Icai budget

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Transcript of Icai budget

  1. 1. TAX PROPOSALSin the Finance Bill,2015THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
  2. 2. Authored by CA.Dilip B.Desai I Supported & researched by CA.Soumen Adak CA.Manish Sheth CA.Neha PaulDirect Tax Committee Indirect Tax Commitee CA.Tarun Jamnadas Ghia,Chairman - CA.Atul Kumar Gupta,Chairman CA.Shyam Lal Agarwal,Vice-Chairman - CA.Sanjay Agarwal,Vice-Chairman CA.Manoj Fadnis,President (Ex-Officio) - CA.Manoj Fadnis,President (Ex-Officio) CA.M.Devaraja Reddy,Vice President (Ex-Officio) - CA.M.Devaraja Reddy,Vice President (Ex-Officio) CA.Prafulla Premsukh Chhajed - CA.Nihar N.Jambusaria CA.Tarun Jamnadas Ghia - CA.Shriniwas Y.Joshi CA.Pankaj I. C. Jain - CA.DhinalAshvinbhai Shah CA.Shriniwas Y.Joshi - CA.Abraham Kallivayalil Babu CA.DhinalAshvinbhai Shah - CA.S.Santhanakrishnan CA.S.Santhanakrishnan - CA.G.Sekar CA.Subodh Kumar Agrawal - CA.J.Venkateswarlu CA.Vijay Kumar Gupta - CA.Subodh Kumar Agrawal Shri Sidharth K.Birla - CA.Vijay Garg Shri Sunil Kanoria - CA.Anuj Goyal Shri Salil Singhal - CA.Sanjiv Kumar ChaudharyCA.Atul Kumar Gupta CA.Naveen N. D. Gupta Shri Sunil KanoriaDisclaimer: The views contained in the publication are those of the concerned contributors and should not be construed as the views of the Institute or any of its Committees or Boards.No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from The Institute of Chartered Accountants of India.The Publication is distributed with the understanding that neither the publisher nor the contributors are responsible for the result of any action taken on the basis of this work whether directly or indirectly.Though due care has been exercised in publishing this book,professional advice should be sought before placing reliance on it.Any error or omission is regretted and would be appreciated if brought to notice. Published by Direct Tax Committee & Indirect Tax Committee of The Institute of Chartered Accountants of India - ICAI Bhawan,Post Box No.7100, Indraprastha Marg,New Delhi-110002. Tel. : +91 (11) 39 89 39 89. E-mail:icaiho@ica. in website:www. icai. orgThis publication is for the members only. Contribution:Rs.20/-
  3. 3. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAFOREWORDAfter the presentation of the Union budget,our members,tax practioners and stakeholders arevery eager to grasp the tax proposals and their implications in as much depth as possible at the earliest for their respective purposes. The Direct Taxes Committee has organised at Mumbai a very comprehensive lecture meeting within a span of only two days from the presentation of the Budget in the Parliament and simultaneous Nation wide webcast of the clause wise analysis of tax proposals.My sincere gratitude to the host of the meeting the Bombay Stock Exchange.The Direct Taxes Committee led by its Chairman CA.Tarun Ghia and Vice Chairman CA.Sanjay Agarwal deserve special compliments for organising so meticulously a well attended event in a short span of time. On the eve of the budget meeting,the Direct Taxes and the Indirect Taxes Committees have brought this comprehensive budget publication.The author of the publication CA.Dilip Desai and his knowledge team well deserve appreciation and compliments.Considering that the budget is the first full fledge budget of the new NDA Government and many policy changes have been introduced in the budget,it is certainly a stupendous task for the authors and his knowledge team to analyse and interpret the new proposals with clarity and depth as presented in this publication. ICAI has been in the forefront of guiding the stakeholders and representing for the simplification and rationalisation of the tax laws.Such tireless exercises by the ICAI and CA fraternity has positioned the ICAI as a partner in nation building.This publication is one more step in that direction.I am sure this publication has become a bench mark for the future. I congratulate Direct Taxes Committee Chairman CA.Tarun Ghia and Vice Chairman CA.Sanjay Agarwal and Indirect Taxes Committee Chairman CA.Atul Gupta and Vice Chairman CA.Shyamlal Agarwal for bringing out this maiden qualitative and comprehensive budget analysis in a time period of only two days from the presentation of the budget. I am sure that members and stakeholders will find the publication very useful. CA.Manoj Fadnis PresidentDate:02-03-2015 Place:New Delhi01
  4. 4. C: ., :2.*" THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAPRESIDENT'S MESSAGEThe fullfledged yearly budget was presented by Hon'ble Finance Minister Shri Arun Jaitley on 28 February 2015.The main objectives of this budget are to formulate laws to curb black money,creation of jobs,upliftment of the rural masses and to promote manufacturing and Make in India project. With an objective to curb black money,the budget has directed for enactment of law on black money.It also aims for achieving 3% fiscal deficit in next three years.Several important measures have been incorporated with a view to achieve overall development.This includes introduction of Direct Taxes Regime,introduction of Tax free infra bonds,introduction of Atal Pension Yojana,formulation of Expert Committee for legislation on single window clearance etc.Also,the budget has aimed in achieving GDP of 7.4% and to bring inflation to 5% by the end of the year.In short,this is certainly a progressive budget which aims at achieving sustainable economic development. The Institute of Chartered Accountants of India (ICAI) has always been proactive in delivering vital information to its members and other stakeholders.For this purpose,ICAI has come up with this publication on Changes Proposed by Union Budget 2015-16 which aptly provides in-depth study of the Union Budget 2015-16.I heartily admire the efforts put in by the two committees i. e. Direct Taxes Committee (DTC) and Indirect Taxes Committee (IDTC) in bringing out this publication.I am sure this publication would prove useful and beneficial for members in their endeavours and help them in achieving new heights in their professional fields. CA.Manoj Fadnis President,ICAIDate:02-03-2015 Place:New Delhi02
  5. 5. I : , : THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAVICE PRESIDENT'S MESSAGEThe Finance Minister Arun Jaitley has announced his maiden fullfledged budget on 28th Feb,2015. The biggest challenge in this Budget was to set aside enough money to kick start the economy without constraining the " I . . Government's finances.It is quite evident that the Budget has announced , f far reaching reforms especially on the tax administration front. The Budget has aimed to achieve an objective-Banking the unbanked and funding the funded.It proposes to create a universal social security system for all Indians and to introduce bankruptcy code.The Budget has taken measures to provide tax breaks and incentives for domestic manufacturers to push the Make in India campaign,a centrepiece of PM Modi's plan to create jobs and rejuvenate the economy.A gamut of changes are introduced by Union Budget 2015-16, paving a way for major changes expected to take place like implementation of GST in April,2016, GAAR to be deferred for two years,achieving fiscal deficit of 3% by the end of next 3 years,corporate tax rate to be reduced to 25% for next 4 years,enactment of law on black money,increase of service tax rate to 14%,replacing wealth tax with additional surcharge of 2% on super rich etc.This publication has addressed the major highlights of the budget which assist the professionals in their respective work areas. The Direct Taxes Committee (DTC) and Indirect Taxes Committee (IDTC) have worked laboriously in bringing this publication in such a short span of time.I sincerely appreciate the efforts put in by them for releasing this publication. CA.Devaraja Reddy Vice- President,ICAI. Date:02-03-2015 Place:New Delhi03
  6. 6. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIACHAIRMAN'S MESSAGEThe Union Budget 2015-16 has been presented in the Parliament with a view to address the needs of all inclusive development and sustainable economic growth.The budget is realistic enough to strike a chord with the masses by targeting the development for one and all.It mainly focuses on fight against the scourge of black money,encouraging make in India and Swachh Bharat.The thrust of this budget is effectively dealing with menace of black money and related quantum of information to be provided and the compliances to be followed.It ensures more transparency in the system and will benefit the honest tax payers as it focuses on the motto- Honest is to be spared and dishonest is to be punished.The main highlights of the budget include enactment of law on black money,more rigid punishments for the income Concealers,abolishing wealth tax and replacing it with an additional surcharge of 2% on super rich,reducing the corporate tax rate to 25%,increasing the threshold limit of transfer pricing to Rs.20 crores,to introduce direct tax regime that is internationally competitive on rates without exemptions,to bring new bankruptcy code etc.It aims at achieving the growth of 8% to 8.5%. This budget indeed addressed to serve each & every class. The Direct Taxes Committee of ICAI has put an initiative in bringing this publication which will enhance the knowledge of the professionals and will also help them to cater the needs of their clients in an efficient manner and will enable the stakeholders to grasp salient aspects of tax proposals. CA.Tarun Jamnadas Ghia Chairman,Direct Taxes CommitteeDate:02-03-2015 Place:New Delhi04
  7. 7. I : , : THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIACHAIRMAN'S MESSAGEThe Hon'ble Finance Minister Shri Arun Jaitley in his budget speech emphasised that taxation is an instrument of social and economic engineering.Tax collections help the Government to provide education,healthcare,housing and other basic facilities to the people to improve their quality of life and to address the problems of poverty,unemployment and slow development.To achieve these objectives we need to have a stable taxation policy and nonadversarial tax administration.The Union Budget 2015-16 focuses on overall growth and development of the economy.Introduction of GST from 1 April 2016 has been reaffirmed.GST is expected to play a transformative role in the way our economy functions.It will add buoyancy to our economy by developing a common Indian market and reducing the cascading effect on the cost of goods and services.Hike in service tax rate from present 12.36% to 14% is a step towards introduction of GST The rate of Central Excise Duty now stands at 12.5% with subsumation of EC & SHEC.Certain services under Negative List have been made taxable and certain exemptions have been withdrawn to widen the tax base.This is also a precursor to GST regime,the basic tenet of which is minimum exemptions. The tax proposals made by Finance Bill,2015 also include changes like increase in time limit for availment of CENVAT Credit to one year from 6 months.Also to facilitate the ease of doing business,a facility of online central excise and service tax registration in two working days has been provided.Further,Central excise and service tax assessees will be allowed to issue digitally signed invoices and maintain electronic records.All the changes made are to make the tax structure user friendly and make way for implementation of GSTThis publication aptly brings out the changes made by the Union Budget 2015-16 on the taxation front and is a joint effort of Direct Taxes Committee and Indirect Taxes Committee. I hope this publication benefits you in your endeavours. CA.Atul Gupta Chairman,Indirect Taxes CommitteeDate:02-03-2015 Place:New Delhi05
  8. 8. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAVICE-CHAIRMAN'S MESSAGEThe changing scenario of taxation in India in recent years has made the law if Imore complicated and challenging.Continuous amendments in tax laws If I have rendered it necessary for members to update themselves with the changing scenario.The Union Budget 2015-16 has brought up with a view to '_~-. , . cope up with the growing economic need of development.The Finance 5 Q Minister believed that every rupee of public expenditure,whether undertaken by the Centre or the States,will contribute to the bettermentof people's lives through job creation,poverty elimination and economic growth. The main objectives of the Budget are to curb black money by introducing more stringent laws,creation of more & more jobs for the youth,to promote make in India by focusing on the manufacturing sector and to uplift the rural areas and below poverty line masses and also improve nonadversarial tax administration;effective delivery of benefits;investment and job creation;welfare of labour,digital connectivity;skilling our youth;efficient and better work culture in Government,ease of doing business etc.It aims at bringing inflation at 5% by the end of the year.It has also given relaxation to the corporate by bringing corporate tax rate at 25%.Moreover,for having check on the inflation,it has directed to formulate Monetary Policy Framework Agreement with RBI.In short,this budget will lay out the roadmap for accelerating growth,enhancing investment and passing on the benefit of the growth process to the common man,woman,youth and child those,whose quality of life needs to be improved. The Direct Taxes Committee of ICAI has taken a step ahead by providing main highlights and tax proposals arising out of the Budget 2015-16 through this publication.I hope this publication will help in enhancing the knowledge and expertise of the CA fraternity as well as to other professionals. CA.Sanjay Agarwal Vice- Chairman,Direct Taxes CommitteeDate:02-03-2015 Place:New Delhi06
  9. 9. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAVICE-CHAIRMAN'S MESSAGE The Union Budget 2015-16 popularly called Makeinlndia Budget has beenI 7presented in the Parliament with a view to address the needs of all ...inclusive development and sustainable economic growth.Taxation being 34-I the key interest area had garnered the attention on the positive front. ' '7 While GAAR has been deferred for 2 years,the game changing reform onthe anvil like GSTis set to be introduced w. e.f.1April 2016.The major change in the area of indirect taxes cover introduction of an all-inclusive rate of Central Excise @12.5% subsuming the old rate on 12.36% including the cesses.Also,the rate of Service Tax has been increased to 14% from present 12.36% in lines with introduction of GST.Basic Custom Duty on 22 items has also been reduced and time limit for availment of CENVAT credit has been increased from 6 months to one year from the date of invoice. The introduction of GST is set to bring both greater transparency and greater investments.GST is expected to play a transformative role in the way our economy functions.It will add buoyancy to our economy by developing a common Indian market and reducing the cascading effect on the cost of goods and services. The budget is pragmatic enough to strike a chord with the masses by targeting the development for one and all.It is quite evident that budget has announced far reaching reforms especially on the tax administration front.This publication is developed with an objective to acquaint the readers with amendments in Taxation brought in by the Union Budget 2015-16.I wish the readers all the success.CA.ShyamlalAgarwal Vice-Chairman, Indirect Taxes CommitteeDate:02-03-2015 Place:New Delhi07
  10. 10. ,/ .s THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015INDEX Sr.No.Particulars Page NO. 01 Foreword 0102 Messages 02-07DIRECT TAXES 03 Rates of Tax 09-14 04 Personal Taxation 15-17 05 Corporate Taxation 18-22 06 International Tax & Transfer Pricing 23-32 07 Trust & Charitable Institutions 33-40 08 Procedural & Others 41-50 INDIRECT TAXES09 Central Excise 51-59 10 Service Tax 60-70 11 Changes in CENVAT Credit Rules,2004 71-73 12 Custom Duty 74-80 13 Glossary 81-82Qaiaiiiiatriai
  11. 11. /ra THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[ Analysis of Tax Proposals in the Finance Bill,2015THE FINANCE BILL 2015DIRECT TAXRATES OF TAXESINCOME TAX RATES: For Individuals,Hindu Undivided Family,Association of Persons and Body of Individuals Income Slabs (*) Tax Rates* 0 2,50,000@ Nil2,50,001 5,00,000 5,00,001 10,00,000 10,00,001 1,00,00,00010.30% of income exceeding Rs.2,50,000 * 25,750 plus 20.60% of income exceeding Rs.5,00,000 * 1,28,750 plus 30.90% of income exceeding Rs.10,00,000 1,00,00,001 and above * 29,09,750 plus 34.608% of income exceeding Rs.1,00,00,000* Tax rates are inclusive of Education Cess and Secondary Higher Education Cess @ 2% and 1% respectively. # Surcharge has been increased from 10% to 12% in case total income exceeds Rs.1,00,00,000.@ In case of resident individual of age 60 years or more (Senior Citizen) the basicthreshold limit of Rs.3,00,000 remains unchanged.In case of resident individual of age 80 years or more (Very Senior Citizen) the basic threshold limit of Rs.5,00,000 remains unchanged. + Resident individual having total income less than Rs.5,00,000 is eligible to claim Tax Rebate u/ s 87A,being lower of tax on total income or Rs.2,000.For Co-operative SocietiesIncome Slabs (*) Tax Rates*0 10,000 10.30%10,001 - 20,000 Rs.1,030 plus 20.60% of income exceeding Rs.10,00020,001 1,00,00,000 Rs.3,090 plus 30.90% of income exceeding Rs.20,000 1,00,00,001 and above Rs.30,86,910 plus 34.608% of income exceeding Rs.1,00,O0,000*Tax rates are inclusive of Education Cess and Secondary Higher Education Cess@ 2% and 1% respectively. # Surcharge has been increased from 10% to 12% in case total income exceeds Rs.1,00,00,0007 ",5: ff ' --4{T 3;. -.'~: :*7.T : '*t. ":, "i" 09
  12. 12. I. /5:54 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[ Analysis of Tax Proposals in the Finance Bill,2015For LocalAuthoritiesLocal Authorities are taxable at the rate of 30%.Surcharge has been increased from 10% to 12% where the total income exceeds Rs.1,00,00,000. Education Cess is applicable at the rate of 2%.Secondary and Higher Education Cess is applicable @ 1% on income tax. For Partnership FirmsPartnership firms are taxable at the rate of 30%.Surcharge has been increased from 10% to 12% where the total income exceeds Rs.1,00,00,000. Education Cess is applicable at the rate of 2%.Secondary and Higher Education Cess is applicable @ 1% on income tax. For Corporates5|_ Particulars Tax Surcharge E.Cess S & H Effective TaxNo.(%) (%) (%) E- Cess (%) (%) 1 Domestic companies (with 30 ' 2 1 30.90total income less than 1 Cr. )2 Domestic companies (with 30 7* 2 1 33.063total income more than 1 cr.but less than 10 Cr. ) 3 Other domestic companies 30 12* 2 1 34,608 4 Foreign companies (with 40 ' 2 1 41.20 total income less than 1 Cr. ) 5 Foreign companies (with 40 2 2 1 42.024 total income more than 1 cr.but less than 10 Cr. ) 6 Other foreign companies 40 5 2 1 43,26 * Surcharge has been increased from 5% to 7%.# Surcharge has been increased from 10% to 12%.MINIMUMALTERNATE TAX (MAT) s| _ Particulars Tax Surcharge E.Cess S & H Effective Tax No.(%) (%) (%) E- C655 (%) (%) 1 Domestic companies (with 18.5 ' 2 1 19.055 total income less than 1 Cr. )
  13. 13. W II THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,20152 Domestic companies (with 18.5 7* 2 1 20.389 total income more than 1 cr.but less than 10 Cr. )3 Other domestic companies 18,5 12* 2 1 21,3424 Foreign companies (with 18.5 ' 2 1 19.06total income less than 1 Cr. )5 Foreign companies (with 18.5 2 2 1 19.436 total income more than 1 cr.but less than 10 Cr. )6 Other foreign companies 185 5 2 1 20,008* Surcharge has been increased from 5% to 7%. # Surcharge has been increased from 10% to 12%. Alternate Minimum Tax (AMT)It is applicable on all persons other than companies.In case of Individual,Hindu Undivided Family,Association of Persons and Body of Individuals,it applies only if Adjusted Total Income exceeds Rs.20,00,000. Adjusted Total Income is computed by increasing Total Income by any Deduction Claimed under chapter VIA [Sec.80-| Ato Sec.80RRB (Except Sec.80P)] and Sec.10AA. AMT would be computed at the rate of 18.5% on adjusted total income.Surcharge has been increased from 10% to 12% where the adjusted total income exceeds Rs.1,00,00,000. Education Cess is applicable at the rate of 2%.Secondary and Higher Education Cess is applicable @ 1% on income tax. Securities Transaction Tax (S'I'| ')S'| '|' is levied on the value of taxable securities transaction as under: SlNC,Transactions Rate Payable byPurchaser/Seller1 Purchase/ Sale of equity shares (delivery based) 0.1%Purchase of units of equity-oriented mutual fund Nil Purchaser(delivery based)T"r3?. ',7:;7?". "..
  14. 14. / _: i/'''5254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,20153 Sale of units of equity-oriented mutual fund (delivery based) 0.001% Seller4 Sale of equity shares,units of equity-oriented mutual fund 0.025% Seller (non-delivery based) 5 Sale of an option in securities 0.017% Seller 6 Sale of an option in securities,where option is exercised 0.125% Purchaser 7 Sale of a futures in securities 0.01% Seller 8 Sale of unit of equity oriented fund to the Mutual Fund 0.001% Seller Commodities Transaction Tax (CTT) C'| '|' is levied on the value of taxable commodities transaction:Transactions Rate Payable by Sale of commodity derivative (other than agricultural 0.1% seuer Commodities) entered in a recognised associationWealth Tax (WT) Levy of Wealth tax has been abolished. Dividend Distribution Tax (DDT)Dividends distributed by an Indian Company are exempt from income tax in the hands of all shareholders.DDT shall be computed on the amount determined after grossing up dividend paid by the rate of tax (excluding Surcharge and Cess) on such dividend. Grossing up needs to be done only of the Basic Rate & not of the Effective Rate.The rates of DDT are as below: DDT Rates for CompaniesBasic Rate Effective Rate*17.647 20.358*including Surcharge of 12% & Education Cess
  15. 15. W _ / -~'Vl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015DDT Rates for Mutual Fund (MF) for payments to - Particulars Basic Rate Effective Rate* (1) Distribution by MF under an Infrastructure 5.263 6.071 Debt fund scheme to a non-resident (2) To an individual or HUF excluding (1) above 33.33 38,449 (3) To any other Person excluding (1) & (2) 42.85 49 432 above ' *including Surcharge of 12% & Education Cess # Excludes equity oriented funds CAPITAL GAINS Short term Long term Particulars capital gains capital gains tax tax Sale transactions of 15% Nil securities which attract STT Sale transactions of securities not attracting STT Individuals (residents and nonresidents) Progressive 20% with Slab rate-'5 indexation;10% without indexation (for listed securities / zero Partnerships (resident and non-resident) 30% Coupon bonds) Resident companies 30% Overseas financial organizations specified 40% in Sec.115AB (corporate) 30% 10% (non- corporate) FIIS 30% 10%13
  16. 16. / _/ IT ITHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Other foreign companies 40% 20% with indexation;Local Authority 30% 10% W't, ht indexation Co-operative Society A5 Per .If l,5t_ed progressive securities/ zero slab rates COUPON b0nd-5)1. To be increased by Surcharge (applicable if any),Education Cess and Secondary and Higher Education Cess. SPECIAL RATES FOR NON-RESIDENTS The following incomes in the case of non-resident are taxed at special rates on gross basis: Nature of Income Rate' Dividendz 20% Interest received on loans given in foreign currency 207 to Indian concern or Government of India Interest received on infrastructure debt funds W referred to in Sec.10(47) Interest of the nature and extent referred to in 59, Sec.194LC and Sec.194LD Income received in respect of units purchased in 207 foreign currency Royalty or technical fees 10% Interest on FCCB 10%1. These rates will further be increased by Surcharge (applicable if any),Education Cess and Secondary and Higher Education Cess. 2. Other than dividends on which DDT has been paid. 3. Rate decreased from 25% to 10%.
  17. 17. I/ 'F' I~'Vl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAPERSONAL TAXATIONDeduction under chapter VI-A for Individuals/ H UFsAmendments proposed under Chapter V| -Aw. e.f 01 -04-201 6.Analysis of Tax Proposals in the Finance Bill,20153B(1)80CCD (13)Contribution to National Pension scheme (NPS) Overall ceiling limit for SI.Nos.1, 2 & 3A Section Particulars Existing Limit (-) Proposed Limit (-) 1 80C Payment of Life Insurance 1,50,000 1,50,000* Premium,etc.2 80CCC Contribution to certain 1,00,000 1,50,000 Pension funds 3A 80CCD 10% of salary or 10% of salary orGTI (restricted to *1 ,00,000)1, 50,000GTIAdditional deduction up to 50,000 on payment in excess of 10%1,50,0005 80D Health Insurance Premium for As per separate table Individual/ HUF 6 80DD Maintenancel medical treatment of disable dependant Disabled 50,000 75,000 - Severely disabled 1,00,000 1,25,000 7 80DDB Medical treatment for Specified Disease - Individual 40,000 40,000 - Senior Citizen 60,000 60,000 - Very Senior Citizen 60,000 80,000 8 80U Deduction in case of person with disability - Disabled 50,000 75,000 Severely disabled1,00,000r; I. ;. ,v, ,'..- '$1,25,000T. ">_-.. ..: 1-15
  18. 18. W _ / six$254 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015* Deposit made by parent or legal guardian of girl child under Sukanya Samriddhi Account Scheme eligible for deduction u/ s 80C.Corresponding interest income and withdrawal from such account also exempt u/ S 10(1 1A).Amendment to take effect retrospectively w. e.f01-04-2015.5 Medical certificate may be obtained from any specialist doctor (whether or not working in Government hospital). #Maximum permissible deduction u/ s 80DUnder existing provisionsSelf,Spouse & Parents Dependant (whetherScenario children dependant Total deduction (family) or not) No one is above 60 years 15,000 15,000 30,000No one in family is above 60 years &either one of parents are above 60 years 150O0 20000 35000Atleast one member of family is above 60 years and either one of parents are 20,000 20,000 40,000 above 60 yearsAs proposedSelf,Spouse & Parents Dependant (whetherScenario children dependant Total deduction (family) or not) No one is above 60 years 25,000 25,000 50,000 No one in family is above 60 years & 25,000 30,000 55,000either one of parents are above 60 yearsAtleast one member of family is above 60 years and either one of parents are 30,000 30,000 60,000 above 60 yearsMedical expenditure (where at least one member is above the age of 80 years 30,000 30,000 60,000 without any health insurance)Contribution to schemes eligible for 100% deduction [Sec.80G]
  19. 19. C _ rl/ U$254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015Under the existing provisions of Sec.80G,contribution made to certain funds and institutions formed for a social purpose of national importance,like the Prime Ministers National Relief Fund,National Foundation for Communal Harmony etc.are eligible for 100% deduction. r It is proposed to include the following funds in the list of such eligible institutions:- "National Fund for Control of DrugAbuse" [w. e.f AY 2016-17] "Swachh Bharat Kosh" [w. r.e. fAY 2015-16] "Clean Ganga Fund" [w. r.e. f AY 2015-16]Enabling of filing of Form 15G/15H for payment made under life insurance policy [Sec.197A] [w. e.f.01-06-2015]r The Finance (No.2) Act,2014, inserted Sec.194DA in the IT Act with effect from01-10-2014 to provide for TDS @ 2% from payments made under life insurance policy,which are chargeable to taxv To avoid TDS in case where tax on total income is likely to be nil during the year, Sec.197A has been amended to provide for submission of self declaration in Form No.15G and 15H. Tr- *": ??;": : ~-I. '~" "Va,. . > 7..A'-, 17
  20. 20. :. /U "$254 THE INSTITUTE or CHARTERED AccouNTANTs or INDIAAnalysis of Tax Proposals in the Finance Bill,2015CORPORATE TAXATIONDeferment of Provisions Relating To General Anti Avoidance Rule [w. e.f AY 2016-17]- Finance Bill proposed to defer the implementation of General Anti Avoidance Rule implementation [GAAR] by two years,making it applicable from AY 2018-19 onwards.Further,investments made up to 31-03-2017 are proposed to be kept outside the applicability of GAAR. Deduction for Employment of New Workmen [Sec.80JJAA] [w. e.fAY 2016-17]- Deduction u/ s 80JJAA is available to Indian companies on additional wages paid to new workmen.In order to encourage employment generation,it is proposed to extend the benefit to all assessees having manufacturing units rather than restricting it to corporate assessees only.It is also proposed to deny deduction to assessee which has acquired the factory by way of transfer from any other person or as a result of any business re- organisation. c Further,in order to enable the smaller units to claim this incentive,it is proposed to extend the benefit to units employing 50 instead of 100 regular workmen. lncentivising industrial development in the State of Andhra Pradesh & Telangana [Sec.32AD and 32(1)(iia)] [w. e.f. AY2016-17]> Additional investment allowance [Sec.32AD]- It is proposed to insert a new Sec.32AD to allow additional investment allowance @15% on the cost of eligible plant & machinery acquired and installed by the assessee in an undertaking or enterprise set up in the notified backward areas of Andhra Pradesh and Telangana on or after 01-04-2015 for manufacture or production of any article or thing.Further the eligible plant & machinery needs to be acquired and installed during the period beginning from 01-04-2015 to 31-03-2020.- In order to ensure that the proposed incentive contributes to economic growth of backward areas,it is also proposed that plant or machinery shall not be transferred for a period of 5 years except in the case of amalgamation or demerger.
  21. 21. // ?i~THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Comments - The above investment allowance u/ s 32AD is in addition to the investment allowancespecified under the existing provisions of Sec.32AC if it fulfils the specified conditions ofboth sections. > Higher rate of additional depreciation [32(1)(iia)]- It is proposed to insert a new proviso below Sec.32(1)(iia) to provide that where an assessee,sets up an undertaking or enterprise for manufacture or production of any article or thing in the notified backward areas ofAndhra Pradesh and Telangana on or after 01-04-2015 additional depreciation u/ s 32(1)(iia) shall be admissible @ 35% instead of20%.Comments - The likely scenario of benefits due to investment in the notified backward areas of AndhraPradesh and Telangana vis-a-vis the other states is depicted as under: Notified backwardParticulars areas of Andhra Pradesh Other states & Telangana Year 1 Year 2 Year 1 Year 2 onwards onwardsInvestment in plant & machinery 100 100Normal Depreciation 15 15Investment Allowance u/s 32AC 15 15Investment Allowance u/s 32AD 15Additional Depreciation u/ s 32(1)(iia) 35 20Depreciation in future years 50 50 65 Total benefits & flow thereof 80 50 50 65The above table shows that 80% of the investment during the specified period in the Notified backward areas of Andhra Pradesh & Telangana would be eligible for deduction in the year ofinvestment itself. :4.{T= Il.gm '9
  22. 22. /?5 THE INSTITUTE or cHARTERED ACCOUNTANTS or INDIA[ Analysis of Tax Proposals in the Finance Bill,2015Allowance of balance 50% Additional Depreciation in immediately succeeding previous year [Sec.32(1)(iia)] [w. e.fAY 2016-17]- Hitherto,additional depreciation u/ s 32(1)(iia) on eligible Plant & Machinery acquired and put to use for less than 180 days in the previous year was restricted to 50% of the prescribed 20%. o It is proposed to provide that the balance additional depreciation of 10% [50% of 20%] oneligible Plant & Machinery acquired & used for less than 180 days in a previous year shall be allowed in the immediately succeeding financial year. CommentsThe proposed amendment fortifies the view taken in the case of DCIT vs. Cosmo Films Ltd (2012) 13 ITR(Tri) 340 (Del),MITC Rolling Mills P.Ltd.(ITA No.2789/Mum/2012),Birla Corporation Limited vs. DCIT (| TANo.683 & 581 / Kol/201 1 ). Prescribed conditions on maintenance of accounts,audit etc to be fulfilled by the approved in house R&D facility [Sec.35(2AB)] [w. e.f.AY 2016-17]o Sec.35(2AB) of the IT Act provides for weighted deduction of 200% to a company engaged in the business of biotechnology or manufacturing of the goods for the expenditure (not being expenditure incurred on land or building) on in house R&D facility.The company is required to enter into an agreement with the DSIR.The company is further required to maintain separate books of accounts and get the same audited for approval R&D facility. - It is proposed to enlarge the procedural requirement of fulfilment of such conditions as would be prescribed for maintenance and audit of accounts and furnishing of reports. - It is also proposed to provide that the report may be submitted to the Principal CCIT or CCIT having jurisdiction over the company claiming the weighted deduction. Commentso The DGIT (Exemptions) does not have jurisdiction over the assessee company.In order to have a better and meaningful monitoring mechanism for weighted deduction u/ s 35(2AB) the facility would now be monitored directly by the Principal CCIT or CCIT having jurisdiction over the assessee.
  23. 23. C _ mix, 5:54 THE INSTITUTE or CHARTERED AccouNTANTs or INDIAAnalysis of Tax Proposals in the Finance Bill,2015Cost of acquisition and period of holding of capital asset in the hands of resulting company in Demerger [Sec.49(1)(iii)(e)] [w. e.f.AY 2016-17]a Presently,there is no express provision in the lTAct for determining the cost of acquisition of capital asset in the hands of resulting company in case of transfer of capital assets by way of demerger which is exempted u/ s 47(vib) of the Act.It is proposed to amend Sec.49(1 )(iii)(e) of the | TAct to provide that cost of acquisition of a capital asset acquired by the resulting company shall be the cost for which the demerged company acquired the capital asset,as increased by the cost of improvement incurred by the demerged company.Consequently,period of holding of such asset in the hands of resulting company will also include the period for which the asset was held by the demerged company. Commentso The above amendment,seeks to treat demerger at par with amalgamation with regard to cost of acquisition of capital asset as well as period of holding in the hands of resulting company. Tax Neutrality on merger of similar schemes of mutual funds [Sec.47(xviii) & Sec.49(2AD)] [w. e.f.AY 2016-17]- Several Mutual Funds are having different schemes with similar features.SEBI has been encouraging to consolidate these mutual funds to have simpler and fewer numbers of schemes.However,since the process will result in transfer of unit between schemes,such merger/ consolidation is treated as 'transfer' u/s 2(47) of the IT Act and hence chargeable to Capital Gains tax. - To facilitate consolidation of different scheme of mutual funds,in the interest of investors,it is proposed to provide tax neutrality to unit holders provided consolidation is of two or more schemes of an equity oriented or two or more schemes of fund other than equity oriented fund. - Accordingly,it is now proposed to insert a new subsection (xviii) to Sec.47 to exempt transfer of a unit in a consolidating scheme of mutual fund,in consideration to the unit of the consolidated scheme of mutual fund. - Further,subsection (2AD) has been inserted in Sec.49 to provide that cost of the unit of
  24. 24. C _ max, $254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015the consolidated scheme of mutual fund received pursuant to transfer exempt u/ s 47(xviii),shall be cost of purchase of units in the consolidating scheme of mutual fund. a The process of such consolidation has to be in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,1996 made under the SEBI Act,1992.Amendment in the definition of Amount sought to be evaded [Sec.271(1)(c)] [w. e.f.AY 2016-17]- Hitherto,penalty u/ s 271 (1 )(c) is levied on the amount of tax sought to be evaded.Such penalty is computed on the amount of concealed income or tax evaded by furnishing inaccurate particulars of income. o It is proposed to modify the definition of amount of tax sought to be evaded provided in Explanation 4 to clause (iii) of sub section (1) of Sec 271 so as to compute penalty on evasion of tax in computation of total income under normal provisions as well as income computed u/ s115JB or 115JC of the | TAct.The computation of amount of tax sought to be evaded will be made by the following formula: (AB) + (CD)A Tax on assessed income as per normal provisions. B - Tax on [assessed income as per normal provisions minus income in respect of which particulars have been concealed or inaccurate particulars have been furnished under normal provisions]C - Tax on assessed income as per Sec 115JB or115JC. D - Tax on [assessed income as per Sec 115JB or 1 15JC minus income in respect of which particulars have been concealed or inaccurate particulars have been furnished under Sec 115JB or Sec 115JC. Commentso The Delhi HC in the case of CIT vs. Nalwa Sons Investments Ltd (2010) 327 ITR 543 (Del) has held that penalty u/ s 271(1)(c) cannot be imposed on the concealment of income under normal provisions,if the total income of the assessee is assessed as per Sec 115JB of the IT Act.The Apex Court has also accepted the decision of the Delhi HC & dismissed the SLP filed by the Revenue.The proposed amendment nullifies the aforesaid decision of the Apex Court.
  25. 25. :. /U "5:54 THE INSTITUTE or CHARTERED AccouNTANTs or INDIAAnalysis of Tax Proposals in the Finance Bill,2015INTERNATIONAL TAX AND TRANSFER PRICINGEligible Fund Manager not to constitute Business Connection of offshore investment funds - position clarified [Sec.9Aand 271 FAB] [w. e.f.AY 2016-17]- Presently,in terms of the existing provisions of Sec.9(1)(i) w. r.t Business Connection and Sec.6 in so far as it relates to residential status of a person other than an individual,an India based fund manager may create a sufficient nexus,and hence a business connection,for the concerned offshore Investment Fund even though such fund manager may be an independent person.Further,income of the off-shore Investment Fund from investment in jurisdictions other than India managed by the India-based fund manager may be liable to tax in India due to the location of fund manager in India and attribution of such profits to the activity of the fund manager undertaken on behalf of the off-shore Investment fund.Moreover,presence of the fund manager under certain circumstances may lead to the off-shore Investment Fund being held to be resident in India on the basis of its control and management being in India.Accordingly,income of such offshore Investment Fund from investments made in countries outside India may also get taxed in India. a Accordingly,offshore Investment Funds do not typically retain fund managers based in India,instead many fund managers that manage India focused offshore funds,tend to be based outside India and only have an advisory relationship in India that provide recommendatory services. - In order to facilitate such fund managers to have their base in India,it has been proposed to insert a new Sec.9A to lay down a specific code for taxability of such Offshore Investment Funds.The new section provides that taxability of the income of the Eligible Investment Fund from investment made in India would not be impacted by the fact that its Eligible Fund Manager is based in India.Similarly for income from investment made outside India,its taxability shall not be in India for the sole reason that its Eligible Fund Manager is based in India. - Thus the new regime proposes that the Eligible Fund Manager in India of a Eligible Investment Fund shall not constitute a business connection in India of the said fund on fulfilment of specified conditions.Further,an Eligible Investment Fund shall not be said to be resident in India merely because the Eligible Fund Manager undertaking fund management activities is based in India.
  26. 26. /I. / I. ~'yI. ,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IThe conditions required to be fulfilled during the relevant year for being an Eligible Investment Fund are: o the fund is not a person resident in India;0 the fund is a resident of a country or a specified territory with which an agreementreferred to in sub-section (1) of Sec.90 or sub-section (1) of Sec.90A has been entered into; 0 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; 0 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; o the fund has a minimum of twenty five members who are,directly or indirectly,not connected persons; 0 any member of the fund along with connected persons shall not have any participation interest,directly or indirectly,in the fund exceeding ten percent; 0 the aggregate participation interest,directly or indirectly,of ten or less members along with their connected persons in the fund,shall be less than fifty percent; 0 the investment by the fund in an entity shall not exceed twenty percent of the corpus of the fund; o no investment shall be made by the fund in its associate entity; 0 the monthly average of the corpus of the fund shall not be less than Rs.100 cr. and if the fund has been established or incorporated in the previous year,the corpus of fund shall not be less than Rs.100 cr.at the end of such previous year; 0 the fund shall not carry on or control and manage,directly or indirectly,any business in India or from India;0 the fund is neither engaged in any activity which constitutes a business connectionin India nor has any person acting on its behalf whose activities constitute a business connection in India other than the activities undertaken by the eligible fund manager on its behalf; 0 the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken on its behalf is not less than the arm's length price of such activity.
  27. 27. C _ max, $254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015The conditions required to be fulfilled for being an Eligible Fund Manager are: 0 the person is not an employee of the Eligible Investment Fund or a connected person of the fund; 0 the person is registered as a fund manager or investment advisor in accordance with the specified regulations; 0 the person is acting in the ordinary course of his business as a fund manager; o the person along with his connected persons shall not be entitled,directly orindirectly,to more than twenty percent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through such fund manager. However this amendment shall not result in excluding any income from the total income of the Eligible Investment Fund,which would have been so included irrespective of whether the activity of the eligible fund manager constituted the business connection in India of such fund or not. It has also been proposed that the Fund shall furnish a statement in a prescribed form regarding fulfilment of above specified conditions to tax authorities within 90 days from the end of the financial year failing which the Fund would be liable to penalty of Rs.5,00,000Reduction in tax rates of income by way of Royalty or Fees for Technical Services [Sec.1 1 5A] [w. e.f.AY 2016-17]c As per the existing provisions of Sec.115A of the IT Act,the NonResident taxpayers are liable to pay tax at the rate of 25% of gross amount of income by way of Royalty and Fees for Technical Services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31-03-1976, and where such agreement is with an Indian concern,the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy,for the time being in force,of the Government of India,the agreement is in accordance with that policy,and,which are not effectively connected with permanent establishment,if any,of the non-resident in India. 0 It is proposed to amend Sec.115A to reduce the above tax rate of 25% to 10% on the gross amount. *" -" n.I
  28. 28. /: ./U I. =yI. r , THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IIndirect Transfers - Deemed income taxable in India - provisions clarified [Sec.9(1),47(viab),47(vicc),271GAand 285A] [w. e.f.AY 2016-17]Presently,Explanation 5 to Sec.9(1)(i) provides that any share or interest in a company or an entity registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives its value substantially from the assets located in India.Hence,any transfer of such share/ interest in a Foreign Company results in an indirect transfer of Indian assets.However,the term value and substantially were not defined under the | TAct leading to significant subjectivity and uncertainty. The present Budget proposes to amend Sec.9(1 )(i) of the | TAct by inserting Explanation 6 to provide clarity on the above.Accordingly,it is proposed to provide that any transfer of interest in a foreign company or entity shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India,if on the specified date,the value of Indian assets (not net of liabilities) exceeds the amount of Rs.10 Crs.and represents at least 50% or more of the fair market value of all the assets (not net of liabilities) owned by such foreign company or entity. However,certain exceptions have been carved out vide Explanation 7 and vide amendment in Sec.47 such as: 0 Transfer outside India of share/ interest in the foreign company/ entity which directly owns the assets situated in India and the transferor (whether individually or along with its AEs),neither holds the management right or control,nor holds voting power or share capital or interest exceeding 5% in such foreign company/ entity;or0 Transfer outside India of share/ interest in the foreign company/ entity which indirectly owns the assets situated in India and the transferor (whether individually or along with its AEs),neither holds the right of management or control in relation to such foreign company/ entity,nor holds any right in,or in relation to,such company or entity which would entitle him to the right of management or control in the company or entity that directly owns the assets situated in India,nor holds such percentage of voting power or share capital or interest in such company or entity which results in holding of (either individually or along with associated enterprises) a voting power or share capital or interest exceeding 5% of the total voting power or total share capital or total interest,as
  29. 29. i . THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I the case may be,of the company or entity that directly owns the assets situated in India.0 Any transfer,in a scheme of amalgamation,of a capital asset,being a share of aforeign company,which derives,directly or indirectly,its value substantially from the share or shares of an Indian company,held by the amalgamating foreign company to the amalgamated foreign company,if at least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company and such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated; 0 Any transfer in a demerger,of a capital asset,being a share of a foreign company,which derives,directly or indirectly,its value substantially from the share or shares of an Indian company,held by the demerged foreign company to the resulting foreign company,if the shareholders,holding not less than 3/4th in value of the shares of the demerged foreign company,continue to remain shareholders of the resulting foreign company and such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated. In case where all the assets owned,directly/ indirectly,by a company or entity are not located in India,the income of the non-resident transferor,from transfer outside India deemed to accrue or arise in India,shall be only such part of the income as is reasonably attributable to assets located in India.The relevant rules in this regard shall be prescribed. It is proposed to insert Sec.285A vide which the Indian concern through or in which theIndian assets are held by the foreign company or the entity shall be under obligation tofurnish information relating to the off-shore transaction having the effect of directly orindirectly modifying the ownership structure or control of the Indian company or entity.If the Indian Entity fails to do so,the income-tax authority in terms of newly inserted Sec. 271 GA may direct that such Indian concern shall pay,by way of penalty:-o a sum equal to 2% of the value of the transaction in respect of which such failure has taken place,if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; 0 Rs.5,00,000in any other case.
  30. 30. I. /5:54 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[ Analysis of Tax Proposals in the Finance Bill,2015CBDT to notify rules for giving foreign tax credit of income tax paid outside India [Sec.295] [w. e.f.01-06-2015]o Presently,Sec.91(1) of the IT Act provides for 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 DTAA.The present mechanism is to provide relief as 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 Sec.90 or Sec.90A,a relief in respect of income-tax on doubly taxed income is available as per the respective DTAAS. o Presently,the IT Act does not provide the manner for granting such credit of taxes.Accordingly,it is proposed to amend sub-section (2) of Sec.295 of the IT Act so as to provide that CBDT may make rules to provide the procedure for granting relief or deduction,as the case may be,of any income-tax paid in any country or specified territory outside India,under Sec.90, 90A or 91, against the income-tax payable under the | TAct. Threshold limit for applicability of domestic transfer pricing provisions raised from Rs.5 Crs.to Rs.20 Crs.[Sec.92BA] [w. e.f.AY 2016-17]- Existing Transfer Pricing Regulations in India vide Sec.92BA provide that Transfer Pricing Provisions shall apply to specified domestic transactions where the aggregate of such transactions in the relevant previous year exceeds a sum of Rs.5 Crs. o It is proposed to amend Sec.92BA to increase the above threshold of Rs.5 Crs.to Rs.20 Crs. Interest paid by Indian Branch to Foreign Banking companies taxable in India and liable to Withholding tax [Sec.9] [w. e.f.AY 2016-17]- The CBDT vide its Circular No.740 dated 17-04-1996 had earlier clarified that branch of a foreign company in India is a separate entity for the purpose of taxation under the IT Act and accordingly 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. 28
  31. 31. / I IN "52:;THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I o The principle enshrined in the Said Circular is now proposed to be incorporated in the ITAct by amending Sec.9(1) to provide that in the case of a non-resident,being a person engaged in the business of banking,any interest payable by the permanent establishment in India of such non-resident to the head office or any other part of such non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to any income attributable to the permanent establishment in India and the permanent establishment in India shall be deemed to be a person separate and independent of the non-resident person of which it is a permanent establishment and the provisions of the IT Act relating to computation of total income,determination of tax and collection and recovery would apply. o Accordingly,the PE in India shall be obligated to deduct tax at source on any interest payable to either the head office or any other branch or PE,etc.of the non-resident outside India.Further,nondeduction would result in disallowance of interest claimed as expenditure by the PE and may also attract levy of interest and penalty in accordance with relevant provisions of the | TAct. Concessional tax rate u/ s 194LD relating to Income by way of interest on certain securities extended upto 30-06-2017 [Sec.194LD] [w. e.f.01-06-2015]o Sec.194LD presently provides lower withholding tax @ 5% in case of interest payable on or after 01-06 -2013 but before 01-06-2015 to Flls and Qualified Foreign Investors (QF| s) on their investments in Government securities and rupee denominated bonds of an Indian Company if the rate of interest does not exceed the rate notified by the Central Government. - To align the eligibility period u/ s 194LC with Sec.194LD,the bill proposes to amend Sec.194LD to extend the concessional rate of 5% upto 30-06-2017 also. IT Act and Depository Receipt Scheme,2014 aligned to extend tax benefits to depository receipts issued against specified securities [Sec.1 15ACA] [w. e.f.AY 2016-17]o The Depository Receipts Scheme,2014 has been notified by the Department of Economic affairs (DEA) vide Notification ENo.9/1/2013ECB dated 21-10-2014. This scheme replaces | ssue of Foreign Currency Convertible Bonds and Ordinary Shares (through depository receipt mechanism) Scheme,1993. 7 . ";)_.6!. -'. .:.29
  32. 32. /: ./U I~IV| :f, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IThe current taxation scheme of income arising in respect of depository receipts under the | TAct is aligned with the earlier scheme which was limited to issue of Depository Receipts (DRS) based on the underlying shares of the company issued for this purpose (i. e. sponsored GDR) or Foreign Currency Convertible Bonds (FCCB) of the issuing company and where the company was either a listed company or was to list simultaneously.Besides,the holder of such DRs was a non-resident only. As per the new scheme Depository Receipts (DRS) can be issued against the securities of listed,unlisted or private or public companies against underlying securities which can be debt instruments,shares or units etc.Further,both the sponsored issues and unsponsored deposits and acquisitions are permitted.Also,DRs can be freely held and transferred by both residents and non-residents. Since the tax benefits under the IT Act were initially intended to be provided in respect of sponsored GDRS and listed companies only,clause (a) of the explanation Sec.115ACA of the IT Act has been amended in order to continue the tax benefits only in respect of GDR'sagainst the issue of: o ordinary shares of issuing company,being a company listed on a recognised stock exchange in India;or 0 Foreign currency convertible bonds of issuing company. Exemption to specified income of Core Settlement Guarantee Fund [Sec.10(23EE)] [w. e.f. AY2016-17]As per the existing provisions,income by way of contributions to the Investor Protection Fund set up by recognised stock exchanges in India,or by commodity exchanges in India or by a depository is exempt from taxation. It has been proposed to exempt the specified income of Core Settlement Guarantee Fund subject to similar conditions as provided in case of Investor Protection Fund set up by the Recognized Stock Exchange or Commodity Exchange or a Depository. Where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared,either wholly or in part with the specified person being any recognized clearing corporation which establishes and maintains the Core Settlement Guarantee Fund and the recognised stock exchange being the shareholder
  33. 33. :]/ 'I5254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[ Analysis of Tax Proposals in the Finance Bill,2015of such clearing corporation,the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is shared. Residency Criteria of Companies - widened by introduction of Place Of Effective Management concept [Sec.6] [w. e.f.AY 2016-17]a As per the existing provisions of Sec.6 of the IT Act,a company is said to be a resident in India in any previous year,if: - 0 it is an Indian company;or 0 during that year,the control and management of its affair is situated wholly inIndia. o Sec.6 is proposed to be amended to widen the concept of residency test for companies as under : - o it is an Indian company;or o its place of effective management,at any time in that year,is in India. o Place of Effective Management (POEM) shall mean a place where key management andcommercial decisions that are necessary for the conduct of the business of an entity as a whole are,in substance made. Rationalisation of MAT provisions for members of an AOP and Flls [Sec.115JB] [w. e.f. AY2016-17]o Presently,a company which is a member of an AOP is not liable to tax in respect of share of the income from such AOP.However,such company is liable to pay MAT on such share of income since there is no specific exclusion under Sec.115JB. - Accordingly,it has been proposed to amend Sec.115JB of the IT Act 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 Sec.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 are also proposed to be added back to the book profit for the purpose of computation of MAT; o Further,vide Finance Act (No.2),2014 it was provided that any securities held by Flls
  34. 34. W _ mix) I THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015which has invested in such securities in accordance with the regulations made under the SEBI Act 1992 would be treated as a capital asset.Consequently,the income arising to a FII from transactions in securities would always be in the nature of capital gains. o It is now proposed to amend Sec.115JB of the IT Act to provide that Income from transactions in securities (other than short term capital gains arising on transactions on which securities transaction tax is not chargeable) arising to a FII,shall be excluded from the chargeability of MAT and the profit corresponding to such income shall be reduced from the book profit.The expenditures,if any,debited to the profit loss account,corresponding to such income are also proposed to be added back to the book profit for the purpose of computation of MAT.
  35. 35. :. /U I5254 THE INSTITUTE or CHARTERED AccoUNTANTs or INDIAAnalysis of Tax Proposals in the Finance Bill,2015TRUST & CHARITABLE INSTITUTIONSTaxation Regime for Real Estate Investment Trust (RE| T) and Infrastructure Investment Trust (Invit) [Sec.2(13A),10(23FCA),111A(1),115UA,w. e.f.AY 2016-17 and 194-I and 194-LBA w. e.f.01-06-2015]- The Finance (No.2) Act,2014 had amended to put in place a special taxation regime in respect of business trusts. o Finance Bill 2015 propose to substitute business trust to mean a trust registered as an Invit under Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations,2014 made under SEBI Act,1992 or REIT under Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations,2014 made under SEBI Act,1992 or the units which are required to be listed on recognised stock exchange in accordance with aforesaid regulations. a In order to rationalise the provision,following proposal are made under the Finance Bill,2015 which are summarised hereunder:Particulars Existing Provisions Proposed amendments T Exchange of shares Sponsor Sponsor if SPVs with units of the business trust Capital gain will be deferred and No changetaxed at the time of sale of units of the business trust by sponsor. Unit holder of the trust Unit holder of the trust (other than sponsor) (other than sponsor) Not Applicable Not Applicable Sale of listed units Sponsor Sponsor of business trust through Initial Offer Benefit of concessional regime Benefit of concessional regime at the time of listing is not available at the time of is available at the time of off of business trust on offloading of units of business loading of units of business trust recognised stock trust exchange Parity of tax treatment on offloading of units vis-a-vis off loading of underline shareholdingthrough an IPO
  36. 36. / I. THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Particulars Existing Provisions Proposed amendmentsS'| '|' shall be levied on sale of units of business trust on similar lines as in case of unlisted equity shares under an IPOLong term capital gain will be exempt u/ s. 10(38) of IT ActShort term capital gain will be taxed @15%Cost of units of business trust to No change be considered as cost of shares to the sponsorHolding period of shares to be No change included in the holding period of such securities sate f listed Its Long term capital gain will be No change f busmess trust exempt u/ s. 10(38) of IT ActShort term capital gain will be taxed @15%
  37. 37. / I IN "52:;THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Particulars Existing Provisions Proposed amendmentsInterest and withholding tax thereonTrustInterest received from SPV is not taxable and as such,no withholding of tax by SPVTrust to withhold tax @5% on payments to non-resident unit holder and 10% in case of resident unit holderTrustNo changeTrust to withhold tax @5% on payments to non-resident unit holder and 10% in case of resident unit holderDividend incomeTrustDividend by SPV to be exemptDDT to be paid by SPV & not by TrustSponsorIncome distributed by business trust to unit holder will be exemptUnit holder of the trust (other than sponsor)TrustNo changeSponsor No ChangeUnit holder of the trust (other than sponsor)Income distributed by business No change trust to unit holder will be exempt Disposal of assets Taxable as capital gain at No change by trust applicable rates other Income Any other income taxable at MMR N0 Change
  38. 38. /5:54 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Particulars Existing Provisions Proposed amendmentsRental income Business trust being REIT only arising to REIT on real estate assetheld directlyRental income taxed at MMRSponsorIncome distributed by business trust to unit holder will be exemptUnit holder of the trust (other than sponsor)Income distributed by business trust to unit holder will be exemptBusiness trust being REIT onlyNo tax in the hands of business trustDistributed income in the nature of rental income arising on real estate asset owned directly by REIT shall be deemed to be income of unit holder chargeable to taxREIT to withhold tax @10% in case of resident unit holder and at the rate in force on any sum chargeable to tax in case of non-resident unit holderRate in force in relation to an AY for the purpose of TDS u/s.195, shall be rate specified in the Finance Act or the rate specified in an agreement u/ s. 90(2) between India and Government of any country outside IndiaNo TDS u/ s.194-|w. e.f.1 June 2015 by REIT where income iscredited or paid to a businesstrust directlyBusiness Trusts are required to furnish its return of income u/ s 139(4E) of the IT ActComments - Pass through status on rental income for RE| Ts.o RE| Ts enable investors to channelise their investments into India's real estatesector and infrastructure sector through a regulated mechanism.RE| Ts and | NV| Ts would also provide liquidity to real estate and infrastructure projects.
  39. 39. W _ / -jszja THE INSTITUTE or CHARTERED AccoUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015Time Limit to Intimate Assessing Officer about Accumulated Fund not applied for Charitable or Religious Purposes [w. e.fAY 2016-17]o Under the existing provision of Sec.11(2) there is no clarity regarding the time limit for furnishing of Form 10 r. w.r.17 of Income Tax Act Rules,1962 to be filed before the AO informing him about accumulation of fund which has not been applied for charitable purpose.Further the existing provisions allows for such accumulation,subject to conditions specified,for the period of 10 years. - In order to remove ambiguity regarding the time limit,the proposed amendment specifies that such form shall be filed before due dates specified u/ s 139(1).Further,accumulation of funds as per the manner specified shall not exceed 5 years instead of 10 years. - In order to make the provision stringent,Sec.13(9) has been introduced which provides that in case Form 10 is not submitted on or before the due date of filing return of income u/ s 139(1),then the benefit of accumulation would not be available and such income would be taxable at the applicable rate.Further,the benefit of accumulation would also not be available if return of income is not furnished before due date of filing of income. Income of Swachh Bharat Kosh and Clean Ganga Fund Exempt From Income Tax [Sec.10(23C)] [w. r.e. f. AY 2015-16]- The existing provisions of Sec.10(23C) of the IT Act provide for exemption from tax in respect of the income of certain charitable funds or institutions.Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund,it is proposed to include these funds in the list of eligible entities for the purpose of Sec.10(23C) exempting their income from the purview of income tax. Mandatory furnishing of return of income by universities and hospitals referred to in Sec.10 (23C) [Sec.139(4C)] [w. e.fAY 2016-17]- Under the existing provisions of Sec.139, all entities whose income is exempt u/ s10(23C),other than university or educational institution specified in sub-clause (iiiab) and hospital or other institution specified in sub-clause (iiiac),are mandatorily required to file their return ofincome. , -(,3;{T= t! .. . :"iI.37
  40. 40. / I IN "52:;THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I o It is proposed to amend Sec.139(4C) to provide for mandatory filing of return of income by these entities. Order passed u/ s 10(23C) appealable to ITAT [w. e.f.01-06-2015]- Income received by a person on behalf of any university or other education institution existing solely for education purpose or any other purpose on behalf of any hospital or other institution providing medical treatment,existing solely for philanthropic purpose is not liable for tax under sub-clause (vi) & (via) of sec.10(23C), if approved by prescribed authority. o Hitherto,order received from the prescribed authority is not appealable before Appealable Tribunal.It is proposed to amend Sec.253(1),to make order passed u/ s 23(C)(vi ) or (via) as appealable to the Appealable Tribunal. Definition of Charitable Purpose to include Yoga & Rationalisation of scope of advancement of any other object of general public utility [Sec.2(15)] [w. e.f.AY 2016-17]a Sec.2(15) defines Charitable purpose to include activity in the nature of relief of the poor,education,medical relief and advancement of any other object of general public utility.Proviso to Sec.2(15),specifies that advancement of any other object of general public utility shall not be a charitable purpose,if it involves the carrying on of commercial activity.However,this restriction shall not apply if the aggregate value of the receipts from the activities referred above is Rs.25,00,000 or less in the previous year. - In order to promote Yoga which has recently received international recognition too by the UN,it is proposed to include yoga within the ambit of activities in the nature of Charitable Purpose. o Further it has been proposed to provide that advancement of any other object of generalpublic utility as mentioned in the above definition shall not be charitable purpose unless such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and 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,for the previous year.
  41. 41. .1/-ixTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAPass through status for Category - I & Category - II Alternative Investment Funds (A| F)[Sec. 115UB][w. e.f. AY 2016-17]0 Vide SEBI (AIF) Regulations,2012, AlFs have been classified into following threecategories:Analysis of Tax Proposals in the Finance Bill,2015ParticularsLegal formCategory - ICategory - IICategory - IIIFund can be set up as a Trust,Company,LLP or any other body corporateCriteriaInvest in startup or early stage ventures or social ventures or SMES orPrivate equity funds or debt funds which do not fall in Category I and IIIFunds that employ diverse or complex trading strategies andand which do not undertake leverage or borrowing other than to meet day-to-dayinfrastructure or other sectors or areas which the Government or regulators consider asmay employ leverage including through investment inlisted or unlistedsocially or economically operational derivatives desirable requirements Investment Funds shall invest not more than 25% of the corpus Fund shall invest not Condition in one Investee Company more than 10% of the corpus in one Investee Company Tenure Minimum tenure of 3 years No tenure specified- Vide Finance Act,2013, Sec.10(23FB) r. w.s 115U was amended to provide the scope of taxability of income of certain Category I of AIF. o It is proposed to insert Sec.115UB to provide specific taxability regime for Category I & Category - | |A| Fs as well.The proposals are summarised hereunder: Income in the nature of profits and gains of business or profession shall be taxable at the applicable rates.Other Income such as Capital Gain & Income from other sources shall be exempt from tax. Taxability in r hands of AIFTaxability in c.Income in the nature of profits and gain of business or profession hands of Unit received from AIF shall be exempt.holder of AIF c Income received in the nature of Capital Gain & Income from othersources shall be chargeable to taxWithholding tax c.Income received by AIF would be exempt from TDS requirement. r TDS @ 10% under newly proposed Sec.194LBB shall be deducted by AIF at the time of payment of income in the nature of Capital Gain & Income from other sources to unit holder
  42. 42. /II THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 Carry forward and v Losses shall be allowed to be set off and carried forward to AIF as set-off of losses per provisions of Chapter VI but same cannot be transferred to unit holders Dividend income A Provisions of DDT shall not apply to the income paid by AIF to its unit holders Return of c Mandatory for AIF to file its ROI u/ s 139 | ncome(RO| ) Applicability Z Sec.115UB shall also apply to Certain category I of AIF which wascovered by Sec.115U
  43. 43. :. /U I$254 THE INSTITUTE or CHARTERED AccoUNTANTs or INDIAAnalysis of Tax Proposals in the Finance Bill,2015PROCEDURAL & OTHERSAbolition of Wealth TaxAct,1957 [w. e.f.AY 2016-17]o Under the existing provisions of Wealth tax Act,1957, wealthtax @ 1% is levied on an Individual or HUF or Company,if the net wealth of such person exceeds Rs.30,00,000 on the valuation date i . e. last date of the previous year. c It is proposed to abolish the Wealth Tax Act since revenue collection from the same is not commensurate with the high cost of collection. a Further,to track the wealth held by individuals and entities,it is proposed that 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. Withdrawal of exemption from TDS on payments to transport contractors owning more than ten goods carriage [Sec.194C(6)] [w. e.f 01-06-2015]- Hitherto,as per sub-section (6) of Sec.194C amended vide Finance (No.2) Act,2009 w. e.f.01-10-2009, no tax was required to be deducted from any sum paid to a transport contractor provided such contractor furnishes his PAN. - It is proposed to amend sub-section (6) of the Sec.194C to restrict the benefit of non deduction of tax on payment made to only those transport contractors owning ten or less goods carriage at any time of the previous year and a declaration to this effect is furnished. Assessment of Income of a person other than the one in whose case search is initiated [Sec.153C] [w. e.f.01-06-2015]0 Under the existing provisions of Sec.153C,during the course of a search,if the A0 is satisfied that books of account or document seized or requisitioned belong to any person other than the person searched,then the books of accounts or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and he shall proceed against such other person. , -(,3;{T= t! .. . :"iI.4
  44. 44. /: ./U I~IVl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IIt is proposed that even if the books of account or document seized or requisitioned pertain to,or any information contained therein,relate to any person other than the searched person,then the books of accounts or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and he shall proceed against such other person. Widening the scope of filing application before Settlement Commission [Sec.245A] [w. e.f01-06-2015]Under the existing provisions,an assessee may make an application before Settlement Commission (ITSC) in respect of assessment year or years which may be pending before AO on date on which application is made.Presently,where a notice is issued u/ s 148, the assessee is eligible to make application to ITSC only for that year and not for other assessment years. It is proposed to amend clause (i) of the Explanation to Sec.245A(b) to enable the assessee to approach ITSC even for other assessment years where the return has been filed but notice u/ S148 has not been issued. Hitherto,assessee can file application in respect of those years for which proceedings have commenced on 1st day of the assessment year and assessment has not been completed by virtue of clause (iv) of Explanation to Sec.245A(b). It is proposed to amend above clause to provide that a proceeding for any assessment year shall be deemed to have commenced from the date on which the return of income has been furnished u/ s 139 or in response to notice u/ s 142 and concluded on the date on which the assessment is made or on the expiry of 2 years from the end of relevant assessment year where no assessment is made. Rectification Order by Settlement Commission [Sec.245D(6B)] [w. e.f 01-06-2015]42Presently,Settlement Commission (ITSC) may amend order passed u/s 245D(4) to rectify its mistake apparent from record within 6 months from the date of order. It is now proposed to substitute Sec.245D(6B) to provide ITSC may rectify its order u/ s 245D(4) as follows:
  45. 45. :. /U 1$254 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015(a) Within 6 months from the end of the month in which the order was passed or(b) Within 6 months from the end of the month in which application for rectification has been made (before the end of period of 6 months) by the Principal Commissioner or Commissioner or applicant. Immunity by Settlement Commission [Sec.245H] [w. e.f 01-06-2015]- Presently,Settlement Commission on fulfilment of certain conditions can grant immunity from penalty & prosecution.However,there is no requirement to record reasons in writing as to why immunity has been granted.It is now proposed that the ITSC will have to record reasons in writing while granting immunity from above proceedings. Bar of subsequent application [Sec.245K] [w. e.f 01-06-2015]- Presently,a person can approach the ITSC once in a life time.However,such person can again approach ITSC through a related person.This defeat the purpose of restricting the opportunity of approaching the Commission only once.It is now proposed that even the related persons as defined would also not be considered as eligible for filing application. Application of seized Cash [Sec.132B] [w. e.f 01-06-2015]- It is proposed to amend Sec.132B to allow seized assets to be adjusted towards the assessee's tax liability under the settlement application in search cases. Levy of Interest u/ s 234B [Sec.234B] [w. e.f.01-06-2015]- Hitherto,when the income assessed u/ s 147 or 153A exceeds the income determined in assessment proceedings,interest u/ s 234B is computed @ 1% per month or a part thereof from the date of determination of total income u/ s 143(1) or 143(3) to the date of reassessment u/ S147 or Sec.153A. It is now proposed to change the time frame for levy of interest u/ s 234B from 1st day of assessment year to the date of determination of total income u/ s 147 or 153A. o It is also proposed to insert sub-section (2A) to Sec.234B to clarify the time period for7 . ";; _-.ff:"--4 4-
  46. 46. I. /5:54 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIAi Analysis of Tax Proposals in the Finance Bill,2015which interest @ 1% for a month or part thereof would be computed when an application is made before Settlement Commission as below: c When an application is made to the ITSC,the additional amount of income tax paid shall be liable to interest u/ s 234B from the 1st day of assessment year to the date of making application. c Further,the additional amount of tax levied by the ITSC in its order u/ s 245D(4), shall be liable to interest u/ s 234B for a period starting from the 1st day of assessment year to the date on which the order is passed. Simplification of TDS mechanism on withdrawal of accumulated balance from Employees Provident Fund Scheme (EPFS) [Sec.192A& Sec.197A] [w. e.f01-06-2015]o Under the existing provision of Sec.10(12) withdrawal of accumulated balance by an employee from recognized Provident Fund (RPF) is exempt from tax,provided the employee has rendered continuous service with the employer for more than 5 years except in specified circumstances.In case of premature withdrawal the exemption is withdrawn and the entire amount is taxable.Rule 10 of the PartAof the Fourth schedule requires trustees of the RPF or the person authorized thereof to deduct tax at the time of making payment to the employee considering it as income under the head salaries.However,trustee does not generally have details of year wise taxable income of the employee. - In order to simplify the TDS application on such withdrawal,it is proposed to insert Sec.192A to provide for fixed rate of TDS @ 10% on withdrawal of Rs.30,000 or more.Further,in case the payee does not furnish PAN,tax shall be deducted at the maximum marginal rate. - To avoid TDS in case where tax on total income is likely to be nil during the year,sub- section (1A) and (1C) of Sec.197A has been amended to provide for submission of self declaration in Form 15G and 15H. Modification of definition of 'accountant [Sec.288] [w. e.f 01 -06-201 5]o Explanation below Sec.288(2) defines 'accountant as chartered accountant within the meaning of Chartered Accountants Act,1949. The said definition includes a person eligible to be appointed as an auditor u/ s 226(2) of the CompaniesAct,1956.
  47. 47. /: ./U I{Viki , THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IIt is proposed to amend the said explanation to provide that the expression accountant means a chartered accountant who holds a valid certificate of practice under the Chartered Accountants Act,1949.Further,several provisions of the IT Act (e. g. Sec.44AB,Sec.80-IA,Sec 115JB etc. ) mandate the taxpayers to furnish audit reports and certificates issued by an 'accountant as defined u/ s 288 for ensuring correct reporting/ computation of taxable income.The proposed amendment also seeks to modify the term 'accountant in respect of the above provisions as follows: c A person who is not eligible to be appointed as an auditor of a company u/ s 141(3) of the Companies Act,2013 shall not be eligible for carrying out any audit or furnishing of any report/ certificate under any provisions of the Act in respect of that company.Amendment on similar lines is proposed for noncompany assessees. r ineligibility for carrying out any audit or furnishing of any report/ certificate in respect of an assessee shall not make an accountant ineligible for attending income-tax proceedings as authorised representative on behalf of that assessee.A person convicted by a court of an offence involving fraud shall not be eligible to act as authorised representative for a period of 10 years from the date of such conviction. c A new explanation has been inserted after sub-section (7) to provide the definitionof relative in relation to an individual to mean spouse,brother,sister,any lineal ascendantl descendant of the spouse/ brother/ sister etc. Clarification on orders to be considered as erroneous and prejudicial to the interest of revenue [Sec.263] [w. e.f01-06-2015]Hitherto,revision proceedings u/ s 263 can be initiated by the CIT if the order passed by the A0 is erroneous or prejudicial to the interests of the revenue.The expressions erroneous or prejudicial to the interest of the revenue has not been defined in the ITAct. It is proposed to insert an Explanation in subsection (1) to Sec.263 to provide that theJW~'r. ,3: _.=4 IE 4-. . ;-2: I- A'-
  48. 48. C _ max, $254 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIAAnalysis of Tax Proposals in the Finance Bill,2015orders passed by the A0 shall be deemed to be erroneous or prejudicial to the interests of the revenue if the CIT or Principal CIT opines that the same is passed : a Without making enquiry or verification which should have been madea Allowing any relief without enquiring into the claimc Without following the order,directions or instructions of the Board. c Without considering the decision of Jurisdictional HC & SC which is prejudicial to the assessee. Widening the restriction on taking or accepting certain loan or deposit or repayments of such loan or deposit [Sec.269SS & 269T] [w. e.f.01-06-2015]> Non acceptance of any sum as advance or otherwise for transfer of an immovable propertyin cash [Sec.269SS]o Hitherto,u/ s 269SS,acceptance of any loan or deposit of Rs.20,000 or more could not be made otherwise than by way of account payee cheque or account payee bank draft or use of electronic clearing system.It is proposed to amend Sec.269SS of the IT Act to provide that no person shall accept from any person any loan or deposit or any sum of money,whether as advance or otherwise in relation to transfer of an immovable property,whether or not the transfer takes place. > Non repayment of any sum as advance for transfer of an immovable property in cash [Sec.269T] - Similarly,scope of Sec.269T is also proposed to be enlarged so as to restrict repayments ofany sum of money as advance in relation to transfer of an immovable property,whether or not the transfer takes place. > Penalty for acceptance of advance or otherwise or repayment thereof for transfer of an immovable property in cash [Sec.271D & 271E]In line with the proposal made in Sec.269SS & 269T,penalty for violation of the amendments therein are proposed to be covered by making consequential amendment in Sec.271D & 271E respectively46
  49. 49. /_/ ii IiTHE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA Analysis of Tax Proposals in the Finance Bill,2015 I Comments - The amendment is proposed to curb generation of black money by way of dealings in cashin immovable property transactions. Enhancement of Income Limit for Decision by Single Member Bench of ITAT [w. e.f 01-06-2015]o Hitherto,a single member bench of ITAT may dispose of any case of an assessee whose total income as computed by the AO does not exceed Rs.5,00,000.o It is proposed to amend sub-section (3) of Sec.255, to enhance this limit to Rs.15,00,000.Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) [w. e.f01-06-2015]o Existing Provisions of Sec.200Awhich was inserted prior to insertion of Sec.234E,does not provide for determination of fee payable u/ s 234E.Accordingly,Sec.200A is proposed to be amended to compute fee payable u/ s 234E at the time of processing of TDS/ TCS Statement. - Sec.206C has been amended to provide for filing correction statement in respect of TCS statement as well.Previously,provision for filing correction statement was allowed only with respect to TDS statement. - Presently,intimation generated after processing of TDS statement is subject to rectification u/s 154, appealable u/ s 246A and shall be deemed as notice of demand u/ s 156 of the Act.In order to bring the processing of TCS statement at par with the processing of TDS statement,it is proposed to insert a new section 206CB relating to processing of statements of TCS.Consequentially,amendment is also proposed in Sec.154(1),Sec.156 and Sec.246A. o In order to avoid charging of interest both u/ s 220(2) and 206C(7) on failure to pay the tax specified in the intimation,it is proposed to insert a new sub-section 220(2C),so as to provide that no interest shall be charged under sub section (2) on the same amount for the same period if it is already charged u/ s 206C(7). 7 . ";~; _-.