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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.

India Budget Series

RATIONALISATION OF ADVANCE TAX PAYMENT SCHEDULE AND CHARGING OF INTEREST

The current and proposed provisions in relation to schedule of advance tax payment are as follows:-

Particulars Current Provisions Proposed Provisions
Company Payment of advance tax in 4 installments viz. 15% by 15th June, 45% by 15th September, 75% by 15th December and 100% by 15th March. Payment of advance tax in 4 installments viz. 15% by 15th June, 45% by 15th September, 75% by 15th December and 100% by 15th March.
Persons other than, Company and assessee opting for presumptive taxation Payment of advance tax in 3 installments viz. 30% by 15th September, 60% by 15th December and 100% by 15th March. Payment of advance tax in 4 installments viz. 15% by 15th June, 45% by 15th September, 75% by 15th December and 100% by 15th March.
Persons opting for presumptive taxation scheme Payment of advance tax not required Payment of 100% advance tax in 1 installment on or before 15th March

Consequential amendments are proposed in Section 234C to bring it in sync with the above amendments. Further, it is proposed to amend Section 234C to include that interest under Section 234C shall not be chargeable in case the assessee has income under the head “Profits and gains of business or profession” for the first time, subject to prescribed conditions.

The above amendments shall provide greater accuracy in collection of taxes and shall be a boost for small businesses and start-ups.

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

India Budget Series

PHASING OUT OF DEDUCTIONS & EXEMPTIONS

 

Sl. No Section Incentive currently available in the Act Proposed phase out measures/ Amendment
1

 

 

 

10AA- Special provision in respect of newly established units in Special economic zones (SEZ).

 

Profit linked deductions for profit derived from export of articles or things or services

 

No deduction shall be for units beginning operations on or after 01.04.2020.

 

2

 

 

 

 

35AC-Expenditure on eligible projects or schemes.

 

 

 

Deduction for expenditure incurred by way of payment of any sum for certain eligible social development project or a scheme.

 

No deduction shall be available with effect from 01.04.2017

 

 

 

3

 

 

 

35CCD-Expenditure on skill development project.

 

 

Weighted deduction of 150% on any expenditure incurred other than on Land & Building Deduction shall be restricted to 100% from 01.04.2020

 

4

 

 

 

 

 

 

 

 

Section Deduction in respect of profits derive from

a) development, operation and maintenance of an infrastructure facility (80-IA)

b) development of special economic zone (80-IAB)

c) production of mineral oil and natural gas [80-IB(9)]

 

 

100% profit linked deductions for specified period.

 

 

 

 

 

 

 

No deduction shall be available if the specified activity commences on or after 01.04.2017.

 

 

 

 

 

 

India Budget Series

RATIONALISATION OF TIME LIMIT FOR ASSESSMENT IN SEARCH CASES

It is proposed to amend the time limit for completion of assessments made under Section 153A or Section 153C cases as follows:-

Particulars Existing Time Limit Proposed Time Limit
Completion of assessment under Section 153A for block of 6 assessment years or assessment year for which the search was conducted or requisition was made 2 years from the end of the financial year in which the last of the authorisations for search under Section 132 or for requisition under Section 132A was executed. 21 months from the end of the financial year in which the last of the authorisations for search under Section 132 or for requisition under Section 132A was executed.
Completion of assessment under Section 153C in case of other person 2 years from the end of the financial year in which the last of the authorisation for search under Section 132 or requisition under Section 132A was executed 21 months from the end of the financial year in which the last of the authorisation for search under Section 132 or requisition under Section 132A was executed
Completion of assessment under Section 153C in case of other person if books of accounts, documents, assets seized or requisitioned are handed over to Assessing Officer having jurisdiction over such other person 1 year from the end of the financial year in which the books of account or documents or assets seized or requisition are handed over under Section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later 9 months from the end of the financial year in which the books of account or documents or assets seized or requisition are handed over under Section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later.

The provisions of Section 153B, as they stood before the amendment by Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 01.06.2016.

The amendment will take effect from 1st day of June, 2016.

India Budget Series

RATIONALISATION OF TIME LIMIT FOR ASSESSMENT, REASSESSMENT AND RECOMPUTATION

In view of increased efficiency within the Department in handling assessments, the following changes in time limits for completion of assessment are proposed:

Particulars Existing Time Limit Proposed Time Limit
Completion of assessment under Section 143 or Section 144 2 years from the end of the assessment year in which the income was first assessable 21 months from the end of the assessment year in which the income was first assessable
Completion of assessment under Section 147 1 year from the end of the financial year in which the notice under Section 148 was served 9 months from the end of the financial year in which the notice under Section 148 was served

 

Fresh assessment pursuant to order under Section 254 or Section 263 or Section 264 1 year from the end of the financial year in which the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or the order under Section 263 or Section 264 is passed by the Principal Commissioner or Commissioner 9 months from the end of the financial year in which the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or the order under Section 263 or Section 264 is passed by the Principal Commissioner or Commissioner
Particulars Proposed Time Limit
Assessing Officer to give effect to an order passed under Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 or an order passed by Settlement Commission 3 months from the end of the month in which order is received or passed, as the case may be, by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. However, the Principal Commissioner or Commissioner may grant additional period of 6 months to Assessing Officer to give effect to such order, on request made by Assessing Officer in writing that the same is not possible for reasons beyond its control
However, in respect of cases pending as on 01.06.2016, the time limit for passing such order is proposed to be extended to 31.3.2017.
Assessment, reassessment or recomputation pursuant to order passed above, excluding order of Settlement Commission, or an order of any court in a proceeding otherwise than by way of appeal or reference under the Act 12 months from the end of the month in which such order is received by the Principal Commissioner or Commissioner
However, for cases pending as on 01.06.2016, the time limit for taking requisite action is proposed to be 31.3.2017 or twelve months from the end of the month, in which such order is received, whichever is later.
Assessment in case of a partner of the firm in consequence of an assessment made on the firm under Section 147 12 months from the end of the month in which the assessment order in the case of the firm is passed
However, for cases pending as on 01.06.2016, the time limit for taking requisite action is proposed to be 31.3.2017 or twelve months from the end of the end of the month, in which order in case of firm is passed, whichever is later.

It is further proposed that where assessment proceedings are stayed by any court or where a reference for exchange of information has been made by the competent authority and consequent to this, where the time available to Transfer Pricing Officer is less than 60 days, it shall be extended to 60 days and consequential changes shall be made in time limit for completion of assessment or reassessment by the Assessing Officer

The provisions of Section 153, as they stood before amendments by Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 01.06.2016.

The amendment will take effect from 1st day of June, 2016.

 

India Budget Series

PROCESSING UNDER SECTION 143(1) BE MANDATED BEFORE ASSESSMENT

Under the existing provisions of the Act, processing of a return is not necessary if notice has to be issued to the assessee for scrutiny assessment.

Thus, it is proposed to amend the said provisions to provide that a return shall be processed and a summary assessment shall be done compulsorily before initiating a scrutiny assessment

This amendment would help in completing the scrutiny assessment at a much faster pace with reduced litigative issues. Refund orders under Section 143 (1) shall now be compulsorily issued prior to issuing notices for scrutiny. This is a huge relief for assessees claiming refunds especially high value refunds.

The amendment will take effect from the 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years.

 

India Budget Series

FILING OF RETURN OF INCOME

As per Section 139 (1) of the Act, a person is required to file the return of income if its total income, before deductions, exceeds the basic exemption limit. Further, the Act contains the provisions in relation to time limit for filing belated returns and revised returns. Furthermore, there is a provision in the Act which provides that the return shall be considered as defective if it is filed with self assessment tax payable.

It is proposed to amend the time limit to file belated returns and widen the scope of revised returns. The time limit to file the belated return is amended to be, end of assessment year or before completion of assessment, whichever is earlier. Further, the provision of revised return is amended to include belated returns as well. Thus, even if the return is filed after the due date prescribed in Section 139 (1), the same can be revised within 1 year from the end of assessment year or completion of assessment, whichever is earlier.

It is further proposed that the return shall not be considered as defective if it is filed without making the payment of self assessment tax. Additionally, Section 139 (1) is amended to consider that if a person earns an income under Section 10 (38), which exceeds the basic exemption limit, he has to file the return of income within the due date specified under Section 139 (1), even though the said income is exempt from tax.

The above amendments shall streamline the filing of returns, including belated returns and further, it shall monitor the transaction dealings of assesses in capital gains transactions.

These amendments will take effect from 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years.

India Budget Series

EXEMPTION FOR FOREIGN DIAMOND MINING COMPANIES

In order to encourage trading of rough diamonds in India, a Special Notified Zone has been created which would permit leading mining companies across the world to trade in India.

However, as per the existing provisions of Section 5 & Section 9, pursuant to trading, displaying of uncut diamonds by foreign companies creates Business Connection in India with potential tax exposure which discourages the foreign mining companies to have business dealings in India.

Thus, it is proposed to amend Section 9 to provide that in case foreign company is engaged in business of mining of diamonds, no income shall be deemed to accrue or arise in India through or from activities which are in relation to display of uncut and un-assorted diamonds in Special Zone notified by Central Government in this regard.

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


India Budget Series

ENABLING OF FILING OF FORM 15G/15H FOR RENTAL PAYMENTS

Under the existing provision of Section 194I, TDS has to be deducted at the rate of 10% by the person making the payment of rent to the recipient if the total rent in the entire year exceeds Rs. 1,80,000.

There may be instances, where the total income of the recipient of rent, including the rental payments, shall be below the basic exemption limit, on which no tax is payable.

Thus, in order to reduce compliance burden in such cases, it is proposed to amend the provisions of Section 197A for allowing the recipients of rental payments to file self-declaration in Form No. 15G/15H for non-deduction of tax at source.

This is a huge step for property owners, especially senior citizens, who only rely on property income for survival.

This amendment will take effect from 1st June, 2016.

India Budget Series

RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) PROVISIONS

The provision of withholding requires every person who is responsible for payment of anyspecified sum to any person shall deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time if the sum exceeds the prescribed amount.

In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in following tables respectively

INCREASE IN THRESHOLD LIMIT OF DEDUCTION OF TAX AT SOURCE ON VARIOUS PAYMENTS MENTIONED IN THE RELEVANT SECTIONS OF THE ACT

Present Section

Heads Existing Threshold Limit (Rs.)

Proposed Threshold Limit(Rs.)

192A Payment of accumulated balance due to an employee 30,000 50,000
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 acquisition of certain Immovable Property 2,00,000 2,50,000
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

 

REVISION IN RATES OF DEDUCTION OF TAX AT SOURCE ON VARIOUS PAYMENTS MENTIONED IN THE RELEVANT SECTIONS OF THE ACT:

Present Section

Heads Existing Rate of TDS (%)

Proposed Rate of TDS (%)

 

194DA

Payment in respect of Life Insurance Policy 2% 1%
 

194EE

Payments in respect of NSS Deposits 20% 10%
 

194D

Insurance commission Rate in force

(10%)

5%
 

194G

Commission on sale of lottery tickets 10% 5%
194H Commission or brokerage 10% 5%

CERTAIN NON-OPERATIONAL PROVISIONS TO BE OMITTED, WHICH ARE AS FOLLOWS:

Present Section Heads Proposal
194K Income in respect of Units To be omitted w.e.f 01.06.2016
194L Payment of Compensation on acquisition of Capital Asset To be omitted w.e.f 01.06.2016

These amendments will take effect from 1st June, 2016.

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