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TMI BlogFINANCE ACT, 2013 – EXPLANATORY NOTES TO THE PROVISIONS OF FINANCE ACT, 2013X X X X Extracts X X X X X X X X Extracts X X X X ..... .3. Insertion of new section 43CA Computation of income under the head "profits and gains of business or profession" for transfer of immovable property in certain cases, 13.1 - 13.4. 56 Taxability of immovable property received for inadequate consideration, 14.1 - 14.4. 80C Raising of limit of percentage of eligible premium for life insurance policies of persons with disability or disease, 15.1 - 15.6. 80CCG Expanding the scope and deduction and its eligibility under the section, 16.1 - 16.5. 80D Deduction for contribution to Health Schemes similar to Central Government Health Scheme (CGHS), 17.1 -17.3. Insertion of new section 80EE Deduction in respect of interest on loan sanctioned during financial year 2013-14 for acquiring residential house property, 18.1 - 18.4. 80G One hundred per cent deduction for donation to National Children's Fund, 19.1- 19.4. 80GGB & 80GGC Contribution not to be in cash for deduction under section 80GGB & 80GGC, 20.1 - 20.3. 80-IA Extension of the sunset date under the section for the power sector, 21.1 - 21.3. 80JJAA Deduction for additional wages in certain cases, 22.1 - 22.6. 87 and Insertion of new section 87A Rebate of 2000 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 grams or less, 43.1 - 43.2. 252 Appointment of President of the Appellate Tribunal, 44.1 - 44.4. Substitution of new section for section 271FA Penalty under section 271FA for non-filing of Annual Information Return, 45.1 - 45.5. Fourth Schedule Extension of time for approval, 46.1 - 46.5. Wealth-tax Act, 1957 2 Change in the definition of capital asset, ; exemption from wealth tax to agricultural land situated in urban area, 47.1 - 47.3. Insertions of new sections 14A and 14B and amendment of section 46 Enabling provisions for facilitating electronic filing of annexure-less return of net wealth, 48.1 - 48.4. Finance (No.2) Act, 2004 Section 98 of the Finance (No.2) Act, 2004 Rationalisation of securities transaction tax rates, 49.1 - 49.3. Chapter VII, Finance Act, 2013 Chapter VII of the Finance Act, 2013 and amendment in sections 36 and 43 of the Income-tax Act, 1961 Commodities Transaction Tax, 50.1 - 50.6.2. 1. Introduction 1.1 The Finance Act, 2013 (hereafter referred to as the Act) as passed by the Parliament, received the assent of the President on the 10th day of May, 2013 and has been enacted as Act No. 17 of 2013. This circular explains the substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and company) as under:- Income chargeable to tax Rate of income-tax Individual(other than senior and very Income senior citizen chargeable resident in India), to tax 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. 2,00,000 Nil Rs. 2,00,001 - Rs. 2,50,000 10% NIL NIL Rs. 2,50,001 - Rs. 5,00,000 10% Rs. 5,00,000.- Rs. 10,00,000 20% 20% 20% Exceeding Rs. 10,00,000 30% 30% 30% In the case of every individual, Hindu undivided family, association of persons or body of individuals, no surcharge is levied. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed in all cases. For instance, if the income-tax computed is Rs. 1,00,000 then the education cess of two per cent is to be computed on Rs. 1,00,000 which works out to Rs. 2,000. In addition, the amount of tax computed shall also be increased by an additional cess called Secondary and Higher Educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, in the case of fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two per cent only in the cases where such company has total income exceeding one crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees. Also, in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act, 1961 and where such income exceeds one crore rupees, marginal relief shall be provided. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation Cess - Education Cess on income-tax shall continue to be levied for the purposes of the Union at the rate of two per cent of income-tax and surcharge, if any, in the cases of persons not resident in India including companies other than domestic company. For instance, if income tax on a foreign company is Rs. 1, 20,00,000 and the surcharge at the rate of two per cent. is Rs. 2,40,000, then the education cess of two per cent is to be computed on Rs. 1,22,40,000 which works out to Rs. 2,44,800. In addition, the amount of tax deducted and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent in all such cases. Thus in the earlier illustration, where the amount of tax deducted is Rs. 1,20,00,000, the surcharge is Rs. 2,40,000, , the said Secondary and Higher Education Cess will be computed at the rate of one percent on Rs. 1,22,40,000 which works out to be Rs. 1,22,400. The total cess in this case will, therefore, amount to Rs. 3,67,200 (i.e., Rs. 2,44,800 + Rs. 1,22,400). 3.3 Rates for deduction of income-tax at source from "Salaries", computation of "advance tax" and charging of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. 3.3.3 Co-operative Societies In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. The rates are as follows- Income chargeable to tax Rate Up to Rs. 10,000 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 ten percent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. However, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Higher Education Cess. 3.3.6 Companies- In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III of the 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 five per cent where such domestic company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of ten 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 Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, in the case of fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964 but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two per cent only where such company has total income exceeding one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e local limits of any municipality or cantonment board as notified by the Central Government having regard to the extent and scope of urbanization and other relevant factors, forms part of capital asset. 4.2 Item (b) of sub-clause (iii) of clause (14) of section 2 has been amended so as to provide that the land situated in any area within the distance, measured aerially (shortest aerial distance), (I) not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh, shall form part of capital asset. 4.3 The expression "population" has also been defined to mean population according to the last preceding census of which the relevant figures have been published befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stor Protection Fund. Section 10(23EA) of the Income-tax Act, 1961 provides that income by way of contributions from a recognised stock exchange received by an Investor Protection Fund set up by the recognised stock exchange shall be exempt from taxation . 6.2 On similar lines, a new clause (23ED) has been inserted in section 10 of the Income-tax Act, 1961 wherein it has been provided that income, by way of contribution from a depository, of the Investor Protection Fund set up by the depository in accordance with the regulations prescribed by SEBI will not be included while computing the total income subject to same conditions as are applicable in respect of exemption to an Investor Protection Fund set up by recognised stock exchanges. However, where any amount standing to the credit of the fund and not charged to income-tax during any previous year is shared wholly or partly with a depository, the amount so shared shall be deemed to be the income of the previous year in which such amount is shared. 6.3 Applicability: - This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years. 7. Pass thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s AIF, are not listed on a recognised stock exchange. (iii) in the context of AIF regulations, the Venture Capital Undertaking shall be defined in the manner as defined in the Alternative Investment Funds Regulations. 7.4 Applicability: - This amendment has been made effective retrospectively from 1st April, 2013 and will, accordingly, apply in relation to assessment year 2013-14 and subsequent assessment years. 8. Exemption of income received in India in Indian currency by a foreign company 8.1 Clause (48) of section 10 of the Income-tax Act, 1961 was introduced by the Finance Act, 2012 with effect from 01.04.2012. This clause provides exemption to a foreign company in respect of any income received by it in India in Indian currency on account of sale of crude oil to any person in India. 8.2 The above clause was introduced in national interest so that payment can be made in Indian currency to foreign companies for import of crude oil. Similar facility is required in relation to certain other goods and services. 8.3 Accordingly, clause (48) of section 10 of the Income-tax Act, 1961 has been amended to provide that income received in India in Indian currency by a foreign comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction allowed, if any, for assessment year 2014-15. 10.2 The phrase "new asset" has been defined as new plant or machinery but does not include - (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; (v) ship or aircraft; or (vi) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year. 10.3 Further, the suitable safeguards have been provided to restrict the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply in a case of amalgamation or demerger but shall continue to apply to the amalgamated company or resulting company, as the case may be. 10.4 Applicability: This amendment takes effect from 1st April, 2014 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 36(1)(viia) of the said Act. However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to clause (vii) of sub-section (1) of section 36 of the Income-tax Act and held that the proviso to clause (vii) of sub-section (1) of section 36 of the Income-tax Act applies only to provision made for bad and doubtful debts relating to rural advances. 11.5 Section 36(1)(viia) of the Income-tax Act contains three sub-clauses, i.e. sub-clause (a), sub-clause (b) and sub-clause (c) and only one of the sub-clauses i.e. sub-clause (a) refers to rural advances whereas other sub-clauses do not refer to the rural advances. In fact, foreign banks generally do not have rural branches. Therefore, the provision for bad and doubtful debts account made under clause (viia) of sub-section (1) of section 36 and referred to in proviso to clause (vii) of sub-section (1) of section 36 and clause (v) of sub-section (2) of section 36 of the Income-tax Act applies to all types of advances, whether rural or other advances. 11.6 It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that surplus arising to such undertakings shall vest with the State Government. As a result it has been claimed that such income by way of surplus is not subject to tax. It is a settled law that State Government undertakings are separate legal entities than the State and are liable to income-tax. 12.2 In order to protect the tax base of State Government undertakings vis-à- vis exclusive levy of fee, charge, etc. or appropriation of amount by the State Governments from its undertakings, section 40 of the Income-tax Act has been amended to provide that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated, directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction for the purposes of computation of income of such undertakings under the head "Profits and gains of business or profession". The expression "State Government Undertaking" for this purpose includes ─ (i) a corporation established by or under any Act of the State Government; (ii) a company in which more than fifty per cent of the paid-up equity share capital is held by the State Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement. 13.4 Applicability: This amendment take effects from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 14. Taxability of immovable property received for inadequate consideration 14.1 Sub clause (b) of clause (vii) of sub-section (2) of section 56 of the Income-tax Act, before its amendment by the Act, inter alia, provided that where any immovable property is received by an individual or HUF without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property would be charged to tax in the hands of the individual or HUF as income from other sources. 14.2 The said provision does not cover a situation where the immovable property has been received by an individual or HUF for inadequate consideration. Accordingly, the provisions of clause (vii) of sub-section (2) of section 56 have been amended so as to provide that where any immovable property is received for a consideration which is less than the stamp duty value of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0C is eligible only to an extent of the premium paid up to 10 percent of the 'actual capital sum assured'. 15.4 In view of the above, it has now been provided that any sum including the sum allocated by way of bonus received under an insurance policy issued on or after 01.04.2013 for the insurance on the life of any person who is (i) a person with disability or a person with severe disability as referred to in section 80U, or (ii) suffering from disease or ailment as specified in the rules made under section 80DDB, shall be exempt under clause (10D) of section 10 of the Income-tax Act, if the premium payable for any of the years during the term of the policy does not exceed 15 percent of the actual capital sum assured. 15.5 Sub-section (3A) of section 80C of the Income-tax Act has also been amended so as to provide that the deduction under the said section on account of premium paid in respect of a policy issued on or after 01.04.2013 for insurance on the life of a person referred to in para 15.4 above shall be allowed to the extent of the premium paid but does not exceed fifteen percent. of the actual capital sum assured. 15.6 Applicability: - This amendment takes effect f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he health of his family or any contribution made towards the Central Government Health Scheme (CGHS) as does not exceed in the aggregate fifteen thousand rupees, is allowed to be deducted in computing the total income of the assessee. 17.2 It has been noticed that there are other health schemes of the Central and State Governments, which are similar to the CGHS but no deduction is available to the subscribers of such schemes. In order to bring such schemes at par with the CGHS, section 80D has been amended. The benefit of deduction under this section within the said limit shall be available in respect of any payment or contribution made by the assessee to such other health scheme which has been notified by the Central Government in this behalf. 17.3 Applicability: This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 18. Deduction in respect of interest on loan sanctioned during financial year 2013-14 for acquiring residential house property 18.1 Under the provisions of section 24 of the Income-tax Act, before amendment by the Act, income chargeable under the head 'Income from Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also provided that where a deduction under section 80EE is allowed for any assessment year, in respect of interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provisions of the Income Tax Act for the same or any other assessment year. The term "financial institution" has been defined to mean a banking company to which the Banking Regulation Act, 1949 applies including any bank or banking institution referred to in section 51 of that Act or a housing finance company. The term "housing finance company" has been defined to mean a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes. 18.4 Applicability: - This amendment takes effect from 1st April, 2014 and accordingly applies in relation to the assessment year 2014-15 and assessment year 2015-16. 19. One hundred percent deduction for donation to National Children's Fund 19.1 Under the provisions of section 80G of the Income-tax Act, before its amendment by the Act, an assessee is allowed a deduction from his total income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of power if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2013; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2013; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on 1st April, 2004 and ending on 31st March, 2013. 21.2 With a view to provide further time to such undertakings to commence the eligible activity for availing the tax incentive, the above provisions have been amended so as to extend the terminal date by a further period of one year i.e. up to 31st March, 2014. 21.3 Applicability: - These amendments take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 22. Deduction for additional wages in certain cases 22.1 Section 80JJAA, before amendment by the Act, provided for a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961, and Section 87 of the said Act has also been consequentially amended. 23.4 Applicability: - These amendments take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 24. Tax Residency Certificate 24.1 Section 90 of the Income-tax Act empowers the Central Government to enter into an agreement with the Government of any foreign country or specified territory outside India for the purpose of - (i) granting relief in respect of double taxation, (ii) exchange of information and (iii) recovery of taxes. Further section 90A of the Income-tax Act empowers the Central Government to adopt any agreement between specified associations for above mentioned purposes. 24.2 In exercise of this power, the Central Government has entered into various Double Taxation Avoidance Agreements (DTAAs) with different countries and has adopted agreements between specified associations for relief of double taxation. The scheme of interplay between DTAA and domestic legislation ensures that a taxpayer, who is resident of one of the contracting country to the DTAA, is entitled to claim applicability of bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommendations included suggestions for legislative amendments, formulation of rules and prescribing guidelines for implementation of GAAR. The major recommendations of the Expert Committee have been accepted by the Government, with some modifications. Some of the recommendations accepted by the Government required amendment in the provisions of Chapter X-A and section 144BA. 25.3 In order to give effect to the recommendations, the following amendments have been made in GAAR provisions inserted in the Income-tax Act through the Finance Act, 2012:- (A) The provisions of Chapter X-A and section 144BA will come into force with effect from April 1, 2016 as against the current date of April 1, 2014. The provisions shall apply from the assessment year 2016-17 instead of assessment year 2014-15. (B) An arrangement, the main purpose of which is to obtain a tax benefit, would be considered as an impermissible avoidance arrangement. The provision of section 96 providing that it should be "the main purpose or one of the main purposes" has been amended accordingly. (C) The factors like, period or time for which the arrangement had existed; the fact of payment of taxes by the assessee; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters have also been made. Further, GAAR rules have been notified vide Notification No.75/2013 dated 23rd of September, 2013. 25.5 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 26. Taxation of Income by way of Royalty or Fees for Technical Services 26.1 Section 115A of the Income-tax Act provides for determination of tax in case of a non-resident taxpayer where the total income includes any income by way of Royalty and Fees for technical services (FTS) received under an agreement entered after 31.03.1976 and which are not effectively connected with permanent establishment, if any, of the non-resident in India. Prior to amendment of section 115A by the Act, the tax was payable on the gross amount of income at the rate of - (i) 30% if income by way of royalty or FTS is received in pursuance of an agreement entered on or before 31.05.1997; (ii) 20% if income by way of royalty or FTS is received in pursuance of an agreement entered after 31.05.1997 but before 01.06.2005; and (iii) 10% if income by way of royalty or FTS is received in pursuance of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as Dividend Distribution Tax (DDT). Such distributed dividend is exempt in the hands of recipients. 28.2 Section 115BBD of Income Tax Act provides for taxation of gross dividends received by an Indian company from a specified foreign company (in which it has shareholding of 26 per cent or more) at the rate of 15 per cent. 28.3 Section 115-O provides that the tax base for DDT (i.e. the dividend payable in case of a company) is to be reduced by an amount of dividend received from its subsidiary if such subsidiary has paid the DDT which is payable on such dividend . This ensured removal of cascading effect of DDT in a multi-tier structure where dividend received by a domestic company from its subsidiary (which is also a domestic company) is distributed to its shareholders. 28.4 section 115-O has been amended in order to remove the cascading effect in respect of dividends received by a domestic company from a similarly placed foreign subsidiary ( i.e. the foreign company in which domestic company holds more than fifty per cent of equity share capital). It has been provided that where the tax on dividends received from the foreign subsidiary is payable under section 115BBD by the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing to the shareholders in respect of such buy back by the company would be exempt under section 10 (34A) of the Income-tax Act where the company is liable to pay the additional income-tax on the buy-back of shares. 29.4 Applicability: - These amendments take effect from 1stJune, 2013. 30. Rationalisation of tax on distributed income by the Mutual Funds 30.1 Under the provisions of section 115R of the Income-tax Act, before its amendment by the Act, any amount of income distributed by the specified company or a Mutual Fund to its unit holders is chargeable to additional income-tax. In case of any distribution made by a fund other than equity oriented fund to a person who is not an individual and HUF, the rate of tax is 30 per cent whereas in case of distribution to an individual or an HUF it is 12.5 per cent or 25 per cent depending on the nature of the fund. 30.2 In order to provide uniform taxation for all types of funds, other than equity oriented fund, the rate of tax on distributed income has been increased from 12.5 per cent to 25 per cent in all cases where distribution is made to an individual or a HUF. 30.3 Further in case of an Infrastructure debt fund (IDF) set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom taxation. (ii) The securitisation trust will be liable to pay additional income-tax on income distributed to its investors on the lines of income distribution tax levied in the case of mutual funds. The additional income-tax shall be levied at the rate of 25 per cent in case of distribution being made to investors who are individual and HUF and at the rate of 30 per cent in other cases. No additional income-tax shall be payable if the income distributed by the securitisation trust is received by a person in whose case income, irrespective of its nature and source, is not chargeable to tax. For instance, in the case of income being distributed to a mutual fund, whose income from all sources are exempt under section 10(23D) of the Income-tax Act, no additional income tax shall be payable. (iii) Consequent to the levy of distribution tax, the distributed income received by the investor will be exempt from tax under section 10 (23D) of the Income-tax Act. (iv) The securitisation trust will be liable to pay interest at the rate of one per cent for every month or part of the month on the amount of additional income-tax not paid within the specified time. (v) The person respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1973. In 1999 a new Act, Foreign Exchange Management Act, 1999 (FEMA) was introduced. The definition of foreign exchange in FERA, 1947 has under gone slight modification in FEMA, 1999. The term foreign exchange is defined in clause (n) of section 2 of FEMA, 1999. 33.2 In view of the above, sub-clause (i) of clause (a) of sub-section (1) section 138 of the Income-tax Act has been amended to provide that foreign exchange shall have the meaning as assigned to it in section 2(n) of FEMA, 1999. 33.3 Similar amendments have been made in sections 10(4), 10(4B), 10(15), 10A, 10B, 48, 115AB, 115C, and 196A of the Income-tax Act. 33.4 Applicability: - This amendment will take effect from 1st April, 2013. 34. Return of Income filed without payment of self- assessment tax to be treated as defective return 34.1 The provisions contained in sub-section (9) of section 139, before amendment by the Act, provide that where the Assessing Officer considers that the return of income furnished by the assessee is defective; he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days. If the defect is not rectified within the time allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or the Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit in the prescribed form. 35.3 Applicability: - This amendment takes effect from 1st June, 2013. 36. Exclusion of time in computing the period of limitation for completion of assessments and reassessments 36.1 Section 153 of the Income-tax Act, inter-alia, provides the time limit for completion of assessment and reassessment of income by the Assessing Officer. Explanation to section 153 provides that certain periods specified therein shall be excluded while computing the period of limitation for the purposes of the said section. Under the provisions of clause (iii) of Explanation 1 to section 153 of the Income-tax Act, prior to its amendment by the Act, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assesee is required to furnish a report of such audit, is excluded in computing the period of limitation for the purposes of assessment or reassessment. However, it did not provide for exclusion of time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act relating to time limit for completion of search assessment. 36.6 Applicability: - These amendments take effect from 1st June, 2013. 37. Time limit for completion of assessment or reassessment where reference is made to Transfer Pricing Officer. 37.1 Sections 153 and 153B of the Income-tax Act, inter alia, provide the time limit for completion of assessment and reassessment of income by the Assessing Officer. Time limits have been provided for completion of assessment or reassessment under sections 143(3), 147, 153A, 153C etc. of the Income-tax Act. These time limits get extended if a reference is made under section 92CA of the Income-tax Act to the Transfer Pricing Officer (TPO) during the course of assessment/reassessment proceedings. These time limits are either from the end of financial year in which notice for initiation of the proceeding was served or from the end of the assessment year to which the proceedings relate. 37.2 Vide Finance Act, 2012 the period of limitation as provided in sections 153 and 153B of the Income-tax Act was extended by three months. In all the cases where reference under section 92CA of the Income-tax Act was made to the Transfer P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then the director (who was the director of such company during the previous year to which non-recovery relates) shall be jointly and severally liable for payment of such tax unless he proves that the non-recovery of tax cannot be attributed to any gross neglect, misfeasance or breach of duty on his part. This provision is intended to recover outstanding demand under the Income-tax Act of a private company from the directors of such company in certain cases. However, some courts have interpreted the phrase 'tax due', used in section 179, does not include penalty, interest and other sum payable under the Income-tax Act. 38.2 In view of the above, it has been clarified that for the purposes of the said section 179, the expression "tax due" includes penalty, interest or any other sum payable under the Income-tax Act. Amendment on the similar lines for clarifying the expression 'tax due' has also been made to the provisions of section 167C of the Income-tax Act. 38.3 Applicability: - These amendments take effect from 1st June, 2013. 39. Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) 39.1 There is a statutory requirement und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on certain bonds and Government securities 40.1 Considering the current account deficit situation and the need to have foreign investment in India in rupees, a new section 194LD has been inserted in the Income-tax Act to provide for reduced rate of 5 per cent of withholding tax as against the normal rate of 20 per cent on interest payable on or after the 1st day of June, 2013 but before the 1st day of June, 2015 in respect of a rupee denominated bond of an Indian company or a Government security if the payment is made to a Foreign Institutional Investor (FII) or a Qualified Foreign Investor (QFI). It has been further provided that interest rate on rupee denominated bonds of an Indian company should not exceed the threshold limit to be notified by the Government. This rate has been notified vide Notification 56/2013 dated 29th July 2013 as below: (i) in case of bonds issued before the 1st day of July, 2010, the rate of interest shall not exceed 500 basis points (bps) over the Base Rate of State Bank of India as on the 1st day of July, 2010. (ii) in case of bonds issued on or after the 1st day of July, 2010, the rate of interest shall not exceed 500 basis points (bps) ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rate of deduction of tax at the rate of 20 per cent. Under section 206AA of the Act, if such non-resident does not provide his Permanent Account Number (PAN) to the payer, then the tax is required to be withheld at the rate of 20 per cent. 42.2 Considering the practical difficulties in obtaining PAN by the non-resident bondholders, section 206AA has been amended to provide that provisions of section 206AA of the Income-tax Act shall not apply to interest paid to a non-resident on long-term infrastructure bonds referred to in section 194LC of the Income-tax Act. 42.3 Applicability: - This amendment takes effect from 1st June, 2013. 43. Removal of exemption from levy of Tax Collection at Source (TCS) to cash sale of any coin or any other article weighing 10 grams or less 43.1 Finance Act, 2012 amended the provisions of section 206C of the Income-tax Act to provide that the seller of bullion or jewellery shall collect tax at the rate of 1 per cent of sale consideration from every buyer of bullion or jewellery if sale consideration exceeds two lakh rupees or five lakh rupees respectively and the sale is in cash. Further, it has also been provided that bullion shall not include an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA of the Income-tax Act, fails to furnish such return within the time prescribed under that sub-section, the income-tax authority prescribed under the said sub-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues. 45.3 Section 271FA of the income-tax Act has been amended to provide that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA of the income-tax Act, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under sub-section (1) of the said section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues. 45.4 It is further provided that where such person fails to furnish the return within the period specified in the notice under sub-section (5) of section 285BA, he shall pay, by way of penalty, a sum of five hundred rupees for every day during which the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rban land. As per this definition urban land means land situated in the jurisdiction of municipality or cantonment board or land situated in notified area. However, certain categories of urban land such as land on which construction of a building is not permissible, land held for industrial purpose, land held as stock in trade, have been excluded from the definition of urban land. Normally on agricultural land, either no construction is allowed or allowed only for a specific purpose (mainly for agricultural needs), but no specific exemption has been provided to the agricultural land. Recently it has been held by the Hon'ble Supreme Court that agricultural land situated in urban area is liable for wealth tax. As the wealth tax is levied only on unproductive assets, there was no intention to levy wealth tax on the agricultural land which cannot be termed as unproductive assets. 47.2 In view of the above, the definition of urban land in the Wealth-tax Act, 1957 has been amended to specifically provide that wealth tax is not leviable on urban land which is, (i) classified as agricultural land in the records of the Government; and (ii) used for agricultural purposes. 47.3 Applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed vide Notification S.O. 1768(E) dated 19th June, 2013. The CTT Rules, 2013 have been notified vide Notification S.O. 1769 (E) dated 19th June, 2013. CTT is levied on taxable commodities transactions entered into in a recognised association. 50.2 'Taxable commodities transaction' has been defined to mean a transaction of sale of commodity derivatives in respect of commodities other than agricultural commodities traded in recognised associations. CTT is to be collected on taxable commodities transactions by the recognised associations. 50.2.1 Agricultural commodities which are not liable to CTT are almond, barley, cardamom, castor seed, channa/gram, copra, coriander/dhaniya, cotton, cotton seed oilcake/kapasia khali, guar seed, isabgul seed, jeera, kapas, maize feed, pepper, potato, rape/mustard seed, raw jute, red chilli, soya bean/seed, soymeal, turmeric, wheat. 50.3 The tax is levied at the rate, given in the Table below, on taxable commodities transactions undertaken by the seller as indicated hereunder:- TABLE S. No. Taxable commodities transaction Rate Payable by (1) (2) (3) (4) 1. Sale of commodity derivative 0.01 per cent Seller 50.4 The provisions with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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