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TMI BlogPROVISIONS RELATING TO DIRECT TAXES & RELATED LAWSX X X X Extracts X X X X X X X X Extracts X X X X ..... ed by taxpayers (I) Rationalisation of provisions (J) Miscellaneous DIRECT TAXES A. RATES OF INCOME-TAX I. Rates of income-tax in respect of income liable to tax for the assessment year 2019-20. In respect of income of all categories of assessees liable to tax for the assessment year 2019-20, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2018 for the purposes of computation of "advance tax", deduction of tax at source from "Salaries" and charging of tax payable in certain cases. (1) Surcharge on income-tax The amount of income-tax shall be increased by a surcharge for the purposes of the Union,- (a) in the case of every individual or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act,- (i) at the rate of ten per cent. of such tax, where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds fifty lakh rupees but does not exceed one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng section 92CE. (2) Marginal Relief- Marginal relief has also been provided in all cases where surcharge is proposed to be levied. (3) Health and Education Cess- For assessment year 2019-20, "Education Cess on income-tax" and "Secondary and Higher Education Cess on income-tax" has been discontinued. However, a new cess, by the name of "Health and Education Cess" has been levied at the rate of four per cent. on the amount of income tax so computed, inclusive of surcharge, wherever applicable, in all cases. No marginal relief is available in respect of such cess. II. Rates for deduction of income-tax at source during the financial year 2019-20 from certain incomes other than "Salaries". The rates for deduction of income-tax at source during the financial year 2019-20 on certain incomes other than "Salaries" have been specified in Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2018, for the purposes of deduction of income-tax at source during the financial year 2018-19. For sections specifying the rate of deduction of tax at source, the tax shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including company other than a domestic company. III. Rates for deduction of income-tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2019-20. The rates for deduction of income-tax at source from "Salaries" during the financial year 2019-20 and also for computation of "advance tax" payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the financial year 2019-20 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs- A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person. Paragraph A of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not exceeding two crore rupees, the total amount payable as income-tax and surcharge on such income 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; (iii) two crore rupees but not exceeding five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees; and (iv) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees. B. Co-operative Societies In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates continue to be the same as those specified for financial year 2018-19. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic company exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of twelve per cent. shall continue to be levied if the total income of the domestic company exceeds ten crore rupees. In case of companies other than domestic companies, the existing surcharge of two per cent. shall continue to be levied, if the total income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of five per cent. shall continue to be levied, if the total income of the company other than domestic company exceeds ten crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten 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. Further total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees. In other cases [including cases where pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration for immovable property' is presently not defined for the purposes of this section. It is noted that in the transaction involving purchase of immovable property, there are other types of payments made besides the sales consideration and the buyer is contractually bound to make such payments to the builder/seller, either under the same agreement or under a different agreement. Some of such payments are those for rights to amenities like club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee etc. Accordingly, it is proposed to amend the Explanation to said section and provide that the term "consideration for immovable property" shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property. This amendment will take effect from 1st September, 2019. [Clause 45] Deemed accrual of gift made to a person outside India Section 9 of the Act relates to Income deemed to accrue or arise in India. Under the Act, non -residents are taxable in India in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson for travel to a foreign country; or (iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or (iv) fulfils such other prescribed conditions, as may be prescribed. Further, currently, a person claiming rollover benefit of exemption from capital gains tax on investment in specified assets like house, bonds etc., is not required to furnish a return of income, if after claim of such rollover benefits, his total income is not more than the maximum amount not chargeable to tax . In order to make furnishing of return compulsory for such persons, it is proposed to amend the sixth proviso to section 139 of the Act to provide that a person who is claiming such rollover benefits on investment in a house or a bond or other assets, under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act, shall necessarily be required to furnish a return, if before claim of the rollover benefits, his total income is more than the maximum amount not chargeable to tax. These amendments will take effect from 1st April, 2020 and will, accordingly apply in relation to assessment year 2020-2021 and subsequent asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hentication of PAN or Aadhaar, the penalty provision contained in section 272B is proposed to be amended suitably. These amendments will take effect from 1st September, 2019. [Clauses 40 & 64] Consequence of not linking PAN with Aadhaar The existing proviso to the sub-section (2) of section 139AA, provides that the PAN allotted to a person shall be deemed to be invalid, in case the person fails to intimate the Aadhaar number, on or before the notified date. In order to protect validity of transactions previously carried out through such PAN, it is proposed to amend the said proviso so as to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner. This amendment will take effect from 1st September, 2019. [Clause 41] Widening the scope of Statement of Financial Transactions (SFT) Existing provisions of section 285BA of the Act, inter alia, provide for furnishing of statement of financial transaction (SFT) or reportable account by person specified therein. In order to enable pre-filling of return of income, it is proposed to obtain information by widening the scope of furnishing of stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) to section 43 of the Act provides the definition of the term "actual cost". The second proviso to the said section specifies that where the assessee incurs any expenditure for the acquisition of an asset or part thereof, and in respect of such acquisition, he makes a payment or aggregate of payments exceeding rupees ten thousand in a day to a person in any mode other than an account payee cheque or an account payee bank draft or using the electronic clearing system through a bank account, then such expenditure shall not be included in the determination of the actual cost. Section 43CA of the Act provides that where the date of agreement fixing the value of consideration for the transfer of the asset and the date of registration of such transfer of asset are different, then the full value of consideration for transfer of such asset shall be the stamp duty value on the date of the agreement provided the amount of consideration or a part thereof has been received by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on or before the date of agreement for transfer of the asset. Similar provision is made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 269ST of the Act prohibits a person from receiving an amount of rupees two lakh or more in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person otherwise than by an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account. Section 269T of the Act prohibits a banking company or a co-operative bank and any other company or co-operative society and any firm or other person from repaying any loan or deposit made with it or any specified advance received by it, in any mode other than by an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, if the amount being repaid is rupees twenty thousand or more. In order to encourage other electronic modes of payment, it is proposed to amend the above sections so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment/receipt in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 2019. [Clauses 59 & 62] Further, it is proposed to make a consequential amendment in the Payment and Settlement Systems Act, 2007 so as to provide that no bank or system provider shall impose any charge upon anyone, either directly or indirectly, for using the modes of electronic payment prescribed under section 269SU of the Income-tax Act. This amendment will take effect from 1st November, 2019. [Clause 194] D.TAX INCENTIVES Incentives to International Financial Services Centre (IFSC): In order to promote the development of world class financial infrastructure in India, some tax concessions have already been provided in respect of business carried on from an IFSC. To further promote such development and bring these IFSC at par with similar IFSC in other countries, following additional benefits are proposed: A) Under the existing provisions of the section 47 of the Act, any transfer of a capital asset, being bonds or Global Depository Receipts or rupee denominated bond of an Indian company or derivative, made by a non-resident through a recognised stock exchange located in any IFSC and where the consideration for such transaction is paid or payable in foreign currenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Fund shall be liable to pay additional income-tax on such distributed income. In order to incentivize relocation of Mutual Fund in IFSC, it is proposed to amend the said section so as to provide that no additional income-tax shall be chargeable in respect of any amount of income distributed, on or after the 1st day of September, 2019, by a Mutual Fund of which all the unit holders are non-residents and which fulfills certain other specified conditions. This amendment will take effect, from 1st September, 2019. [Clause 37] E) The existing provisions of the section 80LA of the Act, inter alia, provide profit linked deduction of an amount equal to one hundred per cent of income for the first five consecutive assessment years and fifty per cent of income for the next five consecutive assessment years, to units of an IFSC. With a view to further incentivize operation of units in IFSC, it is proposed to amend the said section so as to provide that the deduction shall be increased to one hundred per cent for any ten consecutive years. The assessee, at his option, may claim the said deduction for any ten consecutive assessment years out of fifteen years beginning with the year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as interest on any loan or advances from a deposit-taking NBFCs and systemically important non deposit-taking NBFCs shall be allowed as deduction if it is actually paid on or before the due date of furnishing the return of income of the relevant previous year. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years. [Clauses 13 & 15] Relaxation in conditions of special taxation regime for offshore funds Section 9A of the Act provides for a safe harbour in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager located in India and acting on behalf of such fund shall by itself not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India. The benefit under section 9A is available subject to the conditions provided in sub-sections (3), (4) and (5) of the said section. Sub-section (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 194LC of the Act provide that the interest income payable to a non-resident by a specified company on borrowings made by it in foreign currency from sources outside India under a loan agreement or by way of issue of any long-term bond including long-term infrastructure bond, or rupee denominated bond shall be eligible for TDS at a concessional rate of five per cent. In order to incentivise low cost foreign borrowings through Off-shore Rupee Denominated Bond, the press release dated 17th September, 2018, inter alia, announced that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of rupee denominated bond issued outside India during the period from September 17, 2018 to March 31, 2019 shall be exempt from tax. Consequently, no tax was required to be deducted on the payment of interest in respect of the said bond. The exemption announced through the said press release is proposed to be incorporated in the law by amending section 10 of the Act so as to provide exemption to income payable by way of interest to a non-resident by the specified company in respect of monies borrowed from a source outside India by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... politan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); and (ii) the stamp duty value of such residential unit in the housing project shall not exceed forty five lakh rupees; These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years. [Clauses 25 & 26] Incentives to National Pension System (NPS) subscribers (i) Under the existing provisions of section 10 of the Act, any payment from the NPS Trust to an assessee on closure of his account or on his opting out of the pension scheme, to the extent it does not exceed forty per cent of the total amount payable to him at the time of such closure or on his opting out of the scheme, is exempt from tax. With a view to enable the pensioner to have more disposable funds, it is proposed to amend the said section so as to increase the said exemption from forty per cent. to sixty per cent of the total amount payable to the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated. The said clause was inserted vide Finance Act, 2017 in order to facilitate ease of doing business and to promote start-up India. To further facilitate ease of doing business in the case of an eligible start-up, it is proposed to amend section 79 so as to provide that loss incurred in any year prior to the previous year, in the case of closely held eligible start-up, shall be allowed to be carried forward and set off against the income of the previous year on satisfaction of either of the two conditions stipulated currently at clause (a) or clause (b). For other closely held companies, there would be no change, and loss incurred in any year prior to the previous year shall be carried forward and set off only on satisfaction of condition currently provided at clause (a). (2) The existing provisions of the section 54GB of the Income-tax Act, inter alia, provide for roll over benefit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons as may be notified by the Central Government in this behalf. Currently the benefit of exemption is available to Category I AIF. With a view to facilitate venture capital undertakings to receive funds from Category II AIF, it is proposed to amend the said section to extend this exemption to fund received by venture capital undertakings from Category II AIF as well. This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 21] E. FACILITATING RESOLUTION OF DISTRESSED COMPANIES Measures for resolution of distressed companies The existing provisions of section 79 are not applicable to a company where any change in shareholding takes place in a previous year pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 (IBC) subject to the condition that jurisdictional Principal Commissioner or Commissioner is provided a reasonable opportunity of being heard. Thus, loss in such cases can be carried forward and set off even if there is change in voting power or shareholding. This benefit is proposed to be extended to certain companies. Thus it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such determination. In order to provide relief to such types of transactions from the applicability of sections 56(2)(x) and 50CA, it is proposed to amend these sections to empower the Board to prescribe transactions undertaken by certain class of persons to which the provisions of section 56(2)(x) and 50CA shall not be applicable. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clauses 19 & 21] F. IMPROVING EFFECTIVENESS OF TAX ADMINISTRATION Online filing of application seeking determination of tax to be deducted at source on payment to non-residents Under sub-section (2) of section 195 of the Act, if a person who is responsible for paying any sum to a non-resident which is chargeable to tax under the Act (other than salary) considers that the whole of such sum would not be income chargeable in the case of the recipient, he can make an application to the Assessing Officer to determine the appropriate proportion of such sum chargeable. This provision is used by a person making payment to a non-resident to obtain certificate/order from the Assessing Officer for lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n anti-abuse provision to check the practice of unlisted companies resorting to buy-back of shares instead of payment of dividends. This practice of widespread abuse was noted, in the past, amongst unlisted companies where the taxpayers preferred it for tax avoidance, as tax rate for capitals gains was lower than the rate of Dividend Distribution Tax (DDT). However, instances of similar tax arbitrage have now come to notice in case of listed shares as well, whereby the listed companies are also indulging in such practice of resorting to buy-back of shares, instead of payment of dividends. In order to curb such tax avoidance practice adopted by the listed companies, the existing anti abuse provision under Section 115QA of the Act, pertaining to buy-back of shares from shareholders by companies not listed on a recognised stock exchange, is proposed to be extended to all companies including companies listed on recognised stock exchange. Thus, any buy back of shares from a shareholder by a company listed on recognised stock exchange, on or after 5th July 2019, shall also be covered by the provision of section 115QA of the Act. Accordingly, it is also proposed to extend exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e existing conditions for tax-neutral demergers is that the resulting company should record the property and the liabilities of the undertaking at the value appearing in the books of accounts of the demerged company. It has been represented that Indian Accounting Standards (Ind-AS) compliant companies are required to record the property and the liabilities of the undertaking at a value different from the book value of the demerged company. In order to facilitate, it is proposed to amend section 2 of the Act to provide that the requirement of recording property and liabilities at book value by the resulting company shall not be applicable in a case where the property and liabilities of the undertakings received by it are recorded at a value different from the value appearing in the books of account of the demerged company immediately before the demerger in compliance to the Indian Accounting Standards specified in Annexure to the Companies (Indian Accounting Standards) Rules, 2015. This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 3] Relaxing the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2020-21 and subsequent assessment years. [Clause 10] Clarification with regard to power of the Assessing Officer in respect of modified return of income filed in pursuance to signing of the Advance Pricing Agreement (APA) Section 92CC of the Act empowers the Central Board of Direct Taxes (CBDT) to enter into an APA, with the approval of the Central Government, with any person for determining the Arm's Length Price (ALP) or specifying the manner in which ALP is to be determined in relation to an international transaction which is to be entered into by that person. The APA is valid for a period, not exceeding five previous years, as may be specified therein. This section also provides for rollback of the APA for four years. Thus, once the APA is entered into, the ALP of the international transaction, which is subject matter of the APA, would be determined in accordance with such APA. In order to give effect to the APA, section 92CD also provides for mechanism, including filing of modified return of income by the taxpayer and manner of completion of assessments by the Assessing Officer having regard to terms of the APA. Sub-section (3) of this section deals with a situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. In order to address such concerns and to make the secondary adjustment regime more effective and easy to comply with, it is proposed to amend section 92CE of the Act so as to provide that:- (i) the condition of threshold of one crore rupees and of the primary adjustment made upto assessment year 2016-17 are alternate conditions; (ii) the assessee shall be required to calculate interest on the excess money or part thereof; (iii) the provision of this section shall apply to the agreements which have been signed on or after 1st April, 2017; however, no refund of the taxes already paid till date under the pre amended section would be allowed; (iv) the excess money may be repatriated from any of the associated enterprises of the assessee which is not resident in India; (v) in a case where the excess money or part thereof has not been repatriated in time, the assessee will have the option to pay additional income-tax at the rate of eighteen per cent on such excess money or part thereof in addition to the existing requirement of calculation of interest till the date of payment of this additional tax. The additional tax is proposed to be increased by a surcharge of twelve p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with the provisions of Chapter VI and it shall not be passed onto the unit holder; (ii) the loss other than business loss, if any, shall also be ignored for the purposes of pass through to its unit holders, if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast twelve months; (iii) the loss other than business loss, if any, accumulated at the level of investment fund as on 31st March, 2019, shall be deemed to be the loss of a unit holder who held the unit on 31st March, 2019 in respect of the investments made by him in the investment fund and allowed to be carried forward by him for the remaining period calculated from the year in which the loss had occurred for the first time taking that year as the first year and it shall be set-off by him in accordance with the provisions of Chapter VI; (iv) the loss so deemed in the hands of unit holders shall not be available to the investment fund for the purposes of chapter VI. These amendments will take effect from the 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 38] Provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reporting regime in the form of Country-by-Country Report (CbCR) in respect of an international group. It provides that every parent entity or the alternate reporting entity, resident in India, shall, for every reporting accounting year, in respect of the international group of which it is a constituent, furnish a report, to the prescribed authority within a period of twelve months from the end of the said reporting accounting year, in the form and manner as may be prescribed. Several concerns have been expressed that in case of an alternate reporting entity (ARE) resident in India whose ultimate parent entity is not resident in India, the accounting year would always be the accounting year applicable in the country where such ultimate parent entity is resident and cannot be the previous year of the entity resident in India. Accordingly, it has been requested that this unintended anomaly as regards the interpretation of accounting year in case of ARE, resident in India may be removed. In order to address such concerns and to bring clarity in law, it is proposed to suitably amend section 286 so as to provide that the accounting year in case of the ARE of an international group, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Central Government is empowered to notify that the provisions of this section shall not be applicable to consideration received by a notified company. Certain notifications issued under this sub-clause by the Central Government provide for exemption, subject to the fulfilment of certain conditions. With a view to ensure compliance to the conditions specified in the notification, it is proposed to provide that in case of failure to comply with the conditions, the consideration received for issue of shares which exceeds the face value of such shares shall be deemed to be the income of the company chargeable to income-tax for the previous year in which the failure to comply with any of the said conditions has taken place. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 21] Consequential amendment to section 56 The existing provisions of the section 56 of the Income-tax Act, inter alia, provide that income by way of interest received on compensation or on enhanced compensation referred to in section 145A(b) shall be chargeable to tax. The Finance Act, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax collected at source for the purpose of determining tax liability. Further, in order to rationalise the existing threshold limit of tax payable under said section, it is further proposed to amend the said section so as to increase the threshold of tax payable from the existing rupees three thousand to rupees ten thousand. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years. [Clause 65] Rationalisation of provision relating recovery of tax in pursuance of agreements with foreign countries The existing provisions of section 228A of the Act provide inter alia that where an agreement is entered into by the Central Government with the Government of any foreign country for recovery of income-tax under the Income-tax Act and the corresponding law in force in that country and where such foreign country sends a certificate for the recovery of any tax due under such corresponding law from a person having any property in India, the Board, on receipt of such certificate may, forward it to the Tax Recovery Officer within whose jurisdiction such property is situated for the recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptember, 2019. [Clause 68] Rationalisation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 The existing provisions of section 2 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the BM Act) provide inter alia that the "assessee" means a person who is resident in India within the meaning of section 6 of the Income-tax Act. In order to clarify the legislative intent behind enacting the BM Act, which was to tax such foreign income and assets, which were not charged to tax under the Income-tax Act, it is proposed to amend the said section so as to provide that the "assessee" shall mean a person being a resident in India within the meaning of section 6 of the Income-tax Act, in the previous year, or a person being a non-resident or not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates, or in the previous year in which the undisclosed asset located outside India was acquired. It is also proposed to provide that the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government may notify the class of persons to whom the amount of tax, surcharge and penalty, paid in excess of the amount payable under the Scheme shall be refundable. This amendment will take effect retrospectively from 1st June, 2016. [Clauses 199 & 200] Rationalisation of provisions relating to STT As per the existing provisions section 99 of the Finance (No.2) Act, 2004, the value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be, the settlement price. In order to rationalise the levy of STT where the option is exercised, it is proposed to amend the said section so as to provide that value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be the difference between the strike price and the settlement price. This amendment will take effect from 1st September, 2019. [Clause 193] Rationalizing the provisions of the Prohibition of Benami Property Transactions Act The existing provisions of section 23 of the Prohibition of Benami Property Transactions Act ('the PBPT Act') provide that the Initiating Officer, with the prior approval of the Approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. This amendment will take effect from 1st September, 2019. [Clause 175] With a view to enable admissibility of certified copies of records or other documents in the custody of the authority as evidence in any proceeding under the PBPT Act, it is proposed to insert a new section 54B in the said Act so as to provide that entries in the records or other documents in the custody of an authority shall be admitted in evidence in any proceedings for the prosecution of any person for an offence under the PBPT Act. This amendment will take effect from 1st September, 2019. [Clause 175] The existing provisions of the section 55 of the PBPT Act provide that no prosecution shall be instituted against any person in respect of any offence under the said Act without the previous sanction of the Board. With a view to rationalise the provisions, it is proposed to amend the said section so as to provide that no prosecution shall be instituted against any person in respect of any offence under the said Act without the previous sanction of the competent authority. This amendment will take effect from 1st September, 2019. [Clause 176] Extension of tax concession to The Special Undertaking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of this section may result in suspension or denial of certain benefits. [70] 3 Section 103 is being amended so as to- (a)substitute sub-section (1) in order to enable the proper officer to scan or screen, with the prior approval of Deputy Commissioner of Customs or Assistant Commissioner of Customs, any person referred to in sub-section (2) of section 100 who has any goods liable to confiscation secreted inside his body. The proper officer can directly furnish the report of the said screening or scanning to the nearest magistrate if such goods are found secreted inside the body of the said person. (b)so as to enable the magistrate to take action upon the report of scanning or screening by the proper officer under sub-section (6). [71] 4 Section 104 is being amended so as to- (a)empower an officer of customs to arrest a person who has committed an offence outside India or Indian Customs waters also under sub-section (1). (b)insert two new clauses (c) and (d) in sub-section (4) so as to specify two particular offences which shall be cognizable. (c)insert a new clause (e) in sub-section (6) so as to specify a particular offence which shall be non-bailable. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offence if the duty relatable to utilization of the instrument exceeds fifty lakhs of rupees. (c)insert an Explanation to define the term instrument. [78] 11 Section 149 is being amended so as to empower Board to make regulations specifying time, form, manner, restrictions and conditions for amendment of any document. [79] 12 Section 157 is being amended so as to empower the Board to make regulations for purposes of sections 99B and 149 respectively. [80] 13 Sub-section (2) of section 158 is being amended so as to increase the maximum limit of penalty for violation of any provision of rules or regulations from fifty thousand rupees to two lakh rupees. [81] II. AMENDMENTS IN THE CUSTOMS TARIFF ACT, 1975 S. No Amendment Clause of the Finance (No. 2) Bill, 2019 1 Section 9 is being amended so as to insert sub-section (1A) to provide for anti-circumvention measure in respect of countervailing duty. [85] 2 Section 9C is being amended so as to provide that appeal against an order of determination or review regarding the existence, degree and effect of increased volume of imports of any article requiring imposition of safeguard duty, shall lie with Customs Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8512 10 00, 8512 20 10, 8512 20 20 Lighting or visual signaling equipment of a kind used in bicycles or motor vehicles 10% 15% 18 8512 20 90, 8512 30 90 Other visual or sound signalling equipment for bicycles or motor vehicles 7.5% 15% 19 8512 30 10 Horns for vehicles 10% 15% 20 8512 90 00 Parts of visual or sound signalling equipment for bicycles or motor vehicles 7.5% 10% 21 8512 40 00, 8539 10 00, 8539 21 20, 8539 29 40 Windscreen wipers, defrosters and demisters, Sealed beam lamp units and other lamps for automobiles 10% 15% 22 8706 Chassis fitted with engines, for the motor vehicles of headings 8701 to 8705. 10% 15% 23 8707 Bodies (including cabs), for the motor vehicles of headings 8701 to 8705 10% 15% Electronics and Electrical equipments 24 8415 90 00 Indoor and outdoor unit of split -system air conditioner 10% 20% 25 8518 21 00, 8518 22 00 Loudspeaker 10% 15% 26 8521 90 90 Digital Video Recorder (DVR) and Network Video Recorder (NVR) 15% 20% 27 8525 80 CCTV camera and IP camera 15% 20% 28 9001 10 00 Optical Fibres, optical fibre bundles and cables 10% 15% Miscellaneous changes in Tariff Schedule 29 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter 15, 2915 70, 3823 11 00, 3823 12 00, 3823 13 00, 3823 19 00 Palm stearin and other oils, having 20% or more free fatty acid, Palm Fatty Acid Distillate and other industrial monocarboxylic fatty acids, acid oils from refining, for use in manufacture of soap and oleochemicals. Nil 7.5% Petroleum and Petrochemicals 9 2709 00 00 Petroleum Crude Nil Re. 1 per tonne 10 2710 Naphtha 5% 4 % 11 2903 15 00 Ethylene dichloride (EDC) 2% Nil 12 2910 20 00 Methyloxirane (Propylene Oxide) 7.5% 5% 13 Plastic and Rubber 14 3904 Poly Vinyl Chloride 7.5% 10% 15 3926 90 91, 3926 90 99 Articles of plastics 10% 15% 16 4002 31 00 All goods i.e. Butyl Rubber 5% 10% 17 4002 39 00 Chlorobutyl rubber or bromobutyl rubber 5% 10% Paper and Paper products 18 48 a. Newsprint Nil 10% b.Uncoated paper used for printing of newspapers c.Lightweight coated paper used for printing of magazines 19 4901 10 10, 4901 91 00, 4901 99 00 Printed books (including covers for printed books) and printed manuals, in bound form or in loose-leaf form with binder, executed on paper or any other material including transparencies. Nil 5% Textiles 20 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8504 40 Charger/Power adapter for CCTV camera/IP camera/DVR/NVR Nil 15% 38 85 Specified electronic items like plugs, sockets, switches, connectors, relays. Nil Applicable rate Automobile and automobile parts 39 8421 39 20, 8421 39 90 Catalytic convertor (All goods under these tariff items other than catalytic converters will continue at 7.5%) 5% 10% 40 8702, 8704 Completely Built Unit (CBU) of vehicles falling under heading 8702, 8704 25% 30% 41 Any Chapter (i)E-Drive assembly, (ii)On board charger, (iii)E-compressor and (iv)Charging Gun Following parts of electric vehicles: - Applicable rate Nil 42 87 Prescribing actual user condition in respect of existing exemption from BCD to parts of Hybrid vehicles - - Oil rigs and other goods used for oil exploration 43 84 or any other chapter Providing option to pay BCD at transaction value on the disposal of goods, imported without payment of customs duty for petroleum operations / coal bed Methane operations where such disposal is made in unserviceable and mutilated condition Applicable rate on depreciated value 7.5% on transaction value Export Promotion for Sports goods 44 39 , 4407 Foam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification No. 296/76-Customs dated 2nd August, 1976 is proposed to be given retrospective effect so as to exempt IGST and compensation cess leviable under section 3(7) and section 3(9) of the Customs Tariff Act, 1975 respectively, on the temporary importation of vehicles under the Customs Convention on the Temporary Importation of Private Road Vehicles (carnet de passages-en-douane) for the period 1st July, 2017 to 31st December, 2018. [84] 3 Retrospective effect, for the period 21st October, 2015 to 22nd February, 2016 to notification No. 5/2016-Customs (ADD) dated 22nd February, 2016 to insert correct classification of product under consideration for ADD namely All Fully Drawn or Fully Oriented Yarn/Spin Draw Yarn/Flat Yarn of Polyester (non-textured and non - POY) (from 5402 to 5402 47). This notification amended the notification No. 51/2015-Customs (ADD) dated 21st October, 2015. [88] 4 Retrospective effect, for the period 8th March, 2016 to 4th July, 2016 to notification No. 29/2016-Customs (ADD) dated 5th July, 2016 to exclude ter polymer from the ambit of product under consideration for ADD on Polypropylene. This notification amended notification No. 7/2016-Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 3 2402 20 30 Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) not exceeding 65 millimeters Nil ₹ 5 per thousand 4 2402 20 40 Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) exceeding 65 millimeters but not exceeding 70 millimeters Nil ₹ 5 per thousand 5 2402 20 50 Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) exceeding 70 millimeters but not exceeding 75 millimeters Nil ₹ 5 per thousand 6 2402 20 90 Other (Cigarettes containing tobacco) Nil ₹ 10 per thousand 7 2402 90 10 Cigarettes of tobacco substitutes Nil ₹ 5 per thousand 8 2403 11 10 Hookah or gudaku tobacco Nil 0.5% 9 2403 19 10 Smoking mixtures for pipes and cigarettes Nil 1% 10 2403 19 21 Other than paper rolled biris, manufactured without the aid of machine Nil 5 paisa per thousand 11 2403 19 29 Other (Biris) Nil 10 paisa per thousand 12 2403 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in effective rate of Road and Infrastructure Cess, levied as additional duty of excise, on Petrol and Diesel From To 1 Motor spirit commonly known as petrol ₹ 8 per litre ₹ 9 per litre 2 High speed diesel oil ₹ 8 per litre ₹ 9 per litre SERVICE TAX Note: (a) "Service Tax" means the service tax levied under section 66B of the Finance Act, 1994 (b) Amendments carried out through the Finance (No. 2) Bill, 2019 come into effect on the date of its enactment, unless otherwise specified. S. No. Retrospective exemptions Clause of Finance (No.2) Bill, 2019 1 Services provided or agreed to be provided by the State Government by way of grant of liquor licence, against consideration in the form of licence fee or application fee or by whatever name it is called, are proposed to be exempted from service tax for during the period commencing from 1st April, 2016 and ending with the 30th June, 2017. [116] 2 Services provided or agreed to be provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, - (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance Ruling" (which is being created by various amendments in Chapter XVII of the CGST Act) from the definition of "adjudicating authority". [91] 2 A new sub-section is being inserted in section 10 of the CGST Act to bring in an alternative composition scheme for supplier of services or mixed suppliers (not eligible for the earlier composition scheme) having an annual turnover in preceding financial year upto ₹ 50 lakhs. Further, explanation is being added to section 10 to clarify that: i. for computing the aggregate turnover to determine eligibility for the composition scheme, value of exempt supplies services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account; and ii. for determining the value of turnover in a State or Union territory to calculate tax payable, value of exempt supplies of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; and value of the first supplies from 1st of April till the date when the taxpayer becomes liable for registration shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledger of the registered person . [101] 12 New sub-section (8A) is being inserted in section 54 of the CGST Act so as to provide that the Central Government may disburse refund amount to the taxpayers in respect of refund of State taxes as well. [102] 13 New clause (f) is being inserted in section 95 of the CGST Act to define the "National Appellate Authority for Advance Ruling". [103] 14 New sections 101A, 101B and 101C are being inserted in the CGST Act so as to provide for constitution, qualification, appointment, tenure, conditions of services of the National Appellate Authority for Advance Ruling; to provide for procedures to be followed for hearing appeals against conflicting advance rulings pronounced on the same question by the Appellate Authorities of two or more States or Union territories in case of distinct persons; and to provide that the National Appellate Authority shall pass order within a period of ninety days from the date of filing of the appeal respectively. [104] 15 Section 102 of the CGST Act is being amended so as to allow the National Appellate Authority to amend any order passed by it so as to rectify any error apparent on the face of the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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