CNK Budget Analysis 2016

CNK & Associates LLP
Knowledge Based Solutions With Personalized Services
Finance Bill, 2016

- An Analysis
Contents
Particulars
Pg No.
Foreword
Budget Highlights
6-7
Income Tax Proposals:
Income Declaration Scheme 2016
9-10
Direct Tax Dispute Resolution Scheme,2016
11-12
Equalisation Levy
13-14
Country by Country Reporting
15-16
Income Tax Rates
17-19
Residential Status of a Company
20
Presence of Fund Manager in India
21
Charitable Trusts
22
Salary Income
23-24
Business Income
25-30
Capital Gains
31
Income from Other Sources
32
Deduction under Chapter VIA
33
Minimum Alternate Tax (MAT) on Foreign Companies
34
Business Trust (REIT and InvIT)
35
Finance Bill, 2016
Contents
Particulars
Pg No.
Securitisation Trusts
36
Alternate Investment Funds (AIF)
37
Tax Incentive for Start-ups
Taxation of Income from Patents
Procedure of Assessment
41-45
Collection and Recovery of Tax
46-50
Incentives for Promoting Housing for All
51-52
Penalty Provisions
53-54
Miscellaneous Amendments / Observations
55-56
38-39
40
Finance Bill, 2016
Contents
Particulars
Pg No.
Service Tax:
57
Legislative Amendments
Abatement
61
Exemptions
62-63
Reverse Charge
64
Service Tax Rules
65
58-60
Customs:
66
67-69
Baggage Rules
70-71
Tariff Amendments
72-73
Excise:
74
75
Central Excise Rules
76
Non-Tariff Amendments
77-78
Tariff Amendments
79-81
Interest
82
Miscellaneous Amendments
83
CENVAT Credit Rules
84-86
The Indirect Tax Dispute Resolution Scheme, 2016
87
Other Amendments
88
Glossary
89-90
Finance Bill, 2016
Foreword
Dear Reader,
This budget was presented against the backdrop of collapsing oil prices and global economic gloom, contrasted by India shining
as the fastest growing economy of the world. In that light the budget missed the opportunity to be transformational and capitalise on
the unique economic advantage in which India is placed.
The budget rightly focuses on rural economy and infrastructure development. Particularly commendable is the fiscal prudence
exercised by sticking to the planned reduction of fiscal deficit to 3.5% of GDP in the face of enormous pressure to postpone this
target.
The budget has welcome provisions for improvement in tax administration and has introduced provisions to make the tax officers
accountable. A rare initiative indeed! The measures to facilitate Ease of doing Business in the indirect tax proposals and to give
fillip to the Make in India campaign are laudable. However, the inability to build political consensus on the road-map to GST
implementation is a huge dampener.
Phasing out the incentives was inevitable, but any meaningful reduction in corporate tax rates still remains a distant promise.
Increasing the tax on the rich is understandable, but with no change in the tax threshold or tax rates, the neglected minority (middle
class tax payer) has little to cheer. In fact the proposal to tax EPF has created an uproar forcing the Government to contemplate
roll back.
The budget has also introduced a scheme to forgive past tax transgressions by paying 45% tax. It is to be seen whether this will
attract the errant taxpayer.
The tax provisions in the budget are like a chakravyuh; difficult to understand and decipher. This presentation is the CNK KEY to
guide you through this mazeHappy Reading !
March 3, 2016
Finance Bill, 2016
Budget Highlights
Direct Taxes
Tax rates for Individual, HUF, Firm , AOP, BOI and Artificial juridical person remains unchanged subject to increase in
surcharge from 12% to 15% for individuals, HUF, AOP, BOI with income exceeding 1 crore. For companies with turnover
less than 5 crores, tax rate marginally reduced to 29%.
10% additional tax proposed on individuals, Hindu Undivided Family (HUF) and firms on receipt of dividends exceeding INR
10 lakh from domestic companies
Declaration of undisclosed income / asset up to FY 2015-16 by paying 45% of the fair market value in the form of taxes,
surcharge and penalty. The scheme to provide immunity from other laws.
New dispute resolution scheme to be introduced with no penalty for disputed tax upto INR 10 lakh and 25% minimum
penalty for tax exceeding INR 10 lakh
Introduction of equalisation levy @ 6% on payment made to a non-resident towards online advertisement/digital advertising,
except where such non-resident has a permanent establishment in India
100% deduction of profits for 3 out of 5 years for startups setup during 1.04.2016 to 31.03.2019 but MAT to apply
Determination of residency of foreign company on the basis of POEM to be deferred by one year.
CBCR following OECDs report on BEPS from FY 2016-17 onwards for Indian-headquartered Multinational Enterprises with
global consolidated revenues exceeding 750 million Euro
GAAR to be implemented from 1.04.2017
Tax on accreted income of Charitable Trusts in certain circumstances.
Contribution made by employer in excess of 12% or INR150,000 whichever is less to be taxed in the hands of the employee
Presumption taxation @ 50% for professionals where the gross receipt does not exceed 50 lakh.
Shift from EEE TO EET in case of retirement product EPF
Finance Bill, 2016
Budget Highlights
Indirect Taxes:
Mum is the word on GST a clear indication that the political "lokjam" over GST is far from over
A flurry of simplification measures announced to facilitate ease of doing business
A slew of measures announced for mitigating potential tax litigations and for settlement of existing tax disputes
Series of changes made in Customs/Excise Tariffs to support the Government's "Make in India" initiative- benefitted
sectors include IT, Hardware, Capital Goods, Defence Production, Textiles, Mineral Fuel/Oils, Chemicals and
Petrochemicals, Paper and MRO of aircrafts and ships
Infrastructure Cess ranging from 1% to 4% introduced on different types of motor cars
No change in the peak rate of Basic Customs Duty @ 10% and Excise Duty @ 12.5%
Service tax increased marginally from 14.5% to 15%, with the introduction of a New Cenvatable Cess, Krishi Kalyan Cess
(@ 0.5% on value of all taxable services)
Peak interest rates applicable for service tax defaults mercifully brought down from 30% p.a. to a more realistic rate of
15% p.a. (24% p.a. in case of tax collected but not paid)
Rationalisation of CCR to smoothen credit flows, reduce compliance burden and mitigate litigation with regards to reversal
of credit attributable to exempted services
Rationalisation of indirect taxes relating to the IT Software Industry
Finance Bill, 2016
INCOME TAX
Note: Unless otherwise stated the amendments referred to in this e-publication are effective from AY 201718 onwards.
Finance Bill, 2016
A limited period compliance window is introduced for those having undisclosed income/undisclosed assets in India to come
forward and declare the same by paying income tax, surcharge and penalty aggregating to 45% of such declared income
within 2 months of declaration.
The scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to a notified date.
Declaration can be made in respect of undisclosed income chargeable under the Act or income represented in the form of
asset for any FY upto 2015-16
The following cases shall not be eligible for the scheme:
where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C or
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
where information is received under an agreement with foreign countries regarding such income
cases covered under the Black Money Act, 2015, or
persons notified under Special Court Act, 1992, or
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
If the declaration is made in the form of any investment in an asset, the fair market value (as per Rules to be prescribed) of
such asset as on 1st June 2016 shall be deemed to be the undisclosed income
The 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. Further, immunity from Benami Transactions (Prohibition) Act, is also proposed for such declarations.
Finance Bill, 2016
Introduction of such scheme clearly shows the intent of the Government to deal with the menace of black money. In the
previous budget, black money outside India was targeted and this year black money generated in India is given emphasis.
The scheme is similar to the Voluntary Disclosure Income Scheme, 1997. However, on a PIL filed before the SC, the then
Government reportedly came up with an affidavit in the SC stating that the 1997 VDIS scheme would be the last and the
Government would not bring about any such schemes in future. Thus, whether the scheme shall stand the test of law is to
be seen.
Cumulative tax of 45% is payable on the fair market value and not on cost at which the asset is acquired.
Finance Bill, 2016
10
Direct Tax Dispute Resolution Scheme, 2016

New chapter X is inserted in order to reduce the pendency of litigation where a declaration can be
filed with respect to tax arrear and specified tax.
The salient features of the scheme are as follows:

A. Tax Arrear
Tax arrear" is defined as the amount of tax, interest or penalty determined under the Income Tax Act or the Wealth-tax
Act, in respect of which appeal is pending against the assessment order or a penalty order before the CIT(A) or the
CWT(A) as on 29th February, 2016
In case of appeal pending in relation to tax and interest wherein disputed tax exceeds INR 10 Lakhs, the declarant is
required to pay 25% of minimum penalty leviable, along with tax and interest up to the date of assessment. If disputed
tax does not exceed INR 10 lakh, no penalty shall be levied.
Filing of such declaration would amount to deemed withdrawal of the pending appeals before CIT(A) or CWT(A)
In case appeal is pending only against the penalty order, 25% of minimum penalty leviable shall be paid along with tax
and interest up to the date of assessment irrespective of the tax demand earlier paid
The declarant shall get immunity from prosecution and imposition of any further penalty or interest.
B. Specified Tax
Specified tax, means tax determined as a consequence of amendment in the Income Tax Act or Wealth Tax Act with
retrospective effect and relates to the period prior to the date of enactment of such amendment and a dispute in
respect of which is pending as on 29th February 2016.
The declarant is required to pay tax at the applicable rate.
For availing the aforesaid scheme, the declarant shall be required to withdraw any writ petition or any appeal filed
against such specified tax, and any claim in proceedings for arbitration, conciliation or mediation and also furnish an
undertaking in the form to be prescribed waiving the right to pursue any remedy or claim in relation to specified tax.
The declarant shall get complete immunity from prosecution and imposition of penalty and also waiver of Interest
levied under the Income Tax Act or Wealth Tax Act
Finance Bill, 2016
11
Direct Tax Dispute Resolution Scheme, 2016

C. General Provisions
The aforesaid scheme will be applicable from 1st June, 2016

Declaration shall be made to the designated authority not below the rank of Commissioner
The amount paid under the scheme shall not be refunded under any circumstances
On declaration by the assessee, the designated authority has to pass the order within
60 days from the date of

declaration and thereafter the assessee has to make the payment within 30 days from the date of receipt of such order
The scheme is not applicable to the following persons:

o Cases where prosecution has been initiated before 29th February 2016.
o Search or survey cases where the declaration is in respect of tax arrears
o Cases relating to undisclosed foreign income and assets
o Cases based on information received under Double Taxation Avoidance Agreement
o Person notified under Special Courts Act, 1992
o Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of
Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
The aforesaid scheme will help in reducing litigation and uncertainty in cases where assessee is of the opinion that his
chances of succeeding at CIT(A) stage is limited.
It will provide certainty to the assessee in determining its cash flow
This scheme for specified tax is introduced so as to allow entities such as Vodafone etc who have been saddled with tax
liability due to retrospective amendments to pay the tax liability and get complete waiver from interest and penalty and
immunity from prosecution.
Finance Bill, 2016
12
Equalisation Levy
Chapter VIII of Finance Bill 2016 taxation of digital business
The chapter introduces the concept of Equalisation Levy and contains the following provisions which will be effective from
notified date.:
Equalisation Levy at the rate of 6% shall be charged on the consideration in respect of specified services provided by a
non-resident to the following persons (service recipient):
- a person resident in India and carrying on business or profession; or
- a non-resident having a Permanent Establishment (PE) in India.
Specified services are services in the nature of online advertisement, digital advertising space or any other facility or
service for online advertisement and would include any other service notified by the Central Government.
Following services are exempt from Equalisation Levy:
- Non-resident providing the specified service through a PE (fixed base) in India;
- Consideration paid by a person does not exceed INR 1 lakh in a previous year;
- Where the specified services are not for carrying out business or profession.
The service recipient shall deduct the equalisation levy from the amount paid/payable to the non-resident in respect of the
specified services. The levy to be paid by service recipient irrespective of whether deduction is made or not.
Equalisation levy deducted during any calendar month shall be paid to the Central Government by 7th of the next month.
The chapter also contains provisions for annual statements, processing of annual statements, interest, penalty and
prosecution . It also contains provisions relating to appeal against levy of penalty and for recovery and collection of levy
Powers have been conferred on the Central Government to make rules to operationalise these provisions
Finance Bill, 2016
13
Equalisation Levy
In order to avoid double taxation, income received from specified services which has already been subject to Equalisation
Levy is exempt from tax u/s 10.
Expenses towards specified services shall not be allowed as a deduction in computation of total income if the assessee
fails to deduct and deposit Equalisation Levy before the due date of filing return of income
This is a step taken by the Government to meet the challenges of taxing digital transactions where business is carried out
through virtual place of business rather than physical presence and is in line with OECD recommendation under Action
plan 1 of BEPS project.
Earlier, persons carrying on business in digital domain located outside India were not covered under the purview of the
Indian tax regime. Now, with this amendment, entities across the world providing online advertising services through digital
and telecommunication network will come under the purview of Equalisation Levy.
This levy will not form part of Double Taxation Avoidance Agreement.
The onus to pay tax and comply with the procedures laid down will cast an additional burden on service recipient, as the
Non-resident service provider may not commercially agree to bear the same.
There is no provision for grossing up of the levy.
Finance Bill, 2016
14
Country By Country Reporting

Change in Transfer Pricing Reporting Requirements s. 92D & 286
It is proposed to amend s. 92D to provide that constituent entity which is part of an international group shall also be
required to maintain such information and documentation as to be prescribed in respect of the international group.
A newly inserted s. 286 provides for such documentation which are required to be maintained in respect of an international
group.
In order to facilitate exchange of information, provisions of country by country reporting have been introduced via s. 286.
The new documentation and reporting requirements are as follows:
Every constituent/group entity (i.e. an entity which is a part of an international group) resident in India, the parent entity of
which is not a resident in India, will have to notify information regarding the parent entity/alternate reporting entity and its
country of residence in the prescribed form and manner to the income-tax authority
If the parent entity/alternate reporting entity is a resident in India, it will have to furnish a report to the prescribed
authority, containing details of profits, taxes, revenue, capital, accumulated earnings, tangible assets, number of
employees, nature of business activity etc of each entity in the group, before the due date of filing the return of income, in
the form and manner to be prescribed.
The above mentioned detailed report on all group entities will also have to be furnished by the constituent entity resident
in India if the parent entity of the group is a resident of a country with which there is no arrangement for exchange of
information, the country of residence of the parent entity has violated/persistently failed to automatically exchange
information/reports with India
U/s 271GB of the Act, various penalty provisions have been introduced for default in reporting as required u/s 286.
S. 286 may not apply if the total consolidated group revenue as appearing in the consolidated financial statement does not
cross a certain threshold as may be prescribed
Finance Bill, 2016
15
Country By Country Reporting

Change in Transfer Pricing Reporting Requirements s. 92D & 286
Section 286 has been inserted in line with the OECD report on Action Plan 13 of the BEPS Project. It is a measure towards
standardising transfer pricing documentation across countries. This will increase reporting requirements immensely and
will also open doors to more litigation since each country will now be aware about details of each group entity and a mismatch in reporting done in various countries will attract immediate attention of the tax authorities
Forms for reporting are yet to be notified.
Threshold limit of EURO 750 million was recommended under BEPS. Threshold limits may be prescribed by the Rules.
Since various penalty provisions have also been introduced for non-reporting or mis-reporting, accurate reporting will be
very important
Finance Bill, 2016
16
Income Tax Rates

A) For individuals HUF, AOP, BOI, Cooperative Societies and Firms
There is no change in the rate of tax, education cess and higher education cess. However the rate of surcharge has been
increased by 3% for Individual, HUF, AOP & BOI having taxable income exceeding INR 1 crore.
Particulars
Income upto INR

1 Crore
Income above INR

1 Crore
INDIVIDUAL, HUF,AOP & BOI,
CO-OP. SOCIETY, FIRM

(including LLP)
A.Y. 2016-17
A.Y. 2017-18
A.Y. 2016-17
A.Y. 2017-18
Rate of surcharge
NIL
NIL
NIL
NIL
* Effective Tax rate
30.90%
30.90%
30.90%
30.90%
Rate of surcharge
12%
15%
12%
12%
Effective Tax rate
34.608%
35.535%
34.608%
34.608%
* In case of Individuals and HUFs the effective tax rate would be slightly lower due to threshold exemption and lower slab
rates upto INR 10 Lacs.
Increase in surcharge to 15% from existing 12% for income above INR 1 Crore will also impact the AMT payable by
persons other than companies (Section 115JC). This will increase the existing tax rate from 21.341% to 21.913%.
Finance Bill, 2016
17
Income Tax Rates

B) For Companies (Other than companies mentioned in the newly inserted s. 115BA)
The rates for domestic companies having turnover / gross receipts of INR 5 crores and above and for foreign companies has
remained the same.
Particulars
DOMESTIC COMPANY
DOMESTIC COMPANY
FOREIGN
(Having a Turnover
(Having a Turnover above
COMPANY
upto INR 5 Crore for
INR 5 Crore for FY 2014-15)
FY 2014-15)
Income upto
INR 1 Crore
A.Y.
2016-17
A.Y.
2017-18
A.Y.
2016-17
A.Y. 2017-18
(No Change)
A.Y.
2016-17
A.Y. 2017-18
(No Change)
Rate of
surcharge
NIL
NIL
NIL
NIL
NIL
NIL
Effective Tax
rate
30.90%
29.87%
30.90%
30.90%
41.20%
41.20%
Income above
INR 1 Crore
and up to INR
10 Crore
Rate of
surcharge
7%
7%
7%
7%
2%
2%
Effective Tax
rate
33.063%
31.961%
33.063%
33.063%
42.024%
42.024%
Income above
INR 10 Crore
Rate of
surcharge
12
12
12%
12%
5%
5%
Effective Tax
rate
34.608%
33.454%
34.608%
34.608%
43.26%
43.26%
Finance Bill, 2016
18
Income Tax Rates

C) Tax on Income of certain Domestic Companies S. 115BA (Newly inserted)
Section 115BA is introduced so as to give an option to newly set up domestic companies engaged in the business of
manufacture or production of any article or thing to pay tax at a concessional rate of 25%* on fulfilment of following
conditions:
I.
The company has been setup and registered on or after 1st March, 2016;
II.
The company is engaged in the business of manufacture or production of any article or thing and is not engaged in
any other business;
III.
The company while computing its total income has not claimed any benefit u/s 10AA, benefit of accelerated
depreciation, benefit of additional depreciation, investment allowance, expenditure on scientific research and any
deduction in respect of certain income under Part-C of Chapter-VI-A other than the provisions of s. 80JJAA, or any
set off of brought forward loss attributable to such deductions/allowances;
IV.
The option is exercised in the prescribed manner before the due date of furnishing of income.
This option will have to be exercised ever year.
* The surcharge applicable on these companies is same as the surcharge on domestic companies
Finance Bill, 2016
19
Residential Status of a Company

Deferment of provisions relating to Place of Effective Management (POEM) Section 6(3)
The concept of POEM was introduced by Finance Act 2015 and was effective from AY 2016-17. The residential status of a
foreign company was to be determined on the basis of its POEM.
The Finance Minister has recognised that before introducing this concept its ramifications need to be analysed.
Accordingly the implementation of POEM has been deferred by one year and POEM will now be applicable from AY 201718.
It is proposed to insert a new section 115JH to empower the Government to issue notification to provide detailed transition
mechanism for companies incorporated outside India, which due to implementation of POEM, for the first time would be
assessed to tax in India.
Further the notification to be issued will also bring clarity on issues relating to computation of income, treatment of
unabsorbed depreciation, set off or carry forward of losses, applicability of transfer pricing provisions, etc. applicable to
such foreign company deemed to be resident in India.
Finance Bill, 2016
20
Presence of Fund Manager in India

Presence of fund manager not to constitute business connection in India s. 9A:
Current
Proposed
Clause (b) of sub section 3 provides that the fund should

be a resident of a country with which an agreement under
s.90 or 90A has been entered into.
Further, clause (k) of sub section 3 places a restriction
that the fund should not carry on/ control or manage any
business in India or any business from India either directly
or indirectly.
In addition to the existing countries with which agreement

has been entered into, the clause provides that the fund
may be registered or incorporated in a country or a
specified territory notified by the Central Government.
The condition of fund not controlling and managing any
business in India or from India is restricted only to the
activities in India.
The above changes are relatively insignificant and the number of conditions to be fulfilled are still too onerous and rigid.
Finance Bill, 2016
21
Charitable Trusts
Tax on accreted income
A new Chapter XII-EB containing provisions relating to accreted income of Charitable Trusts registered u/s 12AA has been
introduced
The term accreted income refers to 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 computed in accordance with the Rules to be prescribed.
In the following cases, a charitable trust registered u/s 12AA shall be liable to pay tax at maximum marginal rates i.e. 30%
plus applicable surcharge and education cess on the accreted income in addition to the income tax chargeable on the total
income of the trust:
i. Trust converts into any form which is not eligible for registration u/s 12AA. This conversion is triggered even when
registration u/s 12AA has been cancelled or the trust has adopted or undertaken modification of its objects which do
not conform to conditions of registration and it has not applied for fresh registration u/s 12AA or its fresh application
has been rejected.
ii. It merges into an entity not having similar objects and not registered u/s12AA
iii. Non-distribution of assets on dissolution, to any charitable institution registered u/s 12AA or approved u/s 10(23C)
within a period of 12 months from date of dissolution
The tax on the accreted income by the trust shall be treated as the final payment of tax in respect of accreted income and
no further credit shall be claimed by the trust or by any other person in respect of the amount of tax so paid.
For the purpose of recovery of tax and interest, the Principal Officer or the Trustee and the trust shall be deemed to be
assessee in default and all provisions related to the recovery of taxes shall apply. Further, the recipient of assets of the
trust, which is not a charitable organisation, shall also be liable to be held as assessee in default in case of non-payment of
tax and interest. However, the recipient's liability shall be limited to the extent of the assets received.
These amendments will take effect from 1st June, 2016.
While the above amendment seems to be justified, it could result in extremely harsh consequences in case of withdrawal
of registration u/s 12AA for any reason by the commissioner.
Finance Bill, 2016
22
Salary Income-Tax treatment in Pension Plans

Recognized Provident Funds, Pension Funds and National Pension Scheme S. 10(12), 10(13), 80CCD
& 17
Current
Proposed
Accumulated balance due and becoming payable to an

employee in a RPF is exempt from tax subject to
fulfillment of certain condition as specified.
Payment from an approved SAF made to an employee in

lieu of or in commutation of an annuity or on his retirement
at or after a specified age or on his becoming
incapacitated prior to such retirement is exempt from tax.
As per the provisions of s. 80CCD any payment from NPS
to an employee on closure of account or his opting out of
the scheme is chargeable to tax.
Withdrawal of accumulated balance due and becoming

payable to an employee earning wages not exceeding INR
15000 p.m. will continue to be exempt from tax.
Withdrawals attributable to any contributions made on or
after 1st April, 2016 by an employee earning wages
exceeding INR 15000 pm, will be exempt only upto 40%
Any payment in commutation from an annuity purchased
out of contribution made on or after 1st April, 2016 which
exceeds 40% of the annuity shall be chargeable to tax.
Transfer from SAF to NPS will be exempt from tax.
S. 10(12A) is inserted whereby any payment from the
NPS to an employee on closure of the scheme referred to
in s. 80CCD to the extent it does not exceed 40% of the
total amount payable at the time of closure or opting out of
the pension scheme shall not be taxable. However the
amount received by the Nominee on the death of the
assessee shall be fully exempt from tax.
Finance Bill, 2016
23
Salary Income-Tax treatment in Pension Plans

Recognized Provident Funds, Pension Funds and National Pension Scheme S. 10(12), 10(13), 80CCD
& 17
Current
Proposed
Rule 6 to Part A of the Fourth Schedule provides that

contribution made by an employer to the credit of the
employee participating in a RPF in excess of 12% of
salary to an employee is liable to tax in the hands of an
employee.
Exemption limit for employers contribution to SAF is INR

100,000 p.a.
Rule 6 to Part A of the Fourth Schedule is proposed to be

amended so as to provide the limit of employers
contribution to RPF to INR 1,50,000/- or 12% of the salary
which ever is less, without attracting tax.
This limit has been enhanced to INR 150,000 p.a.
Contribution made by employer in excess of 12% or INR 150,000 which ever is less shall now be chargeable to tax in the
hands of the employee.
There is no change in the tax treatment of PPF
Amount invested from NPS in Annuity would be exempt from tax
All contributions to EPF and interest accrued thereon before April 1, 2016, will not attract any tax on withdrawal
The proposed amendment will benefit assessees investing in NPS
Finance Bill, 2016
24
Business Income
Investment Allowance- s.32AC
Current
Proposed
Investment Allowance at 15% is allowed as deduction

on investment made in new assets (plant and
machinery) exceeding INR 25 Crore in a previous year
by a company engaged in the manufacturing or
production of any article or thing provided new assets
are acquired and installed in the same previous year
The twin conditions of acquisition and installation of

the new assets in the same year have been
relaxed. It has been proposed that deduction is
allowable if acquisition of the assets is done in the
previous year and installation of these assets is
done in the subsequent year upto 31st March 2017.
In such cases, deduction would be allowed in the
year of installation of the asset.
This is a welcome provision for the manufacturing industry since it will do away with the hardship caused by the dual
compulsory condition of acquisition and installation of the assets in the same previous year, in order to avail the said
15% benefit under Investment Allowance.
Finance Bill, 2016
25
Business Income - Measures to phase out deductions

Proposed phase out plan of Profit linked deductions/weighted deductions :
Section
Incentive currently available in the Proposed phase out measures

Act
S.10AA - Special
provision in respect of
newly
established
units
in
Special
economic
zones
(SEZ).
Currently, profit linked deductions are

available for units in SEZ for profit
derived from export of articles or
things or services is available
No deduction shall be available to units

commencing manufacture or production of article
or thing or start providing services on or after 1st
day April,2020. (from previous year 2020-21
onwards).
S.35AC- Expenditure Presently, deduction for expenditure No deduction under the said section shall be
on eligible projects or incurred by way of payment of any available from FY 2017-18 (AY 2018-19) onwards.
schemes
sum to a public sector company or a
local authority or to an approved
association or institution,etc. on
certain ligible social development
project or a scheme.
Finance Bill, 2016
26

Proposed phase out plan of Profit linked deductions/weighted deduction :
Section
Incentive currently available in the Act
S. 80IA; 80IAB, Presently, 100 % profit linked deductions

and 80IB
are available for a specified period in
respect of profits derived from a)
development, operation and maintenance of
an infrastructure facility (80-IA), (b)
development of special economic zone (80IAB), (c) production of mineral oil and
natural gas [80-IB(9)]
Proposed phase out measures/Amendment
No deduction shall be available if the specified

activity commences on or after 1st day April, 2017.
(i.e. from previous year 2017-18 and subsequent
years).
Finance Bill, 2016
27

Proposed phase out plan of accelerated depreciation/weighted deduction incentive w.e.f.
AY 2018-19:
Section
Incentive currently available in the

Act
S. 32 read with rule Accelerated depreciation is provided to
5 of Income-tax certain Industrial sectors in order to
Rules,
1962- give impetus for investment. The
Accelerated
depreciation under the Income-tax Act
Depreciation
is available up to 100% in respect of
certain block of assets
Proposed phase out measures/Amendment

It is proposed to amend Rule 5 of Income-tax
Rules, 1962 to restrict the highest rate of
depreciation under the Income-tax Act to 40% for
all the assets (whether old or new) falling in the
relevant block of assets with effect from 1.04.2017
(i.e. from previous year 2017-18 and subsequent
years)
The aforesaid phase out of deductions are applicable to both corporate and non-corporate assessee
In addition to the aforesaid phase out plan is also proposed for s. 35CCD, 35, 35AD and 35CCC.
Finance Bill, 2016
28
Business Income - Presumptive Taxation

Increase in threshold limit for computing Profit and Gains of Business on presumptive basis s. 44AD
Current
Proposed
In case of an assesse engaged in any business having total

turnover or gross receipts not exceeding INR 1 crore, a sum
equal to 8% of the total turnover or gross receipts or such
higher sum earned by the assessee, shall be deemed to be
profit & gains from business chargeable to tax under the head
profit and gains from business or profession.
Against the 8% presumptive income, deduction for

remuneration and interest was available subject to limits u/s
40(b)
There is no requirement of payment of advance tax by eligible

assessee.
It is proposed to increase the existing limit of turnover or

gross receipts from INR 1 crore to 2 crore.
Assessee shall remain in the scheme for 5 consecutive
years after the first year of opting the scheme. If he does
not offer the income as per the scheme in any of the 5
years, he shall not be eligible to claim the benefit under
the scheme for the next 5 years.
If an assessee opts out of the scheme and his total
income exceeds the maximum amount not chargeable to
tax, he shall be required to maintain such books of
accounts specified in s. 44AA(2) and also get them
audited as per s. 44AB of the Act.
No deduction will be available in respect of remuneration
and interest to partners
Eligible assessee is now required to pay the whole amount
of advance tax in one installment by 15th March of the FY.
The increase in turnover limit is to reduce the compliance burden of MSME units and to facilitate ease of doing business.
The scheme is applicable to resident Individuals, HUF and Partnership firms but not applicable to Limited Liability
Partnership.
Tax audit limits u/s 44AB have not been increased
Finance Bill, 2016
29
Business Income - Presumptive Taxation

Special provisions for Specified Professionals s. 44ADA
A new section 44ADA is introduced, for estimating the income of an assessee who is engaged in specified profession and
whose gross receipts does not exceed INR 50 lakh in a previous year.
A sum equal to 50% of the total gross receipts, or such higher sum earned by the assessee shall be deemed to be the
profits and gains chargeable to tax
The scheme will apply only to an individual, HUF or partnership firm.
The assessee should be engaged in medical, legal, engineering or architectural profession or the profession of
accountancy, technical consultancy or interior decoration.
Consequentially the threshold limit for audit of such professionals from INR 25 lacs to INR 50 lakh in a year.
However, if the assessee does not opt for Presumptive taxation, he will be required to maintain books of account as per s.
44AA(1) and get the accounts audited under s. 44AB in respect of such income even if his gross receipts are less than INR
50 lakh.
Assessee carrying on specified profession will require his accounts to be audited if his total gross receipts in the previous
years exceeds INR 50 lakh.
Easwar Committee Report had recommended threshold limit of 1 Crore and 33.33% of the gross receipts be taxable
income. However Finance Bill 2016 provides that 50% of the gross receipts will be deemed to be the profits and gains of
the assessee.
Unlike section 44AD where the advance tax is to be paid only in 1 instalment on or before 15th March, professionals
covered u/s 44ADA are required to pay advance tax in 4 instalments.
Though the Memorandum mentions that s. 44ADA would not apply to an LLP, there is no corresponding provision in the
Finance Bill. Thus, there is ambiguity on its applicability to LLP.
Finance Bill, 2016
30
Capital Gains
Stamp duty valuation s. 50C
Current
Proposed
It is provided that where the consideration declared to be

received or accruing as a result of the transfer of land or
building or both, is less than the stamp duty valuation, the
value so adopted or assessed or assessable shall be
deemed to be the full value of the consideration, and
capital gains shall be computed on the basis of such
consideration u/s 48
Where the date of the agreement fixing the amount of

consideration and the date of registration for the transfer
of the capital asset are not the same, the value adopted or
assessed or assessable by the stamp valuation authority
on the date of agreement may be taken for the purposes
of computing full value of consideration for such transfer:
This would apply only if the amount of consideration or a
part thereof, has been received by way of an account
payee cheque or account payee bank draft or by use of
electronic clearing system through a bank account, on or
before the date of the agreement for transfer
The above amendment is proposed to be introduced in view of the recommendation of the Easwar Committee.
The Committee had pointed out an anomaly in s. 50C. It was highlighted that s. 50C does not provide any relief where the
seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property
and the sale consideration has been fixed in such agreement. Due to such provisions, stamp duty value as on date of
transfer was taken as full value of consideration which would be higher than the stamp duty value assessable as on the
date of agreement, leading to a disadvantage to the assessee. Thus, the above amendment is proposed to be introduced
to fix the anomaly in section 50C.
S. 43CA i.e. provisions relating to selling of immovable property as stock in trade, already has a similar provision.
Finance Bill, 2016
31
Income from Other Sources

Tax on certain dividends received from domestic companies s. 10(34) read with s. 115BBDA
Current
Proposed
Presently, dividends received from a domestic company

are exempt in the hands of shareholders u/s 10(34) of the
Act.
A new section 115BBDA is introduced wherein dividends

received from a domestic company by a resident an
individual, HUF or a firm (including an LLP), exceed INR
10 lakhs, the whole of the said dividend will be chargeable
to tax @ 10% in the hands of shareholder on gross basis
without any deductions. Consequential changes are
proposed in s. 10(34) of the Act.
Dividend from both Debt based and Equity based Mutual Funds will continue to be fully exempt in the hands of the
shareholder.
Dividend from domestic companies received by companies will continue to be exempt even if such dividend income exceeds
INR. 10 lakhs.
Finance Bill, 2016
32
Deduction under Chapter VIA

Deduction u/s 80JJAA in respect of new employment extended to all the assesses
Current
Applicable
to
Indian
manufacturing of goods
Proposed
company
engaged
in
Amount of deduction - 30% of wages paid to new

workmen;
Deduction available for 3 AYs including the AY in which

such employment is provided;
Minimum number of days of employment in a FY for

new employee should be at least 300 days;
No deduction allowed if the factory is transferred from

existing entity, or acquired as a result of amalgamation
or reorganisation;
Deduction allowed only if the number of workmen

increases by at least 10%
Applicable to any assessee to whom s. 44AB (tax audit)

applies
Amount of deduction - 30% of employee cost incurred in
respect of additional employees being employees whose
total emoluments does not exceed INR 25,000/- per month;
Deduction will be available for 3 AYs including the AY in
which such employment is provided;
Minimum number of days of employment in a FY for new
employee should be at least 240 days;
No deduction will be allowed if the business is formed by
splitting up, reconstruction, transfer;
Increase in any number of employees compared to
previous year would be eligible for deduction. In case of
new business, aggregate emoluments paid to employees
will be considered as additional employee cost
The benefit of deduction for new employment will now be available to a larger section of assessees carrying on business
or profession as the scope is widened and the conditions are much more liberalised.
Finance Bill, 2016
33
Minimum Alternate Tax (MAT) on Foreign Companies

Rationalising provisions of MAT applicable to foreign companies s. 115JB
Current
Proposed
No clarity was provided on whether MAT provisions apply

to a foreign company
i) PE in India under relevant DTAA or
Finance Act 2015 rationalised MAT provisions by

excluding the income of foreign companies earned in
relation to capital gains arising on transactions in
securities, interest, royalty or fees for technical services
etc. from the chargeability of MAT.
ii) Where there exists no DTAA and the foreign company

is not required to seek registration in India under any law
relating to companies
It is clarified that MAT shall not be applicable to a foreign

company, w.r.e.f. 01.04.2001 if the foreign company does
not have a
MAT provisions to be further rationalised by allowing

addition to book profit for expense in connection with
income from royalty in respect of patent developed and
registered in India. Such royalty income to be reduced
from book profit if credited to Profit and loss account.
AAR Ruling in the case of Castleton had held that s. 115JB was applicable to foreign companies, even if they dont have a
PE or place of business in India. The effect and implication of these decisions was that foreign companies would be liable
to pay MAT.
The AP Shah Committee vide its report dated 25th August 2015 recommended that MAT should not be levied on FPIs for
years prior to 1st April 2015. The Government vide Press Release dated 24th September 2015 notified that MAT will not be
applicable on foreign companies subject to above conditions.
The above amendment is incorporated as a clarification on foreign companies. A welcome proposal in order to attract
foreign inflows into the country.
Finance Bill, 2016
34
Business Trust (REIT and InvIT )

Exemption from DDT on distribution made by a SPV to Business Trust s. 10(23FC) & 115-O
The business trust structure in India permits the business trust to hold assets either directly or through a SPV.
The income received in a SPV structure is in the form of dividends distributed and interest paid by SPV.
Interest received by business trust is exempt and there is no liability on a SPV to deduct tax at source.
Incase of dividend payments from SPV, DDT was applicable which made the structure tax inefficient.
For rationalising the provisions, it is proposed to grant exemption from levy of DDT in respect of dividend declared,
distributed or paid by SPV to the business trust. Further such dividend received by business trust and unit holders on
distribution would be exempt.
The above benefit is available only if the business trust holds whole of the nominal value of the share capital of the SPV.
This condition would not apply if share capital is mandatorily required to be held by some other person in compliance with
any law or if the equity share capital is held by any Government or Government body itself.
The exemption from the levy of DDT would only be in respect of dividends paid out of current income after the date when
the business trust acquires the shareholding in the SPV. The dividends paid out of accumulated and current profits upto
this date shall be liable for levy of DDT as and when any dividend out of these profits is distributed by the company either
to the business trust or any other shareholder.
The above amendments are effective from 1st June 2016

This eliminates the inefficiency in the SPV structure of business trust and create a positive sentiment as SPV is required
to distribute 90% of its operating income.
Finance Bill, 2016
35
Securitisation Trusts
Taxation of Securitisation trusts, Asset Reconstruction Companies and their investors s. 10(23DA)
& 194LBC
Current
S. 10(23DA) did not include activities undertaken by ARC

trusts.
Securitisation trusts were liable to pay income distribution

tax of income at the rate of:
25% - investor being individual & HUF

30% - investor being other than individual & HUF
No distribution tax if recipients income is not

chargeable to tax.
Income exempt in the hands of investor and also in the

hands of the trust
Proposed
New sub clause has been inserted to the explanation to

include activities of ARC trusts.
Pass through status accorded to securitisation trusts and

ARC trusts.
Income to be taxed in the hands of investor and not in the
hands of the ARC trusts or securitisation trust.
Income of the same nature and same proportion as it is in
the hands of the securitisation trust or ARC trusts
Income deemed to be credited to the investor (on last day of
previous year) if not paid or credited by the securitisation
trust/ARC trusts and such income would not be taxed again
when received.
S. 194LBC inserted for deduction of TDS by securitisation
trust/ ARC trusts:
25% - resident payee is an individual or HUF
30% - resident payee is other than individual or HUF
Rates in force non resident payee
To be effective from 1st June 2016

Lower or non-deduction of tax certificate u/s 197 will have to be obtained by the investors whose income is exempt like
MF
Finance Bill, 2016
36
Alternate Investment Funds(AIF)

TDS provisions for payments made by AIF(category I or II) to investors s. 194LBB & 197
Current
Proposed
An AIF (Category I or II) is considered as tax pass through

in respect of income other than business income. Hence,
at the time of payment or credit (whichever is earlier) of
the income to the unit holders, the AIF has to deduct tax
@ 10%, both for resident and non-resident unit holders.
(i) at the rate of 10%, where payee is a resident;

(ii) At the rates in force, where payee is a nonresident (not being a company or a foreign
company)
TDS will have to be deducted by the AIF at the time of

credit or payment, whichever is earlier,
s. 197 which provides for obtaining of a lower or NIL

deduction certificate by the payee, has also been
amended to include 194LBB in this list of sections for
which such certificate can be obtained.
Earlier the payee did not have an option to obtain a certificate u/s 197. Also, TDS @ 10% was applicable for all resident
or non-resident payees. Thus, non-resident investors were unable to claim DTAA benefit. TDS was deductible on income
payable to them inspite of being eligible for DTAA benefit. They could not even approach the AO for certificate for lower
or NIL deduction of tax. This caused undue hardship to non-resident payees
Income to non-residents is now liable to TDS at the rates in force. Rates in force is rate as per the Act or the DTAA,
whichever is more beneficial to the assessee. Therefore, non-residents can now claim DTAA benefit at withholding stage
itself. They are also eligible to apply to the AO for certificate u/s 197.
This amendment is effective from 1st June 2016
Finance Bill, 2016
37
Tax incentives for Start-ups

Tax incentives for start-ups s. 80-IAC, 54EE & 54GB
A new s. 80-IAC is introduced which provides for a deduction of 100% of the profits and gains derived by an eligible startup from a business involving innovation development, deployment or commercialization of new products, processes or
services driven by technology or intellectual property.
The benefit shall be available to an eligible Start-up which is a company which is setup on or after 1st April 2016 but before
1st April 2019 and shall be available for 3 consecutive assessment years out of 5 years beginning from the year in which
eligible Start-up.
Eligible start up means a company engaged in eligible business which fulfils the following conditions,
(a) it is incorporated on or after the 1st April, 2016 but before the 1st April, 2019;
(b) the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or
after the 1st April, 2016 and ending on the 31st March, 2021; and
(c) it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette
by the Central Government..
In order to promote the start-up eco system as per the start up India Action plan, it is envisaged to establish a Fund of
Funds which would raise INR 2,500 crore annually to finance start-ups. Accordingly it is proposed to introduce a new s.
54EE to provide exemption from capital gains tax if the long term capital gains are invested in units of such specified fund,
within a period of 6 months after such transfer, subject to the condition that the amount remains invested for three years
failing which the exemption shall be withdrawn. The investment in the units of the specified fund shall be allowed upto INR
50 lakh per year and upto INR 50 lakh of capital gain per year.
Finance Bill, 2016
38
Tax incentives for Start-ups

Capital gain on transfer of residential property not to be charged to tax in certain cases s. 54GB
Current
Proposed
Long term capital gains arising to Individual or HUF on

account of transfer of a residential property is exempt in
case the capital gains are invested in a company which
qualifies to be a small or medium enterprise and such
company utilises the amount invested for purchase of
new asset
The definition of new asset does not cover computers or

computer software;
Exemption is being extended to Individual or HUF, on

the capital gains arising from transfer of residential
property if the same are invested in a company which
qualifies to be an eligible start-up and such company
utilises the amount invested for purchase of new asset
The definition of new asset has been amended to
include computer or computer software for Start-ups.
With a view to promote Make in India, start-ups are given encouragement by way of aforesaid deductions/exemptions.
However, there is no exemption to the start-ups from the provisions of MAT.
Finance Bill, 2016
39
Taxation of Income from Patents

Taxation of Income from Patents s. 115BBF
A new section 115BBF is introduced, wherein royalty received by a resident, in respect of a patent developed and
registered in India, will be taxable at a concessional rate of 10% (plus applicable surcharge and cess) on gross basis i.e.
without deduction of any expenditure incurred in respect of such royalty. Following conditions have to be met to be eligible
for this concessional rate of tax:
The assessee should be a resident of India and should be true and first inventor of the patent. His name should be
registered as the patentee in the patent register as per the Patents Act, 1970;
The royalty income received should be for the transfer of all or any rights (including granting of a licence) in respect of
the patent, use of any patent, imparting information related to the use of the patent or any services in relation to the
patent
The consideration received should not be for sale of a product manufactured using a patented process or a patented
article or income chargeable under the head capital gains
This section has been inserted to encourage R&D activities in India and to encourage development of new innovative
products in India
The recommendation of the OECD in its BEPS project under Action Plan 5 on Countering Harmful Tax Practices wherein
emphasis has been laid on the nexus approach, has also been considered. It states that benefit of preferential IP/Patent
tax regime should be available only if substantial R&D activities are undertaken in the said jurisdiction. Therefore, merely
location of the patent in India will not entitle the above beneficial tax rate u/s115BBF. It will have to be ensured that the
R&D in relation to such patent is also carried out in India.
Finance Bill, 2016
40
Procedure of Assessment - Filing of Return of Income

Filing of return - s. 139(4) & 139(5)
Current
Proposed
As per s. 139(4), any person who has not furnished a

return before the due date or within the time allowed under
a notice issued u/s 142(1), may furnish the return for any
previous year at any time before the expiry of 1 year from
the end of the relevant AY or before the completion of the
assessment, whichever is earlier.
As per s. 139(5), any person, having furnished the return
u/s 139(1) or in pursuance of notice issued u/s 142(1),
discovers any omission or any wrong statement therein,
may furnish a revised return at any time before the expiry
of 1 year from the end of the relevant AY or before the
completion of the assessment, whichever is earlier.
U/s. 139(4) the belated return for any previous year would
have to be filed, before the end of the relevant
assessment year or before the completion of assessment,
whichever is earlier.
U/s 139(5), the assessee can now file a revised return

even in case of a belated return filed u/s 139(4) of the Act.
Whether a notice u/s 142(1) is issued or not, the limit to furnish the return will be the last day of the relevant AY, or the date
of the completion of the assessment which ever is earlier.
The extended time limit of 1 year after the end of the relevant assessment year for furnishing the return of income is now
removed. The revised time limit for the belated return is now before end of the relevant assessment year.
In view of this amendment, for AY 2016-17 as well as for AY 2017-18, the time limit for filing belated income tax return
would be till 31st March 2018.
Finance Bill, 2016
41
Procedure of Assessment - Scope of electronic

processing of information
Scope of adjustments to be made while processing of returns s. 143(1)
Current
Proposed
Presently, s 143(1)(a) provides the manner for processing

of a return filed by making adjustments of arithmetical
errors or incorrect claims apparent from any information in
the return
U/s 143(1)(a), following adjustments can be made while

processing a return of income:
i) Arithmetical errors in the return

ii) Incorrect claims apparent from record
iii) Disallowance of loss claimed, if return of the previous
year for which set off of loss is claimed was furnished
beyond the due date specified in s. 139(1),
iv) Disallowance of expenditure indicated in the audit
report but not taken into account in computing the total
income in the return,
v) Disallowance of deduction claimed u/s10AA, 80-IA, 80IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is
furnished beyond the due date specified under section
139(1); or
vi) Addition of income appearing in Form 26AS or Form
16/16A which has not been included in computing the
total income in the return
Finance Bill, 2016
42
Procedure of Assessment - Scope of electronic

processing of information
Scope of adjustments to be made while processing of returns s. 143(1)
Current
Proposed
However, before making any such adjustments, an

intimation shall be given to the assessee either in writing
or through electronic mode requiring him to respond to
such adjustments. The response received, if any, will be
duly considered before making any adjustment and in
case no response is received within thirty days of issue of
such intimation, the processing shall be carried out
incorporating the adjustments.
This amendment will take effect from the 1st June, 2016.
On introduction of the aforesaid changes, the scope of adjustments u/s 143(1) intimation has increased significantly.
Finance Bill, 2016
43
Procedure for Assessment Time limit

Rationalisation of time limit for assessment, reassessment and recomputation s. 153
Particulars
Current
Proposed
Assessment u/s 143(3) or best

judgement assessment u/s
144
2 years from the end of assessment

year in which income was first
assessable (i.e. 31st March)
21 months from the end of assessment

year in which income was first assessable
(i.e. 31st December)
Reassessment u/s 147
1 year from the end of financial year

in which notice for reassessment was
served
9 months from the end of financial year in

which notice for reassessment was served
Effect to order passed u/s 254,

263, 264, setting aside or
cancellation of Assessment
12 months from the end of financial

year in which order is received.
9 months from the end of financial year in

which order is received.
New Limits prescribed s. 153

Particulars
Limits
Giving effect to order passed u/s

250,254,260,262, 263,264
Three months from the end of the month in which the order is received/
passed by the jurisdictional Commissioner. Additional period of six months to
give effect to the order upon request from the AO to specified authorities.
Assessment, reassessment or
recomputation pursuant to the above
orders or in 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 month in which order is received/passed u/s

250,254,260,262, 263,264 by the jurisdictional Commissioner.
Finance Bill, 2016
44
Procedure for Assessment time limit

Rationalisation of time limit for assessment in search cases s. 153
Particulars
Current
Proposed
Time limit for completion of

assessment u/s 153A
2 years from the end of the financial

year in which the last authorizations for
search/ requisition was executed.
21 months from the end of the

financial year in which the last
authorizations
for
search/
requisition was executed.
Time limit for completion of

assessment u/s 153C
2 years from the end of the financial

year in which last authorization for
search/ requisition was executed or 1
year from the end of financial year in
which books of accounts or documents
or assets seized or requisition is handed
over to AO having jurisdiction over the
person
21 months from the end of the

financial year in which last
authorization for search/ requisition
was executed or 9 months from
the end of financial year in which
books of accounts or documents or
assets seized or requisition is
handed over to AO having
jurisdiction over the person
The provisions as they stood immediately before the amendment, shall apply to and in relation to any order of assessment,
reassessment or recomputation made before the 1st day of June, 2016.
The amendment will take effect from 1st day of June, 2016.
Rationalisation of time limit for transfer pricing assessment s. 92CA(3A)
Where assessment proceedings are stayed by any court or where a reference for exchange of information has been made
by the competent authority, the time available to the Transfer Pricing Officer for making an order after excluding the time
for which assessment proceedings were stayed or the time taken for receipt of information, as the case may be, is less
than 60 days, then such remaining period shall be extended to sixty days w.e.f. 1st June 2016.
Finance Bill, 2016
45
Collection and Recovery of Tax - Withholding Tax

Section
Heads
Existing limit (INR)
Existing rate
(%)
Revised limit
(INR)
Proposed
limit(INR)/
Proposed Rate(%)
192A
Payment of accumulated
balance due to an employee
30,000
10%
50,000
10%
194BB
Winnings from Horse Race
5,000
30%
10,000
30%
194C
Payments to Contractors
30,000 per
transaction
75,000 for aggregate
Transactions during
the Year.
2% for
Co/Firm/co-op
housing society
1%
Individual/HUF
30,000 per
transaction
100,000 for
aggregate
transactions
2% for Co/Firm/ coop housing society

1% Individual /HUF
194D
Insurance commission
20,000
10%
15,000
5%
194DA
Payment in respect of Life

Insurance Policy
1,00,000
2%
1,00,000
1%
194EE
Payments in respect of NSS

Deposits
2,500
20%
2,500
10%
194G
Commission on sale of
lottery tickets
1,000
10%
15,000
5%
194H
Commission or brokerage
5,000
10%
15,000
5%
194K
Income in respect of Units
To be omitted
w.e.f 01.06.16
Finance Bill, 2016
46
Collection and Recovery of Tax - Withholding Tax

Section
Heads
Existing limit
(INR)
Existing Rate
(%)
Proposed
limit(INR)/
Proposed Rate(%)
194L
Payment of Compensation
on acquisition of Capital
Asset
194LA
Payment of Compensation
on acquisition of certain
Immovable Property
2,00,000
10%
2,50,000
10%
197A
r.w.s.
194-I
No deduction of tax to be
made on certain payments
if self declaration provided
under Form 15G/15H
Withholding to
be made for
rent received
u/s 194-I.
2% for use of
machinery/plant
10% for Land &
building
Nil withholding if
self declaration
provided under
Form 15G/15H
Nil
194LBB
Income in respect of units

of alternate investment
fund
10% for all

assesses
10% for residents

As per rates in force for Non
residents. New provision for
obtaining lower deduction
certificate under section 197
194LBC
Income in respect of units

of securitisation trust
NA
NA
To be omitted
w.e.f
01.06.2016
For Residents-25% for

Individual and HUF
30% for others
For non residents- As per rates
in force
These amendments will be effective from 1st June 2016
Finance Bill, 2016
47
Collection and Recovery of Tax - Requirement to furnish

PAN in case of non resident
Exemption for non-residents to furnish PAN s. 206AA
Current
As per s. 206AA, if PAN is not provided at the time of
deduction of tax, then tax is to be deducted at higher of the
following:
(i) at the rate specified in Act; or
(ii) at the rate in DTAA; or

(iii) at the rate of 20%.
Proposed
In order to reduce compliance burden for non-residents, it
is proposed that the section shall not apply to a non resident, in respect of any payment, subject to such
conditions as may be prescribed
In such case, there may not be a higher rate of
withholding tax due to non availability of PAN.
This provision was an impediment in terms of ease of business, as many non-residents prefer not to do business with
Indian residents as it either entails higher withholding or obtaining of PAN or it increases the cost of services to residents if
payment to non-residents is net of tax.
This amendment will be effective from 1st June 2016.
Finance Bill, 2016
48
Collection and Recovery of Tax - Installments of Advance

Tax and its Due dates
Schedule for payment of advance tax u/s 211 and levy of interest u/s 234C
Current
Proposed
Presently the advance tax payment schedule for corporate

assessees is 15%, 45%, 75% and 100% and the same is
payable on or before 15th June, 15th September, 15th
December and 15th March respectively.
For assessees other than corporates, the advance tax
payment schedule is 30%, 60% and 100% and the same
is payable on or before 15th September, 15th December
and 15th March respectively.
All assesses (corporate and non corporate) shall be liable

to pay advance tax of 15%, 45%, 75% and 100% on or
before 15th June, 15th September, 15th December and 15th
March respectively.
No interest shall be charged u/s 234C in respect of
assessee having income under the head "Profits and
gains of business or profession" for the first time, subject
to fulfillment of conditions specified therein
Will Increase advance tax compliance for non-corporate assessee .

The above amendment is proposed so as to advance the collection of revenue.
Finance Bill, 2016
49
Collection and Recovery of Tax - Interest on refund

Payment of interest on refund s. 244A
Current
Proposed
Presently, interest is receivable by an assessee on any

refund due to him, being simple interest at the rate of
0.5% for every month comprised in the period from the 1st
day of April of the assessment year to the date on which
the refund is granted.
Interest u/s 244A was not granted if refund was on

account of self-assessment tax
In cases where the Return of Income is filed after the due

date, interest u/s 244A shall be granted for a period
beginning from the date of filing of return.
An assessee shall be eligible to interest on refund of selfassessment tax for the period beginning from the date of
payment of tax or filing of return, whichever is later, to the
date on which the refund is granted.
It is also proposed to amend s. 153 to provide that where
a refund arising out of appeal effect is delayed beyond 3
months from the end of the month in which the order is
received by the tax officer as prescribed u/s153(5), the
assessee shall be entitled to receive additional interest on
such refund amount @ 3% p.a., for the period beginning
after the expiry of the aforesaid period of 3 months to the
date on which the refund is granted.
These amendments will take effect from 1st June, 2016.

Pursuant to the proposed amendment, assessee shall be eligible for interest @ 9% p.a. (6% existing + additional 3%
proposed) on delayed refund arising out of appeal effect.
Whilst the differential interest is small, its a welcome beginning.
Finance Bill, 2016
50

100% deduction for the profits derived from developing and building affordable approved housing
projects s. 80-IBA
A new Section 80-IBA is proposed to be introduced, wherein 100% deduction of the profits derived from developing and
building affordable housing projects (which is approved by the competent authority after 1st June, 2016 but on or before
31st March, 2019), will be allowed to an assesse if:
The project is completed within 3 years from the date of its approval by the competent authority;
For the projects located within metro cities and within the area of 25 km from the municipal limits of these cities:
- The plot of land used should not be less than 1000 sq. metres;
- Size of the residential unit should not be more than 30 sq. metres
- Floor area ratio permissible in respect of the plot of land should not be less than 90%
For the projects located in any other area:
- The plot of land used should not be less than 2000 sq. metres;
- Size of the residential unit should not be more than 60 sq. Metres
- Floor area ratio permissible in respect of the plot of land should not be less than 80%
Once a residential unit is allotted to an individual, no other unit shall be allotted to him or his spouse or minor children
in the same housing project.
The built-up area of the shops and other commercial establishments included in the housing project should not
constitute more than 3% of the aggregate built-up area.
The assessee maintains separate books of account in respect of the eligible housing project.
This deduction will not be available to a contractor.
Finance Bill, 2016
51

Deduction for interest on loan for residential property from a Financial Institution s. 80EE
Current
Proposed
Amount of deduction INR 1,00,000/- for AY 2014-15

and 2015-16 cumulatively;
Loan has to be sanctioned by the financial institution
during the FY 2013-14;
Amount of loan should not exceed INR 25 lakh;
Value of residential house property should not exceed
INR 40 lakh;
Assessee should not own any other residential house
property on the date of sanction of loan.
Amount of deduction INR 50,000/- p.a. till repayment

of loan continues;
Loan has to be sanctioned by the financial institution
during the FY 2016-17;
Amount of loan should not exceed INR 35 lakh;
Value of residential house property should not exceed
INR 50 lakh;
Assessee should not own any other residential house

property on the date of sanction of loan.
The intention of the government is to incentivise affordable housing by encouraging small builders / developers by allowing
100% deduction. However, considering the conditions prescribed, it seems that this would benefit a very small section of
builders developing housing projects.
The provisions proposed also encourages people to own a house by providing deduction in respect of the interest on
housing loan. However, this deduction will be only be beneficial in respect of self occupied property.
Double deduction is not allowed on the same interest.
Finance Bill, 2016
52
Penalty Provisions
Levy of Penalty in cases of under reporting and mis-reporting of Income Section 270A
Section 271(1)(c) which deals with penalty on account of concealment of particulars of income or furnishing inaccurate
particulars of income will not apply in relation to assessments for A.Y. 2017-18 and thereafter. Amount of penalty leviable
was between 100 to 300 percent of the amount of tax sought to be evaded.
New section 270A is inserted in lieu thereof for levy of penalty in case of under reporting and misreporting of income.
An assessee shall be considered to have under reported his income if the assessed income is greater than the income
processed in return u/s 143(1)(a), or assessed income exceeds the maximum amount not chargeable to tax where return
has not been filed, or the reassessed income is greater than the income assessed earlier or the loss claimed is reduced on
assessment.
The above under reporting would be considered as misreporting where there has been suppression of facts, non-recording
of investments or receipt in books, unsubstantiated claim of expenditure, recording of false entries or failure to report any
international transaction.
Penalty in case of under reporting of income shall be fifty per cent of the tax payable on such income. However, when the
under reporting of income results from misreporting, a penalty of two hundred per cent of tax payable will be applicable.
Finance Bill, 2016
53
Penalty Provisions
Waiver of Penalty
New section 270AA has been proposed for grant of immunity from penalty and prosecution if the assessee pays the entire
amount of tax and interest as per the assessment order within the specified time and does not prefer an appeal against
such order. However this immunity would not be applicable in cases of misreporting of income.
The application of grant of immunity has to be made within one month from the end of the month in which the order is
received. The AO will accept or reject the application with one month from the end of the month in which the application is
filed. Such order is final.
Other Provisions
Current section 271AAB(1)(c) provides for penalty between 30% to 90% of the undisclosed income, in cases where search
has been initiated.
Amended section 271AAB(1)(c), provides for penalty leviable at a flat rate of 60% of the undisclosed income , in cases
where search has been initiated.
The intention of the government is to bring certainty and clarity in the penalty provisions. The discretionary power of
income tax officer w.r.t. rate of penalty has been done away with and specific rates have now been prescribed.
However it could still be a subjective matter as to when under reporting of income is a result of misreporting of income.
Finance Bill, 2016
54
It is provided that rate of 10% tax for long term capital gains arising from transfer of securities is applicable to shares of a
unlised company.
The deduction in respect of interest of INR 2 lakh on housing loan for self occupied property is available only if the
acquisition or construction of the house is completed within 3 years from the end of the FY in which capital was borrowed.
This period is now being increased to 5 years.
Provisions of Section 25A, 25AA and 25B is proposed to be merged under a new Section 25A to simplify and consolidate
the provisions for taxing unrealised rent and arrears of rent in the year of its receipt. Therefore, the 30% deduction is
proposed to be allowed even in respect of the unrealised rent realised subsequently, such deduction was earlier restricted
only to arrears of rent received.
The transfer from one plan to another plan on account of consolidation within the same scheme would not be considered
as transfer for the purpose of determination of capital gains.
Sale of motor vehicle for value exceeding INR 10 lakh and sale of goods (other than bullion or jewellery) or provision of
services in cash (excluding where TDS has been deducted) for the value exceeding INR 2 lakh, are made subject to TCS
at the rate of 1% of the sale consideration.
Such provisions relating to TCS on sale of any goods (other than bullion and jewellery) or provision of services shall not
apply subject to prescribed conditions.
Application made by the assessee u/s 220, 273A and 273AA shall be disposed off by the officers mentioned therein, within
a period of 12 months from the end of the month in which such application is received. Further, no application under the
aforesaid sections shall be rejected without giving the assessee the opportunity of being heard.
To promote e-assessment it is proposed to amend section 282A(1) so as to provide that notices and documents required
to be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronic
form.
Finance Bill, 2016
55
Loss of any specified business referred in Section 35AD will be allowed to be carried forward and set off only if the return
is filed in time.
Interest earned on Deposit Certificates under the Gold Monetization Scheme, 2015 is exempt. Deposit Certificates issued
under Gold Monetisation Scheme, 2015 are also excluded from the definition of capital asset and thereby exempt from tax
The non-compete fees received in relation to any profession will also be taxed as business income.
In addition to non-allowance of expenditure against the deemed undisclosed income such as cash credit, unexplained
investments u/s 68, 69, losses also cannot be set off against such income.
Amount of rebate from tax payable subject to the maximum amount of tax available to resident individuals, whose total
income does not exceed INR 5,00,000/-, has increased from INR 2,000/- to INR 5,000/-.
Deduction allowable for rent paid by an individual who is not granted HRA by an employer is been increased from INR.
2,000/- pm to INR 5000 pm u/s 80GG.
Deduction in respect of provision for bad and doubtful debts made by NBFCs would be allowable up to 5% of total income
( before making deductions under Chapter VIA).
If the total income including income exempt u/s 10(38) exceeds the basic exemption limit, it would be liable to file return.
A return filed without payment of self-assessment tax along with interest shall not be treated as a defective return.
The existing provision of Section 194-I provides the threshold limit of Rs.1,80,000 for deduction of tax at source. However,
there may be cases where tax payable on recipients total income, including rental payments will be nil. Thus, the Finance
Bill proposes to provide an option to the landlords to file declaration in Form 15G/15H for non-deduction of tax at source.
Finance Bill, 2016
56
SERVICE TAX
Finance Bill, 2016
57
Particulars
Amendments*
Section 65B(44)
Service Definition
Definition of service proposed to be amended to provide that activities carried out by a lottery
distributor or selling agents should be on behalf of the State Government and as per the
provisions of the Lotteries (Regulation) Act, 1998
Section
66E
Declared Service
Assignment of the right to use the radio-frequency spectrum by the Government and subsequent
transfers thereon proposed to be a declared service and liable to service tax
Section 67A Date of

Determination of Rate
of Tax
The amendment proposes to provide that the point of time with respect to the rate of service tax
shall be determined as per POTR, thereby resolving the anomaly between the FA and the POTR
Section 73 Recovery
of Service Tax
Time limit for issuing demand notices under the normal period proposed to be enhanced from 18
months to 30 months. Extended period of limitation continues to be 5 years.
Section 78A Penalty

for
offences
by
Director, etc of the
Company
The amendment proposes to clarify that once the proceedings against the Company stand
concluded on payment of service tax/interest/penalty (if applicable), within a period of 30 days
from the date of receipt of SCN, the penalty on directors, managers, secretaries, etc of the
Company shall also be deemed to have been concluded
Section 89, 90 and 91

Offences
In a move towards reducing coercive measures, the amendment proposes to confine the powers
to arrest only in situations where tax has been collected but not paid and also proposes to
enhance the monetary limits for exercising such powers from INR 50 lakhs to 200 lakhs
Refund to exporter of
goods
(Notification
No.1/2016 - ST)
Refund of service tax paid on services used beyond the factory or any other place or
premises of production or manufacture of the goods exported is proposed to be allowed for
the period 1st July, 2012 to 2nd February, 2016
Rebate claim to be filed within 1 month from date of enactment of the Bill in respect of claims
rejected for earlier period
* Applicable from the date of enactment of the Bill ,unless otherwise specified.
Finance Bill, 2016
58
Particulars
Amendments*
Section 101 Retrospective

Service Tax exemption to
canal, dam or other irrigation
works
Services by way of construction, erection, commissioning, installation, completion, fitting

out, repairs, maintenance, renovation, or alteration of canal, dam or other irrigation
works provided to entities set up by Government but not necessarily by an Act of
Parliament or a State Legislature proposed to be exempted retrospectively for the period
1st July, 2012 to 29th January, 2014.
Section 102 Restoration of

exemptions withdrawn for
certain contracts entered
before
its
withdrawal
(Notification No. 09/2016-ST)
Service tax exemption on specified construction related services provided to the

Government/Local Authority/ Governmental Authority proposed to be restored till 31st
March, 2020 in respect of contracts entered into prior to 1st March, 2015 and where
applicable stamp duty has been paid prior to such date
Section 103 Restoration of

exemptions withdrawn for
certain contracts entered
before
its
withdrawal
(Notification No. 9/2016-ST)
Service tax exemption on specified construction related services of original works

pertaining to airports or ports proposed to be restored till 31st March, 2020 in respect
of contracts entered into prior to 1st March, 2015 and where applicable stamp duty
has been paid prior to such date.
Certificate form MCA or MoS required to establish that contract has been entered
into prior to 1st March, 2015
Services provided during the period 1st April, 2015 to 29th February, 2016 under
such contracts also proposed to be exempted from service tax
Refund claims Section 101,

102 and 103
Refund of service tax proposed to be allowed on retrospective exemptions

Claim to be filed within 6 months from the date of enactment of the Bill subject to
condition that the burden of tax has not been passed on to the recipient .
* Applicable from the date of enactment of the Bill ,unless otherwise specified.
Finance Bill, 2016
59
Particulars
Amendments
Krishi Kalyan Cess
0.5% KKC proposed to be levied on the value of all or any of the taxable services from
1st June, 2016 for financing and promoting initiatives to improve agriculture and welfare of
farmers.
KKC paid on input services proposed to be allowed as a set-off against payment of KKC
leviable on output services
Section 66D Negative

List
Service of transportation of passengers by an air-conditioned stage carriage proposed

to be removed from the Negative List and made taxable w.e.f. 1st June, 2016
Services by way of transportation of goods by a vessel from a place outside India up to
the customs station of clearance in India proposed to be removed from the Negative List
and made taxable w.e.f 1st June, 2016
Services by way of transportation of goods by an aircraft from a place outside India up to
the customs station of clearance in India moved from the Negative List to the Exemption
List*. Such services continue to be exempt from tax.
Services by way of pre-school education, education as a part of curriculum for obtaining
a qualification recognized under any law and approved vocational courses moved from
the Negative List to the Exemption List*. Such services continue to be exempt from tax.
* Mega Exemption Notification No. 25/2012 as amended from time to time
Finance Bill, 2016
60
Abatement
Nature of Services
Current
Proposed*
Transport of goods or passengers (with or without

accompanied belongings) by rail
Transport of goods in a vessel
CENVAT credit on inputs, input

services and capital goods not
available.
CENVAT credit on input

services available.
Motorcab Services
Cost of fuel to be included in the gross consideration for

the purposes of claiming abatement
Other Services
Abatement
rate
Effective tax
rate**
Abatement
rate
Effective
tax rate**
Transportation of goods by rail in containers by any person

other than Indian Railways
70%
4.35%
60%
5.80%
GTA in relation to transportation of used household goods
70%
4.35%
60%
5.80%
Services provided by foreman of chit fund in relation to chit
NIL
14.5%
30%
10.15%
60%
5.80%
90%
75% / 60%
1.45%
3.63% / 5.8%
90%
70%
1.45%
4.35%
75%/
70%
3.63% /
4.35%
70%
4.35%
Transport of passengers, with or without accompanied

belongings by a stage carriage^
Tour Operators Services
Arranging or booking accommodation only
Others
Construction of a complex, building, civil structure or a part
thereof
* Notification No.08/2016-Service Tax dated 1st March , 2016 effective from 1st April,2016.
** The effective tax rate has been computed based on the prevailing Service Tax rate of 14% and Swachh Bharat Cess of 0.5%.
^ Applicable from 1st June, 2016.
Finance Bill, 2016
61
Exemptions
Nature of Services
Current
Proposed*
Legal services provided by a Senior Advocate to any person except a non business entity
Exempt
Taxable^
Services to an Arbitral Tribunal by a person represented on an Arbitral Tribunal
Exempt
Taxable^
Services provided by the Indian Institutes of Management by way of specified educational

programmes
Taxable
Exempt**
Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of

Skill Development and Entrepreneurship by way of assessments under Skill Development
Initiative Scheme
Taxable
Exempt^
Services provided by way of skill or vocational training by Deen Dayal Upadhyaya Grameen
Kaushalya Yojana Training Partners
Taxable
Exempt^
Specified construction related services provided under Housing for All (Urban) Mission/ Pradhan
Mantri Awas Yojana
Taxable
Exempt**
Construction, erection, commissioning or installation of original works pertaining to monorail or

metro excluding contracts entered into before 1st March, 2016 on which stamp duty has been
paid
Exempt
Taxable**
Construction, erection, commissioning or installation of original works pertaining to low cost

houses up to carpet area of 60 Sq.mt under Housing for All (Urban) Mission / Pradhan Mantri
Awas Yojana / housing scheme of a State Government
Taxable
Exempt**
Performance by an artist in folk or classical art forms of music / dance / theatre (excluding as a
brand ambassador)
Exempted
upto
1,00,000
Exempted
upto
1,50,000^
* Notification No.09/2016-Service Tax dated 1st March, 2016.

** Applicable from 1st March, 2016
^ Applicable from 1 st April, 2016
Finance Bill, 2016
62
Exemptions
Nature of Services
Current
Proposed*
Transportation of passengers by ropeway, cable car or aerial tramway
Exempt
Taxable^
General insurance services provided under Niramaya Health Insurance Scheme implemented
by Trust constituted under the National Trust for the Welfare of Persons with Autism, Cerebral
Palsy, Mental Retardation and Multiple Disabilities Act, 1999
Taxable
Exempt^
Life insurance services provided by way of annuity under the National Pension System
regulated by PFRDA
Taxable
Exempt^
Services provided by the Employees Provident Fund Organisation to persons governed under
the Employees Provident Funds and Miscellaneous Provisions Act, 1952
Taxable
Exempt^
Services provided by IRDA to insurers under the IRDA Act, 1999
Taxable
Exempt^
Services provided by SEBI by way of protecting the interests of investors in securities and to
promote the development of, and to regulate, the securities market
Taxable
Exempt^
Cold chain knowledge dissemination services provided by National Centre for Cold Chain
Development under Ministry of Agriculture, Cooperation and Farmers Welfare
Taxable
Exempt^
Services provided by bio-incubators recognized by Biotechnology Industry Research Assistance

Council to incubatees#
Taxable
Exempt^
Information Technology Software recorded on media required to declare RSP on which

appropriate excise and customs duties have been paid, subject to fulfillment of specified
conditions%
*
%
Notification No.09/2016-Service Tax dated 1st March, 2016.
Exempt**
#Notification No.12/2016-Service Tax dated 1st March, 2016.
Notification No.11/2016-Service Tax dated 1st March, 2016
** Applicable from 1st March, 2016
^ Applicable from 1 st April, 2016

Finance Bill, 2016
63
Reverse Charge
Nature of Services
Current
Proposed*
Services provided by mutual fund agents/ distributor to a mutual fund or asset

management company.
Reverse Charge
Forward Charge
Reverse Charge
Exempt
Exempt
Forward Charge
Forward Charge
Forward Charge
Forward Charge
Forward Charge
Reverse Charge
hitherto applicable
only on Defined
Support Services
Reverse Charge
now applicable
on All Services
Legal services provided by a Senior Advocate to

Business entity with a turnover exceeding INR 10 lakh
Business entity with a turnover of up to INR 10 lakh
Advocate or firm of advocates
Liability to pay Service tax on services provided by Government or local
authorities to business entities
Renting of immovable property, services in relation to an aircraft or vessel
inside or outside the precincts of a port or an airport, transport of goods or
passengers and services by Department of Post by way of speed post,
express parcel post, life insurance and agency services
Other Services
*Notification No.18/2016-Service Tax dated 1st March, 2016 effective from 1st April, 2016.
Finance Bill, 2016
64
Service Tax Rules

Particulars
Amendments*
Rule 6(1)
Deposit of
Service Tax
Deposit of service tax by One Person Company with value of taxable services up to INR 50 lakh
and HUF on quarterly basis
Option to One Person Company with value of taxable services up to INR 50 lakh to deposit
service tax on receipt basis
Rule 6(7A)
Composite Rate
Change
Reduction in the rate of Service Tax on single premium annuity (insurance) policies from 3.5% to
1.4% of the premium.
Rule 7, 7B, 7C Annual Return
Annual return to be filed by manufacturer / service provider for each FY by 30th November of
succeeding FY
Revised return can be filed within a period of one month from the date of filing of original return
Delayed return filing fees - INR 100 per day for period of delay subject to maximum of INR
20,000/-
*Notification No.19/2016-Service Tax dated 1st March, 2016 effective from 1st April, 2016.
Finance Bill, 2016
65
CUSTOMS
Finance Bill, 2016
66
Particulars
Section 2(43),
Warehouse
Amendments*
58A Definition of warehouse amended to insert a new clause of warehouse for enabling storage
of
dutiable goods, which is under the physical control of the Customs Department .
Sec 58A inserted to enable Principal Commissioner/Commissioner to license a private
warehouse for storing goods and for exercising physical control over such warehouse.
Section
2(45),
9
Definition of warehousing station proposed to be deleted
Warehousing Station
Consequential amendment pursuant to deletion of Section 9, which empowered the CBEC to
declare any place to be a warehousing station
Section 25 Power to Requirement of publishing and offering for sale any notification issued by the Directorate of
Grant Duty Exemption
Publicity and Public Relations of CBEC proposed to be done away with
Section 28 SCN
Time limit for service of notice in case of recovery of duties not levied or not paid or short levied
or short paid proposed to be extended from 1 years to 2 years in cases not involving fraud,
suppression of facts, wilful misstatements etc
Sections 47, 51, 156 Facility of deferred payment of customs duties proposed to be extended to importers and
Deferred Payment
exporters with proven track record
Section 53 Transit of
Goods
Sections 57,58, 58A
Licensing of Warehouse
Section
58B
Cancellation
/
Suspension of License
Section
59
Warehousing Bond
Proposed to be amended to enable the CBEC to frame regulations for permitting transit of
goods without payment of duty
Proposed to be amended to enable the Principal Commissioner/Commissioner to license a
public/private warehouse for storage of dutiable goods
Proposed to regulate the process of cancellation of license or suspension of operation of
warehouse of a private/public warehouse on account of certain specified breaches committed
by the licensee.
Proposed to
Enhance the bond amount from two times to three times the duty involved in case of
importers availing warehouse bond facilities and
Furnishing such security(as may be prescribed) in addition to the bond
*Applicable from the date of enactment of the Bill
Finance Bill, 2016
67
Particulars
Section 60 Deposit
of
Goods
in
Warehouse
Section
61
Warehousing Period
Amendments*
Proposed to define the date of removal of goods from a customs station and deposit thereof
into warehouse
CBEC to frame regulations governing the manner of depositing such goods into a warehouse
Proposed to
Extend the period of warehousing for all goods used by EOUs, EHTPs, STPs, SBYs and other
units manufacturing under bond
Empowers Principal Commissioner/Commissioner to extend warehousing period up to a
maximum of 1 year at a time. Period of 1 year can be reduced to a shorter period at the
discretion of Principal commissioner/Commissioner, for goods likely to deteriorate.
Interest payable(at rates fixed by Government) on the amount of duty for the period following
the expiry of the 90 day period till actual date of payment of duty.
Empowers the CBEC to waive the whole or part of interest in exceptional situations.
Section 62 Control of Provisions relating to physical control over a warehouse goods proposed to be deleted, as the
conditions for licensing different categories of warehouse and physical control thereon have been
Warehoused Goods
set out in Sections 57, 58 and 58A
Section 63, 68,
69 Provisions relating to payment of rent and warehousing charges to warehouse keeper proposed
and 72 Rent and to be deleted, in view of the privatisation of services and free market determination of rates
Warehousing Charges
Section 64 Owners Proposed to effectively curtail some of the owners rights (taking of samples, changing of
Rights with respect to containers, separation of damaged/deteriorated goods)
Warehoused Goods
Finance Bill, 2016
68
Particulars
Amendments*
Section 65 Operations relating to Proposed to delete payment of fees to Customs for supervision of
Goods in Warehouse
manufacturing facilities under bond
Sanctioning authority changed from Assistant /Deputy Commissioner to
Principal Commissioner/ Commissioner
Section 72 - Improper Removal of Proposed to delete provisions relating to removal of samples without payment of
Goods from the Warehouse
duty from purview of improper removal of goods from the warehouse
Section 73 Cancellation and Return Proposed to provide for execution of cancellation bond in case of transfer of
of Warehousing Bond
ownership of goods.
Section 73A Responsibility on Proposed to provide for custody of warehoused goods for laying down
Custodian of Warehoused Goods
responsibilities and liabilities of the ware housekeeper
Existing Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996
substituted by the New Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)
Rules, 2016 (effective from 1st April, 2016). The New rules inter-alia provide for:
Simplification of procedures
Duty exemption on import of goods by manufacturer based on self declaration - Permissions from the Central Excise
authorities done away with
No need for any additional registration
Manufacturers permitted to re-export unutilised or defective imported goods within 3 months (6 months earlier) from
the date of import
Section 8C of the Customs Tariff Act, 1975 which covers the transitional safeguard mechanism is proposed to be removed.
This will leave safeguard measures covered under Section 8D as the only tariff related safeguard measure.
Various notifications pertaining to Advance License and Duty Free Import Authorisation Schemes amended retrospectively
to provide that exemption from safeguard duty is available under these notifications
Finance Bill, 2016
69
Baggage Rules
Existing Baggage Rules substituted with new Baggage Rules, 2016* to simplify and rationalise slabs of duty free allowances
across passenger categories
Eligible Passenger
Indian Resident or a foreigner residing
in India or a tourist of Indian origin,
excluding infants
Tourist of foreign origin, excluding
infants of upto 2 years of age
Origin
country
Other than
Nepal,
Bhutan,
Myanmar
Duty
Free
Allowance
Eligible Items
INR 50,000/-
Used personal articles, travel souvenirs and

other articles excluding prohibited articles (If
carried in person or in accompanied baggage)
INR 15,000/-
Same as above
Indian Resident or a foreigner residing

in India or a tourist, excluding infants
of upto 2 years of age
Nepal,
Bhutan,
Myanmar
By Air INR
15,000/By Land Nil
Same as above
Only used personal effects shall be allowed duty
free
Indian passenger who has been

residing abroad for over one year
Anywhere
Gold Jewellery:
Males: 20 gms with a value cap of INR 50,000/Females 40 gms with a value cap of INR
1,00,000/-
All passengers
Anywhere
Alcohol liquor or wine: 2 litres

Cigarettes: 200 numbers or
Cigars 50 numbers or
Tobacco 250 grams
Passenger of 18 years and above
Anywhere
One laptop computer (note book computer )
* Applicable from 1st April, 2016
Finance Bill, 2016
70
Baggage Rules
Eligible Passenger
Duty Free Allowance*
Transfer of residence to India by Overseas

Professionals
Duration of Stay Abroad:
3 months 6 months
6 months 1 year
Minimum stay of 1 year during preceding two years
Minimum stay of 2 years or more
Used personal and household articles, other than articles set

out in Annexure I or II but including articles in Annexure III
Member of crew of a vessel or an aircraft
Chocolates, Cheese, Cosmetics and other petty gift items

upto value of INR 1,500/-
INR 60,000/INR 1,00,000/INR 2,00,000/INR 5,00,000/Subject to fulfillment of specified conditions
CBDR amended to confine filing of Customs Declaration only for passengers coming to India and carrying dutiable or
prohibited goods.*
* Applicable from 1st April, 2016
Finance Bill, 2016
71
Tariff Amendments
Particulars
Current
Proposed*
Cashew nuts
NIL
5%
Cold Chain including pre-cooling unit,

packhouses, sorting and grading lines
and ripening chambers
10%
5%
Refrigerated containers
10%
Natural latex rubber made balloons

falling under specified headings.
Primary aluminium, zinc alloys

5%
10%
20%
Applicable
BCD and
CVD
BCD-NIL
CVD-NIL
5%
7.5%
Jewellery:
Imitation Jewellery
10%
15%
7.5%
10%
Renewable Energy:
Industrial solar water heater
Capital Goods and Parts thereof:
Paper, Paperboard And Newsprint:

Wood in chips or particles
for
manufacture of paper, paperboard
and newsprint
5%
NIL
Plans, drawings and designs
NIL
10%
12.5%
NIL
Increase in the tariff rate of BCD for

211 specified tariff lines in
Chapters 84,85 and 90
Effective rates for 96 tariff lines
Effective rates for 115 tariff lines
7.5%
10%
7.5%
7.5%
10%
7.5%
Capital Goods:
Health Care:
Textiles:
Specified fibres and yarns
Proposed*
Metals:
Petroleum Exploration And Production:
Disposable sterilized dialyzer and

micro barrier of artificial kidney
Current
Articles of Rubber:
Food Processing:
Goods required for exploration and

production of hydrocarbon activities
undertaken
under
Petroleum
Exploration Licenses or Mining
Leases issued or renewed before 1St
April 1999.
Particulars
5%
Specified machinery required for

construction of roads
CVD-NIL
CVD-12.5%
Gold Dore bars
8% CVD
8.75% CVD
Silver Dore
7% CVD
7.75% CVD
Jewellery:
2.5%
* Applicable from 1st March, 2016
Finance Bill, 2016
72
Tariff Amendments
Particulars
Current
Proposed*
Electronics /Hardware :
E-Readers
NIL
7.5%
Applicable
BCD
5%
Magnetron of capacity of 1KW to

1.5KW for use in manufacture of
domestic microwave ovens
10%
NIL
Machinery, electrical equipment and

instrument and parts thereof for
semiconductor wafer fabrication /LCD
fabrication units
Applicable
BCD
SAD
Machinery, electrical equipment and

instrument and parts thereof imported
for Assembly, Test, Marking and
packaging of semiconductor chips
Applicable
BCD
SAD
Charger/adapter, battery and wired

headsets/speakers for manufacture of
mobile phones
BCD-NIL
CVD-NIL
SAD-NIL
Applicable
BCD
CVD-12.5%
SAD-4%
Inputs, parts and components,

subparts
for
manufacture
of
charger/adapter, battery and wired
headsets/speakers of mobile phones,
subject to actual user condition
12.5%
BCD-NIL
CVD-NIL
SAD-NIL
Parts of E-Readers
Specified
equipment
telecommunication
NIL BCD
NIL BCD
NIL SAD
NIL BCD
NIL SAD
10%
Particulars
Current
Proposed*
Parts and components, subparts for

manufacture of Routers, broadband
modems, set-top boxes for gaining
access to Internet and for TV,DVR,
NVR, CCTV camera/IP camera, lithium
ion battery
12.5%
BCD-NIL
CVD-NIL
SAD-NIL
Pre form of silica for manufacture of

telecom grade optical fiber /cables
NIL
10%
Populated PCBs for manufacture of

personal
computers
(laptop
or
desktop)
NIL SAD
4% SAD
Populated PCBs for manufacture of

mobile phone/tablet computer
NIL SAD
2% SAD
BCD-NIL
CVD-6%
Up to
31.03.2016
BCD-NIL
CVD-6%
Without
time
Limit
Applicable
excise duty
NIL
Automobiles:
Specified parts of electric and hybrid
vehicles
Ship Repair units:

Capital goods and spare thereof , raw
materials, parts, material handling
equipment and consumable for repairs
of ocean going vessels by a ship
repair unit subject to actual user
condition
Finance Bill, 2016
73
EXCISE
Finance Bill, 2016
74
Particulars
Amendments*
Section 5A - Power Requirement of publishing and offering for sale any notification issued by the Directorate of
to
Grant
Duty Publicity and Public Relations of CBEC proposed to be done away with
Exemption
Section 11A - SCN
Time limit for service of notice in case of recovery of duties not levied or not paid or short levied or
short paid proposed to be extended from 1 year to 2 years in cases not involving fraud,
suppression of facts, wilful misstatements etc
Section
37B
Instructions
to
Central
Excise
Officers
Proposed to extend the powers of the CBEC to issue orders, instructions and directions for the
purposes of implementation of any other provisions of the Act. Hitherto, such powers were confined
to matters relating to uniformity in classification of excisable goods or with regards to levy of duty in
such goods.
Third Schedule
Proposed to make some editorial changes, consequent to the introduction of the 2017 Harmonized
System of Nomenclature and to include therein:
All goods falling under heading 3401 and 3402
Aluminium foils of a thickness not exceeding 0.2mm
Smart Watches
Accessories of Motor Vehicles and other specified goods.
Finance Bill, 2016
75
Central Excise Rules

Particulars
Amendments
Rule 7(4)*
Interest payable on the duty paid under provisional assessment (before or after the order of assessment)
after the due date till the date of actual payment (earlier interest was payable only on the duty paid after
final order of assessment)
Rule 11(8)**
Self attestation of the duplicate digitally signed invoice meant for transporter has been done away with
Rule 12**
Rule 17**
Revised return by EOU to be filed by end of the calendar month in which original return is filed
Rule 26**
Penalty proceedings deemed to be concluded in respect of persons who deals with any excisable goods
liable for confiscation if the proceedings of the person liable to pay duty has been concluded.
Annual Financial Information Statement (ER-4) would be termed as Annual Return

Filing of Annual Return by EOU
Filing of Annual Installed Capacity Statement (ER-7) has been done away with.
Revised Return
To be filed by end of the calendar month in which original return is filed
Revised Annual Return to be filed within one month from the date of submission of the said return.
Relevant date for recovery of duty shall be the date of filing the revised return

** Applicable from 1st April, 2016
Finance Bill, 2016
76
Non Tariff Amendments

Particulars
Amendments
Jewellery Manufacturers*
Following relaxations extended to manufacturers of jewellery, except silver jewellery,

but including jewellery covered under CETH 7113 of the First Schedule to CETA Option to avail centralised central excise registration
Exemption from requirement of post-registration physical verification of the
premises by the excise authorities
Quarterly payment of duty if value of clearances of excisable goods in the
preceding FY does not exceed INR 12 crores**
Duty exemption on clearances up to INR 6 crores, if value of clearance of
excisable goods in preceding FY does not exceed INR 12 Crores.
Duty exemption for the month of March 2016 on clearances up to INR 50 lakhs.
Fixed Tariff Value*
Fixed tariff value in respect of articles of jewellery (other than silver jewellery),
falling under CETH 7113 of the First Schedule to the CETA rescinded
Tariff value of articles of apparel, not knitted or crocheted falling under CETH 6201
reduced from 60% of RSP to 30%
Pan Masala*
Form 2 revised with respect to break-up of duty payment for apportionment between
various duties
Chewing
Tobacco
Unmanufactured Tobacco *
Abatement*
and
Deemed quantity of production per packing machine per month for Chewing Tobacco,
Filter Khaini, Jarda Scented Tobacco and Unmanufactured Tobacco has been
enhanced, pursuant to an increase in excise duty
Abatement benefit extended to all products falling under CETH 3401, 3402,
Aluminium foil of thickness not exceeding 0.2 mm, Wrist wearable devices (smart
watches), Accessories of Vehicles and Products falling under CETH 8426 41 00,
8427, 8429, 8430 10

Finance Bill, 2016
77
Non Tariff Amendments

Particulars
Amendments
Rebate of Duty on
Export of goods*
Notification No.19/2004C.E(N.T) read with Rule
18 of CER
Single Registration*
Single registration can be obtained by any assessee subject to fulfillment of following conditions:
Two or more premises of the same factory are located within the jurisdiction of a Range
Superintendent
Manufacturing process is interlinked
Units are not operating under any area based exemption notifications
Central Excise (Removal

of
Goods
at
Concessional Rate of
Duty for Manufacture of
Excisable and
Other Goods) Rules,
2001**
Superseded by Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture
of Excisable and Other Goods) Rules, 2016. New Rules provide :
Manufacturers availing benefits of concessional duty rates no longer required to make
additional application to the jurisdictional officers; a simple Self Declaration in Form I is
required to be filed with the supplier manufacturer and the jurisdictional Assistant / Deputy
Commissioner
Quarterly returns in Form II to be filed
Rebate of Duty on
goods used in the
manufacture of export
goods*
Indian market price of the excisable goods at the time of exportation shall not be less than the
amount of rebate claimed
Claim to be filed before expiry of the period specified in Section 11B of CEA (i.e. one year
from date of export)
Mandatory filing of Chartered Engineers certificate in order to substantiate the correctness of

the ratio of input and output
No verification of the correctness of aforesaid ratio by the Assistant Commissioner, unless he
doubts the correctness of the Declaration filed.

Finance Bill, 2016
78
Tariff Amendments
Particulars
Current
Proposed*
Aerated Beverages:
Water,
including
mineral
waters and aerated waters,
containing added sugar or
other sweetening matter or
flavoured
18%
21%
12.5%
6%
Proposed*
Rubber sheets & resin rubber

sheets for soles and heels
12.5%
6%
Increase the abatement from

retail sale price for the purpose
of excise duty assessment for all
categories of footwear
25%
30%
2% (without
Cenvat Credit)
Or 6% (with
Cenvat Credit)
2% (without
Cenvat Credit)
Or 12.5% (with
Cenvat Credit)
Carbon pultrusion used for

manufacture of rotor blades and
intermediaries, parts and subparts of rotor blades for wind
operated electricity generators
12.5%
6%
Solar Lamps
12.5%
Nil
Specified parts of Electric

Vehicles and Hybrid Vehicles
6%
Upto
31.03.2016
6%
Without time
Limit
Engine for xEV (hybrid electric

vehicle)
12.5%
6%
Metals:
Textiles:
Branded readymade garments
and made up articles of
textiles of retail sale price of
INR1000 or more
NIL (without
Cenvat Credit or
6%/12.5% (with
Cenvat Credit)
2% (without
Cenvat Credit) or
12.5% (with
Cenvat Credit)
PSF/PFY manufactured from

plastic scrap or plastic waste
including waste PET bottles
2%(without
Cenvat Credit or
6% (with Cenvat
Credit)
2% (without
Cenvat Credit) or
12.5% (with
Cenvat Credit)
12.5%
6%
Machinery:
Electric motors, shafts, sleeve,
chamber, impeller, washer
required for the manufacture
of centrifugal pump
Current
Footwear:
Food Processing:
Refrigerated Containers
Particulars
Disposable containers made of

aluminum foils
Renewable Energy:
Automobiles:
Finance Bill, 2016
79
Tariff Amendments
Particulars
Current
Proposed*
Precious Metals and Jewellery:
Particulars
Current
Proposed*
Miscellaneous:
Refined gold bars manufactured from

gold/ silver dore bar, gold/ silver ore or
concentrate,
9%
9.5%
Disposable sterilized dialyzer

and micro barrier of artificial
kidney
12.5%
NIL
Refined silver manufactured from silver

ore or concentrate, silver/gold dore bar.
8%
8.5%
NIL (without
Cenvat
Credit)
or
6% (with
Cenvat
Credit)
1% (without
Cenvat
Credit)
Or
12.5% (with
Cenvat
Credit)
2% (without
Cenvat Credit)
or 6% (with
Cenvat Credit)
NIL
Articles of jewellery (excluding silver

jewellery, other than studded with
diamonds or other precious stones
namely, ruby, emerald, and sapphire)
Ready
Mix
Concrete
manufactured at the site of
construction for use in
construction work at such site
Cigarettes:
From INR Per

Thousand
To INR Per
Thousand
Non filter not exceeding 65

mm
70
215
Non-filter exceeding 65 mm
but not exceeding 70 mm
110
370
Filter not exceeding 65 mm
70
215
Filter exceeding 65 mm but

not exceeding 70 mm
70
260
Filter exceeding 70 mm but

not exceeding 75 mm
110
370
Other
180
560
Civil Aviation:
Aviation Turbine Fuel other than for
supply to Scheduled Commuter Airlines
from the Regional Connectivity Scheme
Airports
8%
14%
Maintenance, repair and overhaul of aircrafts:
Tools and tool kits for maintenance,

repair and overhauling of aircraft subject
to a certification by DGCA
12.5%
Nil
Finance Bill, 2016
80
Tariff Amendments
Particulars
Current
Proposed*
Particulars
Current
Proposed*
Clean Energy Cess / Clean Environment Cess:
Electronics and IT hardware:
Charger/adapter, battery and wired

headsets/ speakers for supply to
mobile phone manufacturers as
original equipment manufacturer
NIL
Inputs, parts and components,

subparts for manufacture of charger/
adapter,
battery
and
wired
headsets/speakers of mobile phone,
subject to actual user condition.
12.5% / Nil
2% (without
Cenvat Credit)
or 12.5% (with
Cenvat Credit)
Nil
Coal, lignite and peat
Coal, lignite or peat produced or

extracted as per traditional and
customary rights enjoyed by local tribals
without any license or lease in the State
of Meghalaya and Nagaland (prior
available only to the state of Meghalaya)
INR 300
(effective INR
200)
INR 400
INR 200 per

tonne
NIL
Infrastructure Cess
Routers, broad band Modems, Settop boxes for gaining access to
internet, set top boxes for TV, digital
video recorder (DVR) / network video
recorder (NVR), CCTV camera / IP
camera, lithium ion battery [other than
those for mobile handsets]
12.5%
Parts and components, subparts for

manufacture of Routers, broadband
Modems, Set-top boxes for gaining
access to internet, set top boxes for
TV, digital video recorder (DVR) /
network video recorder (NVR), CCTV
camera / IP camera,lithium ion battery
[other than those for mobile handsets]
12.5%
4% [without
CENVAT credit]
or
12.5% [with
CENVAT credit]
NIL
Particulars
Rate*
Petrol/LPG/CNG driven motor vehicles of length not exceeding

4m and engine capacity not exceeding 1200cc
1%
Diesel driven motor vehicles of length not exceeding 4m and

engine capacity not exceeding 1500cc
2.5%
Other higher engine capacity motor vehicles and SUVs and

bigger sedans
4%
Three wheeled vehicles, Electrically operated vehicles, Hybrid

vehicles and Hydrogen vehicles based on fuel cell technology
NIL
Motor vehicles which after clearance have been registered for

use solely as taxi and Motor vehicles cleared as ambulances or
registered for use solely as ambulance ; Cars for physically
handicapped persons
(exemption available subject to fulfillment of conditions)
NIL
Finance Bill, 2016
81
Interest
Interest rates$ for delays in payment of Excise Duty, Customs Duty reduced from 18% to 15%
Interest rates* for delays in payment of Service Tax tabulated herein below:
Period of Delay
Current
Small Service
Providers^
1. Pertaining to service tax

collected but not deposited
Proposed*
Other Service
Providers
As per the rates set out in Item 2 below
Small Service
Providers^
Other Service
Providers
21%
24%
2. Pertaining to other matters

Up to 6 months
> 6 months but < 1 year
> 1 year
15%
21%
27%
18%
24%
30%
12%
12%
12%
15%
15%
15%
3. Amount collected in excess
15%
18%
12%
15%
Interest rates rationalised at a uniform rate of 15% p.a. across all indirect taxes
^ Service Providers with value of taxable services up to INR 60 lakhs during last preceding FY
$ Applicable from 1st April, 2016
* Notification No.13/2016-Service Tax and 14/2016-Service Tax dated 1st March, 2016 effective from date of enactment of the Bill
Finance Bill, 2016
82
Miscellaneous
Precious Metals and Jewellery*:
Withdrawal of area based exemption available to new industrial unit situated at specified locations and engaged in production of
refined gold or silver which commences the commercial production on or after 1st March, 2016 or an existing unit which undertakes
substantial expansion of existing capacity
Goods bearing a brand name or sold under a brand name:

SSI exemption in respect of goods falling under CETH 61, 62 and 63 (except laminated jute bags falling under CETH 6305, 6309 00
00, 6310) & cleared/ sold under brand name with a RSP of INR 1000/- & above, shall be restricted to INR 12.5 lakhs for March 2016
Cess under Oil Industry (Development) Act, 1974*:
Oil Industries Development Cess levied on domestically produced crude oil reduced from INR 4500 PMT to 20% ad valorem.
Clarification - Exemption to Power Projects:
Power Projects claiming exemption on imports from BCD and CVD under Sr.No.507 of Notification No.12/2012-Customs are also
eligible for excise duty exemption under Sr.No.336 of Notification No.12/2012-C.E, if such project has been awarded based on
International Competitive Bidding and conditions laid down under Sr.507 of aforesaid Notification are fulfilled.
Clarification Incentives received by Air Travel Agents:
Incentives received by the Air Travel Agents from the Companies providing Computer Reservation System are liable to service tax.
Civil Aviation*:
Customs & Excise Duty exemption on tools/tool kits for maintenance, repair & overhauling of aircraft subject to certification by
DGCA
Simplified procedure for availment of excise duty exemption on parts, testing equipment, tools and tool kits for maintenance, repair
and overhauling of aircraft
Removal of restriction of one year for utilization of duty free parts for maintenance, repair and overhauling of aircraft
Foreign aircrafts can stay for a period up to 6 months (earlier 60 days) for the purpose of maintenance, repair and overhaul or such
extended period as may be permitted by DGCA
CST:
Explanation proposed to be inserted in Section 3 of CST to the effect that sale of gas through a common carrier pipeline or any
other common transport distribution systems, which entails introduction of gas in one State and removal thereof in another State,
would be deemed to be an inter-state movement of goods
Finance Bill, 2016
83
CENVAT Credit Rules

Particulars
Amendments^
Capital Goods**
Wagons falling under Sub-heading 860692 explicitly included in the definition of capital goods
Restriction with regard to office equipments and appliances done away with
Goods used outside the factory for pumping of water for captive use within the factory excluded
from the definition of Capital Goods and included under the definition of inputs
Exempted Services*
Transportation of goods by a vessel from customs station of clearance in India to a place outside
India excluded from the definition of exempted services; hence, no CENVAT credit reversal
necessary for such services
Inputs**
Inclusions:
Goods used for pumping of water for captive use
Capital goods upto value of INR 10,000 per piece
of
CENVAT credit of any duty except NCCD cannot be utilized for payment of NCCD leviable on
any product (earlier restricted only to goods covered under CETH 8517 12 10, 8517 12 90 )
No CENVAT credit can be utilised for payment of infrastructure cess
No CENVAT credit of infrastructure cess would be available against any output tax / duty
Availment of CENVAT
credit
100% CENVAT credit of Capital Goods available to specified jewellery manufacturers in the
same financial year, if the value of clearances of excisable goods does not exceed INR 12
crore in preceding FY*
CENVAT Credit on jigs, fixtures moulds and dies or tools sent to a job worker or another
manufacturer would be allowed even if such goods are sent without bringing the same to the
premises of the manufacturer**
Validity of order by Deputy / Assistant Commissioner extended from one year to three years In
respect of clearance of final products from the premises of job worker**
Utilisation
CENVAT credit*

^Notification No.13/2016-Central Excise(N.T) dated 1st March, 2016
Finance Bill, 2016
84
CENVAT Credit Rules

Particulars
Amendments^
Availment of CENVAT
credit**
CENVAT credit of service tax paid on services availed by way of assignment of right to use any
natural resources to be availed as :
Amount of CENVAT in a FY = Service Tax paid on the charges payable for the assignment of
the right to use / No. of Years for which the rights have been assigned
Full credit available in case such rights are further assigned to another person to the extent of
service tax payable on such consideration
Full credit available of service tax paid on annual or monthly user charges in the year of
payment
Rationalisation
of
provisions relating to
reversal of CENVAT
credit attributable to
exempted goods /
services**
Method for calculation of reversal of CENVAT credit pertaining to exempted goods and exempted
services have been streamlined to mitigate litigations. The key features are set out herein below:
Options available for reversal of credit:
Pay 6% of value of the exempted goods and 7% (2% in case of rail transportation of goods
or passengers) of value of the exempted services. Overall reversal restricted to the extent of
total credit available with the taxpayer at the end of the period to which the payment relates.
Pay an amount of CENVAT credit on common inputs and input services used for exempted
and non-exempted goods / services, based on proportionate reversal method
Banking and financial institutions, including non-banking financial companies, engaged in
providing services by way of extending deposits, loans or advances, can follow either of the
above options for reversal of credit or opt to pay 50% of monthly CENVAT credit availed
Delay in monthly provisional reversal of CENVAT credit would attract interest @ 15% p.a.
Interest for payment of difference between provisional and actual reversal under the
proportionate method of reversal beyond 30th June of succeeding year reduced from 24% p.a.
to 15% p.a.

^Notification No.13/2016-Central Excise(N.T) dated 1st March, 2016
Finance Bill, 2016
85
CENVAT Credit Rules

Particulars
Amendments^
Distribution
of
service tax credit on
input services**
CENVAT credit can now be distributed to an outsourced manufacturing unit

CENVAT credit of tax paid on input services available with the ISD as on 31st March, 2016
cannot to be transferred to outsourced manufacturing unit
Mechanism of calculation for distribution of CENVAT credit reframed
Input
Service
Distribution by a
Warehouse**
Applicable to manufacturers having multiple factories and warehouses

Provisions of first stage dealer or second stage dealer made applicable to a warehouse
CENVAT credit allowed to a manufacturer receiving inputs on the basis of invoice issued by
such warehouse
Clearance of goods
as such**
CENVAT credit would now be available on the basis of an invoice issued by a Service Provider for
clearance of inputs or capital goods as such
Annual Return**
Manufacturers required to file an Annual Return in the prescribed format by 30th November of
succeeding FY (earlier 30th April of FY)
Service providers to file an Annual Return by 30th November of succeeding FY. This is in
addition to half yearly returns currently required to be filed by service providers.
Refund under Rule 5*
Time limit for filing refund application by service provider shall be from one year from the date of Receipt of payment in convertible foreign exchange where the provision of services has been
completed prior to the receipt of payment; or
The date of issue of invoice, where payment for the service has been received in advance prior
to the date of issue of invoice.

^Notification No.13/2016-Central Excise(N.T) and Notification No.14/2016-Central Excise (N.T) dated 1st March, 2016
Finance Bill, 2016
86
The Indirect Tax Dispute Resolution Scheme, 2016
Background
Applicability
Procedure
Key Benefits
Exclusions
Applicable for litigations pertaining to Customs Duty, Excise Duty and Service Tax
Amount paid under the scheme is non-refundable
Order under scheme is not an order on merit and shall have no binding effect for future
assessments
Applicable for litigations pending with Commissioner (Appeals) as on 1st March, 2016
Scheme to come into effect from 1st June, 2016
Declaration to opt for the scheme to be filed on or before 31st December, 2016
Declaration to be filed with the Designated Authority
Payment of tax, interest and 25% of the penalty imposed in impugned order within 15 days
of receipt of acknowledgement of declaration
Filing of intimation of payment within 7 days of payment along with proof thereof
Order of discharge of dues to be passed by Designated Authority within 15 days of receipt
of the above intimation
Immunity to the extent of 75% of total penalty

Immunity from other proceedings under the respective Acts
No reopening in any proceedings under the respective Acts
Reduction in pending litigation with Commissioner (Appeals)
Disputed order pertains to search and seizure proceeding

Prosecution for any offence launched before 1st June, 2016
Order related to narcotic drugs/prohibited goods/offence under Indian Penal Code/ Narcotic
Drugs and Psychotropic Substances Act, 1985 / Prevention of Corruption Act,1988 /
Detention under Conservation of Foreign Exchange and Prevention of Smuggling Act, 1974
Finance Bill, 2016
87
Other Amendments
FDI:
Particulars
Marketing of Food Products produced
and manufactured in India
Insurance and Pension Sector
Asset Reconstruction Companies
Indian Stock Exchanges
Existing Limits
Proposed Limits
Remarks
100%
FIPB approval
required
26%
49%
Automatic Route
Up to 49% - Automatic Route

> 49% -Government Approval
100%
Automatic Route
5%
15%
Automatic Route
FDI to be allowed in the NBFC sector beyond the presently permissible 18 specified activities under the Automatic Route
Existing threshold limits for investments by FPIs in Listed Central Public Sector Enterprises (other than banks) enhanced
from 24% to 49%, under the Automatic Route
Presently, foreign investments are permissible only in equity shares, mandatory and fully convertible .
debenture/preference shares warrants and partly paid shares. The basket of eligible units is proposed to be extended to
other hybrid instruments, subject to certain conditions.
With a view to promote Make in India, it is proposed to accord residency status to foreign investors, subject to certain
conditions
FEMA:
A new section 14A proposed to be introduced under FEMA, so as to empower officers (not below the rank of Assistant
Director) to recover arrears of penalty.
FCRA:
It is clarified that foreign investments made in equity share capital of Indian Companies in accordance with FEMA
regulations will not be considered as a foreign source for the purposes of FCRA.
Finance Bill, 2016
88
Glossary
Act
The Income Tax Act, 1961
CESTAT Customs, Excise and Service Tax Appellate Tribunal
AD
Additional Duty
CKD
Completely Knocked Down Condition
AIF
Alternative Investment Fund
CSR
Corporate Social Responsibility
AMC
Asset Management Company
CST
Central Sales Tax
AMT
Alternate Minimum Tax
CVD
Additional Duty of Customs
AO
Assessing Officer
DDT
Dividend Distribution Tax
AOP
Association of Persons
DTC
Direct Tax Code
AY
Assessment Year
EC
Education Cess
BCD
Basic Customs Duty
ECB
External Commercial Borrowings
Bill
Finance Bill, 2015
ECS
Electronic Clearance System
BIN
Business Identification Number
EOU
Export Oriented Units
BOE
Bill of Entry
EPFS
Employee Provident Fund Scheme
BOI
Body of Individuals
FA
Finance Act, 1994
CBDT
Central Board of Direct taxes
FDI
Foreign Direct Investment
CCIT
Chief Commissioner of Income Tax
FII
Foreign Institutional Investor
CEA
Central Excise Act, 1944
FPI
Foreign Portfolio Investor
CED
Central Excise Duty
FTS
Fees for Technical Services
CER
Central Excise Rules, 2002
FY
Financial Year
CIN
Corporate Identification Number
GAAR
General Anti-Avoidance Rule
Finance Bill, 2016
89
Glossary
GDP
Gross Domestic product
ROG
GST
Goods and Service Tax
RPS
Central Excise (Removal of Goods at Concessional Rate of

Duty for Manufacture of Excisable Goods) Rules, 2001
Renewable Power System
GTA
Goods Transport Agency
RSP
Retail Sale Price
GTI
Gross Total Income
SAD
Special Additional Duty of Customs
IEC
Import Export Code
InvIT
Infrastructure Investment Trust
SARFAESI Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002
SBC
Swachh Bharat Cess
ITAT
Income Tax Appellate Tribunal
SCN
Show Cause Notice
LLP
Limited Liability Partnership
SCRA
Securities Contracts (Regulation) Act, 1956
LOU
Letter of Undertaking
SEBI
Securities and Exchange Board of India
MAT
Minimum Alternate Tax
SHEC
Secondary and Higher Education Cess
MF
Mutual Fund
SPV
Special Purpose Vehicle
MNRE
Ministry of New and Renewable Energy
STR
Service Tax Rules, 1994
NBFC
Non- Banking Financial Company
STT
Securities Transaction tax
PAN
Permanent Account Number
TCS
Tax Collected at Source
PMLA
Prevention of Money Laundering Act, 2002 TDS
Tax Deducted at Source
RBI
Reserve Bank of India
u/s
Under Section
REIT
Real Estate Investment Trust
VAT
Value Added Tax
VCF
Venture Capital Fund
Finance Bill, 2016
90
Contact Us
Mumbai, India
Jash Chambers, 3rd Floor,
7A, Sir P.M. Road, Fort,
Mumbai 400 001.
Tel. No.
+91-22-66230600
Fax No.
+91-22-22615814
Chennai, India
501-502, Narain Chambers,

M. G. Road, Vile Parle (E),
Mumbai 400 057.
Tel. No.
+91-22-64577600
Fax No.
+91-22-26286747
Vadodara, India
Dubai, UAE
C/201-202,
Shree Siddhi Vinayak Complex,
Faramji Road,
Vadodara 390 005.
Suite #17.06 Dubai World

Trade Centre, Shaikh Zayed
Road,
Dubai P.O. Box 454442
Tel. No.
+91-265-2343483
Fax No.
+91-265-2354353
Tel. No.
+971-04-3559533
Fax No.
+971-04-3559544
Brindavan,
Old No. 23, New No. 13,
Mc Nichols Road, Chetpet,
Chennai 600 031.
Tel. No.
+91-44-26412919/ 43849695
Mob.
+91-9940432960
Bengaluru, India
Delhi, India
96, 1st Floor,

7th Cross Domlur
Village,
Bengaluru 560 071.
417-419, Tower 2, Pearl

Omaxe, B-1, Netaji
Subhash Place,
Pitampura, Delhi110034
Tel. No.
+91-80-25351353
Mob No.
+91-9845742436
Tel. No.
011-47019833/
47022733/ 47082733
Mob.
+91-9910008315
www.cnkindia.com
Finance Bill, 2016
91
Disclaimer
This e-publication is published by CNK & Associates LLP, Chartered Accountants, India, solely for the purposes of providing
necessary information to clients and associates.
The information and analysis contained herein is of a general nature and is a preliminary overview of the key tax proposal
set forth in the Finance Bill, 2016. It does not purport to offer any taxation, legal, economic or financial advice.
Any business or commercial decision should be taken only after obtaining specific and comprehensive professional advice
and cannot be based solely on this presentation.
This e-publication is a proprietary material created and compiled by CNK & Associates LLP. All rights reserved. This
document or any portion thereof may not be reproduced or sold in any manner whatsoever without the consent of the
publisher.
This analysis is not meant for public circulation and is not meant to be an invitation or solicitation of any kind.
Whilst every care has been taken in the preparation of this e-publication, we do not take responsibility for any inadvertent
errors.
Finance Bill, 2016
92

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CNK & Associates LLP

Knowledge Based Solutions With Personalized Services

Finance Bill, 2016

Income Tax Proposals:

Income Declaration Scheme 2016

Direct Tax Dispute Resolution Scheme,2016

Country by Country Reporting

Income Tax Rates

Residential Status of a Company

Presence of Fund Manager in India

Income from Other Sources

Deduction under Chapter VIA

Minimum Alternate Tax (MAT) on Foreign Companies

Business Trust (REIT and InvIT)

CNK & Associates LLP

Finance Bill, 2016

Alternate Investment Funds (AIF)

Tax Incentive for Start-ups

Taxation of Income from Patents

Collection and Recovery of Tax

Incentives for Promoting Housing for All

Miscellaneous Amendments / Observations

CNK & Associates LLP

Finance Bill, 2016

Service Tax Rules

Central Excise Rules

CENVAT Credit Rules

The Indirect Tax Dispute Resolution Scheme, 2016

CNK & Associates LLP

Finance Bill, 2016

CNK & Associates LLP

Finance Bill, 2016

A flurry of simplification measures announced to facilitate ease of doing business

Infrastructure Cess ranging from 1% to 4% introduced on different types of motor cars

Rationalisation of indirect taxes relating to the IT Software Industry

CNK & Associates LLP

Finance Bill, 2016

Finance Bill, 2016

Income Declaration Scheme 2016

CNK & Associates LLP

Finance Bill, 2016

Income Declaration Scheme 2016

CNK & Associates LLP

Finance Bill, 2016

Direct Tax Dispute Resolution Scheme, 2016

The salient features of the scheme are as follows:

CNK & Associates LLP

Finance Bill, 2016

Direct Tax Dispute Resolution Scheme, 2016

The aforesaid scheme will be applicable from 1st June, 2016

60 days from the date of

The scheme is not applicable to the following persons:

CNK & Associates LLP

Finance Bill, 2016

CNK & Associates LLP

Finance Bill, 2016

CNK & Associates LLP

Finance Bill, 2016

Country By Country Reporting

CNK & Associates LLP

Finance Bill, 2016

Country By Country Reporting

CNK & Associates LLP

Finance Bill, 2016