TMI BlogNotes on clauses - Income taxX X X X Extracts X X X X X X X X Extracts X X X X ..... l year 2012-13. Rates for deduction of tax at source during the financial year 2013-14 from income other than Salaries Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2013-14 from income other than Salaries . In view of the proposed amendment to section 115A, it is proposed to provide that the income by way of royalty or fees for technical services shall be taxable at a uniform rate of twenty-five per cent; if such income has been received by the non-resident (not being a company) or a foreign company under an agreement entered on or after 1st day of April, 1976. Subject to these modifications, the rates of deduction are the same, as those specified in Part II of the First Schedule to the Finance Act, 2012 for the purposes of deduction of income-tax at source during the financial year 2012-13. The amount of tax so deducted shall be increased by a surcharge in the case of- (i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who is of the age of eighty years or more at any time during the previous year:- Up to ₹ 5,00,000 Nil; ₹ 5,00,001 to ₹ 10,00,000 20 per cent. Above ₹ 10,00,000 0 per cent. The surcharge in cases of persons referred to in this paragraph, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph B of this Part specifies the rates of income-tax in the case of every co-operative society. In such cases, the rates of tax will continue to be the same as those specified for assessment year 2013-14. The surcharge in cases of co-operative societies, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph C of this Part specifies the rate of income-tax in the case of every firm. In such cases, the rate of tax will continue to be the same as that specified for assessment year 2013-14. The surcharge in cases of firms, having income above one crore rupees shall be levied at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-clause (c) of the said clause (1A) includes any income derived from any building on, or in the immediate vicinity of the land, and is used as a dwelling house, store house or other out-building as required by the receiver of the rent or revenue or the cultivator, in connection with such land, within the definition of agricultural income . Clause (ii) of proviso to sub-clause (c) provides that where the land is not assessed by land revenue or subject to a local rate, it should not be situated within the areas as specified in item (A) or item (B) of clause (ii) of the proviso, to qualify income derived from any such building as agricultural income. It is proposed to amend item (B) of clause (ii) of the proviso to sub-clause (c) of clause (1A) of section 2 so as to provide that if the land is situated in any area within the distance, measured aerially, (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mend section 10 of the Income tax Act relating to incomes not included in total income. Under the existing provisions contained in clause (10D) of the aforesaid section, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, is exempt, subject to the condition that the premium paid for such policy does not exceed ten per cent. of the actual capital sum assured. It is proposed to insert a new proviso in sub-clause (d) of the aforesaid clause (10D), so as to provide a higher limit of fifteen per cent. where the policy referred to in sub-clause (d) is for insurance on the life of any person who is,-- (i) a person with disability or a person with severe disability as referred to in section 80U; or (ii) suffering from disease or ailment as specified in the rules made under section 80DDB. This proviso shall apply in respect of an insurance policy, issued on or after 1st day of April, 2013. Clause (10D) of the said section, inter alia, exempts any sum received under a life insurance policy other than a Keyman insurance policy. Explanation 1 to clause (10D) defines a Keyman insurance policy to mean a life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations). The company has to satisfy the conditions mentioned in clause (a). Clause (b) of the proposed Explanation defines the venture capital fund as a trust which has been registered before 21st day of May, 2012 under the Venture Capital Funds Regulations or which has been registered as venture capital fund being a sub-category of Category I Alternative Investment Fund under the Alternative Investment Funds Regulations. The trust has to satisfy the conditions mentioned in clause (b). Clause (c) of the proposed Explanation defines the venture capital undertaking as is defined under the Venture Capital Funds Regulations or under the Alternative Investment Funds Regulations. This amendment will take effect retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. It is further proposed to insert a new clause (34A) in section 10 so as to provide for exemption in respect of any income arising to an assessee being a shareholder on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed under sub-section (1) in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head Profits and gains of business or profession of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of the new asset. The proposed sub-section (3) of the aforesaid section provides that where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of subsection (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company. The proposed sub-section (4) of the aforesaid section provides that for the purposes of this section new asset means any new plant or machinery (other than ship or aircraft) but does not include-- (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head Profits and gains of business or profession . It is proposed to insert a new sub-clause (iib) in clause (a) of the aforesaid section so as to provide that any amount paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called which is levied exclusively on or any amount which is appropriated, whether directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction in computing the income chargeable under the head Profits and gains of business or profession . It is further proposed to define the expression State Government undertaking used in the proposed new subclause (iib). This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 8 of the Bill seeks to insert a new section 43CA in the Income-tax Act to provide for a special provision for full value of consideration for transfer of assets other than capital assets in certain cases. The proposed sub-section (1) of the aforesaid section seeks to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here any immovable property is received by an individual or HUF without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property would be charged to tax in the hands of an individual or an HUF as income from other sources. The proposed subclause (b), also provides that where any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration, would be charged to tax in the hands of an individual or an HUF as income from other sources. It is further proposed to insert a proviso so as to state 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 on the date of the agreement may be taken for the purposes of this subclause. It is further proposed to insert a second proviso so as to provide that the first proviso, shall apply only in a case where the amount of the consideration, or a part thereof, has been paid in a mode other than cash on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quity oriented fund shall also be eligible for deduction in accordance with the provisions of section 80CCG. It is further proposed to substitute sub-section (2) so as to provide that the deduction under sub-section (1), shall be allowed in accordance with and subject to the provisions of the said section, for three consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units of equity oriented fund were first acquired. It is also proposed to amend sub-section (3) of the said section so as to enhance the limit of gross total income to twelve lakh rupees from the existing limit of ten lakh rupees. It is also proposed to insert an Explanation in the said section so as to provide that equity oriented fund shall have the meaning assigned to it in Explanation to clause (38) of section 10. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 12 of the Bill seeks to amend section 80D of the Incometax Act relating to deduction in respect of health insurance p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty does not exceed twenty-five lakh rupees; (iii) the value of the residential house property does not exceed forty lakh rupees; (iv) the assessee does not own any residential house property on the date of sanction of the loan. Sub-section (4) of the said section 80EE seeks to provide that where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year. Sub-section (5) of the said section 80EE seeks to define the terms financial institution and housing finance company . This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment year. Clause 14 of the Bill seeks to amend section 80G of the Income-tax Act relating to deductions in respect of donations to certain funds, charitable institutions, etc. Under the existing provisions, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd section 80-IA of the Income-tax Act relating to deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. The existing provisions contained in the clause (iv) of sub-section (4) of the aforesaid section 80-IA provide that, a deduction shall be allowed to an undertaking which,-- (a) is set up in any part of India for the generation or generation and distribution of power, if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2013; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2013; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on 1st April, 2004 and ending on 31st March, 2013. It is proposed to amend sub-clauses (a), (b) and (c) of clause (iv) of the said sub-section so as to extend the time limit from 31st March, 2013 to 31st March, 2014. These amendments will take effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide that an assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under Chapter VIII of the Incometax Act) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent. of such income-tax or an amount of two thousand rupees, whichever is less. Consequential amendments have been proposed in section 87, so as to provide reference to proposed new section 87A. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 21 of the Bill seeks to amend section 90 of the Incometax Act relating to agreement with foreign countries or specified territories. The existing provisions of the aforesaid section 90 confers power upon the Central Government to enter into an agreement with the Government of any specified territory outside India in addition to entering into agreement with foreign countries. It is proposed to omit sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide that the certificate of being a resident in a specified territory outside India referred to in subsection (4), shall be necessary but not a sufficient condition for claiming any relief under the agreement referred to therein. This amendment will take effect retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. Clause 23 of the Bill seeks to omit Chapter X-A of the Incometax Act (as inserted by section 41 of the Finance Act, 2012) relating to General Anti-Avoidance Rule. This amendment will take effect from 1st April, 2014. Clause 24 of the Bill seeks to insert a new Chapter X-A consisting of new sections 95, 96, 97, 98, 99, 100, 101 and 102 in the Income-tax Act relating to General Anti-Avoidance Rule. The provisions of the proposed new section 95 provide that an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and consequences in relation to tax of such a declaration can be determined. The proposed section 96 provides the definition and conditions under which an arrangement can be declared to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide for different rates of tax in case of income by way of royalty or fees for technical services based on the date of agreement under which such income is received by the non-resident (not being a company) or a foreign company. It is proposed to substitute sub-clauses (A), (AA), (B) and (BB) of the aforesaid clause (b), so as to provide that income by way of royalty or fees for technical services shall be taxable at a uniform rate of twenty-five per cent. if it has been received under an agreement entered after 31st day of March, 1976. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 26 of the Bill seeks to amend section 115BBD of the Income-tax Act relating to tax on certain dividends received from foreign companies. The existing provisions of aforesaid section 115BBD provide that where the total income of an assessee, being an Indian company, for the previous year relevant to the assessment year beginning on 1st day of April, 2012 or beginning on 1st day of April, 2013, includes any income by way of dividends declared, distributed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income of domestic company for buy-back of shares. The proposed new section 115QA provides that notwithstanding anything contained in any other provision of the Act, any distributed income to a shareholder by a domestic company on buy-back of shares, the shares being not listed on any recognised stock exchange, shall be chargeable to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent. on the distributed income. The Explanation to the said section defines the expressions buy-back which means purchase by a company of its own shares in accordance with the provisions of section 77A of the Companies Act and distributed income which means the consideration paid by the company on buy-back of shares as reduced by the amount received by the company for issue of such shares. The proposed additional income-tax shall be in addition to the income-tax chargeable in respect of the total income of such company whether income-tax is payable by the company on its total income or not. It further provides that the amount of tax shall be remitted within fourteen days of the date of payment of consideration. It also provides that the tax shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sert a new Chapter XII-EA consisting of new sections 115TA, 115TB and 115TC in the Income-tax Act relating to special provisions relating to tax on distributed income by securitisation trusts. The provisions of the proposed new section 115TA provide that notwithstanding anything contained in any other provisions of the Act any distributed income to an investor by a securitization trust shall be liable to the levy of additional income-tax at the rate of twenty-five per cent. on the distributed income if such income is paid to a person being an individual or Hindu undivided family. The additional income-tax shall be levied at the rate of thirty per cent., if such distributed income is paid to a person other than individual and Hindu undivided family. No additional income-tax shall be levied, if the distributed income is paid to any person who is exempt under the Act. It also provides that the amount of tax shall be remitted within fourteen days of the date of payment or distribution of income. It is provided that no deduction under any provisions of the Act shall be allowed to securitisation trust in respect of the said income. The section provides that the securitisation tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defective unless the tax together with interest, if any, payable in accordance with the provisions of section 140A, has been paid on or before the date of furnishing of the return. This amendment will take effect from 1st June, 2013. Clause 33 of the Bill seeks to amend section 142 of the Incometax Act relating to inquiry before assessment. The existing provisions contained in sub-section (2A) of section 142 of the Act, inter alia, provides that if at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary to do so, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit. It is proposed to amend the aforesaid sub-section so as to provide that if at any stage of the proceeding before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provides that Approving Panel shall, on receipt of a reference from the Commissioner, issue such directions as it deems fit in respect of declaration of an arrangement as an impermissible avoidance arrangement including specifying the previous year or years to which such declaration shall apply. The proposed sub-section (7) of the aforesaid new section provides that a direction prejudicial either to the assessee or the revenue shall not be issued unless an opportunity of being heard has been granted to the assessee or the Assessing Officer, as the case may be. The proposed sub-section (8) of the aforesaid new section provides that Approving Panel may before issuing directions can call for records or evidences and direct the Commissioner to carry out further inquiry and submit report. The proposed sub-section (9) of the aforesaid new section provides that in case of difference in opinion on an issue the direction shall be issued according to the majority opinion. The proposed sub-section (10) of the aforesaid new section provides that every direction issued by the Approving Panel or the Commissioner shall be binding on the Assessing Officer and Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid such remuneration as may be prescribed. The proposed sub-section (17) of the aforesaid new section provides that the term of the Approving Panel shall ordinarily be for one year and may be extended up to a period of three years. The proposed sub-section (18) of the aforesaid new section provides that the Chairperson and members of the Approving Panel shall meet, as often as necessary, to consider the references made to the Approving Panel and shall be paid such remuneration as may be prescribed. The proposed sub-section (19) of the aforesaid new section provides that the Approving Panel shall have all the powers which are vested in the Authority for Advance Rulings under the Incometax Act. The proposed sub-section (20) of the aforesaid new section provides that the Board shall provide to the Approving Panel such officials as may be necessary for the efficient exercise of powers and discharge of functions of the Approving Panel. The proposed sub-section (21) of the aforesaid new section provides that the Board may make rules for the purposes of the constitution and efficient functioning of the Approving Panel and expeditious disposal of the reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid Explanation 1 so as to provide that 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 assessee is required to furnish a report of such audit under that sub-section or where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Commissioner, shall be excluded in computing the period of limitation for the purposes of section 153. The existing provisions contained in clause (viii) of Explanation 1 to section 153 provides for exclusion of the period, commencing from the date on which a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information so requested is received by the Commissioner or a period of one year, whichever is less, in computing the period of limitation for the purposes of section 153. It is proposed to substitute the aforesaid clause so as to provide that the period, commencing from the date on which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under an agreement referred to in section 90 or section 90A and ending with the date on which the information so requested is received by the Commissioner or a period of one year, whichever is less, in computing the period of limitation for the purposes of section 153B. It is proposed to amend the aforesaid clause so as to provide that the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less, shall be excluded in computing the period of limitation for the purposes of section 153B. These amendments will take effect from 1st June, 2013. It is further proposed to omit clause (ix) in Explanation 1 of the sub-section (4) of the said section. This amendment will take effect retrospectively from 1st April, 2013. It is also proposed to insert clause (ix) in Explanation 1 of sub-section (4) of the aforesaid section so as to provide for exclusion of time period starting from recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions in sub-section (1) of section 179 provide that where any tax is due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year, shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. It is proposed to insert an Explanation to the aforesaid section so as to clarify that the expression tax due includes penalty, interest or any other sum payable under the Act. This amendment will take effect from 1st June, 2013. Clause 42 of the Bill seeks to insert a new section 194-IA in the Income-tax Act relating to payment on transfer of certain immovable property other than agricultural land. It is proposed to insert a new section 194-IA to provide that any person, being a transferee, responsible for paying (other than the person refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act relating to definitions in context of Advance Ruling. It is proposed to omit sub-clause (iv) in clause (a) of the said section. It is also proposed to omit sub-clause (iiia) in clause (b) of the said section. These amendments will take effect retrospectively from 1st April, 2013. It is proposed to insert sub-clause (iv) in clause (a) in the said section to empower the Authority for Advance Rulings to determine whether an arrangement which is proposed to be undertaken by any person whether resident or non-resident is an impermissible avoidance arrangement as referred to in Chapter X-A or not. It is further proposed to amend clause (b) of the said section in order to provide that definition of applicant includes a person making an application to the authority for determination of whether an arrangement is an impermissible avoidance arrangement or not. These amendments will take effect from 1st April, 2015. Clause 45 of the Bill seeks to amend section 245R of the Income-tax Act relating to procedure on receipt of application by Authority for Advance Rulings. It is proposed to amend clause (iii) of proviso to subsection (2) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. This amendment will take effect from 1st April, 2016. Clause 48 of the Bill seeks to amend section 271FA of the Income-tax Act relating to penalty for failure to furnish annual information return. The existing provisions contained in section 271FA provides that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under that subsection, the income-tax authority prescribed under the said subsection 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. It is proposed to amend the aforesaid section so as to provide that if a person who is required to furnish an annual information return under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under the said subsection (1) may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which such failure continues. It is further proposed to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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