TDS exemption on dividend payments to business trusts now excludes withholding where dividends are exempt in the trust's hands.
The second proviso to section 194 is amended to exclude payment of dividends from withholding where dividends are credited or paid to a business trust by a special purpose vehicle or to other notified persons; the amendment is made retrospective to the start of the prior financial year.

Withholding on FII payments: deduction at the lower of statutory rate or applicable treaty rate where TRC is furnished.
Withholding on payments to FIIs is amended so that where a payee is entitled to benefits under a double taxation agreement and has furnished the prescribed tax residency certificate, tax shall be deducted at the lower of the statutory deduction rate and the rate provided in the agreement for such income; the amendment is prospective from 1 April, 2021.

Tax audit threshold increased for eligible businesses with limited cash transactions, easing audit compliance from assessment year 2021-22.
The Finance Bill, 2021 proposes to raise the higher audit-threshold applicable to businesses that maintain limited cash transactions-specifically where aggregate cash receipts and aggregate cash payments do not exceed the prescribed five percent limits-so as to reduce compliance burden on small and medium enterprises and incentivise non-cash transactions. The amendment is prospective and will apply from 1 April 2021 for the relevant assessment year and thereafter, with existing audit requirements remaining in force where the cash-transaction conditions are not met.

Advance tax interest exemption: dividend income (excluding deemed dividend) added to 234C exclusions when full tax paid later.
The amendment adds dividend income (excluding deemed dividend) to the list of incomes exempted from interest for shortfall in advance tax instalments, so long as the taxpayer pays the full tax in subsequent instalments; it thereby prevents interest being charged on advance tax shortfalls attributable to dividend receipts.

Exemption threshold for receipts on behalf of educational and hospital institutions expanded, widening small trust eligibility from next assessment year.
Amendment raises the prescribed annual receipts limit that determines entitlement to the exemption under sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10 for income received on behalf of universities/educational institutions and hospitals/institutions. The increased threshold applies to aggregate receipts from the specified institutions, expanding eligibility for small trusts and institutions. The amendment takes effect from 1 April 2022 and applies to the assessment year 2022-23 and subsequent assessment years.

Due date extensions for partner-related taxpayers and reduced filing window for belated and revised returns.
Amendments align original return due dates for spouses of partners and partners of firms with the firms' audit or reporting deadlines, shorten the filing window for belated and revised returns by three months, and allow the Board by notification to relax or modify specified defective-return conditions for classes of assessees; effective from 1st April, 2021 for assessment year 2021-22 and subsequent years.

Employee contribution treatment clarified: employer-payment exclusion no longer applies for determining due date and deduction entitlement.
The Finance Bill amends relevant deduction and employer-payment exclusion provisions to state explicitly that the employer-payment exclusion does not apply, and is deemed never to have applied, for determining the "due date" for employee contributions; the amendments distinguish employee contribution (the employee's own funds held in fiduciary capacity) from employer contribution to prevent unjust enrichment and to clarify deduction entitlement and compliance obligations.

Dispute Resolution Committee offers optional faceless settlement with penalty relief and possible prosecution immunity.
The proposed Dispute Resolution Committee under section 245MA offers an optional, faceless dispute resolution route for small and medium taxpayers where returned income and aggregate variation fall within prescribed thresholds; exclusions apply for cases originating from searches, requisitions, surveys or specified information and for taxpayers subject to detention, prosecution or conviction. The DRC may, subject to conditions, reduce or waive penalties and grant prosecution immunity. The Central Government may notify a scheme to operationalise faceless procedures, adapt Act provisions for the scheme, and impose time limited notification powers; the amendment is to take effect from 1 April 2021.

Advance Rulings Reform: Board issues non-binding rulings with judicial appeal, replaces existing Authority and transfers pending cases
A two-member Board for Advance Rulings will replace the Authority from a notified date; Board rulings will not be binding and may be challenged by judicial appeal. Pending applications with no final order before the notified date will be transferred to the Board with all records. Chapter XIX-B provisions will be amended to substitute references to the Authority with the Board, insert Board definitions, permit a government scheme to govern Board procedures, and align procedural and appellate mechanisms accordingly.

Assessment procedure reform: pre notice enquiries and prior authority approval introduced, with risk flagged information driving reopens.
Proposed amendments recast assessment procedure so section 147 reassessments require information suggesting escaped income and prior specified authority approval before issuing a section 148 notice. Section 148A mandates, except in search/requisition cases, prior enquiries, an opportunity to be heard and a reasoned order on fitness to issue notice, with Board risk flagged data and third party information treated as triggering information. Time limits retain a general three year bar with limited extended exceptions, exclude periods of taxpayer response or court stays, and preserve Assessing Officer powers to address subsequently discovered issues during proceedings.

Faceless notice issuance: prescribed income-tax authority may issue notices under inquiry-before-assessment provision enabling centralized automated compliance.
Amendment empowers the prescribed income-tax authority, alongside the Assessing Officer, to issue notices under section 142(1)(i) to compel non-filers to submit returns; this enables centralized, automated and faceless issuance of such notices and aligns notice powers with the Government's policy to eliminate person-to-person taxpayer-department interface, effective 1 April 2021.

Faceless proceedings enable jurisdictionless appellate processing to reduce human interface and improve administrative efficiency.
Faceless proceedings for appellate disposal before the Income-tax Appellate Tribunal are proposed to eliminate physical interface to the extent technologically feasible, optimise resource utilisation through economies of scale and functional specialisation, and introduce an appellate system with dynamic jurisdiction. The Central Government would be empowered to notify a scheme and issue notifications adapting or disapplying provisions of the Act as necessary to implement the faceless framework, with publication in the Official Gazette and parliamentary laying requirements.

Discontinuance of Income-tax Settlement Commission: pending settlement cases transferred to Interim Boards with inherited powers.
Income-tax Settlement Commission is discontinued and pending settlement applications will be handled by one or more Interim Boards of Settlement composed of three senior officers; the Interim Boards inherit the Commission's powers mutatis mutandis for disposal and rectification of orders, pending applications are deemed valid where invalidity was not declared, assessees may withdraw applications within a prescribed period causing proceedings to abate with specified exclusions to limitation and use of material, and the Central Government may notify a scheme to regulate settlement of pending applications and adapt Act provisions for transitional efficiency.

Reduction of assessment time-limit shortens statutory window for completing income-tax assessments under faceless assessment reforms.
The Finance Bill reduces the statutory time limit for completion of income-tax assessment proceedings, further shortening the window for passing assessment orders in scrutiny cases. The amendment is justified by the operational efficiencies of the Faceless Assessment Scheme-characterised by electronic, team-based, jurisdiction-less procedures-and aims to reduce taxpayer compliance burden and enable earlier detection of revenue leakages; it takes effect from 1 April, 2021.

Double deduction prevention: corpus and loan-funded applications excluded unless reinvested or repaid from prior-year income.
Voluntary contributions specifically directed to form part of corpus must be invested or deposited in prescribed modes maintained separately; application from corpus and from loans or borrowings will not qualify as application for computing the mandatory application threshold, except where reinvestment to corpus or repayment of loans from previous year's income is deposited into prescribed modes, which will then be allowed as application in that previous year. No set-off or allowance of excess application from years before the previous year shall be permitted.

Exemption limits for ULIPs tightened, with excluded policies taxed as capital gains and included under equity-oriented fund rules.
Amendments exclude from the exemption under clause (10D) of section 10 those ULIPs issued on or after 1 February 2021 whose annual premium for any policy year (or aggregate premium across multiple ULIPs held by a person) exceeds the prescribed threshold, while excluding death proceeds. Such excluded ULIPs are classified as capital assets, gains on redemption are to be taxed as capital gains under a new section 45(1B) with rules for computation, and will be treated as equity oriented funds for section 112A and 111A purposes. STT is made applicable on maturity or partial withdrawal of such ULIPs.

Slump sale definition expanded to include all forms of transfer, extending scope of capital gains computation.
Amendment expands the scope of the slump sale definition so that any mode of transfer included in the statutory definition of "transfer" can constitute a slump sale for capital gains computation; this codifies the judicial principle that transactions in substance amounting to a sale - including those with non monetary consideration or alternative legal forms - fall within the slump sale regime and aims to prevent structuring to defeat the provision.

Capital gains on dissolution: distributions in excess of capital account treated as entity income and valued at fair market value.
Where a partner or member receives a capital asset on dissolution or reconstitution, profit or gain on that receipt is chargeable as capital gains and treated as income of the specified entity in the year of receipt, with fair market value on receipt deemed full consideration. The recipient's capital-account balance is calculated excluding increases from revaluation or self-generated goodwill/assets. Money or other assets received in excess of the capital-account balance are similarly taxed as capital gains, with the capital-account balance deemed the cost of acquisition.

Provisional attachment powers expanded to permit attachment during pending false-entry penalty proceedings when large penalties are likely.
Provisional attachment permits the Assessing Officer, with prior approval from designated senior tax authorities, to attach an assessee's property for six months to protect revenue, revocable on furnishing a bank guarantee which may be invoked if tax demand remains unpaid. The Finance Bill proposes to amend this provision to allow the Assessing Officer to exercise attachment powers during pending penalty proceedings for false or omitted entries where a high-value penalty is likely to be imposed.

Equalisation levy broadened to cover sales and services regardless of operator ownership, with treaty-taxable royalties excluded.
Amendments clarify that consideration chargeable to equalisation levy excludes amounts taxable as royalty or fees for technical services under a notified tax treaty; define e-commerce supply or services to include online acceptance of offers, purchase orders, payment and supply/provision (wholly or partly); broaden consideration to cover sale of goods irrespective of operator ownership and provision of services irrespective of whether provided or facilitated by the operator. These changes operate retrospectively from 1 April 2020, and section 10(50) is adjusted to the same definition and to exclude treaty-taxable royalty or FTS, effective for assessment years from 2021-22.