TaxTMI 
TaxTMI 
Explanatory Notes to the provisions of the Finance Act 2015
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....e for computing the period of stay in India,6.1-6.4; Amendment to the conditions for determining residency status in respect of Companies,7.1-7.7. 9 Clarity relating to Indirect transfer provisions, 8.1-8.5; Clarity regarding source rule in respect of interest received by the non-resident in certain cases; 9.1-9.8. 9A Fund Managers in India not to constitute business connection of offshore funds, 10.1-10.11. 10 Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme, 20.1-20.4; Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund 27.1-27.5; Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations, 11.1-11.4; Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7; Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1-34.7. 11 Rationalisation of provisions of section 11 of the Income-tax Act relating to accumulation of Income by charitable trusts and institutions, 12.1 -12.4. 13 Rationalisation of provisions of section 11 of the Income-tax Act ....
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....reshold for specified domestic transaction, 29.1 - 29.3. 95 Deferment of provisions relating to General Anti Avoidance Rule ("GAAR"), 30.1 - 30.5. 111A Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. 115A Reduction in rate of tax on Income by way of Royalty and Fees for technical services in case of non-residents, 31.1 - 31.3. 115ACA Amendments relating to Global Depository receipts (GDRs), 32.1-32.10. 115JB Rationalising the provisions of section 115JB, 33.1.-33.6. 115U Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7. 115UA Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. Chapter XII-FB consisting of section 115UB Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7. 132B Settlement Commission, 49.1 - 49.13. 139 Furnishing of return of income by certain universities and hospitals referred to in section 10 (23C) of the Income-tax Act,36.1-36.4;Return of Income....
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....ing to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1- 47.20. 203A Relaxing the requirement of obtaining TAN for certain deductors, 46.1-46.3. 206C Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 206CB Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 220 Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 234B Interest for defaults in payment of advance tax in case of re-assessment and where additional income is disclosed before the Settlement Commission under section 245C, 48.1-48.7. 245A Settlement Commission, 49.1-49.13. 245D Settlement Commission, 49.1-49.13. 245H Settlement Commission, 49.1-49.13. 245HA Settlement Commission, 49.1-49.13. 245K Settlement Commission, 49.1-49.13. 245-O Eligibility for appointment as Law Member in the Authority for Advance Ruling (AAR),50.1-50.3. 246A Rationalisation of provisions relating to Tax Deduction at Source (TDS) and ....
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.... Infrastructure Investment Trusts (Invit), 34.1 - 34.7. 98 Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. 100 Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. 101 Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. 1. Introduction 1.1 The Finance Act, 2015 (hereafter referred to as 'the Act') as passed by the Parliament, received the assent of the President on the 14th day of May, 2015 and has been enacted as Act No. 20 of 2015. This circular explains the substance of the provisions of the Act relating to direct taxes. 2. Changes made by the Act 2.1 The Act has- (i) specified the rates of income-tax for the assessment year 2015-16 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2015-16. (ii)amended sections 2, 6, 9, 10, 11, 13, 32, 35, 36, 47, 49, 80C ,80CCC, 80CCD, 80D, 80DD, 80DD....
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....00 Nil Nil Nil Rs. 2,50,001 - Rs. 3,00,000 10% Rs. 3,00,001 - Rs. 5,00,000 10% Rs. 5,00,001 - Rs. 10,00,000 20% 20% 20% Exceeding Rs. 10,00,000 30% 30% 30% The amount of income-tax so computed shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a person having a total income exceeding one crore rupees. However, marginal relief shall be available so the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Seco....
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....ry 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 ten percent. 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 shall be available in respect of Education Cess and Secondary and Higher Education Cess....
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....nal 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 2015-16. 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 and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2015-16 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 2015 -16 will continue to be the same as those specified in Part II of the First Schedule to the Finance (No.2) Act, 2014 except that in case of payments in the nature of income by way of royalty or fee for technical services referred to in section 115A, made to non-residents (other than a company) or a foreign company, the rate shall be ten per cent. of such income instead of twenty five per cent.. 3.2.2 Surcharge - The tax deducted at source in the following cases shall be increased by a surcharge for purposes of the Union indicated below:- (i) In case of every non-r....
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....ial year 2015-16 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 2015-16 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 avoid tax, assessment of bodies formed for short duration, etc. The rates are as follows:- 3.3.2 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person - Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company).. The basic exemption limit, rates of tax and slabs of income for various categories remain the same as in financial year 2014-15. The rates of tax during the financial year 2015-16 are as follows:- Income chargeable to tax  ....
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....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. 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 inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.3.4 Firms - In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part III of the First Schedule to the Act. The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve percent. of such income-tax in case of a firm having a total income exceeding one crore rupees as against the rate of ten per cent. for the financial year 2014-15. 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 amount payable as income-tax on a total income of one crore rupees by more than the amount o....
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....rn under an approved agreement made after 31-3-1961 but before 1-4-1976, shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964 but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two per cent where such company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of five per cent shall be levied if the total income of the company other than domestic company exceeds ten crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that (i) 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, (ii) the total amount payable as income-tax and surcharge on total income exceeding ten crore rupees shall not exceed the total amount payable a....
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....s part of actual carrying out of the objects which are of charitable nature were being put to hardship due to first and second proviso to section 2(15). 4.3 The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore the provisions of the Income-tax Act have been amended to include 'yoga' as a specific category in the definition of charitable purpose on the lines of education. 4.4 In order to ensure appropriate balance between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution, the definition of 'charitable purpose' in the Income-tax Act has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other considerati....
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....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 the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43 of the Income-tax Act. 5.2 As mentioned in Press Release dated 5th May, 2015, the amended definition of income shall not apply to the LPG subsidy or any other welfare subsidy received by an individual in his personal capacity and not in connection with the business or profession carried on by him.". 5.3 Applicability:- This amendment takes effect from 1st April, 2016 and would accordingly apply to assessment year 2016-17 and subsequent assessment years. 6. Power of the Central Board of Direct Taxes to prescribe the manner and procedure for computing the period of stay in India 6.1 Clause (1) of section 6 of the Income-tax Act provides the conditions under which an individual is held to....
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....en rendered practically inapplicable. A company could easily avoid becoming a resident by simply holding a board meeting outside India. This could facilitate creation of shell companies which are incorporated outside but controlled from India. 7.3 'Place of effective management' (POEM) is an internationally recognized concept for determination of residence of a company incorporated in a foreign jurisdiction. Most of the tax treaties entered into by India recognise the concept of 'place of effective management' for determination of residence of a company as a tie-breaker rule for avoidance of double taxation. Many countries prefer the POEM test to be appropriate test for determination of residence of a company. The principle of POEM is recognized and accepted by Organisation of Economic Cooperation and Development (OECD) also. The OECD commentary on model convention provides definition of place of effective management to mean the place where key management and commercial decisions that are necessary for the conduct of the entity's business as a whole, are, in substance, made. 7.4 The modification in the condition of residence in respect of company by inc....
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....India. 8.3 Considering the concerns raised by various stakeholders regarding the scope and impact of these amendments, an Expert Committee under the Chairmanship of Dr. Parthasarathi Shome was constituted by the Government to go into the various aspects relating to the amendments. 8.4 The recommendations of the Expert Committee were considered and a number of recommendations (either in full or with partial modifications) were accepted for implementation either by way of an amendment of the Act or by way of issuance of a clarificatory circular in due course. In order to give effect to the recommendations, the provisions of section 9 relating to indirect transfer have been amended by the Act to provide that:- (i) the share or interest of a foreign company or entity shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of Indian assets,- (a) exceeds the amount of ten crore rupees ; and (b) represents at least fifty per cent. of the value of all the assets owned by the company or entity. (ii) value of an asset shall mean the fair market value of s....
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....e capital or interest exceeding five percent. in the direct holding company or entity. (ix) exemption shall be available in respect of any transfer, subject to certain conditions ,in a scheme of amalgamation, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company. (x) exemption shall be available in respect of any transfer, subject to certain conditions, in a demerger, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company. (xi) there shall be a reporting obligation on Indian concern through or in which the Indian assets are held by the foreign company or the entity. The Indian entity shall be obligated to furnish information relating to the off-shore transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian company or entity. In case of an....
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.... they are more beneficial to him. Therefore, the taxpayer is entitled to relief from the provisions of the Income-tax Act if such relief is available under the DTAA and to that extent the provisions of the Income-tax Act are not applicable. 9.3 Further, income of a non-resident from business activity is taxable in India if it has a business connection in India in accordance with the provisions contained in section 9(1)(i) of the Income-tax Act, and only such income is taxable as is attributable to the business connection. Similarly, under the DTAA, income from business activity in the case of a non-resident shall be taxable only if such non-resident has a permanent establishment (PE) in India and only such income is taxable which is attributable to the PE. The concept of PE is almost on similar lines as business connection with variations as per different DTAAs. The DTAA further provides the manner of computation of income attributable to the PE. It is provided that for the purpose of computation of income, the PE shall be deemed to be an independent enterprise with certain restrictions regarding allowability of expense paid to head office by the PE. Under DTAAs, in case of a ba....
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.... that necessary clarity and certainty is provided for in the Income-tax Act. 9.7 Accordingly, the Income-tax Act has been amended to provide that in the case of a non-resident, being a person engaged in the business of banking, any interest payable by the permanent establishment in India of such non-resident to the head office or any permanent establishment or any other part of such non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to any income attributable to the permanent establishment in India. The permanent establishment in India shall be deemed to be a person separate and independent of the non-resident person of which it is a permanent establishment and the provisions of the Income-tax Act relating to computation of total income, determination of tax and collection and recovery would apply. Accordingly, the PE in India shall be obligated to deduct tax at source on any interest payable to either the head office or any other branch or PE, etc. of the non-resident outside India. Further, non-deduction would result in disallowance of interest claimed as expenditure by the PE and may also attract levy of interest ....
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....d being held to be resident in India on the basis of its control and management being in India. 10.4 There are a large number of fund managers who are of Indian origin and are managing the investment of offshore funds in various countries. These persons were being discouraged from locating in India due to the above tax consequence in respect of income from the investments of offshore funds made in other jurisdictions. 10.5 In order to facilitate location of fund managers of off-shore funds in India a specific regime has been provided in the Income-tax Act in line with international best practices with the objective that, subject to fulfillment of certain conditions by the fund and the fund manager,- (i) the tax liability in respect of income arising to the Fund from investment in India would be neutral to the fact as to whether the investment is made directly by the fund or through engagement of Fund manager located in India; and (ii) that income of the fund from the investments outside India would not be taxable in India solely on the basis that the Fund management activity in respect of such investments have been undertaken through a fund manager located i....
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....at the end of such previous year; (xi) the fund shall not carry on or control and manage, directly or indirectly, any business in India or from India; (xii) the fund is neither engaged in any activity which constitutes a business connection in India nor has any person acting on its behalf whose activities constitute a business connection in India other than the activities undertaken by the eligible fund manager on its behalf. (xiii) the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken on its behalf is not less than the arm's length price of such activity. (2) The following conditions shall be required to be satisfied by the person being the fund manager for being an eligible fund manager: (i) the person is not an employee of the eligible investment fund or a connected person of the fund; (ii) the person is registered as a fund manager or investment advisor in accordance with the specified regulations; (iii) the person is acting in the ordinary course of his business as a fund manager; (iii) the person along with his connected persons shall not be entitl....
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....tions to the Investor Protection Fund set up by recognised stock exchanges in India, or by commodity exchanges in India or by a depository is exempt from taxation under the provisions of the Income-tax Act. 11.3 On similar lines, income of the Core SGF arising from (a) contribution received from specified persons;(b) investment made by the fund, and(c) the penalties imposed by the recognised Clearing Corporation has been made exempt from taxation subject to similar conditions as provided in case of Investor Protection Fund set up by a recognised stock exchange or a commodity exchange or a depository. 11.3.1 However, where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is shared and shall accordingly be chargeable to income-tax. 11.3.2 The specified person for this purpose is defined to mean any recognised clearing corporation which establishes and maintains the Core Settlement Guarantee Fund, any recognised stock exchange being a shareholder in such r....
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....poses falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason, then on exercise of the option by the trust/institution in writing on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose. There was no standard format for exercising the option. Accordingly, the provisions of section 11 have also been amended to prescribe a format for exercise of option by the trust/institution for the purposes of clause (2) of the Explanation to sub-section (1) of section 11 of the Income-tax Act. 12.4 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 13. Allowance of balance 50% additional depreciation 13.1 To encourage investment in plant or machinery by the manufacturing and power sector, additional depreciation of 20% of the cost of new plant or machinery acquired and installed is allowed under the existing provisions of section 32(1)(iia) of the Income-tax Act over and above the ....
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.... area in the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal; and (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1st April, 2015 and ending on 31st March, 2020. 14.2.2 This deduction shall be available over and above the existing deduction available under section 32AC of the Income-tax Act. Accordingly, if a company sets up an undertaking in the notified backward area in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, it shall be eligible to claim deduction under the existing provisions of section 32AC of the Income-tax Act as well as under this newly inserted section 32AD of the Income-tax Act if it fulfils the conditions (such as investment above a specified threshold) provided in section 32AC as well as conditions specified in section 32AD. 14.2.3 The phrase "new asset" has been defined as plant or machinery 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 pe....
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....gher additional depreciation shall be available in respect of acquisition and installation of any new machinery or plant for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020. The eligible machinery or plant for this purpose shall not include the machinery or plant which are currently not eligible for additional depreciation as per the existing proviso to section 32(1)(iia) of the Income-tax Act. 14.4 Applicability:- These amendments takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 15. Prescribed conditions relating to maintenance of accounts, audit etc to be fulfilled by the approved in-house R&D facility 15.1 Under section 35(2AB) of the Income-tax Act, weighted deduction of 200% is allowed to a company engaged in the business of biotechnology or manufacturing of any article or thing (except items specified in Schedule-XI) for the expenditure (not being expenditure in the nature of cost of any land or building) incurred on scientific research carried out in an approved in-house re....
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....ing costs incurred for acquisition of assets for extension of existing business up to the date the asset is put to use. However, the provisions of ICDS-IX do not make any distinction between the asset acquired for extension of business or otherwise. 16.2 Therefore, there was an inconsistency between the provisions of proviso to clause (iii) of sub-section (1) of section 36 of the Income-tax Act and the provisions of ICDS-IX. The general principles for capitalisation of borrowing cost requires capitalisation of borrowing cost incurred for acquisition of an asset up to the date the asset is put to use without making any distinction whether the asset is acquired for extension of existing business or not. The Accounting Standard Committee, which drafted the ICDS, also recommended that there is a need to carry out suitable amendments to provisions of the proviso to clause (iii) of sub-section (1) of section 36 of the Income-tax Act for aligning the same with the general capitalisation principles. 16.3 In view of the above, the provisions of proviso to clause (iii) of sub-section (1) of section 36 of the Income-tax Act have been amended so as to provide that the borrowing cost incu....
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....ugar factories were claiming this excess payment as business expenditure whereas the same has been disallowed in the assessment on the ground that the excess price paid for purchase of sugar cane over and above SMP is in the nature of appropriation/distribution of profit and hence not allowable a deduction. 17.3 In order to provide certainty in this matter and to encourage co-operative movement in sugar sector, a new clause (xvii) has been inserted in sub-section (1) of section 36 of the Income-tax Act to provide that the amount paid for purchase of sugarcane by the co-operative societies engaged in the manufacture of sugar at a price which is equal to or less than the price fixed by or fixed with the approval of the Government shall be allowed as deduction for computing business income of the sugar co-operative factories. Hence, for the purposes of computing business income of a co-operative society engaged in the business of manufacture of sugar for assessment year 2016-17 and subsequent assessment years, the price paid for purchase of sugarcane which has been fixed or approved by the Government shall be allowed as deduction under section 36(1)(xvii) of the Income-tax Act even....
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....should be the cost of such asset in the hands of demerged company as increased by the cost of improvement, if any, incurred by the demerged company or the resulting company as the case may be. Further, the period of holding of such asset in the hands of resulting company should include the period for which the asset was held by the demerged company. 19.2 However, under the provisions of the Income-tax Act, before amendment made by the Finance Act, 2015, there was no express provision to this effect. Accordingly, sub-clause (e) of clause (iii) of sub-section (1) of section 49 of the Income-tax Act has been amended so as to provide that the cost of acquisition of an asset acquired by resulting company shall be the cost for which the demerged company acquired the capital asset as increased by the cost of improvement incurred by the demerged company or the resulting company ,as the case may be, and the period of holding of a capital asset in the hands of the resulting company shall include the period for which the asset was held by the demerged company. 19.3 Applicability: This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessme....
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....ted by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme. 21.2 In order to promote social security, sub-section (1) of section 80CCC has been amended to raise the limit of deduction under section 80CCC from one lakh rupees to one hundred and fifty thousand rupees, within the overall limit provided in section 80CCE. 21.3 Applicability:-This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 22. Additional deduction under 80CCD 22.1 Under the provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, before its amendment by the Act, if an individual, employed by the Central Government on or after 1st January, 2004, or an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previous year in his account under a notified pension scheme, a deduction of such amount not exceeding ten per cent. of his salary in the case of an employee and ten per cent. of....
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....sessee to effect or to keep in force insurance on the health of the parent or parents of the assessee. 23.2 A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also provided for a deduction of twenty thousand rupees in both the cases if the individual insured is a senior citizen of sixty years of age or above. 23.3 The quantum of deduction allowed under Section 80D to individuals and HUF in respect of premium paid for health insurance had been fixed vide Finance Act, 2008 at Rs. 15000/- and Rs. 20,000/- for senior citizens. In view of continuous rise in the cost of medical expenditure, section 80D has been amended to raise the limit of deduction from fifteen thousand rupees to twenty five thousand rupees. The limit of deduction for senior citizens has been raised from twenty thousand rupees to thirty thousand rupees. 23.4 Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare m....
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....ned under the said section). 24.4 The said section provided for a deduction of fifty thousand rupees if the person is suffering from disability and one lakh rupees if the person is suffering from severe disability (as defined under the said section). 24.5 The limits under section 80DD and section 80U in respect of a person with disability were fixed at fifty thousand rupees by Finance Act, 2003. Further, the limit under section 80DD and section 80U in respect of a person with severe disability was last enhanced from seventy five thousand rupees to one lakh rupees by Finance (No.2) Act, 2009. 24.6 In view of the rising cost of medical care and special needs of a disabled person, section 80DD and section 80U have been amended to raise the limit of deduction in respect of a person with disability from fifty thousand rupees to seventy five thousand rupees. 24.7 Section 80DD and section 80U have further been amended to raise the limit of deduction in respect of a person with severe disability from one lakh rupees to one hundred and twenty five thousand rupees. 24.8 Applicability:-These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to....
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....previous year. 25.6 Applicability:-These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 26. One hundred per cent deduction for National Fund for Control of Drug Abuse 26.1 Under the provisions of section 80G of the Income-tax Act, before its amendment by the Act, an assessee was allowed a deduction from his total income in respect of donations made by him to certain funds and charitable institutions. The deduction is allowed at the rate of hundred percent of the amount of donations made to certain funds and institutions formed for a social purpose of national importance, like the Prime Ministers' National Relief Fund, National Foundation for Communal Harmony etc. 26.2 The National Fund for Control of Drug Abuse is a fund created by the Government of India in the year 1989, under the Narcotic Drugs and Psychotropic Substances Act, 1985. Since National Fund for Control of Drug Abuse is also a Fund of national importance, section 80G has been amended to provide hundred per cent. deduction in respect of donations made to the said National Fund for Control of Drug Abuse. ....
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....undation for Communal Harmony. Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund, section 10(23C) of the Income-tax Act has also been amended to exempt the income of Swachh Bharat Kosh and Clean Ganga Fund, set up by the Central Government, from income-tax. 27.5 Applicability:-These amendments take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. 28. Deduction for employment of new workmen 28.1 The provisions of section 80JJAA of the Income-tax Act, before its amendment by the Act, inter alia, provided for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. 28.2 Clause (a) of sub-section (2), inter alia, provides that no deduction under sub-section (1) shall be available if the factory is hived off or transferred from anoth....
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.... X-A (consisting of section 95 to 102) and section 144BA of the Income-tax Act. Chapter X-A provides the substantive provision of GAAR whereas section 144BA provides the procedure to be undertaken for invoking GAAR and passing of the assessment order in consequence of GAAR provisions being invoked. 30.2 As provided in the Income-tax Act before its amendment, GAAR provisions were to come into effect from 1.04.2016. These provisions, therefore, would have been applicable to the income of the financial year 2015-16 (Assessment Year 2016-17) and subsequent years. 30.3 The implementation of GAAR provisions was reviewed. Concerns had been expressed regarding certain aspects of GAAR. Further, it was noted that the Base Erosion and Profit Shifting (BEPS) project under Organisation of Economic Cooperation and Development (OECD) is continuing and India is an active participant in the project. The report on various aspects of BEPS and recommendations regarding the measures to counter it are awaited. It would, therefore, be proper that GAAR provisions are implemented as part of a comprehensive regime to deal with BEPS and aggressive tax avoidance. 30.4 Accordingly, the Income-tax Act ....
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....er, section 47(viia) provided exemption from capital gains arising from transfer of GDRs by one non-resident to another non-resident made outside India. 32.3 As per the new depository scheme, Depository Receipts (DRs) can be issued against the securities of listed, unlisted or private or public companies against underlying securities which can be debt instruments, shares or units etc; Further, both the sponsored issues and unsponsored deposits and acquisitions are permitted. DRs can be freely held and transferred by both residents and non-residents. 32.4 Further, the process of conversion of DRs into the underlying shares involves the non-resident holding the DRs in the overseas market giving instruction to its foreign broker regarding cancellation of DRs and release of underlying shares. The foreign broker then delivers the DRs to the foreign depository for cancellation and instructs it to deliver the underlying shares into a demat account held by the foreign investor in India. The foreign depository thereafter cancels the DRs and issues an instruction to its local custodian in India to release and deliver the underlying shares into the special demat account in India. The lo....
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.... issuing company, being a company listed on a recognized stock exchange in India ('sponsored' issue). The benefit of these sections would not be available in respect of depositary receipts issued other than under sponsored issuance of a listed company. Accordingly:- i. The gains arising on transfer of such depository receipt(i.e. other than sponsored issue) between non-resident investors, outside India, would not be exempt from Capital gains; ii. On conversion of these DRs into the underlying shares, the provision of Section 49 (2ABB) shall not apply and the cost of acquisition of such underlying shares on conversion of DR shall be the cost at which DR had been acquired by the investor. 32.10 Applicability: - These amendments take effect from the 1st day of April, 2016 and will, accordingly, apply to the assessment year 2016-17 and subsequent assessment years. 33. Rationalising the provisions of section 115JB 33.1 The provisions contained in section 115JB of the Income-tax Act before its amendment by the Act ,provided that in the case of a company, if the tax payable on the total income as computed under the Income-tax Act in respect of any previous year ....
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.... is less than the rate specified in section 115JB. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is to be excluded from the MAT liability) shall also be added back to the book profit for the purpose of computation of MAT. 33.5 The Finance (No.2) Act, 2014 inserted clause (xvii) in section 47 of the Income-tax Act to provide tax neutrality /deferment in respect of exchange of share of a special purpose vehicle with the units of business trust, however, no neutrality/deferment of Minimum Alternate Tax (MAT) liability under section 115JB of the Income-tax Act has been provided. The liability under MAT may arise due to recording of exchange of shares with the units at fair value by a shareholder, being a company in compliance with the provisions of Accounting Standard - 13 prescribed under the Companies Act, 2013 as per rule 7 of the Companies (Accounts) Rules, 2014. The recording of said exchange at fair value may result into inclusion of notional gain or loss in the book profit of the company for the purposes of levy of MAT under section 115JB of the Income-tax Act. Inclusion of these notional amounts especially notional gain in ....
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....e of unit i.e. Rs. 4000 shall be included in the book profit of financial year 2017-18 for the purposes of levying MAT under section 115JB of the Income-tax Act. 33.6 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 34. Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit) 34.1 The Finance (No.2) Act, 2014 had amended the Income-tax Act to put in place a special taxation regime in respect of business trusts. The business trust as defined in section 2(13A) of the Income-tax Act before amendment by the Act, included a Real Estate investment Trust (REIT) and an Infrastructure Investment Trust(InviT) which is registered under regulations framed by Securities and Exchange Board of India (SEBI) in this regard. 34.2 The said tax regime for the business trust and their investors as contained in different sections of the Income-tax Act, inter alia, provided that:- (i) The listed units of a business trust, when traded on a recognised stock exchange, would be liable to securities transaction tax (STT), a....
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....ct. However, the benefit of concessional regime was not available to the sponsor at the time it offloads units of business trust acquired in exchange of its shareholding in the SPV through Initial offer at the time of listing of business trust on stock exchange. 34.4 In order to provide parity, it has been provided that,- (i) the sponsor would get the same tax treatment on offloading of units under an Initial offer on listing of units as it would have been available had he offloaded the underlying shareholding through an IPO. (ii)Chapter VII of the Finance (No. 2) Act, 2004 has been amended to provide that STT shall be levied on sale of such units of business trust which are acquired in lieu of shares of SPV, under an Initial offer at the time of listing of units of business trust on similar lines as in the case of sale of unlisted equity shares under an IPO. (iii) the benefit of concessional tax regime of tax @15 % on STCG and exemption on LTCG under section 10(38) of the Act shall be available to the sponsor on sale of units received in lieu of shares of SPV subject to levy of STT. (iv) MAT deferral at the time of exchange of shares of SPV w....
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.... of investment made in a VCC or VCF shall be taxable in the same manner, on current year basis, as if the person had made direct investment in the VCU. 35.2 These sections provide a tax pass through (i.e. income is taxable in the hands of investors instead of VCF/VCC) only to the funds, being set up as a company or a trust, which are registered (i) before 21.05.2012 as a VCF under SEBI (Venture Capital Funds) Regulations, 1996, or (ii) as venture capital fund being one of the sub-categories under category-I Alternative investment fund (AIF) regulated by SEBI (AIF) Regulations, 2012 w.e.f. 21.05.2012. This pass through is available only in respect of income which arises to the fund from investment in VCU (Venture Capital Undertaking), being a company which satisfies the conditions provided in SEBI (VCF) Regulations, 1996 or SEBI (AIF) Regulations, 2012 (AIF regulations) . 35.3 Under the AIF regulations, various types of AIFs have been classified under three separate categories as Category I, II and III AIFs. Category I includes AIFs which invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the Government or re....
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....ed by, or had accrued or arisen to, the investment fund. (vi) if in any year there is a loss at the fund level either current loss or the loss which had remained to be set off, the loss shall not be allowed to be passed through to the investors but would be carried over at fund level to be set off against income of the next year in accordance with the provisions of Chapter VI of the Income-tax Act. (vii) the provisions of Chapter XII-D (Dividend Distribution Tax) or Chapter XII-E (Tax on distributed income) shall not apply to the income paid by an investment fund to its unit holders. (viii) the income received by the investment fund would be exempt from TDS requirement vide Notification S.O. 1703 (E)dated 25th June,2015. (ix) it shall be mandatory for the investment fund to file its return of income. The investment fund shall also provide to the prescribed income-tax authority and the investors, the details of various components of income, etc. for the purposes of the scheme. 35.5 Further, the existing pass through regime shall continue to apply to VCF/VCC which had been registered under SEBI (VCF) Regulations, 1996. Remaining VCFs, being part....
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.... return if the asset was held by a person as a beneficial owner or he is a beneficiary of the foreign asset. It has been found that in a large number of cases foreign assets are held in the name of trusts/entities where the assessee is a beneficial owner or is a beneficiary. As a result, he escapes the requirement of furnishing the return of income and disclosing the foreign asset. 37.3 Accordingly, section 139 has been amended to provide for furnishing of return of income by the beneficial owner or beneficiary of a foreign asset. The amendment also defines the term 'beneficial owner' to mean an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. The term 'beneficiary' has been defined to mean an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. 37.4 It has also been provided that a beneficiary of any asset (including any financial interest in any entity) located outside India is not required to furnish a return of income where, income, if any....
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.... requisitioned belong to any person, other than the person referred to in section 153A of the Income-tax Act, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess income of such other person in accordance with the provisions of section 153A. 39.2 Disputes have arisen as to the interpretation of the words "belong to" in respect of a document as for instance when a given document seized from a person is a copy of the original document. Accordingly, section 153C has been amended so as to provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing belongs to, or any books of account or documents seized or requisitioned pertain to, or any information contained therein, relates to, any person, other than the person referred to in section 153A of the Income-tax Act, t....
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....Tribunal in the prescribed form within sixty days from the date of receipt of order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the earlier case. 40.4 The Commissioner or Principal Commissioner shall give such direction only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case. However, in case no such acceptance is received, the Commissioner or Principal Commissioner may, if he objects to the order passed by the Commissioner (Appeals), direct the Assessing Officer to appeal to the Appellate Tribunal as per the normal provisions of appeal to Appellate Tribunal. 40.5 It has also been provided that where the order of the Commissioner (Appeals) is not in conformity with the final decision on the question of law in the other case (if the Supreme Court decides the earlier case in favour of the Department), the Commissioner or Principal Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal against such order within sixty days....
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....ibution to unrecognized provident fund. The trustees of PPFS, being generally part of the employer group, have access to or can easily obtain the information regarding taxability of the employee making pre-mature withdrawal for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Act. However, at times, it is not possible for the trustees of EPFS to get the information regarding taxability of the employee such as year-wise amount of taxable income and tax payable for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Income-tax Act. 41.4 In view of the above, a new section 192A has been inserted in Income-tax Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS. However, deduction of tax on pre-mature withdrawal from the PPFS i.e. private provident fund exempted under section 17 of the EPF & MP Act,1952 and recognised under the Income-tax Act shall continue to be made in accordance with the rule 10 of the schedule IV-A read with sub-section (4) of section 192 of the Income-tax Act. 41.5 Further, to reduce the compliance burden of the employees havi....
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....ead with section 194A(3)(i) of the Income-tax Act provides for deduction of tax on interest (other than interest on securities) over a specified threshold, i.e. Rs. 10,000 for interest payment by banks, co-operative society engaged in banking business (co-operative bank) and post office and Rs. 5,000 for payment of interest by other persons. Further, sub-section (3) of section 194A inter alia also provides for exemption from deduction of tax in respect of following interest payments by co-operative society: (i) Interest payment by a co-operative society to a member thereof or any other co-operative society. [Section 194A(3)(v)of the Income-tax Act] (ii) Interest payments on deposits by a primary agricultural credit society or primary credit society or co-operative land mortgage bank or co-operative land development bank. [Section 194A(3)(viia)(a) of the Income-tax Act] (iii) Interest payment on deposits other than time deposit by a co-operative society engaged in the business of banking other than those mentioned in section 194A(3)(viia)(a) of the Act. [Section 194A(3)(viia)(b) of the Income-tax Act] 42.2 Therefore, as per the provisions of section 194....
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....e applicability of the specific provisions mandating deduction of tax from the payment of interest on time deposits by the co-operative banks to its members by claiming that general exemption is also applicable for payment of interest to member depositors. 42.5 In view of this, the provisions of the section 194A(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015. 42.6 However, the existing exemption provided under section 194A(3)(viia)(a) of the Income-tax Act to primary agricultural credit society or a primary credit societ....
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....y the entities which have adopted core banking solutions. Therefore, a new proviso has been inserted to section 194A(3)(i) of the Income-tax Act so as to provide that in case of a banking company or co-operative society or the public company which has adopted core banking solution, the computation of interest income for the purposes of deduction of tax under section 194A of the Income-tax Act shall be made with reference to the income credited or paid by the banking company or the co-operative society or the public company. 42.10 Under section 194A(3)(ix) of the Income-tax Act, tax is not required to be deducted from the interest credited or paid on the compensation amount awarded by the Motor Accident Claim Tribunal if the amount of such interest credited or paid during a financial year does not exceed Rs. 50,000/-. Finance (No.2) Act, 2009 amended the provisions of section 56 of the Income-tax Act and substituted section 145A of the income-tax Act to, inter alia, provide that interest income received on compensation or enhanced compensation shall be deemed to be the income of the year in which the same has been received. However, the provisions of section 194A(3)(ix) of the In....
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....f their size, were claiming exemption from TDS under the existing provisions of sub-section (6) of section 194C of the Income-tax Act by furnishing their PAN. 43.3 As there is no rationale for exempting payment to all transporters, irrespective of their size, from the purview of TDS, the provisions of section 194C(6) of the Income-tax Act have been amended so as to expressly provide that the relaxation under sub-section (6) of section 194C of the Income-tax Act for non-deduction of tax shall only be applicable to the payment in the nature of transport charges (whether paid by a person engaged in the business of transport or otherwise) made to a contractor who is engaged in the business of transport i.e. plying, hiring or leasing goods carriage and who is eligible to compute income as per the provisions of section 44AE of the Income-tax Act (i.e a person who is not owning more than 10 goods carriages at any time during the previous year) and who has also furnished a declaration to this effect along with his PAN, to the person paying such sum. 43.4 Further, this exemption from TDS is applicable only in respect of transport charges received for plying, hiring or leasing of goods....
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.... own more than 10 goods carriages during the relevant financial year along with his PAN as per the requirement of the amended provision of section 194C(6) of the Income-tax Act. The tax is also not deductible from payment made on 15th November, 2015 as the payment does not exceed Rs. 30,000 and the aggregate of payments during the period from 1st June, 2015 [i.e. the date of effectivity of the amended provision of section 194C(6) ] to15th November, 2015 does not exceed Rs. 75,000 as specified in proviso to section 194C(5) of the Income-tax Act. Tax at the rate of 1% i.e. Rs. 200/- is deductible from payment made on 15th December, 2015 as 'T' owns more than 10 goods carriages on that date and the aggregate of the payments made during the period from 1st June, 2015 to 15th December, 2015 exceeded the threshold of Rs. 75,000. Tax is also deductible from the payment made on 15th February, 2016 even though 'T' did not own more than 10 goods carriages on 15th February, 2016. This is because 'T' owned more than10 goods carriages during the financial year 2015-16 and the payment exceeded both the specified threshold for individual and aggregate payments. In view of this, 'T' is not eligibl....
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....person making declaration" Place: 43.8 It may be mentioned here that the person responsible for paying to transporter is required to report the particulars of payment made to transporters without deduction of tax in compliance to the provision of section 194C(6) of the Income-tax Act in the statement of deduction of tax (Form 26Q) as per the provision of rule 31A(4)(vi) of the Income-tax Rules, 1962. Non-furnishing or incomplete furnishing of this information shall make the deductor liable for penalty as per the provision of section 271H of the Income-tax Act. 43.9 Applicability:- This amendment takes effect from 1st June, 2015. 44. Extension of eligible period of concessional tax rate under section 194LD of the Income-tax Act 44.1 The provisions of section 194LD of the Income-tax Act provide for lower withholding tax at the rate of 5 per cent. in case of interest payable to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds provided that the rate of interest does not exceed the rate notified by the Central Government in this regard. Before amendment by the Act, this benefit was available on interest payable at any time ....
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....ecting tax (collector) is required to obtain Tax Deduction and Collection Account Number (TAN) and quote the same for reporting of tax deduction/collection to the Income-tax Department. However, currently, for reporting of tax deducted from payment over a specified threshold made for acquisition of immovable property (other than rural agricultural land) from a resident transferor under section 194-IA of the Income-tax Act, the deductor is not required to obtain and quote TAN and is allowed to report the tax deducted by quoting his Permanent Account Number (PAN). 46.2 The obtaining of TAN creates a compliance burden for those individuals or Hindu Undivided Family (HUF) who are not liable for audit under section 44AB of the Income-tax Act. The quoting of TAN for reporting of TDS is a procedural matter and the same result can also be achieved in certain cases by quoting of PAN especially for the transactions which are likely to be one time transaction such as single transaction of acquisition of immovable property from a non-resident transferor by an individual or HUF on which tax is deductible under section 195 of the Income-tax Act. For reducing the compliance burden for these ty....
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....rovisions of sub-section (3) of section 200 of the Income-tax Act enable the deductor to furnish TDS correction statement and consequently, section 200A of the Income-tax Act inter alia provides processing of the TDS correction statement. However, there did not exist any provision in the Income-tax Act for allowing a collector to file correction statement in respect of TCS statement already furnished. Therefore, the provision of section 206C of the Income-tax Act has been amended so as to allow the collector to furnish TCS correction statement. 47.5 The Income-tax Act contains detailed provisions for processing of TDS statements, however, there did not exist any provision for processing of TCS statement. As the mechanism of TCS statement is similar to TDS statement, a new section 206CB has been inserted in the Income-tax Act for enabling processing of TCS statements on the lines of existing provision for processing of TDS statement contained in section 200A of the Income-tax Act. This newly inserted section also incorporates the mechanism for computation of fee payable under section 234E of the Income-tax Act for late furnishing of TCS statement. 47.6 Under the existing provi....
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....overnment through book entry. For granting credit to the deductee for TDS/TCS paid through book entry by the Government deductors, a system of capturing information about the credit by PAO/TO/CDDO has been introduced by amending rule 30 and rule 37CA of the Income-tax Rules, 1962 with effect from 1st April, 2010. 47.9 The said rules provide that the PAO/TO/CDDO shall file the details of payment of TDS/TCS made through book entry in Form 24G. This system of reporting of payment of TDS/TCS made through book entry has improved the mechanism of reporting of TDS/TCS by the Government deductor to some extent. 47.10 However, in the absence of any specific provisions in the Income-tax Act for enforcing the furnishing of Form 24G, it has been noticed that in a large number of cases, PAO/ TO/CDDOs did not file Form 24G in prescribed time. Delay in furnishing of the Form 24G results into delay in furnishing of the TDS/TCS statement by the DDO. 47.11 In order to improve the reporting of payment of TDS/TCS made through book entry and to make existing mechanism enforceable, the provisions of sections 200 and 206C of the Income-tax Act have been amended so as to provide that where the ta....
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....ax Act in the prescribed form and manner. 47.16 The existing provisions of sub-section (6) of section 195 of the Income-tax Act, prior to its amendment by the Act, provided that the person referred to in section 195(1) of the Income-tax Act shall furnish prescribed information. Section 195(1) of the Income-tax Act provides that any person responsible for paying any interest (other than interest referred to in sections 194LB or 194LC or 194LD of the Income-tax Act) or any sum chargeable to tax (not being salary income) to a non-resident, not being a company, or to a foreign company, shall deduct tax at the rates in force. 47.17 The mechanism of obtaining of information in respect of remittances fulfils twin objectives of ensuring deduction of tax at appropriate rate from taxable remittances as well as identifying the remittances on which the tax was deductible but the payer has failed to deduct the tax. Therefore, obtaining of information only in respect of remittances which the remitter declared as taxable defeats one of the main principles of obtaining information for foreign remittances i.e. to identify the taxable remittances on which tax was deductible but was not deducte....
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....d have been paid within the prescribed due date. Accordingly, clause (3) of section 234B of the Income-tax Act has been amended so as to provide that the period for which the interest is to be computed will begin from the 1st day of April next following the financial year and end on the date of determination of total income under section 147 or section 153A. 48.3 The provision contained in sub-section (4),prior to its amendment by the Act, provided that where on an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) is increased or reduced, the interest shall be increased or reduced accordingly. However, in case an application is filed before the Settlement Commission under section 245C declaring an additional amount of income-tax, there is no specific provision in section 234B for charging interest on that additional amount. 48.4 Accordingly, a new sub-section (2A) has been inserted in section 234B of Income-tax Act so as to provide that where an application under sub-section (1) of section 245C for any assessment year has been made, the assessee shall be liable to pay sim....
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.... the assessee was eligible to approach Settlement Commission only for the assessment year for which notice under section 148 has been issued. For all other assessment years where there is escapement, the assessee was eligible to file settlement application only after notice under section 148 has been issued for all such assessment years. 49.3 In order to obviate the need for issue of notice in all such assessment years, clause (i) of the Explanation to clause (b) of section 245A of the Income-tax Act has been amended to provide that where a notice under section 148 is issued for any assessment year, the assessee can approach Settlement Commission for other assessment years as well even if notice under section 148 for such other assessment years has not been issued, but such notice could have been issued on such date if the return of income for such other assessment years have been furnished under section 139 or in response to notice under section 142 of the Income-tax Act. 49.4 The provision contained in clause (iv) of the Explanation to clause (b) of section 245A of the Income-tax Act, before its amendment by the Act, provided that a proceeding for any assessment year, other....
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.... in which such income has been derived, grant to such person, immunity from prosecution. With a view to provide for justification for grant of immunity from penalty and prosecution, sub-section (1) of section 245H of the Income-tax Act has been amended to provide that the Settlement Commission while granting immunity from prosecution to any person shall record the reasons in writing in the order passed by it. 49.8 The provision contained in sub-section (1) of section 245HA of the Income-tax Act, before its amendment by the Act, provided for abatement of proceedings in different situations. Sub-section (1) of section 245HA of the Income-tax Act has been amended to provide that where in respect of any application made under section 245C, an order under sub-section (4) of section 245D has been passed without providing for the terms of settlement, the proceedings before the Settlement Commission shall abate on the day on which such order under sub-section (4) of section 245D was passed. 49.9 The provision contained in section 245K of the Income-tax Act, before its amendment by the Act, provided that in certain situations a person shall not be entitled to subsequent application fo....
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....st the same. 49.12 Accordingly, section 132B of the Income-tax Act, has been amended to provide that the asset seized under section 132 or requisitioned under section 132A may also be adjusted against the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Income-tax Act. 49.13 Applicability: These amendments have taken effect from 1st day of June, 2015. 50. Eligibility for appointment as Law Member in the Authority for Advance Rulings (AAR) 50.1 The provision of section 245-O of the Income-tax Act, before its amendment by the Act, provided that a person from Indian legal Service shall be qualified for appointment as law member who is an Additional Secretary to the Government of India. 50.2 In order to widen the scope for eligibility, section 245-O has been amended to provide that a person from Indian legal Service who is, or is qualified to be, an Additional Secretary to the Government of India shall be qualified for appointment as a law Member. 50.3 Applicability: This amendment has taken effect from 1st April, 2015. 51. Orders passed by the prescribed authority under section sub-cla....
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....n 1998. 52.2 Considering the rise in number of cases before ITAT where total income of assessee exceeded five lakh rupees, sub-section (3) of section 255 of the Income-tax Act has been amended to provide that a single member bench may dispose of a case where the total income of assessee as computed by the Assessing Officer does not exceed fifteen lakh rupees. 52.3 Applicability: This amendment has taken effect from 1st day of June, 2015. 53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue"....
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.... or such specified sum is twenty thousand rupees or more. 54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. 54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made. 54.6 Applicability: These amendments have taken effect from 1st day of June, 2015. 55. Amount of tax sought to be evaded for the purposes of penalty for concealment of income under clause (iii) of sub-section (1) of section 271 55.1 The provisions contained in clause (c) of sub-section (1) of section 271 of the Act, before ....
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....or 115JC. Further, in a case where the provisions of section 115JB or 115JC are not applicable, the computation of tax sought to be evaded under the provisions of section 115JB or 115JC shall be ignored. 55.5 Applicability: This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years. 56. Certain accountants not to give reports/certificates 56.1 The Income-tax Act contains several provisions (e.g. section 44AB, section 80-IA, section 92E, section 115JB, etc.) which mandate the taxpayers to furnish audit reports and certificates issued by an 'accountant' for ensuring correct reporting/computation of taxable income by the tax payers. Explanation below section 288(2) of the Income-tax Act defines an 'accountant' as a chartered accountant within the meaning of Chartered Accountants Act, 1949 (including a person eligible to be appointed as auditor under section 226(2) of the Companies Act, 1956, of the companies registered under any State). 56.2 The Comptroller and Auditor General of India (C&AG) published its report on "Appreciation of Third Party (Chartered Accountant) Certificat....
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....y:- These amendments takes effect from 1st June, 2015. 57. Enabling the Board to notify rules for giving foreign tax credit 57.1 Sub-section (1) of section 91 of the Income-tax Act provides relief to Indian residents in respect of income-tax on the income which is taxed in India as well as in the country with which there is no Double Taxation Avoidance Agreement (DTAA) by providing a deduction from the Indian income-tax of a sum calculated on such doubly taxed income, at the Indian rate of tax or the rate of tax of said country, whichever is lower. In cases of countries with which India has entered into an agreement for the purposes of avoidance of double taxation under section 90 or section 90A, a relief in respect of income-tax on doubly taxed income is available as per the respective DTAAs. 57.2 Income-tax Act, before amendment made by the Finance Act, 2015, did not provide the manner for granting credit of taxes paid in any country outside India. Therefore, sub-section (2) of section 295 of the Income-tax Act has been amended to enable CBDT to prescribe the procedure for granting relief or deduction, as the case may be, of any income-tax paid in any country or specifie....