Direct Taxes Committee & Committee on International Taxation
The Institute of Chartered Accountants of India
2nd February, 2021

HIGHLIGHTS OF THE UNION BUDGET-2021 -22

Tax proposals- International Taxation

1. Addressing mismatch in taxation of income from notified overseas retirement fund [Section 89A]

Proposed section 89A seeks to provide relief from double taxation due to mismatch of taxation on income from withdrawal of retirement benefit account maintained by a specified person in a notified country on account of the amount being taxable in the notified State on receipt basis while being taxable in India on accrual basis (hereinafter referred to as “Specified Account”). The details of the application of the provision are to be prescribed by the Central Government.

This amendment is proposed to take effect from 1st April, 2022 and will accordingly apply to assessment year 2022-23 and subsequent assessment years.

2. Rationalisation of the provision concerning withholding on payment made to Foreign Institutional Investors (FIIs) [Section 196D]

It is proposed to insert a proviso to 196D(1) to provide that in case of a payee to whom an agreement referred to in 90(1) or 90A(1) applies and such payee has furnished the tax residency certificate referred to in section 90(4) or section 90A(4) of the Act, then the tax shall be deducted at the rate of 20% or rate or rates of income-tax provided in such agreement for such income, whichever is lower.

This amendment is proposed to take effect from 1st April, 2021

3. Constitution of the Board for Advance Ruling

The Authority for Advance Rulings (AAR) is proposed to be substituted by the Board for Advance Ruling. The Board to consist of two members, each being officer not below the rank of Chief Commissioner of Income Tax, which will ensure continued functioning. This and other proposed changes are stated to impart greater efficiency, transparency and accountability.

These amendments are proposed to take effect from 1st April, 2021.

4. Proposed Rationalization of provisions of Equalization Levy

Proviso is proposed to be inserted in Section 163 (Extent, commencement and application) to clarify that consideration received or receivable for specified services and for e-commerce supply or services shall not include consideration taxable as royalty or fees for technical services in India under the Income-tax Act read with the agreement notified by the Central Government under section 90 or section 90A of the Income-tax Act.

  • Explanation in Section 164(cb) (Definitions) (Certain Activities to constitute e-commerce supply or service) is proposed to be inserted to define activities, such as acceptance of offer for sale, placing/acceptance of the purchase order, payment of consideration and supply of goods or provision of services , partly or wholly, taking place online to be considered as “online sale of goods” and “online provision of services”.
  • Section 165A (Charge of Equalization Levy)(Meaning of Consideration received or receivable inserted) is proposed to be amended by inserting sub-section (3) to provide that consideration received or receivable from ecommerce supply or services shall include:

(i) consideration for sale of goods irrespective of whether the e-commerce operator owns the goods;

(ii) consideration for provision of services irrespective of whether service is provided or facilitated by the e-commerce operator

These amendments are proposed to take effect retrospectively from 1st April, 2020.

5. Section 10(50) is proposed to be amended to give effect to the above mentioned amendments.

These amendments are proposed to take effect from Assessment year 2021-22 and subsequent assessment years.

6. Proposed insertion of definition of “Liable to tax” (Section 10(29A))

It has been proposed to define Liable to tax in relation to a person, means that there is a liability of tax on such person under any law for the time being in force in any country, and shall include a case where subsequent to imposition of tax liability, an exemption has been provided.

These amendments are proposed to take effect from Assessment year 2021-22 and subsequent assessment years.

7. Proposed insertion of new section 206AB

TDS/TCS on non-filer at higher rates not applicable to non-resident who does not have permanent establishment in India.

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