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India Budget Series

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India Budget Series

PROVIDING LEGAL FRAMEWORK FOR AUTOMATION OF VARIOUS PROCESSES AND PAPERLESS ASSESSMENT

In order to enhance efficiency and reduce the compliance burden, the following proposals are made:-

It is proposed to amend sub-section (1) of Section 282A so as to provide that no mandatory signature of the authority in manuscript shall be required to issue notice or other document and the same shall be issued either in paper form duly signed or communicated in electronic form in accordance with procedures as may be prescribed

It is further proposed to amend Section 143 (2) to provide that notice shall be issued by the prescribed authority, either to attend the office of the authority or produce any evidences before the authority on which the assessee may rely in support of the return. However, no notice shall be issued after the expiry of 6 months from the end of financial year in which return is furnished

It is proposed to amend Section 2 by inserting new clause 23C to define the word “hearing” to include communication of data and documents through electronic mode

It is proposed to expand the scope of adjustments that can be made under Section 143(1), which are as follows:-

– Disallowance of loss claimed, if return of the previous year for which set off of loss is claimed is furnished beyond the due date specified under sub-section (1) of Section 139;

– Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return

– Disallowance of deduction claimed under Sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or Section 80-IE, if the return is furnished beyond the due date specified under Section 139(1).

– Addition of income appearing in Form 26AS or Form 16A or Form 16 but not included in computing the total income in the return.

However, the above adjustments shall be made only after intimating assessee and on intimations, response, if any, given by assessee shall be considered while making the adjustments, only if it is received within 30 days of intimation.

These amendments will take effect from the 1st day of June, 2016

India Budget Series

TIME LIMIT FOR CARRY FORWARD AND SET OFF OF SUCH LOSS UNDER SECTION 73A

Section 80 mandates the assesses to file a return of loss within the time limit specified under Section 139 (1) in order to carry forward and set off such loss. In other words, non-filing of a return of loss, within the specified time limit, disentitles the assesses from carrying forward and setting off such loss

Accordingly, it is proposed to amend Section 80 so as to include that the loss computed in respect of specified business referred in Section 35AD shall not be allowed to be carried forward and set off if such loss has not been determined in pursuance of a return filed within the time limit specified in Section 139 (1).

Consequential amendments are proposed in Section 139 (3) to give reference of sub-section (2) of Section 73A in the said sub-section.

These amendments will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years

India Budget Series

PROPOSED PHASE OUT PLAN OF INCENTIVES

SL No. Section Incentive currently available in the Act Proposed phase out measures/Amendment
1 32 read with rule 5 Accelerated depreciation upto 100% Highest rate of depreciation shall be restricted to 40% w.e.f01.04.2017.
2 35(1) (ii) – Expenditure on scientific research. Weighted deduction to the extent of 175% of any sum paid Weighted deduction shall be restricted to 150% from 01.04.2017 to 31.03.2020 and upto 100% from 01.04.2020
3 35(1) (iia)-Expenditure on scientific research. Weighted deduction to the extent of 125% of any sum paid. Deduction shall be restricted to 100% with effect from 01.04.2017
4 35(1) (iii) – Expenditure on scientific research. Weighted deduction to the extent of 125% of contribution Deduction shall be restricted to 100% with effect from 01.04.2017
5 35(2AA) – Expenditure scientific research. Weighted deduction to the extent of 200% of any sum paid Weighted deduction shall be restricted to 150% with effect from 01.04.2017 to 31.03.2020 and upto 100 per cent from 01.04.2020
6 35(2AB) – Expenditure on scientific research. Weighted deduction of 200% of the expenditure (not being expenditure in the nature of cost of any land or building) Weighted deduction shall be restricted to 150% from 01.04.2017 to 31.03.2020 and upto 100% from 01.04.2020
7 35AD- Deduction in respect of specified business. Weighted deduction of 150% of capital expenditure (other than expenditure on land, goodwill and financial assets) Deduction shall be restricted to 100% of capital expenditure w.e.f. 01.04.2017
8. 35CCC- Expenditure on notified agricultural extension project. Weighted deduction of 150% of expenditure incurred Deduction shall be restricted to 100% from 01.04.2017

The above amendments shall be effective from 1st April, 2018

India Budget Series

EXEMPTION OF INCOME OF FOREIGN NATION AND MULTI NATIONAL OIL COMPANIES

With a view to develop India’s Strategic Reserves, the Indian Strategic Petroleum Reserves Limited is setting up underground crude oil storage facility in which private players including Foreign National Oil Companies and Multi National Oil Companies are participating. However, these oil companies shall be liable for taxation upon sale of crude oil from this storage facility by virtue of existing provisions of Section 5 and Section 9.

In order to encourage Foreign Oil Companies to invest in this strategic reserve facility, it is proposed to exempt the income accruing or arising to foreign company from storage of crude oil in India and sale therefrom to any person resident to India. However, the exemption is subject to following two conditions:

– Storage and sale is effected only with prior agreement or an arrangement with the Central Government or agreement or arrangement approved by the Central Government; and

– Both the Foreign Company and the agreement or arrangement should be notified by the Central Government for the sake of nation’s interest.

The amendment is effective retrospectively from 1st April 2016 (applicable for FY 15 -16)

India Budget Series

TAX INCENTIVES FOR START-UPS

The Government envisages the start-ups to be the engine for growth and technological innovation in the country. In this regard, the following proposals have been considered:

Insertion of new Section 80-IAC

Eligible start-ups shall be allowed a deduction of 100% of the profit and gains derived from the eligible business.

This deduction shall be allowable for any 3 consecutive assessment years out of 5 years from the year in which the start-up was incorporated

Eligible business for this Section shall mean a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property

The following conditions shall be satisfied by eligible start-ups to claim the deduction:-

– It shall be incorporated during the period 01.04.2016 to 31.03.2019

– It shall not have turnover exceeding Rs. 25 crores for any previous year during the period 01.04.2016 to 31.03.2021

– It shall hold a certificate of eligible business from the Inter Ministerial Board of Certification

– Further conditions in relation to split-up and plant and machinery shall be as per existing Section 80-IA

Start-ups shall be subject to MAT under Section 115JB

India Budget Series

INCENTIVES FOR PROMOTING HOUSING FOR ALL

With the intent to promote the objective of “Housing for All”, the government has proposed to provide incentives to both; the promoter as well as the buyer of the house property.

For Promoters

develops and builds affordable housing projects, shall be provided deduction of 100% of profits from such business, subject to following condition:-

-The project shall be approved by the competent authority before 31.03.2019. If the project is approved more than once, the project shall be deemed to have been approved on grant of first approval

– The project shall be completed within 3 years from date of approval. It shall be regarded as complete only when a certificate of completion is obtained in writing from competent authority

– The size of the plot and the size of the residential unit and extent of plot utilisation shall differ based on the locality as tabulated below:

Location Minimum Size of the Plot

(sq mts)

Maximum Size of the residential unit

(sq mts)

 

Plot Utilisation
Within 25 kms from municipal limits of Delhi, Mumbai, Chennai and Kolkata 1000 30 90% of floor area ratio
Others 2000 60 80% of floor area ratio

– Where a residential unit in the housing project is allotted to an individual, no unit shall be further allotted to him or his family member

– The built-up area of shops and other commercial establishments in the project shall not exceed 3% of the aggregate built-up area

– The promoter/developer shall maintain separate books of accounts

If the conditions are not satisfied post deduction, the deduction allowed shall be considered to be deemed income in the year in which period of completion expires

No further deduction under any other provisions of the Act shall be allowed if deduction is allowed under this Section

This deduction is not available for works contractors

The provisions are exactly similar to Sec 80IB(10), where practically there were very few beneficiaries for the scheme. We hope atleast this latest version has a few more takers.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

For Buyers

It is proposed to amend Section 80EE to provide an additional deduction of Rs. 50,000 for first-home buyers in respect of interest on loan taken for residential house property from any financial institutions.

The additional deduction shall be available if the value of house property does not exceed Rs. 50 lakhs.

Further, the loan amount shall not exceed Rs. 35 lakhs and the loan shall be sanctioned during the period 01.04.2016 to 31.03.2017. Additionally, the assessee shall not own any residential house property on the date of sanction of loan.

Further, it is proposed that the benefit of deduction shall be available till the repayment of loan continues.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

India Budget Series

TAX INCENTIVE FOR EMPLOYMENT GENERATION

The existing provision of Section 80JJAA provides for deduction of 30% additional wages paid to the new regular workmen employed by an Indian Company only in the manufacturing sector, for the period of 3 years. The minimum number of days of employment in the financial year is 300 days. Further, deduction is allowed only if the number of employees is increased by 10% every year

It is proposed to amend the said Section as follows:

– The deduction shall be allowed to all sectors.

– Deduction shall be allowed in respect of cost incurred on any employee, whose wages are less than or equal to Rs.25,000 per month. However, no deduction shall be allowed of cost incurred on the employees, for whom the entire contribution under EPS is paid by the Government.

– Deduction shall be allowed in respect of employees who do not participate in recognised provident fund.

– The minimum number of days of employment in the financial year shall be reduced from 300 days to 240 days.

– There is no requirement of 10% increase in employees every year for the purpose of deduction.

– Further, in the 1st year of business, 30% of all emoluments paid/payable to employees employed during the previous year shall be allowed as a deduction.

The proposed amendment has been extended to all sectors liberally with a dual focus of encouraging entrepreneurs as well as employment.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

India Budget Series

ENHANCING LIMIT UNDER SECTION 80GG

Under the existing provisions of Section 80GG, the maximum deduction available for rent paid is Rs.2,000 per month, cummulating to Rs. 24,000 per annum.

However, in view of interest of individual tax payers, the limit is proposed to be increased to Rs. 5,000 per month, aggregating to Rs. 60,000 per annum.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

India Budget Series

RATIONALISATION OF LIMIT OF REBATE UNDER SECTION 87A

The existing provisions of Section 87A provide for a maximum rebate of tax of Rs.2,000 provided the total income of the resident individual does not exceed Rs.5 lakhs.

It is proposed to increase the said limit to Rs.5,000.

This increase in limit, in effect, would ensure that an additional income of Rs.30,000 is not subject to tax.

The conditions to claim the said rebate however remains the same.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

India Budget Series

PAYMENT OF INTEREST ON REFUND

It is proposed to make the following amendments under Section 244A in relation to interest on refund:

 

Particulars Interest rate From Date To Date
Return filed after the due date 6% Date of filing of return Date on which refund is granted
Return filed on or before the due date but taxes paid after due date 6% Date of payment of tax Date on which refund is granted
Return filed and taxes paid on or before the due date 6% Date of filing of return Date on which refund is granted
Refund arising out of appeal effect being delayed beyond the time limits prescribed under Section 153 (5) 9% If Assessing Officer does not seek for extension Additional 3% interest from date of expiry of time allowed under Section 153 (5) Date on which refund is granted
9% If Assessing Officer seeks for extension Additional 3% interest from date of expiry of such extended period Date on which refund is granted

It is further proposed that for adjustment of payments received against the taxes due, TDS, TCS and advance tax shall be adjusted first.

The above amendments shall ensure timely filing of returns and reduced litigation matters viewing the additional burden of interest on department on further appeals.

Passing on the burden of additional interest on delayed refunds to the concerned Assessing Officer is a huge step in creating a more accountable bureaucracy and is certainly laudable.

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