AMENDMENTS FOR A.Y

Transcription

1 AMENDMENTS FOR A.Y Points to be noted before studying these amendments: 1. These amendments are introduced by the Finance Act, Amendments have been summarized in the order of chapters in the main book drafted for AY These amendments are relevant for students appearing in May 2016 and Nov 2016 attempts. 4. Kindly give a feedback about your reading on siddharthsuran@gmail.com or For latest tax updates you may stay connected with me on: 6. Kindly like our pages: CA/ ?pnref=story AND 7. Face-to-Face lectures are held in Mumbai at two locations: Charni Road ( / / Gyaan Vijay Academy). AND Andheri ( / Gyaan Vijay Academy with Khetan Education) 8. DVD lectures are available across the globe ( Coppergate Educare) -Prof. Siddharth Narendra Surana (CA) Mumbai-2 ALL THE BEST. MAY GOD BLESS YOU 1

2 1) INTRODUCTION (DONE IN CLASS - NOT IN TEXTBOOK) 1. NORMAL RATES OF TAX (SLAB RATES) FOR A.Y (NO CHANGE FROM LAST YEAR EXCEPT SURCHARGE) A) For Individuals: i) Resident Senior Citizens (60 years and above) SLAB RATE 0-3,00,000 0% (Basic Exemption Limit) 3,00,000-5,00,000 10% 5,00,000-10,00,000 20% 10,00,000-Above 30% ii) Resident Very Senior Citizens (80 years and above) SLAB RATE 0-5,00,000 0% (Basic Exemption Limit) 5,00,000-10,00,000 20% 10,00,000-Above 30% iii) Other Individuals (including all non residents, even if senior or very senior citizens) SLAB RATE 0-2,50,000 0% (Basic Exemption Limit) 2,50,000-5,00,000 10% 5,00,000-10,00,000 20% 10,00,000-Above 30% Rebate u/s 87A for Resident Individuals with Net Taxable Total Income not exceeding Rs. 5,00,000 Tax liability or Rs. 2,000 whichever is less. 12% of Tax Liability if NTTI exceeds Rs. 1 crore. (subject to marginal relief) Education of [Basic Tax + SC if applicable Rebate if applicable] always. B) For HUF/AOP-BOI/Artificial Juridical Person Same as A) i) except that Rebate is not applicable C) For Partnership firms (incl LLP) given in respective chapter of main book [same rates also for Local Authority] D) For Companies given in MAT chapter of main book 2. For an individual residing in India but leaving India as a crew member of Indian ship, the period commencing from the start date of Continuous Discharge Certificate and ending on the end date of Continuous Discharge Certificate, shall be excluded from physical presence in India, while determining the Residential status. After this if the stay in India < 182 days, the assessee will be a non resident as the 60days+365days condition is not applicable for such assessees. 3. ICDS has been postponed for one year by GOI. Thus, they will not be applicable for Nov 16 exams. 2) DOUBLE TAXATION AVOIDANCE AGREEMENTS 2

3 1. w.e.f. 01/06/2015, u/s 295, the CBDT has been granted the power, inter alia, to make rules with respect to the procedures for granting relief u/s 90 or 90A or 91. Not relevant from examination point of view 3) MODE OF ACCEPTANCE AND REPAYMENT OF LOANS 1. Sec 269SS - W.e.f. 01/06/2015 shall along with borrowers of loan and acceptors of deposit, also cover sellers of immovable property. Thus, any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place, has to be received through an acceptable mode u/s 269SS 2. Sec 269T W.e.f. 01/06/2015 will have the resulting amendment i.e. in case an advance received for transfer of immovable property by a seller is being repaid, it has to be repaid through an acceptable mode u/s 269T. Further, to check the balance before repayment i.e. to decide whether penalty gets attracted, advance received by all joint owners shall be calculated. 1. No amendments 4) NRI TAXATION 5) SPECIAL RATES OF TAX 1. Sec 115A Tax rate for Non Residents and Foreign Companies on Income from Royalty and Fees for Technical Services is reduced from 25% to 10%. 6) DIVIDEND DISTRIBUTION TAX / BUYBACK TAX / INCOME DISTRIBUTION TAX / SECURITISATION INCOME TAX 1. Rate of Surcharge for all the taxes i.e. DDT u/s 115O, BBT u/s 115QA, IDT u/s 115R and SIT u/s 115TA shall be 12% w.e.f. A.Y , which will always be applicable irrespective of quantum of Income Earned or Income Distributed. 7) TAXATION OF BUSINESS TRUSTS 1. Section 2(13): As SEBI regulations in this regard are made the new definitions of REIT and INVIT are as follows: Business Trust (B.T.) means a Trust registered as: i) an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the SEBI Act, 1992; or ii) a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the SEBI Act, Section 10 (23FCA): Rental income received by REIT by way of renting out a real estate asset directly owned by it shall be exempt. Thus, any person making payment of rent to the BT shall not deduct tax u/s 194I. w.e.f.a.y Further, w.e.f. A.Y , rental income of REIT from real estate assets shall be taxable in the hands of unitholders and if the unitholder is a non resident (not being a company) or a foreign company, TDS at applicable rates shall be deducted. However, for resident unitholders rate of TDS shall be 10%. 3

4 3. Section 10 (38) & 111A: W.e.f. A.Y , the benefits of these sections shall be available for all unitholders i.e. New Unitholders as well as Shareholders of SPV who become unitholders of BT. [Also, in Stock Market Chapter] 8) SPECIAL PROVISIONS RELATED TO STOCK MARKET DEALINGS 1. Section 10 (38) & 111A: W.e.f. A.Y , the benefits of these sections shall be available for all unitholders i.e. New Unitholders as well as Shareholders of SPV who become unitholders of BT. [Also, in Business Trust Chapter] 4

5 Investor lakhs Investor lakhs Investor lakhs Investor lakhs Investor lakhs 1. No amendments. 9) DIVIDEND AND BONUS STRIPPING 10) TAXATION OF INVESTMENT FUNDS (new chapter introduced w.e.f. A.Y ) Under the existing provisions of the Income Tax Act any income of a Venture Capital Company (VCC) or a Venture Capital Fund (VCF) from investment in a Venture Capital Undertaking (VCU) is exempt from taxation u/s 10(23FB). However, the aforesaid income is taxable in the hand of the investors u/s 115U in the same manner and proportion as if it were income of the investor had he made the investment directly in the VCU. The above provision can be understood as follows: Pays 23 lakhs Invest 500 lakhs VCC / VCF Receives 92 Lakhs [exempt u/s 10(23FB) as it will be considered as income of investors in the same manner and proportion and will be taxed in their hands] Receive 92 lakhs Invest 500 lakhs VCU 400 Lakhs Share capital Thus, amount payable to VCC/VCF will be as follows: 1. Interest 12 lakhs 2. Dividend 80 lakhs (assumed) subject to DDT u/s 115O Thus, amount received per investor is Rs. 4,60,000. The break up of which is as follows: 1. Dividend 4,60,000 x 80/92 = 4,00,000 [exempt u/s 10 (34)] 2. Interest 4,60,000 x 12/92 = 60,000 Taxable by treating as Interest on Debentures Section 115U Further, under the existing provisions, the amount of 69 lakhs out of the total income of the VCC/VCF which is not distributed to the investors, shall be considered as income of the investors for the same year in the same proportion as follows: 1. Dividend: 69,00,000 x 80/92 = 60,00,000 [Thus, dividend per investor is Rs. 12,00,000 exempt u/s 10(34)] 2. Interest: 69,00,000 x 12/92 = 9,00,000 [Taxable as interest income from debentures] Section 115U This, amount will not be, obviously, taxed again when it is ultimately paid to the investors. However, these sections provide a tax pass through (i.e. income is taxable in the hands of investors instead of VCF/VCC) only to the funds, being set up as a COMPANY or a TRUST, which are registered (i) before as a VCF under SEBI (Venture Capital Funds) Regulations, 1996, or (ii) as venture capital fund being one of the sub-categories under CATEGORY-I Alternative investment fund (AIF) regulated by SEBI (AIF) Regulations, 2012 w.e.f The existing pass through is available only in respect of income which arises to the fund from investment in VCU (Venture Capital Undertaking), being a company which satisfies the conditions provided in SEBI (VCF) Regulations, 1996 or SEBI (AIF) Regulations, 2012 (AIF regulations). Under the AIF regulations, various types of AIFs have been classified under three separate categories as Category I, II & III AIFs: 5

6 Category I: includes AIFs which invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable. Category II: AIFs are funds including private equity funds or debt funds which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-today operational requirements. Category III: AIFs are funds which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. The funds can be set up as a trust, company, limited liability partnership and any other body corporate. Similarly, investment by AIFs can be in entities which can be a company, firm etc. Pooled investment vehicles (other than hedge funds) engaged in making passive investments have been accorded pass through in certain tax jurisdictions. In order to rationalize the taxation of Category-I and Category-II AIFs (hereafter referred to as investment fund) it is proposed to provide a special tax regime. The taxation of income of such investment fund and their investors shall be in accordance with the proposed regime which is applicable to such funds irrespective of whether they are set up as a TRUST, COMPANY, or LIMITED LIABILITY FIRM etc. The salient features of the special regime are:- 1. Section 115UB (1): Income of a person, being a unit holder of an investment fund, out of investments made in the investment fund shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to, or received by, such person had the investments, made by the investment fund, been made directly by him. 2. Section 10(23FBA): Income in the hands of investment fund, other than income from profits and gains of business, shall be exempt from tax. The income in the nature of profits and gains of business or profession shall be taxable in the case of investment fund. 3. Section 10(23FBB): Income in the hands of investor which is of the same nature as income by way of profits and gain of business at investment fund level shall be exempt. 4. Section 194LBB: Where any income, other than income which is taxable at investment fund level, is payable to a unit holder by an investment fund, the fund shall deduct income-tax at the rate of ten per cent. 5. Section 115UB(3): The income paid or credited by the investment fund shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as if it had been received by, or had accrued or arisen to, the investment fund. 6. Section 115UB(2): If in any year there is a loss at the fund level either current loss or the loss which remained to be set off, the loss shall not be allowed to be passed through to the investors but would be carried over at fund level to be set off against income of the next year in accordance with the provisions of Chapter VI of the Income-tax Act. 7. Section 115UB(5): The provisions of Chapter XII-D (Dividend Distribution Tax) or Chapter XII-E (Tax on distributed income) shall not apply to the income paid by an investment fund to its unit holders. 8. Section 115UB(4): The total income of the investment fund shall be taxed at i) At the rate specified in the Finance Act, where such fund is a Company or a Firm; ii) At the maximum marginal rate in any other case. 9. The income received by the investment fund would be exempt from TDS requirement. This would be provided by issue of appropriate notification under section 197A(1 F) of the Act subsequently. 10. Section 139(4F): It shall be mandatory for the investment fund to file its return of income. The investment fund shall also provide to the prescribed income-tax authority and the investors, the details of various components of income, etc. for the purposes of the scheme. Further, the existing pass through regime is proposed to be continued to apply to VCF/VCC which had been registered under SEBI (VCF) Regulations, Remaining VCFs, being part of Category-I AIFs, shall be subject to the new pass through regime. 6

7 ILLUSTRATIONS The broad features of the above tax regime can be explained through the following examples. For the sake of simplicity it is assumed that the investment fund has ten unitholders each having one unit and the income from investment in the investment fund is the only income of the unit holder: Example..1 If in a P.Y. income of an investment fund consists of: 1. Income from Capital Gains - 8,00, Income from other sources - 2,00,000 Then: 1. Taxable income of the Investment Fund - NIL 2. Taxable income of the unit holders - 10,00, Taxable income per unitholder - 1,00,000 CG IFOS 80,000 20,000 Example..2 If in a P.Y. income of an investment fund consists of: 1. Business Income - 1,00, Income from Capital Gains - 7,00, Income from other sources - 2,00,000 Then: 1. Taxable income of the Investment Fund(taxable at - 1,00,000 applicable rate if the investment fund is a co or a firm, else at maximum marginal rate) 2. Taxable income of the unit holders - 9,00, Taxable income per unitholder - 90,000 CG IFOS 70,000 20,000 Rs. 1,00,000 is the Business Income of investors (i.e. Rs. 10,000 per investor). However, the same shall be exempt u/s 10(23FBB) as it is taxed in the hands of the investment fund. Example..3 If in a P.Y. income of an investment fund consists of: 1. Business Loss - 1,00, Capital Gains Loss - 3,00, Income from other sources - 4,00,000 Then: 7

8 1. The Business Loss is set off against IFOS Thus, taxable income of the Investment Fund - NIL 2. Capital Loss cannot be set off & will stay at the - level for future set off - NIL 3. Taxable income of the unit holders - 3,00, Taxable income per unitholder - 30,000 (IFOS) Example..4 If in the P.Y. after the P.Y. in example 3, the income of an investment fund consists of: 1. Business Income - 1,00, Income from Capital Gains - 4,50, Income from other sources - 5,00,000 Then: 1. Taxable income of the Investment Fund(PGBP) - 1,00, Exempt income of the Investment Fund - Capital Gains (4,50,000 3,00,000) - 1,50,000 - IFOS - 5,00, Taxable income of the unit holders - 6,50, Taxable income per unitholder - 65,000 CG IFOS 15,000 50,000 Rs. 1,00,000 is the Business Income of investors (i.e. Rs. 10,000 per investor). However, the same shall be exempt u/s 10(23FBB) as it is taxed in the hands of the investment fund. 8

9 11) MINIMUM ALTERNATE TAX(MAT) 1. Rates of Surcharge w.e.f. A.Y have been increased to 7% (if NTTI > 1 crore) and 12 % (if NTTI > 10 crore) i.e. an increase by 2% each. Similar increase has been introduced in rates of Surcharge even under MAT when Book Profits exceed Rs. 1 crore or 10 crore the rates of Surcharge under MAT will be 7% and 12% respectively. However, it is very important to note that SURCHARGE RATES OF FOREIGN COMPANIES ARE UNCHANGED at 2% and 5% for Income > 1 crore and > 10 crore respectively. 2. CALCULATION OF BOOK PROFIT :- 9

10 The following should also be added to the Net Profit as per P & L A/C W.E.F. A.Y to arrive at the Book Profit W.E.F. A.Y :- (a.) Expenditure incurred for earning an income, being share of the assesee in the income of an AOP-BOI which is not taxable u/s 86 (b.) Expenditure incurred by a FOREIGN COMPANY for earning an income being: i) Capital Gains arising on transaction in securities or ii) Interest, Royalty or Fees for technical services, taxable under Special Rates of Tax (c.) The amount of notional loss on exchange of shares in a SPV for units of a BT, or change in carrying amount of such units or loss on transfer of such units (d.) The amount of GAIN on transfer of units REFERRED TO IN Section 47 (xvii) computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where shares are carried at a value other than the cost through the P&L account The following should also be deducted to the Net Profit as per P & L A/C W.E.F. A.Y to arrive at the Book Profit:- (a.) An income credited to the P&L account, being share of the assesee in the income of an AOP-BOI which is not taxable u/s 86 (b.) An income credited to the P&L account of a FOREIGN COMPANY being: i) Capital Gains arising on transaction in securities or ii) Interest, Royalty or Fees for technical services, taxable under Special Rates of Tax (where the tax payable under normal provisions of the Act is at a rate less than 18.5%) (c.) The amount of notional gain on exchange of shares in a SPV for units of a BT, or change in carrying amount of such units or gain on transfer of such units (d.) The amount of LOSS on transfer of units REFERRED TO IN Section 47 (xvii) computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where shares are carried at a value other than the cost through the P&L account 12) ALTERNATE MINIMUM TAX (AMT) 1. Rate of Surcharge on AMT will be 12% if Adjusted Total Income > 1 crore. 13) ASSESSMENT OF PARTNERSHIP FIRMS 1. Rate of Surcharge on Firms will be 12% if NTTI > 1 crore. 14) ASSESSMENT OF CHARITABLE TRUSTS 1. Under Section 2(15), the activity of YOGA has now been included in the definition of Charitable purpose. Thus, the restrictions under the category of advancement of any other object of general public utility shall not be applicable to the activity of Yoga. 2. If the advancement of any other object of general public utility involves carrying on of any activity in the nature of Trade, Commerce or Business, or any activity of rendering any service in relation to any Trade, Commerce or Business, for a Cess or Fees or any other Consideration, irrespective of the nature of use or application, or retention, of the income from such activity, then it shall be a Charitable purpose, only if the following two conditions are satisfied: i) Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (i.e. Business should be related to the main activity) ii) The aggregate receipts from such activity or activities during the P.Y., do not exceed twenty percent of the total receipts, of the trust or institution undertaking such activity or activities, of that P.Y. 10

11 However, it is pertinent to note that these restrictions are not applicable to trusts doing relief for the poor, medical relief, education, YOGA, preservation of environment or object/monuments of artistic/historic interest. 3. Form No. 10 for accumulation of Income has to be furnished on or before the due date of filing return of income u/s 139 in order to get the benefit of accumulation. Further, even the return of income has to be furnished on or before the due date of filing u/s 139 in order to get the benefit of accumulation. Non-filing of form no. 10 or ROI within the time limit will make the trust lose the benefit of exemption on accumulated part of its income. 1. No amendments. 1. No amendments. 15) ASSESSMENT OF POLITCAL PARTIES 16) ASSESSMENT OF ELECTORAL TRUSTS 17) INCOME TAX AUTHORITIES, THEIR POWERS 1. No amendments 18) SEARCH, SEIZURE & SURVEY 1. w.e.f. 01/06/2015, it is proposed to amend section 132B of the Income-tax Act to provide that the asset seized under section 132 or requisitioned under section 132A may also be adjusted against the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C. 19) ASSESSMENT PROCEDURE 1. U/S 139(1), Every Resident & Ordinarily Resident who is otherwise not supposed to submit return of income under this section, if such resident, at any time during the previous year: (i) holds, as a beneficial owner or otherwise, any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India; or (ii) is a beneficiary of any asset (including any financial interest in any entity) located outside India Has to mandatorily furnish Return of Income. However, filing of a tax return would not be mandatory in case of an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India, if income arising from such an asset is includible in the income of person in (i) above. The terms beneficial owner and beneficiary have been defined as under: Beneficial owner in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. Beneficiary in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. 2. Every investment fund referred to in section 115UB, which is not required to furnish return of income or loss under any other provisions of this section, shall furnish the return of income in respect of its income or loss every year. 11

12 3. For the purpose of Re Assessment u/s 147, Notice u/s 148 has to be ISSUED to the assessee within the time limit u/s 149 with the prior approval of higher authorities. W.e.f. 01/06/2015, it is proposed to provide that no notice under section 148 shall be issued by an assessing officer UPTO FOUR YEARS from the end of relevant assessment year without the approval of JOINT COMMISSIONER and BEYOND FOUR YEARS from the end of relevant assessment year without the approval of the PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER. 12

13 20) APPEALS 1. Section 158AA: Special provisions for avoiding Repetitive Appeals (for the Department): The provisions u/s 158A gave the power to make applications to avoid repetitive appeals only to the assessee and no corresponding power was available to the department. In view of this Section 158AA is introduced w.e.f. 01/06/2015 where in case of an assessee, for an earlier assessment year, if a matter is pending before:- Supreme Court (against an order of the High Court in favour of the assesee) on a particular matter and for an identical point in the case of the same assessee, but for some subsequent assessment year, if the same/similar matter is decided against the department by the CIT (A) then: Then Commissioner or Principal Commissioner, rather than repeating the same time consuming procedure of filing the appeal once again at ITAT, may decide to direct the AO to make an application to ITAT under this section (i.e. u/s 158AA) within sixty days from receipt of copy of CIT (A) order stating that an appeal on the question of law arising in the case may be filed when the question of law becomes final in the case pending at SC. This application can be made only if the assesee accepts that the question is an identical question, otherwise the department will have to resort to the normal appellate procedure. If the decision taken in case of earlier year by SC is not in same as the view taken by the CIT (A) in the current year the Commissioner or Principal Commissioner may now direct the AO to appeal within 60 days from the date of receipt of copy of the order. 21) REVISION 1. For the purpose of Section 263 W.E.F. 01/06/2015 to provide clarity it is hereby provided that an order shall be erroneous if: the order is passed without making inquiries or verification which, should have been made; the order is passed allowing any relief without inquiring into the claim; the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 22) INCOME TAX SETTLEMENT COMMISSION 1. An application to the ITSC can be made only in case of a pending proceeding. Only the following will be considered as pending proceedings for the purpose of making an application to ITSC: Sr. PROCEEDING No. 1 A Proceeding for Re Assessment or Re Computation u/s 147 DATE FROM WHICH IT WILL BE CONSIDERED AS PENDING a) From the date on which notice u/s 148 is issued b) W.e.f. 01/06/2015 an application can also be made for any other assessment year in respect of which notice u/s 148 is not issued from the date os issue of notice u/s 148 in (a) above if for such AY on the above date the notice could have been issued and if the 13

14 2 A Proceeding for Fresh Assessment in pursuance of order u/s 254 or 263 or 264 setting aside or cancelling an assessment 3 A Proceeding of Search u/s 153A or 153C 4 Any Other Assessment Proceeding (basically a Regular Assessment Proceeding) ROI for that year was filed u/s 139 or in response to notice u/s 142 From the date on which such order setting aside or cancelling an assessment was passed From the date of issue of notice initiating such proceeding From the date on which ROI u/s 139 or in response to notice u/s 142 is filed In all the cases the Proceeding will be considered pending till the date of passing the Order or till the date when time limit to pass such order expires. 2. If the Final Order of ITSC does not provide for the terms of settlement the case shall abate on the date or Final Order and shall be dealt with by the AO under the provisions of the IT Act as if no application was made. 3. W.e.f. 01/06/2015, if the ITSC is granting immunity from prosecution proceedings the ITSC will have to record the reasons for granting immunity in writing. 4. W.e.f. 01/06/2015 if the application of a person to ITSC is rejected or if the final order of ITSC is levying penalty or if after the final order the assessee is convicted of an offence, any person related to such person shall also not be eligible to approach the ITSC subsequently, where related person means: Original Applicant Related Person Individual Any company in which such person holds more than 50% of the shares or voting rights at any time; or Any Firm or AOP or BOI in which such person is entitled to more than 50% of the profits at any time; or Any HUF in which such person is a Karta Company Any individual who held more than 50% of the shares or voting rights in such company at any time before the date of application before the ITSC by such company Firm or AOP or BOI Any individual who is entitled to more than 50% of the profits in such Firm or AOP or BOI at any time before the date of application before the ITSC by such Firm or AOP or BOI HUF The Karta of that HUF 1. No amendments 1. No amendments 23) AUTHORITY FOR ADVANCE RULINGS 24) TONNAGE TAX SCHEME 25) PENALTIES 1. Explanation 4 to Section 271 (1) (c) has been amended and the new explanation is as follows: Tax sought be evaded means:- a) In a case where ROI had been filed declaring a loss and the concealed income now has the effect of reducing such loss or converting such loss into a positive income, then tax sought to be evaded means - tax on entire concealed income as if such concealed income was the only income of the assessee + MAT / AMT computed 14

15 according to the provisions of Section 115JB or 115JC - MAT / AMT computed had on Book Profits excluding concealments b) In case where no ROI has been filed, then tax sought to be evaded means tax on total income assessed, reduced by the amount of TDS / TCS, Advance Tax and Self- Assessment Tax before notice u/s 148. c) In any other case, tax sought to be evaded means: (A-B) + (C-D), where Tax on total assessed income including concealed income (=A) XXX LESS: Tax on total assessed income excluding concealed income (=B) (XXX) XXX MAT / AMT computed according to the provisions of Section 115JB or 115JC (=C) XXX LESS: MAT / AMT computed had on Book Profits excluding concealments (=D) (XXX) XXX Tax sought to be evaded XXX Notes: 1. Ignore the portion (C-D) where the provisions of Section 115JB or Section 115JC are not applicable. 2. If an amount has been concealed in both Normal Provisions and Book Profits, it shall not been reduced in D above. 2. Section 271GA: (w.e.f. A.Y ) Failure to furnish certain Information by an Indian concern as required u/s 285A of the Act, shall attract a penalty under this section for an amount equal to 2 % of the value of each such transaction if such transaction has the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern or Rs. 5,00,000 in other cases. 3. Section 271I: (w.e.f. 01/06/2015): Failure to furnish information about remittances to Non Residents in form 15CA / 15CB or furnishing inaccurate particulars in such forms shall attract a penalty of Rs. 1,00,000 26) MISCELLANEOUS PROVISIONS IONS 1. SECTION 285A: FURNISHING OF INFORMATION OR DOCUMENTS BY AN INDIAN CONCERN IN CERTAIN CASES (W.E.F. A.Y ): Where any share of, or interest in, a company or an entity registered or incorporated outside India derives, directly or indirectly, its value substantially from the assets located in India, and such company or, as the case may be, entity, holds, directly or indirectly, such assets in India through, or in, an Indian concern, then, such Indian concern shall, for the purposes of determination of any income accruing or arising in India, furnish within the prescribed period to the prescribed income-tax authority the information or documents, in such manner, as may be prescribed. 2. U/s 288, a CA holding COP is permitted to be an authorized representative before any Income Tax Authority or ITAT. Other than the representation work as above, a Chartered Accountant is also required to issue certificates under the Act, for e.g. u/s 44AB, u/s 92E, u/s 115JB, u/s 115JC etc. Under the Chartered Accountants Act, 1949, a CA is barred from expressing opinions on financial statements in which he, his relative, his firm or partner in the firm has substantial interest. A similar disqualification is now brought u/s 288A by inserting an Explanation w.e.f. 01/06/2015. However, it is pertinent to note that such disqualification is introduced only for certification work and a CA shall continue to be eligible for representation work for his related parties. Assessee Person ineligible to do certification work (i) Company A person who is not eligible for appointment as an auditor of the said company under section 141(3) of the Companies 15

16 Act, 2013, namely, (a) A body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008; (b) an officer or employee of the company (c) a person who is a partner, or who is in the employment, of an officer or employee of the company (d) a person who, or his relative or partner 16

17 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS (i) is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company >Rs. 1,000 (ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of 5 lakh. (iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of 1 lakh. (e) a person or a firm who, whether directly or indirectly, has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed. (f) a person whose relative is a director or is in the employment of the company as a director or key managerial personnel (g) a person who is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies (h) a person who has been convicted by a court of an offence involving fraud and a period of 10 years has not elapsed from the date of such conviction (i) any person whose subsidiary or associate company or any other form of entity, is engaged as on the date of appointment in consulting and specialised services as provided in section 144 of the Companies Act, (ii) Individual The assessee himself or his relative (iii) Firm Partner of the firm or his relative (iv) AOP Member of the AOP or his relative 17

18 Prof. Siddharth N. Surana (v) HUF (vi) Trust Institution Or Member of the HUF or his relative CA FINAL/DIRECT TAX/AMENDMENTS (1) The author of the trust or founder of the institution or his relative (2) Any person who has made a substantial contribution to the trust or institution, i.e., any person whose total contribution upto the end of the relevant previous year exceeds 50,000, or his relative (3) Where such author, founder or person is a HUF, a member of the HUF or relative of such member (4) Any trustee of the trust or manager of the institution, or relative of the trustee or manager (vii) Any other person The person who is competent to verify the return under section 139 in accordance with the provisions of section 140 or his relative. (viii) Any assessee Referred to in (ii) to (vii) (1) An officer or employee of the assessee (2) An individual a partner, or who is In the who is employment, assessee. of an officer or employee Of the (3) An individual who, or his relative or partner - (I) is holding any security of, or interest in, the Assessee (II)is indebted to the assessee (III) has given a guarantee or provided any security in connection with the indebtedness of any third person to the assessee (>Rs. 1,00,000 in all 3 cases) (4) a person who, whether directly or indirectly, has business relationship with the assessee of such nature as may be prescribed 18

19 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS (5) a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction. 19

20 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 27) TDS / TCS 1. Under newly introduced section 192A, TDS shall be deducted only at the time of payment. 2. U/s 192 W.e.f. 01/06/2015 the person making payment (employer) will have to obtain from the Payee (employee) proof of such claims for deductions etc including claim for set off of loss. 20

21 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 3. Section 192A: (wef 01/06/2015): TDS from Pre Mature Taxable withdrawal from Employees Provident Fund (EPF): Payer - Trustees of EPF Scheme, 1952 or any person authorized to make payment of accumulated balance due to the employees. Payee Any Employee. Amount - > = Rs. 30,000 /- p.a.. Rate 10 % Points to be noted:- 1) TDS only on payment 2) If Payee does not furnish PAN, rate of TDS will be the Maximum Marginal Rate. 3) Self Declaration forms for non deduction u/s 197A i.e. Form. 15G/H can be submitted 4) TDS only if the withdrawal is taxable i.e the employee has not served for at least five continuous years before withdrawal and the reason for the same is not ill health, contraction or discontinuance of employer s business or any other reason beyond the control of the employee and he has not opted for transfer of accumulated balance to new employer. 4. Section 194A: T.D.S. on interest other than interest on securities, following amendments have taken place: a) W.e.f. 01/06/2015 in respect of interest paid/credited by a Banking Company / Co-op Bank which has adopted Core Banking Solutions (CBS), the threshold limit (>10,000) will be reckoned with reference to the total interest paid/credited by all branches. b) Interest paid by a Co-Op Bank will attract TDS but not when Payee is a Co-Op Society. c) In respect of interest on compensation awarded by Motor Accidents Claim Tribunal (MACT), TDS will be attracted w.e.f. 01/ only at the time of Payment. d) W.e.f. 01/06/2015 TDS will be deducted on Interest on RD Account subject to threshold limit of Rs. 10, The facility of TDS on Payments made to transporters u/s 194C if PAN is furnished will be available only if the transporter owns ten or less goods carriages at any time during the Previous Year. 6. U/s 194I, no TDS on rental income of REIT is respect of Real Estate directly owned by it. 7. Section 194LBB: T.D.S. on Income (other than PGBP) payable by Investment Fund to Unitholders: Payer: Investment Fund Payee: Any Person being Unitholder Amount: Any amount Rate: 10% (However, no TDS on PGBP as it is taxable in the hands of the Investment Fund) 1. No amendments. 1. No amendments. 28) ADVANCE TAX 29) REFUND 30) INTEREST U/S 234 A / B / C 1. W.E.F. 01/06/2015 The period for calculation of Interest u/s 234B on additional tax demanded in an order passed u/s 147 or u/s 153A shall commence from the 1 st day of the relevant Assessment Year and end on date of completion of Re-Assessment / Recomputation u/s. 147 or u/s. 153A. 2. (w.e.f. 01/06/2015): Interest u/s 234B shall be attracted on tax disclosed in an application made to ITSC u/s 245C: In case of an assessee, who has made an application in accordance with the provisions of 21

22 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS Section 245C to the ITSC on the amount of Tax declared by him in the application, then Interest u/s 234B is attracted as follows: Rate: Simple 1% p.m. or a part of a month From: 1 st April of A.Y. Till: The date of making such application to the ITSC. On what Amount: The additional amount of Tax declared in the application made to ITSC However, if due to an order of ITSC u/s 245D, if the tax declared in the application is increased, interest u/s. 234B shall be calculated on such additional 1% p.m. or a part of a month from the 1 st April of A.Y. till the date of order u/s 245D. If the Order u/s 245D is rectified the Interest calculation shall be accordingly modified. 1. No amendments. 31) RECOVERY PROCEEDINGS 32) TRANSFER PRICING 1. The threshold for a transaction to fall in the definition of Specified Domestic Transaction has been increased to Rs. 20 crore. 33) SALARY 1. Exemption for Transport allowance has been enhanced to Rs. 1,600 p.m. for normal employees and Rs. 3,200 for handicapped employees. 1. No amendments 34) HOUSE PROPERTY 35) PROFITS AND GAINS OF BUSINESS OR PROFESSION (PGBP) 1. W.e.f. A.Y , where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the instead of 20%, the eligible rate for additional depreciation shall be 35% (subject to half rate ie 17.5% if used for < 180days during the year) 2. W.e.f. A.Y , where the additional depreciation deduction of an assessee is restricted to half rate (10% or 17.5% as the case may be) as the asset is used <180days during the year, the assessee shall be eligible to get the deduction of the other half in the immediately following previous year. 3. Section 32AD (w.e.f. A.Y ): Investment in NEW PLANT or MACHINERY in notified backward areas in certain States. a) Where an assessee, sets up an undertaking or enterprise for MANUFACTURE OR PRODUCTION of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of ANDHRA PRADESH or in the State of BIHAR or in the State of TELANGANA or in the State of WEST BENGAL, and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, there shall be 22

23 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new asset for the assessment year relevant to the previous year in which such new asset is installed. b) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger or re-organisation of business referred to in clause (xiii) or clause (xiiib) or clause (xiv) of section 47, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) in respect of such new asset shall 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 such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. c) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger or re-organisation of business referred to in clause (xiii) or clause (xiiib) or clause (xiv) ofsection 47 within a period of five years from the date of its installation, the provisions of subsection (2) shall apply to the amalgamated company or the resulting company or the successor referred to in clause (xiii) or clause (xiiib) or clause (xiv) of section 47, as the case may be, as they would have applied to the amalgamating company or the demerged company or the predecessor referred to in clause (xiii) or clause (xiiib) or clause (xiv) of section 47. d) For the purposes of this section, "NEW ASSET" means any NEW PLANT or MACHINERY (other than a ship or aircraft) but does not include i) any plant or machinery, which before its installation by the assessee, was used either within or outside India by any other person; ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; iii) any office appliances including computers or computer software; iv) any vehicle; or v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head D. "Profits and gains of business or profession" of any previous year. f) Thus, an assesee satisfying the conditions of Section 32AD is eligible for: Normal Depreciation Additional 35% (as all conditions of additional depreciation are automatically satisfied) Deduction u/s 32AD i.e. 15% of Cost in year of acquisition g) Further, if the assesee is a COMPANY and the investment exceeds Rs. 25 crore (for P.Y & P.Y ), it shall also be eligible for deduction u/s 32AC. Thus, deduction u/s 32AD is over and above the deduction u/s 32 and u/s 32AC h) It is also pertinent to note that, though normal depreciation and additional depreciation reduce the WDV of the Block of Assets, the deduction u/s 32AD does not reduce the WDV of the Block. The combined effect can be explained as follows: Sr. No. Conditions Deductions 1. Any Assessee + Any Capital Asset Owned & Used for Business Normal Depreciation 2. Manufacturer + New + P&M Normal Depreciation + Additional Depreciation 23

24 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 3. Manufacturer + New + P&M + Co. + Inv > 25crore Normal Depreciation + Additional Depreciation + Deduction u/s 32AC 4. Manufacturer + New + P&M + Backward areas of Andhra Pradesh / Telangana / Bihar / West Bengal 5. Manufacturer + New + P&M + Backward areas of Andhra Pradesh / Telangana / Bihar / West Bengal + Inv > 25crore + Co Normal Depreciation + Additional 35% + Deduction u/s 32AD Normal Depreciation + Additional 35% + Deduction u/s 32AC + Dedcution u/s 32AD 4. U/s 36 (1) (iii) borrowing costs (interest) incurred for acquisition of fixed assets before using an asset for the first time shall be added to the cost of asset always and not just when the asset is acquired for expansion of facilities. 5. U/s 36 (1) (vii) deduction of Bad Debts shall be allowed if it was recognized as Income as per ICDS, whether recorded in accounts or not. 6. U/s 36 (1) (xvi), The amount of expenditure incurred by a co-operative society engaged in the business of manufacture of sugar for purchase of sugarcane at a price which is equal to or less than the price fixed or approved by the Government shall be allowed as a deduction. 1. No amendments 36) INCOME FROM OTHER SOURCES 1. The Cost Inflation Index for P.Y is ) CAPITAL GAINS 2. Following transactions shall be excluded from the definition of taxable transfer: Any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign company, referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company, if (A) at least twenty-five per cent of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and (B) such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated; Any transfer in a demerger, of a capital asset, being a share of a foreign company, referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company, if (a) the shareholders, holding not less than three-fourths in value of the shares of the demerged foreign company, continue to remain shareholders of the resulting foreign company; and (b) such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated: Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause 24

25 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS Any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund: Provided that the consolidation is of two or more schemes of equity oriented fund or of two or more schemes of a fund other than equity oriented fund. Explanation. For the purposes of this clause, (a) "consolidated scheme" means the scheme with which the consolidating scheme merges or which is formed as a result of such merger; (b) "consolidating scheme" means the scheme of a mutual fund which merges under the process of consolidation of the schemes of mutual fund in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); (c) "equity oriented fund" shall have the meaning assigned to it in clause (38)of section 10; (d) "mutual fund" means a mutual fund specified under clause (23D)of section Sec 111A and 10(38) shall be applicable on all units of Business Trust i.e. including those units which were received as a consideration for transfer of shares in the SPV. 1. No amendments. 1. No amendments. 38) CLUBBING OF INCOME 39) SET OFF & C/F OF LOSSES 40) DEDUCTIONS UNDER CHAPTER VI-A 1. For the purpose of Section 80C, w.e.f. 21/01/2015, investment in the Sukanya Samriddhi Account Scheme has been notified. Accordingly, any sum paid or deposited in the said scheme, by an individual in the name of himself/herself or any girl child of himself/herself or any girl child of whom such individual is a legal guardian shall be eligible for 80C deduction. Further u/s 10(11A), interest accruing on such deposits and withdrawals from such account shall be exempt from tax 2. The maximum allowable deduction u/s 80CCC has been increased to Rs. 1,50,000 from Rs. 1,00, The limit of Rs. 1,00,000 u/s 80CCD(1) has been removed however the limit of 10% of Salary / GTI and the limit u/s 80CCE for the aggregate deduction 80C + 80CCC + 80CCD(1) of Rs. 1,50,000 shall continue to be applicable. 4. An additional deduction for Contributions to NPS u/s 80CCD(1B) shall be available upto a maximum of Rs. 50,000 for which neither the limit of 10% of Income (Salary or GTI) nor the limit u/s 80CCE of Rs. 1,50,000 shall be applicable. SUMMARY OF CEILING LIMITS FOR W.E.F. A.Y SECTION PARTICULARS CEILING LIMIT (RS.) 80C Miscellaneous Investments / Contributions 1,50,000 80CCC Contribution to Pension Funds 1,50,000 80CCD (1) Own/Employee Contribution to NPS of Government 10% Salary/GTI 80CCD(1B) Contribution to NPS of Government [over& above 80CCD (1)] 50,000 80CCD(2) Employer s Contribution to NPS of Government 10% Salary 80CCE Aggregate deductions u/s 80C, 80CCC, 80CCD(1) 1,50,

26 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 5. U/s 80D, the threshold for deduction has been enhanced to Rs. 25,000 (from 15,000). Further, in case of beneficiary being Resident Senior Citizen the limit has been enhanced to Rs. 30,000 (from 20,000). 6. U/s 80D, for Individuals and HUFs, deduction shall also be available in respect of any Amount paid on account of medical expenditure for self, spouse or parents (for individuals) or any member (for HUFs), where the patient is a Resident Very Senior Citizen(>=80years) and no payment has been made to keep in force an insurance on the health of such person 7. U/s 80DD, the threshold for deduction has been enhanced to Rs. 75,000 (from 50,000). Further, in case of severe disability the limit has been enhanced to Rs. 1,25,000 (from 1,00,000). 8. U/s 80DDB, in respect of deduction for expenditure incurred for treatment of specified diseases a new limit of Actual Expenditure or Rs. 80,000, whichever is lower is introduced for Resident Very Senior Citizens 9. Further u/s 80DDB, Assessee has to obtain a prescription for such medical treatment from a specialized doctor i.e. from a neurologist, an oncologist, an urologist for the purpose of availing this deduction. (Till A.Y the Certificate had to be from a Doctor working in a Government Hospital. W.E.F. A.Y this requirement is removed as government hospitals at many places do not have doctors specializing in the above branches of medicine). 10. U/s 80G, three new funds have been notified in the Unlimited 100% Category i.e. The Swachch Bharat Kosh, The Clean Ganga Fund, The National Fund for Control of Drug abuse. 11. U/s 80JJAA deduction shall be available to all assessees in the business of manufacturing and not just companies. 12. Further u/s 80JJAA, the deduction shall be available at 30% of the wages paid to NEW REGULAR WORKMEN employed during the year after 50 EMPLOYEES and not after 100 employees. (Kindly note the calculation of this deduction is shown incorrectly in the supplementary paper, 2015 as well as May 2016 RTP. In the supplementary paper the suggested answer has not multiplied by number of months and in the May 2016, RTP the suggested answer has taken wages of all 55 employees and not just the 5 employees after 50 appointments) 13. U/s 80U, the threshold for deduction has been enhanced to Rs. 75,000 (from 50,000). Further, in case of severe disability the limit has been enhanced to Rs. 1,25,000 (from 1,00,000). 26

27 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 27

28 Prof. Siddharth N. Surana CA FINAL/DIRECT TAX/AMENDMENTS 28