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CNK & Associates LLP

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Finance Bill, 2016- An Analysis

2CNK & Associates LLP Finance Bill, 2016

Contents

Particulars Pg No.

Foreword 5

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


Contents

Particulars Pg No.

• Securitisation Trusts 36

• Alternate Investment Funds (AIF) 37

• Tax Incentive for Start-ups 38-39

• Taxation of Income from Patents 40

• 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


Contents

Particulars Pg No.

Service Tax: 57

• Legislative Amendments 58-60

• Abatement 61

• Exemptions 62-63

• Reverse Charge 64

• Service Tax Rules 65

Customs: 66

• Legislative Amendments 67-69

• Baggage Rules 70-71

• Tariff Amendments 72-73

Excise: 74

• Legislative Amendments 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


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 maze……Happy Reading !

March 3, 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 OECD’s 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


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


INCOME TAX

Note: Unless otherwise stated the amendments referred to in this e-publication are effective from AY 2017-

18 onwards.


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.

Income Declaration Scheme 2016


Income Declaration Scheme 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.


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

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.

Direct Tax Dispute Resolution Scheme, 2016

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.


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

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.

Equalisation Levy


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

Country By Country Reporting


Change in Transfer Pricing Reporting Requirements – s. 92D & 286

Country By Country Reporting

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 mis-

match 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


Income Tax Rates

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 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

Income upto INR

1 Crore

Rate of surcharge NIL NIL NIL NIL

* Effective Tax rate 30.90% 30.90% 30.90% 30.90%

Income above INR

1 Crore

Rate of surcharge 12% 15% 12% 12%

Effective Tax rate 34.608% 35.535% 34.608% 34.608%

A) For individuals HUF, AOP, BOI, Cooperative Societies and Firms

* 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%.


Income Tax Rates

Particulars DOMESTIC COMPANY

(Having a Turnover

upto INR 5 Crore for

FY 2014-15)

DOMESTIC COMPANY

(Having a Turnover above

INR 5 Crore for FY 2014-15)

FOREIGN

COMPANY

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)

Income upto

INR 1 Crore

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%

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.


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.

* The surcharge applicable on these companies is same as the surcharge on domestic companies

This option will have to be exercised ever year.


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 2017-

18.

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.

.


Current Proposed

Presence of Fund Manager in India

Presence of fund manager not to constitute business connection in India – s. 9A:

The above changes are relatively insignificant and the number of conditions to be fulfilled are still too onerous and rigid.

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.


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.

Charitable Trusts

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.


Current Proposed

Salary Income-Tax treatment in Pension Plans

Recognized Provident Funds, Pension Funds and National Pension Scheme – S. 10(12), 10(13), 80CCD

& 17

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.


Current Proposed

Salary Income-Tax treatment in Pension Plans

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

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 employer’s 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.

Recognized Provident Funds, Pension Funds and National Pension Scheme – S. 10(12), 10(13), 80CCD

& 17


Current Proposed

Business Income

Investment Allowance- s.32AC

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.

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.

`


Business Income - Measures to phase out deductions

Proposed phase out plan of Profit linked deductions/weighted deductions :

Section Incentive currently available in the

Act

Proposed phase out measures

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

on eligible projects or

schemes

Presently, deduction for expenditure

incurred by way of payment of any

sum to a public sector company or a

local authority or to an approved

association or institution,etc. on

certain éligible social development

project or a scheme.

No deduction under the said section shall be

available from FY 2017-18 (AY 2018-19) onwards.



Proposed phase out plan of Profit linked deductions/weighted deduction :

Section Incentive currently available in the Act Proposed phase out measures/Amendment

S. 80IA; 80IAB,

and 80IB

Presently, 100 % profit linked deductions

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 (80-

IAB), (c) production of mineral oil and

natural gas [80-IB(9)]

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).



Proposed phase out plan of accelerated depreciation/weighted deduction incentive w.e.f.

AY 2018-19:

Section Incentive currently available in the

Act

Proposed phase out measures/Amendment

S. 32 read with rule

5 of Income-tax

Rules, 1962-

Accelerated

Depreciation

Accelerated depreciation is provided to

certain Industrial sectors in order to

give impetus for investment. The

depreciation under the Income-tax Act

is available up to 100% in respect of

certain block of assets

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.


Current Proposed

Business Income - Presumptive Taxation

Increase in threshold limit for computing Profit and Gains of Business on presumptive basis – s. 44AD

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

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.


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.

Business Income - Presumptive Taxation

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.


Current Proposed

Capital Gains

Stamp duty valuation – s. 50C

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.

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


Current Proposed

Income from Other Sources

Tax on certain dividends received from domestic companies – s. 10(34) read with s. 115BBDA

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.


Deduction under Chapter VIA

Current Proposed

Applicable to Indian company engaged in

manufacturing of goods

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

Deduction u/s 80JJAA in respect of new employment extended to all the assesses

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.


Current Proposed

Minimum Alternate Tax (MAT) on Foreign Companies

Rationalising provisions of MAT applicable to foreign companies – s. 115JB

AAR Ruling in the case of Castleton had held that s. 115JB was applicable to foreign companies, even if they don’t 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.

No clarity was provided on whether MAT provisions apply

to a foreign company

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.

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

i) PE in India under relevant DTAA or

ii) Where there exists no DTAA and the foreign company

is not required to seek registration in India under any law

relating to companies

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.


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.


Current Proposed

Securitisation Trusts

Taxation of Securitisation trusts, Asset Reconstruction Companies and their investors – s. 10(23DA)

& 194LBC

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

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 recipient’s income is not

chargeable to tax.

Income exempt in the hands of investor and also in the

hands of the trust

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


Current Proposed

Alternate Investment Funds(AIF)

TDS provisions for payments made by AIF(category I or II) to investors – s. 194LBB & 197

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

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.

TDS will have to be deducted by the AIF at the time of

credit or payment, whichever is earlier,

(i) at the rate of 10%, where payee is a resident;

(ii) At the rates in force, where payee is a non-

resident (not being a company or a foreign

company)

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.


Tax incentives for Start-ups

A new s. 80-IAC is introduced which provides for a deduction of 100% of the profits and gains derived by an eligible start-

up 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.

Tax incentives for start-ups – s. 80-IAC, 54EE & 54GB


Tax incentives 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.

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.


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

Taxation of Income from Patents

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.


Current Proposed

Procedure of Assessment - Filing of Return of Income

Filing of return - s. 139(4) & 139(5)

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.

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.


Current Proposed

Procedure of Assessment - Scope of electronic

processing of information

Scope of adjustments to be made while processing of returns – s. 143(1)

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, 80-

IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is

furnished beyond the due date specified under section

139(1); 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


Current Proposed

Procedure of Assessment - Scope of electronic

processing of information

Scope of adjustments to be made while processing of returns – s. 143(1)

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.

- 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.


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.

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.

New Limits prescribed – s. 153


Procedure for Assessment – time limit

Rationalisation of time limit for assessment in search cases – s. 153

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.

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


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/ co-

op 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


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

To be omitted

w.e.f

01.06.2016

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 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


Current Proposed

Collection and Recovery of Tax - Requirement to furnish

PAN in case of non resident

Exemption for non-residents to furnish PAN – s. 206AA

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.

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%.

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.


Current Proposed

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

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.


Current Proposed

Collection and Recovery of Tax - Interest on refund

Payment of interest on refund – s. 244A

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 self-

assessment 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, it’s a welcome beginning.


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.

Incentives for Promoting ‘Housing for All’


Incentives for Promoting ‘Housing for All’

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.

Deduction for interest on loan for residential property from a Financial Institution – s. 80EE

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.


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.

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.

Penalty Provisions


Miscellaneous Amendments / Observations

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.


Miscellaneous Amendments / Observations

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 recipient’s 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.


SERVICE TAX


Legislative Amendments

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.




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.


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


Abatement

* 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.

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%

Transport of passengers, with or without accompanied

belongings by a stage carriage^

- - 60% 5.80%

Tour Operator’s Services –

Arranging or booking accommodation only

Others

90%

75% / 60%

1.45%

3.63% / 5.8%

90%

70%

1.45%

4.35%

Construction of a complex, building, civil structure or a part

thereof

75%/

70%

3.63% /

4.35%

70% 4.35%


Exemptions


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 1st April, 2016


Exemptions


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 Farmer’s 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%

- Exempt**

* Notification No.09/2016-Service Tax dated 1st March, 2016. #Notification No.12/2016-Service Tax dated 1st March, 2016.

** Applicable from 1st March, 2016 ^ Applicable from 1st April, 2016

% Notification No.11/2016-Service Tax dated 1st March, 2016


Reverse Charge


Services provided by mutual fund agents/ distributor to a mutual fund or asset

management company.

Reverse Charge Forward Charge

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

Reverse Charge

Exempt

Exempt

Forward Charge

Forward Charge

Forward Charge

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

Forward Charge

Reverse Charge

hitherto applicable

only on Defined

Support Services

Forward Charge

Reverse Charge

now applicable

on All Services

*Notification No.18/2016-Service Tax dated 1st March, 2016 effective from 1st April, 2016.


Service Tax Rules


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.


CUSTOMS



Section 2(43), 58A –

Warehouse

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 –

Warehousing Station

Definition of warehousing station proposed to be deleted

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

Grant Duty Exemption

Requirement of publishing and offering for sale any notification issued by the Directorate of

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 –

Deferred Payment

Facility of deferred payment of customs duties proposed to be extended to importers and

exporters with proven track record

Section 53 – Transit of

Goods

Proposed to be amended to enable the CBEC to frame regulations for permitting transit of

goods without payment of duty

Sections 57,58, 58A –

Licensing of WarehouseProposed to be amended to enable the Principal Commissioner/Commissioner to license a

public/private warehouse for storage of dutiable goods

Section 58B –

Cancellation /

Suspension of License

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.

Section 59 –

Warehousing Bond

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



Section 60 – Deposit

of Goods in

Warehouse

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

Section 61 –

Warehousing Period

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

Warehoused Goods

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

set out in Sections 57, 58 and 58A

Section 63, 68, 69

and 72 – Rent and

Warehousing Charges

Provisions relating to payment of rent and warehousing charges to warehouse keeper proposed

to be deleted, in view of the privatisation of services and free market determination of rates

Section 64 – Owner’s

Rights with respect to

Warehoused Goods

Proposed to effectively curtail some of the owner’s rights (taking of samples, changing of

containers, separation of damaged/deteriorated goods)





Section 65 – Operations relating to

Goods in Warehouse

Proposed to delete payment of fees to Customs for supervision of

manufacturing facilities under bond

Sanctioning authority changed from Assistant /Deputy Commissioner to

Principal Commissioner/ Commissioner

Section 72 - Improper Removal of

Goods from the Warehouse

Proposed to delete provisions relating to removal of samples without payment of

duty from purview of “improper removal of goods from the warehouse”

Section 73 – Cancellation and Return

of Warehousing Bond

Proposed to provide for execution of cancellation bond in case of transfer of

ownership of goods.

Section 73A – Responsibility on

Custodian of Warehoused Goods

Proposed to provide for custody of warehoused goods for laying down

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


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 Origin

country

Duty Free

Allowance

Eligible Items

Indian Resident or a foreigner residing

in India or a tourist of Indian origin,

excluding infants

Other than

Nepal,

Bhutan,

Myanmar

INR 50,000/- Used personal articles, travel souvenirs and

other articles excluding prohibited articles (If

carried in person or in accompanied baggage)

Tourist of foreign origin, excluding

infants of upto 2 years of age

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


Baggage Rules

CBDR amended to confine filing of Customs Declaration only for passengers coming to India and carrying dutiable or

prohibited goods.*

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

INR 60,000/-

INR 1,00,000/-

INR 2,00,000/-

INR 5,00,000/-

Subject to fulfillment of specified conditions

Member of crew of a vessel or an aircraft Chocolates, Cheese, Cosmetics and other petty gift items

upto value of INR 1,500/-

* Applicable from 1st April, 2016


Tariff Amendments

Particulars Current Proposed*

Food Processing:

Cashew nuts NIL 5%

Cold Chain including pre-cooling unit,

packhouses, sorting and grading lines

and ripening chambers

10% 5%

Refrigerated containers 10% 5%

Petroleum Exploration And Production:

Goods required for exploration and

production of hydrocarbon activities

undertaken under Petroleum

Exploration Licenses or Mining

Leases issued or renewed before 1St

April 1999.

Applicable

BCD and

CVD

BCD-NIL

CVD-NIL

Paper, Paperboard And Newsprint:

Wood in chips or particles for

manufacture of paper, paperboard

and newsprint

5% NIL

Plans, drawings and designs NIL 10%

Health Care:

Disposable sterilized dialyzer and

micro barrier of artificial kidney

12.5% NIL

Textiles:

Specified fibres and yarns 5% 2.5%* Applicable from 1st March, 2016


Articles of Rubber:

Natural latex rubber made balloons

falling under specified headings.

10% 20%

Metals:

Primary aluminium, zinc alloys 5% 7.5%

Jewellery:

Imitation Jewellery 10% 15%

Renewable Energy:

Industrial solar water heater 7.5% 10%

Capital Goods and Parts thereof:

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%

7.5%

7.5%

10%

10%

7.5%

Capital Goods:

Specified machinery required for

construction of roads

CVD-NIL CVD-12.5%

Jewellery:

Gold Dore bars 8% CVD 8.75% CVD

Silver Dore 7% CVD 7.75% CVD


Tariff Amendments


Electronics /Hardware :

E-Readers NIL 7.5%

Parts of E-Readers 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

NIL BCD

NIL SAD

Machinery, electrical equipment and

instrument and parts thereof imported

for Assembly, Test, Marking and

packaging of semiconductor chips

Applicable

BCD

SAD

NIL BCD

NIL 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

Specified telecommunication

equipment

NIL BCD 10%


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 computerNIL SAD 2% SAD

Automobiles:

Specified parts of electric and hybrid

vehicles

BCD-NIL

CVD-6%

Up to

31.03.2016

BCD-NIL

CVD-6%

Without

time

Limit

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

Applicable

excise duty

NIL

* Applicable from 1st March, 2016


EXCISE



Section 5A - Power

to Grant Duty

Exemption

Requirement of publishing and offering for sale any notification issued by the Directorate of

Publicity and Public Relations of CBEC proposed to be done away with

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.




Central Excise Rules


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** 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

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.


** Applicable from 1st April, 2016


Non Tariff 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 and

Unmanufactured Tobacco *

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* 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




Non Tariff Amendments


Rebate of Duty on

Export of goods*

Notification No.19/2004-

C.E(N.T) read with Rule

18 of CER

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)

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*

Mandatory filing of Chartered Engineer’s 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.





Aerated Beverages:

Water, including mineral

waters and aerated waters,

containing added sugar or

other sweetening matter or

flavoured

18% 21%

Food Processing:

Refrigerated Containers 12.5% 6%

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)

Machinery:

Electric motors, shafts, sleeve,

chamber, impeller, washer

required for the manufacture

of centrifugal pump

12.5% 6%

Tariff Amendments


Footwear:

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%

Metals:

Disposable containers made of

aluminum foils

2% (without

Cenvat Credit)

Or 6% (with

Cenvat Credit)

2% (without

Cenvat Credit)

Or 12.5% (with

Cenvat Credit)

Renewable Energy:

Carbon pultrusion used for

manufacture of rotor blades and

intermediaries, parts and sub-

parts of rotor blades for wind

operated electricity generators

12.5% 6%

Solar Lamps 12.5% Nil

Automobiles:

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%




Precious Metals and Jewellery:

Refined gold bars manufactured from

gold/ silver dore bar, gold/ silver ore or

concentrate,

9% 9.5%

Refined silver manufactured from silver

ore or concentrate, silver/gold dore bar.

8% 8.5%

Articles of jewellery (excluding silver

jewellery, other than studded with

diamonds or other precious stones

namely, ruby, emerald, and sapphire)

NIL (without

Cenvat

Credit)

or

6% (with

Cenvat

Credit)

1% (without

Cenvat

Credit)

Or

12.5% (with

Cenvat

Credit)

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

Tariff Amendments


Miscellaneous:

Disposable sterilized dialyzer

and micro barrier of artificial

kidney

12.5% NIL

Ready Mix Concrete

manufactured at the site of

construction for use in

construction work at such site

2% (without

Cenvat Credit)

or 6% (with

Cenvat Credit)

NIL

Cigarettes: From INR Per

Thousand

To INR Per

Thousand

Non filter not exceeding 65

mm70 215

Non-filter exceeding 65 mm

but not exceeding 70 mm110 370

Filter not exceeding 65 mm 70 215

Filter exceeding 65 mm but

not exceeding 70 mm70 260

Filter exceeding 70 mm but

not exceeding 75 mm110 370

Other 180 560




Electronics and IT hardware:

Charger/adapter, battery and wired

headsets/ speakers for supply to

mobile phone manufacturers as

original equipment manufacturer

NIL 2% (without

Cenvat Credit)

or 12.5% (with

Cenvat Credit)

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 Nil

Routers, broad band 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]

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% NIL

Tariff Amendments


Clean Energy Cess / Clean Environment Cess:

Coal, lignite and peat INR 300

(effective INR

200)

INR 400

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 200 per

tonne

NIL


Infrastructure Cess

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


Interest

$ 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

Period of Delay Current Proposed*

Small Service

Providers^

Other Service

Providers

Small Service

Providers^

Other Service

Providers

1. Pertaining to service tax

collected but not deposited

As per the rates set out in Item 2 below 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$ 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:

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


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



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

Utilisation of

CENVAT credit*

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**

^Notification No.13/2016-Central Excise(N.T) dated 1st March, 2016




CENVAT Credit Rules


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** Applicable from 1st April, 2016


CENVAT Credit Rules


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




The Indirect Tax Dispute Resolution Scheme, 2016

Background 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

Applicability 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

Procedure 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

Key Benefits 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)

Exclusions 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


Other Amendments

FDI:

Particulars Existing Limits Proposed Limits Remarks

Marketing of Food Products produced

and manufactured in India

- 100% FIPB approval

required

Insurance and Pension Sector 26% 49% Automatic Route

Asset Reconstruction Companies Up to 49% - Automatic Route

> 49% -Government Approval100% Automatic Route

Indian Stock Exchanges 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 FPI’s 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

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.

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.

FCRA:

FEMA:


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


Glossary

GDP Gross Domestic product ROG Central Excise (Removal of Goods at Concessional Rate of

Duty for Manufacture of Excisable Goods) Rules, 2001

GST Goods and Service Tax RPS 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 SARFAESI Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002

InvIT Infrastructure Investment Trust 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


Contact Us

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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

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