.2017(i.e. from previous year 2017-18 and subsequent

years)

The aforesaid phase out of deductions are applicable to both corporate and non-corporate assessee

In addition to the aforesaid phase out plan is also proposed for s. 35CCD, 35, 35AD and 35CCC.




Current Proposed

Business Income - Presumptive Taxation

Increase in threshold limit for computing Profit and Gains of Business on presumptive basis – s. 44AD

The increase in turnover limit is to reduce the compliance burden of MSME units and to facilitate ease of doing business.

The scheme is applicable to resident Individuals, HUF and Partnership firms but not applicable to Limited LiabilityPartnership.

Tax audit limits u/s 44AB have not been increased

In case of an assesse engaged in any business having totalturnover or gross receipts not exceeding INR 1 crore, a sumequal to 8% of the total turnover or gross receipts or suchhigher sum earned by the assessee, shall be deemed to beprofit & gains from business chargeable to tax under the headprofit and gains from business or profession.

Against the 8% presumptive income, deduction forremuneration and interest was available subject to limits u/s40(b)

There is no requirement of payment of advance tax by eligibleassessee.

It is proposed to increase the existing limit of turnover orgross receipts from INR 1 crore to 2 crore.

Assessee shall remain in the scheme for 5 consecutiveyears after the first year of opting the scheme. If he doesnot offer the income as per the scheme in any of the 5years, he shall not be eligible to claim the benefit underthe scheme for the next 5 years.

If an assessee opts out of the scheme and his totalincome exceeds the maximum amount not chargeable totax, he shall be required to maintain such books ofaccounts specified in s. 44AA(2) and also get themaudited as per s. 44AB of the Act.

No deduction will be available in respect of remunerationand interest to partners

Eligible assessee is now required to pay the whole amountof advance tax in one installment by 15th March of the FY.




Special provisions for Specified Professionals – s. 44ADA

A new section 44ADA is introduced, for estimating the income of an assessee who is engaged in specified profession andwhose gross receipts does not exceed INR 50 lakh in a previous year.

A sum equal to 50% of the total gross receipts, or such higher sum earned by the assessee shall be deemed to be theprofits and gains chargeable to tax

The scheme will apply only to an individual, HUF or partnership firm.

The assessee should be engaged in medical, legal, engineering or architectural profession or the profession ofaccountancy, technical consultancy or interior decoration.

Consequentially the threshold limit for audit of such professionals from INR 25 lacs to INR 50 lakh in a year.

However, if the assessee does not opt for Presumptive taxation, he will be required to maintain books of account as per s.44AA(1) and get the accounts audited under s. 44AB in respect of such income even if his gross receipts are less than INR50 lakh.

Business Income - Presumptive Taxation

Assessee carrying on specified profession will require his accounts to be audited if his total gross receipts in the previousyears exceeds INR 50 lakh.

Easwar Committee Report had recommended threshold limit of 1 Crore and 33.33% of the gross receipts be taxableincome. However Finance Bill 2016 provides that 50% of the gross receipts will be deemed to be the profits and gains ofthe assessee.

Unlike section 44AD where the advance tax is to be paid only in 1 instalment on or before 15th March, professionalscovered u/s 44ADA are required to pay advance tax in 4 instalments.

Though the Memorandum mentions that s. 44ADA would not apply to an LLP, there is no corresponding provision in theFinance Bill. Thus, there is ambiguity on its applicability to LLP.




Current Proposed

Capital Gains

Stamp duty valuation – s. 50C

The above amendment is proposed to be introduced in view of the recommendation of the Easwar Committee.

The Committee had pointed out an anomaly in s. 50C. It was highlighted that s. 50C does not provide any relief where the

seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable propertyand the sale consideration has been fixed in such agreement. Due to such provisions, stamp duty value as on date oftransfer was taken as full value of consideration which would be higher than the stamp duty value assessable as on thedate of agreement, leading to a disadvantage to the assessee. Thus, the above amendment is proposed to be introducedto fix the anomaly in section 50C.

S. 43CA i.e. provisions relating to selling of immovable property as stock in trade, already has a similar provision.

It is provided that where the consideration declared to bereceived or accruing as a result of the transfer of land orbuilding or both, is less than the stamp duty valuation, thevalue so adopted or assessed or assessable shall bedeemed to be the full value of the consideration, andcapital gains shall be computed on the basis of suchconsideration u/s 48

Where the date of the agreement fixing the amount ofconsideration and the date of registration for the transferof the capital asset are not the same, the value adopted orassessed or assessable by the stamp valuation authorityon the date of agreement may be taken for the purposesof computing full value of consideration for such transfer:

This would apply only if the amount of consideration or a

part thereof, has been received by way of an accountpayee cheque or account payee bank draft or by use ofelectronic clearing system through a bank account, on orbefore the date of the agreement for transfer




Current Proposed

Income from Other Sources

Tax on certain dividends received from domestic companies – s. 10(34) read with s. 115BBDA

Presently, dividends received from a domestic companyare exempt in the hands of shareholders u/s 10(34) of the

Act.

A new section 115BBDA is introduced wherein dividendsreceived from a domestic company by a resident anindividual, HUF or a firm (including an LLP), exceed INR10 lakhs, the whole of the said dividend will be chargeableto tax @ 10% in the hands of shareholder on gross basiswithout any deductions. Consequential changes areproposed in s. 10(34) of the Act.

Dividend from both Debt based and Equity based Mutual Funds will continue to be fully exempt in the hands of theshareholder.

Dividend from domestic companies received by companies will continue to be exempt even if such dividend income exceedsINR. 10 lakhs.




Deduction under Chapter VIA

Current Proposed

Applicable to Indian company engaged inmanufacturing of goods

Amount of deduction - 30% of wages paid to newworkmen;

Deduction available for 3 AYs including the AY in whichsuch employment is provided;

Minimum number of days of employment in a FY fornew employee should be at least 300 days;

No deduction allowed if the factory is transferred fromexisting entity, or acquired as a result of amalgamationor reorganisation;

Deduction allowed only if the number of workmen

increases by at least 10%

Applicable to any assessee to whom s. 44AB (tax audit)applies

Amount of deduction - 30% of employee cost incurred inrespect of additional employees being employees whosetotal emoluments does not exceed INR 25,000/- per month;

Deduction will be available for 3 AYs including the AY in

which such employment is provided;

Minimum number of days of employment in a FY for newemployee should be at least 240 days;

No deduction will be allowed if the business is formed bysplitting up, reconstruction, transfer;

Increase in any number of employees compared to

previous year would be eligible for deduction. In case ofnew business, aggregate emoluments paid to employeeswill be considered as additional employee cost

Deduction u/s 80JJAA in respect of new employment extended to all the assesses

The benefit of deduction for new employment will now be available to a larger section of assessees carrying on businessor profession as the scope is widened and the conditions are much more liberalised.




Current Proposed

Minimum Alternate Tax (MAT) on Foreign Companies

Rationalising provisions of MAT applicable to foreign companies – s. 115JB

AAR Ruling in the case of Castleton had held that s. 115JB was applicable to foreign companies, even if they don’t have aPE or place of business in India. The effect and implication of these decisions was that foreign companies would be liableto pay MAT.

The AP Shah Committee vide its report dated 25 th August 2015 recommended that MAT should not be levied on FPIs foryears prior to 1st April 2015. The Government vide Press Release dated 24th September 2015 notified that MAT will not beapplicable on foreign companies subject to above conditions.

The above amendment is incorporated as a clarification on foreign companies. A welcome proposal in order to attractforeign inflows into the country.

No clarity was provided on whether MAT provisions applyto a foreign company

Finance Act 2015 rationalised MAT provisions byexcluding the income of foreign companies earned inrelation to capital gains arising on transactions insecurities, interest, royalty or fees for technical servicesetc. from the chargeability of MAT.

It is clarified that MAT shall not be applicable to a foreigncompany, w.r.e.f. 01.04.2001 if the foreign company doesnot have a

i) PE in India under relevant DTAA or

ii) Where there exists no DTAA and the foreign companyis not required to seek registration in India under any lawrelating to companies

MAT provisions to be further rationalised by allowingaddition to book profit for expense in connection withincome from royalty in respect of patent developed andregistered in India. Such royalty income to be reducedfrom book profit if credited to Profit and loss account.




Business Trust (‘REIT’ and ‘InvIT ‘)

Exemption from DDT on distribution made by a SPV to Business Trust – s. 10(23FC) & 115-O

The business trust structure in India permits the business trust to hold assets either directly or through a SPV.

The income received in a SPV structure is in the form of dividends distributed and interest paid by SPV.

Interest received by business trust is exempt and there is no liability on a SPV to deduct tax at source.

Incase of dividend payments from SPV, DDT was applicable which made the structure tax inefficient.

For rationalising the provisions, it is proposed to grant exemption from levy of DDT in respect of dividend declared,distributed or paid by SPV to the business trust. Further such dividend received by business trust and unit holders ondistribution would be exempt.

The above benefit is available only if the business trust holds whole of the nominal value of the share capital of the SPV.This condition would not apply if share capital is mandatorily required to be held by some other person in compliance withany law or if the equity share capital is held by any Government or Government body itself.

The exemption from the levy of DDT would only be in respect of dividends paid out of current income after the date whenthe business trust acquires the shareholding in the SPV. The dividends paid out of accumulated and current profits uptothis date shall be liable for levy of DDT as and when any dividend out of these profits is distributed by the company eitherto the business trust or any other shareholder.

The above amendments are effective from 1st June 2016

This eliminates the inefficiency in the SPV structure of business trust and create a positive sentiment as SPV is requiredto distribute 90% of its operating income.




Current Proposed

Securitisation Trusts

Taxation of Securitisation trusts, Asset Reconstruction Companies and their investors – s. 10(23DA)

& 194LBC

To be effective from 1st June 2016

Lower or non-deduction of tax certificate u/s 197 will have to be obtained by the investors whose income is exempt likeMF

S. 10(23DA) did not include activities undertaken by ARCtrusts.

Securitisation trusts were liable to pay income distributiontax of income at the rate of:

25% - investor being individual & HUF

30% - investor being other than individual & HUF

No distribution tax if recipient’s income is notchargeable to tax.

Income exempt in the hands of investor and also in thehands of the trust

New sub clause has been inserted to the explanation toinclude activities of ARC trusts.

Pass through status accorded to securitisation trusts and ARC trusts.

Income to be taxed in the hands of investor and not in thehands of the ARC trusts or securitisation trust.

Income of the same nature and same proportion as it is inthe hands of the securitisation trust or ARC trusts

Income deemed to be credited to the investor (on last day ofprevious year) if not paid or credited by the securitisationtrust/ARC trusts and such income would not be taxed againwhen received.

S. 194LBC inserted for deduction of TDS by securitisationtrust/ ARC trusts:

25% - resident payee is an individual or HUF 30% - resident payee is other than individual or HUF

Rates in force – non resident payee




Current Proposed

Alternate Investment Funds(AIF)

TDS provisions for payments made by AIF(category I or II) to investors – s. 194LBB & 197

Earlier the payee did not have an option to obtain a certificate u/s 197. Also, TDS @ 10% was applicable for all residentor non-resident payees. Thus, non-resident investors were unable to claim DTAA benefit. TDS was deductible on income

payable to them inspite of being eligible for DTAA benefit. They could not even approach the AO for certificate for loweror NIL deduction of tax. This caused undue hardship to non-resident payees

Income to non-residents is now liable to TDS at the rates in force. Rates in force is rate as per the Act or the DTAA,whichever is more beneficial to the assessee. Therefore, non-residents can now claim DTAA benefit at withholding stageitself. They are also eligible to apply to the AO for certificate u/s 197.

This amendment is effective from 1st June 2016

An AIF (Category I or II) is considered as tax pass throughin respect of income other than business income. Hence,at the time of payment or credit (whichever is earlier) ofthe income to the unit holders, the AIF has to deduct tax@ 10%, both for resident and non-resident unit holders.

TDS will have to be deducted by the AIF at the time ofcredit or payment, whichever is earlier,

(i) at the rate of 10%, where payee is a resident;

(ii) At the rates in force, where payee is a non-

resident (not being a company or a foreigncompany)

s. 197 which provides for obtaining of a lower or NILdeduction certificate by the payee, has also beenamended to include 194LBB in this list of sections forwhich such certificate can be obtained.




Tax incentives for Start-ups

A new s. 80-IAC is introduced which provides for a deduction of 100% of the profits and gains derived by an eligible start-up from a business involving innovation development, deployment or commercialization of new products, processes orservices driven by technology or intellectual property.

The benefit shall be available to an eligible Start-up which is a company which is setup on or after 1 st April 2016 but before1st April 2019 and shall be available for 3 consecutive assessment years out of 5 years beginning from the year in whicheligible Start-up.

Eligible start up means a company engaged in eligible business which fulfils the following conditions,

(a) it is incorporated on or after the 1st April, 2016 but before the 1st April, 2019;

(b) the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on orafter the 1st April, 2016 and ending on the 31st March, 2021; and

(c ) it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazetteby the Central Government.’.

In order to promote the start-up eco system as per the start – up India Action plan, it is envisaged to establish a Fund ofFunds which would raise INR 2,500 crore annually to finance start-ups. Accordingly it is proposed to introduce a new s.

54EE to provide exemption from capital gains tax if the long term capital gains are invested in units of such specified fund,within a period of 6 months after such transfer, subject to the condition that the amount remains invested for three yearsfailing which the exemption shall be withdrawn. The investment in the units of the specified fund shall be allowed upto INR50 lakh per year and upto INR 50 lakh of capital gain per year.

Tax incentives for start-ups – s. 80-IAC, 54EE & 54GB




Tax incentives for Start-ups

With a view to promote Make in India, start-ups are given encouragement by way of aforesaid deductions/exemptions.

However, there is no exemption to the start-ups from the provisions of MAT.

Capital gain on transfer of residential property not to be charged to tax in certain cases – s. 54GB

Current Proposed

Long term capital gains arising to Individual or HUF onaccount of transfer of a residential property is exempt incase the capital gains are invested in a company whichqualifies to be a small or medium enterprise and suchcompany utilises the amount invested for purchase ofnew asset

The definition of new asset does not cover computers orcomputer software;

Exemption is being extended to Individual or HUF, onthe capital gains arising from transfer of residentialproperty if the same are invested in a company whichqualifies to be an eligible start-up and such companyutilises the amount invested for purchase of new asset

The definition of new asset has been amended to

include computer or computer software for Start-ups.




Taxation of Income from Patents – s. 115BBF

A new section 115BBF is introduced, wherein royalty received by a resident, in respect of a patent developed andregistered in India, will be taxable at a concessional rate of 10% (plus applicable surcharge and cess) on gross basis i.e.without deduction of any expenditure incurred in respect of such royalty. Following conditions have to be met to be eligiblefor this concessional rate of tax:

The assessee should be a resident of India and should be true and first inventor of the patent. His name should beregistered as the patentee in the patent register as per the Patents Act, 1970;

The royalty income received should be for the transfer of all or any rights (including granting of a licence) in respect ofthe patent, use of any patent, imparting information related to the use of the patent or any services in relation to the

patent The consideration received should not be for sale of a product manufactured using a patented process or a patented

article or income chargeable under the head capital gains

Taxation of Income from Patents

This section has been inserted to encourage R&D activities in India and to encourage development of new innovativeproducts in India

The recommendation of the OECD in its BEPS project under Action Plan 5 on “Countering Harmful Tax Practices” whereinemphasis has been laid on the nexus approach, has also been considered. It states that benefit of preferential IP/Patenttax regime should be available only if substantial R&D activities are undertaken in the said jurisdiction. Therefore, merelylocation of the patent in India will not entitle the above beneficial tax rate u/s115BBF. It will have to be ensured that theR&D in relation to such patent is also carried out in India.




Current Proposed

Procedure of Assessment - Filing of Return of Income

Filing of return - s. 139(4) & 139(5)

Whether a notice u/s 142(1) is issued or not, the limit to furnish the return will be the last day of the relevant AY, or the dateof the completion of the assessment which ever is earlier.

The extended time limit of 1 year after the end of the relevant assessment year for furnishing the return of income is nowremoved. The revised time limit for the belated return is now before end of the relevant assessment year.

In view of this amendment, for AY 2016-17 as well as for AY 2017-18, the time limit for filing belated income tax returnwould be till 31st March 2018.

As per s. 139(4), any person who has not furnished areturn before the due date or within the time allowed undera notice issued u/s 142(1), may furnish the return for anyprevious year at any time before the expiry of 1 year fromthe end of the relevant AY or before the completion of theassessment, whichever is earlier.

As per s. 139(5), any person, having furnished the return

u/s 139(1) or in pursuance of notice issued u/s 142(1),discovers any omission or any wrong statement therein,may furnish a revised return at any time before the expiryof 1 year from the end of the relevant AY or before thecompletion of the assessment, whichever is earlier.

U/s. 139(4) the belated return for any previous year wouldhave to be filed, before the end of the relevantassessment year or before the completion of assessment,whichever is earlier.

U/s 139(5), the assessee can now file a revised return

even in case of a belated return filed u/s 139(4) of the Act.

Procedure of Assessment Scope of electronic




Current Proposed

Procedure of Assessment - Scope of electronic

processing of information

Scope of adjustments to be made while processing of returns – s. 143(1)

Presently, s 143(1)(a) provides the manner for processingof a return filed by making adjustments of arithmeticalerrors or incorrect claims apparent from any information inthe return

U/s 143(1)(a), following adjustments can be made whileprocessing a return of income:

i) Arithmetical errors in the return

ii) Incorrect claims apparent from record

iii) Disallowance of loss claimed, if return of the previousyear for which set off of loss is claimed was furnished

beyond the due date specified in s. 139(1),iv) Disallowance of expenditure indicated in the auditreport but not taken into account in computing the totalincome in the return,

v) Disallowance of deduction claimed u/s10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return isfurnished beyond the due date specified under section139(1); or

vi) Addition of income appearing in Form 26AS or Form16/16A which has not been included in computing thetotal income in the return

Procedure of Assessment Scope of electronic




Current Proposed

Procedure of Assessment - Scope of electronic

processing of information

Scope of adjustments to be made while processing of returns – s. 143(1)

This amendment will take effect from the 1st June, 2016.

On introduction of the aforesaid changes, the scope of adjustments u/s 143(1) intimation has increased significantly.

- However, before making any such adjustments, anintimation shall be given to the assessee either in writingor through electronic mode requiring him to respond tosuch adjustments. The response received, if any, will beduly considered before making any adjustment and incase no response is received within thirty days of issue ofsuch intimation, the processing shall be carried outincorporating the adjustments.




Procedure for Assessment – Time limit

Rationalisation of time limit for assessment, reassessment and recomputation – s. 153

Particulars Current Proposed

Assessment u/s 143(3) or best judgement assessment u/s144

2 years from the end of assessmentyear in which income was firstassessable (i.e. 31st March)

21 months from the end of assessmentyear in which income was first assessable(i.e. 31st December)

Reassessment u/s 147 1 year from the end of financial yearin which notice for reassessment wasserved

9 months from the end of financial year inwhich notice for reassessment was served

Effect to order passed u/s 254,263, 264, setting aside orcancellation of Assessment

12 months from the end of financialyear in which order is received.

9 months from the end of financial year inwhich order is received.

Particulars Limits

Giving effect to order passed u/s

250,254,260,262, 263,264

Three months from the end of the month in which the order is received/

passed by the jurisdictional Commissioner. Additional period of six months togive effect to the order upon request from the AO to specified authorities.

Assessment, reassessment orrecomputation pursuant to the aboveorders or in an order of any court in aproceeding otherwise than by way ofappeal or reference under the Act

12 months from the end of month in which order is received/passed u/s250,254,260,262, 263,264 by the jurisdictional Commissioner.

New Limits prescribed – s. 153




Procedure for Assessment – time limit

Rationalisation of time limit for assessment in search cases – s. 153

The provisions as they stood immediately before the amendment, shall apply to and in relation to any order of assessment,reassessment or recomputation made before the 1st day of June, 2016.

The amendment will take effect from 1st day of June, 2016.

Rationalisation of time limit for transfer pricing assessment – s. 92CA(3A)

Where assessment proceedings are stayed by any court or where a reference for exchange of information has been madeby the competent authority, the time available to the Transfer Pricing Officer for making an order after excluding the timefor which assessment proceedings were stayed or the time taken for receipt of information, as the case may be, is lessthan 60 days, then such remaining period shall be extended to sixty days w.e.f. 1st June 2016.

Particulars Current Proposed

Time limit for completion ofassessment u/s 153A

2 years from the end of the financialyear in which the last authorizations forsearch/ requisition was executed.

21 months from the end of thefinancial year in which the lastauthorizations for search/requisition was executed.

Time limit for completion ofassessment u/s 153C

2 years from the end of the financialyear in which last authorization forsearch/ requisition was executed or 1year from the end of financial year in

which books of accounts or documentsor assets seized or requisition is handedover to AO having jurisdiction over theperson

21 months from the end of thefinancial year in which lastauthorization for search/ requisitionwas executed or 9 months from

the end of financial year in whichbooks of accounts or documents orassets seized or requisition ishanded over to AO having

jurisdiction over the person




Collection and Recovery of Tax - Withholding Tax

Section Heads Existing limit (INR) Existing rate

(%)

Revised limit

(INR)

Proposed

limit(INR)/

Proposed Rate(%)192A Payment of accumulated

balance due to an employee30,000 10% 50,000 10%

194BB Winnings from Horse Race 5,000 30% 10,000 30%

194C Payments to Contractors 30,000 pertransaction

75,000 for aggregateTransactions duringthe Year.

2% forCo/Firm/co-op

housing society1%Individual/HUF

30,000 pertransaction

100,000 foraggregatetransactions

2% for Co/Firm/ co-op housing society

1% Individual /HUF

194D Insurance commission 20,000 10% 15,000 5%

194DA Payment in respect of LifeInsurance Policy

1,00,000 2% 1,00,000 1%

194EE Payments in respect of NSS

Deposits

2,500 20% 2,500 10%

194G Commission on sale oflottery tickets

1,000 10% 15,000 5%

194H Commission or brokerage 5,000 10% 15,000 5%

194K Income in respect of Units To be omittedw.e.f 01.06.16




Collection and Recovery of Tax - Withholding Tax

Section Heads Existing limit

(INR)

Existing Rate

(%)

Proposed

limit(INR)/

Proposed Rate(%)

194L Payment of Compensationon acquisition of Capital

Asset

To be omittedw.e.f01.06.2016

194LA Payment of Compensationon acquisition of certainImmovable Property

2,00,000 10% 2,50,000 10%

197Ar.w.s.194-I

No deduction of tax to bemade on certain paymentsif self declaration providedunder Form 15G/15H

Withholding tobe made forrent receivedu/s 194-I.

2% for use ofmachinery/plant10% for Land &building

Nil withholding ifself declarationprovided underForm 15G/15H

Nil

194LBB Income in respect of unitsof alternate investmentfund

- 10% for allassesses

- 10% for residents As per rates in force for Nonresidents. New provision forobtaining lower deductioncertificate under section 197

194LBC Income in respect of unitsof securitisation trust

NA NA For Residents-25% forIndividual and HUF30% for othersFor non residents- As per ratesin force

These amendments will be effective from 1st June 2016

Collection and Recovery of Tax - Requirement to furnish




Current Proposed

Collection and Recovery of Tax - Requirement to furnish

PAN in case of non resident

Exemption for non-residents to furnish PAN – s. 206AA

This provision was an impediment in terms of ease of business, as many non-residents prefer not to do business withIndian residents as it either entails higher withholding or obtaining of PAN or it increases the cost of services to residents ifpayment to non-residents is net of tax.

This amendment will be effective from 1

st

June 2016.

As per s. 206AA, if PAN is not provided at the time ofdeduction of tax, then tax is to be deducted at higher of thefollowing:

(i) at the rate specified in Act; or

(ii) at the rate in DTAA; or

(iii) at the rate of 20%.

In order to reduce compliance burden for non-residents, itis proposed that the section shall not apply to a non -resident, in respect of any payment, subject to suchconditions as may be prescribed

In such case, there may not be a higher rate ofwithholding tax due to non availability of PAN.

Collection and Recovery of Tax - Installments of Advance




Current Proposed

Collection and Recovery of Tax - Installments of Advance

Tax and its Due dates

Schedule for payment of advance tax u/s 211 and levy of interest u/s 234C

Presently the advance tax payment schedule for corporateassessees is 15%, 45%, 75% and 100% and the same ispayable on or before 15th June, 15th September, 15th December and 15th March respectively.

For assessees other than corporates, the advance taxpayment schedule is 30%, 60% and 100% and the same

is payable on or before 15th September, 15th Decemberand 15th March respectively.

All assesses (corporate and non corporate) shall be liableto pay advance tax of 15%, 45%, 75% and 100% on orbefore 15th June, 15th September, 15th December and 15th March respectively.

No interest shall be charged u/s 234C in respect ofassessee having income under the head "Profits and

gains of business or profession" for the first time, subjectto fulfillment of conditions specified therein

Will Increase advance tax compliance for non-corporate assessee .

The above amendment is proposed so as to advance the collection of revenue.




Current Proposed

Collection and Recovery of Tax - Interest on refund

Payment of interest on refund – s. 244A

Presently, interest is receivable by an assessee on anyrefund due to him, being simple interest at the rate of0.5% for every month comprised in the period from the 1stday of April of the assessment year to the date on whichthe refund is granted.

Interest u/s 244A was not granted if refund was onaccount of self-assessment tax

In cases where the Return of Income is filed after the duedate, interest u/s 244A shall be granted for a periodbeginning from the date of filing of return.

An assessee shall be eligible to interest on refund of self-assessment tax for the period beginning from the date ofpayment of tax or filing of return, whichever is later, to the

date on which the refund is granted. It is also proposed to amend s. 153 to provide that where

a refund arising out of appeal effect is delayed beyond 3months from the end of the month in which the order isreceived by the tax officer as prescribed u/s153(5), theassessee shall be entitled to receive additional interest onsuch refund amount @ 3% p.a., for the period beginningafter the expiry of the aforesaid period of 3 months to thedate on which the refund is granted.

These amendments will take effect from 1st June, 2016.

Pursuant to the proposed amendment, assessee shall be eligible for interest @ 9% p.a. (6% existing + additional 3%proposed) on delayed refund arising out of appeal effect.

Whilst the differential interest is small, it’s a welcome beginning.

I ti f P ti ‘H i f All’




100% deduction for the profits derived from developing and building affordable approved housing

projects – s. 80-IBA

A new Section 80-IBA is proposed to be introduced, wherein 100% deduction of the profits derived from developing andbuilding affordable housing projects (which is approved by the competent authority after 1st June, 2016 but on or before31st March, 2019), will be allowed to an assesse if:

The project is completed within 3 years from the date of its approval by the competent authority;

For the projects located within metro cities and within the area of 25 km from the municipal limits of these cities:

- The plot of land used should not be less than 1000 sq. metres;

- Size of the residential unit should not be more than 30 sq. metres

- Floor area ratio permissible in respect of the plot of land should not be less than 90%

For the projects located in any other area:

- The plot of land used should not be less than 2000 sq. metres;

- Size of the residential unit should not be more than 60 sq. Metres

- Floor area ratio permissible in respect of the plot of land should not be less than 80%

Once a residential unit is allotted to an individual, no other unit shall be allotted to him or his spouse or minor childrenin the same housing project.

The built-up area of the shops and other commercial establishments included in the housing project should notconstitute more than 3% of the aggregate built-up area.

The assessee maintains separate books of account in respect of the eligible housing project.

This deduction will not be available to a contractor.

Incentives for Promoting ‘Housing for All’

I ti f P ti ‘H i f All’




Incentives for Promoting ‘Housing for All’

Current Proposed

Amount of deduction – INR 1,00,000/- for AY 2014-15and 2015-16 cumulatively;

Loan has to be sanctioned by the financial institutionduring the FY 2013-14;

Amount of loan should not exceed INR 25 lakh;

Value of residential house property should not exceedINR 40 lakh;

Assessee should not own any other residential houseproperty on the date of sanction of loan.

Amount of deduction – INR 50,000/- p.a. till repaymentof loan continues;

Loan has to be sanctioned by the financial institutionduring the FY 2016-17;

Amount of loan should not exceed INR 35 lakh;

Value of residential house property should not exceedINR 50 lakh;

Assessee should not own any other residential houseproperty on the date of sanction of loan.

Deduction for interest on loan for residential property from a Financial Institution – s. 80EE

The intention of the government is to incentivise affordable housing by encouraging small builders / developers by allowing100% deduction. However, considering the conditions prescribed, it seems that this would benefit a very small section ofbuilders developing housing projects.

The provisions proposed also encourages people to own a house by providing deduction in respect of the interest onhousing loan. However, this deduction will be only be beneficial in respect of self occupied property.

Double deduction is not allowed on the same interest.

P lt P i i




Levy of Penalty in cases of under reporting and mis-reporting of Income – Section 270A

Section 271(1)(c) which deals with penalty on account of concealment of particulars of income or furnishing inaccurateparticulars of income will not apply in relation to assessments for A.Y. 2017-18 and thereafter. Amount of penalty leviablewas between 100 to 300 percent of the amount of tax sought to be evaded.

New section 270A is inserted in lieu thereof for levy of penalty in case of under reporting and misreporting of income.

An assessee shall be considered to have under reported his income if the assessed income is greater than the income

processed in return u/s 143(1)(a), or assessed income exceeds the maximum amount not chargeable to tax where returnhas not been filed, or the reassessed income is greater than the income assessed earlier or the loss claimed is reduced onassessment.

The above under reporting would be considered as misreporting where there has been suppression of facts, non-recordingof investments or receipt in books, unsubstantiated claim of expenditure, recording of false entries or failure to report anyinternational transaction.

Penalty in case of under reporting of income shall be fifty per cent of the tax payable on such income. However, when theunder reporting of income results from misreporting, a penalty of two hundred per cent of tax payable will be applicable.

Penalty Provisions

P lt P i i




Waiver of Penalty

New section 270AA has been proposed for grant of immunity from penalty and prosecution if the assessee pays the entireamount of tax and interest as per the assessment order within the specified time and does not prefer an appeal againstsuch order. However this immunity would not be applicable in cases of misreporting of income.

The application of grant of immunity has to be made within one month from the end of the month in which the order isreceived. The AO will accept or reject the application with one month from the end of the month in which the application isfiled. Such order is final.

Other Provisions

Current section 271AAB(1)(c) provides for penalty between 30% to 90% of the undisclosed income, in cases where searchhas been initiated.

Amended section 271AAB(1)(c), provides for penalty leviable at a flat rate of 60% of the undisclosed income , in caseswhere search has been initiated.

The intention of the government is to bring certainty and clarity in the penalty provisions. The discretionary power of

income tax officer w.r.t. rate of penalty has been done away with and specific rates have now been prescribed. However it could still be a subjective matter as to when under reporting of income is a result of misreporting of income.

Penalty Provisions

Mi ll A d t / Ob ti




Miscellaneous Amendments / Observations

It is provided that rate of 10% tax for long term capital gains arising from transfer of securities is applicable to shares of aunlised company.

The deduction in respect of interest of INR 2 lakh on housing loan for self occupied property is available only if theacquisition or construction of the house is completed within 3 years from the end of the FY in which capital was borrowed.This period is now being increased to 5 years.

Provisions of Section 25A, 25AA and 25B is proposed to be merged under a new Section 25A to simplify and consolidatethe provisions for taxing unrealised rent and arrears of rent in the year of its receipt. Therefore, the 30% deduction isproposed to be allowed even in respect of the unrealised rent realised subsequently, such deduction was earlier restrictedonly to arrears of rent received.

The transfer from one plan to another plan on account of consolidation within the same scheme would not be consideredas transfer for the purpose of determination of capital gains.

Sale of motor vehicle for value exceeding INR 10 lakh and sale of goods (other than bullion or jewellery) or provision ofservices in cash (excluding where TDS has been deducted) for the value exceeding INR 2 lakh, are made subject to TCSat the rate of 1% of the sale consideration.

Such provisions relating to TCS on sale of any goods (other than bullion and jewellery) or provision of services shall notapply subject to prescribed conditions.

Application made by the assessee u/s 220, 273A and 273AA shall be disposed off by the officers mentioned therein, withina period of 12 months from the end of the month in which such application is received. Further, no application under theaforesaid sections shall be rejected without giving the assessee the opportunity of being heard.

To promote e-assessment it is proposed to amend section 282A(1) so as to provide that notices and documents requiredto be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronicform.

Mi ll A d t / Ob ti




Miscellaneous Amendments / Observations

Loss of any specified business referred in Section 35AD will be allowed to be carried forward and set off only if the returnis filed in time.

Interest earned on Deposit Certificates under the Gold Monetization Scheme, 2015 is exempt. Deposit Certificates issuedunder Gold Monetisation Scheme, 2015 are also excluded from the definition of capital asset and thereby exempt from tax

The non-compete fees received in relation to any profession will also be taxed as business income.

In addition to non-allowance of expenditure against the deemed undisclosed income such as cash credit, unexplainedinvestments u/s 68, 69, losses also cannot be set off against such income.

Amount of rebate from tax payable subject to the maximum amount of tax available to resident individuals, whose totalincome does not exceed INR 5,00,000/-, has increased from INR 2,000/- to INR 5,000/-.

Deduction allowable for rent paid by an individual who is not granted HRA by an employer is been increased from INR.2,000/- pm to INR 5000 pm u/s 80GG.

Deduction in respect of provision for bad and doubtful debts made by NBFCs would be allowable up to 5% of total income( before making deductions under Chapter VIA).

If the total income including income exempt u/s 10(38) exceeds the basic exemption limit, it would be liable to file return.

A return filed without payment of self-assessment tax along with interest shall not be treated as a defective return.

The existing provision of Section 194-I provides the threshold limit of Rs.1,80,000 for deduction of tax at source. However,there may be cases where tax payable on recipient’s total income, including rental payments will be nil. Thus, the Finance

Bill proposes to provide an option to the landlords to file declaration in Form 15G/15H for non-deduction of tax at source.




SERVICE TAX

Legislative Amendments





Particulars Amendments*

Section 65B(44) –

Service Definition

Definition of service proposed to be amended to provide that activities carried out by a lottery

distributor or selling agents should be on behalf of the State Government and as per theprovisions of the Lotteries (Regulation) Act, 1998

Section 66E –

Declared Service

Assignment of the right to use the radio-frequency spectrum by the Government and subsequenttransfers thereon proposed to be a declared service and liable to service tax

Section 67A – Date of

Determination of Rate

of Tax

The amendment proposes to provide that the point of time with respect to the rate of service taxshall be determined as per POTR, thereby resolving the anomaly between the FA and the POTR

Section 73 – Recoveryof Service Tax Time limit for issuing demand notices under the normal period proposed to be enhanced from 18months to 30 months. Extended period of limitation continues to be 5 years.

Section 78A – Penalty

for offences by

Director, etc of the

Company

The amendment proposes to clarify that once the proceedings against the Company standconcluded on payment of service tax/interest/penalty (if applicable), within a period of 30 daysfrom the date of receipt of SCN, the penalty on directors, managers, secretaries, etc of theCompany shall also be deemed to have been concluded

Section 89, 90 and 91

– Offences

In a move towards reducing coercive measures, the amendment proposes to confine the powersto arrest only in situations where tax has been collected but not paid and also proposes to

enhance the monetary limits for exercising such powers from INR 50 lakhs to 200 lakhs

Refund to exporter of

goods (Notification

No.1/2016 - ST)

Refund of service tax paid on services used beyond the factory or any other place orpremises of production or manufacture of the goods exported is proposed to be allowed forthe period 1st July, 2012 to 2nd February, 2016

Rebate claim to be filed within 1 month from date of enactment of the Bill in respect of claimsrejected for earlier period

* Applicable from the date of enactment of the Bill ,unless otherwise specified.







Section 101 – Retrospective

Service Tax exemption tocanal, dam or other irrigation

works

Services by way of construction, erection, commissioning, installation, completion, fitting

out, repairs, maintenance, renovation, or alteration of canal, dam or other irrigationworks provided to entities set up by Government but not necessarily by an Act ofParliament or a State Legislature proposed to be exempted retrospectively for the period1st July, 2012 to 29th January, 2014.

Section 102 – Restoration of

exemptions withdrawn for

certain contracts entered

before its withdrawal

(Notification No. 09/2016-ST)

Service tax exemption on specified construction related services provided to theGovernment/Local Authority/ Governmental Authority proposed to be restored till 31st March, 2020 in respect of contracts entered into prior to 1st March, 2015 and whereapplicable stamp duty has been paid prior to such date

Section 103 – Restoration of

exemptions withdrawn for

certain contracts entered

before its withdrawal

(Notification No. 9/2016-ST)

Service tax exemption on specified construction related services of original workspertaining to airports or ports proposed to be restored till 31st March, 2020 in respectof contracts entered into prior to 1st March, 2015 and where applicable stamp dutyhas been paid prior to such date. Certificate form MCA or MoS required to establish that contract has been entered

into prior to 1st March, 2015 Services provided during the period 1st April, 2015 to 29th February, 2016 under

such contracts also proposed to be exempted from service tax

Refund claims – Section 101,

102 and 103

Refund of service tax proposed to be allowed on retrospective exemptions Claim to be filed within 6 months from the date of enactment of the Bill subject to

condition that the burden of tax has not been passed on to the recipient .

* Applicable from the date of enactment of the Bill ,unless otherwise specified.

L i l ti A d t




Particulars Amendments

Krishi Kalyan Cess 0.5% KKC proposed to be levied on the value of all or any of the taxable services from

1st June, 2016 for financing and promoting initiatives to improve agriculture and welfare offarmers.

KKC paid on input services proposed to be allowed as a set-off against payment of KKCleviable on output services

Section 66D – Negative

List

Service of transportation of passengers by an air-conditioned stage carriage proposedto be removed from the Negative List and made taxable w.e.f. 1st June, 2016

Services by way of transportation of goods by a vessel from a place outside India up tothe customs station of clearance in India proposed to be removed from the Negative List

and made taxable w.e.f 1st June, 2016 Services by way of transportation of goods by an aircraft from a place outside India up to

the customs station of clearance in India moved from the Negative List to the ExemptionList*. Such services continue to be exempt from tax.

Services by way of pre-school education, education as a part of curriculum for obtaininga qualification recognized under any law and approved vocational courses moved fromthe Negative List to the Exemption List*. Such services continue to be exempt from tax.


* Mega Exemption Notification No. 25/2012 as amended from time to time

Abatement




Abatement

* Notification No.08/2016-Service Tax dated 1st March , 2016 effective from 1st April,2016.** The effective tax rate has been computed based on the prevailing Service Tax rate of 14% and Swachh Bharat Cess of 0.5%.^ Applicable from 1st June, 2016.

Nature of Services Current Proposed*

Transport of goods or passengers (with or without

accompanied belongings) by railTransport of goods in a vessel

CENVAT credit on inputs, input

services and capital goods notavailable.

CENVAT credit on input

services available.

Motorcab Services Cost of fuel to be included in the gross consideration forthe purposes of claiming abatement

Other Services Abatement

rate

Effective tax

rate**

Abatement

rate

Effective

tax rate**

Transportation of goods by rail in containers by any person

other than Indian Railways

70% 4.35% 60% 5.80%

GTA in relation to transportation of used household goods 70% 4.35% 60% 5.80%

Services provided by foreman of chit fund in relation to chit NIL 14.5% 30% 10.15%

Transport of passengers, with or without accompaniedbelongings by a stage carriage^

- - 60% 5.80%

Tour Operator’s Services – Arranging or booking accommodation only

Others

90%

75% / 60%

1.45%

3.63% / 5.8%

90%

70%

1.45%

4.35%

Construction of a complex, building, civil structure or a partthereof

75%/70%

3.63% /4.35%

70% 4.35%

Exemptions




Exemptions


Legal services provided by a Senior Advocate to any person except a non business entity Exempt Taxable^Services to an Arbitral Tribunal by a person represented on an Arbitral Tribunal Exempt Taxable^

Services provided by the Indian Institutes of Management by way of specified educationalprogrammes

Taxable Exempt**

Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry ofSkill Development and Entrepreneurship by way of assessments under Skill DevelopmentInitiative Scheme

Taxable Exempt^

Services provided by way of skill or vocational training by Deen Dayal Upadhyaya GrameenKaushalya Yojana Training Partners

Taxable Exempt^

Specified construction related services provided under Housing for All (Urban) Mission/ PradhanMantri Awas Yojana

Taxable Exempt**

Construction, erection, commissioning or installation of original works pertaining to monorail ormetro excluding contracts entered into before 1st March, 2016 on which stamp duty has beenpaid

Exempt Taxable**

Construction, erection, commissioning or installation of original works pertaining to low costhouses up to carpet area of 60 Sq.mt under Housing for All (Urban) Mission / Pradhan Mantri Awas Yojana / housing scheme of a State Government

Taxable Exempt**

Performance by an artist in folk or classical art forms of music / dance / theatre (excluding as abrand ambassador)

Exemptedupto1,00,000

Exemptedupto1,50,000^

* Notification No.09/2016-Service Tax dated 1st March, 2016.

** Applicable from 1st March, 2016 ^ Applicable from 1st April, 2016

Exemptions




Exemptions


Transportation of passengers by ropeway, cable car or aerial tramway Exempt Taxable^

General insurance services provided under Niramaya Health Insurance Scheme implementedby Trust constituted under the National Trust for the Welfare of Persons with Autism, CerebralPalsy, Mental Retardation and Multiple Disabilities Act, 1999

Taxable Exempt^

Life insurance services provided by way of annuity under the National Pension Systemregulated by PFRDA

Taxable Exempt^

Services provided by the Employees Provident Fund Organisation to persons governed underthe Employees Provident Funds and Miscellaneous Provisions Act, 1952

Taxable Exempt^

Services provided by IRDA to insurers under the IRDA Act, 1999 Taxable Exempt^

Services provided by SEBI by way of protecting the interests of investors in securities and topromote the development of, and to regulate, the securities market

Taxable Exempt^

Cold chain knowledge dissemination services provided by National Centre for Cold ChainDevelopment under Ministry of Agriculture, Cooperation and Farmer’s Welfare

Taxable Exempt^

Services provided by bio-incubators recognized by Biotechnology Industry Research AssistanceCouncil to incubatees#

Taxable Exempt^

Information Technology Software recorded on media required to d eclare RSP on whichappropriate excise and customs duties have been paid, subject to fulfillment of specifiedconditions%

- Exempt**

* Notification No.09/2016-Service Tax dated 1st March, 2016. #Notification No.12/2016-Service Tax dated 1st March, 2016.

** Applicable from 1st March, 2016 ^ Applicable from 1st April, 2016

% Notification No.11/2016-Service Tax dated 1st March, 2016

Reverse Charge




Reverse Charge


Services provided by mutual fund agents/ distributor to a mutual fund or assetmanagement company.

Reverse Charge Forward Charge

Legal services provided by a Senior Advocate to – Business entity with a turnover exceeding INR 10 lakh Business entity with a turnover of up to INR 10 lakh Advocate or firm of advocates

Reverse ChargeExemptExempt

Forward ChargeForward ChargeForward Charge

Liability to pay Service tax on services provided by Government or localauthorities to business entities – Renting of immovable property, services in relation to an aircraft or vessel

inside or outside the precincts of a port or an airport, transport of goods orpassengers and services by Department of Post by way of speed post,express parcel post, life insurance and agency services

Other Services

Forward Charge

Reverse Chargehitherto applicableonly on Defined

Support Services

Forward Charge

Reverse Chargenow applicableon All Services

*Notification No.18/2016-Service Tax dated 1st March, 2016 effective from 1st April, 2016.

Service Tax Rules




Service Tax Rules


Rule 6(1) –

Deposit of

Service Tax

Deposit of service tax by One Person Company with value of taxable services up to INR 50 lakhand HUF on quarterly basis

Option to One Person Company with value of taxable services up to INR 50 lakh to depositservice tax on receipt basis

Rule 6(7A) –

Composite Rate

Change

Reduction in the rate of Service Tax on single premium annuity (insurance) policies from 3.5% to1.4% of the premium.

Rule 7, 7B, 7C -

Annual Return

Annual return to be filed by manufacturer / service provider for each FY by 30th November of

succeeding FY Revised return can be filed within a period of one month from the date of filing of original return Delayed return filing fees - INR 100 per day for period of delay subject to maximum of INR

20,000/-

*Notification No.19/2016-Service Tax dated 1st March, 2016 effective from 1st April, 2016.





Section 2(43), 58A –

Warehouse

Definition of warehouse amended to insert a new clause of warehouse for enabling storageof dutiable goods, which is under the physical control of the Customs Department .

Sec 58A inserted to enable Principal Commissioner/Commissioner to license a privatewarehouse for storing goods and for exercising physical control over such warehouse.

Section 2(45), 9 –

Warehousing Station

Definition of warehousing station proposed to be deleted Consequential amendment pursuant to deletion of Section 9, which empowered the CBEC to

declare any place to be a warehousing station

Section 25 – Power to

Grant Duty Exemption

Requirement of publishing and offering for sale any notification issued by the Directorate ofPublicity and Public Relations of CBEC proposed to be done away with

Section 28 – SCN Time limit for service of notice in case of recovery of duties not levied or not paid or short levied

or shor t paid proposed to be extended from 1 years to 2 years in cases not involving fraud,suppression of facts, wilful misstatements etc

Sections 47, 51, 156 –

Deferred Payment

Facility of deferred payment of customs duties proposed to be extended to importers andexporters with proven track record

Section 53 – Transit of

Goods

Proposed to be amended to enable the CBEC to frame regulations for permitting transit ofgoods without payment of duty

Sections 57,58, 58A –

Licensing of Warehouse Proposed to be amended to enable the Principal Commissioner/Commissioner to license apublic/private warehouse for storage of dutiable goods

Section 58B – Cancellation /

Suspension of License

Proposed to regulate the process of cancellation of license or suspension of operation ofwarehouse of a private/public warehouse on account of certain specified breaches committedby the licensee.

Section 59 –

Warehousing Bond Proposed to – Enhance the bond amount from two times to three times the duty involved in case of

importers availing warehouse bond facilities and Furnishing such security(as may be prescribed) in addition to the bond


*Applicable from the date of enactment of the Bill






Section 60 – Deposit

of Goods in

Warehouse

Proposed to define the date of removal of goods from a customs station and deposit thereof

into warehouse CBEC to frame regulations governing the manner of depositing such goods into a warehouse

Section 61 –

Warehousing Period

Proposed to –

Extend the period of warehousing for all goods used by EOUs, EHTPs, STPs, SBYs and other

units manufacturing under bond

Empowers Principal Commissioner/Commissioner to extend warehousing period up to a

maximum of 1 year at a time. Period of 1 year can be reduced to a shorter period at the

discretion of Principal commissioner/Commissioner, for goods likely to deteriorate.

Interest payable(at rates fixed by Government) on the amount of duty for the period following

the expiry of the 90 day period till actual date of payment of duty.

Empowers the CBEC to waive the whole or part of interest in exceptional situations.

Section 62 – Control of

Warehoused Goods

Provisions relating to physical control over a warehouse goods proposed to be deleted, as the

conditions for licensing different categories of warehouse and physical control thereon have been

set out in Sections 57, 58 and 58A

Section 63, 68, 69

and 72 – Rent andWarehousing Charges

Provisions relating to payment of rent and warehousing charges to warehouse keeper proposed

to be deleted, in view of the privatisation of services and free market determination of rates

Section 64 – Owner’s

Rights with respect to

Warehoused Goods

Proposed to effectively curtail some of the owner’s rights (taking of samples, changing of

containers, separation of damaged/deteriorated goods)








Section 65 – Operations relating to

Goods in Warehouse

Proposed to delete payment of fees to Customs for supervision of

manufacturing facilities under bond Sanctioning authority changed from Assistant /Deputy Commissioner to

Principal Commissioner/ Commissioner

Section 72 - Improper Removal of

Goods from the Warehouse

Proposed to delete provisions relating to removal of samples without payment of

duty from purview of “improper removal of goods from the warehouse”

Section 73 – Cancellation and Return

of Warehousing Bond

Proposed to provide for execution of cancellation bond in case of transfer of

ownership of goods.

Section 73A – Responsibility onCustodian of Warehoused Goods Proposed to provide for custody of warehoused goods for laying downresponsibilities and liabilities of the ware housekeeper



Existing Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996substituted by the New Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)Rules, 2016 (effective from 1st April, 2016). The New rules inter-alia provide for: Simplification of procedures Duty exemption on import of goods by manufacturer based on self declaration - Permissions from the Central Excise

authorities done away with

No need for any additional registration Manufacturers permitted to re-export unutilised or defective imported goods within 3 months (6 months earlier) fromthe date of import

Section 8C of the Customs Tariff Act, 1975 which covers the transitional safeguard mechanism is proposed to be removed.This will leave safeguard measures covered under Section 8D as the only tariff related safeguard measure.

Various notifications pertaining to Advance License and Duty Free Import Authorisation Schemes amended retrospectivelyto provide that exemption from safeguard duty is available under these notifications

Baggage Rules




Baggage Rules

Existing Baggage Rules substituted with new Baggage Rules, 2016* to simplify and rationalise slabs of duty free allowancesacross passenger categories

Eligible Passenger Origincountry

Duty FreeAllowance Eligible Items

Indian Resident or a foreigner residingin India or a tourist of Indian origin,excluding infants

Other thanNepal,Bhutan,Myanmar

INR 50,000/- Used personal articles, travel souvenirs andother articles excluding prohibited articles (Ifcarried in person or in accompanied baggage)

Tourist of foreign origin, excludinginfants of upto 2 years of age

INR 15,000/- Same as above

Indian Resident or a foreigner residingin India or a tourist, excluding infantsof upto 2 years of age

Nepal,Bhutan,

Myanmar

By Air – INR15,000/-By Land – Nil

Same as aboveOnly used personal effects shall be allowed dutyfree

Indian passenger who has beenresiding abroad for over one year

Anywhere - Gold Jewellery:Males: 20 gms with a value cap of INR 50,000/-Females 40 gms with a value cap of INR1,00,000/-

All passengers Anywhere - Alcohol liquor or wine: 2 litres

Cigarettes: 200 numbers orCigars 50 numbers orTobacco 250 grams

Passenger of 18 years and above Anywhere - One laptop computer (note book computer )

* Applicable from 1st April, 2016

Baggage Rules




Baggage Rules

CBDR amended to confine filing of Customs Declaration only for passengers coming to India and carrying dutiable orprohibited goods.*

Eligible Passenger Duty Free Allowance*

Transfer of residence to India by OverseasProfessionalsDuration of Stay Abroad:3 months – 6 months6 months – 1 yearMinimum stay of 1 year during preceding two yearsMinimum stay of 2 years or more

Used personal and household articles, other than articles setout in Annexure I or II but including articles in Annexure III

INR 60,000/-INR 1,00,000/-INR 2,00,000/-INR 5,00,000/-Subject to fulfillment of specified conditions

Member of crew of a vessel or an aircraft Chocolates, Cheese, Cosmetics and other petty gift items

upto value of INR 1,500/-

* Applicable from 1st April, 2016

Tariff Amendments



72

CNK & Associates LLP Finance Bill, 2016

Tariff Amendments

Particulars Current Proposed*

Food Processing:

Cashew nuts NIL 5%

Cold Chain including pre-cooling unit,packhouses, sorting and grading linesand ripening chambers

10% 5%

Refrigerated containers 10% 5%

Petroleum Explorat ion And Prod uct ion:

Goods required for exploration andproduction of hydrocarbon activitiesundertaken under PetroleumExploration Licenses or MiningLeases issued or renewed before 1St April 1999.

ApplicableBCD and

CVD

BCD-NILCVD-NIL

Paper, Paperboard And Newspr int :

Wood in chips or particles formanufacture of paper, paperboardand newsprint

5% NIL

Plans, drawings and designs NIL 10%

Health Care:

Disposable sterilized dialyzer andmicro barrier of artificial kidney

12.5% NIL

Textiles:

Specified fibres and yarns 5% 2.5%* Applicable from 1st March, 2016


Art ic les of Rubber:

Natural latex rubber made balloonsfalling under specified headings.

10% 20%

Metals:

Primary aluminium, zinc alloys 5% 7.5%

Jewellery:

Imitation Jewellery 10% 15%

Renewable Energy:

Industrial solar water heater 7.5% 10%

Capital Good s and Parts thereof :

Increase in the tariff rate of BCD for211 specified tariff lines inChapters 84,85 and 90• Effective rates for 96 tariff lines• Effective rates for 115 tariff lines

7.5%

7.5%7.5%

10%

10%7.5%

Capital Goods :

Specified machinery required forconstruction of roads

CVD-NIL CVD-12.5%

Jewellery:

Gold Dore bars 8% CVD 8.75% CVD

Silver Dore 7% CVD 7.75% CVD

Tariff Amendments



73


Tariff Amendments

Part iculars Current Proposed*

Electronics /Hardware :

E-Readers NIL 7.5%Parts of E-Readers Applicable

BCD5%

Magnetron of capacity of 1KW to1.5KW for use in manufacture ofdomestic microwave ovens

10% NIL

Machinery, electrical equipment andinstrument and parts thereof forsemiconductor wafer fabrication /LCDfabrication units

ApplicableBCDSAD

NIL BCDNIL SAD

Machinery, electrical equipment andinstrument and parts thereof importedfor Assembly, Test, Marking andpackaging of semiconductor chips

ApplicableBCDSAD

NIL BCDNIL SAD

Charger/adapter, battery and wiredheadsets/speakers for manufacture ofmobile phones

BCD-NILCVD-NILSAD-NIL

ApplicableBCD

CVD-12.5%

SAD-4%Inputs, parts and components,subparts for manufacture ofcharger/adapter, battery and wiredheadsets/speakers of mobile phones,subject to actual user condition

12.5% BCD-NILCVD-NILSAD-NIL

Specified telecommunicationequipment

NIL BCD 10%

Part iculars Current Proposed*

Parts and components, subparts formanufacture of Routers, broadband

modems, set-top boxes for gainingaccess to Internet and for TV,DVR,NVR, CCTV camera/IP camera, lithiumion battery

12.5% BCD-NILCVD-NIL

SAD-NIL

Pre form of silica for manufacture oftelecom grade optical fiber /cables

NIL 10%

Populated PCBs for manufacture ofpersonal computers (laptop ordesktop)

NIL SAD 4% SAD

Populated PCBs for manufacture ofmobile phone/tablet computer

NIL SAD 2% SAD

Automobi les :

Specified parts of electric and hybridvehicles

BCD-NILCVD-6%

Up to31.03.2016

BCD-NILCVD-6%Without

timeLimit

Ship Repair units :

Capital goods and spare thereof , rawmaterials, parts, material handlingequipment and consumable for repairsof ocean going vessels by a shiprepair unit subject to actual usercondition

Applicableexcise duty

NIL

* Applicable from 1st March, 2016



74


EXCISE




75



Section 5A - Power

to Grant Duty

Exemption

Requirement of publishing and offering for sale any notification issued by the Directorate ofPublicity and Public Relations of CBEC proposed to be done away with

Section 11A - SCN Time limit for service of notice in case of recovery of duties not levied or not paid or short levied orshor t paid proposed to be extended from 1 year to 2 years in cases not involving fraud,suppression of facts, wilful misstatements etc

Section 37B –

Instructions to

Central Excise

Officers

Proposed to extend the powers of the CBEC to issue orders, instructions and directions for thepurposes of implementation of any other provisions of the Act. Hitherto, such powers were confinedto matters relating to uniformity in classification of excisable goods or with regards to levy of duty insuch goods.

Third Schedule Proposed to make some editorial changes, consequent to the introduction of the 2017 HarmonizedSystem of Nomenclature and to include therein: All goods falling under heading 3401 and 3402

Aluminium foils of a thickness not exceeding 0.2mm Smart Watches Accessories of Motor Vehicles and other specified goods.



Central Excise Rules



76



Rule 7(4)* Interest payable on the duty paid under provisional assessment (before or after the order of assessment)after the due date till the date of actual payment (earlier interest was payable only on the duty paid afterfinal order of assessment)

Rule 11(8)** Self attestation of the duplicate digitally signed invoice meant for transporter has been done away with

Rule 12** Annual Financial Information Statement (ER-4) would be termed as Annual Return Filing of Annual Return by EOU Filing of Annual Installed Capacity Statement (ER-7) has been done away with.

Revised Return To be filed by end of the calendar month in which original return is filed Revised Annual Return to be filed within one month from the date of submission of the said return. Relevant date for recovery of duty shall be the date of filing the revised return

Rule 17** Revised return by EOU to be filed by end of the calendar month in which original return is filed

Rule 26** Penalty proceedings deemed to be concluded in respect of persons who deals with any excisable goodsliable for confiscation if the proceedings of the person liable to pay duty has been concluded.

* Applicable from 1st March, 2016** Applicable from 1st April, 2016

Non Tariff Amendments



77



Jewellery Manufacturers* Following relaxations extended to manufacturers of jewellery, except silver jewellery,but including jewellery covered under CETH 7113 of the First Schedule to CETA - Option to avail centralised central excise registration Exemption from requirement of post-registration physical verification of the

premises by the excise authorities Quarterly payment of duty if value of clearances of excisable goods in the

preceding FY does not exceed INR 12 crores** Duty exemption on clearances up to INR 6 crores, if value of clearance of

excisable goods in preceding FY does not exceed INR 12 Crores. Duty exemption for the month of March 2016 on clearances up to INR 50 lakhs.

Fixed Tariff Value* Fixed tariff value in respect of articles of jewellery (other than silver jewellery),falling under CETH 7113 of the First Schedule to the CETA rescinded

Tariff value of articles of apparel, not knitted or crocheted falling under CETH 6201reduced from 60% of RSP to 30%

Pan Masala* Form 2 revised with respect to break-up of duty payment for apportionment betweenvarious duties

Chewing Tobacco and

Unmanufactured Tobacco *

Deemed quantity of production per packing machine per month for Chewing Tobacco,Filter Khaini, Jarda Scented Tobacco and Unmanufactured Tobacco has beenenhanced, pursuant to an increase in excise duty

Abatement* Abatement benefit extended to all products falling under CETH 3401, 3402, Aluminium foil of thickness not exceeding 0.2 mm, Wrist wearable devices (smartwatches), Accessories of Vehicles and Products falling under CETH 8426 41 00,8427, 8429, 8430 10


Non Tariff Amendments



78



Rebate of Duty on

Export of goods*

Notification No.19/2004-

C.E(N.T) read with Rule

18 of CER

Indian market price of the excisable goods at the time of exportation shall not be less than theamount of rebate claimed

Claim to be filed before expiry of the period specified in Section 11B of CEA (i.e. one yearfrom date of export)

Single Registration* Single registration can be obtained by any assessee subject to fulfillment of following conditions: Two or more premises of the same factory are located within the jurisdiction of a Range

Superintendent Manufacturing process is interlinked Units are not operating under any area based exemption notifications

Central Excise (Removal

of Goods at

Concessional Rate of

Duty for Manufacture of

Excisable and

Other Goods) Rules,

2001**

Superseded by Central Excise (Removal of Goods at Concessional Rate of Duty for Manufactureof Excisable and Other Goods) Rules, 2016. New Rules provide : Manufacturers availing benefits of concessional duty rates no longer required to make

additional application to the jurisdictional officers; a simple Self Declaration in Form I isrequired to be filed with the supplier manufacturer and the jurisdictional Assistant / DeputyCommissioner

Quarterly returns in Form II to be filed

Rebate of Duty on

goods used in the

manufacture of export

goods*

Mandatory filing of Chartered Engineer’s certificate in order to substantiate the correctness ofthe ratio of input and output

No verification of the correctness of aforesaid ratio by the Assistant Commissioner, unless hedoubts the correctness of the Declaration filed.


Tariff Amendments



79



Aerated Beverages:

Water, including mineralwaters and aerated waters,containing added sugar orother sweetening matter orflavoured

18% 21%

Food Processing:

Refrigerated Containers 12.5% 6%

Textiles:

Branded readymade garmentsand made up articles oftextiles of retail sale price ofINR1000 or more

NIL (withoutCenvat Credit or6%/12.5% (withCenvat Credit)

2% (withoutCenvat Credit) or

12.5% (withCenvat Credit)

PSF/PFY manufactured fromplastic scrap or plastic wasteincluding waste PET bottles

2%(withoutCenvat Credit or6% (with Cenvat

Credit)

2% (withoutCenvat Credit) or

12.5% (withCenvat Credit)

Machinery:

Electric motors, shafts, sleeve,chamber, impeller, washerrequired for the manufactureof centrifugal pump

12.5% 6%


Footwear:

Rubber sheets & resin rubbersheets for soles and heels

12.5% 6%

Increase the abatement fromretail sale price for the purposeof excise duty assessment for allcategories of footwear

25% 30%

Metals:

Disposable containers made ofaluminum foils

2% (withoutCenvat Credit)

Or 6% (withCenvat Credit)


Or 12.5% (withCenvat Credit)

Renewable Energy:

Carbon pultrusion used formanufacture of rotor blades andintermediaries, parts and sub-parts of rotor blades for windoperated electricity generators

12.5% 6%

Solar Lamps 12.5% Nil

Automobiles:

Specified parts of ElectricVehicles and Hybrid Vehicles

6%Upto

31.03.2016

6%Without time

Limit

Engine for xEV (hybrid electricvehicle)

12.5% 6%


Tariff Amendments



80



Precious Metals and Jewellery:

Refined gold bars manufactured fromgold/ silver dore bar, gold/ silver ore orconcentrate,

9% 9.5%

Refined silver manufactured from silverore or concentrate, silver/gold dore bar.

8% 8.5%

Articles of jewellery (excluding silver jewellery, other than studded withdiamonds or other precious stonesnamely, ruby, emerald, and sapphire)

NIL (withoutCenvatCredit)

or

6% (withCenvatCredit)

1% (withoutCenvatCredit)

Or

12.5% (withCenvatCredit)

Civil Aviation:

Aviation Turbine Fuel other than forsupply to Scheduled Commuter Airlinesfrom the Regional Connectivity Scheme Airports

8% 14%

Maintenance, repair and overhaul of aircrafts:

Tools and tool kits for maintenance,repair and overhauling of aircraft subjectto a certification by DGCA

12.5% Nil


Miscellaneous:

Disposable sterilized dialyzerand micro barrier of artificialkidney

12.5% NIL

Ready Mix Concretemanufactured at the site ofconstruction for use inconstruction work at such site


or 6% (withCenvat Credit)

NIL

Cigarettes: From INR Per Thousand

To INR Per Thousand

Non filter not exceeding 65mm

70 215

Non-filter exceeding 65 mmbut not exceeding 70 mm

110 370

Filter not exceeding 65 mm 70 215

Filter exceeding 65 mm but

not exceeding 70 mm

70 260

Filter exceeding 70 mm butnot exceeding 75 mm

110 370

Other 180 560




Interest



82


$ Applicable from 1st April, 2016* Notification No.13/2016-Service Tax and 14/2016-Service Tax dated 1st March, 2016 effective from date of enactment of the Bill

Period of Delay Current Proposed*

Small Service

Providers^

Other Service

Providers

Small Service

Providers^

Other Service

Providers

1. Pertaining to service taxcollected but not deposited

As per the rates set out in Item 2 below 21% 24%

2. Pertaining to other matters Up to 6 months

> 6 months but < 1 year > 1 year

15%

21%27%

18%

24%30%

12%

12%12%

15%

15%15%

3. Amount collected in excess 15% 18% 12% 15%

Interest rates$ for delays in payment of Excise Duty, Customs Duty reduced from 18% to 15% Interest rates* for delays in payment of Service Tax tabulated herein below:

Interest rates rationalised at a uniform rate of 15% p.a. across all indirect taxes

^ Service Providers with value of taxable services up to INR 60 lakhs during last preceding FY

Miscellaneous



83


Precious Metals and Jewellery*:

Withdrawal of area based exemption available to new industrial unit situated at specified locations and engaged in production ofrefined gold or silver which commences the commercial production on or after 1 st March, 2016 or an existing unit which undertakessubstantial expansion of existing capacity

Goods bearing a brand name or sold under a brand name:

SSI exemption in respect of goods falling under CETH 61, 62 and 63 (except laminated jute bags falling under CETH 6305, 6309 0000, 6310) & cleared/ sold under brand name with a RSP of INR 1000/- & above, shall be restricted to INR 12.5 lakhs for March 2016

Cess under Oil Industry (Development) Act, 1974*:

Oil Industries Development Cess levied on domestically produced crude oil reduced from INR 4500 PMT to 20% ad valorem.

Clarification - Exemption to Power Projects:

Power Projects claiming exemption on imports from BCD and CVD under Sr.No.507 of Notification No.12/2012-Customs are alsoeligible for excise duty exemption under Sr.No.336 of Notification No.12/2012-C.E, if such project has been awarded based onInternational Competitive Bidding and conditions laid down under Sr.507 of aforesaid Notification are fulf illed.

Clarification – Incentives received by Air Travel Agents:

Incentives received by the Air Travel Agents from the Companies providing Computer Reservation System are liable to service tax.

Civil Aviation*:

Customs & Excise Duty exemption on tools/tool kits for maintenance, repair & overhauling of aircraft subject to certification byDGCA

Simplified procedure for availment of excise duty exemption on parts, testing equipment, tools and tool kits for maintenance, repairand overhauling of aircraft

Removal of restriction of one year for utilization of duty free parts for maintenance, repair and overhauling of aircraft Foreign aircrafts can stay for a period up to 6 months (earlier 60 days) for the purpose of maintenance, repair and overhaul or such

extended period as may be permitted by DGCA

CST:

Explanation proposed to be inserted in Section 3 of CST to the effect that sale of gas through a common carrier pipeline or anyother common transport distribution systems, which entails introduction of gas in one State and removal thereof in another State,would be deemed to be an inter-state movement of goods


CENVAT Credit Rules



84


Particulars Amendments^

Capital Goods** Wagons falling under Sub-heading 860692 explicitly included in the definition of capital goods

Restriction with regard to office equipments and appliances done away with Goods used outside the factory for pumping of water for captive use within the factory excluded

from the definition of Capital Goods and included under the definition of inputs

Exempted Services* Transportation of goods by a vessel from customs station of clearance in India to a place outsideIndia excluded from the definition of exempted services; hence, no CENVAT credit reversalnecessary for such services

Inputs** Inclusions: Goods used for pumping of water for captive use

Capital goods upto value of INR 10,000 per piece

Utilisation of

CENVAT credit*

CENVAT credit of any duty except NCCD cannot be utilized for payment of NCCD leviable onany product (earlier restricted only to goods covered under CETH 8517 12 10, 8517 12 90 )

No CENVAT credit can be utilised for payment of infrastructure cess No CENVAT credit of infrastructure cess would be available against any output tax / duty

Availment of CENVAT

credit

100% CENVAT credit of Capital Goods available to specified jewellery manufacturers in thesame financial year, if the value of clearances of excisable goods does not exceed INR 12crore in preceding FY*

CENVAT Credit on jigs, fixtures moulds and dies or tools sent to a job worker or anothermanufacturer would be allowed even if such goods are sent without bringing the same to thepremises of the manufacturer**

Validity of order by Deputy / Assistant Commissioner extended from one year to three years Inrespect of clearance of final products from the premises of job worker**

^Notification No.13/2016-Central Excise(N.T) dated 1st March, 2016


CENVAT Credit Rules



85



Availment of CENVAT

credit**

CENVAT credit of service tax paid on services availed by way of assignment of right to use any

natural resources to be availed as : Amount of CENVAT in a FY = Service Tax paid on the charges payable for the assignment of

the right to use / No. of Years for which the rights have been assigned Full credit available in case such rights are further assigned to another person to the extent of

service tax payable on such consideration Full credit available of service tax paid on annual or monthly user charges in the year of

payment

Rationalisation of

provisions relating toreversal of CENVAT

credit attributable to

exempted goods /

services**

Method for calculation of reversal of CENVAT credit pertaining to exempted goods and exempted

services have been streamlined to mitigate litigations. The key features are set out herein below: Options available for reversal of credit: Pay 6% of value of the exempted goods and 7% (2% in case of rail transportation of goods

or passengers) of value of the exempted services. Overall reversal restricted to the extent oftotal credit available with the taxpayer at the end of the period to which the payment relates.

Pay an amount of CENVAT credit on common inputs and input services used for exemptedand non-exempted goods / services, based on proportionate reversal method

Banking and financial institutions, including non-banking financial companies, engaged inproviding services by way of extending deposits, loans or advances, can follow either of the

above options for reversal of credit or opt to pay 50% of monthly CENVAT credit availed Delay in monthly provisional reversal of CENVAT credit would attract interest @ 15% p.a. Interest for payment of difference between provisional and actual reversal under the

proportionate method of reversal beyond 30th June of succeeding year reduced from 24% p.a.to 15% p.a.

^Notification No.13/2016-Central Excise(N.T) dated 1st March, 2016** Applicable from 1st April, 2016

CENVAT Credit Rules



86



Distribution of

service tax credit oninput services**

CENVAT credit can now be distributed to an outsourced manufacturing unit

CENVAT credit of tax paid on input services available with the ISD as on 31 st March, 2016cannot to be transferred to outsourced manufacturing unit

Mechanism of calculation for distribution of CENVAT credit reframed

Input Service

Distribution by a

Warehouse**

Applicable to manufacturers having multiple factories and warehouses Provisions of first stage dealer or second stage dealer made applicable to a warehouse CENVAT credit allowed to a manufacturer receiving inputs on the basis of invoice issued by

such warehouse

Clearance of goods

as such**

CENVAT credit would now be available on the basis of an invoice issued by a Service Provider for

clearance of inputs or capital goods as such

Annual Return** Manufacturers required to file an Annual Return in the prescribed format by 30th November ofsucceeding FY (earlier 30th April of FY)

Service providers to file an Annual Return by 30 th November of succeeding FY. This is inaddition to half yearly returns currently required to be filed by service providers.

Refund under Rule 5* Time limit for filing refund application by service provider shall be from one year from the date of - Receipt of payment in convertible foreign exchange where the provision of services has been

completed prior to the receipt of payment; or The date of issue of invoice, where payment for the service has been received in advance prior

to the date of issue of invoice.

^Notification No.13/2016-Central Excise(N.T) and Notification No.14/2016-Central Excise (N.T) dated 1st March, 2016


The Indirect Tax Dispute Resolution Scheme, 2016



87


Background Applicable for litigations pertaining to Customs Duty, Excise Duty and Service Tax

Amount paid under the scheme is non-refundable Order under scheme is not an order on merit and shall have no binding effect for futureassessments

Applicability Applicable for litigations pending with Commissioner (Appeals) as on 1st March, 2016 Scheme to come into effect from 1st June, 2016 Declaration to opt for the scheme to be filed on or before 31st December, 2016

Procedure Declaration to be filed with the Designated Authority Payment of tax, interest and 25% of the penalty imposed in impugned order within 15 days

of receipt of acknowledgement of declaration Filing of intimation of payment within 7 days of payment along with proof thereof Order of discharge of dues to be passed by Designated Authority within 15 days of receipt

of the above intimation

Key Benefits Immunity to the extent of 75% of total penalty Immunity from other proceedings under the respective Acts No reopening in any proceedings under the respective Acts Reduction in pending litigation with Commissioner (Appeals)

Exclusions Disputed order pertains to search and seizure proceeding Prosecution for any offence launched before 1st June, 2016 Order related to narcotic drugs/prohibited goods/offence under Indian Penal Code/ Narcotic

Drugs and Psychotropic Substances Act, 1985 / Prevention of Corruption Act,1988 /Detention under Conservation of Foreign Exchange and Prevention of Smuggling Act, 1974

Other Amendments



88


FDI:

Particulars Existing Limits Proposed Limits Remarks

Marketing of Food Products producedand manufactured in India

- 100% FIPB approvalrequired

Insurance and Pension Sector 26% 49% Automatic Route

Asset Reconstruction Companies Up to 49% - Automatic Route> 49% -Government Approval

100% Automatic Route

Indian Stock Exchanges 5% 15% Automatic Route

FDI to be allowed in the NBFC sector beyond the presently permissible 18 specified activities under the Automatic Route Existing threshold limits for investments by FPI’s in Listed Central Public Sector Enterprises (other than banks) enhanced

from 24% to 49%, under the Automatic Route Presently, foreign investments are permissible only in equity shares, mandatory and fully convertible .

debenture/preference shares warrants and partly paid shares. The basket of eligible units is proposed to be extended toother hybrid instruments, subject to certain conditions.

With a view to promote Make in India, it is proposed to accord residency status to foreign investors, subject to certainconditions

A new section 14A proposed to be introduced under FEMA, so as to empower officers (not below the rank of AssistantDirector) to recover arrears of penalty.

It is clarified that foreign investments made in equity share capital of Indian Companies in accordance with FEMAregulations will not be considered as a foreign source for the purposes of FCRA.

FCRA:

FEMA:

Glossary



89


Act The Income Tax Act, 1961 CESTAT Customs, Excise and Service Tax Appellate Tribunal

AD Additional Duty CKD Completely Knocked Down Condition

AIF Alternative Investment Fund CSR Corporate Social Responsibility

AMC Asset Management Company CST Central Sales Tax

AMT Alternate Minimum Tax CVD Additional Duty of Customs

AO Assessing Officer DDT Dividend Distribution Tax

AOP Association of Persons DTC Direct Tax Code

AY Assessment Year EC Education Cess

BCD Basic Customs Duty ECB External Commercial BorrowingsBill Finance Bill, 2015 ECS Electronic Clearance System

BIN Business Identification Number EOU Export Oriented Units

BOE Bill of Entry EPFS Employee Provident Fund Scheme

BOI Body of Individuals FA Finance Act, 1994

CBDT Central Board of Direct taxes FDI Foreign Direct Investment

CCIT Chief Commissioner of Income Tax FII Foreign Institutional Investor

CEA Central Excise Act, 1944 FPI Foreign Portfolio Investor

CED Central Excise Duty FTS Fees for Technical Services

CER Central Excise Rules, 2002 FY Financial Year

CIN Corporate Identification Number GAAR General Anti-Avoidance Rule

Glossary



90


GDP Gross Domestic product ROG Central Excise (Removal of Goods at Concessional Rate ofDuty for Manufacture of Excisable Goods) Rules, 2001

GST Goods and Service Tax RPS Renewable Power System

GTA Goods Transport Agency RSP Retail Sale Price

GTI Gross Total Income SAD Special Additional Duty of Customs

IEC Import Export Code SARFAESI Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002

InvIT Infrastructure Investment Trust SBC Swachh Bharat Cess

ITAT Income Tax Appellate Tribunal SCN Show Cause Notice

LLP Limited Liability Partnership SCRA Securities Contracts (Regulation) Act, 1956LOU Letter of Undertaking SEBI Securities and Exchange Board of India

MAT Minimum Alternate Tax SHEC Secondary and Higher Education Cess

MF Mutual Fund SPV Special Purpose Vehicle

MNRE Ministry of New and Renewable Energy STR Service Tax Rules, 1994

NBFC Non- Banking Financial Company STT Securities Transaction tax

PAN Permanent Account Number TCS Tax Collected at Source

PMLA Prevention of Money Laundering Act, 2002 TDS Tax Deducted at Source

RBI Reserve Bank of India u/s Under Section

REIT Real Estate Investment Trust VAT Value Added Tax

VCF Venture Capital Fund

Contact Us



91


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Disclaimer



This e-publication is published by CNK & Associates LLP, Chartered Accountants, India, solely for the purposes of providingnecessary information to clients and associates.

The information and analysis contained herein is of a general nature and is a preliminary overview of the key tax proposalset forth in the Finance Bill, 2016. It does not purport to offer any taxation, legal, economic or financial advice.

Any business or commercial decision should be taken only after obtaining specific and comprehensive professional adviceand cannot be based solely on this presentation.

This e-publication is a proprietary material created and compiled by CNK & Associates LLP. All rights reserved. Thisdocument or any portion thereof may not be reproduced or sold in any manner whatsoever without the consent of thepublisher.

This analysis is not meant for public circulation and is not meant to be an invitation or solicitation of any kind.

Whilst every care has been taken in the preparation of this e-publication, we do not take responsibility for any inadvertenterrors.

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