DISSOLUTION OF LLP & TAXABILITY

BY SASHI KANTA PANDA

Winding up is different from dissolution. Winding up is a process which culminates into dissolution. During the period, when winding up commences till the dissolution takes place, the legal entity of LLP remains and so, such LLP can be sued. But on dissolution, the LLP loses its existence because its name is struck off from the register of LLPs and therefore, it is not possible to sue the LLP.

Procedure:

Declaring the LLP as Defunct

In case the LLP wants to close down its business or where it is not carrying on any business operations, it can make an application to the Registrar of Companies for declaring the company as defunct and removing the name of the LLP from its register of LLP’s.

The procedure is given below       
1. An application is required to be made in eForm 24 to the Registrar of Companies for Striking off the name of the LLP under clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008 with the consent of all partners.

2. The Registrar shall publish a notice on its website as to the content of the application for a period of one month for the notice of the general public.

3. Application submitted to be supported by Indemnity Bonds to indemnify any person legally claiming after the LLP to be striked off and duly sworn Affidavits declaring all the information provided and statements given to be true, from all partners. 

4. Application filed also to be supported by approvals or No Objection Certificates from concerned Regulatory Authorities with which the LLP is registered. For eg. LLP engaged in or registered with RBI for Banking Business has to obtain NOC from RBI before winding up of its affairs. 

5. The Registrar, where he has sufficient cause to believe that the limited liability partnership has any asset or liability, satisfy himself that sufficient provision has been made for the realization of all amount due to the limited liability partnership and for the payment or discharge of its liabilities and obligations by the limited liability partnership within a reasonable time and, if necessary, obtain necessary undertakings from the designated partner or partner or other persons in charge of the management of the limited liability partnership.

6. On the expiry of period of one month, the Registrar may, by an order, unless cause to the contrary is shown by the limited liability partnership, strike its name off the register, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the limited liability partnership shall stand dissolved.

Guidelines:
a. There should have been no liability existing or obligation subsisted on part of LLP and its partners.

b. There should be no litigation pending for or against LLP.

c. The assets of the limited liability partnership shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the limited liability partnership from the register.

d. Liability of the Designated Partners subsists even after dissolution of LLP for payment of any legal dues to its creditors and other persons as if the LLP has not been dissolved.

Declaring the LLP as defunct is much easier process to close down the LLP as compared to wounding up because it does not involves high formalities and due to simplified procedure, the time consumed is comparatively very less.

Winding UP

As per section 63 of the LLP Act, the winding up of the Limited Liability Partnership could be either of the following-

Voluntary Winding up

Here the partners of the LLP, after consenting among them, agree to wind up its affairs and activities. And adopt the following procedure to windup the limited liability partnership. If the firm is not solvent the partners cannot start the process of winding up the firm. They also need to have creditors’ consent/approval for winding up the firm. And many more formalities have to be complied with for winding up the business.

i) Passing of Resolution-

An LLP can be wound up voluntarily only if at least three fourth of total numbers of partners pass such a resolution and file a copy of it with the Registrar within the next 30 days. It shall be deemed that the winding up has commenced from the time of the passing of such resolution.

ii) Declaration of solvency by designated partners-

The designated partners are required to make a declaration, which shall be verified by an affidavit, that their LLP is solvent and will be able to fully settle the debts out of proceeds realized from the sale of assets within a time period of one year starting from the date when winding up commenced. This declaration along with the Statement of Assets and Liabilities and Assets Valuation Report prepared by an independent valuer shall be submitted with the Registrar of Companies (ROC) within 15 days of passing of the winding up resolution.

iii) Approval of Creditors-

No winding up can take place voluntarily unless the approval of creditors is sought. The LLP shall intimate to its creditors, the estimated amount that it owes to each of these parties and shall give them an offer to approve and accept the claims. They shall be given a 30days time to accord their approval in respect of voluntary winding up or acceptance of the offer made to them. Consent of at least 2/3 in value of creditors is required for winding up. The LLP shall file the decision of the creditors with the ROC within 15 days of receipt of their consent.

iv) Publication of Resolution-

Once the resolution demanding voluntary winding is passed and approval of the creditors is obtained, then the LLP shall within 14 days of receipts of creditors consent give a public notice about its resolution. For this purpose, it shall place an advertisement concerning this matter in the local newspaper of the district where the principal office or registered office of the LLP is situated.

v) Appointment of Liquidator-

To administer the proceedings of winding up, an official known as LLP liquidator is appointed from the panel maintained by the Central Government within 30 days of filing of consent of creditors. Once the LLP liquidator gets appointed, all the powers of the designated partners as well as that of other partners shall cease. Further notice of such appointment of the LLP Liquidators shall also be given to the  Registrar.

Duties of LLP Liquidator :

The LLP Liquidator is supposed to discharge the following duties with regard to the winding up–

1. Perform such functions and duties as may be prescribed under the Act or Rules,

2. Maintain books of accounts in the proper manner,

3. Settle the list of creditors and partners,

4. Pay off the liabilities of the LLP and adjust the rights of the partners among themselves,

5. Observe due care and diligence while discharging his duties,

  

6. Give a quarterly report on the progress of winding up of the LLP to the partners and creditors in the prescribed form & manner,

7. Get the accounts of the LLP audited.

Preparation of Final Report by the Liquidator-

Once the affairs of the LLP get fully wound up, then the liquidator shall prepare a final report concerning the winding up accounts and explanations in the prescribed format. Thereafter, he/she shall seek the approval of the partners and the creditors, as the case may be, with regard to the said report and accounts in the meeting with the partners and creditors.

Further, all the above mentioned documents shall be filed with the ROC within 15 days of the approval by the partners /creditors.

vi) Passing of Dissolution Order-

If the tribunal is satisfied that the process of winding up has been duly followed, it shall pass the dissolution order within 60 days of the receipt of the application. The liquidator is required to file a final copy of the dissolution order of LLP with the Registrar of Companies (ROC), who shall then get this fact notified in the Official Gazette.

Compulsory Winding up

The firm may also wound up by the order of the Tribune/court. And this kind of winding up is known as Compulsory Winding up. The Tribune may order an LLP firm to wind up in the following circumstances as provided under section 64.

a) Petition by LLP - If the LLP firm has resolved to be wound up by the Tribunal, then it may file a petition to the Tribune under section 64 subsection (a).

b) Number of the partners below statutory minimum - If the number of partners in an LLP falls below two, and still it keeps carrying on for more than 6 months, then the Tribunal is bound to issue a winding up order under the provisions of Section 64 sub section (b).

c) Inability to Pay Debts - If the LLP is in a severe financial crunch and is unable to honour its obligations towards the creditors, the Tribunal may make a winding up order. The power of the Tribunal is, however, discretionary and it may desist from making a winding up order, if the majority of creditors in value oppose the petition in the hope that the LLP would be able to regain its financial position and must therefore continue to trade as referred under Section 64 subsection (c).

d) LLP acts against the National Interest - If the activities of the LLP put at risk the sovereignty, integrity and security of India, then the tribune may make a winding up order under section 64 sub section (d).

e) Default in submitting the prescribed financial disclosures and other documents with the Registrar - If the LLP has, for any reason defaulted in filing with the Registrar its Statement of Account and Solvency or Annual Return for five consecutive financial years, then the Tribune is bound to make a winding up order as per the provisions of Section 64 subsection (e).

f) Just and Equitable to wind up - If in the opinion of the Tribunal, it is just and equitable to wind up the LLP; it may order it’s winding up. The Tribunal has wide discretionary powers under this clause and on the basis of judicial decisions; the following circumstances may be made a ground for winding up under Section 64 subsection (f).

i) If there is a complete deadlock in management.

ii) If there is a Bubble LLP i.e. LLP exists only for the name sake without any real business or property.

iii) If there is a loss of substratum i.e. whole of the capital of the LLP has eroded or the main object of the LLP has failed.

iv) If the LLP firm carries business which is illegal.

v) The business of LLP cannot be carried on further except at a loss.

The following points should also be noted and understood along with the conditions laid in section 64. These provisions relate to the details of winding up procedure.

i) The petition or an application for winding up of an LLP could be filed with the tribunal by the LLP itself or by any of its partner(s) or creditor(s) or by the Registrar or by Central Government or by a person authorized by Central Government.

ii) It shall be deemed that winding up of the LLP has commenced from the time of the presentation of its petition to the tribunal.

iii) The tribunal is empowered with the special powers that can be exercised by the Tribunal as per his discretion on presentation of petition. Once the petition for winding up of the LLP, has been received by the Tribunal, it fixes a date for its hearing and issues notice to the LLP to appear and justify its position. The Tribunal shall also give a public notice in order to inform everybody, particularly, the creditors and the partners, about winding up so that their concerns or objections could also be considered. Then, on the specified date, after taking into consideration the concerns of all the parties and circumstances of the case, the Tribunal (within ninety days from the date on which petition was presented), may – dismiss the petition or make an interim order or direct to revive or rehabilitate the LLP or appoint a liquidator as provisional liquidator till the final order or pass an order to windup the LLP.

iv) Once the Tribunal passes and communicates the Winding up order to the firm, the following consequences will follow.

a) The petitioner and the LLP shall ensure that a certified copy of the winding up order has been filed with the ROC so that the Registrar could notify the fact in the Official Gazette.

b) The winding up order serves as a notice of discharge to all the employees and officers of the concerned Limited Liability Partnership.

c) No suit or legal proceedings can be commenced against the LLP without the leave of the court. Even a suit, which is pending against the LLP at the date of winding up order, cannot be preceded unless the permission of Tribunal is obtained. 

Taxability:

Up to the assessment year 1987-88 distribution of assets on dissolution of firm was not subjected to capital gains taxation. As a matter of fact Sec.47(ii) specifically provided that it will not be considered to be a transfer. In Malabar Fisheries Co. vs. CIT (1979) 120-ITR-49(SC), the Supreme Court held that distribution of assets among partners on dissolution does not involve transfer as it is only because of pre-existing rights. This settled position was upset by introduction of Sec. 45(4) and deletion of Sec. 47(ii) with effect from 1-4-1988 i.e., A.Y. 1988-89 onwards. The reasons for the introduction of the new Section and for disturbing the settled position is explained by Circular No. 495, dated 22-9-1987, vide para 24.3. It was felt that the route of dissolution was used in a scheme of tax avoidance, which enabled the participants of the scheme to transfer assets from one hand to another hand without payment of legitimate tax.

The profits or gains are deemed to have arisen in the previous year in which the transfer takes place. The identification of the year of transfer becomes an issue in cases where the year of distribution happens to be different than the year of dissolution. The term ‘distribution’ is a legal and accounting concept which has given rise to a debate as to whether the Section will apply in a case where all the assets are taken away by one of the partners. An issue also has arisen as to whether the sale of capital assets to a partner could be treated as distribution of assets or not. A doubt has arisen about the entity in whose hands the deemed capital gain could be taxable, i.e., whether the gain would be taxed in the hands of the firm or in the hands of the group of partners as the firm has been dissolved and ceases to continue.

Relevant Sections:

Sec. 45(4) of the Income-tax Act provides for taxation of the deemed capital gains arising on distribution of capital assets in the course of dissolution. The essential requirement for attracting this provision is that there is a dissolution, and that in the course of such dissolution, capital assets are distributed.

The said Sec. 45(4) reads as under:         
“The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place, and for the purposes of S. 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as result of the transfer.”

Ordinarily, capital gains arise on transfer of a capital asset. ‘Transfer is considered to be ‘sine qua non’ of capital gains. The term ‘transfer’ is defined by Sec. 2(47) of the Act, which reads as under :

“ ‘transfer’, in relation to a capital asset, includes: the sale, exchange or relinquishment of the asset; or the extinguishments of any rights therein; or the compulsory acquisition thereof under any law; or in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Sec. 53A of the Transfer of Property Act, 1882 (4 of 1882); or any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, any immovable property;

Explanation : For the purposes of sub-clauses (v) and (vi), ‘immovable property’ shall have the same meaning as in clause (Id) of the Sec. 269UA”.

From a bare reading of the above provisions, it is seen that the distribution of capital asset in the course of dissolution is not specifically included in the definition of the term ‘transfer’. Instead, a direct charge is sought to be created by introducing a deeming fiction in the form of Sec. 45(4) for bringing to tax the deemed capital gains on such distribution. It is this act of by passing the provision of Sec. 2(47) by the Legislature that has become the subject matter of an interesting controversy where under a possibility of rendering Sec. 45(4) nugatory is being debated.

One view of the matter is that Sec. 45(4) is a charging Section that brings in an effective charge in the circumstances provided therein, independent of Sec. 2(47). This view is supported by the decisions of the Karnataka and the Goa Bench of the Bombay High Court. The other view of the matter holds that without a specific amendment in Sec. 2(47) amending the definition of ‘transfer’, Sec. 45(4) has no independent application. This view is supported by a decision of the Madhya Pradesh High Court.

Case Studies:-

CIT v. Moped and Machines [ (2005) 281- ITR- 52 (MP)]

The High Court observed that the admitted facts revealed a dissolution of the firm; that the dissolution deed showed that the retiring partner had no objection whatsoever in continuation of business in the same name, either as a sole proprietary or in any other manner as the other partner thought fit; that the other partner in terms of the materials placed on record had taken over the entire assets and liabilities of the partnership firm.

The Court further observed that a reading of Sec. 45(4) showed that the profits or gains arising from the transfer of capital assets by way of distribution of capital assets on the dissolution of a firm was chargeable to tax as the income of the firm, in the light of the fact that a transfer had taken place. The Court also took notice of the assessee’s contention that the term ‘transfer’ had been defined u/s.2(47) of the Act and that if Sec. 2(47) was read with Sec. 45(4), there was no transfer at all, and in any case if there was any transfer, it was not by the assessee, but by the retiring partner.

For considering the issue on hand, the Court was inclined to notice Sec. 47 of the Act. It noted that Sec. 47 was a special provision which would define the transactions not regarded as transfer and a reading of the said Sec. 47 of the Act showed that several transactions were considered as ‘no-transfer’ for the purpose of Sec. 45 of the Act.

It noted Sec. 47(ii), prior to its deletion read as : “any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons.”; that the said provision was omitted by the Finance Act, 1987 with effect from April 1, 1988; that therefore, any transaction resulting in distribution on dissolution of a firm had to be considered as ‘transfer’ in terms of Sec. 47; that on omission of clause (ii) of Sec. 47, it could not be said that Sec. 45 was inapplicable to the facts in the case on hand.

The Karnataka High Court further distinguished the judgement of the Madhya Pradesh High Court in CIT v. Moped and Machines, 281 ITR 52 relied upon by the assessee by observing that in the said judgement, there was no reference to omission of clause (ii) of Sec. 47 as it stood prior to April 1, 1988; that in the said judgement, what was considered was the provisions of Sec. 45(4) and Sec. 2(47), as it stood then; that therefore, the said judgement would not be applicable to the issue involved in the case on hand; that on the other hand, the decision of the Bombay High Court in the case of CIT v. A.N. Naik Associates, 265 ITR 346 was found to be applicable, as in the said decision, the Bombay High Court had noticed the effect of the omission of the said clause (ii) of Sec. 47 by the Act of 1987.

The Karnataka High Court, in respectful agreement with the judgement of the Bombay High Court, noted that when the Parliament in its wisdom had chosen to remove a provision which provided for the cases of ‘no transfer’, there was no need for any further amendment to Sec. 2(47) of the Act. The Court accordingly held that despite no amendment to Sec. 2(47), in the light of removal of clause (ii) to Sec. 47, the transaction was liable to capital gains tax at the hands of the authorities.

Conclusion :
Normally, in cases of firms consisting of more than two partners, the death or insolvency of a partner would result in dissolution of the firm as per the provisions of the said Act. However, there would be no dissolution in a case where the partners have agreed to continue the partnership and the business even after death or insolvency, on certain terms and conditions. On compliance of such terms, the firm will be said to have continued. In such cases, there is a consensus of opinion that the provisions of Sec. 45(4) will not apply.

Cases which create real difficulty are the cases of partnership consisting of two partners only. It is in such cases that a difficulty arises, where one of the partners dies or is declared insolvent or retires. In such cases, the firm shall stand automatically dissolved on death or insolvency or on retirement by operation of the law. In such cases of severe hardships, the recent decision of the Madras High Court in the case of CIT v. Vijaya Metal Industries, 256 ITR 540, provides a major breakthrough. In that case, the assessee partnership consisted of two partners, which was dissolved on death of one of the partners. The business of the partnership firm was continued by the surviving partner with the assets of the partnership firm. The Income-tax Department applied the provisions of Sec. 45(4) and brought to tax the deemed capital gain by holding that the transfer took place on dissolution of the firm. The Tribunal held that though the dissolution of firm took place by operation of law, it was not followed by transfer of capital assets by way of distribution of such assets. The Madras High Court confirmed the decision of the Tribunal.

The decision in the case of Vijaya Metal Industries provides a much needed relief. With this, one thing is certain that the dissolution by itself will not result in distribution of assets of the firm. The distribution will take place only on taking of a positive action by the parties concerned for distributing the assets. Till such time, the assets may be treated as jointly held by the parties. This by itself is a big relief for the assessees who are caught unaware. It is also certain  that it is possible to defer the year of taxation to the year in which the distribution takes place. This will enable an assessee to comprehend the impact of Sec. 45(4) and plan for the same. In view of the above, a new possibility has emerged where under the surviving partner can successfully join hands with the legal heirs of the deceased partner, in partnership and continue the business with the assets of the erstwhile firm. In such a case, the above-referred decision will help in contending that the assets of the erstwhile firm are not distributed amongst the parties entitled to it and till such time no liability to tax by virtue of Sec. 45(4) will arise.

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KEY FEATURES OF BUDGET 2017- 18

INTRODUCTION
 

1. In the last two and half years administration has moved from discretionary, favouritism based to system and transparency based

2. Inflation brought under control. CPI-based inflation declined from 6% in July 2016 to 3.4% in December, 2016
 

3. Economy has moved on a high growth path. India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17. FDI grew 36% in H1 2016-17 over H1 2015-16, despite 5% reduction in global FDI inflows. Foreign exchange reserves have reached 361 billion US Dollars as on 20th January, 2017
 

4. War against black money launched
 

5. Government continued on path of fiscal consolidation, without compromising on public investment.
 

6. The Indian economy has been robust to mild shocks and IMF forecasts, India to be one of the fastest growing major economies in 2017

CHALLENGES IN 2017-18
 

1. World economy faces considerable uncertainty, in the aftermath of major economic and political developments during the last year.
 

2. The US Federal Reserve's , intention to increase policy rates in 2017, may lead to lower capital inflows and higher outflows from the emerging economies .
 

3. Uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies
 

4. Signs of retreat from globalisation of goods, services and people, as pressures for protectionism are building up
 

TRANSFORMATIONAL REFORMS IN LAST YEAR
 

1. Passage of the Constitution Amendment Bill for GST and the progress for its introduction
 

2. Demonetisation of high denomination bank notes
 

3. Enactment of the Insolvency and Bankruptcy Code; amendment to the RBI Act for inflation targeting; enactment of the Aadhar bill for disbursement of financial subsidies and benefits.
 

4. Budget 2017-18 contains 3 major reforms. First, presentation of Budget advanced to 1st February to enable the Ministries to operationalise all activities from the commencement of the financial year.

Second, merger of Railways Budget with General Budget to bring Railways to the centre stage of Government’s Fiscal Policy and Third, removal of plan and nonplan classification of expenditure to facilitate a holistic view of allocations for sectors and ministries

DEMONITISATION
 

1. Bold and decisive measure to curb tax evasion and parallel economy

 

2. Government’s resolve to eliminate corruption, black money, counterfeit currency and terror funding
 

3. Drop in economic activity, if any, to be temporary
 

4. Generate long term benefits including reduced corruption, greater digitisation, increased flow of financial savings and greater formalisation of the economy
 

5. Pace of remonetisation has picked up and will soon reach comfortable levels
 

6. The surplus liquidity in the banking system will lower borrowing costs and increase the access to credit
 

7. Announcements made by the Honourable Prime Minister on 31st Dec, 2016 focusing on housing for the poor; relief to farmers; credit support to MSMEs; encouragement to digital transactions; assistance to pregnant women and senior citizens; and priority to dalits, tribals, backward classes and women under the Mudra Yojana, address key concerns of our economy
 

ROADMAP & PRIORITIES
 

1. Agenda for 2017-18 is: “Transform, Energise and Clean India”
 

2. TEC India TEC India seeks to
 

• Transform the quality of governance and quality of life of our people;
• Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and
• Clean the country from the evils of corruption, black money and non-transparent political funding
 

Ten distinct themes to foster this broad agenda:
 

• Farmers: committed to double the income in 5 years.
• Rural Population : providing employment & basic infrastructure;
• Youth : energising them through education, skills and jobs;
• The Poor and the Underprivileged : strengthening the systems of social security, health care and affordable housing;
• Infrastructure: for efficiency, productivity and quality of life;
• Financial Sector : growth & stability by stronger institutions;
• Digital Economy : for speed, accountability and transparency;
• Public Service : effective governance and efficient service delivery through people’s participation;
• Prudent Fiscal Management: to ensure optimal deployment of resources and preserve fiscal stability;
• Tax Administration: honouring the honest

FARMERS
 

1. Target for agricultural credit in 2017-18 has been fixed at a record level of Rs. 10 lakh crores
 

2. Farmers will also benefit from 60 days’ interest waiver announced on 31 Dec 2016.
 

3. To ensure flow of credit to small farmers, Government to support NABARD for computerisation and integration of all 63,000 functional Primary Agriculture Credit Societies with the Core Banking System of District Central Cooperative Banks. This will be done in 3 years at an estimated cost of Rs. 1,900 crores.
 

4. Coverage under Fasal Bima Yojana scheme will be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19 for which a budget provision of Rs. 9000 crore has been made.
 

5. New mini labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVKs in the country for soil sample testing.
 

6. As announced by the Honourable Prime Minister, the Long Term Irrigation Fund already set up in NABARD to be augmented by 100% to take the total corpus of this Fund to Rs. 40,000 crores.
 

7. Dedicated Micro Irrigation Fund in NABARD to achieve ‘per drop more crop with an initial corpus of Rs. 5,000 crores Coverage of National Agricultural Market (e-NAM) to be expanded from250 markets to 585 APMCs. Assistance up to Rs. 75 lakhs will be provided to every e-NAM.
 

8. A model law on contract farming to be prepared and circulated among the States for adoption
 

9. Dairy Processing and Infrastructure Development Fund to be set up in NABARD with a corpus of Rs. 2000 crores and will be increased to Rs. 8000 crores over 3 years

RURAL POPULATION
 

1. Over Rs. 3 lakh crores spent in rural areas every year, for rural poor from Central Budget, State Budgets, Bank linkage for self-help groups, etc
 

2. Aim to bring one crore households out of poverty and to make 50,000 Gram Panchayats poverty free by 2019, the 150th birth anniversary of Gandhiji
 

3. Against target of 5 lakh farm ponds under MGNREGA, 10 lakh farm ponds would be completed by March 2017. During 2017-18, another 5 lakh farm ponds will be taken up
 

4. Women participation in MGNREGA has increased to 55% from less than48%
 

5. MGNREGA allocation to be the highest ever at Rs. 48,000 crores in2017-18.
 

6. Pace of construction of PMGSY roads accelerated to 133 km roads per day in 2016-17, against an avg. of 73 km during 2011-2014
 

7. Government has taken up the task of connecting habitations with more than 100 persons in left wing extremism affected Blocks under PMGSY. All such habitations are expected to be covered by 2019 and the allocation for PMGSY, including the State's Share is Rs. 27,000 crores in 2017-18
 

8. Allocation for Pradhan Mantri Awaas Yojana – Gramin increased fromRs. 15,000 crores in BE 2016-17 to Rs. 23,000 crores in 2017-18 with a target to complete 1 crore houses by 2019 for the houseless and those living in kutcha houses.
 

9. Well on our way to achieving 100% village electrification by 1st May 2018.
 

10. Allocation for Prime Minister's Employment Generation Program and Credit Support Schemes has been increased three fold
 

11. Sanitation coverage in rural India has gone up from 42% in Oct 2014 to about 60%. Open Defecation Free villages are now being given priority for piped water supply.
 

12. As part of a sub mission of the National Rural Drinking Water Programme(NRDWP), it is proposed to provide safe drinking water to over 28,000 arsenic and fluoride affected habitations in the next four years.
 

13. For imparting new skills to people in rural areas, mason training will be provided to 5 lakh persons by 2022
 

14. A programme of “human resource reforms for results” will be launched during 2017-18 for human resources development in Panchayati Raj Institutions
 

15. Total allocation for Rural, Agriculture and Allied sectors is Rs. 187223 crores
 

YOUTH
 

1. To introduce a system of measuring annual learning outcomes in our schools
 

2. Innovation Fund for Secondary Education proposed to encourage local innovation for ensuring universal access, gender parity and quality improvement to be introduced in 3479 educationally backward districts.
 

3. Good quality higher education institutions to have greater administrative and academic autonomy
 

4. SWAYAM platform, leveraging IT, to be launched with at least 350 online courses. This would enable students to virtually attend courses taught by the best faculty
 

5. National Testing Agency to be set-up as an autonomous and self-sustained premier testing organisation to conduct all entrance examinations for higher education institutions
 

6. Pradhan Mantri Kaushal Kendras to be extended to more than 600 districts across the country. 100 India International Skills Centres will be established across the country.
 

7. Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) to be launched at a cost of Rs. 4000 crores. SANKALP will provide market relevant training to 3.5 crore

youth
 

8. Next phase of Skill Strengthening for Industrial Value Enhancement(STRIVE) will also be launched in 2017-18 at a cost of Rs. 2,200 crores
 

9. A scheme for creating employment in the leather and footwear industries along the lines in Textiles Sector to be launched
 

10. Incredible India 2.0 Campaign will be launched across the world to promote tourism and employment.
 

THE POOR AND THE UNDERPRIVILEGED
 

1. Mahila Shakti Kendra will be set up with an allocation of Rs. 500 crores in 14lakh ICDS Anganwadi Centres. This will provide one stop convergent support services for empowering rural women with opportunities for skill development, employment, digital literacy, health and nutrition
 

2. Under Maternity Benefit Scheme Rs. 6,000 each will be transferred directly to the bank accounts of pregnant women who undergo institutional delivery and vaccinate their children
 

3. Affordable housing to be given infrastructure status
 

4. National Housing Bank will refinance individual housing loans of about Rs. 20,000 crore in 2017-18
 

5. Government has prepared an action plan to eliminate Kala-Azar and Filariasis by 2017, Leprosy by 2018, Measles by 2020 and Tuberculosis by 2025 is also targeted
 

6. Action plan has been prepared to reduce IMR from 39 in 2014 to 28 by2019 and MMR from 167 in 2011-13 to 100 by 2018-2020
 

7. To create additional 5,000 Post Graduate seats per annum to ensure adequate availability of specialist doctors to strengthen Secondary and Tertiary levels of health care
 

8. Two new All India Institutes of Medical Sciences to be set up in Jharkhandand Gujarat
 

9. To foster a conducive labour environment, legislative reforms will be undertaken to simplify, rationalise and amalgamate the existing labour laws into 4 Codes on (i) wages; (ii) industrial relations; (iii) social security and welfare; and (iv) safety and working conditions.
 

10. Propose to amend the Drugs and Cosmetics Rules to ensure availability of drugs at reasonable prices and promote use of generic medicines
 

11. The allocation for Scheduled Castes has been increased by 35% compared to BE 2016-17. The allocation for Scheduled Tribes has been increased to Rs. 31,920 crores and for Minority Affairs to Rs. 4,195 crores
 

12. For senior citizens, Aadhar based Smart Cards containing their healthdetails will be introduced
 

INFRASTRUCTURE
 

1. For transportation sector as a whole, including rail, roads, shipping, provision of Rs. 2,41,387 crores has been made in 2017-18.
 

2. For 2017-18, the total capital and development expenditure of Railways has been pegged at Rs. 1,31,000 crores. This includes Rs. 55,000 crores provided by the Government
 

3. For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created witha corpus of Rs. 1 lakh crores over a period of 5 years
 

4. Unmanned level crossings on Broad Gauge lines will be eliminated by 2020
 

5. In the next 3 years, the throughput is proposed to be enhanced by 10%.This will be done through modernisation and upgradation of identified corridors.
 

6. Railway lines of 3,500 kms will be commissioned in 2017-18. During2017-18, at least 25 stations are expected to be awarded for station redevelopment.
 

7. 500 stations will be made differently abled friendly by providing lifts and escalators.
 

8. It is proposed to feed about 7,000 stations with solar power in the medium term
 

9. SMS based Clean My Coach Service has been started ‘Coach Mitra’, a single window interface, to register all coach related complaints and requirements to be launched
 

10. By 2019, all coaches of Indian Railways will be fitted with bio toilets. Tariffs of Railways would be fixed, taking into consideration costs, quality of service and competition from other forms of transport
 

11. A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing, as well as standardisation and indigenisation of hardware and software
 

12. A new Metro Rail Act will be enacted by rationalising the existing laws. This will facilitate greater private participation and investment in construction and operation.
 

13. In the road sector, Budget allocation for highways increased from Rs. 57,976 crores in BE 2016-17 to Rs. 64,900 crores in 2017-18
 

14. 2,000 kms of coastal connectivity roads have been identified for construction and development
 

15. Total length of roads, including those under PMGSY, built from 2014-15till the current year is about 1,40,000 kms which is significantly higher than previous three years
 

16. Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode
 

17. By the end of 2017-18, high speed broadband connectivity on optical fibrewill be available in more than 1,50,000 gram panchayats, under BharatNet. A DigiGaon initiative will be launched to provide tele-medicine, education and skills through digital technology
 

18. Proposed to set up strategic crude oil reserves at 2 more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take our strategic reserve capacity to 15.33 MMT
 

19. Second phase of Solar Park development to be taken up for additional20,000 MW capacity.
 

20. For creating an eco-system to make India a global hub for electronics manufacturing a provision of Rs. 745 crores in 2017-18 in incentive schemes like M-SIPS and EDF.
 

21. A new and restructured Central scheme with a focus on export infrastructure, namely, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18
 

FINANCIAL SECTOR
 

1. Foreign Investment Promotion Board to be abolished in 2017-18 and further liberalisation of FDI policy is under consideration
 

2. An expert committee will be constituted to study and promote creation of an operational and legal framework to integrate spot market and derivatives market in the agricultural sector, for commodities trading. e- NAM to be an integral part of the framework.
 

3. Bill relating to curtail the menace of illicit deposit schemes will be introduced. A bill relating to resolution of financial firms will be introduced in the current Budget Session of Parliament. This will contribute to stability and resilience of our financial system
 

4. A mechanism to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts will be introduced as an amendment to the Arbitration and Conciliation Act 1996.
 

5. A Computer Emergency Response Team for our Financial Sector (CERT-Fin)will be established
 

6. Government will put in place a revised mechanism and procedure toensure time bound listing of identified CPSEs on stock exchanges. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock exchanges.
 

7. Propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies
 

8. A new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18
 

9. In line with the ‘Indradhanush’ roadmap, Rs. 10,000 crores for recapitalisation of Banks provided in 2017-18
 

10. Lending target under Pradhan Mantri Mudra Yojana to be set at Rs. 2.44lakh crores. Priority will be given to Dalits, Tribals, Backward Classes and Women.
 

DIGITAL ECONOMY
 

1. 125 lakh people have adopted the BHIM app so far. The Government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cash back Scheme for merchants
 

2. Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly
 

3. A Mission will be set up with a target of 2,500 crore digital transactions for2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards
 

4. A proposal to mandate all Government receipts through digital means, beyond a prescribed limit, is under consideration
 

5. Banks have targeted to introduce additional 10 lakh new POS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhar based POS by September 2017
 

6. Proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems
 

PUBLIC SERVICE
 

1. The Government e-market place which is now functional for procurement of goods and services
 

2. To utilise the Head Post Offices as front offices for rendering passport services
 

3. A Centralised Defence Travel System has been developed through which travel tickets can be booked online by our soldiers and officers
 

4. Web based interactive Pension Disbursement System for Defence Pensioners will be established
 

5. To rationalise the number of tribunals and merge tribunals whereverappropriate
 

6. Commemorate both Champaran and Khordha revolts appropriately
 

PRUDENT FISCAL MANAGEMENT
 

1. Stepped up allocation for Capital expenditure by 25.4% over the previous year
 

2. Total resources being transferred to the States and the Union Territories with Legislatures is Rs. 4.11 lakh crores, against Rs. 3.60 lakh crores in BE 2016-17
 

3. For the first time, a consolidated Outcome Budget, covering all Ministries and Departments, is being laid along with the other Budget documents
 

4. FRBM Committee has recommended 3% fiscal deficit for the next three years, keeping in mind the sustainable debt target and need for public investment, fiscal deficit for 2017-18 is targeted at 3.2% of GDP and Government remains committed to achieve 3% in the following year
 

5. Net market borrowing of Government restricted to Rs. 3.48 lakh crores after buyback in 2017-18, much lower than Rs. 4.25 lakh crores of the previous year
 

6. Revenue Deficit of 2.3% in BE 2016-17 stands reduced to 2.1% in the Revised Estimates. The Revenue Deficit for next year is pegged at 1.9% , against 2% mandated by the FRBM Act
 

PROMOTING AFFORDABLE HOUSING AND REAL ESTATE SECTOR
 

1. Between 8th November and 30th December 2016, deposits between 2 lakh Rupees and 80 lakh Rupees were made in about 1.09 crore accounts with an average deposit size of Rs. 5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs. 3.31 crores.
 

2. Under the scheme for profit-linked income tax deduction for promotion of affordable housing, carpet area instead of built up area of 30 and 60 Sq.mtr. will be counted.
 

3. The 30 Sq.mtr. limit will apply only in case of municipal limits of 4metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 Sq.mtr. will apply
 

4. For builders for whom constructed buildings are stock-in-trade, tax on notional rental income will only apply after one year of the end of the year in which completion certificate is received
 

5. Reduction in the holding period for computing long term capital gains from transfer of immovable property from 3 years to 2 years. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property
 

6. For Joint Development Agreement signed for development of property, the liability to pay capital gain tax will arise in the year the project is completed
 

7. Exemption from capital gain tax for persons holding land on 2.6.2014, the date on which the State of Andhra Pradesh was reorganised, and whose land is being pooled for creation of capital city of Andhra Pradesh under the Government scheme
 

MEASURES FOR STIMULATING GROWTH
 

1. Concessional withholding rate of 5% charged on interest earned by foreign entities in external commercial borrowings or in bonds and Government securities is extended to 30.6.2020. This benefit is also extended to Rupee Denominated (Masala) Bonds
 

2. For the purpose of carry forward of losses in respect of start-ups, the condition of continuous holding of 51% of voting rights has been relaxed subject to the condition that the holding of the original promoter/promoters continues. Also the profit (linked deduction) exemption available to the start-ups for 3 years out of 5 years is changed to 3 years out of 7 years
 

3. MAT credit is allowed to be carried forward up to a period of 15 years instead of 10 years at present
 

4. In order to make MSME companies more viable, income tax for companies with annual turnover upto Rs. 50 crore is reduced to 25%
 

5. Allowable provision for Non-Performing Asset of Banks increased from7.5% to 8.5%. Interest taxable on actual receipt instead of accrual basis in respect of NPA accounts of all non-scheduled cooperative banks also to be treated at par with scheduled banks
 

6. Basic customs duty on LNG reduced from 5% to 2.5%

PROMOTING DIGITAL ECONOMY
 

1. Under scheme of presumptive income for small and medium tax payers whose turnover is upto 2 crores, the present, 8% of their turnover which is counted as presumptive income is reduced to 6% in respect of turnover which is by non-cash means
 

2. No transaction above Rs. 3 lakh would be permitted in cash subject to certain exceptions
 

3. Miniaturised POS card reader for m-POS (other than mobile phones or tablet computers), micro ATM standards version 1.5.1, Finger Print Readers / Scanners and Iris Scanners and on their parts and components for manufacture of such devices to be exempt from BCD, Excise/CV duty and SAD
 

TRANSPARENCY IN ELECTORAL FUNDING
 

1. Need to cleanse the system of political funding in India
 

2. Maximum amount of cash donation, a political party can receive, will be Rs. 2000/- from one person.
 

3. Political parties will be entitled to receive donations by cheque or digital mode from their donors.
 

4. Amendment to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard.
 

5. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act
 

6. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions

EASE OF DOING BUSINESS
 

1. Scope of domestic transfer pricing restricted to only if one of the entities involved in related party transaction enjoys specified profit-linked deduction
 

2. Threshold limit for audit of business entities who opt for presumptive income scheme increased from Rs. 1 crore to Rs. 2 crores. Similarly, the threshold for maintenance of books for individuals and HUF increased from turnover of 10 lakhs to 25 lakhs or income from 1.2 lakhs to 2.5 lakhs
 

3. Foreign Portfolio Investor (FPI) Category I& II exempted from indirect transfer provision. Indirect transfer provision shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India
 

4. Commission payable to individual insurance agents exempt from the requirement of TDS subject to their filing a self-declaration that their income is below taxable limit
 

5. Under scheme for presumptive taxation for professionals with receipt upto Rs. 50 lakhs p.a. advance tax can be paid in one instalment instead of four
 

6. Time period for revising a tax return is being reduced to 12 months from completion of financial year, at par with the time period for filing of return. Also the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter

PERSONAL INCOME-TAX
 

1. Existing rate of taxation for individual assesses between income of Rs.2.5 lakhs to 5 lakhs reduced to 5% from the present rate of 10% .
 

2. Surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs.50 lakhs and Rs. 1 crore
 

3. Simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income upto Rs. 5 lakhs other than business income
 

4. Appeal to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of 2.5 lakhs to 5 lakhs.
 

GOODS AND SERVICES TAX
 

1. The GST Council has finalised its recommendations on almost all the issues based on consensus on the basis of 9 meetings held
 

2. Preparation of IT system for GST is also on schedule.
 

3. The extensive reach-out efforts to trade and industry for GST will start from 1st April, 2017 to make them aware of the new taxation system.
 

RAPID (Revenue, Accountability, Probity, Information and Digitisation)
 

1. Maximise efforts for e-assessment in the coming year
  

2. Enforcing greater accountability of officers of Tax Department for specific act of commission and omission.

Annex III to Part B of Budget Speech

DIRECT TAXES

1. Additional Revenue Mobilisation (ARM) and Anti-abuse Measures

1.1 It is proposed to extend the provisions of section 115BBDA of the Income-tax Act which provides for levy of tax at the rate of ten per cent. on dividend income exceeding `10 lakh, to all resident persons except domestic companies or trust or institution or fund registered under section 12AA or referred to in section 10(23C). Presently, these provisions are applicable only to the individuals, Hindu undivided family (HUF) and firms.
 

1.2 It is proposed to widen the scope of section 56 of the Income-tax Act to provide that any money, immovable property or specified movable property received without consideration or with inadequate consideration, by any person, subject to certain exemption and exceptions, shall be taxable if its value exceeds rupees fifty thousand.
 

1.3 It is proposed to provide that in case of transfer of unquoted equity shares, where the fair market value, determined in the prescribed manner is less than the consideration received, such fair market value shall be the deemed value of consideration for the purpose of computation of capital gains.
 

1.4 It is proposed to restrict the exemption from long term capital gains in case of transfer of listed shares by providing that the exemption, subject to notification of certain exceptions, shall be available if security transaction tax has been paid at the time of acquisition of such shares where they have been acquired after 1st October, 2004.
 

1.5 It is proposed to introduce a new provision in the Income-tax Act to provide for tax deduction at source at the rate of five per cent. by an individual or HUF, other than those whose books of account are required to be audited, while making payment of rent of an amount exceeding `50,000 per month. It is also proposed to provide that such tax shall be deducted and deposited only once in a financial year through a challan-cum-statement. Further, the deductor shall not be required to obtain TAN or file any separate TDS return for this purpose.
 

1.6 In order to align the transfer pricing provisions with the OECD transfer pricing guidelines and international best practices, it is proposed to insert a new section to provide that the assesse shall make secondary adjustment where the primary adjustment to the transfer price has been made in certain cases. The provision shall apply if the primary adjustment exceeds one crore rupees and the excess money attributable to the adjustment is not brought to India within the prescribed time.
 

1.7 In order to address the issue of thin capitalisation, it is proposed to provide that the interest paid by an Indian company or permanent establishment of a foreign company, in excess of thirty percent of earnings before interest, taxes, depreciation and amortisation (EBITDA), or interest paid to its associated enterprise, whichever is less, shall not be allowed as deduction in computing its taxable profit. It is also proposed to allow carry forward and set off of the interest so disallowed for eight assessment years.
 

1.8 In order to address the existing anomaly of interest deduction in respect of let out property vis-à-vis self-occupied property, it is proposed to restrict set off of loss from house property against income under any other head during the current year up to Rs two lakhs. The loss not so set off would be allowed to be carried forward for set off against house property income for eight assessment years.
 

1.9 It is proposed that donation by an entity registered under section 12A or approved under section 10(23C), to other entity, registered under section 12A, with the direction that such donation shall form part of the corpus, shall not be treated as application of income for charitable purposes.
 

2. Rationalisation Measures
 

2.1 It is proposed to provide that in case of foreign company, sale of leftover stock of crude oil in case of strategic petroleum reserve after the expiry of agreement or the arrangement, subject to fulfilment of certain conditions, shall not be liable to tax in India.
 

2.2 It is proposed to provide a concessional tax rate of ten per cent. in case of income arising from sale of carbon credit.
 

2.3 It is proposed to exempt government, foreign missions and state PSUs engaged in business of transportation of passengers from Tax Collection at Source (TCS) provisions relating to purchase of vehicles.
 

2.4 It is proposed to provide that the fair market value of the asset which has been taken into account for the purpose of computation of accreted income on which tax has been paid in accordance with provisions of Chapter XII-EB of the Income-tax Act, shall be taken as the cost of acquisition of that asset.
 

2.5 It is proposed to modify the conditions of special taxation regime for off shore funds under section 9A of the Income-tax Act so as to provide that the maintenance of minimum fund size would not be necessary in the year in which the fund is being wound up.
 

2.6 In line with exemption available to the Prime Minister’s Relief Fund and certain other funds, it is proposed to provide that the income of the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund shall be exempt from tax.
 

2.7 It is proposed to do away with the provisions enabling the Assessing Officer not to process the return and thus withhold the refund in cases where the return is selected for scrutiny till the completion of assessment. It is however proposed that in cases where grant of refund is likely to adversely affect the interest of revenue, it can be withheld with the approval of the higher authority after recording the reasons in writing.
 

2.8 It is proposed to provide that certain entities, like, Investor Protection Funds, Core Settlement Guarantee Fund, Tea/Coffee/Rubber Boards, MPEDA, or APDEA; enjoying exemption from levy of income-tax under section 10 of the Income-tax Act shall be required to furnish return of their income.
 

2.9 In order to ensure timely filing of returns of income, it is proposed to levy a fee in case of delay in filing the return.
 

2.10 It is proposed to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate, he shall be liable to a penalty of ten thousand rupees for each such default.
 

2.11 It is proposed to provide that where the amount of foreign tax credit (FTC) allowed against the tax paid under sections 115JB or 115JC of the Income-tax Act exceeds the amount of FTC admissible against the tax payable by the assesse on his income in accordance with the other provisions of the Act, such excess credit shall be ignored while computing the amount of credit under section 115JAA or section 115JD.
 

2.12 In a case where the foreign tax credit has not been granted to the assesse on the ground that payment of such tax is in dispute, it is proposed to provide, subject to certain conditions, additional time to the Assessing Officer for allowing the said tax credit after such dispute is settled.
 

2.13 It is proposed to provide that no person shall receive payment or aggregate of payments of an amount of three lakh rupees or more from a person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. Such restriction shall not apply to Government, banks or such other persons or class of persons or receipts notified by the Central Government. It is also proposed to provide for a penalty in case of contravention of this provision.
 

2.14 It is proposed to clarify that provisions relating to tax deduction at source shall not apply to exempt compensation received under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
 

2.15 It is proposed to lower the rate of deduction of tax in case of payments made to a person engaged only in the business of operation of call centre.
 

2.16 It is proposed to provide tax neutrality in case of conversion of preference shares of a company into equity shares of that company.
 

2.17 It is proposed to provide that the cost of acquisition of share of an Indian company in the hands of demerged foreign company in a tax neutral demerger, shall be taken as the cost of acquisition in the hands of resulting foreign company.
 

2.18 It is proposed to provide for grant of interest in case of refund of excess payment of TDS.
 

2.19 It is proposed to merge the Authority for Advance Ruling (AAR) for Income-Tax with AAR for Customs, Central Excise and Service Tax; and create common AAR. It is also proposed to amend the qualifications for appointment of Chairman and Members.
 

2.20 It is proposed to make the orders passed by the authority under section 10(23C) of the Income-tax Act, appealable before the Tribunal.
 

2.21 It is proposed to authorise the Central Board of Direct Taxes (CBDT), to issue directions or instructions in order to remove hardships faced by the taxpayers in connection with imposition of penalty relating to tax deduction or collection at source.
 

2.22 It is proposed to amend the provisions relating to computation of book profit for the purpose of levy of minimum alternate tax (MAT) so as to align it with the Indian Accounting Standards (Ind-AS).
 

2.23 It is proposed to clarify that the amendment made by the Finance Act, 2016 in Section 112 of the Income-tax Act providing for concessional rate of tax in respect of transfer of share of a private limited company shall be applicable retrospectively from assessment year 2013-14.
 

2.24 It is proposed to amend section 10AA of the Income-tax Act so as to provide that the amount of deduction referred therein shall be allowed from the total income computed in accordance with the provisions of the Act before giving effect to the provisions of the said section and that the said deduction shall not exceed the total income.
 

2.25 It is proposed to clarify that in the case of furnishing of information relating to payment to a non-resident of any sum whether or not chargeable to tax, the “person responsible for paying” shall be the payer himself, or, if the payer is a company, the company itself including the principal officer thereof.
 

2.26 It is proposed to provide that where any ‘term’ used in an agreement entered into under sub-section (1) of Section 90 and 90A of the Income-tax Act, is defined under the said agreement, the said term shall be assigned the meaning as provided in the said agreement and where the term is not defined in the agreement, but is defined in the Act, it shall be assigned the meaning as defined in the Act or any technical explanation issued by the Central Government.
 

2.27 It is proposed to provide that where the capital asset referred to in section 35AD of the Income-tax Act is used for an ineligible business and the benefit of said section is withdrawn, the actual cost to the assessee in respect of such asset shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used for the purposes of business since the date of its acquisition.
 

2.28 It is proposed to provide that a trust or an institution, which has been granted registration, and, has adopted or undertaken modification of the objects subsequently which do not conform to the conditions of registration, shall be required to obtain fresh registration.
 

2.29 In order to strengthen the TCS regime, it is proposed to provide that the collectee shall furnish his PAN to the collector, failing which, tax shall be collected at a higher rate.
 

2.30 In order to provide parity between an individual who is an employee and an individual who is self-employed, it is proposed to provide that the self-employed individual shall be eligible for deduction upto twenty per cent of his gross total income in respect of contribution made to National Pension System Trust.
 

2.31 It is proposed to provide that the authorised officer can, subject to conditions as specified, provisionally attach a property for a period of six months in order to protect the interest of revenue. It is also proposed to provide that he can make a reference to the valuation officer for the purpose of estimation of FMV of a property.
 

2.32 It is proposed to authorise the Joint Director, Deputy Director or the Assistant Director of Income-tax to call for information for the purpose of any enquiry without seeking approval of the higher authority.
 

2.33 It is proposed to expand the provision of section 133A of the Income-tax Act so as to include any place at which activity for charitable purpose is carried on.
 

2.34 It is proposed to authorise the CBDT to frame a scheme for centralised issuance of notice calling for information and documents for the purpose of verification of information in its possession, processing of such documents and making the outcome thereof available to the Assessing Officer.
 

2.35 In order to remove hardship, it is proposed to omit section 197(C) of the Finance Act, 2016 which provided for assessment of undisclosed income relating to any period prior to commencement of the Income Declaration Scheme, 2016. However, in search cases, it is proposed to provide that in case tangible evidence is found during the search, the Assessing Officer can assess income upto ten years preceding the year in which search took place.
 

2.36 In order to strengthen the TDS provisions, it is proposed to provide that a disallowance shall be made in respect of an expenditure incurred against income from other sources unless tax has been deducted thereon at applicable rates.
 

2.37 In order to maintain the confidentiality of the source of the information and the identity of the informer, it is proposed to clarify that the reasons to believe as recorded by the income-tax authority authorising a search operation or a requisition of books of account or asset, shall not be disclosed to any person, authority or appellate tribunal.
 

2.38 It is proposed to provide that in case of unit in the consolidated plan of a mutual fund scheme received in lieu of unit in the consolidating plan, the actual cost and the period of holding shall be the cost and the period of holding of the unit in the consolidating plan.
 

2.39 It is proposed to amend the provision of clause 4 of section 10 of the Income-tax Act, 1961 so as to make the correct reference to Foreign Exchange Management Act (FEMA).
 

2.40 It is proposed to provide a sun set clause in respect of deduction allowed to certain persons in respect of investment in listed equity shares and listed units of an equity oriented fund.
 

2.41 It is proposed to exempt capital gains arising out of transfer of a rupee denominated bond by a non-resident to a non-resident.

INDIRECT TAXES

I. PROPOSALS INVOLVING CHANGE IN DUTY / TAX RATES:
 

CUSTOMS

		Commodity	Rate of Duty
			From	To
I.	Incentivizing domestic value addition, ‘Make in India’
A.	Reduction in Customs duty on inputs and raw materials to reduce costs
		Mineral fuels and Mineral oils
	1.	Liquefied Natural Gas	BCD – 5%	BCD – 2.5%
		Chemicals & Petrochemicals
	2.	Medium Quality Terephthalic Acid (MTA) & Qualified Terephthalic Acid (QTA)	BCD – 7.5%	BCD – 5%
		Metals
	3.	Nickel	BCD – 2.5%	BCD – Nil
		Finished Leather
	4.	Vegetable tanning extracts, namely, Wattle extract and Myrobalan fruit extract	BCD – 7.5%	BCD – 2.5%
		Capital Goods
	5.	Ball screws, linear motion guides and CNC systems for use in the manufacture of CNC machine tools, subject to actual user condition	Ball screws and liner motion guides BCD – 7.5% CNC systems BCD – 10%	BCD – 2.5%
		Renewable Energy
	6.	All items of machinery required for fuel cell based power generating systems to be set up in the country or for demonstration purposes, subject to certain specified conditions	BCD – 10% /7.5% CVD – 12.5%	BCD – 5%   CVD – 6%
	7.	All items of machinery required for balance of systems operating on biogas/ bio-methane/ by-product hydrogen, subject to certain specified conditions	BCD – 10% /7.5% CVD – 12.5%	BCD – 5% CVD – 6%
		Miscellaneous
	8.	All parts for use in the manufacture of LED lights or fixtures, including LED lamps, subject to actual user condition	Applicable BCD, CVD	BCD – 5% CVD – 6%
	9.	All inputs for use in the manufacture of LED Driver and MCPCB for LED lights or fixtures, including LED lamps, subject to actual user condition	Applicable BCD	5%
B.	Changes in Customs and Excise / CV duty to address the problem of duty inversions in certain sectors
		Chemicals & Petrochemicals
	10.	o-Xylene	BCD – 2.5%	BCD – Nil
	11.	2-Ethyl Anthraquinone [29146990] for use in manufacture of hydrogen peroxide, subject to actual user condition	BCD – 7.5%	BCD – 2.5%
	12.	Vinyl Polyethylene Glycol (VPEG) for use in manufacture of Poly Carboxylate Ether, subject to actual user condition	BCD – 10%	BCD – 7.5%
		Textiles
	13.	Nylon mono filament yarn for use in monofilament long line system for Tuna fishing, subject to certain specified conditions	BCD – 7.5%	BCD – 5%
		Metals
	14.	Co-polymer coated MS tapes / stainless steel tapes for manufacture of specified telecommunication grade optical fibres or optical fibre cables, subject to actual user condition	BCD – Nil	BCD – 10%
	15.	MgO coated cold rolled steel coils [7225 19 90] for use in the manufacture of CRGO steel, subject to actual user condition	BCD – 10%	BCD – 5%
	16.	Hot Rolled Coils [7208] for use in the manufacture of welded tubes and pipes falling under heading 7305 or 7306, subject to actual user condition	BCD – 12.5%	BCD – 10%
		Automobiles
	17.	Clay 2 Powder (Alumax) for use in ceramic substrate for catalytic convertors, subject to actual user conditon	BCD – 7.5%	BCD – 5%
		Renewable Energy
	18.	Solar tempered glass for use in the manufacture of solar cells/panels/modules	BCD – 5%	BCD – Nil
	19.	Parts/raw materials for use in the manufacture of solar tempered glass for use in solar photovoltaic cells/modules, solar power generating equipment or systems, flat plate solar collector, solar photovoltaic module and panel for water pumping and other applications, subject to actual user condition	CVD – 12.5%	CVD – 6%
	20.	Resin and catalyst for use in the manufacture of cast components for Wind Operated Energy Generators [WOEG], subject to actual user condition	BCD – 7.5% CVD – 12.5% SAD – 4%	BCD – 5% CVD – Nil SAD – Nil
		Miscellaneous
	21.	Membrane Sheet and Tricot / Spacer for use in the manufacture of RO membrane element for household type filters, subject to actual user condition	CVD – 12.5%	CVD – 6%
C.	Changes in Customs duty to provide adequate protection to domestic industry
		Food Processing
	22.	Cashew nut, roasted, salted or roasted and salted	BCD – 30%	BCD – 45%
		Electronics / Hardware
	23.	Populated Printed Circuit Boards (PCBs) for use in the manufacture of mobile phones, subject to actual user condition	SAD – Nil	SAD – 2%
		Miscellaneous
	24.	RO membrane element for household type filters	BCD – 7.5%	BCD – 10%
D.	Promotion of cashless transactions and promote domestic manufacturing of devices used therefor
	25.	a)   Miniaturized POS card reader for m-POS (not including mobile phones or tablet computer), b)  Micro ATM as per standards version 1.5.1, c)   Finger Print Reader / Scanner, and d)  Iris Scanner	Applicable BCD, CVD SAD	BCD – Nil CVD – Nil SAD – Nil
	26.	Parts and components for manufacture of: a)   miniaturized POS card reader for m-POS (not including mobile phones or tablet computer), b)  micro ATM as per standards version 1.5.1, c)   Finger Print Reader / Scanner, and d)  Iris Scanner	Applicable BCD, CVD SAD	BCD – Nil CVD – Nil SAD – Nil
II.	Imposition of export duty to conserve domestic resources
	27.	Other aluminium ores, including laterite	Nil	15%
III.	Improving ease of doing business and Export Promotion
	28.	De-minimis customs duties exemption limit for goods imported through parcels, packets and letters	Duty payable not exceeding Rs.100 per consignment	CIF value not exceeding Rs.1000 per consignment
	29.	Limit of duty free import of eligible items for manufacture of leather footwear or synthetic footwear or other leather products for use in the manufacture of said goods for export	3% of FOB value of said goods exported during the preceding financial year	5% of FOB value of said goods exported during the preceding financial year
IV.	Anti-avoidance measure
	30.	Silver medallion, silver coins, having silver content not below 99.9%, semi-manufactured form of silver and articles of silver	CVD – Nil	CVD – 12.5%

Note:

(a) “Basic Customs Duty” means the customs duty levied under the Customs Act, 1962.
(b) “CVD” means the Additional Duty of Customs levied under sub-section (1) of section 3 of the Customs Tariff Act, 1975.
(c) “SAD” means the Special Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975.
(d) “Export duty” means duty of Customs leviable on goods specified in the Second Schedule to the Customs Tariff Act, 1975.
 

EXCISE

		Commodity	Rate of Duty
			From	To
I.	Public Health
A.	Tobacco and Tobacco Products
	1.	Cigar and cheroots	12.5% or Rs.3755 per thousand, whichever is higher	12.5% or Rs.4006 per thousand, whichever is higher
	2.	Cigarillos	12.5% or Rs.3755 per thousand, whichever is higher	12.5% or Rs.4006 per thousand, whichever is higher
	3.	Cigarettes of tobacco substitutes	Rs.3755 per thousand	Rs.4006 per thousand
	4.	Cigarillos of tobacco substitutes	12.5% or Rs.3755 per thousand, whichever is higher	12.5% or Rs.4006 per thousand, whichever is higher
	5.	Others of tobacco substitutes	12.5% or Rs.3755 per thousand, whichever is higher	12.5% or Rs.4006 per thousand, whichever is higher
	6.	Paper rolled biris – handmade	Rs.21 per thousand	Rs.28 per thousand
	7.	Paper rolled biris – machine made	Rs.21 per thousand	Rs.78 per thousand
II.	Incentivizing domestic value addition, ‘Make in India’
A.	Renewable Energy
	8.	All items of machinery required for balance of systems operating on biogas/ bio-methane/ by-product hydrogen	12.5%	6%
B.	Miscellaneous
	9.	Membrane Sheet and Tricot/Spacer for use in the manufacture of RO membrane element for household type filters, subject to actual user condition	12.5%	6%
	10.	All parts for use in the manufacture of LED lights or fixtures, including LED lamps, subject to actual user condition	Applicable duty	6%
	11.	a.    Waste and scrap of precious metals or metals clad with precious metals arising in course of manufacture of goods failing in Chapter 71 b.   Strips, wires, sheets, plates and foils of silver c.    Articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire d.   Silver coin of purity 99.9% and above, bearing a brand name when manufactured from silver on which appropriate duty of customs or excise has been paid	Nil	Nil, subject to the condition that no credit of duty paid on inputs or input services or capital goods has been availed by manufacturer of such goods
III.	Promotion of cashless transactions and promote domestic manufacturing of devices used therefor
	12.	a)        Miniaturized POS card reader for m-POS (not including mobile phones or tablet computers), b)       micro ATM as per standards version 1.5.1, c)        Finger Print Reader / Scanner, and d)       Iris Scanner	Applicable duty	Nil
	13.	Parts and components for manufacture of: a)        Miniaturized POS card reader for m-POS (not including mobile phones or tablet computers), b)       Micro ATM as per standards version 1.5.1, c)        Finger Print Reader / Scanner, and d)       Iris Scanner	Applicable duty	Nil

Note: “Basic Excise Duty” means the excise duty set forth in the First Schedule to the Central Excise Tariff Act, 1985.

CHANGES IN RATE OF ADDITIONAL DUTY LEVIED UNDER SECTION 85 OF THE FINANCE ACT, 2005

		Commodity	Rate of duty
			From	To
A.	Pan Masala
	1.	Pan Masala	6%	9%
B.	Tobacco and Tobacco Products
	2.	Unmanufactured tobacco	4.2%	8.3%
	3.	Non-filter Cigarettes of length not exceeding 65mm	Rs.215 per thousand	Rs.311 per thousand
	4.	Non-filter Cigarettes of length exceeding 65mm but not exceeding 70mm	Rs.370 per thousand	Rs.541 per thousand
	5.	Filter Cigarettes of length not exceeding 65mm	Rs.215 per thousand	Rs.311 per thousand
	6.	Filter Cigarettes of length exceeding 65mm but not exceeding 70mm	Rs.260 per thousand	Rs.386 per thousand
	7.	Filter Cigarettes of length exceeding 70mm but not exceeding 75mm	Rs.370 per thousand	Rs.541 per thousand
	8.	Other Cigarettes	Rs.560 per thousand	Rs.811 per thousand
	9.	Chewing tobacco (including filter khaini)	6%	12%
	10.	Jarda scented tobacco	6%	12%
	11.	Pan Masala containing Tobacco (Gutkha)	6%	12%

SERVICE TAX

	S. No.	Changes	Existing	Proposed
A.	Relief to the armed forces of the Union from service tax
	1.	Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax from 10th September, 2004 (the date when the services of life insurance became taxable).	14%	Nil
B.	Dispute resolution, certainty of taxation  and avoidance of  litigation
	1.	Notification No. 41/2016-ST dated 22.09.2016, which has exempted from service tax, one time upfront amount (called as premium, salami, cost, price, development charges or by whatever name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/undertakings to industrial units, is proposed to be made effective from 1.6.2007 (the date when the services of renting of immovable property became taxable).	14%	Nil
	2.	Rule 2A of the Service Tax (Determination of Value) Rules, 2006 is proposed to be amended from 01.07.2010 so as to make it clear that value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land.	4.2%	4.2%
C.	Promotion of Regional Connectivity  Scheme of Ministry of Civil Aviation
	1.	Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the airline operator for providing the services of transport of passengers by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) airport as notified by Ministry of Civil Aviation.	14%	Nil
D.	Rationalization Measures
	1.	The exemption in respect of services provided by Indian Institutes of Management (IIMs) by way of two year full time residential Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIMs, is being extended to include non-residential programmes.	14%	Nil
	2.	Explanation-I (e) to Rule 6 of CENVAT Credit Rules, 2004 is being amended so as to exclude banks and financial institutions including non-banking financial companies engaged in providing services by way of extending deposits, loans or advances from its ambit.
	3.	The Negative List entry in respect  of “services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption”, in the Finance Act, 1994, is proposed to be omitted and instead placed in the exemption notification. Consequently, clause (40) of section 65B of the Finance Act, which defines ‘process amounting to manufacture’ is also proposed to be omitted and instead placed in the exemption notification.	Nil	Nil

AMENDMENT IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975

S. No.	Amendment
A.	Amendments not affecting rates of duty
1.	The following amendments are being carried out to: (i)         Delete tariff items 1302 32 10 and 1302 32 20 and entries relating thereto and create new tariff items 1106 10 10 and 1106 10 90, in relation to Guar meal and its products so as to harmonize the Customs Tariff with HS Nomenclature. (ii)        Create new tariff item 1511 90 30 for Refined bleached deodorized palm stearin, so as to harmonize Customs Tariff in accordance with WCO classification decision. (iii)      Substitute tariff items 3823 11 11 to 3823 11 90 and entries relating thereto with tariff item 3823 11 00. (iv)      Substitute tariff items 3904 10 10 to 3904 22 90 with tariff items 3904 10 10 to 3904 22 00 in relation to the PVC Resin.
2.	Chapter Note (4) of Chapter 98 is being amended so as to remove the non-applicability of headings 9803 and 9804 to goods imported through courier service. Also, heading 9804 is being amended so as to extend the classification of personal imports by courier, sea, or land under this heading.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.