union budget 2016: key direct tax proposals
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Union Budget 2016: Key direct tax proposals
1. Changes in corporate tax rate
Headline tax rate remains at 30 percent plus surcharge and cess as in Financial
Year (‘FY”) 2015-16.
Lower headline corporate tax rate of 29 percent for certain domestic companies – In
case of domestic companies having total turnover / gross receipts not exceeding
INR 50 mn in the FY 2014-15, tax rate is proposed to be reduced from 30 percent to
29 percent.
Domestic companies set up for manufacturing / production activities can opt for a
headline tax rate of 25 percent – Domestic companies engaged in manufacturing
activities set up on or after March 1, 2016 shall have an option to choose a lower
base corporate tax rate of 25 percent instead of 30 percent provided the company
does not claim specified tax holiday and incentives, and exercises such option in
the prescribed manner before the due date of furnishing of its return of income.
2. Phasing out of deductions and exemptions
It is proposed to phase out various tax holidays and incentives under the Income-tax Act,
1961 (‘Act’) as under:
Section Incentive currently
available
in the Act
Proposal for phase out
Section 10AA:
Tax holiday for
Special Economic
Zone (‘SEZ’) Units
Profit linked deductions
for units in SEZ for profit
derived from export of
articles or things or
services.
No deduction to be
available to units
commencing manufacture
or production of article or
thing or start providing
services on or after
April 1, 2020 (from FY
2020-21 onwards).
Section 35AC:
Expenditure on
Deduction for
expenditure incurred by
No deduction to be
available from
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Customs and excise
Service tax
Central sales tax
GST
Anurag Jain +911246695254 [email protected]
Manoj N Kumar +918040320030 [email protected]
Thirumalesh BN
eligible projects or
schemes
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
eligible social
development project or a
scheme.
April 1, 2017 (i.e. from
FY 2017-18 and
subsequent years).
Section 35CCD:
Expenditure on
skill development
project
Weighted deduction of
150 percent on any
expenditure incurred (not
being expenditure in the
nature of cost of any
land or building) on any
notified skill
development project by
a company.
Deduction to be restricted
to 100 percent from April 1,
2020 (i.e. from FY 2020-21
onwards).
Section 80IA;
80IAB, and 80IB -
Deduction in
respect of profits
derive from:
a) development,
operation and
maintenance of an
infrastructure
facility (80-IA)
(b) development
of SEZs (80-IAB)
(c) production of
mineral oil and
natural gas [80-
IB(9)]
100 percent profit linked
deductions for specified
period on eligible
business carried on by
industrial undertakings
or enterprises referred in
sections 80IA; 80IAB,
and 80IB.
No deduction to be
available if the specified
activity commences on or
after April 1, 2017. (i.e.
from FY 2017-18 and
subsequent years).
Section 32 read
with the rules:
Accelerated
Depreciation
Accelerated depreciation
is currently available up
to 100 percent in respect
of certain block of assets
for certain sectors.
The highest rate of
depreciation to be
restricted to 40 percent
with effect from April 1,
2017. (i.e. from FY 2017-
18 and subsequent years).
The new rate to be made
applicable to all the assets
(whether old or new) falling
in the relevant block of
assets.
+918040320187 [email protected]
Radhika Rastogi +918040320189 [email protected]
Section 35(1)(ii):
Expenditure on
scientific research
Weighted deduction from
the business income to
the extent of 175 percent
of any sum paid to an
approved scientific
research association
which has the object of
undertaking scientific
research. Similar
deduction is also
available if a sum is paid
to an approved
university, college or
other institution and if
such sum is used for
scientific research.
Weighted deduction to be
restricted to 150 percent
from April 1, 2017 to March
31, 2020 (i.e. from FY
2017-18 to FY 2019-20)
and deduction shall be
restricted to 100 percent
from April 1, 2020 (i.e.
from FY 2020-21 onwards)
Section 35(1)(iia):
Expenditure on
scientific research
Weighted deduction from
the business income to
the extent of 125 percent
of any sum paid as
contribution to an
approved scientific
research company.
Deduction to be restricted
to 100 percent with effect
from April 1, 2017 (i.e.
from FY 2017-18 and
subsequent years)
Section 35(1)(iii):
Expenditure on
scientific research
(c) production of
mineral oil and
natural gas [80-
IB(9)]
Weighted deduction from
the business income to
the extent of 125 percent
of contribution to an
approved research
association or university
or college or other
institution to be used for
research in social
science or statistical
research.
Deduction to be restricted
to 100 percent with effect
from April 1, 2017 (i.e.
from FY 2017-18 and
subsequent years)
Section 35(2AA):
Expenditure on
scientific research
Weighted deduction from
the business income to
the extent of 200 percent
of any sum paid to a
National Laboratory or a
university or an Indian
Institute of Technology
or a specified person for
the purpose of approved
scientific research
programme.
Weighted deduction to be
restricted to 150 percent
with effect from April 1,
2017 to March 31, 2020
(i.e. from FY 2017-18 to
FY 2019-20)
Deduction shall be
restricted to 100 percent
from April 1, 2020 (i.e.
from FY
2020-21 onwards).
Section 35(2AB):
Expenditure on
scientific research
Weighted deduction of
200 percent of the
expenditure (not being
expenditure in the nature
of cost of any land or
building) incurred by a
company, engaged in
the business of bio-
technology or in the
business of manufacture
or production of any
article or thing except
some items appearing in
the negative list
specified in Schedule-XI,
on scientific research on
approved in-house
research and
development facility.
Weighted deduction shall be
restricted to 150 percent from
April 1, 2017 to March 31,
2020 (i.e. from FY 2017-18 to
FY 2019-20)
Deduction shall be restricted
to 100 percent from April 1,
2020 (i.e. from FY 2020-21
onwards)
Section 35AD:
Deduction in
respect of
specified business
In case of a cold chain
facility, warehousing
facility for storage of
agricultural produce, an
affordable housing
project, production of
fertilizer and hospital
weighted deduction of
150 percent of capital
expenditure (other than
expenditure on land,
goodwill and financial
assets) is allowed.
Weighted deduction to be
restricted to 100 percent of
capital expenditure with
effect from April 1, 2017
(i.e. from FY 2017-18
onwards)
Section 35CCC:
Expenditure on
notified
agricultural
extension project
Weighted deduction of
150 percent of
expenditure incurred on
notified agricultural
extension project
Deduction to be restricted
to 100 percent from April 1,
2017 (i.e from FY 2017-18
onwards).
The above proposals are a part of the overall plan of the Government to reduce to the
headline tax rate to 25 percent and to compensate the same by removal of tax holidays
and incentives currently prevailing under the Act.
3. Equalisation levy
In line with one of the recommendations under the BEPS Action Plan 1, it is
proposed to introduce an Equalization levy under a separate chapter in the Finance
Act at the rate of 6 percent on the consideration for specified services (online
advertisement, provision for digital advertising space or any other facility or service
as may be prescribed for the purpose of online advertisement) received by non-
resident, from a resident or a non-resident having a PE in India.
Equalisation levy would not be applicable in case the non-resident has a permanent
establishment in India or in case the consideration from a payer does not exceed
INR 100,000 in any FY or in a case where the payments are not for the purpose of
any business or profession.
Equalisation levy is to be deducted by the payer at the time of making payment to
the non-resident and deposited with the Government within specified time.
Failure to deduct and pay the levy will attract interest and penalty on the payer.
It is also proposed to introduce section 10(50) to exempt amounts subjected to
Equalisation levy from payment of income-tax.
The BPES Action Plan 1 provides that countries could consider introduction of
Equalisation levy provided they respect their existing treaty obligations or bilateral
tax treaties. While the Government appears to have unilaterally introduced the new
Equalisation levy, the constitutional validity of the levy and position of this levy vis-a-
vis the double taxation avoidance treaties is not clear. It may also be relevant to
note that most treaties (US, UK, Singapore etc.) cover taxes identical or
substantially similar to income-tax which are imposed in addition to or in place of
the existing income-tax in India.
While an appeal is provided against the levy of penalty for non-deduction / non-
payment of Equalization levy, there does not seem to be any remedy against the
imposition of the levy itself.
Non deduction / payment of Equalization levy would also lead to disallowance of the
expenditure in the hands of the payer under section 40(a) of the Act.
4. Additional tax on dividend income
In addition to the Dividend Distribution Tax (‘DDT’) paid by companies, it is proposed to
levy tax at the rate of 10 percent on gross amount of dividend, in excess of INR 1 mn
per annum, payable to individuals, HUFs and firms by a domestic company. This
amendment is to be effective from FY 2016-17.
5. Changes related to income from business / profession
Rationalisation of disallowance under section 14A
It is proposed to amend Rule 8D of the Income-tax Rules, 1962, to rationalize quantum
of disallowance under section 14A and further provide that disallowance shall not
exceed the actual expenditure claimed.
Patent box regime
It is proposed that royalty income of an eligible assessee derived from patents
developed and registered in India be taxed at 10 percent (plus applicable surcharge
and cess) on the gross amount of royalty, subject to certain conditions. Eligible
assessee means a person resident in India, who is the ‘true and first’ inventor of the
invention and whose name is entered on the patent register as the patentee in
accordance with Patents Act, 1970. No expenditure or allowance in respect of such
royalty income will be allowed. Such income would not be liable to MAT.
Rationalisation of investment allowance provision under section 32AC
The current provisions require acquisition and installation of the plant and machinery
exceeding INR 250 mn in the same FY to avail of investment allowance. It is now
proposed to allow investment allowance even where the plant and machinery is
acquired during any FY and installation is made before March 31, 2017. Where the
installation is not in the year of acquisition, the deduction shall be allowed in the year of
installation.
Presumptive taxation
It is proposed to increase the monetary limit in respect of the presumptive taxation
for business under section 44AD from INR 10 mn to INR 20 mn. The presumptive
tax regime would be denied for a certain period where it is not availed
continuously for a specified period.
It is also proposed to extend the presumptive scheme to professionals with gross
receipts of up to INR 5 mn by introducing section 44ADA. The profits would be
deemed to be 50 percent of gross receipts.
6. New incentives / deductions announced
Revamp of section 80JJAA to allow a deduction to all companies subject to tax
audit
Section 80JJAA earlier entailed a deduction of 30 percent of the wages paid to new
regular workmen employed by a manufacturing entity for a period of 3 years subject to
satisfaction of certain conditions.
It is proposed to revamp section 80JJAA to make it applicable to all assesses that are
subjected to tax audit under section 44AB of the Act and allows a deduction equivalent
to 30 percent of the emoluments paid to additional employees for a period of 3 years
subject to satisfaction of certain conditions.
Additional depreciation of 20 percent to be extended to companies engaged in
transmission of power
It is proposed to extent the benefit of additional depreciation of 20 percent in respect of
cost of new plant and machinery acquired and installed to assesses engaged in
transmission / distribution of power, in addition to companies engaged in generation or
generation and distribution of power.
7. Changes in ‘Capital Gains’ tax provisions
Amendment to section 112 – concessional rate on certain securities
The provisions of section 112 currently provide a lower tax rate of 10 percent for long
term capital gains on transfer of unlisted securities by non-residents. There have been
differing views on whether shares of a private companies would be covered under this
provision. The proposal seeks to specifically include shares of a company, other than a
company in which public are substantially interested, for concessional tax
treatment. However, this proposal is applicable prospectively from FY 2016-17 and
hence positions adopted for the past would have to be considered accordingly.
Reduction of period of holding for unlisted companies
While in the Budget speech, the Finance Minister mentioned that the period of holding
in case of unlisted companies is proposed to be reduced from 36 months to 24 months
to qualify as a long term capital asset, there is no specific amendment in the Finance
Bill in this regard.
Other changes related to ‘Capital Gains tax’ provisions
A new condition under section 47(xiiib) for tax neutrality of conversion of company
into LLP, that the total value of assets as appearing in books of accounts of the
company in any of the three FYs preceding the year of conversion should not
exceed INR 50 mn.
Amendment to section 50C to provide that where the date of agreement and date
of registration for transfer of the immovable property are different, the value
adopted by the stamp valuation authority as on date of agreement may be
considered as full value of consideration, subject to certain conditions.
Insertion of section 54EE to provide an exemption from long term capital gains up
to an amount of INR 5 mn provided the capital gains are invested up to March 31,
2019, in units of such funds as may be notified by the Government.
Provisions related to taxability of non-compete fee in section 28(va) are proposed
to be extended to professionals.
8. Withholding tax provisions
It is proposed to increase the threshold limit for deduction of tax at source on
various payments as given below:
Present
section
Nature of payments Existing threshold
limit (in INR)
Proposed
threshold limit (in
INR)
192A Payment of
accumulated balance
due to an employee
30,000 50,000
194BB Winnings from Horse
Race
5,000 10,000
194C Payments to Contractors Aggregate annual
limit of 75,000
Aggregate
annual limit of
100,000
194LA Payment of
Compensation on
acquisition of certain
Immovable Property
200,000 250,000
194D Insurance commission 20,000 15,000
194G Commission on sale of
lottery tickets
1,000 15,000
194H Commission or
brokerage
5,000 15,000
It is also proposed to reduce the rates for deduction of tax at source on various
payments as given below:
Present
section
Nature of payment Existing rate of
TDS
Proposed rate of
TDS
19DA Payment in respect of
Life Insurance Policy
2 percent 1 percent
194EE Payments in respect
of NSS Deposits
20 percent 10 percent
194D Insurance commission Rate in force
(10 percent)
5 percent
194G Commission on sale
of lottery tickets
10 percent 5 percent
194H Commission or
brokerage
10 percent 5 percent
9. Provisions relating to Foreign Companies / non-residents
As promised after the report of the AP Shah Committee, it is proposed to amend
section 115JB to exclude, retrospectively from Assessment Year (‘AY’) 2001-02,
foreign companies from levy of MAT subject to the following conditions:
Foreign company does not have a permanent establishment in India under the
relevant double taxation avoidance treaty; or
Where there is no double tax avoidance treaty, the foreign company is not
required to seek registration under the company law of India.
Provisions relating to testing residence in India of a foreign company on the basis of
Place of Effective Management (‘POEM’), which was introduced by the Finance Act,
2015, with effect from FY 2015-16, is proposed to be deferred by one year. It is also
proposed to insert enabling provisions for prescribing mechanism of taxation of foreign
companies considered as ‘resident’ in India for the first time based on POEM. Given
that the guidelines relating to determining POEM have not yet been finalized, this is a
welcome step.
Higher withholding tax stipulated under section 206AA for non-furnishing of PAN is
proposed to be withdrawn in respect of payments to non-residents in respect of
payment of interest on long term bonds covered under section 194LC and on other
payments on satisfaction of prescribed conditions.
10. Changes related to filing of Return of Income and other procedural changes
It is proposed to make the following amendments in the provisions in relation to filing of
the return of income for AY 2017-18 onwards:
The time limit for filing a belated return is proposed to be reduced and belated
return can be filed only till the end of the relevant AY as against current period of
one year from the end of the relevant AY.
Belated return will also be capable of amendment which is currently not
permitted.
It is proposed to make it mandatory for furnishing of return of income, if the total
income before exemption under section 10(38) of the Act is in excess of maximum
amount not chargeable to tax.
Time limits to give effect to appellate / revision orders are proposed to be provided as
under:
Appellate orders (other than cases of fresh assessment), within a period of three
months from the end of the month in which order is received.
Revision orders under section 263 (other than for fresh assessment), three
months from the end of the month of passing the revision order).
Timelines would be extended by a maximum period of six months only on a
written request of the assessing officer to the Principal Commissioner or
Commissioner.
In case the appellate orders / revision orders are received / passed before June 1,
2016, the orders giving effect to the same are required to be passed on or before
March 31, 2017.
Additional interest in case of delay in processing refunds
In cases where a refund, arising from appellate / revision orders is not processed
within three months, additional interest of 3 percent per annum under section 244A of
the Act would be paid to the taxpayers from the expiry of the period of three
months. This amendment is applicable from June 1, 2016.
No appeal by revenue against Dispute Resolution Panel (‘DRP’) directions
In order to reduce litigation, it is proposed that an assessing officer will not be
permitted to appeal before the Tribunal against the order pursuant to DRP’s
directions. This amendment is applicable from June 1, 2016.
11. Rationalization of penalty for concealment of income
It is proposed to do away with the current penalty provisions under section 271 which
prescribes a minimum penalty of 100 percent and maximum penalty of 300 percent of
tax evaded.
To remove discretion of assessing officers and reduce litigation, new penalty
provisions reducing penalty to 50 percent of the tax on income ‘under reported’ other
than cases of misreporting have been proposed by way of insertion of section 270A.
Penalty of 200 percent of the tax on income ‘misreported would be levied’.
Under reported income is basically the difference between the income assessed and
returned or the income assessed beyond the maximum amount not chargeable to tax
where no return is filed. In certain situations income may not be treated as under-
reported, for instance where the assessing officer is satisfied that the explanation of
the assessee is bona fide and all material facts have been disclosed by the assessee
or higher income is assessed on account of difference in estimates or on account of
transfer pricing adjustments where appropriate documentation has been maintained
and transaction reported etc. .
‘Misreporting’ is defined to include situations of misrepresentation, suppression of
facts, claims of expenditure not substantiated by evidence, false entries in the books,
failure to record receipts and failure to report international transactions.
The tax on which penalty is computed is calculated at the rate applicable to a company
or firm as the case may be and in other cases at 30 percent of under reported income.
The taxpayer can make an application to the assessing officer to grant immunity from
penalty and prosecution for under reporting income other than cases of misreporting,
subject to certain conditions, including not filing an appeal against the assessment
order.
However, it seems that inadvertently no provision has been made for an appeal to
Commissioner (Appeals) against the order of the assessing officer levying penalty
under section 270A.
12. Transfer pricing
Country by Country Reporting
The Bill proposes to adopt recommendations under Action Plan 13 of Base Erosion
and Profit Shifting (‘BEPS’) initiative of Organization of Economic Co-operation and
Development (‘OECD’) with reference to Country by Country Reporting (‘CbCR’) and
Master file in line with international consensus. Information required to be disclosed
under the proposed provision appears to be consistent with the template prescribed
under Action 13. Further, the timelines for CbCR as per the Bill is consistent with
international model legislation which applies to reporting FYs of international groups
beginning after Jan 1, 2016 and filing CbCR no later than 12 months from the end of
the FY.
With effect from April 1, 2016, entities fulfilling prescribed criteria are required to
disclose following information of the group:
aggregate amount of revenue;
profit / loss before income tax;
amount of income-tax paid and accrued;
details of capital;
accumulated earnings;
number of employees;
tangible assets other than cash or cash equivalent in respect of each country or
territory;
details of each constituent's residential status;
nature and detail of main business activity; and
any other information as may be prescribed.
The threshold parameter for CbCR filing requirement is the consolidated group
revenue. While the threshold amount is to be prescribed, entities with consolidated
group revenue not exceeding such threshold are exempted from these
requirements. Useful to note that current international consensus is for Euro 750 mn
equivalent in local currency.
The first CbCR filing will be due along with the Indian return of income for FY 2016-17,
i.e. by November 30, 2017.
A constituent entity resident in India, is required to report to the prescribed income-tax
authority whether it is the alternate reporting entity of the group or the details of the
parent entity or the alternate entity and the country in which such entities are resident.
A parent entity or alternate reporting entity, resident in India, is to furnish the report as
may be prescribed. A constituent entity, resident in India, is to furnish the report if
parent entity is resident of a country with which India does not have an agreement for
exchange of CbCR or in case a systematic failure has been intimated by the
prescribed authority. An exemption is provided to a constituent entity from furnishing
the report in case the alternate reporting entity has furnished a similar report to the
authority of another country, subject to satisfaction of prescribed conditions.
Guidelines for CbCR are to be prescribed by the Revenue.
While no specific documentation requirement is prescribed for a master file, the
Memorandum makes a reference to maintenance of a master file.
Additional provisions relating to prescribed authority requesting documents from
reporting entity for ascertaining accuracy of CbCR, definitions of terms such as
‘constituent entity’, ‘alternate reporting entity’, ‘international group’, ‘parent entity’ and
‘reporting entity’, etc are provided in context of filing responsibility of CbCR.
Penalty provisions
Non-furnishing of CbCR by an entity is to entail a penalty of:
INR 5,000 per day where default is upto one month;
INR 15,000 per day from period after one month for a continuing default.
Non-furnishing of information / documents within period allowed by the prescribed
authority is to entail a penalty of INR 5,000 per day.
Where a default continues even after service of order levying penalty under the above
two provisions, a penalty of INR 50,000 per day is to apply beyond the date of service
of order.
Inaccurate information provided in CBCR is to entail a penalty of INR 500,000.
Increase in period of limitation for transfer pricing assessment
With effect from June 1, 2016, if the period of limitation available for a transfer pricing
officer to pass an order is less than 60 days [under the circumstances
referred in clause (ii) or (viii) of explanation 1 to section 153], the remaining period
shall be extended upto 60 days. Such circumstances apply in the following cases:
assessment proceeding is stayed by an order or injunction of any court; or
where a reference for exchange of information is made by an authority competent
under an agreement referred to in section 90 or section 90A.
Change in period of limitation for assessment
With effect from June 1, 2016, the due date for passing an assessment order under
section 143 or section 144 will be 21 months from end of AY. In case of reference to a
transfer pricing officer, such due date is extended by 12 months, hence the transfer
pricing order has to be issued 60 days prior to such date of completion of
assessment.
13. New Dispute Resolution Scheme
It is proposed to implement a new scheme (called The Direct Tax Dispute Resolution
Scheme 2016) in respect of tax disputed in appeals before the Commissioner on
Income-tax (Appeals) pending as on February 29, 2016 and for tax demanded on
account of any retrospective amendment relating to a period prior to the date on which
amendment was made and which is disputed as on February 29, 2016, subject to
certain conditions. The scheme is not proposed to be a part of the Income-tax Act but
envisaged to be a part of the Finance Bill 2016.
The taxpayer can avail the benefits under the said scheme by filing a declaration
during the specified period (starting from June 1, 2016) with the designated authority. If
the declaration is filed in accordance with the scheme, the amount payable would be
as under:
For tax disputed in appeal pending before Commissioner (Appeals):
o In case of assessment order - the tax and interest up to date of assessment. If
the disputed tax exceeds INR 1 mn, 25 percent of the minimum penalty would
also be required to be paid.
o In case of penalty order – 25 percent of the penalty along with the tax and
interest up to date of assessment.
For disputes on account of retrospective amendments - amount of tax.
In cases where an appeal is pending with the Commissioner (Appeals), on filing the
declaration, the appeal would deemed to have been withdrawn. In other cases, the
taxpayer would have to withdraw the appeal and / or the claims for arbitration /
conciliation etc and furnish the proof of such withdrawal along with the declaration in
addition to an undertaking not to pursue any remedy in respect of the dispute.
Within 60 days of the receipt of such declaration, the designated authority shall
determine the amount payable and issue a certificate to that extent (the same is not
appealable). The taxpayer would have to remit such amount within a period of 30 days
of receipt of the certificate and communicate the same to the designated authority.
The designated authority is required to grant certain immunities from prosecution,
penalties and interest subject to the fulfilment of prescribed conditions. The scheme is
designed to inter alia cover disputed matters on account of the amendment to section 9
of the Act relating to ‘indirect transfer’ on account of transfer of shares of a foreign
company.
14. New Income Declaration Scheme
It is proposed introduce a new scheme (called The Income Declaration Scheme, 2016)
effective from June 1, 2016 to facilitate a one-time disclosure of undisclosed income of
any FY up to 2015-16, subject to certain conditions.
Any amounts declared under this scheme would be taxed at 30 percent plus a
surcharge of 25 percent (to be called Krishi Kalyan cess) of such tax and penalty at the
rate of 25 percent of the tax payable, effectively amounting to 45 percent on the
undisclosed income.
Amounts covered under the Black Money (Undisclosed Foreign Income and Assets)
and Imposition of Tax Act 2015 are not eligible for declaration under this scheme.
The amounts declared under this scheme would not be included in the total income for
any year under the Act or in net wealth under the Wealth Tax Act and shall be immune
from penalties and prosecution under the Act.
It seems to be debatable whether this scheme meets the undertaking given by the
Government earlier to not introduce any new voluntary disclosure scheme granting
immunities to dishonest taxpayers.
15. Other proposals
Tax collection at source
It is proposed to collect tax at source at 1 percent in case of following items:
Purchase of Motor vehicle of value exceeding INR 1 mn; and
Purchase of goods and services in cash of value exceeding INR 0.2 mn.
Advance tax for other than corporate assessee
Due dates for payment of advance tax and the number of instalments is proposed to
be rationalized with those of companies (i.e four instalments instead of
three). Consequential amendments are also proposed to be made to section 234C
which provides for chargeability of interest for deferment of advance tax to bring it in
sync with the amendments proposed in the abovementioned section 211.
Interest under section 244A
It is proposed that where there has been a delay in the filing of the return of
income, the period for computation of interest on refunds arising from advance tax
and TDS shall commence from the date of filing the return as against April 1 of the
relevant AY.
Interest on refunds arising from self-assessment tax are proposed to be granted
statutory recognition from the date of payment of tax or filing of return, wherever is
later, to the date of grant of refund.
Rationalisation of buy back tax provisions
It is proposed that section 115QA of the Act relating the taxation of share buy
back will apply to buy back under any provision of applicable company law in India
and not restricted to buy back under section 77A of the Companies Act 1956.
Further, rules shall be prescribed for the manner of determination of amount
received by the company on issue of shares in various circumstances, including
shares being issued under tax neutral reorganizations (mergers, demergers etc.)
to remove ambiguities in applying the provisions.
16. Changes related to individual taxation
Tax rates
Slab rates for FY 2016-17 have remained unchanged;
Surcharge on persons other than companies, firms and co-operative societies
having income above INR 10 mn increased from 12 percent to 15 percent;
Relief in respect of Personal taxation
Certain minor reliefs are proposed in respect of rebates and deductions available to
individuals. However, employer contributions to provident fund / superannuation in
excess of INR 0.15 mn per annum are proposed to be taxed as income for the
employees.
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date of preparation and does not express views or expert opinions of BMR Advisors. The newsletter is meant for general
guidance and no responsibility for loss arising to any person acting or refraining from acting as a result of any material
contained in this newsletter will be accepted by BMR Advisors. It is recommended that professional advice be sought
based on the specific facts and circumstances. This newsletter does not substitute the need to refer to the original
pronouncements.
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