Latest Amendments in Union Budget 2016

A R A J & Associates Union Budget 2016
© A R A J & Associates 2016 Page 1 of 79
CONTENTS
S. No Particulars Page No.
1. Brief Highlights of Union Budget 2016 03-09
2. Proposed Rates of Income Tax for the AY 2017-18 10-13
3. Proposed section wise Direct Taxes Amendments 14-54
4. Service Tax Amendments 55-78
5. Disclaimer 79

BRIEF HIGHLIGHTS OF
UNION BUDGET
2016-17

INTRODUCTION
Growth of Economy accelerated to 7.6% in 2015-16.
India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
Robust growth achieved despite very unfavourable global conditions and two consecutive years shortfall in monsoon by 13%
Foreign exchange reserves touched highest ever level of about 350 billion US dollars.
Despite increased devolution to States by 55% as a result of the 14th Finance Commission award, plan expenditure increased at RE stage in 2015-16 – in
contrast to earlier years.
AGRICULTURE AND FARMERS’ WELFARE
Allocation for Agriculture and Farmers’ welfare is ₹ 35,984 crore
‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. 28.5 lakh hectares will be brought under irrigation.
Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked
A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about ` 20,000 crore
Programme for sustainable management of ground water resources with an estimated cost of ` 6,000 crore will be implemented through multilateral
funding
5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA
Soil Health Card scheme will cover all 14 crore farm holdings by March 2017.
2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and 'Organic Value Chain Development in North East Region'.
Unified Agricultural Marketing ePlatform to provide a common emarket platform for wholesale markets
Allocation under Pradhan Mantri Gram Sadak Yojana increased to ₹ 19,000 crore. Will connect remaining 65,000 eligible habitations by 2019.
To reduce the burden of loan repayment on farmers, a provision of ₹ 15,000 crore has been made in the BE 2016-17 towards interest subvention
Allocation under Prime Minister Fasal Bima Yojana ` 5,500 crore.
₹850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous
breeds
RURAL SECTOR
Allocation for rural sector - ₹ 87,765 crore.
₹ 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission
Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission
A sum of ` 38,500 crore allocated for MGNREGS.
300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission
100% village electrification by 1st May, 2018.

District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central
Sector and Centrally Sponsored Schemes.
Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.
A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
National Land Record Modernisation Programme has been revamped.
New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of ₹ 655 crore.
SOCIAL SECTOR INCLUDING HEALTH CARE
Allocation for social sector including education and health care –₹ 1,51,581 crore.
₹ 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
New health protection scheme will provide health cover up to ₹ One lakh per family. For senior citizens an additional top-up package up to ₹30,000 will
be provided.
3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17.
‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode
“Stand Up India Scheme” to facilitate at least two projects per bank branch. This will benefit at least 2.5 lakh entrepreneurs.
National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with industry associations
Allocation of ₹ 100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru Gobind
Singh.
EDUCATION, SKILLS AND JOB CREATION
62 new Navodaya Vidyalayas will be opened
Sarva Shiksha Abhiyan to increasing focus on quality of education
Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions
Higher Education Financing Agency to be set-up with initial capital base of ₹ 1000 Crores
Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
SKILL DEVELOPMENT
Allocation for skill development – ₹ 1804. crore.
1500 Multi Skill Training Institutes to be set-up.
National Board for Skill Development Certification to be setup in partnership with the industry and academia
Entrepreneurship Education and Training through Massive Open Online Courses
JOB CREATION
G OI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision of ₹ 1000
crore for this scheme.

Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act
100 Model Career Centres to operational by the end of 2016-17 under National Career Service.
Model Shops and Establishments Bill to be circulated to States.
INFRASTRUCTURE AND INVESTMENT
Total investment in the road sector, including PMGSY allocation, would be ₹ 97,000 crore during 2016-17.
India’s highest ever kilometres of new highways were awarded in 2015. To approve nearly 10,000 kms of National Highways in 2016-17.
Allocation of ₹ 55,000 crore in the Budget for Roads. Additional ₹ 15,000 crore to be raised by NHAI through bonds.
Total outlay for infrastructure - ₹ 2,21,246 crore.
Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment
Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature
areas
Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.
Steps to re-vitalise PPPs:
Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17
Guidelines for renegotiation of PPP Concession Agreements will be issued
New credit rating system for infrastructure projects to be introduced
Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, approved.
FINANCIAL SECTOR REFORMS
A comprehensive Code on Resolution of Financial Firms to be introduced.
Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.
A Financial Data Management Centre to be set up.
RBI to facilitate retail participation in Government securities.
New derivative products will be developed by SEBI in the Commodity Derivatives market.
Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non institutional investors to
invest in Securitization Receipts.
Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
Increasing members and benches of the Securities Appellate Tribunal.
Allocation of ₹ 25,000 crore towards recapitalisation of Public Sector Banks.
Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to ₹ 1,80,000 crore.

General Insurance Companies owned by the Government to be listed in the stock exchanges.
GOVERNANCE AND EASE OF DOING BUSINESS
A Task Force has been constituted for rationalisation of human resources in various Ministries.
Comprehensive review and rationalisation of Autonomous Bodies.
Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.
Introduce DBT on pilot basis for fertilizer.
Automation facilities will be provided in 3 lakh fair price shops by March 2017.
Amendments in Companies Act to improve enabling environment for start-ups.
Price Stabilisation Fund with a corpus of ₹ 900 crore to help maintain stable prices of Pulses.
“Ek Bharat Shreshtha Bharat” programme will be launched to link States and Districts in an annual programme that connects people through exchanges
in areas of language, trade, culture, travel and tourism.
FISCAL DISCIPLINE
Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
Total expenditure projected at ₹ 19.78 lakh crore
Plan expenditure pegged at ₹ 5.50 lakh crore under Plan, increase of 15.3%
Non-Plan expenditure kept at ₹ 14.28 lakh crores
Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and
Scheduled Tribes, minorities, infrastructure.
Mobilisation of additional finances to the extent of ₹ 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.
Plan / Non-Plan classification to be done away with from 2017-18.
Every new scheme sanctioned will have a sunset date and outcome review.
Rationalised and restructured more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.
Committee to review the implementation of the FRBM Act.
RELIEF TO SMALL TAX PAYERS
Raise the ceiling of tax rebate under section 87A from ₹ 2000 to ₹ 5000 to lessen tax burden on individuals with income upto ₹ 5 laks.
Increase the limit of deduction of rent paid under section 80GG from ₹ 24000 per annum to ₹ 60000, to provide relief to those who live in rented houses.
BOOST EMPLOYMENT AND GROWTH
Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to ₹ 2 crores to bring big relief to a large
number of assessees in the MSME category.
Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to ₹ 50 lakh.

Phasing out deduction under Income Tax
Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017
Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020
Corporate Tax rate proposals:
New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not
claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
Lower the corporate tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding ₹ 5 crore (in the
financial year ending March 2015), to 29% plus surcharge and cess.
100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
Complete pass through of income-tax to securitization trusts including trusts of ARCs. Securitisation trusts required to deduct tax at source.
Period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years.
Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful debts.
Determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year.
Commitment to implement General Anti Avoidance Rules (GAAR) from 1.4.2017.
Exemption of service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies
empanelled by Ministry of Skill Development & Entrepreneurship.
Exemption of Service tax on general insurance services provided under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the Welfare
of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.
Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.
MAKE IN INDIA
Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like
Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper,
paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and ship repair.
MOVING TOWARDS A PENSIONED SOCIETY
Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes
to legal heir will not be taxable.
In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of
corpus created out of contributions made on or from 1.4.2016.
Limit for contribution of employer in recognized Provident and Superannuation Fund of ₹ 1.5 lakh per annum for taking tax benefit. Exemption from
service tax for Annuity services provided by NPS and Services provided by EPFO to employees.

Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.
PROMOTING AFFORDABLE HOUSING
100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities,
approved during June 2016 to March 2019 and completed in three years. MAT to apply.
Deduction for additional interest of `50,000 per annum for loans up to ₹35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does
not exceed ₹ 50 lakh.
Distribution made out of income of SPV to the REITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax, in
respect of dividend distributed after the specified date.
Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including
PPP Schemes.
Extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work to Ready Mix Concrete.
RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND CLEAN ENVIRONMENT
Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of ₹ 10 lakh per annum.
Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above ₹ 1 crore.
Tax to be deducted at source at the rate of 1 % on purchase of luxurycars exceeding value of ` ten lakh and purchase of goods and services in cash
exceeding ₹ two lakh.
Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
Equalization levy of 6% of gross amount for payment made to nonresidents exceeding ` 1 lakh a year in case of B2B transactions.
Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of
agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and
SUVs. No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.
Excise duty of ‘1% without input tax credit or 12.5% with input tax credit’ on articles of jewellery [excluding silver jewellery, other than studded with
diamonds and some other precious stones], with a higher exemption and eligibility limits of ₹ 6 crores and ₹ 12 crores respectively.
Excise on readymade garments with retail price of ₹ 1000 or more raised to 2% without input tax credit or 12.5% with input tax credit.
‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from ₹ 200 per tonne to ₹ 400 per tonne.
Excise duties on various tobacco products other than beedi raised by about 10 to 15%.
Assignment of right to use the spectrum and its transfers has been deducted as a service leviable to service tax and not sale of intangible goods.
PROVIDING CERTAINITY IN TAXATION
Committed to providing a stable and predictable taxation regime and reduce black money.
Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5%
and penalty at 7.5%, which is a total of 45% of the undisclosed income. Declarants will have immunity from prosecution.

Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to ₹ 10 lakh. Cases with disputed tax exceeding ₹
10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25%
of the minimum of the imposable penalty and tax interest on quantum addition.
High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.
One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.
Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure
claimed under rule 8D of Section 14A of Income Tax Act.
Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before
Commissioner of Income-tax (Appeals).
Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from ₹ 15 lakhs to ₹ 50 lakhs.
11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
SIMPLIFICATION AND RATIONALIZATION OF TAXES
13 cesses, levied by various Ministries in which revenue collection is less than ₹ 50 crore in a year to be abolished.
For non-residents providing alternative documents to PAN card, higher TDS not to apply.
Revision of return extended to Central Excise assesses.
Additional options to banking companies and financial institutions, including NBFCs, for reversal of input tax credits with respect to nontaxable services.
Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record.
Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.
Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.
TECHNOLOGY FOR ACCOUNTABILITY
Expansion in the scope of e-assessments to all assesses in 7 mega cities in the coming years.
Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.
‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.

PROPOSED RATES UNDER
INCOME TAX
FOR THE AY 2017-18

PROPOSED TAX RATES FOR FINANCIAL YEAR 2016-17 A. Y. 2017-18
Income Tax Rates for Individuals, HUF
Individuals, Hindu Undivided Families (HUF) and Artificial Jurisdictional Person:
Net Income Range Income Tax Rates Tax
Upto Rs. 2,50,000 Nil Nil
Rs. 2,50,001 - Rs. 5,00,000 10% 10% of (total income minus Rs. 2,50,000)
Rs. 5,00,001 - Rs. 10,00,000 20% Rs. 25,000 + 20% of (total income minus Rs.5,00,000)
Above 10,00,000 30% Rs. 1,25,000 + 30% of (total income minus Rs.10,00,000)
Individual being Resident whose age is more than or equal to Sixty years but less than eighty years (Age 60 – 80)
Rs. 5,00,001 - Rs. 10,00,000 20% Rs. 20,000 + 20% of (total income minus Rs. 5,00,000)
Above 10,00,000 30% Rs. 1,20,000 + 30% of (total income minus Rs. 10,00,000)
Individual being Resident whose age is more than or equal to 80 Years.
Above 10,00,000 30% Rs. 1,00,000 + 30% of (total income minus Rs. 10,00,000)
Notes:
Note 1: - Add Surcharge - 15% if income exceeds Rs. 1 Crores - with marginal relief.
Note 2: - Add Education Cess - E. Cess is 2% of Income Tax
Note 3: - Add Secondary and Higher Education Cess - SHE. Cess is 1% of Income Tax
Note 4:- Rebate - Upto Rs. 5,000 U/s 87A - Any individual who is resident in India is eligible for this rebate, if total income is not exceeding Rs. 500,000 This
rebate is not allowed to HUF, AOP or BOI.

Income Tax Rates for Co-operatives Societies
Rates for Co-operative Society for the AY 2017-18
Net Income Range Rate
of Tax
Up to Rs. 10,000 10%
Rs. 10,000 - Rs. 20,000 20%
Rs. 20,000 and above 30%
Note 2: - Add Education Cess - E. Cess is 2% of Income Tax
Income Tax Rates for Companies
Rates for companies for the AY 2017-18
Company Rate of
Income Tax
In case of domestic company (turnover exceeding Rs. 5 crore) 30%
In case of domestic company (turnover below or equal to Rs. 5 crore) 29%
Domestic company registered after 01.03.2016 engages inmanufacturing and fullfilling prescribed conditions 25%
In case of foreign Company
- Royalty received from Government or an Indian Concern in pursuance of an agreement made by it with the Indian concern after March 31, but
before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made by it after February 29, 1964 but before April
1, 1976 and where such agreement has, in either case, been approved by central Government
50%
- Other Income 40%
Notes:
Note 1: - Add Surcharge - Surcharge is 7% of income-tax, in case of domestic companies and 2% in case of foreign companies if net income exceeds Rs.1 crore
but not exceeding Rs. 10 Crore in either case. Rate of Surcharge will be 12% of income-tax in case of domestic companies and 5% in case of foreign companies if
net income exceeds Rs.10 Crore in either case. Surcharge is subject to marginal Relief.
Note 2: - Add Education Cess - Education Cess is 2% of Income Tax plus surcharge
Note 3: - Add Secondary and Higher Education Cess - SHE. Cess is 1% of Income Tax plus surcharge.

Income Tax Rates for Firms & Local Authorities
Rates for firms & Local authorities for the AY 2017-18
Rate of Tax is 30%.
Notes:
Note 2: - Add Education Cess - Education Cess is 2% of Income Tax

PROPOSED SECTIONWISE AMENDMENT
IN INCOME TAX ACT, 1961

Section/Applicability Earlier Provision After amendment
2(14), 10(15)
(01.04.2016)
Deposit Certificates issued under Gold monetisation scheme,
2015 was treated as capital assets
The proposed amendment have excluded Deposit Certificates
issued under Gold Monetisation Scheme, 2015 notified by the
Central Government, from the definition of capital asset and
thereby exemption from capital gains tax.
It is also proposed to amend clause (15) of section 10 so as to
provide that the interest on Deposit Certificates issued under
the Scheme, shall be exempt from income-tax.
2 (23C)
(01.06.2016)
New Insertion The term "hearing" to include communication of data and
documents through electronic mode
2(24)
(01.04.2017)
Grant or cash assistance or subsidy etc. provided by the Central
Government for budgetary support of a trust or any other entity
formed specifically for operationalizing certain government
schemes was taxable in the hands of trust or any other
Entity
proposed amendment to section 2(24) provides that subsidy
or grant by the Central Government for the purpose of the
corpus of a trust or institution established by the Central
Government or State government shall not form part of
income.
2(37A)
(01.06.2016)
Rate in force for purpose of deduction does not include section
194LBB and section 194LBC.
After amendment Rate in force for purpose of deduction shall
include section 194LBB and section 194LBC.
6(3)
(01.04.2017)
Prior to amendment of section 6(3) by the Finance Act 2015, a
company was said to be resident in India in any previous year if
it was an Indian company or during that year the control and
management of its affairs was situated wholly in India.
The Finance Act, 2015 amended the above provision so as to
provide that a company would be resident in India in any
previous year if it is an Indian company or its Place of Effective
Management (POEM) in that year is in India. The POEM was
defined to mean a place where key management and
commercial decisions that are necessary for the conduct of the
business of an entity as a whole are in substance made.
9(1)(i)
(01.04.2016)
Section 9 of the Act provides circumstances under which
income is deemed to accrue or arise in India. One of the
circumstances providing for income to be deemed to accrue or
arise in India is if any income is directly or indirectly derived
through or from a business connection in India.
it is proposed to amend section 9 of the Act to provide that in
the case of a foreign company engaged in the business of
mining of diamonds, no income shall be deemed to accrue or
arise in India to it through or from the activities which are
confined to display of uncut and unassorted diamonds in a
Special Zone notified by the Central Government in the Official
Gazette in this behalf.
A "Special Notified Zone" (SNZ) had been created to facilitate
shifting of operations by foreign mining companies (FMC) to

India and to permit the trading of rough diamonds in India by
the leading diamond mining companies of the world.
9A(3)
(01.04.2017)
Section 9A of the Act provides for a special regime in respect of
offshore funds. It provides that in the case of an eligible
investment fund, the fund management activity carried out
through an eligible fund manager acting on behalf of such fund
shall not constitute business connection in India of the said
fund. Further, an eligible investment fund shall not be said to be
resident in India merely because the eligible fund manager
undertaking fund management activities on its behalf is located
in India. The benefit under section 9A is available subject to the
conditions provided in sub-sections (3), (4) and (5) of this
section.
The sub-section (3) of section 9A provides for the conditions for
the eligibility of the fund. These conditions, inter-alia, are
related to residence of fund, corpus size, investor base,
investment diversification and payment of remuneration to
fund manager at arm's length. In respect of residence of the
fund, the condition is that the fund has to be resident of a
country or territory with which India has entered into a Double
Taxation Avoidance Agreement (DTAA) or Tax Information
Exchange Agreement (TIEA).
In respect of activities of fund, there is a restriction that the fund
shall not carry on or control and manage, directly or indirectly,
any business in India or from India and shall neither engage in
any activity which constitutes a business connection in India
nor have any person acting on its behalf whose activities
constitute a business connection in India other than the
activities undertaken by the eligible fund manager on its behalf.
It is proposed to modify these conditions to provide that the
eligible investment fund for purposes of section 9A, shall also
mean a fund established or incorporated or registered outside
India in a country or a specified territory notified by the
Central Government in this behalf. It is also proposed to
provide that the condition of fund not controlling and
managing any business in India or from India shall be
restricted only in the context of activities in India.
10(12),10(12A),10(13) (i) Under the existing provisions of the Income-tax Act, tax
treatment for the National Pension System (NPS) referred to in
section 80CCD is Exempt, Exempt and Tax (EET) i.e., the
monthly/periodic contributions during the pension
accumulation phase are allowed as deduction from income for
(i) It is proposed to amend section 10 so as to provide that in
respect of the contributions made on or after the 1stday of
April, 2016 by an employee participating in a recognised
provident fund and superannuation fund, up to 40 % of the
accumulated balance attributable to such contributions on

tax purposes; the returns generated on these contributions
during the accumulation phase are also exempt from tax;
however, the terminal benefits on exit or superannuation, in the
form of lump sum withdrawals, are taxable in the hands of the
individual subscriber or his nominee in the year of receipt of
such amounts.
(ii) Under the existing provisions, any payment from an
approved superannuation fund made to an employee in lieu of
or in commutation of an annuity on his retirement at or after a
specified age or on his becoming incapacitated prior to such
retirement is exempt from tax.
withdrawal shall be exempt from tax.
(ii) It is proposed to amend the said provisions so as to
provide that any payment in commutation of an annuity
purchased out of contributions made on or after the 1stday of
April, 2016, which exceeds forty per cent of the annuity, shall
be chargeable to tax.
(iii) Clause (13) of section 10 so as to provide that any
payment from an approved superannuation fund by way of
transfer to the account of the employee under NPS referred to
in section 80CCD and notified by the Central Government shall
be exempt from tax.
10(23DA), 10(35A),
115TA, 115TB, 115TC,
115TCA
(01.06.2016)
Under the existing provisions of Chapter-XII-EA of the Act
consisting of sections 115TA, 115TB and 115TC, special
taxation regime in respect of income of the securitisation trusts
and the investors of such trusts has been provided. The regime
provides that income distributed by the securitisation trust to
its investors shall be subject to a levy of additional tax to be paid
by the securitisation trust within 14 days of distribution of
income. The distribution tax shall be paid @ 25% if the
distribution is made to an individual or a Hindu undivided
family (HUF) and @ 30% if the distribution is to others. Further,
no distribution tax is to be levied if the distribution is made to
an exempt entity. Consequent to the levy of distribution tax, the
income of the investor, received from the securitisation trust, is
exempt under section 10(35A) of the Act and the income of
securitisation trust itself is exempt under section 10(23DA) of
the Act.
It has been represented that under the current regime, the
trusts set up by reconstruction companies or the securitisation
companies are not covered although such trusts are also
engaged in securitisation activity. These companies are
established for
the purposes of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002 (SARFAESI Act) and their activities are regulated by the
Reserve Bank of India (RBI). It has been represented that the
existing regime providing for final levy in the form of
distribution tax is tax inefficient for the investors specially the
banks and financial institutions. Disallowance of expenditure
in respect of income received from securitisation trust
increases the effective rate of taxation. Further, the non-
resident and resident investors are unable to take benefits of
their specific tax status.
In order to rationalise the tax regime for securitisation trust
and its investors, and to provide tax pass through treatment, it
is proposed to amend the provisions of the Act to substitute
the existing special regime for securitisation trusts by a new
regime having the following elements: -
(i) The new regime shall apply to securitisation trust being an

SPV defined under SEBI (Public Offer and Listing of Securitised
Debt Instrument) Regulations, 2008 or SPV as defined in the
guidelines on securitisation of standard assets issued by RBI
or being setup by a securitisation company or a reconstruction
company in accordance with the SARFAESI Act;
(ii) The income of securitisation trust shall continue to be
exempt. However, exemption in respect of income of investor
from securitisation trust would not be available and any
income from securitisation trust would be taxable in the hands
of investors;
(iii) The income accrued or received from the securitisation
trust shall be taxable in the hands of investor in the same
manner and to the same extent as it would have happened had
investor made investment directly in the underlying assets
and not through the trust;
(iv) Tax deduction at source shall be effected by the
securitisation trust at the rate of 25% in case of payment to
resident investors which are individual or HUF and @ 30% in
case of others. In case of payments to non-resident investors,
the deduction shall be at rates in force;
(v) The facility for the investors to obtain low or nil deduction
of tax certificate would be available; and
(vi) The trust shall provide breakup regarding nature and
proportion of its income to the investors and also to the
prescribed income-tax authority.
Further, it is proposed to provide that the current regime of
distribution tax shall cease to apply in case of distribution
made by securitisation trusts.
10(23FC) Only interest received or receivable from a special Purpose
vehicle was exempt
After the proposed amendment it also included dividend
referred in subsection (7) of section 115-O
10(38)
(01.04.2017)
Under the existing provisions of clause (38) of section 10,
income by way of long term capital gains arising from equity
shares or units of an equity oriented fund or business trust is
exempt where securities transaction tax is paid.
It is proposed to amend the section 10 so as to provide for
exemption from tax on capital gains to the income arising from
transaction undertaken in foreign currency on a recognised
stock exchange located in an International Financial Services

Centre even when securities transaction tax is not paid in
respect of such transactions.
10(48A)
(01.04.2016)
New Insertion it is proposed to amend the provisions of section 10 of the Act
to provide that any income accruing or arising to a foreign
company on account of storage of crude oil in a facility in India
and sale of crude oil therefrom to any person resident in India
shall not be included in the total income, if, -
I. such storage and sale by the foreign company is pursuant to
an agreement or an arrangement entered into by the Central
Government or approved by the Central Government; and
II. having regard to the national interest, the foreign company
and the agreement or arrangement are notified by the Central
Government in this behalf.
10(50)
(01.06.2016)
New insertion it is proposed to provide exemption under section 10 of the
Act for any income arising from providing specified services
on which equalisation levy is chargeable
10AA
(01.04.2017)
Profit linked deductions for units in SEZ for profit derived from
export of articles or things or services
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)
17
(01.04.2017)
Perquisite includes the amount of any contribution exceeding
one lakh rupees to an approved superannuation fund by the
employer in the hands of the assessee.
The existing limit of Rs. One lakh has been increased to Rs. One
Lakh Fifty Thousand.
24(b)
(01.04.2017)
As per existing provisions interest on borrowed capital is
allowable as deduction if the construction is completed within 3
year from the end of year in which capital was borrowed.
It is proposed to increase the said limit of 3 year to 5 years.
25A, 25AA, 25B
(01.04.2017)
Existing provisions of sections 25A, 25AA and 25B relate to
special provisions on taxation of unrealised rent allowed as
deduction when realised subsequently, unrealised rent received
subsequently and arrears of rent received respectively. Certain
deductions are available thereon.
It is proposed to simplify these provisions and merge them
under a single new section 25A and bring uniformity in tax
treatment of arrears of rent and unrealised rent. It is proposed
to provide that the amount of rent received in arrears or the
amount of unrealised rent realised subsequently by an
assessee shall be charged to income-tax in the financial year in
which such rent is received or realised subject to deduction of
30%, whether the assessee is the owner of the property or not
in that financial year.

28(va)
(01.04.2017)
The existing provision of clause (va) of section 28 of the Act
includes within the scope of "profit and gains of business or
profession" any sum received or receivable in cash or in kind
under an agreement for not carrying out activity in relation to
any business; or not to share any know how, patent, copyright,
trade mark, licence, franchise or any other business or
commercial right of similar nature or information or technique
likely to assist in the manufacture or processing of goods or
provision for services and is chargeable to tax as business
income. Further, the provisions clarify that receipts for transfer
of right to manufacture, produce or process any article or thing
or right to carry on any business, which are chargeable to tax
under the head "Capital gains", would not be taxable as profits
and gains of business or profession. Under section 45 of the Act,
any capital receipt arising out of transfer of any business or
commercial rights is taxable under the head "Capital gains". The
amount of "Capital gains" is computed according to section 48 of
the Act. For this purpose, 'cost of acquisition' and 'cost of
improvement' are defined under section 55. However, non-
compete fee received/receivable in relation to carrying out of
profession are not
covered under these provisions.
It is proposed to amend clause (va) of section 28 of the Act to
bring the non-compete fee received/receivable( which are
recurring in nature) in relation to not carrying out any
profession, within the scope of section 28 of the Act i.e. the
charging section of profits and gains of business or profession.
Further, it is also proposed to amend the proviso to clarify that
receipts for transfer of right to carry on any profession, which
are chargeable to tax under the head "Capital gains", would
not be taxable as profits and gains of business or profession. It
is also proposed to amend section 55 so as to provide that the
'cost of acquisition' and 'cost of improvement' for working out
"Capital gains" on capital receipts arising out of transfer of
right to carry on any profession shall also be taken as 'nil'
32(1)(iia)
(01.04.2017)
Under the existing provisions of section 32(1)(iia) of the Act,
additional depreciation of 20% is not available on the new
machinery or plant installed by an assessee engaged in the
business of transmission of power.
It is proposed to amend this section so as to provide that an
assessee engaged in the business of transmission of power
shall also be allowed additional depreciation at the rate of
20% of actual cost of new machinery or plant acquired and
installed in a previous year.
32 read with rule 5 of
Income Tax Rules, 1962
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.
To amend the new Appendix IA read with rule 5 of Income-tax
Rules, 1962 to provide that highest rate of depreciation under
the Income-tax Act shall be restricted to 40% w.e.f 01.4.2017.
(i.e. from previous year 2017-18 and subsequent years). The
new rate is proposed to be made applicable to all the assets
(whether old or new) falling in the relevant block of assets.
32AC
(01.04.2017)
The existing provision of sub-section (1A) in section 32AC of the
Act provides for investment allowance at the rate of 15% on
It is proposed to amend the sub-section (1A) of section 32AC
so as to provide that the acquisition of the plant & machinery

investment made in new assets (plant and machinery)
exceeding Rs.25 crore in a previous year by a company engaged
in manufacturing or production of any article or thing subject to
the condition that the acquisition and installation has to be done
in the same previous year. This tax incentive is available up to
31.03.2017.
of the specified value has to be made in the previous year.
However, installation may be made by 31.03.2017 in order to
avail the benefit of investment allowance of 15% in the year of
installation.
35(1)(ii)
(01.04.2018)
Weighted deduction from the business income to the extent of
175 per cent 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 shall be restricted to 150 per cent from
01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to
previous year 2019-20) and deduction shall be restricted to
100 per cent from 01.04.2020 (i.e. from previous year 2020-
21 onwards).
35(1)(iia)
(01.04.2018)
125 per cent of any sum paid as contribution to an approved
scientific research company.
Deduction shall be restricted to 100 per cent with effect from
01.04.2017 (i.e. from previous year 2017-18 and subsequent
years).
35(1)(iii)
(01.04.2018)
125 per cent 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 shall be restricted to 100 per cent with effect from
01.04.2017 (i.e. from previous year 2017-18 and subsequent
years).
35(2AA)
(01.04.2018)
200 per cent 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 shall be restricted to 150 per cent with
effect from 01.04.2017 to 31.03.2020 (i.e. from previous year
2017-18 to previous year 2019-20). Deduction shall be
restricted to 100 per cent from 01.04.2020 (i.e. from previous
year 2020-21 onwards).
35(2AB)
(01.04.2018)
Weighted deduction of 200 per cent 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 per cent from
01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to
previous year 2019-20). Deduction shall be restricted to 100
per cent from 01.04.2020 (i.e. from previous year 2020-21
onwards).
35ABA
(01.04.2017)
New Insertion Under section 32 of the Act, depreciation is allowed in respect
of assets including certain intangible assets. Under section
35ABB of the Act, amortisation of license fee in case of
telecommunication service is provided.

Government has newly introduced spectrum fee for auction of
airwaves. There is uncertainty in tax treatment of payments in
respect of Spectrum i.e. whether spectrum is an intangible
asset and the spectrum fees paid is eligible for depreciation
under section 32 of the Act or whether it is in the nature of a
'license to operate telecommunication business' and eligible
for deduction under section 35ABB of the Act.
In order to provide clarity and avoid any future litigation and
controversy, it is proposed to insert a new section 35ABA in
the Act to provide for tax treatment of spectrum fee. The
section seeks to provide,-
(i) any capital expenditure incurred and actually paid by an
assessee on the acquisition of any right to use spectrum for
telecommunication services by paying spectrum fee will be
allowed as a deduction in equal instalments over the period
for which the right to use spectrum remains in force.
(ii) where the spectrum is transferred and proceeds of the
transfer are less than the expenditure remaining unallowed, a
deduction equal to the expenditure remaining unallowed as
reduced by the proceeds of transfer, shall be allowed in the
previous year in which the spectrum has been transferred.
(iii) if the spectrum is transferred and proceeds of the transfer
exceed the amount of expenditure remaining unallowed, the
excess amount shall be chargeable to tax as profits and gains
of business in the previous year in which the spectrum has
been transferred.
(iv) unallowed expenses in a case where a part of the
spectrum is transferred would be amortised.
(v) under the scheme of amalgamation, if the amalgamating
company sells or transfer the spectrum to an amalgamated
company, being an Indian company, then the provisions of this
section will apply to amalgamated company as they would
have applied to amalgamating company if later has not
transferred the spectrum.

35AC
(01.04.2017)
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 eligible social
development project or a scheme.
No deduction shall be available with effect from 1.4.2017 (i. e.
from previous year 2017-18 and subsequent years).
35AD
(01.04.2018)
In case of a cold chain facility, warehousing facility for storage of
agricultural produce, an affordable housing project, production
of fertiliser and hospital weighted deduction of 150 per cent of
capital expenditure (other than expenditure on land, goodwill
and financial assets) is allowed.
In case of a cold chain facility, warehousing facility for storage
of agricultural produce, hospital, an affordable housing
project, production of fertilizer, deduction shall be restricted
to 100 per cent of capital expenditure w.e.f. 01.4.2017 (i.e.
from previous year 2017-18 onwards).
35CCC
(01.04.2018)
Weighted deduction of 150 per cent of expenditure incurred on
notified agricultural extension project
Deduction shall be restricted to 100 per cent from 1.4.2017
(i.e from previous year 2017-18 onwards).
35CCD
(01.04.2017)
Weighted deduction of 150 per cent 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 shall be restricted to 100 per cent from 01.04.2020
(i.e. from previous year 2020-21 onwards).
36
(01.04.2017)
Under the existing provisions of sub-clause (c) of clause (viia) of
sub-section (1) of section 36 of the Act, in computing the profits
of a public financial institutions, State financial corporations
and State industrial investment corporations a deduction,
limited to an amount not exceeding five per cent of the gross
total income, computed, before making any deduction under the
aforesaid clause and Chapter VI-A, is allowed in respect of any
provision for bad and doubtful debt.
Considering the fact that Non-Banking Financial companies
(NBFCs) are also engaged in financial lending to different
sectors of society, it is proposed to amend the provision of
clause (viia) of sub-section (1) of section 36 so as to provide
deduction from total income (computed before making any
deduction under this clause and Chapter-VIA) on account of
provision for bad and doubtful debts to the extent of five per
cent of the total income in the case of NBFCs.
40a(ib) New Insertion It is proposed to provide that the expenses incurred by the
assessee towards specified services chargeable under this
Chapter shall not be allowed as deduction in case of failure of
the asseseee to deduct and deposit the equalisation levy to the
credit of Central government. Where Equalisation levy has
been deducted in the subsequent year or has been deducted
during the previous year but paid after the due date, such sum
shall be allowed as deduction in the previous year in which it
has been paid.
43B
(01.04.2017)
The existing provisions of section 43B of the Act, inter alia,
provide that any sum payable by the assessee by way of tax,
cess, duty or fee, employer contribution to Provident Fund, etc.,
It is proposed to amend section 43B so as to expand its scope
to include payments made to Indian Railways for use of
Railway assets within its ambit.

is allowable as deduction of the previous year in which the
liability to pay such sum was incurred (relevant previous year)
if the same is actually paid on or before the due date of
furnishing of the return of income irrespective of method of
accounting followed by a person.
44AA
(01.04.2017)
New insertion It is also proposed that the assessee will not be required to
maintain books of account under sub-section (1) of section
44AA and get the accounts audited under section 44AB in
respect of such income unless the assessee claims that the
profits and gains from the aforesaid profession are lower than
the profits and gains deemed to be his income under sub-
section (1) of section 44ADA (i.e. 50% of the gross receipts)
and his income exceeds the maximum amount which is not
chargeable to income-tax.
44AB
(01.04.2017)
Under the existing provisions of section 44AB of the Act every
person carrying on a profession is required to get his accounts
audited if the total gross receipts in a previous year exceed
twenty five lakh rupees.
It is proposed to increase the threshold limit of total gross
receipts, specified under section 44AB for getting accounts
audited, from twenty five lakh rupees to fifty lakh rupees in
the case of persons carrying on profession.
44AD, 234C
(01.04.2017)
The existing provisions of section 44AD provide for a
presumptive taxation scheme for an eligible business having
total turnover or gross receipts not exceeding rupees one crore,
a sum equal to eight per cent. of the total turnover or gross
receipts, or as the case may be, a sum higher than the aforesaid
sum shall be deemed to be profits and gains of such business
chargeable to tax under the head "Profits and gains of business
or profession". Under the scheme, the assessee will be deemed
to have been allowed the deduction under sections 30 to 38 of
the Act including partner’s remuneration and interest u/s 40(b)
. Further, the eligible assessee can report income less than the
deemed income of eight per cent. of the total turnover or gross
receipts not exceeding rupees one crore provided he maintains
books of accounts and get its audited under section 44AB.
Further in the case of an eligible assessee, so far as the eligible
business is concerned, the provisions of Chapter XVII-C
(advance tax) shall not apply.
It is also proposed that the expenditure in the nature of salary,
remuneration, interest etc. paid to the partner as per clause
(b) of section 40 shall not be deductible while computing the
income under section 44AD as the said section 40 does not
mandate for allowance of any expenditure but puts restriction
on deduction of amounts, otherwise allowable under section
30 to 38.
It is also proposed that where an eligible assessee declares
profit for any previous year in accordance with the provisions
of this section and he declares profit for any of the five
consecutive assessment years relevant to the previous year
succeeding such previous year not in accordance with the
provisions of sub-section (1), he shall not be eligible to claim
the benefit of the provisions of this section for five assessment
years subsequent to the assessment year relevant to the
previous year in which the profit has not been declared in

accordance with the provisions of sub-section (1).
For example, an eligible assessee claims to be taxed on
presumptive basis under section 44AD for Assessment Year
2017-18 and offers income of Rs. 8 lakh on the turnover of Rs.
1 crore. For Assessment Year 2018-19 and Assessment Year
2019-20 also he offers income in accordance with the
provisions of section 44AD. However, for Assessment Year
2020-21, he offers income of Rs.4 lakh on turnover of Rs. 1
crore. In this case since he has not offered income in
accordance with the provisions of section 44AD for five
consecutive assessment years, after Assessment Year 2017-18,
he will not be eligible to claim the benefit of section 44AD for
next five assessment years i.e. from Assessment Year 2021-22
to 2025-26.
It is proposed to provide that eligible assessee shall be require
to pay advance tax. However, in order to keep the compliance
minimum in his case, it is proposed that he may pay advance
tax by 15th March of the financial year.
44ADA
(01.04.2017)
New Insertion
The existing scheme of taxation provides for a simplified
resumptive taxation scheme for certain eligible persons
engaged in certain eligible business only and not for persons
earning professional income.
New section 44ADA is proposed to be inserted in the Act to
provide for estimating the income of an assessee who is
engaged in any profession referred to in sub-section (1) of
section 44AA such as legal, medical, engineering or
architectural profession or the profession of accountancy or
technical consultancy or interior decoration or any other
profession as is notified by the Board in the Official Gazette
and whose total gross receipts does not exceed fifty lakh
rupees in a previous year, at a sum equal to fifty per cent of the
total gross receipts, or, as the case may be , a sum higher than
the aforesaid sum earned by the assessee. The scheme will
apply to such resident assessee who is an individual, Hindu
undivided family or partnership firm but not Limited
Liability partnership firm.
Under the scheme, the assessee will be deemed to have been

allowed the deductions under section 30 to 38, hence no
deduction of interest and partner’s remuneration and
depreciation shall be allowed.
It is also proposed that the assessee will not be required to
maintain books of account under sub-section (1) of section
44AA and get the accounts audited under section 44AB in
respect of such income where he claims profits are lower than
the profits and gains deemed to be his income under sub-
section (1) of section 44ADA and his income exceeds the
maximum amount which is not chargeable to income-tax.
47(viic)
(01.04.2017)
New Insertion It is proposed to amend Section 47 of the Income-tax Act, so as
to provide that any redemption of Sovereign Gold Bond under
the Scheme, by an individual shall not be treated as transfer
and therefore shall be exempt from tax on capital gains.
47(xiiib)
(01.04.2017)
Existing provisions of clause (xiiib) of Section 47 provides that
conversion of a private limited or unlisted public company into
Limited Liability Partnership (LLP) shall not be regarded as
transfer, if certain conditions are fulfilled, which, inter alia,
include a condition that the company's gross receipts, turnover
or total sales in any of the preceding three years did not exceed
Rs.60 lakh.
It is proposed to amend the said section so as to provide that,
for availing tax-neutral conversion, in addition to the existing
conditions, the value of the total assets in the books of
accounts of the company in any of the three previous years
preceding the previous year in which the conversion takes
place, should not exceed five crore rupees.
47(xix)
(01.04.2017)
Under the existing provisions of section 47(xviii), any transfer
by a unit holder of a capital asset, being a unit or units, held by
him in the consolidating scheme of a mutual fund, made in
consideration of the allotment to him of a capital asset, being a
unit or units, in the consolidated scheme of the mutual fund is
not chargeable to tax.
It is proposed to extend the tax exemption, available on
merger or consolidation of mutual fund schemes, to the
merger or consolidation of different plans in a mutual fund
scheme. For this purpose, it is proposed to amend Section 47
so as to provide that any transfer by a unit holder of a capital
asset, being a unit or units, held by him in the consolidating
plan of a mutual fund scheme, made in consideration of the
allotment to him of a capital asset, being a unit or units, in the
consolidated plan of that scheme of the mutual fund shall not
be considered transfer for capital gain tax purposes and
thereby shall not be chargeable to tax.
48
(01.04.2017)
New benefits It is also proposed to amend section 48 of the Income-tax Act,
so as to provide indexation benefits to long terms capital gains

arising on transfer of Sovereign Gold Bond to all cases of
assessees.
It is proposed to amend section 48 of the Act so as to provide
that the capital gains, arising in case of appreciation of rupee
between the date of issue and the date of redemption against
the foreign currency in which the investment is made shall be
exempt from tax on capital gains
50C
(01.04.2017)
Under the existing provisions contained in Section 50C, there is
no provision that where the date of the agreement fixing the
amount of consideration for the transfer of immovable property
and the date of registration are not the same, the stamp duty
value on the date of the agreement may be taken for the
purposes of computing the full value of consideration, whereas
similar provision exists in section 43CA of the Act i.e. when an
immovable property is sold as a stock-in-trade.
In order to make provision of section 50C parallel with 43CA it
is proposed to provide this provision in 50C also, moreover it
is also brought in same lines with section 43CA that this
provision shall apply only in a case where the amount of
consideration referred to therein, or a part thereof, has been
paid by way of an account payee cheque or account payee
bank draft or use of electronic clearing system through a bank
account, on or before the date of the agreement for the
transfer of such immovable property.
54EE
(01.04.2017)
New Insertion It is proposed to insert a new Section 54EE to provide
exemption from capital gains tax if the long term capital gains
proceeds are invested by an assessee in units of such specified
fund, as may be notified by the Central Government in this
behalf, 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 up to Rs. 50 lakh.
54GB
(01.04.2017)
The existing provisions of section 54GB provide exemption
from tax on long term capital gains in respect of the gains
arising on account of transfer of a residential property, if such
capital gains are invested in subscription of shares of a company
which qualifies to be a small or medium enterprise under the
Micro, Small and Medium Enterprises Act, 2006 subject to other
conditions specified therein.
The existing provision of section 54GB requires that the
company should invest the proceeds in the purchase of new
It is proposed to amend section 54GB so as to provide that
long term capital gains arising on account of transfer of a
residential property shall not be charged to tax if such capital
gains are invested in subscription of shares of a company
which qualifies to be an eligible start-up subject to the
condition that the individual or HUF holds more than fifty
percent shares of the company and such company utilises the
amount invested in shares to purchase new asset before due
date of filing of return by the investor.

asset being new plant and machinery but does not include,
inter-alia, computers or computer software.
It is proposed to amend section 54GB so as to provide that the
expression "new asset" includes computers or computer
software in case of technology driven start-ups so certified by
the Inter-Ministerial Board of Certification notified by the
Central Government in the official Gazette.
55
(01.04.2017)
Earlier the term profession was not included. It is proposed to amend section 55 so as to provide that the
'cost of acquisition' and 'cost of improvement' for working out
"Capital gains" on capital receipts arising out of transfer of
right to carry on any profession shall be taken as 'nil'.
56
(01.04.2017)
The existing provisions of clause (vii) of sub-section 2 of section
56 of the Act provide for chargeability of income from other
sources in case any money, immovable property or other
property with or without consideration in excess of Rs 50,000 is
received by an assessee being an individual or an Hindu
undivided family (HUF). The provisions also apply where shares
of a company are received as a consequence of demerger or
amalgamation of a company. Such a transaction is not regarded
as transfer where the recipient is a firm or a company.
It is proposed to amend the Act so as to provide that any
shares received by an individual or HUF as a consequence of
demerger or amalgamation of a company shall not attract the
provisions of clause (vii) of sub-section (2) of section 56.
80
(01.04.2016)
The existing provisions of section 73A of the Act provide that
any loss, computed in respect of any specified business referred
to in section 35AD shall not be set off except against profits and
gains, if any, of any other specified business. Further, section 80
of the Act inter-alia provides that a loss which has not been
determined in pursuance of return filed in accordance with the
provisions of sub-section (3) of section 139, shall not be carried
forward and set-off under sub-section (1) of section 72 or sub-
section (2) of section 73 or sub-section (1) or sub-section (3) or
section 74 or sub-section 74A.
In accordance with the scheme of the Act, this loss is to be
allowed if the return is filed within the specified time i.e. by the
due date of filing of the return of the income as provided in
section 80 for other losses determined under the Act.
It is proposed to amend section 80 so as to provide that the
loss determined as per section 73A of the Act shall not be
allowed to be carried forward and set off if such loss has not
been determined in pursuance of a return filed in accordance
with the provisions of sub-section (3) of section 139.
80CCD
(01.04.2017)
Earlier it was chargeable to tax It is proposed to provide that any payment from National
Pension System Trust to an employee on account of closure or
his opting out of the pension scheme referred to in Section

80CCD, to the extent it does not exceed forty percent of the
total amount payable to him at the time of closure or his
opting out of the scheme, shall be exempt from tax. However,
the whole amount received by the nominee, on death of the
assessee shall be exempt from tax.
80EE
(01.04.2017
The existing provisions of section 80EE provide a deduction of
up to 1 lakh rupees in respect of interest paid on loan by an
individual for acquisition of a residential house property. This
benefit is available for the two assessment years beginning on
the 1st day of April 2014 and on the 1st day of April 2015.
In furtherance of the goal of the Government of providing
'housing for all', it is proposed to incentivise first-home buyers
availing home loans, by providing additional deduction in
respect of interest on loan taken for residential house
property from any financial institution up to Rs. 50,000. This
incentive is proposed to be extended to a house property of a
value less than fifty lakhs rupees in respect of which a loan of
an amount not exceeding thirty five lakh rupees has been
sanctioned during the period from the 1st day of April, 2016 to
the 31stday of March, 2017. It is also proposed to extend the
benefit of deduction till the repayment of loan continues
80GG
(01.04.2017)
Under the existing provisions deduction is restricted to
Rs.2000/- subject to certain conditions.
It is proposed to replace the deduction of Rs.2000/- by
Rs.5000/-
80IA; 80IAB, and 80IB
(01.04.2017)
Deduction in respect of profits derived from
a) development, operation and maintenance of an
insfrastructure facility (80-IA)
(b) development of special economic zone (80-IAB)
(c) production of mineral oil and natural gas [80-IB(9)]
100 per cent profit linked deductions for specified period on
eligible business carried on by industrial undertakings or
enterprises referred in section 80IA; 80IAB, and 80IB.
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).
80JJAA
(01.04.2017)
The existing provisions of Section 80JJAA provide for a
deduction of thirty percent of additional wages paid to new
regular workmen in a factory for three years. The provisions
apply to the business of manufacture of goods in a factory
where 'workmen' are employed for not less than three hundred
days in a previous year. Further, benefits are allowed only if
there is an increase of at least ten percent in total number of
workmen employed on the last day of the preceding year.
it is proposed to provide that the deduction under the said
provisions shall be available in respect of cost incurred on any
employee whose total emoluments are less than or equal to
twenty five thousand rupees per month. No deduction,
however, shall be allowed in respect of cost incurred on those
employees, for whom the entire contribution under
Employees' Pension Scheme notified in accordance with
Employees' Provident Fund and Miscellaneous Provisions Act,
1952, is paid by the Government.

It is further proposed to relax the norms for minimum number
of days of employment in a financial year from 300 days to
240 days and also the condition of ten per cent increase in
number of employees every year is proposed to be done away
with so that any increase in the number of employees will be
eligible for deduction under the provision.
It is also proposed to provide that in the first year of a new
business, thirty percent of all emoluments paid or payable to
the employees employed during the previous year shall be
allowed as deduction.
87A
(01.04.2017)
The existing provisions of section 87A provided for rebate of
Rs.2000/- from tax payable
It is proposed to increase the rebate from existing Rs. 2,000 to
Rs.5,000/-
92D, 271GB, 286
(01.04.2017)
Under provision of section 92D, there is requirement for
maintenance of prescribed information and document relating
to the international transaction and specified domestic
transaction.
The OECD report on Action 13 of BEPS Action plan provides
for revised standards for transfer pricing documentation and a
template for country-by-country reporting of income,
earnings, taxes paid and certain measure of economic activity.
India has been one of the active members of BEPS initiative
and part of international consensus. It is recommended in the
BEPS report that the countries should adopt a standardised
approach to transfer pricing documentation. A three-tiered
structure has been mandated consisting of:-
(i) a master file containing standardised information relevant
for all multinational enterprises (MNE) group members;
(ii) a local file referring specifically to material transactions of
the local taxpayer; and
(iii) Country-by-country report containing certain information
relating to the global allocation of the MNE's income and taxes
paid together with certain indicators of the location of
economic activity within the MNE group.
The report mentions that taken together, these three
documents (country-by-country report, master file and local
file) will require taxpayers to articulate consistent transfer
pricing positions and will provide tax administrations with

useful information to assess transfer pricing risks. It will
facilitate tax administrations to make determinations about
where their resources can most effectively be deployed, and,
in the event audits are called for, provide information to
commence and target audit enquiries.
The elements relating to CbC reporting requirement and
matters related to it proposed to be included through
amendment of the Act are:—
(i) the reporting provision shall apply in respect of an
international group having consolidated revenue above a
threshold to be prescribed.
(ii) the parent entity of an international group, if it is resident
in India shall be required to furnish the report in respect of the
group to the prescribed authority on or before the due date of
furnishing of return of income for the Assessment Year
relevant to the Financial Year (previous year) for which the
report is being furnished;
(iii) the parent entity shall be an entity which is required to
prepare consolidated financial statement under the applicable
laws or would have been required to prepare such a
statement, had equity share of any entity of the group been
listed on a recognized stock exchange in India;
(iv) every constituent entity in India, of an international group
having parent entity that is not resident in India, shall provide
information regarding the country or territory of residence of
the parent of the international group to which it belongs. This
information shall be furnished to the prescribed authority on
or before the prescribed date;
(v) the report shall be furnished in prescribed manner and in
the prescribed form and would contain aggregate information
in respect 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

along with details of each constituent's residential status,
nature and detail of main business activity and any other
information as may be prescribed. This shall be based on the
template provided in the OECD BEPS report on Action Plan 13;
(vi) an entity in India belonging to an international group shall
be required to furnish CbC report to the prescribed authority
if the parent entity of the group is resident ;-
(a) in a country with which India does not have an
arrangement for exchange of the CbC report; or
(b) such country is not exchanging information with India
even though there is an agreement; and
(c) this fact has been intimated to the entity by the prescribed
authority;
(vii) If there are more than one entities of the same group in
India, then the group can nominate (under intimation in
writing
to the prescribed authority) the entity that shall furnish the
report on behalf of the group. This entity would then furnish
the report;
(viii) If an international group, having parent entity which is
not resident in India, had designated an alternate entity for
filing its report with the tax jurisdiction in which the alternate
entity is resident, then the entities of such group operating in
India would not be obliged to furnish report if the report can
be obtained under the agreement of exchange of such reports
by Indian tax authorities;
(ix) The prescribed authority may call for such document and
information from the entity furnishing the report for the
purpose of verifying the accuracy as it may specify in notice.
The entity shall be required to make submission within thirty
days of receipt of notice or further period if extended by the
prescribed authority, but extension shall not be beyond 30
days;
(x) For non-furnishing of the report by an entity which is
obligated to furnish it, a graded penalty structure would

apply:-
(a) if default is not more than a month, penalty of Rs. 5000/-
per day applies;
(b) if default is beyond one month, penalty of Rs 15000/- per
day for the period exceeding one month applies;
(c) for any default that continues even after service of order
levying penalty either under (a) or under (b), then the penalty
for any continuing default beyond the date of service of order
shall be @ Rs 50,000/- per day;
(xi) In case of timely non-submission of information before
prescribed authority when called for, a penalty of Rs5000/-
per day applies. Similar to the above, if default continues even
after service of penalty order, then penalty of Rs.50,000/- per
day applies for default beyond date of service of penalty order.
(xii) If the entity has provided any inaccurate information in
the report and,-
(a) the entity knows of the inaccuracy at the time of furnishing
the report but does not inform the prescribed authority; or
(b) the entity discovers the inaccuracy after the report is
furnished and fails to inform the prescribed authority and
furnish correct report within a period of fifteen days of such
discovery; or
(c) the entity furnishes inaccurate information or document in
response to notice of the prescribed authority, then penalty of
Rs.500,000/- applies;
(xiii) The entity can offer reasonable cause defence for non-
levy of penalties mentioned above.
The proposed amendment in the Act in respect of
maintenance of master file and furnishing it are: -
(i) The entities being constituent of an international group
shall, in addition to the information related to the
international transactions, also maintain such information and
document as is prescribed in the rules. The rules shall
thereafter prescribe the information and document as

mandated for master file under OECD BEPS Action 13 report;
(ii) the information and document shall also be furnished to
the prescribed authority within such period as may be
prescribed and the manner of furnishing may also be provided
for in the rules;
(iii) for non-furnishing of the information and document to the
prescribed authority, a penalty of Rs. 5 lakh shall be leviable.
However, reasonable cause defence against levy of penalty
shall be available to the entity.
As indicated above, the CbC reporting requirement for a
reporting year does not apply unless the consolidated
revenues of the preceding year of the group, based on
consolidated financial statement, exceeds a threshold to be
prescribed. The current international consensus is for a
threshold of € 750 million equivalent in local currency. This
threshold in Indian currency would be equivalent to Rs. 5395
crores (at current rates). Therefore, CbC reporting for an
international group having Indian parent, for the previous
year 2016-17, shall apply only if the consolidated revenue
of the international group in previous year 2015-16
exceeds Rs. 5395 crore (the equivalent would be
determinable based on exchange rate as on the last day of
previous year 2015-16).
112
(01.04.2017)
Existing provisions of clause (c) of sub-section (1) of section
112 provide tax rate of ten per cent for long-term capital gain
arising from transfer of securities, whether listed or unlisted.
The expression "securities" for the purpose of the said provision
has the same meaning as in clause (h) of section 2 of the
Securities Contracts (Regulations) Act, 1956 (32 of
1956)('SCRA'). A view has been taken by the courts that shares
of a private company are not "securities".
With a view to clarify the position so far as taxability is
concerned, it is proposed to amend the provisions of clause (c)
of sub-section (1) of section 112 of the Income- tax Act, so as
to provide that long-term capital gains arising from the
transfer of a capital asset being shares of a company not being
a company in which the public are substantially interested,
shall be chargeable to tax at the rate of 10 per cent.
115BA
(01.04.2017)
New Insertion It is proposed to amend the Act by way of insertion of new
section 115BA, to provide that the income-tax payable in
respect of the total income of a domestic company for any
previous year relevant to the assessment year beginning on or

after the 1st day of April, 2017 shall be computed @ 25% at
the option of the company, if, -
(i) the company has been setup and registered on or after 1st
day of 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 under section 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 section 80JJAA; and
(iv) the option is furnished in the prescribed manner before
the due date of furnishing of income.
115BBDA
(01.04.2017)
New Insertion It is proposed to amend the Income-tax Act so as to provide
that any income by way of dividend in excess of Rs. 10 lakh
shall be chargeable to tax in the case of an Individual, Hindu
undivided family (HUF) or a firm who is resident in India, at
the rate of ten percent. The taxation of dividend income in
excess of ten lakh rupees shall be on gross basis.
115BBE
(01.04.2017)
Section 115 BBE of the Act, inter-alia provides that the income
relating to section 68 or section 69 or section 69A or section
69B or section 69C or section 69D is taxable at the rate of thirty
per cent and further provides that no deduction in respect of
any expenditure or allowances in relation to income referred to
in the said sections shall be allowable.
Currently, there is uncertainty on the issue of set-off of losses
against income referred in section 115BBE of the Act. The
matter has been carried to judicial forums and courts in some
cases has taken a view that losses shall not be allowed to be
set-off against income referred to in section 115BBE.
However, the current language of section 115BBE of the Act
does not convey the desired intention and as a result the
matter is litigated. In order to avoid unnecessary litigation, it
is proposed to amend the provisions of the sub-section (2) of
section 115BBE to expressly provide that no set off of any loss
shall be allowable in respect of income under the sections 68
or section 69 or section 69A or section 69B or section 69C or
section 69D.

115BBF
(01.04.2017)
New Insertion It is proposed to insert new section 115BBF to provide that
where the total income of the eligible assessee income
includes any income by way of royalty in respect of a patent
developed and registered in India, then such royalty shall be
taxable at the rate of ten per cent (plus applicable surcharge
and cess) on the gross amount of royalty. No expenditure or
allowance in respect of such royalty income shall be allowed
under the Act.
For the purpose of this concessional tax regime an 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 and includes every such person, being the true and
the first inventor of the invention, where more than one
person is registered as patentees under Patents Act, 1970 in
respect of that patent.
115JB
(r.e.f. 01.04.2001)
Under the existing provisions contained in sub-section (1) of the
115JB in case of a company, if the tax payable on the total
income as computed under the Income-tax Act, is less than
eighteen and one-half per cent of its book profit, such book
profit shall be deemed to be the total income of the assessee and
the tax payable by the assessee for the relevant previous year
shall be eighteen and one-half per cent of its book profit. Issues
were raised regarding the applicability of this provision to
Foreign Institutional Investors (FIIs) who do not have a
permanent establishment (PE) in India. Vide Finance Act, 2015
of the provisions of section 115JB were amended to provide
that in case of a foreign company any income chargeable at a
rate lower than the rate specified in section 115JB shall be
reduced from the book profits and the corresponding
expenditure will be added back.
However, since this amendment was prospective w.e.f.
assessment year 2016-17, the issue for assessment year prior
to 2016-17 remained to be addressed., hence it is proposed to
amend the Income-tax Act so as to provide that with effect
from 01.04.2001, the provisions of section 115JB shall not be
applicable to a foreign company if -
(i) the assessee is a resident of a country or a specified
territory with which India has an agreement referred to in
sub-section (1) of section 90 or the Central Government has
adopted any agreement under sub-section (1) of section 90A
and the assessee does not have a permanent establishment in
India in accordance with the provisions of such Agreement; or
(ii) the assessee is a resident of a country with which India
does not have an agreement of the nature referred to in clause
(i) above and the assessee is not required to seek registration
under any law for the time being in force relating to
companies.
It is further proposed to amend section 115JB so as to provide

that in case of a company, being a unit located in International
Financial Services Centre and deriving its income solely in
convertible foreign exchange, the Minimum Alternate Tax
shall be chargeable at the rate of nine per cent.
115-O (7)/115-O (8)
(01.06.2016)
New Clause It is proposed to amend section 115-O so as to provide that no
tax on distributed profits shall be chargeable under this
section in respect of any amount declared, distributed or paid
by the specified domestic company by way of dividend
(whether interim or otherwise) to a business trust out of its
current income on or after the specified date provided that
nothing contained in this sub-section shall apply in respect of
any amount declared, distributed or paid, at any time, by the
specified domestic company by way of dividends (whether
interim or otherwise) out of its accumulated profits and
current profits up to the specified date.
It is further proposed to amend section 115-O so as to provide
that no tax on distributed profits shall be chargeable in respect
of the total income of a company being a unit located in
International Financial Services Centre, deriving income solely
in convertible foreign exchange, for any assessment year on
any amount declared, distributed or paid by such company, by
way of dividends (whether interim or otherwise) on or after
the 1st day of April, 2017 out of its current income, either in
the hands of the company or the person receiving such
dividend.
115QA
(01.06.2016)
The existing provisions of section 115QA of the Act provide for
the levy of additional Income-tax @ 20% of the distributed
income on account of buy back of unlisted shares by a company.
The distributed income has been defined in the section to mean
the consideration paid by the company on buy back of shares as
reduced by the amount which was received by the company for
issue of such shares. Buyback has been defined to mean the
purchase of a company of its own shares in accordance with the
provisions of section 77A of the Companies Act, 1956.
Recently doubts have been raised regarding the effect of
buybacks undertaken by the company under different
provisions of the Companies Act, 1956 or the Companies Act,
2013 and applicability of provisions of section 115QA to such
transactions.
An issue has also been raised regarding lack of clarity in
determination of consideration received by the company at
the time of issue of shares being bought back by the company.
There are situations where shares may have been issued by

the company in tranches, for different considerations, at
different point of time or may have been issued in lieu of
existing shares of another company under amalgamation,
merger or demerger.
For the purposes of section 115QA, it is the effect of buyback
being in the nature of distribution of income which is relevant
rather than particular provision of the law relating to
companies under which it has been undertaken. Further, lack
of clarity in the manner of determination of consideration
received by the company would lead to avoidable disputes and
also presents a tax arbitrage opportunity of scaling up of
consideration particularly under a tax neutral business
reorganisation followed by buyback of shares.
In order to provide clarity and remove any ambiguity on the
above issues, it is proposed to amend section 115QA to
provide that the provisions of this section shall apply to any
buy back of unlisted share undertaken by the company in
accordance with the provisions of the law relating to the
Companies and not necessarily restricted to section 77A of the
Companies Act, 1956. It is further proposed to provide that for
the purpose of computing distributed income, the amount
received by the Company in respect of the shares being bought
back shall be determined in the prescribed manner. The rules
would thereafter be framed to provide for manner of
determination of the amount in various circumstances
including shares being issued under tax neutral
reorganisations and in different tranches
115TD, 115TE, 115TF
(01.06.2016)
New Insertion
The existing provisions of section 2(24) of the Act define
"Income" in an inclusive manner. Any voluntary contribution
received by a charitable trust or institution or a fund is included
in the definition of income. Sections 11 and 12 of the Act
provide for exemption to trusts or institutions in respect of
income derived from property held under trust and voluntary
A society or a company or a trust or an institution carrying on
charitable activity may voluntarily wind up its activities and
dissolve or may also merge with any other charitable or non-
charitable institution, or it may convert into a non-charitable
organization. In such a situation, the existing law does not
provide any clarity as to how the assets of such a charitable
institution shall be dealt with. In order to ensure that the
intended purpose of exemption availed by trust or institution

contributions, subject to various conditions contained in the
said sections. The primary condition for grant of exemption is
that the income derived from property held under trust should
be applied for the charitable purposes, and where such income
cannot be applied during the previous year, it has to be
accumulated and invested in the modes prescribed and applied
for such purposes in accordance with various conditions
provided in the section. If the accumulated income is not
applied in accordance with the conditions provided in the said
section within a specified time, then such income is deemed to
be taxable income of the trust or the institution. Section 12AA
provides for registration of the trust or institution which
entitles them to be able to get the benefit of sections 11 and 12.
It also provides the circumstances under which the registration
can be cancelled. Section 13 of the Act provides for the
circumstances under which exemption under section 11 or 12
in respect of whole or part of income would not be available to a
trust or institution.
is achieved, a specific provision in the Act is required for
imposing a levy in the nature of an exit tax which is attracted
when the organization is converted into a non-charitable
organization or gets merged with a non-charitable
organization or does not transfer the assets to another
charitable organisation.
Accordingly, it is proposed to amend the provisions of the Act
and introduce a new Chapter to provide for levy of additional
income-tax in case of conversion into, or merger with, any
non-charitable form or on transfer of assets of a charitable
organisation on its dissolution to a non-charitable institution.
The elements of the regime are: -
(i) The accretion in income (accreted income) of the trust or
institution shall be taxable on conversion of trust or
institution into a form not eligible for registration u/s 12 AA
or on merger into an entity not having similar objects and
registered under section 12AA or on non-distribution of assets
on dissolution to any charitable institution registered u/s
12AA or approved under section 10(23C) within a period
twelve months from dissolution.
(ii) Accreted income shall be amount of aggregate of total
assets as reduced by the liability as on the specified date. The
method of valuation is proposed to be prescribed in rules. The
asset and the liability of the charitable organisation which
have been transferred to another charitable organisation
within specified time will be excluded while calculating
accreted income.
(iii) The taxation of accreted income shall be at the maximum
marginal rate.
(iv) This levy shall be in addition to any income chargeable to
tax in the hands of the entity.
(v) This tax shall be final tax for which no credit can be taken
by the trust or institution or any other person, and like any
other additional tax, it shall be leviable even if the trust or
institution does not have any other income chargeable to tax

in the relevant previous year.
(vi) In case of failure of payment of tax within the prescribed
time a simple interest @ 1% per month or part of it shall be
applicable for the period of non-payment.
(vii) For the purpose of recovery of tax and interest, the
principal officer or the trustee and the trust or the institution
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.
124
(01.06.2016)
The existing sub-section (3) of the section 124, inter-alia,
provides that no person shall be entitled to call in question the
jurisdiction of an Assessing Officer in a case where return is
filed under section 139, after the expiry of one month from the
date on which he was served with a notice issued under sub-
section (1) of section 142 or sub-section (2) of section 143 or
after the completion of the assessment, whichever is earlier.
Currently, this provision does not specifically refer to notices
issued under section 153A or section 153C which relate to
assessment in cases where a search and seizure action has been
taken or cases connected to such cases.
Instances have come to notice wherein the jurisdiction of an
Assessing Officer in such cases have been called into question
at the appellate stages, despite the fact that order passed
under section 153A or 153C is read with section 143(3) of the
Act. In order to remove any ambiguity in such cases it is
proposed to amend sub-section (3) of section 124 to
specifically provide that cases where search is initiated under
section 132 or books of accounts, other documents or any
assets are requisitioned under section 132A, no person shall
be entitled to call into question the jurisdiction of an Assessing
Officer after the expiry of one month from the date on which
he was served with a notice under sub-section (1) of section
153A or sub-section (2) of section 153C or after the
completion of the assessment, whichever is earlier.
133C
(01.06.2016)
The existing provisions of section 133C empower the
prescribed income-tax authority to issue notice calling for
information and documents for the purpose of verification of
information in its possession.
In order to expedite verification and analysis of the
information and documents so received, it is proposed to
amend section 133C to provide adequate legislative backing
for processing of information and documents so obtained and
making the outcome thereof available to the Assessing Officer
for necessary action, if any
139
(01.04.2017)
Existing provisions of sub-section (1) of section 139 provide
that every person referred to therein shall file a return of
In order to rationalise the time allowed for filing of returns,
completion of proceedings, and realization of revenue without

income on or before the due date. The sixth proviso to the said
section provides that every person, being an individual or Hindu
undivided family or an association of person or a body of
individual, whether incorporated or not or any artificial
juridical person, if his total income or of any other person in
respect of which he is assessable under this Act during the
previous year, without giving effect to provisions of section 10A
or section 10B or section 10BA or Chapter VI-A, exceeds the
maximum amount which is not chargeable to income tax shall
be liable to furnish return on or before the due date.
Existing provision of sub-section (4) of section 139 provides
that a person who has not furnished a return within the time
allowed to him under sub-section (1), or within the time
allowed under a notice issued under sub-section (1) of section
142, may furnish the return for any previous year at any time
before the expiry of one year from the end of the relevant
assessment year or before the completion of the assessment,
whichever is earlier.
Sub-section (5) of the section 139 provides that if any person,
having furnished the return under sub-section (1), or in
pursuance of a notice issued under sub-section (1) of section
142 discovers any omission or any wrong statement therein, he
may furnish a revised return at any time before one year from
the end of the relevant assessment year or completion of
assessment, whichever is earlier.
Clause (aa) of Explanation to sub-section (9) of the section 139
provides that a return of income shall be regarded as defective
unless the self-assessment tax together with interest, if any,
payable in accordance with the provisions of section 140A, has
been paid on or before the date of furnishing of return.
undue compliance burden on the taxpayer, and to promote the
culture of compliance, it is proposed to amend the above
provisions of the Act.
It is proposed to amend the sixth proviso to sub-section (1) of
the section 139 to include that if a person during the previous
year earns income which is exempt under clause (38) of
section 10 and income of such person without giving effect to
the said clause of section 10 exceeds the maximum amount
which is not chargeable to tax, shall also be liable to file return
of income for the previous year within the due date.
It is also proposed to substitute sub-section (4) of the
aforesaid section to provide that any person who has not
furnished a return within the time allowed to him under sub-
section (1), may furnish the return for any previous year at
any time before the end of the relevant assessment year or
before the completion of the assessment, whichever is earlier.
It is also proposed to substitute sub-section (5) of the
aforesaid section so as to provide that if any person, having
furnished a return under sub-section (1) or under sub-section
(4), or in a return furnished in response to notice issued under
sub-section (1) of section 142, discovers any omission or any
wrong statement therein, he may furnish a revised return at
any time before the expiry of one year from the end of the
relevant assessment year or before the completion of the
assessment, whichever is earlier.
It is also proposed to omit clause (aa) of the Explanation to
sub-section (9) of aforesaid section to provide that a return
which is otherwise valid would not be treated defective
merely because self-assessment tax and interest payable in
accordance with the provisions of section 140A has not been
paid on or before the date of furnishing of the return.

Section 153 (01.06.2016)
Section Time limit upto 31st May 2016 Time limit from 1st June 2016
Assessment under section 143(3) or
under section 144
2 years 21 Month
Assessment or reassessment under 1 year 9 Months
143
(01.06.2016)/
(01.04.2017)
Under the existing provision of sub-section (1D) of section 143,
processing of a return is not necessary where a notice has been
issued to the assessee under sub-section (2) of the said section.
Clause (a) of sub-section (1) of section 143 provides that, a
return filed is to be processed and total income or loss is to be
computed after making the adjustments on account of any
arithmetical error in the return or on account of an incorrect
claim, if such incorrect claim is apparent from any information
in the return.
01.04.2017
It is proposed to amend sub-section (1D) of the aforesaid
section to provide that before making an assessment under
sub-section (3) of section 143, a return shall be processed
under sub-section (1) of section 143.
01.06.2016
In order to expeditiously remove the mismatch between the
return and the information available with the Department, it is
proposed to expand the scope of adjustments that can be
made at the time of processing of returns under sub-section
(1) of section 143. It is proposed that such adjustments can be
made based on the data available with the Department in the
form of audit report filed by the assessee, returns of earlier
years of the assessee, 26AS statement, Form 16, and Form
16A. However, before making any such adjustments, in the
interest of natural justice, 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. However, if no response is received within thirty
days of issue of such intimation, the processing shall be
carried out incorporating the adjustments.
147
(01.06.2016)
New addition It is proposed to in section 147 of the Income-tax Act, to
include in definition of cases of income escaping assessment
that information received by the department u/s 133C can
also be base for detection of cases of income escaping
assessment.

section 147
Fresh assessment under section
143(3)/144/147 for order u/s 254,
263 or 264
1 year 9 months.
The period for giving effect direction in
an order of appeal or revision or of the
Settlement Commission or by order of
a court under any other law
-otherwise than by making a fresh
assessment or reassessment
-by making assessment
No time limit
For otherwise than by making a fresh assessment or reassessment - 3
months from the end of the month in which order is received or
passed.
Where it is not possible to give effect, for reasons beyond his control,
the above mentioned period may be extended for additional time of
six months to give effect to the said order
By making assessment:- expiry of twelve months from the end of the
month in which such order is received.
However, for cases pending as on 1.6.2016, the time limit for taking
requisite action is proposed to be 31.3.2017 or twelve months from the
end of the month in which such orderis received, whichever is later.
Where in case of a firm, an assessment
is made on the partner of the firm in
consequence of an assessment or
reassessment made on the firm under
section 147
New Insertion Where an assessment is made on a partner of the firm in consequence
of an assessment made on the firm under section 147, such assessment
be made on or before the expiry of twelve months from the end of the
month in which the assessment order in the case of the firm is passed.
However, for cases pending as on 1.6.2016, the time limit for taking
requisite action is proposed to be 31.3.2017 or twelve months from the
end of the end of the month in which order in case of firm is passed,
whichever is later
Transfer Pricing 1 year in addition to normal provisions. 9 Months in addition to normal proposed provision.
The provisions of section 153 as they stood immediately before their amendment by the Finance Act, 2016, shall apply to and in relation to any order of
assessment, reassessment or recomputation made before the 1st day of June, 2016.

153B (01.06.2016)
Time Limit for completion of assessment or reassessment
Section Earlier Provisions After amendment
153A- 6 year before and 1 year in which search is
conducted.
2 years 21 Months
153C- 6 year before and 1 year in which search is
conducted.
2 years 21 Months
153C- where books of accounts, assests etc. are handed
over under section 153C to the A.O. having jurisdiction
over such other person.
1 year 9 months
TDS PROVISIONS Existing Threshold limit Rs. Proposed Threshold limit Rs.
192A (Payment of accumulated balance due to an
employee)
30000 50000
194BB (Winnings from Horse Race) 5000 10000
194C (Payments to Contractors) Aggregate annual limit of 75000 Aggregate annual limit of 100000
194D (Insurance commission) 20000 15000
194LA(Payment of Compensation on acquisition of
certain Immovable Property)
200000 250000
194G (Commission on sale of lottery tickets) 1000 15000
194H 5000 15000
Section Existing rate Proposed rate
194DA(Payment in respect of Life Insurance Policy) 2% 1%
194EE(Payments in respect of NSS Deposits) 20% 10%
194G (Commission on sale of lottery tickets) 10% 5%
194H (Commission or brokerage) 10% 5%
194LBB(Income in respect of units of investment
funds referred in clause (23FBB) of Sec 10)
TDS 10% for non residents. Rates in force for non resident (not being a
company) or foreign company.

194LBC Not Applicable Where any income is payable to investor in respect
of investment in a securitisation trust specified in
clause (d) of the Explanation occurring after
section 115TCA, tax shall be deducted as under:
a. twenty-five per cent., if the payee is an
individual or a Hindu undivided family;
b. thirty per cent., if the payee is any other
person.
c. Rates in force for non residents payee.
Non Operational Provisions
194K (Income in respect of Units) TDS in payment of income in relation to f Mutual
Fund specified under clause (23D) of section 10
or of the Unit Trust of India.
Omitted w.e.f 1st June 2016
194L (Payment of Compensation on acquisition of
Capital Asset)
Any person responsible for paying to a resident
any sum being in the nature of compensation , of
any capital asset .
Omitted w.e.f 1st June 2016
Section/Applicability Earlier Provision After amendment
197(Certificate for
deduction at lower rate)
(01.06.2016)
New entry Inclusion of section 194LBB and 194LBC for lower deduction
of tax.
197A
(01.06.2016)
New entry Inclusion of section 194EE and 194DA for nil deduction of tax.
206AA (Requirement to
furnish Permanent
Account Number)
(01.06.2016)
The provisions of this section shall not apply in respect of payment
of interest, on long-term bonds, as referred to in section 194LC, to
a non-resident, not being a company, or to a foreign company
Provisions of section 206AA shall not be applicable for Non
residents including foreign company in respect
(I) payment of interest on long-term bonds as
referred to in section 194LC; and
(II) any other payment subject to such conditions as
may be prescribed.”.
206C
(01.06.2016)
The Seller shall collect the tax at the rate of one per cent from the
purchaser on sale of Jewellery in cash > Rs. 2 Lakh
Bullion in cash > Rs. 2 Lakh
The Seller shall collect the tax at the rate of one per cent from
the purchaser on sale of
(i) Motor Vehicle> Rs.10 lakh
(ii) Any goods and services (Other than bullion and

Jewellery) in cash > Rs. 2 Lakh
(iii) Jewellery in cash > Rs. 2 Lakh
(iv) Bullion in cash > Rs. 2 Lakh
However no collection on which tax is deducted at source
under Chapter XVII-B.
It is also proposed to provide that the sub-section (1D)
relating to TCS in relation to sale of any goods (other than
bullion and jewellery) or services shall not apply to certain
class of buyers who fulfil such conditions as may be
prescribed.
211
(01.06.2011)
Due date for advance Tax
For Companies
15th junupto 15% of total tax
15th Sep upto 45% of total tax
15th Dec upto 75% of total tax
15th mar 100% of total tax
For Non Companies
15th Sep upto 30% of total tax l
Eligible business referred to in sec 44AD
Not applicable
Due Date for Advance Tax
For all except, assessee under 44AD
15th jun upto 15% of total tax
15th Sep upto 45% of total tax
Eligible business referred to in sec 44AD
15th March 100% of Total Tax
220
(01.06.2016)
Sub-section (2) of section 220 provides for levy of interest at the
rate of 1 per cent for every month or part of month for the period
during which the default continues. Sub-section (2A) of said
section inter-alia, empowers the Principal Chief Commissioner,
Chief Commissioner, Principal Commissioner or Commissioner to
reduce or waive the amount of interest paid or payable under sub-
section (2) of the said section.
It is proposed to amend section 220 to provide that an order
accepting or rejecting application of an assessee shall be
passed by the concerned Principal Chief Commissioner, Chief
Commissioner, Principal Commissioner or Commissioner
within a period of twelve months from the end of the month
in which such application is received.
234C
(01.06.2016)
No interest for eligible business u/s 44AD 1% per month from 15th march of the previous year in case
of non deposit of advance tax.
It is also proposed that interest under section 234C shall not
be chargeable in case of an assessee having income under the

head "Profits and gains of business or profession" for the first
time, subject to fulfilment of conditions specified therein.
244A
(01.06.2016)
Section 244A inter alia provides that an assessee is entitled to
interest on refund arising out of excess payment of advance tax,
tax deducted or collected at source. It also provides that the period
for which the interest is paid on such excess payment of tax begins
from the 1st April of the assessment year and ends on the date on
which refund is granted.
Now the interest on refund
A. on account of Advance tax, TDS and TCS during the
financial year will be given as under:-
(i) from the 1st day of April of the assessment year to
the date on which the refund is granted, if the
return of income has been furnished on or before
the due date specified under sub-section (1) of
section 139.
(ii) from the date of furnishing of return of income to
the date on which the refund is granted, in a case
not covered under sub-clause (i);
B. On account of payment u/s 140A (self assessment
tax) from the date of furnishing of return of income or
payment of tax, whichever is later, to the date on
which the refund is granted
No interest if refund is less than 10% of tax determined u/s
143(1) or regular assessment.
It is also proposed to provide that where a refund arises out
of appeal effect being delayed beyond the time prescribed
under sub-section (5) of section 153, the assessee shall be
entitled to receive, in addition to the interest payable under
sub-section (1) of section 244A, an additional interest on such
refund amount calculated at the rate of three per cent per
annum, for the period beginning from the date following the
date of expiry of the time allowed under sub-section (5) of
section 153 to the date on which the refund is granted. It is
clarified that in cases where extension is granted by the
Principal Commissioner or Commissioner by invoking
proviso to sub-section (5) of section 153, the period of
additional interest, if any, shall begin from the expiry of such
extended period.
249(2)(b) Clause (b) of sub-section (2) of section 249 provides that an
appeal before the Commissioner (Appeals) is to be made within
Consequential amendment for exclusion of time period of
30days for filing appeal with CIT (A) in respect of application

(01.04.2017) thirty days of the receipt of the notice of demand relating to an
assessment order.
filed under section 270AA (new inserted section for
immunity from penalty u/s 270A and prosecution) till the
disposal of such application.
252
(01.06.2016)
Existing clause (b) of sub-section (3), sub-section (4A) and sub-
section (5) of section 252 provide for the appointment and powers
of Senior Vice- President of the Appellate Tribunal.
In view of the fact that there are no extra-judicial or
administrative duties or difference in the pay scale attached
with the post of Senior Vice-president in the Tribunal, it is
proposed to omit the reference of "Senior Vice-President".
253
(01.06.2016)
Sub-section (2A) of section 253 provides that the Principal
Commissioner or Commissioner may, if he objects to any direction
issued by the Dispute Resolution Panel (DRP) under sub-section
(5) of section 144C in pursuance of which the Assessing Officer
has passed an order completing the assessment or reassessment,
direct the Assessing Officer to appeal to the Appellate Tribunal
against such order.
Further, sub-section (3A) of section 253 provides that every
appeal under sub-section (2A) shall be filed within sixty days of
the date on which the order sought to be appealed against is
passed by the Assessing Officer in pursuance of the directions of
the DRP under sub-section (5) of section 144C.
In line with the decision of the Government to minimise
litigation, it is proposed to omit the said sub-sections (2A)
and (3A) of section 253 to do away with the filing of appeal by
the Assessing Officer against the order of the DRP.
Consequent amendments are proposed to be made to sub-
section (3A) and (4) of the said provision also.
It is also proposed to provide that in cases where Department
is already in appeal against the directions of DRP under sub-
section (2A) of the section 253 (as it stood before the
amendment of the Finance Act, 2016), no fee shall be payable.
This amendment will take effect retrospectively from 1st July,
2012.
254
(01.06.2016)
The existing provisions sub-section (2) of the section 254 of the
Act, provide that the Appellate Tribunal may rectify any mistake
apparent from the record in its order at any time within four years
from the date of the order.
In order to bring certainty to the order of ITAT, it is proposed
to amend sub-section (2) of section 254 to provide that the
Appellate Tribunal may rectify any mistake apparent from the
record in its order at any time within six months from the end
of the month in which the order was passed.
255
(01.06.2016)
The existing provision of sub-section (3) of section 255, inter alia,
provides that a single member bench may dispose of any case
which pertains to an Assessee whose total income as computed by
the Assessing Officer does not exceed fifteen lakh rupees.
In view of the recent increase in monetary limit for filing
appeal before ITAT and to expedite the process of dispute
resolution at the level of ITAT, it is proposed to amend the
said sub-section (3) so as to provide that a single member
bench may dispose of a case where the total income as
computed by the Assessing Officer does not exceed fifty lakh
rupees.

Section 270A (01.04.2017)
Under the existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under
section 271(1)(c) of the Income-tax Act.
In order to rationalize and bring objectivity, certainty and clarity in the penalty provisions, it is proposed that section 271 shall not apply to and in relation to
any assessment for the assessment year commencing on or after the 1stday of April, 2017 and subsequent assessment years and penalty be levied under the
newly inserted section 270A with effect from 1stApril, 2017. The new section 270A provides for levy of penalty in cases of under reporting and misreporting of
income. Sub-section (1) of the proposed new section 270A seeks to provide that the Assessing Officer, Commissioner (Appeals) or the Principal Commissioner
or Commissioner may levy penalty if a person has under reported his income.
It is proposed that a person shall be considered to have under reported his income if,-
(a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1)of section 143;
(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished;
(c) the income reassessed is greater than the income assessed or reassessed immediately before such re-assessment;
(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or 115JC, as the case may be, is greater than the deemed
total income determined in the return processed under clause (a) of sub-section (1) of section 143;
(e) the amount of deemed total income assessed as per the provisions of section 115JB or 115JC is greater than the maximum amount not chargeable to tax,
where no return of income has been filed;
(f) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.
The amount of under-reported income is proposed to be calculated in different scenarios as discussed herein. In a case where return is furnished and
assessment is made for the first time the amount of under reported income in case of all persons shall be the difference between the assessed income and the
income determined under section 143(1)(a).
In a case where no return has been furnished and the return is furnished for the first time, the amount of under-reported income is proposed to be:
(i) for a company, firm or local authority, the assessed income;
(ii) for a person other than company, firm or local authority, the difference between the assessed income and the maximum amount not chargeable to tax.
In case of any person, where income is not assessed for the first time, the amount of under reported income shall be the difference between the income assessed
or determined in such order and the income assessed or determined in the order immediately preceding such order.
It is further proposed that in a case where under reported income arises out of determination of deemed total income in accordance with the provisions of
section 115JB or section 115JC, the amount of total under reported income shall be determined in accordance with the following formula-
(A - B) + (C - D)

where,
A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);
B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under
reported income;
C = the total income assessed as per the provisions contained in section 115JB or section 115JC;
D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been
reduced by the amount of under reported income.
However, where the amount of under reported income on any issue is considered both under the provisions contained in section 115JB or section 115JC and
under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.
It is clarified that in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income,
the amount of under reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed.
Where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss,
as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter
referred to as “preceding year”) and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to
cover such receipt, deposit or investment.
The amount referred to in above be deemed to be amount of income under-reported for the preceding year in the following order—
(a) the preceding year immediately before the year in which the receipt, deposit or investment appears, being the first preceding year; and
(b) where the amount added or deducted in the first preceding year is not sufficient to cover the receipt, deposit or investment, the year immediately preceding
the first preceding year and so on.
It is also proposed that the under-reported income under this section shall not include the following cases:
(i) where the assessee offers an explanation and the income-tax authority is satisfied that the explanation is bona fide and all the material facts have been
disclosed;
(ii) where such under-reported income is determined on the basis of an estimate, if the accounts are correct and complete but the method employed is such that
the income cannot properly be deducted therefrom;
(iii) where the assessee has, on his own, estimated a lower amount of addition or disallowance on the issue and has included such amount in the computation of
his income and disclosed all the facts material to the addition or disallowance;
(iv) where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X
and disclosed all the material facts relating to the transaction;
(v) where the undisclosed income is on account of a search operation and penalty is leviable under section 271AAB.

It is proposed that the rate of penalty shall be fifty per cent of the tax payable on under-reported income. However in a case where under reporting of income
results from misreporting of income by the assessee, the person shall be liable for penalty at the rate of two hundred per cent of the tax payable on such
misreported income. The cases of misreporting of income have been specified as under:
(i) misrepresentation or suppression of facts;
(ii) non-recording of investments in books of account;
(iii) claiming of expenditure not substantiated by evidence;
(iv) recording of false entry in books of account;
(v) failure to record any receipt in books of account having a bearing on total income;
(vi) failure to report any international transaction or deemed international transaction under Chapter X. It is also proposed that in case of company, firm or local
authority, the tax payable on under reported income shall be calculated as if the under-reported income is the total income. In any other case the tax payable
shall be thirty per cent of the under-reported income.
It is also proposed that no addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the
basis of imposition of penalty in the case of the person for the same or any other assessment year.
270AA
(01.04.2017
New Insertion It is proposed to provide that an assessee may make an application to
the Assessing Officer for grant of immunity from imposition of penalty
under section 270A and initiation of proceedings under section 276C,
provided he pays the tax and interest payable as per the order of
assessment or reassessment within the period specified in such notice
of demand and does not prefer an appeal against such assessment
order. The assessee can make such application within one month from
the end of the month in which the order of assessment or
reassessment is received in the form and manner, as may be
prescribed.
It is proposed that the Assessing Officer shall, on fulfilment of the
above conditions and after the expiry of period of filing appeal as
specified in sub-section (2) of section 249, grant immunity from
initiation of penalty and proceeding under section 276C if the penalty
proceedings under section 270A has not been initiated on account of
the following, namely:—
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account;
(c) claim of expenditure not substantiated by any evidence;

(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing
on total income; or
(f) failure to report any international transaction or any transaction
deemed to be an international transaction or any specified domestic
transaction to which the provisions of Chapter X apply.
It is proposed that the Assessing Officer shall pass an order accepting
or rejecting such application within a period of one month from the
end of the month in which such application is received. However, in
the interest of natural justice, no order rejecting the application shall
be passed by the Assessing Officer unless the assessee has been given
an opportunity of being heard. It is proposed that order of Assessing
Officer under the said section shall be final.
It is proposed that no appeal under section 246A or an application for
revision under section 264 shall be admissible against the order of
assessment or reassessment referred to in clause (a) of sub-section
(1), in a case where an order under section 270AA has been made
accepting the application.
Clause (b) of sub-section (2) of section 249 provides that an appeal
before the Commissioner (Appeals) is to be made within thirty days of
the receipt of the notice of demand relating to an assessment order.
It is proposed to provide that in a case where the assessee makes an
application under section 270AA of the Income-tax Act seeking
immunity from penalty and prosecution, then, the period beginning
from the date on which such application is made to the date on which
the order rejecting the application is served on the assessee shall be
excluded for calculation of the aforesaid thirty days period. The
proposed amendment is consequential to the insertion of section
270AA.
271AAB
(01.04.2017)
Existing provision of clause (c) of sub-section (1) of section
271AAB provides that in a case not covered under the provisions
of clauses (a) and (b) of the said sub-section of section 271 AAB,
a penalty of a sum which shall not be less than thirty per cent but
which shall not exceed ninety per cent of the undisclosed income
In order to rationalise the rate of penalty and to reduce discretion it is
proposed to amend that clause (c) of sub-section (1) of section
271AAB to provide for levy of penalty on such undisclosed income at a
flat rate of sixty per cent of such income.

of the specified previous year shall be levied in case where
search has been initiated under section 132 on or after the 1st
day of July, 2012.
272A
(01.04.2017)
Existing provision of Sub-section (1) provides for levy of penalty
of ten thousand rupees for each failure or default to answer the
questions raised by an income-tax authority under the Income-
tax Act, refusal to sign any statement legally required during the
proceedings under the Income-tax Act or failure to attend to give
evidence or produce books or documents as required under sub-
section (1) of section 131 of the Income-tax Act.
It is proposed to amend sub-section (1) of section 272A to further
include levy of penalty of ten thousand rupees for each default or
failure to comply with a notice issued under sub-section (1) of section
142 or sub-section (2) of section 143 or failure to comply with a
direction issued under sub-section (2A) of section 142.
It is further proposed to amend sub-section (3) of section 272A to
provide that penalty in case of failure referred above shall be levied by
the income tax authority issuing such notice or direction.
273A, 273AA
(01.06.2016)
Sub-section (4) of section 273A, inter alia, provides that the
Principal Commissioner or the Commissioner may, on an
application made by an assessee, reduce or waive the amount of
any penalty payable by the assessee or stay or compound any
proceeding for recovery of the penalty amount in certain
circumstances.
Section 273AA inter alia, provides that the Principal
Commissioner or the Commissioner may grant immunity from
penalty, if penalty proceedings have been initiated in case of a
person who has made application for settlement before the
settlement commission and the proceedings for settlement had
abated under the circumstances contained in section 245HA of
the Act
It is proposed to amend section 273A and section 273AA to provide
that an order accepting or rejecting the application of an assessee
shall be passed by the Principal Commissioner or Commissioner
within a period of twelve months from the end of the month in which
such application is received.
It is also proposed to provide that no order rejecting the application of
the assessee under section 220 or 273A, 273AA shall be passed
without giving the assessee an opportunity of being heard. However,
in respect of applications pending as on 1st day of June, 2016, the
order under said sections shall be passed on or before 31stMay, 2017
281B
(01.06.2016)
Under the existing provisions of section 281B the Assessing
Officer may provisionally attach any property of the assessee
during the pendency of assessment or reassessment
proceedings, for a period of six months with the prior approval
of the income- tax authorities specified therein, if he is of the
opinion that it is necessary to do so for the purpose of protecting
the interests of the revenue. Such attachment of property is
extendable to a maximum period of two years or sixty days after
the date of assessment order, whichever is later.
It is proposed to substitute provisional attached property by a bank
guarantee subject to fulfillment of certain conditions. It proposed that
the Assessing Officer shall revoke provisional attachment of property
made under sub-section (1) of the aforesaid section in a case where
the assessee furnishes a bank guarantee from a scheduled bank, for an
amount not less than the fair market value of such provisionally
attached property or for an amount which is sufficient to protect the
interests of the revenue.

In order to help the Assessing Officer to determine the fair market
value of the property, the Assessing Officer may, make a reference to
the Valuation Officer, who may be required to submit the report of the
estimate of the property to the Assessing
Officer within a period of thirty days from the date of receipt of such
reference.
In order to ensure the revocation of attachment of property in lieu of
bank guarantee in a time bound manner, it is proposed to provide that
an order revoking the attachment be made by the Assessing Officer
within fifteen days of receipt of such guarantee, and in a case where a
reference is made to the Valuation Officer, within forty-five days from
the date of receipt of such guarantee.
Further where a notice of demand specifying a sum payable is served
upon the assessee and the assessee fails to pay such sum within the
time specified in the notice, the Assessing Officer may invoke the bank
guarantee, wholly or partly, to recover the said amount.
In a case where the assessee fails to renew the bank guarantee or fails
to furnish a new guarantee from a scheduled bank for an equal
amount fifteen days before the expiry of such guarantee, the Assessing
Officer may in the interests of the revenue, invoke the bank guarantee.
The amount realised by invoking the bank guarantee shall be adjusted
against the existing demand which is payable and the balance amount,
if any, be deposited in the Personal Deposit Account of the Principal
Commissioner or Commissioner at the place where the office of the
Principal Commissioner or Commissioner is situated.
Where the Assessing Officer is satisfied that the bank guarantee is not
required anymore to protect the interests of the revenue, he shall
release that guarantee forthwith.
282A
(01.06.2016)
Sub-section (1) of section 282A provides that where a notice or
other document is required to be issued by any income-tax
authority under the Act, such notice or document should be
It is proposed to amend sub-section (1) of section 282A 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

signed by that authority in manuscript paper form or in electronic form in accordance with such procedure
as may be prescribed.
288
(01.04.2017)
It is proposed to make consequential amendment to section 288 by
insertion of a new clause (d) in sub-section (1) of section 272A in the
Income-tax Act relating to penalty for failure to comply with the
notices and directions specified therein.
Fourth Schedule
(rule 6)
Employer contribution made in excess of 12% of salary of
employee, shall added to the total income of the assessee for that
assessment year.
Now the employer contribution made in excess of lower of
following shall be included in the total income of the employee for the
assessment in which such contribution is made:-
a. contributions made by the employer in excess of 12 per cent of
the salary of the employee
b. contributions made by the employer in excess of Rs.1,50,000/-
Fourth Schedule
(rule 8)
The accumulated balance due and becoming payable to an
employee participating in a recognised provident fund shall be
excluded from the computation of his total income in certain
circumstances.
In the said rule 8, one more circumstance is added which is as under:-
If the entire balance standing to the credit of the employee is
transferred to his account under a pension scheme referred to in
section 80CCD and notified by the Central Government.

PROPOSED AMENDMENTS
IN FINANCE ACT, 1994

Changes applicable w.e.f. 01.03.2016
Particulars Legal Position prior to Union Budget 2016 Legal Position post Union Budget 2016
AMENDMENT IN MEGA EXEMPTION NOTIFICATION
a) Services provided by Indian
Institutes of Management
No specific provision There was certain confusion regarding the taxability of various
education programmes conducted by Indian Institute of
Management as to whether such programmes qualify as a part
of a curriculum for obtaining a qualification recognised by any
law for the time being in force.
Therefore, in order to clarify the taxability of various
education programmes conducted by IIM inserted a new
exemption:
“9B. Services provided by the Indian Institutes of Management,
as per the guidelines of the Central Government, to their
students, by way of the following educational programmes,
except Executive Development Programme, -
(a) two year full time residential Post Graduate Programmes
in Management for the Post Graduate Diploma in Management,
to which admissions are made on the basis of Common
Admission Test (CAT), conducted by Indian Institute of
Management;
(b) fellow programme in Management;
(c) five year integrated programme in Management.
Thus, the above educational programme conducted by IIM
shall not be subject to service tax.
Services provided to the
Government, a local authority
or a governmental authority by
way of construction, erection,
commissioning, installation,
completion, fitting out, repair,
No Exemption Legislature in its Budget of the year 2015 withdrew the
exemption to the services provided to the Government, a local
authority or a governmental authority by way of construction,
erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant

maintenance, renovation, or
alteration
predominantly for use other than for commerce, industry, or
any other business or profession;
(b) a structure meant predominantly for use as
(i) an educational,
(ii) a clinical, or
(iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or
the use of their employees or other persons specified in the
Explanation 1 to clause (44) of section 65 B of the said Act
However many service providers who have entered into an
agreement with government for providing aforesaid service
were severly affected by this amendment as they had to bear
additional burden of service tax.
Therefore, in order to safeguard various service providers,
legislature has now provided exemption to the aforesaid
services provided under a contract which has been entered
prior to 01.03.2015 and on which appropriate stamp duty has
been paid.
Further this exemption shall be available only upto 31.03.2020
and if the contracts entered prior to 01.03.2015 were not
completed by this date, then they would be liable to pay
service tax on services provided w.e.f. 01.04.2020
Services provided under
Housing for All (Urban)
Mission/ Pradhan Mantri
Aawas Yojna
No exemption Housing for all by 2022 with the main focus on urban poor is a
vision of present government of India and in order to achieve
that government needs to reduce the burden of tax on
construction of houses.
Therefore, in order to achieve its vision, government has
exempted the Services provided by way of
construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or
alteration of,-

a) a civil structure or any other original works pertaining to
the In-situ rehabilitation of existing slum dwellers using land
as a resource through private participation ‟under the
Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana,
only for existing slum dwellers.
(b) a civil structure or any other original works pertaining to
the Beneficiary led individual house construction/
enhancement under the Housing for All (Urban)
Mission/Pradhan Mantri Awas Yojana.
Services by way of construction,
erection, commissioning, or
installation of original works
Services by way of construction, erection, commissioning,
or installation of original works pertaining to,-
(a) railways, including monorail or metro;
(b) a single residential unit otherwise than as a part of a
residential complex;
(c) low- cost houses up to a carpet area of 60 square
metres per house in a housing project approved by
competent authority empowered under the ‘Scheme of
Affordable Housing in Partnership’ framed by the Ministry
of Housing and Urban Poverty Alleviation, Government of
India;
(d) post- harvest storage infrastructure for agricultural
produce including a cold storages for such purposes; or
(e) mechanised food grain handling system, machinery or
equipment for units processing agricultural produce as
food stuff excluding alcoholic beverages
In the present budget, the legislature has withdrawn the
benefit of exemption on services provided by way of
construction, erection, commissioning, or installation of
original works pertaining to monorail or metro.
However in order to safeguard the interest of various
contractors who have entered into an agreement before
01.03.2016 and on which appropriate rate of stamp duty has
been paid shall remain exempt. Thus all the contracts which
are entered on or after 01.03.2016 shall be subject to service
tax.
Further for the purpose of availing exemption pertaining to
low cost houses upto a carpet area of 60 sq. mt., government
has now specified the following schemes-
(i) the “Affordable Housing in Partnership” component of the
Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
(ii) any housing scheme of a State Government
Thus low cost houses other than approved by competent
authority under aforesaid scheme shall be subject to service
tax.

Services by way of construction,
erection, commissioning, or
installation of original works to
an port or airport
No Exemption Legislature in its Budget of the year 2015 withdrew the
exemption to the services provided by way of construction,
erection, commissioning, or installation of original works
pertaining to an airport or port
However many service providers who have entered into an
agreement with government for providing aforesaid service
were severely affected by this amendment as they had to bear
additional burden of service tax.
Therefore, in order to safeguard various service providers,
legislature has now provided exemption to the aforesaid
services provided under a contract which has been entered
prior to 01.03.2015 and on which appropriate stamp duty has
been paid. Further the service provider in order to avail the
benefit of this exemption shall be required to take the
certificate from Ministry of Civil Aviation or the Ministry of
Shipping in the Government of India, as the case may be, that
the contract had been entered into before the 1st March, 2015:
Further this exemption shall be available only upto 31.03.2020
and if the contracts entered prior to 01.03.2015 were not
completed by this date, then they would be liable to pay
service tax on services provided w.e.f. 01.04.2020
AMENDMENTS IN POINT OF TAXATION RULES, 2011
Point of Taxation in case of new
service
Where a service is taxed for the first time, then,—
(a) no tax shall be payable to the extent the invoice has
been issued and the payment received against such invoice
before such service became taxable;
(b) no tax shall be payable if the payment has been
received before the service becomes taxable and invoice
has been issued within fourteen days of the date when the
service is taxed for the first time.
The Point of Taxation Rules did not provide for point of
taxation in case of new levy on services. With the introduction
of Swachch Bharat Cess, there was confusion regarding
applicability of service tax and rate of tax on provision of
service. Therefore, in order to clear this confusion and to
define point of taxation in case of new levy, amendment was
made in Rule 5.
Accordingly, the provisions of rule 5 shall apply in case of new
levy on services.

NEW EXEMPTIONS
Exemption to services provided
by bio-incubators
No such exemption Earlier the exemption was only provided to services provided
by Technology Business Incubator (TBI) or a Science and
Technology Entrepreneurship Park (STEP).
However, now the benefit of exemption has been extended to
bio-incubators recognized by the Biotechnology Industry
Research Assistance Council, under Department of
Biotechnology, Government of India.
Exemption on the service of
Information technology
Software.
Service tax on the services of Information Technology
Software on media bearing retail sale price is being exempted
from Service Tax provided Central Excise duty is paid on retail
sale price in accordance with Section 4A of the Central Excise
Act.
AMENDMENTS IN CENVAT Credit Rules, 2004
Exempted Service Transportation of goods by a vessel from custom station of
clearance in India to a place outside India was covered
under the definition of exempted service
An amendment in definition of exempted service is made so as
to exclude the services of transportation of goods by a vessel
from custom station of clearance in India to a place outside
India out of its ambit.
It is a major relief to shipping industry as they had to incurs
huge cost on account of loss of service tax paid on inputs,
capital goods and input services.
Utilization of CENVAT Credit Presently CENVAT Credit except NCCD shall not be allowed
to utilized for payment of NCCD on goods falling under
tariff items 85171210 and 85171290 respectively of the
First Schedule of the Central Excise Tariff
Now, legislature has barred the utilization of CENVAT Credit
against the NCCD leviable under Section 136 of the Finance
Act, 2001 whereas earlier the restriction on utilization was
only on goods falling under tariff items 85171210 and
85171290 respectively.
Utilization of CENVAT Credit
for payment of Infrastructure
Cess
No provision Legislature has levied a new cess namely “Infrastructure Cess”
for development of infrastructure in India. Therefore, in order
to collect the cash, they have restricted the utilization of
CENVAT Credit for payment of infrastructure cess and hence,
every assessee shall be liable to deposit the entire
Infrastructure Cess in cash with the department.

Particulars Legal Position prior to Union Budget 2016 Legal Position post Union Budget 2016
AMENDMENT IN EXEMPTION PROVIDED BY WAY OF ABATEMENT
a) Transportation of Goods by
rail
Abatement of 70% on transportation of goods by rail by
any person i.e. whether provided by Indian Railways or any
other person.
No CENVAT Credit on inputs, capital goods and input
services was available to service providers availing the
benefit of abatement on such services.
A distinction has been made between services provided by
Indian railways and other than Indian Railways.
Union Budget 2016 has reduced the exemption percentage on
transportation of goods services provided by other than
Indian Railways. Such other person shall be liable to pay
service tax on 40% value of service tax as compared to 30%
prior to Budget 2016.
Further CENVAT Credit on input services shall now be
available to all the service providers engaged in
transportation of goods by rail.
Transportation of passengers in
rail
CENVAT Credit on input services shall now be available to
service providers availing the benefit of abatement.
Transportation of Goods by
Road
Transportation of all kinds of goods (except those goods
specifically excluded by way of exemption notification)
were subject to service tax after availing the abatement of
70%
Now, the legislature has reduced the percentage of abatement
on transportation of used household goods. Abatement on
transportation of used household goods has now been
reduced from 70% to 60%.
Service providers engaged in provision of transportation of
used household goods by road shall now be liable to pay
service tax on 40% value of amount charged.
Services provided by Foreman
of chit fund in relation to chit
No abatement was available on such services An abatement of 30% has now been granted to services
provided by Foreman of chit fund in relation to chit.
Such service providers shall be liable to pay service tax on
70% value of the amount charged towards provision of
service.
Further CENVAT Credit on inputs, capital goods or input

services shall not be available to the service provider availing
the benefit of this abatement.
Transportation of Goods in a
vessel
CENVAT Credit on input services shall now be available to
service providers availing the benefit of abatement.
Tour Operator Services Particulars Value of
taxable service
Service by tour operator in relation to
(i) a package tour 25%
(ii) a tour, if the tour operator is
providing services solely of arranging
or booking accommodation for any
person in relation to a tour
10%
(iii) any services other than specified
at (i) and (ii) above.
40%
Particulars Value of taxable
service
Service by tour operator in relation to
(i) a tour, only for the purpose of
arranging or booking accommodation
for any person
10%
(iii) tours other than (i) above. 30%
Construction of residential or
commercial complex
Construction of complex, building, civil structure or a part
thereof which is intended for a sale to buyer except where
entire consideration is received after the issuance of
completion certificate shall be subject to service tax as
under
Particulars Value of taxable
service
a) for a residential unit satisfying
both the following conditions,
namely:-
(i) the carpet area of the unit is less
than 2000 square feet; and
(ii) the amount charged for the unit
is less than rupees one crore;
25%
(b) for other than the (a) above. 30%
A flat rate of 30% has been prescribed as value of taxable
service on construction of complex, building, civil structure or
a part thereof which is intended for a sale to buyer except
where entire consideration is received after the issuance of
completion certificate.
Residential units having carpet area of less than 2000 square
feet and where the amount charged is less than one crore shall
attract higher service tax as earlier the taxable value of such
service was 25% of the gross amount charged, whereas after
the amendments brought out in union budget 2016, such
services shall attract service tax on 30% of the gross amount
charged.
Renting of motorcab No provision An explanation has been inserted in Notification No. 26/2012-
ST so as to clarify that in case of renting of motor cab, the
gross amount charged shall include the value of all goods

(including fuel) and services supplied by service recipient.
Some cab operators used to charge separately for the fuel etc
so as to underrate the value of service. Thus, in order to
safeguard the interest of revenue, the above explanation has
been introduced.
AMENDMENTS IN MEGA EXEMPTION NOTIFICATION
Legal Services Services provided by-
(a) an arbitral tribunal to -
(i) any person other than a business entity; or
(ii) a business entity with a turnover up to rupees ten
lakh in the preceding financial year;
(b) an individual as an advocate or a partnership firm of
advocates by way of legal services to,-
(i) an advocate or partnership firm of advocates
providing legal services ;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten
lakh in the preceding financial year; or
(c) a person represented on an arbitral tribunal to an
arbitral tribunal.
Services provided by-
(a) an arbitral tribunal to -
(i) any person other than a business entity; or
(ii) a business entity with a turnover up to rupees ten lakh in
the preceding financial year;
(b) a partnership firm of advocates or an individual as an
advocate other than a senior advocate, by way of legal services
to-
(i) an advocate or partnership firm of advocates providing
legal services;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten lakh
in the preceding financial year; or
(c) a senior advocate by way of legal services to a person other
than a person ordinarily carrying out any activity relating to
industry, commerce or any other business or profession.
Earlier the services provided by senior advocate to specified
person were exempted from payment of service tax. However,
now the services provided by senior advocates shall now be
exempt only if such services are provided to any person
ordinarily not carrying out any activity relating to industry,
commerce or any other business or profession.

Furthermore, the services provided by a person represented
on an arbitral tribunal to an arbitral tribunal were also
exempted from service tax prior to Union Budget, 2016, but
now the exemption available on such services has been
withdrawn. Thus arbitrator providing services to arbitral
tribunal shall been subject to service tax.
Services by way of Assesement
under Skill Development
Initiative Scheme
No Exemption Exemption has been provided to services provided by
assessing bodies in assessment of trainees which are
empanelled centrally Directorate General of Training, Ministry
of Skill Development and Entrepreneurship under Skill
Development Initiative (SDI) Scheme.
Government of India has introduced Skill Development
Initiative (SDI) Scheme to provide vocational training to
school leavers, existing workers, ITI graduates, etc. to improve
their employability by optimally utilizing the infrastructure
available in Govt., private institutions and the Industry.
All the trainees are subject to assessment by independent
assessing bodies. Such assessing bodies were liable to pay
service tax on services provided by them. Therefore a new
exemption has been inserted in mega exemption notification
so as to exempt the aforesaid services.
Services provided under Deen
Dayal Upadhyaya Grameen
Kaushalya Yojana
No specific exemption Legislature has exempted services provided by training
providers under Deen Dayal Upadhyaya Grameen Kaushalya
Yojana under the Ministry of Rural Development by way of
offering skill or vocational training courses certified by
National Council For Vocational Training
There was no exemption available to these services earlier.
Legislature has now exempted these services
Services by an artist Services by an artist by way of a performance in folk or
classical art forms of (i) music, or (ii) dance, or (iii) theatre,
if the consideration charged for such performance is not
more than one lakh rupees:
Earlier the services provided by an artist by way of
performance in folk or classical art forms were exempted if
the amount charged for performance such service was not
more than one lakh rupees:

Provided that the exemption shall not apply to service
provided by such artist as a brand ambassador However, now this limit has been enhanced from one lakh
rupees to one lakh and fifty thousand rupees.
Transport of passengers, with
or without accompanied
belongings,
Transport of passengers, with or without accompanied
belongings, by ropeway, cable car or aerial tramway
exempted from payment of service tax
Finance Budget 2016 has withdrawn the exemption available
on transportation of passengers by ropeway, cable car or
aerial tramway. These services shall now be subject to service
tax
Services of general insurance
business provided under
Nirmaya Health Insurance
Scheme
No exemption Legislature has exempted the services of general insurance
provided under Nirmaya Health Insurance Scheme
implemented by Trust constituted under the provisions of the
National Trust for the Welfare of Persons with Autism,
Cerebral Palsy, Mental Retardation and Multiple Disabilities
Act, 1999
This scheme covers the people suffering with with Autism,
Cerebral Palsy, Mental Retardation & Multiple Disabilities. The
people suffering with aforesaid illness doesnot have easy
access to health insurance schemes. Therefore, in order to
improve the general health condition & quality of life of people
with development disability, legislature has exempted the
general insurance services provided under Nirmaya Health
Insurance Scheme
Services of life insurance
business provided by way of
annuity under the National
Pension System
No exemption A new exemption has been provided to services of life
insurance business provided by way of annuity under the
National Pension System regulated by Pension Fund
Regulatory and Development Authority of India (PFRDA)
under the Pension Fund Regulatory And Development
Authority Act, 2013 (23 of 2013).
National Pension System (NPS) is a voluntary, defined
contribution retirement savings scheme designed to enable
the subscribers to make optimum decisions regarding their
future through systematic savings during their working life.
NPS seeks to inculcate the habit of saving for retirement
amongst the citizens.

New Exemptions No exemption Legislature has granted following exemptions in its Union
Budget 2016:-
a) Services provided by EPFO to the persons governed under
the Employees Provident Funds and Miscellaneous Provisions
Act, 1952
b) Services provided by IRDA to the insurers under the
Insurance Regulatory and Development Authority of India Act,
1999
c) Services provided by Securities and Exchange Board of
India (SEBI) set up under the Securities and Exchange Board
of India Act, 1992 by way of protecting the interests of
investors in securities and to promote the development of, and
to regulate, the securities market
d) Services provided by National Centre for Cold Chain
Development under Ministry of Agriculture, Cooperation and
Farmer’s Welfare by way of cold chain knowledge
dissemination
Exemption to services provided
by bio-incubators
No such exemption Earlier the exemption was only provided to services provided
by Technology Business Incubator (TBI) or a Science and
Technology Entrepreneurship Park (STEP)
However, now the benefit of exemption has been extended to
bio-incubators recognized by the Biotechnology Industry
Research Assistance Council, under Department of
Biotechnology, Government of India
Amendments in Finance Act, 1994
Support Services provided by
Government
Legislature in the Union Budget 2015 brought all the
services provided by the government to business entities
under the service tax net.
However this amendment was not made effective
Legislature has appointed 01.04.2016 as the date for bringing
this notification into effect and with this all the services
received by the business entities from the government shall be
liable to service tax.
AMENDMENTS IN REVERSE CHARGE MECHANISM
Any service provided by the
government to business entities
Presently only support services provided by the
government to business entities were covered under the
Legislature has appointed 01.04.2016 as the date for bringing
this notification into effect and with this all the business

reverse charge mechanism, Legislature in the Union Budget
2015 brought all the services provided by the government
to business entities under reverse charge mechanism.
However this amendment was not made effective
entities receiving services from the government shall be liable
to pay service tax under Reverse Charge Mechanism.
Further consequential amendment in the definition of person
liable to pay service tax in service tax rules has also been
made effective from 01.04.2016
Services provided by Mutual
Fund agents or distributors
Services provided by Mutual Fund agents or distributors to
mutual funds or asset management company were covered
under Reverse Charge Mechanism.
The mutual funds or asset management company were
liable to service tax under reverse charges on the services
received from Mutual Fund agents or distributors
This provision has been deleted. Hence, now the Mutual Fund
agents or distributors shall be liable to discharge their service
tax liability on the services provided by them.
The mutual funds or asset management company have been
relieved from the payment of service tax under Reverse
Charge mechanism.
Services provided by Senior
Advocates
Services provided by all the advocates were covered under
Reverse Charge mechanism and any business entity
(having turnover of more than Rs. 10 lakhs) availing
services from advocates or firm of advocates shall be liable
to discharge service tax under Reverse Charge.
Distinction has been made between senior advocates and
other advocates. Now the services provided by senior
advocates shall not be covered under Reverse Charge
mechanism and such senior advocates shall be liable to pay
service tax under Reverse Charge mechanism.
Services provided by selling or
marketing agents of lottery
tickets
Lottery distributor or selling agents are liable to pay
service tax under Reverse Charge mechanism on services
received by them from selling or marketing agent of lottery
tickets
A clarificatory amendment has been made to cover all the
services provided by the selling or marketing agent of lottery
tickets to lottery distributor or selling agents of the State
Government under the provisions of the Lotteries
(Regulation) Act, 1998 are covered under Reverse Charge.
AMENDMENTS IN SERVICE TAX RULES, 1994
Person liable to pay service tax In the case of services provided by senior advocates and
mutual funds or asset management company, the liability
to pay service tax was casted on the recipient of service.
Services provided by senior advocates and mutual funds or
asset management company have been excluded from the
reverse charge mechanism and hence, the definition of person
liable to pay service tax was amended.
Payment of Service Tax One person company were liable to pay service tax to the
credit of Central Government by 5th or 6th of the month as
the case may be immediately following the calendar
month in which service is provided
Now the one person company has been brought on the same
footing with an individual or proprietary firm or partnership
firm.
Now the one person company whose turnover in previous
year is rupees fifty lakhs or less shall be liable to discharge
their service tax liability by 5th or 6th as the case may be of the

month as the case may be immediately following the quarter
in which service is provided.
Further an option has been granted to one person company
whose turnover in previous year is rupees fifty lakhs or less to
discharge their service tax liability on receipt basis rather than
discharging service tax liability on the basis of Point of
Taxation Rules.
Special rate of tax on single
premium annuity policies
No specific rate was defined for single premium annuity
policies
A reduced rate of 1.4% of the single premium charged from
the policy holder has been provided to insurers in case of
single premium annuity policies.
Annual Return of service tax No such provision A new concept of annual return of service tax has been
introduced by the legislature. Now all the assessee who are
liable to file their service tax return shall be liable to file
annual return by 30th November of the succeeding financial
year in the prescribed form.
This is a welcome step as it has been seen that many assessee
are unable to revise their return after the period of 90 days.
Therefore, in order to rectify their return, they had no option.
Now with this annual return, the assessees can now file annual
return with all the corrections and true data.
Further power has been granted to the Central Government to
exempt specified class of person from filing the annual return
as referred above.
Revision of Annual Return of
Service Tax
No provision A period of one month has been granted for revision of annual
return and such one month shall be calculated from the date of
submission of the original annual return
Penalty for late filing of Annual
Return
No provision A penalty of Rs. 100 per day for the period of delay in filing of
such return, subject to a maximum of twenty thousand rupees
has been specified so as to ensure the compliance of this
provision

AMENDMENTS IN CENVAT CREDIT RULES, 2004
Capital Goods a) Wagons covered under sub heading 860692 was not
covered under the definition of capital goods
b) Equipments or appliances used in an office were
excluded from the definition of capital goods
c) Further the capital goods used in pumping of water were
excluded from the definition of capital goods
In this budget, legislature has enlarged the scope of capital
goods and extended the benefit of CENVAT Credit on capital
goods on following
a) Wagons covered under sub heading 860692
b) Equipments or appliances used in an office
c) Capital goods used in pumping of water
All the aforesaid shall now be eligible as Capital Goods and all
the assessee shall be ne entitle to avail the benefit of CENVAT
Credit.
Input Following goods were not covered under the definition of
inputs
a) Goods used in pumping of water
b) Capital Goods which have a value upto Rs. 10,000/- per
piece
The definition of input service has been enlarged to cover the
goods used in pumping of water.
Further in order to reduce the burden of documentation,
legislature has covered the capital goods having a value upto
Rs. 10,000/- per piece under the definition of input. Now the
assessee can avail full CENVAT Credit of such capital goods
immediately on receipt of goods in their factory.
Input service distributor Input service distributor could not distribute the credit of
service tax paid on input services to outsourced
manufacturing unit.
Input service distributors were not allowed to distribute the
credit of service tax on invoices received by them to the
outsourced manufacturing unit and now they can adjust the
same against their output tax liability.
It has now been provided that an Input Service Distributor
shall distribute CENVAT credit in respect of Service tax paid
on the input services to its manufacturing units or units
providing output service or to outsourced manufacturing units
subject to the conditions specified therein
CENVAT Credit on jigs, fixtures,
moulds, dies or tools falling
under Chapter 82 of the First
Schedule to the CETA
CENVAT Credit was not available on tools falling under
Chapter 82 of the First Schedule to the CETA when it was
intended to be used by another manufacturer or job
worker for the production of goods on the behalf of
manufacturer.
Manufacturer of final products is being allowed to take
CENVAT credit on tools of Chapter 82 of the CETA, when the
same was intended to be used in the premises of job-worker
or another manufacturer, who manufactures the goods as per
specification of manufacturer of final products.

Further earlier the manufacturer had to first bring the
goods in its own premises in order to avail the benefit of
CENVAT Credit
Further a relaxation has been provided to the manufacturer
from bringing the jigs, fixtures, moulds, dies or tools in its own
premises before sending the same to such other manufacturer
or job-worker.
Permission to manufacturer to
send inputs or partially
processed inputs outside his
factory
Earlier the permission given by Assistant Commissioner or
Deputy Commissioner to the manufacturer to send inputs
or partially processed inputs outside his factory to job
worker was valid for one financial year.
However, now the time limit of one year has been extended to
three financial years meaning thereby the manufacturer does
not have to seek permission every year.
Utilization of CENVAT Credit of
service tax paid by way of
assignment of the right to use
any natural resources
No provision Legislature has levied service tax on assignment by the
government or any other person of the right to use natural
resources.
Since, the benefit of the rights is spread across number of
years, legislature has spread the benefit of availment of
CENVAT Credit over the period of time for which the right to
use has been assigned.
Further where a person further assigns such to any other
person for consideration, than it shall be entitle to avail the
benefit of CENVAT Credit equivalent to tax payable on such
consideration
However, where the annual or monthly user charges are
payable in respect of assignment of the right to use natural
resources.
Availment of CENVAT Credit Where a manufacturer or producer of final products and
a provider of output service is engaged in manufacture of
dutiable goods and exempted goods or provider of output
services and exempted services, then it shall be entitle to
avail CENVAT Credit as under:
a) No CENVAT Credit shall be allowed in respect of inputs
and input services exclusively used in relation to
manufacture of exempted goods or provision of output
service
b) A service provider of output service or manufacture of
The manufacturers or provider of output service were facing
difficulties in availing CENVAT credit as where it is not
possible to maintain separate accounts, they had to forego
proportionate CENVAT credit for even input and input
services used exclusively in manufacture of final goods and
provider of output service.
Union Budget 2016 has made following amendments:-
a) No CENVAT Credit shall be allowed in respect of inputs and
input services exclusively used in relation to manufacture of

final goods shall take CENVAT credit of inputs and input
services used for manufacture of dutiable goods or
provision of output service provided it maintains separate
accounts for receipt, consumption and inventory of input
and input services
c) However where it is not possible to maintain separate
accounts, then a manufacturer or provider of output
service shall have following option:-
i) pay an amount equal to six per cent of value of the
exempted goods and seven per cent of value of the
exempted services; or
ii) avail proportionate CENVAT Credit
iii) maintain separate accounts for inputs and avail
proportionate CENVAT credit on input services
exempted goods or provision of output service
b) pay an amount equal to six per cent of value of the
exempted goods and seven per cent of value of the exempted
services; or
c) i) Avail full CENVAT credit on input or input services used
exclusively for manufacture of dutiable goods or provision of
output service; and
ii) Reverse CENVAT Credit on input or input services used
exclusively for manufacture of exempted goods or provision of
exempted service; and
iii) Avail proportionate CENVAT credit on common input and
input services.
No provision Where a person failed to exercise the option of availment of
CENVAT credit, the jurisdictional central excise officer may
allow such manufacturer or provider of output service to
follow the procedure and such person shall be allowed to avail
the benefit of this option and such person shall pay the
amount along with interest at the rate of 15% p.a.
CENVAT Credit for Banking
Company and a financial
institution including a non-
banking financial company
Banking Company and a financial institution including a
non-banking financial company were entitle to avail the
50% of the CENVAT credit availed on inputs and input
services in that month
Banking Company and a financial institution including a non-
banking financial company now in addition to availment of
50% CENVAT Credit also has following options to avail
CENVAT Credit:
a) No CENVAT Credit shall be allowed in respect of inputs and
input services exclusively used in relation to manufacture of
exempted goods or provision of output service
b) pay an amount equal to six per cent of value of the
exempted goods and seven per cent of value of the exempted
services; or
c) i) Avail full CENVAT credit on input or input services used
exclusively for manufacture of dutiable goods or provision of

output service; and
ii) Reverse CENVAT Credit on input or input services used
exclusively for manufacture of exempted goods or provision of
exempted service; and
iii) Avail proportionate CENVAT Credit on common input and
input services.
CENVAT Credit on capital goods
used exclusively in the
manufacture of exempted
goods or in providing exempted
services
No provision Legislature has allowed the benefit of CENVAT Credit on
capital goods which are used exclusively in the manufacture of
exempted goods or in providing exempted services. However
such CENVAT Credit shall be available after the period of two
years from the date of commencement of the commercial
production or provision of service.
Distribution of credit on inputs
by warehouse of manufacturer
No such provision A manufacturer of dutiable goods having one or more
factories shall be eligible to distribute CENVAT credit from
warehouse of the said manufacturer under the cover of
invoice issued by such warehouse
Annual Return of CENVAT
Credit
No provision A manufacturer of final products or provider of output service
shall be liable to file annual return by 30th November of the
succeeding financial year in the prescribed form.
Changes applicable from the date of enactment of Finance Act, 2016
Particulars Position prior to Union Budget 2016 Position post Union Budget 2016
Amendment in definition Earlier the definitions were given in Finance Act, 1994.
However in this budget, the same were proposed to be
deleted from the Finance Act, 1994
The following terms were earlier defined in the Finance Act,
1994, however legislature had no intention to bring the
following activities under the service tax net, therefore the
following terms were inserted in the mega exemption
notification.
a) “approved vocational education course” means, -
(i) a course run by an industrial training institute or an
industrial training centre affiliated to the National Council for
Vocational Training or State Council for Vocational Training

offering courses in designated trades notified under the
Apprentices Act, 1961 (52 of 1961); or
(ii) a Modular Employable Skill Course, approved by the
National Council of Vocational Training, run by a person
registered with the Directorate General of Training, Ministry
of Skill Development and Entrepreneurship.
b) “educational institution” means an institution providing
services by way of: (i) pre-school education and education up
to higher secondary school or equivalent; (ii) education as a
part of a curriculum for obtaining a qualification recognised
by any law for the time being in force; (iii) education as a part
of an approved vocational education course.
Definition of Senior Advocate Not defined Legislature has brought the services provided by senior
advocate to person other than carrying on business activities
under the ambit of service tax. Therefore, there was a need to
define the term “senior advocate”.
According the said definition, “Senior advocate‟ has the
meaning assigned to it in section 16 of the Advocates Act,
1961.
Rate of Interest on late
payment of service tax
Rate of
Interest
Delay in payment of service tax
18% Delay upto 6 months
24% More than six months and upto one Year
30% More than One Year
Now, the legislature has substantially reduced the interest on
late payment of service tax. However legislature has specified
higher rate of interest for person who collect service tax
where service tax is not leviable.
Particulars Rate of
Interest
Collection of any amount as Service tax
but failing to pay the amount so collected
to the credit of the Central Government on
or before the date on which such payment
becomes due.
24%
Other than in situations covered specified
above.
15%

AMENDMENTS IN FINANCE ACT, 1994
Declared list of service No provision Legislature has covered the services of assignment by the
government of right to use the radio frequency spectrum and
subsequent transfers thereof under Declared list of services.
Amendments in Section 73 Presently department can issue show cause notice within a
period of 18 months if the service tax has not been levied
or paid or has been short-levied or short-paid or
erroneously refunded provided there was no intention to
evade payment of service tax.
Now this limitation period of 18 months has been increased to
30 months and now department can issue show cause notice
within 30 months for recovery of service tax not been levied
or paid or has been short-levied or short-paid or erroneously
refunded
Rate of interest on late payment
of service tax
No provision Legislature in order to penalize the person who collects
service tax without authority has inserted a proviso in section
75 of the act. With the insertion of this proviso, central
government has been empowered to specify different rate of
interest for persons who collect any amount as service tax.
Penalty for offenses by director
etc. of the company
No such provision It has been provided that where the proceedings are
concluded in case where the person has discharged its entire
service tax liability along with interest and penalty within 30
days from the date of service of notice, then the proceedings
pending against any person shall also be deemed to be
concluded.
Offences and Penalties Prosecution provisions are applicable where the default in
payment of service tax or CENVAT credit exceeds Rs. 50
lakhs
The limit of Rs. 50 lakhs has been enhanced to Rs. 200 lakhs
meaning thereby the prosecution proceedings shall be
initiated where the offence exceeds Rs. 200 lakhs.
Cognizable offences Legislature has made certain offences non cognizable The provision of non cognizable offence has been deleted.
Power to arrest Principle Commissioner of Central Excise or Commissioner
of Central Excise has the power to arrest a person where
such person committed any fraud specified in section 89(1)
of the act
The power to arrest has been restricted only in the cases
where a person has collected any amount as service tax but
failed to pay the same beyond the period of six months from
the date on which such payment becomes due.
Retrospective Exemption No provision Legislature has granted a retrospective exemption w.e.f.
01.07.2012 to 29.01.2014 in respect of taxable services of
completion, fitting out, repair, maintenance, renovation or
alteration of canal dam or other irrigational work provided to
an authority or a board or any other body setup by an act of
parliament or state legislature or government with 90% or

more participation to carry out functions entrusted to
municipality.
Further refund shall be made in cases where service tax has
been collected which would not have been so collected had
this provision been in force. However, such person shall file
refund within 6 months from the date of enactment of finance
act.
completion, fitting out, repair, maintenance, renovation or
alteration of a civil structure predominantly meant for non
commercial purpose or for use as educational or clinical or art
or cultural establishment. Further exemption has also been
provided for aforesaid period to services provided in
connection with residential complex predominantly meant for
self use or for the use of their employees or other specified
person.
However the benefit of this exemption shall be available only
to those person who have entered into a contract before
01.03.2015 and appropriate stamp duty has been paid.
act.
construction, erection, commissioning or installation, of
original work pertaining to port or airport.
However the benefit of this exemption shall be available only

to those person who have entered into a contract before
01.03.2015 and appropriate stamp duty has been paid.
act.
Particulars Position prior to Union Budget 2016 Position post Union Budget 2016
NEGATIVE LIST OF SERVICES
Services provided by way of
transportation of passengers by
stage carriage
Such services were covered under Negative List of services,
hence no service tax was leviable on such services
Legislature has deleted the services provided by stage carriage
from the negative list of services, thereby bringing such
services under the net of service tax.
The services provided by stage carriage by way of
transportation of passengers shall be subject to service tax.
AMENDMENT IN EXEMPTION PROVIDED BY WAY OF ABATEMENT
stage carriage
No Provision Legislature has brought the services of transportation of
passengers by stage carriage under the service tax net by
deleting the same from negative list of services.
However the benefit of exemption of 60% of the amount
charged has been extended to such services i.e. now the
services providers provided services of transportation of
passengers by stage carriage shall be liable to pay service tax
on 40% value of the service.
Services provided by an aircraft
or a vessel from a place outside
India upto the customs station
of clearance in India
Such services were covered under the negative list of
services and no service tax was payable on such services
This entry has been deleted from the negative list of services
making such services liable to service tax.
However, legislature has granted an exemption to services
provided by an aircraft from a place outside India upto the
customs station of clearance in India.

non air conditioned stage
carriage
No provision Legislature has exempted the services provided by way of
transportation of passengers in a non air conditioned stage
carriage.
Services provided by air conditioned stage carriage shall be
subject to service tax, however they are entitle to avail the
benefit of abatement as stated in above discussion.
Services by way of
transportation of goods by an
aircraft from a place outside
India upto the customs station
of clearance in India
These services were covered under Negative list of
services.
The services by way of transportation of goods by an aircraft
and vessel from a place outside India upto the customs station
of clearance in India were earlier covered under negative list
of services.
This entry has been deleted from negative list of service.
Consequent to this deletion, a new entry has been inserted in
the Mega Exemption Notification so as to exempt the services
provided by way of transportation of goods by an aircraft.
However, the services provided by way of transportation of
goods by a vessel would be liable to service tax. Further
reverse charge mechanism shall be applicable on such
services.
IMPOSITION OF KRISHI KALYAN CESS
Krishi Kalyan Cess No provision In order to improve agriculture sector, Krishi Kalyan Cess of
0.50% has been imposed in addition to service tax and other
cess on the value of taxable service. All the provision of
Chapter V of the Finance Act, 1994 shall be applicable in
relation to levy and collection of Krishi Kalyan Cess
THE INDIRECT TAX DISPUTE RESOLUTION SCHEME 2016
In order to reduce litigation and speedy recovery of service tax, The Indirect Tax Dispute Resolution Scheme 2016 has been introduced. All the appeals pending
before the Commissioner (Appeals) as on 01.03.2016 under the Central Excise Act, 1944 or the Customs Act, 1962 or the Finance Act, 1994 are eligible for
settlement under this Scheme.
However, certain specified cases have been excluded from availing the benefit of this scheme. Further, proceedings against the eligible assessees shall stands
concluded if they discharge the disputed tax liability along with interest and penalty equal to 25% of the penalty imposed under the impugned order. The
central government shall notify the form and procedure in which the application for availing the benefit of this scheme can be made.

Disclaimer: The information provided in this document is intended for informational purposes only and does not constitute legal opinion or advice.
Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein.
Prepared by:
A R A J & Associates
CHARTERED ACCOUNTANTS
247-248, Vardhman Mall, Road No. 43,
Pitampura, New Delhi-110034
Ph: 011-45564490, 9811440509
Email id: mail@arajassociates.com
arajassociates@yahoo.com
Web: www.arajassociates.com

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