TaxTMI 
TaxTMI 
Explanatory Notes to the Provisions of the Finance Act, 2016
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.....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; Tax Treatment of Gold Monetization Scheme, 2015, 23.1 - 23.3; Tax Incentives to International Financial Services Centre, 27.1 - 27.9; Rationalisation of tax treatment of National Pension Scheme, Recognised Provident Funds and Superannuation Funds 31.1 - 31.4 10AA Phasing out of deductions and exemptions, 34.1 - 34....
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....e Income-tax Act, 24.1 - 24.3 80 Time limit for carry forward and set off of such loss under section 73A of the Income-tax Act, 48.1 - 48.4 80CCD Rationalisation of tax treatment of National Pension Scheme, Recognised Provident Funds and Superannuation Funds, 31.1 - 31.4 80EE Incentives for Promoting Housing for All, 17.1 - 17.4 80GG Rationalization of limit of deduction allowable in respect of rents paid under section 80GG, 22.1 - 22.3 80-IA Phasing out of deductions and exemptions, 34.1 - 34.3 80-IAB Tax incentives for start-ups, 16.1 - 16.7; Phasing out of deductions and exemptions, 34.1 - 34.3 80-IAC Tax incentives for start-ups, 16.1 - 16.7 80-IB Phasing out of deductions and exemptions, 34.1 - 34.3 80-IBA Incentives for Promoting Housing for All, 17.1 - 17.4 80JJAA Tax incentive for employment generation, 18.1 - 18.5 87A Rationalization of limit of rebate in income-tax allowable under section 87A, 25.1 - 25.3 92CA Extension of time limit to Transfer Pricing Officer in certain cases, 64.1 - 64.3 92D BEPS action plan - Country-By-Country Report and Master file, 13.1 - 13.10 111A Tax Incentives t....
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....ses and paperless assessment, 54.1 - 54.7 147 Legislative framework to enable and expand the scope of electronic processing of information, 66.1 - 66.6 153 Rationalisation of time limit for assessment, reassessment and recomputation, 57.1 - 57.7 153B Rationalisation of time limit for assessment in search cases, 58.1 - 58.3 192A Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194BB Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194C Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194D Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194DA Rationalization of Tax Deduction at Source (TDS) provisions, 49.1 - 49.2 194EE 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 Ra....
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....S 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 under section 281B, 63.1 - 63.8 282A Providing legal framework for automation of various processes and paperless assessment, 54.1 - 54.7 286 BEPS action plan - Country-By-Country Report and Master file, 13.1 - 13.10 288 Rationalisation of penalty provisions, 62.1 - 62.17.5 CHAPTER VIII Equalisation Levy, 32.1 - 32.8 CHAPTER X The Direct Tax Dispute Resolution Scheme, 2016, 68.1 - 68.10 1. Introduction 1.1 The Finance Act, 2016 (hereafter referred to as &....
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....ing 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 juridical person. Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company) as under: Income chargeable to tax Rate of income- tax Individual (other than senior and very senior citizen), HUF, association of persons, body of individuals and artificial juridical person. Individual, resident in India who is of the age of sixty years or more but less than eighty years. (senior citizen) Individual, resident in India who is of the age of eighty years or more (very senior citizen) Up to Rs. 2,50,000 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% ....
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.... 10% Rs. 10,001 - Rs. 20,000 20% Exceeding Rs. 20,000 30% 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 co-operative society 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. 3.1.4 Firms. In the case of every firm, the rate of income-tax of thirty per cent has been specifie....
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....First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of seven per cent where such domestic company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of twelve per cent shall be levied if the total income of the company exceeds ten crore rupees. In the case of a company other than a domestic company, royalties received from Government or an Indian concern 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 an 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 oth....
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....cent of such tax, in case of an individual, HUF, association of person, body of individual or artificial juridical person; (b) twelve per cent of such tax, in case of a firm or cooperative society; where the income or aggregate of such income paid or likely to be paid and subject to the deduction exceeds one crore rupees. (ii) In case of payments made to foreign company, the rate of surcharge is two per cent of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed ten crore rupees. In case where such income or the aggregate of such incomes paid or likely to be paid to a foreign company and subject to the deduction exceeds ten crore rupees, the rate of surcharge is five per cent. (iii) No surcharge on tax deducted at source shall be levied in the case of an individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person, co-operative society, local authority, firm, being a resident or a domestic company. 3.2.3 Education Cess. Education Cess on income-tax shall ....
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....emption limit, rates of tax and slabs of income for various categories remain the same as in financial year 2015-16. The rates of tax during the financial year 2016-17 are as follows:- Income chargeable to tax Rate of income-tax Individual (other than senior and very senior citizen), HUF, association of persons, body of individuals and artificial juridical person Individual, resident in India who is of the age of sixty years or more but less than eighty years. (senior citizen) Individual resident in India, who is of the age of eighty years or more. (very senior citizen) Up to Rs. 2 ,50,000 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 fifteen per cent of such income-tax in case of a person having a total income exceeding one crore rupees as against the rate of twelve per cent for the financial year 2015-16. However, the total amount payable as income-tax and surcharge on total income exceeding one cr....
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....al income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent. on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.3.5 Local Authorities. In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part III of the First Schedule to the Act. The amount of income-tax so computed shall continue to 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. Accordingly, the total amount payable as in....
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.... crore rupees. Surcharge at the rate of twelve per cent shall continue to be levied if the total income of the company exceeds ten crore rupees. In the case of a company other than a domestic company, royalties received from Government or an Indian concern 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 continue to 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 continue to 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 ru....
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....re key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are in substance made. 4.3 In the context of implementation of POEM based residence rule, certain issues, relating to the applicability of current provisions of the Income-tax Act to a company which is incorporated outside India and has not earlier been assessed to tax in India, have arisen. In particular, the issues relate to applicability of specific provisions of the Income-tax Act relating to Advance tax payment, applicability of TDS provisions, computation of total income, set off of losses and manner of application of transfer pricing regime. These provisions have compliance requirements which would not have been undertaken by the company at relevant time due to absence of any such requirement under tax laws of country of incorporation of such company. Similarly, issues of computation of depreciation also arise when in earlier years it has not been subject to computation under the Income-tax Act. 4.4 Problems highlighted also arise due to the fact that a company may be claiming to be a foreign company not resident in India but in the course o....
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....in exercise of this power by the Central Government shall be laid before each house of the Parliament. 4.6 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. 5. Exemption of income of Foreign Company from storage and sale of crude oil stored as part of strategic reserves. 5.1 Section 5 of the Income-tax Act provides for the scope of total income. In the case of a non-resident, the taxation of income takes place only if the income accrues or arises in India or is deemed to accrue or arise in India or is received in India. Section 9 of the Income-tax Act provides for circumstances in which the income is deemed to accrue or arise in India. One of the circumstances providing for income to be deemed to accrue or arise in India is if any income is directly or indirectly derived through or from a business connection in India. 5.2 The setting up and maintenance of underground storage facility for storage of crude oil as part of strategic reserves is in India's national interest and ensures price stability for Indian oil companies. The ....
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.... the world. The activity of FMC of mere display of rough diamonds even with no actual sale taking place in India may lead to creation of business connection in India of the FMC. This potential tax exposure has been an area of concern for the mining companies willing to undertake these activities in India. 6.3 In order to facilitate the FMCs to undertake activity of display of uncut diamond (without any sorting or sale) in the special notified zone, section 9 of the Income-tax Act has been amended to provide that in the case of a foreign company engaged in the business of mining of diamonds, no income shall be deemed to accrue or arise in India to it through or from the activities which are confined to display of uncut and unassorted diamonds in a Special Zone notified by the Central Government in the Official Gazette in this behalf. 6.4 Applicability: This amendment takes effect retrospectively from 1st of April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years. 7. Modification in conditions of special taxation regime for off shore funds section 9A. 7.1 Section 9A of the Income-tax Act provi....
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....of the country. It had been further mentioned that the conditions relating to restriction on fund carrying on business or controlling fund managing business in India or from India restricts the flexibility of operation for funds and focus should be on nature of activities undertaken in India. 7.5 In order to rationalise the regime and to address the concerns of the industry, section 9A of the Income-tax Act has been amended to provide that the eligible investment fund for the purposes of section 9A, shall also mean a fund established or incorporated or registered outside India in a country or a specified territory notified by the Central Government in this behalf. It has also been provided that the condition of fund not controlling and managing any business in India or from India shall be restricted only in the context of activities in India. 7.6 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. 8. Exemption from Dividend Distribution Tax (DDT) on distribution made by an SPV to Business Trust. 8.1 The Income-tax Act contains a spe....
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.... operating income to the investors, whereas in case of normal real estate company, there is no requirement of such annual distribution of dividends. It has been mentioned that because of the additional levy of DDT and associated tax inefficiency, these initiatives have not yet taken off. 8.3 In order to further rationalise the taxation regime for business trusts (REITs and Invits) and their investors, provisions of sections 10, 115-O, 115UA and 194LBA of the Income-tax Act have been amended to provide a special dispensation and exemption from levy of Dividend Distribution Tax. The salient features of the said special dispensation are: (a) exemption from levy of DDT in respect of distributions made by SPV to the business trust; (b) such dividend received by the business trust and its investor shall not be taxable in the hands of trust or investors; (c) the exemption from levy of DDT shall only be in the cases where the 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 s....
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....ken. Further, lack of clarity in the manner of determination of consideration received by the company would lead to avoidable disputes and also presented a tax arbitrage opportunity of scaling up of consideration particularly under a tax neutral business reorganisation followed by buyback of shares. 9.4 In order to provide clarity and remove any ambiguity on the above issues, section 115QA of the Income-tax Act has been amended to provide that the provisions of this section shall apply to any buy back of unlisted share undertaken by the company in accordance with the provisions of the law relating to the Companies and not necessarily restricted to section 77A of the Companies Act, 1956. It has been further provided that for the purpose of computing distributed income, the amount received by the Company in respect of the shares being bought back shall be determined in the prescribed manner. 9.5 Applicability: This amendment takes 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 contain....
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....tion company or a reconstruction company in accordance with the SARFAESI Act; (ii) The income of securitisation trust shall continue to be exempt. However, exemption in respect of income of investor from securitisation trust would not be available and any income from securitisation trust would be taxable in the hands of investors; (iii) The income accrued or received from the securitisation trust shall be taxable in the hands of investor in the same manner and to the same extent as it would have happened had investor made investment directly in the underlying assets and not through the trust; (iv) Tax deduction at source under a newly inserted section 194LBC shall be effected by the securitisation trust at the rate of 25% in case of payment to resident investors 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 in....
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....titution, or it may convert into a non-charitable organization. In such a situation, the existing law does not provide any clarity as to how the assets of such a charitable institution shall be dealt with. Under provisions of section 11, certain amount of income of prior period can be brought to tax on failure of certain conditions. However, there was no provision in the Income-tax Act which ensured that the corpus and asset base of the trust accreted over period of time, with promise of it being used for charitable purpose, continues to be utilised for charitable purposes and is not used for any other purpose. In the absence of a clear provision, it was always possible for charitable institutions to transfer assets to a non-charitable 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....
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....e taxation of accreted income shall be at the maximum marginal rate. (iv) This levy shall be in addition to any income chargeable to tax in the hands of the entity. (v) This tax shall be final tax for which no credit can be taken by the trust or institution or any other person, and like any other additional tax, it shall be leviable even if the trust or institution does not 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....
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....or NIL rate in respect of deductions made under section 194LBB. 12.4 In order to rationalise the TDS regime in respect of payments made by the investment funds to its investors, section 194LBB of the Income-tax Act has been amended to provide that the person responsible for making the payment to the investor shall deduct income-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 amend....
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.... a particular tax jurisdiction and to provide an indication of the business activities each entity engages in. The CbC report has to be submitted by parent entity of an international group to the prescribed authority in its country 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 e....
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.... (vi) 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 tax jurisdiction in which the alternate entity is resident, then the entities of such group operating in India would not be obliged to furnish report if the report can be obtained under the agreement of exchange of such r....
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....nt 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 rules; (c) for non-furnishing of the information and document to the prescribed authority, a penalty of Rs. 5,00,000/- shall be leviable. However, reasonable cause defence against levy of penalty shall be available to the entity. 13.8 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. 14. Rationalisation of taxation of income by way of dividend 14.1 The provisions contained in clause (34) of section 10 of the Income-tax Act, before its amendment by the Act, provided that dividend which suffers dividend DDT under section 115-O is exempt in the hands of the shareholder. Section 115-O specifies that dividends are taxed only at the rate of fifteen ....
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....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, processes or services driven by technology or intellectual property. The benefit of hundred per cent deduction of the profits derived from such business shall be available to an eligible start-up, being a company or Limited Liability Partnership (L.L.P), setup before 01.04.2019, subject of fulfilment of certain condition,. 16.2 In order to promote the start-up ecosystem in the country, it was envisaged in 'Start-up India Action Plan' to establish a Fund of Funds. With a view to provide tax incentive for investment in Fund of Funds, section 54EE has been inserted in the Income-tax Act so as to provide exemption from capital gains if the long term capital proceeds are invested by an assessee in units of notified fund subject to condition that the amount remains invested for three years failin....
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....jective 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 project is completed within a period of three years from the date of approval, (ii) The project is on a plot of land measuring not less than 1000 sq. metres where the project is located within the cities of Delhi, Mumbai, Chennai & Kolkata or within 25 kms measured aerially; from the municipal limits of these four metros and in any other area, it is measuring not less than 2000 sq. metres and where the built-up area of the residential unit in the said areas is not more than thirty sq. metres and sixty sq. metres, respectively and also the project is only housing project on such plot of land, (iii) Where residential unit is allotted to an individual, no such unit shall be allotted to him or any member of his family, etc. 17.2 The provisions contained in section 80EE of the Income-tax Act....
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....owever, 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 norms for minimum number of days of employment in a financial year has been relaxed from 300 days to 240 days .In this connection it may be noted that the norms for minimum number of days of employment has further been relaxed to 150 days for an assessee who is engaged in the business of manufacturing of apparel by The Taxation Laws (Amendment) Act 2016.The existing condition of ten per cent increase in number of employees every year has been done away with so that any increase in the number of employees will be eligible for deduction under the new provisions. 18.4 It is also provided that in the first year of a new business, thirty per cent of all emoluments paid or payable to the employees employed during the previous year shall be allowed as deduction. 18.5 Applicability: This amendment takes effect from 1st of April, 2017 and will accordingly apply in relation to assessme....
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....he 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 mutual fund schemes, to the merger or consolidation of different plans in a mutual fund scheme, section 47 of the Income-tax Act has been amended so as to provide that any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund, shall not be considered transfer for the purposes of tax on capital gains and thereby shall not be chargeable to tax. 21.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 22. Rationalization of limit of deduction allowable in respect of rents paid under section 80GG 22.1 Th....
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....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 Rs. 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 of a company. Such a transaction is not chargeable where the recipient is a firm or a company. 24.2 With a view to bring uniformity in tax treatment between different categories of assessees, clause (vii) of sub-section 2 of section 56 of the Income-tax Act has been amended to provide that any shares received by an individual or HUF as a consequence of demerger or amalgamation of a company shall not attract the provisions of clause (vii) of sub-section (2) of section 56. 24.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 25. Rationalization of limit of rebate in income-tax allowable under section 87A 25.1 The provisions contained in section 87A of the Income-tax Act before ....
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....n 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 of a country or a specified territory with which India has an agreement referred to in sub-section (1) of section 90 or the Central Government has adopted any agreement under sub-section (1) of section 90A and the assessee does not have a permanent establishment in India in accordance with the provisions of such Agreement; or (ii) the assessee is a resident of a country with which India does not have an agreement of the nature referred to in clause (i) above and the assessee is not required to seek registration under any law for the time being in force relating to companies. 26.5 Applicability: This amendment takes effect retrospectively from the 1st of April, 2001 and will, accordingly, apply in relation to assessment year 2001-02 and subsequent years. 27. Tax Incentives to Internation....
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....saction 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 recognized stock exchange located in International Financial Services Centre where the consideration for such transaction is paid or payable in foreign currency, thereby exempting such transaction from securities transaction tax. 27.7 Further, section 132A in Chapter VII of the Finance Act, 2013 has been inserted so as to provide that the provisions of Chapter VII shall also not apply to taxable commodities transactions entered into by any person on a recognized association located in unit of International Financial Services Centre where the consideration for such transaction is paid or payable in foreign currency, thereby exempting such transaction from commodities transaction tax. 27.8 Applicability: The insertion of section 113A to Finance (No.2) Act, 2004 and section 132A to the Finance Act, 2013 take effect from 1st June, 2016. ....
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....here 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 amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. 29.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 30. Rationalization of conversion of a company into Limited Liability Partnership (LLP) 30.1 Clause (xiiib) of section 47 of the Income-tax Act before amendment by the Act provided that conversion of a private limited or unlisted public company into Limited Liability Partnership (LLP) shall not be regarded as transfer, if certain conditions are fulfilled, whi....
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....r 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 lakh and fifty thousand rupees without attracting tax. 31.4 Applicability: These amendments take effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 32. Equalisation Levy 32.1 If permanent establishment (PE) principles are to remain effective in the new economy operating in the digital domain, the fundamental PE rules developed for the old economy i.e. place of business, location, and permanency must be reconciled with the new digital reality. 32.2 In this regard, the Organization for Economic Cooperation and Development (OECD) under Action plan 1 of Base Erosion and Profit Shifting (BEPS) project has suggested several options to tackle the direct tax challenges. The options inter-alia inc....
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....ecified 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-section (1D) of section 206C of the Income-tax Act has been amended by the Act to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source under chapter XVII-B) exceeding two lakh rupees and new sub-section (1F) was inserted in section 206C of the Income-tax Act to provide that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer. 33.3 Further new sub-section (1E) was inserted in section 206C of the Income-tax Act to provide that the provisions of sub-s....
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.... 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 35CCC- Expenditure on notified agricultural extension project. Weighted deduction of 150 per cent of expenditure incurred on notified agricultural extension project. Deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards). 5 Section 80IA; 80IAB, and 80IB - Deduction in respect of profits derive from (a) development, operation and maintenance of an infrastructure (b) facility (80-IA) development of special economic zone (80- IAB) (c) production of mineral oil and natural gas [80-IB(9)] 100 per cent profit linked deductions for specified period on eligible business carried on by industrial undertakings or enterprises referred in section 80IA; 80IAB, and 80IB. No deduction shall be available if the specified activity commences on or after 1st day April, 2017. (i.e from previous year 2017-18 and subsequent years). 34.2 Applicability: These amendments mentioned in Table 1....
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....t years). 5 35(2AA) - Expenditure on scientific research. Weighted deduction from the business income to the extent of 200 per cent of any sum paid to a National Laboratory or a university or an Indian Institute of Technology or a specified person for the purpose of approved scientific research programme. Weighted deduction shall be restricted to 150 per cent with effect from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20). Deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards). 6 35(2AB) - Expenditure on scientific research. Weighted deduction of 200 per cent of the expenditure (not being expenditure in the nature of cost of any land or building) incurred by a company, engaged in the business of bio-technology or in the business of manufacture or production of any article or thing except some items appearing in the negative list specified in Schedule-XI, on scientific research on approved in-house research and development facility. 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).....
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....lump sum or over instalments along with interest. There is uncertainty in tax treatment of above mentioned payments (lump sum or instalments) in respect of Spectrum i.e. whether spectrum is an intangible asset and the spectrum fees paid is eligible for depreciation under section 32 of the Income-tax Act or whether it is in the nature of a 'license to operate telecommunication business' and eligible for deduction under section 35ABB of the Income-tax Act. 36.2 In order to provide clarity and avoid any future litigation and controversy, the Act, inserted a new section 35ABA in the Income-tax Act to provide that the fees paid for obtaining right to use the spectrum is to be amortized over the period for which the right to use the spectrum has been granted. The following detailed tax treatment of spectrum fee is provided,- (i) any capital expenditure incurred and actually paid by an assessee or payable by an assessee in such manner as may be prescribed for the acquisition of any right to use spectrum for telecommunication services by paying spectrum fee will be allowed as a deduction in equal instalments over the period for which the right to use spectr....
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....t has been provided that where the total income of the eligible assessee income includes any income by way of royalty in respect of a patent developed and registered in India, such royalty shall be taxable at the rate of ten per cent (plus applicable surcharge and cess) on the gross amount of royalty. No expenditure or allowance in respect of such royalty income shall be allowed under the Income-tax Act. It is further provided that this concessional tax regime is optional and the eligible assessee may exercise the option for taxation under this section in prescribed manner on or before the due date of furnishing the return of income under section 139(1) of the Income-tax Act. It has been also provided that where an eligible assessee declares income by way of royalty for any previous year in accordance with the provisions of this section but he does not declares such income for any of the five consecutive assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of this section, he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant t....
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....l, Hindu undivided family or partnership firm but not Limited Liability partnership firm. 38.3 Under the scheme, the assessee will be deemed to have been allowed the deductions under section 30 to 38 of the Income-tax Act. Accordingly, the written down value of any asset used for the purpose of the profession of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for the relevant assessment years. 38.4 It has also been provided that the assessee will not be required to maintain books of account under sub-section (1) of section 44AA and get the accounts audited under section 44AB in respect of such income unless the assessee claims that the profits and gains from the aforesaid profession are lower than the profits and gains deemed to be his income under sub-section (1) of section 44ADA and his income exceeds the maximum amount which is not chargeable to income-tax. 38.5 Applicability: These amendments take effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 39. Increase in thres....
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....tion on deduction of amounts, otherwise allowable under section 30 to 38. 40.4 It has been further provided that where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five consecutive assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of this section, he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of this section. For example, an eligible assessee claims to be taxed on presumptive basis under section 44AD for Assessment Year 2017-18 and offers income of Rs. 8 lakh on the turnover of Rs. 1 crore. For Assessment Year 2018-19 and Assessment Year 2019-20 also he offers income in accordance with the provisions of section 44AD. However, for Assessment Year 2020-21, he offers income of Rs. 4 lakh on turnover of Rs. 1 crore. In this case since he has not offered income in accordance with the provisions of section 44AD for fiv....
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....e in a previous year by a company engaged in manufacturing or production of any article or thing subject to the condition that the acquisition and installation has to be done in the same previous year. This tax incentive is available up to 31.03.2017. 42.2 The dual condition of acquisition and installation causes genuine hardship in cases in which assets having been acquired could not be installed in same previous year. 42.3 The provision of sub-section (1A) of section 32AC of the Income-tax Act has been amended so as to provide that the acquisition of the plant & machinery of the specified value has to be made in the previous year. However, installation may be made by 31.03.2017 in order to avail the benefit of investment allowance of 15%. It has been further provided that where the installation of the new asset is in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new asset is installed. 42.4 Applicability: This amendment takes effect retrospectively from 1st of April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years. ....
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....of section 24 of the Income-tax Act has been amended so as to provide that subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or State government shall not form part of income. 44.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. 45. Extension of scope of section 43B to include certain payments made to Railways 45.1 The existing provisions of section 43B of the Income-tax Act, inter alia, provide that any sum payable by the assessee by way of tax, cess, duty or fee, employer contribution to Provident Fund, etc., is allowable as deduction of the previous year in which the liability to pay such sum was incurred (relevant previous year) if the same is actually paid on or before the due date of furnishing of the return of income irrespective of method of accounting followed by a person. 45.2 With a view to ensure the prompt payment of dues to Railways for use of the Railway assets, the provision of section 43B of the Income-tax Act has been amended so as to ....
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....ther, the provisions clarify that receipts for transfer of right to manufacture, produce or process any article or thing or right to carry on any business, which are chargeable to tax under the head "Capital gains", would not be taxable as profits and gains of business or profession. Under section 45 of the Income-tax Act, any capital receipt arising out of transfer of any business or commercial rights is taxable under the head "Capital gains". The amount of "Capital gains" is computed according to section 48 of the Income-tax Act. For this purpose, 'cost of acquisition' and 'cost of improvement' are defined under section 55. However, non-compete fee received/receivable in relation to carrying out of profession are not covered under these provisions. Clause (va) of section 28 of the Income-tax Act has been amended so as to bring the non-compete fee received/receivable( which are recurring in nature) in relation to not carrying out any profession, within the scope of section 28 of the Income-tax Act i.e. the charging section of profits and gains of business or profession. Further, the proviso to clause (va) of section 28 of the Income-tax Act has also been amended to....
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.... 48.1 49. Rationalization of Tax Deduction at Source (TDS) provisions 49.1 Under the scheme of deduction of tax at source as provided in the Income-tax Act every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit. In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are rationalised by amending the respective sections of the Income-tax Act through the Act as mentioned in Table 3 and Table 4 respectively. TABLE - 3 Present section Heads Threshold Limit prior to Amendment by Finance Act, 2016 (in Rs.) Revised Threshold Limit as per amendments made in the Finance Act, 2016 (in Rs.) 192A Payment of accumulated balance due to an employee 30,000 50,000 194BB Winnings from Horse Race 5,000 10,000 194C Payments to Contractors Aggregate annual limit of 75,000 Aggregate annual li....
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....d to in section 194-I of the Income-tax Act shall also be eligible for filing self-declaration in Form no. 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A of the Income-tax Act. 50.4 Applicability: This amendment takes effect from 1st of June, 2016. 51. Increase in time period for acquisition or construction of self-occupied house property for claiming deduction of interest 51.1 The existing provision of clause (b) of section 24 of the Income-tax Act provides that interest payable on capital borrowed for acquisition or construction of a house property shall be deducted while computing income from house property. The second proviso to the said clause provides that a deduction of an amount of two lakh rupees shall be allowed where a house property referred 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 housin....
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....ommissioner or Commissioner to reduce or waive the amount of interest paid or payable under sub-section (2) of the said section. 53.2 Sub-section (4) of section 273A of the Income-tax Act inter alia provides that the Principal Commissioner or the Commissioner may, on an application made by an assessee, reduce or waive the amount of any penalty payable by the assessee or stay or compound any proceeding for recovery of the penalty amount in certain circumstances. 53.3 Section 273AA of the Income-tax Act provides inter alia that the Principal Commissioner or the Commissioner may grant immunity from penalty, if penalty proceedings have been initiated in case of a person who has made application for settlement before the Settlement Commission and the proceedings for settlement had abated under the circumstances contained in section 245HA of the 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 ....
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.... the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, he shall serve on the assessee a notice requiring him to produce, or cause to be produced on a specified date, any evidence on which the assessee may rely in support of the return. 54.5 In order to ensure timely service of notice issued under sub-section (2) of section 143 of the Income-tax Act, the said sub-section has been substituted to provide that notice under the said sub-section may be served on the assessee by the Assessing Officer or the prescribed income-tax authority, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return. 54.6 The existing provision of section 2 of the Income-tax Act has also been amended by inserting 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 (....
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....on (1) of the section 139 of the Income-tax Act has been amended to include that if a person during the previous year earns income which is exempt under clause (38) of section 10 of the Income-tax Act and income of such person without giving effect to the said clause of section 10 of the Income-tax Act exceeds the maximum amount which is not chargeable to tax, shall also be liable to file return of income for the previous year within the due date. 55.7 Sub-section (4) of the aforesaid section has been substituted to provide that any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. 55.8 Sub-section (5) of the aforesaid section has been substituted so as to provide that if any person, having furnished a return under 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 e....
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....isions of existing section 153 of the Income-tax Act by retaining only those provisions that are relevant to the current provisions of the Income-tax Act, section 153 of the Income-tax Act has been amended by substituting the existing section with the following changes in time limit from the existing time limits: (i) the period, for completion of assessment under section 143 or section 144 has been changed from existing two years to twenty-one months from the end of the assessment year in which the income was first assessable; (ii) the period for completion of assessment under section 147 has been changed from existing one year to nine months from the end of the financial year in which the notice under section 148 was served; (iii) the period for completion of fresh assessment in pursuance of an order 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 o....
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....017 or twelve months from the end of the month in which order in case of firm is passed, whichever is later. 57.5 Similarly, consequential changes in time limit for completion of assessment or reassessment by the Assessing Officer have been made in accordance with the extension of time limit provided to the Transfer Pricing Officer in certain cases by amendment in sub-section (3A) to section 92CA of the Income-tax Act. 57.6 The provisions of section 153 of the Income-tax Act as they stood immediately before their amendment by the Act shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 1st of June, 2016. 57.7 Applicability: These amendments take effect retrospectively from 1st of June, 2016. 58. Rationalisation of time limit for assessment in search cases 58.1 The time 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 t....
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....ber, 15th December and 15th March respectively. For other assessees, the advance tax payment schedule is thirty per cent, sixty per cent and hundred per cent of tax payable on current income to be paid by 15th September, 15th December and 15th March respectively. 59.2 Based on the recommendations of Expenditure Management Commission clubbed with the fact that most of the advance tax is now paid electronically the schedule for advance tax payment has been rationalised by amending the provisions of section 211 of the Income-tax Act and same advance tax schedule has been prescribed for all assessees other than an eligible assessee in respect of eligible business as referred to in section 44AD of the Income-tax Act. The modification in payment schedule will facilitate forecasting of revenue 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 fin....
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....o the date on which the refund is granted. It is clarified that in cases where extension is granted by the Principal Commissioner or Commissioner by invoking proviso to sub-section (5) of section 153 of the Income-tax Act, the period of additional interest, if any, shall begin from the expiry of such extended period. 60.5 Applicability: This amendment takes effect from 1st of June, 2016. 61. Rationalisation of the provisions relating to Appellate Tribunal 61.1 Existing clause (b) of sub-section (3), sub-section (4A) and sub-section (5) of section 252 of the Income-tax Act provide for the appointment and powers of Senior Vice-President of the Appellate Tribunal. 61.2 In view of the fact that there are no extra-judicial or administrative duties or difference in the pay scale attached with the post of Senior 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....
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.... dispute resolution at the level of ITAT, the provision of sub-section (3) of section 255 of the Income-tax Act has been amended so as to provide that a single member bench may dispose of a case where the total income as computed by the Assessing Officer does not exceed fifty lakh rupees. 61.13 Applicability: These amendments to sections 254 and 255 take effect from 1st June, 2016. 62. Rationalisation of penalty provisions 62.1 Under the existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under section 271(1)(c) of the Income-tax Act. In order to rationalize and bring objectivity, certainty and clarity in the penalty provisions, section 271 of the Income-tax Act has been made non- applicable in relation to any assessment for the assessment year commencing on or after the 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. ....
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....rm or local authority, the difference between the assessed income and the maximum amount not chargeable to tax. 62.5 In case of any person, where income is not assessed for the first time, the amount of under reported income shall be the difference between the income assessed or determined in such order and the income assessed or determined in the order immediately preceding such order. 62.6 It is further provided that in a case where under reported income arises out of determination of deemed 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 contain....
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.... 62.10 The rate of penalty shall be fifty per cent of the tax payable on under-reported income. However in a case where under reporting of income results from misreporting of income by the assessee, the person shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income. The cases of misreporting of income 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 am....
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....alty 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 Penalty Leviable** 50 % of 1,25,000 = 62,500 * Being maximum amount not chargeable to tax * Considering under-reported income is not on account of misreporting Example 3.Case is of a company liable to tax at the rate of 30 per cent.: (Figures in Rs. lakh) Returned total Income (loss) (-)100 Total Income (loss) determined under section 143(1)(a) of the Income-tax Act (-)90 Total Income (loss) assessed under section ....
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....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 the Income-tax Act. 62.17.3 Further, sub-section (3) of section 272A of the Income-tax Act has been amended to provide that penalty in case of failure referred above shall be levied by the income-tax authority issuing such notice or direction. 62.17.4 Consequential amendments to section 288 of the Income-tax Act have been made by making reference of newly inserted clause (d) in sub- section (1) of section 272A of the Income-tax Act to clause (b) of sub-section (4) of section 288. 62.17.5 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. 63. Provision for bank guarantee under section 281B of the Income-tax Act 63....
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....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 Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub - section (1) of section 45 of the Reserve Bank of India Act, 1934 at the place where the office of the Principal Commissioner or Commissioner is situated. 63.7 In a case where the Assessing Officer is satisfied that the bank guarantee is not required anymore to protect the interests of the revenue, he shall release that guarantee forthwith. 63.8 Applicability: This amendment takes effect from 1st June, 2016. 64. Extension of time limit to Transfer Pricing Officer in certain cases 64.1 As per the existing provisions of sub-section (3....
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.... 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 the assessment, whichever is earlier. 65.3 Applicability: This amendment takes effect from 1st June, 2016. 66. Legislative framework to enable and expand the scope of electronic processing of information 66.1 The existing provisions of section 133C of the Income-tax Act empower the prescribed income-tax authority to issue notice calling for information and documents for the purpose of verification of information in its possession. 66.2 In order to expedite verification and analysis of the information and documents so received, provisions of section 133C of the Income-tax Act have been amended to provide adequate legislative backing for processing of information and document....
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....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 after the expiry of period of filing appeal as specified in sub-section (2) of section 249 of the Income-tax Act, grant immunity from initiation of penalty and proceeding under section 276C or section 276CC of the Income-tax Act, if the penalty proceedings under section 270A of the Income-tax Act have not been initiated on account of the following, namely:- (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to rec....
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....e 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 arrears" which is defined as the amount of tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, 1957 ('the Wealth-tax Act') in respect of which appeal is pending before the Commissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on the 29th day of February, 2016. (2) The pending appeal could be against an assessment order or a penalty order. (3) The declarant under the scheme is required to pay tax at the applicable rate plus interest up to the date of assessment. However, in case of disputed tax exceeding rupees ten lakh, twenty-five per cent of the minimum penalty leviable is also required to be paid. (4) In case of pending appeal against a penalty order, twenty-five per cent of minimum penalty leviable is payable along with the tax and interest payable on account of assessment or reassessment. (5) Conseq....
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....evived. 68.5 The declarant under the scheme shall get immunity from institution of any proceeding for prosecution for any offence under the Income-tax Act or the Wealth-tax Act. In case of specified tax the declarant shall also get immunity from imposition of penalty under the Income-tax Act or the Wealth-tax Act. However, in case of tax arrears immunity from penalty is of the amount that exceeds the penalty payable as per the scheme. The scheme provides waiver of interest under the Income-tax Act or the Wealth-tax Act in respect of specified tax. However, waiver of interest in respect of tax arrears is to the extent the interest exceeds the amount of interest referred in the scheme. 68.6 In the following cases a person shall not be eligible for the scheme: (i) Cases where the process of instituting prosecution was initiated on or before 29.02.2016, the assessee was intimated of the same and prosecution proceedings were instituted before the date of filing of declaration. (ii) Search or survey cases where the declaration is in respect of tax arrears. (iii) Cases relating to undisclosed foreign income and assets. (iv)....