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HEMANT ARORA & CO. LLP Chartered Accountants INDIA BUDGET STATEMENT 2019 The Direct Tax Proposals
HEMANT ARORA & CO. LLP Chartered Accountants
INDIA BUDGET STATEMENT 2019
The Direct Tax Proposals
HEMANT ARORA & CO. LLP
Chartered Accountants
Offices
- Gurgaon
1117-19, 11th Floor, DLF Galleria Tower
DLF Phase IV, Gurgaon 122002
Tel.: + 91 124 257 8088
Fax.: + 91 124 257 0888
- Dehradun
1, Tyagi Road, Dehradun 248001
Tel.:+ 91 135 2626795
Fax: + 91 135 2627795
- Roorkee
354B, 30 Civil Lines, Roorkee 247667
Tel.:+ 91 1332 273343
Fax: + 91 1332 277272
- Mumbai
B-304 New India Chambers, MIDC Road, Andheri East, Mumbai 400093
Tel.: + 91 98370 28795
Partners
Hemant K Arora
Jeetan Nagpal
Sanjay Arora
Prabhat Rastogi
Kamal Nagpal
www.hemantarora.in
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Contacts
Hemant K. Arora
+ 91 98370 39666
Jeetan Nagpal
+ 91 98370 28795
Sanjay Arora
+ 91 97562 08586
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This document is a result of our study of the direct tax proposals forming part of the Finance (No.2)
Bill, 2019 and is intended to bring to you the salient proposals in a simple, condensed and
comprehensible manner.
We would like to reiterate that what have been discussed in the following pages are the proposals
pertaining to the direct taxes. The said proposals are open to modifications and alterations during the
course of discussion in the Parliament before they eventually become law upon receiving the assent of
the President of India.
Disclaimer
This document is intended for use by Firm’s personnel and clients only. It summarizes the Direct tax
proposals forming part of the Union Budget 2019.
While due care has been taken during the compilation of this document to ensure that the information
is accurate to the best of our knowledge and belief, the content is not to be construed in any manner
whatsoever as a substitute for professional advice. We do not assume any liability or responsibility for
the outcome of decisions taken as a result of any reliance placed on this publication.
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Contents
Foreword ............................................................................................................... 7
At a glance............................................................................................................. 9
Direct Tax Proposals ........................................................................................... 13
Glossary............................................................................................................... 24
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Foreword
Finance Minister Nirmala Sitharaman
presented the Finance (No.2) Bill 2019 to the
Parliament on July 5, 2019.
In keeping with the firm’s tradition, we are
presenting to you this document which
explains the proposed changes in direct tax
law in a reader friendly and comprehensible
manner and hope you would find it useful.
The major changes for individual tax payers
are the steep increase in surcharge on rich and
super rich which will impose a heavy tax
burden on those having income of over Rs. 1
crore and even greater burden on those having
income of over Rs. 5 crores in a year. Even
though the number of such individuals
declaring income of over Rs. 5 crore is a partly
6,361 [source: Economic Times], the
maximum tax rate for them is now whooping
42.7% which is 7% higher than the earlier
effective tax rate. On the other hand,
additional deductions shall be provided for
interest on loans for affordable housing and
electric vehicles, withdrawals and
contributions from/to National Pension scheme
which are expected to provide some relief to
eligible taxpayers. Certain provisions like the
one mandating TDS by individuals and Hindu
undivided families on payment to contractors
and professionals even for personal use
services would impose an additional
compliance obligation even though the
objective of these provisions may have been to
facilitate enable greater data mining of
transactions by the Government. What is
praiseworthy is introduction of faceless e-
assessment wherein the identity of the officer
will not be known to the taxpayer is intended
to reduce the interface between tax collector
and tax payer. Also, the inter-changeability
between PAN and Aadhar would make
compliance easier.
For corporates having turnover of upto Rs.
400 crores (earlier limit was Rs. 250 crores)
the reduction of tax rate to 25% would be a
welcome relief. For start-ups many of their tax
related concerns have been addressed and at
the same time additional incentives are in the
offing. Also, more tax incentives are now
available for units located in International
Financial Services Centre and to Non-Banking
Finance Companies. Provisions are also
introduced for redressal of certain taxation
issues of distressed companies which are under
resolution with the NCLT.
On the transfer pricing front, clarification on
assessments post filing of modified tax returns
in pursuance of Advance Pricing Agreements
is a welcome move. So also, are the proposals
for aligning transfer pricing provisions with
international best practices in respect of
secondary adjustment and for allowing
adoption of parent entity’s accounting year for
Country by Country Report.
To conclude I would like to borrow and share
with the readers the opening paragraph from
the Foreword to Kanga and Palkhivala’s The
Law and Practice of Income Tax (10th Edition)
which reads as under:
“The power to tax involves the power to
destroy, warned Chief Justice John Marshall.
To which, a century later, the reply of Justice
Holmes was, the power to tax is not the power
to destroy while this Court sits.
Sturdy independence is equally the hallmark of
the Indian courts. By their enlightened
approach to our income-tax law they have
often controlled and sometimes curtailed, its
lethal power.”
Jeetan Nagpal
Partner
HEMANT ARORA & CO. LLP
Chartered Accountants
July 6, 2019.
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At a glance
Income Tax
Changes in tax rates
Concessional corporate tax rate of 25% is now applicable to companies having turnover upto
Rs. 400 crores. The earlier turnover limit was Rs. 250 crores.
Super rich individuals having income in excess of Rs. 5 crores to be subjected to 42.74% tax
and those having incomes between Rs. 2 crores to Rs. 5 crores are to be pay tax @ 39%.
Provisions relating to widening and deepening of tax base
Individuals and HUFs not subjected to audit would be required to make TDS at the rate of
five percent on payments for personal or business use to resident contractors and
professionals if the quantum of payments exceed Rs. 50,00,000 in a year.
TDS on consideration for transfer of immovable property at the rate of 1% will also be
required to be deducted on other charges such as club membership, car parking fee, electricity
and water facility fees, maintenance fee etc.
Gifts of money or immovable properties situated in India by an Indian tax resident to a person
outside India shall be deemed to accrue or arise in India and taxable in India.
Persons having income below taxable limits but entering into following specified high value
transactions shall be mandatorily required to file income tax returns:
- On depositing Rs. 1 crore or more in one or more current account
- On incurring expenditure of Rs. 2 lacs or more on foreign travel of self or any other
person
- On incurring expenditure of Rs. 1 lacs or more on electricity bills
Also, persons having income below taxable limit but claiming rollover benefit of capital gains
exemption on investment in house or exemption bond etc. shall be mandatorily required to
file income tax return.
Persons who do not have PAN and enter into high value transactions may quote their Aadhar
in place of PAN and in such case PAN shall be allotted.
If PAN and Aadhar are linked, Aadhar can be used in lieu of PAN.
The ambit of furnishing statement of financial transactions [‘SFT’] is expanded and the
minimum threshold of Rs. 50,000 for reporting in SFTs is removed to facilitate data capturing
for generation of pre-filled income details in tax returns.
Measures to promote less cash economy
Various provisions under the Act which prohibit cash transactions and allow
payments/receipts only through account payee cheque/ bank draft or electronic clearing
system to also permit other prescribed electronic modes of payment.
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Businesses having annual turnover in excess of Rs. 50 crores are mandated to provide facility
for accepting payments through prescribed electronic modes.
Aggregate withdrawals in excess of Rs. 1 crore from a bank account in a year will be
subjected to TDS @ 2%.
Tax incentives
Incentives to businesses located in International Financial Services Centre
Following further tax incentives are provided to business carried on from International
Financial Services Centre –
- No capital gains tax on transfer of GDRs or Rupee denominated bond of an Indian
Company/derivative made by Category III Alternative Investment Fund if all unit holders
are non-residents;
- Apart from GDRs and Rupee denominated bonds, other specified securities to also
qualify for capital gains exemption.
- Interest payable to a non-resident by a unit located in IFSC to be tax exempt.
- Exemption from Dividend distribution tax to a company located in IFSC and deriving
income solely in convertible foreign exchange which is presently available on dividends
declared out of current incomes is extended to dividends declared out of accumulated
income.
- No additional income tax on income distributed by Mutual Funds located in IFSC if all
unit holders of such mutual fund are non-residents.
- Income of businesses located in IFSC to be 100% tax exempt for any ten consecutive
years out of fifteen years beginning from the year in which approval is obtained.
Incentives to Non-Banking Finance Companies
- Interest income in relation to bad and doubtful debts received by NBFCs shall be taxable
only in year in which it is actually received or credited to profit and loss account,
whichever is earlier.
- Interest payment on borrowing from NBFCs will be allowable as a deduction if it is
actually paid on or before the due date for filing of income tax return.
Incentive for electric vehicles – a deduction of Rs. 1,50,000 shall be allowed from total
income in respect of interest paid on loan taken for purchase of an electric vehicle.
Tax incentive for affordable housing – a deduction of Rs. 1,50,000 shall also be allowed in
respect of interest paid on loan taken from financial institution for purchase of residential
house property costing less than Rs. 45 lacs.
Incentives to subscribers of National Pension Scheme
- Receipts on closure of or on opting out of an NPS account shall now be exempt to the
extent of sixty percent of the total amount as against forty percent earlier.
- Contribution by the Central Government to the NPS account of its employees to the
extent of 14% of salary shall be eligible for deduction against the income of such
employees.
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- Any amount contributed by the Central Government employees to Tier II NPS account
shall be eligible for deduction against such employee’s income.
Incentives for start-ups
- Provisions relating to carry forward and set-off of unabsorbed losses of closely held
eligible start-ups have been rationalised.
- Roll-over benefit in respect of capital gains arising from transfer of residential property
would be available if the net consideration is invested in equity shares of start-ups and the
minimum shareholding/voting power is twenty five percent as against fifty one percent
earlier.
- When capital gains exemption is claimed for investment in start-ups, the lock in period of
five years on acquisition of computer/software purchased by start-ups is relaxed to 3
years.
Facilitating Resolution of Distressed Companies
Unabsorbed losses of distressed companies, their subsidiaries/ step down subsidiaries shall be
allowed to be carried forward and set off even if there is a change in the voting power or
shareholding where NCLT has suspended the Board of Directors and appointed new Directors
nominated by the Central Government and the change in shareholding has taken place
pursuant to resolution plan approved by NCLT.
Unabsorbed book profit and depreciation shall also be allowed to be reduced for calculating
the book profit for such companies.
Electronic filing process
An electronic filing and approval process is introduced for determination by the assessing
officer of the tax to be deducted at source on payments to non-residents.
An electronic filing system is also introduced for submissions of statement of transactions of
interest payment to residents on which no tax has been deducted at source.
Strengthening Anti-Abuse Measures
Buyback of shares from a shareholder by a company listed on recognised stock exchange
shall attract levy of additional income tax at the rate of twenty percent. Earlier similar
provision was applicable only to closely held companies. The consequential income arising
from buy back of shares by a company listed on recognised stock exchange shall be tax
exempt in the hands of shareholders.
The registration of a charitable Trust/ Institution for availing exemption of income may be
cancelled on violation of any other law which is material for the purpose of achieving the
objects of such Trust/ Institution.
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Removing difficulties faced by taxpayers
For defaults in deduction or deposit of TDS on payments to non-residents, a person shall be
liable to pay interest for the period after the recipient non-resident has filed its return,
disclosed such receipt and paid tax thereon.
The provisions relating to disallowance of expenditure on account of non-deduction of tax
shall not apply if the recipient non-resident has filed its return, disclosed such receipt and paid
tax thereon.
Clarification relating to assessment post filing of modified return of income in pursuance of APA
It has been clarified that in cases where assessment has been completed and modified return
of income has been filed in pursuance of an APA, the assessing officer shall only pass an
order modifying the total income of the relevant year in accordance with the APA.
Clarification relating to secondary adjustments
Amendments are introduced to align transfer pricing provisions with international best
practices in respect of secondary adjustment and for giving an option to the assessee to make
one-time payment for such adjustment.
TDS on non-exempt portion of life insurance pay-out on net basis
Non-exempt payments under a life insurance policy shall now be subject to TDS @ 5% on
income component embedded in such payment i.e. on gross amount as reduced by life
insurance premium paid.
Accounting year in respect of CbCR of an international group
The reporting accounting year for the purpose of Country by Country Report in case of an
alternate reporting entity of an international group, the parent entity of which is not resident in
India shall be the one applicable to such parent entity.
Information and documents to be maintained by a constituent entity of an international group
regardless of whether or not international transactions have been undertaken.
The information and documents are to be kept and maintained by a constituent entity of an
international group and filing of required form shall be mandatory even where there is no
international transaction undertaken by the constituent entity.
Penalty in case of under-reported income
Mechanism relating to determination of under-reported income and quantum of penalty has
been prescribed for cases where return is filed for the first time in response to reassessment
notices.
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Direct Tax Proposals
This section summarizes significant proposals on direct taxes announced in Union Budget 2019.
These proposals are generally effective from financial year commencing April 1, 2019 relevant to
Assessment year 2020-21. However some of the proposals are effective either prospectively or
retrospectively in which case the dates from which they become applicable have been mentioned
against respective proposals.
Income Tax
Rates of Tax for Assessment year 2020-21
The tax slabs for individual (other than senior citizens)/HUF/ AOP/BOI/artificial
juridical person shall be as under:
Income Slabs Tax Rate (percent)
Upto Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5
Rs. 5,00,000 to Rs. 10,00,000 20
Above Rs. 10,00,000 30
The above tax slabs are also applicable to all non-resident individuals irrespective of the
fact whether they fall within the age limit for senior citizens or more senior citizens.
The tax slabs for senior citizens, resident in India who are of the age of sixty years or more
but less than eighty year shall be as under:
Income Slabs Tax Rate (percent)
Upto Rs. 3,00,000 Nil
Rs. 3,00,000 to Rs. 5,00,000 5
Rs. 5,00,000 to Rs. 10,00,000 20
Above Rs. 10,00,000 30
The tax slabs for senior citizens, being a resident in India and who are of the age of eighty
years or more, shall be as under:
Income Slabs Tax Rate (percent)
Upto Rs. 5,00,000 Nil
Rs. 5,00,000 to Rs. 10,00,000 20
Above Rs. 10,00,000 30
The tax slabs for domestic companies, shall be as under:
Turnover/Gross receipts limit Tax Rate (percent)
Less than Rs. 400 crore for previous year 2017-
18
25
More than Rs. 400 crore for previous year
2017-18
30
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Surcharge on Individuals/ HUF/ AOP/ BOI/ artificial juridical person shall be levied:
Income Slabs Surcharge Rate (percent)
Exceeding Rs. 50,00,000 but less than Rs. 1,00,00,000 10
Exceeding Rs. 1,00,00,000 but less than Rs. 2,00,00,000 15
Exceeding Rs. 2,00,00,000 but less than Rs. 5,00,00,000 25
Exceeding Rs. 5,00,00,000 37
Surcharge on domestic companies having a total income exceeding Rs. 1,00,00,000 but less
than Rs. 10,00,00,000 shall continue to be levied at a rate of 7% and for total income
exceeding Rs.10,00,00,000/- will be levied at a rate of 12%.
Surcharge on foreign companies having a total income exceeding Rs. 1,00,00,000 but less
than Rs. 10,00,00,000 shall continue to be levied at a rate of 2% and for total income
exceeding Rs.10,00,00,000/- will be levied at a rate of 5%.
The Education Cess and the Secondary and Higher Education Cess shall be replaced by
the Health and Education Cess at the rate of 4%
Section 2 – Definitions
It is proposed that for tax-neutral demerger the condition stipulating that the resultant
company should record property and liabilities of the undertaking at the value appearing in
the books of accounts of the demerged company would not be applicable in the case of Ind
AS compliant companies.
Section 9 – Income deemed to accrue or arise in India
It is proposed that income arising from any sum of money paid for any property situated in
India transferred, on or after 5th July 2019 by a person resident in India to a person outside
India shall be deemed to accrue or arise in India.
Section 9A – Certain activities not to constitute business connection in India
The existing provisions provide for safe harbor in respect of offshore funds and accordingly
provide that for an eligible investment fund the mere fund management activity carried out in
India or through an eligible fund manager located in India shall by itself not constitute a
business connection in India. The existing provisions also provide that the eligible investment
fund shall not become resident in India merely because the fund manager is located in India.
The provisions are subject to certain conditions. It is proposed to relax certain conditions so
as to provide that (i) the corpus of fund shall not be less than Rs. 100 crore at the end of the
prescribed period and (ii) the remuneration paid to the eligible manager for fund management
activity is not less than the prescribed limited.
To apply retrospectively w.e.f. 1st April 2019.
Section 10 – Incomes not included in total income
It is proposed to provide that any income by way of interest payable to a non-resident by a
unit located in IFSC in respect of monies borrowed by it on or after 1st September 2019, shall
be exempt.
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It is proposed to increase the exemption limit for payment from NPS Trust to an assessee on
closure/opting out of pension scheme to 60% of the total amount (from existing 40%).
Section 13A – Special provisions relating to income of political parties
It is proposed to permit political parties to receive donation exceeding Rs. 2,000 by other
prescribed electronic modes in addition to the existing requirement of receiving such donation
in bank account.
Section 35AD – Deduction in respect of expenditure on specified businesss
It is proposed to amend the condition for allowing deduction of capital expenditure on
specified business which presently provides that such expenditure in excess of Rs. 10,000
should be paid only through banking channels to also allow payment for capital expenditure
by other prescribed electronic modes.
Section 40 – Amount not deductible
It is proposed to insert a new provision to provide that where an assessee fails to deduct tax
on any such sum but is not deemed to be an assessee in default because the payee has offered
the receipt as income and paid tax thereon, then it shall be deemed that the assessee has
deducted and paid the tax on such sum on date of furnishing of return of income by the payee
and no disallowance shall be made for reasons of non-deduction of TDS.
Further it is proposed to make the above concession available uniformly to resident and non-
resident assessees.
Section 40A – Expenses or payments not deductible in certain circumstances
It is proposed to amend the provision which disallows payments exceeding Rs. 10,000
otherwise than by account payee cheque/bank draft or ECS to permit other prescribed
electronic modes.
Section 43 – Definitions of certain terms relevant to income from profits and gains of business or
profession
It is proposed to amend the provision which provides that payment towards capital
expenditure in excess of Rs. 10,000 made otherwise than by account payee cheque/bank draft
or ECS shall not be included in actual cost of such asset, to also permit such payments by
other prescribed electronic modes.
Section 43B – Certain deductions to be only on actual payment
It is proposed to provide that interest expenditure on any loan or advances taken from a
deposit taking NBFC’s and systematically important non-deposit taking NBFC’s shall be
allowed as deduction if such interest is actually paid on or before the due date of furnishing
the return of income of the relevant previous year.
Section 43CA – Special provisions for full value of consideration for transfer of assessee other than
capital assets in certain cases
The said section provides that where the date of agreement fixing the value of consideration
for transfer of certain capital assets and the date of registration are different, the full value of
consideration shall be the stamp duty value on the date of agreement provided the
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consideration is received by account payee cheque/demand draft of EC. It is proposed to
allow receipt of such consideration payments by other prescribed electronic modes.
Section 43D – Special provisions in case of income of public financial institutions, public
companies, etc.
It is proposed to provide that the interest income of deposit taking NBFCs and systematically
important non-deposit taking NBFCs interest income on bad or doubtful debits shall be
taxable in the year in which interest income is actually received or credited to profit and loss
account whichever is earlier.
Section 44AD – Special provisions for computing profits and gains of business on presumptive
basis
The said section allows a concessional presumptive taxation rate of 6% (as against 8%) to
eligible business if the turnover is received through account payee cheque/bank draft or ECS.
It is proposed to allow receipt of such consideration payments by other prescribed electronic
modes.
Section 47 – Transaction not regarded as transfer
It is proposed to amend the said section so as to provide that any transfer of a specified capital
by an Alternate Investment Fund, of which all the unit holders are non-resident, shall not be
regarded as transfer subject to fulfillment of specified conditions.
It is also proposed to widen the types of securities listed in said clause by empowering the CG
to notify other securities for the purposes of this clause.
Section 50C – Special provision for full value of consideration in certain cases
It is also proposed to include other prescribed electronic mode of payment in addition to the
already existing permissible mode i.e. account payee cheque/bank draft or ECS for the
purpose of receiving consideration for transfer of immovable property.
Section 50CA – Special provision for full value of consideration for transfer of share other than
quoted shares
The said section provides that where the consideration received on account of transfer of
unquoted shares is less than the fair market value of such share determined in such manner as
prescribed, such FMV shall be deemed to be full the value of consideration. It is proposed to
provide that this provision shall not apply to certain cases where consideration has been
approved by certain authorities.
Section 54GB – Capital gain on transfer of residential property not to be charged in certain cases
It is proposed to amend the section to allow further concessions in respect of roll over benefit
of capital gains arising from transfer of residential property which are presently available if
the net consideration is invested in equity shares of an eligible company (start-up). The
proposed amendments provide to (i) extend the sun set date of transfer of residential property
to 31st March 2020, (ii) relax the condition of minimum shareholding of fifty percent of share
capital/voting rights to twenty five percent, and (iii) relax the condition restricting transfer of
new computer/computer software from the current five years to three years.
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Section 56 – Income from other sources
The said section provides that where a closely held company issues shares to a resident at
value which is more than the fair market value of such shares the excess shall be chargeable
to tax. Exemption from this is presently provided to venture capital undertaking issuing shares
to venture capital company/fund or notified persons. It is proposed to extend the benefit of
exemption to Category II AIFs.
Section 79 – Carry forward and set off losses in case of certain companies
The said section restricts benefit of carry forward and set off of losses where any change in
shareholding takes place. It is proposed to provide that the benefit of carry forward and set off
of losses shall be available if the change in voting power or shareholding takes place pursuant
to a resolution plan approved under the IBC, 2016 subject to the condition that jurisdictional
Principal Commissioner or Commissioner is provided a reasonable opportunity of being
heard.
Section 80C – Deductions in respect of life insurance premia, deferred annuity, contributions to
PF, subscription to certain equity shares or debentures, etc
It is proposed to provide that any amount paid or deposited by a CG employee as a
contribution to his Tier II account of pension scheme shall be eligible for deduction.
Section 80CCD – Deductions in respect of contribution to pension scheme of CG
It is proposed to increase the deduction available to an employee on account of contribution
by CG/ other employer to the NPS to the extent of 14% of the contribution made by the CG.
(from present 10%).
Section 80EEA – Deduction in respect of interest on loan taken for certain house property
It is proposed to insert a new section to allow a deduction of upto Rs. 150,000 in respect of
interest paid on loan taken for residential house property from any financial institution subject
to the following conditions:
- Loan is sanctioned between 1st April 2019 and 31
st March 2020.
- the stamp duty value of house property does not exceed Rs. 45,00,000
- Assessee does not own any other residential house property on the date of sanction of
loan.
80EEB – Deduction in respect of purchase of electric vehicles
It is proposed to insert a new section to allow a deduction of upto Rs. 150,000 in respect of
interest paid on loan taken from any financial institution for purchase of electric vehicles
subject to the following conditions:
- Loan is sanctioned between 1st April 2019 and 31
st March 2023.
- Assessee does not own any other electric vehicle on the date of sanction of loan.
Section 80-IBA – Deduction in respect of profits and gains from housing projects
It is proposed to amend the conditions for deduction of income from developing and building
housing projects to provide that:
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(i) the assessee shall be eligible for deduction under the section, in respect of a housing
project if a residential unit in the housing project has carpet area not exceeding 60 square
meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan
cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida,
Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai
(whole of Mumbai Metropolitan Region); and
(ii) the stamp duty value of such residential unit in the housing project shall not exceed Rs.
45,00,000
80 JJA – Deduction in respect of employment of new employees
The said section provides for deduction on account of additional employee cost incurred by
an assessee in the course of a specified business provided emoluments are paid by account
payee cheque/bank draft or ECS. It is proposed to also permit payment by other prescribed
electronic modes.
80 LA – Deduction in respect of certain incomes of Offshore Banking Units and International
Financial Services Center
It is proposed to amend the said section so as to provide that any transfer of a capital asset,
specified in the said clause by such AIF, of which all the unit holders are non-resident, are not
regarded as transfer subject to fulfillment of specified conditions.
It is also proposed to widen the types of securities listed in said clause by empowering the
Central Government to notify other securities for the purposes of this clause.
Section 92CD – Effect to Advance Pricing Agreement
It is proposed to clarify that in cases where assessment or reassessment has already been
completed and modified return of income is filed by the assessee in pursuance of an APA the
Assessing Officers shall pass an order modifying the total income of the relevant assessment
year determined in such assessment or reassessment, having regard to and in accordance with
the APA.
To apply w.e.f. 1st September, 2019.
Section 92CE – Secondary Adjustments in certain cases
The following amendments are proposed in provisions relating to carrying out secondary
adjustments where primary adjustment to transfer price has been made by the assessee suo
moto or has been made by the assessing office and accepted by the assessee or made under
APA/Safe harbor rules/MAP-
i) the condition of threshold of Rs. 1 crore and of the primary adjustment made upto
assessment year 2016-17 are alternative conditions;
ii) the assessee shall be required to calculate interest on the excess money or part
thereof;
iii) the provision of this section shall apply to the agreements which have been
signed on or after 1st April, 2017;
iv) the excess money may be repatriated from any of the non-resident AE of the
assessee;
v) in a case where the excess money has not been repatriated in time, the assessee
will have the option to pay additional income-tax at 18% on such excess money
in addition to the existing requirement of calculation of interest till the date of
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payment of this additional tax. The additional tax is proposed to be increased by a
surcharge of 12%;
vi) the tax so paid shall be the final payment of tax and no credit shall be allowed;
vii) the deduction in respect of which such tax has been paid, shall not be allowed
under any other provision;
viii) if the assessee pays the additional income-tax, he shall not be required to make
secondary adjustment or compute interest from the date of such payment.
The amendments listed in para (i) to (iv) above will apply retrospectively from the 1st
April, 2018 and the amendments listed in para (v) to (viii) above will be effective from 1st
September, 2019.
Section 92D – Maintenance of keeping work and keeping information and document by persons
entering into an International Transaction [or Specified Domestic Transaction]
It is proposed to provide that the information and documents which are required to be
maintained by a constituent entity of an international group and also forms that are required to
be filed shall have to be maintained/filed even where there is no international transaction
undertaken by such constituent entity.
Section 111A – Tax on Short Term Capital Gain on certain cases
It is proposed to provide the concessional rate of tax for STCG with respect to transfer of
units of funds setup for disinvestment of CPSE’s.
Section 115A – Tax on dividends, royalty and technical service fees in the case of foreign
companies
It is proposed that the units in an IFSC earning income in the form of dividend, royalty and
fees for technical service are allowed to claim full deduction u/s 80LA.
Section 115JB – Special Provision for payment of tax by certain companies
It is proposed that for distressed companies where any change in voting power or
shareholding takes place pursuant to a resolution plan approved under the IBC, 2016 the
aggregate amount of unabsorbed depreciation and loss (excluding depreciation) brought
forward shall be allowed to be reduced for computing the book profits.
Section 115-O – Tax on distributed profits of Domestic Companies
It is proposed to provide that any dividend paid out of accumulated income derived from
operations in IFSC, after 1st April, 2017 shall also be exempt from dividend distribution tax as
against the earlier provision which provided exemption from DDT to only dividend paid out
of its current income .
Section 115QA – Tax on distributed income to shareholders
It is proposed to extend the applicability of provisions which provide for levy of additional
income tax @ 25% of the distributed profit on account of buy back of shares to all companies
including the companies listed on a recognized stock exchange.
Section 115R – Tax on distributed income to Unit holders
To incentivize relocation of mutual funds in an IFSC it is proposed to provide that no
additional income-tax shall be chargeable on amount of income distributed by a Mutual Fund
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on or after 1st September 2019 provided all its unit holders are non-residents and subject to
certain other conditions.
Section 115UB – Tax on income of Investment Fund and its unit holders
It is proposed to make following amendments in provisions relating to treatment of losses of
investment funds
- the business loss of an investment fund shall be allowed to be carried forward and it shall
not be passed onto the unit holder;
- loss other than business loss shall also not be considered for the purposes of pass through
to its unit holders if such loss has arisen in respect of a unit which has not been held by
the unit holder for a period of at least 12 months;
- the loss other than business loss, accumulated at the level of investment fund as on 31st
March, 2019, shall be deemed to be the loss of a unit holder who held the unit on said
date;
- the loss so deemed in the hands of unit holders shall not be available to the investment
fund for the purposes of set off and carry forward.
Section 139 – Return of Income
It is proposed to provide that that a person shall be mandatorily required to file a return of
income, irrespective of whether or not he has taxable income, if he enters into any of the
following transactions:
- Deposits Rs. 1 crore or more in one or more current account
- Incurs an expenditure of Rs. 2 lacs or more on foreign travel of self or any other person
- Incurs an expenditure of Rs. 1 lacs or more on electricity bills
It is further proposed to provide that a person claiming exemption in respect of capital gain
income, shall necessarily be required to furnish a return.
Section 139A – Permanent account number
It is proposed to provide that every person who is required to quote his PAN but has not been
allotted a PAN may quote Aadhaar number in lieu of PAN.
It is further proposed to provide that every person who has been allotted a PAN, and who has
linked his Aadhaar number to PAN may quote his Aadhaar number in lieu of a PAN,
It is further proposed to cast duty upon the person receiving any document relating to
specified transactions to ensure that PAN or Aadhaar number is duly quoted.
To apply w.e.f. 1st September, 2019.
Section 139AA – Quoting of Aadhaar number
It is proposed to provide that if a person fails to intimate the Aadhaar number in the Income
tax return, the PAN allotted to such person shall be made inoperative.
Section 140A – Self-Assessment
It is proposed to allow relief with respect to arrears of salary for the purpose of determining
final tax liability.
To apply retrospectively w.e.f. 1st April, 2007.
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Section 143 – Assessment
This section provides that the income tax liability would be computed after allowing credit for
prepaid taxed and certain reliefs, credits, etc. where the relief with respect to arrears of salary
was not specifically mentioned. It is now proposed to provide that computation of tax liability
shall be made after giving benefit of relief with respect to arrears of salary.
Section 194DA – Payment in respect of life insurance policy
It is proposed to provide TDS @ 5% on the income component (as against TDS on gross
amount earlier) embedded in payment of taxable amounts under the life insurance.
Section 194-IA – Payment on transfer of certain immovable property other than agricultural land
A clarificatory amendment is proposed to provisions relating to TDS on transfer of
immovable property to provide that the term “consideration for immovable property” on
which TDS is required to be made shall include all charges of the nature of club membership
fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any
other charges of similar nature, which are incidental to transfer of the immovable property for
the purpose of levy of TDS @ 1%.
Section 194M – Payment of certain sums by certain individual or certain HUFs
It is proposed to cast an obligation on those individuals and HUFs who are not required to get
their accounts audited to deduct TDS at the rate of 5% on the payments exceeding Rs. 50 lacs
made for contractual work or professional fees whether such payments are for personal use or
business purposes.
It is further proposed that such individuals and HUFs shall be able to deposit TDS using PAN
and shall not be required to obtain TAN.
Section 194N – Payment of certain amounts in cash
It is proposed to provide for levy of TDS at the rate of 2% on cash withdrawals in excess of
Rs. 1 crore during the year from a bank account.
The aforesaid proposed amendment also provides exemption from TDS on cash withdrawals
by Government, banking company, certain cooperative society, post office, banking
correspondents and white label ATM operators.
Section 195 – Payment to non-residents
It is proposed to introduce an online process for making an application to the assessing officer
for determination of TDS rate for making payments to non-residents. It is also proposed to
make the approval process online.
Section 197 – Certificate for deduction at lower rates
It is proposed to provide that the sums on which TDS has been deducted u/s 194M (as defined
above) shall also be eligible for certificate for deduction at lower rate.
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Section 201 – Consequences of failure to deduct or pay
It is proposed that deductor shall not be deemed to be an assessee in default for failure to
make TDS while making payment to a non-resident if such non-resident has furnished his
return of income and disclosed such payment for computing his income. It is further proposed
that interest for TDS default on such payments shall be restricted till the date of filing of tax
return by the non-resident payee.
Section 206A – Furnishing of statement in respect of payment of any income to residents without
deduction of tax
It is proposed to introduce online electronic filing of statement in respect interest payments to
residents made without TDS.
Section 228A – Recovery of tax in pursuance of agreements with foreign countries
It is proposed to provide for recovery of tax as per treaty obligation with the other country in
cases where details of property of the person, resident in India are not available.
It is further proposed to provide for tax recovery, where details of property of an assessee in
default under the Act are not available but the said assessee is a resident in a foreign country.
Section 234A/234B/234C – Interest Liability
It is proposed to allow relief in respect of arrears salary for the purpose of computing interest
for delayed payment of tax or delayed filing of tax return.
Section 239 – Form of claim for refund and limitations
It is proposed to provide that for every person claiming refund of tax furnish of return of
income shall be sufficient compliance for the purpose.
Section 269SU – Acceptance of payment through prescribed electronic modes
It is proposed to provide that every person whose total sales/turnover/gross receipts in
business exceeds Rs.50 crores shall provide facility for accepting payment through prescribed
electronic modes.
Section 269SS/269ST/269T – Mode of payment/repayments/acceptance of undertaking specified
transactions
It is proposed to provide that where payment/repayment of loans/deposit are to be made by
account payee cheque/bank draft or ECS, other prescribed electronic modes shall also be
allowed for such transactions. Similar amendment is also proposed in provision which
prohibits receiving Rs. 2 lacs or more in any mode other than cheque/bank draft or ECS.
Section 270A – Penalty for under-reporting and misreporting of income
It is proposed to provide manner of computing the quantum of penalty in a case where the
person has under-reported income and furnished his return for the first time during the course
of reassessment proceedings.
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Section 271DB – Penalty for failure to comply with provisions of Section 269SU
It is proposed to provide that the penalty of Rs. 5,000 per day shall be imposed in case a
person whose total sales/turnover/gross receipts in business exceeds Rs.50 crores and who
fails to provide facility for receipt through prescribed electronic modes. However, such
penalty shall not be imposed where the person proves that there were good and sufficient
reasons for such failure.
Section 271FAA – Penalty for quoting inaccurate statement of financial transaction
It is proposed to widen the scope of penalty by covering all entities required to furnish SFT.
Section 272B – Penalty for failure to comply with provisions of Section 139A
It is proposed to impose penalty of Rs 10,000 for quoting false Aadhaar number in any
document.
Section 285BA – Obligation to quote statement of financial transaction
It is proposed to expand the scope of furnishing of statement of financial transactions by
including certain prescribed persons to the existing list of persons.
It is further proposed to remove the threshold of Rs.50,000 on aggregate value of transactions
during a financial year required for furnishing of STFs.
It is further proposed that in case defects in the statement of financial transactions are not
rectified within the period of 30 days or such further period so allowed, it shall be treated that
such person had furnished inaccurate information in the statement and consequential penalty
shall be levied.
Section 286 – Quoting of report in respect of International group
It is proposed that the accounting year for the purpose of CbCR in case of an alternate
reporting entity resident in India whose parent entity is not resident in India, shall be the one
applicable to such parent entity.
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Glossary
Act The Income Tax Act, 1961 (except as otherwise stated)
AAR Authority for Advance Ruling
AIF Alternate Investment Fund
AO Assessing Officer
ALP Arm’s Length Price
AMT Alternate Minimum Tax
AOP Association of Persons
APA Advance Pricing Agreement
AY Assessment Year
BOI Body of Individuals
CbCR Country by Country Report
CBDT Central Board of Direct Taxes
DDT Dividend Distribution Tax
DRP Dispute Resolution Panel
DTAA Double Tax Avoidance Agreement
EPFO Employees’ Provident Fund Organization
EPF & MP Act Employees’ Provident Funds & Miscellaneous Provision Act, 1952
FMV Fair Market Value
FPC Farm Producer Companies
GAAR General Anti Avoidance Rules
GDP Gross Domestic Output
HUF Hindu Undivided Family
ICDS Income Computation and Disclosure Standards
IFSC International Financial Services Centre
IPR Intellectual Property Rights
LLP Limited Liability Partnership
MAT Minimum Alternate Tax
NBFC Non-Banking Finance Company
NELP New Exploration Licensing Policy
PE Permanent Establishment
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POEM Place of Effective Management
RBI Reserve Bank of India
SEBI Securities and Exchange Board of India
SEZ Special Economic Zone
SME Small & Medium Enterprises
SPV Special Purpose Vehicle
TCS Tax Collected at Source
TDS Tax Deducted at Source
TPO Transfer Pricing Officer
TRC Tax Residency Certificate
VCC Venture Capital Company
VCF Venture Capital Funds
VCU Venture Capital Undertaking
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