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TMI BlogExplanatory Notes to the provisions of the Finance Act 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... y status in respect of Companies,7.1-7.7. 9 Clarity relating to Indirect transfer provisions, 8.1-8.5; Clarity regarding source rule in respect of interest received by the non-resident in certain cases; 9.1-9.8. 9A Fund Managers in India not to constitute business connection of offshore funds, 10.1-10.11. 10 Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme, 20.1-20.4; Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund 27.1-27.5; Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations, 11.1-11.4; Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7; Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1-34.7. 11 Rationalisation of provisions of section 11 of the Income-tax Act relating to accumulation of Income by charitable trusts and institutions, 12.1 -12.4. 13 Rationalisation of provisions of section 11 of the Income-tax Act relating to accumulation of Income by charitable trusts and institutions, 12.1 -12.4. 32 Allowance of balance 50% additional depreciation, 13.1-13.3; Incentives for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come by way of Royalty and Fees for technical services in case of non-residents, 31.1 - 31.3. 115ACA Amendments relating to Global Depository receipts (GDRs), 32.1-32.10. 115JB Rationalising the provisions of section 115JB, 33.1.-33.6. 115U Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7. 115UA Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1 - 34.7. Chapter XII-FB consisting of section 115UB Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7. 132B Settlement Commission, 49.1 - 49.13. 139 Furnishing of return of income by certain universities and hospitals referred to in section 10 (23C) of the Income-tax Act,36.1-36.4;Return of Income is to be filed by 'beneficial owner' or 'beneficiary' of a foreign asset, 37.1 - 37.5; Pass through status to Category -I and Category -II Alternative Investment Funds, 35.1-35.7. 151 Simplification of approval regime for issue of notice for re-assessment, 38.1 - 38.3. 153C Assessment of income of a person other than the person in whose case search has been initiated or books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of re-assessment and where additional income is disclosed before the Settlement Commission under section 245C, 48.1-48.7. 245A Settlement Commission, 49.1-49.13. 245D Settlement Commission, 49.1-49.13. 245H Settlement Commission, 49.1-49.13. 245HA Settlement Commission, 49.1-49.13. 245K Settlement Commission, 49.1-49.13. 245-O Eligibility for appointment as Law Member in the Authority for Advance Ruling (AAR),50.1-50.3. 246A Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 253 Orders passed by the prescribed authority under section sub-clauses (vi) and (via) of clause (23C) of section 10 made appealable before Income-tax Appellate Tribunal, 51.1-51.4. 255 Raising the income-limit of the cases that may be decided by single member bench of ITAT, 52.1-52.3. 263 Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue, 53.1-53.3. 269SS Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances, 54.1-54.6. 269T Mode of taking or accepting certain loans, deposits an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2015-16. (ii)amended sections 2, 6, 9, 10, 11, 13, 32, 35, 36, 47, 49, 80C ,80CCC, 80CCD, 80D, 80DD, 80DDB, 80G, 80JJAA, 80U, 92BA, 95, 111A, 115A, 115ACA, 115JB, 115U, 115UA, 132B, 139, 153C, 154, 156, 192, 194A, 194C, 194I, 194LBA, 194LD, 195, 197A, 200, 200A, 203A, 206C, 220, 234B, 245A, 245D, 245H, 245HA, 245K, 245O, 246A, 253, 255, 263, 269T, 271, 271D, 271E, 272A, 273B, 288, and 295 of the Income-tax Act, 1961; (iii) Substituted new sections for sections 151 and 269SS; (iv) inserted new sections 9A, 32AD, 158AA, 192A, 194LBB, 206CB, 271FAB, 271GA, 271-I and 285A in the Income-tax Act, 1961; (v) inserted Chapter XII-FB consisting of section 115UB in the Income-tax Act, 1961; (vi) repealed the Wealth-tax Act, 1957; (vii) amended sections 97, 98, 100 and 101 of the Finance (No.2) Act, 2004. 3. Rate structure 3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2015-16 3.1.1 In respect of income of all categories of assessees liable to tax for the assessment year 2015-16, the rates of income-tax have been specified in Part I of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, if the income of an individual is ₹ 1,01,00,000 and income-tax computed is ₹ 28,55,000. Surcharge on the income-tax at the rate of 10% of such tax is ₹ 2,85,500. Thus the total income-tax inclusive of surcharge is ₹ 31,40,500 without providing marginal relief. On providing marginal relief, the income-tax inclusive of surcharge shall be limited to ₹ 29,55,000. Then the education cess of two per cent is to be computed on ₹ 29,55,000 which works out to ₹ 59,100. In addition, the amount of tax computed shall also be increased by an additional cess called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax which for the present case of income-tax of ₹ 29,55,000 works out to be ₹ 29,550. Thus, where the amount of tax computed is ₹ 29,55,000, the Education Cess of two per cent is ₹ 59,100, the Secondary and Higher is ₹ 29,550. The total cess in this case will amount to ₹ 88,650 (i.e., ₹ 59,100 + ₹ 29,550). No marginal relief shall be available in respect of such Cess. 3.1.3 Co-operative Societies In the case of every co-operative society, the rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6 Companies - In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I 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 an Indian concern under an approved agreement made after 31-3-1961 but before 1-4-1976, shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or an Indian concern under an approved agreement made after 29-2-1964 but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two per cent. where such company has total income exceeding one crore rupees but not exceeding ten crore ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the rate of surcharge is twelve percent of tax where the income or aggregate of such income paid or likely to be paid and subject to the deduction exceeds one crore rupees. (ii) In case of payments made to foreign companies, the rate of surcharge is two per cent of such income tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed ten crore rupees. In case where such income or the aggregate of such incomes paid or likely to be paid to a foreign company and subject to the deduction exceeds ten crore rupees, the rate of surcharge is five percent. (iii) No surcharge on tax deducted at source shall be levied in the case of an individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person, co-operative society, local authority, firm ,being a resident or a domestic company. 3.2.3 Education Cess - Education Cess on income-tax shall continue to be levied for the purposes of the Union at the rate of two per cent of income-tax and surcharge, if any. For instance, if the amount of income of a foreign company is ₹ 1,20,00,000 and tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Individual (other than senior and very senior citizen), HUF, association of persons, body of individuals and artificial juridical person. Individual, resident in India who is of the age of sixty years or more but less than eighty years. (senior citizen) Individual, resident in India who is of the age of eighty years or more (very senior citizen) Up to ₹ 2 ,50,000 Nil Nil Nil ₹ 2,50,001 - ₹ 3,00,000 10% ₹ 3,00,001 - ₹ 5,00,000 10% ₹ 5,00,001 - ₹ 10,00,000 20% 20% 20% Exceeding ₹ 10,00,000 30% 30% 30% The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve percent. of such income-tax in case of a person having a total income exceeding one crore rupees as against the rate of ten per cent. for the financial year 2014-15. 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 amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.3.5 Local Authorities- In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part III of the First Schedule to the Act. The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve percent. of such income-tax in case of a local authority having a total income exceeding one crore rupees as against the rate of ten per cent. for the financial year 2014-15. However, marginal relief shall be available. Accordingly, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exceeds ten crore rupees. Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of income-tax computed including surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.4 Surcharge on Additional Income-tax Where additional income-tax has to be paid under section 115-O or section 115-QA or sub-section (2) of section 115R or section 115TA of the Income-tax Act, that is to say, on distribution of dividend by domestic companies or distribution of income by a company on buy-back of shares from shareholders or on distribution of income by a mutual fund to its unit holders or on distribution of income by a securitization trust to its investors, the additional tax so payable shall be increased by a surcharge of twelve percent of such tax as against the rate of ten per cent. for the financial year 2014-15. 4. Rationalisation of definition of charitable purpose in the Income-tax Act 4.1 Section 11 of the Income-tax Act deals with exemption to charitable trusts and institutions. The primary condition for gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year . 4.5 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. 5. Alignment of provisions relating to taxation of Government Grants with the provisions of Income Computation and Disclosure Standards (ICDS). 5.1 Sub-section (2) of section 145 of the Income-tax Act provides that the Central Government may notify Income Computation and Disclosure Standards (ICDS) for any class of assessees or for any class of income. The Central Board of Direct Taxes (CBDT) notified ICDS-I to ICDS-X vide Notification No.S.O. 892(E) dated 31st March, 2015 after wide public consultations. The ICDS-VII relating to Government grants provides that all Government grants except relating to depreciable asset shall be recognised as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty five days or more, is in India for a period or periods amounting in all to sixty days or more in that year. However, in the case of an individual, being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship, the above mentioned condition of sixty days is extended to one hundred and eighty-two days. 6.2 In the case of foreign bound ships where the destination of the voyage is outside India, there was uncertainty with regard to the manner and basis of determination of the period of stay in India for crew members of such ships who are Indian citizens. 6.3 In view of the above, the Income-tax Act has been amended to provide that in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed in the Income-tax Rules, 1962. Rule 126 of Income-tax Rules, 1962 notified vide S.O. No. 2240(E) dated 17th August, 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and would also be in line with international standards. It would also be a measure to deal with cases of creation of shell companies outside India but being controlled and managed from India. 7.5 In view of the above, section 6 of the Income-tax Act has been amended to provide that a person being a company shall be said to be resident in India in any previous year, if- (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India . 7.6 Further, the "place of effective management" has been defined to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made. 7.7 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. 8. Clarity relating to Indirect transfer provisions 8.1 The provisions of section 9 of the Income-tax Act deal with cases of income which are deemed to accrue or arise in India. Sub-section(1) of the said section creates a legal fiction that certain incomes shall be deemed to accrue or arise in India. Clause(i) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer. (iv) however, if the book value of the assets of the company on the date of transfer exceeds by at least 15% of the book value of the assets as on the last balance sheet date preceding the date of transfer, then instead of the date mentioned in (iii) above, the date of transfer shall be the specified date of valuation. (v) the manner of determination of fair market value of the Indian assets vis-a vis global assets of the foreign company shall be prescribed in the rules. (vi) the taxation of gains arising on transfer of a share or interest deriving, directly or indirectly, its value substantially from assets located in India will be on proportional basis. The method for determination of proportionality shall be prescribed in the rules. (vii) the exemption shall be available to a non-resident from transfer, outside India, of a share of, or interest in, a foreign company or entity if such foreign company or entity directly owns the assets situated in India and the transferor along with its associated enterprises, at any time in twelve months preceding the date of transfer, (a) neither holds the right of control or management in relation to such company or enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management or control in relation to the Indian concern; and (b) a sum of five lakh rupees in any other case. 8.5 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. 9. Clarity regarding source rule in respect of interest received by the non-resident in certain cases 9.1 The provisions of section 5 of the Income-tax Act provide for scope of total income for the purposes of its chargeability to tax. In case of a non-resident person, the chargeability of income in India is on the basis of source rule under which certain categories of income are deemed to accrue or arise in India. The provisions of section 9 provide for the circumstances under which income is deemed to accrue or arise in India. Section 9(1) (v) relates specifically to the interest income. The said clause provides that the income by way of interest is deemed to accrue or arise in India if it is payable by- (a) the Government ; or (b) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, TDS provisions would apply along with separate taxation of interest paid to head office or other branches of the non-resident, which would be chargeable to tax in India. 9.5 Some of the judicial rulings in this context have held that although under the provisions of the Income-tax Act the payment of interest by the branch to head office is non-deductible under domestic law, being payment to the self, however, such interest is deductible due to computation mechanism provided under the DTAA but it is not taxable in the hands of the Bank, being income generated from self. The view expressed in the CBDT circular has not found favour in these judicial decisions. If the legal fiction created under the treaty were treated to be of limited effect, it would have led to base erosion. The interest paid by the permanent establishment to the head office or other branch etc. is an interest payment sourced in India and is liable to be taxed under the source rule in India. This position is also recognised in some of our DTAAs, in particular Article 14 (3) the Indo-USA DTAA which reads as under:- "In the case of a banking company which is resident of the United States, the interest paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al with incomes which are deemed to accrue or arise in India. Section 9(1)(i) provides a set of circumstances in which income is deemed to accrue or arise in India, and is taxable in India. One of the conditions for the income of a non-resident to be deemed to accrue or arise in India is the existence of a business connection in India. Once such a business connection is established, income attributable to the activities which constitute business connection becomes taxable in India. Similarly, under Double Taxation Avoidance Agreements (DTAAs), the source country assumes taxation rights on certain incomes if the non-resident has a Permanent Establishment (PE) in that country. 10.2 Further, section 6 of the Act provides conditions under which a person is said to be resident in India. In the case of a person other than an individual, the test is dependent upon the location of its "control and management". 10.3 In the case of off-shore funds, under the above provisions, the presence of a fund manager in India could create sufficient nexus of the off-shore fund with India and could constitute a business connection in India even though the fund manager may be an independent person. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking fund management activities on its behalf is located in India. This specific exception from the general rules for determination of business connection and 'resident status' of off-shore funds and fund management activity undertaken on its behalf is subject to the following:- (1) The offshore fund shall be required to fulfill the following conditions during the relevant year for being an eligible investment fund: (i) the fund is not a person resident in India; (ii) the fund is a resident of a country or a specified territory with which an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into; (iii) the aggregate participation or investment in the fund, directly or indirectly, by persons being resident in India does not exceed five percent. of the corpus of the fund; (iv) the fund and its activities are subject to applicable investor protection regulations in the country or specified territory where it is established or incorporated or is a resident ; (v) the fund has a minimum of twenty five members who are, directly or indirectly, not connected persons; (vi) any member of the fund along with connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund shall, in respect of its activities in a financial year, furnish within ninety days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority containing information relating to the fulfillment of the above conditions or any information or document which may be prescribed. In case of non furnishing of the prescribed information or document or statement, a penalty of ₹ 5 lakh shall be leviable on the fund (section 271FAB). The provisions of the new section 9A shall be applied in accordance with such guidelines and in such manner as the CBDT may prescribe in this behalf. 10.10 It has also been clarified that this regime shall not have any impact on taxability of any income of the eligible investment fund which would have been chargeable to tax irrespective of whether the activity of the eligible fund manager constituted the business connection in India of such fund or not. Further, the new regime shall not have any effect on the scope of total income or determination of total income in the case of the eligible fund manager. 10.11 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition for grant of exemption to trust or institution in respect of income derived from property held under such trust is that the income derived from property held under trust should be applied for charitable purposes in India. Where such income cannot be applied during the previous year, it has to be accumulated and applied for such purposes in accordance with various conditions provided in the section. While 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions that such person submits the prescribed Form 10 to the Assessing Officer in this regard and the money so accumulated or set apart is invested or deposited in the specified forms or modes. If the accumulated income is not applied in accordance with these conditions, then such income is deemed to be taxable income of the trust or institution. 12.2 In order to remove the ambiguity regarding the period within which the assessee is required to furnish Form 10, and to ensure due compliance of the above conditions within time, the Income-tax Act has been amended to provide that the Form 10 shall be furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee to defer such investment to the next year for availing full 100% allowance for additional depreciation in the next year. 13.2 To remove the discrimination in the manner of allowing additional depreciation on plant or machinery used for less than 180 days and plant or machinery used for 180 days or more, a new proviso has been inserted to section 32(1)(ii) of the Income-tax Act so as to provide that the balance 50% of the additional depreciation allowance on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. 13.3 Applicability: - This amendment takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 14. Incentives for the States of Andhra Pradesh, Bihar, Telangana and West Bengal 14.1 Manufacturing sector plays significant role in the economic growth of any region. In order to encourage the setting up of industrial undertakings in the backward areas of the State of Andhra Pradesh or the State of Bihar or the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re set up by availing this incentive actually contribute to economic growth of these backward areas by carrying out the activity of manufacturing for a reasonable period of time, suitable safeguards have been provided for restricting the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply to the amalgamating or demerged company or the predecessor in a case of amalgamation or demerger or business reorganisation but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be. 14.3 Additional Depreciation at the rate of 35% 14.3.1 To incentivise investment in new plant or machinery, additional depreciation of 20% is allowed under the existing provisions of section 32(1)(iia) of the Income-tax Act in respect of the cost of plant or machinery acquired and installed by certain assessees. This depreciation allowance is allowed over and above the deduction allowed for general depreciation under section 32(1)(ii) of the Income-tax Act. 14.3.2 In order to incentivise acquisition and installation of plant and machinery for setting up of manufacturing units in the notified backward areas in the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Comptroller and Auditor General of India in its report on performance audit of pharmaceuticals sector recommended for rationalisation of the provision relating to monitoring of this weighted deduction. 15.2 In order to have a better and meaningful monitoring mechanism for weighted deduction allowed under section 35 (2AB) of the Income-tax Act, the provisions of section 35(2AB) of the Income-tax Act has been amended so as to provide that deduction under the said section shall be allowed if the company enters into an agreement with the prescribed authority for cooperation in such research and development facility and fulfils such conditions as may be prescribed with regard to maintenance and audit of accounts and also furnishes prescribed reports. Further a reference of the Principal Chief Commissioner or Chief Commissioner is inserted in section 35(2AA) and section 35(2AB) of the Income-tax Act so as to provide that the report referred to therein may also be sent to the Principal Chief Commissioner or Chief Commissioner. 15.3 Applicability:- These amendments takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, inter alia, require that the amount should be written off in the accounts of the assessee. 16.5 Therefore, the reversal of income in accordance with the provisions of the ICDS may not be allowable on the ground that same has not been written off in the accounts as per the provisions of section 36(1)(vii) of the Income-tax Act. In view of this, a proviso has been inserted in section 36(1)(vii) of the Income-tax Act so as to provide that for claiming deduction under section 36(1)(vii) of the Income-tax Act, the income which have been recognised as per the provisions of ICDS without recording in the accounts and is required to be written off as irrecoverable as per the provisions of ICDS,it shall be deemed to be written off as irrecoverable in the accounts. 16.6 Applicability:- These amendments take effect from 1st April, 2016 and would accordingly apply to assessment year 2016-17 and subsequent assessment years. 17. Deduction for payment made for purchase of sugar cane by co-operative sugar factories at a price fixed by or fixed with the approval of the Government. 17.1 Sugar factories operating in the cooperative sectors in certain states of India pay to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors, tax neutrality has been provided to unit holders upon consolidation or merger of mutual fund schemes provided that the consolidation is of two or more schemes of an equity oriented fund or two or more schemes of a fund other than an equity oriented fund by amending section 47 of the Income-tax Act. Section 49 of the Income-tax Act has also been amended to provide that the cost of acquisition of the units in a consolidated scheme of a mutual fund shall be the cost of units in the consolidating scheme and period of holding of the units of the consolidated scheme shall include the period for which the units in consolidating schemes were held by the assessee. 18.3 Consolidating scheme has been defined as the scheme of a mutual fund which merges under the process of consolidation of the schemes of mutual fund in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the consolidated scheme means the scheme with which the consolidating scheme merges or which is formed as a result of such merger. 18.4 Applicability: These amendments will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the said scheme will be exempt from tax. 20.2 Accordingly, a new clause (11A) has been inserted in section 10 of the Income-tax Act to provide that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873, shall not be included in the total income of the assessee. As a result, the interest accruing on deposits in the aforesaid account, and withdrawals from any such account under the scheme would be exempt. 20.3 The Scheme has been notified under clause (viii) of sub-section (2) of section 80C of the Income-tax Act vide Notification number 9/2015 S.O.210 (E),F.No. 178/3/2015-ITA-I dated 21.01.2015.With a view to provide that the deduction under section 80C may be availed by the parent or legal guardian of the girl child, amendment of section 80C of the Income-tax Act has been made to provide that a sum paid or deposited during the year in the Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Income-tax Act. 20.4 Applicability:-These amendments tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n omitted. The overall limit of one hundred and fifty thousand rupees under section 80CCE shall apply in respect of the contribution made in accordance with sub-section (1) of section 80CCD. In addition to the enhancement of the limit under section 80CCD(1), a new sub-section (1B) has been inserted in section 80CCD so as to provide for an additional deduction in respect of any amount paid, upto fifty thousand rupees for contributions made by any individual assessee under the NPS. The additional deduction of ₹ 50,000/- will be available whether or not any claim under sub-section (1) of section 80CCD has been made. Consequential amendments have also been made in sub-section (3) and sub-section (4) of section 80CCD. 22.3 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. 23. Amendment in section 80D relating to deduction in respect of health insurance premia 23.1 The provisions contained in section 80D of the Income-tax Act, before its amendment by the Act, inter alia, provided for --- a) deduction upto fifteen thousand rupees to an assessee, being an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Deduction eligible u/s 80D ₹ 21000 + ₹ 30000 = ₹ 51,000 A 'very senior citizen' has been defined to mean an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year. 23.5 Applicability:-These amendments take effect from the 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 24. Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability 24.1 The provisions of section 80DD of the Income-tax Act, before its amendment by the Act, inter alia, provided for a deduction to an individual or HUF, who is a resident in India, and has incurred- (a) Expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability as defined under the said section; or (b) Paid any amount to LIC or any other insurer in respect of a scheme for the maintenance of a disabled dependant. 24.2 The section provided for a deduction of fifty thousand rupees if the dependant is suffering from disability and one lakh rupees if the dependant is sufferi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d family (HUF) for such expenditure incurred on its members. Dependant in case of an individual means the spouse, children, parents, brother or sister of an individual and in case of an HUF means a member of the HUF ,wholly or mainly dependant on such individual or HUF for his support and maintenance. 25.3 Under the provisions of section 80DDB before its amendment by the Act, a certificate in the prescribed form, from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital was required. It had been represented that the requirement of a certificate from a doctor working in a Government hospital causes undue hardship to the persons intending to claim the aforesaid deduction. Government hospitals at many places do not have doctors specialising in the above branches of medicine. Therefore, it may be difficult for the taxpayer to obtain a certificate from a Government hospital. 25.4 In view of the above, section 80DDB has been amended to provide that the assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing this deduction. 25.5 Section 80DDB has been amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hquake Relief Fund, the Africa (Public Contributions-India) Fund, the National Children's Fund, the National Foundation for Communal Harmony etc. 27.2 "Swachh Bharat Kosh" has been set up by the Central Government to mobilize resources for improving sanitation facilities in rural and urban areas and school premises through the Swachh Bharat Abhiyan. Similarly, Clean Ganga Fund has been established by the Central Government to attract voluntary contributions to rejuvenate river Ganga. 27.3 With a view to encourage and enhance people's participation in the national effort to improve sanitation facilities and rejuvenation of river Ganga, section 80G of the Income-tax Act has been amended to incentivise donations to the two funds. It has been provided that donations made by any donor to the Swachh Bharat Kosh and donations made by resident donors to Clean Ganga Fund will be eligible for a deduction of hundred per cent in computing the total income. However, any sum spent on this account in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor. 27.4 The provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of fifty workmen employed during the previous year. 28.5 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. 29. Raising the threshold for specified domestic transaction 29.1 The provisions of section 92BA of the Income-tax Act define "specified domestic transaction" in case of an assessee to mean any of the specified transactions, not being an international transaction, where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum as provided in the said section. Before amendment by the Act, this threshold was rupees five crore. 29.2 In order to address the issue of compliance cost in case of small businesses on account of low threshold of five crore rupees, the said section 92BA has been amended to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as 'specified domestic transaction'. 29.3 Applicability: - This amendment takes effect from 1st April, 2016 and will, accordingly, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-resident in India, tax shall be levied on the gross amount of such income at the rate provided therein. The Finance Act, 2013 had provided the rate to be 25%. 31.2 In order to reduce the hardship faced by small entities due to high rate of tax of 25%, the Income-tax Act has been amended to reduce the rate of tax provided under section 115A on royalty and FTS payments made to non-residents to 10%. 31.3 Applicability: - This amendment takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 32. Amendments relating to Global Depository receipts (GDRs) 32.1 The Depository Receipts Scheme, 2014 was notified by the Department of Economic affairs (DEA) vide Notification F.No.9/1/2013-ECB dated 21st October, 2014. This scheme replaces "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through depository receipt mechanism) Scheme, 1993". 32.2 The taxation scheme of income arising in respect of depository receipts under section 115AC of the Income-tax Act, before amendment by the Act, was aligned with the earlier scheme which was limited to issue of Global Depository Receipts (GDRs) based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of a company, which is acquired by the non-resident assessee on redemption of Global Depository Receipts held by such assessee, the period of holding shall be reckoned from the date on which request of such redemption was made. 32.7 Section 49 (2ABB) has been inserted in the Income-tax Act to provide that where the capital asset being share of a company is acquired by the non-resident assessee on redemption of Global Depositary Receipts (GDR) held by him, then the cost on acquisition of the share shall be the price of such share prevailing on any recognized stock exchange in India on the date on which a request for redemption was made. 32.8 In view of the process of conversion of GDR into underlying shares referred to above, it is hereby clarified that the "date on which a request for redemption was made" for purposes of Section 49(2ABB), shall be the date on which the instruction from foreign depositary is received by the local custodian in India requesting the release of underlying shares in favour of the non-residence assessee. 32.9 It is also clarified that GDRs which qualify for special treatment under the Income-tax Act constitute a subset of Depository receipts whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which is a member of an AOP is liable to MAT on such share also since such income is not excluded from the book profit while computing the MAT liability of the member. In the case of a partner of a firm, the share in the profits of the firm is exempt in the hands of the partner as per section 10(2A) of the Act and no MAT is payable by the partner on such profits. 33.3 In view of the above, section 115JB has been amended to provide that the share of a member of an AOP, in the income of the AOP, on which no income-tax is payable in accordance with the provisions of section 86 of the Act, should be excluded while computing the MAT liability of the member under 115JB of the Act. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is to be excluded from the MAT liability) shall also be added back to the book profit for the purpose of computation of MAT. 33.4 The provisions of section 115JB have also been amended to provide that the amount of income from (i) capital gains arising on transactions in securities; or (ii) interest, royalty or fees for technical services chargeable to tax at the rates specified in Chapter XII, accruing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of such shares at the time of exchange where such shares are carried at a value other than the cost through profit or loss account, as the case may be, shall be included in the book profit of the year of transfer of units for the purposes of levying MAT under section 115JB of the Income-tax Act. These amendments are explained by way of the following illustration:- * Company 'A' is holding 100 shares of Special Purpose Vehicle (SPV) which are carried at ₹ 2000 in the books of the company as on 1st April, 2015. During the financial year 2015-16, these 100 shares are exchanged with the 100 units of Business Trust (BT) and the same is recorded at the fair value of ₹ 3000 resulting into a notional gain of ₹ 1000. At the end of financial year 2016-17, the carrying amount of the units has been recorded at ₹ 2500 resulting into a notional loss of ₹ 500. During the financial year 2017-18, these units are sold for ₹ 4000. * In the above illustration, the notional gain of ₹ 1000 shall be excluded from the book profit of the financial year 2015-16. Similarly, the notional loss of ₹ 500 shall be excluded from the book profit of the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of income by way of interest received by the business trust from SPV i.e., there is no taxation of such interest income in the hands of the trust and no withholding tax at the level of SPV. (vii) However, withholding tax at the rate of 5 per cent. in case of payment of interest component of income distributed to non-resident unit holders, and at the rate of 10 per cent. in respect of payment of interest component of distributed income to a resident unit holder is required to be effected by the trust. (viii) The dividend received by the trust is subject to dividend distribution tax at the level of SPV and is exempt in the hands of the trust, and the dividend component of the income distributed by the trust to the unit holders is also exempt. 34.3 The deferral of capital gains provided to the sponsor of business trust had placed such a sponsor at a disadvantageous tax position vis-a vis direct listing of the shares of the SPV. In case the sponsor holding the shares of the SPV decides to exit through the Initial Public Offer (IPO) route, then the benefit of concessional tax regime relating to capital gains arising on transfer of shares subject to levy of STT is available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REIT, shall be deemed to be income of such unit holder and shall be charged to tax. (iii) the REIT shall effect TDS on rental income allowed to be passed through. In case of resident unit holder, tax shall be deducted @ 10%, and in case of distribution to non-resident unit holder, the tax shall be deducted at rate in force as applicable for deduction of tax on payment to the non-resident of any sum chargeable to tax . (iv) no deduction shall be made under section 194-I of the Income-tax Act where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset held directly by such REIT. 34.7 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. 35. Pass through status to Category -I and Category -II Alternative Investment Funds 35.1 The provisions of section 10(23FB) of the Income-tax Act provide that any income of a Venture Capital Company (VCC) or a Venture Capital Fund (VCF) from investment in a Venture Capital Undertaking (VCU) shall not form part of its total income. Section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re set up as a trust, company, or limited liability firm etc. The salient features of the special regime are as under:- (i) income of a person, being a unit holder of an investment fund, out of investments made in the investment fund shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to, or received by, such person had the investments, made by the investment fund, been made directly by him. (ii) income in the hands of investment fund, other than income from profits and gains of business, shall be exempt from tax. The income in the nature of profits and gains of business or profession shall be taxable in the case of investment fund. (iii) income in the hands of investor which is of the same nature as income by way of profits and gains of business or profession at investment fund level, shall be exempt. (iv) where any income, other than income which is taxable at investment fund level, is payable to a unit holder by an investment fund, the fund shall deduct income-tax at the rate of ten per cent. (v) the income paid or credited by the investment fund shall be deemed to be of the same nature and in the same proportion in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide that entities covered under clauses (iiiab) and (iiiac) of clause (23C) of section 10 shall be mandatorily required to file their return of income. 36.4 Applicability: -This amendment takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 37. Return of Income is to be filed by 'beneficial owner' or 'beneficiary' of a foreign asset 37.1 Sub-section (1) of section 139 of the Income-tax Act specifies the category of tax payers who are required to furnish their return of income. Fourth proviso to sub-section (1) of section 139 of the said Act provides that a resident who is not required to furnish a return of income but who during the previous year has any asset (including any financial interest in any entity) located outside India or signing authority in any account located outside India shall furnish, on or before the due date, his return of income. 37.2 In the budget announcement of 2015 it was stated that the requirement of furnishing of return of income will be extended to beneficial owner of assets. Before the amendment made by the Act, there was no requirement of furnishing the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 148 shall be issued by an assessing officer upto four years from the end of relevant assessment year without the approval of Joint Commissioner and beyond four years from the end of relevant assessment year without the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 38.3 Applicability: This amendment has taken effect from 1st day of June, 2015. 39. Assessment of income of a person other than the person in whose case search has been initiated or books of account, other documents or assets have been requisitioned. 39.1 Section 153C of the Income-tax Act relates to assessment of income of any person other than the person in whose case search has been conducted or requisition has been made. The provisions contained in sub-section (1) of the section 153C, before amendment made by the Act, provided that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o parallel provisions in the Income-tax Act, before amendments made by the Finance Act, 2015, enabling revenue not to file appeal for subsequent years where the Department is in appeal on the same question of law for an earlier year. As a result, appeals had been filed by the revenue year after year on the same question of law until it is finally decided by the Supreme Court thus, multiplying litigation. 40.3 Accordingly, a new section 158AA has been inserted to provide that where any question of law arising in the case of an assessee for any assessment year(relevant case) is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition under Article 136 of the Constitution filed by the revenue, against the order of the High Court, the Commissioner or Principal Commissioner may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal under sub-section (2) or sub-section (2A) of section 253 (normal provisions of appeal by revenue to Appellate Tribunal), direct the Assessing Officer to make an application to the Appellate Tribunal in the prescribed form wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV-A of the Income-tax Act, the withdrawal of accumulated balance by an employee from the RPF is exempt from taxation. However, in order to discourage pre-mature withdrawal and to promote long term savings, it has been provided that such withdrawal shall be taxable if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc.) and does not opt for transfer of accumulated balance to any recognised provident fund maintained by the new employer. Rule 9 of the said Schedule further provides computation mechanism for determining tax liability of the employee in respect of such pre-mature withdrawal. For ensuring collection of tax in respect of these withdrawals, rule 10 of Schedule IV-A provides that the trustees of the RPF, at the time of payment, shall deduct tax as computed in rule 9 of Schedule IV-A. 41.3 Rule 9 of Schedule IV-A to the Income-tax Act provides that the tax on withdrawn amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund. The trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer to deduct balance tax or through payment of advance tax / self-assessment tax. For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite. The existing provisions of section 206AA of the Income-tax Act provide for deduction of tax @ 20% in case of non-furnishing of PAN where the rate of deduction of tax at source is specified. As mentioned earlier, there may be employees who may be liable to pay tax at the highest slab rate. In order to ensure the collection of balance tax from these employees, it has also been provided that non-furnishing of PAN to the EPFS for receiving these payments shall attract deduction of tax at the maximum marginal rate. 41.8 Applicability:- These amendments take effect from 1st June, 2015. 42. Rationalisation of provisions relating to deduction of tax on interest (other than interest on securities) 42.1 Section 194A(1) read with section 194A(3)(i) of the Income-tax Act provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me deposit and cannot avoid the same by taking the plea of the general exemption provided under section 194A(3)(v) of the Income-tax Act. This is because the specific provision of tax deduction provided under section 194A(3)(i)(b) and 194A(3)(viia)(b) of the Income-tax Act for co-operative banks override the general exemption provided to all co-operative societies for non-deduction of tax from interest payment to members under section 194A(3)(v) of the Income-tax Act. 42.4 As there is no difference in the functioning of the co-operative banks and other commercial banks, the Finance Act, 2006 and Finance Act, 2007 amended the provisions of the Income-tax Act to provide for co-operative banks a taxation regime which is similar to that for the other commercial banks. Therefore, there is no rationale for treating the co-operative banks differently from other commercial banks in the matter of deduction of tax and allowing them to avail the exemption meant for smaller credit co-operative societies formed for the benefit of small number of members. However, as mentioned earlier, a doubt has been created regarding the applicability of the specific provisions mandating deduction of tax fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urring deposit is also made for a fixed tenure and, therefore, is akin to time deposit. In view of this, the definition of 'time deposits' as provided in Explanation 1 below clause (xi) of sub-section (3) of section 194A of the Income-tax Act has been amended so as to include recurring deposits within its scope for the purposes of deduction of tax under section 194A of the Income-tax Act. However, the existing threshold limit of ₹ 10,000 for non-deduction of tax shall also be applicable in case of interest payment on recurring deposits to safeguard interests of small depositors. 42.9 The proviso to clause (i) of sub-section (3) of section 194A of the Income-tax Act provides that the interest income for the purpose of deduction of tax by the banking company or the co-operative society engaged in carrying on the business of banking or the public company shall be computed with reference to a branch of these entities. As currently, most of these entities are computerised and follow core banking solutions for crediting interest, there is no rationale for continuing branch wise calculation of interest by the entities which have adopted core banking solutions. Therefore, a new prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 30,000 or aggregate of such payment in a financial year exceeds ₹ 75,000. Prior to 1.10.2009, section 194C of the Income-tax Act provided for exemption from TDS to an individual transporter who did not own more than two goods carriage at any time during the previous year. 43.2 The Finance (No.2) Act, 2009 substituted section 194C of the Income-tax Act with effect from 1.10.2009, which inter alia provided for non- deduction of tax from payments made to the contractor during the course of plying, hiring and leasing goods carriage if the contractor furnishes his Permanent Account Number (PAN) to the payer. The memorandum explaining the provisions of Finance (No.2) Bill, 2009 indicates that the intention was to exempt only small transport operators (as defined in section 44AE of the Act) from the purview of TDS on furnishing of Permanent Account Number (PAN). Thus, the intention was to reduce the compliance burden on the small transporters. However, the language of sub-section (6) of section 194C of the Income-tax Act did not convey the desired intention and as a result all transporters, irrespective of their size, were claiming exemption from TDS under the existing provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transporter was not owning more than ten goods carriages. However, as the provisions of section 194C(6) were amended with effect from 1st June, 2015, for determining the aggregate payments for the financial year 2015-16, the payments made on or after 1st June, 2015 shall only be taken into account. This is explained by way of following illustration:- 'T', an individual owns five goods carriages from 1st April, 2015 to 31st October, 2015. On 1st November, 2015, he purchased 6 more goods carriages. On 1st January, 2016, he sold 8 goods carriages. 'P' makes following payment of transport charges to 'T' during the financial year 2015-16: 15th April, 2015 - ₹ 35,000 15th July, 2015 - ₹ 40,000 15th November, 2015 - ₹ 20,000 15th December, 2015 - ₹ 20,000 15th February, 2016 - ₹ 50,000 No tax is deductible on payment made on 15th April, 2015 if 'T' furnishes his PAN as per the pre-amended provisions of section 194C (6) of the Income-tax Act. No tax is deductible from payment made on 15th July, 2015 if 'T' furnishes a declaration that he does not own more than 10 goods carriages during the relevant financial year along with his PAN as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge at any time duringthe period from 1st April …….. to ……………..My Permanent Account Number (PAN) is ……….I hereby enclose a self-attested photocopy of my PAN Card. …………….…………….. Signature of the person making declaration" Place: 43.8 It may be mentioned here that the person responsible for paying to transporter is required to report the particulars of payment made to transporters without deduction of tax in compliance to the provision of section 194C(6) of the Income-tax Act in the statement of deduction of tax (Form 26Q) as per the provision of rule 31A(4)(vi) of the Income-tax Rules, 1962. Non-furnishing or incomplete furnishing of this information shall make the deductor liable for penalty as per the provision of section 271H of the Income-tax Act. 43.9 Applicability:- This amendment takes effect from 1st June, 2015. 44. Extension of eligible period of concessional tax rate under section 194LD of the Income-tax Act 44.1 The provisions of section 194LD of the Income-tax Act provide for lower withholding tax at the rate of 5 per cent. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of section 197A of the Income-tax Act. 45.4 Applicability:- This amendment takes effect from 1st June, 2015. 46. Relaxing the requirement of obtaining TAN for certain deductors 46.1 Under the provisions of section 203A of the Income-tax Act, every person deducting tax (deductor) or collecting tax (collector) is required to obtain Tax Deduction and Collection Account Number (TAN) and quote the same for reporting of tax deduction/collection to the Income-tax Department. However, currently, for reporting of tax deducted from payment over a specified threshold made for acquisition of immovable property (other than rural agricultural land) from a resident transferor under section 194-IA of the Income-tax Act, the deductor is not required to obtain and quote TAN and is allowed to report the tax deducted by quoting his Permanent Account Number (PAN). 46.2 The obtaining of TAN creates a compliance burden for those individuals or Hindu Undivided Family (HUF) who are not liable for audit under section 44AB of the Income-tax Act. The quoting of TAN for reporting of TDS is a procedural matter and the same result can also be achieved in certain cases by quoting of PAN es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing of TDS statements. Therefore, the provisions of section 200A of the Income-tax Act has been amended so as to enable computation of fee payable under section 234E of the Income-tax Act at the time of processing of TDS statement under section 200A of the Income-tax Act. 47.4 Currently, the provisions of sub-section (3) of section 200 of the Income-tax Act enable the deductor to furnish TDS correction statement and consequently, section 200A of the Income-tax Act inter alia provides processing of the TDS correction statement. However, there did not exist any provision in the Income-tax Act for allowing a collector to file correction statement in respect of TCS statement already furnished. Therefore, the provision of section 206C of the Income-tax Act has been amended so as to allow the collector to furnish TCS correction statement. 47.5 The Income-tax Act contains detailed provisions for processing of TDS statements, however, there did not exist any provision for processing of TCS statement. As the mechanism of TCS statement is similar to TDS statement, a new section 206CB has been inserted in the Income-tax Act for enabling processing of TCS statements on the lines of existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted through book entry, the Drawing and Disbursing Officer (DDO) intimates the TDS/TCS amount to the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer (PAO/TO/CDDO) who credits the TDS/TCS amount to the credit of Central Government through book entry. For granting credit to the deductee for TDS/TCS paid through book entry by the Government deductors, a system of capturing information about the credit by PAO/TO/CDDO has been introduced by amending rule 30 and rule 37CA of the Income-tax Rules, 1962 with effect from 1st April, 2010. 47.9 The said rules provide that the PAO/TO/CDDO shall file the details of payment of TDS/TCS made through book entry in Form 24G. This system of reporting of payment of TDS/TCS made through book entry has improved the mechanism of reporting of TDS/TCS by the Government deductor to some extent. 47.10 However, in the absence of any specific provisions in the Income-tax Act for enforcing the furnishing of Form 24G, it has been noticed that in a large number of cases, PAO/ TO/CDDOs did not file Form 24G in prescribed time. Delay in furnishing of the Form 24G results into delay in furnishing of the TDS/TCS statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee or computing tax deductible under section 192(1) of the Income-tax Act, shall obtain from the assessee evidence or proof or particulars of the prescribed claim (including claim for set-off of loss) under the provisions of the Income-tax Act in the prescribed form and manner. 47.16 The existing provisions of sub-section (6) of section 195 of the Income-tax Act, prior to its amendment by the Act, provided that the person referred to in section 195(1) of the Income-tax Act shall furnish prescribed information. Section 195(1) of the Income-tax Act provides that any person responsible for paying any interest (other than interest referred to in sections 194LB or 194LC or 194LD of the Income-tax Act) or any sum chargeable to tax (not being salary income) to a non-resident, not being a company, or to a foreign company, shall deduct tax at the rates in force. 47.17 The mechanism of obtaining of information in respect of remittances fulfils twin objectives of ensuring deduction of tax at appropriate rate from taxable remittances as well as identifying the remittances on which the tax was deductible but the payer has failed to deduct the tax. Therefore, obtaining of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined under section 143(1) or on assessment or reassessment or total income declared in a settlement application was the tax payer's true liability right from the beginning and it was with reference to that amount the advance tax should have been paid within the prescribed due date. Accordingly, clause (3) of section 234B of the Income-tax Act has been amended so as to provide that the period for which the interest is to be computed will begin from the 1st day of April next following the financial year and end on the date of determination of total income under section 147 or section 153A. 48.3 The provision contained in sub-section (4),prior to its amendment by the Act, provided that where on an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) is increased or reduced, the interest shall be increased or reduced accordingly. However, in case an application is filed before the Settlement Commission under section 245C declaring an additional amount of income-tax, there is no specific provision in section 234B for charging interest on that additional amount. 48.4 Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of issue of notice under section 148 of the Act. 49.2 It was observed that issue relating to escapement of income often involves more than one assessment year. Therefore, before amendment made by the Act, in such case the assessee was eligible to approach Settlement Commission only for the assessment year for which notice under section 148 has been issued. For all other assessment years where there is escapement, the assessee was eligible to file settlement application only after notice under section 148 has been issued for all such assessment years. 49.3 In order to obviate the need for issue of notice in all such assessment years, clause (i) of the Explanation to clause (b) of section 245A of the Income-tax Act has been amended to provide that where a notice under section 148 is issued for any assessment year, the assessee can approach Settlement Commission for other assessment years as well even if notice under section 148 for such other assessment years has not been issued, but such notice could have been issued on such date if the return of income for such other assessment years have been furnished under section 139 or in response to notice under section 142 of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, immunity from prosecution. With a view to provide for justification for grant of immunity from penalty and prosecution, sub-section (1) of section 245H of the Income-tax Act has been amended to provide that the Settlement Commission while granting immunity from prosecution to any person shall record the reasons in writing in the order passed by it. 49.8 The provision contained in sub-section (1) of section 245HA of the Income-tax Act, before its amendment by the Act, provided for abatement of proceedings in different situations. Sub-section (1) of section 245HA of the Income-tax Act has been amended to provide that where in respect of any application made under section 245C, an order under sub-section (4) of section 245D has been passed without providing for the terms of settlement, the proceedings before the Settlement Commission shall abate on the day on which such order under sub-section (4) of section 245 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax liability arising on additional income disclosed in the application. Since such liability was not an 'existing' liability and in the absence of specific provision, the Assessing Officer was unable to adjust the same. 49.12 Accordingly, section 132B of the Income-tax Act, has been amended to provide that the asset seized under section 132 or requisitioned under section 132A may also be adjusted against the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Income-tax Act. 49.13 Applicability: These amendments have taken effect from 1st day of June, 2015. 50. Eligibility for appointment as Law Member in the Authority for Advance Rulings (AAR) 50.1 The provision of section 245-O of the Income-tax Act, before its amendment by the Act, provided that a person from Indian legal Service shall be qualified for appointment as law member who is an Additional Secretary to the Government of India. 50.2 In order to widen the scope for eligibility, section 245-O has been amended to provide that a person from Indian legal Service who is, or is qualified to be, an Additional Secretary to the Government of India sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of assessee as computed by the Assessing Officer did not exceed five lakh rupees. This limit of total income of five lakh rupees for a single member bench was last revised in 1998. 52.2 Considering the rise in number of cases before ITAT where total income of assessee exceeded five lakh rupees, sub-section (3) of section 255 of the Income-tax Act has been amended to provide that a single member bench may dispose of a case where the total income of assessee as computed by the Assessing Officer does not exceed fifteen lakh rupees. 52.3 Applicability: This amendment has taken effect from 1st day of June, 2015. 53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more. 54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. 54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made. 54.6 Applicability: These amendments have taken effect from 1st day of June, 2015. 55. Amount of tax sought to be evaded for the purposes of penalty for concealment of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 115JB or 115JC then such amount shall not be considered in computing tax sought to be evaded under provisions of section 115JB or 115JC. Further, in a case where the provisions of section 115JB or 115JC are not applicable, the computation of tax sought to be evaded under the provisions of section 115JB or 115JC shall be ignored. 55.5 Applicability: This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years. 56. Certain accountants not to give reports/certificates 56.1 The Income-tax Act contains several provisions (e.g. section 44AB, section 80-IA, section 92E, section 115JB, etc.) which mandate the taxpayers to furnish audit reports and certificates issued by an 'accountant' for ensuring correct reporting/computation of taxable income by the tax payers. Explanation below section 288(2) of the Income-tax Act defines an 'accountant' as a chartered accountant within the meaning of Chartered Accountants Act, 1949 (including a person eligible to be appointed as auditor under section 226(2) of the Companies Act, 1956, of the companies registered under any State). 56.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act has also been revised on the lines of definition of 'chartered accountant' in the Companies Act, 2013. 56.5 Applicability:- These amendments takes effect from 1st June, 2015. 57. Enabling the Board to notify rules for giving foreign tax credit 57.1 Sub-section (1) of section 91 of the Income-tax Act provides relief to Indian residents in respect of income-tax on the income which is taxed in India as well as in the country with which there is no Double Taxation Avoidance Agreement (DTAA) by providing a deduction from the Indian income-tax of a sum calculated on such doubly taxed income, at the Indian rate of tax or the rate of tax of said country, whichever is lower. In cases of countries with which India has entered into an agreement for the purposes of avoidance of double taxation under section 90 or section 90A, a relief in respect of income-tax on doubly taxed income is available as per the respective DTAAs. 57.2 Income-tax Act, before amendment made by the Finance Act, 2015, did not provide the manner for granting credit of taxes paid in any country outside India. Therefore, sub-section (2) of section 295 of the Income-tax Act has been amended to enable CBDT to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be tracked and this gives an opportunity to the assessees to under report/under value the assets which are liable for wealth-tax. Due to this, the collection of wealth-tax over the years has not shown any significant growth and has only resulted into disproportionate compliance burden on the assessees and administrative burden on the department. 58.5 Therefore, the levy of wealth tax under the Wealth-tax Act, 1957 has been abolished with effect from the 1st April, 2016. It has also been provided that the objective of taxing high net worth persons shall be achieved by levying a surcharge on tax payer earning higher income as levy of surcharge is easy to collect & monitor and also does not result into any compliance burden on the assessee and administrative burden on the department. The details regarding levy of enhanced surcharge on this account are given under the heading "Rates of Income-tax". Further the information relating to assets which is currently required to be furnished in the wealth-tax return shall be captured by suitably modifying income-tax return for assessment year 2016-17 and subsequent assessment years. 58.6 Applicability:- This amendment takes effe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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