Taxation Amendments Applicable For May 2017 Exam

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TAXATION AMENDMENTS
APPLICABLE FOR MAY 2017 EXAM
COMPLIED BY
CA J.S.JOHAR 08010921000
INCOME TAX 1- 21
INDIRECT TAX 22 - 31
FACE TO FACE CLASSES IN DELHI
(LAXMI NAGAR , KOHAT ENCLAVE , GTB NAGAR)
SATELLITE CLASSES ACROSS INDIA
(ALDINE CA CENTERS)
AMENDMENTS FOR AY 2017-2018 RELEVANT FOR MAY 2017
EXAMS
AMENDMENTS UNDER INCOME TAX FOR
THE
ASSESSMENT YEAR 2017-2018
CHAPTER 1 : BASIC CONCEPTS AND DEFINITIONS
No significant amendment has taken place for IPCC level
CHAPTER 2 : RESIDENTIAL STATUS
PROVISION FOR AY 2016-2017
Section 6(3) : Residential status of Company
Company is said to be resident if a) it is an Indian company or
b) it is a foreign company having full control and management situated in
India
Control and management of a Company is in the hands of its BOD. Therefore, control and
management exists where its BOD meetings take place. If all meetings are held in India then
foreign company is said to be a resident of India.
Section 6(3) : Residential status of Company
Company is said to be resident if
a) it is an Indian company or
b) it is a foreign company having its
place of effective management
(POEM), in that year, in India.
For the purposes of this clause "place of effective
management" (POEM) means a place where key
management and commercial decisions that are
necessary for the conduct of the business of an entity
Example : ABC Ltd. Is a Swedish company having headquartered at Stockholm and not
having a permanent establishment in India. It has set up a liaison office in Mumbai in April,
2016 in compliance with RBI guidelines to look after its day to day business operations in
India, spread awareness about the companys products and explore further opportunities.
The liaison office takes decisions relating to day to day routine operations and performs
support functions that are preparatory and auxiliary in nature. The significant management
and commercial decisions are, however, in substance made by the Board of Directors at
Sweden. Determine the residential status of ABC Ltd for AY 2017-2018.
Answer
In the case of ABC Ltd. its place of effective management for PY 2016-2017 is not in India,
since the significant management and commercial decisions are, in substance, made by the
Board of Directors outside India in Sweden.
ABC Inc. has only a liaison office in India through which it looks after its routine day to day
business operations in India. The place where decisions relating to day to day routine
operations are taken and support functions that are preparatory or auxiliary in nature are
performed are not relevant in determining the place of effective management.
Hence, ABC Ltd., being a foreign company is a non-resident for AY 2017-2018, since its
place of effective management is outside India in the PY 2016-2017.
as a whole, are in substance, made.
AMENDMENTS AY 2017-2018 CA JS JOHAR - 8010921000 Page 1
EXAMS
CHAPTER 3 : INCOME TAX CALCULATION
The rate of surcharge shall be:
In case of Individual , HUF , AOP-BOI , AJP , Firm , Local Authority , Co-Operative Society
the rate of
surcharge shall be 12 % of tax if the total income is more than `100 lakhs.
The rate of surcharge shall be:
In case of Individual, HUF, AOP-BOI and AJP the rate
of surcharge shall be 15 % of tax if the total income is more than `100 lakhs.
In case of Firm, Local Authority, Co-Operative Society the rate of surcharge shall continue to
be 12 % of tax if the total income is more than `100 lakhs.
Rate of tax for domestic company ----30%
Rate of tax for domestic company
a)When total turnover or gross receipts for the PY 2014-2015 < = `5
crores ---- ----------------------------------------------29%
b) Other domestic companies ------30%
REBATE UNDER SECTION 87A : Maximum of `2,000
REBATE UNDER SECTION 87A : Maximum of
`5,000
NEW CONCEPT
Illustration: Mrs. J was born on 1/4/1937 and she is a resident of India. She has earned
income of `19,70,000. Calculate her income tax liability for the AY 2017-2018 ie PY 2016-
2017.
Solution: As per latest circular no 28/2016 it will be considered that Mrs. J has attained age
of 80 years on 31/3/2017 and thus slab 3 will be applicable for calculation of income tax
liability.
Calculation of income tax liability for AY 2017-2018 ie PY 2016-2017
CLARIFICATIONS REGARDING ATTAINING PRESCRIBED AGE OF 60 / 80
YEARS ON 31st MARCH
ITSELF, IN CASE OF SENIOR / VERY SENIOR CITIZENS WHOSE DATE OF BIRTH
FALLS ON 1st APRIL
: CIRCULAR NO.28/2016 , DATED 27-7-2016
CBDT has clarified that a person born on 1st April would be considered to have attained a
particular age on
31st March, the day preceding the anniversary of his birthday.
First `5,00,000
NIL
`5,00,000 to `10,00,000
20%
`1,00,000
Balance of `9,70,000
30%
`2,91,000
Total
`3,91,000
Add: surcharge
NIL
Tax plus surcharge
`3,91,000
ADD: Education cess on tax plus surcharge 2% for primary education
1% for secondary and higher education
`7,820 `3,910
Total tax rounded off u/s 288B
`4,02,730
EXAMS
CHAPTER 4 : AGRICULTURE INCOME
NO AMENDMENT
CHAPTER 5 : INCOME FROM SALARY
EMPLOYERS CONTRIBUTION TO APPROVED SUPERANNUATION FUND : SECTION
17(2)(vii)
Perquisite includes employers contribution to an approved superannuation fund in excess of
`1,00,000
EMPLOYERS CONTRIBUTION TO APPROVED SUPERANNUATION FUND : SECTION
17(2)(vii)
Perquisite includes employers contribution to an approved superannuation fund in excess of
`1,50,000
CHAPTER 6 : INCOME FROM HOUSE PROPERTY
SECTION 24(b) DEDUCTION OF INTEREST FROM NAV
If Loan is borrowed on or after 1/4/1999
And property has been Acquired
Constructed
Then deduction allowed is lower of: a) Actual interest payable
b) Maximum limit of `2,00,000 pa.
However limit of `2,00,000 will be applicable only when construction gets completed within
three years from the end of the financial year in which
loan has been taken.
If not then limit applicable will be `30,000 and not `2,00,000
SECTION 24(b) DEDUCTION OF INTEREST FROM NAV
If Loan is borrowed on or after 1/4/1999
And property has been Acquired
Constructed
Then deduction allowed is lower of: c) Actual interest payable
d) Maximum limit of `2,00,000 pa.
However limit of `2,00,000 will be applicable only when construction gets completed within
five years from the end of the financial year in which
loan has been taken.
If not then limit applicable will be `30,000 and not `2,00,000
CONCEPT OF RECOVERY OF UNREALIZED RENT : SECTION 25A AND SECTION
25AA
From the amount of recovery, no deduction or expenses were allowed to be reduced.
RECOVERY OF ARREAR OF RENT : SECTION 25B
From the amount of recovery , deduction of 30% of such amount is allowed as deduction.
Further no other deduction or expenses were allowed to be reduced.
ALL THREE SECTIONS ie SECTION 25A, SECTION 25AA AND SECTION 25B HAVE
BEEN REPLACED BY FOLLOWING NEW SECTION
CONCEPT OF RECOVERY OF UNREALIZED RENT AND RECOVERY OF ARREAR OF
RENT : SECTION 25A
a) When the assessee realizes unrealized then it
shall be chargeable to tax under the head of
House Property in the year of recovery.
b) If any assessee has let out any building and has received arrear of rent (increased rent
from back date) from such property, which has not been charged to income tax earlier, then
such an
EXAMS
amount shall be chargeable to tax under the head
of House Property in the year of recovery.
c) Amount mentioned in a) and b) above will be chargeable to tax after deducting 30% of
such
amount.
d)It would be of no significance whether the
assessee is owner of the house property or not.
Example : Mr. Anand sold his residential house property in March, 2016. In June, 2016, he
recovered rent of `10.000 from Mr. Gaurav, to whom he had let out his house for two years
from April 2010 to March 2012. He could not realise two months rent of `20,000 from him
and to that extent his actual rent was reduced while computing income from house properly
for AY 2012-2013.
Further, he had let out his property from April, 2012 to February, 2016 to Mr. Satish. In April,
2014, he had increased the rent from `12,000 to `15,000 per month end the same was a
subject matter of dispute. In September, 2016, the matter was finally settled and Mr. Anand
received `69,000 as arrears of rent for the period April 2014 to February, 2016.
Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr.
Anand, and if so in which year?
Solution : Since the unrealised rent was recovered in the PY 2016-2017, the same would be
taxable in the AY 2017-2018 under section 25A, irrespective of the fact that Mr. Anand was
not the owner of the house in that year Further, the arrears of rent was also received in the
PY 2016-2017, and hence the same would be taxable in the AY 2017-2018 under section
25A, even though Mr. Anand was not the owner of the house in that year. A deduction of
30% of unrealised rent recovered and arrears of rent would be allowed while computing
income from house property of Mr. Anand for AY 2017-2018.
CHAPTER 7 : INCOME FROM BUSINESS OR PROFESSION
Computation of income from house property of Mr. Anand for AY 2017-2018
Particulars
`
(i)
Unrealised rent recovered
10,000
(ii)
Arrears of rent received
69,000
79,000
Less:
Deduction @ 30%
23,700
Income from house property
55,300
Section 28 : Incomes taxable as PGBP Income
Any sum received in cash or in kind under an agreement of not carrying out any activity in
relation to
any business.
Section 28 : Incomes taxable as PGBP Income
Any sum received in cash or in kind under an agreement of not carrying out any activity in
relation
to any business or profession.
ADDITIONAL DEPRECIATION ON NEW PLANT OR MACHINERY : SECTION 32(1)(iia)
Additional depreciation of 20% shall be allowed to assessee engaged in the manufacturing
or production of any article or thing or engaged in the business of generation or generation
and distribution of electricity.
ADDITIONAL DEPRECIATION ON NEW PLANT OR MACHINERY : SECTION 32(1)(iia)
Additional depreciation of 20% shall be allowed to assessee engaged in the manufacturing
or production of any article or thing or engaged in the business of
generation or TRANSMISSION or distribution of electricity.
EXAMS
INCENTIVE FOR ACQUISITION AND INSTALLATION OF NEW PLANT OR
MACHINERY BY MANUFACTURING COMPANY:SECTION 32AC
INCENTIVE FOR ACQUISITION AND INSTALLATION OF NEW PLANT OR MACHINERY
BY MANUFACTURING COMPANY: SECTION 32AC
Deduction of 15% of cost of asset is allowed if assets is acquired and installed in
the previous year.
Deduction of 15% of cost of asset is allowed even if the installation of the new
assets is in a year other than the year of acquisition.
The deduction shall be allowed in the year in which the new assets are installed.
NEW CONCEPT
INVESTMENT-LINKED TAX INCENTIVE FOR SPECIFIED BUSINESSES : SECTION
35AD : 100% WEIGHTED DEDUCTION AVAILABLE TO THE ASSESSEE CARRYING ON
THE SPECIFIED BUSINESS
In relation to a new infrastructure facility
Developing or
maintaining and operating or
developing, maintaining and operating.
Definition of infrastructure facility
1) A road including toll road, a bridge or a rail system.
2) A highway project including housing or other activities being an integral part of the
highway project.
3) A water supply project, water treatment system, irrigation project, sanitation and
sewerage system or solid waste management system.
4) A port, airport, inland waterway, inland port or navigational channel in the sea.
Date of commencement
On or after 1.4.2017
Conditions to be satisfied by such specified business
1) The business should be owned by an Indian company or by a consortium of Indian
companies or by an authority or a board or corporation or any other body established or
constituted under any Central or State Act.
2) The entity should have entered into an agreement with the Central Government or a State
Government or a local authority or any other statutory body.
NOTE: Deduction of revenue capital expenses shall be 100%.
DEDUCTION OF EXPENSES ON THE PAYMENT BASIS : SECTION 43B
Expenses covered under this section are:
a) Any tax, duty, cess or fees under any law in force.
b) Any sum payable to an employee as bonus or
commission.
c) Interest on loan or borrowings from any public
financial institution or state financial corporation or on any term loan or advance from a
scheduled bank.
d) Interest on loan or advances from a scheduled bank.
DEDUCTION OF EXPENSES ON THE PAYMENT BASIS : SECTION 43B
Expenses covered under this section are:
g) Anytax,duty,cessorfeesunderanylawinforce.
h) Any sum payable to an employee as bonus or
commission.
i) Interest on loan or borrowings from any public
financial institution or state financial corporation or on any term loan or advance from a
scheduled bank.
j) Interest on loan or advances from a scheduled bank.
EXAMS
e) Payment of leave encashment to employee.
f) Contribution by employer to any PF or superannuation fund or gratuity fund or ESI or any
other fund for the welfare of employees
k) Payment of leave encashment to employee.
l) Contribution by employer to any PF or superannuation fund or gratuity fund or ESI or any
other fund for the welfare of employees
m)any sum payable by the assessee to the Indian Railways for use of
Railway assets
Depreciation under section 32
Depreciation on OIL WELLS shall be charged at
15%
Section 36 : PROVISIONS OF BAD DEBTS:
Generally there shall be no deduction for the provisions of bad debts. However in the
following cases provisions for bad debts shall be allowed:
In case of
Foreign Banks
Public Financial Institutions
State Financial Institutions
State industrial investment corporations
Provision for bad debts allowed as deduction shall be 5% of the gross total income
Section 36 : PROVISIONS OF BAD DEBTS:
Generally there shall be no deduction for the provisions of bad debts. However in the
following cases provisions for bad debts shall be allowed:
In case of
Foreign Banks
Public Financial Institutions
State Financial Institutions
State industrial investment corporations
Non-BankingFinancial
Companies (NBFCs)
Provision for bad debts allowed as deduction shall be 5% of the gross total income
COMPULSORY AUDIT OF ACCOUNTS IN
COMPULSORY AUDIT OF ACCOUNTS IN
CASE OF PROFESSIONALS COVERED
`25 Lakhs.
CASE OF PROFESSIONALS COVERED
UNDER SECTION 44AA : SECTION 44AB
UNDER SECTION 44AA : SECTION 44AB
If gross receipts for the current previous year exceeds
If gross receipts for the current previous year exceeds
`50 Lakhs.
PRESUMPTIVE TAXATION : SECTION 44AD :
PRESUMPTIVE TAXATION : SECTION 44AD : ALL TYPE OF BUSINESS EXCEPT
COVERED UNDER SECTION 44AE
1) Assessee is engaged in any business except the
business covered under section 44AE, if his total receipt does not exceed `200 lakhs.
2) From these estimated incomes no deduction of sections 30 to 38 shall be allowed to be
made. But in case of the firm, normal deduction of salary and the interest to the partners
under section 40(b) shall be allowed.
Now salary of partners and interest on their capital and loan will not be allowed as deduction
to the partnership firm
ALL TYPE OF BUSINESS EXCEPT COVERED
UNDER SECTION 44AE
1) Assessee is engaged in any business except the
business covered under section 44AE, if his total
receipt does not exceed `100 lakhs.
2) From these estimated incomes no deduction of
sections 30 to 38 shall be allowed to be made. But
in case of the firm, normal deduction of salary and
the interest to the partners under section 40(b) shall
be allowed.
EXAMS
NEW CONCEPTS FROM AY 2017-2018 UNDER SECTION 44AD
Payment of tax
Assessee following section 44AD has to make payment of tax in one instalment on or
before 15/3/PY.
Section 44AD(4): concept of 5 years
If any person declares profit for any year as per this section and he declares profit for any
of next five years not as per provisions of this section then he shall not be eligible to claim
the benefit this section for five years subsequent to the year in which the profit has not been
declared as per provisions of this section
Example: Mr. A is an eligible assessee and claims to be taxed on presumptive basis under
section 44AD for AY 2017-2018 i.e. PY 2016-2017 and offers income of `8 lakh on the
turnover of 1 Crores. For Assessment Year 2018-2019 and Assessment Year 2019-2020
also he offers income in accordance with the provisions of section 44AD. However, for
Assessment Year 2020-2021, he offers income of `4 lakh on turnover of 1 Crores.
In this case since he has not offered income in accordance with the provisions of section
44AD for five consecutive assessment years, after Assessment Year 2017- 2018, he will not
be eligible to claim the benefit of section 44AD for next five assessment years i.e. from
Assessment Year 2021-2022 to 2025-2026.
Section 44AD(5) : books of accounts and audit of books
Assessee to whom section 44AD(4) are applicable and
whose total income exceeds the basic exemption limit
shall be required to keep and maintain such books of account and other documents as
required under section 44AA and get them audited and furnish a report of such audit as
required under section 44AB.
NEW SECTIONS FROM AY 2017-2018
SECTION 44ADA : SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS
OF PROFESSION ON PRESUMPTIVE BASIS
Nature of scheme
This is a voluntary scheme. An assessee need not follow this presumptive taxation
schemes and can declare higher income in his ITR.
Eligible assessee: Section 44ADA(1)
Resident Assessee who is
Engaged in a profession referred to in section 44AA
Turnover: Section 44ADA(1)
Total gross receipts does not exceed `50,00,000 in a previous year
Presumed income: Section 44ADA(1)
Sum equal to 50% of the total gross receipts of the assessee in the previous year
Disallowed expenses: Section 44ADA(2) and (3)
From this estimated incomes no deduction of any expense [Section 44ADA(2)] or
depreciation [Section 44ADA(3)] shall be allowed to be made. Further in case of the
partnership firm deduction of salary and the interest to the partners under section 40(b) shall
be allowed.
Section 44ADA(4): books of accounts and audit of books
An assessee who claims that his profits and gains from the profession are lower than
the profits and gains specified in section 44ADA(1) and whose total income exceeds the
basic exemption limit shall be required to keep and maintain such books of account and
other documents as required under section 44AA and get them audited and furnish a report
of such audit as required under section 44AB.
EXAMS
TAX TREATMENT FOR SPECTRUM FEE : SECTION 35ABA
Transaction
Manner of deduction
1.
Acquisition of right to use spectrum
Any capital expenditure incurred for acquisition of any right to use spectrum for
telecommunication services either before the commencement of the business or thereafter
at any time during any previous year and for which payment has actually been made (actual
payment of expenditure or payable in the prescribed manner) to obtain a right to use
spectrum.
Appropriate fraction of the amount expenditure / total number of relevant years
Meaning of relevant previous years
Case
Meaning
Where the spectrum fee is actually paid before the commencement of business to operate
telecommunication services
The previous year beginning with the P.Y. in which such business commenced and the
subsequent P.Y. or P.Y.s during which the spectrum, for which the fee is paid, shall be in
force.
In any other case
The previous years beginning with the P.Y in which the spectrum fee is actually paid and
the subsequent P.Y or years during which the spectrum, for which the tee is paid, shall be in
force
2.
Transfer of the spectrum
Case 1: Where the proceeds of the transfer are less than the expenditure incurred
remaining unallowed
The expenditure remaining unallowed as reduced by the proceeds of transfer shall be
allowed in the previous year in which the spectrum has been transferred
Case 2: Where the proceeds of the transfer exceed the amount of expenditure
remaining unallowed
The excess amount shall be chargeable to tax as profits and gains of business in the
previous year in which the spectrum has been transferred However, the excess should not
exceed the difference between the expenditure incurred to obtain the spectrum arid the
amount of expenditure remaining unallowed.
If the spectrum is transferred in a previous year in which the business is no longer in
existence, the taxability would arise in the above manner as though the business is in
existence in that previous year.
EXAMS
Case 3: Where the proceeds of the transfer are not less than the amount of
expenditure incurred remaining unallowed.
No deduction for such expenditure shall be allowed in the previous year in which
spectrum is transferred or in respect of any subsequent previous year or years.
Case 4: Where a part of the spectrum is transferred (and the case is not covered under
Case 2 above)
Unallowed expenses would be amortised in the following manner
(i) subtracting the proceeds of transfer from the expenditure remaining unallowed; arid
(ii) dividing the remainder by the number of relevant previous years which have not expired
at the beginning of the previous year during which the licence is transferred.
3.
Transfer of spectrum in a scheme of amalgamation
If the amalgamating company sells or transfers the spectrum to the amalgamated
company, being an Indian company under the scheme of amalgamation
The provisions of section 35ABA will apply to amalgamated company as they would have
applied to amalgamating company as if the latter has not transferred the spectrum.
The tax treatment in cases 1,2 & 3 given in (2) above will not apply to the amalgamating
company.
4.
Transfer of spectrum in a scheme of demerger
If the demerged company sells or transfers the spectrum to the resulting company,
being an Indian company under the scheme of demerger
The provisions of section 35A8A will apply to resulting company as they would have
applied to demerged company as if the latter has not transferred the spectrum. The tax
treatment in cases 1.2 & 3 given in (2) above will not apply to the demerged company.
Consequences of failure to comply with the conditions after grant deduction
Where, in a previous year, any deduction has been claimed and granted to an assessee and
subsequently, there is failure to comply with any of the provisions of this section, then
(1) the deduction shall be deemed to have been wrongly allowed;
(2) the Assessing Officer may recompute the total income of the assessee for the said
previous year and make the necessary rectification. This is notwithstanding anything
contained in the Income-tax Act, 1961;
(3) the provisions under section 154 for rectification of mistake apparent from the record
would apply. The period of four years would be reckoned from the end of the previous year in
which the failure to comply with the provisions of section 154 takes place.
CHAPTER 8 : INCOME FROM CAPITAL GAINS
SECTION 2(14) : Capital asset will not include : a) 6.5% Gold Bonds 1977
b) 7% Gold Bonds 1980
c) National Defense Gold Bonds 1980
d) Special Bearer Bonds 1991
SECTION 2(14) : Capital asset will not include a) 6.5%GoldBonds1977
b) 7%GoldBonds1980
c) NationalDefenseGoldBonds1980
d) SpecialBearerBonds1991
EXAMS
e) Gold Deposit Bonds issued under Gold Deposit Scheme 1999.
e) Gold Deposit Bonds issued under Gold Deposit Scheme 1999
f) Deposit certificates issued under the Gold Monetisation Scheme, 2015
SECTION 47 : TRANSACTIONS NOT REGARDED AS A TRANSFER
--
SECTION 47 : TRANSACTIONS NOT REGARDED AS A TRANSFER
Any redemption of Sovereign Gold Bond under the Scheme, by an individual shall not be
treated as transfer and therefore shall be exempt from tax on capital gains.
THIRD PROVISO OF SECTION 48
Benefit of indexation is not available on transfer of Bonds and Debentures.
However in case of Capital Indexed Bonds issued by the government system of indexation
will be applicable.
THIRD PROVISO OF SECTION 48
Benefit of indexation is not available on transfer of Bonds and Debentures.
However in following two cases system of indexation will be applicable
1)Capital Indexed Bonds issued by the government.
2)Sovereign Gold Bond issued by the Reserve Bank of India under the
Sovereign Gold Bond Scheme, 2015
IN CASE OF SELF GENERATED ASSETS WHICH ARE
goodwill of the business
tenancy rights
route permits
loom hours
patents
copyrights
trademarks
brand name
which are self generated , COA and COI shall be taken to be NIL
IN CASE OF SELF GENERATED ASSETS WHICH ARE
goodwill of the business
goodwill of profession
tenancy rights
route permits
loom hours
patents
copyrights
trademarks
brand name
which are self generated , COA and COI shall be taken to be NIL
EXAMS
NEW CONCEPTS FROM AY 2017-2018
SECTION 2(42A): SHORT TERM CAPITAL ASSET (STCA) : A Capital Asset, which is not
a long term
Capital Asset, is a short term Capital Asset. In other words, Asset held for 36 months or less
is regarded as
short term Capital Asset.
ST
1 PROVISO OF SECTION 2(42A)
nd
rd
Following assets shall be
treated as LTCA after 12
1.
2. 3. 4. 5. 6.
7. 8.
Mutual Fund
Listed Equity Shares
1.
2. 3. 4.
5.
Mutual Funds [Listed or not]
months:
Units of Equity Oriented
months:
months:
1. 2.
Non Listed Equity Shares
listed
Non Listed Debentures
Non Listed Preference
Shares
Listed Preference Shares.
Non Listed Bonds
Listed Debentures
Listed Bonds
Non Listed Government
Securities
Listed Government
Other capital assets like
Securities
Land, Building, Jewellery etc.
Zero coupon Bonds
Units of UTI
COST OF ACQUISITION OF AN ASSET DECLARED UNDER THE INCOME
DECLARATION SCHEME, 2016 : SECTION 49(5)
When assessee transfers such an asset which has been declared under Income Declaration
scheme, 2016 then the cost of acquisition of the asset shall be deemed to be the fair market
value of the asset which has been adopted for such Income declaration scheme.
CII for the AY 2016-2017 i.e. PY 2015-2016 is 1125
SECTION 50C : FULL VALUE OF CONSIDERATION
Sale consideration u/s 50C shall be Actual Sale price
Higher
Value determined by valuation officer
Stamp duty value
From AY 2017-2018
st
1) 1 Proviso of Section 50C : If date of the agreement and the date of registration are not
the same
then the value determined by the stamp valuation authority on the date of agreement shall be
regarded as full value of consideration.
nd st
2) 2 Proviso of Section 50C : 1 Proviso shall apply only when amount of consideration or
its part has been received by an account payee cheque or account payee bank draft or by
use of electronic clearing system on or before the date of the agreement for transfer.
NEW SECTION : SECTION 54EE : CAPITAL GAIN NOT TO BE CHARGED ON
INVESTMENT IN UNITS OF A SPECIFIED FUND
1) Exemption is allowed to all type of assessees.
2) Exemption is allowed from LTCG on transfer of any type of LTCA on or after 1/4/2016
3) Exemption is allowed if LTCG is invested within 6 months from the date of transfer in the
long-term specified asset.
Lower
EXAMS
4) Assessee should hold such specified asset for the minimum period of 3 years from the
date of its acquisition.
5) The investment in the long-term specified asset by an assessee during any financial year
and during the subsequent financial year cannot exceed `50 lakhs.
6) If Where the long term specified asset is transferred by the assessee within 3 years from
the date of its acquisition, the amount of capital gain exempted earlier, shall be deemed to be
long-term capital gain of the previous year, in which the long term specified asset is
transferred. Similarly , If the assessee takes any loan or advance on the security of such
long-term specified asset, he shall be deemed to have transferred such long-term specified
asset on the date on which such loan or advance is taken.
7) Long-term specified asset means a unit or units, issued before 1/4/2019 of such fund as
may be notified by the Central Government in this behalf.
SECTION 54GB : EXEMPTION OF LONG-TERM CAPITAL GAIN TAX ON TRANSFER
RESIDENTIAL PROPERTY SHALL ALSO BE ALLOWED IF THE NET CONSIDERATION IS
INVESTED IN ELIGIBLE START UP
1) If an individual or HUF sets up a start-up company by selling a residential property and
invests in the
shares of such company then LTCG arising on account of transfer of a residential property
shall be exempt
from tax.
2) Exemption shall be : LTCG / Net sale consideration X amount invested in subscription of
shares
3) Such investment in shares must be made before 1/4/2019
4) Individual or HUF must holds more than 50% shares of the company and such company
shall utilise the
amount invested in shares to purchase new asset before due date of filing of return by the
investor.
5) The company should invest the proceeds in the purchase of new asset being new plant
and machinery. Investment in computers or computer software is allowed in case of
technology driven start-ups certified by
the Inter-Ministerial Board of Certification.
CHAPTER 9 : INCOME FROM OTHER SOURCES
NEW CONCEPT UNDER SECTION 56(2) : Any shares received by an individual or HUF as
a consequence of demerger or amalgamation of a company shall not attract the provisions of
Gift under section 56(2)(vii). In other words value of such shares shall not be taxable.
CHAPTER 10 : CLUBBING OF INCOME NO AMENDMENT
CHAPTER 11 : SET OFF AND CARRY FORWARD OF LOSSES Section
80 : Carry forward and set off of loss of specified business under section 73A
Loss of specified business can be carry forwarded for unlimited period of time.
Section 80 : Such loss can be carry forwarded even if ITR is not filed on or before the due
date (ITR filed after the due date , still loss can be carry forwarded)
Loss of specified business can be carry forwarded for unlimited period of time.
Section 80 : Such loss can be carry forwarded if ITR is filed on or before the due date (ITR
filed after the due date , loss can not be carry forwarded)
EXAMS
CHAPTER 12 : DEDUCTION FROM GROSS TOTAL INCOME
SECTION 80CCD : NEW PENSION SCHEME
Amount received from NPS by the Individual or his nominee
(a) due to closure or his opting out of NPS or
(b) as pension received from the annuity plan purchased or taken on such closure or opting
out
then the full amount so received shall be deemed to be the income of the individual or his
nominee of the previous year in which such amount is received
SECTION 80CCD : NEW PENSION SCHEME
PROVISO TO SECTION 80CCD Amount received by the nominee on
the death of the assessee shall not be deemed to be the income of the
nominee.
However, pension received by the nominee from the annuity plan purchased or taken on
such closure or opting out shall be taxable.
--
INTEREST ON LOAN FOR ACQUIRING RESIDENTIAL HOUSE PROPERTY: SECTION
80EE
1) The deduction shall be allowed to an individual
only.
2) The deduction shall be allowed for the amount of
interest payable on loan taken by the individual from any financial institution for the purpose
of acquisition of a residential House, which is to be let out or self-occupied, provided certain
conditions are satisfied.
3) Conditions to be satisfied are:
a) The loan is sanctioned by the financial institution
during the period beginning on 1/4/2016 and
ending on 31/3/2017.
b) The amount of loan sanctioned for acquisition of
the residential house property does not exceed `
35,00,000
c) The value of the residential house property does
not exceed `50,00,000.
d)The assessee does not own any residential
house property on the date of sanction of the
loan.
4) The deduction shall not exceed `50,000.
5) The deduction under this section is over and above
the limit of `2,00,000 provided for a self-occupied property u/s 24(b).
DEDUCTION IN RESPECT OF THE RENT PAID: SECTION 80GG
Amount of deduction shall be the least of the following:
a) Rent paid LESS 10% of Adjusted GTI b) 25% of the Adjusted GTI
c)`2,000 per month.
DEDUCTION IN RESPECT OF THE RENT PAID: SECTION 80GG
Amount of deduction shall be the least of the following:
a) Rent paid LESS 10% of Adjusted GTI b) 25% of the Adjusted GTI
c)`5,000 per month.
EXAMS
DEDUCTION IN RESPECT OF THE EMPLOYMENT OF THE NEW WORKERS :
SECTION 80JJAA
Old section has been omitted and new section has been introduced
DEDUCTION IN RESPECT OF THE EMPLOYMENT OF THE NEW WORKERS :
SECTION 80JJAA
(1) Section 80JJAA(1)
a) Deduction is allowed to all type of assessee.
b) Deductionshallbeallowedwhenassesseehastogethisaccountsauditu/s44AB.
c) Deduction is allowed when GTI includes PGBP income.
d) Deduction allowed shall be an amount equal to 30% of additional employee cost incurred
in business
during the PY and such deduction shall be allowed for 3 consecutive years starting from the
year in
which such additional employee cost was incurred.
e) Deductionshallbeallowedsubjecttotheconditionsspecifiedinsection80JJAA(2)
(2) Essential conditions: Section 80JJAA(2) : No deduction u/s 80JJAA(1) shall be allowed
a) if the business is formed by splitting up, or reconstruction of an existing business
b) if the business is acquired by the assessee by way of transfer from any other person or as
a result of
any business reorganization
c) Unless the assessee furnishes along with ITR a report of a CA giving such particulars in
the report as
may be prescribed.
(3) Additional employee cost
a) New Business : In the first year of a new business, emoluments paid or payable to
employees
employed during the PY shall be deemed to be the additional employee cost
b) Existing Business : in case of an existing business it means total emoluments paid or
payable to
additional employees employed during the PY. However no deduction shall be allowed if
(i) there is no increase in the number of employees from the total number of employees
employed as
on the last day of the preceding year
(ii) emoluments are paid in a manner otherwise than by an account payee cheque or account
payee
bank draft or by use of electronic clearing system through a bank account
(4) Additional employee : means an employee who has been employed during the PY and
whose
employment has the effect of increasing the total number of employees employed by the
employer as on the last day of the preceding year, but does not include
a) an employee whose total emoluments are more than `25,000 pm.
b)
anemployeeforwhomtheentirecontributionispaidbytheGovernmentundertheEmployeesPensio
n
Scheme notified in accordance with the provisions of the Employees Provident Funds and
Miscellaneous Provisions Act, 1952
c) an employee employed for a period of less than 240 days during the PY
d) anemployeewhodoesnotparticipateintherecognizedprovidentfund
(5) Emoluments: means any sum paid or payable to an employee but does not include
a) any contribution paid or payable by the employer to any pension fund or provident fund or
any other
fund for the benefit of the employee
b) any lump-sum payment paid or payable to an employee at the time of termination of his
service or
superannuation or voluntary retirement, such as gratuity, leave encashment, voluntary
retrenchment benefits, commutation of pension and the like.
BUSINESS OF ELIGIBLE START UP : SECTION 80-IAC
(1) Eligible start up means
d) acompanyorLLP
e) engaged in the eligible business
f) which is incorporated between 1/4/2016 and 31/3/2019
g) havingturnoverwhichislessthanorequalto25croresinanyPYfromPY2016-2017toPY2020-
2021
h) andholdscertificateofeligiblebusinessfromnotifiedIMBC(Inter-
MinisterialBoardofCertification)
(2) Eligible business means a business which involves innovation, development, deployment
or commercialization of new products, processes or services driven by technology or
intellectual property.
EXAMS
(3) 100% deduction of profit from eligible business : Section 80-IAC(1) and (2) : If
assessee is eligible start-up and GTI includes PGBP income of such business then it shall
be allowed a deduction of 100% of the Profits from such business for any 3 consecutive
assessment years out of 5 years beginning from the year in which the eligible start up is
incorporated.
(4) Conditions to be satisfied to claim exemption : Section 80-IAC(3): This section applies to
a start-up which fulfils the following conditions, namely
a) it is not formed by splitting up, or the reconstruction, of a business already in existence
nd
b) it is not formed by the sale to a new business of 2 hand plant or machinery.
nd
However, any machinery or plant shall not be regarded as 2 hand plant or machinery if all
the following conditions are fulfilled, namely:
(i) such plant or machinery was never used in India
(ii) such machinery or plant is imported into India;
(iii) no depreciation has been claimed in India.
nd
c) Further maximum of 20% of the total value of the plant or machinery can be 2 hand plant
or
machinery.
(5) Computation of profits of eligible business: For computing deduction under this section
the profits of the eligible business shall be computed as if it is the only source of income of
the assesses during the PY.
(6) Audit of accounts: The deduction shall be allowed only if the accounts of the start-up
have been audited by a CA and audit report has been submitted with ITR.
(7) Inter-unit transfer of goods: If goods or services held for the purposes of the eligible
business are transferred to any other business and the consideration for the same does not
correspond with the FMV of the goods or services then PGBP income shall be calculated on
the basis of such FMV.
(8) Restriction on double deduction: The deduction shall not exceed PGBP income of the
eligible business. Further, if deduction allowed under this section then no deduction shall be
allowed under any other section.
DEDUCTION IN RESPECT OF PGBP INCOME HOUSING PROJECTS: SECTION 80-
IBA
(1) 100% deduction of profit from housing projects: If GTI of an assessee includes PGBP
income from the business of developing and building housing projects then deduction of
100% of the PGBP income from
such business shall be allowed.
(2) Conditions to be fulfilled: Housing Project shall be a project which fulfils the following
conditions, namely
a) the project is approved after 1/6/2016 but on or before 31/3/2019
b) theprojectiscompletedwithinaperiodof3yearsfromthedateofapproval
c) the project shall be deemed to have been completed when a certificate of completion of
project as a
whole is obtained.
d) The built-up area of the shops and other commercial establishments included in the
housing project
does not exceed 3% of the aggregate built-up area.
e) the project is on a plot of land measuring not less than
(i) 1,000 square meters in city of Chennai, Delhi, Kolkata or Mumbai or within the distance
measured
aerially of 25 kms from the municipal limits of these cities
(ii) 2,000 square meters where the project is located in any other place
f) the built-up area of the residential unit comprised in the housing project does not exceed
(i) 30 square meters in the city of Chennai, Delhi, Kolkata or Mumbai or within the distance
measured
aerially of 25 kms from the municipal limits of these cities, or
(ii) 60 square meters, where the project is located in any other place
g) if residential unit in the housing project is allotted to an individual, no other residential unit
in the housing project shall be allotted to the individual or the spouse or the minor children of
such individual
EXAMS
h) theprojectutilizes
(i) minimum of 90% of the floor area ratio if project is located in city of Chennai, Delhi,
Kolkata or
Mumbai or within the distance measured aerially of 25 kms from the municipal limits of these
cities,
or
(ii) minimum of 80% of such floor area ratio if project is located in any other place.
i) the assessee maintains separate books of account in respect of the housing project.
(3) Consequences if the project is not completed within a period of 3 years from the date of
approval :
Deduction claimed and allowed during preceeding PYs shall be withdrawn and shall be
deemed to be the income taxable under PGBP of the previous year in which the period for
completion so expires.
(4) Deduction under any other provisions of the Act not allowed if the same is claimed under
this section : If deduction is allowed under this section then no deduction shall be allowed
under any other section of the Act.
CHAPTER 13 : EXEMPTED INCOMES
PROVISION FOR AY 2016-2017 NEW SECTIONS HAVE BEEN
INTRODUCED
SECTION 10(11A) : PAYMENT FROM SUKANYA SAMRIDDHI ACCOUNT
Interest accruing on deposits in and withdrawal from any account from this scheme would be
exempt from tax.
SECTION 10(12A) : AMOUNT PAYABLE AT THE TIME OF CLOSURE OR OPTING OUT
OF NATIONAL PENSION SCHEME
Any payment from National Pension System Trust referred to in Section 80CCD , to an
employee
Due to closure of the pension scheme or
his opting out of the pension scheme
shall be exempt from tax upto 40% of the total amount payable to him.
However, the full amount received by the nominee, on death of the assessee shall be exempt
from tax.
SECTION 10(13) : APPROVED SUPERANNUATION FUND TRANSFERRED TO
NATIONAL PENSION SCHEME
Any payment from an approved superannuation fund which is transferred to the NPS
account of the employee shall be exempt from tax.
INCOME OF CERTAIN NATIONAL FUNDS: SECTION 10(23C)
Income of swachh bharat kosh and clean ganga fund, set up by the central government shall
be exempt from income tax
EXEMPTION IN RESPECT OF INTEREST ON DEPOSIT CERTIFICATES UNDER
GOLD MONETIZATION SCHEME, 2015 : SECTION 10(15)
The interest on Deposit Certificates issued under the Gold Monetization Scheme, 2015, shall
be exempt from income-tax.
DIVIDENDS EARNED BY INDIVIDUAL OR HUF : SECTION 115BBDA
If individual, Hindu undivided family (HUF) or a firm who is resident in India earns dividend
which is more than `10 lakh then it shall be chargeable to tax at the rate of 10%. Further no
deduction of expenses shall be allowed and no set-off of loss shall be allowed to the
assessee in computing the income by way of dividends.
EXAMS
EXAMPLE
A Ltd., a domestic company, declared dividend of `170 lakh for the year FY 2015-2016 and
distributed the same on 10/7/2016. Mr. X, holding 10% shares in A Ltd., receives dividend of
`17 lakh in July, 2016. Mr. Y. holding 5% shares in A Ltd., receives dividend of `8.50 lakh.
Discuss the tax implications in the hands of Mr. X and Mr. Y, assuming that Mr. X and Mr. Y
have not received dividend from any other domestic company during the year.
SOLUTION:
(1) The dividend of `110 lakh declared and distributed in the PY 2016-2017 is subject to
dividend distribution tax in the hands of A Ltd.
(2) In the hands of Mr. X, dividend received upto `10 lakh would be exempt under section
10(34). `7 lakh, being dividend received in excess of `10 lakh, would be taxable @ 10% as
per section 115BBDA. Such dividend would not be exempt under section 10(34). Therefore,
tax payable by Mr. X on dividend of `7 lakh under section 115BBDA would be `72,100 [10%
of `7 lakh + cess @ 3%].
(3) In the hands of Mr. Y, the entire dividend of `8.50 lakh received would be exempt under
section 10(34), since only dividend received in excess of `10 lakh would be taxable under
section 115BBDA.
CHAPTER 14 : INCOME TAX RETURN
NA
FILING OF INCOME TAX RETURN (ITR) : SECTION 139(1)
if a person earns income which is exempt under section 10(38) and taxable income of such
person before giving such exemption exceeds basic exemption limit, he shall also be liable to
file ITR on or before the due date.
RETURN OF DECLARING THE LOSS : SECTION
RETURN OF DECLARING THE LOSS : SECTION
139(3)
139(3)
(1) It is not mandatory to file a Return of Loss, as
(3) It is not mandatory to file a Return of Loss, as
there is no taxable Income. However carrying
there is no taxable Income. However carrying
forward of losses is not permitted unless the
forward of losses is not permitted unless the
Return of Loss is submitted on or before due date.
Return of Loss is submitted on or before due date.
(2) Losses of
Non speculative Business u/s 72(1)
Speculative Business u/s 73(2)
Capital Gains u/s 74
Losses from the activity of owning and
maintaining of Race Horses u/s 74A
can be carried forward only if a Return of Loss is filed on or before the due date
(4) Losses of
Non speculative Business u/s 72(1)
Speculative Business u/s 73(2)
Capital Gains u/s 74
Losses from the activity of owning and
maintaining of Race Horses u/s 74A
loss of the specified business
referred to in section 35AD
can be carried forward only if a Return of Loss is filed on or before the due date.
AMENDMENTS FOR AY 2017-2018 RELEVANT FOR
MAY 2017 EXAMS
BELATED INCOME TAX RETURN: SECTION 139(4)
If ITR is not filed within the time allowed u/s 139(1) then assessee can file ITR even after the
due date of that section and such ITR shall be known as belated Return.
Belated ITR can be filed before:
a) the end of the relevant assessment
year or
b) the completion of the assessment whichever is earlier.
BELATED INCOME TAX RETURN: SECTION
139(4)
If ITR is not filed within the time allowed u/s 139(1), then the Assessing Officer can issue a
notice requiring the assessee to furnish ITR within the time specified by him/her. If the
Return is not furnished within time allowed u/s 139(1) or within the time allowed under notice
issued by the Assessing Officer still assessee can file ITR and such ITR shall be known as
belated Return.
Belated ITR can be filed before:
(i) End of one year from the end of relevant AY or (ii) Before completion of assessment
whichever is earlier.
REVISED INCOME TAX RETURN: SECTION 139(5)
If assessee discovers any omission or wrong statement (which have been incurred due to
bona- fide mistake) in a Return filed u/s 139 (1) or u/s 142 (1), he/she may furnish a revised
Return.
ITR can be revised:
1. Before the end of one year from the end of the relevant assessment year, or
2. Before the completion of assessment whichever is earlier.
Belated ITR can not be revised
REVISED INCOME TAX RETURN: SECTION 139(5)
If assessee discovers any omission or wrong statement in a ITR filed u/s 139 (1) or u/s
139(4) he / she may furnish a revised ITR.
ITR can be revised before:
a) the end of the relevant assessment
year or
b) the completion of the assessment whichever is earlier.
Belated ITR can be revised
DEFECTIVE INCOME TAX RETURN : SECTION 139(9)
A Return of Income shall be regarded as defective unless all the following conditions are
fulfilled, namely: (1) The annexures, statements and columns in
the Return of Income relating to computation of Income chargeable under each head of
Income, computations of gross Total Income and Total Income have been duly filled in.
(2) The Tax, together with interest, if any, payable in accordance with the provisions of
Section 140A, has been paid on or before the date of furnishing of the Returns.
DEFECTIVE INCOME TAX RETURN : SECTION 139(9)
A Return of Income shall be regarded as defective unless all the following conditions are
fulfilled, namely: (1) The annexures, statements and columns in
the Return of Income relating to computation of Income chargeable under each head of
Income, computations of gross Total Income and Total Income have been duly filled in.
(2) The Tax, together with interest, if any, payable in accordance with the provisions of
Section 140A, has been paid on or before the date of furnishing of the Returns.
If self assessment tax and its interest has not been paid before filing of
ITR then ITR is not said to be defective ITR
EXAMS
CHAPTER 15 : TAX DEDUCTED AT SOURCE
Section
Topic
Exempted amount for AY 2016-2017
Exempted amount for AY 2017-2018 (From 1/6/2016)
192A
Payment of accumulated balance due to an employee
30,000
50,000
194BB
Winnings from Horse Race
5,000
10,000
194C
Payments to Contractors
Aggregate annual limit of 75,000
Aggregate annual limit of 1,00,000
194LA
Payment of Compensation on acquisition of certain Immovable Property
2,00,000
2,50,000
194D
Insurance commission
20,000
15,000
194G
Commission on sale of lottery tickets
1,000
15,000
194H
Commission or brokerage
5,000
15,000
Section
Topic
TDS rate for AY 2016-2017
TDS rate for AY 2017-2018 (From 1-6-2016)
194DA
Payment in respect of Life Insurance Policy
2%
1%
194EE
Payments in respect of NSS Deposits
20%
10%
194D
Insurance commission
10%
5%
194G
Commission on sale of lottery tickets
10%
5%
194H
Commission or brokerage
10%
5%
Section
Topics
194K
Income in respect of Units
To be omitted w.e.f. 1/6/2016
194L
Payment of compensation on acquisition of capital assets
To be omitted w.e.f. 1/6/2016
Provision for AY 2016-2017
Provision for AY 2017-2018
NO TDS IN CERTAIN CASES : SECTION 197A
No TDS shall be done under Section 192A , Section 193, Section 194A, Section 194DA ,if
a) The payee is a person other than a company or a
firm
b) Individual furnishes declaration in Form 15G (In
case of senior citizen in Form 15H)
c) Such declaration states that the individual has the
income tax liability as NIL.
NO TDS IN CERTAIN CASES : SECTION 197A
No TDS shall be done under Section 192A , Section 193, Section 194A, Section 194DA and
Section 194-I if
a) The payee is a person other than a company or a
firm
b)Individual furnishes declaration in Form 15G (In
case of senior citizen in Form 15H)
c) Such declaration states that the individual has the
income tax liability as NIL.
EXAMS
CHAPTER 16 : ADVANCE TAX AND INTEREST PAYABLE TO THE
GOVERNMENT
For the payment of advance tax u/s 211
a) By company , 4 installments were used
b) By person other than company , 3
installments were used.
For the payment of advance tax u/s 211
a) By company , 4 installments are used
b) Bypersonotherthancompany,4 installments are used.
INSTALLMENTS OF ADVANCE TAX: SECTION 211
Part a) for all type of assessees other than those covered in part b)
DUE DATE OF INSTALLMENT
AMOUNT PAYABLE
On or before 15/06/PY
15% of Advance Tax payable
45% of Advance Tax payable as reduced by any amount already paid.
75% of Advance Tax payable as reduced by any amount already paid.
100% of Advance Tax payable as reduced by the amount already paid.
Part b)
An assessee doing eligible business referred u/s 44AD can pay full amount of advance tax
during each financial year on or before the 15th March.
If any person has not paid his advance tax on the due dates as mentioned in Section 211
then such person has to pay interest under Section 234C
(1) The rate of interest shall be 1% per month or for part of the month.
(2) The period of interest shall be three months for every installment but for the last
installment the period shall
be only one month.
(3)An assessee doing eligible business referred u/s 44AD who is liable
to pay advance tax u/s section 208 has failed to pay such tax or the
advance tax paid by the assessee on its current income on or before the
15th March is less than the tax due on the returned income, then, the
assessee shall be liable to pay simple interest 1% on the amount of the
shortfall from the tax due on the returned income.
Comments
(1) No interest shall be levied in respect of any shortfall in the payment of Advance Tax if
shortfall is due to
under-estimation or failure to estimate the amount of
Capital Gains
Casual Incomes such as lottery
PGBP in cases where the income accrues for the first time.
(2) No interest under Section 234C shall be charged if it has paid at least
st
12% of Advance Tax during 1 installment and has paid at least 36% of
Advance Tax
nd
during 2 instalment.
DEFERMENT IN PAYMENT OF ADVANCE TAX: SECTION 234C (from 1/6/2016)
EXAMS
INTEREST PAYABLE BY GOVERNMENT TO ASSESSEE: SECTION 244A
Sometimes assessee pays income tax which is higher than his tax liability. In such a case he
will get refund of excess income tax paid by him. For this purpose he shall also be entitled to
get interest at the rate of 0.5% per month or part of month. The period for calculation of
interest shall be determined as follows:
In case of refund of advance tax, income tax, TDS or TCS no interest shall be payable if
the excess amount is less that 10% of the income tax liability.
If the proceedings resulting in the refund are delayed due to acts of assessee the period
of the delay due to acts of assessee shall be excluded from the period for which interest is
payable.
The period to be excluded shall be determined Commissioner of Income Tax and his
decision shall be final.
SECTION 244A(1)(aa) : REFUND IS FOR ANY TAX PAID UNDER SECTION 140A : WEF
1/6/2016
If refund is out of any tax paid under section 140A (i.e. self-assessment tax), such interest
shall be calculated at the rate of 0.5% for every month or part of a month for the period
Starting from the date of furnishing of ITR or Payment Of Tax, whichever is later
Ending on the date on which the refund is granted
If ITR has been furnished on or before the due date u/s 139(1)
Period : Starting from the 1/4/AY to the date on which the refund is granted
If ITR has not been furnished on or before the due date u/s 139(1)
Period : Starting from the date of furnishing of return of income to the date on which the
refund is granted
AMENDMENTS FOR FINANCIAL YEAR 2016-2017 APPLICABLE FOR
MAY 2017 EXAMS
AMENDMENTS UNDER INDIRECT TAX FOR
THE
FINANCIAL YEAR 2016-2017
CENTRAL EXCISE DUTY
SSI EXEMPTION OF ` 6 CRORE WITH AN ELIGIBILITY LIMIT OF ` 12 CRORE FOR
JEWELLERY MANUFACTURERS
With effect from 1/3/2016, excise duty of 1% (without CENVAT credit) or 12.5% (with
CENVAT credit) has been levied on articles of jewellery [excluding silver jewellery, other than
studded with diamonds / other precious stones]
The SSI exemption for such jewellery manufacturers would be upto `6 crore in a year with an
eligibility limit of `12 crore in the preceding year. Thus, a jewellery manufacturer will be
eligible for exemption from excise duty on first clearances upto `6 crore during a financial
year, if his aggregate domestic clearances during preceding financial year did not exceed `12
crore.
ANNUAL RETURN
In place of Annual Financial Information Statement [ER-4], an Annual Return will have to
be filed by central excise assessees by 30th November of the succeeding year
REVISING OF CENTRAL EXCISE RETURN
The central excise return can now be revised by the end of the calendar month in which
the original return is filed.
INTEREST PAYABLE ON DELAYED PAYMENT OF EXCISE DUTY
Interest payable on delayed payment of excise duty has been reduced from 18% to 15%
CUSTOM DUTY
NO significant amendment for IPCC level has taken place
CENTRAL SALES TAX
SALE OF GAS THROUGH A COMMON CARRIER PIPELINE
When the gas sold or purchased and transported through
a) a common carrier pipeline or
b) any other common transport or
c) distribution system
becomes co-mingled and fungible with other gas in the pipeline or system and such gas is
introduced into the pipeline or system in one State and is taken out from the pipeline in
another State
then such sale or purchase of gas shall be deemed to be a movement of goods from one
State to another.
VALUE ADDED TAX
NO amendment has taken place
AMENDMENTS FY 2016-2017 CA JS JOHAR - 8010921000 Page 22
AMENDMENTS FOR FINANCIAL YEAR 2016-2017 APPLICABLE
FOR MAY 2017 EXAMS
SERVICE TAX
KRISHI KALYAN CESS Section 161 of the Finance Act, 2016
A Krishi Kalyan Cess (KKC) will be levied as service tax @ 0.5% on the value of all taxable
services. Therefore, w.e.f., 1/6/2016, the effective rate of service tax would be 15% [14% +
0.5% SBC + 0.5% KKC]
A point to note here is that though CEN VAT credit of KKC would be available, SBC will not
be eligible for credit.
LOTTERY DISTRIBUTOR OR SELLING AGENT
Transactions between the State Government and the distributors or selling agents is on
principal to agent basis. Thus, activity carried out by a lottery distributor or selling agent of
the State Government is leviable to service tax.
EDUCATIONAL SERVICES
Educational services removed from negative list but exemption continues through mega
exemption notification.
Services provided by Institutes of Language Management (ILMs) are liable to service tax
SERVICE TAX PAYABLE ON PASSENGER TRANSPORTATION BY AN AIR
CONDITIONED STAGE CARRIAGE [SECTION 66D]
Service of transportation of passengers, with or without accompanied belongings, by a air
conditioned stage carriage would become taxable with effect from 1/6/2016. Abatement of
60% is allowed and value of services will be 40%.
SERVICE TAX PAYABLE ON GOODS TRANSPORTATION BY A VESSEL FROM A
PLACE OUTSIDE INDIA UP TO THE CUSTOMS STATION OF CLEARANCE [SECTION
66D]
1) Services by way of transportation of goods by an aircraft or a vessel from a place outside
India up to the customs station of clearance in India were covered in negative list of services
under section 66D. However this has been omitted and thus now it has been made liable to
service tax.
2) However, service tax will not be payable on such services by an aircraft as the same have
been exempted under Mega Exemption Notification.
3) Therefore, services by way of transportation of goods by a vessel from a place outside
India up to the customs station of clearance in India would be liable to service tax.
4) The domestic shipping lines registered in India will have to pay service tax under forward
charge while the services availed from foreign shipping line by a business entity located in
India will get taxed under reverse charge at the hands of the business entity.
SERVICES PROVIDED BY AN ARBITRAL TRIBUNAL
Service tax is payable under reverse charge in case of services provided by an arbitral
tribunal (including the individual arbitrators of the tribunal) to business entity with a turnover
exceeding Rs.10 lakh in the preceding financial year
MAY 2017 EXAMS
SERVICES PROVIDED BY GOVERNMENT OR LOCAL AUTHORITY : Section 66D(a)
Negative List
All services provided by the Central Government or State Government or Local Authority
are in the negative list.
Services provided by the Department of Posts which are
(i) Services of basic mails like post cards, inland letters, book post, registered post
(ii) Services of money order, issue of postal orders, operations of savings account, pension
payments and other similar service
Services not covered in Negative list and thus liable for service tax
(1)
Services provided by the Department of Posts by way of speed post, express parcel
post, life insurance and agency services provided to any person other than government
(2)
Services in relation to a vessel or an aircraft inside or outside the precincts ( ) of a
port or an airport.
(3)
Transport of goods and / or passengers.
(4)
Any services other than those covered by clauses (1) , (2) , (3) provided to business entity.
Taxable if turnover of preceeding year is more than `10 lakhs
Not Taxable if turnover of preceeding year is less than or equal to `10 lakhs
CBEC has clarified the following aspects pertaining to the taxation of services provided
by Government to business entities
S.No.
Issue
Clarification
1.
Services provider : Government or a Local Authority
Service Receiver : Another Government or a Local Authority
Such services have been exempted. However, the said exemption does not cover services
of (1), (2) and (3) of Section 66D mentioned above
2.
Services provider : Government or a Local Authority
Service Receiver : An individual doing profession or business
Services of grant of passport, visa, driving license, birth or death certificates have been
exempted.
Further, for services provided up to a taxable value of Rs. 5000 have been exempted.
However, the said exemption does not cover services of (1), (2) and (3) of Section 66D
mentioned above. Further, in case of continuous service, the exemption shall be applicable
where the gross amount charged for such service does not exceed Rs. 5,000 in a financial
year.
3.
Service tax on tax, cess or duty
Tax, cess or duty levied are not consideration for service and hence not leviable to service
tax.
4.
Service tax on fines and penalties
Fines and penalty chargeable by Government or a local authority imposed for violation of
a law are not leviable to service tax.
5.
Services provided in lieu of fee charged by Government or a local authority
It is clarified that any activity undertaken by Government or a local authority against a
consideration constitutes a service and the amount charged for performing such activities is
liable to service tax.
MAY 2017 EXAMS
Service tax is leviable on any payment for any permission or license granted by
the Government or a local authority.
However, services provided by the Government or a local authority by way
(i) registration required under the law;
(ii) testing, safety check or certification relating to protection or safety of workers, consumers
or public at large have been exempted.
6.
Services in the nature of allocation of natural resources by Government or a local authority
to individual farmers
Services by way of allocation of natural resources to an individual farmer for the purposes
of agriculture have been exempted. Such allocations / auctions to categories of persons
other than individual farmers would be leviable to service tax.
7.
Services in the nature of change of land use, commercial building approval, utility
services provided by Government or a local authority
Services provided by Government or a local authority have been exempted.
8.
Services provided by Government, a local authority or a governmental authority by way of
any activity in relation to any function entrusted to a Panchayat
Such services have been exempted.
9.
Whether service tax is payable on the interest charged by Government or a local authority
where the payment for assignment of natural resources is allowed to be made under
deferred payment option ?
Where payment for service is allowed to be deferred on payment of interest, such interest
shall be included in the value of the taxable service.
10.
When and how will the allottee of the right to use natural resource be entitled to take
CENVAT credit of service tax paid for such assignment of right?
CENVAT credit of the service tax on one time charges (whether paid upfront or in
installments) paid in a year, may be allowed to be taken evenly over a period of 3 (three)
years.
Service tax paid on royalty in respect of natural resources and any periodic payments shall
be available as credit in the year in which the same is paid.
CENVAT credit may be taken even after the period of 1 year from the date of issue of such a
document in case of services provided by the Government or a local authority or any other
person by way of assignment of right to use any natural resource.
MAY 2017 EXAMS
POINT OF TAXATION
Rule 7 : In case the person is required to pay service tax under the concept of reverse
charge:
POT will be
whichever is earlier.
a) date of payment or
b) first day that occurs immediately after the period of 3 months from date of invoice.
However , when there is change in the rate of service tax POT date will be date of issue of
invoice if both of these conditions are satisfied :
a) service has been provided and the invoice issued before the date of such change
b) but payment has not been made as on the date of such change
Rule 7 : In case of services provided by the Government or local authority to any business
entity, the POT shall be the earlier of the dates on which
(a) any payment for service becomes due as per invoice, bill, challan or any other document
issued by the Government or local authority demanding payment
(b) payment for such services is made.
VALUATION OF TAXABLE SERVICE
In case of service provided by Government to a business entity, interest chargeable on
deferred payment to be included in the value of the taxable service [Rule 6]
Interest on delayed payment of any consideration for the provision of services or sale of
property is not included in the value of the taxable service.
A proviso has been inserted in Rule 6 : The interest chargeable on deferred payment in case
of any service provided by Government or a local authority to a business entity, where
payment for such service is allowed to be deferred on payment of interest, will be included in
the value of the taxable service.
EXEMPTIONS AND ABATEMENTS FOLLOWING SERVICES HAVE BEEN
EXEMPTED :
Services provided by the Indian Institutes of Management (IIM) to their students, by
way of the following educational programmes relating to
a. two year full time residential Post Graduate Programmes in Management for the Post
Graduate Diploma in
Management, to which admissions are made on the basis of Common Admission Test
(CAT), conducted by
Indian Institute of Management
b. fellow programme in Management
c. five year integrated programme in Management
Services of assessing bodies empanelled centrally by Directorate General of Training,
Ministry of Skill Development and Entrepreneurship by way of assessments under Skill
Development Initiative (SDI) Scheme.
Services provided by training providers (Project implementation agencies) under Deen
Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by
way of offering skill or vocational training courses certified by National Council For Vocational
Training.
LIMIT ENHANCED : Threshold limit of consideration charged per performance in folk or
classical art forms of music / dance / theatre raised from `1,00,000 to `1,50,000
MAY 2017 EXAMS
GENERAL INSURANCE :
1) Services Under 'Niramaya' Health Insurance Scheme implemented by Trust constituted
under the provisions
of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple
Disabilities Act, 1999 , have been exempted.
2) Services of life insurance business provided by way of annuity under the National Pension
System (NPS) has
been exempted.
SERVICES BY SPECIFIED BODIES EXEMPTED
1)
ServicesbyEmployeesStateInsuranceCorporationtopersonsgovernedundertheEmployeesIns
urance
Act, 1948.
2) Services provided by Employees' Provident Fund Organisation (EPFO) to persons
governed under the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952
3)
ServicesprovidedbyInsuranceRegulatoryandDevelopmentAuthorityofIndia(IRDA)toinsurersun
derthe
Insurance Regulatory and Development Authority of India Act, 1999
4) Services provided by Securities and Exchange Board of India (SEBI) by way of protecting
the interests of
investors in securities and to promote the development of, and to regulate, the securities
market.
5)
ServicesprovidedbyNationalCentreforColdChainDevelopmentunderMinistryofAgriculture,Coo
peration
and Farmer's Welfare by way of cold chain knowledge dissemination.
CHARITABLE ACTIVITIES : Yoga included in the definition of charitable activities
Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of
charitable activities are exempt from service tax. The definition of charitable activities
includes activities relating to advancement of religion or spirituality. Now yoga has also been
included in the defination.
Thus, services relating to advancement of yoga provided by charitable entities registered
under section I2AA of the Income-tax Act, 1961 will not be liable to service tax e.g., service
tax will not be payable on fee charged for yoga camps conducted by charitable trusts.
MERCHANT OVERTIME CHARGES : Services provided by Government by way of deputing
officers after office hours or on holidays for inspection or container stuffing or such other
duties in relation to import export cargo on payment of Merchant Overtime charges (MOT)
has been exempted.
EXEMPTION IN RESPECT OF SERVICES PROVIDED BY A SENIOR ADVOCATE
The comparative position prior to and post amendment in Entry 6 has been illustrated in the
following table
Services provided by
Whether exempted from service tax?
Prior to amendment
Post amendment
An arbitral tribunal to
(i) any person other than a business entity; or
(ii) a business entity with a turnover up to 10 lakh in the preceding financial year.

A partnership firm of advocates or an individual advocate other than senior advocate
by way of legal services to
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to 10 lakh in the preceding financial year.

A senior advocate by way of legal services to an advocate or partnership firm of
advocates providing legal services.

X
MAY 2017 EXAMS
A senior advocate by way of legal services to a person other than business entity, i.e. a
person ordinarily carrying out any activity relating to industry, commerce or any other
business or profession.

A senior advocate by way of legal services to a business entity with a turnover up to 10
lakh in the preceding financial year.

X
A person represented on an arbitral tribunal to an arbitral tribunal.

X
ROPEWAY, CABLE CAR OR AERIAL TRAMWAY : Exemption to transportation of
passengers by ropeway, cable car or aerial tramway withdrawn.
ABATEMENTS
Description of taxable service
% of abatement
Prior
After
Transport of goods in containers by rail by any person other than Indian Railways
70
60
Services of GTA in relation to transportation of used household goods
70
60
Other services
Transport of passengers, with or without accompanied belongings, by a stage
carriage
Earlier the service was exempt
60
Services provided by a foreman of chit fund in relation to chit
Nil
30
Services by a tour operator in relation to,
(i) a tour, only for the purpose of arranging or booking
accommodation for any person
(ii) a tour other than (i) above
90 75
90 70
SERVICE TAX PROCEDURES
INTEREST TO BE PAYABLE AT A SEPARATE RATE ON SERVICE TAX COLLECTED BUT
NOT PAID [SECTION 75] : If any person has failed to pay to the credit of Central
Government within the prescribed time period, such person shall pay interest for the period
of delay at the rate of minimum 10% and maximum 36%pa. (rate to be fixed by the
government between 10% and 36%). Further in the case of a service provider, whose value
of taxable services provided in the preceding financial year is up to `60 Lakhs, rate of interest
shall be reduced by 3%. Interest rates are:
ONE PERSON COMPANY : Facility of quarterly payment of service tax and payment of
service tax on receipt basis extended to OPC having service turnover upto `50 lakh in the
previous financial year and (b) quarterly payment of service tax extended to HUF
Situation
Rate of simple interest
Service tax collected but not paid to the central government on or before due date
24%
Other Service tax dues
15%
MAY 2017 EXAMS
SPECIAL RATES FOR PAYMENT OF SERVICE TAX : [Rule 6(7A)] LIFE INSURANCE
BUSINESS
Composition rate in case of single premium annuity policies to be 1.4% of the single
premium charged KRISHI KALYAN CESS : KKC = value of services / 14 X 0.5
PROVISIONS INTRODUCED FOR FILING OF ANNUAL RETURNS [RULE 7]
1) Every assessee has to file annual service tax return in addition to half yearly return.
2) Rule 7(3A) : Every assessee will have to submit an annual return for the financial year by
the 30th day of
November of the succeeding financial year. The form and manner of filing the return will be
specified in the
notification by the CBEC.
3) Rule 7(3B) : Central Government may exempt an assessee or class of assessees from
filing such annual
return.
4) Rule 7(4) : CBEC can extend the due date for filing of Annual Return under circumstances
of special nature.
5) Rule 7B(2) : Annual return filed by the due date may be revised within 1 month from the
date of its submission
6) Rule 7C(2) : Delayed filing of Annual Return to attract a late fee of Rs.100 per day for the
period in default
subject to a maximum of Rs. 20,000.
REVERSE CHARGE MECHANISM
THE REVERSE CHARGE MECHANISM SHALL APPLY IN FOLLOWING CASES
Description of services
% of service tax payable by service provider
% of service tax payable person liable to pay service tax other than service provider
WEF 1/4/2016
Services provided or agreed to be provided by a selling or marketing agent of lottery tickets
to a lottery distributor or selling agent of the State Government.
NIL
100%
WEF 1/4/2016
Services provided or agreed to be provided by a firm of advocates or an individual
advocate other than a senior advocate by way of legal services
NIL
Service provider is an Individual
100%
Service receiver is any business entity.
WEF 1/4/2016
Services provided by the government or local authority excluding
1) renting of immovable property
2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section
66D of Finance Act, 1994
NIL
Service provider is Govt. or local authority
100%
Service receiver is any business entity located in taxable territory.
MAY 2017 EXAMS
CENVAT CREDIT
DEFINITION OF CAPITAL GOODS : [RULE 2(a)]
The scope of definition of capital goods has been widened to include:
(a) Wagons falling under sub-heading 8606 92 of the Central Excise Tariff
(b) Equipment or appliance used in an office located within a factory - It may be noted that
CENVAT credit will be allowed only on those equipment or appliance which are used in an
office located within the factory and not outside the factory.
(c) Capital goods used outside the factory of the manufacturer of the final products for
pumping of water, for captive use within the factory.
DEFINITION OF INPUTS : [RULE 2(k)]
The scope of definition of inputs has been widened to include:
(a) All goods used for pumping of water for captive use.
(b) All capital goods which have a value up to Rs.10,000 per piece.
DEFINATION OF INPUT SERVICES : [RULE 2(l)]
Services by way of sale of dutiable goods on commission basis is sales promotion and thus,
an eligible input service
RULE 3 :
1) Ship breaking units would be entitled to avail 100% credit of the CVD paid.
2) Output Service provider allowed to take CENVAT credit of the KKC on taxable services
3) SBC and KKC cannot be paid by utilizing CENVAT credit of any duty or service tax
4) Credit of KKC to be utilized only for payment of KKC
5) CENVAT credit of only NCCD to be utilised for payment of the NCCD payable on all
goods.
6) CENVAT credit not to be used for payment of non CENVATabIe infrastructure cess
With effect from 1/3/2016, the Finance Act, 2016 has imposed an infrastructure cess, as a
duty of excise on motor vehicles falling under heading 8103. A ninth proviso has been
inserted in rule 3(4) to provide that CENVAT credit cannot be utilised for payment of this
infrastructure cess. Further, no credit of this cess would be available under the CENVAT
Credit Rules, 2004.
RULE 4 :
1) Jewellery manufacturer (excluding manufacturer of plain silver jewellery) with turnover
upto `12 crore in preceding year eligible to avail 100% CENVAT credit on capital goods in the
year of purchase. An assessee whose aggregate value of clearances of all excisable goods
for home consumption in the preceding financial year does not exceed `4 crores (computed
in accordance with SSI notification), can take 100% CENVAT credit on capital goods in the
financial year when the same are received by him.
MAY 2017 EXAMS
2) CENVAT credit is allowed on jigs, fixtures, moulds, dies and tools of Chapter 82 of the
Central Excise Tariff sent to another manufacturer or job-worker for production of goods
according to his specifications.
3) Earlier, under rule 4(6), the permission given by an Assistant / Deputy Commissioner to a
manufacturer of the final products for sending inputs or partially processed inputs outside his
factory to a job-worker and clearance therefrom on payment of duty was valid for a financial
year. Rule 4(6) has been amended to provide that the said permission would be valid for
three financial years.
4) Service tax paid on assignment charges of a natural resource to be allowed as CENVAT
credit spread evenly over a period of 3 years.
5) In case of services provided by the Government or a local authority by way of assignment
of right to use any natural resource, CENVAT credit can be taken even after the period of 1
year from the date of issue of such a document.
6) CENVAT credit of service tax paid in a financial year, on the one time charges payable in
full upfront or in installments, for the service of assignment of the right to use any natural
resource by the Government, local authority or any other person, will be spread evenly over
a period of three years.

Taxation Amendments Applicable For May 2017 Exam

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