31 May 2016

income accruing to foreign e-commerce companies from India

In order to tap tax on income accruing to foreign e-commerce companies from India, the Finance Act 2016 said a person making payment to a non-resident (who does not have a permanent establishment) exceeding in aggregate Rs 1 lakh in a year will withhold tax at 6 per cent of gross amount paid, as equalisation levy.

 

The levy will only apply to business to business transactions.

 

The salient features of this Equalisation Levy is as under:-

 

* It is to tax the e-commerce transaction/digital business which is conducted without regard to national boundaries.

* The equalization levy would be 6% of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment (‘PE’) in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India.

* Specified services means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government.

* No levy if aggregate amount of consideration does not exceed Rs.1 lacs in any previous year.

 

The Central Board of Direct Taxes has notified 1 June 2016 as the effective date for Equalisation Levy (Chapter VIII of the Finance Act, 2016). Additionally, the Equalisation Levy Rules, 2016 have also been notified and shall be effective from 1 June 2016.  The notification (attached) prescribes the following:

 

Form 1: To be furnished electronically in respect of specified services chargeable to equalisation levy on or before 30 June immediately following that financial year.

Form 2: Notice of demand.

Form 3: Filing of appeal to commissioner of income tax (Appeals).

Form 4: Filing of appeal to Income tax appellate tribunal.

 

The specified services would include online advertising or any services, rights or use of software for online advertising, including advertising on radio and television, designing, hosting or maintenance of websites, digital space for website, e-mails, blogs, facility for online sale of goods or services or collecting online payments.

Annual Return under Service Tax (Applicable w. e. f. 01.04.2016):

Annual Return under Service Tax (Applicable w. e. f. 01.04.2016):

Rule 7, 7B and 7C of Service Tax Rules 1994 are being amended to provide for filing of annual return by assessee. The important points are as under:

(i)       This return shall be in addition to the half yearly returns filed by the assessee;

(ii)       The due date for filing the annual return is 30th November of succeeding financial year;

(iii)       Annual return can be revised within one month from the date of filing of return;

(iv)      Late filing fees for delay in filing the annual return is Rs. 100/- per day for the period of delay, subject to maximum amount of Rs. 20,000/-;

(v)      The format for the same shall be prescribed separately. Further, assessee or a class of assessee exempted from filing the annual return shall also be notified separately.

28 May 2016

CBDT Ciruclars

CBDT Circular No. 20/2016 dated 27-5-2016
Extension of time-limit for e-filing of CIT(A) appeals to mitigate taxpayers' inconvenience
  • Appeal due on or before May 15, 2016 can be filed upto June 15, 2016 without being treated as delayed appeals
  • EVC functionality for verification of e-appeals was made operational from May 12, 2016 for individuals and from May 19, 2016 for other persons
  • The word limit for filing grounds of appeal and mapping of jurisdiction of CIT(A) also caused grievance in some cases
  • CBDT Press Release dated 27-5-2016
    Implementation of General Anti Avoidance Rule Provisions- Issuance of Guidance Note-Comments of the Stakeholders
    CBDT Clarification dated 26-5-2016
    Clarifications for implementation of FATCA and CRS

    CBDT issues FATCA/CRS clarification, allows account holders' self-certification through internet banking platform

     CBDT issues further clarifications for implementation of FATCA and CRS pursuant to consultation held with Financial Institutions (FI); Considering the difficulty of physically obtaining self-certification from account holders, CBDT now provides an "alternative" channel, allows FIs to obtain account-holders' self-certification  through internet banking platform from the user account where the customer has transaction rights; Regarding Tax Identification Number ('TIN') or other functional equivalent of it, CBDT reiterates that TIN is not required to be collected by FIs if it is not issued by the relevant country in which the person is a tax resident including the cases where person is eligible to obtain TIN, but has not obtained the same, however in such cases CBDT suggests that FIs should make note of it and seek TIN once it is obtained; With regards to valuation guidelines to determine account balance/value of a custodial account for the purpose of reporting, states that the valuation of securities may be done at the values "regularly communicated by Depository (CDSL/NSDL) to the depository participants/brokers"; Lastly in respect of the procedure for furnishing report under FATCA and CRS draws attention to Notification No. 4 dated April 6, 2016 and user manual for registration, upload & view of Form 61B

    CBDT : Charitable trusts' temporary receipts beyond threshold won't result in cancellation of Sec 12AA registration

    CBDT issues beneficial circular, clarifies that where charitable trust engaged in 'advancement of object of general public utility' crosses the threshold of 20% or Rs. 25 lakhs for prescribed commercial activities under proviso to Sec. 2(15), it shall not be mandatory to cancel the Sec. 12AA registration; CBDT Circular adds a condition that there should not be any change  in  the  nature   of activities of  the institution; CBDT Circular notes the background that such charitable institute could be treated as a charitable institution in one year and not a charitable  institution  in the other  year  depending  on  the aggregate value  of receipts from commercial activities; CBDT clarifies that "The temporary excess of receipts beyond the specified cut-off in one  year may  not  necessarily  be the  outcome of alteration  in the  very nature of the  activities of the  trust orinstitution  requiring cancellation  of registration  already granted to the trust or institution"; CBDT further states that "If  in   any particular   year,    the   specified    cut-off   is exceeded,   the  tax  exemption  would   be denied   to  the  institution   in  that year   and cancellation   of  registration    would  not   be mandatory  unless   such  cancellation becomes necessary  on  the ground(s)   prescribed under the  Act."; CBDT notes that in view of the introduction of special  provisions  relating   to  tax  on  accretedincome under Chapter  XII-EB  in the  Act vide  Finance  Act,  2016, cancellation  of  registration  granted  u/s 12AA  may lead   to  a charitable  institution  getting  hit  by sub-section (3) of Sec. 115TD  and  becoming liable  to tax  on  accreted income & resulting into a hardship; CBDT therefore states that officers should not cancel registration merely because proviso to Sec. 2(15) comes into effect; CBDT further states that "The   process   for cancellation   of registration   is  to  be  initiated  strictly    in  accordance with   section 12AA(3)   and  12AA(4)  after  carefully examining the  applicability of these  provisions"
    Beneficial CBDT Circular No. 21/2016 dated 26-5-2016
    No cancellation of Sec 12AA registration where charitable trusts' temporary receipts crosses threshold u/s 2(15)
    • Where charitable trust engaged in 'advancement of object of general public utility' crosses the threshold of 20% or Rs. 25 lakhs for prescribed commercial activities under proviso to Sec. 2(15), it shall not be mandatory to cancel Sec. 12AA registration.
    • However, there should not be any change in the nature of activities of the institution.
    • The temporary excess of receipts beyond the specified cut-off in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution requiring cancellation of registration already granted to the trust or institution.
    • If in any particular year, the specified cut-off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the Act.
    • Cancellation of registration granted u/s 12AA may lead to a charitable institution getting hit by sub-section (3) of Sec. 115TD and becoming liable to tax on accredited income & resulting into a hardship.
  • The process for cancellation of registration is to be initiated strictly in accordance with section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions

  •  

     



    ·         CBDT/ GoI Invites Comments and Inputs of the Stakeholders for Issuance of Guidance Note on Implementation of Provisions of General Anti Avoidance Rule (GAAR)
    ·         The provisions of General Anti Avoidance Rule (GAAR) are contained in Chapter X-A of the Income-tax Act, 1961 (the Act). The GAAR provisions shall be effective from assessment year 2018-19 onwards, i.e.financial Year 2017-18. The necessary procedures for application of GAAR and conditions under which it shall not apply, have been enumerated in Rules 10U to 10UC of the Income-tax Rules, 1962. 
    ·         Several stakeholders and industry associations have represented that guidelines for implementation of GAAR be issued so that there is adequate clarity in this regard. 
    ·         The general public and stakeholders are therefore requested by the GoI to provide their inputs on the provisions of GAAR in respect of which further clarity is required, from its implementation perspective. For the exercise to be meaningful, it is essential that reference to hypothetical situation be avoided. If the input relates to interpretation of a specific real world structure or arrangement, the structure should be such as that, which commonly occurs in the sector and involves clarification of general principles of application. Further, in relation to such structure, the particular provision and apprehensions or doubts along with basis thereof may also be provided with all the relevant facts. 2560185
    ·         The inputs may be provided on or before 30.06.2015 electronically on e-mail ID gaar-dor@gov.in and/or by post at the following address:
    ·         "Comments for Guidance Note on GAAR", The Director (Tax Policy & Legislation)-I, Room No. 147-D, Central Board of Direct Taxes, North Block, New Delhi – 110001.


    25 May 2016

    High Value Financial transaction Information collected by Income tax

    Annual Information Return (AIR) of 'high value financial transactions' is required to be furnished under section 285BA of the Income-tax Act, 1961 by 'specified persons' in respect of 'specified transactions' registered or recorded by them during the financial year. The due date of filing of the return is the 31st of August of the following year. The 'specified persons' and the 'specified transactions' are listed in Rule 114E of the Income-tax Rules, 1962. Briefly, these are as under:

    Sl. No. (1)Class of Person(2)Nature and Value of transaction(3)Clarifications by Central Board of Direct Taxes vide Circular No.07/2005 dated 24thAug, 2005(4)
    1.A Banking Company to which the Banking Regulation Act, 1949(10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).Cash deposits aggregating to ten lakh rupees or more in a year in any savings account of a person maintained in that bankOnly the aggregate of all the cash deposits in the savings account of a person to be reported as one transaction and the date of the transaction is to be the last date of the financial year i.e. 31.03.2005 in respect of FY 2004-2005.
    2.A Banking Company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or any other Company or institution issuing credit card.Payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to two lakh rupees or more in the year.Only the aggregate of all the payments by a person to the credit card company is required to be reported as one transaction and date of transaction is to be the last date of the financial year i.e. 31.03.2005 in respect of FY 2004-05.
    3.A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorized by the trustee in this behalf.Receipt from any person of an amount of two lakh rupees or more for acquiring units of that fund.The amount actually received from the transacting party and not the amount relating to allotment is to be reported.
    4.A Company or institution issuing bonds or debentures.Receipt from any person of an amount of five lakh rupees or more for acquiring bonds or debentures issued by the Company or institution.The amount actually received from the transacting party and not the amount relating to allotment is to be reported.
    5.A Company issuing shares through public or rights issue.Receipt from any person of an amount of one lakh rupees or more for acquiring shares issued by the Company.The amount actually received from the transacting party and not the amount relating to allotment is to be reported.
    6.Registrar or Sub Registrar appointed under section 6 of the Registration Act, 1908Purchase or sale by any person of immoveable property valued at thirty lakh rupees or more.There may be certain situations where the transaction in respect of property valued at thirty lakh rupees involves joint parties and value for one or more parties is less than rupees thirty lakh. In such situations, all such transactions are to be reported in respect of all the joint parties even though the value of transaction in the hands of one or more of the joint parties is less than the threshold limit.
    7.A person being an officer of the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 who is duly authorized by the Reserve Bank of India in this behalf.Receipt from any person of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India.The aggregate of all the receipts from a person is required to be reported as one transaction and the date of the transaction is to be mentioned as the last date of the financial year i.e. 31.03.2005 in respect of FY 2004-05.

    Draft Indirect Transfer Rules

    CBDT notifies draft rules for determination of Fair Market Value (FMV)  and reporting requirement for Indian concerns in respect of indirect transfer provisions u/s 9(1) ; Sec 9(1) states  'share or interest is said to derive its value substantially from assets located in India, if fair market value (FMV) of assets located in India comprise at  least 50% of the FMV of total assets of the company or entity'; Draft  rules introduce 11 areas of reporting by Indian company ; CBDT seeks comments on draft rules by May 29

    23 May 2016

    Unique Warehouse Code

    Customs
     Allotment of Unique Warehouse Code for Customs Bonded Warehouses
    The Central Board of Excise and Customs ("the CBEC") vide Circular No. 19 /2016 –Customs dated May 20, 2016 has informed that in terms of changes made in Finance Act, 2016 in regard to shifting towards a record based control with respect to Bonded Warehouses, it is proposed that each Warehouse be allotted a Unique Warehouse Code so that importers can at the into-bond bill of entry stage declare the Warehouse in which goods shall be deposited.
    In this respect a module has been developed in ICES to capture details of Customs Bonded Warehouses licensed in each Commissionerate and to generate a Warehouse Code in the system.
    Further, any formation of Central Excise having control over a Customs Bonded Warehouse but not connected on ICES are directed to forward the list of Warehouses licensed by them to the Principal Commissioner/ Commissioner of Customs having jurisdiction over the nearest EDI enabled Customs station latest by June 1, 2016.
    Also, the CBEC has requested the Commissioners at EDI locations to complete the said exercise by 6th June, 2016 and confirm the same and it is proposed to publish the said code  generated on the ICEGATE website for the information of trade from June 10, 2016 to June 15, 2016.
    From June 20, 2016, declaring the warehousing code in the Bill of Entry would become mandatory for filing Into-Bond and Ex-Bond Bill of Entry and Ex-Bond Bill of Entries with invalid Warehousing Code will be rejected.

    *SALARIED EMPLOYEES TO SUBMIT PROOF FOR LTA, HRA CLAIMS*

    *SALARIED EMPLOYEES TO SUBMIT PROOF FOR LTA, HRA CLAIMS*

    The CBDT (Central Board of Direct Taxes) has introduced a new form (Form 12 BB) for claiming tax deduction towards LTA, LTC, HRA & interest paid for home loans. The new form mandates people to furnish proof of travel while claiming LTA, LTC, and details of landlord in case of HRA claims. Let us understand this in detail:-

    *Why this Rule?*

    The main reason behind introducing this rule is to plug the loopholes under tax laws by tightening the entire procedure for claiming these tax exemptions. This becomes more important because there was no standard or prescribed format until now for filing these declarations. And in the Budget 2015, the Finance Act had already introduced Section 192(2D) of the Income Tax Act mandating employers to collect all necessary evidences, but the rules and form were yet to be prescribed. The same has been done now.

    *What is this form about?*

    The declaration needs to be filed for claiming deductions in a prescribed form i.e. Form 12 BB as set up under rule 26C.

    *What is the obligation on the Employer?*

    Earlier the employers were not under any statutory obligations for collecting bills or other proofs in order to prove the fact that their employees have actually utilized the money they are claiming towards these claims.

    But, the current amendment with the introduction of this rule will now make all the employers obligated to collect all the relevant information in the prescribed format apart from collecting the proof of evidence, before they can allow the respective benefits under various tax benefits to the employees.

    Details needed to furnish LTA, LTC and HRA claims

    The circular as issued by the government has not specified the documents required to be submitted for claiming deductions but the existing documents that employees used to provide should hold good. Following are the documents which are required to claim these benefits:-

    *HRA:*

    As per the notification issued by the government, a person claiming HRA (Housing Rent Allowance) for over Rs. 1 lakh needs to furnish name, address and PAN i.e. Permanent Account Number of the landlord, apart from giving the rent receipts. With this the government can start tracking the fraudulent claims and can also verify whether the rent received by the landlord has been duly disclosed in their tax-return.

    *LTA/LTC:*

    To claim LTA (Leave Travel Allowance) or LTC (Leave Travel Concession), people need to provide the evidence of expenditure, and submit boarding pass and tickets for claiming LTA or LTC.

    *Housing Loan:*

    To claim deduction on the interest on a housing loan, people need to provide PAN of the lender and their name and address.

    *Deductions u/s Chapter VI-A*

    People need to submit relevant proof for claiming deductions under chapters VIA(A) and VI-A that cover Sections 80C, 80CCC, 80CCD, 80E, 80G, 80TTA. Sections 80CCC, 80CCD and section 80C allow a deduction of Rs. 1.5 lakhs on specified investments.

    *What will be the impact of this new Rule?*

    The new rule and the forms will make it really easy for both the taxpayer and the employer because it brings standardization which will help employees and employers both. Moreover from the government's point of view, the new format will ensure collection and maintenance of information, and will assist them in streamlining their assessment process and curb the malpractice of fake claims.

    *When will this rule come into effect?*

    The rules will be applicable from June 1, 2016.

    21 May 2016

    Clarification on Arbitral Tribunal


    Clarification regarding leviability of Service tax in respect of services provided by arbitral tribunal and members of such tribunal
    In accordance with Notification No. 30/2012-ST dated June 20, 2012, Services provided or agreed to be provided by an arbitral tribunal to a business entity (turnover exceeding Rs 10 lakh) located in the taxable territory, is taxable under reverse charge mechanism.
    Further, In the Budget 2016-17, the Entry No. 6(c) of the Notification No. 25/2012-ST dated June 20, 2012 has been omitted with effect from April 1, 2016, which read as: "Services provided by a person represented on an arbitral tribunal to an arbitral tribunal."
    Now, it has come to the notice of the Board that there is some confusion regarding the legal position with respect to continuance of reverse charge mechanism for services provided by arbitral tribunals and individual arbitrators on the arbitral tribunal, with effect from April 1, 2016
    Therefore the Board explains that-
    ·         It could be argued that service provided by an arbitrator on the panel of arbitrators, to the arbitral tribunal is taxable under forward charge. However, this does not appear to be a correct interpretation of law. Any reference in Service tax law to an "arbitral tribunal" necessarily includes the natural persons on the arbitral tribunal, by virtue of clause (d) of Section 2 of the Arbitration and Conciliation Act, 1996 and
    ·         Services are provided or agreed to be provided by the panel of arbitrators, as comprising of the several natural persons on the said panel, to the business entity or to the arbitration institution approached by the business entity for purposes of arbitration
    ·         Thus,  the liability to discharge Service tax is on the service recipient, if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.
    Further, The Central Board of Excise and Customs vide Circular No. 193/03/2016-Service Tax dated May 18, 2016 has issued clarification that Service tax liability for services provided by an arbitral tribunal (including the individual arbitrators of the tribunal) shall be on the service recipient under reverse charge mechanism if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.

    Vijaya Bank Empanelment of Concurrent Auditors

    Vijaya Bank invites applications for Empanelment of Concurrent Auditors for the year 2016-17. Last Date 21.05.2016. Follow the link http://goo.gl/7jQfMk

    20 May 2016

    MCA : *Special Courts Notified*

    MCA : *Special Courts Notified*

    In exercise of the powers conferred by sub-section (3) of section 1 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 18th day of May, 2016 as the date on which the provisions of clause (iv) of sub-section (29) of section 2, sections 435 to 438 (both sections inclusive) and section 440 of the said Act shall come into force.

    17 May 2016

    Finance Bill, 2016 assented to by President

    Finance Bill, 2016 assented to by President
    The Finance Bill was presented in the Lok Sabha on February 29, 2016. On May 5, 2016, the Lok Sabha passed the Finance Bill, 2016 and later on it was approved by the Rajya Sabha.The Finance Bill, 2016 received the presidential assent on May 14, 2016. Now it becomes the Finance Act, 2016 (28/2016).

    13 May 2016

    *Pre-Multipurpose Empanelment Form

    *Pre-Multipurpose Empanelment Form (P-MEF)* for the year 2016-17 is now hosted at MEFICAI website. The status of your firm as on 01.01.16 has been updated in your concerned Regional office. However, if you find any deviation from your actual status, kindly ensure that your status is updated on or before 25th May, 2016 with your concerned Regional Office. Soon after this MEF data verification process, MEF will be hosted at www.meficai.org

    12 May 2016

    India, Mauritius plug loopholes in tax treaty

    Press Information Bureau
    Government of India
    Ministry of Finance
    10-May-2016 18:12 IST
    India and Mauritius sign the Protocol for amendment of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains



                The Protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries today at Port Louis, Mauritius. The key features of the Protocol are as under:
    i.          Source-based taxation of capital gains on shares: With this Protocol, India gets taxation rights on capital gains arising from alienation of shares acquired on or after 1st April, 2017 in a company resident in India with effect from financial year 2017-18, while simultaneously protection to investments in shares acquired before 1st April, 2017 has also been provided. Further, in respect of such capital gains arising during the transition period from 1st April, 2017 to 31st March, 2019, the tax rate will be limited to 50% of the domestic tax rate of India, subject to the fulfillment of the conditions in the Limitation of Benefits Article. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards.
    ii.         Limitation of Benefits (LOB): The benefit of 50% reduction in tax rate during the transition period from 1st April, 2017 to 31st March, 2019 shall be subject to LOB Article, whereby a resident of Mauritius (including a shell / conduit company) will not be entitled to benefits of 50% reduction in tax rate, if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs. 2,700,000 (Mauritian Rupees 1,500,000) in the immediately preceding 12 months.
    Iii         Source-based taxation of interest income of banks: Interest arising in India to Mauritian resident banks will be subject to withholding tax in India at the rate of 7.5% in respect of debt claims or loans made after 31st March, 2017. However, interest income of Mauritian resident banks in respect of debt-claims existing on or before 31st March, 2017 shall be exempt from tax in India.
    iv         The Protocol also provides for updation of Exchange of Information Article as per international standard, provision for assistance in collection of taxes, source-based taxation of other income, amongst other changes.

                Major impact: The Protocol will tackle the long pending issues of treaty abuse and round tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius. It will improve transparency in tax matters and will help curb tax evasion and tax avoidance. At the same time, existing investments, i.e. investments made before 1.4.2017 have been grand-fathered and will not be subject to capital gains taxation in India.
    **********
    DSM/KA

    Key Changes in Service Tax



    1.    Krishi Kalyan Cess @ 0.5% on gross value of taxable services (from 01.06.2016) Total ST rate @ 15%

    2.    AC Bus service by Road Transport Corporation taxable @ 6% (from 01.06.2016)

    3.    Rate of ST for the package tour increased from 3.625% to 4.35%

    4.    ST on foreman commission at 10.15%

    5.    Rate of ST for sale of flats increased from 3.625% to 4.35%

    6.    Rate of ST for transport of goods by Rail in container other than by IR increased from 4.35% to 5.8%

    7.    Rate of ST for transport of used household increased from 4.35% to 5.8%

    8.    Assignment of radio-frequency spectrum and subsequent transfers thereof taxable

    9.     Senior advocate service liable to service tax.

    10.  Transport of passengers ropeway, cable car or aerial tramway made liable for ST

    11.Interest rate reduced to 15% (if ST not collected) and 24% (if ST collected)

    12.Due date for issue of SCN extended from 18 months to 30 months

    13.The monetary limit for prosecution cases enhanced to Rs.2 Crores.

    14.Dispute resolution scheme for the cases pending before Commissioner (Appeals)

    15.New levy on services exempted only if amount received and invoice raised before the notified date

    16.Spl. Exemption for construction canal, dam or other irrigation works for the period 01.07.2012 to 29.01.2014.

    17.Restoration of exemption for construction of non-commercial buildings for the contracts enter prior to 01.03.2015 for the period upto 31.03.2020

    18.Spl. Exemption for constriction of ports and airports for the period from 01.04.2015 to 31.03.2020 for the contracts entered prior to 01.03.2015

    19.Construction under House For All (Urban) Mission / Pradhan Mantri Awas Yojana (PMAY), exempted

    20.Construction of low cost houses up to a carpet area of 60 sq.m per house under Govt. scheme exempted from service tax.

    21.Levy of Central Excise duty/CVD and service tax on IT Software made mutually exclusive

    22.Services provided by the Indian Institutes of Management (IIM) exempted

    23.Business Entity receiving any service from government to pay service tax

    24.Business entity located in India to pay service tax on ocean freight availed by foreign shipping line

    25.HUF and One person company (<50l basis="" o="" on="" p="" pay="" quarterly="" t="" to="">
    26.Annual returns to be filed by service provider by 30th Nov every year

    10 May 2016

    Guidance Note on Accounting for Real Estate

    ICAI has today issued Guidance Note on Accounting for Real Estate Transactions (for entities to whom Ind AS is applicable).

    http://resource.cdn.icai.org/42173asb31843.pdf

    09 May 2016

    The Insolvency and Bankruptcy Code at a Glance

    The Insolvency and Bankruptcy Code at a glance

    Lok Sabha has passed the Insolvency and Bankruptcy Code 2016 on May 05, 2016. It covers individuals, companies, limited liability partnerships and partnership firms. The new code will speed up the resolution process for stressed assets in the country. It attempts to simplify the process of insolvency and bankruptcy proceedings. The highlights of bankruptcy code are enumerated hereunder:
      1. Strict deadlines : Authority to decide insolvency applications within 180 days further, an extension of additional 90 days can be allowed
      2. Fast track Insolvency process: Fast track process is available for Corporate- Debtor with low income and assets, Specified class of creditors and any other category notified by Govt. Under fast track process, 90 days time-limit to complete whole process and further an extension of 45 days is allowed
      3. Adjudicating Authority:
        - NCLT for Corporates
        - DRTs for Individuals and Partnerships Firms
        - NCLAT to act as Appellate Authority
      4. Insolvency Regulator: To exercise regulatory authority over insolvency professionals, insolvency professional agencies and informational utilities
      5. Stringent punishment to defaulter: The bill proposes upto five-year jail term to debtors for concealment of property and debars bankrupt individuals from holding any public office.
      6. Initiation of Insolvency process
      6.1 Who can initiate corporate insolvency process?
    Financial Creditor: Financial creditor can file application before Adjudicating Authority for initiation of insolvency process against Corporate Debtor along with-
        - Proof of default and Name of resolution professional to act as an interim resolution professional
    Operational Creditor: creditor can initiate corporate insolvency process by giving 10 day notice to Corporate-debtor
    Corporate Debtor: The Corporate Debtor himself can initiate corporate insolvency process by making a reference to adjudicating authority
     6.2 Time-limit for admitting/rejection of plea: The Adjudicating Authority shall admit or reject application within 14 days of receipt
     6.3 Declaration of moratorium: The Authority shall declare moratorium to avoid institution of suits, transferring of assets, foreclosure, etc.
     6.4 Public announcement: It includes details of debtor, name of 'interim resolution profession' and last date of submission of claims.
     6.5 'Interim resolution professional': Adjudicating authority to appoint interim resolution profession within 14 days from insolvency commencement date
     6.6 Committee of creditors: Interim resolution professional shall constitute committee of creditors after collating all claims against debtors and determining their financial position. All decisions to be taken by 75% voting share of financial creditors. Resolution profession shall conduct the meeting of committee. Meeting may be in person or through electronic means
     6.7 Submission and Approval of resolution plan: Any applicant can submit a resolution plan to resolution professional, such professional can forward the resolution plan to authority after taking creditors' approval.
     6.8 Adjudicating Authority can order liquidation if:
       - Resolution plan is not presented in given time
       - Resolution plan is not as per rules
       - Committee of creditors demands liquidation
       - Debtor-company violates the terms of resolution plans
      7. Appointment of Liquidator:
        - Resolution professionals shall act as liquidator
      8. Workmen dues to get priority: Workers' salaries for up to 24 months will get first priority in case of liquidation of assets of a company ahead of secured creditors.
      9. Creation of 'insolvency information utilities'
       - to collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies
    (Source: taxmann)

    06 May 2016

    Procedure for TCS/ TDS return filing in the ITD e-filing portal

    Procedure for TCS/ TDS return filing in the ITD e-filing portal
    With effect from 1st May 2016, the online submission of Quarterly TDS/TCS statements will be discontinued at TIN-NSDL website.
    The Deductors who desires to upload the Quarterly TDS/TCS e-Returns online, shall upload the same at e-Filing Portal of ITD. 
    The Deductor must have registered the TAN at ITD's e-Filing Portal using a valid Digital Signature Certificate. To know detailed procedure on how to register as 'Tax Deductor and Collector' please read this booklet.
    Once the Tax Deductor and Collector login is created, user can upload the Quarterly TDS/TCS statements as described below:
    1. Visit ITD's e-filing home page (ITD e-filing) and login using TAN and Password
    2. After successful login, go to TDS menu >> Upload TDS
    3. In the form provided select the appropriate statement details, viz. FVU Version, Financial Year, Form Name, Quarter and Upload Type (Regular / Correction) and verify.
    4. Browse the TDS return filing zip file generated using Saral TDS
    5. Attach Signature file created using DSC Utility and click 'Upload'
    6. On successful upload appropriate message will be displayed along with Transaction ID and the Token Number for future reference. Deductor can check the status of return after 24 hours of upload using the Token Number.
    Read here for the detailed procedure of TCS/ TDS return filing statement upload.

    Lok Sabha Passed the Finance Bill,2016


    Changes in the Finance Bill 2016 as passed by the Lok Sabha

    On May 5, 2016, the Lok Sabha passed the Finance Bill. The Bill which was presented originally in the Lok Sabha on February 29, 2016 has not been passed in its original shape. Various changes have been made in the Bill. New amendments have been proposed. Some earlier proposed amendments have been removed, so on and so forth. A snippet of all changes made in the Finance Bill, 2016 as passed by the Lok Sabha viz-a-viz the Finance Bill, 2016 presented originally in the Lok Sabha are presented hereunder.
    1. Unlisted shares held for 24 months or less would be treated as short-term capital asset
    As per section 2(42A) of the Income-tax Act, any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer is treated as short-term capital asset.
    The aforesaid period of 36 months is treated as 12 months in case of shares held in a company. However, an amendment was made by Finance Act (No. 2) Act, 2014 to provide that the said period of 12 months won't be applicable in respect of shares not listed in recognized stock exchange. Hence, with effect from 01.04.2015, unlisted share is treated as short-term capital asset if it is held for not more than 36 months immediately preceding the date of its transfer.
    The Finance Bill, 2016 as passed by the Lok Sabha inserted a new clause to provide that the period of 36 months would be substituted with period of 24 months in case of unlisted shares. In other words, unlisted shares of company would be treated as short-term capital asset if it is held for a period of 24 months or less immediately preceding the date of its transfer.
    2. When employer's annual contribution is deemed as income received by employee
    The Finance Bill, 2016 proposed an amendment to the Fourth Schedule of the Income-tax Act to provide that lower of the following shall be deemed as income of the employee:
    (i)

    Annual contribution made by employer in excess of 12% of salary to the recognized provident fund account of the employees; or
    (ii)

    Rs. 1,50,000
    The Finance Bill, 2016 as passed by the Lok Sabha provides that any contribution by employer in excess of 12% of salary to the recognized provident fund account of the employees shall be deemed as income of employee. The ceiling limit of Rs. 1.50 lacs has been removed from the approved Finance Bill.
    3. TCS collection at the time of receipt only in specific cases
    The Finance Bill, 2016 proposed that every seller of a motor vehicle shall collect TCS at the rate of 1% of value of motor car if such value exceeds ten lakh rupees. Such tax was proposed to be collected from the buyer under section 206C at the time of debiting the amount receivable or at the time of receipt, whichever happened earlier.
    The Finance Bill, 2016 as passed by the Lok Sabha provides that tax shall be collected under Section 206C only at the time of receipt of consideration.
    4. Section 270A - Computation of tax on underreported income
    Under the existing provisions, penalty on account of concealment of income or on furnishing of inaccurate particulars of income is levied under Section 271(1)(c). In order to rationalize and bring objectivity, certainty and clarity in the penalty provisions, new Section 270A has been proposed to be inserted. It provides for levy of penalty in cases of underreporting and misreporting of income.
    It is proposed that rate of penalty shall be 50% of tax in case of under reporting of income and 200% of tax in case of misreporting of income. Following amendments to Section 270A have been approved by the Lok Sabha:
    (i)

    What constitutes under-reporting of income: The Finance Bill, 2016 proposed six instances where a person shall be deemed to have underreported his income. However, the Finance Bill, 2016 as passed by the Lok Sabha has included one more instance of underreporting of income. A person shall also be deemed to have underreported his income where the amount of total income reassessed as per Section 115JB or Section 115JC (MAT or AMT) provisions is greater than the deemed total income assessed or reassessed under provisions of the MAT or the AMT immediately before such reassessment.
    (ii)

    Tax payable on underreporting of income: The existing clause of the Finance Bill, 2016, proposed a flat tax rate of 30% in respect of underreported income in case of Individuals, HUF, AOP, BOI, Artificial Juridical person. The Finance Bill, 2016 as passed by the Lok Sabha provides that the tax payable in respect of the underreported income shall be as under:

    (a)

    Return not furnished: Where return of income has not been furnished and the income has been assessed for the first time, the tax shall be calculated on underreported income as increased by maximum amount not chargeable to tax.
    (b)

    In case of loss: Where the total income assessed or re-assessed is a loss, the tax shall be calculated on underreported income as if it was the total income.
    (c)

    In any other case: Tax on underreported income as increased by income assessed or re-assessed originally less tax on income assessed or re-assessed originally.
    5. Under reporting of income shall be punishable as willful attempt to evade tax
    The Finance Bill, 2016 proposed insertion of a new Section 270A to levy penalty in case of under reporting and misreporting of income by assessee. However, there was no corresponding provision to invoke prosecution in this case.
    Section 276C provides for rigorous imprisonment of minimum 3 months to 7 years in case an assessee has made willful attempt to evade tax.
    The Finance Bill, 2016 as passed by the Lok Sabha amends Section 276C to provide that under reporting of income as per section 270A shall be punishable with rigorous imprisonment under section 276C.
    6. Processing of returns before scrutiny assessment
    The Finance Bill, 2016 proposed mandatory processing of returns under Section 143(1) even when the scrutiny assessment notice is issued to the assessee. This amendment was proposed so that the assessee need not to wait for the refunds, if any, due to him till the scrutiny assessment was completed.
    The Finance Bill, 2016 had provided that return shall be processed before issuing assessment order under section 143(3). However, the finance bill as passed by the Lok Sabha provides that the processing of return is not necessary before the expiry of one year from the end of the financial year in which return is furnished, where a notice is issued for scrutiny assessment under Section 143(2).
    7. Benefit of 25 percent tax rates on certain domestic companies
    The Finance Bill, 2016 proposed insertion of new section 115BA to provide benefit of concessional tax rate of 25% to certain domestic companies engaged in the business of manufacturing or production of any article or thing, provided such company has been set-up and registered on or after March 1, 2016.
    The Finance Bill, 2016 as passed by the Lok Sabha provides that benefit of concessional tax rate shall also be available to the companies engaged in research in relation to or distribution of article or thing manufactured or produced by it.
    The Finance Bill, 2016 also proposed that to avail of the concessional rate of tax, domestic company shall exercise the option in the prescribed manner on or before due date of furnishing the return of income under section 139(1) for the relevant previous year.
    It is also provided that once the option to avail of benefit of concessional tax rate has been exercised by the company for any previous year, it cannot subsequently withdraw the same or for any other previous year.
    8. Cost of acquisition of asset declared under Income Declaration Scheme, 2016
    The Finance Bill, 2016 proposed Income Declaration Scheme, 2016 to provide an opportunity to taxpayers to declare their undisclosed income and pay tax, surcharge and penalty in aggregate at 45% of such undisclosed income.
    It is provided under the scheme that where the income chargeable to tax is declared in the form of investment in any asset, the fair market value of such asset as on the date of commencement of this scheme shall be deemed to be the undisclosed income.
    The Finance Bill, 2016 as passed by the Lok Sabha provides that the cost of acquisition of such asset shall be deemed to be the fair market value taken into account for purposes of Income Declaration Scheme, 2016.
    9. LLPs can be 'Eligible start-ups'
    The Finance Bill, 2016 proposed a new section 80-IAC to provide 100 percent deduction for 3 consecutive assessment years to an 'eligible Start-up' engaged in an eligible business. Such deduction may, at the option of assessee, be claimed for any three consecutive AYs out of the five years beginning from the year in which eligible startup is incorporated. The 'eligible start-up' is proposed to be defined to mean a 'company' engaged in an eligible business.
    The Finance Bill, 2016 as passed by the Lok Sabha extends the definition of 'eligible start-up' to include 'limited liability partnership' also. In other words, LLPs shall also be eligible to claim deductions under Section 80-IAC subject to fulfilment of other conditions.
    10. Levy of additional tax on dividend
    The Finance Bill, 2016 had proposed an additional tax of 10% if amount of dividend received by a taxpayer exceeds Rs. 10 Lakhs.
    The Finance Bill, 2016 as passed by the Lok Sabha clarified that dividend whether paid or declared or distributed by one or more domestic companies, the aggregate of dividend shall be considered for the limit of Rs.10 lakhs but Tax shall be payable only on the amount of dividend exceeding Rs 10 lakhs.
    11. Tax on income from patent developed and registered in India
    The Finance Bill, 2016 proposed insertion of new section 115BBF to tax royalty income in respect of a patent developed and registered in India at the rate of 10%.
    The Finance Bill, 2016 as passed by the Lok Sabha inserts two new sub-sections in Section 115BBF to provide as follows:
    (a)

    Assessee may exercise the option for taxation of income from patents in accordance with the provisions of section 115BBF, in prescribed manner on or before the due date of furnishing of return of income under section 139(1) of the relevant previous year.
    (b)

    If assessee opts for taxation of income from patents as per section 115BBF in any previous year and fails to offer tax on income from patents as per section 115BBF in any of the 5 succeeding assessment years then he shall not be eligible to claim benefit of said section for 5 assessment years subsequent to the assessment year in which such income has not been offered to tax as per section 115BBF.
    The Finance Bill, 2016 also provided that for the purpose of section 115BBF, patent shall be developed and registered in India. The word 'developed' had been described in the Explanations to mean the expenditure incurred by the assessee for any invention in respect of which patent is granted under the Patents Act, 1970.
    The Finance Bill, 2016 as passed by the Lok Sabha specifically provides that the meaning of "developed" shall mean at least 75 percent of the expenditure incurred in India by the eligible assessee for any invention in respect of which patent is granted under the Patents Act, 1970.
    12. Transfer of shares through a recognized stock exchange located in IFSC
    In order to mobilise growth of International Financial Services Centres (IFCS), the Finance Bill, 2016 proposed that no Securities Transaction Tax ('STT') and Commodities Transaction Tax ('CTT') shall be levied on transactions of securities carried out through recognized stock exchange located in IFSC where the consideration for such transaction is paid or payable in foreign currency.
    Consequently, it was proposed to amend the section 10(38) of the Income-tax Act to provide that long-term capital gains arising from transfer of equity shares, equity oriented mutual fund or units of business trust shall be exempt from tax if the transaction is undertaken in foreign currency through a recognised stock exchange located in an IFSC, even if STT is not paid in respect of such transactions.
    However, no such amendment was proposed to section 111A [short-term capital gain arising from transfer of listed securities].
    Therefore, the Finance Bill, 2016 as passed by the Lok Sabha makes similar amendment to section 111A to provide that short-term capital gains arising from transfer of underlying securities shall be taxable at 15%, if the transaction is undertaken in foreign currency through a recognised stock exchange located in an IFSC, even if STT is not paid in respect of such transactions.
    13. Amortization of spectrum fee
    The Finance Bill, 2016 proposed to insert a new section 35ABA to provide that the spectrum fee paid for auction of airwaves shall be allowed to be deducted over the useful life of the spectrum.
    The Finance Bill, 2016 as passed by the Lok Sabha also provides for consequences if specified conditions are not fulfilled. If subsequently there is a failure to comply with any of the conditions, the deduction shall be treated as wrongly allowed and the Assessing Officer may re-compute the total income of the assessee for the respective previous years. It is also provided that the provisions of Section 154 shall apply for four years from the end of the year in which the default is made.
    14. Relief to specific Non-Residents from the tax deduction under section of 194LBB
    The Finance Act, 2015 had inserted a special taxation regime in respect of Category I and II Alternative Investment Funds (investment fund) registered with the SEBI. Under this regime the income of the investment fund (not being in the nature of business income) is exempt in the hands of investment fund. However, income received by the investor from the investment fund (other than the income which is taxed at the level of investment fund) is taxable in their hands. Accordingly, Section 194LBB was inserted for deduction of tax in respect of payment made to such investors.
    The existing provisions of section 194LBB provide that in respect of any income credited or paid by the investment fund to its investor (resident or non-resident), a tax deduction at source (TDS) shall be made by the investment fund at the rate of 10% of the income. This TDS regime had created certain difficulties that non-resident investors, whose income was not taxable as per the relevant DTAA, were not able to claim benefit of lower or nil rate of taxation. Even section 197 didn't provide for any facility to the deductee to approach the Assessing Officer for seeking certificate for TDS at a lower or nil rate in respect of deductions made under section 194LBB.
    The Finance Bill, 2016 proposes to amend the section 194LBB to provide that tax shall be deducted at the rate of 10% where payee is resident. Where the payee is non-resident or foreign company, tax shall be deducted at the rates in force.
    The Finance Bill, 2016 as passed by the Lok Sabha inserts a proviso that where payee is a non-resident, no tax shall be deducted in respect of any income which is not chargeable to tax.
    15. Withdrawal of amendments relating to retirement funds
    I. Recognized Provident Fund
    The Finance Bill, 2016 proposed to amend Fourth Schedule so as to provide that:
    (a)

    Contribution: Employer's contributions to the recognized provident fund account of the employees shall not be chargeable to tax to the extent of 12% of employee's salary or Rs.1,50,000, whichever is less.
    (b)

    Withdrawal of employee's contribution: Any withdrawal from the accumulated balance in the provident fund account, which is attributable to employee's contribution made on or after April 1, 2016, shall not be chargeable to tax up to 40 % of such accumulated balance.
    The Finance Bill, 2016 as passed by the Lok Sabha withdraws such amendment to the Fourth Schedule and maintains the status-quo for the taxability of contribution to and withdrawal from the provident fund account.
    II. Withdrawal from superannuation fund account
    The Finance Bill, 2016 proposed that any payment in lieu of or in commutation of an annuity purchased out of contributions made on or after April 1, 2016, where it exceeds 40% of annuity, shall be chargeable to tax.
    The Finance Bill, 2016 as passed by the Lok Sabha withdraws such an amendment.
    16. Rate of MAT for unit located in IFSC
    The Finance Bill, 2016 had proposed to reduce the MAT rate from existing 18.5% to 9% in case of unit located in International Financial Services Center ('IFSC')
    In order to enjoy the lower MAT rate, following conditions were to be satisfied:

    The taxpayer is a unit established in IFSC

    The unit must be a new unit established on or after April 1, 2016

    It should derive its income solely in convertible foreign exchange
    All units that fulfill the above conditions shall have to compute MAT at 9% of book profit instead of normal rate of 18.5%.
    The Finance Bill, 2016 as passed by the Lok Sabha withdraws the condition of establishment of new IFSC unit after April 1, 2016. Consequently, the benefit of reduced rate of MAT shall also be given to those units which have been set up before April 1, 2016.
    17. Immunity from penalty and prosecution in certain cases
    The Finance Bill, 2016 proposed to insert section 270AA to provide immunity to the assessee from penalties under section 270A and prosecution under section 276C if the assessee pays the tax and interest within the time prescribed by the notice, provided assessee does not file an appeal against the order.
    The Finance Bill, 2016 as passed by the Lok Sabha also includes immunity from prosecution under Section 276CC in the new Section 270AA.
    18. Tax on Accreted Income of Trusts
    The Finance Bill, 2016 proposed to insert a new Chapter XII-EB, containing Section 115TD, 115TE and 115TF, under the Act to provide that 'accreted income' of a trust or institution registered under section 12AA shall be chargeable to tax at the maximum marginal rates in following circumstances:
    (a)

    If the trust or institution gets converted into any form which is not eligible under section 12AA;
    (b)

    If the trust or institution gets merged into any entity which is not eligible under section 12AA;
    (c)

    If the trust or institution, in case of dissolution, fails to transfer its assets to exempt entities under section 12AA and section 10(23C) (iv), (v), (vi) & (via).
    The difference between the fair market value of the assets and liabilities of the trust or institution would be treated as 'accreted income' and tax thereon shall be paid in addition to the income-tax chargeable in respect of the total income of such trust or institution.
    The Finance Bill, 2016 as passed by the Lok Sabha makes certain changes in the proposed Section 115TD, as under:
    A. Assets which don't form part of accreted income
    A proviso is inserted in Section 115TD to provide that the value of the following assets shall not be taken into consideration while computing the 'accreted income':
    (a)

    Any asset acquired by a trust or institution out of its agricultural income.
    (b)

    Any asset acquired by the trust before getting registered under section 12AA provided that no exemption under section 11 or 12 is provided to trust or institution during that period.
    B. Time-limit to pay tax on accreted income
    As per section 115TD, a trust or an institution shall be deemed to have been converted into any form not eligible for registration under section 12AA in a previous year on occurrence of following events:
    (a)

    when registration granted to it under Section 12AA has been cancelled; or
    (b)

    It has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it:


    has not applied for fresh registration under Section 12AA in the said previous year; or

    has filed application for fresh registration under Section 12AA but the said application has been rejected.
    It was proposed under Finance Bill, 2016 that the tax on accreted income shall be payable within 14 days from date of receipt of order cancelling registration or date of order rejecting application for fresh registration.
    The Finance Bill, 2016 as passed by the Lok Sabha has proposed new time-limit for payment of tax on accreted income. It has been prescribed that tax on accreted income shall be paid within 14 days from:
    (a)

    the date on which the period for filing appeal before ITAT against the order cancelling the registration (or order rejecting the application) expires, if no appeal has been filed by the trust or the institution; or
    (b)

    the date on which the order in any appeal, confirming the cancellation of the registration (or application), is received by the trust or institution.
    C. Validity of registration obtained under section 12A
    The Finance Bill, 2016 as passed by the Lok Sabha has made a clarificatory amendment to provide that registration under section 12AA shall include any registration obtained under section 12A.
    19. Section 80-IBA - Profit linked deduction on housing projects
    The Finance Bill, 2016 proposed insertion of a new Section 80-IBA which provides for deductions from profit arising from the business of developing and building housing projects. Such deduction is available subject to fulfillment of certain conditions where project is located within cities of Chennai, Delhi, Kolkata or Mumbai or within acceptable distance from municipal limits. The Finance Bill, 2016 as passed by the Lok Sabha provides that the distance from municipal limits shall be measured aerially. Further, it is mentioned clearly that the 'built-up area' of the residential unit shall be relevant to check if the size of the residential unit is within threshold limit of 30 sq. meter or 60 sq. meter, as the case may be.
    20. Limit on deduction in respect of expenditure on agricultural extension project
    The Finance Bill, 2016 had proposed to limit the deduction allowed under section 35CCC from existing 150% to 100% w.e.f April 1, 2018 (Assessment year 2018-19).
    The Finance Bill, 2016 as passed by the Lok Sabha defers the applicability of this provision from April 1, 2018 to April 1, 2021 (Assessment Year 2021-22).

    Empanel as Concurrent Auditors

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