The Lok Sabha on 5th May 2016 passed the Financial Bill 2016 and on 11th May 2016, the upper house known as Rajya Sabha passed the same bill with certain amendments. So this Financial Bill 2016 received the Presidential assent on 14th May 2016 and became Finance Act 2016. Now you can observe the latest Amendments of Finance Act 2016.
Amendments to Finance Act 2016
There are 31 Amendments to Finance Act 2016 with effect from 1st June 2016. The list of the Amendments are listed below:
- Equalisation Levy Section 10.
- Income Declaration Scheme 2016.
- New Direct Tax Dispute Resolution Scheme 2016.
- New taxation regime for Securitization Trusts.
- TDS provisions.
- Section 194K and Section 194L.
- Section 194LBA (TDS on certain income from units of a business trust).
- Section 194LBB (TDS on income in respect of units of investment fund).
- Section 197 (Certificate for lower deduction of tax).
- Section 197A.
- Section 206AA.
- Section 206C.
- Section 2.
- Section 92CA (Reference to Transfer Pricing Officer).
- Section 115O (Dividend distribution tax on companies).
- Section 115QA (Tax on distributed income to shareholders).
- Section 115TA (Tax on distributed income to investors).
- Section 124 (jurisdiction of Assessing Officers).
- Section 133 (Power to call for information by prescribed income tax authority).
- Section 211.
- Section 220.
- Section 234C.
- Section 244A.
- Section 252 (Appellate Tribunal).
- Section 253 (Appeals to Appellate Tribunal).
- Section 254 (Powers of Appellate Tribunal).
- Section 255.
- Section 273A and 273AA.
- Section 281B.
- Section 282A.
- Section 132.
Equalisation Levy under Section 10
For Exemption of Income from Specified Services chargeable to equalization levy, a new clause 50 has been inserted under Section 10 of Income Tax Act. The meaning of “Specified Services” is explained in Section 161(i) of Chapter VIII of the Finance Act, 2016.
Section 40(a): (Expense Disallowance Provision)
Under Section 40(a) a new clause (ib) has been inserted into it that provides the expenses incurred for “Specified Services” chargeable. These expenses under this Section shall not be allowed as a deduction in case assessee fails to deduct and deposit the Equalisation Levy with the Government. Where it has been deducted in the subsequent year or has been deducted during the previous year but paid after the due date, it shall be allowed as the deduction in the previous year in which it has been paid. The new Chapter VIII has been inserted in Finance Act 2016 to Equalisation levy.
Income Declaration Scheme 2016
A one-time disclosure scheme that is the Income Declaration Scheme 2016 for the declaration of undisclosed income of any financial year upto 2015 to 2016 was added in the Finance Bill 2016. The same scheme is to be brought with effect from 1st June 2016 and must be opened upto date that to be notified by the Central Govt in the Official gazette.
Assessment in cases of search under Section 153A or 153C:
The Income Declaration Scheme 2016 shall not be applicable in the case where notices have been issued under section 153A or 153C.
New Direct Tax Dispute Resolution Scheme 2016
The salient features of the new Direct Tax Dispute Resolution Scheme 2016 are provided here:
- The scheme is applicable to the “Tax Arrears” including tax, penalty or interest determined under the Income Tax Act or the Wealth Tax Act 1957 in respect of which appeal is pending before CIT(A) or CWT(A) as on 29 February 2016.
- The declarant under the scheme is required to pay tax at the applicable rate plus interest upto the date of assessment. However, in case if the disputed tax exceeding Rs. 10 lakhs, 25% of the minimum penalty leviable shall also be required to be paid.
- Consequent to such declaration, appeal in respect of the disputed income and disputed wealth pending before the Commissioner (Appeals) shall be deemed to be withdrawn.
New Taxation regime for Securitization Trusts
The Section 115TC provides for situations where a Securitization Trust defaults in payment of tax and is considered to be the assessee in default. These are the following changes that are made:
- In clause (a) or security receipt has been inserted in the definition of “Investor”;
- In sub-clause (ii) or is inserted after the words “Reserve Bank of India”;
- A new sub-clause has been added to the definition of securitization trust thereby expanding its definition;
- Clause (e) has been added to define “Security Receipt”, which shall have the same meaning as given in section 2(1)(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.
A new Chapter XII EB that is the Special Provisions relating to tax on accreted income of certain trusts and institutions has been added to provide for levy of additional Income Tax in case of conversion into, or merger with, any non-charitable form or on transfer of assets of a charitable organization on its dissolution to a non-charitable institution. For this, the Section 115TD, 115TE, and 115TF have been inserted.
TDS on income in respect of investment in securitization trust under Section 194LBC:
After Section 194LBB, a new Section 194LBC is inserted.
Sub-Section (1) provides that where any income is payable to an investor who is a resident in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, then the person responsible for making the payment shall deduct tax at source at the rate of 20%, if the payee is an individual or an HUF or 30% if payee is any other person.
Sub-Section (2) provides that where any income is payable to an investor a non-resident or a foreign company in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA. The person responsible for making the payment shall deduct tax at source at the rates in force.
Increase in threshold limit of Deduction of Tax at source on various payments mentioned in the relevant sections:
|Present Section||Heads||Existing Threshold Limit in Rs.||Amended Threshold Limit in Rs.|
|Section 192A||Payment of accumulated balance due to an employee||Rs. 30,000/-.||Rs. 50,000/-.|
|Section 194BB||Winnings from Horse Race||Rs. 5,000/-.||Rs. 10,000/-.|
|Section 194C||Payments to Contractors||Aggregate annual limit of Rs. 75,000/-.||Aggregate annual limit of Rs. 1,00,000/-.|
|Section 194LA||Payment of Compensation on the acquisition of certain Immovable Property||Rs. 2,00,000/-.||Rs. 2,50,000/-.|
|Section 194D||Insurance commission||Rs. 20,000/-.||Rs. 15,000/-.|
|Section 194G||Commission on the sale of lottery tickets||Rs. 1,000/-.||Rs. 15,000/-.|
|Section 194H||Commission or brokerage||Rs. 5,000/-.||Rs. 15,000/-.|
Revision in rates of TDS on several payments mentioned in the relevant sections of the Income Tax Act:
|Present Section||Heads||Existing Rate of TDS (%)||Amended Rate of TDS (%)|
|Section 194DA||Payment in respect of Life Insurance Policy||2%||1%|
|Section 194EE||Payments in respect of NSS Deposits||20%||10%|
|Section 194D||Insurance Commission||Rate in force (10%)||5%|
|Section 194G||Commission on sale of lottery tickets||10%||5%|
|Section 194H||Commission or brokerage||10%||5%|
Section 194K and Section 194L
Under Section 194K for Income for Tax Deducted at Source in respect of units is omitted and under Section 194L for payment of compensation for Tax Deducted at Source on the acquisition of Capital Asset is omitted.
TDS on Income from units of a Business Trust under (Section 194LBA)
The Sub-Section (1) and Sub-Section (2) which is referred to in Section 115UA is amended for Deducting Tax at Source on payments in respect of distributed income. It is of the nature referred to in clause (23FC) of Section 10 and also in the nature referred to in sub-clause (a) of clause 23FC of Section 10.
TDS on income in respect of units of Investment Fund (Section 194LBB)
It is proposed to amend Section 194LBB to rationalize the TDS rule concerning payments made by the investment funds to its investors. It is also amended to provide that the person responsible for making the payment to the investor shall deduct Income Tax under Section 194LBB at the rate of 10% where the payee is a resident and at the rates in force where the payee is a non-resident. A provision is inserted that provides that where the payee is a non-resident or a foreign company, no deduction shall be made in case any income is not chargeable to tax under the provisions of the Act.
Certificate for lower deduction of tax under (Section 197)
Section 197 is amended to include Section 194LBB, Section 194LBC in the list of Sections for which a certificate for Deduction of Tax at the lower rate or no Deduction of Tax can be obtained.
Section 197A of the Income Tax Act
The Sub-Section 1A & Sub-Section 1C is amended for making the recipients of payments referred to in Section 194I also eligible for filing the self-declaration in Form no. 15G or 15H for non-Deduction of Tax at Source.
Section 206AA of the Income Tax Act
This Section 206AA(7) is amended in order to reduce compliance burden. It is amended to provide that the provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company. The payment in respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed.
Section 206C of the Indian Income Act
The Sub-Section (1D) is amended to include consideration for the sale of any goods that is goods other than bullion or jewellery or providing any service for the purpose of collecting tax from the buyer. A new clause (iii) is inserted to sub-section (1D) which provides that tax should be collected at the source for any goods, other than those referred to in clauses (i) and (ii), or any service. If the amount exceeds Rs. 2 lakhs a New Sub-Section (1E) and (1F) inserted after Sub-Section (1D).
Section 2 of Income Tax Act
- In order to define ” hearing” which include communication of data and documents through electronic mode, a new clause (23C) has been added to section 2.
- To provide the “rate or rates in force,” Section 2(37A) is amended for the purpose of deduction shall include section 194LBB & Section 194LBC.
Reference to TPO under Section 92CA
In Section 92CA(3A) it has been explained that if a court order stays assessment proceedings or a reference for exchange of information has been made by the competent authority and time limit available to Transfer Pricing Officer (TPO) is less than 60 days. Then after excluding the time for which assessment has stayed or the time taken for receipt of information, then such remaining period shall be extended to 60 days.
Dividend Distribution Tax on Companies under Section 115O
In Section 115O a Sub-Section 7 has been added to provide that no tax on distributed profits shall be chargeable. The tax chargeable may in respect of any amount declared, paid or distributed by the specified domestic company by way of dividend to a business trust out of its current income on or after the specified date.
Tax on distributed income to shareholders under Section 115QA
The Section 115QA which is amended provides that the provision shall apply to any buy back (buying back of goods by the original seller) of unlisted share engaged by a company in a manner of conforming with the provisions of the law relating to the Companies. These provisions may not necessarily restrict to Section 77A of the Companies Act, 1956.
Tax on Distributed Income to investors under (Section 115TA)
Sub-Section (5) has been inserted in Section 115TA, which provides an exception with a prospective effect. This Section is inserted for income distributed by a securitization trust to its investors.
Jurisdiction of Assessing Officers (AO’s) under Section 124
Section 124(3) is amended specifically to provide that cases where the search is initiated under Section 132 or books of accounts, other documents or any assets are requisitioned under Section 132A. Here, no person shall be allowed to call into question of jurisdiction of an Assessing Officer after the expiry of 1 month from the date on which he was served with a notice under sub-section (1) of section 153A. He may or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.
Power to call for Information by prescribed Income Tax Authority (Section 133), Reassessments under (Section 147) and Assessments under (Section 143)
- To facilitate the mechanism of assessment, Section 133C has been amended to provide a legislative framework. This framework is used for processing of information and documents obtained from the taxpayer and make the outcome available to the AO (Assessing Officer) for necessary action.
- Income liable to tax has escaped assessment can be re-opened for assessment is defined under Section 147. The tax as per the amendment information received by the department under Section 133C can also be the base for detection of cases of income escaping assessment.
- To expand the scope of adjustment is amended under Section 143(1)(a) which can be made while processing the return. Based on data available to the Department, which is in the form of audit report filed by the taxpayer. It also includes returns of earlier years of the taxpayer, Form 16, 26AS Statement, and Form 16A. However, an intimation shall be given to the taxpayer before making any such adjustments either through electronic mode or through writing asking him to respond to such adjustments. The response which is received by the assessee will be considered before making the adjustments. The processing shall be carried out as usual without any adjustments if no response is received from the taxpayer.
Section 211 of Income Tax Act:
The Advance Tax on current Income is provided in Sub-Section (1) which is to be calculated in the manner laid down in Section 209. Clause (a) makes taxpayers other than those mentioned in clause (b) chargeable to pay advance tax while clause (b) makes an eligible taxpayer in respect of an acceptable business referred to in section 44AD subjected to pay the Advance Tax.
Section 220 of Income Tax Act
Provisions are inserted after Section 220(2A)(iii) to provide:
- The concerned officers shall pass an order accepting or rejecting the application of an assessee within a period of 12 months from the end of the month in which the application form is received.
- Without giving an opportunity of being heard to the assessee the “no order” rejecting the application under Sections 220 or Section 273A or Section 273AA shall be passed.
- The order under the said Sections shall be passed on or before 31st May 2017 with respect to applications pending on 1st June 2016.
Section 234C of IT Act
Interest on Refund under Section 244A:
- The Interest on Refund must be payable from the date of filing of return if the return filed has after the due date (deadline).
- Interest on refund of self assessment tax from the date of payment of tax or filing return whichever is later.
- For the purpose of determining the order of adjustment of payments received against the taxes due, the prepaid taxes that is the TDS, TCS, & Advance Tax shall be adjusted first.
- Further, the additional interest of 3% would be payable where the refunds arise on account of appeal effect, and there is the delay in passing of order giving effect to appellate order beyond three months or beyond the period of extension granted by Principal Commissioner or Commissioner.
- In such cases, the interest would be payable for the period from date following the date of expiry of three months or extended period as the case may be to the date on which the refund is granted
Appellate Tribunal Section 252
- Sub-Section (3)(b) is amended which provides that Senior Vice-President of (Income Tax Appellate Tribunal) ITAT is prevented from appointed by Central Government as President.
- Sub-Section 4A is omitted.
- Sub-Section (5) is amended which provides that Senior Vice-President is prevented exercising powers and functions of the President as may be delegated to him by the President.
Appeals to Appellate Tribunal (Section 253)
Sub-Sections (2A) and Section (3A) of Section 253 have been omitted in to expedite the litigation process and omit to file the appeal by the Assessing Officer (AO’s) against the order of the Dispute Resolution Panel. So relevant amendments are made to Sub-Section (3A) and (4) to give effect to the amendments.
Powers of Appellate Tribunal under Section 254
The monetary limit for disposing of the Taxpayer’s case by the Appellate Tribunal is now increased to Rs. 50 lakhs from 15 lakhs rupees.
Section 273A and Section 273AA
Section 273A & Section 273AA is amended to provide the time limit for disposing applications made for immunity for the penalty. Proposes that order under Sub-Section (4) for either rejecting or accepting the application in full or part shall be passed within a period of 12 months from the end of the month in which the application under the said subsection is received by the Principal Commissioner or the Commissioner.
Section 281B of Income Tax Act
Section 281B is amended to provide that Assessing Officer shall revoke provisional attachment of assets when taxpayer furnishes bank guarantee for an amount not less than fair market value of such provisionally attached property or for an amount sufficient to protect the Interest of Revenue.
Section 282A of IT Act
Under Section 282A(1) an amendment was proposed so as to provide the documents and notices required to be issued by Income Tax Authority. Under this Income Tax Act shall be issued by such authority either in electronic form or in electronic form by following such procedure as may be prescribed.
Section 132 of Income Tax Act
Section 132A was added to provide that the provisions of Chapter VII shall also not apply to taxable commodities transactions entered into by any person on a recognized association located in a unit of IFSC. However, the consideration for such transaction is paid or payable in foreign currency, and thus, this transaction was exempted from CTT with effect from 1st June 2016.
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