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BUDGET 2017

BY TAXPERT PROFESSIONALS PRIVATE LIMITED


Preface Bird's eye view Budget proposals

India has witnessed historic and impactful economic reforms and policy making in the last one year. There were two tectonic policy initiatives, namely:

- Passage of the Constitution Amendment Bill for GST and the progress for its implementation; and
- Demonetisation of high denomination bank notes.

Indias GDP forecast for 2016 downwards, has projected a GDP growth of 7.2% and 7.7% in 2017 and 2018 respectively. The World Bank, however, is more
optimistic and has projected a GDP growth of 7% in 2016-17, 7.6% in 2017-18 and 7.8% in 2018-19. This pick up in Indias economy is premised upon its policy
and determination to continue with economic reforms; increase in public investment in infrastructure and development projects; and export growth in the context
of the expected rebound in world economy. The surplus liquidity in the banking system, created by demonetisation, will lower borrowing costs and increase the
access to credit. This will boost economic activity, with multiplier effects.

The Agenda of Government this year is TEC India:

- Transform,
- Energise, and
- Clean India

This agenda of TEC India seeks to:

- Transform the quality of governance and quality of life of our people;


- Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and
- Clean the country from the evils of corruption, black money and non-transparent political funding.

Budget 2017 was unique because it changed the age-old tradition of being presented on the last day of February, and the first time in India, the Railway Budget was
combined with the General Budget.

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Preface Bird's eye view Budget proposals

Personal Income Tax


Reduction of rate of tax for individual assessees between income of Rs. 2.50 lakhs to Rs. 5 lakhs from 10% to 5%.
Surcharge of 10% introduced for individuals whose total income is between 50 lakhs and 1 crore.
Personal Income The tax rebate under section 87A will be available for resident individuals having income up to Rs. 3.5 lakhs. The amount
Tax of rebate has been reduced from Rs. 5,000 to Rs. 2,500.
Deduction under section 80CCG discontinued from FY 2017-18 onwards.
Exemption under section 10 allowed on partial withdrawal from national pension system (NPS) not exceeding 25% of
the contribution made.
Deduction under section 80CCD increased from 10% to 20% of gross total income for self-employed individual.
Individuals and HUF (other than those covered under tax audit) to deduct tax at 5% if rent payment exceeds Rs. 50,000
a month or part of month.
Set-off of loss from house property to be restricted to Rs. 2 lakhs. The unabsorbed loss to be carried forward in
subsequent years.

International Tax
Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer provisions.
International Tax Indirect transfer provisions not to apply if redemption or sale of investment is chargeable to tax in India.
In line with Action 4 of BEPS interest expenses claimed by an entity shall be restricted to 30% of its earnings before
EBITDA or interest paid or payable to associated enterprise.
New section 92CE to be inserted for carrying out secondary adjustment where primary adjustment to transfer price was
made suo moto or made by assessing officer and accepted by the assesse.
Foreign Investment Promotion Board to be abolished.

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Other Direct Tax Proposals
Holding period for the purpose of computing long term capital gains reduced from 3 years to 2 years in case of
immovable property.
Set-off of loss from house property to be restricted to Rs. 2 lakhs. The unabsorbed loss to be carried forward in
subsequent years.
Corporate tax rate for companies having annual turnover upto Rs. 50 crore (for the FY ending 31 March 2016) reduced
to 25% plus applicable surcharge and cess. This applies to all companies whether engaged in manufacturing or services
or other activities. No other change in tax rates for companies and firms.
Other Direct Tax In case of start-ups, the condition of continuous holding of 51% of shares carrying voting rights for carry-forward of
losses relaxed subject to condition that the holding of original promoters continues. The profit linked deduction changed
Proposal from 3 out of 5 years to 3 out of 7 years.
Income from transfer of carbon credit shall be taxable at concessional rate of 10% plus applicable surcharge and cess.
Transaction above Rs. 3 lakhs not permitted subject to certain exceptions. Penalty equivalent to sum received in cash to
be levied.
Limit of allowable cash payment reduced from INR 20,000 to INR 10,000.
Section 80G deduction not to be allowed on cash donation above Rs. 2,000 instead of Rs. 10,000.
Scope of domestic transfer pricing reduced only to the cases where one of the related entities avails specified profit-
linked deduction
Threshold limit for audit of business entities who opt for presumptive income scheme increased from Rs. 1 crore to Rs.
2 crore.
Threshold limit for maintenance of books for individuals and HUF increased from turnover of Rs. 10 lakhs to Rs. 25
lakhs or income from Rs. 1.2 lakhs to Rs. 2.5 lakhs.
Conversion of preference shares in to equity shares not to be regarded as transfer for the purpose of capital gains.
Special provisions have been introduced for computing Minimum Alternative Tax (MAT) in case of Ind AS compliant
companies in the year of adoption and thereafter.
Exemption under section 10(38) on transfer of equity shares available only if STT paid on acquisition of shares, subject
to notified cases.
Section 50CA proposed to be inserted to deem FMV of unquoted share as sale consideration for computing capital
gains if sale proceeds is less than FMV.

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Taxation of dividend exceeding Rs.10 lacs @ 10% to be applicable to all resident assessees except domestic companies
and specific funds, trusts, etc.
Penalty of Rs. 10,000 to be leviable on professionals for furnishing incorrect information in statutory report or certificate
Penalty for delayed filing of return imposed.

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Budget proposals

Indirect Tax International Tax Goods & Service Tax


Direct Tax

RATES OF INCOME TAX

The rates of charging Income Tax has been revised in the Budget presented by our Finance Minister on 1 st February, 2017. The rates are applicable for charging
income-tax during the financial year 2017-18 on current incomes in cases where accelerated assessments have to be made.

1) Individual, HUF, AOP, BOI, Artificial Juridical Person


a) Age is eighty years or more:

Total Income (INR) Existing Rates Revised Rates


<5,00,000 Nil Nil
5,00,001 to 10,00,000 20% 20%
>10,00,000 30% 30%

b) Age is sixty years or more but less than eighty years:

Total Income (INR) Existing Rates Revised Rates


<3,00,000 Nil Nil
3,00,000 to 5,00,000 10% 5%
5,00,001 to 10,00,000 20% 20%
>10,00,000 30% 30%

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c) Others:

Total Income (INR) Existing Rates Revised Rates


<2,50,000 Nil Nil
2,50,000 to 5,00,000 10% 5%
5,00,001 to 10,00,000 20% 20%
>10,00,000 30% 30%

2) Domestic Company

Total turnover or Gross Existing Rates Revised Rates


Receipt in the P.Y. 2015-16
<50 Crores 30% of Total Income 25% of Total Income
Others 30% of Total Income 30% of Total Income

Surcharge1

Finance Minister Mr. Arun Jaitley has proposed to revise the rate of surcharge to be charged in addition of the tax in case of every Individual, HUF, AOP, BOI,
Artificial Jurisdiction Person. The revised rates are as under:

Total Income (INR) Existing Rates Revised Rates


5,00,001 to 10,00,000 Nil 10%
>10,00,000 15% 15%
However, the surcharge shall be subject to marginal relief. 2

1 The amount of income-tax and the applicable surcharge, shall be further increased by Education Cess @ 2% and Secondary and Higher Education Cess
@1% of such income-tax and surcharge.
2 Where income exceeds fifty lakhs or one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as

income-tax on total income of fifty lakhs or one crore rupees respectively by more than the amount of income that exceeds one crore rupees.

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DIRECT TAX

Tax-exemption to partial withdrawal from National Pension System (NPS)


Section No. Extant Provision Proposed change Reason of change
Section Section 10(12A) provides that Exemption is provided to partial withdrawal not exceeding 25% To provide further relief to an
10(12A) payment from National Pension of the contribution made by an employee in accordance with the employee subscriber of NPS
System (NPS) trust to an employee terms and conditions specified under Pension Fund Regulatory
on closer of his account or opting and Development Authority Act, 2013 and regulations made there
out shall be exempt up to 40% of under.
total amount payable to him. This amendment will take effect from 1st April, 2018

Measures for promoting digital payments in case of small unorganized businesses


Section No. Extant Provision Proposed change Reason of change
Section An eligible assessee engaged in The existing rate of deemed total income is reduced from eight To promote digital transactions and
44AD eligible business having total per cent to six per cent in respect of the amount of such total to encourage small unorganized
turnover or gross receipts not turnover or gross receipts received by an account payee cheque or business to accept digital payments
exceeding two crore rupees in a account payee bank draft or use of electronic clearing system
previous year, a sum equal to eight through a bank account during the previous year or before the due
per cent of the total turnover or date specified in sub-section (1) of section 139 in respect of that
gross receipts, or, as the case may be, previous year. However, the existing rate of deemed profit of 8%
a sum higher than the aforesaid sum referred to in section 44AD of the Act, shall continue to apply in
declared by the assessee in his respect of total turnover or gross receipts received in any other
return of income, is deemed to be mode. This amendment will take effect from 1st April, 2017
the profits and gains of such
business chargeable to tax under the
head "profits and gains of business
or profession".

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Special provisions for computation of capital gains in case of Joint Development Agreement
Section No. Extant Provision Proposed change in Provision Reason of change
Section Insertion of new sub-section In case of an assessee being individual or Hindu undivided family, To minimise the genuine hardship
45(5A) who enters into a specified agreement for development of a which the owner of land may face in
project, the capital gains shall be chargeable to income-tax as paying capital gains tax in the year of
income of the previous year in which the certificate of completion transfer as per Section 45
for the whole or part of the project is issued by the competent
authority. The amendment will take effect from 1st April, 2018

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Rationalisation of deduction under section 80CCD for self-employed individual
Section No. Extant Provision Proposed Provision Reason of change
Section Section 80CCD provides that The upper limit of ten per cent of gross total income is proposed To provide parity between an
80CCD employee or other individuals shall to be increased to twenty per cent in case of individual other than individual who is an employee and
be allowed a deduction for amount employee. an individual who is self-employed
deposited in National Pension This amendment will take effect from 1st April, 2018
System trusts (NPS). The deduction
under section 80CCD (1) cannot
exceed 10% of salary in case of an
employee or 10% of gross total
income in case of other individuals.
However, under the provisions of
section 80CCD (2) of the Act,
further deduction to an employee in
respect of contribution made by his
employer is allowed up to 10% of
salary of the employee. Thus, in case
of an employee, the deduction
allowed under section 80CCD adds
up to 20% of salary whereas in case
of other individuals, the total
deduction under section 80CCD is
limited to 10% of gross total income.

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Rationalization of deduction under section 80CCG
Section No. Extant Provision Proposed Provision Reason of change
Section Under the existing provisions of it is proposed to phase out this deduction by providing that no This amendment has been brought
80CCG section 80CCG, deduction for three deduction under section 80CCG shall be allowed from assessment considering the fact that limited
consecutive assessment years is year 2018-19. However, an assesse who has claimed deduction number of individuals availed this
allowed upto Rs. 25,000 to a resident under this section for assessment year 2017-18 and earlier deduction and also to rationalize the
individual for investment made in assessment years shall be allowed deduction under this section till multiplicity of deductions available
listed equity shares or listed units of the assessment year 2019-20 if he is otherwise eligible to claim the under Chapter VI-A of the Act
an equity oriented fund subject to deduction as per the provisions of this section.
fulfilment of certain conditions. This This amendment will take effect from the 1st April, 2018
deduction was introduced vide
Finance Act, 2012.
Rationalization of rebate allowable under Section 87A
Section No. Extant Provision Proposed change in Provision Reason of change
Section The existing provisions of section The amendment is made to revise the maximum amount of rebate In the view of rationalisation of tax
87A 87A provide for a rebate up to available under this section from existing Rs. 5000 to Rs. 2500. It rates for individuals in the income
Rs.5000 from the income-tax is also proposed to provide that this rebate shall be available to slab of Rs. 2,50,000 to Rs.5,00,000
payable to a resident individual if only resident individuals whose total income does not exceed Rs.
this total income does not exceed 3,50,000.
Rs. 5,00,000. This amendment will take effect from 1st April, 2018

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Deduction of tax at source in the case of certain Individuals and Hindu undivided family
Section No. Extant Provision Proposed change in Provision Reason of change
Section New section inserted Individuals or a HUF (other than those covered under 44AB of To widen the scope of Section 194-I
194-IB the Act), responsible for paying to a resident any income by way
of rent exceeding fifty thousand rupees for a month or part of
month during the previous year, shall deduct an amount equal to
five per cent of such income as income-tax thereon. It is also
proposed that the deductor shall be liable to deduct tax only once
in a previous year.
This amendment will take effect from 1st June, 2017.

Enabling of Filing of Form 15G/15H for commission payments specified under section 194D
Section No. Extant Provision Proposed change in Provision Reason of change
Section The existing provisions of section It is proposed to amend section 197A so as to make them eligible To reduce compliance burden in the
197A 197A of the Act , inter-alia provide for filing self-declaration in Form.No.15G/15H for non- case of Individuals and HUFs
that tax shall not be deducted, if the deduction of tax at source in respect insurance commission
recipient of certain payments on referred to in section 194D. This amendment will take effect from
which tax is deductible furnishes to 1st June, 2017.
the payer a self- declaration in
prescribed Form.No.15G/15H
declaring that the tax on his
estimated total income of the
relevant previous year would be nil.
Presently, the payment in the nature
of income referred to in section
194D is not covered by provisions
of section 197A.

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Fee for delayed filing of return
Section No. Proposed Provision Reason of change
New Fee for delay in furnishing of return shall be levied for assessment year 2018-19 and onwards in a case In view of the non-intrusive
Section where the return is not filed within the due dates specified for filing of return under sub-section (1) of information-driven approach for
234F section 139. The proposed fee structure is as follows: improving tax compliance and
inserted (i) a fee of five thousand rupees shall be payable, if the return is furnished after the due date but on or effective utilization of information in
before the 31st day of December of the assessment year; tax administration
(ii) a fee of ten thousand rupees shall be payable in any other case.
Interest on refund due to deductor
Section no Proposed Provision
New Section 244A of the Act provides that an assessee is entitled to receive interest on refund arising out of excess payment of advance tax, tax
Inserted deducted or collected at source, etc.
Section It is proposed to insert a new sub-section (1B) in the said section to provide that where refund of any amount becomes due to the deductor, such
244A(1B) person shall be entitled to receive, in addition to the refund, simple interest on such refund, calculated at the rate of one-half per cent. for every
month or part of a month comprised in the period, from the date on which claim for refund is made in the prescribed form or in case of an order
passed in appeal, from the date on which the tax is paid, to the date on which refund is granted.
It is also proposed to provide that the interest shall not be allowed for the period for which the delay in the proceedings resulting in the refund is
attributable to the deductor.
This amendment will take effect from 1st April, 2017.

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Restriction on cash transactions
Section No. Extant Provision Proposed change in Provision Reason of change
Section New insertion Insertion of section 269ST in the Act to provide that no person To achieve the mission of the
269ST shall receive an amount of three lakh rupees or more, Government to move towards a less
(a) in aggregate from a person in a day; cash economy to reduce generation
(b) in respect of a single transaction; or and circulation of black money
(c) in respect of transactions relating to one event or occasion
from a person, otherwise than by an account payee cheque or
account payee bank draft or use of electronic clearing system
through a bank account. Transactions of the nature referred to in
section 269SS are proposed to be excluded from the scope of the
said section. The amendments will take effect from 1st April, 2017

Restriction on cash transactions


Section No. Extant Provision Proposed change in Provision Reason of change
Section New insertion To provide for levy of penalty on a person who receives a sum in To achieve the mission of the
271DA contravention of the provisions of the proposed section 269ST. Government to move towards a less
The penalty is proposed to be a sum equal to the amount of such cash economy to reduce generation
receipt. The said penalty shall however not be levied if the person and circulation of black money
proves that there were good and sufficient reasons for such
contravention. It is also proposed that any such penalty shall be
levied by the Joint Commissioner. The amendments will take
effect from 1st April, 2017

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Incentives for Promoting Investment in immovable property
Section No. Extant Provision Proposed change in Provision Reason of change
Section To qualify for long-term asset, an assessee is required to To reduce the period of holding from the To promote the real-estate
2(42A) hold the asset for more than 36 months subject to certain existing 36 months to 24 months in case of sector and to make it
exceptions immovable property, being land or building or more attractive for
both, to qualify as long term capital asset. This investment
amendment will take effect from 1st April, 2018

Exemption of long term capital gains tax u/s 10(38)


Section No. Extant Provision Proposed change in Provision Reason of change
Section As per the existing Section 10(38), exmeption is available if It is proposed that the nothing in the clause b of To protect the exemption
10(38) the income arising from transfer of Capital Asset, being an sub-section 38 of section 10 shall be applicable for genuine cases where
equity share in a Company is available only if the to the transaction of acquisition, other than the Securities Transactions
transaction of sale of such equity share is entered on or acquisition as notified by Central Government Tax could not have been
after 1st October, 2004 and such transaction is not of equity shares as entered into on or after 1st paid due to the nature of
chargeable to Securities Transaction Tax. October, 2004 and such transaction is not transfer.
chargeable to STT. This amendment will take
effect from 1st April, 2018.

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Transparency in Electoral Funding
Section No. Extant Provision Proposed change in Provision Reason of change
Section Political parties that are registered with the Election The amendments have been made to avail the To discourage the cash
13A Commission of India, are exempt from paying income-tax. following benefit of the said section: (i) No transactions and to bring
To avail the exemption, the political parties are required to donations of Rs.2000/- or more is received transparency in the source
submit a report to the Election Commission of India as otherwise than by an account payee cheque of funding to political
mandated under sub-section (3) of section 29C of the drawn on a bank or an account payee bank draft parties
Representation of the People Act,1951 (43 of 1951) or use of electronic clearing system through a
furnishing the details of contributions received by a bank account or through electoral bonds, (ii)
political party in excess of Rs.20,000 from any person. Political party furnishes a return of income for
the previous year in accordance with the
provisions of sub-section (4B) of section 139 on
or before the due date under section 139.
Further, in order to address the concern of
anonymity of the donors, it is proposed to
amend the said section to provide that the
political parties shall not be required to furnish
the name and address of the donors who
contribute by way of electoral bond. This
amendment will take effect from 1st April, 2018.

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No notional income for house property held as stock-in-trade
Section No. Extant Provision Proposed change in Provision Reason of change
Section Section 23 of the Act provides for the manner of Where the House Property consisting of any The section is ammended
23 determination of annual value of house property. building and land appurtenant thereto is held as considering the business
stock-in-trade and the property or any part of exigencies in case of real
the property is not let during the whole or any estate developers
part of the previous year, the annual value of
such property or part of the property, for the
period upto one year from the end of the
financial year in which the certificate of
completion of construction of the property is
obtained from the competent authority, shall be
taken to be nil. This amendment will take effect
from 1st April, 2018

Disallowance of capital expenditure under section 35AD on cash payment


Section No Extant Provision Proposed Provision Reason of change
Section 35AD Further, section 35AD of the Act , inter-alia provides for Section 35AD to be amended that any In order to discourage
investment linked deduction on the amount capital expenditure in respect of which payment or cash transactions even for
expenditure incurred, wholly or exclusively for the aggregate of payments made to a person in a capital expenditure
purposes of business, during the previous year for a day, otherwise than by an account payee cheque
specified business except capital expenditure incurred for drawn on a bank or an account payee bank draft
acquisition of any land or goodwill or financial instrument. or use of electronic clearing system through a
bank account, exceeds ten thousand rupees, no
deduction shall be allowed in respect of such
expenditure.

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Measures to discourage cash transactions
Section No. Extant Provision Proposed change in Provision Reason of change
Section Sub-section (3) of Section 40A of the Act, provides that The ammendments have been made to provide The ammendments have
40A(3) any expenditure in respect of which payment or aggregate the following: (i) To reduce the existing been made to
of payments made to a person in a day, otherwise than by threshold of cash payment to a person from disincentivise cash
an account payee cheque drawn on a bank or account twenty thousand rupees to ten thousand rupees transactions.
payee bank draft, exceeds twenty thousand rupees, shall in a single day;
not be allowed as a deduction. (ii) Deeming a payment as profits and gains of
business of profession if the expenditure is
incurred in a particular year but the cash
payment is made in any subsequent year of a
sum exceeding ten thousand rupees to a person
in a single day; and
(iii) Further expand the specified mode of
payment under respective sub-section of section
40A from an account payee cheque drawn on a
bank or account payee bank draft to by an
account payee cheque drawn on a bank or
account payee bank draft or use of electronic
clearing system through a bank account. These
amendments will take effect from 1st April,
2018.

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Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment
Section No. Extant Provision Proposed change in Provision Reason of change
Section Revenue expenditure incurred in cash exceeding certain where an assessee incurs any expenditure for In order to discourage
43 monetary threshold is not allowable as per sub-section (3) acquisition of any asset in respect which a cash transactions even for
of section 40A of the Act except in specified circumstances payment or aggregate of payments made to a capital expenditure
as referred to in Rule 6DD of the Income-tax Rules, 1962. person in a day, otherwise than by an account
payee cheque drawn on a bank or account payee
bank draft or use of electronic clearing system
through a bank account, exceeds ten thousand
rupees, such expenditure shall be ignored for the
purposes of determination of actual cost of
such asset. The amendments will take effect
from 1st April, 2018

Increasing the threshold limit for maintenance of books of accounts in case of Individuals and Hindu undivided family
Section No. Extant Provision Proposed change in Provision Reason of change
Section Every person carrying on business or profession [other It is proposed to amend the provisions of To reduce compliance
44AA than those mentioned in sub-section (1) such as legal, section 44AA to increase monetary limits of burden.
medical, engineering or architectural profession or the income and total sales or turn over or gross
profession of accountancy or technical consultancy or receipts, etc specified in said clauses for
interior decoration or any other profession as is notified by maintenance of books of accounts from one
the Board in the Official Gazette] to maintain such books lakh twenty thousand rupees to two lakh fifty
of accounts and documents in the previous year to enable thousand rupees and from ten lakh rupees to
the Assessing Officer to compute his total income in twenty-five lakh rupees, respectively in the case
accordance with the provisions of Act, provided that the of Individuals and Hindu undivided family
income and total sales or turn over or gross receipts, etc carrying on business or profession. This
specified in said clauses exceeds rupees one lakh twenty amendment will take effect from 1st April, 2018
thousand and rupees ten lakh, respectively.

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Exclusion of certain specified person from requirement of audit of accounts under section 44AB
Section No. Extant Provision Proposed change in Provision Reason of change
Section Every person carrying on the business is required to get his It is proposed to amend the section 44AB to To reduce the compliance
44AB accounts audited if the total sales, turnover or gross exclude the eligible person, who declares profits burden of the small tax
receipts in the previous year exceeds one crore rupees. for the previous year in accordance with the payers and facilitate the
The threshold limit for applicability of presumptive provisions of sub-section (1) of section 44AD ease of doing business
taxation in case of eligible business carried on by eligible and his total sales, total turnover or gross
person under section 44AD was increased to two crore receipts, as the case may be, in business does not
rupees from one crore rupees with effect from 1st April, exceed two crore rupees in such previous year,
2017 relevant to Assessment year 2017-18 by Finance Act, from requirement of audit of books of accounts
2016. Further vide press release dated 20th June, 2016, it under section 44AB. This amendment will take
was clarified that if an eligible person opts for presumptive effect from 1st April, 2017
taxation scheme as per section 44AD(1) of the Act, he
shall not be required to get his accounts audited if the total
turnover or gross receipts of the relevant previous year
does not exceed two crore rupees.

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Tax neutral conversion of preference shares to equity shares
Section No. Extant Provision Proposed Provision Reason of change
Section 47 Conversion of security from one form to another is Conversion of preference share of a company No similar tax neutrality
regarded as transfer for the purpose of levy of capital gains into its equity share shall not be regarded as (as in case of conversion
tax. However, tax neutrality to the conversion of bond or transfer.These amendments will take effect from of Bond or debenture into
debenture of a company to share or debenture of that 1st April, 2018 share or debenture) in
company is there. relation to the conversion
of preference share of a
company into its equity
share is provided
presently.
The amendment is made
to provide tax neutrality in
case of conversion of
preference share of a
company into equity share
of that company,
Fair Market Value to be full value of consideration in certain cases
New section Section 50CA to provide that where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market
inserted 50 Value (FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of
consideration for the purposes of computing income under the head "Capital gains". This amendment will take effect from 1st April, 2018

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Expanding the scope of long term bonds under 54EC
Section No. Extant Provision Proposed change in Provision Reason of change
Section Capital gain to the extent of Rs. 50 lakhs arising from the Investment in any bond redeemable after three To widen the scope of the
54EC transfer of a long-term capital asset shall be exempt if the years which has been notified by the Central section for sectors which
assessee invests the whole or any part of capital gains in Government in this behalf shall also be eligible may raise fund by issue of
certain specified bonds, within the specified time. for exemption. This amendment will take effect bonds eligible for
Currently, investment in bond issued by the National from 1st April, 2018 exemption under section
Highways Authority of India or by the Rural Electrification 54EC
Corporation Limited is eligible for exemption under this
section.

Shifting base year from 1981 to 2001 for computation of capital gains
Section No. Extant Provision Proposed change in Provision Reason of change
Section An assessee shall be allowed deduction for cost of The cost of acquisition of an asset acquired The base year for
55 acquisition of the asset and also cost of improvement, if before 01.04.2001 shall be allowed to be taken as computation of capital
any. However, for computing capital gains in respect of an fair market value as on 1st April, 2001 and the gains has become more
asset acquired before 01.04.1981, the assessee has been cost of improvement shall include only those than three decades old,
allowed an option of either to take the fair market value of capital expenses which are incurred after assessees are facing
the asset as on 01.04.1981 or the actual cost of the asset as 01.04.2001. The amendment will take effect genuine difficulties in
cost of acquisition. The assessee is also allowed to claim from 1st April, 2018 computing the capital
deduction for cost of improvement incurred after gains in respect of a
01.04.1981, if any. capital asset, especially
immovable property
acquired before
01.04.1981 due to non-
availability of relevant
information for
computation of fair
market value of such asset
as on 01.04.1981.

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Widening scope of Income from other sources
Section No. Proposed Provision
A new clause Receipt of the sum of money or the property by any person without consideration or for inadequate consideration in excess of Rs. 50,000
(x) in sub- shall be chargeable to tax in the hands of the recipient under the head "Income from other sources". These amendments will take effect
section (2) of from 1st April, 2017
section 56

Disallowance for non-deduction of tax from payment to resident


Section No. Extant Provision Proposed Provision Reason of change
Section Section 58 of the Act, specify the amounts which are not Provisions of section 40(a)(ia) shall, so far as they With a view to improve
58 deductible in computing the income under the head "Income may be, apply in computing income chargeable under compliance of provision
from other sources" which include certain disallowances made the head "income from other sources" as they apply relating to tax deduction at
in computation of income under the head "Profits and gains of in computing income chargeable under source (TDS)
business or profession". the head "Profit and gains of business or
Profession". This amendment will take effect from
1st April, 2018

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Carry forward and set off of loss in case of certain companies.
Section No Extant Provision Proposed Provision Reason of change
Section The existing provisions of section 79 of the Act, inter-alia Eligible start up ( besides the company in which Facilitate ease of doing
79 provides that where a change in shareholding has taken public is substantially interested) also excluded business and to promote
place in a previous year in the case of a company, not from the preview of Section 79. This start up India
being a company in which the public are substantially amendment will take effect from 1st April, 2018
interested, no loss incurred in any year prior to the
previous year shall be carried forward and set off against
the income of the previous year unless on the last day of
the previous year the shares of the company carrying not
less than fifty-one per cent of the voting power were
beneficially held by person who beneficially held shares of
the company carrying not less than fifty-one per cent of
the voting power on the
last day of the year or years in which the loss was incurred.

Restricting cash donations


Section No. Extant Provision Proposed change in Provision Reason of change
Section Deduction is not allowed in respect of donation made of No deduction shall be allowed under the section To provide cash less
80G any sum exceeding Rs.10,000, if the same is not paid by 80G in respect of donation of any sum economy and
any mode other than cash. exceeding two thousand rupees unless such sum transparency
is paid by any mode other than cash. This
amendment will take effect from 1st April, 2018

23
Extending the period for claiming deduction by start-ups
Section No. Extant Provision Proposed change in Provision Reason of change
Section An eligible start-up shall be allowed a deduction of an Deduction under section 80-IAC can be claimed Since the start-ups may
80-IAC amount equal to one hundred per cent of the profits and by an eligible start-up for any three consecutive take time to derive profit
gains derived from eligible business for three consecutive assessment years out of seven years beginning out of their business, the
assessment years out of five years beginning from the year from the year in which such eligible start-up is Section is amended to
in which such eligible start-up is incorporated. incorporated. This amendment will take effect increase the year of
from 1st April, 2018 deduction.

Rationalisation of Provisions of Section 80-IBA to promote Affordable Housing


Section No. Extant Provision Proposed change in Provision Reason of change
Section The existing section provides for 100% deduction in The revision in the section shall provide the To promote the
80-IBA respect of the profits and gains derived from developing following relaxation: development of affordable
and building certain housing projects subject to specified (i) The size of residential unit shall be measured housing sector
conditions. The conditions specified, inter alia, include the by taking into account the "carpet area" as
limit of 30 square meters for the built-up area of residential defined in Real Estate (Regulation and
unit in respect of project located in the Chennai, Delhi, Development) Act, 2016 and not the "built-up
Kolkata and Mumbai or within 25 kms from the municipal area".
limits of these four cities. For claiming deduction, the (ii) The restriction of 30 square meters on the
project shall be completed in 3 years. size of residential units shall not apply to the
place located within a distance of 25 kms from
the municipal limits of the Chennai, Delhi,
Kolkata or Mumbai.
(iii) The condition of period of completion of
project for claiming deduction under this section
shall be increased from existing three years to
five years. The amendment shall be effective
form 1st April, 2018.

24
Scope of section 92BA of the Income-tax Act relating to Specified Domestic Transactions
Section No. Extant Provision Proposed Provision Reason of change
Section Section 92BA of the Act, inter-alia provide that any Expenditure in respect of which payment has To reduce the compliance
92BA expenditure in respect of which payment has been made by been made by the assessee to a person referred burden of taxpayers
the assessee to certain "specified persons" under section to in under section 40A(2)(b) are proposed to be
40A(2)(b) are covered within the ambit of specified excluded from the scope of section 92BA of the
domestic transactions. Act.
These amendments will take effect from 1st
April, 2017

Income from transfer of Carbon credits


Section No. Proposed Provision Reason of change
New Section Where the total income of the assessee includes any income from transfer of carbon credit, such income shall In order to bring clarity
115BBG be taxable at the concessional rate of ten per cent (plus applicable surcharge and cess) on the gross amount of on the issue of taxation of
such income. No expenditure or allowance in respect of such income shall be allowed under the Act. This income from transfer of
amendment will take effect from 1st April, 2018 carbon credits and to
encourage measures to
protect the environment,

25
Rationalisation of Provisions relating to tax credit for Minimum Alternate Tax and Alternate Minimum Tax
Section No. Extant Provision Proposed change in Provision Reason of change
Section The Section contains provision for carry forward and set- The amendment in the Section is to provide that These amendments will
115JA off of tax credit in respect of Minimum Alternate Tax the tax credit determined under this section can take effect from 1st April,
(MAT) paid by companies under section 115JB. Currently, be carried forward up to fifteenth assessment 2018
the tax credit can be carried forward upto tenth assessment years immediately succeeding the assessment
years. years in which such tax credit becomes
allowable. Further, similar amendment is
proposed in section 115JD so as to allow carry
forward of Alternate Minimum Tax (AMT) paid
under section 115JC upto fifteenth assessment
years in case of non corporate assessee. These
amendments will take effect from 1st April,
2018.

Legislative framework to enable centralised issuance of notice and processing of information under section 133C
Section No. Extant Provision Proposed Provision Reason of change
Section Section 133C of the Act empowers the prescribed income- it is proposed to amend section 133C to To expedite verification
133C tax authority to issue notice calling for information and empower the Central Board of Direct Taxes to and analysis of the
documents for the purpose of verification of information make a scheme for centralised issuance of notice information and
in its possession. calling for information and documents for the documents so received
purpose of verification of information in its
possession, processing of such documents and
making the outcome thereof available to the
Assessing Officer for necessary action, if any.
This amendment will take effect from 1st April,
2017.

26
Simplification of the provisions of tax deduction at source in case Fees for professional or technical services under section 194J
Section No. Extant Provision Proposed change in Provision Reason of change
Section A specified person is required to deduct an amount equal It is proposed to amend section 194J to reduce To promote ease of doing
194J to ten per cent. of any sum payable or paid (whichever is the rate of deduction of tax at source to two per business
earlier) to a resident by way of fees for professional cent. from ten per cent in case of payments
services or fees for technical services provided such sum received or credited to a payee, being a person
paid/payable or aggregate of sum paid/payable exceeds engaged only in the business of operation of
thirty thousand rupees to a person in a financial year. call center.
This amendment will take effect from the 1st
day of June, 2017.

Non-deduction of tax in case of exempt compensation under RFCTLAAR Act, 2013


Section No. Extant Provision Proposed change in Provision Reason of change
Section 194LA Any person paying compensation shall deduct tax at It is proposed to amend the section 194LA to To bring Income Tax
source at the rate of ten per cent on the compensation or provide that no deduction shall be made under provisions in line with the
enhanced compensation or consideration on account of this section where such payment is made in RFCTLARR Act.
compulsory acquisition of any immovable property (other respect of any award or agreement which has
than agricultural land) under any law for the time being in been exempted from levy of income-tax under
force subject to certain conditions specified therein. The section 96 (except those made under section 46)
CG has enacted a new law namely 'RFCTLARR Act' of RFCTLARR Act.
which came into force on 1st January, 2014. Section 96 of This amendment will take effect from 1st April,
the RFCTLARR Act inter-alia, provides that income-tax 2017.
shall not be levied on award or agreement made subject to
limitations mentioned in section 46 of the said Act.
Therefore, compensation received for compulsory
acquisition of land under the RFCTLARR Act (except
those made under section 46 of RFTCLARR Act), is
exempted from the levy of income-tax.

27
Restriction on cash transactions
Section No. Extant Provision Proposed change in Provision Reason of change
Section To omit the provision relating to tax collection To achieve the mission of
206C at source at the rate of one per cent. of sale the Government to move
consideration on cash sale of jewellery exceeding towards a less cash
five lakh rupees. The amendments will take economy to reduce
effect from 1st April, 2017 generation and circulation
of black money
Rationalisation of section 211 and section 234C relating to advance tax
Section No. Extant Provision Proposed change in Provision Reason of change
Section Clause (b) of sub-section (1) of Section 211, provides that Vide Finance Act, 2016, presumptive taxation To bring the Section in
211 an eligible assessee engaged in an eligible business referred regime has been extended to professionals also line with the amendments
to in section 44AD is liable to pay advance tax in a single (i.e. Section 44ADA). Hence, it is proposed to made in Finance Act,
instalment on or before the 15th of March every financial amend clause (b) to provide that the assessee 2016.
year. who declares profits and gains in accordance
with presumptive taxation regime provided
under section 44ADA shall also be liable to pay
advance tax in one instalment on or before the
15th of March. The consequential amendment is
also made in Section 234C(1) to provide that in
respect of an assesse referred to in section
44ADA, interest under the said section shall be
levied, if the advance tax paid on or before the
15th March, is less than the tax due on the
returned income.
These amendments shall be effective from 1st
April, 2017.

28
Rationalisation of Section 234C relating to advance tax
Section No. Extant Provision Proposed change in Provision Reason of change
Section Section 211 of the Act provides for instalments of advance Vide Finance Act, 2016, tax on certain dividends In view of the uncertain
234C(1) tax and due dates for depositing the same. received from domestic companies is to be nature of declaration and
levied under section 115BBDA of the Act with receipt of dividend
effect from the 1st April, 2017, if such income incomes, an assessee liable
exceeds ten lakh rupees. It is proposed to to pay advance tax may
provide that that if shortfall in payment of not be able to correctly
advance tax is on account of under-estimation determine such liability
or failure in estimation of income of the nature within the payment
referred to in section 115BBDA, the interest schedule as specified
under section 234C shall not be levied subject to under section 211 and
the conditions as specified. shall, therefore, incur levy
of interest on deferment
of advance tax as specified
under clauses (a) or (b) of
section 234C(1). To
reduce the levy of interest
in genuine cases the
amendment is made.

29
Processing of return within the prescribed time and enable withholding of refund in certain cases
Section No. Extant Provision Proposed Provision Reason of change
New Section The provisions of sub-section (1D) of section 143 provide It is proposed that provisions of section To address the grievance
241A that the processing of a return shall not be necessary, 143(1D) shall cease to apply in respect of of delay in issuance of
where a notice has been issued to the assessee under sub- returns furnished for assessment year 2017-18 refund in genuine cases
section (2) of the said section. Amendment to the said sub- and onwards. However, to address the concern which are routinely
section brought by Finance Act, 2016 provides that with of recovery of revenue in doubtful cases, it is selected for scrutiny
effect from assessment year 2017-18, processing under proposed to insert a new section 241A to assessment
section 143(1) is to be done before passing of assessment provide that, for the returns furnished for
order. assessment year commencing on or after 1st
April, 2017, where refund of any amount
becomes due to the assessee under section
143(1) and the Assessing Officer is of the
opinion that grant of refund may adversely
affect the recovery of revenue, he may, for the
reasons recorded in writing and with the
previous approval of the Principal
Commissioner or Commissioner, withhold the
refund upto the date on which the assessment is
made.
These amendments will take effect from 1st
April, 2017

Penalty on professionals for furnishing incorrect information in statutory report or certificate


Section No. Extant Provision Proposed Provision Reason of change
New inserted If an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or To ensure that the person
Section 271J certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the furnishing report or
Commissioner (Appeals) may direct him to pay a sum of ten thousand rupees for each such report or certificate undertakes due
certificate by way of penalty. These amendments will take effect from 1st April, 2017. diligence before making
such certification

30
Amendments to the structure of Authority for Advance Rulings
Chapter XIX-B of the Act relates to the Advance rulings under the Act.
Chapter XIX- With a view to promote ease of doing business, it has been decided by the Government to merge the Authority for Advance Ruling (AAR)
B for income-tax, central excise, customs duty and service tax. Accordingly, necessary amendments, have been made to Chapter XIX-B to
allow merger of these AARs.
These amendments will take effect from 1st April, 2017

31
Budget proposals

Direct Tax Indirect Tax International Tax Goods & Service Tax

Clarity relating to Indirect transfer provisions


Section No. Extant Provision Proposed change in Provision Reason of change
Section Section 9 of the Act deals with cases of income which are Explanation 5 shall not apply to any asset or In response to various queries
9 deemed to accrue or arise in India. Explanation 5 in capital asset mentioned therein being investment raised by stakeholders seeking
section 9(1)(i) clarified that an asset or capital asset, being held by non-resident, directly or indirectly, in a clarification on the scope of
any share or interest in a company or entity registered or Foreign Institutional Investor, as referred to in indirect transfer provisions, the
incorporated outside India shall be deemed to be situated clause (a) of the Explanation to section 115AD, CBDT issued Circular No 41 of
in India, if the share or interest derives, directly or and registered as Category-I or Category II 2016. However, concerns have
indirectly, its value substantially from the assets located in Foreign Portfolio Investor under the Securities been raised by stakeholders that
India and Exchange Board of India (Foreign Portfolio the provisions result in
Investors) Regulations, 2014 made under the multiple taxation.
Securities and Exchange Board of India Act,
1992, as these entities are regulated and broad
based. This amendment will take effect
retrospectively from 1st April, 2012 .

Modification in conditions of special taxation regime for off shore funds under section 9A
Section No. Extant Provision Proposed change in Provision Reason of change

32
Section Sub-section (3) of section 9A provides for the conditions It is proposed to provide that in the previous To rationalise the regime and to
9A for the eligibility of the fund. In respect of corpus of the year in which the fund is being wound up, the address the concerns of the
fund, the condition is that the monthly average of the condition that the monthly average of the stakeholders
corpus of the fund shall not be less than one hundred corpus of the fund shall not be less than one
crore rupees except where the fund has been established hundred crore rupees, shall not apply. This
or incorporated in the previous year in which case, the amendment will take effect retrospectively from
corpus of fund shall not be less than one hundred crore 1st April, 2016
rupees at the end of such previous year.

Rationalisation of provisions of Section 10AA


Section No. Extant Provision Proposed change in Provision Reason of change
Section Deduction is allowed from the total income of an assessee, It is proposed to clarify that the amount of The change is clarification in
10AA in respect of profits and gains from his Unit operating in deduction referred to in section 10AA shall be nature
SEZ, subject to fulfilment of certain conditions. allowed from the total income of the assessee
However, courts have taken a view (while deciding the computed in accordance with the provisions of
matter pertaining to section 10A which also contains the Act before giving effect to the provisions of
similar provision) that the deduction is to be allowed from the section 10AA and the deduction under
the total income of the undertaking and not from the total section 10AA in no case shall exceed the said
income of the assessee total income. This amendment will take effect
from 1st April, 2018.

Extension of capital gain exemption to Rupee Denominated Bonds


Section No. Proposed Provision Reason of change

33
Section Any transfer of capital asset, being rupee denominated bond of Indian company issued outside India, by a With a view to provide relief to
47 non- resident to another non- resident shall not be regarded as transfer. These amendments will take effect non-resident investor, in the
from 1st April, 2018 wake of permission to the
Indian corporates by the
Reserve Bank of India (the
RBI) to issue rupee
denominated bonds outside
India as a measure to enable the
Indian corporates to raise funds
from a source outside India
Cost of acquisition in Tax neutral demerger of a foreign company
Section No. Extant Provision Proposed change in Provision Reason of change
Section Under the existing provision of section 47(vic), the It is proposed to amend section 49 so as to Clarification in the Cost of
49 transfer of shares of an Indian company by a demerged provide that cost of acquisition of the shares of Acquisition in case of Transfer
foreign company to a resulting foreign company is not Indian company referred to in section 47(vic) in from demerged foreign
regarded as transfer. the hands of the resulting foreign company shall company to resulting foreign
be the same as it was in the hands of demerged company.
foreign company. This amendment will take
effect from 1st April, 2018

34
Clarification with regard to interpretation of 'terms' used in an agreement entered into under section 90 and 90A.
Section No. Extant Provision Proposed Provision Reason of change
Section Section 90 and 90A of the Act that any 'term' used but not It is proposed to amend the sections 90 and 90A In the light of above discussion
90 and 90A defined in this Act or in the agreement referred to in sub- of the Act, to provide that where any 'term' used and to bring in clarity to avoid
section (1) of respective provisions shall have the meaning in an agreement entered into under sub-section litigation
assigned to it in the notification issued by the Central (1) of Section 90 and 90A of the Act, is defined
Government in the Official Gazette in this behalf, unless under the said agreement, the said term shall be
the context otherwise requires, provided the same is not assigned the meaning as provided in the said
inconsistent with the provisions of this Act or the agreement and where the term is not defined in
agreement. the agreement, but is defined in the Act, it shall
be assigned the meaning as definition in the Act
or any explanation issued by the Central
Government. These amendments will take effect
from 1st April, 2018

Secondary adjustments in certain cases


Section No. Proposed Provision Reason of change
New Section Section 92CE provides that the assessee shall be required to carry out secondary adjustment where the In order to align the transfer
92CE primary adjustment to transfer price, has been made suo motu by the assessee in his return of income; or pricing provisions in line with
made by the Assessing Officer has been accepted by the assessee; or is determined by an advance pricing OECD transfer pricing
agreement entered into by the assessee under section 92CC; or is made as per the safe harbour rules framed guidelines and international
under section 92CB; or is arising as a result of resolution of an assessment by way of the mutual agreement best practices
procedure under an agreement entered into under section 90 or 90A. This amendment will take effect from
1st April, 2018
Limitation of Interest deduction in certain cases
Section No. Proposed Provision Reason of change
New Section Interest expenses claimed by an entity to its associated enterprises shall be restricted to 30% of its earnings In line with Action plan 4 of
94B before interest, taxes, depreciation and amortization (EBITDA) or interest paid or payable to associated Base Erosion and Profit
enterprise, whichever is less. Applicable to an Indian company, or a permanent establishment of a foreign Shifting
company being the borrower who pays interest in respect of any form of debt issued to a non-resident or to a
permanent establishment of a non-resident and who is an 'associated enterprise' of the borrower. Further, the
debt shall be deemed to be treated as issued by an associated enterprise where it provides an implicit or

35
explicit guarantee to the lender or deposits a corresponding and matching amount of funds with the lender.
The provisions shall allow for carry forward of disallowed interest expense to eight assessment years
immediately succeeding the assessment year for which the disallowance was first made and deduction against
the income computed under the head "Profits and gains of business or profession to the extent of maximum
allowable interest expenditure. In order to target only large interest payments, it is proposed to provide for a
threshold of interest expenditure of one crore rupees exceeding which the provision would be applicable. It is
further proposed to exclude Banks and Insurance business from the ambit of the said provisions keeping in
view of special nature of these businesses. This amendment will take effect from 1st April, 2018
Rationalization of taxation of income by way of dividend
Section No. Extant Provision Proposed change in Provision Reason of change
Section Income by way of dividend in excess of Rs. 10 lakh is The scope of applicability of this section is To ensure horizontal equity
115BBDA chargeable to tax at the rate of 10% on gross basis in case extended to include all resident assesses except among all categories of tax
of a resident individual, Hindu undivided family or firm. domestic company and certain funds as payers deriving income from
mentioned in sub-clause iv, v, vi, via of clause dividend
23C of Section 10.
This amendment will take effect from 1st April,
2018.

36
Extension of eligible period of concessional tax rate on interest in case of External Commercial Borrowing and Extension of benefit to Rupee
Denominated Bonds
Section No. Extant Provision Proposed change in Provision Reason of change
Section The interest payable to a non-resident by a specified company on Concessional rate of five percent TDS on interest To boost the
194LC borrowings made by it in foreign currency from sources outside payment under this section will now be available economy by way of
India under a loan agreement or by way of issue of any long-term in respect of borrowings made before the 1st July, introduction of
bond including long-term infrastructure bond shall be eligible for 2020. This amendment will take effect from 1st foreign capital.
concessional TDS of five per cent. It further provides that the April, 2018. Section 194LC is amended to extend
borrowings shall be made, under a loan agreement at any time on to rupee denominated bond issued outside India
or after the 1st July, 2012, but before the 1st July, 2017; or by way before the 1st July, 2020.
of any long-term bond including long-term infrastructure bond on
or after the 1st October, 2014 but before the 1st July, 2017,
respectively.

Extension of eligible period of concessional tax rate under section 194LD


Section No. Extant Provision Proposed change in Provision Reason of change
Section Lower TDS at the rate of five percent in the case of interest Concessional rate of five percent TDS on interest Considering the
194LD payable at any time on or after 1st June, 2013 but before the 1st will now be available on interest payable before representations
July, 2017 to FIIs and QFIs on their investments in Government the 1st July, 2020. This amendment will take effect received from
securities and rupee denominated corporate bonds provided that from 1st April, 2018. stakeholders.
the rate of interest does not exceed the rate notified by the Central
Government in this behalf.

37
Enabling claim of credit for foreign tax paid in cases of dispute
Section No. Proposed Provision Reason of change
New section Section 155 sub-section (14A) is proposed to provide that where credit for foreign taxes paid is not given for In view of rule 128 of the
inserted the relevant assessment year on the grounds that the payment of such foreign tax was in dispute, the Assessing Income-tax Rules, 1962, which
155(14A) Officer shall rectify the assessment order or an intimation under sub-section (1) of section 143, if the assessee, provides a mechanism for
within six months from the end of the month in which the dispute is settled, furnishes proof of settlement of claim of foreign tax credit
such dispute, submits evidence before the Assessing Officer that the foreign tax liability has been discharged
and furnishes an undertaking that credit of such amount of foreign tax paid has not been directly or indirectly
claimed or shall not be claimed for any other assessment year. This amendment will take effect from 1st April,
2018

38
Budget proposals

Direct Tax Indirect Tax International Tax Goods & Service Tax

SERVICE TAX

Rate of Service Tax

The basic rate of Service Tax remains unchanged at 15 per cent with Swach Bharat Cess leviable at 0.5 per cent and Krishi Kalyan Cess at 0.5 per cent.

Services proposed to be exempted from levy of Service Tax

- Services provided from June 1, 2007 to September 21, 2016 (both days inclusive), by State Government industrial development Corporation or undertaking
to industrial units by way of grant of long term lease of 30 years or more of industrial plots.
- Services provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force,
respectively, from September 10, 2004 to February 1, 2016 (both days inclusive) under the Group Insurance Schemes of the Central Government.
Further, refund in respect of above services shall be allowed in respect of service tax, already collected during the said period. And the application for the
same can be filed within 6 months from enactment of Finance Act, 2017.
- Services provided by the Indian Institutes of Management, to their students, by way of two year residential as well as non-residential full time Post
Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission
Test, conducted by Indian Institute of Management.

39
Services proposed to be exempted from levy of Service Tax

- Exemption from Service Tax on the amount payable as Viability Gap Funding (VGF) to the selected airline operator for the services of transport of
passengers, with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme Airport (RCS). The
exemption would be valid for a period of one year from the date of commencement of operations of the RCS.
- Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds to members of the Army,
Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government.
- Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption proposed
to be deleted from the negative list however the Service tax exemption has been continued via amending the exemption notification no. 25/2012-ST, the
given provision would be effective from the date of enactment of Finance Act, 2017.

Repeal of Research and Development Cess Act, 1986

Research and Development Cess Act, 1986 has been proposed to be repealed. Therefore the Service Tax exemption of the amount of Research and
Development Cess payable on import of technology would no longer be available.

Amendment in the valuation rules of Works Contract

- It has been clarified that with effect from July 1, 2010, the value of service portion in execution of works contract shall not include value of property
involve in transfer of goods and land or undivided share of land, as the case may be.
- Where the amount charged for works contract includes the value of goods as well as land or undivided share of land, the service tax shall be payable on
30 per cent of the total amount charged for works contract, the given percentage would be different for different time period provided in the sixth schedule
of the Finance Bill, 2017.

40
CENTRAL EXCISE

Rate of Excise Duty

The standard rate of Excise Duty on most products remains unchanged at 12.5 per cent.

Products proposed to be exempted from levy of Central Excise

- The government has exempted resin and catalyst for manufacture of cast components for Wind Operated Energy Generators (WOEG) from levy of Excise
Duty, subject to actual user conditions as the government is trying promote the development and application of renewable sources of energy.
- Miniaturized POS card, Micro-ATM, Finger Print Reader / Scanner or Iris Scanner along with the parts and components for their manufacture have been
exempted from Excise Duty by the government in its attempt to shift towards a digital and cashless economy.

Change in Rates

The government has increased the rate of Excise Duty on Sin goods such as tobacco and cigarettes in order to increase its revenue while discouraging their
usage at the same time. The details of the changed rates are given below: -

Sr. No. Commodity Current Rate Proposed rate


1. Cigar and cheroots 12.5% or Rs 3755 per thousand, whichever is 12.5% or Rs 4006 per thousand,
higher whichever is higher
2. Cigarettes of tobacco substitutes Rs 3755 per thousand Rs 4,006 per thousand
3. Pan Masala 6% 9%

4. Unmanufactured Tobacco 4.2% 8.3%

5. Paper rolled biris handmade Rs 21 per thousand Rs 28 per thousand

41
6. Paper rolled biris machine made Rs 21 per thousand Rs 78 per thousand

The rate of Basic Excise Duty on components for manufacture of renewable sources of energy has been reduced by the government. Details of the changed
rates are given below: -

Sr. Commodity Current Rate Proposed rate


No.

1. Parts/raw materials for manufacture of solar tempered glass for use in solar cells/modules 12.5% 6%

2. All items of machinery required for balance of systems operating on biogas/bio-methane/by-product 12.5% 6%
hydrogen
3. All items of machinery required for fuel cell based power generating systems to be set up in the country 12.5% 6%
or for demonstration purposes

Amendments in the Central Excise Act, 1944

- The advance ruling authority has been defined as a authority constituted under the Income Tax Act, 1961.

- Section 23C of the Central Excise Act has been amended so as to increase the application fee for seeking advance ruling from Rs 2,500 to Rs 10,000.
Further, Section 23D has been amended to extend the time limit for pronouncement of the ruling to 6 months from 90 days.

- Every application and proceeding pending before the erstwhile authority of Advance Ruling (Central Excise, Service Tax, Customs) shall be transferred to
the advance ruling authority of Income Tax from the stage at which the such application stood at the date of Enactment of Finance Act, 2017.

- A long-awaited amendment has finally been made in Section 32E of Central Excise Act, 1944 to enable any person, other than assesse to make an
application to the Settlement Commission.

42
- Previously, only an assessee as defined in Section 31(a) of the Central Excise Act was allowed to make an application before the Settlement Commission
in relation to a case pending against him.
- As a consequence of this amendment, co-noticees to a Show-cause notice can now file applications for settlement in relation to a case.

- A new sub-section (5A) has been inserted in Section 32F enabling the Settlement Commission to amend the order passed by it to rectify any error evident
on the face of record.

Amendments in the Central Excise Rules, 2002

A new sub-rule (2) has been inserted in Rule 21 so as to provide a time limit of 3 months for remission of duty under the said rule read with Section 5 of
the Central Excise Act.

Amendments in CENVAT Credit Rules, 2004

A new sub-rule (4) has been inserted in Rule 10 so as to provide a time limit of three months (further extendable by 6 months) for approval of requests
regarding transfer of CENVAT Credit on account of shifting, merger, sale etc of the factory.

CUSTOMS DUTY

Change in Rates

The rate of Customs Duty on components for manufacture of renewable sources of energy has been reduced by the government in its initiative to promote
the development and application of renewable sources of energy. Details of the changed rates are given below: -

43
Sr. Commodity Current Rate Proposed rate
No.

1. Parts/raw materials for manufacture of solar tempered glass for use in photovoltaic CVD 12.5% CVD 6%
cells/modules.
2. Resin and catalyst for manufacture of cast components for Wind Operated Energy Generators BCD 7.5% BCD 5%
CVD 12.5% CVD Nil
SAD 4% SAD Nil
3. All items of machinery required for fuel cell based power generating systems BCD 10% / 7.5% BCD 5%
CVD 12.5% CVD 6%
4. All items of machinery required for balance of systems operating on biogas/bio-methane/by- BCD 10% / 7.5% BCD 5%
product hydrogen CVD 12.5% CVD 6%

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Exemption to certain imports

- Goods imported through postal parcels, packets and letters with a CIF (Cost Insurance Freight) value up to Rs One thousand per consignment have been
exempted from levy of Basic Customs Duty, Counter-vailing Duty and Special Additional Duty.
- The government has exempted Basic Customs Duty, Counter-vailing Duty and Special Additional Duty on import of POS devices, Micro ATMs,
fingerprint-reader/scanner, Iris Scanner in order to facilitate the transition towards a digital and cashless economy.
- Solar Tempered glass for use in manufacture of solar cells/panels/modules have been exempted from Basic Customs Duty by the government in order to
encourage the development and application of renewable sources of energy.

Amendments in the Customs Act, 1962

- The application fee for seeking advance ruling has been increased from Rs 2,500 to Rs 10,000 by amending Section 28H of Customs Act, 1962.

- A new clause (3A) has been inserted in Section 2 to define a beneficial owner as any person on whose behalf goods are being imported or exported or
who exercises effective control over the goods being imported or exported.

- The definitions of exporter and importer have been amended so as to include beneficial owner.

- Section 47 (2) has been amended so as to provide the manner of payment of duty and interest thereon in the case of self-assessed bills of entry.

- Section 46 (3) has been amended so as to make it mandatory to file the bill of entry before the end of next day following the day on which the aircraft or
vessel carrying the goods arrives at the customs station.

- Section 17 has been amended to rationalize the requirement of documents for verification of self assessment.

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Budget proposals
Goods & Service
Direct Tax Indirect Tax International Tax
Tax

Substantial progress has been made in the ushering Goods and Services Tax (GST). The advantages of GST for our
economy in terms of spurring growth, competitiveness, indirect tax simplification and greater transparency is widely
known. Implementation of GST is likely to bring more taxes both to Central and State Governments because of widening
of tax net.

GST Council held 9 meetings to discuss various issues relating to GST, including broad contours of the GST rate structure,
threshold exemption and parameters for composition scheme, details for compensation to States due to implementation
of GST, examination of draft model GST law, draft IGST law and the Compensation Law and administrative mechanism
for GST. Almost all the recommendation of the council is finalized. The preparation of IT system for GST is also on schedule.
GST is soon going to be reality.

Mr. Arun Jaitley mentioned in his Budget Speech

I have preferred not to make many changes in current regime of Excise & Service Tax because the same are to be
replaced by GST soon.

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