Union Budget 2021-2022- Analysis of Finance Bill 2021

The third Union Budget (in the Second Term of Prime Minister Shri Narendra Modi led Government) presented by the Finance Minister Smt. Nirmala Sitharaman on 1^st February 2021; was unique for various reasons-it was delivered digitally, first budget in post COVID imposed lockdown; one of the budgets wherein government has chosen to go past the fiscal deficit of 3.5% to spur growth in economy which is required to take India to next level in these challenging times.

The Radical tax reforms include not putting additional burden of Income on tax payers, increased dependence on disinvestments for meeting the deficit, bringing efficiency in tax collections using use of data analytics and reduction in human interface between taxpayer and officer, to name few.

The budget is in line with the vision of Prime Minister of ATMANIRBHAR BHARAT and at the same time making India a preferred choice for the world to do business.

Also, the Budget reflects the intent of forwarding the commitment made to taxpayers of transparency, minimum government maximum governance and does not include so called small print devils and many retrospective amendments.

As in the earlier years, we have made humble attempt to lucidly present in the following paragraphs; our analysis of some of the salient tax proposals, to enable you to grasp them easily.

As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2022-2023 relevant to Financial Year 2021-2022, unless specifically provided otherwise.

I. DIRECT TAXES

Amendments proposed under the Income-tax Act, 1961 (hereafter referred to as “the Act”).

1. Rates of Tax-No change:

To surprise of many, this time the Finance Minister has not proposed any hike in the tax rates and maintained status quo for all types of Assessee’s, basis the last year; despite the additional expenditure incurred in the fight against the COVID pandemic.

2. Granting benefit Leave Travel Concession to employees, despite nationwide lockdown-Welcome clarification:

With a view to compensate employees and give boost to consumption expenditure during lockdown, the Finance Minister has permitted payment of cash allowance upto maximum of Rs. 36,000/- per person as Deemed LTC for Financial Year 2020-21 subject to fulfilment of following conditions:

• Exemption allowed is lower of 1/3rd of the specified expenditure or Rs. 36,000/- per person;
• Specified expenditure shall mean expenditure incurred by an individual or a member of his family through digital mode during the period 12th October 2020 to 31st March 2021 on goods or services which are subject to GST @12% or above and the goods are purchased or services procured from GST registered vendors/service providers;
• The employee exercises the option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-2021.

It may be noted that this exemption would not be available to employees who have opted for concessional regime under Section 115BAC of the Act.

(The above amendment is only applicable for Assessment Year 2021-22.)

3. Increased Safe Harbour Limit of 20% for residential units-Boost to real estate sector:

In order to boost demand in the real-estate sector and to enable the real-estate developers liquidate their unsold inventory of residential houses to buyers, the Finance Minister has proposed to increase the tolerable difference in valuation of property under Section 43CA as per Stamp Valuation Authority and transaction value from earlier 10% to 20% of the transaction value subject to following conditions:

• The transfer of residential unit takes place during the period from 12^th November, 2020 to 30^th June, 2021;
• The transfer is by way of first time allotment;
• The consideration does not exceed Rs.2 Crores.

Consequential amendment is also proposed in Section 56(2)(x) of the Act to give relief to buyer of house.

However, it may be noted that there is no such amendment in Section 50C wherein the tolerable difference continues to be 10%.

4. Addressing mismatch in taxation of income from notified overseas retirement fund-welcome move:

To address the issue of timing mismatch in taxation of retirement benefits earned by non-residents who have decided to settle in India post retirement, and remove genuine hardship faced by Assessee’s, the Finance Minister has proposed to insert a new section 89A to provide that the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed.

Further details in this regard are not yet prescribed.

5. Rationalization of provisions of Minimum Alternate Tax (MAT)-Welcome measures:

The Finance Minister has proposed following amendments in Section 115JB:

• Adjustment for additional income in cases where earlier year income is included in books of account of current year on account of an APA entered u/s 92CC or a secondary adjustment u/s.92CE-Officer to recompute the book profit of the past year(s) and tax payable, if any, during the previous year, on application made by Assessee under Section 154;
• Adjustment for Dividend income and expenses related thereto-since Dividend income is now taxable in the hands of the shareholders, it is proposed to exclude dividend income and the expense claimed in respect thereof, while computing book profit in case of foreign companies where such income is taxed at lower rate than Section 115JB due to DTAA.

6. Restriction of exemption on sums received from Unit Linked Insurance Policy:

Presently, any sum received under ULIP is exempt from tax u/s.10(10D) where the premium payable during the term of the policy does not exceed 10% of capital sum assured.

However, it is now proposed that for policies issued on/ after 1^st February, 2021 the above exemption would be available only if aggregate premiums paid during a financial year do not exceed Rs.2,50,000/-; otherwise the amounts received on sale/ maturity would be taxed as capital gain either as short term/ long term capital asset.

However, it is also proposed that amount received on death of policy holder will continue to be exempt.

7. Restriction of exemption on Interest earned on Provident Fund:

In order to cap the benefit of exempted interest on Provident Fund being claimed without any limit; the Finance Minister has now proposed that interest earned on Employees contribution beyond Rs.2,50,000/- per annum would be taxable.

Accordingly, if employee’s current annual salary is Rs.2,083,333/- (Rs.2,50,000/12%) or lower and there is no voluntary contribution apart from mandatory contribution, then interest received from EPF will be exempt.

8. More Tax incentives for units located in International Financial Services Centre (IFSC):

In order to further promote foreign investors to set-up units in IFSC, the Finance Minister has proposed following incentives:

• Exemption of income earned by a Non Resident (‘NR’) on account of transfer of non-deliverable forward contracts entered into with an offshore banking unit located in IFSC, subject to certain conditions;
• Exemption of Income accrued to investment division of offshore banking unit located in IFSC subject to certain conditions;
• Royalty income of a NR from lease of an aircraft paid by a unit located in IFSC, if the unit is eligible for deduction under section 80LA, subject to certain conditions;
• Capital gains arising to original funds from transfer of assets to resultant fund on account of relocation before 31^st March, 2023;
• Income arising from transfer of an aircraft or aircraft engine which was leased by a unit located in IFSC to a domestic company engaged in the business of operation of aircrafts before such transfer shall be eligible for 100% deduction subject to condition that the unit has commenced operation on or before the 31^st March 2024

Further, amendment is proposed in Section 9A to enable central government to relax and modify conditions in sections 9A(3) and (4) of the Act where Fund Manager is located in an IFSC and has commenced its operations on or before 31^st March, 2024.

9. Increase in Threshold limit for Tax Audit in case of persons doing Business:

In order to reduce compliance burden on small and medium businesses and to promote business through banking channels, the Finance Minister has proposed to increase the threshold limit from Rs.5 Crores to Rs.10 Crores; above which a person for a person carrying on business is required to get his books of account audited. The increased threshold limit is applicable only if following Two conditions are fulfilled:

• aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipts; and
• aggregate of all payments in cash during the previous year does not exceed five per cent of such payments.

It may be noted that the above increased threshold is only applicable to persons carrying on business and that too for those not covered under presumptive taxation scheme of Section 44AD. There is no change in threshold under Section 44AB/ Section 44ADA of the Act for persons engaged in Profession.

10. Restricting deduction on account of Employee’s contribution to a Fund, only if paid before on or before due date:

As regards delayed deposit of employees’ contribution to a welfare fund, various Courts have held that if payment of contribution to PF, ESIC and other Labour Welfare Funds is made before the due date of filing of Return of Income under section 139(1) of the Act; then no disallowance u/s. 36(1)(va) of the Act is required.

With a view to clarify the intention behind provision of Section 36(1)(va), and to avoid litigation on the subject the Finance Minister has proposed to provide that if the employer fails to deposit the employee’s contribution in timely manner as per the relevant Act, then same shall not be allowed as a deduction in any year even if such contributions are deposited subsequently.

Consequential amendment is also proposed in Section 43B of the Act.

(The above amendments are applicable retrospectively from, Assessment Year 2021-22.)

11. Rationalisation of the provisions of Equalization Levy:

Hitherto, the provisions of Equalisation Levy (‘EL’) were applicable on specified services of online advertising etc. requiring the recipient of service to pay 6% on services received from non-resident.

Later on, Finance Act 2020 expanded scope of EL by providing a 2% levy on the amount of consideration received or receivable by an e-commerce operator from e-commerce supply to specified person effective from AY 2020-21. However, exemption in Section 10(50) on above was applicable from AY 2021-22; raising apprehension of double levy i.e. taxation under Act as also EL provision.

This anomaly is now sought to be removed by making suitable amendment in Section 10(50) to provide that it would be operative from AY 2020-21.

Further, having regard to nature of EL, it is possible that a transaction may get covered under Act and also EL provisions; thereby raising apprehension whether Assessee can choose to be governed by Act or EL whichever is beneficial or can a transaction be subject to both?

This has also now been clarified by providing that income which is chargeable to tax in India as per provisions of Act read with DTAA as Royalty or Fees for technical services shall not be covered for EL and accordingly such income would not qualify for exemption under section 10(50).

Apart from above, the scope of EL is expanded by insertion of Explanation clarifying meaning of “online sale of goods” and “online provision of services”.

Also, it is further clarified that e-commerce supply would include consideration for sale of goods irrespective of whether the e-commerce operator owns the goods/ supply of services irrespective of whether service is provided or facilitated by e-commerce operator.

(The above amendments are applicable retrospectively from, Assessment Year 2020-21.)

12. Rationalization of provision of transfer of capital asset to partner on dissolution or reconstitution:

The Finance Minister has proposed to substitute existing Section 45(4) by providing new framework for taxation in case of dissolution or reconstitution of partnership firm.

Following are the relevant points under the new provisions:

• Taxability would get attracted in the year when specified person i.e. partner receives any capital asset at the time of dissolution or reconstitution of specified entity i.e. firm, which represents balance in his capital account;
• Any gain arising from receipt of such capital asset by partner is taxable in hands of the firm;
• Section 45(4) deals with receipt of capital asset and section 45(4A) deals with receipt of cash and other asset;
• FMV of capital asset/ Value of money or FMV of other asset on date of receipt shall be deemed to be the full value of consideration received or accruing as a result of transfer of such capital asset;
• Cost of acquisition of capital asset shall be determined in accordance with provision of Capital Gains Chapter;
• Proviso mandates ignoring amount credited to partner capital on account of revaluation of self-generated goodwill or other self-generated asset.

Since Fair market value on date of receipt is deemed to be full value consideration assessable in hands of the Firm, it may be advisable to obtain valuation report to document FMV.

While determining Capital balance for the purpose of Section 45(4A), revaluation on account of goodwill or self-generated asset needs to be ignored. This would require that each Partner’s capital account is re-drawn on actual basis excluding revaluation/goodwill adjustments since his admission to firm.

13. No Depreciation on Goodwill-undoing relief granted by Supreme Court:

In order to overrule the recent decision of Supreme Court in case of Smiff Securities Limited (348 ITR 302) which held in assessee’s favour; the Finance Minister has clarified intent of government that Goodwill is to be treated as a non-depreciable asset. Accordingly, amendments are proposed in Section 32, 2(11), 55, 49.

Further, it is also provided that no adjustment would be required in respect of depreciation already claimed on Goodwill upto Financial Year 2019-20. However, the unclaimed balance of Goodwill would be considered as cost, same is transferred in future.

This would result in additional tax outflow for entities as Goodwill is not tax deductible anymore. Also, it may create practical challenges in working out depreciation on other intangible assets (excl. goodwill) on which depreciation is to be claimed, due to block of asset concept.

14. Relaxation from filing income-tax return for certain category of senior citizens:

To give relief to senior citizens having only pension and interest income, the Finance Minister has proposed to exempt Senior Citizen from requirement of filing ITR, if the following conditions are satisfied:

• The senior citizen is resident in India and of the age of 75 or more;
• They should only have Pension Income and Interest Income both from the which is credited in a single specified bank (which would be notified by Government);
• They shall be required to furnish a declaration to the specified bank.

Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen for the relevant assessment year and deduct income tax on the basis of rates in force.

It appears that above conditions need to be strictly followed to avail the waiver from filing return. Receipt of any other income apart from above, say Dividend of Rs. 1,000 which is exempt, or if he has any other bank account in addition to specified account, then he would be out above scheme.

 (The above amendment will take effect from 1^st April, 2021)

15. No TDS on payment of Dividend to Business Trusts in whose hand dividend is exempt-welcome move:

Hitherto, TDS was required to be done on payment of Dividend to REIT’s and InvIT’s under Section 194. However, since income of Business Trusts was exempt, there is challenge in claiming TDS credit.

Now, the Finance Minister has proposed to grant exemption from doing TDS on payment of Dividend to Business Trust, which is welcome as it has addressed the need of the industry. This move is likely to attract more investments in Business Trusts.

However, one needs to see whether benefit of this amendment can be taken for Dividends declared/ distributed prior to 1^st February 2021.

(This amendment will take effect retrospectively from 1^st April, 2020.)

16. Relief from Advance Tax on Dividend income-welcome step:

Recognizing the fact that receipt of Dividend in hands of shareholder cannot be estimated with certainty till receipt, the Finance Minister has proposed to insulate the taxpayers from payment of interest under section 234C of the Act in cases where accurate determination of advance tax liability is not possible due to the Dividend income [other than deemed dividend u/s.2(22)(e)].

This is welcome step on the lines as done for Dividends which were taxable hitherto u/s.115BBDA.

Needles to state that from now on interest u/s.234C will be applicable in case of mismatch between installment of advance tax and actual tax only after receipt of dividend income. This would require shareholders to maintain record of dividend receipts from various companies, for timely discharge of Advance tax thereon.

17. Tax Deduction at Source (‘TDS’) on purchase of goods-New Levy:

The Finance Minister has proposed to introduce new Section 194Q requiring of TDS @ 0.1% on sum paid for purchase of goods by person, subject to following conditions:

• TDS to be done by buyer if value or aggregate value of goods purchased from a person exceed Rs. 50,00,000 in a year;
• TDS to be deducted on value exceeding Rs.50,00,000/- at the time of credit or payment whichever is earlier;
• Buyer is defined to mean a person whose total sales, gross receipts or turnover from business carried on in previous year exceed Rs.10 Crores;
• Section not applicable if TDS required to be done under other provisions or if TCS is to be done (other than 206C(1H);
• If PAN of seller is not available, then TDS to be done @5%;
• Other provisions of TDS apply, as applicable to other sections.

Also, there may be situations in which both Section 194Q and Section 206C(1H) simultaneously apply to a transaction.

Also, there could be practical difficulties in determining TDS on composite contract of supply of goods and services; wherein buyer would have to allocate consideration appropriately and then do TDS.

There apart, this provision would also be covered by new provision requiring TDS at higher rate if seller is non-filer of return.

18. TDS/TCS to be done at higher rates if other party does not file Income Tax Returns:

To ensure filing of income-tax return by persons who have suffered TDS/ TCS, the Finance Minister has proposed to insert a new section 206AB and section 206CCA requiring higher rate of TDS and TCS to be done by Deductor/ Collectee from, payments made to specified person.

The rate of TDS from amounts payable to specified person is higher of the followings rates:

• twice the rate specified in the relevant provision of the Act; or
• twice the rate or rates in force;
• or the rate of 5%.

The rate of TCS from amounts receivable from specified person is higher of the followings rates:

• twice the rate specified in the relevant provision of the Act; or
• the rate of 5%.

In case, the other party does not provide PAN, then TDS would be required to be done @20% and TCS @5% being higher of rates as per Section 206AB and 206AA.

Specified person is defined as:

• A person who has not filed Returns for earlier Two years prior to current year and for which the time limit of filing of filing Return under section 139(1) has expired; and
• Aggregate tax collected and deducted at source in his case is Rs.50,000 in each of the two years’ prior years with respect to the specified person.

Further, specified person would not include a non-resident who does not have a permanent establishment in India.

From now on, service receivers making payments would not only have to ensure to collect PAN of other person but also ensure filing of return for earlier years.

The above requirement only extends Assessee’s compliance burden and costs further to the benefit of Income Tax Department to chase non-filers of returns!!

(The above amendment is applicable from 1^st July, 2021)

19. Income escaping assessment and Search Assessments-Overhaul of existing provisions:

The Finance Bill, 2021 proposes a completely new procedure of assessment/reassessment in case of search and income escaping Assessment. This new system would result in less litigation and would provide ease of doing business to taxpayers as there is a reduction in time limit by which a notice for assessment or reassessment or re-computation can be issued.

New Section 148A of the Act has been proposed as under:

• Before issuance of notice under section 148 of the Act the Assessing Officer shall conduct enquiries, if required, and provide an opportunity of being heard to the Assessee.
• After considering his reply, the Assessing Office shall decide, whether it is a fit case for issue of notice under section 148 and serves a copy of such order along with such notice on the Assessee.
• For issuance of Notice under section 148A approval of specified authority is required.
• However, this procedure of enquiry, providing opportunity and passing order, before issuing notice under section 148 of the Act, shall not be applicable in search or requisition cases.

Notice under section 148 can be issued as under:

• In Normal cases where income escaping Assessment does not exceed Rs. 50,00,000/-, the time period to issue notice under section 148 has been reduced from 6 Years to 3 Years from the end of the relevant Assessment Year.
• In cases where the income escaping Assessment amounts to or is more than Rs. 50,00,000/-, notice can be issued beyond 3 years but not beyond the period of 10 years from the end of relevant Assessment Year.

The differences in the new system as compared to existing provisions are summarized below:

• ‘Reason to believe’ concept given a go by- Officer now has power to reopen the assessment in any case where income has escaped;
• Assessment can be reopened irrespective of the fact that original assessment was under section 143(1) or section 143(3);
• AO can now reopen the assessment even if earlier assessment has been completed under section 143(3) and there is no failure on part of the assessee to disclose fully and truly all material facts necessary for assessment;
• No reassessment notice to be issued after 3 years from the end of the relevant assessment year unless case falls in clause below;
• No reassessment notice to be issued after 3 years but before 10 years from the end of the relevant assessment year unless following conditions are cumulatively satisfied:

i. AO has in his possession books of accounts or other documents or evidences; AND

ii. Such books or documents or evidences reveal that income chargeable to tax represented in the form of assets has escaped assessment; AND

iii. The above assets escaping assessment amount to or likely amounts to Rs 50,00,000 or more

• Time limit for reassessment reduced to 10 years from existing time limit of 16 years in case of foreign assets;
• In case assessment for any year prior to 1 April 2021 could not be reopened under existing provisions as time limit of 4 years / 6 years have passed, the same cannot be reopened under new provisions.

For search assessments, it is proposed that existing provisions in Section 153A and Section 153C shall apply only in case of search initiated /assets requisitioned upto 31st March 2021. Post 1st April 2021, search assessments would be done under new provisions of Section 147, 148 and 148A.

The introduction of new system of reassessments, implies that settled judicial precedents on the issue that reopening cannot be on the basis of change of opinion is now become irrelevant

Also, decisions setting out what constitutes failure on part of assessee to disclose fully and truly material facts, would no longer be applicable in new system.

Though this appears to be a welcome amendment as it intends to reduce the compliance and litigation burden of the taxpayers; one will have to wait and watch whether this intention gets fulfilled.

20. Rationalisation of the provision of Charitable Trust and Institutions to eliminate possibility of double deduction while calculating application or accumulation:

Hitherto, income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus was exempt from Tax under Section 11 and Section 10(23C). It is now proposed that the corpus donations shall be exempt only if it is invested or deposited in one or more specified forms or modes as prescribed in Section 11(5) maintained specifically for such corpus.

Further, it is also proposed that any Application of funds out of corpus shall not be considered as application for charitable purposes.

It is also provided that Excess application of earlier years shall not be allowed to be set off in subsequent years’ while computing exempt income. Thus, now benefit of various decisions which permitted set-off would stand overruled.

As regards application of income out of borrowed funds, the Finance Minister has now proposed to clarify that utilisation of loans and borrowings shall not be considered as application for charitable or religious purposes. However, repayment of loans or borrowings shall be considered as application of income. Hence, if application exceeds donations received in any year, then the excess shall be ignored in that year and same would be allowed as application of income in the year of repayment of loan.

Apart from the above, it has been proposed that the extend exemption under sub-clause (iiiad) and (iiiae) of Section 10(23C) of the Act if aggregate receipts of the person from university/ educational institution/ hospitals do not exceed Rs.5 Crores.

21. Rationalization of provisions related to TDS from FII’s-Benefit of DTAA granted:

Currently, Section 196D prescribes flat rate of TDS 20% (plus surcharge and cess) as there was no reference to rates in force therein.

On recognizing hardships faced by FII’s due to higher TDS, the Finance Minister has proposed to amend Section 196D by providing that if DTAA benefit is available and the FII has provided tax residency certificate; then TDS may be done at lower rate as per DTAA.

22. Rationalization of provisions related to Sovereign Wealth Fund and Pension Fund:

Currently, Sovereign Wealth Fund (‘SWF’) and Pension Fund (‘PF’) notified under section 10(23FE) were exempted from taxation on interest, dividend, long term capital gains etc. from investment made in India.

Now, with a view to remove hardships faced and to attract greater foreign investments, it is proposed to relax certain conditions for the SWF’s & PF’s to make investments and conduct activities. The amendments proposed are:

• The SWFs/ PFs to be allowed to invest up to 50% in non-eligible investments;
• SWFs or PFs to be allowed to invest in Category I or II AIFs having 50% of their investments ineligible infrastructure companies/investments;
• The Category I & II AIFs receiving investments from SWFs/PFs will be allowed to investin InvITs;
• To allow proportionate exemption where the investment by AIF in infra companies or InvITs is less than 100%;
• The SFWs & PFs will now be allowed to invest through holding companies, subject to certain conditions;
• SWFs & PFs will now be allowed to invest in NBFCs subject to specified conditions;
• the prohibition for funding of investments through borrowed funds shall only be with respect to making investments in India;
• SWFs & PFs would be permitted now to appoint directors & executive directors in order to monitor their investments, and the same will not be considered being involved in day-to-day operations.

Further, the it is also proposed to introduce concept of “liable to tax” in the Income Tax Act, 1961 by inserting Section 2(29A). For the PF’s whose income is taxable in the country where the PF is established but then it is exempted subsequently, such PF shall also be eligible for exemption u/s. 10(23FE).

(The above amendment will take effect from 1^st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.

23. Revamp of system of Authority for Advance Ruling (AAR):

Considering the long pendency of applications and challenge in filling up vacancy in posts of Chairman and Vice-Chairman, the Finance Minister has proposed to replace the Authority for Advance Rulings (‘AAR’) with new Boards of Advance Rulings (‘BAR’) for giving advance rulings to be constituted by Central Government from the notified date. BAR shall consist of two members, each being an officer not below the rank of Chief Commissioner of Income-tax, as may be nominated by the CBDT. Accordingly, several other consequential amendments to Chapter XIX-B have been made.

All pending applications before AAR in respect of which order allowing or rejecting the application or advance ruling has not been pronounced before the specified date will be transferred to BAR.

Also following differences are to be noted in the existing system vis-a vis- new system:

• Now onwards, BAR will be constituted only by revenue officials as compared to current system being headed by a retired judge of High Court or Supreme Court;
• Hitherto, orders passed by AAR was binding on both the applicant as well as tax department. However, now orders of BAR are appealable, so it is not likely to provide certainty.

24. Faceless ITAT Scheme:

 Continuing the endeavor of the Government to reduce interface between Department & taxpayer, the Government has already launched the Faceless Assessment, Faceless Appeal and Faceless Penalty scheme.

Now, the Faceless ITAT scheme is proposed on the same lines as the Faceless Appeals scheme.

Under the proposed Faceless ITAT scheme, the proceedings are likely to be faceless, with virtual hearings through video conferencing being held only on application or request of the assessee to make submissions before the Bench.

The details of the Faceless ITAT scheme are not yet notified.

25. Setting up of Dispute Resolution Committee for small and medium taxpayers:

The Finance Minister has proposed to constitute Dispute Resolution Committee (‘DRC’) for resolving disputes of small and medium taxpayers.

In order to provide early tax certainty to small and medium taxpayers, a new scheme to prevent new disputes and settle the issue at the initial stage, is proposed through the insertion of a new section 245MA.

The DRC, subject to conditions, shall have the powers to reduce or waive any penalty imposable under the Act or grant immunity from prosecution for any offence under this Act in respect of eligible cases.

26. Incentives for Start-Ups/ Affordable Housing:

The following incentives are proposed to promote Start-ups/ affordable housing activity:

• In order to continue promoting purchase of affordable housing, the period of sanctioning of loan by the financial institution is extended to 31^st March 2022;
• Benefits to affordable rental housing projects & grant of additional time for approval for affordable housing projects for deduction under Section 80-IBA.
• To incentivize start-up in the country, the benefit of section 80-IAC is extended to entities incorporated up to 31^st March 2022.
• Now the exemption for investment in start-ups is extended by one more year till 31^st March 2022 under Section 54GB.

27. Rationalisation of the provision relating to processing of returns:

Currently, only adjustment in respect of disallowance of expenditure as per audit report which is omitted to be taken in return of income was permitted under Section 143(1)(a) of the Act. Now, the Finance Minister has proposed made to allow the Centralized Processing Centre to make adjustments for increase in income on account of mismatch in the income disclosed in the Tax Audit Report and Total Income in the return of income.

28. Time limit for filing of return of income/ assessment-curtailed:

With increased dependence on technology, Artificial intelligence and data analytics; making pre-filled Income TAX return forms available to Assessees; the government has proposed to reduce the time allowed to Assessee’s to filed belated / revised returns and also cut down time limit for processing of returns, selection of case for scrutiny, completion of assessments etc; the comparative details of which are provided in below table:

Particulars	Proposed Time Limits	Current Time Limits
Filing of belated/revised return of income	3 months prior to end of the   relevant assessment year (i.e. 31st December) or before completion of assessment, whichever is earlier	End of the relevant assessment year (i.e. 31st March) or before completion of  assessment, whichever is earlier
Processing of return of income	9 months from the end of the financial year in which the return of income is furnished	1 year from the end of the financial year in which the return of income is furnished
Selection of Scrutiny Assessment	3 months from the end of the financial year in which the return of  income is furnished	6 months from the end of the financial year in which the return of income is furnished
Completion  of assessment	9 months from the end of relevant assessment year	12 months from the end of relevant assessment year

Others:

• The clarification has been provided that Limited Liability Partnership (LLP) is required to maintain books of accounts under the section 44AA, though they have taken the benefit of section 44ADA.
• Scope of slump sale has been widened by including all types of transfers – primarily intend to cover slump exchange transactions-rationalisation.
• In order to enable centralized issuance of notices in an automated manner, it is proposed to amend the provisions of Section 142(1)(i) to empower the prescribed income-tax authority besides the Assessing Officer to issue notice.
• the Competent Authority constituted under Section 5(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) shall be the Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988 which shall commence discharging its function from 1^st July, 2021.

Also, it is proposed to extend the time limit for passing order from 1^st July, 2021 to 30^th September, 2021.

• Amendments have been proposed in the definition of zero coupon bonds so as to include Infrastructure debt funds to issue zero coupon bond.
• It is now proposed to further amend the Income Declaration scheme stating that no interest would be payable on the refund.
• To facilitate strategic disinvestment of public sector company, amendments are proposed in Section 2(19AA) and Section 72A.
• Discontinue the ITSC with effect from 1^st February, 2021-the Central Government shall constitute Interim Board for settlement of applications pending with the ITSC as on 31^st January, 2021.
• In the fight against fake invoices, now Assessing officer has a right to attach any property of the Assessee during the pendency of the penalty proceeding under section 271AAD if the amount or aggregate of amounts of penalty imposable is likely to exceed Rs.2 Crores.

II. INDIRECT TAXES

Key amendments proposed in respect to Goods and Service Tax are stated hereunder:

> The Finance Minister has proposed retrospective amendment effective from 1st July 2017 to include in the scope of ‘supply’ the activities or transactions between mutual association and its members. This overrules the position confirmed by Supreme Court of India in case of Calcutta Club Limited.

> Assessee will be able to claim ITC on vendor’s invoices or debit notes only if such invoice or debit note is declared by the vendor in its statement of outward supply (i.e. Form GSTR-1).

> The requirement of certifying reconciliation statement in Form GSTR 9C (‘GST Audit’) by a Chartered Accountant or Cost Accountant is done away with as this information will have to be self-certified by the taxpayers.

> The issue as to levy of interest on gross tax liability or net tax liability during the period 1st July, 2017 to 31st August, 2020 is now settled with the proposed amendment which provides that interest to be calculated on net liability, effective from 1st July, 2017.

> Supply of goods or services to SEZ shall qualify as zero rated supplies only if such supply is to be used for authorised operations by SEZ unit or SEZ developer.

> Supplier exporting goods without payment of tax shall be liable to pay back refund received by him on failure to realise the export proceeds within the time prescribed under FEMA with interest.

> It is proposed that refund of IGST will be allowed only in case of notified class of taxpayers or notified goods or services.

> It is proposed to delink penalty proceedings on supplier (main noticee) and transporter (co-noticee).

> Self-assessed tax will include tax payable on invoices declared in the statement of outward supply (Form GSTR 1) even though not declared in GST Return (Form GSTR 3B) for recovery proceedings to be initiated by Officer.

> Power of provisional attachment enhanced

> It is proposed to release the goods and conveyance on payment of penalty equivalent to 200% of tax payable on goods when the owner of goods comes forward for payment of such penalty.

> In case the owner does not come forward for payment of penalty, goods and conveyance shall be released on payment of penalty equivalent to higher of 50% of the value of the goods or 200% of tax payable on such goods. Power to release goods provisionally > withdrawn.

> Further, Officer is to pass an order within the period of 7 days from the date of service of notice. If penalty is not paid in 15 days, officer is empowered to sale or dispose of goods or conveyance so detained for recovery of penalty.

> It is proposed that in detention and seizure cases, appeal shall be admitted only upon payment of 25% of penalty.

> Jurisdictional commissioner or an officer authorized by him is empowered to direct any person to furnish information relating to any matter dealt with in connection with GST Act.

(Compiled By Partners of ‘B. S. Shah & Co., Chartered Accountant’ Namely (i) Bhupendra Shah -B.Com., L.L.B. (SP.), A.C.S., F.C.A. (ii) N. Krishnakumar- B. Com., F.C.A., Grad CWA and (iii) Shreyam Shah -B.Com. A.C.A.,DISA)