On May 5, 2016, the
Lok Sabha passed the Finance Bill with a few changes in the Finance Bill which was presented
originally in the Lok Sabha on February 29, 2016.
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Particullars
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Finance BIll 2016
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Finance Bill Passed by Lok Sabha
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section
2(42A)
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Unlisted Share held for a period of
> 36 month, then LTCA otherwise STCA
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Unlisted Share held for a period of
>24 month, then LTCA otherwise STCA
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Contribution
to PF
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Lower of the following out of ER's Contribution deemed as income of
Employee
# In excess of 12% of Salary
Or
1,50,000
And
Any withdrawal from the accumulated balance in the provident fund
account, which is attributable to employee's contribution made on or after
April 1, 2016, shall not be chargeable to tax up to 40 % of such accumulated
balance.
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LokSabha withdraws such amendment to the
Fourth Schedule and maintains the status-quo for the taxability of
contribution to and withdrawal from the provident fund account.
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TCS
in case of Motor Car
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Every seller of a
motor vehicle shall collect TCS at the rate of 1% of value of motor car if
such value exceeds ten lakh rupees.
Such tax was
proposed to be collected from the buyer under section 206C at the time of
debiting the amount receivable or at the time of receipt, whichever happened
earlier.
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Every seller of a
motor vehicle shall collect TCS at the rate of 1% of value of motor car if
such value exceeds ten lakh rupees.
Such tax shall be collected only at the time of receipt of
consideration.
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Processing
of Reurn u/s 143(1)
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Before the finance bill 2016 the processing of return u/s 143(1) was
not mandatory if there has been issued the notice u/s 143(2). The Finance Bill, 2016 proposed that the processing of return u/s 143(1)
is mandatory even if there has been issued the notice u/s 143(2) and the
return shall be processed before issuing assessment order under section
143(3).
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The processing of return u/s 143(1) is
mandatory but not necessary before the expiry of one year from the end of the
financial year in which return is furnished, where a notice is issued for
scrutiny assessment under Section 143(2).
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25% tax rates on certain domestic Co
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The Finance Bill, 2016
proposed insertion of new section 115BA :
The domestic companies engaged in the
business of manufacturing or production of any article or thing shall be
liable to pay tax @ 25%, provided such company has been set-up and registered
on or after March 1, 2016.
The option shall be exercised on or
before due date u/s 139(1) for the relevant previous year and once the option
is exercised cannot be withdrawn for same or any other financial year.
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The
Finance Bill passed by Lok Sabha provides that benefit of concessional
tax rate shall also be available to the companies engaged in research in
relation to or distribution of article or thing manufactured or produced by
it.
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Income
Declaration Scheme, 2016 proposed by Finance Bill, 2016 and ammended by Lok
sabha
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The taxpayer will have the opportunity to declare their undisclosed
income and pay tax, surcharge and penalty in aggregate at 45% of such
undisclosed income under Income Declaration Scheme, 2016 and where the income chargeable to tax is
declared in the form of investment in any asset, the fair market value of
such asset as on the date of commencement of this scheme shall be deemed to
be the undisclosed income.
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The cost of acquisition of such asset shall be deemed to be the fair
market value taken into account for the purpose of this scheme.
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Section
80- IAC
Deduction
for start-up
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The 100% deduction for any 3 consecutive assessment years out of 5
years beginning from the year in which eligible startup is incorporated to an
'eligible Start-up' engaged in an eligible business.
The 'eligible start-up' is proposed to
be defined to mean a 'company' engaged in an eligible business.
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The Finance Bill, 2016 as
passed by the Lok Sabha extends the definition of 'eligible start-up' to
include 'limited liability partnership' also.
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The
Additional tax on dividend paid by receiver of dividend
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The additional tax of 10% will be
paid if amount of dividend received by
a taxpayer exceeds Rs. 10 Lakhs.
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The Lok Sabha clarified that dividend
whether paid or declared or distributed by one or more domestic companies,
the aggregate of dividend shall be considered for the limit of Rs.10 lakhs
but Tax shall be payable only on the amount of dividend exceeding Rs 10
lakhs.
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Deduction
u/s 35CCC in respect of expenditure on agricultural extension project
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Proposed to limit the deduction of 100%
(Earlier it was 150%) w.e.f 01.04.2018
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The Lok Sabha defers the applicability of the provision from
01.04.2018 to 01.04.2021
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Section
80-IBA - Profit linked deduction on housing projects
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Proposed to insert a section 80-IBA for deduction from profit arising
from the business of developing and building housing projects subject to
fulfillment of certain conditions where project is located within cities of
Chennai, Delhi, Kolkata or Mumbai or within acceptable distance from
municipal limits
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The Lok Sabha clarified that
The distance from municipal limits shall be measured aerially.
The 'built-up area' of the residential
unit shall be relevant to check if the size of the residential unit is within
threshold limit .
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Tax
on Accreted Income of Trusts
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As per Chapter XII-EB, containing Section 115TD, 115TE and 115TF,
under the Act to provide that 'accreted income' of a trust or institution registered
under section 12AA shall be chargeable to tax at the MMR in following
circumstances:
** If the trust or institution gets
converted into any form which is not eligible under section 12AA;
** If the trust or institution gets
merged into any entity which is not eligible under section 12AA;
** If the trust or institution, in
case of dissolution, fails to transfer its assets to exempt entities under
section 12AA and section 10(23C) (iv), (v), (vi) & (via).
Accreted Income : The
difference between the fair market value of the assets and liabilities of the
trust or institution
Time-limit
to pay tax on accreted income:
14 days from date of receipt of order
cancelling registration or date of order rejecting application for fresh
registration
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Immunity
from penalty and prosecution in certain cases
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section 270AA provides
immunity to the assessee from penalties under section 270A and
prosecution under section 276C if the assessee pays the tax and interest
within the time prescribed by the notice, provided assessee does not file an
appeal against the order.
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LokSabha also includes immunity from prosecution under Section 276CC
in the new Section 270AA
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Rate
of MAT for unit located in IFSC
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The assessee shall pay the the tax under MAT @ 9% instead of 18.5%
provided
**The taxpayer is a unit
established in IFSC
**The unit must be a new unit
established on or after April 1, 2016
** It should derive its income
solely in convertible foreign exchange
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LokSabha withdraws the condition of establishment of new IFSC unit
after April 1, 2016
Hence all the unit whether established before April 1, 2016 or later
can avail the benefit if they fulfill other two condition
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Amortization
of spectrum fee
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35ABA provides that the spectrum fee paid for auction of airwaves
shall be allowed to be deducted over the useful life of the spectrum.
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LokSabha also provides for consequences if specified conditions are
not fulfilled subsequently, the
deduction shall be treated as wrongly allowed and the Assessing Officer may
re-compute the total income of the assessee for the respective previous years
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Transfer
of shares through a recognized stock exchange located in IFSC
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it was proposed to amend the section 10(38) of the Income-tax Act to
provide that LTCG arising from transfer of equity shares, equity oriented
mutual fund or units of business trust shall be exempt from tax if the transaction is undertaken in
foreign currency through a recognised stock exchange located in an IFSC, even
if STT is not paid in respect of such transactions.
However, no such amendment was proposed to section 111A
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The Finance Bill, 2016 as passed by the LokSabha makes similar
amendment to section 111A to provide that short-term capital gains arising
from transfer of underlying securities shall be taxable at 15%
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Tax
on income from patent developed and registered in India
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The royalty income in respect of a patent
developed and registered in India will be taxable at the rate of 10%b as per
section 115BBF proposed to be inserted by finance bill 2016.
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The LokSabha inserts two new sub-sections
in Section 115BBF to provide as follows:
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