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Ambalal Patel & Co. Chartered Accountants 1 st Floor, Sapphire Business Centre, Above SBI Vadaj Branch, Usmanpura, Ashram Road, Ahmedabad-380013 Email: [email protected] Website: www.apcca.com Blog: apcca.wordpress.com Budget Highlights 2016-17 DIRECT TAX PROPOSALS

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Ambalal Patel & Co.

Chartered Accountants 1st Floor, Sapphire Business Centre,

Above SBI Vadaj Branch, Usmanpura,

Ashram Road, Ahmedabad-380013

Email: [email protected]

Website: www.apcca.com

Blog: apcca.wordpress.com

Budget Highlights

2016-17 DIRECT TAX PROPOSALS

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Union Budget 2016-17 – Direct Tax Proposals (For Clients only)

Ambalal Patel & Co

Chartered Accountants

Budget

2016-17

Finance Minister Arun Jaitley on 29th February, 2016, Monday announced a

budget aimed at high growth,

He started the Speech by saying that “The Global Slow Down has not impacted

the Indian Economy. The International Monetary Fund has hailed India as a

‘bright spot’ amidst a slowing global economy”.

Here are the clause by clause changes proposed by Honorable Finance Minister

in respect of Direct Tax :

i. Income Tax rates:

a) There is no change in Slabs of Income tax, Rates of Income Tax or Education

Cess except in case of Companies. The changes in the tax rate of Domestic

Companies is as under:

Assessee Old Tax

Rate

New Tax

Rate

Conditions

Domestic

Company

30% 29% Turnover Below 5 crores in Prev. year i.e. in

2014-15

Newly set-up

Domestic

Company

(Section

115BA)

NA 25% (at

Option of

Assessee)

1) Set-up and registered after

01.03.2016

2) Manufacturing or Production activity

3) No other activity allowed

4) Has not claimed any profit linked

benefits or deductions e.g.10AA,

Additional Depreciation,etc.

5) 80JJAA Deduction can be claimed

6) MAT is Applicable

Domestic

Company

30% 30% Other Than above

b) In case Resident Individual having taxable income of less than Rs.5,00,000/-

(after deduction under Ch-VIA), the amount of Tax Rebate u/s 87A will be

increased from Rs.2000/- to Rs.5000/- .

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c) However there is change in rate of Surcharge as under:

Assessee Taxable income Old

Surcharge

Rate

New

Surcharge

Rate

Maximum

Tax Rate

FY 2016-17

Individual/HUF More than 1 Crore 12% 15% 35.535%

Partnership Firm More than 1Crore 12% No Change 34.608%

Domestic Company

(Normal Tax)

1 Cr to 10 Crs 7% No Change 33.063%

More than 10 Crs 12% No Change 34.608%

MAT 1 Cr to 10 Crs 7% No Change 20.38885%

More than 10 Crs 12% No Change 21.3416%

Dividend Dist Tax No Change 20.3576%

ii. Section 2 (23C) Electronic hearing added

In the definition of the hearing, communication of data and documents through

electronic mode is included. Due to which the “E-Assessments” can be done from

01.06.2016.

iii. Withdrawal of accumulated balance from Provident Fund (Section 10(12)) and

Superannuation Fund (Sec.10(13)) (W.e.f: FY 2016-17) :

Current:

a) Whole amount withdrawn from Provident Fund after 5 years of service is

exempt.

b) Whole amount of Annuity is exempt.

Proposed:

It is proposed that tax is payable on amount withdrawn in excess of 40% of

balance as on date (60% of the total withdrawl is taxable). This is applicable for

employees contribution made on or after 01.04.2016.

However, any amount received in hands of Legal Heir on death, is not taxable.

The taxability is protested and Govt. may rollback to the Non-taxability.

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iv. Section 10(12A) Withdrawl of accumulated balance from National Pension System

Fund (W.e.f: FY 2016-17) :

Current:

Whole amount withdrawn is taxable.

Proposed:

It is proposed that tax is payable on amount withdrawn in excess of 40% of

balance as on date (60% of the total withdrawl is taxable).

However, any amount received in hands of Legal Heir on death, is not taxable.

(Section 80CCD(3) proviso)

v. Section 10(15B) Interest on deposit certificate issued under “Gold Monetisation

Scheme” (W.e.f: FY 2016-17) :

Present:

Whole amount of interest is taxable.

Proposed:

It is proposed that Whole amount of Interest is exempt.

vi. Section 10(34) Dividend Income in excess of Rs.10 lacs (W.e.f: FY 2016-17) :

Present Provision:

The amount of dividend income is exempt.

Proposed Change:

In case of Resident Individual, HUF and Firms, dividend received exceeding Rs.10

Lakhs is taxable @ 10% (Section 115BBDA) in the hands of the receiver of the

dividend (From FY 2016-17). No expenses are allowed as deduction from such

Taxable Dividend exceeding Rs. 10 lacs.

AOP and BOI are not covered under this provisions.

Example:

In case the amount of dividend is Rs.11,00,000/-, then amount taxable @ 10% is

Rs.1,00,000/- (Rs.11,00,000 – Rs.10,00,000).

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vii. Section 10AA – Deduction to units in SEZ

Deduction under this section will not be available from 01.04.2020.

viii. Section 17(2)(vii) – Perquisites – Change in limit of Superannuation Fund

Currently the amount contributed by Employer towards Superannuation Fund of an

Employee is not taxable upto limit of Rs.1,00,000/-.

It is proposed to enhance the limit from Rs.1,00,000/- to Rs.1,50,000/- in a financial

year.

Change in Rule 6 of Part-A of Fourth Schedule – Change in limit of Provident Fund

Currently the amount contributed by Employer towards Employees Provident Fund of

an Employee is not taxable upto limit of 12% of Basic Salary.

It is proposed that the amount in excess of Rs.1,50,000/- contributed by an Employer in

Provident Fund of an Employee will be taxable in hands of Employee in a financial year.

ix. Section 24- Deduction from Income from House Property ( W.e.f.: FY 2016-17)

Currently the interest on borrowed capital is allowed as deduction if property is

acquired or constructed within 3 years from the year in which capital is

borrowed.

It is proposed that the period of 3 years may be increased to 5 years.

x. Section 28- Taxability of Non- Compete fees received by Professionals ( W.e.f.: FY

2016-17)

It is proposed that the amount of received by Professionals as Non – Compete fees

will now be taxable under “Income from Business & Profession”. Earlier it was

taxable under “Income from Other Sources”.

xi. Section 32- Proposal to reduce the rate of Depreciation to 40% for all assets.

It is proposed that the rate of depreciation on all the assets may be reduced to a

maximum rate of 40% in the coming years. The date of applicability of this change

has not been announced.

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xii. Section 35- Phasing out of Deductions and Exemptions

Section Deduction Type Upto

FY 2016-17

From FY

2017-18 to

2019-20

From FY

2020-21

35(1)(ii) Scientific research to

university, college, etc.

175% 150% 100%

35(1)(iia) Scientific research to

company

125% 100% 100%

35(1)(iii) Social or Statistical

research to university,

college, etc.

125% 100% 100%

35(2AA) Scientifice Research-

National Laboratory/

I.I.T.

200% 150% 100%

35(2AB) Scientific Research - In

house research

200% 150% 100%

35AC Contribution to

approved institution for

Social Development (Eg.

CRY, Akshay Patra)

100% No deduction No

deduction

xiii. Section 35AD- Deduction of Capital Investment in Infrastructure Projects (Similar to

Section 80IA) (w.e.f.: AY 2018-19)

It is proposed that any company shall be given deduction of whole capital

expenditure pertaining to Developing or Maintaining and Operating or Developing,

Maintaining and Operating a new Infrastructure Facility on entering into agreement

with Central Government or State Government.

This provisions are similar to Section 80IA but the only difference is that Section 80IA

gives deduction of Profit whereas Section 35AD gives deduction of Capital

Expenditure.

xiv. Section 36(1)(viia)- Provision for Bad & Doubtful debts made by NBFC (w.e.f.: FY

2016-17)

Deduction upto 5% of Total Income (before deduction of Chapter – VIA) is allowed as

provision for bad & doubtful debts in case of NBFCs.

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xv. Section 40(a)(ib) – Disallowance of amount on which Equalisation Levy has not

been deducted (w.e.f.: FY 2016-17)

It is proposed that where an amount is payable for services from non-resident and

equalization levy is not deducted and paid, the amount of such expense shall not be

allowed as deduction. However if the equalization levy is paid before filing the return

of income, then the same will be allowed as deduction.

xvi. Section 43B- Deductions on actual payment basis (w.e.f.: FY 2016-17)

Amount due to Indian Railways for use of assets of Indian Railways shall be

allowed as deduction only if the payment is made on or before the due date, just like

any other duties and taxes under Section 43B.

xvii. Changes in Presumptive taxation and Tax Audit Limit (w.e.f.: FY 2016-17)

Presumptive Taxation(Individuals, HUF and Partnership Firms)

The limit of turnover for governing under this section has been increased as under:

Sections Nature of

Activity

Old Turnover

Limit

New Turnover

Limit

Rate of

Presumptive

Profit

44AD Business 1 crores 2 crores 8%

44ADA (New) Profession NA 50 Lakhs 50%

Note:-

1) In case of Partnership firms, the amount of profit after deducting interest and

remuneration paid to partners shall be more than 8% or 50% as may be

applicable of total turnover. Previously the deduction of interest and

remuneration was allowed from such profit.

2) For Section 44AD – Business, where once an assesse has shown profit as per

Section 44AD in a Financial Year, then he has to follow the same for lifetime. And

in case he does not show profit as per Section 44AD in subsequent year, then he

cannot show the profit as per Section 44AD for next 5 years. For Example:

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Asst Year Turnover Profit Remarks

2017-18 1 crore 8 lacs As per 44AD

2018-19 1 crore 4 lacs Not as per 44AD

2019-20 to

2024-25

For this 5 years profit cannot be shown as per 44AD. (Books

of accounts are required to be maintained).

2025-26 From this 6th year he can opt for 44AD

Tax Audit Limits – Section 44AB

The limits of tax audit has been changed as under:

Particulars Old Turnover Limit New Turnover Limit

Business 1 crore No Change

Profession 25 Lacs 50 Lacs

xviii. Section 47- Transaction not regarded as transfer for Capital Gains (w.e.f.: FY 2016-

17)

a) In case of Individuals assesse only, redemption of Sovereign Gold Bonds issued by

RBI will not be considered as transfer and thus there will not be any Capital Gains

Tax.

b) In case of conversion of Company into LLP, one more condition is added that the

Total assets in books of accounts of company in any of the 3 Previous Year

preceding the previous year in which conversion took place does not exceed Rs.5

crores.

xix. Section 48- Computation of Capital Gains (w.e.f.: FY 2016-17)

a) In case of redemption of Sovereign Gold Bonds issued by RBI, benefit of

indexation in case of Long Term Capital Gain will be available.

b) In case of Non Resident, while calculating capital gain on account of redemption

of Rupee denominated bond (Capital Index Bonds) of Indian company, gain

arising due to exchange rate fluctuation shall be allowed as deduction from Sale

Consideration.

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xx. Section 50C- Adaption of Stamp duty value in case of sale of Immovable Property

(w.e.f.: FY 2016-17)

It is proposed that when any amount of consideration was paid by way of Account

Payee cheque, D.D. or ECS before the agreement to sale (banakhat) and sale deed is

executed on date after that, then the Sale Consideration shall be the stamp duty

valuation on the date of agreement to sale (banakhat) and NOT THE VALUE ON DATE OF

SALE DEED.

xxi. Section 54EE- Investment of Capital Gain in units of Specified Funds

(w.e.f.: FY 2016-17)

It is proposed to provide exemption from Capital Gain tax if the capital gain proceeds

are invested by an Assessee in the units of specified fund not exceeding 50 Lacs as may

be notified within a period of Six Months from date of transfer and lock in period of 3

years is applicable. (Similar Provision to Section 54EC).

xxii. Section 56- Income from Other Sources (w.e.f.: FY 2016-17)

It is proposed that Shares received as a result of Demerger or Amalgamation of a

company by individual or HUF will be exempt.

xxiii. Section 80EE- Deduction on account of Interest on Housing Loan (w.e.f.: FY 2016-

17)

With effect from 01.04.2016, it is proposed that deduction of Rs.50,000/- above

Rs.2,00,000/- (u/s.24) will be allowed, subject to following conditions:

Conditions Upto 31.03.2016 W.e.f. 01.04.2016

1) Residential house purchased First First

2) Loan Sanctioned between FY 2013-14 FY 2016-17

3) Amount of Loan Below Rs.25 lacs Below Rs.35 lacs

4) Value of Residential House Below Rs.40 lacs Below Rs.50 lacs

5) Amount of deduction Max Rs.1 lacs

(One time

Deduction)

Rs.50,000/- for every year till

repayment of loan.

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xxiv. Section 80GG- Deduction on account of Rent paid (Other than HRA) (w.e.f.: FY

2016-17)

With effect from 01.04.2016, it is proposed that maximum deduction of Rs.5000/- per

month will be allowed, subject to following conditions:

Conditions Upto 31.03.2016 W.e.f. 01.04.2016

1) Maximum deduction Rs.2000/- per month Rs.5000/- per month

2) Excess of 10% of

Income

Rent paid – 10% of Total

Income

No Change

3) Max 25% of Total

Income

Maximum upto 25% of the

Total Income

No Change

Lower of the above will be available.

xxv. Restriction on claim of various deductions.

Section Description Available for Not Available for

80IA(4)(i) Development of

Infrastructure

Facility like Road,

Bridges, etc.

Projects started

before 31.03.2017

(Will continue to

claim benefit after

01.04.2017)

Projects started

after 01.04.2017

80IAB(1) Development of SEZ Projects started

before 31.03.2017

Projects started

after 01.04.2017

80IB(9)(ii),(iv),(v) Industrial

undertaking other

than Infrastructure

Projects

Projects started

before 31.03.2017

Projects started

after 01.04.2017

Note:-

The deductions in case of 80IA for Development of Infrastructure Facility like Road,

Bridges, etc. shall now be available under Section 35AD. Only difference is that Section

80IA gives deduction of Profit whereas Section 35AD gives deduction of Capital

Expenditure.

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xxvi. Insertion of New Section – 80IAC for deduction in respect of “Start-ups”.

a) Deduction available to “Start-Up Business” involving the activities like Innovation,

Development, Deployment or Commercialization of new products, processes or

services driven by Technology or Intellectual Property.

b) “Start-Up” must be incorporated between 01.04.2016 to 31.03.2019.

c) The amount of Turnover of the business does not exceed Rs.25 crores in any

previous year during 01.04.2016 to 31.03.2021.

d) Business is approved and holds certificate from Inter-Ministerial Board of

Certification as notified by the Central Government.

e) 100% of Profits and Gains are eligible for deduction.

f) Benefit can be availed for 3 consecutive Assessment Years out of 5 years.

g) Deduction is available from FY 2016-17.

h) Subject to certain other conditions.

xxvii. Insertion of New Section – 80IBA for deduction in respect of Housing Projects.

Particulars 4 Metro Cities – 25 kms

from Muncipal Limit

Non – Metro cities

Plot Size Above 1000 sq. mtrs. Above 2000 sq.mtrs

Built-up area of Residential

units

Less than 30 sq.mtrs. Less than 60 sq.mtrs

Commercial

Establishments

Not more than 3% of total

built-up area

Not more than 3% of total

built-up area

a) The project has to be approved by Competent Authority between 01.06.2016 to

31.03.2019.

b) The assesse is required to complete the said project within 3 years from the date

of approval, failing which the entire deduction claimed in earlier years shall be

deemed as his income.

c) Only one unit is allotted to an individual in the project and no other unit has been

allotted to his wife or minor children.

d) Separate books of accounts are required to be maintained for such projects.

e) The deduction shall be available to “Developer” only and not available to “Work-

Contractor”, even if the project is allotted by Central or State Government.

f) 100% of Profits and Gains are eligible for deduction.

g) Deduction is available from FY 2016-17.

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xxviii. Substitution of Section – 80JJAA for deduction of 30% in respect of New Employees

Cost. (w.e.f. FY 2016-17)

Particulars Old Section New Section

Applicable to Manufacturing Units All units covered by Audit

u/s 44AB

No. of Employees

increased

Minimum 100 workmen

and increase of 10% per

year of New Workmen

Additional employees

employed during the year

and no such condition of

increase

No. of Days employed in a

FY

Minimum 300 days Minimum 240 days

Period of deduction 3 years from the Previous

Year

No change

Covered Employees All covered Employees below salary of

Rs.25000/- per month and

included in EPF.

Mode of Payment of

salary

Any Other than Cash

xxix. Section – 112(1)(c)(iii) – Tax on Long Term Capital Gain on shares of unlisted

companies by Non Resident. (W.e.f. FY 2016-17)

It is proposed that the Long Term Capital Gain on Shares of Unlisted Company for

Non Resident will be taxable at 10%, without indexation.

xxx. Insertion of Section – 115BBF for taxation of Income from Royalty @ 10% in

respect of New Patents developed and registered in India. (w.e.f. FY 2016-17)

It is proposed that the Royalty Income received in respect of New Patents developed

and registered in India, will be taxable at 10%. No expense is allowed as deduction.

While calculating the MAT, income from royalty shall be ignored if tax is paid as per

this provisions.

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xxxi. Changes in Section – 115JB MAT. (w.e.f. FY 2016-17)

a) In case of a company being a unit of International Financial Service center (Like

GIFT City) established after 01.04.2016 and deriving its income only in convertible

foreign exchange, MAT is payable @ 9%.

b) MAT will not be applicable to all Foreign Company retrospectively from AY 2001-

02.

c) Patent Income received on new patents as taxed under Section 115BBF shall be

excluded for calculation of MAT under this Section.

xxxii. Changes in Section – 115JH Place of Effective management.

The applicability of Place of Effective Management rules has been deferred for 1 more

year. Government may issue guidelines for foreign companies which may be considered

as resident due to “POEM Rules”.

xxxiii. Changes in Section – 115O -Dividend Distribution Tax (w.e.f. FY 2016-17)

No Dividend Tax is payable on dividend distributed by Special Purpose Vehicle (SPV)

Domestic Company to business trust out of its current income. Further any income

distributed by Business trust to Unit Holder will not be taxable under Section 115UA.

Also no Dividend Tax is payable on dividend distributed by a company being a unit of

International Financial Service center established after 01.04.2016 and deriving its

income only in convertible foreign exchange.

xxxiv. “Exit Tax” for Trusts Section – 115TD (w.e.f. 01.06.2016)

Any charitable trust registered under Section 12AA in the following cases have to pay

tax @ Maximum Marginal Rate (30%) on the amount of Accreted Income:

a) Change of Object from Charitable to Non-Charitable.

b) Merger with the trust having Non Charitable Object

c) On dissolution of the trust the assets are transferred to the trust having Non

Charitable Object.

Accreted Income means the amount by which the aggregate fair market value of the

total assets of the trust or the institution, as on the specified date, exceeds the total

liability of such trust or institution computed in accordance with the method of

valuation as may be prescribed.

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xxxv. Changes in Section – 139 – Filling of return of Income (w.e.f. FY 2016-17)

Current:

a) Any Individual, HUF, AOP or BOI is required to file the return of income, if his

income before allowing deduction u/s. 10A, 10B, 10BA or Chapter – VIA is above

the basic exemption limit.

b) Belated Return u/s. 139(4) can be filed before one year from the end of specific

assessment year (upto AY 2016-17, return can be filed till 31.03.2018)

c) Belated return as above cannot be revised.

d) If return is filed without paying Self Asst Tax then it is considered as Defective

Return.

Proposed:

a) It is proposed that in case of Individual, HUF, AOP or BOI in addition to above

Income from Long term Capital Gains (exempt u/s.10(38)) is also required to be

added to calculate the basic exemption limit.

b) Belated return u/s. 139(4) can be filed before the end of specific assessment year

(From AY 2017-18, return can be filed till 31.03.2018), so Extra Period of ONE

YEAR is now NOT AVAILABLE to file Belated Return.

c) Belated return filed as above can be revised.

d) If the return is filed without paying Self Asst Tax, then it will not be considered as

Defective Return.

xxxvi. Changes in Section – 143 – Issue of Intimation and selection of case for Scrutiny

Assessment (w.e.f. FY 2016-17)

a) Any difference of Income as per Form 26AS and as per Return of Income filed will

be added while processing the return u/s 143(1). However 30 days time will be

given to explain and rectify the difference, otherwise the amount will be added in

income.

b) Any amount reported by Auditor as disallowance and the same has not been

disallowed in Income Computation will be added while processing u/s 143(1).

c) It is compulsory to issue intimation u/s 143(1) even if the case is selected for

Scrutiny Assessment u/s 143(3).

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xxxvii. Changes in Section – 153 - Time Limit of Completion of Assessment or Re-

assessment and Re-computation (w.e.f. 01.06.2016)

a) The due date for completion of assessment proceeding u/s. 143 or 144 has been

reduced from 24 months to 21 months from the end of relevant Asst Year i.e. to

be completed before 31st December instead of 31st March.

b) The due date for completion of re-assessment proceeding u/s. 147 has been

reduced from 12 months to 9 months from the end of Financial year in which

notice was issued i.e. to be completed before 31st December instead of 31st

March.

xxxviii. Changes in Provisions related to Tax Deducted at Source and Tax Collected at

source (w.e.f. 01.06.2016)

a) Increase in threshold limit of deduction of tax at source on various payments

mentioned in the relevant sections of the Act

Present Heads – Section Existing Threshold

Limit (Rs.)

Proposed Threshod

Limit (Rs.)

192A - Payment of accumulated balance

due to an employee

30,000 50,000

194BB - Winnings from Horse Race 5,000 10,000

194C - Payments to Contractors Aggregate annual

limit of 75,000

Aggregate annual

limit of 1,00,000

194LA - Payment of Compensation on

acquisition of certain Immovable Property

2,00,000 2,50,000

194D - Insurance commission 20,000 15,000

194G - Commission on sale of lottery tickets 1,000 15,000

194H - Commission or brokerage 5,000 15,000

b) Revision in rates of deduction of tax at source on various payments mentioned

in the relevant sections of the Act

Present Heads – Section Existing Rate

of TDS (%)

Proposed Rate of

TDS (%)

194DA Payment in respect of Life Insurance

Policy

2% 1%

194EE Payments in respect of NSS Deposits 20% 10%

194D Insurance commission 10% 5%

194G Commission on sale of lottery tickets 10% 5%

194H Commission or brokerage 10% 5%

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c) Form 15G / H can be furnished for NO TDS on payments made in respect of

Rent of Immovable Property.

d) Tax Collected At Source (TCS):

Nature of Goods Rate of

TCS (%)

Mode of Payment

Sale of Motor Vehicle, value exceeding 10 Lacs 1% Any mode of payment

Sale of any goods or service except bullion and

jewelry

1% In cash only (Note -1)

Note - 1:

In case tax has been deducted by the buyer on the amount then TCS is not required to

be collected.

xxxix. Requirement of furnishing PAN in case of payment made to Non Residents (w.e.f.

01.06.2016)

Current:

If a Non Resident does not hold a PAN, then TDS is required to be deducted at 20.6%

or rate applicable as per Section 195 or DTAA, whichever is higher.

Proposed:

It is proposed that this provision will not be applicable for Payments made to Non

Residents. Hence if the rate of TDS as per Section 195 or DTAA is lower than 20.6%,

then TDS can be deducted at such lower rate. Subject to furnishing of other

documents as may be prescribed.

xl. Changes in Section – 211 - Provisions related to Advance Tax (w.e.f. 01.06.2016)

1) It is proposed to amend the advance tax payment schedule for assesse other

than companies and bring it in line with payment made by companies. So now

advance tax has to be paid in FOUR INSTALLMENTS INSTEAD OF THREE

INSTALLMENTS.

2) It is proposed that the eligible assesse opting for Section 44AD – Presumptive

taxation shall be required to pay advance tax of 100% in one installment on or

before 15th March of Financial year. Earlier there was no such provisions.

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xli. Changes in levy of Penalty Section – 270A & 270AA (w.e.f. FY 2016-17)

Upto 31.03.2016 – Section 271(1)(c)

1) Penalty on account of Concealment of Particulars of Income or Furnishing of

Inaccurate particulars of Income is leviable @ 100% to 300% of amount of tax

evaded.

2) Appeal can be filed against such orders.

From 01.04.2016 – Section 270A

Section Description Rate of Penalty

270A 1) Penalty of Under Reporting and 50% of Tax Evaded

2) Penalty of Mis-Reporting of Income 200% of Tax Evaded

Section 270AA – Immunity from Imposition of Penalty levied u/s.270A

Immunity from Penalty can be granted on following conditions:

1) This immunity is available for Penalty of Under reporting of Income cases only.

2) Application to AO who has imposed penalty within 30 days from the date of

order u/s. 143(3) or 147.

3) Application can be made only if assesse has paid Tax and Interest payable as per

order u/s. 143(3) or 147.

4) No appeal has been filed against the order u/s. 143(3) or 147

5) The order passed under this section for imposing penalty is not appealable.

xlii. Changes in levy of Penalty in Search Cases – 271AAB (w.e.f. FY 2016-17)

It is proposed that the rate of penalty on undisclosed income in case of search shall

be levied at flat rate of 60%. Earlier the penalty was leviable between 30 – 90% of

the undisclosed income.

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xliii. Changes in stay of Demand by paying 15% - Instruction No.1914 dated.21.03.1996

as amended on 29.02.2016(w.e.f. 29.02.2016)

It is instructed to all the AO, that even if the Appeal has been filed he may ask for

payment of 15% of disputed demand and balance can be stayed till the disposal of

first Appeal.

xliv. Changes in period of holding in case of Shares of Private Company

As mentioned by Honorable Finance Minister in his speech, it is proposed that the

period of holding will be reduced to 2 years from 3 years to consider the shares of

Private Ltd Company as Long Term Capital assets.

xlv. Change in section 14A- Rule 8D Calculation:

It is proposed that disallowance under section 14A will be limited to 1% of the

average monthly value of investments yielding exempt income, but not exceeding

the actual expenditure claimed under rule 8D (Effective date yet not notified).

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Income Declaration Scheme 2016

An opportunity is proposed to be provided to persons who have not paid full

taxes in the past to come forward and declare the undisclosed income and pay tax,

surcharge and penalty totaling in all to forty-five per cent of such undisclosed

income declared at Fair Market Value as on 01.04.2016.

The scheme is proposed to be brought into effect from 1st June 2016 and will

remain open up to the date to be notified by the Central Government in the official

gazette. The scheme is proposed to be made applicable in respect of undisclosed

income of any financial year upto 2015-16.

Tax is proposed to be charged at the rate of thirty per cent on the declared

income as increased by surcharge at the rate of twenty five per cent (Effective

7.5%) of tax payable (to be called the Krishi Kalyan cess). A penalty at the rate of

twenty five per cent (Effective 7.5%) of tax payable (Totalling to 45% of Declared

Income) is also proposed to be levied on undisclosed income declared under the

scheme.

It is proposed that following cases shall not be eligible for the scheme:

1) where notices have been issued under section 142(1) or 143(2) or 148 or 153A or

153C, or

2) where a search or survey has been conducted and the time for issuance of notice

under the relevant provisions of the Act has not expired, or

3) where information is received under an agreement with foreign countries regarding

such income,

4) cases covered under the Black Money Act, 2015, or

5) persons notified under Special Court Act, 1992, or

6) cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic

Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention

of Corruption Act, 1988.

It is proposed that payment of tax, surcharge and penalty may be made on or before a

date to be notified by the Central Government in the Official Gazette and non-payment

up to the date so notified shall render the declaration made under the scheme void.

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It is proposed to provide that declarations made under the scheme shall be exempt

from wealth-tax in respect of assets specified in declaration. It is also proposed that no

scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in

respect of such declarations and immunity from prosecution under such Acts be

provided. Immunity from the Benami Transactions (Prohibition) Act, 1988 is also

proposed for such declarations subject to certain conditions.

It is proposed to provide that where a declaration under the scheme has been made by

misrepresentation or suppression of facts, such declaration shall be treated as void.

It is also proposed that nothing contained in the Scheme shall be construed as

conferring any benefit, concession or immunity on any person other than the person

making the declaration under this Scheme. In cases where any declaration has been

made but no tax and penalty referred to the scheme has been paid within the time

specified, the undisclosed income shall be chargeable to tax under the Income-tax Act in

the previous year in which such declaration is made.

In cases where any income has accrued, arisen or received or any asset has been

acquired out of such income prior to commencement of this Scheme, and no

declaration in respect of such income is made under the Scheme such income shall be

deemed to have accrued, arisen or received, or the value of the asset acquired out of

such income shall be deemed to have been acquired or made, in the year in which a

notice under section 142, section 143(2) or section 148 or section 153A or section 153C

of the Income-tax Act is issued by the Assessing Officer and the provisions of the

Income-tax Act shall apply accordingly.

It is further proposed that if any difficulty arises in giving effect to the provisions of this

Scheme, the Central Government may, by order, not inconsistent with the provisions of

this Scheme, remove the difficulty by an order not after the expiry of a period of two

years from the date on which the provisions of this Scheme come into force and such

order be laid before each House of Parliament.

It is proposed that the Central Board of Direct Taxes under the control of Central

Government be provided the power to make rules, by notification in the Official

Gazette, for carrying out the provisions of this Scheme and such rules made be laid

before each House of Parliament in the manner provided in the scheme.

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EQUALISATION LEVY

A new chapter has been added in the Finance Act 2016, named Equalisation Levy.

Highlights of the same is as under:

Applicability:

This levy is applicable in following cases:

1) To a person resident in India and carrying on business activities (B2B

Transactions only) and Non Resident having Permanent Establishment in India.

2) Making payment to Non Resident not having PE in India above Rs.1 lacs

3) For services such as Online Advertisement, any space or any other service for

Online Advertisement and any other service as may be notified.

Example: Google Adwords, Monster, etc.

Rate of Deduction:

The Equalisation Levy is required to be deducted @ 6% on the consideration paid or

payable to the Non Resident.

Date of Payment:

The amount deducted as above has to be paid to the credit of Government by 7th Day of

next month.

Furnishing of Statements:

Statement has to be furnished to AO or other specified Authority in prescribed form

within prescribed time at the end of Financial Year.

The effective date of applicability of Equalisation Levy is not yet published in Official

Gazette.

Indirect Tax Proposals will Follow Soon……..