Zero coupon bond issuance by infrastructure debt funds permitted, triggering tax-rule amendments and retrospective withholding changes. Amendment to the definition of zero coupon bond extends eligible issuers to include notified infrastructure debt funds, enabling those funds to issue instruments with no payment or benefit before maturity; implementing amendments to Income-tax Rules (including Rules 2F and 8B) and an associated amendment to withholding provisions in section 194A are contemplated, with specified staged effective dates and Official Gazette notifications to operationalise the changes.
Tax neutral conversion of cooperative banks preserves deduction apportionment and treats asset and share transfers as non-transfers. Conversion of primary co-operative (urban co-operative) banks into banking companies is brought within the business reorganisation provisions so that section 44DB's apportionment of deductions between predecessor and successor applies; transfers of capital assets and allotment of shares on conversion are not to be treated as transfers under section 47, effected by amendments to section 44DB and clauses (vica)/(vicb) of section 47, effective 1 April 2021.
Strategic disinvestment: clarifying demerger treatment and extending carry forward benefits to enable restructuring before transfer of control. Amendments treat certain reconstructions or splits of a public sector company as demergers where assets transfer and the resultant entity remains a public sector company, and extend carry forward and set off benefits to amalgamations involving public sector and erstwhile public sector companies subject to conditions, limits on deemed losses and allowances, and notified requirements; new explanations define control, erstwhile public sector company, and strategic disinvestment.
Interest deduction for affordable home loans extended to cover loans sanctioned within the revised outer date, effective for assessment year 2022 23. The amendment extends the outer sanction date for loans eligible for the interest deduction for affordable residential house property while retaining existing conditions: availability to first time home buyers, limitation to interest on loans from financial institutions, and a cap on the stamp duty value of the property. The extension allows loans sanctioned within the revised period to qualify and takes effect from 1 April 2022, applying to the corresponding assessment year.
Startup incorporation date extension expands eligibility for tax deduction and capital gains reinvestment benefits through amended provisions. The proposal extends temporal eligibility for startup tax benefits by amending the startup deduction and capital gains reinvestment exemption: the outer date for incorporation of eligible start ups is extended to enlarge eligibility for the hundred percent deduction (subject to the turnover ceiling and three year within ten year rule), and the outer date for qualifying transfers of residential property is extended so more capital gains can be reinvested in eligible start ups; both amendments take effect from the start of the fiscal year.
Safe harbour threshold for residential transfers widened, so circle rate counts only where valuation gap is materially large. The safe-harbour margin for specified first-time allotments of residential units is increased, so declared consideration will be treated as full value where the stamp duty value does not exceed the enhanced margin; correspondingly, stamp duty value will be imputed as income only when the gap between agreement value and circle rate exceeds that margin. The change applies to transfers meeting the statutory temporal, allotment and consideration conditions and takes effect from the stated assessment year onward.
Senior citizen filing exemption: qualifying pension recipients relieved from return filing when bank computes and deducts tax. The amendment exempts resident senior citizens aged seventy five or older from filing income tax returns if their sole income is pension and optional interest from the same prescribed bank, provided they furnish a prescribed declaration. The specified bank must compute taxable income after allowable deductions and rebate and deduct tax at source; once tax is deducted for the assessment year, the senior citizen is not required to file a return for that year.
Exemption for sovereign and pension funds broadened to allow varied infrastructure investment routes with proportionate tax relief. Amendments expand tax exemption routes for specified SWF and PF investors by permitting Category I/II AIFs with up to fifty percent non-eligible investments and investment in InvITs, allowing investment via newly formed domestic holding companies with minimum seventy-five percent infrastructure investments, and permitting investment in NBFC-IDF/IFC entities that lend at least ninety percent to infrastructure entities; exemptions will be calculated proportionately where thresholds are not met. Loans for the purpose of making investments in India remain prohibited, day-to-day operational participation is barred while monitoring roles are permitted, and pension funds taxable abroad qualify if fully exempt under their home law. Effective 1 April 2021.
Taxation of overseas retirement withdrawals: Central Government may prescribe year and manner of taxation to remove timing mismatch. A new Section 89A is proposed to permit the Central Government to prescribe the year and manner in which income of a specified person from a specified account is taxed, addressing mismatches where an overseas retirement account is taxed on withdrawal abroad but on accrual in India; "specified person", "specified account" and "notified country" are defined, and the amendment is to apply prospectively from the tax year beginning 1 April 2022.
Minimum Alternate Tax adjustments allow recomputation of past years' book profit for APA and secondary adjustments. Amendments to section 115JB allow a taxpayer to apply to the Assessing Officer for recomputation of past years' book profit and tax where past year income is included in current books due to an APA or secondary adjustment; section 154 applies and its four year period is reckoned from the end of the financial year in which the application is received. Similar treatment is provided for specified dividend income of foreign companies where such income is taxed below MAT under a double taxation agreement, by adjusting both the dividend income and related expense in computing book profit.
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.
National Appellate Authority for Advance Ruling clarifies binding advance rulings, procedural powers and remedies under amended CGST framework. The amendments create a National Appellate Authority for Advance Ruling with defined composition, powers to regulate procedure and exercise civil court ... Summary
National Appellate Authority for Advance Ruling clarifies binding advance rulings, procedural powers and remedies under amended CGST framework.
The amendments create a National Appellate Authority for Advance Ruling with defined composition, powers to regulate procedure and exercise civil court powers, time bound disposal and limited rectification capacity; its advance rulings are binding on distinct applicants and registered persons with the same permanent account identifier and void if obtained by fraud. They also introduce an alternative composition scheme for service/mixed suppliers with specified turnover limits, clarify treatment of interest/discount for turnover computations, raise the exclusive goods exemption threshold, mandate Aadhaar authentication for specified taxpayers, require specified electronic payment options, permit electronic cash ledger head transfers and authorize Commissioner extensions for certain filings, while calibrating interest charging and refund disbursement, and enhancing anti profiteering penalty authority.
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