AMENDMENTS TO FINANCE BILL, 2017 Reinventing India INDIA BUDGET 2017-18
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Contents Sl. No. Particulars Page No. A. DIRECT TAX 1 Definition of Income u/s 2(24) to include income under proposed Sec. 56(2)(x) 3 2 Sec. 56(2)(x) not to apply to trust created for the benefit of relatives 3 3 Mandatory Quoting of Aadhaar Number while filing return of income and 3 making application for PAN 4 Reduction in limit of cash transactions [Sec. 269ST] 4 5 TCS on jewellery, goods and services u/s 206C(ID) removed 4 6 Omission of redundant clause in Sec. 143(3) 4 7 Indirect transfer provisions clarified [Sec. 9] 5 8 Terms used but not defined in the agreement specified in Sec. 90 and 90A to 5 have same meaning as assigned in the Act [Sec. 90 & 90A] 9 Thin Capitalization introduced - Limitation of Interest deduction in certain 5 cases [Sec. 94B] B. INDIRECT TAX 10 Procedure on receipt of application by the Settlement Commission [Sec. 32F 6 of the Central Excise Act, 1944] 11 Procedural amendments relating to rectification of order by Settlement 7 Commission [Sec. 32F(5A) of the Central Excise Act, 1944] 12 Proposed amendments under Sec. 129 of the Customs Act, 1962 7 13 Proposed amendments under Sec. 105(1) of the Finance Act, 1994 7
THE FINANCE BILL, 2017 AS APPROVED BY THE LOK SABHA & THE RAJYA SABHA, HAS GOT ASSENT OF HON BLE PRESIDENT OF INDIA ON 31ST MARCH, 2017 AND HAS BEEN ENACTED AS FINANCE ACT 2017. THE AMENDMENTS TO FINANCE BILL, 2017 ARE HIGHLIGHTED here: 2 INDIA BUDGET 2017 18
SECTION A DIRECT TAX 1 Definition of Income u/s 2(24) to include income under proposed Sec. 56(2)(x) [w.e.f. AY 2018-19] Earlier Proposal [Para 8.7 of Book] New clause (x) in Sec. 56(2) was inserted to cover receipt of sum of money or property by any person without consideration or for inadequate consideration (in excess of ` 50,000) on or after 01-04-2017. Consequential amendment made in the definition of income u/s 2(24) by inserting a new clause (xviia) to include any sum of money or value of property referred to in Sec. 56(2)(x) within its scope. 2 Sec. 56(2)(x) not to apply to trust created for the benefit of relatives [w.e.f. AY 2018-19] Earlier Proposal [Para 8.7 of Book] Exemption from New clause (x) in Sec. 56(2) was provided to specified trusts and institutions referred to in Sec. 10(23C) or trusts registered u/s 12AA. Exemption from the section is extended to any sum of money or any property received from an individual by a trust created or established solely for the benefit of relative of the individual. Further, it is also extended to a trust registered u/s 12A. 3 Mandatory Quoting of Aadhaar Number while filing return of income and making application for PAN [Sec. 139AA] [w.e.f. 01-07-2017] New Sec. 139AA is proposed to be inserted requiring mandatory quoting of Aadhaar Number in the Return of Income and application form for PAN from 1st July onwards. In case a person does not possess Aadhaar Number, Enrolment ID of Aadhaar application form issued at the time of enrolment shall be quoted in PAN application form or in return of income. 3
Every person who has been allotted PAN as on 01-07-2017 and eligible to obtain Aadhaar number (Resident individual as per Aadhar Act), shall intimate his Aadhaar number to such authority and in such form and manner as may be prescribed. In case of failure to intimate the Aadhaar number, the PAN allotted to the person shall be deemed to be invalid and the other provisions of the Income Tax Act, 1961 shall apply, as if the person had not applied for PAN allotment. 4 Reduction in limit of cash transactions [Sec. 269ST] [w.e.f. AY 2018-19] Earlier Proposal [Para 7.1 of Book] In the Finance Bill, new Sec. 269ST was inserted to provide that no person shall receive a sum of ` 3 lacs or more, otherwise than by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account: (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person. The limit of cash transaction has been reduced from ` 3 lacs to ` 2 lacs. (a) in aggregate from a person in a day; 5 TCS on jewellery, goods and services u/s 206C(ID) removed [w.e.f. AY 2018-19] Earlier Proposal [Para 7.7 of Book] Hitherto, provisions of Sec. 206C(1D) provides for TCS by the seller @ 1% in case of sale of bullion or any other goods in cash exceeding ` 2 lacs and jewellery in cash exceeding ` 5 lacs. It was proposed to reduce the limit of cash sale of jewellery to ` 2 lacs by removing special mention of jewellery in Sec. 206C and including the same in any other goods. Sec. 269ST has been inserted by the Finance Bill 2017 restricting permitted transaction in cash to ` 2 lacs. Accordingly, it has been proposed to omit sub-sections (1D) & (1E) of Sec. 206C. 6 Omission of redundant clause in Sec. 143(3) [w.r.e.f. 01-06-2016] Consequent to the amendment by Finance Act, 2016 to Sec. 143(2), reference to clause (i) and (ii) of Sec. 143(2) in Sec. 143(3) had become redundant. Therefore, Sec. 143(3) is now proposed to be amended to remove separate references to clauses (i) and (ii) of Sec. 143(2) and refer to Sec. 143(2) only. 4 INDIA BUDGET 2017 18
7 Indirect transfer provisions clarified [Sec. 9] [w.r.e.f. AY 2012-13] Earlier Proposal [Para 5.1 of Book] In the Finance Bill, explanation 5A was proposed to be inserted to Sec. 9(1)(i) to clarify that indirect transfer provisions shall not be applicable to an asset or capital asset held by a non-resident by way of investment, directly or indirectly, in a FII as referred to in clause (a) of the Explanation to Sec. 115AD and registered as Category-I or Category-II Foreign Portfolio Investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 made under the SEBI Act, 1992 w.r.e.f. AY 2012-13. Explanation 5A which was proposed to be inserted has not been inserted. However, a proviso has been inserted in explanation 5 to clarify that indirect transfer provisions shall not be applicable to an asset or capital asset held by a non-resident by way of investment, directly or indirectly, - In a FII as referred to in clause (a) of the Explanation to section 115AD for AY commencing on or after 01-04-2012 but before 01-04-2015 w.r.e.f. 01-04-2012; - In Category-I or Category-II Foreign Portfolio Investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 made under the SEBI Act, 1992 w.e.f. 01-04-2015. 8 Terms used but not defined in the agreement specified in Sec. 90 and 90A to have same meaning as assigned in the Act [Sec. 90 & 90A] [w.e.f. AY 2018-19] Earlier Proposal [Para 5.7 of Book] In the Finance Bill, it was proposed to clarify vide insertion of Explanation 4 to Sec. 90 and 90A respectively where any term used in an agreement entered into u/s 90 and 90A is defined under the said agreement, the said term shall be assigned the meaning as provided in the said agreement and where the term used but not defined in the agreement, but is defined in the Act, it shall be assigned the meaning as defined in the Act and any explanation issued by the Central Government. Any explanation has been substituted with explanation, if any. 9 Thin Capitalization introduced - Limitation of Interest deduction in certain cases [Sec. 94B] [w.e.f. AY 2018-19] Earlier Proposal [Para 5.10 of Book] In the Finance Bill, it was proposed to insert new Sec. 94B to limit interest deduction in certain cases, the provisions of which is triggered only when the borrower pays interest or other similar consideration deductible in computing income chargeable under the head Profits and gains of business or profession in respect of any debt issued by a non-resident, being an associated enterprise of such borrower exceeds ` 1 Cr. Pays interest or other similar consideration has been substituted with incurs any expenditure by way of interest or of similar nature. 5
SECTION B INDIRECT TAX 10 Procedure on receipt of application by the Settlement Commission [Section 32F of the Central Excise Act, 1944] Earlier Proposal [Para 9.3.2 of Book] In the Finance Bill, 2017, sub-section (3) of Sec. 32F of the Central Excise Act, 1944 was amended to empower Settlement Commission to call for report along with the relevant records from the jurisdictional Principal Additional Director General/ Additional Director General of Central Excise Intelligence. In the Finance Bill passed by the Lok Sabha, the power of Settlement Commission to call for report has been restricted only to Principal Commissioner of Central Excise or Commissioner of Central Excise Similar changes has been proposed in Sec. 127C of the Customs Act, 1962 6 INDIA BUDGET 2017 18
11 Procedural amendments relating to rectification of order by Settlement Commission [Section 32F(5A) of the Central Excise Act, 1944] Earlier Proposal [Para 9.3.2 of Book] In the Finance Bill, 2017, Sec. 32F(5A) has been inserted to grant the Settlement Commission powers to rectify any error in its order as apparent on the face of record within three months from the date of passing of the order. Such rectification was proposed to be made either suo moto by the Settlement Commission or when such error is brought to its notice by jurisdictional Principal Commissioner of Central Excise or Commissioner of Central Excise or Principal Additional Director General/ Additional Director General of Central Excise Intelligence or the applicant. In the Finance Bill passed by the Lok Sabha, Principal Additional Director General/ Additional Director General of Central Excise Intelligence has been excluded from ambit of the above section. Similar changes has been proposed in Sec. 127C of the Customs Act, 1962. 12 Proposed amendments under Section 129 of the Customs Act, 1962 In the Finance Bill passed by the Lok Sabha, a sub-section (7) to Section 129 of the Customs Act, 1962 has been inserted wherein terms of service of the President, Vice-President or any other member of the Appellate Tribunal appointed after the commencement of the Finance Act, 2017 has been stated to be governed by Section 179 of the Finance Bill, 2017. 13 Proposed amendments under Section 105(1) of the Finance Act, 1994 Earlier Proposal [Para 11.2.4 of Book] In the Finance Bill, 2017 Sec. 105 (1) was inserted in the Finance Act, 1994 where-in exemption from levy of service tax was granted to services provided by Army, Naval and Air Force Group Insurance Funds to `the members of the Army, Naval and Air Force by way of life insurance covered under the group insurance schemes of the Central Government during the period of 10th September, 2004 to 1st February, 2016. In the Finance Bill 2017 introduced in the Lok Sabha, anomaly relating to the period of exemption has been removed and the exemption has been extended from 1st February, 2016 to 1st February, 2017. 7
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