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BUDGET 2016
SONALEE GODBOLE
1
Penalties
2
Section 270A
• Section 271 levying penalty for failure to furnish returns, comply
with notices, concealment of income, etc. will be applicable upto
A.Y. 2016-17.
• Section 270A is introduced w.e.f. A.Y. 2017-18 and replaces section
271(1)(c) and provides levy of penalty in case of under-reporting
and misreporting of income.
• The penalty of under-reporting/misreporting should be initiated
during the course of any proceedings.
3
Circumstances in which a person shall be considered to have under-reported his income:
1. Assessed Income > Income as per return processed under section143(1)(a).
2. Where no return of income has been furnished -Assessed Income > maximum amount not chargeable to tax
3. Reassessed Income > income assessed or reassessed before suchre-assessment
4. Deemed Total Income assessed/reassessed as per section115JB/115JC > Income as per section 143(1)(a)
4
5. Where no return of income has been filed -
Deemed Total Income assessed as per section 115JB/115JC >the maximum amount not chargeable to tax;
6. Deemed Total Income reassessed as per section 115JB/115JC >Deemed Total Income assessed/reassessed before such re-assessment;
7. The income assessed/reassessed has the effect of reducing the lossor converting such loss into income;
5
The amount of under-reported income is to be calculated in different
scenarios as under:
6
Situation Amount of under – reported
income
(I) Where income is assessed for the first time
(1) Return has been filed Assessed income - income determined
u/s. 143(1)(a).
(2) Return has not been filed:
a) In case of a company, firm
or local authority.
Income Assessed
b) In case of other assessees Assessed income - maximum amount
not chargeable to tax
Situation Amount of under – reported
income
(II) Where income has been re-
assessed
Income re-assessed- income
which was assessed/re-assessed as
per immediately preceding order.
(III)Where under reported income
arises due to determination of
income as per section 115JB/115JC
(A - B) + (C - D) Similar to
provisions of explanation 4 to
section 271(1)
(IV)Where assessment/reassessment
has the effect of reducing the
loss or converting the loss into
income
Income or loss assessed /
reassessed – Loss claimed
7
• Calculation of under-reported income in a case where the source of any
receipt, deposit or investment is linked to earlier year - Provisions similar
to existing Explanation 2 to section 271.
• Under-reported income under this section shall not include specificamount under the following circumstances:
i. Income in respect of which the assessee offers an explanation andthe income-tax authority is satisfied that the explanation is bonafide and all the material facts have been disclosed;
ii. under-reported income is determined on the basis of an estimate,if the accounts are correct and complete but the method employedis such that the income cannot properly be deduced therefrom;
iii. under-reported income is determined on the basis of an estimate,if the assessee has, on his own, estimated a lower amount ofaddition or disallowance on the same issue, has included suchamount in the computation of income and disclosed all factsmaterial to the addition made.
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iv. Transfer pricing adjustment is made by the Transfer Pricing
Officer where the assessee has maintained information and
documents as prescribed under section 92D,
declared the international transaction and disclosed all the
material facts relating to the transaction;
iv. where the undisclosed income is on account of a search operation
and penalty is leviable under section 271AAB.
9
• The cases of misreporting of income have been specified as under:
i. misrepresentation or suppression of facts;
ii. non-recording of investments in books of account;
iii. claiming of expenditure not substantiated by evidence;
iv. recording of false entry in books of account;
v. failure to record any receipt in books of account having a bearing
on total income;
vi. failure to report any international transaction or deemed
international transaction or specified domestic transactions.
10
Tax payable on under reported income
• in case of company, firm or local authority, tax is computed on
under-reported income assuming under reported income is the total
income.
• Other cases : thirty per cent of the under-reported income.
• No penalty to be levied on addition or disallowance of any amount
if such addition or disallowance has formed the basis of imposition
of penalty in the case of the person for the same or any other
Assessment Year.
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• penalty will be levied at fifty per cent of the tax payable on under-
reported income.
• However in a case where under reporting of income results
from misreporting of income by the assessee, penalty will be levied
at the rate of two hundred per cent of the tax payable on such
misreported income.
12
Section 270AA-Immunity from Penalty
and Prosecution• Provisions providing for immunity from imposition of penalty
under section 270A and prosecution under section 276C or under
section 276CC, if the following conditions are fulfilled:
i. the tax and interest payable as per the order of assessment issued
under section 143(3) or reassessment issued under section 147,
has been paid within the period specified in the notice of demand;
and
ii. no appeal against the order referred to in clause (a) has been filed.
iii. penalty levied is not for misreported income.
• The assessee can make an application, in the prescribed form to the
Assessing Officer within 1 month from the end of the month in
which assessment order under section 143(3) of the Act or
reassessment order under section 147 of the Act is received;
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• The Assessing Officer shall pass the order, within one month from
the end of the month in which the assessee makes the application,
accepting or rejecting the application for immunity after giving an
opportunity of being heard to the assessee;
• Where the application for immunity is accepted and an order is
passed under the section, no appeal or revision would lie against the
assessment or reassessment order.
• The order passed under the section would be final; Hence, it cannot
be re-opened or revised or reviewed.
• Where the application is rejected, appeal can be filed against the
assessment/reassessment order within the prescribed time.
Section 271AA
Failure to keep and maintain information and documents etc. in
respect of certain transactions – sub-section (2) added
• If an entity of an international group fails to furnish the information
and the documents as required under Rule 10D
- penalty of Rs.5,00,000/- after giving opportunity of being heard.
• Penalty is discretionary.
• No penalty to be levied if the failure is on account of a reasonable
cause (Section 273B)
15
Section 271GBPenalty for failure to furnish report or for inaccurate reportunder
section 286
A. For non-furnishing of report prescribed under section 286(2) by an
entity:-
a) if default is not more than a month, penalty is Rs.5,000/- per day;
b) if default is beyond one month, penalty is Rs.15,000/- per day for
the period exceeding one month;
B. For non-furnishing of information and documents called for by the
prescribed Authority within the prescribed time – penalty of
Rs.5,000/- per day.
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C. any default as prescribed in (A) and (B) above that continues even
after service of order levying penalty, then the penalty leviable is
Rs.50,000/- per day, for continuing default beyond the date of
service of order;
• Penalty of Rs.5,00,000/- shall be levied if the entity has provided
inaccurate information in the CbC report.
• No penalty to be levied if the failure is on account of a reasonable
cause (Section 273B).
• No provision for preferring appeal against the penalty order.
17
Section 272A
• The existing provisions of section 271(1)(b) for levy of penalty for
failure to comply with notices issued under sections 142(1) or
143(2), or failure to comply with directions issued under section
142(2A) are now shifted to section 272A Penalty of Rs.10,000/-
for each failure.
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Section 273A
• Principal Commissioner or Commissioner has the power to reduce
or waive penalty imposed under section 270A based on application
filed by Assessee.
• Principal Commissioner / Commissioner of Income Tax to pass
order accepting / rejecting application within 12 months from the
end of the month in which the application is received.
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CHAPTER VI-A
DEDUCTIONS
20
Section 80CCDExemption in respect of amount standing to the credit of pension
account of an individual received by nominee on death of
the individual
Section 80CCD is amended to provide that any amount received by
the nominee, on the death of the assessee, shall not be income of
nominee if such amount is received on account of closure of the
pension account or upon opting out of the pension scheme.
21
Section 80EE
Deduction in respect of interest on loan taken for residential House
property
As per the provisions of section 80EE existing till A.Y. 2015-16, deduction
of housing loan interest paid upto Rs.1 lakh can be claimed by a first time
home buyer. Section 80EE has been substituted to provide deduction in
respect of interest on housing loan paid by first time home buyer on the
following lines:
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Particulars Existing
Requirements
New Requirements
Loan sanctioned - 1st April, 2016 and 31st
March, 2017 by a
Financial Institution.
Maximum Interest deductible Rs.1,00,000/- Rs.50,000/-
Maximum amount of loan Rs.25,00,000/- Rs.35,00,000/-
Threshold limit for cost of
residential house property
Rs.40,00,000/- Rs.50,00,000/-
Purpose of loan For acquiring
residential house
For acquiring
residential house
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The assessee should not own any other residential property as on date
of sanction of loan.
Section 80GG
Deduction in respect of Rent paid
• Deduction under section 80GG is available to an assessee in respect
of rent paid by him, if the assessee does not own a house or does not
receive the House Rent Allowance (HRA) from his/her employer.
• The monetary ceiling of deduction has been increased from
Rs.2,000/- per month to Rs.5,000/- per month.
24
Section 80IACDeduction in respect of profits earned by eligible Start-Up
Companies / LLP
Eligible start-up has been defined as:
a) a company / LLP engaged in a business which involves innovation,
development, deployment or commercialization of new products,
processes or services driven by technology or intellectual property;
b) the company / LLP is incorporated between 1st April, 2016 and 31st
March, 2019;
c) the total turnover of its business does not exceed Rs.25 Crores in any
financial year between 1st April, 2016 to 31st March, 2021; and
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d) it holds certificate of eligible business from Inter-Ministerial Board ofCertification.
e) It is not formed by splitting up or the reconstruction of a businessalready in existence.
f) It is not formed by the transfer to a new business of machinery orplant previously used for any purpose in India (transfer of upto 20% ofthe total value of plant & machinery permitted.)
g) Other conditions provided in section 80IA(5), 80IA(7) to 80IA(11)shall apply.
• Deduction = 100% of profits derived from business for any threeconsecutive assessment years out of five years beginning from the year inwhich the eligible-start-up is incorporated.
• Return of Income be filed before due date of filing of return.
26
Section 80IBA
Deduction in respect of profits from housing projects
A new Section has been inserted to provide 100% deduction in respect
of profit arising from the business of developing and building housing
projects, subject to the following conditions:
i. The housing project is approved by the competent authority after
1st June, 2016 but before 31st March, 2019.
ii. The project is to be completed within 3 years from the date of
approval.
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iii. In case the project is located in the 4 metropolitan cities of India
or within the 25 kilometers from the municipal limit of such
cities, the project is on land measuring not less than 1000 sq.
meters and the area of residential units does not exceed 30 sq.
meters.
iv. In case project is situated in any other part of India, the project is
on land measuring not less than 2000 sq. meters and area of
residential units does not exceed 60 sq. meters.
v. Where residential unit is allotted to an individual, no other unit in
such project is allotted to him or any member of his family.
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vi. The built up area of shops and other commercial establishments in
the project does not exceed 3% of the aggregate built up area.
vii. Assessee maintains separate books of accounts in respect of the
housing project.
• If the project is not completed within permissible time period –
amount of deduction allowed is subject to tax in the year in which
stipulated period of completion expires.
29
Section 80JJAADeduction in respect of employment of new workmen
Section 80JJA which provides deduction in respect of wages to new
workmen has been substituted as under:
30
Sr
No
Particulars Existing Requirements New Requirements
1. Permissible
deduction:
30% of the additional
employee cost incurred
for three years
Employee should be:
New workmen in excess of
50 workmen employed
during the Financial Year
Any new employee
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Sr.
No.
Particulars Existing Requirements New Requirements
Employer should
be:
assessee engaged in
manufacture of goods
An assessee to whom
section 44AB applies
Salary Limit
No Limit Salary of the employee
should be ≤ Rs. 25,000/-
Other condition
No such condition No deduction is available
if, entire contribution under
Employees’ Pension
Scheme is paid by the
Government or the
employee does not
participate in recognised
P.F. ‘Emoluments’ should
be paid by A/c payee
cheque/draft or credit to
bank account.
Sr
No
Particulars Existing Requirements New Requirements
2 Number of days of
employment
300 days 240 days
3 Increase in number of
employees
10% increase in number of
workmen as compared to
the workmen employed on
the last day of the
preceding year.
No such
requirement
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• The business should not be formed by splitting up or reconstruction
of an existing business.
The business is not acquired by way of transfer from any other
person or as a result of any business reorganization.
The assessee furnishes the report of an accountant along with the
return.
Section 80IA/80IB/80IC
Nature of expenditure Present deduction Deduction from A.Y. 2018-19
Deduction in respect of profitsderived from :a. development, operation andmaintenance of aninfrastructure facility (80-IA)b. development of specialeconomic zone (80-IAB)c. production of mineral oiland natural gas [80-IB(9)]
100% of the profits Nil if the activity commencesafter A.Y. 2018-19
33
INCOME FROM
BUSINESS &
PROFESSION
34
Section 28
• Non Compete fees received by a person carrying on profession is
taxable under the head “Profits and gains of business or profession”
35
Section 32(1)(iia)
Additional Depreciation
Additional depreciation of 20% on cost of new Plant & machinery
now available to an assessee engaged in the business of transmission
or distribution of power.
36
Investment Allowance - Section 32AC
Clarification provided – Deduction available where new plant &
machinery was acquired in earlier year but installed at any time before
31st March, 2017, irrespective of the year of acquisition. The
deduction will be available in the year of installation.
The amendment will have retrospective effect from April 1, 2016.
37
Phasing out incentives in the form of weighted deduction and
profit linked incentives
The available deductions are phased out as under:
38
Section Nature of expenditure Proposed phase-out plan
35(1)(ii) Amount paid to research
association having the object
of undertaking scientific
research or to a university,
college, or other institution to
be used for scientific research
From A.Y.s 2018-19 to 2020-
21, weighted deduction of
150% allowed.
Applicable for both old and
new assets.
Section Nature of expenditure Proposed phase-out plan
35(1)(iia) Amount paid to a company to be
used for scientific research
With effect from A.Y.
2018-19, deduction of
only 100%.
35(1)(iii) Amount paid to research association
which has as its object the
undertaking of research in social
science or statistical research or to a
university, college or other
institution to be used for research in
social science or statistical research
With effect from A.Y.
2018-19, deduction of
only 100%.
35(2AA) Amount paid to a National
Laboratory, university, Indian
Institute of Technology or a
specified person
From A.Y.s 2018-19 to
2020-21, weighted
deduction of 150%
allowed.
39
Section Nature of expenditure Proposed phase-out plan
to be used in scientific research
programme approved by the
prescribed authority
With effect from A.Y. 2021-
22, deduction of only 100%
35(2AB) Expenditure incurred by a
company engaged in the business
of bio-technology, manufacture or
production of any article or thing
for in-house scientific research
From A.Y.s 2018-19 to
2020-21,weighted deduction
of 150% allowed.
With effect from A.Y. 2021-
22, deduction of only 100%.
35AC Expenditure incurred on eligible
social development projects or
schemes
With effect from AY. 2018-
19, deduction will be ‘Nil’
35AD Capital expenditure incurred for
the purpose of specified business
With effect from AY. 2018-
19, deduction of only 100%
40
Section Nature of expenditure Proposed phase-out plan
35CCC Expenditure incurred on
notified agricultural
extension project
With effect from A.Y. 2018-19,
deduction of only 100%.
35CCD Expenditure incurred on
notified skill development
programme by a company
100% of expenditure incurred
from A.Y. 2021-22
41
Section 35ABA
Deduction for Expenditure Incurred for Obtaining Right to Use
Spectrum for Telecommunication Services
• Deduction for the capital expenditure incurred for acquiring any right
to use spectrum for telecommunication services.
Deduction = Actual fees paid / No. of years for which license to use
is granted.
• Deduction is allowed from the year in which spectrum fee is actually
paid.
• If the spectrum fee is actually paid before the commencement of the
business to operate telecommunication services, the deduction will be
granted from the year in which business commences.
• The provisions relating to transfer of license, amalgamation and
demerger as contained in subsections (2) to (8) of Section 35ABB are
applicable.
42
Section 35AD
Deduction in Respect of Expenditure Incurred on Specified
Businesses
• Deduction will be available for capital expenditure incurred for the
business of developing, or maintaining and operating, or
developing, maintaining and operating a new infrastructure facility,
which commences its operation on or after 1st April, 2017, where
such business is:
i. Owned by a company registered in India or by a consortium of
such companies or by an authority or a board or corporation or
any other body established or constituted under any Central or
State Act;
43
ii. the entity referred to above has entered into an agreement with the
Central Government or a State Government or a local authority or
any other statutory body for developing or operating and
maintaining or developing, operating and maintaining, a new
infrastructure facility
• “Infrastructure facility” is defined in the same manner as in Section
80IA(4).
• This amendment is effective from A.Y. 2018-19.
44
Section 36(1) (viiia)
• Non-Banking Finance Companies (NBFCs) will be allowed a
deduction of provision made for bad and doubtful debts.
• Maximum deduction = 5% of the total income computed before
making any deduction under this section and other sections of
Chapter VI-A.
45
Section 40(a)(ib)
• Deduction for the payment to Non-resident will not be allowed if
the equalization levy is not deposited with the Government before
the due date of filing of the Return of Income.
• If such levy is deposited after the due date for filing Return of
Income, the deduction for the payment to Non-resident will be
allowed in the year of deposit of the levy with the Government.
46
Section 43B
• Deduction for any amount payable to Indian Railways for use of
railway assets now covered by section 43B.
47
INCOME FROM SALARY
48
Section 17(2)(vii)
Increase in exemption limit of Employer’s Contribution to
Superannuation Fund
Section 17(2)(vii) has been amended to increase the exemption limit
of employer’s contribution to an approved superannuation fund from
Rs.1,00,000/- to Rs.1,50,000/- per annum.
49
Rule 8 of Part A of Schedule IV to
the Income Tax Act
Rule 8 of Part A of Schedule IV is amended to provide that balance
standing to the credit of the employee in a Recognised Provident Fund
transferred to his account in the National Pension Scheme is exempt
from tax.
50
INCOME FROM HOUSE
PROPERTY
51
Section 24(b)
Increase in time period for acquisition or construction of Self
Occupied House Property for claiming interest
Section 24(b) has been amended to provide that the deduction of
interest paid on capital borrowed for acquisition or construction of
self-occupied house property shall be available if the acquisition or
construction is completed within 5 years from the end of the financial
year in which capital was borrowed.
52
Section 25A, 25AA and 25B
Sections 25A, 25AA and 25B have been merged under a single new
section 25A which provides that the amount of rent received in arrears
or the amount of unrealized rent realised subsequently is chargeable to
tax in the year in which such rent is received or realised, irrespective
of whether the assessee is the owner of the property or not in that
financial year.
30% standard deduction will be available.
53
TAX DEDUCTION /
COLLECTION AT SOURCE
54
Revision in TDS Threshold Limits
The below amendments are applicable from June 1, 2016.
55
Section Existing Threshold Limit (Rs.)
Proposed Threshold Limit (Rs.)
192A – TDS on Payment of Accumulated Provident Fund Balance due to an employee
30,000/- 50,000/-
194BB – TDS on Winnings from Horse Race 5,000/- 10,000/-
194C - TDS on Payments to Contractors Annual Limit of 75,000/-
Annual Limit of 1,00,000/-
194D – TDS on Insurance Commission 20,000/- 15,000/-
194G – TDS on Commission of sale of lottery tickets
1,000/- 15,000/-
194H - TDS on Commission or Brokerage 5,000/- 15,000/-
194LA – TDS on payment of Compensation of acquisition of certain immovable property
2,00,000/- 2,50,000/-
Revision in TDS Rate Limits
The rate of tax deducted at source has been changed as follows:
ggg
56
Section Existing TDS Rate (%)
Proposed TDS Rate (%)
194D – TDS on Insurance Commission 10 5
194DA – TDS in respect of Life Insurance Policy (not exempt u/s.10(10D))
2 1
194EE – TDS on withdrawal from NSS Deposit A/c.
20 10
194G – TDS on Commission of sale of lottery tickets
10 5
194H - TDS on Commission or Brokerage 10 5
The above amendments are applicable from June 1, 2016.
Section 197AFurnishing of Form Nos.15G / 15H
A self-declaration in prescribed Form Nos. 15G/15H for lower
deduction can be furnished in respect of rental income as well.
This amendment will take effect from June 1, 2016.
57
Section 206AA
Requirement to furnish PAN
Section 206AA provides for higher TDS at the rate of 20% in case the
recipient does not have a PAN in India.
Section 206AA is amended to provide that the provisions of this
section shall not apply to non-residents, subject to the fulfilment such
conditions as may be prescribed.
The said amendment is applicable from June 1, 2016.
Notification No. 53/2016 dated June 24, 2016
58
Section 206CTax Collection at Source
Section 206C has been amended to provide that tax needs to be
collected at source in the following transactions:
59
Nature of Transaction Monetary Limit (Rs.)
Rate (%)
Sale of Motor Vehicle > 10 lakhs 1
Sale in cash of any goods (other than bullion and jewellery)*
> 2 lakhs 1
Payment in cash for any services (other than payments on which tax is deducted at source under Chapter XVII-B)
> 2 lakhs 1
* TCS in relation to cash sale of any goods (other than bullion and
jewellery) or services shall not apply to certain class of buyers who fulfil
such conditions as may be prescribed.
Section 206(contd)
• FAQ – Circular No. 22/2016
• Further clarification for cases where sale consideration is received
partly in cash and partly in cheque – Circular No. 23/2016
60
THANK YOU
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