TMI BlogExplanatory Notes to the Provisions of the Finance Act, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... l assets, 15.1 - 15.3 ; Tax Treatment of Gold Monetization Scheme, 2015, 23.1 - 23.3 ; Rationalization of section 56 of the Income-tax Act, 24.1 - 24.3 ; Exemption of Central Government subsidy or grant or cash assistance, etc. towards corpus of fund established for specific purposes from the definition of Income, 44.1 - 44.3 ; Providing legal framework for automation of various processes and paperless assessment, 54.1 - 54.7 . 6 Enabling provision for implementation of various provisions of the Act in case of a foreign company held to be resident in India , 4.1 - 4.8 . 9 Exemption in respect of certain activity related to diamond trading in Special Notified Zone , 6.1 - 6.5 . 9A Modification in conditions of special taxation regime for off shore funds , 7.1 - 7.6 . 10 Exemption of income of Foreign Company from storage and sale of crude oil stored as part of strategic reserves , 5.1 - 5.4 ; Exemption from Dividend Distribution Tax (DDT) on distribution made by an SPV to Business Trust, 8.1 - 8.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profession , 39.1 - 39.3 44AD Increase in threshold limit for presumptive taxation scheme for persons having income from business , 40.1 - 40.6 44ADA Introduction of Presumptive taxation scheme for persons having income from profession , 38.1 - 38.5 47 Provision for Tax benefits to Sovereign Gold Bond Scheme, 2015, 19.1 - 19.3 48 Provision for Tax benefits to Sovereign Gold Bond Scheme, 2015 , 19.1 - 19.3 ; Provisions for tax benefits to Rupee Denominated Bond , 20.1 - 20.2 50C Rationalization of section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property, 29.1 - 29.4 54EE Tax incentives for start-ups , 16.1 - 16.7 54GB Tax incentives for start-ups, 16.1 - 16.7 55 Taxation of Non-compete fees and exclusivity rights in case of Profession , 47.1 - 47.2 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng set off of losses against deemed undisclosed income , 46.1 - 46.3 115BBF Taxation of Income from 'Patents' , 37.1 - 37.4 115JB Applicability of Minimum Alternate Tax (MAT) on foreign companies for the period prior to 1-4-2015 , 26.1 - 26.5 ; Tax Incentives to International Financial Services Centre , 27.1 - 27.6 115JH Enabling provision for implementation of various provisions of the Act in case of a foreign company held to be resident in India , 4.1 - 4.8 115-O Tax Incentives to International Financial Services Centre , 27.1 - 27.6 115QA Tax on distributed income to shareholder , 9.1 - 9.6 115TA New Taxation Regime for securitisation trust and its investors , 10.1 - 10.5 115TC New Taxation Regime for securitisation trust and its investors , 10.1 - 10.5 115TCA New Taxation Regime for securitisation trust and its investors , 10.1 - 10.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194G Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194H Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194K Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194L Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194LA Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194LBA Exemption from Dividend Distribution Tax (DDT) on distribution made by an SPV to Business Trust , 8.1 - 8.4 194LBB Rationalization of tax deduction at source provisions relating to payments by Category-I and Category-II Alternate Investment Funds to its investors , 12.1 - 12.6 194LBC New Taxation Regime for securitisation trust and its investors, 10.1 - 10.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Report and Master file , 13.1 - 13.10; Rationalisation of penalty provisions , 62.1 - 62.15 271AAA Rationalisation of penalty provisions , 62.1 - 62.16.3 271GB BEPS action plan - Country-By-Country Report and Master file , 13.1 - 13.10 272A Rationalisation of penalty provisions , 62.1 - 62.17.5 273A Providing Time limit for disposing applications made by assessee under section 273A, 273AA or 220(2A) , 53.1 - 53.8 ; Rationalisation of penalty provisions , 62.1 - 62.14 273B BEPS action plan - Country-By-Country Report and Master file , 13.1 - 13.10 273AA Providing Time limit for disposing applications made by assessee under section 273A, 273AA or 220(2A) , 53.1 - 53.8 276C Rationalisation of penalty provisions , 62.1 - 62.14 279 Rationalisation of penalty provisions , 62.1 - 62.14 281B Provision for bank guarantee u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115JH in the Income-tax Act. ( vi ) introduced, vide Chapter VIII, Equalisation Levy on e-commerce transactions; ( vii ) introduced, vide Chapter X, the Direct Tax Dispute Resolution Scheme, 2016, to reduce litigation and enable the Government to realise its dues expeditiously. 3. Rate structure 3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2016-17. 3.1.1 In respect of income of all categories of assessees liable to tax for the assessment year 2016-17, 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, 2015 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 2015-16. The main features of the rates specified in the said Part I are as follows: 3.1.2 Individual, Hindu undivided family (HUF), association of persons, body of individuals or artificial jurid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is ₹ 28,55,000/-. Surcharge on the income-tax at the rate of twelve per cent of such tax is ₹ 3,42,600/-. Thus the total income-tax inclusive of surcharge is ₹ 31,97,600/- without providing marginal relief. On providing marginal relief, the income-tax inclusive of surcharge shall be limited to ₹ 29,55,000/-. Then the education cess of two per cent is to be computed on ₹ 29,55,000/- which works out to ₹ 59,100/-. In addition, the amount of tax computed shall also be increased by an additional cess called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax which for the present case of income-tax of ₹ 29,55,000/- works out to be ₹ 29,550/-. Thus, where the amount of tax computed is ₹ 29,55,000/-, the Education Cess of two per cent is ₹ 59,100, the Secondary and Higher is ₹ 29,550/-. The total cess in this case will amount to ₹ 88,650 (i.e., ₹ 59,100/- + ₹ 29,550/-). No marginal relief shall be available in respect of such Cess. 3.1.3 Co-operative Societies. In the case of every co-operative society, the rates of income-tax have been specified in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 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. The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve per cent of such income-tax in case of a local authority having a total income exceeding one crore rupees. However, marginal relief shall be available so that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and surcharge 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 the amount of tax computed, inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.2 Rates for deduction of income-tax at source from certain incomes during the financial year 2016-17. 3.2.1 In every case in which tax is to be deducted at the rates in force under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D, 194LBA, 194LBB, 194LBC and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2016-17 have been specified in Part II of the First Schedule to the Act. The rates for deduction of income-tax at source during the financial year 2016-17 will continue to be the same as those specified in Part II of the First Schedule to the Finance Act, 2015 except that in case of payments in the nature of income by way of insurance commission made to a resident (other than a company), the rate shall be five per cent of such income instead of ten per cent.. 3.2.2 Surcharge. The tax ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of one per cent in all such cases. Thus in the above illustration, where the amount of tax deducted is ₹ 12,00,000/-, the surcharge is ₹ 24,000/-, the said Secondary and Higher Education Cess will be computed at the rate of one per cent on ₹ 12,24,000/- which works out to be ₹ 12,240/-. The total cess in this case will, therefore, amount to ₹ 36,720/- (i.e., ₹ 24,480/- + ₹ 12,240/-). 3.3 Rates for deduction of income-tax at source from Salaries , computation of advance tax and charging of income-tax in special cases during the financial year 2016-17. 3.3.1 The rates for deducting income-tax at source from 'Salaries' and computing advance tax during the financial year 2016-17 have been specified in Part III of the First Schedule to the Act. These rates are also applicable for charging income-tax during the financial year 2016-17 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are likely to transfer property to av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 3.3.3 Co-operative Societies. In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. The rates are as follows- Income chargeable to tax Rate Up to ₹ 10,000 10% ₹ 10,001 -Rs. 20,000 20% Exceeding ₹ 20,000 30% The amount of income-tax so computed shall continue to be increased by a surcharge at the rate of twelve per cent of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. However, marginal relief shall be available. Accordingly, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.3.6 Companies. In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is twenty nine per cent of the total income, if the total turnover or gross receipts of the company in the previous year 2014-15 does not exceed five crore rupees, and in all other cases, the rate of income tax is thirty per cent of total income. In order to provide relief to newly setup domestic companies engaged solely in the business of manufacture or production of article or thing, a new section 115BA has been inserted in the Income-tax Act, to provide that the income-tax payable in respect of the total income of a domestic company for any previous year relevant to the assessment year beginning on or after the 1st of April, 2017 shall be computed @ 25% at the option of the company, if, - ( i ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the amount of income that exceeds one crore rupees, and ( ii ) the total amount payable as income-tax and surcharge on total income exceeding ten crore rupees shall not exceed the total amount payable as 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 or section 115TD 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination would be well after closure of the previous year and it may not be possible for company to undertake many of procedural requirements. Representations have also been made by stakeholders that the implementation of POEM be deferred by a year, by which time clarity regarding guidelines and applicability of other provisions of the Income-tax Act would be in place. 4.5 In order to provide clarity in respect of implementation of POEM based rule of residence and also to address concerns of the stakeholders, amendments to section 6 of the Income-tax Act and section 4 of the Finance Act, 2015 have been made. These amendments have been made so as to defer the applicability of POEM based residence test by one year and the determination of residence based on POEM shall be applicable from 1st of April 2017. Further, a new Chapter XII-BC consisting of section 115JH has been inserted in the Income- tax Act. The provisions of section 115JH of Income-tax Act,- ( a ) provide a transition mechanism for a company which is incorporated outside India and has not earlier been assessed to tax in India. The Central Government has been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal interest and ensures price stability for Indian oil companies. The filling cost of such facility entails huge financial burden. The Government has explored the possibility of meeting a substantial part of the financial burden through participation of private players including foreign national oil companies (NOCs) and multinational companies (MNCs) storing and selling crude oil from outside India. However, the storage of crude oil by NOCs/ MNCs and its sale in India would create tax liability for these entities. 5.3 In order to achieve neutrality in terms of taxation to encourage the NOCs and MNCs to store their crude oil in India and to build up strategic oil reserves, the provisions of section 10 of the Income-tax Act have been amended to provide that any income accruing or arising to a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India shall not be included in the total income, if, - ( i ) such storage and sale by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in conditions of special taxation regime for off shore funds section 9A. 7.1 Section 9A of the Income-tax Act provides for a special regime in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India. The benefit under section 9A is available subject to the conditions provided in sub-sections (3), (4) and (5) of this section. 7.2 Sub-section (3) of section 9A provides for the conditions for the eligibility of the fund. These conditions, inter-alia, are related to residence of fund, corpus size, investor base, investment diversification and payment of remuneration to fund manager at arm's length. In respect of residence of the fund, the condition is that the fund has to be resident of a country or territory with which India has entered into a Double Taxation Avoidance Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (DDT) on distribution made by an SPV to Business Trust. 8.1 The Income-tax Act contains a specific taxation regime in respect of taxation of business trusts comprising of Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (Invits) regulated by SEBI. Under this regime, multiple taxation due to interposition of business trusts is avoided. Under the SEBI regulation, these business trusts can hold the income generating asset either directly or through a Special Purpose Vehicle (SPV). The SPV can be a company or an LLP. Under SEBI Regulation, SPV is defined to mean any company or LLP in which REIT holds or proposes to hold controlling interest which is not less than fifty per cent of the equity share capital or interest. The SPV should hold at least 80% of the assets in properties and not invest in other SPV. The existing tax regime provides that in case of REITs, the income by way of interest paid by SPV being a company to REIT is given pass through i.e. it is not taxed at the level of REIT but in the hands of respective investors of REIT. The rental income from directly held assets by REIT is also allowed a pass through. In respect of assets held through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business trust either holds 100% of the share capital of the SPV or holds all of the share capital other than that which is required to be held by any other entity as part of any direction of any Government or specific requirement of any law to this effect or which is held by Government or Government bodies; and ( d ) the exemption from the levy of DDT shall only be in respect of dividends paid out of current income after the date when the business trust acquires the shareholding referred in ( c ) above in the SPV. The dividends paid out of accumulated and current profits up to this date shall be liable for levy of DDT as and when any dividend out of these profits is distributed by the company either to the business trust or any other shareholder. 8.4 Applicability: The amendments to sections 115-O and 194LBA take effect from 1st June, 2016. The amendments to sections 10 and 115UA take effect from 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent assessment years. 9. Tax on distributed income to shareholder. 9.1 Section 115QA of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es effect from 1st June, 2016. 10. New Taxation Regime for securitisation trust and its investors. 10.1 A special taxation regime in respect of income of the securitisation trusts and the investors of such trusts was contained in Chapter-XII-EA of the Income-tax Act consisting of sections 115TA, 115TB and 115TC. The regime provided that income distributed by the securitisation trust to its investors shall be subject to a levy of additional tax to be paid by the securitisation trust within 14 days of distribution of income. The distribution tax was to be paid @ 25% if the distribution was made to an individual or a HUF and @ 30% if the distribution was to others. Further, no distribution tax was to be levied if the distribution was made to an exempt entity. Consequent to the levy of distribution tax, the income of the investor, received from the securitisation trust, was exempt under section 10(35A) of the Income-tax Act and the income of securitisation trust itself is exempt under section 10(23DA) of the Income-tax Act. 10.2 The existing regime did not cover the trusts set up by reconstruction companies or the securitisation companies are not covered although such tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestors which are individual or HUF and @ 30% in case of others. In case of payments to non-resident investors, the deduction shall be at rates in force; ( v ) The facility for the investors to obtain low or nil deduction of tax certificate would be available; and ( vi ) The trust shall provide breakup regarding nature and proportion of its income to the investors and also to the prescribed income-tax authority. 10.4 Further, it has also been provided that the regime of distribution tax existing prior to above amendments by the Act shall cease to apply in case of distribution made by securitisation trusts with effect from 1st June, 2016. 10.5 Applicability: The amendments to sections 2, 115TA and 197, and the insertion of section 194LBC take effect from 1st June, 2016. The amendment to section 115TCA takes effect from 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent assessment years. 11. Levy of tax where the charitable institution ceases to exist or converts into a non-charitable organization. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable institution. Therefore, there was a need to ensure that the benefit conferred over the years by way of exemption is not misused and to plug the gap in law that allowed the charitable trusts having built up corpus/wealth through exemptions being converted into non-charitable organisation with no tax consequences. 11.3 In order to ensure that the intended purpose of exemption availed by trust or institution is achieved, a specific provision in the Act is required for imposing a levy in the nature of an exit tax which is attracted when the organisation is converted into a non-charitable organisation or gets merged with a non-charitable organisation or a charitable organisation with dissimilar objects or does not transfer the assets to another charitable organisation. 11.4 Accordingly, a new Chapter XII-EB consisting of sections 115TD, 115TE and 115TF has been inserted in the Income-tax Act. This chapter contains specific provisions for levy of additional income-tax in case of conversion into, or merger with, any non-charitable form or on transfer of assets of a charitable organisation on its dissolution to a non-charitable institution. The main elements of this regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have any other income chargeable to tax in the relevant previous year. ( vi ) The tax has to be paid within the specified period. In case of failure of payment of tax within the specified period, a simple interest at the rate of one per cent. per month or part of it shall be applicable for the period of non-payment. ( vii ) For the purpose of recovery of tax and interest, the principal officer or the trustee and the trust or the institution shall be deemed to be assessee in default and all provisions related to the recovery of taxes shall apply. Further, the recipient of assets of the trust, which is not a charitable organisation, shall also be liable to be held as assessee in default in case of non-payment of tax and interest. However, the recipient's liability shall be limited to the extent of the assets received. 11.4 Applicability: This amendment takes effect from 1st June, 2016. 12. Rationalization of tax deduction at source provisions relating to payments by Category-I and Category-II Alternate Investment Funds to its investors. 12.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax under section 194LBB, at the rate of ten per cent where the payee is a resident; and at the rates in force where the payee is a non-resident (not being a company) or a foreign company. However, it has also been provided that where the payee is a non-resident (other than a company) or a foreign company, no deduction shall be made in respect of income not chargeable to tax under the provisions of the Income-tax Act. 12.5 Further, section 197 of the Income-tax Act has also been amended to include section 194LBB in the list of sections for which a certificate for deduction of tax at lower rate or no deduction of tax can be obtained. Consequential amendment has also been made to the definition of rates in force contained in section 2(37A) of the Income-tax Act, so as to include section 194LBB in it. 12.6 Applicability: These amendments take effect from 1st June, 2016. 13. BEPS action plan - Country-By-Country Report and Master file. 13.1 Sections 92 to 92F of the Income-tax Act contain provisions relating to transfer pricing regime. Under provision of section 92D, there is requirement for maintenance of prescribed information and document relating to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of residence. This report is to be based on consolidated financial statement of the group. 13.5 The master file is intended to provide an overview of the MNE group's business, including the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity in order to assist tax administrations in evaluating the presence of significant transfer pricing risk. In general, the master file is intended to provide a high-level overview in order to place the MNE group's transfer pricing practices in their global economic, legal, financial and tax context. The master file shall contain information which may not be restricted to transaction undertaken by a particular entity situated in particular country. In that aspect, information in master file would be more comprehensive than the existing regular transfer pricing documentation. The master file shall be furnished by each entity to the tax authority of the country in which it operates. 13.6 In order to implement the international consensus, a specific reporting regime in respect of CbC reporting and also the master file has been provided. The essen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entity in India belonging to an international group shall be required to furnish CbC report to the prescribed authority if the parent entity of the group is resident:- ( a ) in a country with which India does not have an arrangement for exchange of the CbC report; or ( b ) such country is not exchanging information with India even though there is an agreement; and ( c ) this fact has been intimated to the entity by the prescribed authority; ( vii ) If there are more than one entities of the same group in India, then the group can nominate (under intimation in writing to the prescribed authority) the entity that shall furnish the report on behalf of the group. This entity would then furnish the report; ( viii ) If an international group, having parent entity which is not resident in India, had designated an alternate entity for filing its report with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority and furnish correct report within a period of fifteen days of such discovery; or ( c ) the entity furnishes inaccurate information or document in response to notice of the prescribed authority, then penalty of ₹ 5,00,000/- applies under section 271GB of the Income-tax Act; ( xiii ) The entity can offer reasonable cause defence for non-levy of penalties mentioned above. The remaining aspects shall be prescribed through rules. 13.7 The amendments made in respect of maintenance of master file and furnishing it are: ( a ) the entities being constituent of an international group shall, in addition to the information related to the international transactions, also maintain such information and document as is prescribed in the rules; ( b ) the information and document shall also be furnished to the prescribed authority within such period as may be prescribed and the manner of furnishing will also be provided for in the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by an assessee for not more than thirty-six months immediately preceding the date of its transfer. The first proviso to the clause (42A), inter alia, provides for a reduced period of holding of twelve months for certain securities including listed shares of a company. 15.2 In order to reduce the holding period of unlisted shares of a company, section 2 of the Income-tax Act has been amended to provide that in case of unlisted shares of a company, period of holding shall be twenty-four months instead of thirty-six month for these shares to be treated as long-term capital asset. 15.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years. 16. Tax incentives for start-ups 16.1 With a view to provide an impetus to start-ups and facilitate their growth in the initial phase of their business, a new section 80-IAC has been inserted in the Income-tax Act to provide a deduction of one hundred per cent of the profits and gains derived by an eligible start-up from a business involving innovation, development, deployment or commercialization of new products, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With a view to avoid incidence of the aforesaid condition on start-up where computers or computer software form the core asset base owing to nature of business activity, section 54GB of the Income-tax Act has further been amended so as to provide that the expression new asset includes computers or computer software in case of technology driven start-ups so certified by the Inter-Ministerial Board of Certification notified by the Central Government in the official Gazette. 16.7 Applicability: These amendments take effect from 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent assessment years. 17. Incentives for Promoting Housing for All 17.1 With a view to incentivise affordable housing sector as a part of larger objective of 'Housing for All' , a new section 80-IBA has been introduced to provide for hundred per cent deduction of the profits of an assessee developing and building housing project if the housing project is approved by the competent authority before the 31st March, 2019 subject to certain conditions which inter alia, include: ( i ) The proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration 18.1 The provisions of section 80JJAA of the Income tax Act, before its substitution by the Act provided for a deduction of thirty per cent of additional wages paid to new regular workmen in a factory for three years. The provisions apply to the business of manufacture of goods in a factory where 'workmen' are employed for not less than three hundred days in a previous year. Further, benefits are allowed only if there is an increase of at least ten per cent in total number of workmen employed on the last day of the preceding year. 18.2 With a view to encourage employment generation and provide incentive to all sectors, section 80JJAA has been substituted to provide that the deduction under the said provisions shall be available in respect of cost incurred on any employee whose total emoluments are less than or equal to twenty five thousand rupees per month. No deduction, however, shall be allowed in respect of cost incurred on those employees, for whom the entire contribution under Employees' Pension Scheme notified in accordance with Employees' Provident Fund and Miscellaneous Provisions Act, 1952, is paid by the Government. 18.3 Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide relief to non-resident investor who bears the risk of currency fluctuation, section 48 of the Income-tax Act has been amended to provide that the capital gains, arising in case of appreciation of rupee between the date of issue and the date of redemption against the foreign currency in which the investment is made shall be exempt from tax on capital gains. 20.2 Applicability : This amendment takes effect from 1st of April, 2017 and will accordingly apply in relation to assessment year 2017-18 and subsequent assessment years. 21. Consolidation of 'plans' within a 'scheme' of mutual fund 21.1 Under the provisions of clause (xviii) of section 47 of the Income-tax Act, any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund is not chargeable to tax. 21.2 Security Exchange Board of India (SEBI) has issued guidelines for consolidation of mutual fund plans within a scheme. To extend the tax exemption, available on merger or consolidation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme, 1999, clause (14) of section 2 of the Income-tax Act has been amended so as to exclude Deposit Certificates issued under Gold Monetisation Scheme, 2015 notified by the Central Government, from the definition of capital asset and thereby to exempt it from tax on capital gains. Further, clause (15) of section 10 of the Income-tax Act has also been amended so as to provide that the interest on Deposit Certificates issued under the Scheme, shall be exempt from tax. 23.3 Applicability : These amendments take effect retrospectively from 1st of April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years. 24. Rationalization of section 56 of the Income-tax Act 24.1 The provision contained in clause (vii) of sub-section (2) of section 56 of the Income-tax Act before amendment by the Act provided for chargeability of income from other sources in case any money, immovable property or other property with or without consideration in excess of ₹ 50,000 is received by an assessee being an individual or an HUF. The provisions also apply where shares of a company are received as a consequence of demerger or amalgamation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere amended to provide that in case of a foreign company any income chargeable at a rate lower than the rate specified in section 115JB of the Income-tax Act shall be reduced from the book profits and the corresponding expenditure will be added back. However, since this amendment was prospective w.e.f assessment year 2016-17, the issue for assessment year prior to 2016-17 remained to be addressed. 26.3 A Committee on Direct Tax matters headed by Justice A.P. Shah, set up by the Government to look into the matter, recommended for an amendment of section 115JB to clarify the applicability of Minimum Alternate Tax (MAT) provisions to Foreign Institutional Investors/Foreign Portfolio Investors (FIIs/FPIs) in view of the fact that FIIs and FPIs normally do not have a place of business in India. 26.4 In view of the recommendations of the committee and with a view to provide certainty in taxation of foreign companies, section 115JB of the Income-tax Act has been amended to provide that with effect from 01.04.2001, the provisions of section 115JB shall not be applicable to a foreign company if ( i ) the assessee is a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide that in case of a company, being a unit located in International Financial Services Centre and deriving its income solely in convertible foreign exchange, MAT shall be chargeable at the rate of nine per cent. 27.5 Section 115-O of the Income-tax Act has also been amended so as to provide that no tax on distributed profits shall be chargeable in respect of the total income of a company being a unit located in International Financial Services Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2017 out of its current income, either in the hands of the company or the person receiving such dividend. 27.6 The existing provisions relating to securities transaction tax and commodities transaction tax provide for levy of tax on transactions in taxable securities and commodities respectively. Section 113A of the Finance (No.2) Act, 2004 has been substituted so as to provide that the provisions of Chapter VII shall not apply to taxable securities transactions entered into by any person on a recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to the date of registration of immovable property 29.1 Section 50C of the Income-tax Act provides that in case of transfer of a capital asset being land or building or both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. This provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Income-tax Act i.e. when an immovable property is sold as stock-in-trade. 29.2 Section 50C of the Income-tax Act has been amended so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of 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 computing the full value of consideration. It has been further provided that this provision shall apply only in a case where the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from tax. However, the whole amount received by the nominee, on death of the assessee shall be exempt from tax. 31.3 Recognised provident funds and Superannuation funds are alternate options for social security provided by employer. Under the Part A of Fourth Schedule to the Act contributions made by employer to the credit of an employee participating in a recognised provident fund, which are in excess of twelve per cent of the salary of the employee, are liable to tax in the hands of the employee. However, there is no monetary limit for the contribution made by the employer. Part A of Fourth schedule was amended to provide a monetary cap of rupees one lakh and fifty thousand on tax-free contribution by an employer in employee's account in a recognised provident fund. Further, under section 17, perquisite in the hands of the assessee includes the amount of any contribution exceeding one lakh rupees to an approved superannuation fund by the employer. In order to bring parity between the tax-free employer's contribution to both approved superannuation fund and recognised provident fund, section 17 has been amended to increase the limit of employer contribution to one la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Chapter shall not be allowed as deduction in case of failure of the assessee to deduct and deposit the equalisation levy to the credit of Central government. 32.7 Applicability : It was provided that this chapter shall come in to force from a date to be appointed by the Central Government through notification in Official Gazette. Subsequently, the Central Government vide Notification. No 37(SO 1904E), dated 27th May 2016 appointed 1st of June, 2016 as the date from which the provisions of this Chapter will come into force. 33. Tax Collection at Source (TCS) on sale of vehicles; goods or services 33.1 The existing provision of section 206C of the Income-tax Act, inter alia, provides that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption, tendu leaves, scrap, mineral being coal or lignite or iron ore, bullion etc. in cash exceeding two lakh rupees. 33.2 In order to reduce the cash transactions in sale of goods and services, and for curbing the flow of unaccounted money in to the trading system and to bring high value transactions into tax net, sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units in SEZ for profit derived from export of articles or things or services. No deduction shall be available to units commencing manufacture or production of article or thing or start providing services on or after 1st day April, 2020. (from previous year 2020-21 onwards). 2 35AC-Expenditure on eligible projects or schemes Deduction for expenditure incurred by way of payment of any sum to a public sector company or a local authority or to an approved association or institution, etc. on certain eligible social development project or a scheme. No deduction shall be available with effect from 1.4.2017 (i.e from previous year 2017-18 and subsequent years). 3 35CCD-Expenditure project on skill development Weighted deduction of 150 per cent on any expenditure incurred (not being expenditure in the nature of cost of any land or building) on any notified skill development project by a company. Deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards). 4 35C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant block of assets. 2 35(1)( ii ) - Expenditure on scientific research. Weighted deduction from the business income to the extent of 175 per cent of any sum paid to an approved scientific research association which has the object of undertaking scientific research. Similar deduction is also available if a sum is paid to an approved university, college or other institution and if such sum is used for scientific research. Weighted deduction shall be restricted to 150 per cent from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20) and deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards). 3 35(1)(iia) - Expenditure on scientific research. Weighted deduction from the business income to the extent of 125 per cent of any sum paid as contribution to an approved scientific research company. Deduction shall be restricted to 100 per cent with effect from 01.04.2017 (i.e. from previous year 2017-18 and subsequent years). 4 35(1)( iii ) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction of fertilizer, deduction shall be restricted to 100 per cent of capital expenditure w.e.f. 01.4.2017 (i.e. from previous year 2017-18 onwards). 34.3 Applicability: These amendments mentioned in Table 2 take effect from 1st of April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. 35. Extending the benefit of initial additional depreciation under section 32(1)(iia) for power sector 35.1 Under the existing provisions of section 32(1)(iia) of the Income-tax Act, 1961, additional depreciation of 20% is allowed in respect of the cost of new plant or machinery acquired and installed by certain assessees engaged in the business of generation and distribution of power. This depreciation allowance is over and above the deduction allowed for general depreciation under section 32(1)( ii ) of the Act. This benefit of additional depreciation is not available on the new machinery or plant installed by an assessee engaged in the business of transmission of power. 35.2 In order to rationalise the incentive of power sector, section 32(1)(iia) of the Act has been amended so as to provide that an assessee en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax as profits and gains of business in the previous year in which the spectrum has been transferred. ( iv ) unallowed expenses in a case where a part of the spectrum is transferred would be amortised. ( v ) under the scheme of amalgamation, if the amalgamating company sells or transfer the spectrum to an amalgamated company, being an Indian company, then the provisions of this section will apply to amalgamated company as they would have applied to amalgamating company if later has not transferred the spectrum. 36.3 Applicability : This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 37. Taxation of Income from 'Patents' 37.1 In order to encourage indigenous research development activities and to make India a global R D hub, the Government has decided to put in place a concessional taxation regime for income from patents. The aim of the concessional taxation regime is to provide an additional incentive for companies to retain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the true and the first inventor of the invention, where more than one person is registered as patentee under Patents Act, 1970 in respect of that patent. Further amendments has also been made to section 115JB of the Income-tax act to provide that the amount of income by way of royalty chargeable to tax under section 115BBF and related expenditure shall not be taken in to account for computation of book profit under section 115JB of the Income-tax Act. 37.4 Applicability : These amendments take effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 38. Introduction of Presumptive taxation scheme for persons having income from profession 38.1 The existing scheme of taxation provides for a simplified presumptive taxation scheme for certain eligible persons engaged in certain eligible business only and not for persons earning professional income. In order to rationalize the presumptive taxation scheme and to reduce the compliance burden of the small tax payers having income from profession and to facilitate the ease of doing business, the Income-tax Act has been amended to provide for presumptive taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts audited from twenty five lakh rupees to fifty lakh rupees for persons carrying on profession. 39.3 Applicability : This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 40. Increase in threshold limit for presumptive taxation scheme for persons having income from business. 40.1 The existing provisions of section 44AD of the Income-tax Act provide for a presumptive taxation scheme for an eligible business. Where in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding rupees one crore, a sum equal to eight per cent of the total turnover or gross receipts, or as the case may be, a sum higher than the aforesaid sum shall be deemed to be profits and gains of such business chargeable to tax under the head Profits and gains of business or profession . Under the scheme, the assessee will be deemed to have been allowed the deduction under sections 30 to 38 of the Income-tax Act. Further, the eligible assessee can report income less than the deemed income of eight per cent of the total turnover or gross receipts not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed that he may pay advance tax by 15th March of the financial year. The applicability of section 44AB has also been clarified vide Press release dated 20th June, 2016. 40.6 Applicability : These amendments take effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 41. Deduction in respect of provision for bad and doubtful debt in the case of Non- Banking Financial companies. 41.1 Under the existing provisions of sub-clause ( c ) of clause (viia) of sub-section (1) of section 36 of the Income-tax Act, in computing the profits of a public financial institutions, State financial corporations and State industrial investment corporations a deduction, limited to an amount not exceeding five per cent of the gross total income, computed, before making any deduction under the aforesaid clause and Chapter VI-A, is allowed in respect of any provision for bad and doubtful debt. 41.2 Considering the fact that Non-Banking Financial companies (NBFCs) are also engaged in financial lending to different sectors of society, the provision of clause (viia) of sub-section (1) of section 36 has been amended so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Income-tax Act or at the rate in force or at the rate of twenty per cent., whichever is higher. The provisions of section 206AA also apply to non-residents with an exception in respect of payment of interest on long-term bonds as referred to in section 194LC. 43.2 In order to reduce compliance burden, the said section 206AA of the Income-tax Act has been amended to provide that the provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company, in respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed. 43.3 Applicability : This amendment takes effect from 1st of June, 2016. 44. Exemption of Central Government subsidy or grant or cash assistance, etc. towards corpus of fund established for specific purposes from the definition of Income 44.1 The Finance Act, 2015 had amended the definition of income under clause (24) of section 2 of the Income-tax Act so as to provide that the income shall include assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69D is taxable at the rate of thirty per cent and further provides that no deduction in respect of any expenditure or allowances in relation to income referred to in the said sections shall be allowable 46.2 Currently, there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE of the Income-tax Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set-off against income referred to in section 115BBE. However, the current language of section 115BBE of the Income-tax Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, the provision of the sub-section (2) of section 115BBE of the Income-tax Act has been amended as to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 46.3 Applicability : This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 47. Taxation of Non-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 48. Time limit for carry forward and set off of such loss under section 73A of the Income-tax Act 48.1 The existing provisions of section 73A of the Income-tax Act provide that any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business. Further, section 80 of the Income-tax Act inter-alia provides that a loss which has not been determined in pursuance of return filed in accordance with the provisions of sub-section (3) of section 130, shall not be carried forward and set-off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) or section 74 or sub-section 74A. 48.2 In accordance with the scheme of the Income-tax Act, this loss is to be allowed if the return is filed within the specified time i.e. by the due date of filing of the return of the income as provided in section 80 for other losses determined under the Income-tax Act. 48.3 Accordingly, section 80 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ottery tickets 1,000 15,000 194H Commission or brokerage 5,000 15,000 TABLE - 4 Present section Heads Rate of TDS (%) prior to amendment by Finance Act, 2016 Revised Rate of TDS (%) as per amendments made vide Finance Act, 2016 194DA Payment in respect of Life Insurance Policy 2% 1% 194EE Payments in respect of NSS Deposits 20% 10% 194D Insurance commission in case of persons other than a company Rate in force (10%) 5%* 194G Commission on sale of lottery tickets 10% 5% 194H Commission or brokerage 10% 5% 49.2 The Following provisions of the Income-tax act which are not in operation are omitted in the Income-tax Act as detailed in Table 5. TAB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in sub-section (2) of section 23 of the Income-tax Act (self-occupied house property) has been acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed. 51.2 In view of the fact that housing projects often take longer time for completion, the second proviso to clause ( b ) of section 24 of the Income-tax Act has been amended to provide that the deduction under the said proviso on account of interest paid on capital borrowed for acquisition or construction of a self-occupied house property shall be available if the acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed. 51.3 Applicability : This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 52. Simplification and rationalisation of provisions relating to taxation of unrealised rent and arrears of rent 52.1 Existing provisions of sections 25A, 25AA and 25B of the Income-tax Act relate to spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. 53.4 Under the existing provisions no time limit has been provided regarding the passing of orders either under section 220 or sections 273A or 273AA of the Income-tax Act. Further, these provisions do not specifically mandate that assessee be given an opportunity of being heard in case such application is rejected by an authority. Therefore, in order to rationalise the provisions and provide for specific time-line, amendment to the existing provisions have been made. 53.5 In view of the above, section 220 of the Income-tax Act has been amended to provide that an order accepting or rejecting application of an assessee shall be passed by the concerned Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received. 53.6 On the same line , section 273A and section 273AA of the Income-tax Act have been amended to provide that an order accepting or rejecting the application of an assessee shall be passed by the Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng new clause (23C) to define the term hearing to include communication of data and documents through electronic mode. 54.7 Applicability : These amendments effect from 1st June, 2016. 55. Filing of return of Income 55.1 Existing provisions of sub - section (1) of section 139 of the Income-tax Act provide that every person referred to therein shall file a return of income on or before the due date. The sixth proviso to the said section provides that every person, being an individual or Hindu undivided family or an association of person or a body of individual, whether incorporated or not or any artificial juridical person, if his total income or of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to provisions of section 10A or section 10B or section 10BA or Chapter VI-A of the Income-tax Act, exceeds the maximum amount which is not chargeable to income tax shall be liable to furnish return on or before the due date. 55.2 Existing provision of sub-section (4) of section 139 of the Income-tax Act provides that a person who has not furnished a return within the time allowed to him under sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-section (1) or under sub-section (4), or in a return furnished in response to notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. 55.9 Clause (aa) of the Explanation to sub-section (9) of aforesaid section has been omitted to provide that a return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A of the Income-tax Act has not been paid on or before the date of furnishing of the return. 55.10 Applicability : The amendment to sub-section (3) of section 139 takes effect retrospectively from 1st of April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years. The amendments to sub-sections (1), (4), (5) and (9) of section 139 will take effect from 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent years. 56. Processing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 254 or section 263 or section 264, setting aside or cancelling an assessment has been changed from existing one year to nine months from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner 57.2 It is further provided that the period for giving effect to an order, under sections 250 or 254 or 260 or 262 or 263 or 264 of the Income-tax Act or an order of the Settlement Commission under sub-section (4) of section 245D of the Income-tax Act, where effect can be given wholly or partly otherwise than by making a fresh assessment or reassessment shall be three months from the end of the month in which order is received or passed, as the case may be, by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. It is also provided that in a case where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit for completion of assessments made under section 153A or section 153C of the Income-tax Act has been amended to bring it in sync with the new time limits provided for other cases. In order to simplify the provisions of existing section 153B of the Income-tax Act by retaining only those provisions that are relevant to the current provisions of the Act, section 153B of the Income-tax Act has been substituted with the following changes in time limit from the existing time limits as under: ( i ) The limitation for completion of assessment under section 153A of the Income-tax Act, in respect of each assessment year falling within six assessment years referred to in clause ( b ) of sub-section (1) of section 153A of the Income-tax Act and in respect of the assessment year relevant to the previous year in which search is conducted under section 132 of the Income-tax Act or requisition is made under section 132A of the Income-tax Act has been changed from existing two years to twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 of the Income-tax Act or for requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue collections during a financial year with greater accuracy. 59.3 It is further provided that an eligible assessee in respect of eligible business referred to in section 44AD of the Income-tax Act opting for computation of profits or gains of business on presumptive basis shall be required to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year. 59.4 Consequential amendments have also been made to section 234C of the Income-tax Act which provides for chargeability of interest for deferment of advance tax to bring it in sync with the amendments made in section 211 of the Income-tax Act. 59.5 It is also provided that interest under section 234C of the Income-tax Act shall not be chargeable in case of an assessee having income under the head Profits and gains of business or profession for the first time, subject to fulfilment of conditions specified therein. 59.6 Applicability : These amendments take effect from 1st of June, 2016. 60. Payment of interest on refund 60.1 Section 244A of the Income-tax Act inter alia provides that an assessee is entitled to interest on refund arising out of excess paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Vice-president in the Tribunal, the reference of Senior Vice-President has been omitted from the above provisions of section 252 of the Income-tax Act. 61.3 Sub-section (2A) of section 253 of the Income-tax Act provides that the Principal Commissioner or Commissioner may, if he objects to any direction issued by the Dispute Resolution Panel (DRP) under sub-section (5) of section 144C of the Income-tax Act in pursuance of which the Assessing Officer has passed an order completing the assessment or reassessment, direct the Assessing Officer to appeal to the Appellate Tribunal against such order. 61.4 Further, sub-section (3A) of section 253 of the Income-tax Act provides that every appeal under sub-section (2A) shall be filed within sixty days of the date on which the order sought to be appealed against is passed by the Assessing Officer in pursuance of the directions of the DRP under sub-section (5) of section 144C of the Income-tax Act. 61.5 In line with the decision of the Government to minimise litigation, sub-sections (2A) and (3A) of section 253 of the Income-tax Act have been omitted in order to do away with the filing of appeal by the Assessing Officer aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1st of April, 2017 and subsequent assessment years and penalty shall be levied under the newly inserted section 270A of the Income-tax Act with effect from 1st of April, 2017. The new section 270A of the Income-tax Act provides for levy of penalty in cases of under reporting and misreporting of income. 62.2 Sub-section (1) of section 270A of the Income-tax Act provides that the Assessing Officer, Commissioner (Appeals) or the Principal Commissioner or Commissioner during the course of any proceedings under the Act may levy penalty if a person has under reported his income. 62.3 It provides that a person shall be considered to have under reported his income if, ( a ) the income assessed is greater than the income determined in the return processed under clause ( a ) of sub-section (1) of section 143 of the Income-tax Act; ( b ) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished; ( c ) the income reassessed is greater than the income assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income in accordance with the provisions of section 115JB or section 115JC of the Income-tax Act, the amount of total under reported income shall be determined in accordance with the following formula- (A - B) + (C - D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC of the Income-tax Act (herein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under reported income; C = the total income assessed as per the provisions contained in section 115JB or section 115JC of the Income-tax Act; D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC of the Income-tax Act been reduced by the amount of under reported income. However, where the amount of under reported income on any issue is considered both under the provisions contained in section 115JB of the Income-tax Act or and under general provisions, such amount shall not be reduced from total income assessed while deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been specified as under: ( i ) misrepresentation or suppression of facts; ( ii ) non-recording of investments in books of account; ( iii ) claiming of expenditure not substantiated by evidence; ( iv ) recording of false entry in books of account; ( v ) failure to record any receipt in books of account having a bearing on total income; ( vi ) failure to report any international transaction or deemed international transaction under Chapter X of the Income-tax Act. 62.11 The tax payable on under reported income in different circumstances has been provided as under: ( a ) Where no return has been furnished and income is assessed for first time, the amount of tax calculated on under reported income as increased by maximum amount not chargeable to tax as if it was the total income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 147 of the Income-tax Act Under-reported Income (150-110) = 40 (180-150) = 30 Tax Payable on under-reported Income 30 % of 40 = 12 30 % of 30 = 9 Penalty Leviable* 50 % of 12 = 6 50 % of 9 = 4.5 * Considering under-reported income is not on account of misreporting Example 2. Case is of an individual below 60 years of age and no return of income has been furnished liable to tax at slab rates as: income up to 2,50,000- Nil; 2,50,000- 5,00,000-10%; 5,00,000-10,00,000-20%; income 10,00,000- 30%: ( Figures in Rs. ) Total Income assessed under section 143(3) of the Income-tax Act 10,00,000 Under-reported Income 10,00,000-2,50,000* =7,50,000 Under-reported Income as increased by maximum amount not chargeable to tax 7,50,000+2,50,000=10,00,000 Tax payable 10% of 2,50,000 + 20% of 5,00,000 = 1,25,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lat rate of sixty per cent of such income. 62.16.3 Applicability : This amendment will take effect from the 1st of April, 2017 and will accordingly apply in relation to assessment year 2017-18 and subsequent years. 62.17 Amendment of section 272A of the Income-tax Act 62.17.1 The existing provision of sub-section (1) of section 272A of the Income-tax Act provides for levy of penalty of ten thousand rupees for each failure or default to answer the questions raised by an income-tax authority under the Income-tax Act, refusal to sign any statement legally required during the proceedings under the Income-tax Act or failure to attend to give evidence or produce books or documents as required under sub-section (1) of section 131 of the Income-tax Act. 62.17.2 The said provisions of sub-section (1) of section 272A of the Income-tax Act have been amended to further include levy of penalty of ten thousand rupees for each default or failure to comply with a notice issued under sub-section (1) of section 142 of the Income-tax Act or sub-section (2) of section 143 of the Income-tax Act or failure to comply with a direction issued under sub-section (2A) of section 142 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of attachment of property in lieu of bank guarantee in a time bound manner, it has been provided that an order revoking the attachment shall be made by the Assessing Officer within fifteen days of receipt of such guarantee, and in a case where a reference is made to the Valuation Officer, within forty-five days from the date of receipt of such guarantee. 63.5 It is further provided that where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay such sum within the time specified in the notice; the Assessing Officer may invoke the bank guarantee, wholly or partly, to recover the said amount. 63.6 In a case where the assessee fails to renew the bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount fifteen days before the expiry of such guarantee, the Assessing Officer may in the interest of the revenue, invoke the bank guarantee. The amount realised by invoking the bank guarantee shall be adjusted against the existing demand which is payable and the balance amount, if any, shall be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not specifically refer to notices issued under section 153A of the Income-tax Act or section 153C of the Income-tax Act which relate to assessment in cases where a search and seizure action has been taken or cases connected to such cases. 65.2 Instances have come to notice wherein the jurisdiction of an Assessing Officer in such cases have been called into question at the appellate stages, despite the fact that order passed under section 153A or 153C of the Income-tax Act is read with section 143(3) of the Income-tax Act. In order to remove any ambiguity in such cases, the provisions of sub-section (3) of section 124 of the Income-tax Act have been amended to specifically provide that cases where search is initiated under section 132 of the Income-tax Act or books of accounts, other documents or any assets are requisitioned under section 132A of the Income-tax Act, no person shall be entitled to call into question the jurisdiction of an Assessing Officer after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A of the Income-tax Act or sub-section (2) of section 153C of the Income-tax Act or after the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 2016. The amendment to section 143 takes effect from 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent assessment years. 67. Immunity from penalty and prosecution in certain cases by inserting new section 270AA of the Income-tax Act 67.1 In order to provide immunity from penalty and prosecution in certain cases, a new section 270AA has been inserted in the Income-tax Act under which an assessee may make an application to the Assessing Officer for grant of immunity from imposition of penalty under section 270A of the Income-tax Act and initiation of proceedings under section 276C or section 276CC of the Income-tax Act, provided he pays the tax and interest payable as per the order of assessment or reassessment within the period specified in such notice of demand and does not prefer an appeal against such assessment order. The assessee can make such application, within one month from the end of the month in which the order of assessment or reassessment is received, in such form and manner, as may be prescribed. 67.2 It is also provided that the Assessing Officer shall, on fulfilment of the above conditions and aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act have also been amended to provide that in a case where the assessee makes an application under section 270AA of the Income-tax Act seeking immunity from penalty and prosecution, then, the period beginning from the date on which such application is made to the date on which the order rejecting the application is served on the assessee shall be excluded for calculation of the aforesaid thirty days period. The said amendment is consequential to the insertion of section 270AA of the Income-tax Act. 67.7 Applicability: These amendments will take effect from the 1st of April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years. 68. The Direct Tax Dispute Resolution Scheme, 2016 68.1 Litigation has been a major area of concern in direct taxes. In order to reduce the huge backlog of cases and to enable the Government to realise its dues expeditiously, 'The Direct Tax Dispute Resolution Scheme, 2016' has been introduced in relation to tax arrears and specified tax. The salient features of the scheme are as under: (1) The scheme is applicable to tax arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an undertaking in the prescribed form and verified in the prescribed manner, waiving the right, whether direct or indirect, to seek or pursue any remedy or claim in relation to the specified tax which otherwise be available to him under any law, in equity, by statute or under an agreement, whether for protection of investment or otherwise, entered into by India with a country or territory outside India. No appellate authority or Arbitrator or Conciliator or Mediator shall proceed to decide an issue relating to the specified tax in the declaration in respect of which an order is made by the designated authority or in respect of the payment of the sum determined to be payable. 68.4 Where the declarant violates any of the conditions referred to in the scheme or any material particular furnished in the declaration is found to be false at any stage, it shall be presumed as if the declaration was never made under this Scheme and all the consequences under the Income-tax Act or Wealth-tax Act under which the proceedings against declarant were or are pending, shall be deemed to have been revived. 68.5 The declarant under the scheme shall get immunity from institution of any proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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