executive summary of finance bill, 2016 - direct taxes · 2019-01-01 · executive summary of...

EXECUTIVE SUMMARY OF FINANCE BILL, 2016 - DIRECT TAXES

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I. ADDITIONAL RESOURCE MOBILISATION :

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016

SECTION AMENDED /NEWLY

INSERTED

APPLICABLEW.E.F. BRIEF OF AMENDMENT

Rationalizatio

n of taxation of

income by way

of dividend

7

&

50

Sec. 10(34)

Sec. 115BBD

Amendment

Newly inserted

01/04/2017 It is proposed to insert a new section 115BBDA to

provide that in the case of an individual, Hindu

undivided family or a firm who is a resident in

India any income by way of dividend declared,

distributed or paid by a domestic company, in

excess of 10 Lacs shall be taxable @ 10%.

Further, no deduction of any expenditure or

allowance or set off of loss shall be allowed in

computing the income by way of dividend referred

in section 2(22) except dividend referred in Section

2(22)(e).

Consequently, provisions of Section 10(34)

amended.

Change in rateof SecuritiesTransaction taxin case whereoption is notexercised

230 Section 98 ofthe Finance(No.2) Act,2004

Amendment 01/06/2016 STT on sale of an option in securities where option

is not exercised is increase to 0.05% from 0.017%

of the option premium.


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EqualisationLevy

7,

22,

&

160 to 177

Section 10

Section 40

New clause(50) inserted

Amendment

New ChapterVIII inserted

01/04/2017

01/06/2016

This Chapterwill take effectfrom the dateappointed inthe notificationto be issued bythe CentralGovernment.

A new clause (50) proposed to be inserted tosection 10 to provide that any income arising fromspecified services provided on or after the date onwhich the provisions of Chapter VIII of the FinanceAct, 2016, comes into force and chargeable toequalisation levy under that Chapter shall beexempt.

“Equalisation levy” - Chapter VIII of theFinance Act, 2016Proposed to impose an “equalisation levy” @ 6%of consideration received or receivable for specifiedservices by a non-resident from a resident andcarrying on business or profession or from a non-resident having a PE in India, if the aggregateconsideration exceeds Rs. 1 Lakh in any P.Y.Equalisation levy shall not be charged if:

i) non-resident service provider has a PE inIndia and income from such specifiedservices are effectively connected to such PE.

ii) Where the consideration is not for thepurpose of carrying out business orprofession.

Equalisation levy so deducted by the payer has tobe paid to the Government by 7 day of the monthfollowing the month in which the equalisation levyis collected and in case of delay an interest @ of1% for every month or part of a month shall becharged.

Further, expenses incurred by the assessee towards


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specified services chargeable under this Chaptershall not be allowed as deduction in case of failureof the asseseee to deduct and deposit theequalisation levy to the credit of Centralgovernment.

A statement shall be furnished in the prescribedform and prescribed manner. A computationmechanism is provided and no intimation shall bemade after the expiry of 1 year from the end of therelevant F.Y.

An order passed by the AO shall be rectified within1 year from the end of the F.Y. in which the ordersought to be amended was passed.

Penalty for failure to deduct or pay:where the assessee fails to deduct the whole or anypart of equalisation levy a sum equal to the amountof equalisation levy not deducted. In other cases,penalty of Rs. 1,000/- for every day during whichthe failure continues. However, the penalty shallnot exceed the amount of equalisation levy that wasto be paid.

Penalty for failure to furnish statement u/s 164:Penalty of Rs. 100 for every day during which thefailure continues shall be imposed.

No penalty will be imposable u/s 168 or 169, if theassessee proves that there was reasonable cause forthe failure.


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For making any statement in any verification,account or statement which is false assessee shallbe punished with an imprisonment up to a period of3 years and with fine.

II. Widening of Tax Base and Anti Abuse Measures

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016


INSERTED


Tax Collectionat Source (TCS)on sale ofvehicles; goodsor services

86 206C Amendment 01/06/2016 Proposed to imposed TCS @ 1% on

I. Sale of motor vehicle of the value exceeding Rs.10 lakh in cash or by the issue of a cheque ordraft or by any other mode or

II. sale in cash of any goods (other than bullion &jewellery) or providing of any service (other thanpayments on which tax is deducted at sourceunder Chapter XVII-B) exceeding Rs. 2 LakhsFurther, a new sub-section 1(E) proposed to beinserted so as to provide that provision of sub-section (1D) shall not apply to such classes ofbuyers who fulfill prescribed conditions.

Tax ondistributedincome toshareholder

56 115QA Amendment 01/06/2016 It is proposed to clarify that the provisions ofsection 115QA shall apply to any buy back ofunlisted share undertaken by the company inaccordance with the provisions of the law relatingto the Companies and not necessarily restricted tosection 77A of the Companies Act, 1956.Further, for the purpose of computing distributedincome, the amount received by the Company inrespect of the shares being bought back shall bedetermined in the prescribed manner.


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Levy of taxwhere thecharitableinstitutionceases to existor converts intoa non-charitableorganization

60 115TD,115TE,&115TF

Newlyinserted

01/06/2016 It is proposed to introduce a new Chapter XII-EB toprovide that accreted income of the trust orinstitution shall be taxable @ MMR on conversionof trust or institution into a form not eligible forregistration u/s 12 AA or on merger into an entitynot having similar objects and registered u/s 12AAor on non-distribution of assets on dissolution toany charitable institution registered u/s 12AA orapproved u/s 10(23C) within a period twelvemonths from dissolution. No credit can be taken forsuch tax and payable even the trust does not haveany other taxable income.

“Accreted income” shall be amount of aggregateof total assets as reduced by the liability as on thespecified date. The method of valuation is proposedto be prescribed in rules. The asset and the liabilityof the charitable organisation which have beentransferred to another charitable organisation withinspecified time will be excluded while calculatingaccreted income.It is also provided that in case of failure to pay taxwithin the time provided, an interest @ 1% forevery month and part thereof of such failure shallbe payable and the principal officer or the trusteeand the trust or the institution shall be deemed to bean assessee in default.

III. Measures to phase out deductions

III. Measures to phase out deductions

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016


INSERTED



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Phasing out ofdeductions andexemptions

8,

15,

17,

18,

19,

20,

39,

40

&

42

Section 10AA

Section 35

Section 35AC

Section 35AD

Section35CCCSection35CCD

Section 80-IA

Section 80-IAB

Section 80-IB

Amended

Amended

Amended

Amended

Amended

Amended

Amended

Amended

Amended

01/04/2017

01/04/2018

01/04/2018

01/04/2018

01/04/2018

01/04/2018

01/04/2017

01/04/2017

01/04/2017

Proposed Phase out plan of incentives (Profit linkedDeductions/weighted deduction):

Section/ Proposed phase outmeasures/Amendment10AA- Special

provision in respectof newlyestablished units inSpecial economiczones (SEZ).

No deduction shall beavailable to unitscommencingmanufacture orproduction of article orthing or start providingservices on or after01/04/2020.

35AC-Expenditureon eligible projectsor schemes.

No deduction shall beavailable with effect from1.4.2017

35CCD-Expenditure on skil l development project.

Deduction shall berestricted to 100% from01.04.2020.


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Section 80IA;80IAB, and 80IB - Deduction in respect of profits derive froma) developmentoperation andmaintenance of aninfrastructurefacility (80-IA)(b) development ofSEZ (80-IAB)(c) production of

mineral oil andnatural gas [80-IB(9)]

No deduction shall beavailable if the specifiedactivity commences onor after 01/04/2017.


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Proposed Phase out plan of incentives(Accelerated Depreciation/WeightedDeduction)

Section/ Proposed phase outmeasures/Amendment32 r.w. Rule 5 –

AcceleratedDepreciation.

To amend the new AppendixIA read with rule 5 ofIncome-tax Rules, 1962 toprovide that highest rate ofdepreciation under theIncome-tax Act shall berestricted to 40% w.e.f01.4.2017.The new rate is proposed tobe made applicable to all theassets (whether old or new)falling in the relevant blockof assets.

35(1)(ii)-Expenditure onscientificresearch.

Weighted deduction shall berestricted to 150% from01.04.2017 to 31.03.2020and deduction shall berestricted to 100% from01.04.2020.

35(1)(iia)-Expenditureon scientificresearch.

Deduction shall be restrictedto 100% w.e.f. 01.04.2017

35(1)(iii)-Expenditure onscientificresearch.

Deduction shall be restrictedto 100 % w.e.f. 01.04.2017


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35(2AA)-Expenditure onscientificresearch.

Weighted deduction shall berestricted to 150 % w.e.f.01.04.2017 to 31.03.2020Deduction shall be restrictedto 100% from 01.04.202035(2AB)-

Expenditure onscientificresearch.

Weighted deduction shall berestricted to 150% from01.04.2017 to 31.03.2020Deduction shall be restrictedto 100 % from 01.04.2020

35AD-Deduction inrespect ofspecifiedbusiness.

In case of a cold chainfacility, warehousing facilityfor storage of agriculturalproduce, hospital, anaffordable housing project,production of fertilizer,deduction shall be restrictedto 100 %of capital expenditurew.e.f. 01.4.2017.

35CCC-Expenditure onnotifiedagriculturalextensionproject.

Deduction shall be restrictedto 100 % from 1.4.2017


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IV. Measures to promote socio-economic growth

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016


INSERTED


Exemption ofincome of Foreigncompany fromstorage and saleof crude oil storedas part ofstrategic reserves

7 Section 10 New clause(48A)inserted

01/04/2016(retrospectivelyfrom A.Y.2016-17)

It is proposed that any income of a foreigncompany on account of storage of crude oil in afacility in India and sale of crude oil therefromto any resident subject to the conditionsspecified in respect of an agreement.

Exemption inrespect of certainactivity related todiamond tradingin "SpecialNotified Zone".

5 Section 9 Newly Inserted– clause (e) ofExplanation 1to Sub-section(1)clause(i)

01/04/2016(retrospectively

from A.Y.2016-17)

In order to facilitate the FMCs to undertakeactivity of display of uncut diamond (withoutany sorting or sale) in the special notified zone,it is proposed to amend section 9 of the Act toprovide that in the case of a foreign companyengaged in the business of mining of diamonds,no income shall be deemed to accrue or arise inIndia to it through or from the activities whichare confined to display of uncut and unassorteddiamonds in a Special Zone notified by theCentral Government in the Official Gazette inthis behalf.


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Extending thebenefit of initialadditionaldepreciationunder section32(1)(iia) forpower sector

13 Section32(1)(iia)

Amended 01/04/2017 It is proposed that an additional depreciation@20% of actual cost of new machinery or plantacquired and installed in a P.Y. shall also beallowed to an assessee engaged in the businessof transmission of power.

Taxation ofIncome from'Patents’

52

&

53

Section115BBF

Section 115JB

Newly Inserted-Section115BBF

Amendment

01/04/2017

01/04/2016

Where the total income of the ‘eligible assessee’includes any income by way of royalty inrespect of a patent developed and registered inIndia, then such royalty income shall bechargeable @10% (pluse surcharge & cess) onthe gross amount of royalty.It is further proposed that no deduction of anyexpenditure or allowance in respect of suchroyalty income shall be allowed.

Consequently, provisions of section 115JBproposed to amend so as to provide that thebook profit shall be increased by an amount oramounts of expenditure relatable to income, byway of royalty in respect of patent chargeable totax in accordance with the provisions of section115BBF and also the amount of income shallbe reduced from the book profit.

Tax incentives forstart-ups

31

32

Section 54EE

Section 54GB

Newly Inserted

Amendment

01/04/2017

01/04/2017

It is proposed to insert section 54EE so as toprovide exemption up to Rs. 50 lakh fromcapital gains tax if LTCG is invested in Units ofSpecified Fund, as may be notified by theCentral Government subject to the conditionthat the amount remains invested for 3 years.


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41 80-IAC Newly Inserted 01/04/2017

It is proposed to amend section 54GB so as toprovide that capital gains arising on transfer of aresidential property shall not be charged to tax ifsuch capital gains is invested in subscription ofshares of a company which qualifies to be aneligible start-up subject to other specifiedconditions & also the expression “new asset”includes computers or computer software incase of technology driven start-ups certified bythe Inter-Ministerial Board of Certification notified bythe Central Government in the Official Gazette.

Proposed to provide a deduction of 100% of theprofits and gains derived by an eligible start-upfrom a business involving innovation,development, deployment or commercialisationof new products, processes or services driven bytechnology or intellectual property, subject toincorporation before 01/04/2019, for 3consecutive A.Ys. out of 5 years at the optionof the assessee.


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Incentives forPromotingHousing for All

37

&

43

Section 80EE

Section 80-IBA

Substitution ofnew section80EE

Newly Inserted

01/04/2017

01/04/2017

It is proposed to substitute the section 80EE soas to provide a deduction for those who buyresidential house property for the first time, inrespect of interest on loan taken from anyfinancial institution upto Rs. 50,000/- subject toother conditions specified therein & extend thebenefit of deduction till repayment of loancontinues.

New section 80-IBA is inserted to proposed toprovide for 100% deduction of the profits andgains of an assessee developing and buildinghousing projects, if the project is approved bythe Competent authority on or before the31/03/2019 subject to the conditions specifiedtherein and the project required to be completedwithin three years failing which the entirededuction claimed in previous years shall bedeemed as income.

Further, the project is on a plot of landmeasuring not less than 1000 sq. metres wherethe project is within 25 km from the municipallimits of Delhi, Mumbai, Chennai & Kolkataand in any other area, it is measuring not lessthan 2000 sq. metres where the size of theresidential unit in the said areas is not more than30 sq. metres and 60 sq. metres, respectively,


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Tax incentive foremploymentgeneration

44 Section80JJAA

Substitution ofnew section80JJA

01/04/2017 It is proposed to extend the benefit to allassessees who are required to get their accountsaudited u/s 44AB. Deduction under theproposed provisions will be available in respectof cost incurred on those employees whose totalemoluments are less than or equal to Rs.25,000/- p.m.It is also proposed to provide that in the firstyear of a new business, 30% of all emolumentspaid or payable to the employees employedduring the previous year shall be allowed asdeduction.

It is further proposed to reduce minimumnumber of days of employment in a F.Y. from300 days to 240 days and also the condition of10% increase in number of employees everyyear is proposed to be done away. However, nodeduction shall be allowed in respect of costincurred on those employees for whom theentire contribution is paid by the Governmentunder the Employees’ Pension Scheme notifiedin accordance with the Employees’ ProvidentFunds and Miscellaneous Provisions Act, 1952.


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V. Relief and Welfare Measures

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016

SECTION AMENDED/ NEWLY

INSERTED


Provision forTax benefits toSovereign GoldBond Scheme,2015 and RupeeDenominatedBonds(i) Sovereign

Gold BondScheme,2015

(ii) RupeeDenominated Bond

28 & 29

29

47 &Third proviso to

48

47

Amended

Amended

01/04/2017It is proposed to exempt redemption ofSovereign Gold Bonds issued by the RBI in thehands of Individuals. Also benefit ofindexation has been proposed to be provided tothe Sovereign Gold Bonds.

It is proposed to provide that in case of non-resident, any gains arising on account ofappreciation of rupee against a foreigncurrency at the time of redemption of rupeedenominated bond of an Indian companysubscribed by him, shall be ignored for thepurpose of computation of full value ofconsideration.


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Consolidation of'plans' within a'scheme' ofmutual fund

28 47(xix) Newlyinserted

01/04/2017 In view of SEBI guidelines regardingconsolidation of mutual fund plans within ascheme, tax exemption is proposed to beprovided in the case allotment of units ofConsolidated plans in consideration of units inconsolidating plan.

Also the meaning of Consolidating plan andconsolidated plan has been proposed to beinserted.

Rationalizationof limit ofdeductionallowable inrespect of rentspaid underSection 80GG

38 80GG Amended 01/04/2017 Proposed to increase maximum limit ofdeduction for rent paid by an Individual inrespect of any furnished or unfurnishedaccommodation occupied by him for thepurposes of his own residence from Rs. 2000p.m. (i.e. Rs. 24000/-) to Rs. 5000/- pm (i.e.Rs. 60,000/-) in the case where HRA is notgranted by the employer.

Tax Treatmentof GoldMonetizationScheme, 2015

3 & 7 2(14) &10(15)

Amended 01/04/2016retrospectively

It is proposed to provide exemption in respectof Deposit Certificates issued under GoldMonetisation Scheme from Capital gain tax.

Interest from such scheme is also proposed tobe exempted.

Rationalizationof section 56 ofthe Income-taxAct

34 Second Provisoto 56(2) (vii)

Amended 01/04/2017 It is proposed to provide exemption u/s56(2)(vii) in respect of shares received by anindividual or HUF as a consequence ofdemerger or amalgamation of a company asreferred to in Section 47 (vicb), (vid) & (vii) soas to bring uniformity in both the sections.


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Rationalizationof limit of rebatein income-taxallowable underSection 87A

45 87A Amended 01/04/2017 Proposed to enhance limit of rebate u/s 87A toRs. 5000/- from Rs. 2000/-

Increase in timeperiod foracquisition orconstruction ofself-occupiedhouse propertyfor claimingdeduction ofinterest

10 24(b) Amended 01/04/2017 Proposed to increase the time limit ofacquisition or construction of Self occupiedhouse property from three years to five yearsfor the purpose of claiming interest paid onborrowed capital u/s 24(b)

Simplificationandrationalizationof provisionsrelating totaxation ofunrealized rentand arrears ofrent

11 25A Amended 01/04/2017 New Section 25A provided substitutingearlier Section 25A, 25AA & 25B

Provisions for cases where unrealised rentallowed as deduction is realised subsequently,unrealised rent received subsequently to becharged to income tax and special provision forarrears of rent received, with a new section25A.

Proposed to provide that the amount of rentreceived in arrears or the amount of unrealisedrent realised subsequently by an assessee shallbe charged to income-tax in the F.Y. in whichsuch amount is received or realised, whetherthe assessee is the owner of the property or notin that financial year. Also proposed to allowdeduction of 30% of such amount.


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VI. Ease of doing Business/dispute resolution

PARTICULARS

CLAUSE(S)OF

FINANCEBILL, 2016


INSERTED


Exemption fromDividendDistribution Tax(DDT) ondistributionmade by an SPVto BusinessTrust.

7, 55, 61 &

80

- Amended 1st June, 2016 In order to rationalize the taxation regime forbusiness trusts (REITs and Invits) and theirinvestors, it is proposed to provide a specialdispensation and exemption from levy of dividenddistribution tax. The salient features of theproposed dispensation are: —

(a) exemption from levy of DDT in respect ofdistributions made by SPV to the business trust;

(b) such dividend received by the business trustand its investor shall not be taxable in the hands oftrust or investors;

(c) the exemption from levy of DDT would onlybe in the cases where the business trust either holds100% of the share capital of the SPV or holds all ofthe share capital other than that which is required tobe held by any other entity as part of any directionof any Government or specific requirement of anylaw to this effect or which is held by Governmentor Government bodies; and

(d) the exemption from the levy of DDT wouldonly be in respect of dividends paid out of currentincome after the date when the business trust


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acquires the shareholding referred in (c) above inthe SPV. The dividends paid out of accumulatedand current profits upto this date shall be liable forlevy of DDT as and when any dividend out of theseprofits is distributed by the company either to thebusiness trust or any other shareholder.

Modification inconditions ofspecial taxationregime for offshore fundsSection 9A

6 9A Amended 1st April 2017 In order to rationalize the regime and to address theconcerns of the industry, it is proposed to providethat the eligible investment fund for purposes ofsection 9A, shall also mean a fund established orincorporated or registered outside India in acountry or a specified territory notified by theCentral Government in this behalf. It is alsoproposed to provide that the condition of fund notcontrolling and managing any business in India orfrom India shall be restricted only in the context ofactivities in India.

Enablingprovision forimplementationof variousprovisions of theAct in case of aforeign companyheld to beresident in India

4, 54 &

235

6 Amended 1st April 2017 In order to provide clarity in respect ofimplementation of POEM based rule of residenceand also to address concerns of the stakeholders, itis proposed to: -(a) defer the applicability of POEM basedresidence test by one year and the determination ofresidence based on POEM shall be applicable from01/04/17.(b) provide a transition mechanism for a companywhich is incorporated outside India and has notearlier been assessed to tax in India. The CentralGovernment is proposed to be empowered to notifyexception, modification and adaptation subject towhich, the provisions of the Act relating tocomputation of income, treatment of unabsorbed


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depreciation, setoff or carry forward and setoff oflosses, special provision relating to avoidance oftax and the collection and recovery of taxes shallapply in a case where a foreign company is said tobe resident in India due to its POEM being in Indiafor the first time and the said company has neverbeen resident in India before.

(c) provide that these transition provisions wouldalso cover any subsequent previous year upto thedate of determination of POEM in an assessmentproceedings. However, once the transition iscomplete, then normal provision of the Act wouldapply.

(d) provide that in the notification, certainconditions including procedural conditions subjectto which these adaptations shall apply can beprovided for and in case of failure to comply withthe conditions, the benefit of such notificationwould not be available to the foreign company.

(e) provide that every notification issued inexercise of this power by the Central Governmentshall be laid before each house of the Parliament.

Introduction ofPresumptivetaxation schemefor personshaving incomefrom profession

24, 25 &

27

44AA, 44AB,44ADA

44AA &44AB

amended

44ADANewlyinserted

1st April, 2017 Section 44ADA (newly inserted)Presumptive taxation regime proposed forprofessionals engaged in Professions referred to inSection 44AA(1) i.e. legal, medical, engineering orarchitectural profession or the profession ofaccountancy or technical consultancy or interiordecoration or any other profession as is notified bythe Board in the Official Gazette and whose gross


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receipts does not exceeds Rs. 50 lakhs. Income tobe presumed at 50% of total gross receipts.

Proposed that where assessee claims income lessthan above and the income exceeds the maximumamount which is not chargeable to income-tax,books of account and other documents as perSection 44AA(1) are required to be maintained andduly audited u/s 44AB

Increase inthreshold limitfor audit forpersons havingincome fromprofession

25 44AB Amended 1st April, 2017 Limit for tax audit in case of Profession proposedto increase to Rs. 50 lakhs from Rs. 25 lakhs

Increase inthreshold limitfor presumptivetaxation schemefor personshaving incomefrom business

25, 26 &

87

44AB, 44AD &211

Amended 1st April, 2017

1st April, 2017

Section 44AD Threshold limit of Rs. 1 crore proposed to be

increased to Rs. 2 crores Proposed that Salary, remuneration, interest etc.

paid to the partner u/s 40(b) shall not bedeductible while computing the income u/s 44AD.

Sub-Sec (4): Proposed to withdraw benefit u/s 44AD(1)to those assessees who do not declare income u/s 44ADfor 6 consecutive A.Y.s. after once claiming benefit underthis section (6 years including first year). The benefit willbe withdrawn for next 5 A.Y.s subsequent to the A.Y. inwhich the income was not declared u/s 44AD i.e. 6 A.Y.sincluding the first A.Y. in which benefit is not claimed.

Proposed that provisions of Chapter XVII-C shall now beapply to an eligible assessee in so far as they relate to theeligible business.

Section 44AB


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1st June 2016

Proposed that assessee shall get the accountsaudited u/s 44AB where

assessee claims income less than incomepresumed u/s 44ADA

assessee is not allowed benefit u/s 44AD(4)and the income exceeds the maximum amountwhich is not chargeable to income-tax.

Section 211 Proposed that Advance tax shall be paid by all the

assessee (companies as well as non-companies)other than assessees eligible u/s 44AD in fourinstalment i.e.

15-June – 15%15-Sept – 45%15-Dec – 75%15-Mar – 100%

In case of eligible assessees u/s 44AD, wholeadvance tax is to be paid by 15th March

Deduction inrespect ofprovision for badand doubtfuldebt in the caseof Non-BankingFinancialcompanies

21 36(1)(viia)(d) &Explanation

(vii)

Newlyinserted

1st April 2017 Proposed that NBFCs shall be allowed deduction of5% of Gross total income on account of provisionfor bad and doubtful debts.

NBFC shall have the meaning as provided u/s 45-I(f) of the RBI Act, 1934.

Rationalisationof scope of taxincentive undersection 32AC

14 32AC(1A)

First Proviso toSection

32AC(1A)

Amended

Newlyinserted

1st April 2016retrospectively

Proposed to allow deduction u/s 32AC(1A) in thecases where plant & machinery is acquired in theprevious year for amount exceeding Rs. 25 croresbut installed on or before 31st March, 2017.However, the deduction shall be available in the


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year in which the asset has been installed.

Exemption fromrequirement offurnishing PANunder section206AA to certainnon-resident

85 206AA Amended 1st June 2016 Proposed that Section 206AA shall not apply incase of non-resident (not being a company or to aforeign company in respect of Payment of interestof long term bonds referred in Section 194-LC andany other payment subject to condition as may beprescribed.

Applicability ofMinimumAlternate Tax(MAT) onforeigncompanies forthe period priorto 01.04.2015

53 115JB Amended 1st April 2001retrospectively

In view of the recommendations of Committee onDirect Tax matters headed by Justice A.P. Shah andwith a view to provide certainty in taxation offoreign companies, it is proposed to amend theIncome-tax Act so as to provide that with effectfrom 01.04.2001, the provisions of section 115JBshall not be applicable to a foreign company if -

(i) the assessee is a resident of a country or aspecified territory with which India has anagreement referred to in sub-section (1) of section90 or the Central Government has adopted anyagreement under sub-section (1) of section 90A andthe assesse does not have a permanentestablishment in India in accordance with theprovisions of such Agreement; or

(ii) the assessee is a resident of a country withwhich India does not have an agreement of thenature referred to in clause (i) above and theassessee is not required to seek registration under


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any law for the time being in force relating tocompanies.

Tax Incentives toInternationalFinancialServices Centre

7, 53, 55,

230 & 234

10(38), 115JB,115-O

Amended 1st April 2017

1st April, 2017

1st June, 2016

It is proposed to amend section 115JB to providethat in case of a company, being a unit located inInternational Financial Services Centre andderiving its income solely in convertible foreignexchange, the MAT shall be chargeable at 9%.

It is proposed to amend section 115-O so as toprovide that no tax on distributed profits shall bechargeable in respect of the total income of acompany being a unit located in InternationalFinancial Services Centre, deriving incomesolely in convertible foreign exchange, for anyassessment year on any amount declared,distributed or paid by such company, by way ofdividends (whether interim or otherwise) on orafter the 1st day of April, 2017 out of its currentincome, either in the hands of the company orthe person receiving such dividend.

Section 113A of the Finance (No.2) Act, 2004 isproposed to be amended to exempt transactionfrom STT by providing that the provisions ofChapter VII shall not apply to taxable securitiestransactions entered into by any person on arecognized stock exchange located inInternational Financial Services Centre wherethe consideration for such transaction is paid orpayable in foreign currency.

it is proposed to insert section 132A in Chapter


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1st June, 2016

VII of the Finance Act, 2013 so as to providethat the provisions of chapter VII shall also notapply to taxable commodities transactionsentered into by any person on a recognizedassociation located in unit of InternationalFinancial Services Centre where theconsideration for such transaction is paid orpayable in foreign currency, thereby exemptingsuch transaction from commodities transactiontax.

The IncomeDeclarationScheme, 2016

178 to 196 1st June 2016 Income Declaration Scheme, 2016 Proposed to provide an opportunity to the

assessees to declare undisclosed incomepertaining to years upto FY 2015-16. Thescheme requires payment of 45% of undisclosedincome in lieu of tax, surcharge & penalty onsuch undisclosed income (Tax @ 30% plusSurcharge 25% of tax in the name of KrishiKalyan Cess plus penalty @ 25% of tax)

Proposed to implement Scheme from 1st June2016 till the date to be notified.

Opportunity not available in certain casesincluding where notices u/s 142(1)/143(2) / 148/153A/ 153C issued, Search or survey conductedand time limit for issue of notice not expired,where information received from foreigncountries in respect of such income, casescovered under Black Money Act, etc.

Immunity provided from scrutiny and enquiryunder Income Tax Act and Wealth tax Act,prosecution under Benami Transaction(Prohibition) Act subject to consideration.


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The Direct TaxDisputeResolutionScheme, 2016

197 to 208 1st June 2016 Direct Tax Dispute Resolution Scheme, 2016It is proposed to bring this Scheme so as to reducebacklog of cases and to enable the Government torealise its dues expeditiously. The scheme will beapplicable to "tax arrear" which is defined as theamount of tax, interest or penalty determined underthe Income-tax Act or the Wealth-tax Act, 1957 inrespect of which appeal is pending before the CIT(Appeals) or the CWT (Appeals) as on the 29th Feb,2016.

Providing Timelimit fordisposingapplicationsmade by assesseeunder section273A, 273AA or220(2A)

88, 104 &

105

220(2A), 273A& 273AA

Amended 1st June 2016

1st April 2017

Power to reduce or waive interest or penalty,etc.Proposed to provide limit, for passing order u/s220(2A), 273A and 273AA, whether accepting orrejection the application of assessee, of 12 monthsfrom the end of month in which application isreceived. Further, an opportunity of being heardshall be provided in case of rejection of application.

In respect of applications pending as on 1st June,2016, it is proposed that order shall be passed on orbefore 31st May, 2017.

It is proposed to make a reference of section 270A(levy of penalty for under-reporting or misreportingof income) in clause (ii) and in the Explanation tosub-section (1) and in clause (b) of sub- section (2)of section 273A.

Providing legalframework forautomation ofvarious processesand paperlessassessment

3, 66 &109 2(23C),143(2) &282A(1)

Newlyinserted/Amended

1st June 2016 Section 2(23C) newly insertedProposed to include communication of data anddocuments through electronic mode in the meaningof “hearing”

Section 143(2) - amended


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Proposed to delete Clause (i) of sub-section (2)Propose to empower Income Tax Authority also,other than AO, as prescribed, to issue notice u/s143(2)

Section 282A(1) - amendedProposed to amend 282A(1)so as to provide thatthe notices & documents required to be issued byincome-tax authority shall be issued by suchauthority either in paper form or in electronic formin accordance with such procedure as may beprescribed.


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VII. Rationalisation Measures

PARTICULARS OFAMENDMENT

RELEVANTCLAUSES

SECTION AMENDMENT/NEWINSERTION

APPLICABLEWEF

BRIEF OFAMENDMENT

Processing u/s 143(1)be mandated beforeassessment

66 143(1D) Amendment 01/04/2017 It is proposed to process the return u/s143(1) before making an order u/s 143(3).This will entail quick processing and reduceTDS mismatching and un-necessarywithholding of refunds due.

The Bill is silent as to cases where the orderis passed u/s 144, etc. however, theexpression assessment includesreassessment.

Payment of intereston refund

90 244A(1)(a)244A(1)(aa)244A(1A)newlyinserted

Amendment 01/04/2017 In order to ensure filing of return within thedue date it is proposed to amend section244A to provide that in cases where thereturn is filed after the due date, theperiod for grant of interest on refundmay begin from the date of filing ofreturn.

In the interest of fairness and equity, it isfurther proposed to provide that an assesseeshall be eligible to interest on refund ofself-assessment tax for the periodbeginning from the date of payment oftax or filing of return, whichever is later,to the date on which the refund isgranted. For the purpose of determining theorder of adjustment of payments receivedagainst the taxes due, the prepaid taxes i.e.


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the TDS, TCS and advance tax shall beadjusted first.

(Thus the judgement of the HonbleBombay HC in the case of Merck Limitedv/s CIT (WP 2529 of 2004) 55Taxmann.com 392 is affirmed)

It is also proposed to provide that where arefund arises out of appeal effect beingdelayed beyond the time prescribed undersub-section (5) of section 153, the assesseeshall be entitled to receive, in addition tothe interest payable under sub-section (1)of section 244A, an additional interest onsuch refund amount calculated at the rateof three per cent per annum, for theperiod beginning from the date followingthe date of expiry of the time allowedunder sub-section (5) of section 153 to thedate on which the refund is granted. It isclarified that in cases where extension isgranted by the Principal Commissioner orCommissioner by invoking proviso to sub-section (5) of section 153, the period ofadditional interest, if any, shall begin fromthe expiry of such extended period.

This is in line with recommendation no. 20of the Part 1 of the Justice RV EshwarCommittee at its page 59.

Further accountability of the AO to grant


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such interest has been fixed u/s 153(5)[newly inserted].

Rationalisation of theprovisions relating toAppellate Tribunal

92 252(3)252(4A)252(5)

Amended 01/06/2016 The reference to the expression ‘Senior Vicepresident’ has been omitted/deleted byvirtue of these amendments since there thereare no extra-judicial or administrative dutiesor difference in the pay scale attached withthe post of Senior Vice-president in theTribunal.


93 253(2A)253(3A)253(4)

Amended 01/04/2017 The order of penalty passed u/s 270A(newly inserted) has been made Appealablebefore ITAT also.

Further henceforth it it proposed to do awaywith the filing of appeal by the AssessingOfficer against the order of the DRP.Evenmore su-section (4) has been amendedto provide that a Cross Objection can alsonot be filed against the order of DRP.


94 254(2) Amended 01/06/2016 Till now a MA can be filed to get a mistakerectified within 4 years from the end of theFY in which the order sought to be rectifiedwas passed by ITAT. It is proposed now,that this period is being curtailed to 6months from the end of the month in whichthe order was passed.This is in line with recommendation no. 22of the Part 1 of the Justice RV EshwarCommittee at its page 65.

Rationalisation of theprovisions relating to

95 255(3) Amended 01/06/2016 Till now a single member, so notified by thecentral govt could dispose off matters in


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Appellate Tribunal SMC bench having Total Income upto Rs.15 Lakhs.The said limit has now been enhanced tocases where the total income as computedby the Assessing Officer does not exceedfifty lakh rupees

This is in line with recommendation no. 23of the Part 1 of the Justice RV EshwarCommittee at its page 66 wherein this limitwas suggested to be increased to Rs. 30Lakhs.

Rationalisation ofpenalty provisions

62,93,96,98,99,100,101, 104 &107

270A Newly Inserted 01/04/2017 The newly inserted section provides for levyof penalty in cases of under-reporting andmis-reporting of income. The section isaimed at reducing discretion in levying thepenalty.

Sub-section (1) to (5) pertains to UNDER-REPORTED INCOME and penaltythereon.

(6) on being satisfied as to existence ofbonafides, or determination of such incomebased on estimates, the penalty shall not beleviable (present scenario).

(7) The rate of such penalty shall be 50% ofthe amount of tax payable on under-reportedincome.(it is advisable to give disclosures in thecomputation of Total income)


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Sub-section (8), (9) pertains to MIS-REPORTED INCOME and penaltythereon.

(8) The rate of such penalty shall be 200%of the amount of tax payable on Mis-reported income.

The New Section has made a fine distinctionbetween class of cases falling within theUnder-reporting of income and Mis-reporting of income.

Explanations of old section 271(1)(c.)over-ruling Following case Laws areverbatim imported.

1. SC in Anwar Ali’s Case2. SC in Pritpal Singh3. DHC in Nalwa Capital

Following case Laws Nullified1. Price Water house Coopers Pvt. Ltd.

vs. CIT (SC) [2012] 348 ITR 3062. CIT vs. Reliance Petro Products

(SC) (2010) 322 ITR 1583. DHC order dated 09.12.14 in

Compro Technologies Pvt.Ltd.,concealment penalty not leviable formistake of professional.

This amendments are not incommensuration to the recommendation


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no. 26.1 of the Part 1 of the Justice RVEshwar Committee at its page 69.


101 271AAB Amended 01/04/2017 Existing provision of clause (c) of sub-section (1) of section 271AAB provides thatin a case not covered under the provisions ofclauses (a) and (b) of the said sub-section ofsection 271 AAB, a penalty of a sum whichshall not be less than thirty per cent butwhich shall not exceed ninety per cent of theundisclosed income of the specifiedprevious year shall be levied in case wheresearch has been initiated under section 132on or after the 1st day of July, 2012.

In order to rationalise the rate of penalty andto reduce discretion it is proposed to amendthat clause (c) of sub-section (1)of section 271AAB to provide for levy ofpenalty on such undisclosed income at a flatrate of sixty per cent of such income.


103, 111 272A Amended 01/04/2017 It is proposed to amend sub-section (1) ofsection 272A to further include levy ofpenalty of ten thousand rupees for eachdefault or failure to comply with a noticeissued under sub-section (1) of section 142or sub-section (2) of section 143 or failureto comply with a direction issued under sub-section (2A) of section 142.

It is further proposed to amend sub-section(3) of section 272A to provide that penaltyin case of failure referred above shall be


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levied by the income tax authority issuingsuch notice or direction.

It is also proposed to make consequentialamendment to section 288 by insertion of anew clause (d) in sub- section (1) of section272A in the Income-tax Act relating topenalty for failure to comply with thenotices and directions specified therein.

It is important to note that a person onwhom a penalty u/s 272A(1)(d) has beenimposed shall not be entitled to be anauthorized representative.

Provision for bankguarantee undersection 281B

108 281B Amended 01/06/2016 The Income Tax Simplification Committee(Easwar Committee) has recommended thatprovisional attachment of property could besubstituted by a bank guarantee subject tofulfillment of certain conditions. Havingconsidered this recommendation, it isproposed that the Assessing Officer shallrevoke provisional attachment of propertymade under sub-section (1) of the aforesaidsection in a case where the assesseefurnishes a bank guarantee from a scheduledbank, for an amount not less than the fairmarket value of such provisionally attachedproperty or for an amount which issufficient to protect the interests of therevenue.

In order to help the Assessing Officer todetermine the fair market value of the


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property, the Assessing Officer may, make areference to the Valuation Officer, who maybe required to submit the report of theestimate of the property to the AssessingOfficer within a period of thirty days fromthe date of receipt of such reference.

In order to ensure the revocation ofattachment of property in lieu of bankguarantee in a time bound manner, it isproposed to provide that an order revokingthe attachment be made by the AssessingOfficer within fifteen days of receipt of suchguarantee, and in a case where a reference ismade to the Valuation Officer, within forty-five days from the date of receipt of suchguarantee.

It is further proposed that where a notice ofdemand specifying a sum payable is servedupon the assessee and the assessee fails topay such sum within the time specified inthe notice, the Assessing Officer mayinvoke the bank guarantee, wholly or partly,to recover the said amount.

This amendments are in commensurationto the recommendation no. 27 of the Part 1of the Justice RV Eshwar Committee at itspage 70.

Extension of timelimit to TransferPricing Officer in

46 92CA(3A) Inserted newly 01/06/2016 It is proposed to amend sub-section (3A) ofsection 92CA to provide that whereassessment proceedings are stayed by any


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certain cases court or where a reference for exchange ofinformation has been made by thecompetent authority, the time available tothe Transfer Pricing Officer for making anorder after excluding the time for whichassessment proceedings were stayed or thetime taken for receipt of information, as thecase may be, is less than sixty days, thensuch remaining period shall be extended tosixty days.

Assumption ofjurisdiction ofAssessing Officer

63 124(3) Inserted newly 01/06/2016 The existing sub-section (3) of the section124, inter-alia, provides that no person shallbe entitled to call in question the jurisdictionof an Assessing Officer in a case wherereturn is filed under section 139, after theexpiry of one month from the date on whichhe was served with a notice issued undersub-section (1) of section 142 or sub-section(2) of section 143 or after the completion ofthe assessment, whichever is earlier.Currently, this provision does notspecifically refer to notices issued undersection 153A or section 153C which relateto assessment in cases where a search andseizure action has been taken or casesconnected to such cases.

Instances have come to notice wherein thejurisdiction of an Assessing Officer in suchcases have been called into question at theappellate stages, despite the fact that orderpassed under section 153A or 153C is readwith section 143(3) of the Act. In order to


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remove any ambiguity in such cases it isproposed to amend sub-section (3) ofsection 124 to specifically provide that caseswhere search is initiated under section 132or books of accounts, other documents orany assets are requisitioned under section132A, no person shall be entitled to call intoquestion the jurisdiction of an AssessingOfficer after the expiry of one month fromthe date on which he was served with anotice under sub-section (1) of section 153Aor sub-section (2) of section 153C or afterthe completion of the assessment, whicheveris earlier.

Legislativeframework to enableand expand the scopeof electronicprocessing ofinformation

64 133C(2) Inserted newly 01/06/2016 In order to expedite verification and analysisof the information and documents soreceived, it is proposed to amend section133C to provide adequate legislativebacking for processing of information anddocuments so obtained and making theoutcome thereof available to the AssessingOfficer for necessary action, if any.


66 143(1)(a)(iii) to (iv)and 1st

proviso and2nd proviso

Inserted newly 01/04/2017 Certain new items have been added to theprocessing of the return of income. Thesame are as under: -

“(iii) disallowance of loss claimed, ifreturn of the previous year for whichset off of loss is claimed wasfurnished beyond the due datespecified under sub-section ( 1) ofsection 139;


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(iv) disallowance of expenditure indicatedin the audit report but not taken intoaccount in computing the total income inthe return; 30

(v) disallowance of deduction claimedunder sections 10AA, 80-IA, 80-IAB,80-IB, 80-IC, 80-ID or section 80-IE,if the return is furnished beyond thedue date specified under sub-section(1) of section 139; or

(vi) addition of income appearing in Form26AS or Form 16A or Form 16 which hasnot been included in computing the totalincome in the return: 35

Provided that no such adjustmentsshall be made unless an intimation isgiven to the assessee of suchadjustments either in writing or inelectronic mode:

Provided further that the responsereceived from the assessee, if any, shallbe considered before making anyadjustment, and in a case where noresponse is received within thirtydays of the issue of such intimation, suchadjustments shall be made;”

This amendment is in commensuration tothe recommendations wrt transparency inTax administration –E governance and are


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appearing at item no. 3(g) of page 76 of thePart 1 of the Justice RV Eshwar CommitteeReport.


67 147Explanation2, Clause(ca)

Inserted newly 01/06/2016 It is proposed to provide for reopening ofcases by the AO on the basis of theinformation so received from the prescribedauthority u/s 133C of the Act.

Immunity frompenalty andprosecution in certaincases by insertingnew section 270AA

97, 91 270AA Inserted newly 01/04/2017 It is proposed to provide that an assesseemay make an application to the AssessingOfficer for grant of immunity fromimposition of penalty under section 270Aand initiation of proceedings under section276C, provided he pays the tax and interestpayable as per the order of assessment orreassessment within the period specified insuch notice of demand and does not preferan appeal against such assessment order.

The assessee can make such applicationwithin one month from the end of the monthin which the order of assessment orreassessment is received in the form andmanner, as may be prescribed.

It is proposed that the Assessing Officershall, on fulfilment of the above conditionsand after the expiry of period of filingappeal as specified in sub-section (2) ofsection 249, grant immunity from initiationof penalty and proceeding under section


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276C if the penalty proceedings undersection 270A has not been initiated onaccount of the Mis-Reporting of Income asreferred u/s 270A of the Act.

Thus the immunity is permissible incasewhere penalty is initiated on account ofunder-reporting of income ONLY.

It has been further provided that where suchan application has been received, the AOshall within one month from the end of themonth in which application is received byhim, pass an order accepting or rejecting thesame.

This order has also been referred to be afinal one incase the application has beenaccepted.

However, if the application is rejected,the period commencing from the date onwhich the application is made, to the dateon which the order rejecting theapplication of the assessee is served onhim, shall be excluded in computing theperiod of limitation (amendment tosection 249).

Rationalisation ofadvance tax paymentschedule undersection 211 andcharging of interest

87 & 89 211, 234Cand 44AD

Amended 01/06/2016 It is proposed that the date of advancepayment by all assessee’s shall be uniform.

Now non corporate assessee’s shall alsobe required to deposit advance tax in four


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under section 234C installments.Assessee in respect of eligible businessreferred to in section 44AD opting forcomputation of profits or gains of businesson presumptive basis, shall be required topay advance tax of the whole amount in oneinstallment on or before the 15th March ofthe financial year.

It has also been clarified that the anyamount of taxes paid on or before 31st

March shall also be treated as advance Tax.

Similar amendments have been made tosection 234C qua computation of interest ondeferment of advance taxes.

However, an exemption has been permittedto an assessee in whose case no interest u/s234C shall be levied, if the income underthe head PGBP accrues to him for the firsttime.

Rationalisation oftime limit forassessment,reassessment andrecomputation

Rationalisation oftime limit forassessment in searchcases

68-69 153 and153B

Newlysubstituted

01/06/2015 The existing statutory time limit forcompletion of assessment proceedings istwo years from the end of the assessmentyear in which the income was firstassessable.

It is desirable that proceedings under the Actare finalised more expeditiously, section153 is proposed to be substituted with thechanges in time limit from the existing


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time limits to within 21 days from the endof the the assessment year in which theincome was first assessable.

Thus the old time limits of time barringcases would be 31st December wef A.Y.2014-2015 and thus the time barring will be31.3.2016 and not 31.03.2017.

This is important since the expression usedin the proviso is to any order of assessmentand not to pending assessment proceeding.

Amendment on similar lines is proposed u/s153B of the Act also.

Amendments relatingto Filing of return ofIncome

65 139(1),139(3),139(4) and139(9)

Amended,substituted

01/04/2017 Mandatory filing of ITR by person havingExempt LTCG from Equity shares andEquity oriented mutual funds income inexcess 10 Lakhs.Filing of return of loss within ‘due date’made mandatory for specified business u/s35AD.

Revision of Belated return filed, madepermissible (Goetze Law nullified).However, time to file revised returnpermitted is too short.Recommendation of RV EashwarCommittee accepted partially (sl no. 09,page 23, Part 1 of the report). Unfortunately,a well drafted effort as per therecommendation has gone wasted out.Vide Finance Act, 2013, section 139(9) was


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amended to provide that where tax is unpaidu/s 140A, the return shall be deemed to bedefective. This clause (aa) is sought to beomitted, apparently due to the fact that thereturn, if tax is unpaid, cannot be Now filedonline.

Rationalisation of taxtreatment ofRecognised ProvidentFunds, Pension Fundsand National PensionScheme

7, 9, 36 &112

80CCD,10(12),10(12A),17

Amended 01/04/2017 Under the existing provisions of theIncome-tax Act, tax treatment for theNational Pension System (NPS) referred toin section80CCD is Exempt, Exempt and Tax (EET)i.e., the monthly/periodic contributionsduring the pension accumulation phase areallowed as deduction from income for taxpurposes; the returns generated on thesecontributions during the accumulation phaseare also exempt from tax; however, theterminal benefits on exit or superannuation,in the form of lump sum withdrawals, aretaxable in the hands of the individualsubscriber or his nominee in the year ofreceipt of such amounts.

However, commutation of GovernmentPension and superannuation fund is exemptfrom taxation. The monthly contribution,annual accrued income, advances/withdrawals for specific purposes and finalwithdrawal from the Recognised ProvidentFunds (RPFs) on superannuation are alsoaccorded EEE status i.e. Exempt, Exempt,Exempt.


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In order to bring greater parity in taxtreatment of different types of pensionplans, it is proposed to amend section 10 soas to provide that in respect of thecontributions made on or after the 1st day ofApril, 2016 by an employee participating ina recognised provident fund andsuperannuation fund, up to 40 % of theaccumulated balance attributable to suchcontributions on withdrawal shall be exemptfrom tax.

Under the Part A of Fourth Schedule to theIncome-tax Act contributions made byemployer to the credit of an employeeparticipating in a recognised provident fund,which are in excess of twelve percent of thesalary of the employee, are liable to tax inthe hands of the employee. However, thereis no monetary limit for the contributionmade by the employer though there is amonetary ceiling for employee'scontribution.

However the amount received by the legalheirs shall be exempt.

Rationalization ofconversion of acompany into LimitedLiability Partnership(LLP)

28 47(xiiib) Amended 01/04/2017 Existing provisions of clause (xiiib) ofSection 47 provides that conversion of aprivate limited or unlisted public companyinto Limited Liability Partnership (LLP)shall not be regarded as transfer, if certainconditions are fulfilled, which, inter alia,


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include a condition that the company's grossreceipts, turnover or total sales in any of thepreceding three years did not exceed Rs.60lakh.

It is proposed to amend the said section soas to provide that, for availing tax-neutralconversion, in addition to the existingconditions, the value of the total assets inthe books of accounts of the company in anyof the three previous years preceding theprevious year in which the conversion takesplace, should not exceed five crore rupees.

Rationalization ofSection 50C in casesale consideration isfixed underagreement executedprior to the date ofregistration ofimmovable property

30 50C Amended 01/04/2017 It is proposed to amend the provisions ofsection 50C so as to provide that where thedate of the agreement fixing the amount ofconsideration for the transfer of immovableproperty and the date of registration are notthe same, the stamp duty value on the dateof the agreement may be taken for thepurposes of computing the full value ofconsideration.

It is further proposed to provide that thisprovision shall apply only in a case wherethe amount of consideration referred totherein, or a part thereof, has been paid byway of an account payee cheque or accountpayee bank draft or use of electronicclearing system through a bank account, onor before the date of the agreement for thetransfer of such immovable property.


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Enabling of Filing ofForm 15G/15H forrental payments

84 197A Amended 01/06/2016 it is proposed to amend the provisions ofsection 197A for making the recipients ofpayments referred to in section 194-I alsoeligible for filing self-declaration in Formno 15G/15H for non-deduction of tax atsource in accordance with the provisions ofsection 197A.

Rationalization of taxdeduction at Source(TDS) provisions

70 to 79 192A,194BB,194C,194LA,194D,194G,194H,194DA,194EE,194K, 194L

Amended 01/06/2016 The threshold limits have been increased insome case while in certain cases the rate ofTDS has been decreased. Section 194K and194L Have been OMITTED.

However for sake of brevity, the details arenot being tabulated and may be referreddirectly.

Amortisation ofspectrum fee forpurchase of spectrum

16 35ABA Inserted 01/04/2017 Any capital expenditure incurred andactually paid by an assessee on theacquisition of any right to use spectrum fortelecommunication services by payingspectrum fee will be allowed as a deductionin equal installments over the period forwhich the right to use spectrum remains inforce.

Passover provisions to permit benefit ofremaining deduction have been provided inthe cases of transfer of license by way ofdemerger and amalgamation.

Clarificationregarding thedefinition of the term

48 112(1)(c.) Amended 01/04/2017 With a view to clarify the position so far astaxability is concerned, it is proposed toamend the provisions of clause (c) of sub-


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'unlisted securities' forthe purpose of Section112 (1) (c)

section (1) of section 112 of the Income- taxAct, so as to provide that long-term capitalgains arising from the transfer of a capitalasset being shares of a company not being acompany in which the public aresubstantially interested, shall be chargeableto tax at the rate of 10 per cent.

Taxation of Non-compete fees andexclusivity rights incase of Profession

12, 33 28(va)55

Amended 01/04/2015 However, non-compete feereceived/receivable in relation to carryingout of profession are not covered underthese provisions.

It is proposed to amend clause (va) ofsection 28 of the Act to bring the non-compete fee received/receivable( which arerecurring in nature) in relation to notcarrying out any profession, within thescope of section 28 of the Act i.e. thecharging section of profits and gains ofbusiness or profession. Further, it is alsoproposed to amend the proviso to clarifythat receipts for transfer of right to carry onany profession, which are chargeable to taxunder the head "Capital gains", would not betaxable as profits and gains of business orprofession. It is also proposed to amendsection 55 so as to provide that the 'cost ofacquisition' and 'cost of improvement' forworking out "Capital gains" on capitalreceipts arising out of transfer of right tocarry on any profession shall also be takenas 'nil'


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DHC judgment in the case of Khanna andAnnadhanam dated 25.02.2013 nullified.

Clarificationregarding set offlosses against deemedundisclosed income

51 115BBE Amended 01/04/2017 It is proposed to amend the provisions of thesub-section (2) of section 115BBE toexpressly provide that no set off of any lossshall be allowable in respect of incomeunder the sections 68 or section 69 orsection 69A or section 69B or section 69Cor section 69D.

Though the above amendment is clear fromthe memorandum explaining the provisionsof Finance Act, 2012

Extension of scope ofsection 43B to includecertain paymentsmade to Railways

23 43B(g) Inserted 01/04/2017 Any sum payable by the assessee to IndianRailways for use of Railway assets.

Exemption of CentralGovernment subsidyor grant or cashassistance, etc.towards corpus offund established forspecific purposesfrom the definition ofIncome.

3 2(24)(xviii) Substituted 01/04/2017 Subsidy or grant by the Central Governmentfor the purpose of the corpus of a trust orinstitution established by the CentralGovernment or State government shall notform part of income.

BEPS action plan -Country-By-CountryReport and Master

47, 100, 102,106 & 110

92D,271AA,271GB,

Inserted 01/04/2017 The OECD report on Action 13 of BEPSAction plan provides for revised standardsfor transfer pricing documentation and a


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file 286 template for country-by-country reporting ofincome, earnings, taxes paid and certainmeasure of economic activity. India hasbeen one of the active members of BEPSinitiative and part of internationalconsensus. It is recommended in the BEPSreport that the countries should adopt astandardised approach to transfer pricingdocumentation. A three-tiered structure hasbeen mandated

The report mentions that taken together,these three documents (country-by-countryreport, master file and local file) will requiretaxpayers to articulate consistent transferpricing positions and will provide taxadministrations with useful information toassess transfer pricing risks. It will facilitatetax administrations to make determinationsabout where their resources can mosteffectively be deployed, and, in the eventaudits are called for, provide information tocommence and target audit enquiries.

The country-by-country report requiresmultinational enterprises (MNEs) to reportannually and for each tax jurisdiction inwhich they do business; the amount ofrevenue, profit before income tax andincome tax paid and accrued. It also requiresMNEs to report their total employment,capital, accumulated earnings and tangibleassets in each tax jurisdiction. Finally, it


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requires MNEs to identify each entity withinthe group doing business in a particular taxjurisdiction and to provide an indication ofthe business activities each entity engagesin. The Country-by-Country (CbC) reporthas to be submitted by parent entity of aninternational group to the prescribedauthority in its country of residence. Thisreport is to be based on consolidatedfinancial statement of the group.

Non furnishing of this information willentail penalty u/s 271AA and also u/s271GB.

New TaxationRegime forsecuritisation trustand its investors

3, 7, 57, 58,59, 82 & 83

10, 115TA,115TC,115TCA,194LBC,197

Amended /inserted

01/06/2016 Under the existing provisions of Chapter-XII-EA of the Act consisting of sections115TA, 115TB and 115TC, special taxationregime in respect of income of thesecuritisation trusts and the investors ofsuch trusts has been provided. The regimeprovides that income distributed by thesecuritisation trust to its investors shall besubject to a levy of additional tax to be paidby the securitisation trust within 14 days ofdistribution of income. The distribution taxshall be paid @ 25% if the distribution ismade to an individual or a Hindu undividedfamily (HUF) and @ 30% if the distributionis to others. Further, no distribution tax is tobe levied if the distribution is made to anexempt entity. Consequent to the levy ofdistribution tax, the income of the investor,received from the securitisation trust, is


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exempt under section 10(35A) of the Actand the income of securitisation trust itselfis exempt under section 10(23DA) of theAct.

It has been represented that under thecurrent regime, the trusts set up byreconstruction companies or thesecuritisation companies are not coveredalthough such trusts are also engaged insecuritisation activity. These companies areestablished for the purposes of theSecuritisation and Reconstruction ofFinancial Assets and Enforcement ofSecurity Interest Act, 2002 (SARFAESIAct) and their activities are regulated by theReserve Bank of India (RBI). It has beenrepresented that the existing

regime providing for final levy in the formof distribution tax is tax inefficient for theinvestors specially the banks and financialinstitutions. Disallowance of expenditure inrespect of income received fromsecuritisation trust increases the effectiverate of taxation. Further, the non-residentand resident investors are unable to takebenefits of their specific tax status.

In order to rationalise the tax regime forsecuritisation trust and its investors, and toprovide tax pass through treatment, it isproposed to amend the provisions of the Act


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to substitute the existing special regime forsecuritisation trusts by a new regime havingthe following elements: -

(i) The new regime shall apply tosecuritisation trust being an SPV definedunder SEBI (Public Offer and Listing ofSecuritised Debt Instrument) Regulations,2008 or SPV as defined in the guidelines onsecuritisation of standard assets issued byRBI or being setup by a securitisationcompany or a reconstruction company inaccordance with the SARFAESI Act;

(ii) The income of securitisation trust shallcontinue to be exempt. However, exemptionin respect of income of investor fromsecuritisation trust would not be availableand any income from securitisation trustwould be taxable in the hands of investors;

(iii) The income accrued or received fromthe securitisation trust shall be taxable in thehands of investor in the same manner and tothe same extent as it would have happenedhad investor made investment directly in theunderlying assets and not through the trust;

(iv) Tax deduction at source shall beeffected by the securitisation trust at the rateof 25% in case of payment to residentinvestors which are individual or HUF and@ 30% in case of others. In case of


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payments to non-resident investors, thededuction shall be at rates in force;

(v) The facility for the investors to obtainlow or nil deduction of tax certificate wouldbe available; and

(vi) The trust shall provide breakupregarding nature and proportion of itsincome to the investors and also to theprescribed income-tax authority.

Further, it is proposed to provide that thecurrent regime of distribution tax shall ceaseto apply in case of distribution made bysecuritisation trusts with effect from01.06.2016.

Rationalization of taxdeduction at sourceprovisions relating topayments byCategory-I andCategory-II AlternateInvestment Funds toits investors.

3, 81& 83

194LBB,197

Substitutedinserted

01/06/2016 In order to rationalise the TDS regime inrespect of payments made by the investmentfunds to its investors, it is proposed toamend section 194LBB to provide that theperson responsible for making the paymentto the investor shall deduct income-taxunder section 194LBB at the rate of ten percent where the payee is a resident and at therates in force where the payee is a non-resident (not being a company) or a foreigncompany.

Further, it is proposed to amend section 197to include section 194LBB in the list ofsections for which a certificate for deductionof tax at lower rate or no deduction of tax


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can be obtained.

Period of gettingbenefit of LTCGregime in case of un-listed companiesreduced

As per para 127 of the budget the saidperiod was proposed to be reduced to twoyears from three years. However, noamendments have been made to section2(42A) of the Act in this regard. Thisappears to be a drafting error oroversight.

executive summary of finance bill, 2016 - direct taxes · 2019-01-01 · executive summary of...

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