Highlights DIRECT TAX PROPOSALS Ambalal Patel & Co. 1 st Floor, Sapphire Business Centre, Above SBI Vadaj Branch, Usmanpura, Ashram Road, Ahmedabad-380013 Email: apcca@apcca.com Website: www.apcca.com Blog: apcca.wordpress.com
Finance Minister Arun Jaitley on 29 th February, 2016, Monday announced a budget aimed at high growth, He started the Speech by saying that The Global Slow Down has not impacted the Indian Economy. The International Monetary Fund has hailed India as a bright spot amidst a slowing global economy. Here are the clause by clause changes proposed by Honorable Finance Minister in respect of Direct Tax : i. Income Tax rates: a) There is no change in Slabs of Income tax, Rates of Income Tax or Education Cess except in case of Companies. The changes in the tax rate of Domestic Companies is as under: Assessee Domestic Company Newly set-up Domestic Company (Section 115BA) Domestic Company Old Tax Rate New Tax Rate Conditions 30% 29% Turnover Below 5 crores in Prev. year i.e. in 2014-15 NA 25% (at 1) Set-up and registered after Option of 01.03.2016 Assessee) 2) Manufacturing or Production activity 3) No other activity allowed 4) Has not claimed any profit linked benefits or deductions e.g.10aa, Additional Depreciation,etc. 5) 80JJAA Deduction can be claimed 6) MAT is Applicable 30% 30% Other Than above b) In case Resident Individual having taxable income of less than Rs.5,00,000/- (after deduction under Ch-VIA), the amount of Tax Rebate u/s 87A will be increased from Rs.2000/- to Rs.5000/-. Union Direct Tax Proposals
c) However there is change in rate of Surcharge as under: Assessee Taxable income Old Surcharge Rate New Surcharge Rate Maximum Tax Rate FY Individual/HUF More than 1 Crore 12% 15% 35.535% Partnership Firm More than 1Crore 12% No Change 34.608% Domestic Company 1 Cr to 10 Crs 7% No Change 33.063% (Normal Tax) More than 10 Crs 12% No Change 34.608% MAT 1 Cr to 10 Crs 7% No Change 20.38885% More than 10 Crs 12% No Change 21.3416% Dividend Dist Tax No Change 20.3576% ii. Section 2 (23C) Electronic hearing added In the definition of the hearing, communication of data and documents through electronic mode is included. Due to which the E-Assessments can be done from 01.06.2016. iii. Withdrawal of accumulated balance from Provident Fund (Section 10(12)) and Superannuation Fund (Sec.10(13)) (W.e.f: FY ) : Current: a) Whole amount withdrawn from Provident Fund after 5 years of service is exempt. b) Whole amount of Annuity is exempt. Proposed: It is proposed that tax is payable on amount withdrawn in excess of 40% of balance as on date (60% of the total withdrawl is taxable). This is applicable for employees contribution made on or after 01.04.2016. However, any amount received in hands of Legal Heir on death, is not taxable. The taxability is protested and Govt. may rollback to the Non-taxability. Union Direct Tax Proposals
iv. Section 10(12A) Withdrawl of accumulated balance from National Pension System Fund (W.e.f: FY ) : Current: Whole amount withdrawn is taxable. Proposed: It is proposed that tax is payable on amount withdrawn in excess of 40% of balance as on date (60% of the total withdrawl is taxable). However, any amount received in hands of Legal Heir on death, is not taxable. (Section 80CCD(3) proviso) v. Section 10(15B) Interest on deposit certificate issued under Gold Monetisation Scheme (W.e.f: FY ) : Present: Whole amount of interest is taxable. Proposed: It is proposed that Whole amount of Interest is exempt. vi. Section 10(34) Dividend Income in excess of Rs.10 lacs (W.e.f: FY ) : Example: Present Provision: The amount of dividend income is exempt. Proposed Change: In case of Resident Individual, HUF and Firms, dividend received exceeding Rs.10 Lakhs is taxable @ 10% (Section 115BBDA) in the hands of the receiver of the dividend (From FY ). No expenses are allowed as deduction from such Taxable Dividend exceeding Rs. 10 lacs. AOP and BOI are not covered under this provisions. In case the amount of dividend is Rs.11,00,000/-, then amount taxable @ 10% is Rs.1,00,000/- (Rs.11,00,000 Rs.10,00,000). Union Direct Tax Proposals
vii. viii. Section 10AA Deduction to units in SEZ Deduction under this section will not be available from 01.04.2020. Section 17(2)(vii) Perquisites Change in limit of Superannuation Fund Currently the amount contributed by Employer towards Superannuation Fund of an Employee is not taxable upto limit of Rs.1,00,000/-. It is proposed to enhance the limit from Rs.1,00,000/- to Rs.1,50,000/- in a financial year. Change in Rule 6 of Part-A of Fourth Schedule Change in limit of Provident Fund Currently the amount contributed by Employer towards Employees Provident Fund of an Employee is not taxable upto limit of 12% of Basic Salary. It is proposed that the amount in excess of Rs.1,50,000/- contributed by an Employer in Provident Fund of an Employee will be taxable in hands of Employee in a financial year. ix. Section 24- Deduction from Income from House Property ( W.e.f.: FY ) Currently the interest on borrowed capital is allowed as deduction if property is acquired or constructed within 3 years from the year in which capital is borrowed. It is proposed that the period of 3 years may be increased to 5 years. x. Section 28- Taxability of Non- Compete fees received by Professionals ( W.e.f.: FY ) It is proposed that the amount of received by Professionals as Non Compete fees will now be taxable under Income from Business & Profession. Earlier it was taxable under Income from Other Sources. xi. Section 32- Proposal to reduce the rate of Depreciation to 40% for all assets. It is proposed that the rate of depreciation on all the assets may be reduced to a maximum rate of 40% in the coming years. The date of applicability of this change has not been announced. Union Direct Tax Proposals
xii. Section 35- Phasing out of Deductions and Exemptions Section Deduction Type 35(1)(ii) Scientific research to university, college, etc. 35(1)(iia) Scientific research to company 35(1)(iii) Social or Statistical research to university, college, etc. 35(2AA) Scientifice Research- National Laboratory/ I.I.T. 35(2AB) Scientific Research - In house research 35AC Contribution to approved institution for Social Development (Eg. CRY, Akshay Patra) Upto From FY From FY FY 2017-18 to 2020-21 2019-20 175% 150% 100% 125% 100% 100% 125% 100% 100% 200% 150% 100% 200% 150% 100% 100% No deduction No deduction xiii. Section 35AD- Deduction of Capital Investment in Infrastructure Projects (Similar to Section 80IA) (w.e.f.: AY 2018-19) It is proposed that any company shall be given deduction of whole capital expenditure pertaining to Developing or Maintaining and Operating or Developing, Maintaining and Operating a new Infrastructure Facility on entering into agreement with Central Government or State Government. This provisions are similar to Section 80IA but the only difference is that Section 80IA gives deduction of Profit whereas Section 35AD gives deduction of Capital Expenditure. xiv. Section 36(1)(viia)- Provision for Bad & Doubtful debts made by NBFC (w.e.f.: FY ) Deduction upto 5% of Total Income (before deduction of Chapter VIA) is allowed as provision for bad & doubtful debts in case of NBFCs. Union Direct Tax Proposals
xv. Section 40(a)(ib) Disallowance of amount on which Equalisation Levy has not been deducted (w.e.f.: FY ) It is proposed that where an amount is payable for services from non-resident and equalization levy is not deducted and paid, the amount of such expense shall not be allowed as deduction. However if the equalization levy is paid before filing the return of income, then the same will be allowed as deduction. xvi. Section 43B- Deductions on actual payment basis (w.e.f.: FY ) Amount due to Indian Railways for use of assets of Indian Railways shall be allowed as deduction only if the payment is made on or before the due date, just like any other duties and taxes under Section 43B. xvii. Changes in Presumptive taxation and Tax Audit Limit (w.e.f.: FY ) Presumptive Taxation(Individuals, HUF and Partnership Firms) The limit of turnover for governing under this section has been increased as under: Sections Nature of Activity Old Turnover Limit New Turnover Limit 44AD Business 1 crores 2 crores 8% 44ADA (New) Profession NA 50 Lakhs 50% Rate Presumptive Profit of Note:- 1) In case of Partnership firms, the amount of profit after deducting interest and remuneration paid to partners shall be more than 8% or 50% as may be applicable of total turnover. Previously the deduction of interest and remuneration was allowed from such profit. 2) For Section 44AD Business, where once an assesse has shown profit as per Section 44AD in a Financial Year, then he has to follow the same for lifetime. And in case he does not show profit as per Section 44AD in subsequent year, then he cannot show the profit as per Section 44AD for next 5 years. For Example: Union Direct Tax Proposals
Asst Year Turnover Profit Remarks 2017-18 1 crore 8 lacs As per 44AD 2018-19 1 crore 4 lacs Not as per 44AD 2019-20 to 2024-25 For this 5 years profit cannot be shown as per 44AD. (Books of accounts are required to be maintained). 2025-26 From this 6 th year he can opt for 44AD Tax Audit Limits Section 44AB The limits of tax audit has been changed as under: Particulars Old Turnover Limit New Turnover Limit Business 1 crore No Change Profession 25 Lacs 50 Lacs xviii. Section 47- Transaction not regarded as transfer for Capital Gains (w.e.f.: FY 2016-17) a) In case of Individuals assesse only, redemption of Sovereign Gold Bonds issued by RBI will not be considered as transfer and thus there will not be any Capital Gains Tax. b) In case of conversion of Company into LLP, one more condition is added that the Total assets in books of accounts of company in any of the 3 Previous Year preceding the previous year in which conversion took place does not exceed Rs.5 crores. xix. Section 48- Computation of Capital Gains (w.e.f.: FY ) a) In case of redemption of Sovereign Gold Bonds issued by RBI, benefit of indexation in case of Long Term Capital Gain will be available. b) In case of Non Resident, while calculating capital gain on account of redemption of Rupee denominated bond (Capital Index Bonds) of Indian company, gain arising due to exchange rate fluctuation shall be allowed as deduction from Sale Consideration. Union Direct Tax Proposals
xx. Section 50C- Adaption of Stamp duty value in case of sale of Immovable Property (w.e.f.: FY ) It is proposed that when any amount of consideration was paid by way of Account Payee cheque, D.D. or ECS before the agreement to sale (banakhat) and sale deed is executed on date after that, then the Sale Consideration shall be the stamp duty valuation on the date of agreement to sale (banakhat) and NOT THE VALUE ON DATE OF SALE DEED. xxi. Section 54EE- Investment of Capital Gain in units of Specified Funds (w.e.f.: FY ) It is proposed to provide exemption from Capital Gain tax if the capital gain proceeds are invested by an Assessee in the units of specified fund not exceeding 50 Lacs as may be notified within a period of Six Months from date of transfer and lock in period of 3 years is applicable. (Similar Provision to Section 54EC). xxii. Section 56- Income from Other Sources (w.e.f.: FY ) It is proposed that Shares received as a result of Demerger or Amalgamation of a company by individual or HUF will be exempt. xxiii. Section 80EE- Deduction on account of Interest on Housing Loan (w.e.f.: FY 2016-17) With effect from 01.04.2016, it is proposed that deduction of Rs.50,000/- above Rs.2,00,000/- (u/s.24) will be allowed, subject to following conditions: Conditions Upto 31.03.2016 W.e.f. 01.04.2016 1) Residential house purchased First First 2) Loan Sanctioned between FY 2013-14 FY 3) Amount of Loan Below Rs.25 lacs Below Rs.35 lacs 4) Value of Residential House Below Rs.40 lacs Below Rs.50 lacs 5) Amount of deduction Max Rs.1 lacs Rs.50,000/- for every year till (One time repayment of loan. Deduction) Union Direct Tax Proposals
xxiv. Section 80GG- Deduction on account of Rent paid (Other than HRA) (w.e.f.: FY ) With effect from 01.04.2016, it is proposed that maximum deduction of Rs.5000/- per month will be allowed, subject to following conditions: Conditions Upto 31.03.2016 W.e.f. 01.04.2016 1) Maximum deduction Rs.2000/- per month Rs.5000/- per month 2) Excess of 10% of Rent paid 10% of Total No Change Income Income 3) Max 25% of Total Maximum upto 25% of the No Change Income Total Income Lower of the above will be available. xxv. Restriction on claim of various deductions. Section Description Available for Not Available for 80IA(4)(i) Development of Projects started Projects started Infrastructure before 31.03.2017 after 01.04.2017 Facility like Road, (Will continue to Bridges, etc. claim benefit after 01.04.2017) 80IAB(1) Development of SEZ Projects started Projects started 80IB(9)(ii),(iv),(v) Industrial undertaking other than Infrastructure Projects before 31.03.2017 Projects started before 31.03.2017 after 01.04.2017 Projects started after 01.04.2017 Note:- The deductions in case of 80IA for Development of Infrastructure Facility like Road, Bridges, etc. shall now be available under Section 35AD. Only difference is that Section 80IA gives deduction of Profit whereas Section 35AD gives deduction of Capital Expenditure. Union Direct Tax Proposals
xxvi. xxvii. Insertion of New Section 80IAC for deduction in respect of Start-ups. a) Deduction available to Start-Up Business involving the activities like Innovation, Development, Deployment or Commercialization of new products, processes or services driven by Technology or Intellectual Property. b) Start-Up must be incorporated between 01.04.2016 to 31.03.2019. c) The amount of Turnover of the business does not exceed Rs.25 crores in any previous year during 01.04.2016 to 31.03.2021. d) Business is approved and holds certificate from Inter-Ministerial Board of Certification as notified by the Central Government. e) 100% of Profits and Gains are eligible for deduction. f) Benefit can be availed for 3 consecutive Assessment Years out of 5 years. g) Deduction is available from FY. h) Subject to certain other conditions. Insertion of New Section 80IBA for deduction in respect of Housing Projects. Particulars 4 Metro Cities 25 kms Non Metro cities from Muncipal Limit Plot Size Above 1000 sq. mtrs. Above 2000 sq.mtrs Built-up area of Residential Less than 30 sq.mtrs. Less than 60 sq.mtrs units Commercial Not more than 3% of total Not more than 3% of total Establishments built-up area built-up area a) The project has to be approved by Competent Authority between 01.06.2016 to 31.03.2019. b) The assesse is required to complete the said project within 3 years from the date of approval, failing which the entire deduction claimed in earlier years shall be deemed as his income. c) Only one unit is allotted to an individual in the project and no other unit has been allotted to his wife or minor children. d) Separate books of accounts are required to be maintained for such projects. e) The deduction shall be available to Developer only and not available to Work- Contractor, even if the project is allotted by Central or State Government. f) 100% of Profits and Gains are eligible for deduction. g) Deduction is available from FY. Union Direct Tax Proposals
xxviii. Substitution of Section 80JJAA for deduction of 30% in respect of New Employees Cost. (w.e.f. FY ) Particulars Old Section New Section Applicable to Manufacturing Units All units covered by Audit u/s 44AB No. of Employees increased No. of Days employed in a FY Period of deduction Minimum 100 workmen and increase of 10% per year of New Workmen Minimum 300 days Additional employees employed during the year and no such condition of increase Minimum 240 days 3 years from the Previous No change Year Covered Employees All covered Employees below salary of Rs.25000/- per month and included in EPF. Mode of Payment of salary Any Other than Cash xxix. Section 112(1)(c)(iii) Tax on Long Term Capital Gain on shares of unlisted companies by Non Resident. (W.e.f. FY ) It is proposed that the Long Term Capital Gain on Shares of Unlisted Company for Non Resident will be taxable at 10%, without indexation. xxx. Insertion of Section 115BBF for taxation of Income from Royalty @ 10% in respect of New Patents developed and registered in India. (w.e.f. FY ) It is proposed that the Royalty Income received in respect of New Patents developed and registered in India, will be taxable at 10%. No expense is allowed as deduction. While calculating the MAT, income from royalty shall be ignored if tax is paid as per this provisions. Union Direct Tax Proposals
xxxi. Changes in Section 115JB MAT. (w.e.f. FY ) a) In case of a company being a unit of International Financial Service center (Like GIFT City) established after 01.04.2016 and deriving its income only in convertible foreign exchange, MAT is payable @ 9%. b) MAT will not be applicable to all Foreign Company retrospectively from AY 2001-02. c) Patent Income received on new patents as taxed under Section 115BBF shall be excluded for calculation of MAT under this Section. xxxii. Changes in Section 115JH Place of Effective management. The applicability of Place of Effective Management rules has been deferred for 1 more year. Government may issue guidelines for foreign companies which may be considered as resident due to POEM Rules. xxxiii. Changes in Section 115O -Dividend Distribution Tax (w.e.f. FY ) No Dividend Tax is payable on dividend distributed by Special Purpose Vehicle (SPV) Domestic Company to business trust out of its current income. Further any income distributed by Business trust to Unit Holder will not be taxable under Section 115UA. Also no Dividend Tax is payable on dividend distributed by a company being a unit of International Financial Service center established after 01.04.2016 and deriving its income only in convertible foreign exchange. xxxiv. Exit Tax for Trusts Section 115TD (w.e.f. 01.06.2016) Any charitable trust registered under Section 12AA in the following cases have to pay tax @ Maximum Marginal Rate (30%) on the amount of Accreted Income: a) Change of Object from Charitable to Non-Charitable. b) Merger with the trust having Non Charitable Object c) On dissolution of the trust the assets are transferred to the trust having Non Charitable Object. Accreted Income means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the method of valuation as may be prescribed. Union Direct Tax Proposals
xxxv. Changes in Section 139 Filling of return of Income (w.e.f. FY ) Current: a) Any Individual, HUF, AOP or BOI is required to file the return of income, if his income before allowing deduction u/s. 10A, 10B, 10BA or Chapter VIA is above the basic exemption limit. b) Belated Return u/s. 139(4) can be filed before one year from the end of specific assessment year (upto AY, return can be filed till 31.03.2018) c) Belated return as above cannot be revised. d) If return is filed without paying Self Asst Tax then it is considered as Defective Return. Proposed: a) It is proposed that in case of Individual, HUF, AOP or BOI in addition to above Income from Long term Capital Gains (exempt u/s.10(38)) is also required to be added to calculate the basic exemption limit. b) Belated return u/s. 139(4) can be filed before the end of specific assessment year (From AY 2017-18, return can be filed till 31.03.2018), so Extra Period of ONE YEAR is now NOT AVAILABLE to file Belated Return. c) Belated return filed as above can be revised. d) If the return is filed without paying Self Asst Tax, then it will not be considered as Defective Return. xxxvi. Changes in Section 143 Issue of Intimation and selection of case for Scrutiny Assessment (w.e.f. FY ) a) Any difference of Income as per Form 26AS and as per Return of Income filed will be added while processing the return u/s 143(1). However 30 days time will be given to explain and rectify the difference, otherwise the amount will be added in income. b) Any amount reported by Auditor as disallowance and the same has not been disallowed in Income Computation will be added while processing u/s 143(1). c) It is compulsory to issue intimation u/s 143(1) even if the case is selected for Scrutiny Assessment u/s 143(3). Union Direct Tax Proposals
xxxvii. xxxviii. Changes in Section 153 - Time Limit of Completion of Assessment or Reassessment and Re-computation (w.e.f. 01.06.2016) a) The due date for completion of assessment proceeding u/s. 143 or 144 has been reduced from 24 months to 21 months from the end of relevant Asst Year i.e. to be completed before 31 st December instead of 31 st March. b) The due date for completion of re-assessment proceeding u/s. 147 has been reduced from 12 months to 9 months from the end of Financial year in which notice was issued i.e. to be completed before 31 st December instead of 31 st March. Changes in Provisions related to Tax Deducted at Source and Tax Collected at source (w.e.f. 01.06.2016) a) Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act Present Heads Section Existing Threshold Proposed Threshod Limit (Rs.) Limit (Rs.) 192A - Payment of accumulated balance 30,000 50,000 due to an employee 194BB - Winnings from Horse Race 5,000 10,000 194C - Payments to Contractors Aggregate annual limit of 75,000 Aggregate annual limit of 1,00,000 194LA - Payment of Compensation on 2,00,000 2,50,000 acquisition of certain Immovable Property 194D - Insurance commission 20,000 15,000 194G - Commission on sale of lottery tickets 1,000 15,000 194H - Commission or brokerage 5,000 15,000 b) Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act Present Heads Section Existing Rate Proposed Rate of of TDS (%) TDS (%) 194DA Payment in respect of Life Insurance 2% 1% Policy 194EE Payments in respect of NSS Deposits 20% 10% 194D Insurance commission 10% 5% 194G Commission on sale of lottery tickets 10% 5% 194H Commission or brokerage 10% 5% Union Direct Tax Proposals
c) Form 15G / H can be furnished for NO TDS on payments made in respect of Rent of Immovable Property. d) Tax Collected At Source (TCS): Nature of Goods Rate of Mode of Payment TCS (%) Sale of Motor Vehicle, value exceeding 10 Lacs 1% Any mode of payment Sale of any goods or service except bullion and 1% In cash only (Note-1) jewelry Note - 1: In case tax has been deducted by the buyer on the amount then TCS is not required to be collected. xxxix. Requirement of furnishing PAN in case of payment made to Non Residents (w.e.f. 01.06.2016) Current: If a Non Resident does not hold a PAN, then TDS is required to be deducted at 20.6% or rate applicable as per Section 195 or DTAA, whichever is higher. Proposed: It is proposed that this provision will not be applicable for Payments made to Non Residents. Hence if the rate of TDS as per Section 195 or DTAA is lower than 20.6%, then TDS can be deducted at such lower rate. Subject to furnishing of other documents as may be prescribed. xl. Changes in Section 211 - Provisions related to Advance Tax (w.e.f. 01.06.2016) 1) It is proposed to amend the advance tax payment schedule for assesse other than companies and bring it in line with payment made by companies. So now advance tax has to be paid in FOUR INSTALLMENTS INSTEAD OF THREE INSTALLMENTS. 2) It is proposed that the eligible assesse opting for Section 44AD Presumptive taxation shall be required to pay advance tax of 100% in one installment on or before 15 th March of Financial year. Earlier there was no such provisions. Union Direct Tax Proposals
xli. Changes in levy of Penalty Section 270A & 270AA (w.e.f. FY ) Upto 31.03.2016 Section 271(1)(c) 1) Penalty on account of Concealment of Particulars of Income or Furnishing of Inaccurate particulars of Income is leviable @ 100% to 300% of amount of tax evaded. 2) Appeal can be filed against such orders. From 01.04.2016 Section 270A Section Description Rate of Penalty 270A 1) Penalty of Under Reporting and 50% of Tax Evaded 2) Penalty of Mis-Reporting of Income 200% of Tax Evaded Section 270AA Immunity from Imposition of Penalty levied u/s.270a Immunity from Penalty can be granted on following conditions: 1) This immunity is available for Penalty of Under reporting of Income cases only. 2) Application to AO who has imposed penalty within 30 days from the date of order u/s. 143(3) or 147. 3) Application can be made only if assesse has paid Tax and Interest payable as per order u/s. 143(3) or 147. 4) No appeal has been filed against the order u/s. 143(3) or 147 5) The order passed under this section for imposing penalty is not appealable. xlii. Changes in levy of Penalty in Search Cases 271AAB (w.e.f. FY ) It is proposed that the rate of penalty on undisclosed income in case of search shall be levied at flat rate of 60%. Earlier the penalty was leviable between 30 90% of the undisclosed income. Union Direct Tax Proposals
xliii. Changes in stay of Demand by paying 15% - Instruction No.1914 dated.21.03.1996 as amended on 29.02.2016(w.e.f. 29.02.2016) It is instructed to all the AO, that even if the Appeal has been filed he may ask for payment of 15% of disputed demand and balance can be stayed till the disposal of first Appeal. xliv. Changes in period of holding in case of Shares of Private Company As mentioned by Honorable Finance Minister in his speech, it is proposed that the period of holding will be reduced to 2 years from 3 years to consider the shares of Private Ltd Company as Long Term Capital assets. xlv. Change in section 14A- Rule 8D Calculation: It is proposed that disallowance under section 14A will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D (Effective date yet not notified). Union Direct Tax Proposals
Income Declaration Scheme 2016 An opportunity is proposed to be provided to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all to forty-five per cent of such undisclosed income declared at Fair Market Value as on 01.04.2016. The scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to the date to be notified by the Central Government in the official gazette. The scheme is proposed to be made applicable in respect of undisclosed income of any financial year upto 2015-16. Tax is proposed to be charged at the rate of thirty per cent on the declared income as increased by surcharge at the rate of twenty five per cent (Effective 7.5%) of tax payable (to be called the Krishi Kalyan cess). A penalty at the rate of twenty five per cent (Effective 7.5%) of tax payable (Totalling to 45% of Declared Income) is also proposed to be levied on undisclosed income declared under the scheme. It is proposed that following cases shall not be eligible for the scheme: 1) where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C, or 2) where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of the Act has not expired, or 3) where information is received under an agreement with foreign countries regarding such income, 4) cases covered under the Black Money Act, 2015, or 5) persons notified under Special Court Act, 1992, or 6) cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988. It is proposed that payment of tax, surcharge and penalty may be made on or before a date to be notified by the Central Government in the Official Gazette and non-payment up to the date so notified shall render the declaration made under the scheme void. Union Direct Tax Proposals
It is proposed to provide that declarations made under the scheme shall be exempt from wealth-tax in respect of assets specified in declaration. It is also proposed that no scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in respect of such declarations and immunity from prosecution under such Acts be provided. Immunity from the Benami Transactions (Prohibition) Act, 1988 is also proposed for such declarations subject to certain conditions. It is proposed to provide that where a declaration under the scheme has been made by misrepresentation or suppression of facts, such declaration shall be treated as void. It is also proposed that nothing contained in the Scheme shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Scheme. In cases where any declaration has been made but no tax and penalty referred to the scheme has been paid within the time specified, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made. In cases where any income has accrued, arisen or received or any asset has been acquired out of such income prior to commencement of this Scheme, and no declaration in respect of such income is made under the Scheme such income shall be deemed to have accrued, arisen or received, or the value of the asset acquired out of such income shall be deemed to have been acquired or made, in the year in which a notice under section 142, section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly. It is further proposed that if any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty by an order not after the expiry of a period of two years from the date on which the provisions of this Scheme come into force and such order be laid before each House of Parliament. It is proposed that the Central Board of Direct Taxes under the control of Central Government be provided the power to make rules, by notification in the Official Gazette, for carrying out the provisions of this Scheme and such rules made be laid before each House of Parliament in the manner provided in the scheme. Union Direct Tax Proposals
EQUALISATION LEVY A new chapter has been added in the Finance Act 2016, named Equalisation Levy. Highlights of the same is as under: Applicability: This levy is applicable in following cases: 1) To a person resident in India and carrying on business activities (B2B Transactions only) and Non Resident having Permanent Establishment in India. 2) Making payment to Non Resident not having PE in India above Rs.1 lacs 3) For services such as Online Advertisement, any space or any other service for Online Advertisement and any other service as may be notified. Example: Google Adwords, Monster, etc. Rate of Deduction: The Equalisation Levy is required to be deducted @ 6% on the consideration paid or payable to the Non Resident. Date of Payment: The amount deducted as above has to be paid to the credit of Government by 7 th Day of next month. Furnishing of Statements: Statement has to be furnished to AO or other specified Authority in prescribed form within prescribed time at the end of Financial Year. The effective date of applicability of Equalisation Levy is not yet published in Official Gazette. Indirect Tax Proposals will Follow Soon.. Union Direct Tax Proposals