TMI BlogFINANCE ACT, 2013 – EXPLANATORY NOTES TO THE PROVISIONS OF FINANCE ACT, 2013X X X X Extracts X X X X X X X X Extracts X X X X ..... r deduction as bad debts in case of banks, 11.1 - 11.8. 40 Disallowance of certain fee, charge, etc. in case of State Government Undertakings, 12.1 - 12.3. Insertion of new section 43CA Computation of income under the head "profits and gains of business or profession" for transfer of immovable property in certain cases, 13.1 - 13.4. 56 Taxability of immovable property received for inadequate consideration, 14.1 - 14.4. 80C Raising of limit of percentage of eligible premium for life insurance policies of persons with disability or disease, 15.1 - 15.6. 80CCG Expanding the scope and deduction and its eligibility under the section, 16.1 - 16.5. 80D Deduction for contribution to Health Schemes similar to Central Government Health Scheme (CGHS), 17.1 -17.3. Insertion of new section 80EE Deduction in respect of interest on loan sanctioned during financial year 2013-14 for acquiring residential house property, 18.1 - 18.4. 80G One hundred per cent deduction for donation to National Children's Fund, 19.1- 19.4. 80GGB 80GGC Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 194-IA Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land), 39.1-39.6. Insertion of new section 194LD , amendment of sections 115AD , 195 and 196D Income by way of interest on certain bonds and Government securities, 40.1 - 40.2. 204 Meaning of person "responsible for paying" under Chapter XVII, 41.1 - 41.4. 206AA Exemption from requirement of furnishing PAN under section 206AA to certain non-resident bond holder, 42.1 -42.3. 206C Removal of exemption from levy of Tax Collection at Source (TCS) to cash sale of any coin or any other article weighing 10 grams or less, 43.1 - 43.2. 252 Appointment of President of the Appellate Tribunal, 44.1 - 44.4. Substitution of new section for section 271FA Penalty under section 271FA for non-filing of Annual Information Return, 45.1 - 45.5. Fourth Schedule Extension of time for approval, 46.1 - 46.5. Wealth-tax Act, 1957 2 Change in the definition of capital asset, ; exemption from wealth tax to agricultural land situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2004; (x) introduced Commodity Transaction Tax through Chapter VII. 3. Rate structure 3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2013-14 3.1.1 In respect of income of all categories of assessees liable to tax for the assessment year 2013-14, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These rates are the same as those laid down in Part III of the First Schedule to the Finance Act, 2012 for the purposes of computation of "advance tax", deduction of tax at source from "Salaries" and charging of tax payable in certain cases during the financial year 2012-13. The major features of the rates specified in the said Part I are as follows: 3.1.2 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person. Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company) as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part I of the First Schedule to the Act. No surcharge shall be levied in the case of a firm. Education Cess on Income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed. In addition, such amount of tax shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax computed at the rate of one per cent on the amount of tax, in all cases. 3.1.5 Local Authorities In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part I of the First Schedule to the Act. No surcharge shall be levied. However, Education Cess, and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. 3.1.6 Companies In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act, 2012 except that in case of certain payments made to a non-resident (other than a company) or a foreign company, in the nature of income by way of royalty or fees for technical services, the rate shall be twenty-five percent. of such income instead of ten percent. 3.2 2 Surcharge The tax deducted at source in the following cases shall be increased by a surcharge for purposes of the Union indicated below:- (i) In case of every non-resident person not being a company, the rate of surcharge is ten percent of tax where the income or aggregate of such income paid or likely to be paid and subject to the deduction exceeds one crore rupees. (ii) In case of payments made to foreign companies, the rate of surcharge is two per cent of such income tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed ten crore rupees. In case where such income or the aggregate of such incomes paid or likely to be paid to a foreign company and subject to the deduction exceeds ten crore rupees, the rate of surcharge is five percent. (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company). The basic exemption limit, the rates of tax and slabs of income for various categories remain the same as in financial year 2012-13. The rates of tax during the financial year 2013-14 are as follows:- Income chargeable to tax Rate of income- tax Individual (other than senior and very senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person. Individual, resident in India who is of the age of sixty years or more but less than eighty years. (senior citizen) Individual resident in India, who is of the age of eighty years or more. (very senior citizen) Up to Rs. 2 ,00,000 Nil Rs. 2,00,001 -Rs. 2,50,000 10% Nil Nil Rs. 2,50,001 -Rs. 5,00,000 10% Rs. 5,00,001 -Rs. 10,00,000 20% 20% 20% Exceeding Rs. 10,00,000 30% 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. of such income-tax in case of a firm having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.3.5 Local Authorities- In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part III of the First Schedule to the Act. The amount of income-tax so computed shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a local authority having a total income exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees. Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of income-tax computed including surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.4 Surcharge on Additional Income-tax Where additional income-tax has to be paid under section 115-O or section 115-QA or sub-section (2) of section 115R or section 115TA of the Income-tax Act, that is to say, on distribution of dividend by domestic companies or distribution of income by a company on buy-back of shares from shareholders or on distribution of income by a mutual fund to its unit holders or on distribution of income by a securitization trust to its investors, the additional tax so payable shall be increased by a surcharge of ten percent of such tax. 4. Amendment in the definition of Capital Asset 4.1 The provisions contained in clause (14) of section 2 of the Income-tax Act, 1961, before amendment by the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any sum received under a life insurance policy other than a keyman insurance policy. Explanation 1 to the said clause (10D) defines a keyman insurance policy to mean a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person. 5.2 It has been noticed that the policies taken as keyman insurance policy are being assigned to the keyman before its maturity. The keyman pays the remaining premium on the policy and claims the entire sum received under such policy as exempt on the ground that the policy is no longer a keyman insurance policy. 5.3 The exemption under section 10(10D) is claimed for policies which were originally keyman insurance policies but during the term these were assigned to some other person. The Courts have also noticed this loophole in law. 5.4 With a view to plug the loophole and check such practices to avoid payment of taxes, the provisions of clause (10D) of section 10 of the Income-tax Act, 1961 have been amended to provide that a keyman insurance policy which has been assigned to any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sections provide a pass through status (i.e. income is taxable in the hands of investors instead of VCF/VCC) only to the funds which satisfy the investment and other conditions as are provided in SEBI (Venture Capital Fund) Regulations, 1996. Further the pass through status is available only in respect of income which arises to the fund from investment in VCU, being a company which satisfies the conditions provided in SEBI (Venture Capital Fund) Regulations, 1996. 7.3 The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF regulations) have replaced the SEBI (Venture Capital Fund) Regulations, 1996 (VCF regulations) from 21st May, 2012. In order to provide pass through status to similar venture capital funds which are registered under new regulations and subject to same conditions of investment restrictions in the context of investment in a venture capital undertaking, section 10(23FB) has been amended to provide that (i) the existing VCFs and VCCs (i.e. which have been registered before 21/05/2012) and are regulated by the VCF regulations, as they stood before repeal by AIF regulations, would continue to avail pass through status as currently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment years. Page 20 of 56 9. Exemption to National Financial Holdings Company Limited 9.1 The Specified Undertaking of Unit Trust of India (SUUTI) was created vide the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 as the successor of Unit Trust of India (UTI). Exemption from Income-tax was available to SUUTI in respect of its income up to 31st March, 2014. SUUTI has been succeeded by a new company wholly owned by the Central Government. It has been incorporated on 7th June, 2012 as National Financial Holdings Company Limited (NFHCL). 9.2 In order to provide the exemption on the lines of SUUTI to NFHCL, clause (49) has been inserted in section 10 of the Income-tax Act, 1961 to grant exemption to NFHCL in respect of income accruing, arising or received on or before 31.03.2014. 9.3 Applicability : - This amendment has been made effective retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and assessment year 2014-15. 10. Incentive for acquisition and installation of new plant or machinery by manufacturing company 10.1 In order to encourage substantial investment in plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years. 11. Clarification for amount to be eligible for deduction as bad debts in case of banks 11.1 Under the provisions of section 36(1)(viia) of the Income-tax Act, before amendment by the Act, in computing the business income of certain banks and financial institutions, deduction is allowable in respect of any provision for bad and doubtful debts made by such entities subject to certain limits specified therein. The limit specified under section 36(1)(viia)(a) of the Income-tax Act restricts the claim of deduction for provision for bad and doubtful debts for certain banks (not incorporated outside India) and certain cooperative banks to 7.5 percent of gross total income (before deduction under this clause) of such banks and 10 percent of the aggregate average advance made by the rural branches of such banks. This limit is 5 percent of gross total income (before deduction under this clause) under sections 36(1)(viia)(b) and 36(1)(viia)(c) for a bank incorporated outside India and certain financial institutions. 11.2 Provisions of clause (vii) of sub-section (1) of section 36 of the Income-tax Act provides for deduction for bad debt actually written off as irrecovera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to urban advances, then, it should not be set off against provision for bad and doubtful debts made for rural advances. There is no such distinction made in clause (viia) of sub-section (1) of section 36 of the Income-tax Act. 11.7 In order to clarify the scope and applicability of provision of clause (vii), (viia) of sub-section (1) and sub-section (2), an Explanation in clause (vii) of sub-section (1) of section 36 has been inserted stating that for the purposes of the proviso to clause (vii) of sub-section(1) of section 36 and clause (v) of sub-section (2) of section 36, only one account as referred to therein is made in respect of provision for bad and doubtful debts under clause (viia) of sub-section (1) of section 36 and such account relates to all types of advances, including advances made by rural branches. Therefore, for an assessee to which clause (viia) of sub-section (1) of section 36 applies, the amount of deduction in respect of the bad debts actually written off under clause (vii) of sub-section (1) of section 36 shall be limited to the amount by which such bad debts exceeds the credit balance in the provision for bad and doubtful debts account made under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) a company in which more than fifty per cent of the paid-up equity share capital is held by the entity referred to in clause (i) or clause (ii) (whether singly or taken together); (iv) a company or corporation in which the State Government has the right to appoint the majority of the directors or to control the management or policy decisions, directly or indirectly, including by virtue of its shareholding or management rights or shareholders agreements or voting agreements or in any other manner; (v) an authority, a board or an institution or a body established or constituted by or under any Act of the State Government or owned or controlled by the State Government. 12.3 Applicability: - This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 13. Computation of income under the head "Profits and gains of business or profession" for transfer of immovable property in certain cases 13.1 Under the provisions of the Income-tax Act, when a capital asset, being immovable property, is transferred for a considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty is received for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the difference between the stamp duty value of such property and the consideration, shall be chargeable to tax in the hands of the individual or HUF as income from other sources. 14.3 Considering the fact that there may be a time gap between the date of agreement and the date of registration, it has been provided that where the date of the agreement fixing the amount of consideration for the transfer of the immovable property and the date of registration are not the same, the stamp duty value may be taken as on the date of the agreement, instead of that on the date of registration. This exception shall, however, apply only in a case where the amount of consideration, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement fixing the amount of consideration for the transfer of such immovable property. 14.4 Applicability: - This amendment takes effect from 1st April, 2014 and accordingly, applies in relation to the assessment year 2014-15 and subsequent assessment years. 15. Raising the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 above shall be allowed to the extent of the premium paid but does not exceed fifteen percent. of the actual capital sum assured. 15.6 Applicability: - This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 16. Expanding the scope of deduction and its eligibility under section 80CCG 16.1 Section 80CCG of the Income-tax Act, before its amendment by the Act, inter-alia, provide that a resident individual who has acquired listed equity shares in accordance with the scheme notified by the Central Government, shall be allowed a deduction of fifty per cent of the amount invested in such equity shares to the extent that the said deduction does not exceed twenty five thousand rupees. 16.2 The deduction is one-time and is available only in one assessment year in respect of the amount so invested. The deduction is available to a new retail investor whose gross total income does not exceed ten lakh rupees. Rajiv Gandhi Equity Savings Scheme has been notified under section 80CCG. 16.3 With a view to liberalize the incentive available for investment in capital markets by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned during financial year 2013-14 for acquiring residential house property 18.1 Under the provisions of section 24 of the Income-tax Act, before amendment by the Act, income chargeable under the head 'Income from House Property' is computed after making the deductions specified therein. The deductions specified under the aforesaid section are as under:- i. A sum equal to thirty per cent of the annual value; ii. Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. It has also been provided that where the property consists of a house or part of a house which is in the occupation of the owner for the purposes of his own residence or cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, then the amount of deduction as mentioned above shall not exceed one lakh fifty thousand rupees subject to the conditions provided in the said section. 18.2 Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the assessment year 2014-15 and assessment year 2015-16. 19. One hundred percent deduction for donation to National Children's Fund 19.1 Under the provisions of section 80G of the Income-tax Act, before its amendment by the Act, an assessee is allowed a deduction from his total income in respect of donations made by him to certain funds and institutions. The deduction is allowed at the rate of fifty per cent of the amount of donations made except in the case of donations made to certain funds and institutions specified in clause (i) of sub-section (1) of said section 80G, where deduction is allowed at the rate of one hundred per cent. 19.2 In the case of donations made to the National Children's Fund, a deduction at the rate of fifty per cent of the amount so donated was allowed. 19.3 Donations to Funds which are of national importance have been generally provided a deduction of one hundred per cent of the amount donated. As the National Children's Fund is also a Fund of national importance, the section has been amended to provide a hundred per cent deduction in respect of any sum paid as donation to the said Fund in computing the total income of an assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, 2014. 21.3 Applicability: - These amendments take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 22. Deduction for additional wages in certain cases 22.1 Section 80JJAA, before amendment by the Act, provided for a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed in any previous year by an Indian company in its industrial undertaking engaged in manufacture or production of article or thing. The deduction is available for three assessment years including the assessment year relevant to the previous year in which such employment is provided. 22.2 No deduction under this section is allowed if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking . 22.3 The tax incentive under section 80JJAA was intended for employment of blue collared employees in the manufacturing sector whereas in practice, it is being claimed for other employees in other sectors also. Therefore, the provisions of section 80JJAA have been amended so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government to adopt any agreement between specified associations for above mentioned purposes. 24.2 In exercise of this power, the Central Government has entered into various Double Taxation Avoidance Agreements (DTAAs) with different countries and has adopted agreements between specified associations for relief of double taxation. The scheme of interplay between DTAA and domestic legislation ensures that a taxpayer, who is resident of one of the contracting country to the DTAA, is entitled to claim applicability of beneficial provisions either of DTAA or of the domestic law. Sub-section (4) of sections 90 and 90A of the Income-tax Act inserted by Finance Act, 2012 make submission of Tax Residency Certificate (TRC) containing prescribed particulars, as a condition for availing benefits of the agreements referred to in these sections. 24.3 Concerns were expressed by Tax Authorities of other countries, as well as stakeholders that different countries issue TRC as per their practice and law. Therefore, the TRCs issued by different countries may not contain all the particulars which were mandatorily required to be included under section 90(4) or 90A (4) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into force with effect from April 1, 2016 as against the current date of April 1, 2014. The provisions shall apply from the assessment year 2016-17 instead of assessment year 2014-15. (B) An arrangement, the main purpose of which is to obtain a tax benefit, would be considered as an impermissible avoidance arrangement. The provision of section 96 providing that it should be "the main purpose or one of the main purposes" has been amended accordingly. (C) The factors like, period or time for which the arrangement had existed; the fact of payment of taxes by the assessee; and the fact that an exit route was provided by the arrangement, would be relevant but not sufficient to determine whether the arrangement is an impermissible avoidance arrangement. The provisions of section 97 which provided that these factors would not be relevant have been amended accordingly. (D) An arrangement shall also be deemed to be lacking commercial substance, if it does not have a significant effect upon the business risks, or net cash flows of any party to the arrangement apart from any effect attributable to the tax benefit that wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax in case of a non-resident taxpayer where the total income includes any income by way of Royalty and Fees for technical services (FTS) received under an agreement entered after 31.03.1976 and which are not effectively connected with permanent establishment, if any, of the non-resident in India. Prior to amendment of section 115A by the Act, the tax was payable on the gross amount of income at the rate of - (i) 30% if income by way of royalty or FTS is received in pursuance of an agreement entered on or before 31.05.1997; (ii) 20% if income by way of royalty or FTS is received in pursuance of an agreement entered after 31.05.1997 but before 01.06.2005; and (iii) 10% if income by way of royalty or FTS is received in pursuance of an agreement entered on or after 01.06.2005. 26.2 India has tax treaties with 87 countries, majority of tax treaties allow India to levy tax on gross amount of royalty at rates ranging from 10 per cent to 25 per cent, whereas the tax rate as per section 115A is 10 per cent. In some cases, this has resulted in taxation at a lower rate of 10 per cent even if the treaty all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 115-O provides that the tax base for DDT (i.e. the dividend payable in case of a company) is to be reduced by an amount of dividend received from its subsidiary if such subsidiary has paid the DDT which is payable on such dividend . This ensured removal of cascading effect of DDT in a multi-tier structure where dividend received by a domestic company from its subsidiary (which is also a domestic company) is distributed to its shareholders. 28.4 section 115-O has been amended in order to remove the cascading effect in respect of dividends received by a domestic company from a similarly placed foreign subsidiary ( i.e. the foreign company in which domestic company holds more than fifty per cent of equity share capital). It has been provided that where the tax on dividends received from the foreign subsidiary is payable under section 115BBD by the holding domestic company then, any dividend distributed by the holding company in the same year, to the extent of such dividends, shall not be subject to Dividend Distribution Tax under section 115-O of the Income-tax Act. 28.5 Applicability : - This amendment takes effect from 1st June, 2013. 29. Additional Income-tax on distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on distributed income by the Mutual Funds 30.1 Under the provisions of section 115R of the Income-tax Act, before its amendment by the Act, any amount of income distributed by the specified company or a Mutual Fund to its unit holders is chargeable to additional income-tax. In case of any distribution made by a fund other than equity oriented fund to a person who is not an individual and HUF, the rate of tax is 30 per cent whereas in case of distribution to an individual or an HUF it is 12.5 per cent or 25 per cent depending on the nature of the fund. 30.2 In order to provide uniform taxation for all types of funds, other than equity oriented fund, the rate of tax on distributed income has been increased from 12.5 per cent to 25 per cent in all cases where distribution is made to an individual or a HUF. 30.3 Further in case of an Infrastructure debt fund (IDF) set up as a Non-Banking Finance Company (NBFC) the interest payment made by the fund to a non-resident investor is taxable at a concessional rate of 5 per cent. However in case of distribution of income by an IDF set up as a Mutual Fund the distribution tax is levied at the rates described above in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied at the rate of 25 per cent in case of distribution being made to investors who are individual and HUF and at the rate of 30 per cent in other cases. No additional income-tax shall be payable if the income distributed by the securitisation trust is received by a person in whose case income, irrespective of its nature and source, is not chargeable to tax. For instance, in the case of income being distributed to a mutual fund, whose income from all sources are exempt under section 10(23D) of the Income-tax Act, no additional income tax shall be payable. (iii) Consequent to the levy of distribution tax, the distributed income received by the investor will be exempt from tax under section 10 (23D) of the Income-tax Act. (iv) The securitisation trust will be liable to pay interest at the rate of one per cent for every month or part of the month on the amount of additional income-tax not paid within the specified time. (v) The person responsible for payment of income or the securitisation trust will be deemed to be an assessee in default in respect of the amount of tax payable by him or it in case the additional i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gone slight modification in FEMA, 1999. The term foreign exchange is defined in clause (n) of section 2 of FEMA, 1999. 33.2 In view of the above, sub-clause (i) of clause (a) of sub-section (1) section 138 of the Income-tax Act has been amended to provide that foreign exchange shall have the meaning as assigned to it in section 2(n) of FEMA, 1999. 33.3 Similar amendments have been made in sections 10(4), 10(4B), 10(15), 10A, 10B, 48, 115AB, 115C, and 196A of the Income-tax Act. 33.4 Applicability: - This amendment will take effect from 1st April, 2013. 34. Return of Income filed without payment of self- assessment tax to be treated as defective return 34.1 The provisions contained in sub-section (9) of section 139, before amendment by the Act, provide that where the Assessing Officer considers that the return of income furnished by the assessee is defective; he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days. If the defect is not rectified within the time allowed by the Assessing Officer, the return is treated as an invalid return. The conditions, the non-fulfillment of which renders the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report of such audit in the prescribed form. 35.3 Applicability: - This amendment takes effect from 1st June, 2013. 36. Exclusion of time in computing the period of limitation for completion of assessments and reassessments 36.1 Section 153 of the Income-tax Act, inter-alia, provides the time limit for completion of assessment and reassessment of income by the Assessing Officer. Explanation to section 153 provides that certain periods specified therein shall be excluded while computing the period of limitation for the purposes of the said section. Under the provisions of clause (iii) of Explanation 1 to section 153 of the Income-tax Act, prior to its amendment by the Act, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assesee is required to furnish a report of such audit, is excluded in computing the period of limitation for the purposes of assessment or reassessment. However, it did not provide for exclusion of time in case the direction of the Assessing Officer as aforesaid is set aside by the court. 36.2 Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty: - These amendments take effect from 1st June, 2013. 37. Time limit for completion of assessment or reassessment where reference is made to Transfer Pricing Officer. 37.1 Sections 153 and 153B of the Income-tax Act, inter alia, provide the time limit for completion of assessment and reassessment of income by the Assessing Officer. Time limits have been provided for completion of assessment or reassessment under sections 143(3), 147, 153A, 153C etc. of the Income-tax Act. These time limits get extended if a reference is made under section 92CA of the Income-tax Act to the Transfer Pricing Officer (TPO) during the course of assessment/reassessment proceedings. These time limits are either from the end of financial year in which notice for initiation of the proceeding was served or from the end of the assessment year to which the proceedings relate. 37.2 Vide Finance Act, 2012 the period of limitation as provided in sections 153 and 153B of the Income-tax Act was extended by three months. In all the cases where reference under section 92CA of the Income-tax Act was made to the Transfer Pricing Officer the period of limitation was extended to one year from the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year to which non-recovery relates) shall be jointly and severally liable for payment of such tax unless he proves that the non-recovery of tax cannot be attributed to any gross neglect, misfeasance or breach of duty on his part. This provision is intended to recover outstanding demand under the Income-tax Act of a private company from the directors of such company in certain cases. However, some courts have interpreted the phrase 'tax due', used in section 179, does not include penalty, interest and other sum payable under the Income-tax Act. 38.2 In view of the above, it has been clarified that for the purposes of the said section 179, the expression "tax due" includes penalty, interest or any other sum payable under the Income-tax Act. Amendment on the similar lines for clarifying the expression 'tax due' has also been made to the provisions of section 167C of the Income-tax Act. 38.3 Applicability: - These amendments take effect from 1st June, 2013. 39. Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) 39.1 There is a statutory requirement under section 139A of the Income-tax Act read with rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent securities 40.1 Considering the current account deficit situation and the need to have foreign investment in India in rupees, a new section 194LD has been inserted in the Income-tax Act to provide for reduced rate of 5 per cent of withholding tax as against the normal rate of 20 per cent on interest payable on or after the 1st day of June, 2013 but before the 1st day of June, 2015 in respect of a rupee denominated bond of an Indian company or a Government security if the payment is made to a Foreign Institutional Investor (FII) or a Qualified Foreign Investor (QFI). It has been further provided that interest rate on rupee denominated bonds of an Indian company should not exceed the threshold limit to be notified by the Government. This rate has been notified vide Notification 56/2013 dated 29th July 2013 as below: (i) in case of bonds issued before the 1st day of July, 2010, the rate of interest shall not exceed 500 basis points (bps) over the Base Rate of State Bank of India as on the 1st day of July, 2010. (ii) in case of bonds issued on or after the 1st day of July, 2010, the rate of interest shall not exceed 500 basis poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 5 per cent instead of general rate of deduction of tax at the rate of 20 per cent. Under section 206AA of the Act, if such non-resident does not provide his Permanent Account Number (PAN) to the payer, then the tax is required to be withheld at the rate of 20 per cent. 42.2 Considering the practical difficulties in obtaining PAN by the non-resident bondholders, section 206AA has been amended to provide that provisions of section 206AA of the Income-tax Act shall not apply to interest paid to a non-resident on long-term infrastructure bonds referred to in section 194LC of the Income-tax Act . 42.3 Applicability: - This amendment takes effect from 1st June, 2013. 43. Removal of exemption from levy of Tax Collection at Source (TCS) to cash sale of any coin or any other article weighing 10 grams or less 43.1 Finance Act, 2012 amended the provisions of section 206C of the Income-tax Act to provide that the seller of bullion or jewellery shall collect tax at the rate of 1 per cent of sale consideration from every buyer of bullion or jewellery if sale consideration exceeds two lakh rupees or five lakh rupees respectively and the sale is in cash. Further, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 271FA of the income-tax Act, prior to its amendment by the Act, provided that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA of the Income-tax Act, fails to furnish such return within the time prescribed under that sub-section, the income-tax authority prescribed under the said sub-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues. 45.3 Section 271FA of the income-tax Act has been amended to provide that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA of the income-tax Act, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under sub-section (1) of the said section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues. 45.4 It is further provided that where such person fails to furnish the return within the period specified in the notice under sub-section (5) of section 285BA, he s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied only on certain specified assets. The definition of assets on which wealth tax is leviable inter alia includes urban land. As per this definition urban land means land situated in the jurisdiction of municipality or cantonment board or land situated in notified area. However, certain categories of urban land such as land on which construction of a building is not permissible, land held for industrial purpose, land held as stock in trade, have been excluded from the definition of urban land. Normally on agricultural land, either no construction is allowed or allowed only for a specific purpose (mainly for agricultural needs), but no specific exemption has been provided to the agricultural land. Recently it has been held by the Hon'ble Supreme Court that agricultural land situated in urban area is liable for wealth tax. As the wealth tax is levied only on unproductive assets, there was no intention to levy wealth tax on the agricultural land which cannot be termed as unproductive assets. 47.2 In view of the above, the definition of urban land in the Wealth-tax Act, 1957 has been amended to specifically provide that wealth tax is not leviable on urban land which is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund to the mutual fund Seller 0.25 0.001 49.3 Applicability - These amendments take effect from 1st June, 2013 and will accordingly apply to any transaction made on or after that date. 50. Commodities Transaction Tax 50.1 Commodities Transaction Tax (CTT) has been introduced vide Chapter VII of the Act and has come into force from 1st July, 2013 as notified vide Notification S.O. 1768(E) dated 19th June, 2013. The CTT Rules, 2013 have been notified vide Notification S.O. 1769 (E) dated 19th June, 2013. CTT is levied on taxable commodities transactions entered into in a recognised association. 50.2 'Taxable commodities transaction' has been defined to mean a transaction of sale of commodity derivatives in respect of commodities other than agricultural commodities traded in recognised associations. CTT is to be collected on taxable commodities transactions by the recognised associations. 50.2.1 Agricultural commodities which are not liable to CTT are almond, barley, cardamom, castor seed, channa/gram, copra, coriander/dhaniya, cotton, cotton seed oilcake/kapasia khali, guar seed, isabgul seed, jeera, kapas, maize feed, pepper, potato, ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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