Vispi T. Patel
The Lok Sabha has introduced the Notice of Amendments to the Finance Bill, 2018 on 12 March 2018. Please find below an analysis of the amendments which are effective from Financial Year 2018-19 (i.e. Assessment Year 2019-20), except as provided otherwise:
|Amendments as introduced by Finance Bill, 2018||Amendments as passed by Lok Sabha
|1. Significant economic presence shall constitute Business connection
|– Section 9(1)(i) is amended to provide that ‘significant economic presence’ in India shall also constitute ‘business connection’.
– Further, ‘significant economic presence’, shall mean –
software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or
– Income attributable to such transactions or activities shall be deemed to accrue or arise in India.
– The transactions or activities shall constitute significant economic presence in India, whether or not the non-resident has a residence or place of business in India or renders services in India.
|– The scope of ‘significant economic presence’ in India is expanded
– The transactions or activities shall constitute significant economic presence in India, whether or not:
|2. Conversion of stock-in-trade into capital Asset
[Section 2(24)(xiia), 2(42A) and 28(via)]
|– In cases where the inventory is converted into, or treated as, capital asset:
||– A new ‘Explanation 1A’is inserted to Section 43, to provide that the fair market value of the inventory as on the date of conversion shall be deemed to be the actual cost of capital asset|
|3. Capital Gain not to be charged on investment in certain bonds
|– Capital gain arising from the transfer of a long-term capital asset, only being land or building or both, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, shall not be charged to tax subject to certain conditions specified in the said section
– Long-term specified asset, for making any investment:
by National Highways Authority of India or by Rural Electrification Corporation Limited or any other bond notified by the Central Government
|– A new proviso is inserted in section 54EC(2) which provides that the exemption shall be withdrawn if bonds issued on or after 1 April 2018 are transferred or redeemed within 5 years|
|4. Long-term capital gains on sale of equity shares, etc.
[New Section 112A]
|– Insertion of new section 112A, to tax long-term capital gains in case of transfer of equity shares, etc.
– Cost of acquisition, in respect of assets acquired before 1 February 2018, shall be higher of:
Fair market value means:
– Other Conditions:
|– The method of computation of cost of acquisition of listed equity shares or units as explained in Section 112A and meaning of ‘fair market value’ is now inserted in Section 55 and omitted from section 112A.
– The meaning of ‘fair market value’ is expanded to include a situation
In the above scenario, the taxpayer is also allowed to take the benefit of indexation of cost of acquisition for FY 2017-18 of such unlisted equity shares
– Section 112A(5) provides that the long term capital gains shall be computed without giving effect to the first proviso (asset acquired in foreign currency) and second proviso (indexation benefit) of Section 48
– The provision of this sub-section is inserted in Section 48 and omitted from section 112A
|5. Rationalization of provisions relating to Country- by country (CbC) report
|Following amendments are proposed to be made in section 286:
– A constituent entity resident in India, having a non-resident parent, shall also be required to furnish CbC report, in case its parent entity outside India has no obligation to file the report in the parents’ country or territory.
– The due date for furnishing of CbC report by a constituent entity referred under section 286(4) is proposed to be twelve months from end of the reporting accounting year
– The definition of the term ‘agreement’ is proposed to also include an agreement as may be notified by the Central Government for exchange of the CbC report referred to in section 286 (2) and 286 (4)
– This amendment will take effect retrospectively from AY 2017-18
|– The due date for furnishing of CbC report by a constituent entity referred to in section 286(4) shall be within the period as may be prescribed
– The definition of the term ‘agreement’ is substituted to include an agreement as may be notified by the Central Government for exchange of the CbC report referred to in section 286 (2)
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
15 March 2018
(The author can be reached at firstname.lastname@example.org)