Shubham Jain

Introduction:

The Lok Sabha on Tuesday, 21 March 2107 has passed 40 Amendments to the Finance Bill 2017.

These amendments were made mainly to make the law in sync with the proposed changes in Finance Bill 2017 as well as Finance Bill 2016.

Contents:

Financial Bill

Snippets of changes proposed in the Finance Bill, 2017 (‘Bill 2017’)

Mandatory quoting of Aadhaar Number

The Finance Bill, 2017 as passed by Lok Sabha introduced a new section 139AA which provides that every person who is eligible to obtain Aadhaar Number (Appendix A) is required to quote Aadhaar Number in :-

a) PAN application form;

b) Return of income.

Person can quote the Enrollment ID of Aadhaar application form in case he does not possess the Aadhaar Number.

Every person who has been allotted PAN shall intimate his Aadhaar Number to the authority which will be notified by the Central Govt. In case of failure to intimate the Aadhaar Number to such authority, PAN allotted shall be deemed to be invalid and it shall also be deemed that the person had not applied for allotment of PAN.

It is a welcome move by the Government. It will put curbs on instances of issuing multiple PAN to a single individual. Further, quoting of Aadhaar number would restrict granting of subsidies to only those individuals who are eligible to claim it.

Threshold limit prohibiting cash payments reduced

In order to reduce generation and circulation of domestic black money the Finance Bill, 2017 had imposed a prohibition on receipt of cash payments of rupees three lakhs and above under new section 269ST. Any contravention of the aforesaid provision would invite penalty on the recipient under Section 271DA which shall be equivalent to the amount of cash received. However, there would be no penalty if there is good and sufficient reasons for contravention of such provision.

The Finance Bill, 2017 originally presented on February 1, 2017 has proposed to amend the threshold limit of cash payments from rupees three lakhs to two lakhs.

TCS on cash transactions scrapped

The existing provision to collect 1% TCS on cash sale of jewellery above five lakh rupees has been proposed to be omitted. After omission of such provision the TCS liability would attract on any cash transaction for goods or services above rupees two lakhs.

TCS on cash transactions scrapped (cont)

Now the TCS provision on cash payments has been proposed to be omitted. So, any cash receipt of rupees two lakhs or above would only invite penalty on seller as per provisions of Section 269ST. In that case there would be no liability to collect TCS from buyer on such payment.’

Cap on political donations removed

As per the existing provisions of the Companies Act, 2013, companies can donate only up to 7.5% of their average profits to political parties. Now such limit has been proposed to be removed. So, companies will now have liberty to donate huge sums to political parties.

A new provision has also been proposed which mandates donation to political parties via account- payee cheques or bank draft or through electronic mode. Further, a provision has been made for funding of political donations through any notified instrument. Now Govt. would get powers to notify electoral bonds for funding of political parties.

Appendix A

Eligibility Criteria for Aadhaar Card

The following persons are eligible to apply for Aadhaar card:

1. Resident of India

2. Non resident India (‘NRI’)

3. Foreign Citizen, resident in India.

Comprehensive amendments in the Finance Bill, 2017 (‘Bill 2017’)

Sl. No. Clause No. Bill 2017 Amendments Bill 2017 Remarks
16 3 [section 2(24)]

 

 

> Sub-clause(xviia) stating as below has been inserted in section 2(24):

Any some of money or value of property referred to in clause (x) of sub-section (2) of section 56.

In order to synchronize with the addition of clause (x) in section 56(2), this addition to the definition of income was made.
17 4 (section 9) > Explanation 5A has been inserted in clause (i) in sub-section (1) of section 9. > This Explanation 5A has been substitute by:

4. In section 9 of the Income-tax Act, in sub-section (1), in clause (i), in Explanation 5,—

(i) the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2012, namely:—

“Provided that nothing contained in this Explanation shall apply to an asset or capital asset, which is held by a non-resident by way of investment, directly or indirectly, in a Foreign Institutional Investor as referred to in clause (a) of the Explanation to section 115AD for an assessment year commencing on or after the 1st day of April, 2012 but before the 1st day of April, 2015:”;

(ii) after the first proviso as so inserted, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2015, namely: —

“Provided further that nothing contained in this Explanation shall apply to an asset or capital asset, which is held by a non-resident by way of investment, directly or indirectly, in Category-I or Category-II foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, made under the Securities and Exchange Board of India Act, 1992.”.

18 29 (Section 56) > New clause (x) has been inserted in sub-section (2) of section 56. > Proviso to the sub-clause (c) of clause (x), now includes a trust or institution registered u/s 12AA as well as u/s 12 A and;

> (X) from an individual by a trust created for established solely for the benefit of relative of individual.

>Further, in Point (IX) of the proviso “or” has been added at the end. 

 

19 39 > Explanation 4 has been inserted to section 90

 

> The word “explanation, if any” substitutes “any explanation” in the explanation 4 to section 90.
20 40 >Explanation 4 has been inserted to section 90A

 

> The word “explanation, if any” substitutes “any explanation” in the explanation 4 to section 90A.
21 43 (section 94A) > New section 94B has been inserted. > Under section 94B, the word “pay interest or similar consideration” has been substituted by “incurs any expenditure by way of interest or of similar nature”. After this amendment, this section will now work on accrual concept i.e this section will be applicable to the company which incurs any interest expense or similar consideration and not to the company which pays interest or similar consideration.
22 44 (section 115BBDA – taxability of dividend income) > In Finance Bill 2017, in respect of section 115BBDA the definition of specified assesse included “a trust or institution registered under section 12 AA”. > This definition has been amended to include a trust or institution registered u/s 12A and 12 AA.
23 47 (Section 115JB) > The definition of “transition amount” – I means the amount or the aggregate of the amounts adjusted in the other equity (excluding equity component of compound financial instrument, capital reserve and securities premium reserve) but has some exclusions. > The equity component of compound financial instrument (‘ECCFI’) has been omitted from the definition of transition amount. This amendment has now specifically included ECCFI in the definition of transition amount. Does this means that, 1/5 of the   equity component needs to be added/ reduced from book profits.
24 55A (New – Quoting of Aadhaar card number) > > New section 139AA has been inserted

55A. After section 139A of the Income-tax Act, the following section shall be inserted, namely:—

‘139AA. (1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number—

(i) in the application form for allotment of permanent account number;

(ii) in the return of income:

Provided that where the person does not possess the Aadhaar number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or, as the case may be, in the return of income furnished by him.

(2) Every person who has been allotted permanent account number as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed, on or before a date to be notified by the Central Government in the Official Gazette:

Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.

(3) The provisions of this section shall not apply to such person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.

Explanation.—For the purposes of this section, the expressions—

(i) “Aadhaar number”, “Enrolment” and “resident” shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016;

Aadhaar card has been made mandatory to be quoted while:

1. Filing of Return

2. PAN application.

25 57 (Amendment of Section 143) > In section 143(1) of the Act, the word “and interest” & “or interest” shall be substituted with “interest and fees”

> Proviso to sub-section 1D has been amended to say this sub-section will not apply to any return furnished on or after 01 April 2017.

> Additional amendment (c) in sub-section (3) of section 143, for the portion beginning with the word, “On the day specified in the notice” an ending with words, bracket and letter “issued under clause(ii) of”, the word “On the day specified in the notice issued under” shall be substituted.

> The above will have effect from 1 June 2016

 

This amendment has been made in order to aline with the amendment made in sub-section (2) vide the Finance Bill, 2016.
26/27/28/29 71 > In sub-section 1D of section 206C, for the words and brackets “or jewellery or any other goods (other than bullion or jewellery)”, the words and brackets “or any other goods (other than bullion)” has been substituted;

> In sub-section (1E), the words “or jewellery” has been omitted

> Sub-section (1D) and (1E) of section 206C has been omitted.

> Wherever word “sub-section (1D)” occurs, has been omitted.

> In clause (c), for the word “or sub-section (1D) are sold or services referred to in sub-section (1D) are provided” the word “are sold” has been substituted.

The existing provision to collect 1% TCS on cash sale of jewellery above five lakh rupees has been proposed to be omitted. After omission of such provision the TCS liability would attract on any cash transaction for goods or services above rupees two lakhs.

Now the TCS provision on cash payments has been proposed to be omitted. So, any cash receipt of rupees two lakhs or above would only invite penalty on seller as per provisions of Section 269ST. In that case there would be no liability to collect TCS from buyer on such payment.

30 83 > New section 269ST was introduced in order to provide that no person shall receive an amount of three lakh or more other than banking channel. > This limit of three lakhs rupee has been restricted to two lakhs rupee. In order to reduce generation and circulation of domestic black money the Finance Bill, 2017 had imposed a prohibition on receipt of cash payments of rupees two lakhs and above under new section 269ST. Any contravention of the aforesaid provision would invite penalty on the recipient under Section 271DA which shall be equivalent to the amount of cash received

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2 responses to “Direct Tax Amendments to the Finance Bill 2017”

  1. M L Mittal says:

    whether cash withdrawals of Rs.2.00 Lac or more from bank’s current/C.C.Limt account in a day attracts vio;ation of section 269ST

  2. GANDHI MOHAN BHARATI says:

    In case of HUF is it mandatory to quote Aadhar No. of the Karta in ITR ?
    Please clarify.

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