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AKGVG Weekly Insight

26th

December, 2016

Coverage:

Income Tax Updates

Customs Updates

Service Tax

Weekly News

RBI Updates

Regulatory Updates

Assembled & Edited by:

Team - AKGVG

AKGVG Weekly Insight | 26thDecember’ 16 | Page No. 1

Taxation Laws (2nd Amendment) Act, 2016 receives president’s

assent

The Taxation Laws (Second Amendment) Bill, 2016 containing

demonetization related amendments to Income-tax Act received

President’s assent on December 15 and became immediately

effective. The ‘Taxation and Investment Regime for Pradhan

Mantri Garib Kalyan Yojana, 2016' (PMGKY) introduced vide

the said Act.

The Taxation Laws (Second Amendment) Act, 2016 has also

amended the penalty provisions in respect of search and seizure

cases. The existing slab for penalty of 10%, 20% & 60% of income

levied under section 271AAB has been rationalized to 30% of

income, if the income is admitted and taxes are paid. Otherwise

a penalty @60% of income shall be levied.(Click here to read

more)

Taxation and Investment Regime for Pradhan Mantri Garib

Kalyan Yojana, 2016 (the Scheme) introduced:

The Taxation and Investment Regime for Pradhan Mantri Garib

Kalyan Yojana, 2016 (the Scheme) introduced vide the said Act.

The salient features of the Scheme are as under:

(i) Declaration under the Scheme can be made by any person

in respect of undisclosed income in the form of cash or

deposits in an account with bank or post office or specified

entity.

(ii) Tax @30% of the undisclosed income, surcharge @33% of

tax and penalty @10% of such income is payable besides

mandatory deposit of 25% of the undisclosed income in

Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. The

deposits are interest free and have a lock-in period of four

years.

(iii) The income declared under the Scheme shall not be

included in the total income of the declarant under the

Income-tax Act for any assessment year.

(iv) The declarations made under the Scheme shall not be

admissible as evidence under any Act (eg. Central Excise Act,

Wealth-tax Act, Companies Act etc.). However, no immunity

will be available under Criminal Acts mentioned in section

199-O of the Scheme.

Non declaration of undisclosed cash or deposit in accounts

under the Scheme will render such undisclosed income liable

to tax, surcharge and cess totaling to 77.25% of such income, if

declared in the return of income. In case the same is not

shown in the return of income a further penalty @10% of tax

shall also be levied followed by prosecution. It may be noted

that the provisions for levy of penalty for misreporting of

income @200% of tax payable under section 270A of the

Income-tax Act have not been amended and shall continue to

apply with respect to cases falling under the said section. (Click

here to read more)

Time limit of Pradhan Mantri Garib Kalyan Yojana, 2016

notified:

The ‘Taxation and Investment Regime for Pradhan Mantri Garib

Kalyan Yojana, 2016' (PMGKY) shall commence on 17th

December, 2016 and shall remain open for declarations up

to 31st March, 2017.(Notification No.115 dated 16th December,

2016)

Taxation and Investment Regime for PMGKY Rules 2016,

notified

CBDT via (Notification No.116 dated 16th December, 2016), has

provided the forms for declaration of income in form of cash or

deposit in an account. The declarant shall furnish a detail of

income in the form of cash or deposit in an account to principal

commissioner if Form-1 of these rules. The declaration can be

furnished electronically under digital signature or verification

code or in print form.

Government introduces Pradhan Mantri Garib Kalyan Deposit

Scheme, 2016

Govt in consultation with RBI has introduced Pradhan Mantri

Garib Kalyan Deposit Scheme, 2016 which shall come into force

from the 17th day of December, 2016 and shall be valid till 31st

day of March, 2017. The deposit under this Scheme shall be

made by any person who intends to declare undisclosed income

under sub-section (1) of section 199C of the Taxation and

Investment Regime for Pradhan Mantri Garib Kalyan Yojana,

2016.(Click here to read more)

AKGVG Weekly Insight |26th December’ 16 | Page No. 2

Rate of deemed profit reduced to 6% from 8% u/s 44AD if

receipts made through banking/digital channel

In order to promote digital payments & creation of less- cash

economy, CBDT has issued a press release dated 19.12.2016,

in which it has been decided to reduce the existing rate of

deemed profit of8% u/s 44AD of the act to 6% in respect of

the total turnover or gross receipts received through banking

channel/ digital means for the financial year 2016-17.(Click

here to read more)

DTAA between India & Cyrus revised:

A revised Agreement between India and Cyprus for the

Avoidance of Double Taxation and the Prevention of Fiscal

evasion (DTAA) with respect to taxes on income, along with its

Protocol, was signed on 18th November, 2016 in Nicosia,

which will replace the existing DTAA that was signed by two

countries on 13th June 1994.Both sides have now exchanged

notifications intimating the completion of their respective

internal procedures for the entry into force of the DTAA, with

which the revised DTAA shall come into effect in India in the

fiscal years beginning on or after 1st April, 2017. The revised

DTAA will enable source based taxation of capital gains on

shares, except in respect of investments made prior to 1st

April, 2017. In addition, the DTAA will also bring into effect

updated provisions as per international standards and in

accordance with the consistent position of India.(Click here to

read more)

CBDT issues clarification regarding indirect transfer

provisions

CBDT via circular no. 41/2016 dtd 21.12.2016, has provided

clarification regarding the issues raised by the stakeholders in

respect of indirect transfer of asset or a capital asset, being

any share or interest in a company or entity registered or

incorporated outside India, which shall be deemed to be and

shall always be deemed to have been situated in India, if the

share or interest derives, directly or indirectly, its value

substantially from the assets located in India. Addressing the

issues further, CBDT has further provided FAQ’s on the said topic for better understanding.

CBDT hints for scrutiny of returns of political parties

There have been some newspaper reports which seem to

wrongly suggest that there cannot be any scrutiny of Income-

tax returns of political parties registered with the Election

Commission in the context of deposits of old currency notes.

This inference seems to have been drawn because of the fact

that the income of the political parties is exempt from Income

- tax under Section 13A. CBDT has further clarified that the

exemption from income-tax is given to only registered

political parties subject to certain conditions, which are

mentioned in section 13A. There are enough provisions in the

Income Tax to scrutinize the accounts of the political parties

and these political parties are also subject to other provisions

of income -tax including filing of return. (Click here to read

more)

HSN 2017 will replace HSN 2012 from 01.01.2017

The amendments notified in Section 141 and 146 of the

Finance Act 2016 regarding the changes from the WCO

Harmonized System Nomenclature 2012 edition to the 2017

edition are to be implemented w.e.f. 00:00 hours on 01-01-

2017. It includes 233 sets of amendments, divided as follows:

agricultural sector 85; chemical sector 45; wood sector 13;

textile sector 15; base metal sector 6; machinery sector 25;

transport sector 18; other sectors 26. The classification of

goods should be in accordance with HSN 2017 while filing the

customs declarations for the goods to be imported or

exported from 01-01-2017. (Click here to read more)

Govt. allows e-invoice without digital sign till Jan 31,

2017 for OIDAR services from abroad

CBEC via notification no. 53/2016-Service Tax dtd 19/12/2016,

has amended Service Tax Rules, 1994 so as to allow a person

located in non-taxable territory providing online information

and database access or retrieval (OIDAR) services to a non-

assesse online recipient, to issue online invoices not

authenticated by means of a digital signature for a period

upto 31st January, 2017. (Click here to read more)

Customs Act

AKGVG Weekly Insight | 26th December’ 16 | Page No. 3

EPFO fixes 8.65% interest rate for PF deposits, cut from 8.8%

Retirement fund body EPFO today decided to lower the interest

on EPF deposits for the current fiscal to 8.65 per cent, from 8.8

provided in 2015-16, for its over four crore subscribers. In

September, the government reduced interest rates on small

savings schemes marginally by 0.1 per cent for the October-

December quarter of 2016-17, which resulted in lower returns

on PPF, Kisan Vikas Patra, Sukanya Samriddhi Account, among

others. (Click here to read more)

ESIC introduces a new scheme to promote registration of

employers/employees

ESIC has approved a new employer friendly scheme as one time

opportunity to (a) Encourage the employers to register

themselves; (b) Encourage the employer to register employees,

if any, who have been left out of coverage including contractual,

casual, temporary etc. The proposed Scheme will remain open

for a period of three months from 1st January, 2017 to 31st

March, 2017. (Click here to read more)

ESIC introduces approves enhancement of ceiling on medical

expenditure

In order to improve the medical services under State run ESI

facilities, ESIC has increased per capita ceiling of sharing

expenditure with State Governments from existing Rs. 2150/- to

Rs. 3000/- with sub ceiling of Rs. 1250/- for Ad i istratio and Rs. 1750/- for Others . With e ha ce e t of this ceili g, the State Governments may now further equip better their

medical services to ESI beneficiaries in its ESI medical

institutions. The enhanced ceiling of Rs. 3000/- will be fixed

from 2017-2018 to 2019-2020 and reviewed annually from

2020-21 on the basis of WPI and expenditure pattern of the

States. (Click here to read more)

ESIC scheme: Reduction in insurance contribution of

employers, employees takes effect

From October 2016, the employees and employers contribution

rate in Employee's State Insurance Corporation (ESIC) had been

reduced to 1% and 3% of the wages respectively from 1.75%

and 4.75%. Till the time the modifications are made to the

software of ESIC, the employers have been asked to file the

monthly contribution details as usual. However, for the actual

payment into the bank account, the employees need to

calculate at the reduced rate, which will be reconciled by the

ESIC at a later date. (Click here to read)

RBI notifies banks for payment of interest under Special

Deposit Scheme 1975 for calendar year 2016

RBI asks agency banks handling Special Deposit Scheme, 1975 to

ensure that interest for the calendar year 2016 for the Special

Deposit Scheme 1975 is disbursed to the account holders as per

rates mentioned therein. The disbursement may be made

through electronic mode or by way of account payee cheques

on January 2, 2017 itself (January 1, 2017 being Sunday), subject

to instructions, as applicable now, contained in our circular

CO.DT.No.15.01.001/H-3527/2003-04 dated December 30,

2003. (Click here to read more)

RBI withdraws Rs 5000 deposit limit for KYC -

compliant accounts In a sharp U-turn by the Reserve Bank of

India, the restrictions imposed on bank deposits exceeding Rs

5000 in old notes have now been withdrawn by the central

bank. In a circular issued to banks on 21/12/2016, RBI said it

was revoking the restrictions after reviewing the case. Earlier on

19/12/2016, RBI announced that deposits in old notes will be

limited to Rs 5000, and those exceeding the sum will come

under scrutiny. (Click here to read more)

RBI details distribution of banknotes during November 10 to

December 19, 2016

RBI via Press release: 2016-2017/1602 dtd 21/12/2016, stated

that over the said period, banks have reported that banknotes

worth Rs. 5, 92,613 crore have been issued to public either over

the counter or through ATMs. In this period, RBI has issued to

the banks and their branches, for distribution to the public, a

total of 22.6 billion pieces of notes of various denominations of

which 20.4 billion pieces belonged to small denominations of

Rs. 10, 20, 50 and 100s and 2.2 billion belonged to higher

denominations of Rs. 2000 and Rs. 500.

AKGVG Weekly Insight | 26thDecember’ 16 | Page No. 4

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Disclaimer: This insight is meant for informational purpose only and should not be

considered as an advice or opinion, or otherwise, whatsoever. AKGVG & Associates

does not intend to advertise its services through this insight. AKGVG & Associates is not

responsible for any error or omission in this insight or for any action taken based on its

contents.

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