06 May, 2016

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Changes and Amendments in the Finance Act 2016 - Simplified Tabular Analysis

Changes and Amendments in the Finance Act 2016

Every fiscal year , the finance minister will have his budget on his desk, waiting for approval.This budget has many amendments and changes as compared to last fiscal year.Lets see what all the finance minister gave us and what all he took away ?

All Details At a glance
Provision with respect to
Amendment in Finance Act 2016
Unlisted shares
Holding period entitling the unlisted shares , to be long term capital asset – 24 months

Employer’s Annual Contribution to RPF (Recognized Provident Fund) to be deemed as income where
Ceiling limit of Rs 150000 which was proposed to be inserted , is rolled back.Hence ,annual contribution by employer above 12% of salary to be considered as income.

TCS (Tax Collected At Source) on sale of motor vehicles
TCS @ 1% of the car value , where such value exceeds Rs 10 lakhs .However ,TCS to be collected only at the time of receiving the consideration.

Under reporting of Income
  • New section 270A has been introduced for penalty levy.
  • One more instance added with respect to under reporting of income , which is –
Total income reassessed under MAT (Minimum Alternative Tax) or AMT (Alternate Minimum Tax)provisions  >  Deemed total income (assessed or reassessed )under MAT or AMT provisions before such reassessment
  • Rate of penalty under new section 270A shall be
50% of tax for under reporting and 200% of tax for misreporting of income
  • Tax payable on under reported income to be calculated as below
  1. If return is not furnished , then tax to be calculated on unreported income as increased by maximum taxable threshold.
  2. In case of loss , tax calculated on unreported income as if it were total income.
  3. In any other case , tax calculated on under reported income net of tax already assessed or reassessed.
  • Under reporting of Income is liable for rigorous imprisonment of minimum 3 months and maximum 7 years (in case of willful evasion of tax).

Processing of returns before scrutiny assessment
Processing of return not necessary within expiry of an year from the end of financial year in which return was furnished.The condition is that notice for scrutiny assessment is issued.

Tax rate for following domestic companies
  • Engaged in manufacture or production (set up and registered on or after 1-3-16)
  • Engaged in research with respect to distribution of article manufactured by itself.
Concessional tax rate of 25% under new section 115BA was introduced.Only condition would be that return of income is filed on or before due date.

IDC (Income Declaration Scheme)
  • Opportunity given to taxpayers for declaration of undisclosed income and pay tax (along with surcharge and penalty) @ 45% .
  • Where the undisclosed income is declared in the form of asset or investment , FMV (Fair Market Value) to be deemed as income(FMV = cost of acquisition of such asset)

Eligible start ups
New section 80- IAC introduced which could provide 100% deduction for 3 consecutive AY (Assessment Years) , which carries out eligible business.
Such eligible start up covers company and LLP (Limited Liability Partnership)

Tax on Dividend
Additional tax @ 10% to be applicable on dividend received in excess of Rs 10 lakhs.

Tax on patent
New section 115 BBF is introduced , for taxing the royalty income of patent developed and registered in India.Such tax rate is 10%.
Developed in India would mean that at least 75% of the expenditure incurred  for the patent.

Transfer of shares through recognized stock exchange located in IFSC (International Financial Services Centre)
  • No STT (Securities Transaction Tax) or CTT(commodities Transaction Tax) applicable on such transactions , where the consideration is in foreign exchange.
  • LTCG (Long Term Capital Gains) would be exempt and (STCG)Short Term Capital Gains taxed @ 15% ,from listed securities in case as mentioned above .

Spectrum fees
New section 35 ABA is introduced to provide for amortization of spectrum fees over the life span of spectrum.

TDS under section 194LBB for Investment Fund
Amendment in existing for provisions of 194 LBB to segregate the resident payee from NR (Non Resident Payee).This amendment has mandated 10% TDS only for resident payee.TDS under section 194LBB not applicable for ,NR payee who does not have taxable income as per DTAA (Double Tax Avoidance Agreement).

MAT rate for units located in IFSC
9% rate applicable for units for MAT calculation for such units

Profit linked deduction with respect to housing projects
New section introduced for deduction of profits from housing projects .However such deduction is subject to size of the built up area, only if it is within threshold limit of 30 or 60 square mtr.

Deduction for expenditure on agricultural extension project
Deduction allowed ,was decreased from 150% to 100% with effect from AY 2021 -22.

Accreted Income of trusts
  • Accreted Income refers to difference between fair value of assets and liabilities of the trust.Such accreted income shall not include
  1. Asset acquired from agricultural income by the trust
  2. Asset acquired before getting registered under 12AA.
  • Time limit for payment of tax on cancellation to be paid within 14 days from which period for making appeal expires or order of cancellation is received by the trust.
  • Even if the trust is registered under section 12 A , it shall mean that trust is registered under section 12 AA

We have tried summarizing each amendment and change in Finance Act 2016.If you want to read the whole text , please refer the official Income Tax Department website.These provisions will be applicable for the AY 2017-18.

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