It is our immense pleasure to present the wide analysis of the Finance Bill 2017 (Union Budget 2017) on the very same day of the Budget Speech.
This budget is historic one in the Indian
Parliamentary history because of the following two reasons:
- For the first
time, the General budget was presented on the 1st day of
February instead of the 28th / 29th day of February.
- It is also for
the first time where the Railway Budget has been merged with the General
budget and there is no separate railway budget.
The demonetization scheme of the Govt. has
been regarded a mixed success scheme and not truly an effectively implemented
scheme. During the 50 days of demonetization, common people have suffered a lot
and so there was much expectation by the common man from the General Budget.
Below, we have tried to analyze the various
provisions of the Union Budget 2017. The analysis of Union Budget 2017 unfolds
into following categories:
- Provisions for Non Corporate assesses
- Corporate Taxation provisions
- TDS Provisions
- Provisions related Income from Capital Gain
- Provisions related to Income from House Property
- Provisions related to Income from other sources
- Start Up Incentives
- Promotion of Digital Economy
- Transparency in Electoral Funding
- Presumptive taxation
- Assessment related provisions etc
-:FOR NON CORPORATE ASSESSES:-
Change in the Income
Tax rate for individuals:
There is reduction in the rate of income tax
for every individual, HUF, AOP, BOI and every artificial judicial person from
10% to 5% in case the income is not exceeding Rs. 5,00,000/-.
This is considered as big step for middle
class of the country after the demonetization scheme.
The Hon’ble Prime Minister has announced the
demonetization scheme. However the scheme was so not effective as expected by
the Govt.
Because of the demonetization scheme, the
common people of the country has suffered a lot and as there was not much
success of the scheme, so there is need to give incentives to them which is in
latin referred to as quid pro quo.
Also, it was admitted the Hon’ble Finance
Minister that in the income category up to Rs. 2.50 Lacs, major assesses are
the salaried persons and they are honest in paying the tax. So, there is need
to reward the honest tax payers and therefore, he has reduced the tax rate to
5% from an existing 10% in case income is not exceeding Rs. 5 Lacs.
This
is the only change in the income tax rate and which is in the welcoming nature.
Other rates of income tax are same.
Rebate allowable
under Section 87A
The
existing provisions of section 87A provide for a rebate up to Rs. 5000 from the
income-tax payable to a resident individual if this total income does not
exceed Rs. 5,00,000.
As
there is proposed rationalization of tax rates for individuals in the income
slab of Rs. 2,50,000 to Rs.5,00,000, it is proposed to amend section 87A so as
to reduce the maximum amount of rebate available under this section from
existing Rs. 5000 to Rs. 2500.
It
is also proposed to provide that this rebate shall be available to only
resident individuals whose total income does not exceed Rs. 3,50,000.
Therefore,
there will not be any rebate available to the individuals whose income exceeds
Rs. 3.50 Lacs as earlier it was Rs. 5.00 Lacs.
Rationalisation of
deduction under section 80CCD for self-employed individual
The
existing provisions of section 80CCD provide that employee or other individuals
shall be allowed a deduction for amount deposited in National Pension System
trusts (NPS). The deduction under section 80CCD (1) cannot exceed 10% of salary
in case of an employee or 10% of gross total income in case of other
individuals.
However,
under the provisions of section 80CCD (2) of the Act, further deduction to an
employee in respect of contribution made by his employer is allowed up to 10%
of salary of the employee. Thus, in case of an employee, the deduction allowed
under section 80CCD adds up to 20% of salary whereas in case of other
individuals, the total deduction under section 80CCD is limited to 10% of gross
total income.
In
order to provide parity between an individual who is an employee and an
individual who is self-employed, it is proposed to amend section 80CCD so as to
increase the upper limit of ten per cent of gross total income to twenty per
cent in case of individual other than employee.
Surcharge:
As
the rate of income has been lowered from 10% to 5% in case of specified income,
there is loss to the revenue appr. of Rs. 12000 Cr.
So,
to compensate the said loss, the Hon’ble Finance Minister has introduced the
surcharge at the rate of 10% of such income-tax in case of a person having a
total income exceeding 50 Lacs rupees but not exceeding 1 Crore rupees.
-:CORPORATE TAXATION:-
Change in tax rate:
The
rate of taxation for the companies in India is very high as compared to other
Asian countries. There is need to provide the competitive tax rates to the
companies in India.
Therefore,
in case of domestic company, the rate of income-tax shall be 25% of the total
income if the total turnover or gross receipts of the previous year 2015-16
does not exceed Rs. 50 Cr and in all other cases the rate of Income-tax shall
be thirty per cent.
With
the reference to the analysis of the Govt., Hon’ble Finance Minister informed
the parliament that out of total companies registered, almost 96-97 percentage
of the companies are falling in the above criteria and are MSME.
MSME
enterprises contribute huge value to the India’s GDP. So, there is need to
provide the incentives for the MSME enterprises.
Also
there is need to provide the incentive to the unorganized sector to the formal
sector of the economy and this reduction in tax rate will provide the incentive
to them.
Rationalization for
provisions of MAT credit
Section 115JAA contains provisions regarding
carrying forward and set off of tax credit in respect of Minimum Alternate Tax
(MAT) paid by companies under section 115JB. Currently, the tax credit can be
carried forward up to tenth assessment years.
It is proposed to extend the same to
fifteenth assessment year.
-:TDS PROVISIONS:-
TDS on Rent (194 I / 194 IB)
Under
the present provisions of Section 194 I of the Income Tax Act, 1961, an
Individual or HUF who is liable for tax audit under section 44AB
for any financial year immediately preceding the financial year is liable for
deduction of tax on the rent paid by him exceeding the specified limit.
Therefore,
Section 194I of the act is applicable for the individuals and HUF if they are
liable for Audit u/s 44AB of the Act during the previous financial year.
The
Hon’ble Finance Minister proposed to extent the scope of TDS on rent.
Therefore, he has introduced Section 194 IB of the Act, the summarized
provisions of which are as below:
a)
Applicable
to Individual and HUF other than covered u/s 44AB
b)
Rent
paid is more than Rs. 50,000/- for the month or part of the month.
c)
TDS
to be deducted @5%,
d)
It
is required to be deducted from the rent amount of the last month of the
previous year or last month of the tenancy.
e)
It
is one time deduction only.
f)
No
need to obtain TAN.
g)
The
TDS amount should not exceed the rent amount of the last month of the previous
year or last month of the tenancy.
This
amendment will take effect from 1st June, 2017.
Enabling of Filing of Form 15G/15H for
commission payments specified under section 194D
U/s 194D of the Act, TDS @5% is required to be
deducted for payments in the nature of insurance commission beyond a threshold
limit of Rs. 15,000 per financial year.
It is proposed that a person can file Form 15G/15H
if his income is below the exemption limit and thereby no TDS is required to be
deducted.
Simplification of TDS u/s 194J for a
person engaged only in the business of operation of call center.
In
order to promote ease of doing business, it is proposed to amend section 194J
to reduce the rate of deduction of tax at source to two per cent from ten per
cent. in case of payments received or credited to a payee, being a person
engaged only in the business of operation of call center
Interest
on refund due to deductor
It
is proposed to provide that where refund of any amount becomes due to the
deductor, such person shall be entitled to receive, in addition to the refund,
simple interest on such refund, calculated at the rate of one-half per cent.
for every month or part of a month comprised in the period, from the date on
which claim for refund is made in the prescribed form or in case of an order
passed in appeal, from the date on which the tax is paid, to the date on which
refund is granted.
Disallowance
for non-deduction of tax from payment to resident
Section 58 describes the amounts which are
not deductible in computing the income under the head "Income from other
sources".
However, it doesn’t include the disallowance on
account of non deduction of TDS from payment to resident.
Section 40(a)(ia) of the act provides for
disallowance on account of non deduction of TDS for computing income under the
head Profits and Gains from Business and Profession.
Therefore,
it is proposed to amend the said section so as to provide that provisions of
section 40(a)(ia) shall, so far as they may be, apply in computing income
chargeable under the head "income from other sources" as they apply
in computing income chargeable under the head "Profit and gains of
business or Profession”.
Definition
of 'person responsible for paying' in case of payments covered under
sub-section (6) of section 195
In
order to bring clarity to the meaning of 'person responsible for paying' in
case of payment by a resident to a non-resident in accordance with section
195(6) of the Act, it is proposed to amend the said section of the Act to
provide that in the case of furnishing of information relating to payment to a
non-resident, not being a company, or to a foreign company, of any sum, whether
or not chargeable under the provisions of this Act, 'person responsible for
paying' shall be the payer himself, or, if the payer is a company, the company
itself including the principal officer thereof.
-:CAPITAL
GAIN PROVISIONS:-
Reduction
of period for long term gain in case of land, building or both:
Due
to demonetization, real estate is one of the sector which has suffered a lot.
Therefore, there is a need to provide incentive to boost the real estate
industry.
With
a view to promote the real-estate sector and to make it more attractive for
investment, it is proposed to amend section 2 (42A) of the Act so as to reduce
the period of holding from the existing 36 months to 24 months in case of
immovable property, being land or building or both, to qualify as long term
capital asset.
Rationalisation
of Provisions of Section 80-IBA to promote Affordable Housing
During
the last year, Hon’ble Finance Minister has introduced Section 80 IBA of the
act to provide 100% deduction in respect of the profits and gains derived from
developing and building certain housing projects subject to specified
conditions.
There
is change in the terms and conditions of the section which are as below:
(i)
The
size of residential unit shall be measured by taking into account the
"carpet area" as defined in Real Estate (Regulation and Development)
Act, 2016 and not the "built-up area".
(ii)
The
restriction of 30 square meters on the size of residential units shall not
apply to the place located within a distance of 25 kms from the municipal
limits of the Chennai, Delhi, Kolkata or Mumbai.
(iii)
The
condition of period of completion of project for claiming deduction under this
section shall be increased from existing three years to five years.
Computation
of capital gains in case of joint development agreement
Under
the existing provisions of section 45, capital gain is chargeable to tax in the
year in which transfer takes place except in certain cases.
With
a view to minimise the genuine hardship which the owner of land may face in
paying capital gains tax in the year of transfer, it is proposed to insert a
new sub-section (5A) in section 45 so as to provide that in case of an assessee
being individual or Hindu undivided family, who enters into a specified
agreement for development of a project, the capital gains shall be chargeable
to income-tax as income of the previous year in which the certificate of
completion for the whole or part of the project is issued by the competent
authority.
It
is further proposed to provide that the stamp duty value of his share, being
land or building or both, in the project on the date of issuing of said
certificate of completion as increased by any monetary consideration received,
if any, shall be deemed to be the full value of the consideration received or
accruing as a result of the transfer of the capital asset.
It
is also proposed to provide that benefit of this proposed regime shall not
apply to an assessee who transfers his share in the project to any other person
on or before the date of issue of said certificate of completion. It is also
proposed to provide that in such a situation, the capital gains as determined
under general provisions of the Act shall be deemed to be the income of the
previous year in which such transfer took place and shall be computed as per
provisions of the Act without taking into account this proposed provisions.
It
is also proposed to define the following expressions "competent
authority", "specified agrement" and "stamp duty
value" for this purpose.
It
is also proposed to make consequential amendment in section 49 so as to provide
that the cost of acquisition of the share in the project being land or building
or both, in the hands of the land owner shall be the amount which is deemed as
full value of consideration under the said proposed provision.
These
amendments will take effect from 1st April, 2018 and will,
accordingly, apply in relation to the assessment year 2018-19 and subsequent
years.
It
is also proposed to insert a new section 194-IC in the Act so as to provide
that in case any monetary consideration is payable under the specified
agreement, tax at the rate of ten per cent shall be deductible from such
payment.
Shifting
base year from 1981 to 2001 for computation of capital gains
For an asset acquired before 01.04.1981, the
assessee has been allowed an option of either to take the fair market value of
the asset as on 01.04.1981 or the actual cost of the asset as cost of
acquisition.
As the base year for computation of capital
gains has become more than three decades old, assessees are facing genuine
difficulties in computing the capital gains in respect of a capital asset,
especially immovable property acquired before 01.04.1981 due to
non-availability of relevant information for computation of fair market value
of such asset as on 01.04.1981.
Therefore, it is proposed to amend section 55
of the Act so as to provide that the cost of acquisition of an asset acquired
before 01.04.2001 shall be allowed to be taken as fair market value as on 1st
April, 2001
Expanding
the scope of Section 54EC of the Act
Currently, investment made in bond issued by
NHAI and REC is eligible for exemption.
It is proposed to amend section 54EC so as to
provide that investment in any bond redeemable after three years which has been
notified by the Central Government in this behalf shall also be eligible for
exemption.
No
capital gain on conversion of preference shares to equity shares
It is proposed to amend section 47 to provide
that the conversion of preference share of a company into its equity share
shall not be regarded as transfer
Clarification
regarding the applicability of section 112
Section 112(1)(c) to provide concessional
rate of taxation of ten per cent for long-term capital gains arising from the
transfer of unlisted securities in case of non-resident as inserted vide
Finance Act, 2013.
There was an uncertainty as to whether the
provision of section 112(1)(c)(iii) is applicable to the transfer of share of a
private company or not.
Finance Act, 2016 amended section 112(1)(c)
to clarify that the share of company in which public are not substantially
interested shall also be chargeable to tax at the rate of ten per cent with
effect from 1st April, 2017.
As the concessional rate was provided with
effect from 1st April, 2013, there was uncertainty about the
applicability of the amendment to the intervening period.
Therefore, it is hereby clarified that the
benefit will be available from retrospective period i.e. from 01.04.2013 onwards
and not from 01.04.2017.
Exemption
of long term capital gains tax u/s 10(38)
There is little amendment in the section. The
words ‘if the acquisition of share is chargeable to Securities Transactions
Tax’ have been inserted to prevent the abuse use of fake exemption.
-:
PROVISIONS RELATED TO INCOME FROM HOUSE PROPERTY:-
Notional
income from the house property
Section 23 of the Act provides for the manner
of determination of annual value of house property and it also considers the
notional income from the house property.
As said earlier, there is need to provide
boost up to the real estate industry as after demonetization there is fall in
the real estate industry and the property remains unsold for the builder and
liable for the notional income.
It is proposed to amend the said section so
as to provide that where the house property consisting of any building and land
appurtenant thereto is held as stock-in-trade and the property or any part of
the property is not let during the whole or any part of the previous year, the
annual value of such property or part of the property, for the period up to one
year from the end of the financial year in which the certificate of completion
of construction of the property is obtained from the competent authority, shall
be taken to be nil.
Restriction
on set-off of loss from House property
Section 71 of the Act relates to set-off of
loss from one head against income from another.
It is proposed to insert sub-section (3A) in
the said section to provide that set-off of loss under the head "Income
from house property" against any other head of income shall be restricted
to Rs. 2 Lacs for any assessment year.
However, the unabsorbed loss shall be allowed
to be carried forward for set-off in subsequent years in accordance with the
existing provisions of the Act.
-:INCOME
FROM OTHER SOURCES:-
Amendment
in Section 56(2)(vii)
Present provisions of Section 56(2)(vii) of
the Act are applicable only to Individual and HUF and to Firm / Company for
certain cases.
Therefore, there is chance that other
assesses may take undue advantage of these provisions.
Therefore, it has been proposed to insert a
new clause (x) in sub-section (2) of section 56 so as to provide that receipt
of the sum of money or the property by any person without consideration or for
inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in
the hands of the recipient under the head "Income from other
sources".
Taxation
of dividend income
During
the Budget Speech of 2016, Hon’ble Finance Minister has introduced Section
115BBDA by way of taxing income from dividend in
excess of Rs. 10 lakh is chargeable to tax at the rate of 10% on gross basis.
However,
during the present budget speech, it is proposed to amend section 115BBDA so as
to provide that the provisions of said section shall be applicable to all
resident assessees except domestic company and certain funds, trusts,
institutions, etc.
This
amendment is applicable from A Y 18-19 onwards.
-:START
UP INCENTIVE:-
Set
off and carry forward of losses
During the initial period of Start Up
ventures, generally they are incurring losses.
At the same time, they also raise the funds
from various investors as start ups are mainly dependent on the funding from
investors. The said funding is obtained against the issuance of equity stake in
the company. So there will be dilution in the equity of the existing
shareholders.
Section 79 of the Act, specified certain
terms and conditions regarding maintenance of shareholding to allow set off and
carry forward of losses.
So, for the start up ventures, it is very
difficult to have the benefit of set off and carry forward of losses.
Therefore, in order to facilitate ease of
doing business and to promote start up India, it is proposed to amend section
79 of the Act.
It provides that where a change in shareholding
has taken place in an eligible start-up, loss shall be carried forward and set
off against the income of the previous year, if all the shareholders of such
company which held shares carrying voting power on the last day of the year or
years in which the loss was incurred, being the loss incurred during the period
of seven years beginning from the year in which such company is incorporated,
continue to hold those shares on the last day of such previous year.
Extending
the period for claiming deduction by start-ups
Section 80 IAC of the act provides the
deduction of 100% profit to an eligible start up for three consecutive three
years out of five years.
It is proposed to extent the period of five
years to seven years.
-:MEASURES
TO PROMOTE DIGITAL ECONOMY:-
Disallowance
of expenditure incurred in cash:
Under the existing
provisions of the Act, revenue expenditure incurred in cash exceeding Rs.
20,000/- is not allowable as per sub-section (3) of section 40A of the Act.
However, there is no
provision to disallow the capital expenditure incurred in cash.
In order to
discourage cash transactions even for capital expenditure, it has been proposed
that such expenditure incurred in cash in excess of Rs. 10,000/- will be
ignored for the determination of the actual cost of the asset.
The same limit of
Rs.10,000/- is also fixed for revenue transactions from Rs. 20,000/-.
Digital
payments in case of small unorganized businesses:
Under existing
provisions of Section 44AD of the Act, presumptive income scheme has been
specified @8%.
To encourage cash
less transactions, it has been proposed that the rate of presumptive income
will be 6% instead of 8% in respect of the amount of such total turnover or
gross receipts received by an account payee cheque or account payee bank draft
or use of electronic clearing system through a bank account.
Restriction
on cash transactions
In India, the quantum
of domestic black money is huge which adversely affects the revenue of the
Government creating a resource crunch for its various welfare programmes. Black
money is generally transacted in cash and large amount of unaccounted wealth is
stored and used in form of cash.
In order to achieve the
mission of the Government to move towards a less cash economy to reduce
generation and circulation of black money, it is proposed to insert section
269ST in the Act to provide that no person shall receive an amount of three
lakh rupees or more,—
(a)
in
aggregate from a person in a day;
(b)
in
respect of a single transaction; or
(c)
in
respect of transactions relating to one event or occasion from a person,
otherwise than by an
account payee cheque or account payee bank draft or use of electronic clearing
system through a bank account.
It is further
proposed to provide that the said restriction shall not apply to Government,
any banking company, post office savings bank or co-operative bank or other
notified persons.
Penalty is also
prescribed for non compliance for the same.
-:TRANSPARENCY
IN ELECTORAL FUNDING:-
Restricting
cash donations
Present Govt. is
showing too much enthusiasm regarding the steps taken by them to curb the black
money. However, when it comes to political funding which is the core grey area
for black money generation, there is no major changes made by the Govt.
There is also failure
or less success of the demonetization scheme. Therefore, there was also need to
rationalize or to say to bring transparency in the funding of the political
parties.
In order to provide
cash less economy and transparency, it is proposed to amend section 80G so as
to provide that no deduction shall be allowed under the section 80G in respect
of donation of any sum exceeding Rs. 2000 (from existing limit of Rs. 20000/-)
unless such sum is paid by any mode other than cash.
Limit
for cash donations
No donations of
Rs.2000/- or more is received otherwise than by an account payee cheque drawn
on a bank or an account payee bank draft or use of electronic clearing system
through a bank account or through electoral bonds.
-:PRESUMPTIVE
TAXATION PROVISIONS:-
Exclusion
of certain specified person from requirement of audit of accounts under section
44AB
It is proposed that specified persons, who declare income under
presumption scheme up to a turnover of Rs. 2 Cr, are not required to get their
books of accounts audited u/s 44AB of the Act.
Rationalisation
of section 211 and section 234C relating to advance tax
For the persons covered under section 44AD is
liable to pay advance tax in a single instalment on or before the 15th of March
every financial year.
Under Finance Act, 2016, presumptive taxation
regime has been extended to professionals also u/s 44ADA. Therefore, advance tax provisions are also
made applicable to them as applicable for the persons covered u/s 44AD.
Section 115BBDA of
the Act provides taxability of the certain the dividend income. However, in
view of the uncertain nature of declaration and receipt of dividend incomes, an
assessee liable to pay advance tax may not be able to correctly determine such
liability.
It is hence proposed
to provide that that if shortfall in payment of advance tax is on account of
under-estimation or failure in estimation of income of the nature referred to
in section 115BBDA, the interest under section 234C shall not be levied subject
to fulfilment of conditions specified therein.
This amendment is
applicable from A Y 17-18 onwards.
-:PROVISIONS
RELATED TO ASSESSMENT:-
Processing
of return within the prescribed time and enable withholding of refund in
certain cases
Section 143(1D) of
the Act provides that the processing of a return shall not be necessary, where
a notice has been issued to the assessee under sub-section (2) of the said
section.
In order to address
the grievance of delay in issuance of refund in genuine cases which are
routinely selected for scrutiny assessment, it is proposed that provisions of
section 143(1D) shall cease to apply in respect of returns furnished for
assessment year 2017-18 and onwards.
However, in case of
doubtful cases of recovery of revenue, the A O may hold the refund for the
reasons to be recorded in writing and with the prior approval of Commissioner
or Principal Commissioner.
Amendments
to the structure of Authority for Advance Rulings
With a view to
promote ease of doing business, it has been decided by the Government to merge
the Authority for Advance Ruling (AAR) for income-tax, central excise, customs
duty and service tax. Accordingly, necessary amendments, have been made to
Chapter XIX-B to allow merger of these AARs.
Amendment
of Section 253
It is proposed to
expand the scope of the said section to provide that the orders passed by the
prescribed authority under sub-clauses (iv) and (v) of sub-section (23C) of section
10 shall also be appealable before the Appellate Tribunal.
Rationalisation
of time limits for completion of assessment, reassessment and re-computation
and reducing the time for filing revised return.
The existing
provisions of section 153 specify time limit for completion of assessment,
reassessment and re-computation of cases mentioned therein.
The revised time
limits are as under:
|
Sr. No.
|
Particulars
|
Applicable Sections
|
Revised time limit
for assessment
|
|
1
|
A Y 18-19
|
143/144
|
18 months
|
|
2
|
A Y 19-20 onwards
|
143/144
|
12 months
|
|
3
|
|
147
|
For the notices
issued after 01.04.2019 - 12 months
|
|
4
|
F Y 19-20 onwards
|
254/263/264
|
12 months
|
|
5
|
F Y 18-19
|
153A
|
18 months
|
|
6
|
F Y 19-20 onwards
|
153A
|
12 months
|
It is proposed to amend the provisions of
sub-section (5) of section 139 to provide that the time for furnishing of
revised return shall be available up to the end of the relevant assessment year
or before the completion of assessment, whichever is earlier.
Reason to believe to
conduct a search, etc. not to be disclosed
It is proposed to insert an Explanation to
sub-section (1) and to sub-section (1A) of section 132 and to sub-section (1)
of section 132A to declare that the 'reason to believe' or 'reason to suspect',
as the case may be, shall not be disclosed to any person or any authority or
the Appellate Tribunal.
This amendment is against the various
judicial pronouncements which lays down that the reason to believe should be
disclosed.
Also, this amendment has been made with
retrospective effect i.e. from 1st day of October, 1975. Therefore,
it may lead to serious consequence to existing cases which are in appeal on the
facts of disclosure of reason to believe.
Rationalisation of
provisions of the Income Declaration Scheme, 2016 and consequential amendment
to section 153A and 153C
The
existing provisions of clause (c) of the section 197 of the Finance Act, 2016
provide that where any income has accrued, arisen or been received or any asset
has been acquired out of such income prior to commencement of the Income
Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such
income is made under the Scheme, then, such income shall be deemed to have
accrued, arisen or received, as the case may be, in the year in which a notice
under sub-section (1) of section 142 or sub-section (2) of section 143 or
section 148 or section 153A or section 153C of the Income-tax Act is issued by
the Assessing Officer, and provisions of the said Act shall apply accordingly.
In
view of the various representations received from stakeholders citing genuine
hardships if the said provision is made applicable, it is proposed to omit
clause (c) of section 197 of the Finance Act, 2016.
This
amendment will take effect retrospectively from lst June, 2016.
However,
in order to protect the interest of the revenue in cases where tangible
evidence(s) are found during a search or seizure operation (including 132A
cases) and the same is represented in the form of undisclosed investment in any
asset, it is proposed that section 153A relating to search assessments be
amended to provide that notice under the said section can be issued for an
assessment year or years beyond the sixth assessment year already provided upto
the tenth assessment year if—
(i)
the
Assessing Officer has in his possession books of accounts or other documents or
evidence which reveal that the income which has escaped assessment amounts to
or is likely to amount to fifty lakh rupees or more in one year or in aggregate
in the relevant four assessment years(falling beyond the sixth year);
(ii)
such
income escaping assessment is represented in the form of asset;
(iii)
the
income escaping assessment or part thereof relates to such year or years.
It
is however proposed that the amended provisions of section 153A shall apply where
search under section 132 is initiated or requisition under section 132A is made
on or after the 1st day of April, 2017.
It is also proposed to consequentially amend
section 153C to provide a reference to the relevant assessment year or years as
referred to in section 153A.
-:IMPORTANT PROVISIONS:-
Restriction on
exemption in case of corpus donation by exempt entities to other exempt
entities
Donation given by these exempt entities to
another exempt entity, with specific direction that it shall form part of
corpus, is though considered application of income in the hands of donor trust
but is not considered as income of the recipient trust. Trusts, thus, engage in
giving corpus donations without actual applications.
Therefore, it is proposed to insert a new
Explanation to section 11 of the Act to provide that any amount credited or
paid, out of income referred to in clause (a) or clause (b) of sub-section (1)
of section 11, being contributions with specific direction that they shall form
part of the corpus of the trust or institution, shall not be treated as
application of income.
It is also proposed to insert a proviso in
clause (23C) of section 10 so as to provide similar restriction as above on the
entities exempt under sub-clauses (iv), (v), (vi) or (via) of said clause in
respect of any amount credited or paid out of their income.
Rationalisation of
provisions of Section 10AA
It is proposed to clarify that the amount of
deduction referred to in section 10AA shall be allowed from the total income of
the assessee computed in accordance with the provisions of the Act before
giving effect to the provisions of the section 10AA and the deduction under
section 10AA in no case shall exceed the said total income.
Scope of Section 92B
of the Income-Tax Act relating to Specified Domestic Transactions
The existing provisions of section 92BA of the Act, inter-alia
provide that any expenditure in respect of which payment has been made by the
assessee to certain "specified persons" under section 40A(2)(b) are
covered within the ambit of specified domestic transactions.
As a matter of compliance and reporting, taxpayers need to obtain the
chartered accountant's certificate in Form 3CEB providing the details such as
list of related parties, nature and value of specified domestic transactions
(SDTs), method used to determine the arm's length price for SDTs, positions
taken with regard to certain transactions not considered as SDTs, etc. This has
considerably increased the compliance burden of the taxpayers.
In order to reduce the compliance burden of taxpayers, it is proposed to
provide that expenditure in respect of which payment has been made by the
assessee to a person referred to in under section 40A(2)(b) are to be excluded
from the scope of section 92BA of the Act. Accordingly, it is also proposed to
make a consequential amendment in section 40(A)(2)(b) of the Act.
Income from transfer of Carbon Credits
Carbon credits is an
incentive given to an industrial undertaking for reduction of the emission of
GHGs (Green House gases).
Income-tax Department
has been treating the income on transfer of carbon credits as business income
which is subject to tax at the rate of 30%. However, divergent decisions have
been given by the courts on the issue as to whether the income received or
receivable on transfer of carbon credit is a revenue receipt or capital
receipt.
Therefore, it is
provided that such income shall be taxable at the concessional rate of 10%
(plus applicable surcharge and cess) on the gross amount of such income.
No expenditure or allowance in respect of
such income shall be allowed under the Act.
PROCEDURAL
CHANGES / AMENDMENT:
Fee for delayed
filing of return
There are very few tax payers in the country.
Also out of the total income tax return fillers, many assesses are filing the
belated return i.e. return filed after the due date.
Existing provision of Section 271F of the act
prescribes that the income tax officer may levy the penalty of Rs. 5000/- for
late filing of return. However, there are very rare cases where the penalty has
been levied in small income tax returns.
To avoid all these practices, it is proposed
to insert a new section 234F in the Act to provide that a fee for delay in
furnishing of return shall be levied for assessment year 2018-19 and onwards in
a case where the return is not filed within the due dates specified for filing
of return under sub-section (1) of section 139. The proposed fee structure is
as follows:—
(i)
a
fee of Rs. 5000/- shall be payable, if the return is furnished after the due
date but on or before the 31st day of December of the assessment
year;
(ii)
a
fee of Rs. 10000/- shall be payable in any other case.
However, in a case where the total income
does not exceed Rs. 500000/-, it is proposed that the fee amount shall not
exceed Rs. 1000/-.
In view of above, it is proposed to make
consequential amendment in section 140A to include that in case of delay in
furnishing of return of income, along with the tax and interest payable, fee
for delay in furnishing of return of income shall also be payable.
It means that at the time of filing of
return, the system will automatically reflect the amount of penalty to be paid
along with the tax which was not there in the present case as the power to levy
the penalty is available with the jurisdictional assessing officer.
It is also proposed to make consequential
amendment in sub-section (1) of section 143, to provide that in computation of
amount payable or refund due, as the case may be, on account of processing of
return under the said sub-section, the fee payable under section 234F shall
also be taken into account.
It is therefore to be noted that, processing
u/s 143(1) of the act will be done after considering the late filing fees and
therefore, there will be liability to pay late fees or there will be less
refund if the return has been filed belatedly without paying the late fees.
Consequentially, it is also proposed that the
provisions of section 271F in respect of penalty for failure to furnish return
of income shall not apply in respect of assessment year 2018-19 and onwards.
Penalty on
professionals for furnishing incorrect information in statutory report or
certificate
Under the Income Tax Act, 1961, the
legislature has put a thorough thrust on the Chartered Accountant, merchant
banker, registered valuer etc for certification of various reports and
documents.
In order to ensure that the person furnishing
report or certificate undertakes due diligence before making such
certification, it is proposed to insert a new section 271J so as to provide
that if an accountant or a merchant banker or a registered valuer, furnishes
incorrect information in a report or certificate under any provisions of the
Act or the rules made thereunder, the Assessing Officer or the Commissioner
(Appeals) may direct him to pay a sum of Rs. 10000/- for each such report or
certificate by way of penalty.
Strengthening of PAN
quoting
In
order to strengthen the PAN mechanism, it is proposed to insert new section
206CC to provide the following:
I.
any
person paying any sum or amount, on which tax is collectable at source under
Chapter XVII BB (hereafter referred to as collectee) shall furnish his
Permanent Account Number to the person responsible for collecting such tax
(hereafter referred to as collector), failing which tax shall be collected at
the twice the rate mentioned in the relevant section under Chapter XVII BB or
at the rate of five per cent. whichever is higher.
II.
that
the declaration filed under sub section (1A) of section 206C shall not be valid
unless the person filing the declaration furnishes his Permanent Account Number
in such declaration.
III.
that
in case any declaration becomes invalid under sub-section (2), the collector
shall collect the tax at source in accordance with the provisions of
sub-section (1).
IV. no certificate under sub section (9) of
section 206C shall be granted unless it contains the Permanent Account Number
of the applicant.
V.
the
collector knows about the correct PAN of the collectee it is also proposed to
provide for mandatory quoting of PAN of the collectee by both the collector and
the collectee in all correspondence, bills and vouchers exchanged between them.
VI. that the collectee shall furnish his
Permanent Account Number to the collector who shall indicate the same in all
its correspondence, bills, vouchers and other documents which are sent to
collectee.
VII.
where the Permanent Account Number provided by the collectee is invalid or it
does not belong to the collectee, then it shall be deemed that Permanent
Account Number has not been furnished to the collector.
VIII.
to exempt the non-resident who does not have permanent establishment in India
from the provisions of this proposed section 206CC of the Act.
-:OTHER
PROVISIONS:-
- Extension
of eligible period of concessional tax rate on interest in case of External
Commercial Borrowing and Extension of benefit to Rupee Denominated Bonds
- Extension of eligible period of concessional tax rate under section 194LD
-
Clarity relating to Indirect transfer provisions
-
Modification in conditions of special taxation
regime for off shore funds under section 9A
-
Exemption of income of Foreign Company from sale of
leftover stock of crude oil from strategic reserves at the expiry of agreement
or arrangement
-
Rationalization of provisions of section 115JB in
line with Indian Accounting Standard (Ind-AS) Various clarifications have also been made by the Hon’ble Finance
Minister.
-
Extension of scope of
section 43D to Co-operative Banks
- Increase in deduction limit in respect of
provision for bad and doubtful debts
- Non-deduction of tax in case of exempt
compensation under RFCTLAAR Act, 2013
-
Exemption from tax
collection at source under sub-section (1F) of section 206C in case of certain
specified buyers
-
Cost of acquisition in
Tax neutral demerger of a foreign company
-
Extension of capital
gain exemption to Rupee Denominated Bonds
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