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CONTENT

Page No. 1 HIGHLIGHTS A. INCOME TAX …………………………………………………………………………..…….. 01-09 B. SERVICE TAX…………………………………………….…………………………..…….. 11-14 C. CENTRAL EXCISE ………………………………………………………………………….. 15-18 2 KEY FEATURES OF BUDGET ………………………………………………………… 19-22

3 THE INCOME TAX DECLARATION SCHEME, 2016 ……………… 23-25

4 THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016… 26-28

5 THE INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 29-30

6 ANALYSIS OF BUDGET, 2016 A. INCOME TAX …………………………………………………………………………………. 31-86 B. SERVICE TAX ………………………………………………………………………….……. 87-100 7 MAJOR SECTORIAL IMPACTS……………………………………………….……. 101-105 8 ECONOMIC SURVEY – HIGHLIGHTS ………………………………….…….. 106 9 BUDGET AT GLANCE …………………………………………………………………… 107-110 10 GRAPH SHOWING SOURCES AND APPLICATION OF RUPEE … 111 11 STATEMENT OF REVENUE FOREGONE………………………………………… 112 12 TRENDS IN RECEIPTS ………………………………………………………………….. 113 13 TRENDS IN EXPENDITURE …………………………………………………………… 114 14 DEBT POSITION OF THE GOVERNMENTOF INDIA………………… 115

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H I G H L I G H T S - I N C O M E T A X FINANCE BILL, 2016

There is no change in the basic tax rate and exemption l imit for

Individual, Hindu Undivided Family, Association of Person, Body Of

Individuals and Art if icial Jur idical Person

There is increase in Surcharge from 12% to 15% in case of Individual and

HUF having taxable income exceeding Rs. 1 crore. Hence, tax rate on

income exceeding 1 Crore in case of Individual/HUF wi l l increase from

34.608% to 35.535%.

Tax Rebate for Individual having income less than Rs. 5 lakhs is increased

from Rs. 2,000/- to Rs. 5,000/-

Dividend received by Individual, HUF and Firm from domestic company in

excess of Rs. 10 lacs is now chargeable to tax at 10%

Deposit cert i f icates issued under the Gold Monetisation Scheme, 2015 is

now to be excluded from the definit ion of capital asset.

Subsidy or grant received from the Central Government for the purpose

of the corpus of a trust or inst itut ion establ ished by the Central

Government or a State Government shall not form part of the definit ion

of income.

Place of Effective Management (POEM) is to be effective from the F.Y.

2016-17 instead of the F.Y. 2015-16.

Benefit of exemption of income received by way of distr ibuted income

from a securit ization trust given is withdrawn w.e.f 1st day of June, 2016.

Similar ly now tax is not required to be paid under section 115TA on

distr ibuted income by securit ization trust to i ts investors w.e.f 1st day of

June, 2016.

To avai l benefit of tax hol iday under section 10AA, units in SEZ need to

commence manufacture of production of art icle or thing or start

providing services on or before 31st March, 2020.

Sect ion 17 is proposed to increase the l imit of employer’s contribution to

an approved superannuation fund from Rs.1,00,000/- to Rs.1,50,000/- p.a.

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Precondit ion to complete the acquisit ion or construction within 3 years is

proposed to increase to 5 years for claiming deduction of interest on

house property.

Amount of rent received in arrears or unreal ised rent real ised shal l be

chargeable to tax along with deduction of 30% of such rent in the

f inancial year in which such rent is received or real ised

Non-compete fees of recurr ing nature received/receivable relating to

profession is chargeable to tax under the head “income from Business

and Profession”

LTCG exemption to individual/HUF on transfer of residential house

property i f the capital gain is invested in the share of an el igible start-up

in which such individual/HUF holds more than 50% of the shareholding.

Threshold l imit of turnover or gross receipts u/s. 44AD is proposed to be

increase from Rs. 1.00 crore to Rs. 2.00 crores

A new section 44ADA is proposed to include professionals to cover under

presumptive taxation @ 50% of gross receipt subject to gross receipt does

not exceed Rs. 50 lacs in the previous year

Shares received by an individual or HUF as a consequence of demerger

or amalgamation of a company shal l not amount to Income in the hands

of an individual or HUF.

The benefit of addit ional depreciation on the new machinery or plant

acquired and instal led is proposed to be extended to company

engaged in Power transmission.

Twin condit ions for acquisit ion and instal lat ion of new machinery

exceeding Rs. 25 crores in the same previous year is proposed to be

relaxed with respect to investment al lowance.

Weighted deduction of expenditure incurred or contribution made

towards scientif ic research is proposed to be reduced in phased manner.

New Section 35ABA is proposed to be inserted to provide tax treatment

of payment of spectrum fees.

Withdrawal of deduction on expenditure on el igible projects or schemes.

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I t is proposed to reduce deduction from 150% to 100 % in respect of

expenditure incurred on agricultural extension project and expenditure

on ski l l development project

A deduction not exceeding 5% of gross total income on account of

provis ion for bad and doubtful debts also al lowed to NBFCs

The expenses incurred by the assessee towards specif ied services on

which equalisation levy is applicable; shal l not be al lowed as deduction

in case of fai lure of the asseseee to deduct and deposit the equalisation

levy to the credit of Central government.

Payments made to Indian Rai lways for use of Rai lway assets i s covered

under section 43B

Threshold l imit of gett ing accounts audited of a person carrying on a

profession is proposed to be increase from Rs. 25 lacs to Rs. 50 lacs.

Redemption of Sovereign Gold Bond by an individual is proposed to be

removed from the purview of t ransfer u/s. 47

An addit ional condit ion being total book value of the assets of company

must not exceed Rs. 5 crores in any of the 3 preceding year; i s proposed

to be inserted for claiming of an exemption u/s. 47 on conversion of a

company into LLP

Capital gains aris ing in case of appreciation of rupee between the date

of i ssue and the date of redemption against the foreign currency in

which the investment is made shal l be exempt from tax

Rationalization of provis ions u/s. 50C where sale consideration is f ixed

under agreement executed prior to the date of registration of

immovable property

New Section 54EE to provide tax exemption from long term capital gains

tax on amount invested in units of such specif ied fund, as may be

noti f ied by the Central Government.

Lumpsum repayment, out of pension scheme of central government

made to the nominee on the death of the contributor, shal l be

exempted from tax.

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The deduction on account of the payment of rent to an individual tax

payer, increased from Rs. 2,000/- p.m. to Rs. 5,000/- p.m.

100 per cent deduction for a period of 3 consecutive years out of the

init ial 5 years for el igible ‘startups’ which are set-up before 1st Apri l 2019

and whose turnover does not exceed Rs. 25 crores in any FY from 1st

Apri l 2016 to 31st March 2021.

Dividend income of HNIs receiving dividend in excess of Rs. 10 lacs would

be taxed at 10% on gross dividend.

Addit ional interest deduction of Rs. 50,000 p.a. shal l be avai lable to a

home buyer, not owning a home as on the loan sanction date for

housing loans up to Rs. 35 lakh sanctioned between Apri l 2016 to March

2017 and value of the property not exceeding INR 50 lakh.

Income by way of royalty in respect of patent developed and registered

in India by an Indian resident to be taxed at the rate of 10% on a gross

basis plus surcharge / cess. The income wi l l not be subject to MAT.

The deduction of 30% for addit ional wages paid to new workmen in a

factory for three years extended to al l assessees subject to tax audit, as

against assessees deriving income from the manufacture of goods in a

factory.

The condit ion of 10% minimum number of persons employed during the

year is relaxed and an employee can be employed for a minimum period

of 240 days instead of 300 days with a monthly emolument paid or

payable to be less than Rs. 25,000/-.

No deduction shal l be admissible in respect of employees for whom the

government is paying the entire EPS contribution or an employee who

does not part icipate in the RPF.

Profit l inked deduction on el igible business of infrastructure faci l i ty (road,

rai l system, highway project, port, ai rport , etc.), developer of a special

economic zone and production of oi l and natural gas, to be avai lable

only i f the specif ied activity i s commenced on or before 31s t March 2017.

Profit l inked deduction of 100% provided to the business of developing

and bui lding affordable housing projects approved by the competent

authority before 31s t March 2019, provided the same is completed within

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three years of obtaining such an approval, and other condit ions are

satisf ied such as the minimum land area, specif ied municipal boundaries,

etc.

Profit l inked deduction of 100% provided to a start-up in a business

involving innovation, development, deployment or commercial isat ion of

new products, processes or services driven by technology or intel lectual

property for any three consecutive assessment years out of f ive years, at

the option of the assessee, subject to incorporation before 1s t Apri l 2019.

International Financial Service Centre:

- Unit set-up in IFSC which receives income solely in convert ible foreign

exchange is l iable to MAT at a reduced basic rate of 9%.

- Furthermore, such a unit is exempted from dividend distr ibution tax on

dividend declared, distr ibuted or paid by it on or after 1st Apri l 2017,

out of i ts current income.

- Securit ies and commodity transactions undertaken on a recognised

stock exchange/ association located in an IFSC is exempted from the

levy of securit ies transaction tax and commodity transaction tax,

respectively. These provis ions are to take effect from 1s t June 2016.

The t ime l imit to f i le belated return of income has been reduced by

one year and can be furnished at any t ime before the end of the

relevant assessment year or before completion of the assessment

whichever is earl ier. Henceforth, belated return can also be revised

u/s. 139(5).

I f the taxpayer has not fi led the return or has been fi led voluntari ly or

in response to the inquiry of assessment and the taxpayer discovers

omission or a wrong statement, the taxpayer can furnish revised return

at any t ime before expiry of one year from the end of the assessment

year or before completion of the assessment whichever is earl ier.

The return of income wil l not be regarded defective even if self-

assessment tax and interest i s not paid on or before the f i l ing return of

income.

The provis ions of summary assessment is proposed to be extended to

four more instances.

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Time l imits for Assessment:

- Time l imit to complete the regular assessment reduced to 21

months (from 24 months) from the end of the relevant assessment

year and for reassessment reduced to 9 months (from 12 months)

from the end of the f inancial year in which notice for re-opening is

issued

- Time l imit for completion of assessment where reference is made to

the TPO reduced to 33 months (from 36 months) from the end of

the relevant assessment year.

- Time l imit to complete assessment of revis ionary orders, appel late

orders or the Commissioner’s order of sett ing aside or cancell ing an

assessment reduced to nine months from the end of the relevant

f inancial year.

- The AO is required to pass appeal effect order within three months

in cases where no fresh assessment or reassessment is required and

can seek six months extension in cases beyond his control.

- I t is also proposed to complete assessment, reassessment or re-

computation for appellate orders other than any reference, on or

before the expiry of 12 months from the end of the month in which

such order is received by the Commissioner. However, cases

pending on or before 1 June 2016, the t ime l imit is later of 31 March

2017 or 12 months from the end of the month in which such order is

received.

- The t imel ine for completion of regular assessment proceedings is to

be reduced by three months, thus, the t imel ine for completion of

t ransfer pricing assessment proceedings to be also reduced by

three months

Exit tax to be levied on accreted income of charitable organisations

converted or merged into non charitable organisation or where it

does not t ransfer assets to another charitable organisation. Accreted

income defined to mean aggregate fai r market value of the total

assets reduced by the l iabi l i t ies of such trust, as on the date such

event takes place as per prescribed valuation rules. The provis ions

shal l be applicable from 1 June 2016 .

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I t is proposed to amend the advance tax payment schedule for al l the

assessees (other than companies) and bring it in consonance with the

exist ing advance tax payment schedule applicable for a company

I t is further proposed that an assessee opting for computation of profits

or gains of business on presumptive basis u/s 44AD, shal l be required to

pay advance tax of the whole amount on or before the 15th March of

the f inancial year.

I t is proposed to provide t ime l imit of 12 months for disposal of

appl ication made u/s 220(2A) (Power to reduce or waive the amount of

interest paid or payable u/s. 220(2)), u/s 273A (Power to reduce or waive

penalty levied u/s. 270A in certain cases) and u/s 273AA (Power to grant

immunity from penalty in case where application for sett lement u/s. 245C

has been made).

I t is proposed to provide that in cases where the return is f i led after the

due date, the period of interest on refund u/s 244A would be from the

date of f i l ing of return. Interest on refund shal l also be el igible on self-

assessment tax for the period beginning from the date of payment of tax

or f i l ing of return, whichever is later.

I t i s also proposed that no interest shal l be payable, i f the amount of

refund is less than 10% of the tax as determined under sub-section (1) of

section 143 or on regular assessment.

I t is also proposed that i f appeal effect is given beyond 3 months an

addit ional interest @3% p.a. shal l be given.

I t is proposed to provide that Assessing Off icer cannot f i le appeal

against the order of the DRP.

I t is proposed to provide that the Appellate Tr ibunal may recti fy any

mistake apparent from the record in its order at any t ime within six

months (from exist ing t ime period of four years) from the end of the

month in which the order was passed.

I t is proposed to insert new penalty provis ions (Section 270A) in place

current provis ions as contained u/s 271 of the Act.

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Penalty for under report ing of income - 50% of tax payable

Penalty for misreport ing of income - 200% of tax payable

I t is proposed to provide for immunity from penalty u/s 270A provided

that the assessee pays the tax and interest payable as per the order of

assessment or reassessment within the period specif ied in such notice of

demand and does not prefer an appeal against such assessment order.

I t is proposed to amend clause (c) of sub-section (1) of section 271AAB

(where income is not declared in the course of search and/or where tax

is not paid and included in return) and to provide for levy of penalty on

undisclosed income at a f lat rate of 60% of such income (earl ier the rate

of penalty was discretionary ranging from 30% to 90%).

I t i s proposed to amend sub-section (1) of section 272A to further include

levy of penalty of ten thousand rupees for each default or fai lure to

comply with a notice issued under sub-section (1) of section 142 or sub-

section (2) of section 143 or fai lure to comply with a direction issued

under sub-section (2A) of section 142.

I t is proposed to subst itute a bank guarantee instead of provis ional

attachment of property u/s. 281B subject to fulf i lment of certain

condit ions.

In order to implement the international consensus report of the OECD on

Action 13 of BEPS Action plan, i t i s proposed to provide a specif ic

report ing regime in respect of Country-by-Country (CbC) report ing by

insert ing new section 286.

Further, i t i s also proposed to levy of penalty for fai lure to furnish report

ranging from Rs. 5,000 per day to Rs. 50,000 per day. Moreover, penalty

for furnishing of inaccurate report ing or for non-furnishing of the

information and document has also been proposed at Rs. 5 lacs.

I t i s proposed that employers contribution in excess of 12% of salary or

Rs. 150,000 whichever is less shal l be exempt and balance shal l be

taxable in the hands of employee as deemed salary.

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Stay of demand at the f irst appeal stage (CBDT Off ice memorandum

dated 29.02.2016)

Stay of demand t i l l disposal of appeal before CIT (A) on payment of 15%

of the disputed demand (on producing undertaking from the assessee

that he wi l l cooperate in the early disposal of appeal fai l ing which the

stay order wi l l be cancelled), unless nature of addit ion result ing in the

disputed demand is such that payment of a lump sum amount

higher/lower than 15% is warranted (e.g. in a case where addit ion on the

same issue has been confi rmed/deleted by appellate authorit ies in

earl ier years

The assessing officer/CIT shal l dispose of a stay petit ion within 2 weeks of

f i l ing of the petit ion.

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[THIS SPACE IS LEFT INTENTIONALLY BLANK]

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H I G H L I G H T S - S E R V I C E T A X

All changes wi l l come into effect on enactment of Finance Bi l l , 2016, unless

stated otherwise.

KRISHI KALYAN CESS LEVIED:

Krishi Kalyan Cess is levied on any or al l the taxable services at the

rate of 0.5% on the value of such taxable services.

(w.e.f. 1s t June, 2016)

AMENDMENT IN NEGATIVE LIST (SECTION 66D):

- Educational services are proposed to be omitted [section 66D (l)]

from the Negative List. However the same has been incorporated in

Mega Exemption l ist.

- Passenger transportation services by a stage carr iage is excluded

from the negative l ist. However, as services provided by non-air

condit ioned stage carr iages are exempted vide mega exemption

notif ication (notif ication no. 25/2012- ST dated 20 June 2012), only

air-condit ioned stage carriage would become taxable (effective

from 1 June 2016).

- Services by way of transportation of goods by an aircraft or a

vessel from a place outside India up to the customs station of

clearance is excluded from the negative l ist. However, as services

by way of transportation of goods by aircraft is exempted vide a

mega exemption notif ication, services by way of transportation of

goods by vessel would become taxable (effective from 1 June

2016)

INTEREST RATE RATIONALIZED:

Interest rates on delayed payment of duty/tax across al l indirect taxes

is proposed to be made uniform at 15%, except in case of service tax

collected but not deposited with the Central Government, in which

case the rate of interest wil l be 24% from the date on which the

service tax payment became due.

OTHERS:

- Service tax on services provided by a mutual fund agent/distr ibutor

to a mutual fund or asset management company would be

payable by the service provider instead of the service recipient.

- Assignment of spectrum on a r ight to use basis by the government

and subsequent transfers declared as a ‘service’

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- Limitation period for recovery of service tax in cases not involving

fraud, collusion, suppression, etc. enhanced from 18 months to 30

months.

- Monetary l imit for invoking imprisonment provis ions has been

increased from Rs. 50 Lacs to Rs. 2 Crore for specif ic offences. The

power to arrest is restr icted to situations where the taxpayer has

collected service tax exceeding Rs. 2 Crore but not deposited the

same.

- Quarterly payment of service tax and facil ity of payment of service

tax on receipt basis has been extended to One Man Company

whose aggregate value of taxable service provided from one or

more premises does not excess of Rs. 50 lacs in previous f inancial

years.

- All Service tax assessees above a certain threshold l imit as may be

specif ied by the government would be required to f i le an annual

return over and above 2 half yearly returns.

BROADENING OF TAX BASE:

No. Part iculars Exist ing Proposed1. Exemption on serv ices provided by,-

( i ) a senior advocate to an advocate or partnership f i rm of advocates providing legal serv ice; and

(i i ) a person represented on an arbit ral t r ibunal to an arbit ral t r ibunal ,

i s being withdrawn with effect f rom 1st Apr i l , 2016 and Serv ice Tax is being levied under forward charge.

Nil

14%

2. Exemption on construct ion, erect ion, commiss ioning or instal lat ion of or iginal works pertaining to monorai l or metro, in respect of contracts entered into on or after 1st March 2016, i s being withdrawn with effect f rom 1st March, 2016.

Nil

5.6%

3. Exemption on the serv ices of t ransport of passengers, with or without accompanied belongings, by ropeway, cable car or aer ial t ramway is being withdrawn with effect f rom 1st Apr i l , 2016.

Nil

14%

4. The Negat ive L ist entry that covers ‘serv ice of t ransportat ion of passengers, with or without accompanied belongings, by a stage carr iage’ is being omitted with effect f rom 1st June, 2016. Serv ice Tax is being levied on transportat ion of passengers by air condit ioned stage carr iage with effect f rom 1st June, 2016, at the same level of abatement as appl icable to the t ransportat ion of passengers by a contract carr iage, that is , 60% without credit of inputs, input serv ices and capital goods.

Nil

5.6%

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NEW EXEMPTIONS:

No. Part iculars Exis t ing Proposed 1 . Serv ices by way of const ruct ion etc. in respect of-

(i) hous ing projects under Hous ing For Al l (HFA) (Urban) Miss ion/Pradhan Mantr i Awas Yojana (PMAY);

(ii) low cost houses up to a carpet area of 60 square metres in a hous ing project under “Affordable hous ing in Partnersh ip” component of PMAY,

(iii) low cost houses up to a carpet area of 60 square metres in a hous ing project under any hous ing scheme of the State Government ,

are being exempted f rom Serv ice Tax with effect f rom1st March, 2016.

5.6%

Ni l

2 . The serv ice of l i fe insurance bus iness prov ided by way of annuity under the Nat ional Pens ion System regulated by Pens ion Fund Regulatory and Development Author i ty (PFRDA) of India i s being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

3.5%

Ni l

3 . Serv ices prov ided by Employees’ Prov ident Fund Organisat ion (EPFO) to employees are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016

14%

Ni l

4 . Serv ices prov ided by Insurance Regulatory and Development Author i ty (IRDA) of India are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

Ni l

5 . The regulatory serv ices prov ided by Secur i t ies and Exchange Board of India (SEBI ) are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14% Ni l

6 . The rate of Serv ice Tax on s ingle premium annuity ( insurance) pol ic ies i s being reduced f rom 3.5% to 1.4% of the premium, in cases where the amount a l located for investment , or sav ings on behalf of pol icy holder i s not int imated to the pol icy holder at the t ime of prov iding of serv ice, with effect f rom 1st Apr i l , 2016.

3 .5%

1 .4%

7. The serv ices of general insurance bus iness prov ided under ‘Ni ramaya’ Health Insurance scheme are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

Ni l

8 . Serv ices prov ided by Nat ional Centre for Cold Chain Development under Department of Agr icul ture, Cooperat ion and Farmer’s Wel fare, Government of India, by way of knowledge disseminat ion are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

N i l

9 . Serv ices prov ided by B iotechnology Indust ry Research Ass i s tance Counci l (B IRAC) approved biotechnology incubators to incubatees are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

Ni l

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No. Part iculars Exis t ing Proposed 10. Serv ices prov ided by way of sk i l l /vocat ional t ra in ing

by t ra in ing partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

N i l

11. Serv ices of assess ing bodies empanel led cent ral ly by Di rectorate General of T ra in ing, Min is t ry of Sk i l l Development & Ent repreneursh ip are being exempted f rom Serv ice Tax with effect f rom 1st Apr i l , 2016.

14%

N i l

12. The threshold exempt ion to serv ices prov ided by a performing art i s t in fo lk or c lass ical art forms of mus ic, dance or theatre i s being enhanced f rom Rs 1 lakh to Rs 1 .5 lakh charged per event with effect f rom 1st Apr i l , 2016.

14%

N i l

RATIONALIZATION OF ABATEMENTS:

No. Part iculars Ex is t ing Proposed 1 Credit of input serv ices i s being al lowed on

t ransport of passengers by ra i l at the ex is t ing rate of abatement of 70%.

4 .2% Without credit

4 .2% With input ser . credit

2 Credit of input serv ices i s being al lowed on t ransport of goods, other than in containers , by rai l at the ex is t ing rate of abatement of 70%.

4 .2% Without credit

4 .2% With input ser . credit

3 Credit of input serv ices i s being al lowed on t ransport of goods in containers by rai l at a reduced abatement rate of 60%.

4 .2% Without credit

5 .6% With input ser . credit

4 Credit of input serv ices i s being al lowed on t ransport of goods by vessel at the ex is t ing rate of abatement of 70%.

4 .2% Without credit

4 .2% With input ser . credit

5 The abatement rate in respect of serv ices by way of const ruct ion of res ident ia l complex, bui ld ing, c iv i l s t ructure, or a part thereof, i s being rat ional ized at 70% by merging the two exis t ing rates (70% for h igh end f lats and 75% for low end f lats) .

3 .5%/ 4.2%

4 .2%

6 The abatement rate in respect of serv ices by a tour operator in re lat ion to packaged tour (def ined where tour operator prov ides to the serv ice recip ient t ransportat ion, accommodat ion, food etc) and other than packaged tour i s being rat ional ized at 70%.

3 .5%/ 5.6% of amount charged

4.2% of amount charged

7 The abatement on sh i f t ing of used household goods by a Goods T ransport Agency (GTA) i s being rat ional ized at the rate of 60%, without CENVAT credit on inputs , input serv ices and capital goods. (The ex is t ing rate of abatement of 70% al lowed on t ransport of other goods by GTA cont inues unchanged).

4 .2%

5 .6%

8 The abatement rate on serv ices of a foreman to a chit fund i s being rat ional i sed at the rate of 30%, without CENVAT credit on inputs , input serv ices and capital goods.

14%

9 .8%

[The above changes wi l l come into effect f rom 1st Apr i l , 2016.]

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H I G H L I G H T S - C E N T R A L E X C I S E

Rate of duty

The excise duty rates remain unchanged.

To simplify the tax structure, various cess levied under different

enactments are proposed to be abol ished.

Certain goods have been ful ly exempted from the payment of Central

Excise Duty whi le Central Excise duty has been reduced in certain

goods. Certain goods have been given concessional excise duty

benefit whi le in case of certain goods, the Central Excise Duty has

been increase.

Change in Central Excise Act,1944

Section 5A is being amended so as to omit the requirement of

publ ishing and offering for sale any notif ication issued, by the

Directorate of Publ icity and Publ ic Relations of CBEC.

Section 11A for recovery of duties not levied or not paid or short-

levied or short-paid or erroneously refunded is being amended so as

to increase the period of l imitation from one year to two years in

cases not involving fraud, suppression of facts, wi l l ful mis-statement,

etc.

Section 37B is being amended so as to empower the Board for

implementation of any other provis ion of the said Act in addit ion to

the power to issue orders, instructions and directions.

Changes in Central Excise Tari f f Act, 1985 -

Fi rst Schedule to the Central Excise Tari ff Act, 1985 is to be real igned

with the changes in Harmonised System of Nomenclature notif ied by

World Customs Organisation.

Excise duty exemption on the concrete mix manufactured at the site

for use in construction work has been extended to ready mix

concrete.

Readymade branded garments with RSP of INR1000 and above are to

be subject to 2 % excise duty (without CENVAT Credit) and 12.5 %

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(with CENVAT Credit). Tar i ff value for readymade garments and made

up art icles of text i les increased from 30% to 60% of RSP

Rate of abatement for RSP valuation on al l footwear increased from

25% to 30%.

Excise duty of 4 % (without CENVAT Credit) and 12.5 % (with CENVAT

Credit) extended to l i thium-ion batter ies, broadband modem, routers,

set top boxes for gaining access to internet, digital or network video

recorder, CCTV or IP cameras, etc. subject to the prescribed

condit ions.

Excise duty on ATF increased from 8 % to 14 % except on suppl ies to

scheduled commuter air l ines from the Regional Connectivity Scheme.

The Clean Energy Cess as applicable on coal, l ignite and peat is

being renamed as Clean Environment Cess and the rate has been

increased to Rs.400 per tonne.

Excise duty on waters, including mineral waters and aerated waters ,

containing added sugar or other sweeting matter or f lavour increased

from 18 % to 21 %.

Infrastructure Cess is being levied on motor vehicles as under:

Type of vehicles Specif ications Rate of Cess

Petrol/LPG/CNG dr iven motor vehicles

Length not exceeding 4m and engine capacity not exceeding 1200cc

1%

Diesel dr iven motor vehicles

Length not exceeding 4m and engine capacity not exceeding 1500cc

2.5%

Motor vehicles and SUVs and bigger sedans

Other higher engine capacity 4%

However, three-wheelers, electr ical ly operated vehicles, hybrid vehicles,

hydrogen vehicles based on fuel cel l technology, etc. are exempted.

Further the said cess is non-cenvatable.

CHANGE IN CENTRAL EXCISE RULES, 2002

The Central Excise Rules, 2002 are being amended so as to provide-

- reduce the number of returns to be f i led by a central excise assessee above a certain threshold from 27 to 13.

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- extend the faci l i ty for revis ion of return by the end of the month in

which they are submitted.

- in cases where invoices are digital ly s igned, the manual attestation

of copy of invoice, meant for transporter, is done away with.

- in case of f inal ization of provis ional assessment, the interest wi l l be

chargeable from the original date of payment of duty.

- A manufacturer or service provider above a certain threshold wi l l be

required to f i le an annual return by the 30th day of November of the

succeeding year in the specif ied form effective 1 Apri l 2016.

- Relevant central excise rules have been revised to al low duty

exemptions to importers/manufacturers based on self-declaration

instead of obtaining permissions.

CENVAT Credit Rules, 2004:

CENVAT credit on any equipment or appliance used in an office wi l l

now available. (w.e.f 01.04.2016)

CENVAT credit on capital goods meant for pumping of water located

physical ly outside the factory and captive use in the factory wi l l be

avai lable.

CENVAT Credit reversal i s not required in case of services provided by

transportation of goods by a vessel to a place outside India.

Restr ict ion on uti l i sat ion of CENVAT Credit to pay for the NCCD

expanded from mobile phones to al l goods which attract NCCD.

The t ime l imit for f i l ing of service tax refund claims has been amended

to one year from the date of receipt of payment (where services have

been completed) or i ssuance of invoice (in case of advance

payment), whichever is later.

Banks and other f inancial inst itut ions are to be al lowed to reverse

credit in respect of exempted services, on actual basis also, in

addit ion to the option of 50% reversal.

All capital goods of value less than INR10,000 are to be treated as

inputs and hence, are el igible for ful l CENVAT Credit in the fi rst year

itself .

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Rule 6 of CCR, which provides for reversal of credit in respect of

inputs and input services used in the manufacture of exempted goods

or for provis ion of exempted services has been amended inter-al ia as

fol lows:

- Ful l credit of input or input services used exclusively in dutiable

f inal products/taxable output services to be avai lable.

- Proport ionate credit avai lable for common inputs/input services.

- Exist ing rule 6 of CCR to continue to be in operation up to 30 June

2016.

- No CENVAT credit to be al lowed on capital goods that are used for

the manufacture of exempted goods or provis ion of exempted

service for two years from the date of commencement of

commercial production or provis ion of service.

Manufacturers with mult iple manufacturing units have been al lowed

to maintain a common warehouse for inputs and distr ibute inputs with

credits to the individual manufacturing units. (s imi lar to Fi rst/ Second

stage dealer)

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KEY FEATURES OF BUDGET 2016-2017

Introduction

Growth of Economy accelerated to 7.6% in 2015-16.

India hai led as a ‘br ight spot’ amidst a s lowing global economy by IMF.

Robust growth achieved despite very unfavourable global condit ions and two

consecut ive years shortfal l in monsoon by 13%

Foreign exchange reserves touched highest ever level of about 350 bi l l ion US

dol lars .

Despite increased devolut ion to States by 55% as a result of the 14th F inance

Commiss ion award, plan expenditure increased at RE stage in 2015-16 – in

contrast to earl ier years.

Roadmap & Priorit ies

Transform India' to have a s ignif icant impact on economy and l ives of people.

focus on ensur ing macro-economic stabi l i ty and prudent f iscal management,

boost ing on domest ic demand and cont inuing with the pace of economic

reforms and pol icy in it iat ives to change the l ives of our people for the better

undertake important banking sector reforms and publ ic l ist ing of general

insurance companies undertake s ignif icant changes in FDI pol icy.

Agriculture & Farmers’ Welfare

Allocat ion for Agr iculture and Farmers’ welfare is Rs. 35,984 crore

“Pradhan Mantr i Kr i sh i S inchai Yojana” to be implemented in miss ion mode.

28.5 lakh hectares wi l l be brought under i r r igat ion.

A dedicated Long Term I r r igat ion Fund wil l be created in NABARD with an in it ial

corpus of about Rs. 20,000 crore

5 lakh farm ponds and dug wel l s in rain fed areas and 10 lakh compost pits for

product ion of organic manure wi l l be taken up under MGNREGA

To reduce the burden of loan repayment on farmers, a provis ion of Rs. 15,000

crore has been made in the BE 2016-17 towards interest subvent ion

Allocat ion under Pr ime Minister Fasal B ima Yojana Rs. 5,500 crore.

Rural Sector

Allocat ion for rural sector – Rs. 87,765 crore.

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Rs. 2.87 lakh crore wi l l be given as Grant in Aid to Gram Panchayats and

Municipal it ies as per the recommendations of the 14th F inance Commiss ion

100% vi l lage electr i f icat ion by 1st May, 2018.

Social Sector

Al location for social sector including education and health care Rs.1 ,51,581

crore.

New health protect ion scheme wil l provide health cover up to Rs. One lakh per

family. For senior cit izens an addit ional top-up package up to Rs. 30,000 wi l l be

provided.

“Stand Up India Scheme” to faci l i tate at least two projects per bank branch.

This wi l l benefit at least 2.5 lakh entrepreneurs.

Education, Ski l ls & Job

62 new Navodaya Vidyalayas wi l l be opened

Sarva Shiksha Abhiyan to increasing focus on qual ity of education Higher

Educat ion F inancing Agency to be set-up with in it ial capital base of Rs. 1000

Crores

Digital Depository for School Leaving Cert i f icates, Col lege Degrees, Academic

Awards and Mark sheets to be set-up.  

Allocat ion for sk i l l development – Rs. 1804. crore.

1500 Mult i Sk i l l T raining Inst itutes to be set-up.  

GoI wi l l pay contr ibut ion of 8.33% for of al l new employees enrol l ing in EPFO for

the f i rst three years of their employment.

Deduct ion under Sect ion 80JJAA of the Income Tax Act wi l l be avai lable to al l

assesses who are subject to statutory audit under the Act.

Infrastructure & Investment

Total investment in the road sector, including PMGSY al locat ion, would be Rs.

97,000 crore dur ing 2016-17.

Allocation of Rs. 55,000 crore in the Budget for Roads. Addit ional Rs. 15,000

crore to be raised by NHAI through bonds.

Act ion plan for revival of unserved and underserved airports to be drawn up in

partnership with State Governments.

100% FDI to be al lowed through FIPB route in market ing of food products

produced and manufactured in India.

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Reforms in FDI pol icy in the areas of Insurance and Pension, Asset

Reconstruct ion Companies, Stock Exchanges. 

A new pol icy for management of Government investment in Publ ic Sector

Enterpr ises, including dis investment and st rategic sale approved.

Financial Sector

A Financial Data Management Centre to be set up.

Allocation of Rs. 25,000 crore towards recapital isat ion of Publ ic Sector Banks.

General Insurance Companies owned by the Government to be l isted in the

stock exchanges.

Governance & Ease of doing Business

A Task Force has been const ituted for rat ional isat ion of human resources in

var ious Minist r ies.

Pr ice Stabi l isat ion Fund with a corpus of Rs. 900 crore to help maintain stable

pr ices of Pulses.

“Ek Bharat Shreshtha Bharat” programme wil l be launched to l ink States and

Dist r icts in an annual programme that connects people through exchanges in

areas of language, t rade, culture, t ravel and tour ism.

Fiscal Discipl ine

Fiscal def icit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.

Revenue Deficit target f rom 2.8% to 2.5% in RE 2015-16

Total expenditure projected at Rs. 19.78 lakh crore

Plan expenditure pegged at Rs. 5.50 lakh crore under Plan

Non-Plan expenditure kept at Rs. 14.28 lakh crore

Relief to Small Tax Payers

Raise the cei l ing of tax rebate under sect ion 87A from Rs. 2000 to Rs. 5000 to

lessen tax burden on indiv iduals with income upto Rs. 5 laks.

Increase the l imit of deduct ion of rent paid under sect ion 80GG from Rs. 24000

per annum to Rs. 60000 per annum, to provide rel ief to those who l ive in rented

houses.

Make in India

Changes in customs and excise duty rates on certain inputs to reduce costs

and improve competit iveness of domest ic industry in sectors l ike Information

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technology hardware, capital goods, defence production, text i les, mineral

fuels & mineral oi l s , chemicals & petrochemicals, paper, paperboard &

newspr int , Maintenance repair and overhaul ing [MRO] of ai rcrafts and ship

repair .

Promoting Affordable Housing

100% deduct ion for prof its to an undertaking in housing project for f lats upto 30

sq. metres in four metro cit ies and 60 sq. metres in other cit ies, approved

dur ing June 2016 to March 2019 and completed in three years. MAT to apply.

Deduct ion for addit ional interest of Rs, 50,000 per annum for loans up to Rs.35

lakh sanct ioned in 2016-17 for f i rst t ime home buyers, where house cost does

not exceed Rs. 50 lakh.

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T H E I N C O M E D e c l a r a t i o n S c h e m e , 2 0 1 6

Sr . Part iculars Detai ls

1 Scheme cal led The Income Declarat ion Scheme, 2016

2 Scheme shal l come into force from

1s t June, 2016

3 Scheme shal l remain open upto

Date to be not i f ied by the Central Government in the Off ic ial Gazette. However, the Hon’ble F inance Minister has in the budget speech ment ioned to keep the scheme open upto September, 30 2016 .

4 Purpose for introduct ion of the Scheme

Opportunity given to any person who has not paid ful l taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty

5 Who can take the benef it of this scheme (appl icabi l i ty)

Any person except in cases - - where not ices have been issued under

sect ion 142(1) or 143(2) or 148 or 153A or 153C, or

- where a search or survey has been conducted and the t ime for i ssuance of not ice under the relevant provis ions of the Act has not expired, or

- where information is received under an agreement with foreign countr ies regarding such income,

- cases covered under the Black Money Act, 2015, or

- persons not i f ied under Special Court Act, 1992, or

- cases covered under Indian Penal Code, the Narcot ic Drugs and Psychotropic Substances Act, 1985, the Unlawful Act iv it ies (Prevent ion) Act, 1967, the Prevent ion of Corrupt ion Act, 1988.

6 F inancial Years covered in respect of undisclosed income

Any f inancial year upto 2015-2016 (A.Y.2016-2017)

7 Tax + Surcharge +penalty to be paid on undisclosed income

Tax Rate 30.00%

Surcharge to be cal led Kr ishi Kalyan Cess (25% of 30% tax rate)

7.50%

Penalty (25% of 30% tax rate) 7.50%

Total 45.00%

8 Which Income can be declared as undisclosed Income

Income – (a) For which no return of income is f i led u/s

139 (b) Which has not been disclosed in the return

of income furnished before the date of commencement of scheme (i .e. 01.06.2016

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Sr. Part iculars Detai ls (c) Which has escaped assessment by reason

of omiss ion or fai lure on the part of such person to furnish a return under the Act or to disclose ful ly and t ruly al l mater ial facts necessary for the assessment or otherwise

I f Income is declared in form of investment in any asset , the FMV (Fair Market Value) as on the date of commencement of scheme (i .e. 01.06.2016) shal l be deemed to be the undisclosed income. The manner for determining FMV of any asset wi l l be prescr ibed.

9 Whether any deduct ion or al lowances al lowed against the undisclosed income

No deduct ion is al lowable against the undisclosed income declared under th is scheme.

10 L imitat ion on declarat ion of undisclosed income by any person

Once a person makes declarat ion of h is income or as representat ive assesse in respect of the income of any other person, then, he shal l not be ent it led to make any other declarat ion in respect of his income or the income of such other person. Thus, f rom this i t can be interpreted that l imit of making declarat ion of undisclosed income is per se Person and not per se assessment year.

11 Author ity to whom declarat ion of undisclosed income to be made

Pr incipal Commiss ioner or Commiss ioner of Income Tax

12 Form of declarat ion To be prescr ibed

13 T ime for payment of Tax To be not if ied by the Central Government. However, the Hon’ble F inance Minister has in the budget speech ment ioned that the amount of tax due has to be paid within the two months of declarat ion.

14 Immunity Declarat ion of undisclosed income made under the Scheme shal l be exempt from – - Wealth Tax in respect of assets specif ied in

declarat ion - No scrut iny and inquiry under the Income

Tax Act and Wealth Tax Act - Immunity from prosecut ion and proceedings

relat ing to imposit ion of penalty (other than the penalty to be paid under this scheme) under such Acts

- Immunity f rom Benami Transact ions (Prohibit ion) Act, 1988

- Income declared under the scheme shal l not be included in the total income for any assessment year of the declarant under the Act provided 45% tax has been paid by the date so not i f ied

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Sr. Part iculars Detai ls

15 Declarat ion made under the Scheme to be considered as VOID

- Non-payment of tax + surcharge + penalty on or before the date so not if ied.

- Declarat ion made by mis-representat ion or suppress ion of facts

16 Refund of tax + surcharge + penalty paid under the scheme

Not Refundable once paid by the declarant in pursuance of the declarat ion made

17 Whether undisclosed income declared by the declarant would affect the f inal ity of completed assessments

A declarant under this Scheme shal l not be ent it led, in respect of undisclosed income declared or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957, or claim any set off or rel ief in any appeal, reference or other proceeding in relat ion to any such assessment or reassessment.

18 Year of chargeabil i ty of undisclosed income if declared under this scheme but tax+surcharge+penalty has not been paid thereon within the t ime specif ied.

The undisclosed income shal l be chargeable to tax under the Act in the previous year in which such declarat ion is made

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T H E D I R E C T T a x D i s p u t e R e s o l u t i o n S c h e m e 2 0 1 6

Sr. Part iculars Detai ls

1 Scheme cal led The Direct Tax Dispute Resolut ion Scheme, 2016

2 Scheme shal l come into force from

June 01, 2016

3 Purpose for introduct ion of the Scheme

Reduce huge backlog of cases pending before the Commiss ioner of Income Tax (Appeals) and to enable the Government to real ize i ts dues more expedit iously.

4 Scheme appl icable to

I t i s appl icable to - ‘tax arrear” - “specif ied tax” In respect of which appeal is pending before the Commissioner of Income Tax (Appeals) .

5 Meaning of ‘tax arrear”

Amount of tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, 1957 in respect of which appeal is pending before the Commiss ioner of Income-tax (Appeals) or the Commiss ioner of Wealth-tax (Appeals) as on the 29th day of February, 2016. Pending appeal could be against an assessment order or the penalty order.

6 Meaning of specif ied tax

Any tax determined inconsequence of or i s val idated by an amendment made with retrospect ive effect in the Income-tax Act or Wealth-tax Act, as the case may be, for a period pr ior to the date of enactment of such amendment and a dispute in respect of which is pending as on29.02.2016.

7 Immunity In case of “tax arrear”-

Tax ar rear ( tax + interest) Quantum Appeal

Tax ar rear (penal ty) Penal ty Appeal

Disputed tax does not exceed Rs 10

lacs

Disputed tax exceeds Rs 10

lacs

Disputed tax & interest thereon i s

to be paid fu l ly . Immuni ty i s avai lable in

respect of Penal ty

D i sputed tax & interest

thereon + 25% of minimum

penal ty lev iable i s to

be paid ( immuni ty

avai lable- 75% of minimum

penal ty waived )

25% of the minimum penal ty lev iable i s to

be paid ( immuni ty avai lable- 75% of

penal ty levied provided tax &

interest i s paid ) . Thus , i f penal ty i s

lev ied @ 300%, which i s pending appeal , then by just paying 8.33% (25% of 100 %

minimum penal ty /300% penal ty

lev ied), immuni ty of 91.67% of penal ty lev ied @ 300% can

be avai led.

( Interest s tated in the above table includes, interest upto the date of assessment order only . )

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Sr. Part iculars Detai ls In case of “ specif ied tax”- - only payment of disputed tax is to be done. - Ful l immunity f rom interest and penalty Immunity from Prosecut ion : Immunity f rom prosecut ion in both the cases i .e. “tax arrear” and “specif ied tax” cases.

8 Who is not el igible for the scheme

(a) Cases where prosecut ion has been in it iated before 29.02.2016.

(b) Search or survey cases where the declarat ion is in respect of tax arrears.

(c) Cases relat ing to undisclosed foreign income and assets.

(d) Cases based on information received under Double Taxat ion Avoidance Agreement under sect ion 90 or 90A of the Income-tax Act where the declarat ion is in respect of tax arrears.

(e) Person noti f ied under Special Courts Act, 1992. (f) Cases covered under Narcot ic Drugs and

Psychotropic Substances Act, Indian Penal Code, Prevent ion of Corrupt ion Act or Conservat ion of Foreign Exchange and Prevent ion of Smuggl ing Act iv it ies Act, 1974

9 Designated Author ity to whom declarat ion to be made

An off icer not below the rank of Commiss ioner of Income Tax and not i f ied by the Pr incipal Chief Commiss ioner for the purposes of the scheme

10 Part iculars to be furnished

(a) In respect of “tax arrear”- On f i l ing of declarat ion along with payment of the disputed tax + interest + penalty as appl icable the pending appeal shal l be deemed to have been withdrawn.

(b) In respect of “specif ied tax”- Alongwith f i l ing of declarat ion and payment of disputed tax, the declarant shal l also -

(a) Withdraw any appeal or wr it pet it ion f i led before the Commiss ioner of Income-tax (Appeals) or the Commiss ioner of Wealth-tax (Appeals) or the Appel late Tr ibunal or the High Court or the Supreme Court or any wr it pet it ion before the High Court or the Supreme Court against any order in respect of the specif ied tax and furnish proof of such withdrawal along with the declarat ion;

(b) Withdraw not ice or claim in any proceeding in it iated for arbit rat ion, conci l iat ion nor mediat ion or under any law for the t ime being in force or under any agreement entered into by India with any other country or terr i tory outs ide India whether for protect ion of investment or otherwise and furnish proof thereof along with the declarat ion.

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Sr. Part iculars Detai ls (c) Furnish an undertaking, in such form and ver i f ied in

such manner as may be prescr ibed, waiv ing his r ight , whether direct or indirect , to seek or pursue any remedy or any claim which may otherwise be avai lable to him under any law for the t ime being in force, in equity, by statute or under an agreement referred to in clause (b) above.

11 T ime & Manner for payment of Tax

- The designated author ity shal l , with in a per iod of s ixty days f rom the date of receipt of the declarat ion, determine the amount payable and grant a cert i f icate in such form as may be prescr ibed.

- The declarant shal l pay the sum within thi rty days of the date of receipt of the cert i f icate and int imate the fact of such payment along with proof thereof and the designated author ity shal l thereupon pass an order stat ing that the declarant has paid the sum.

- Every order passed determining the sum payable under this Scheme, shal l be conclus ive as to the matters stated therein and no matter covered by such order shal l be re-opened in any other proceeding under the Income-tax Act or the Wealth-tax Act or under any other law for the t ime being in force, or as the case may be, under any agreement, whether for protect ion of investment or otherwise, entered into by India with any other country or terr i tory outs ide India.

12 Declarat ion made under the Scheme to be considered as VOID

- Where any mater ial part icular furnished in the declarat ion is found to be false at any stage or

- the declarant v iolates any of the condit ions referred to in th is Scheme or

- the declarant acts in a manner which is not in accordance with the undertaking given by him.

13 Refund of amount paid under the scheme

Not Refundable once paid by the declarant in pursuance of the declarat ion made

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T H E I N D I R E C T T a x D i s p u t e R e s o l u t i o n S c h e m e , 2 0 1 6

Sr. Part iculars Detai ls

1 Scheme cal led The Indirect Tax Dispute Resolut ion Scheme, 2016

2 Scheme shal l come into force from

I t shal l come into force on June 01, 2016 and shal l be appl icable to declarat ions made upto December 31, 2016.

3 Purpose for introduct ion of the Scheme

Reduce huge backlog of cases pending and to enable the Government to real ize its dues more expedit iously.

4 Scheme appl icable to Disputes in respect of any provis ions of Act which is pending before the Commiss ioner (Appeals)as an appeal against the impugned order as on March 01, 2016

5 Scheme not to apply in certain cases

- the impugned order is in respect of search and seizure proceeding or

- prosecution for any offence punishable under the Act has been inst ituted before 01.06.2016 or

- impugned order is in respect of narcot ic drugs or other prohibited goods or

- impugned order is in respect of any offence punishable under the Indian Penal Code, the Narcot ic Drugs and Psychotropic Substances Act , 1985 or the Prevent ion of Corrupt ion Act, 1988 or

- any detent ion order has been passed under the Conservat ion of Foreign Exchange and Prevent ion of Smuggl ing Act, 1974.

6 Designated Author ity to whom declarat ion to be made

Off icer not below the rank of Ass istant Commiss ioner who is author ized to act as Ass istant Commiss ioner by the Commiss ioner for the purpose of this Scheme.

7 Procedure for making the appl icat ion

- Person may make a declarat ion to the designated author ity on or before the 31.12.2016 in such form and manner as may be prescr ibed.

- The designated author ity shal l acknowledge the declarat ion in such form and manner as may be prescr ibed.

- The declarant shal l pay tax due along with the interest thereon at the rate as provided in the Act and penalty equivalent to twenty-f ive per cent. of the penalty imposed in the impugned order, within f i fteen days of the receipt of acknowledgement and int imate the designated author ity within seven days of making such payment giv ing the detai l s of payment made along with the proof thereof.

- the designated author ity shal l , with in f i fteen days of the receipt of such proof, pass an order of discharge of dues in such form as may be prescr ibed.

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Sr. Part iculars Detai ls

8 Immunity - Upon the pass ing of an Immunity order as above, the appeal pending before the Commiss ioner (Appeals) shal l stand disposed of and the declarant shal l get immunity f rom al l proceedings under the Act, in respect of the indirect tax dispute for which the declarat ion has been made under this Scheme.

- A declarat ion made above by the declarant shal l become conclus ive upon the issuance of an immunity order as above and no matter relat ing to the impugned order shal l be reopened thereafter in any proceedings under the Act before any author ity or court .

9 Refund of amount paid under the scheme

Not Refundable once paid by the declarant in pursuance of the declarat ion made

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A n a l y s i s - I N C O M E T A X Fol lowing is the analysis of the important proposals as recommended in the

Income Tax Act, 1961 by the Finance Bi l l , 2016.

TAX RATES :

There is no change in the basic tax rate and exemption l imit for

Individual, Hindu Undivided Family, Association of Person, Body Of

Individuals and Art if icial Jur idical Person

There is increase in Surcharge from 12% to 15% in case of Individual

and HUF having taxable income exceeding Rs. 1 crore. Hence, tax

rate on income exceeding 1 Crore in case of Individual/HUF wi l l

increase from 34.608% to 35.535%.

Tax Rebate for Individual having income less than Rs. 5 lakhs is

increased from Rs. 2,000/- to Rs. 5,000/-

There is no change in basic tax rate of Co-operative Society, F i rms

and Local Authorit ies

There is no change in Basic tax rate of Companies, however in case of

companies having turnover less than 5 crores in the FY 2014-15 the tax

rate shal l be 29%.

In case of newly setup domestic companies fulf i l l ing the fol lowing

condit ions the applicable tax rate shal l be 25% at the option of the

company:

the company is setup and registered on or after 1st day of March,

2016;

the company is engaged in the business of manufacture or

production of any art icle or thing and is not engaged in any other

business;

the company whi le computing its total income has not claimed any

benefit under section 10AA, benefit of accelerated depreciation,

benefit of addit ional depreciation, investment al lowance,

expenditure on scientif ic research and any deduction in respect of

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certain income under Part-C of Chapter-VI-A other than the

provis ions of section 80JJAA; and

the company shal l furnish the option in prescribed manner before

the due date of furnishing of income.

There is no change in the rate of Education Cess and Secondary &

Higher Education Cess on Income Tax and accordingly rate of 2% and

1% respectively on the amount of tax computed inclusive of

surcharge, wherever applicable would be applied in al l cases.

TAX IMPACT ON INDIVIDUALS

Exempt ion l imit Indiv iduals having

income more than 5 lacs

Indiv iduals having Income Upto 5 Lacs

Age upto

60 yrs Age 60 to

80 yrs Age upto

60 yrs Age 60 to

80 yrs

<= Rs . 2 ,50,000/- Ni l N i l N i l N i l

Rs . 2 ,50 ,000/- to Rs . 3 ,00,000/- 5 ,000 Ni l 5 ,000 Ni l

Rs . 3 ,00 ,000/- to Rs . 5 ,00,000/- 20,000 20,000 20,000 20,000

Less : Rebate 87A Ni l Ni l 5 ,000 5,000

Net Tax E f fect 25,000 20,000 20,000 15,000

TAX IMPACT ON DOMESTIC COMPANIES

Newly Setup Companies on or after March 01, 2016

Par t iculars Income Level

Taxable Income Upto 1 Crore 1 Crore to 10 Crore Above 10 Crore

Current Tax 30.900% 33.063% 34.608%

Proposed Tax 25.750% 27.553% 28.840%

Companies having Turnover less than 5 Cr. In FY 14-15

Par t iculars Income Level

Taxable Income Upto 1 Crore 1 Crore to 5 Crore 5 Crore to 10 Crore

Above 10 Crore

Current Tax 30.900% 33.063% 33.063% 34.608%

Proposed Tax 29.870% 31.961% 33.063% 34.608%

INCOME DEEMED TO ACCRUE OR ARISE IN INDIA :

New clause (e) i s inserted in the Explanation 1 to section 9(1)(i ) so as

to provide that in the case of a foreign company engaged in the

business of mining of diamonds, no income shal l be deemed to

accrue or arise in India through or from the activit ies which are

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confined to the display of uncut and un-assorted diamond in any

special zone notif ied by the Central Government in the Off icial

Gazette in this behalf.

(w.e.f . A.Y. 2016-2017)

MODIFICATION IN CONDITIONS OF SPECIAL TAXATION REGIME FOR OFF

SHORE FUNDS SECTION 9A

In order to rationalize the regime and to address the concerns of the

industry, i t is proposed to modify the condit ions prescribed under

section 9A to provide that the el igible investment fund for purposes of

section 9A, shal l also mean a fund established or incorporated or

registered outside India in a country or a specif ied terr i tory notif ied by

the Central Government in this behalf. I t i s also proposed to provide

that the condit ion of fund not control l ing and managing any business

in India or from India shal l be restr icted only in the context of

activit ies in India.

(w.e.f . A.Y. 2017-2018)

EXEMPTIONS:

I t i s proposed to exempt the fol lowing income –

Section Income Exempt f rom Tax

10 (12) Any amount received to the extent of 40% of interest paid on contr ibut ion made on or after 1s t Apr i l , 2016 to an employee part ic ipat ing in a Recognised Provident Fund on any contr ibut ions

(w.e.f . A.Y.2017-2018)

10 (12A) Any amount received by an employee from the National Pension System Trust to the extent 40% of the total amount payable at the t ime of closure or opt ing out of the pension scheme. However, the whole amount received by the nominee, on death of the assessee shal l be exempt from tax.

(w.e.f . A.Y.2017-2018)

10 (13) Any amount received to the extent of 40% in commutation of an annuity purchased out of contr ibut ions

(w.e.f . A.Y.2017-2018)

10 (15) Interest income received on deposit cert i f icates issued under the Gold Monetisat ion Scheme , 2015.

(w.e.f . A.Y.2016-2017)

10 (23FC) Any income of a business t rust by way of interest f rom a special purpose vehicle or the div idend referred to in sub-sect ion (7) of sect ion 115-O

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Section Income Exempt f rom Tax (w.e.f . A.Y.2017-2018)

10 (23FD) Any dist r ibuted income received by a unit holder f rom a business t rust which is of the same nature as div idend referred to in sub-sect ion (7) of sect ion 115-O

(w.e.f . A.Y.2017-2018)

10(34) Any income received by way of dividend to the extent of Rs. 10 Lacs, i f recipient is an indiv idual , Hindu undiv ided family or a f i rm.

(w.e.f . A.Y.2017-2018)

10 (38) Any income ar is ing in nature of long term capital gain tax from transact ion undertaken on a Recognised Stock Exchange located in the International F inancial Services Centre and the considerat ion for such transact ion is paid or payable in foreign currency, even when secur it ies t ransact ion tax is not paid in respect of such transact ions.

(w.e.f . A.Y.2017-2018)

10 (48A) Any income of a foreign company on account of storage of crude oi l in a facil i ty in India and sale of crude oi l there-from to any person resident in India , subject to ful f i l lment of certain condit ions.

(w.e.f . A.Y.2016-2017)

10 (50) Any income ar is ing from providing specif ied serv ices on which equalization levy i s chargeable.

(w.e.f . 1s t June , 2016)

SALARY, PERQUISITE & PROFIT IN LIEU OF SALARY:

Perquisite u/s. 17:

I t i s proposed to increase the l imit of employer’s contr ibution to an

approved superannuation fund from Rs.1,00,000/- to Rs.1,50,000/- p.a.

Accordingly, the amount exceeding Rs.1,50,000/- wi l l be considered

as perquisite and wi l l form part of salary.

(w.e.f . A.Y.2017-2018)

INCOME FROM HOUSE PROPERTY:

Deduction in respect of Interest on housing loan [Section 24(b)]

To provide the more relaxation in t ime l imit for completion of self-

occupied property, i t is proposed to provide that the deduction of an

amount of Rs.2,00,000/- shal l be al lowed for interest on housing loan if

the acquisit ion or construction is completed within 5 years (presently 3

years) from the end of the financial year in which the capital was

borrowed.

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(w.e.f . A.Y.2017-2018)

Simplif ication of provisions relating to taxation of unrealized and

arrears of rent [Section 25A, 25AA, 25B]

In order to bring the uniformity in tax treatment of arrears of rent and

unrealised rent, i t i s proposed to merge Section 25A, 25AA and 25B

into a single new section 25A to provide that the amount of rent

received in arrears or the amount of unrealised rent real ised

subsequently by an assessee shal l be chargeable to tax in the

f inancial year in which such rent is received or real ised, i r respective

of the fact that whether the assessee is the owner of the property or

not in that f inancial year.

I t is also proposed to al low deduction of 30% on arrears of rent or

unrealised rent real ised subsequently.

(w.e.f . A.Y.2017-2018)

BUSINESS INCOME:

Taxation of Non-compete fees in relation to not carrying out any

profession [Section 28(va)]

I t is proposed to tax non-compete fees received/receivable (which

are recurr ing in nature) relating to profession.

Further, i t i s also proposed to clari fy that capital receipts for transfer

of r ight to carry on any profession, which are chargeable to tax under

the head "Capital gains", would not be taxable as profits and gains of

business or profession.

I t is also proposed to amend section 55 so as to provide that the 'cost

of acquisit ion' and 'cost of improvement' for working out "Capital

gains" on transfer of r ight to carry on any profession shal l also be

taken as 'ni l '

(w.e.f . A.Y.2017-2018)

Extending the benefit of addit ional depreciation to Power Transmission

Company [section 32(1)(i ia)]

Presently under section 32(1)(i ia), benefits of addit ional depreciation

@ 20% on the new machinery or plant acquired and instal led is

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available to an assessee engaged in the business of manufacture or

production of any art icle or thing or in the business of generation or

generation and distr ibut ion of power only.

Now, it is also proposed to include company engaged in Power

transmiss ion for claiming addit ional depreciation @ 20 % on the new

machinery or plant acquired and instal led.

(w.e.f . A.Y.2017-2018)

Extending the scope of tax incentive on Investment in new asset

(plant and machinery) in excess of Rs. 25 crores [section 32AC(1A)]

Section 32AC(1A) provides that where a company acquires and

instal ls new assets during any previous year, in excess of Rs. 25 crore,

i t shal l be al lowed deduction of 15% of actual cost of new assets up

t i l l 31.03.2017. However, companies are facing diff icult ies in fulf i l l ing

the dual condit ion of acquisit ion and instal lat ion of new assets in

same previous year for avai l ing the investment al lowance.

To overcome the said diff icult ies, i t is proposed to amend the said sub

section to provide that where the instal lat ion of the new asset i s in a

year other than the year of acquisit ion, the deduction shal l be

al lowed in the year in which the new asset is instal led.

(w.r .e.f . A.Y.2016-2017)

Deduction on Expenditure of Scienti f ic Research [section 35]

Proposed amendment is given herein below –

Section Current Provis ions Proposed amendments 35(1)(i i ) Weighted deduct ion from the business

income to the extent of 175 % of sum paid to an approved scient if ic research associat ion which has the object of undertaking scient i f ic research.

Deduction shal l be restr icted to – - 150 % of sum paid

from A.Y. 2018-19 to A.Y. 2020-21

- Actual sum paid from A.Y. 2021-22 and onwards.

35(2AA) Weighted deduct ion from the business income to the extent of 200 % of sum paid to a National Laboratory or a univers ity or an Indian Inst itute of Technology or a specif ied person for the purpose of approved scient i f ic research programme.

35(2AB)- Weighted deduct ion of 200 % of the expenditure (not being expenditure in the nature of cost of any land or

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Section Current Provis ions Proposed amendments bui lding) incurred by a company, engaged in the business of bio-technology or in the business of manufacture or production of any art ic le or th ing except some items appearing in the negative l i s t specif ied in Schedule-XI , on scient i f ic research on approved in-house research and development faci l i ty.

35(1)(i ia) Weighted deduct ion from the business income to the extent of 125 % of any sum paid as contr ibut ion to an approved scient i f ic research company.

Deduction shal l be restr icted to actual sum paid from A.Y. 2018-19 and onwards

35(1)(i i i ) Weighted deduct ion from the business income to the extent of 125 % of contr ibut ion to an approved research associat ion or univers ity or col lege or other inst i tut ion to be used for research in social science or stat ist ical research.

Amortization of spectrum fee for purchase of spectrum [section

35ABA]

Department of Telecommunications (DoT) conducts auctions of

electromagnetic spectrum whereby various telecommunications

services companies pay spectrum fees to DoT. At present, there is an

ambiguity of tax treatment of payments of Spectrum fees in respect of

whether –

- Spectrum is an intangible asset el igible for depreciation under

section 32 or

- i t is in the nature of a ' l icense to operate telecommunication

business' and el igible for deduction equal to the appropriate

fraction of the amount of such expenditure under section 35ABB of

the Act.

In order to clear ambiguity and to avoid any protracted l i t igation in

tax treatment of payments of Spectrum, i t is proposed to insert a new

section 35ABA in the Act to provide –

- any capital expenditure incurred and actual ly paid on the

acquisi t ion of any r ight to use spectrum for telecommunication

services wi l l be al lowed as a deduction in equal instal lments over

the period for which the r ight to use spectrum remains in force.

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- where the spectrum is transferred and proceeds of the transfer are

less than the expenditure remaining un-al lowed, a deduction equal

to the expenditure remaining un-al lowed as reduced by the

proceeds of transfer, shal l be al lowed in the previous year in which

the spectrum has been transferred.

- i f the spectrum is transferred and proceeds of the transfer exceed

the amount of expenditure remaining un-al lowed, the excess

amount shal l be chargeable to tax as profits and gains of business

in the previous year in which the spectrum has been transferred.

- Un-al lowed expenses in a case where a part of the spectrum is

t ransferred would be amortized over the period for which

remaining period remains in force.

- under the scheme of amalgamation, i f the amalgamating

company sel ls or transfer the spectrum to an amalgamated

company, being an Indian company, then the provis ions of this

section wi l l apply to amalgamated company as they would have

applied to amalgamating company i f later has not transferred the

spectrum.

(w.e.f. A.Y.2017-2018)

Withdrawal of deduction on expenditure on eligible projects or

schemes [section 35AC]

I t is proposed to insert sunset clause under sub-section (7) so as to

provide that deduction for expenditure incurred by way of payment

of any sum to a publ ic sector company or a local authority or to an

approved association or inst itut ion, etc. on certain el igible social

development project or a scheme wi l l not be available from A.Y.

2018-19 onwards.

(w.e.f . A.Y.2017-2018)

Deduction in respect of specif ied business [section 35AD]

I t is proposed to withdraw deduction of 150% of capital expenditure in

respect of cold chain faci l i ty, warehousing faci l i ty for storage of

agricultural produce, an affordable housing project, production of

fert i l izer and hospital.

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I t i s proposed to insert clause (iv) in clause 2 so as to provide

deduction of 100% of any capital expenditure incurred whol ly and

exclusive in developing or operating and maintaining or developing,

operating and maintaining the new infrastructure faci l i ty subject to

certain condit ions.

“infrastructure faci l i ty” means -

- a road including tol l road, a bridge or a rai l system;

- a highway project including housing or other activit ies being an

integral part of the highway project;

- a water supply project, water treatment system, i r r igation project,

sanitation and sewerage system or sol id waste management

system;

- a port , ai rport , inland waterway, inland port or navigational

channel in the sea;

(w.e.f . A.Y.2018-2019)

Deduction of expenditure of noti f ied agricultural extension project

[section 35CCC]

I t is proposed to reduce deduction to 100 % from presently 150% of

expenditure incurred on agricultural extension project from 1.4.2017.

(w.e.f . A.Y.2018-2019)

Deduction of expenditure on ski l l development project [section

35CCD]

I t is proposed to reduce deduction to 100 % from presently 150% of

expenditure incurred on ski l l development project from 1.4.2017.

(w.e.f . A.Y.2017-2018)

Deduction in respect of provision for bad and doubtful debt to NBFCs

[section 36]

I t is proposed to amend the provis ion of clause (vi ia) of sub-section

(1) so as to provide deduction from total income (computed before

making any deduction under this clause and Chapter-VIA) on

account of provis ion for bad and doubtful debts to the extent of 5%

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40

of the total income in the case of NBFCs in l ine with deduction

avai lable to public f inancial inst itut ions, State f inancial corporations

and State industr ial investment corporations.

(w.e.f . A.Y.2017-2018)

Amount not deductible [section 40]

I t is proposed to insert new sub clause (ib) after clause (ia) whereby

any consideration paid or payable to a non-resident for a specif ied

service on which “equalisation levy” is deductible under the provis ions

of Chapter VI I I of the Finance Act, 2016, and such levy has not been

deducted or after deduction, has not been paid on or before the due

date specif ied in sub-section (1) of section 139, then amount of such

consideration shal l not be al lowable a deduction in computing the

income of the previous year.

However, where “equalisation levy” has been deducted in any

subsequent year or has been deducted during the previous year but

paid after the due date specif ied in sub-section (1) of section 139,

such sum shal l be al lowed as a deduction in computing the income of

the previous year in which such levy has been paid;”.

(w.e.f . 01.06.2016)

Certain deduction to be on actual payment [section 43B]

I t i s proposed to include payments made to Indian Rai lways for use of

Rai lway assets is al lowable as deduction of the previous year in which

the l iabi l i ty to pay such sum was incurred (relevant previous year) i f

the same is actually paid on or before the due date of furnishing of

the return of income irrespective of method of accounting fol lowed

by a person.

(w.e.f . A.Y. 2017-18)

Maintenance of Books of accounts [section 44AA]

I t is proposed to amend the section 44AA(2) so as to provide that

every person carrying on the business shal l , i f the provis ions of section

44AD(4) and 44ADA(4) are applicable, in his case and his income

exceeds the maximum amount which is not chargeable to income-

tax, keep and maintain such books of account and other documents

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for computing his total income in accordance with the provis ions of

this Act.

(w.e.f . A.Y. 2017-18)

Audit of accounts [section 44AB]

I t is proposed to amend the clause (b) so as to increase the threshold

l imit of gett ing accounts audited before specif ied date of a person

carrying on a profession whose gross receipt exceeds Rs. 50 lacs from

exist ing l imit of Rs. 25 lacs in previous year.

Further, i t i s also proposed to amend the clause (d) so as to provide

that in the case of an assessee, who is covered under the presumptive

taxation on profession u/s. 44ADA, the audit of books of account is

required if he claims that the profits and gains from the profession are

lower than the profits and gains computed in accordance with the

provis ions of Section 44ADA(1) and i f his income exceeds the

maximum amount which is not chargeable to income-tax.

(w.e.f . A.Y.2017-2018)

Presumptive taxation for business [section 44AD]

A person engaged in el igible business and whose turnover or gross

receipts does not exceeds Rs. 2 crores (replaced with exist ing l imit of

Rs. 1.00 crore) is not required to maintain books of accounts u/s. 44AA

and not required to get his account audited u/s. 44AB of the Act.

Further, the expenditure in the nature of salary, remuneration, interest

etc. paid to the partner as per section 40(b) shal l not be deductible

whi le computing the income under section 44AD.

It is also proposed that where an el igible assessee declares profit for

any previous year in accordance with the provis ions of this section

and he declares profit for any of the 5 consecutive assessment years

relevant to the previous year succeeding such previous year not in

accordance with the provis ions of sub-section (1), he shal l not be

el igible to claim the benefit of the provis ions of this section for f ive

assessment years subsequent to the assessment year relevant to the

previous year in which the profit has not been declared in

accordance with the provis ions of sub-section (1).

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Example –

A.Y. Gross Receipts/ Turnover

Prof i t % Whether required to maintain books of accounts and get

his accounts audited 2017-18 75,00,000 8% No 2018-19 1,00,00,000 9% No 2019-20 1,00,00,000 6% Yes

In A.Y. 2019-20, assessee has not offered his income in accordance

with the provis ions of section 44AD for block of 5 consecutive

assessment years i .e. A.Y. 2018-19 to A.Y. 2023-04 after A.Y. 2017-18,

he wi l l not be el igible to claim the benefit of section 44AD for next 5

assessment years i .e. from A.Y. 2020-21 to 2024-25.

Further, i t is also proposed to withdraw relaxation for payment of

Advance tax in the case of assessee covered under section 44AD of

the Act and proposed to pay advance tax by 15t h March of the

f inancial year.

(w.e.f . A.Y. 2017-18)

Presumptive taxation for Profession [section 44ADA]

In order to reduce the compliance burden of the small tax payers

having income from profession, i t is proposed to provide for

presumptive taxation regime for professionals in l ine with provis ions of

Section 44AD as applicable for assessee engaged in el igible business.

I t is proposed to provide for est imating the income of an assessee

engaged in any profession such as legal, medical, engineering or

architectural profession or the profession of accountancy or technical

consultancy or interior decoration or any other profession as is

noti f ied by the Board in the Official Gazette and whose total gross

receipts does not exceed 50 lacs rupees in a previous year, at a sum

equal to 50 % of the total gross receipts or a sum higher than the 50%

earned by the assessee.

It i s further proposed that any deduction al lowable under the

provis ions of sections 30 to 38 shal l , be deemed to have been already

given ful l effect to and no further deduction under those sections

shal l be al lowed.

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Further, the expenditure in the nature of salary, remuneration, interest

etc. paid to the partner as per section 40(b) shal l not be deductible

whi le computing the income under section 44ADA.

The scheme wi l l apply to such resident assessee who is an individual,

HUF or partnership f i rm but wi l l not apply to LLP.

(w.e.f . A.Y. 2017-18)

CAPITAL GAIN INCOME:

Transactions not regarded as Transfer [section 47]

I t is proposed to insert new clause (vi ic) so as to provide that any

redemption of Sovereign Gold Bond issued by the Reserve Bank of

India under the Sovereign Gold Bond Scheme, 2015, by an assessee

being an individual shal l not be considered as transfer.

In addit ion to the exist ing condit ions for not considering the

conversion of a private l imited or unl isted public company into Limited

Liabi l i ty Partnership (LLP) as t ransfer, a new condit ion under sub

clause (ea) under clause (xi i ib) i s proposed to be inserted to provide

that the value of the total assets in the books of accounts of the

company in any of the 3 previous years preceding the previous year

in which the conversion takes place, should not exceed Rs. 5 Crores.

To extend the tax exemption avai lable on merger or consol idation of

mutual fund schemes and to the merger or consol idation of different

plans in a mutual fund scheme, it i s proposed to insert a clause (xix)

so as to provide that any transfer of unit/s by a unit holder in the

consol idating plan of a mutual fund scheme/s in consideration of the

al lotment of unit/s in other scheme/s shal l not be considered as

transfer and not chargeable to capital gain tax.

(w.e.f . A.Y. 2017-18)

Mode of computation of Capital Gain [section 48]

I t i s proposed to provide that indexation benefits to long terms capital

gains aris ing on transfer of Sovereign Gold Bond to al l cases of

assessees other than redemption of Sovereign Gold Bond by an

assessee being an individual which shal l not be considered as transfer

within purview of amendment in section 47 of the Act.

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The Reserve Bank of India has recently permitted Indian corporates to

issue rupee denominated bonds outside India as a measure to enable

the Indian corporates to raise funds from outside India.

Accordingly, with a view to provide rel ief to non-resident investor who

bears the r i sk of currency f luctuation, i t i s proposed to amend section

48 of the Act so as to provide that the capital gains, ar is ing in case of

appreciation of rupee between the date of i ssue and the date of

redemption against the foreign currency in which the investment is

made shal l be exempt from tax on capital gains

(w.e.f . A.Y. 2017-18)

Rationalization of provisions in case where sale consideration is f ixed

under agreement executed prior to the date of registration of

immovable property [section 50C]

There is a genuine hardship to the assessee in declaring consideration

to be adopted for capital gain tax, where the sel ler has entered into

an agreement to sel l the property much before the actual date of

transfer of the immovable property and the sale consideration is f ixed

in such agreement to sel l the property.

To remove the said hardship, i t is proposed to amend the provis ions of

section 50C so as to provide that where the date of the agreement

f ix ing the amount of consideration for the transfer of immovable

property and the date of registration are not the same, the stamp

duty value on the date of the agreement to sel l may be taken for the

purposes of computing the ful l value of consideration provided

amount of consideration referred to therein, or a part thereof, has

been paid by way of an account payee cheque/bank draft or use of

ECS through a bank account, on or before the date of the sale

agreement for the transfer of such immovable property.

(w.e.f . A.Y. 2017-18)

Capital Gain not to be charged on investment in specif ied fund for

“Start Up India” [section 54EE]

i t is proposed to insert a new Section 54EE to provide tax exemption

from capital gains tax in proport ion to the proceeds from the long

term capital gains invested in units of such specif ied fund, as may be

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noti f ied by the Central Government in this behalf, provided the

assessee has, at any t ime within a period of 6 months after the date of

such transfer, invested the whole or any part of capital gains in the

long-term specif ied asset.

The investment in the units of the specif ied fund on transfer of one or

more original assets, during the financial year and in the subsequent

f inancial year shal l be al lowed up to Rs. 50 lacs only.

Where the long-term specif ied asset being units of the specif ied fund

is transferred by the assessee at any t ime within a period of three

years from the date of i ts acquisit ion or where assessee takes any loan

or advance on the security of such specif ied asset being units of the

specif ied fund, he shal l be deemed to have transferred such specif ied

asset on the date on which such loan or advance is taken.

(w.e.f . A.Y. 2017-18)

Capital Gain not to be charged on transfer of residential property

[section 54GB]

I t is proposed to amend section 54GB so as to provide that long term

capital gains aris ing on account of transfer of a residential property

shal l not be charged to tax i f such capital gains are invested in

investment in subscript ion of shares of a company which quali f ies to

be an el igible start-up subject to the condit ion that -

- the individual or HUF holds more than 50% shares of the company

and

- such company uti l i ses the amount invested in shares to purchase

new asset before due date of f i l ing of return by the investor

an investment in el igible start-up should be made before 01s t Apri l ,

2019

“el igible start-up” and “el igible business” shal l have the meanings

respectively assigned to them in Explanation below sub-section (4) of

section 80-IAC.

It i s also proposed to provide that the expression "new asset" includes

computers or computer software in case of technology driven start-

ups so cert i f ied by the Inter-Ministerial Board of Cert i f ication noti f ied

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by the Central Government in the off icial Gazette which was earl ier

excluded within the meaning of “new asset” in clause 6(d).

(w.e.f . A.Y. 2017-18)

Meaning of “Adjusted”, “Cost of Improvement” and “Cost of

Acquisit ion” [section 55]

I t i s also proposed to amend section 55 so as to insert term “or

profession” after a word “any business”.

Further, the 'cost of acquisit ion' and 'cost of improvement' for working

out "Capital gains" on capital receipts aris ing out of transfer of r ight to

carry on any profession shall be taken as 'Ni l '

(w.e.f . A.Y. 2017-18)

INCOME FROM OTHER SOURCES:

Income from Other Sources [section 56]

Where a f i rm or a company receives shares as a consequence of

demerger or amalgamation of a company then it would not amount

to income within the meaning of 56(2)(vi ia) of the Act.

With a view to bring uniformity in tax treatment, i t i s proposed to insert

a new clause (h) after clause (g) of second proviso to 56(2)(vi i ) so as

to provide that any shares received by an individual or HUF as a

consequence of demerger or amalgamation of a company shal l not

amount to Income in the hands of an individual or HUF.

(w.e.f . A.Y. 2017-18)

TAX INCENTIVES AND RELIEFS:

Submission of Return for losses u/s. 80:

Losses under the head Income from business / Profession and Capital

gains are al lowed to be carr ied forward only i f the return of income is

f i led within t ime prescribed u/s. 139(1) of the Act.

I t is proposed to amend Section 80 so as to mandate fi l ing of return of

income wherein losses are incurred u/s. 35AD (in respect of specif ied

business) within t ime prescribed u/s.139(1) of the Act, to carry forward

those losses, otherwise the losses would not be entit led to be carr ied

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forward for being set off against income of specif ied business in

subsequent year.

(w.e.f . A.Y.2016-2017)

Deduction u/s. 80CCD – Deduction in respect of contr ibution to certain

Pension Scheme of Central Government:

Under the exist ing provis ions any contribution standing in the name of

any person, to the credit of pension scheme of Central Government

along with accruals thereto, i f received by that person or his nominee

in whole or part, would be taxable in the previous year in which such

amount is received.

It is proposed to amend these provis ions by exempting the receipt of

such amount by the nominee on death of that person i f such amount

is received in lumpsum.

(w.e.f . A.Y.2017-2018)

Deduction u/s. 80EE – Deduction in respect of interest on loan taken

for residential house property

As per the present provis ions interest on loan taken from any f inancial

inst itut ion for acquisit ion of residential house property is al lowed as

deduction for a maximum amount of Rs. 1.00 lac for AY 2014-15 & AY

2015-16.

I t is proposed to subst itute the said section with new section which

provides as fol lows.

a) Deduction on account of interest shal l not exceed Rs. 50,000/- per

annum.

b) Loan has been sanctioned by the f inancial inst itut ion during FY

2016-17.

c) Amount of loan sanctioned does not exceed Rs. 35.00 lacs.

d) The value of the house property does not exceed Rs. 50.00 lacs.

e) The assessee does not own any residential house property on the

date of sanction of loan.

(w.e.f . A.Y.2017-2018)

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48

Deduction u/s. 80GG – Deductions in respect of rents paid

In order to provide rel ief to the individual tax payers, i t i s proposed to

amend section 80GG so as to increase the maximum l imit of

deduction from exist ing Rs. 2000 per month to Rs. 5000 per month.

(w.e.f . A.Y.2017-2018)

Deduction u/s. 80IA / 80IAB / 80IB – Deductions in respect of profits

and gains from industr ial undertakings or enterprises engaged in

infrastructure development etc., development of SEZ or other than

infrastructure development undertakings

The Sunset clause for avai l ing deduction u/s. 80IA, 80IAB & 80IB has

been proposed from AY 2017-18.

Sr . No.

Sect ion Incent ive current ly avai lable in the Act

Proposed phase out amendment

1 Sect ion 80IA ; 80IAB, and 80IB - Deduction in respect of prof i ts der ive f rom a) development, operat ion and maintenance of an inf rast ructure faci l i ty (80- IA) (b) development of special economic zone (80- IAB) (c) production of mineral oi l and natural gas [80- IB(9)]

100 per cent prof i t l inked deductions for speci f ied per iod on el igible bus iness carr ied on by indust r ia l undertakings or enterpr i ses refer red in sect ion 80IA ; 80IAB, and 80IB.

No deduction shal l be avai lable i f the speci f ied act iv i ty commences on or after 1st day Apr i l , 2017. ( i .e f rom prev ious year 2017-18 and subsequent years) .

(w.e.f . A.Y.2017-2018)

Deduction u/s. 80IAC – Deductions in respect of profi ts and Gains from

Specif ied Businesses

I t is proposed to insert new section 80-IAC so as to provide a

deduction of one hundred per cent of the profits and gains derived

by an el igible start-up from a business involving innovation,

development, deployment or commercial isation of new products,

processes or services driven by technology or intel lectual property.

Condit ions prescribed for claiming deduction are as fol lows.

a) Deduction may at the option of the assessee, be claimed by the

company for any three consecutive assessment years out of f ive

S N K

49

years beginning from the year in which the el igible start-up is

incorporated.

b) The start-up is not formed by spl itt ing up, or the reconstruction, of a

business already in existence, except in case of re-establ ishment,

reconstruction or revival by the assessee of the business of any

such undertaking as referred to in section 33B.

c) The start-up is not formed by the transfer to a new business of

machinery or plant previously used for any purpose.

d) The company is incorporated on or after the 1st day of Apri l , 2016

but before the 1st day of Apri l , 2019.

e) The total turnover of i ts business does not exceed twenty-f ive crore

rupees in any of the previous years beginning on or after the 1st

day of Apri l , 2016 and ending on the 31st day of March, 2021.

f) The start-up holds a cert i f icate of el igible business from the Inter-

Ministerial Board of Cert i f ication as noti f ied in the Official Gazette

by the Central Government.

(w.e.f . A.Y.2017-2018)

Deduction u/s. 80IBA – Deductions in respect of profits and gains from

housing projects

I t is proposed to insert new section 80-IBA so as to provide hundred

percent deduction in respect of profits and gains of an assessee

developing and bui lding el igible housing projects.

Condit ions prescribed for claiming deduction are as fol lows.

a) the project is approved by the competent authority after the 1st

day of June, 2016, but on or before the 31st day of March, 2019, in

accordance with such guidelines as may be prescribed,

b) the project is completed within a period of three years from the

date of approval by the competent authority,

c) the bui lt-up area of the shops and other commercial

establ ishments included in the housing project does not exceed

three per cent of the aggregate bui lt-up area,

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50

d) the project is on a plot of land measuring not less than one

thousand square metres where such project is located within the

cit ies of Chennai, Delhi , Kolkata or Mumbai or within the area of

twenty-five ki lometres from the municipal l imits of these cit ies, or

two thousand square metres within the jur isdiction of any other

municipality or cantonment board,

e) the residential units comprised in the housing project does not

exceed thi rty square metres where such project is located within

the cit ies of Chennai, Delhi, Kolkata or Mumbai or within the area

of twenty-five ki lometres from the municipal l imits of these cit ies, or

s ixty square metres, where such project is located within the

jur isdict ion of any other municipal ity or cantonment board,

f) where a residential unit in the housing project is al lotted to an

individual, no other residential unit in the housing project shal l be

al lotted to the individual or the spouse or the minor chi ldren of

such individual;

g) the project ut i l i ses—

(i ) not less than ninety per cent. of the f loor area ratio permissible

in respect of the plot of land under the rules to be made by the

Central Government or the State Government or the local

authority, as the case may be, where the project is located

within the cit ies of Chennai, Delhi , Kolkata or Mumbai or within

the area of twenty-f ive ki lometres from the municipal l imits of

these cit ies, or

(i i ) not less than eighty per cent. of such f loor area ratio where such

project is located in any area other than the areas referred to in

sub-clause ( i); and

h) the assessee maintains separate books of account in respect of the

housing project.

i ) The benefit under this section shal l not be admissible to the person

who executes the housing project as a works-contract awarded by

any person (including the Central Government or the State

Government)

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51

j ) Where the housing project is not completed within the period of three

years as aforesaid and deduction has been claimed and al lowed

under this section during the intervening period, the total amount of

deduction so claimed and al lowed in one or more previous years,

shal l be deemed to be the income of the assessee chargeable under

the head “Profits and gains of business or profession” of the previous

year in which the period for completion so expires.

(w.e.f . A.Y.2017-2018)

Deduction u/s. 80JJAA – Deductions in respect of employment of new

employees

I t is proposed to subst itute section 80-JJAA with a new section to

provide for deduction in respect of expenses incurred on employment

of new employees.

Condit ions prescribed for claiming deduction are as fol lows.

a) The new provision extends incentive to any assessee having income

from business or profession and covered by provis ions of section

44AB of the Act and not merely to an Indian company which

derives income from the manufacture of goods in a factory.

b) The deduction shall be avai lable in respect of cost incurred on any

employee whose total emoluments are less than or equal to

twenty-five thousand rupees per month.

c) No deduction, however, shal l be al lowed in respect of cost

incurred on those employees, for whom the entire contribution

under Employees' Pension Scheme noti f ied in accordance with

Employees' Provident Fund and Miscel laneous Provis ions Act, 1952,

is paid by the Government.

d) I t is further proposed to relax the norms for minimum number of

days of employment in a f inancial year from 300 days to 240 days.

e) I t is further proposed to do away with the condit ion of ten per cent

increase in number of employees every year so that any increase in

the number of employees wi l l be el igible for deduction under the

provis ion.

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52

f) I t i s also proposed to provide that in the f i rst year of a new

business, thirty percent of al l emoluments paid or payable to the

employees employed during the previous year shal l be al lowed as

deduction.

(w.e.f . A.Y.2017-2018)

Deduction u/s. 87A – Rebate of income-tax in case of certain

individuals:

I t is proposed to increase the l imit of deduction u/s. 87A from Rs.

2,000/- to Rs. 5,000/-

(w.e.f . A.Y.2017-2018)

INTERNATIONAL TAX AND TRANSFER PRICING:

Provisions of section 92D of the Act prescribes maintenance of

prescribed information and documents by every person who has entered

into an international transaction or specif ied domestic transaction.

It is proposed that the said condit ion of maintenance of information and

documents shal l also apply to a person, being a const ituent entity of an

international group. The said person shall also furnish these detai ls before

the assessing officer or the Commissioner of Income Tax (Appeals) as the

case may be.

(w.e.f . A.Y.2017-2018)

SECTION 112 – TAX ON LONG TERM CAPITAL GAIN:

Presently provis ions of section 112 permit taxing of long-term capital gain

aris ing from transfer of securit ies, whether l i sted or unl isted at ten

percent. The term ‘securit ies’ is defied under provis ions of Securit ies

Contracts (Regulations) Act, 1956, which was interpreted by courts to not

include shares of company not being a company in which the publ ic are

substantial ly interested.

Accordingly, i t is proposed to amend the said section to expressly

include shares of a company in which the public are substantial ly

interested along with unl isted securit ies.

(w.e.f . A.Y.2017-2018)

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53

SECTION 115BA – TAX ON INCOME OF CERTAIN DOMESTIC COMPANIES:

Section 115BA is proposed to be inserted which provides that income-tax

payable in respect of the total income of a domestic company, for any

previous year relevant to the assessment year 2017-18 shal l , at the option

of the company, be computed at the rate of twenty-five per cent, i f

fol lowing condit ions are satisf ied.

(a) the company has been set up and registered on or after the 1st day

of March, 2016;

(b) the company is engaged in the business of manufacturing or

production of any art icle or thing; and

(c) the total income of the company has been computed, –

(i ) without any deduction under the provis ions of section 10AA or

addit ional depreciation under section 32 or deduction under

section 32AC or section 32AD or section 33AB or section 33ABA

or sub-clause (i i ) or sub-clause (i ia) or sub-clause (i i i ) of

subsection (1) or sub-section (2AA) or sub-section (2AB) of

section 35 or section 35AC or section 35AD or section 35CCC or

section 35CCD or under section 80JJAA;

(i i ) without set off of any loss carr ied forward from any earl ier

assessment year i f such loss i s attr ibutable to any of the

deductions referred to in sub-clause (i ) ; and

(i i i ) regular depreciation under section 32 is determined in the

manner to be prescribed.

(iv) Loss incurred after the company has been set up and registered

shal l not be al lowed to be carr ied forward for being set off

against income for any subsequent year.

(v) The option by the person shal l be exercised in the prescribed

manner on or before the due date for furnishing the return of

income for the relevant previous year.

(w.e.f . A.Y.2017-2018)

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54

SECTION 115BBDA – TAX ON CERTAIN DIVIDENDS RECEIVED FROM

DOMESTIC COMPANIES:

Section 115BBDA is proposed to be inserted to provide that when total

income of an Individual, HUF or a Fi rm includes any income exceeding

Rs. 10 lacs by way of dividend (other than deemed dividend u/s.2(22)(e))

declared, distr ibuted and paid by a domestic company, tax shal l be

payable on such dividends at a f lat rate of ten percent.

No deduction in respect of any expenditure or al lowance or set off of

loss shal l be al lowed to the assessee under any provis ion of this Act in

computing aforesaid dividend income.

For the purpose of this section dividend shall have its meaning as given

in section 2(22)(e) of the Act.

(w.e.f . A.Y.2017-2018)

SECTION 115BBE – TAX ON INCOME REFERRED TO IN SECTION 68 OR

SECTION 69 OR SECTION 69A OR SECTION 69B OR SECTION 69C OR

SECTION 69D:

Section 115BBE is proposed to be amended to debar set off of any types

of losses against taxing of deemed income in form of Cash credit ,

Unexplained Investment, Unexplained money, Investments not ful ly

disclosed in books of accounts, Unexplained expenditure or amount

borrowed or repaid on Hundi.

(w.e.f . A.Y.2017-2018)

SECTION 115BBF – TAX ON ROYALTY INCOME FROM PATENT:

Section 115BBF is proposed to be inserted to levy tax at the concessional

rate of ten percent on income by way of royalty in respect of a patent

developed and registered in India. However, no expenditure or

al lowance shal l be al lowed to be claimed against the said income.

The term royalty, means consideration (including any lump sum

consideration but excluding any consideration taxable under the head

“Capital gains” or consideration taxable as income from business from

sale of product manufactured with the use of patented process or the

patented art icle for commercial use for the -

S N K

55

(I ) t ransfer of al l or any r ights (including the granting of a l icence) in

respect of a patent; or

(I I ) impart ing of any information concerning the working of, or the use

of, a patent; or

(I I I ) use of any patent; or

(IV) rendering of any services in connection with the activit ies referred to

in aforesaid clauses.

Provis ions of section 115JB imposing Minimum Alternate Tax shal l not be

applicable to the said income and as a corol lary, expenses incurred to

earn the said income shall also not be al lowable whi le computing MAT

on income of companies.

(w.e.f . A.Y.2017-2018)

SECTION 115JB – SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN

COMPANIES (MAT):

Explanation is inserted to Section 115JB(2), which provides that the

provis ions of this section shal l not be applicable and shal l be deemed

never to have been applicable to a foreign company, i f—

(i ) the assessee is a resident of a country or a specif ied terr i tory with

which India has a Double Taxation Avoidance Agreement u/s. 90 or

the Central Government has adopted any agreement u/s. 90A(1) and

the assessee does not have a permanent establ ishment in India in

accordance with the provis ions of such agreement; or

(i i ) the assessee is a resident of a country with which India does not have

an agreement of the nature referred to in clause (i )

and

the assessee is not required to seek registration under any law for the

t ime being in force relating to companies.”;

(w.r .e.f . A.Y.2001-2002)

Sub Section (7) has been inserted to this section providing

concessional rate of tax of nine percent on income of a unit located

in an International Financial Services Center, deriving its income solely

in convert ible foreign exchange and establ ished on or after

01/04/2016.

S N K

56

(w.e.f . A.Y.2017-2018)

SECTION 115JH – SPECIAL PROVISION RELATING TO FOREIGN COMPANY

SAID TO BE RESIDENT IN INDIA:

Section 115JH is proposed to be inserted to provide that where a

foreign company is said to be resident in any previous year and such

foreign company has not been resident in India in any of the

preceding previous year, then, the provis ions of the Income-tax Act

relating to –

– computation of total income,

– treatment of unabsorbed depreciation,

– set off or carry forward and set off of losses,

– special provis ions relat ing to avoidance of tax and

– the col lection and recovery

shal l apply with such exceptions, modifications and adaptations on

fulf i l lment of such condit ions as may be noti f ied by the Central

Government in this behalf.

It i s further provided that where determination regarding residence of

foreign company has been done in the assessment proceedings

relevant to any previous year, then, the provis ions of Chapter XI I-BC

(presently covering section 115JH) shal l apply in respect of previous

years succeeding the relevant previous year which ends on or before

the date on which the determination of assessment has been made.

I f any condit ions which may be notif ied under sub-section (1) are not

complied with, the provis ions of the Income-tax Act shal l apply

without any modification and the necessary recti f ication may be

undertaken by the Assessing Off icer for which the period of four years

shal l be avai lable for such rectif ication from the date of fai lure.

(w.e.f . A.Y.2017-2018)

SECTION 115O – TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES:

Section 115-O is proposed to be amended by insert ing sub-section (7) to

provide that no tax shal l be charged on dividend declared, distr ibuted

or paid on or after the specif ied date by specif ied domestic company to

a business t rust out of i ts current income.

S N K

57

The aforesaid provis ions shal l not apply to dividends declared,

distr ibuted or paid out of accumulated profits or current profits upto the

date of acquisit ion of such holding by the business trust in the specif ied

domestic company.

(w.e.f . 01-06-2016)

Sub-section (8) in proposed to be inserted to this section so as to provide

that no tax shal l be levied on profits declared, distr ibuted or paid as

dividend by a company being a unit of an International Financial

Services Centre (deriving income solely in convert ible foreign exchange)

out of i ts current income, either in the hands of the company or the

person receiving such dividend.

(w.e.f . 01-04-2017)

SECTION 115TD, 115TE AND 115TF - SPECIAL PROVISIONS RELATING TO TAX

ON ACCRETED INCOME OF CERTAIN TRUSTS AND INSTITUTIONS:

New sections 115TD, 115TE and 115TF are proposed to be inserted in

the Income Tax Act on special provis ions relating to tax on accreted

income of certain trusts and inst itut ions.

a) The accretion in income (accreted income) of the trust or

inst i tut ion shall be taxable on –

– conversion of trust or inst itut ion into a form not el igible for

registration u/s 12AA or

– on merger into an entity not having simi lar objects and

registered under section 12AA or

– on non-distr ibution of assets on dissolut ion to any charitable

inst itut ion registered u/s 12AA or approved under section

10(23C) within a period twelve months from dissolut ion.

b) Accreted income shal l be amount of aggregate of total assets as

reduced by the l iabi l i ty as on the specif ied date. The method of

valuation is proposed to be prescribed in rules. The asset and the

l iabi l i ty of the charitable organisation which have been transferred

to another charitable organisation within specif ied t ime wi l l be

excluded whi le calculating accreted income.

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58

c) The taxation of accreted income shal l be at the maximum marginal

rate. This levy shal l be in addit ion to any income chargeable to tax

in the hands of the entity.

d) This tax shal l be final tax for which no credit can be taken by the

trust or inst itut ion or any other person, and l ike any other addit ional

tax, i t shal l be leviable even i f the trust or inst i tut ion does not have

any other income chargeable to tax in the relevant previous year.

e) In case of fai lure of payment of tax within the prescribed t ime a

simple interest @ 1% per month or part of i t shal l be appl icable for

the period of non-payment.

f) For the purpose of recovery of tax and interest, the principal

off icer or the trustee and the trust or the inst i tut ion shall be

deemed to be assessee in default and al l provis ions related to the

recovery of taxes shal l apply. Further, the recipient of assets of the

trust, which is not a charitable organisation, shal l also be l iable to

be held as assessee in default in case of non-payment of tax and

interest. However, the recipient’s l iabi l i ty shal l be l imited to the

extent of the assets received.

(w.e.f . A.Y.2017-2018)

SECTION 124 – JURISDICTION OF ASSESSING OFFICERS:

I t is proposed to amend the said sub-section (3) so as to provide that in

a case where a search is init iated under section 132 or books of

account, other documents or any assets are requisit ioned under section

132A, no person shal l be entit led to cal l in quest ion the jur isdict ion of an

Assessing Officer after the expiry of one month from the date on which

he was served with a notice under subsection (1) of section 153A or sub-

section (2) of section 153C or after the completion of the assessment,

whichever is earl ier.

(w.e.f . 01-06-2016)

SECTION 139 – RETURN OF INCOME:

(a) Presently section 139(1) provide that every person referred to therein

shal l f i le a return of income on or before the due date. The sixth

proviso to the said section provides that every person, being an

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59

individual or Hindu undivided family or an association of person or a

body of individual, whether incorporated or not or any art i f icial

jur idical person, i f his total income or of any other person in respect

of which he is assessable under this Act during the previous year,

without giving effect to provis ions of section 10A or section 10B or

section 10BA or Chapter VI-A, exceeds the maximum amount which is

not chargeable to income tax shal l be l iable to furnish return on or

before the due date. In order to rationalise the t ime al lowed for f i l ing

of returns and to promote the culture of compliance, i t is proposed to

amend the said sixth to include that i f a person during the previous

year earns income which is exempt under clause (38) of section 10

and income of such person without giving effect to the said clause of

section 10 exceeds the maximum amount which is not chargeable to

tax, shal l also be l iable to f i le return of income for the previous year

within the due date.

(b) Sub-section (3) of section 139 is further proposed to be amended so

as to provide that i f the assessee intends to carry forward losses from

specif ied business u/s. 73A(2) he should f i le return of income on or

before the prescribed t ime l imit . In case of fai lure to comply the

lossess wi l l not be al lowed to be carr ied forward.

(c) Sub-section (4) i s proposed to be amended to restr ict f i l ing of

belated return of income which was required to be fi led within t ime

prescribed u/s. 139(1) of the Act on or before the end of the relevant

assessment year or before the completion of assessment, whichever is

earl ier. But return of income which is required to be fi led in response

to notice u/s. 142(1) of the Act wi l l have to be fi led within the t ime

al lowed in the notice.

(d) Presently sub-section (5) permits revis ion of return f i led u/s. 139(1) at

any t ime before the end of the relevant assessment year or before

the completion of the assessment, whichever is earl ier. The said

provis ion is also extended to belated return f i led u/s. 139(4) of the

Act. However, provis ion to revise return f i led in response to notice

u/s. 149(1) which was at par with return f i led u/s. 139(1) has been

withdrawn.

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60

(e) I t is also proposed to omit clause (aa) of the Explanation to sub-

section (9) of section 139 to provide that a return which is otherwise

val id would not be treated defective merely because self-assessment

tax and interest payable in accordance with the provisions of section

140A has not been paid on or before the date of furnishing of the

return.

(w.e.f . A.Y. 2017-18)

SECTION 143 – ASSESSMENT:

A) Summary assessment u/s. 143(1) of the Act presently carr ied out in two

cases has been extended to four more instances.

a) disal lowance of loss claimed, i f return of the previous year for

which set off of loss i s claimed was furnished beyond the due date

specif ied under sub-section (1) of section 139;

b) disal lowance of expenditure indicated in the audit report but not

taken into account in computing the total income in the return;

c) disal lowance of deduction claimed under sections 10AA, 80-IA, 80-

IAB, 80-IB, 80-IC, 80-ID or 80-IE, i f the return is furnished beyond the

due date specif ied under sub-section (1) of section 139; or

d) addit ion of income appearing in Form 26AS or Form 16A or Form 16

which has not been included in computing the total income in the

return:

The aforesaid adjustments along with exist ing two adjustments shal l

not be made unless an int imation is given to the assessee of such

adjustments either in writ ing or in electronic mode. The assessee shal l

respond to the int imation in thi rty days and the said response shal l be

considered before making any adjustments.

B) Presently when a return of income is selected for scrutiny by issuance

of notice u/s. 143(2) of the Act, processing of return was not

necessary. Now it is proposed to provide that the processing of return

shal l be compulsory before conclusion of assessment and issuance of

order u/s. 143(3) of the Act.

(w.e.f . A.Y. 2017-18)

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61

SECTION 147 – INCOME ESCAPING ASSESSMENT:

Under the exist ing provis ions of the aforesaid section, i f the Assessing

Off icer has reason to bel ieve that any income chargeable to tax has

escaped assessment, he may assess or reassess such income or re-

compute the loss or any other al lowance. Explanation 2 to the said

section provides certain s i tuations which shal l also be deemed to be the

cases where income chargeable to tax has escaped assessment.

I t is proposed to amend the said Explanation 2 so as to provide that a

case shal l be deemed to be a case where income chargeable to tax has

escaped assessment where on the basis of information or document

received from the prescribed income-tax authority it i s noticed by the

Assessing Off icer that the income of the assessee exceeds the maximum

amount not chargeable to tax, or the assessee has understated the

income or has claimed excessive loss, deduction, al lowance or rel ief in

the return.

(w.e.f . 01-04-2016)

SECTION 153 – TIME LIMIT FOR COMPLETION OF ASSESSMENT, RE-

ASSESSMENT AND COMPUTATION:

The exist ing statutory t ime l imit for completion of assessment proceedings

is two years from the end of the assessment year in which the income

was f i rst assessable. To make the process more expedit ious and to

s implify the provis ions it is proposed to substitute section 153 with the

fol lowing changes in t ime l imit from the exist ing t ime l imits:

Sr. No.

Provis ion for complet ion of

assessment

Present t ime l imit Proposed t ime l imit

1 Assessment order u/s. 143 / 144

Twenty-four months. Twenty-one months.

2 Assessment order u/s. 147

Twelve months. Nine months.

3 Fresh assessment in pursuance of an order under sect ion 254 or sect ion 263 or sect ion 264 sett ing as ide or cancel l ing an assessment

Twelve months. Nine months.

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62

Sr. No.

Provis ion for complet ion of

assessment

Present t ime l imit Proposed t ime l imit

4 Order giv ing effect to an order, under sect ions 250 or 254 or 260 or 262 or 263 or 264 or an order of the Sett lement Commiss ion under sub-sect ion (4) of sect ion 245D, where effect can be given whol ly or part ly otherwise than by making a f resh assessment or reassessment

-- Three months f rom the end of the month in which order is received or passed, as the case may be, by the Pr incipal Chief Commiss ioner or Chief Commiss ioner or Pr incipal Commiss ioner or Commiss ioner, subject to further extension of s ix months on approval by Pr incipal Commiss ioner or Commiss ioner. However, in respect of cases pending as on 1st June 2016, the t ime l imit for pass ing such order is proposed to be extended to 31.3.2017.

5 Assessment, reassessment or re-computat ion in consequence of or to give effect to any f inding or direct ion contained in an order under sect ion 250, 254, 260, 262, 263, or sect ion 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Income-tax Act.

-- Twelve months f rom the end of the month in which such order is received by the Pr incipal Commiss ioner or Commiss ioner. However, in respect of cases pending as on 1st June 2016, the t ime l imit for pass ing such order is proposed to be extended to 31.3.2017.

6 Assessment made in case of partner of a f i rm in consequence of an assessment made on the f i rm u/s. 147.

-- Twelve months f rom the end of the month in which the assessment order in the case of the f i rm is passed. However, in respect of cases pending as on 1st June 2016, the t ime l imit for pass ing such order is proposed to be extended to 31.3.2017.

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Sr. No.

Provis ion for complet ion of

assessment

Present t ime l imit Proposed t ime l imit

7 Reference under sub-sect ion (1) of sect ion 92CA is made dur ing the course of the proceeding for the assessment or reassessment

Twenty-four months. Twelve months.

T ime l imit for completion of assessment by an AO on receipt of order

of the TPO shal l be a minimum period of s ixty days from the date of

receipt of the order.

(w.e.f . 01-04-2016) SECTION 153B – TIME LIMIT FOR COMPLETION OF ASSESSMENT, RE-

ASSESSMENT AND COMPUTATION:

I t is proposed to amend the t ime l imit for completion of assessments

under section 153A or section 153C cases to br ing it in sync with the new

time l imits provided for other cases. Fol lowing changes in t ime l imit is

made from the exist ing t ime l imits.

Sr. No.

Provis ion for completion of assessment Present t ime l imit

Proposed t ime l imit

1 Assessment or reassessment in respect of each assessment year fal l ing within s ix assessment years referred to in clause (b) of sub-sect ion (1) of sect ion 153A or in respect of the assessment year relevant to the previous year in which search is conducted under sect ion 132 or requis it ion is made under sect ion 132A.

Twenty-four months.

Twenty-one months.

2 Assessment or reassessment in case of other person referred to in sect ion 153C.

Twelve months.

Nine months.

3 Assessment or reassessment in case where the last of the author isat ions for search under sect ion 132 or for requis it ion under sect ion 132A was executed and dur ing the course of the proceedings for the assessment or reassessment of total income, a reference under sub-sect ion (1) of sect ion 92CA is made

Twenty-one months.

Thi rty-Three months.

T ime l imit for completion of assessment by an AO on receipt of order

of the TPO shal l be a minimum period of s ixty days from the date of

receipt of the order.

(w.e.f . 01-04-2016)

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Deduction of tax at source from payment of accumulated balance of

Employees’ Provident Fund or similar fund to an employee (Section 192A)

Tax @ 10% is deducted from payments made to an employee on account

of his EPF dues or dues under any recognised funds, at the t ime of

payment of accumulated balance due to the employee i f withdrawn

before completion of 5 years of employment. Now, the tax shal l not be

deducted i f the payment does not exceed Rs. 50,000/-.

In case i f the employee fai ls to furnish his Permanent Account Number to

the person responsible for deducting such tax, tax shal l be deducted at

the maximum marginal rate.

(w.e.f . June 01,2016)

Deduction of tax at source from winnings from Horse Race (Section

194BB)

I t i s proposed to enhance the threshold l imit for deduction of TDS from

payment to any person any income by way of winning from horse race

from Rs. 5,000/- to Rs. 10,000/-.

(w.e.f . June 01,2016)

Deduction of tax at source from payment to Contractors (Section 194C)

I t is proposed to enhance the threshold l imit for deduction of TDS for

aggregate of payments made for carrying out any work (including

supply of labour for carrying out any work) in pursuance of a contract

between the contractor and a specif ied person from Rs. 75,000/- to Rs.

1,00,000/-.

(w.e.f. June 01,2016)

Deduction of tax at source from payment for Insurance Commission

(Section 194D)

I t is proposed to reduce the threshold l imit for deduction of TDS from

payments, where the amount of such income, or the aggregate of the

amount of the income, relating to remuneration or reward, whether by

way of commission or otherwise, for sol icit ing or procuring insurance

business from Rs. 20,000/- to Rs. 15,000/-.

I t is further proposed to reduce the rate of TDS from 10% to 5% for al l

aforesaid payments.

(w.e.f. June 01,2016)

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Deduction of tax at source for payment in respect of Li fe Insurance

Policy (Section 194DA)

I t is proposed to reduce the rate of TDS from 2% to 1% in respect of

payments made to a resident of any sum under a l i fe insurance pol icy,

including the sum al located by way of bonus on such pol icy, other than

the amount not includible in the total income under clause (10D) of

section 10.

(w.e.f. June 01,2016)

Deduction of tax at source for payment in respect of deposits under

National Saving Scheme(NSS) (Section 194EE)

I t i s proposed to reduce the rate of TDS from 20% to 10% in respect of

payments in respect of deposits under National Saving Scheme.

(w.e.f. June 01,2016)

Deduction of tax at source for payments in respect of Commission on

Sale of Lottery t ickets (Section 194G)

I t is proposed to increase the threshold l imit for deduction of TDS for

payments by way of commission, remuneration or prize (by whatever

name cal led) to a person who is engaged in activity of stocking,

distr ibuting, purchasing or sel l ing of lottery t ickets from Rs. 1,000/- to Rs.

15,000/-.

I t is further proposed to reduce the rate of TDS from 10% to 5% for al l

aforesaid payments.

(w.e.f. June 01,2016)

Deduction of tax at source for payments in respect of Commission or

Brokerage (Section 194H)

I t is proposed to increase the threshold l imit for deduction of TDS for

payments made in respect of Commission or Brokerage from Rs. 5,000/-

to Rs. 15,000/-.

I t i s further proposed to reduce the rate of TDS from 10% to 5%.

(w.e.f . June 01,2016)

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Deduction of tax at source on payment of Compensation on acquisit ion

of certain Immovable Property (Section 194LA)

I t is proposed to increase the threshold l imit for deduction of TDS in

respect of payments of compensation or enhanced compensation on

compulsory acquisit ion of immovable property (other than agricultural

land), credited or paid or l ikely to be credited or paid during the

f inancial year to the payee from Rs. 2,00,000/- to Rs. 2,50,000/-.

(w.e.f. June 01,2016)

Deduction of tax at source from income distr ibuted on units of Investment

fund (Section 194LBB)

I t is proposed to provide that where any income is earned in respect of

units of an investment fund, tax shal l be deducted thereon at the rate of

ten per cent in case of resident and at applicable tax rates in case of

non- resident (not being a company) or a foreign company.

(w.e.f . June 01,2016)

Deduction of tax at source from income distr ibuted on units of Investment

fund (Section 194LBC)

The proposed new section seeks to provide that where any income is

payable to an investor, being a resident, in respect of an investment in a

securit isation trust specif ied in clause (d) of the Explanation to section

115TCA, the person responsible for making the payment shal l , at the t ime

of credit of such income to the account of payee or at the t ime of

payment thereof in cash or by issue of a cheque or draft or by any other

mode, whichever is earl ier, deduct income-tax at the rate of 25% in case

of an individual or a Hindu undivided family and 30% in case of any other

person.

It also seeks to provide that i f the investor i s a non-resident (not being a

company) or a foreign company then TDS should be deducted at the

rates in force. The term “investor” shal l have the meaning assigned to it

in clause (a) of the Explanation to section 115 TCA.

(w.e.f . June 01,2016)

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No deduction of tax to be made in certain cases (Section 197A)

I t is proposed to amend the provis ions of section 197A for making the

recipients of payments referred to in section 194-I also el igible for f i l l ing

self declaration in Form no 15G/15H for non deduction of tax at source.

(w.e.f. June 01,2016)

Exemption for furnishing Permanent Account Number (Section 197A)

I t is proposed to subst itute sub section (7) of section 206AA so that a

non-resident, not being a company, or to a foreign company shal l not be

required to furnish PAN in respect of any other payment received subject

to such condit ions as may be prescribed in addit ion to interest on long-

term bonds as referred to in section 194LC.

(w.e.f. June 01,2016)

Collection of tax at source (Section 206C)

I t is proposed to amend the aforesaid section to provide that the sel ler

shal l col lect the tax at the rate of one per cent from the purchaser on

sale of motor vehicle of value exceeding Rs. 10,00,000/- in cash or by the

issue of a cheque or draft or by any other mode or for sale of any other

goods (other than bul l ion and jewellery) or providing any services in cash

(other than payments on which tax is deducted at source under Chapter

XVII-B) exceeding 2,00,000/-.

I t is also proposed to provide that the sub-section (1D) relating to TCS in

relation to sale of any goods (other than bul l ion and jewellery) or

services shal l not apply to certain class of buyers who fulf i l such

condit ions as may be prescribed.

(w.e.f . June 01,2016)

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TABLE FOR PROPOSED T.D.S./ T.C.S. RATES FOR A.Y. 2017-18

U/s. Nature of income When to deduct Rate of TDS

192 Salary Monthly- at the t ime of payment where est imated year ly net taxable salary

exceeds tax f ree l imi t .

On the average rates on the bas i s of per rates for

indiv iduals .

192A (See note-

6)*

Payment of accumulated

balance due of Employees’

Provident Fund Scheme, 1952,

to Employess

when the amount of payment or aggregate amount of

payment exceeds Rs . 50,000/-

10%

193 (See note-

1)*

Interest on secur i t ies*

At the t ime of credi t or payment, whichever i s

ear l ier , when the amount exceeds Rs. 5 ,000/-

10%

194 Div idends Before making payment to shareholder , other than

div idend declared U/s . 115-O, when amount exceeds Rs .

2 ,500/-

20%

194A (See note-

2)*

Interest other than “ Interest on secur i t ies”

At the t ime of credi t or payment, whichever i s

ear l ier , when the amount exceeds Rs. 5 ,000/- . However , l imi t i s Rs . 10,000/- in case of

interest credi ted by banks including co-operat ive banks

to i t s members .

10%

194B Winnings f rom lottery, cross word

puzz les card games, games of any sort

including T .V. Game Shows

At the t ime of payment when i t exceeds Rs . 10,000/-

30%

194BB (See note-

6)*

Winnings f rom horse races

At the t ime of payment when i t exceeds Rs . 10,000/-

30%

194C

(See note- 3-6)*

Payment to contractors/ sub-

contractors

At the t ime of credi t or payment, whichever i s

ear l ier , when the amount of a part icular contract exceeds

Rs . 30,000/- or the total amount of contract dur ing the whole year exceeds Rs .

1 ,00 ,000/-

2% - For payments to contractor/Sub-

contractor who i s not an Indiv idual/HUF

1% - For payment to contractor/Sub-contractor

who i s an Indiv idual/HUF

194D (See note-

6)*

Insurance Commiss ion

At the t ime of credi t or payment, whichever i s ear l ier when the amount exceeds Rs .

15,000/-

5%

194DA (See note-

6)*

Payment under l i fe insurance pol icy ( including Bonus)

At the t ime of payment when the amount or the total

amount dur ing the whole year exceeds Rs . 1 ,00,000/-

1%

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69

U/s. Nature of income When to deduct Rate of TDS

194E Payment to Non-res ident Sportsman or Sport Associat ion

At the t ime of credi t or payment, whichever i s ear l ier

20%

194EE (See note-

6)*

Payment in respect of NSS depos i ts

At the t ime of payment 10%

194F Payment on repurchase of Mutual

Fund or UT I

At the t ime of payment 20%

194G (See note-

6)*

Commiss ion on sales of lottery t ickets

At the t ime of payment when the amount or the total

amount dur ing the whole year exceeds Rs . 15,000/-

5%

194H (See note-

6)*

Payment of commiss ion brokerage

At the t ime of credi t or payment whichever i s ear l ier when the amount exceeds

Rs . 15,000/-

5%

194I Rent At the t ime of credi t or payment, whichever i s

ear l ier , when the amount exceeds Rs. 1 ,80 ,000/-

10% - I f rent i s for land, bui lding or furni ture

2% - I f the rent i s for Machinery, P lant or

Equipment

194IA Payment on t ransfer of certain immovable property other than

agr icul ture land.

At the t ime of credi t or payment, whichever i s

ear l ier , when the land i s s i tuated in speci f ied area

when amount exceeds Rs . 50 lacs, and in case of land

s i tuated in other than speci f ied area when amount

exceeds Rs . 20 lacs.

1%

194J Profess ional or technical serv ice Fees, or royal ty or non-compete fees

Di rectors remunerat ion which

i s not in the nature of sa lary

At the t ime of credi t or payment, whichever i s

ear l ier , when the amount exceeds Rs. 30,000/-

10%

194LA (See note-

6)*

Compensat ion on compulsory

acquis i t ion of certain immovable property

other than agr icul ture land.

At the t ime of payment 20%

194LB Payment of interest on inf rast ructure debt fund to non

res ident or foreign company

At the t ime of credi t or payment whichever i s ear l ier

5%#

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U/s. Nature of income When to deduct Rate of TDS

194LBA (See note-

6)*

Payment of d i s t r ibuted income to

res ident uni t holder by a bus iness t rust

and Payment of d i s t r ibuted income to

non res ident uni t holder by a bus iness

t rust

At the t ime of credi t or payment whichever i s ear l ier

10%

5%#

194LBB (See note-

6)*

Payment of d i s t r ibuted income to uni t holder in respect

of uni ts of an investment fund

At the t ime of credi t or payment whichever i s ear l ier

Res ident - 10% Non Resident or a fore ign company – At the rates in

force

194LBC (See note-

6)*

Payment in respect of an investment in a

secur i t i sat ion t rust

At the t ime of credi t or payment whichever i s ear l ier

Indiv idual/HUF – 25% Any other person – 30%

Non Resident or a fore ign company – At the rates in

force

194LC Payment of interest on money borrowed in foreign cur rency

by speci f ied company or business

t rust

At the t ime of credi t or payment whichever i s ear l ier

5%#

194LD Payment of interest on bond or

Government secur i ty to Foreign Investor

At the t ime of credi t or payment whichever i s ear l ier

5%#

206C (See note-

6)*

Col lect ion on Sale of Motor Car

At t ime of sa le, i f cons iderat ion i s received in

cash or any other mode exceeding Rs . 10 lacs.

1%

206C (See note-

6)*

Col lect ion on Sale of any other goods and serv ice (not l iable to

TDS)

At t ime of sa le, i f sale cons iderat ion i s received in cash in excess of Rs . 2 Lacs

1%

# Surcharge, educat ion cess and secondary and higher educat ion cess wi l l be added to the above tax rate, as appl icable.

Notes:

1. Securities includes listed as well as unlisted debentures issued by companies in which public are substantially interested.

2. In case of interest payment by co-operative banks to its members the TDS Provision is applicable from 1-6-2016.

3. If the payment is made to contractor/sub contractor in transport business, no TDS shall be deducted at source in the course of payment for plying, hiring or leasing goods carriages if the contractor provides PAN Number and such contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect.

4. In case of section 194 LA, the sub-registrar shall register the document only after the challan for payment of TDS is presented before him.

5. If the payment is made to a person (including non resident) whose receipts are subject to TDS shall mandatory furnish his PAN to the deductor (even though the deductee file a declaration in form no. 15G or 15H) otherwise the deductor shall deduct the TDS at higher of the following rates-

– The applicable rate prescribed in the Act or

– The rate mentioned in the Finance Act or

– 20%

6. Effective from June 01, 2016. 7. Section 194K and 194L are to be omitted w.e.f. June 01, 2016.

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ADVANCE TAX PAYMENT SCHEDULE CHANGED (SECTION 211) AND

CONSEQUENTIAL AMENDMENT IN SECTION 234C:

I t is proposed to amend the advance tax payment schedule for al l the

assessees (other than companies) and bring it in consonance with the

exist ing advance tax payment schedule applicable for a company.

Advance tax shal l be payable as under by al l the assesses:

Due date of instalment Amount payable

On or before the 15th June

Not less than 15% of such advance tax

On or before the 15th September

Not less than 45% of such advance tax, as reduced by the amount, i f any, paid in the earl ier instalment.

On or before the 15th December

Not less than 75% of such advance tax, as reduced by the amount or amounts, i f any, paid in the earl ier instalment or instalments.

On or before the 15th March The whole amount of such advance tax, as reduced by the amount or amounts, i f any, paid in the earl ier instalment or instalments;

I t is further proposed that an assessee opting for computation of profits

or gains of business on presumptive basis u/s 44AD, shal l now be required

to pay advance tax of the whole amount in one instalment on or before

the 15th March of the financial year.

I t is also proposed to amend section 234C to give consequential effect

of interest calculation on advance tax payment schedule for al l the

assessees (other than companies) and bring it in consonance with the

exist ing advance tax payment schedule applicable for a company.

It i s also proposed that interest under section 234C shal l not be

chargeable in case of an assessee having income under the head

"Profits and gains of business or profession" for the fi rst t ime.

(w.e.f . June 01,2016)

PROVIDING TIME LIMIT FOR DISPOSING APPLICATIONS MADE BY ASSESSEE

UNDER SECTION 220(2A) 273A/273AA:

I t is proposed to amend section 220(2A) (Power to reduce or waive the

amount of interest paid or payable u/s. 220(2)), section 273A (Power to

reduce or waive penalty levied u/s. 270A in certain cases) and section

273AA (Power to grant immunity from penalty in case where application

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72

for sett lement u/s. 245C has been made) to provide that an order

accepting or rejecting the application of an assessee shal l be passed

within a period of twelve months from the end of the month in which

such application is received.

However, in respect of applications pending as on 1s t day of June, 2016,

the order under said sections shal l be passed on or before 31st May,

2017.

(w.e.f . June 01,2016)

INTEREST ON REFUND (SECTION 244A):

In order to ensure f i l ing of return within the due date it is proposed to

amend section 244A to provide that in cases where the return is f i led

after the due date, the period for grant of interest on refund may begin

from the date of f i l ing of return.

It is further proposed to provide that an assessee shal l be el igible to

interest on refund of self-assessment tax for the period beginning from

the date of payment of tax or f i l ing of return, whichever is later, to the

date on which the refund is granted. For the purpose of determining the

order of adjustment of payments received against the taxes due, the

prepaid taxes i .e. the TDS, TCS and advance tax shal l be adjusted fi rst .

I t is also proposed to provide that no interest shal l be payable, i f the

amount of refund is less than 10% of the tax as determined under sub-

section (1) of section 143 or on regular assessment.

I t is also proposed to provide that where a refund arises out of appeal

effect being delayed beyond the t ime prescribed u/s 153(5), the

assessee shal l be entit led to receive an additional interest @3% p.a., for

the period beginning from the date fol lowing the date of expiry of the

t ime al lowed u/s 153(5) to the date on which the refund is granted.

(w.e.f . June 01,2016)

APPEALS TO ITAT AGAINST DISPUTE RESOLUTION PANEL (DRP) BY

DEPARTMENT (SECTION 253):

I t i s proposed to omit the sub-sections (2A) and (3A) of section 253 to

do away with the fi l ing of appeal by the Assessing Off icer against the

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order of the DRP. Consequent amendments are proposed to be made

to sub-section (3A) and (4) of the said provis ion also.

(w.e.f . June 01,2016)

REDUCED TIME LIMIT FOR PASSING ORDER BY ITAT FOR RECTIFYING MISTAKE

APPARENT FROM RECORD (SECTION 254):

I t is proposed to provide that the Appellate Tr ibunal may recti fy any

mistake apparent from the record in its order at any t ime within six

months (from exist ing t ime period of four years) from the end of the

month in which the order was passed.

(w.e.f . June 01,2016)

NEW PENALTY PROVISIONS (SECTION 270A):

Under the exist ing provis ions, penalty on account of concealment of

part iculars of income or furnishing inaccurate part iculars of income is

leviable under section 271(1)(c) of the Income-tax Act.

I t i s proposed that section 271 shal l not apply effective from A.Y. 2017-

18 and penalty be levied under the newly inserted section 270A

effective from A.Y. 2017-18. The new section 270A provides for levy of

penalty in cases of under reporting and misreport ing of income.

Sub-section (1) of the proposed new section 270A seeks to provide that

the Assessing Off icer, Commissioner (Appeals) or the Principal

Commissioner or Commissioner may levy penalty i f a person has under

reported his income.

It i s proposed that a person shal l be considered to have under reported

his income i f,-

(a) the income assessed is greater than the income determined in the

return processed under clause (a) of sub-section (1) of section 143;

(b) the income assessed is greater than the maximum amount not

chargeable to tax, where no return of income has been furnished;

(c) the income reassessed is greater than the income assessed or

reassessed immediately before such re-assessment;

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(d) the amount of deemed total income assessed or reassessed as per

the provis ions of section 115JB or 115JC, as the case may be, i s

greater than the deemed total income determined in the return

processed under clause (a) of sub-section of section 143;

(e) the amount of deemed total income assessed as per the provis ions

of section 115JB or 115JC is greater than the maximum amount not

chargeable to tax, where no return of income has been fi led;

(f) the income assessed or reassessed has the effect of reducing the loss

or convert ing such loss into income.

The amount of under-reported income shal l be -

(i ) in a case where income has been assessed for the f i rst t ime, -

(a) i f return has been furnished, the difference between the

amount of income assessed and the amount of income

determined under clause (a) of sub-section (1) of section 143;

(b) in a case where no return has been furnished -

- the amount of income assessed, in the case of a company,

f i rm or local authority; and

- the difference between the amount of income assessed and

the maximum amount not chargeable to tax, in a case not

covered in item (A);

(i i ) in any other case, the difference between the amount of income

reassessed or recomputed and the amount of income assessed,

reassessed or recomputed in a preceding order:

I t is also proposed to provide that where under-reported income arises

out of determination of deemed total income in accordance with the

provis ions of section 115JB or section 115JC, the amount of total under-

reported income shall be determined in accordance with the fol lowing

formula -

(A — B) + (C — D)

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where,

A = the total income assessed as per the provis ions other than the

provis ions contained in section 115JB or section 115JC (herein

cal led general provis ions);

B = the total income that would have been chargeable had the total

income assessed as per the general provis ions been reduced by the

amount of under-reported income;

C = the total income assessed as per the provis ions contained in

section 115JB or section 115JC;

D = the total income that would have been chargeable had the total

income assessed as per the provis ions contained in section 115JB or

section 115JC been reduced by the amount of under-reported

income:

Provided further that where the amount of under-reported income on

any issue is considered both under the provis ions contained in section

115JB or section 115JC and under general provis ions, such amount shal l

not be reduced from total income assessed whi le determining the

amount under item D.

Explanation.—For the purposes of this section,—

(a) “preceding order” means an order immediately preceding the order

during the course of which the penalty under sub-section (1) has

been init iated;

(b) in a case where an assessment or reassessment has the effect of

reducing the loss declared in the return or convert ing that loss into

income, the amount of under-reported income shal l be the

difference between the loss claimed and the income or loss, as the

case may be, assessed or reassessed.

Calculation of under-reported income in a case where the source of

any receipt, deposit or investment is l inked to earl ier year is proposed to

be provided based on the exist ing Explanation 2 to sub-section (l ) of

section 271 (1).

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I t is also proposed that the under-reported income under this section

shal l not include the fol lowing cases:

(i) where the assessee offers an explanation and the income-tax

authority i s satisf ied that the explanation is bona fide and al l the

material facts have been disclosed;

(ii) where such under-reported income is determined on the basis of an

est imate, i f the accounts are correct and complete but the method

employed is such that the income cannot properly be deducted

therefrom;

(iii) where the assessee has, on his own, est imated a lower amount of

addit ion or disal lowance on the issue and has included such amount

in the computation of his income and disclosed al l the facts material

to the addit ion or disal lowance;

(iv) where the assessee had maintained information and documents as

prescribed under section 92D, declared the international transaction

under Chapter X and disclosed al l the material facts relating to the

transaction;

(v) where the undisclosed income is on account of a search operation

and penalty is leviable under section 271AAB.

It is proposed that the rate of penalty shal l be f i fty per cent of the tax

payable on under-reported income.

However in a case where under report ing of income results from

misreport ing of income by the assessee, the person shal l be l iable for

penalty at the rate of two hundred per cent of the tax payable on such

misreported income. The cases of misreport ing of income have been

specif ied as under:

(i ) misrepresentation or suppression of facts;

(i i ) non-recording of investments in books of account;

(i i i ) claiming of expenditure not substantiated by evidence;

(iv) recording of false entry in books of account;

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(v) fai lure to record any receipt in books of account having a bearing

on total income;

(v i) fai lure to report any international t ransaction or deemed

international transaction under Chapter X.

I t i s also proposed that

- in case of company, f i rm or local authority, the tax payable on under

reported income shal l be calculated as i f the under-reported income

is the total income

- In any other case the tax payable shal l be thirty per cent of the

under-reported income.

It i s also proposed that no addit ion or disal lowance of an amount shal l

form the basis for imposit ion of penalty, i f such addit ion or disal lowance

has formed the basis of imposit ion of penalty in the case of the person

for the same or any other assessment year.

Consequential amendments have been proposed in sections 119, 253,

271A, 271AA, 271AAB, 273A and 279 to provide reference to newly

inserted section 270A.

(w.e.f . Apri l 01, 2017, A.Y. 2017-18)

IMMUNITY FROM PENALTY U/S 270A AND PROSECUTION U/S 276C (SECTION

270AA):

I t is proposed to provide that an assessee may make an application to

the Assessing Officer for grant of immunity from imposit ion of penalty

under section 270A and init iat ion of proceedings under section 276C,

provided

- the assessee pays the tax and interest payable as per the order of

assessment or reassessment within the period specif ied in such notice

of demand and

- does not prefer an appeal against such assessment order.

The assessee can make such application within one month from the end

of the month in which the order of assessment or reassessment is

received.

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I t i s proposed that the Assessing Off icer shal l , on fulf i lment of the above

condit ions and after the expiry of period of f i l ing appeal, grant

immunity from init iat ion of penalty and proceeding under section 276C

i f the penalty proceedings under section 270A has not been init iated on

account of misreport ing of income.

It is proposed that the Assessing Officer shal l pass an order accepting or

rejecting such application within a period of one month from the end of

the month in which such application is received. It is proposed that

order of Assessing Officer under the said section shal l be final.

I t is proposed that no appeal under section 246A or an application for

revis ion under section 264 shal l be admissible against the order of

assessment or reassessment referred to in clause (a) of sub-section (1),

in a case where an order under section 270AA has been made

accepting the application.

It is also proposed to provide that in a case where the assessee makes

an application u/s 270AA of the Income-tax Act seeking immunity from

penalty and prosecution, then, the period beginning from the date on

which such application is made to the date on which the order

rejecting the application is served on the assessee shal l be excluded for

calculation of the period of thi rty days for f i l ing appeal before CIT(A).

The proposed amendment is consequential to the insert ion of section

270AA.

(w.e.f . Apri l 01, 2017, A.Y. 2017-18)

LEVY OF PENALTY WHERE SEARCH HAS BEEN INITIATED (SECTION 271AAB):

I t is proposed to amend clause (c) of sub-section (1) of section 271AAB

(where income is not declared in the course of search and/or where tax

is not paid and included in return) and to provide for levy of penalty on

undisclosed income at a f lat rate of 60% of such income (earl ier the rate

of penalty was discretionary ranging from 30% to 90%).

(w.e.f . Apri l 01, 2017, A.Y. 2017-18)

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PENALTY FOR FAILURE TO COMPLY WITH NOTICE/DIRECTION, ETC. (SECTION

272A):

I t i s proposed to amend sub-section (1) of section 272A to further include

levy of penalty of ten thousand rupees for each default or fai lure to

comply with a notice issued under sub-section (1) of section 142 or sub-

section (2) of section 143 or fai lure to comply with a direction issued

under sub-section (2A) of section 142.

(w.e.f . Apri l 01, 2017, A.Y. 2017-18)

AMENDMENT IN PROVISION OF PROVISIONAL ATTACHMENT (SECTION 281B)

I t is proposed that the Assessing Off icer shal l revoke provis ional

attachment of property made u/s. 281B in a case where the assessee

furnishes a bank guarantee from a scheduled bank, for an amount not

less than the fai r market value of such provis ional ly attached property

or for an amount which is suff icient to protect the interests of the

revenue.

In order to help the Assessing Off icer to determine the fai r market value

of the property, the Assessing Officer may, make a reference to the

Valuation Officer, who may be required to submit the report of the

est imate of the property to the Assessing Officer within a period of 30

days from the date of receipt of such reference.

In order to ensure the revocation of attachment of property in l ieu of

bank guarantee in a t ime bound manner, i t is proposed to provide that

an order revoking the attachment be made by the Assessing Off icer

within 15 days of receipt of such guarantee, and in a case where a

reference is made to the Valuation Off icer, within 45 days from the date

of receipt of such guarantee.

It is further proposed that where a notice of demand specifying a sum

payable is served upon the assessee and the assessee fai ls to pay such

sum within the t ime specif ied in the notice, the Assessing Officer may

invoke the bank guarantee, whol ly or part ly, to recover the said

amount.

In a case where the assessee fai ls to renew the bank guarantee or fai ls

to furnish a new guarantee from a scheduled bank for an equal amount

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15 days before the expiry of such guarantee, the Assessing Off icer may

in the interests of the revenue, invoke the bank guarantee. The amount

real ised by invoking the bank guarantee shal l be adjusted against the

exist ing demand which is payable and the balance amount, i f any, be

deposited in the Personal Deposit Account of the Principal Commissioner

or Commissioner.

I t is proposed that in a case where the Assessing Officer i s satisf ied that

the bank guarantee is not required anymore to protect the interests of

the revenue, he shal l release that guarantee forthwith.

(w.e.f . June 01,2016)

LEGALISING E-NOTICES (SECTION 282A):

I t is proposed to amend sub-section (1) of section 282A (authentication

of notices and other documents) so as to provide that notices and

documents required to be issued by income-tax authority under the Act

shal l be issued by such authority either in paper form or in electronic

form in accordance with such procedure as may be prescribed.

(w.e.f . June 01,2016)

FURNISHING OF REPORT IN RESPECT OF INTERNATIONAL GROUP (SECTION

286) AND LEVY OF PENALTY FOR FAILURE TO FURNISH REPORT OR FOR

FURNISHING OF INACCURATE REPORTING (SECTION 271GB):

In order to implement the international consensus report of the OECD on

Action 13 of BEPS Action plan, i t i s proposed to provide a specif ic

report ing regime in respect of Country-by-Country (CbC) report ing. It i s

proposed to include essential elements in the Act whi le remaining

aspects can be detai led in rules. The elements relating to CbC report ing

requirement and matters related to it proposed to be included through

amendment of the Act are:—

(i ) the report ing provis ion shal l apply in respect of an international group

having consol idated revenue above a threshold to be prescribed.

(i i ) the parent entity of an international group, i f i t is resident in India

shal l be required to furnish the report in respect of the group to the

prescribed authority on or before the due date of furnishing of return

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of income for the Assessment Year relevant to the Financial Year

(previous year) for which the report is being furnished;

(i i i ) the parent entity shal l be an entity which is required to prepare

consol idated financial statement under the applicable laws or would

have been required to prepare such a statement, had equity share of

any entity of the group been l i sted on a recognized stock exchange in

India;

(iv) every const ituent entity in India, of an international group having

parent entity that is not resident in India, shal l provide information

regarding the country or terr i tory of residence of the parent of the

international group to which it belongs. This information shal l be

furnished to the prescribed authority on or before the prescribed

date;

(v) the report shal l be furnished in prescribed manner and in the

prescribed form and would contain aggregate information in respect

of revenue, profit & loss before Income-tax, amount of Income-tax

paid and accrued, detai ls of capital , accumulated earnings, number

of employees, tangible assets other than cash or cash equivalent in

respect of each country or terr i tory along with detai ls of each

constituent's residential status, nature and detai l of main business

activity and any other information as may be prescribed.

(v i) an entity in India belonging to an international group shal l be

required to furnish CbC report to the prescribed authority i f the

parent entity of the group is resident ;-

(a) in a country with which India does not have an arrangement for

exchange of the CbC report ; or

(b) such country is not exchanging information with India even

though there is an agreement; and

(c) this fact has been int imated to the entity by the prescribed

authority;

(v i i ) I f there are more than one entit ies of the same group in India, then

the group can nominate (under int imation in writ ing to the prescribed

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authority) the entity that shal l furnish the report on behalf of the

group. This entity would then furnish the report;

(v i i i ) I f an international group, having parent entity which is not resident in

India, had designated an alternate entity for f i l ing its report with the

tax jur isdiction in which the alternate entity i s resident, then the

entit ies of such group operating in India would not be obl iged to

furnish report i f the report can be obtained under the agreement of

exchange of such reports by Indian tax authorit ies;

(ix) The prescribed authority may cal l for such document and information

from the entity furnishing the report for the purpose of veri fying the

accuracy as it may specify in notice. The entity shal l be required to

make submission within thirty days of receipt of notice or further

period i f extended by the prescribed authority, but extension shall not

be beyond 30 days;

The proposed amendment in the Act in respect of maintenance of

master f i le and furnishing it are: -

(i ) the entit ies being constituent of an international group shal l , in

addit ion to the information related to the international transactions,

also maintain such information and document as may be prescribed

in the rules.

(i i ) the information and document shal l also be furnished to the

prescribed authority within such period as may be prescribed and the

manner of furnishing may also be provided for in the rules;

(i i i ) for non-furnishing of the information and document to the prescribed

authority, a penalty of Rs. 5 lakh shal l be leviable. However,

reasonable cause defence against levy of penalty shal l be avai lable

to the entity. [Section 271AA(2)]

Levy of penalty for fai lure to furnish report or for furnishing of inaccurate

report ing (Section 271GB)

- For non-furnishing of the report by an entity which is obl igated to

furnish it , a graded penalty structure would apply:-

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(a) i f default i s not more than a month, penalty of Rs. 5000/- per day

applies;

(b) i f default i s beyond one month, penalty of Rs 15000/- per day for

the period exceeding one month applies;

(c) for any default that continues even after service of order levying

penalty either under (a) or under (b), then the penalty for any

continuing default beyond the date of service of order shal l be Rs

50,000/- per day;

- In case of t imely non-submission of information before prescribed

authority when cal led for, a penalty of Rs5000/- per day applies.

Simi lar to the above, i f default continues even after service of

penalty order, then penalty of Rs.50,000/- per day applies for

default beyond date of service of penalty order;

- I f the entity has provided any inaccurate information in the report

and,-

(a) the entity knows of the inaccuracy at the t ime of furnishing the

report but does not inform the prescribed authority; or

(b) the entity discovers the inaccuracy after the report is furnished

and fai ls to inform the prescribed authority and furnish correct

report within a period of f i fteen days of such discovery; or

(c) the entity furnishes inaccurate information or document in

response to notice of the prescribed authority,

then penalty of Rs.500,000/- is proposed to be levied;

- The entity can offer reasonable cause defence for non-levy of

penalt ies (Section 273B).

As indicated above, the CbC report ing requirement for a report ing year

does not apply unless the consol idated revenues of the preceding year

of the group, based on consol idated f inancial statement, exceeds a

threshold to be prescribed. (In the budget speech Hon’ble Finance

Minister has mentioned threshold of Euro (€) 750 mil l ion)

(w.e.f . Apri l 01, 2017, A.Y. 2017-18)

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EMPLOYER'S ANNUAL CONTRIBUTIONS TO PROVIDENT FUND DEEMED TO BE

INCOME RECEIVED BY EMPLOYEE:

Currently, employer contribution to Provident Fund (Rule 6 of Fourth

Schedule) is not taxable in the hands of the employee to the extent the

employer contributions do not exceed 12% of salary.

I t is proposed to cap this amount to Rs. 150,000 per annum such that the

employer contributions upto 12% of salary or Rs. 150,000 whichever is less

wi l l only be tax exempt and balance shal l be taxable in the hands of the

employee.

It is also proposed to provide one-t ime portabi l i ty of accumulated

balances from a Recognized Provident Fund and/or superannuation fund

to National Pension System which shal l be exempt from tax.

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E Q U A L I S A T I O N L E V Y

Sr. Part iculars Detai ls

1 Effect ive from Date to be not i f ied

2 Purpose for introduction Current ly in the digital domain, bus iness may be conducted without regard to nat ional boundaries and may dissolve the l ink between income producing act iv ity and a specif ic location. Consider ing the potent ial of new digital economy and the rapidly evolv ing nature of business operat ions, i t i s proposed to insert a new chapter t i t led “Equal isat ion Levy”

4 Transactions covered Specif ied serv ices provided by non-res ident(not having a permanent establ ishment in India) to – - a person res ident in India and carry ing on business

or profess ion or - non-res ident having a permanent establ ishment in

India

5 Meaning of specif ied serv ices

Means onl ine advert isement, any provis ion for digital advert is ing space or any other faci l i ty or serv ice for the purpose of onl ine advert isement and includes any other serv ice as may be not i f ied by the Central Government in th is behalf .

6 Rate of Equal isat ion Levy

6% of the amount of considerat ion for any specif ied serv ices exceeding RS 1 lac in aggregate dur ing the previous year shal l be deducted

7 When Equal isat ion Levy shal l not be charged

(a) When the non-res ident providing the specif ied serv ices, has a permanent establ ishment in India and the specif ied serv ice is effect ively connected with such permanent establ ishment

(b) Aggregate amount of considerat ion for specif ied serv ices does not exceed Rs 1 Lac or

(c) Payment for the specif ied services by the person res ident in India or the permanent establ ishment in India is not for the purpose of carry ing out business or profess ion.

8 Col lect ion and Recovery of Equal isat ion Levy

The Equal isat ion Levy deducted dur ing any month shal l be paid to the credit of the Central Government by the 7t h day of the fol lowing month

9 Furnishing of Statement

Every assesse shal l within prescr ibed t ime after the end of each f inancial year, prepare and del iver to the Assess ing Off icer or to any other author ity or agency author ised by the Board in th is behalf, a statement in such form, ver i f ied in such manner and sett ing forth such part iculars as may be prescr ibed, in respect of al l specif ied serv ices dur ing such f inancial year. Assessee may also furnish revised statement at any t ime before the expiry of two years f rom the end of the f inancial year in which the specif ied serv ice was provided.

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Sr. Part iculars Detai ls

10 Interest on delayed payment

S imple Interest at the rate of 1% of such levy for every month or part of month by which such credit ing of tax or any part thereof is delayed.

11 Penalty for fai lure to deduct or pay Equal isat ion Levy

In cases where the assessee fai ls to deduct the whole or any part of the equal izat ion levy, he shal l be l iable to pay a penalty equal to the amount of equal izat ion levy that he fai led to deduct whi le in cases where assesse having deducted the equal izat ion levy fai l s to pay such levy to the credit of the Central Government shal l pay penalty of RS 1,000/- for every day dur ing which the fai lure continues. However, the amount of penalty shal l not exceed the amount of equal izat ion levy.

12 Appeal to Commiss ioner of Income Tax (Appeals)

Assessee may appeal within per iod of thi rty days f rom the date of receipt of the order of the Assess ing Off icer in such form and ver i f ied in such manner accompanied by fee of RS 1,000/-

13 Appeal to Appel late Tr ibunal

Assessee may appeal within per iod of s ixty days f rom the date of receipt of the order passed by Commiss ioner of Income Tax (Appeals) Off icer in such form and ver i f ied in such manner accompanied by fee of RS 1,000/-

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A n a l y s i s - S E R V I C E T A X All changes wi l l come into effect from a date to be notif ied after the

enactment of F inance Bi l l , 2016, unless stated otherwise.

RATE OF KRISHI KALYAN CESS:

Krishi Kalyan Cess is levied on any or al l the taxable services at the rate

of 0.5% on the value of such taxable services. I t is in addit ion to any cess

or service tax leviable on such taxable services under Chapter V of the

Finance Act, 1994, or under any other law for the t ime being in force.

Credit of Krishi Kalyan Cess paid on input services shal l be al lowed to be

used for payment of the proposed Cess on the service provided by a

service provider.

The provis ions of Chapter V of the Finance Act, 1994 and the rules made

thereunder, including those relating to refunds and exemptions from tax,

interest and imposit ion of penalty shal l , as far as may be, apply in

relat ion to the levy and col lection of the Krishi Kalyan Cess on taxable

services, as they apply in relation to the levy and col lection of tax on

such taxable services under the said Chapter or the rules made

thereunder, as the case may be.

Krishi Kalyan Cess shal l be levied with effect from 1st June, 2016.

PROPOSED CHANGES IN THE NEGATIVE LIST (SECTION 66D) AND

CONSEQUENT PROPOSED CHANGES IN DEFINITIONS (SECTION 65B)

(A) The Negative List service that covered specif ied educational

services are proposed to be omitted [section 66D (l)] f rom the

Negative List . Consequently, the definit ion of “approved

vocational education course‟ [clause (11) of section 65B] is also

proposed to be omitted.

But the service tax exemption on them is being continued by

incorporating them in the general exemption noti f ication

(Noti f ication No. 25/2012-ST as amended by noti f ication No.

09/2016-ST, dated 1st March, 2016).

This amendment in the noti f ication shal l come into effect from the

date of enactment of Finance Bi l l , 2016.

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(B) The Negative List service that covered “service of transportation of

passengers, with or without accompanied belongings, by a stage

carr iage” is proposed to be omitted [section 66D (o)(i )] with effect

from 1.06.2016.

Consequently, Service Tax to be levied with effect from 1.06.2016.

However, such services by a non-air-condit ioned contract carriage

wi l l continue to be exempted by way of exemption notif ication .

[Notif ication No. 25/2012-ST, as amended by notif ication No.

09/2016-ST, dated 1st March, 2016].

The service of transportation of passengers by air-condit ioned

stage carr iage is be taxed at 40% (after abatement of 60%) as

appl icable to the transportation of passengers by a contract

carr iage, with same condit ions of non-avai lment of Cenvat credit.

[Notif ication No. 08/2016-St dated 29th February, 2016]

(C) The Negative List service that covered services by way of

t ransportation of goods by an aircraft or a vessel from a place

outside India up to the customs station of clearance [section 66D

(p)(i i )] is proposed to be omitted with effect from 1.06.2016.

However, such services by an aircraft wil l continue to be exempted

by way of exemption noti f ication [Not. No. 25/2012-ST, as amended

by noti f ication No. 09/2016-ST dated 1st March, 2016 refers].

The domestic shipping l ines registered in India wi l l pay service tax

under forward charge whi le the services avai led from foreign

shipping l ine by a business entity located in India wi l l get taxed

under reverse charge at the hands of the business entity. The

service tax so paid wi l l be avai lable as credit with the Indian

manufacturer or service provider avai l ing such services.

In addit ion, Cenvat credit of el igible inputs, capital goods and

input services is being al lowed for providing the service by way of

t ransportation of goods by a vessel from the customs station of

clearance in India to a place outside India. Consequential

amendments are being made in Cenvat Credit Rules, 2004.

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AMENDMENTS IN CHAPTER V OF THE FINANCE ACT, 1994:

1. Section 66E – Services of Right to use Radio-Frequency Spectrum

Assignment by the Government of the r ight to use the radio-frequency

spectrum and subsequent transfers thereof is a service leviable to

service tax and not sale of intangible goods.

2. Amendment in section 73 of the Finance Act (Period of Service of

notice expanded)

The l imitation period for recovery of service tax not levied or paid or

short- levied or short paid or erroneously refunded, for cases not

involving fraud, col lusion, suppression etc. i s proposed to be

enhanced by one year, that is , from eighteen months to thirty months

by making suitable changes to section 73 of the Finance Act, 1994.

3. Amendment to section 75 of Finance Act

- Section 75 of the Finance Act is amended so that a higher rate of

interest would apply to a person who has col lected the amount of

service tax from the service recipient but not deposited the same

with the Central Government.

As per noti f ication no 13/2016

Serial Number

Situation Rate of simple interest (effective from enactment of

the Bi l l) 1. Col lection of any amount as service

tax but fai l ing to pay the amount so col lected to the credit of the Central Government on or before the date on which such payment becomes due.

24%

2. Other than in s i tuations covered under serial number 1 above.

15%

3. In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh

12%

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4. Section 89 of the Finance Act, 1994 (Offence categoraisation based

on amount involved wil l consider the increased l imit of 2 crore)

The monetary l imit for f i l ing complaints for punishable offences is

proposed to be enhanced to Rs. 2 crore from exist ing threshold l imit of

50 lakh.

5. Sections 90 and 91 of the Finance Act, 1994 (threshold l imit increased

upto 2 crore)

- The power to arrest in service tax law is proposed to be restr icted

only to situations where the tax payer has col lected the tax but not

deposited it with the exchequer, and amount of such tax col lected

but not paid is above the threshold of Rs 2 crore. Sections 90 and

91 of the Finance Act, 1994 are being amended accordingly.

- Sub-section (2) of section 90 is also proposed to be omitted to the

effect that al l the offences under the Act shal l be congnizable

offence (provis ion for certain offences as non-cognizable and

bai lable proposed to be omitted).

6. Retrospective effect to notif ication No. 01/2016- ST (Date of al lowing

Rebate)

- There was an amendment on 3r d February,2016 vide notif ication No

1/2016-ST in section 93A to grant Rebate and al low refund of service

tax on services used beyond the factory or any other place or

premises of production or manufacture of the said goods, for export

of the said goods.

- The said amendment is given Retrospective Effect from 29t h June,

2012 being the date of notif ication 41/2012-ST. t ime period of one

month is proposed to be al lowed to the exporters whose claims of

refund were earl ier rejected in absence of amendment carr ied out

vide noti f ication No.1/2016-ST dated 3rd February, 2016.

7. Service Tax exemption to canal, dam or other ir r igation works with

retrospective effect ( i .e. Services provided between 01-07-2012 to 29-

01-2014)

- Definit ion of Governmental authority was amended with effect

from 30.01.2014 so as to exempt services provided by way of

construction, erection, maintenance, or alteration etc. of canal,

dam or other i r r igation works provided to entit ies set up by

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Government but not necessari ly by an Act of Parl iament or a State

Legis lature.

- However, services provided prior to 30.01.2014 to such bodies

remained taxable. The benefit of exemption is proposed to be

extended to the said services provided during the period from the

1st July, 2012 to 29t h January, 2014.

- Consequently, refund of Service Tax paid on the said services

during the period from the 1st July, 2012 to 29t h January, 2014 shal l

also be al lowed in accordance with the law including the law of

unjust enrichment. Application for refund may be al lowed to be

f i led within a period of s ix months from the date on which the

Finance Bi l l , 2016 receives the assent of the President.

8. Restoration of certain exemptions withdrawn last year for projects,

contracts which were entered into before withdrawal of the

exemption.

Restoration of Exemption:

Exemption withdrawn on fol lowing services w.e.f. 1.4.2015 is being

restored:

(a) Exemption from Service Tax on services provided to the

Government, a local authority or a governmental authority by

way of construction, erection, etc. of -

(i ) a civi l structure or any other original works meant

predominantly for use other than for commerce, industry, or

any other business or profession;

(i i ) a structure meant predominantly for use as (i ) an

educational, (i i ) a cl inical , or (i i i ) an art or cultural

establ ishment;

(i i i ) a residential complex predominantly meant for self-use or

the use of their employees or other persons specif ied in the

Explanation 1 to clause 44 of section 65B of the said Act;

(b) Exemption from Service Tax on services by way of construction,

erection, etc. of original works pertaining to an airport, port was

withdrawn with effect from 1.4.2015 the same is being restored.

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For Contracts entered before 01.03.2015

The exemption is being restored for the services provided under

a contract which had been entered into prior to 01.03.2015 and

on which appropriate stamp duty, where applicable, had been

paid prior to that date. The exemption is being restored t i l l

31.03.2020.

For services provided between 01.04.2015 to 29.02.2016 for

contracts entered before 01.03.2015

The services provided during the period from 01.04.2015 to

29.02.2016 under such contracts are also proposed to be

exempted from service tax.

The above changes in the Finance Act, 1994 shal l come into force on the

day the Finance Bi l l , 2016 is enacted.

INFORMATION TECHNOLOGY SOFTWARE

Service tax on the services of Information Technology Software on media

bearing RSP is being exempted from Service Tax provided Central Excise

duty is paid on RSP in accordance with Section 4A of the Central Excise

Act and a declaration is made by the service provider on the invoice

relating to such service that no amount in excess of the retai l sale price

declared on such media has been recovered from the customer.

(w.e.f . 1st March, 2016)

EXEMPTIONS WITHDRAWN:

- Exemption in respect of the fol lowing services is being withdrawn-

Services provided by a senior advocate to an advocate or

partnership f i rm of advocates, and

A person represented on an arbitral tr ibunal to an arbitral tr ibunal;

However, the exist ing dispensation regarding legal services

provided by a f i rm of advocates or an advocate other than senior

advocate is being continued.

(w.e.f . 1s t Apri l ,2016)

- Exemption in of transport of passengers, with or without accompanied

belongings, by ropeway, cable car or aerial tramway is being

withdrawn.

(w.e.f. 1s t Apri l ,2016)

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- Exemption to construction, erection, commissioning or instal lation of

original works pertaining to monorai l or metro is being withdrawn, in

respect of contracts entered into on or after 1st March 2016.

NEW MEGA EXEMPTIONS:

- The services of l i fe insurance business provided by way of annuity

under the National Pension System (NPS) regulated by Pension Fund

Regulatory and Development Authority (PFRDA) of India is being

exempted from service tax.

(w.e.f . 1s t Apri l ,2016)

- Services provided by Securi t ies and Exchange Board of India (SEBI) set

up under SEBI Act, 1992, by way of protecting the interests of investors

in securit ies and to promote the development of, and to regulate, the

securit ies market are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services provided by Employees‟ Provident Fund Organisation (EPFO)

to employees are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services provided by Biotechnology Industry Research Assistance

Counci l (BIRAC) approved biotechnology incubators to the

incubatees are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services provided by National Centre for Cold Chain Development

under Department of Agriculture, Cooperation and Farmer‟s Welfare,

Government of India, by way of knowledge dissemination are being

exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services provided by Insurance Regulatory and Development

Authority (IRDA) of India are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services of general insurance business provided under “Niramaya‟

Health Insurance scheme are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

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94

- The threshold exemption l imit of consideration charged for services

provided by a performing art ist in folk or classical art forms of music,

dance or theatre, is being increased from Rs 1 lakh to Rs 1.5 lakh per

performance.

(w.e.f. 1st Apri l ,2016)

- Services provided by way of ski l l/vocational t raining by Deen Dayal

Upadhyay Grameen Kaushalya Yojana training partners are being

exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services of assessing bodies empanelled central ly by Directorate

General of Training, Ministry of Ski l l Development & Entrepreneurship

are being exempted from service tax.

(w.e.f . 1st Apri l ,2016)

- Services by way of construction, erection etc. of a civi l st ructure or

any other original works pertaining to the “In-situ Rehabi l i tation of

exist ing s lum dwellers using land as a resource through private

part icipation” component of Housing for Al l (HFA) (Urban) Mission /

Pradhan Mantri Awas Yojana (PMAY), except in respect of such

dwell ing units of the projects which are not constructed for exist ing

s lum dwellers, i s being exempted from service tax.

(w.e.f . 1st March,2016)

- Services by way of construction, erection etc., of a civi l st ructure or

any other original works pertaining to the “Beneficiary- led individual

house construction / enhancement” component of Housing for Al l

(HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY) is being

exempted from service tax.

(w.e.f . 1st March,2016)

- Services by way of construction, erection, etc., of original works

pertaining to low cost houses up to a carpet area of 60 sq.m per

house in a housing project approved by the competent authority

under the “Affordable housing in partnership” component of PMAY or

any housing scheme of a State Government are being exempted from

service tax.

(w.e.f . 1st March,2016)

- Services provided by the Indian Inst itutes of Management (I IM) by way

of 2 year ful l t ime Post Graduate Programme in Management(PGPM)

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95

(other than executive development programme), admissions to which

are made through Common Admission Test conducted by I IMs, 5 year

Integrated Programme in Management and Fel lowship Programme in

Management are being exempted from service tax.

(w.e.f . 1st March,2016)

- Ministry of Human Resource Development (MHRD) is vested with the

power to recognise educational courses for the purpose of

recruitment to posts under Government of India. It has been further

mentioned that I IMs have been conducting Post Graduate

Programmes in Management and Fel lowship Programmes which are

equivalent to MBA and Ph.D degrees, respectively, (as also clari f ied

by associations l ike Association of Indian Universit ies, Inter –University

Board of India etc.). In view of this, the exemption being given to the

above programmes of I IMs is clari f icatory in nature and in view of the

same, l iabi l i ty to pay service tax in respect of the said programmes for

the past period wil l also become infructuous.

(w.e.f . 1st Apri l ,2016)

ABATEMENTS

Sr. No. Part iculars Taxable Amount

Remarks

1. Serv ices by a tour operator in relat ion to,- ( i ) a tour, only for the purpose of arranging or booking accommodat ion for any person

10% (i ) CENVAT credit on inputs, capital goods and input serv ices other than input serv ices of a tour operator , used for providing the taxable serv ice, has not been taken under the provis ions of the CENVAT Credit Rules, 2004. ( i i ) The invoice, bi l l or chal lan issued indicates that i t is towards the charges for such accommodation. ( i i i ) This exemption shal l not apply in such cases where the invoice, bi l l or chal lan issued by the tour operator , in relat ion to a tour, includes only the serv ice charges for arranging or booking accommodat ion for any person but does not include the cost of such accommodat ion.

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Sr. No. Part iculars Taxable Amount

Remarks

tours other than (i) above 30% (i ) CENVAT credit on inputs, capital goods and input serv ices other than input serv ices of a tour operator , used for providing the taxable serv ice, has not been taken under the provis ions of the CENVAT Credit Rules, 2004. ( i i ) The bi l l i ssued for this purpose indicates that it i s inclus ive of charges for such a tour and the amount charged in the bi l l i s the gross amount charged for such a tour.” ;

2. Serv ices provided by a foreman of chit fund in relat ion to chit

70% CENVAT credit on inputs, capital goods and input serv ices, used for providing the taxable serv ice has not been taken under the provis ions of the CENVAT Credit Rules, 2004.”;

3. Serv ices provided by way of rent ing of motor-cab serv ices

40% (i ) CENVAT credit on inputs, capital goods and input serv ices, used for providing the taxable serv ice has not been taken under the provis ions of the CENVAT Credit Rules, 2004.”; ( i i ) Cost of fuel should be included in the considerat ion charged for providing rent ing of motor-cab serv ices for avai l ing the abatement

4. Construct ion of a complex, bui lding, civ i l st ructure or a part thereof, intended for a sale to a buyer, whol ly or part ly except where ent i re considerat ion is received after issuance of complet ion cert i f icate by the competent author ity

30% CENVAT credit on inputs used for providing the taxable serv ice has not been taken under the provis ions of the CENVAT Credit Rules, 2004.

5. ( i ) T ransport of goods by rai l (other than serv ice specif ied at S l . No. ( i i ) below)

30% CENVAT credit on inputs and capital goods, used for providing the taxable serv ice, has not been taken under the provis ions of the CENVAT Credit Rules, 2004.”;

( i i ) T ransport of goods in containers by rai l by any person other than Indian Rai lways

40%

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Sr. No. Part iculars Taxable Amount

Remarks

6. Serv ices provided by way of t ransport of used household goods by a Goods Transport Agency (GTA)

40%

7. Serv ices provided by way of t ransport of passengers by rai l

30% (i ) CENVAT credit on inputs, capital goods used for providing the taxable serv ice has not been taken under the provis ions of the CENVAT Credit Rules, 2004.”; ( i i ) Cenvat credit of input serv ices for the said serv ice can be taken

8. Serv ices provided by way of t ransport of goods by vessel

30%

(w.e.f . 1st Apri l ,2016)

REVERSE CHARGE MECHANISM

- Removal of Reverse charge Mechanism on services provided by

mutual fund agents/distr ibutors to an asset management company

Rule 2(1)(d)(EEA) of Service Tax Rules, 1994 making service

recipient, that is , mutual fund or Asset Management Company

as the person l iable for paying service tax is being deleted.

So now mutual fund agents/distr ibutors are l iable to pay the

service tax direct ly on a normal basis or forward charge basis.

The small sub-agents down the distr ibution chain wi l l st i l l be

el igible for small service provider exemption (i .e. threshold

turnover is less than Rs 10 lakh/year)

- Reverse charge Mechanism on service provided by Government or a

local authority to business entit ies

Reverse Charge Mechanism is applicable on services provided

by Government or local authority to business entit ies by way of

support services excluding the fol lowing services-

(1) Renting of immovable property, and

(2) Services specif ied in sub-clauses (i ) , (i i ) and (i i i ) of clause (a)

of section 66D of the Finance Act, 1994, to any business entity

located in the taxable terr i tory

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The word “by way of support services” is deleted. So (1) & (2)

supra are the only exceptions to reverse charge of services

provided by Government.

(w.e.f. 1st Apri l ,2016)

SERVICE TAX RULES

- The benefits of (a) quarterly payment of service tax and (b) payment

of service tax on receipt basis, which are avai lable to individual and

partnership f i rms, are being extended to One Person Company (OPC)

whose aggregate value of services provided is up to Rs. 50 lakh in the

previous f inancial year.

(w.e.f . 1st Apri l ,2016)

- Further, the benefit of quarter ly payment of service tax is also being

extended to HUF.

(w.e.f . 1st Apri l ,2016)

- Rule 2(1)(d)(i ) (D)(I I) i s being modified so that legal services provided

by a senior advocate shal l be on forward charge.

(w.e.f . 1st Apri l ,2016)

- The service tax l iabi l i ty on single premium annuity (insurance) policies

is being rational ised and the effective alternate service tax rate

(composit ion rate) is being prescribed at 1.4% of the total premium

charged, in cases where the amount al located for investment or

savings on behalf of pol icy holder i s not int imated to the policy holder

at the t ime of providing of service.

(w.e.f . 1st Apri l ,2016)

- Recipient of services avai led from foreign shipping l ine by a business

entity located in India wi l l get taxed under reverse charge at the

hands of the business entity.

(w.e.f . 1st June,2016)

THE POINT OF TAXATION RULES (POTR)

I t has been clari f ied that the rule governing point of taxation for services

taxed for the fi rst t ime shall apply mutatis mutandis in case of new levy

of services

(w.e.f . 1st March,2016)

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CERTAIN ISSUES CLARIFIED:

- Incentives received by air travel agents from computer reservation

system companies (CCRS)

I t is clarif ied that incentives received by the Air Travel Agents

(ATAs) from the Companies providing Computer Reservation

System (CCRS) are for using the software and platform provided

by the CCRS l ike Gali leo, Amadeus, etc. The CCRS are providing

these incentives either for achieving the targeted booking of air

t ickets or for loyalty for booking of ai r t ickets using their software

system. Thus, the service provided by CCRS is to the Air l ines and

Air Travel Agent is promoting the service provided by CCRS to

Air l ines. Therefore, service tax is leviable on the same.

- Services provided by Container Train Operators (CTOs)

Notif ication No. 26/2012-ST is being amended to provide that

transport of goods by rai l (other than transport of goods in

containers by any person other than Indian Rai lway) shal l be

el igible for abatement at the rate of 70% with credit of input

services. Transport of goods in containers by any person other

than Indian Rai lway shal l be el igible for abatement at the rate of

60% with credit of input services.

I t is hereby also clari f ied that service provided by the Indian

Rai lways to Container Train Operators (CTOs) of haulage of their

container train (rake of wagons with containers) i s a service of

Transport of Goods by Rai l and is , therefore, el igible for

abatement at the rate of 70% with credit of input services.

REFUND OF CENVAT CREDIT.

- The t ime l imit for f i l ing application for refund of Cenvat Credit under

Rule 5 of the Cenvat Credit Rules, 2004, in case of export of services,

shal l be 1 year from the date of –

(a) Receipt of payment in convert ible foreign exchange, where

provis ion of service had been completed prior to receipt of such

payment; or

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100

(b) Issue of invoice, where payment for the service had been

received in advance prior to the date of issue of the invoice

RETURNS

All Service tax assessees above a certain threshold l imit as may be

specif ied by the government would be required to f i le an annual return

over and above 2 half yearly returns. The due date for f i l ing the said

annual return would be 30th November of the succeeding year. The

same can be revised within 1month from the date of submission of the

annual return.

(w.e.f . 1st Apri l ,2016)

SERVICES PROVIDED BY INSTITUTES OF LANGUAGE MANAGEMENT (ILMS)

I t has been observed that Inst itutes of Language Management (ILMs) are

engaged by various schools/inst itut ions to develop knowledge and

language ski l ls of students. Since the ILMs are providing

coaching/teaching to the students in a school or col lege, as a part of a

curr iculum for obtaining a quali f ication recognized by any law for the

t ime being in force it should be clar i f ied that the services provided by

ILMs are l iable to service tax .

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MAJOR SECTORIAL IMPACTS

Automobiles – Negative

Key Announcement Impact

Inf rast ructure Cess being lev ied on motor vehicles

Demand to be hi t as pr ices wi l l be ra i sed to offset the same. Negat ive for the sector

Petrol /LPG/CNG dr iven motor vehicles of length not exceeding 4m and engine capaci ty not exceeding 1200cc ‐ 1%

Negative for Marut i , Tata Motors

Diesel dr iven motor vehic les of length not exceeding 4m and engine capaci ty not exceeding 1500cc ‐ 2 .5%

Negative for Marut i , Tata Motors

Other h igher engine capaci ty and SUVs and bigger sedans ‐ 4%

Negative for M&M, Marut i , Tata Motors

Abol i t ion of permi t ra j for publ ic t ransport Pos i t ive for Ashok Leyland, Tata Motors , Ba jaj Auto, TVS Motors , Atu l Auto

Reduced benef i t of R&D deduct ion f rom 200% to 150% t i l l 2020 and fur ther lower to 100% f rom 2020

Negative for the sector

Tax at source of 1% on purchase of luxury cars exceeding value of Rs10 lakhs

Negative for M&M, Marut i , Tata Motors

Increase in a l location towards MGNREGA and other rural development schemes

Pos i t ive for M&M, Escorts , Hero Motocorp

T ime l imi t of 31 March 2016 removed for N i l customs duty and 6% exci se duty on parts of e lectr ic vehicles

Pos i t ive for M&M

BFSI/Exchanges – Posit ive

Key Announcement Impact

Retent ion of F iscal Def icit target of 3.5% for FY17

Posit ive for the sector in general as this would keep Government 's market borrowings in check and encourage RBI to ease rates

No increase in FY17 re ‐capital isat ion commitment of Rs. 25,000cr for PSU Banks

Negative for PSU Banks; more so for smal ler banks having very weak capital pos it ion

NBFCs to be el igible for deduct ion to the extent of 5% of income in respect of provis ion for bad and doubtful debts

Pos it ive for al l NBFCs; would be earnings accret ive

Credit target under Pradhan Mantr i Mudra Yojana (scheme launched to benefit smal l/micro entrepreneurs) increased s ignif icantly to Rs. 180,000cr for FY17

Posit ive for Banks, NBFCs and MFIs having exposure to Micro & Smal l Enterpr ise lending

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Cement - Posit ive

Key Announcement Impact

Increase in rural and urban housing spending

Posit ive for sector

Increase in road and rai l spending Posit ive for sector

No hike in rai l f reight Posit ive for sector

Doubl ing of clean energy cess on coal Negative for sector

Poss ibi l i ty of sharp increase in excise duty of diesel and petrol

Negative for sector

FMCG - Posit ive

Key Announcement Impact

Higher Disposable Income - Raise the cei l ing of tax rebate

under sect ion 87A from Rs 2000 to Rs 5000 to lessen tax burden on indiv iduals with income upto Rs 5 lacs.

- Benefit under sect ion 80GG l imit extended from Rs 24,000 to Rs 60,000 per auuam for people not having their own house nor receiv ing any HRA.

Posit ive for the overal l industry

Increase in out lay to Rural schemes and social infrastructure (Rs 15,000 cr interest subvent ion to farmers and Rs 38,500 cr al locat ion to MNREGA).

Posit ive for the overal l industry

Excise duty of 1% on Jewel lery without input credit tax or 12.5% with input tax credit .

Negative for Jewel lery Companies

For the ‘f i rst – home buyers’ , deduction for addit ional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanct ioned dur ing the next f inancial year, provided the value of the house does not exceed Rs 50 lakh.

Marginal ly Pos it ive

Rs 9,000 cr has been provided for Swachh Bharat Abhiyan.

Pos it ive

Cuts excise duty on rubber sheets for soles to 6% v/s 12.5%.

Posit ive for BATA, L iberty Shoes

Kr ish i kalyan Cess @0.5 % to be introduced

Negative

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Infrastructure - Posit ive

Key Announcement Impact

Target to award 10,000 km of Nat ional Highways in FY17. Also 50,000 km of State Highways to be upgraded as Nat ional Highways

Pos it ive for the ent i re road sector

Total out lay for roads and highways increased to Rs.97,000cr

Pos it ive for the ent i re road sector

Serv ice tax @5.6% to be levied on contracts entered on or after 1st March 2016 for construct ion of monorai l and metro

Negative for ITD, Jkumar Infra, Rel iance Infra

Redevelopment of unserved and under-served airports ; to develop 10 of 25 non ‐ funct ional ai rst r ips around the country

Posit ive for companies l ike GMR Infra

Creat ion of a dedicated Long Term I r r igat ion Fund in NABARD with an in it ial corpus of about Rs.20,000cr.

Pos it ive for companies l ike Prat ibha Industr ies, Jain I r r igat ion, I TD Cementat ion

Withdrawal of 80IA benefit under IT Act for development and O&M on or after 1st Apri l , 2017. However investment l inked deduct ion under sect ion 35AD of IT Act to be al lowed.

Negative for selected players avai l ing 80IA benefit l ike KNR Construct ions

Total out lay for Inf rastructure sector pegged at Rs. 221,246 cr for FY17 (FY16 - Rs.180,000 cr)

Pos it ive for the ent i re Infra sector

IT/Education – Posit ive

Key Announcement Impact

Sunset date extended by three years to March 2020 for Sect ion 10AA which relates to commencement of act iv ity by a unit located in a SEZ

Pos it ive for the sector ‐ could moderate tax rate for some companies for the coming years

1500 Mult i Sk i l l T raining Inst itutes to be set ‐up across the country with a budget of Rs. 1,700cr

Posit ive for NI IT and Aptech

Metals & Mining – Neutral

Key Announcement Impact

Customs duty for aluminium raised by 2.5%

Posit ive for aluminium producers l ike Hindalco, NALCO and Vedanta

Customs duty for z inc al loys raised by 2.5%

Posit ive for z inc producers l ike HZL and Vedanta

Export duty on i ron ore lumps & f ines below 58% Fe content to NIL

Pos it ive for low grade i ron ore mines in Goa. Marginal ly posit ive for Vedanta

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Key Announcement Impact

Export duty on bauxite reduced from 20% to 15%

No impact

Export duty on chromium ores and concentrates reduced from 30% to NIL

Marginal posit ive for MOIL

Increased out lay in infrastructure spending

Would lead to higher metal demand. Posit ive for al l metal producing companies

Oil & Gas – Negative

Key Announcement Impact

Rate of Oi l Industr ies Development Cess, on domest ical ly produced crude oi l changed from Rs4,500/ton to 20% ad valorem

Lower than expected benefit , negative for ONGC, Oi l India and Cairn India

No deduct ion shal l be avai lable to an undertaking engaged in production of mineral oi l or natural gas i f the product ion commences on or after 1st Apr i l , 2017

Negative for ONGC, Oi l India, Rel iance Industr ies, Cairn India

Against expectat ions the government did not levy any customs duty on crude oi l

Negative for ONGC but posit ive for HPCL, BPCL and IOC

Goods required for explorat ion & production of hydrocarbon activ it ies undertaken under Petroleum Explorat ion L icenses (PEL) or Mining Leases (ML) issued or renewed before 1s t Apr i l 1999

Posit ive for ONGC, Oi l India

A proposal i s under considerat ion for new discover ies and areas which are yet to commence production, f i r st , to provide cal ibrated market ing freedom; and second, to do so at a pre-determined cei l ing pr ice to be discovered on the pr inciple of landed pr ice of alternat ive fuels

No impact t i l l the regulat ions are f inal ized

Pharmaceuticals – Neutral

Key Announcement Impact

Reduce weighted R&D deduction to 150% from Apri l 2017 and 100% from Apri l 2020

Negative for al l pharma companies

10% tax rate for global income accrued from patent developed and f i led in India

To benefit players l ike Dr Reddys' which can commercial ize patents on global basis

Customs duty on import of Molybdenum ‐99 has been removed

Posit ive for radio pharma players l ike Jubi lant and Poly Medicure

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Key Announcement Impact

An amount of Rs. 850cr al located over next few years for several animal wel lness programs

Posit ive for animal health players l ike SeQuent Scient i f ic and Omkar Special ity

Health cover of Rs. 1 lakh for BPL famil ies with addit ional Rs. 30,000 cover for senior cit izens

Pos it ive for healthcare providers l ike Apol lo as it expands coverage market

Uti l i t ies – Neutral

Key Announcement Impact

Target to electr i fy 100% vi l lages by May 01, 2018. Rs.8,500 cr provided for Deendayal Upadhayaya Gram Jyot i Yojna and Integrated Power Development Schemes.

Would lead to higher power demand. Posit ive for al l power generat ion companies

Withdrawal of 80IA benefit under IT Act for development and O&M on or after 1st Apr i l , 2017. However investment l inked deduct ion under sect ion 35AD of IT Act to be al lowed.

Negative for companies avai l ing 80IA benefit

Custom dut ies on certain capital goods products increased from 7.5% to 10%

Negative for power generat ion companies as this may lead to increase in costs

Clean energy cess on coal increased from Rs. 200/ton to Rs. 400/ton

Negative for power generat ion companies

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HIGHLIGHTS OF THE ECONOMIC SURVEY 2015-16

GDP growth rate for 2015-16 to be in the range of 7 % to 7.75 %

Amidst gloomy international economic landscape, India stands as a haven of stabi l i ty

Low inflat ion has taken hold and confidence in price stabi l i ty has improved

Services continues to be key driver; expected to be 9.2% in 2015-16

Foreign exchange reserves have r isen to US $349.6 (Jan-2016)

Govt wi l l meet its f iscal deficit target of 3.9 per cent of GDP

Agriculture sector needs a transformation to ensure sustainable l ivel ihoods for farmers and food security

Informal sector has created jobs and keeping unemployment low

Schemes such as Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jivan Jyoti Bima Yojana (PMJJBY), and the Atal Pension Yojana(APY), were launched in 2015 in the insurance and pension sectors for creating a universal social security system for al l Indians, especial ly for the poor and the underpriv i leged

India can become the leading investment dest ination owing to its robust macroeconomic fundamentals

Reserve Bank of India wil l meet 5 per cent inf lat ion target by the end of March 2017

Reform package for the fert i l izer Sector

Rates of 8% or higher possible in next 2 years, given macroeconomic stabi l i ty

Indian Equity market relatively resi l ient compared to other major emerging market economies

Impressive str ides made in the power sector in the last two years

Economic Survey projects 7.6 per cent economic growth rate in 2015-16

India ranks f i rst in milk production, accounting for 18.5% of world production

Increase in wages recommended by the 7th Pay Commission not l ikely to destabi l ise prices, wi l l have l i tt le impact on inflat ion

India’s long run potential GDP Growth is substantial, about 8 to 10%

FY17 expected to be challenging from fiscal point of view

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Budget at a Glance (In Crore of Rupees)

                           Part iculars   2014 ‐2015   2015 ‐2016   2016 ‐2017  

Actuals   Revised   Budget  

    Est imates   Est imates  

1.   Revenue  Receipts   1101472   1206084   1377022  

2.   Tax  Revenue   (net  to  centre)   903615   947508   1054101  

3.   Non ‐Tax  Revenue   197857   258576   322921  

4.   Capita l  Receipts   (5+6+7)$   562201   579307   601038  

5.   Recover ies  of  Loans   13738   18905   10634  

6.   Other  Receipts   37737   25312   56500  

7.   Borrowings  and  other   l iab i l i t ies     510725   535090   533904  

8.   Total  Receipts   (1+4)   1663673   1785391   1978060  

9.   Non ‐Plan  Expenditure   1201029   1308194   1428050  

10.   On  Revenue  Account  of  which,   1109394   1212669   1327408  

11.   Interest  Payments   402444   442620   492670  

12.   On  Capita l  Account   91635   95525   100642  

13.   Plan  Expenditure   462644   477197   550010  

14.   On  Revenue  Account   357597   335004   403628  

15.   On  Capita l  Account   105047   142193   146382  

16.   Total  Expenditure   (9+13)   1663673   1785391   1978060  

17.   Revenue  Expenditure   (10+14)   1466992   1547673   1731037  

18.   Of  Which,  Grants   for  creat ion  of   130760   132004   166840  

  Capita l  Assets        

19.   Capita l  Expenditure     196681   237718   247023  

  (12+15)        

20.   Revenue  Defic i t   (17 ‐1)  

   

365519   341589   354015  

(2 .9)   (2 .5)   (2 .3)  

21.   Effect ive  Revenue     234759   209585   187175  

  Def ic i t   (20 ‐18)   (1 .9)   (1 .5)   (1 .2)  

22.   Fisca l  Def ic it   {16 ‐ (1+5+6)}   510725   535090   533904  

(4 .1)   (3 .9)   (3 .5)  

23.   Pr imary  Defic it   (22 ‐11)  

   

108281   92469   41234  

(0 .9)   (0 .7)   (0 .3)  

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Receipts (In Crore of Rupees)

Part iculars

2014-2015 2015-2016 2016-2017

Actuals Revised Budget

Est imates Est imates

REVENUE RECEIPTS

1 Tax Revenue

Gross Tax Revenue 1244885 1459611 1630888

Corporat ion Tax 428925 452970 493923

Taxes on Income 265733 299051 353174

Weal th Tax 1086 - - - -

Customs 188016 209500 230000

Union Exc ise Dut ies 189952 284142 318670

Serv ice Tax 167969 210000 231000

Taxes on Union ter r i tor ies 3204 3948 4121

Less - NCCD t ransfer red to the Nat ional Calami ty Cont igency Fund/Nat ional Disaster Response Fund

3461 5910 6450

Less - States ’ share 337808 506193 570337

1(a) Centre 's Net Tax Revenue 903615 947508 1054101

2 Non-Tax Revenue

In terest rece ip ts 23804 23142 29620

Div idend and Prof i ts 89833 118271 123780

External Grants 1600 2937 2862

Other Non Tax Revenue 81258 112937 165320

Receipts o f Union Terr i tor ies 1362 1289 1339

Tota l Non-Tax Revenue 197857 258576 322921

Tota l Revenue Receipts (1a+2) 1101472 1206084 1377022

3 Capi ta l Receipts

A. Non-debt Receipts

Recover ies of loans and advances@ 13738 18905 10634

Misce l laneous Capi ta l Receipts 37737 25312 56500

Tota l 51475 44217 67134

B. Debt Receipts*

Market Loans 453075 44608 425181

Shor t term borrowings 9179 68665 16649

Externa l Ass is tance (Net) 12933 11485 19094

Secur i t ies issued against 32226 53418 22108

Smal l Sav ings

State Prov ident Fund (Net) 11920 11000 12000

Other Receipts (Net ) -83630 -28002 25677

Tota l 432973 557174 520709

Tota l Capi ta l Receipts (A+B) 484448 601391 587854

4 DRAW-DOWN OF CASH BALANCE -77752 -22084 13195

Tota l Receipts (1a+2+3+4) 1663672 1785391 1978060

F inanc ing of F isca l Def ic i t (3B+4) 510725 535090 533904

Receipts under MSS (Net) - - - - 20000

@excludes recover ies of shor t - term loans and advances f rom States, loans to Government servants , e tc .

12808 22011 11861

S N K

109

Expenditure (In Crore of Rupees)

Part iculars

2014-2015 2015-2016 2016-2017

Actuals Revised Budget

Est imates Est imates

1 NON-PLAN EXPENDITURE

A. Revenue Expendi ture

1 . In terest Payments and 402444 442620 492670

Prepayment Premium

2 . Defence Serv ices 136807 143236 162759

3. Subsid ies 258258 257801 250433

4. Grants to State and 77125 108233 118356

U.T. Governments

5 . Pensions 93611 95731 123368

6. Pol ice 44767 52681 59796

7. Ass is tance to States f rom 3461 52681 59796

Nat ional Calami ty Cont igency

Fund/Nat ional Disaster

Response Fund (NDRF)

8 . Other Genera l Serv ices 26147 30345 35003

(Organs of State, tax co l lec t ion,

ex terna l a f fa i rs etc . )

9 . Soc ia l Serv ices (Educat ion, 25829 32149 32134

Heal th , Broadcast ing etc . )

10. Economic Serv ices 26632 33722 34266

(Agr icu l ture, Indust ry, Power ,

Transpor t , Communicat ions,

Sc ience & Technology, e tc . )

11. Posta l Def ic i t 6121 6749 8416

12. Expendi ture of Union 4833 5109 5677

Terr i tor ies wi thout Legis la ture

13. Amount met f rom Nat ional -3461 -5910 -6450

Calami ty Cont igency Fund/

Cont r ibut ion to Nat ional

D isaster Response Fund

(NDRF)

14. Grants to Fore ign 3820 4293 4530

Governments

Tota l Revenue Non-Plan

Expendi ture

B. Capi ta l Expendi ture

1 . Defence Serv ices 81887 81400 86340

2. Other Non-Plan 8180 13187 13348

Capi ta l Out lay

3 . Loans to Publ ic Enterpr ises 650 668 898

4. Loans to State and 73 79 81

U.T. Governments

S N K

110

Part iculars

2014-2015 2015-2016 2016-2017

Actuals Revised Budget

Est imates Est imates

5. Loans to Fore ign - - 158 - -

Governments

6 . Others 845 33 -45

Tota l Capi ta l Non-Plan

Expendi ture 91635 95525 100642

Tota l Non-Plan Expendi ture 1201029 1308194 1428050

2 . PLAN EXPENDITURE

A. Revenue Expendi ture

1 . Centra l P lan 100061 133245 176076

2. Cent ra l Ass is tance

for State & Union

Terr i tory P lans 257536 201759 227551

State Plans 252798 196051 221816

Union Terr i tory P lans 4738 5708 5735

Tota l Revenue Plan 357597 335004 403628

Expendi ture

B. Capi ta l Expendi ture

1 . Centra l P lan 91754 127843 132033

2. Cent ra l Ass is tance

for State & Union

Terr i tory P lans 13293 14349 14349

State Plans 11927 12536 12550

Union Terr i tory P lans 1366 1813 1799

Tota l Capi ta l P lan Expendi ture 105047 142193 146382

Tota l - P lan Expendi ture 462644 477197 550010

Tota l Budget Suppor t 191814 261089 308110

for Centra l P lan

Tota l Centra l Ass is tance 270829 216108 241900

for State & UT Plans

TOTAL EXPENDITURE* 1663673 1785391 197060

DEBT SERVICING

1 . Repayment o f debt** 207517 250709 284694

2. Tota l In terest Payments 402444 442620 492670

3. Tota l Debt Serv ic ing (1+2) 609961 693329 777364

4. Revenue Receipts 1101473 1206084 137022

5. Percentage of 2 to 4 36.54% 36.70% 35.78%

S N K

111

GRAPH SHOWING SOURCES & APPLICATION OF RUPEE

S N K

112

STATEMENT OF REVENUE FOREGONE

AS PER RECEIPT BUDGET 2016-17

Effective tax rate* of sample companies in the public and private sectors (financial year 2014-15)

Sl.

No.

Sector Number of Companies

Share in total profits (in %)

Share in total tax payable

(in %)

Effective tax rate

(in %)

1 Public 218# 21.37 20.23 25.03

2 Private 582671 78.63 79.77 23.36

Total 582889 100.00 100.00 24.67

* Effective tax rate is inclusive of surcharge and education cess. # Based on the information given by the assessee companies (as PSU) in their respective returns.

Effective tax rate* of sample companies in the manufacturing and service sectors (financial year 2014-15)

Sl.

No.

Sector Number of Companies

Share in total profits (in %)

Share in total tax payable

(in %)

Effective tax rate

(in %)

1 Manufacturing 128095 44.05 39.38 22.06

2 Service 454794 55.95 60.62 26.73

Total 582889 100.00 100.00 24.67

* Effective tax rate is inclusive of surcharge and education cess.

Revenue Foregone (Direct Taxes) in the F.Y. 2014-15 and 2015-16

(In Crore of Rupees)

Particulars Revenue Foregone in 2014-15

Project Revenue Foregone in 2015-16

Corporate Income Tax 65067.21 68710.98

Personal Income Tax 53525.83 59928.33

Total 118593.04 128639.31

Revenue Foregone (Indirect Taxes) in the F.Y. 2014-15 and 2015-16

Particulars Revenue Foregone in 2014-15

Revenue Foregone in 2015-16 (Estimated)

Excise Duty 196789.00 224940.00

Customs Duty 238967.00 257549.00

Total 435756.00 482489.00

S N K

113

TRENDS IN RECEIPTS

(In crores of Rupees) Actuals Actuals Actuals Actuals Actuals Actuals Actuals Actuals Revised Budget

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

REVENUE RECEIPTS 541864 540259 572811 788471 751437 879232 1014724 1101473 1206084 1377022

A. Tax Revenue (Net of States's share)

(Details in Annex 2) 439547 443319 456536 569869 629765 741877 815854 903615 947508 1054101

B. Non-Tax Revenue

(Details in Annex 2) 102317 96940 116275 218602 121672 137355 198870 197858 258576 322921

CAPITAL RECEIPTS 197978 299863 453063 402428 568918 582152 563894 484448 601645 587843

1 Internal Debt-Market

Borrowings (Net) 131768 233630 398424 325414 436211 467356 453550 445138 401929 425181

1.01 Gross Market Borrowings 168101 273000 451000 437000 509796 558000 564147 590345 585000 600000

1.02 Less - Repayments 36333 39370 52576 111586 73585 90644 110597 145208 183071 174819

2 External Assistance(Net) 9315 11015 11038 23556 12448 7201 7292 12933 11485 19094

2.01 Gross External Borrowings 16808 21022 22177 35330 26034 23309 25416 33534 34580 44789

2.02 Less Repayments 7493 10007 11139 11774 13586 16108 18124 20601 23095 25695

3 Recovery of Loans* 5100 6139 8613 12420 18850 15060 12497 13738 18905 10634

4 Small Savings(Net) -11302 -1302 13256 11233 -10302 8626 12357 32226 53418 22108

5 State Provident Funds(Net) 3897 8041 16056 12514 10804 10920 9753 11920 11000 12000

6 Special Deposits(Net)

7 Disinvestment of equity

in public sector enterprises 38795 566 24581 22846 18088 25890 29368 37737 25313 56500

8 Other items of Capital

receipts(Net)# 20405 41774 -18905 -5555 82819 47099 39077 8508 57258 99737

TOTAL- RECEIPTS 739842 840122 1025874 1190899 1320355 1461384 1578618 1663673 1785392 1978060

Deficit on Revenue Account 52569 253539 338998 252252 394348 364282 357048 356619 341589 354015

Primary deficit -44118 144788 205389 139569 242840 1056252 128604 108281 92469 41233

Draw-down of cash balance -27171 43834 -1386 6430 -15990 -51012 -19171 77752 -22084 13195

Fiscal deficit 126912 336992 418482 373592 515990 1369422 502858 510725 535090 533904

* Net of Recovery of

Ways & Means Advances 10000 10000 10000 10000 20000 10000

Loans to Govt. servants, etc. 479 479 469 433 398 349 316 276 275 275

# Excludes Securities

(a) issued to the IMF omitted per

contra from Capital Expenditure 3654 9051 1613 4323 367 4619 52920

(b) Securities issued to

- Nationalised Banks

- SBI 9996

(c) Securities issued to

Oil Companies 20554 75942 10306

(d) Securities issued to Food

Corporation of India

(e) Securities issued to UTI

(f) Redemption of securities issued

to oil and fertiliser companies -13343 -5763

(g) Securities issued to Fertilizer

Companies 7500 20000

(h) Asset management Trust for

SASF of IDBI 1225

(i) Conversion of interst receivable

into equity in NHPC & THDC

(i) Securities issued to RBI to

set off loans to IDFC Ltd.

(k) Enhancement of the corpus of

Contingency Fund of India

(l) Realisation of Stressed Assets

of IDBI 300 300 300 300 250 105 150

S N K

114

TRENDS IN EXPENDITURE (In crores of Rupees)

Actuals Actuals Actuals Actuals Actuals Actuals Actuals Actuals Revised Budget

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

A. Non-Plan Expenditure 507589 608721 721096 818299 891990 996746 1106120 1201029 1308194 1428050

1. Interest Payments and Debt Servicing

171030 192204 213093 234022 273150 313170 374254 402444 442620 492670

2. Defence Expenditure 91681 114223 141781 154117 170913 181776 203499 218694 224636 249099

3. Subsidies 70926 129708 141351 173420 217941 257079 254632 258258 257801 250433

4. Grants to States & U.T. Governments

35769 38161 45946 49790 51523 47996 60551 77125 108233 118356

5. Grants to Foreign Governments

1355 1442 1561 2256 2163 3228 4013 3820 4293 4530

6. Pensions 24261 32940 56149 57405 61166 69479 74896 93611 95731 123368

7. Police 13924 19904 25999 27339 33106 37285 42095 47767 52681 59796

8. Other Non-Plan Revenue Expenditure

47103 68241 79823 86423 66136 70524 79648 84729 102964 109820

9. Non-Plan Capital Expenditure (Excluding Defence)

47891 7271 10952 23619 11478 7644 7430 8180 13187 13448

10. Loans & Advances to

State & U.T.

Governments

86 86 83 85 72 3406 80 73 79 81

11. Loans to Foreign Governments

42 833 124 248 700 156 ... 158 ...

12. Other Loans 1465 790 936 6308 311 299 288 1401 707 776

13. Non-Plan Expenditure of UTs without Legislature

2056 2918 3298 3515 3783 4162 4578 4927 5104 5673

On Revenue Account 2274 3119 3334 3775 3853 4269 4577 4833 5109 5677

On Capital Account -218 -201 -36 -260 -70 -107 1 94 -5 -4

B. Plan Expenditure 205082 275235 303391 379029 412375 413625 453327 462644 477197 550010

On Revenue Account 173572 234774 253884 314232 333736 329208 352732 357597 335004 403628

On Capital Account 31510 40461 49507 64797 78639 84417 100595 105047 142193 146382

TOTAL EXPENDITURE 712671 883956 1024487 1197328 1304365 1410372 1559447 1663673

1785391 1978060

On Revenue Account 594433 793798 911809 1040723 1145785 1243514 1371772 1466992

1547673 1731037

On Capital Account 118238 90158 112678 156605 158580 166858 187675 196681

237718 247023

S N K

115

DEBT POSITION OF THE GOVERNMENT OF INDIA The outstanding internal and external debt and other liabilities of the Government of India at the end of

2016-2017 is estimated to amount to Rs. 74,38,181.45 crore as against Rs. 68,91,913.58 crore at the end of

2015-2016 (RE). Broad details are as follows:-

(In Crores of Rupees)

As on 31st March 2016 As on 31st March 2017

Internal debt and other liabilities 66,82,915.16 72,10,088.61

of which under Market Stabilisation Scheme --- 20,000.00

External debt 2,08,998.42 2,28,092.84

Total 68,91,913.58 74,38,181.45

TAX REVENUES RAISED BUT NOT REALISED (Principal Taxes) (Under Rule 6 of the FRBM Rules 2004)

(As at the end of Reporting Year 2014-2015)

(In Crores of Rupees)

Major

Head

Description Amount under dispute

(Rs. In Crores)

Amount not under dispute

(Rs. In Crores)

Grand

Total

Over 1

year but less

than 2 years

Over 2

years but less

than 5 years

Over 5

years but less

than 10 years

Over 10

years

Total Over 1

year but less

than 2 years

Over 2

years but less

than 5 years

Over 5

years but less

than 10 years

Over 10

years

Total

Taxes on Income & Expenditure

206611.00 252105.00 21251.00 17879.00 497846.00 39249.00 18797.00 5478.00 3033.00 66557.00 564403.00

0020 Corporation Tax

144001.00 64570.00 11026.00 1334.00 220931.00 25111.00 11590.00 3899.00 2143.00 42743.00 263674.00

0021 Taxes on Income other than Corporation Tax

62610.00 187535.00 10225.00 16545.00 276915.00 14138.00 7207.00 1579.00 890.00 23814.00 300729.00

Taxes on Commodities & Services

35626.46 60475.54 17710.49 3298.01 117110.50 2914.15 4215.41 5600.42 6517.99 19247.97 136358.47

0037 Customs 2782.42 5552.16 2144.67 357.81 10837.06 580.82 1344.56 1657.62 1125.98 4708.98 15546.04

0038 Union Excise 11454.50 19189.36 7812.60 2796.82 41253.28 1162.23 1856.66 3128.01 4105.07 10251.97 51505.25

0044 Service Tax 21389.54 35734.02 7753.22 143.38 65020.16 1171.10 1014.19 814.79 1286.94 4287.02 69307.18

Total 242237.46 312580.54 38961.49 21177.01 614956.50 42163.15 23012.41 11078.42 9550.99 85804.97 700761.47