An overview of

Finance (No. 2) Bill, 2019 –

Direct Taxes
[presented on 05-07-2019]

Presented by: CA. Sanjay K. Agarwal

Email: agarwal.s.ca@gmail.com
 Proposed Amendments under Direct Taxes
in the Finance Bill, 2018

A. Rates of Income-tax
B. Widening and deepening of tax base
C. Measures for promoting cash less economy
D. Tax incentives
E. Facilitating resolution of distressed companies
F. Improving effectiveness of tax administration
G. Strengthening Anti-abuse Measures
H. Removing difficulties faced by taxpayers
I. Rationalisation of provisions
2

Note: The applicable date being 01.04.2019, 01.04.2018 and 01.04.2017 denotes the
amendment is applicable w.e.f. A.Y. 2019-20, AY 2018-19 and AY 2017-18 respectively.
A. Rates of Income-tax
For A.Y. 2020-21

3
Brief Impact:
A. Individual, Hindu undivided family, association of persons,
body of individuals, artificial juridical person.
I. The rate of income tax is same.Tax slab and rates remain unchanged.

Total income New tax rate* (AY Existing tax rate*

2020-21) (AY 19-20)
Up to INR 250,000** Nil Nil
INR 250,001 to INR 500,000 5% 5%
INR 500,001 to INR 1,000,000 20% 20%
Above INR 1,000,000 30% 30%

* Health & Education cess and surcharge as applicable.

** Basic exemption limit for resident individuals above 60 years but less
than 80 years of age (i.e. Senior Citizen) at any time during the FY is
INR 300,000 and for resident individuals 80 years of age or more (i.e.
Super Senior Citizen) is INR 500,000 (unchanged).
4
 Contd….
II. The amount of income-tax computed in accordance with the preceding
provisions shall be increased by a surcharge at the rate of: (as amended by
Finance (No. 2) Bill, 2019)
Particulars Surcharge
Taxable income < INR 50 lacs -
INR 50 lacs < taxable income < INR 1 crore 10%*
INR 1 crore < taxable income < INR 2 crore 15%*
INR 2 crore < taxable income < INR 5 crore 25%*
Taxable income > INR 5 crore 37%*

*[Subject to Marginal Relief]

For A.Y. 2019-20, Surcharge @ 10% is levied in cases where total income of an
individual/HUF/AOP/BOI/Artificial Judicial Person exceeds Rs.50 lakh but do not
exceed Rs. 1.00 crores. Surcharge of 15% would be applicable where the total income of an
individual/HUF/AOP/BOI exceeds Rs 1.00 Crore. [Subject to Marginal Relief]
5
 Contd….

III. Health and Education cess is @ 4% of income tax plus

surcharge.

Rebate u/s 87A amended for A.Y. 2020-21 by Finance Act, 2019:
1. Maximum Rebate amended u/s 87A - Rs. 12,500 (for AY 2019-
20 Rs. 2,500).
2. If total Income does not exceed Rs. 5,00,000 (for AY 2019-20
Rs.3,50,000).

Rebate u/s 87A is available only to Individual assessees, being resident in

India.

6
B. Co-operative Societies (for A.Y. 2020-21)
I. The rates of income-tax will continue to be the same as those specified
for Assessment Year 2019-20.
Total income Tax rate*
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

II. Surcharge of 12% would continue to be applicable where the total

income of co-operative society exceeds Rs 1.00 Crore. [Subject to
Marginal Relief]

II. Health and Education cess is @ 4% of income tax plus

surcharge.

7
C. Partnership Firms (for A.Y. 2020-21)

The rates of income-tax will continue to be the same as those specified

for Assessment Year 2019-20 i.e. a partnership firm (including
LLP) is taxable at 30%.

Add:

I. Surcharge of 12% would continue to be applicable where

the total income of firm exceeds Rs 1.00 Crore. [Subject to
Marginal Relief]

II. Health and Education cess is @ 4% of income tax plus

surcharge.
8
D. Local Authority (for A.Y. 2020-21)

The rates of income-tax will continue to be the same as those specified

for Assessment year 2019-20 i.e. a local authority is taxable at
30%

Add:

I. Surcharge of 12% would continue to be applicable where the total

income of Local Authority exceeds Rs. 1.00 Crore [Subject to
Marginal Relief]

II. Health and Education cess is @ 4% of income tax plus

surcharge.
9
E. Domestic Company (for A.Y. 2020-21)
I. Paragraph E of Part III to the First Schedule: In the case of domestic
companies the rate of income-tax shall be @ 25% (plus applicable surcharge and
health & education cess) of the total income where the total turnover or gross
receipts of previous year 2017-2018 does not exceed Rs. 400.00 crore and
in all other cases the rate of income-tax shall be 30% (plus applicable surcharge and
health & education cess) of the total income (Unchanged).

A. For a domestic company having total turnover/ gross receipts in the

previous year (2017-18) not exceeding INR 400 Crores:
Taxable INR 1 crore < Taxable
Particulars income < INR taxable income < income > INR
1 crore INR 10 crore 10 crore
Corporate tax 25% 25% 25%
Surcharge - 7% 12%
Corporate tax + surcharge 25% 26.75% 28%
Health & Education cess 4% 4% 4%
Effective tax rate 26% 27.82% 29.12%
10
 B. For a domestic company having total turnover/ gross receipts in
previous year 2017-18 exceeding INR 400 Crores:

Taxable INR 1 crore < Taxable

Particulars income < taxable income < income >
INR 1 crore INR 10 crore INR 10 crore
Corporate tax 30% 30% 30%
Surcharge - 7% 12%
Corporate tax + surcharge 30% 32.10% 33.60%
Health & Education cess 4% 4% 4%
Effective tax rate 31.20% 33.38% 34.94%

For A.Y. 2019-20, In the case of domestic companies the rate of income-tax shall be proposed @
25% (plus applicable surcharge and health & education cess) of the total income where the total
turnover or gross receipts of previous year 2016-2017 does not exceed Rs. 250.00 crore
and in all other cases the rate of income-tax shall be 30% (plus applicable surcharge and health &
education cess) of the total income 11
F. Foreign Company (for A.Y. 2020-21)
I. The rates of income-tax will continue to be the same as those specified
for assessment year 2019-20 i.e. a foreign company is taxable at
40% [ Health & Education cess and surcharge as applicable].

Taxable Taxable
INR 10 million <
income < income >
Particulars taxable income <
INR 10 INR 100
INR 100 million
million million

Corporate tax 40% 40% 40%

Surcharge - 2% 5%
Corporate tax + surcharge 40% 40.80% 42.00%
Health & Education cess 4% 4% 4%
Effective tax rate 41.60% 42.43% 43.68%

12
B. WIDENING AND DEEPENING
OF TAX BASE

13
B. Widening and deepening of Tax base

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
TDS on payment by Individual/HUF
1. 194M 46 01-09-2019
to contractors and professionals
TDS at the time of purchase of 01-09-2019
2. 194-IA 45
immovable property
Deemed accrual of gift made to a
3. 9 4 01-04-2020
person outside India

Mandatory furnishing of return of

4. 139 39 01-04-2020
income by certain persons

14
B. Widening and deepening of Tax base

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Inter-changeability of PAN &
5. Aadhaar and mandatory quoting in 139A, 272B 40 & 64 01.09.2019
prescribed transactions
Consequence of not linking PAN 01.09.2019
6. 139AA 41
with Aadhaar

Widening the scope of Statement of 285BA,

7. 63 & 66 01.09.2019
Financial Transactions (SFT) 271FAA

15
1. TDS on payment by Individual/HUF to
contractors and professionals [Clause 46]

Insertion of new Section 194M w.e.f. 1st day of September, 2019

194M. (1) Any person, being an individual or a Hindu undivided family (other
than those who are required to deduct income-tax as per the provisions of section
194C or section 194J) responsible for paying any sum to any resident for carrying
out any work (including supply of labour for carrying out 20 any work) in
pursuance of a contract or by way of fees for professional services during the
financial year, shall, at the time of credit of such sum or at the time of payment of
such sum in cash or by issue of a cheque or draft or by any other mode, whichever
is earlier, deduct an amount equal to five per cent. of such sum as income -tax
thereon:

16
 Contd….

Provided that no such deduction under this section shall be made if such sum
or, as the case may be, aggregate of such sums, credited or paid to a resident
during a financial year does not exceed fifty lakh rupees.
(2) The provisions of section 203A shall not apply to a person required to deduct
tax in accordance with the provisions of this section.
Explanation.––For the purposes of this section,––
(a) “contract” shall have the meaning assigned to it in clause (iii) of the
Explanation to section 194C;
(b) “professional services” shall have the meaning assigned to it in clause (a) of the
Explanation to section 194J;
(c) “work” shall have the meaning assigned to it in clause (iv) of the Explanation
to section 194C. 17
 Contd….

Brief Impact:
At present there is no liability on an individual or HUF to deduct tax at
source on any payment made to a resident contractor or professional when it
is for personal use.

Further, if the individual or HUF is carrying on business or profession which

is not subjected to audit, there is no obligation to deduct tax at source on
such payment to a resident, even if the payment is for the purpose of business
or profession.

Due to this exemption, substantial amount is escaping the levy of

TDS, leaving a loophole for possible tax evasion.

18
 Contd….

Consequently, it is proposed to insert a new section 194M in the

Act to provide for levy of TDS at the rate of five per cent. on the
sum, or the aggregate of sums, paid or credited in a year on
account of contractual work or professional fees by an individual
or a HUF.

However, in order to reduce the compliance burden, it is proposed that such

individuals or HUFs shall be able to deposit the tax deducted using their
PAN and shall not be required to obtain TAN.

This amendment will take effect from 1st September, 2019.

19
 2. TDS at the time of purchase of immovable
property [Clause 45]
Amendment of Section 194-IA w.e.f. 1st day of September, 2019
In section 194-IA of the Income-tax Act, in the Explanation, after clause (a), the
following clause shall be inserted––
‘(aa) “consideration for immovable property” shall include all charges of the nature of club,
membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or
any other charges of similar nature, which are incidental to transfer of the immovable
property;’.
Brief Impact:
The term ‘consideration for immovable property’ is presently not defined for the
purposes of this section. Accordingly, it is proposed to amend the
Explanation to said section and provide that the term “consideration
for immovable property” shall include all charges of the nature of club
membership fee, car parking fee, electricity and water facility fees,
maintenance fee, advance fee or any other charges of similar nature,
which are incidental to transfer of the immovable property. 20
3. Deemed accrual of gift made to a person
outside India [Clause 4]
Amendment of Section 9 w.e.f. 1st day of April, 2020
In section 9 of the Income-tax Act, in sub-section (1), after clause (vii), the
following clause shall be inserted––
“(viii) income of the nature referred to in sub-clause (xviia) of clause (24) of section 2,
arising from any sum of money paid, or any property situate in India transferred, on or
after the 5th day of July, 2019 by a person resident in India to a person outside
India.”.
Brief Impact:
Section 9 of the Act relates to Income deemed to accrue or arise in India.
Under the existing provisions, a gift of money or property is taxed in the
hands of donee, except for certain exemptions provided in clause (x) of sub-
section (2) of section 56.
21
 Contd….

It has been reported that gifts are made by persons being residents in
India to persons outside India and are claimed to be non-taxable in
India as the income does not accrue or arise in India.

It is proposed to provide that income of the nature referred to in

sub-clause (xviia) of clause (24) of section 2, arising from any sum
of money paid, or any property situate in India transferred, on or
after 5th July, 2019 by a person resident in India to a person outside
India shall be deemed to accrue or arise in India.

However, the existing provision for exempting gifts as provided in proviso to

clause (x) of sub-section (2) of section 56 will continue to apply for such gifts
deemed to accrue or arise in India. In a treaty situation, the relevant
article of applicable DTAA shall continue to apply for such gifts as
well. 22
4. Mandatory furnishing of return of income
by certain persons [Clause 39]
Amendment of Section 139 w.e.f. 1st day of April, 2020
In section 139 of the Income-tax Act, in sub-section (1) ––
(a) in the sixth proviso, after the word, figures and letters “section 10BA”, the
words, figures and letters “or section 54 or section 54B or section 54D or section
54EC or section 54F or section 54G or section 54GA or section 54GB” shall be
inserted;
(b) after the sixth proviso, and before Explanation 1 the following proviso shall
be inserted, namely:–
“Provided also that a person referred to in clause (b), who is not required to furnish a
return under this sub-section, and who during the previous year––
(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in
one or more current accounts maintained with a banking company or a co-operative
bank; or
(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two
lakh rupees for himself or any other person for travel to a foreign country; or 23
 Contd….

(iii)has incurred expenditure of an amount or aggregate of the amounts exceeding one

lakh rupees towards consumption of electricity; or
(iv) fulfils such other conditions as may be prescribed,

shall furnish a return of his income on or before the due date in such form and verified
in such manner and setting forth such other particulars, as may be prescribed.”;

(c) after Explanation 5, the following Explanation shall be inserted, namely:––

‘Explanation 6.—For the purposes of this sub-section,—
(a) “banking company” shall have the meaning assigned to it in clause (i) of the
Explanation to section 269SS;
(b) “co-operative bank” shall have the meaning assigned to it in clause (ii) of the
Explanation to section 269SS.’ 24
 Contd….

Brief Impact:
Currently, a person other than a company or a firm is required to
furnish the return of income only if his total income exceeds the
maximum amount not chargeable to tax, subject to certain exceptions.
Therefore, a person entering into certain high value transactions is not
necessarily required to furnish his return of income.

In order to ensure that persons who enter into certain high

value transactions do furnish their return of income, it is
proposed to amend section 139 of the Act so as to provide
that “certain prescribed persons” shall be mandatorily
required to file the return of income.
25
 Contd….

Further, currently, a person claiming rollover benefit of exemption

from capital gains tax on investment in specified assets like house,
bonds etc., is not required to furnish a return of income, if after claim
of such rollover benefits, his total income is not more than the
maximum amount not chargeable to tax.

In order to make furnishing of return compulsory for such persons, it

is proposed to amend the sixth proviso to section 139 of the
Act to provide that a person who is claiming such rollover
benefits on investment in a house or a bond or other assets,
shall necessarily be required to furnish a return, if before
claim of the rollover benefits, his total income is more than
the maximum amount not chargeable to tax.
26
5. Inter-changeability of PAN & Aadhaar and mandatory
quoting in prescribed transactions [Clauses 40 & 64]

Amendment of Section 139A w.e.f. 1st day of September, 2019

In section 139A of the Income-tax Act -
(i) in sub-section (1), in clause (vi), for the words, brackets and figure
“on behalf of the person referred to in clause (v)”, the following shall be
substituted, namely:––
“on behalf of the person referred to in clause (v); or
(vii) who intends to enter into such transaction as may be
prescribed by the Board in the interest of revenue,”;

(ii) after sub-section (5D), the following sub-section shall be inserted,

namely:––
“(5E) Notwithstanding anything contained in this Act, every person who is
required to furnish or intimate or quote his permanent account number under this
Act, and who,–– 27
 Contd….

(a) has not been allotted a permanent account number but possesses the Aadhaar number,
may furnish or intimate or quote his Aadhaar number in lieu of the permanent
account number, and such person shall be allotted a permanent account number in
such manner as may be prescribed;

(b) has been allotted a permanent account number, and who has intimated his Aadhaar
number in accordance with provisions of sub-section (2) of section 139AA, may
furnish or intimate or quote his Aadhaar number in lieu of the permanent account
number.”;

(iii) in sub-section (6), for the words “the General Index Register Number”, the
words “the General Index Register Number or the Aadhaar number, as the case may be,”
shall be substituted;
(iv) after sub-section (6), the following sub-sections shall be inserted, namely:––
28
 Contd….

“(6A) Every person entering into such transaction, as may be prescribed, shall quote
his permanent account number or Aadhaar number, as the case may be, in the
documents pertaining to such transactions and also authenticate such permanent
account number or Aadhaar number, in such manner as may be prescribed.

(6B) Every person receiving any document relating to the transactions referred to in
sub-section (6A), shall ensure that permanent account number or Aadhaar number,
as the case may be, has been duly quoted in such document and also ensure that
such permanent account number or Aadhaar number is so authenticated.”;

(v) in sub-section (8), in clauses (b) and (f), for the words “the General
Index Register Number”, the words “the General Index Register Number or the
Aadhaar number, as the case may be,” shall be substituted;
29
 Contd….

(vi) in the Explanation, for clause (a), the following clauses shall be
substituted, namely-

‘(a) “Aadhaar number” shall have the meaning assigned to it in clause (a) of section
2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016;
(aa) “Assessing Officer” includes an income-tax authority who is assigned the duty of
allotting permanent account numbers;
(ab) “authentication” means the process by which the permanent account number or
Aadhaar number alongwith demographic information or biometric information of
an individual is submitted to the income-tax authority or such other authority or
agency as may be prescribed for its verification and such authority or agency verifies
the correctness, or the lack thereof, on the basis of information available with it;’.
30
 Contd….

Amendment of Section 272B w.e.f. 1st day of September, 2019

In section 272B of the Income-tax Act -
(a) in sub-section (2),––
(i) for the words “permanent account number”, the words “permanent account number
or Aadhaar number, as the case may be,” shall be substituted;

(ii) for the words “ten thousand rupees”, the words “ten thousand rupees for each such
default” shall be substituted;

(b) after sub-section (2), the following sub-sections shall be inserted,

namely:––
“(2A) If a person, who is required to quote his permanent account number or Aadhaar number,
as the case may be, in documents referred to in sub-section (6A) of section 139A or
authenticate such number in accordance with the provisions of the said sub-section, fails to do
so, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten
thousand rupees for each such default. 31
 Contd….

(2B) If a person, who is required to ensure that the permanent account number or the
Aadhaar number, as the case may be, has been,––

(i) duly quoted in the documents relating to transactions referred to in clause (c) of sub-
section (5) or in sub-section (6A) of section 139A; or

(ii) duly authenticated in respect of transactions referred to under sub-section (6A) of that
section, fails to do so, the Assessing Officer may direct that such person shall pay, by way of
penalty, a sum of ten thousand rupees for each such default.”;

(c) in sub-section (3), for the word, brackets and figure “sub-section (2)”, the
words, brackets, figures and letters “sub-section (2) or sub-section (2A) or sub-section
(2B)” shall be substituted.

32
 Contd….

Brief Impact:
In many cases persons entering into high value transactions,
such as purchase of foreign currency or huge withdrawal from
the banks, do not possess a PAN.

In order to keep an audit trail of such transactions, it is

proposed to insert a new clause (vii) in sub-section (1) of
section 139A of the Act so as to provide that every person, who
intends to enter into certain prescribed transactions and has
not been alloted a PAN, shall also apply for allotment of a PAN.

33
 Contd….

To ensure ease of compliance, it is also proposed to provide for inter-

changeability of PAN with the Aadhaar number.

A new sub-section (6A) is also proposed to be inserted to ensure quoting of

PAN or Aadhaar number for entering into prescribed transactions and
authentication thereof in the prescribed manner. Duty is also proposed to be
cast upon the person receiving any document relating to such transactions,
through newly proposed sub-section (6B), to ensure that PAN or Aadhaar
number, as the case may be, is duly quoted, and authenticated.

In order to ensure proper compliance of the provisions relating

to quoting and authentication of PAN or Aadhaar, the penalty
provision contained in section 272B is proposed to be amended
suitably.
34
6. Consequence of not linking PAN with Aadhaar
[Clause 41]

Amendment of Section 139AA w.e.f. 1st day of September, 2019

In section 139AA of the Income-tax Act, in sub-section (2), in the proviso, for the
words “deemed to be invalid and the other provisions of this Act shall apply, as if the
person had not applied for allotment of permanent account number”, the words
“made inoperative after the date so notified in such manner as may be prescribed” shall be
substituted with effect from the 1st day of September, 2019.

Brief Impact:
The existing proviso to the sub-section (2) of section 139AA, provides that the PAN
allotted to a person shall be deemed to be invalid, in case the person fails to
intimate the Aadhaar number, on or before the notified date. In order to protect
validity of transactions previously carried out through such PAN, it is
proposed to amend the said proviso so as to provide that if a person
fails to intimate the Aadhaar number, the PAN allotted to such person
shall be made inoperative in the prescribed manner. 35
7. Widening the scope of Statement of Financial
Transactions (SFT) [Clauses 63 & 66]

Amendment of Section 285BA w.e.f. 1st day of September, 2019

In section 285BA of the Income-tax Act -
(i) in sub-section (1), for clause (k), the following clauses shall be substituted,
namely:––

“(k) a prescribed reporting financial institution; or

(l) a person, other than those referred to in clauses (a) to (k), as may be prescribed,”;

(ii) in sub-section (3), the second proviso shall be omitted;

(iii) in sub-section (4), for the words “such statement shall be treated as an
invalid statement and the provisions of this Act shall apply as if such person had
failed to furnish the statement”, the words “the provisions of this Act shall apply as if
such person had furnished inaccurate information in the statement” shall be substituted.
36
 Contd….

Amendment of section 271FAA w.e.f. 1st day of September,

2019
In section 271FAA of the Income-tax Act, in the opening portion, the
words, brackets and letter “clause (k) of ” shall be omitted with effect
from the 1st day of September, 2019.

Brief Impact:
Existing provisions of section 285BA of the Act, provide for furnishing
of statement of financial transaction (SFT) or reportable account by
person specified therein.

37
 Contd….

In order to enable pre-filling of return of income, it is

proposed to obtain information by widening the scope of
furnishing of statement of financial transactions by
mandating furnishing of statement by certain prescribed
persons other than those who are currently furnishing the
same.

It is also proposed to remove the current threshold of

rupees fifty thousand on aggregate value of transactions
during a financial year, for furnishing of information, with a
view to ensure pre-filling of information relating to small
amount of transactions as well.
38
 Contd….

In order to ensure proper compliance, it is also proposed to

amend the provisions of sub-section (4) of aforesaid section
so as provide that if the defect in the statement is not
rectified within the time specified therein, the provisions of
the Act shall apply as if such person had furnished
inaccurate information in the statement.

Consequently, it is also proposed to amend the penalty

provisions contained in section 271FAA so as to ensure correct
furnishing of information in the SFT and widen the scope of penalty to
cover all the reporting entities under section 285BA .

39
C. MEASURES FOR PROMOTING
LESS CASH ECONOMY

40
C. Measures for promoting less cash economy

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
13A, 35AD, 40A,
8,9,11,
43(1), 43CA,
Prescription of electronic mode of 12,14,1
1(a) 44AD, 50C(1), 01-04-2020
payment 6,18,21
56(2)(x)(b),
& 27
80JJAA,
Prescription of electronic mode of 269SS, 269ST & 57, 58
1(b) 01-09-2019
payment 269T & 60
TDS on cash withdrawal to
2. 194N 46 01-09-2019
discourage cash transaction
269SU, 271DB &
Mandating acceptance of
10A of Payment and 59, 62
3. payments through prescribed 01-04-2019
settlement Systems & 194
electronic modes
Act 41
1. Prescription of electronic mode of payments
[Clauses 8,9,11,12,14,16,18,21,27,57,58 & 60]
In section 13A of the Income-tax Act, in the first proviso, in clause (d)
w.e.f 1st day of April,2020
(d) no donation exceeding two thousand rupees is received by such political party otherwise than
by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic
clearing system through a bank account or through such other electronic mode as
may be prescribed bank account or through electoral bond.

In section 35AD of the Income-tax Act, in sub-section (8), in clause (f)

w.e.f 1st day of April,2020
(f) any expenditure of capital nature shall not include [any expenditure in respect of which the
payment or aggregate of payments made to a person in a day, otherwise than by an account
payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system
through a bank account or through such other electronic mode as may be
prescribed bank account , exceeds ten thousand rupees or] any expenditure incurred on the
acquisition of any land or goodwill or financial instrument. 42
 Contd….

In section 40A w.e.f 1st day of April,2020

• For the words “bank account” wherever they occur, the words “bank account or through such
other electronic mode as may be prescribed” shall be substituted;
• in sub-section (4), after the words “such cheque or draft or electronic clearing system”, the
words “or such other electronic mode as may be prescribed” shall be inserted.”

In section 43 of the Act, second proviso of clause (1) w.e.f 1st day of
April,2020
[Provided further that where the assessee incurs any expenditure for acquisition of any asset or
part thereof in respect of which a payment or aggregate of payments made to a person in a day,
otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or
use of electronic clearing system through a bank account or through such other
electronic mode as may be prescribed bank account , exceeds ten thousand rupees, such
expenditure shall be ignored for the purposes of determination of actual cost.]
43
 Contd….

In section 43CA of the Income-tax Act, in sub-section (4) w.e.f 1st day of
April,2020
(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or
a part thereof has been received [by way of an account payee cheque or an account payee bank draft
or by use of electronic clearing system through a bank account or through such other
electronic mode as may be prescribed bank account ] on or before the date of agreement for
transfer of the asset.

In section 44AD of the Act, in sub-section (1), in the proviso w.e.f 1st day of
April,2020
[Provided that this sub-section shall have effect as if for the words "eight per cent", the words "six
per cent" had been substituted, in respect of the amount of total turnover or gross receipts which is
received by an account payee cheque or an account payee bank draft or use of electronic clearing
system through a bank account or through such other electronic mode as may
be prescribed bank account during the previous year or before the due date specified in sub-
section (1) of section 139 in respect of that previous year.] 44
 Contd….

In section 50C of the Act, in sub-section (1), in the second proviso w.e.f 1st
day of April,2020
Provided further that the first proviso shall apply only in a case where the amount of consideration,
or a part thereof, has been received by way of an account payee cheque or account payee bank draft
or by use of electronic clearing system through a bank account or through such other
electronic mode as may be prescribed bank account , on or before the date of the
agreement for transfer

In section 56 of the Act, in sub-section (2), in clause (x),in sub-clause (b),

w.e.f 1st day of April,2020
[Provided further that the provisions of the first proviso shall apply only in a case where the amount
of consideration referred to therein, or a part thereof, has been paid by way of an account payee
cheque or an account payee bank draft or by use of electronic clearing system through a bank
account or through such other electronic mode as may be prescribed bank
account , on or before the date of agreement for transfer of such immovable property:]
45
 Contd….

In section 80JJAA of the Act, in the Explanation, in clause (i), in the

first proviso, in clause (b) w.e.f 1st day of April,2020
(b) emoluments are paid otherwise than by an account payee cheque or account payee
bank draft or by use of electronic clearing system through a bank account or
through such other electronic mode as may be prescribed bank account

In section 269SS of the Income-tax Act, in the opening portion,

w.e.f 1st day of September,2019
No person shall take or accept from any other person (herein referred to as the depositor),
any loan or deposit or any specified sum, otherwise than by an account payee cheque or
account payee bank draft or use of electronic clearing system through a bank account
or through such other electronic mode as may be prescribed bank account , if

46
 Contd….

In section 269ST of the Income-tax Act, in the long line, w.e.f 1st day of
September,2019
Otherwise than by an account payee cheque or an account payee bank draft or use of electronic
clearing system through a bank account or through such other electronic mode as
may be prescribed bank account :

In section 269T of the Act, in the opening portion, w.e.f 01-09-2019,

No branch of a banking company or a co-operative bank and no other company or co-operative
society and no firm or other person shall repay any loan or deposit made with it or any specified
advance received by it otherwise than by an account payee cheque or account payee bank draft
drawn in the name of the person who has made the loan or deposit or paid the specified advance,
or by use of electronic clearing system through a bank account or through such other
electronic mode as may be prescribed bank account if—

47
 Contd….

Brief Impact:
There are various provisions in the Act which prohibit cash transactions and
allow/encourage payment or receipt only through account payee cheque,
account payee draft or electronic clearing system through a bank account.

“In order to encourage other electronic modes of payment, it is

proposed to amend the above sections [13A, 35AD, 40A, 43(1), 43CA,
44AD, 50C(1), 56(2)(x)(b), 80JJAA, 269SS, 269ST & 269T] so as to
include such other electronic mode as may be prescribed, in
addition to the already existing permissible modes of
payment/receipt in the form of an account payee cheque or an
account payee bank draft or the electronic clearing system through
a bank account.”
48
2. TDS on cash Withdrawal to discourage cash
transactions [Clauses 46]
New Section 194N (Payment of certain amount in cash) inserted w.e.f. 1st
day of September, 2019
Every person, being,–
(i) a banking company to which the Banking Regulation Act, 1949 applies (including any bank
or banking institution referred to in section 51 of that Act);
(ii) a co-operative society engaged in carrying on the business of banking; or
(iii) a post office,
who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess
of one crore rupees during the previous year, to any person (herein referred to as the recipient)
from an account maintained by the recipient with it shall, at the time of payment of such sum,
deduct an amount equal to two per cent. of sum exceeding one crore rupees, as income-tax:

Provided that nothing contained in this sub-section shall apply to any payment made to,–
(i) the Government;
(ii) any banking company or co-operative society engaged in carrying on the business of banking
or a post office; 49
 Contd….
(iii) any business correspondent of a banking company or co-operative society engaged in carrying on the
business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under
the Reserve Bank of India Act, 1934;
(iv) any white label automated teller machine operator of a banking company or co-operative society engaged
in carrying on the business of banking, in accordance with the authorization issued by the Reserve Bank of
India under the Payment and Settlement Systems Act, 2007;
(v) such other person or class of persons, which the Central Government may, by notification in the Official
Gazette, specify in consultation with the Reserve Bank of India.
Brief Impact:
“In order to achieve the target of cash less economy it is purposed to insert a new
section 194N in the Act, Which provides the levy of TDS at @ 2% on cash payments in
excess of Rs. one crore in aggregate made during the year, by a banking company or
cooperative bank or post office, to any person from an account maintained by the
recipient. This levy will discourage the cash withdrawal and promote the Indian
economy towards cashless payments.”
However, payment made to certain recipients as specified in proviso are exempt.
50
3. Mandating acceptance of payments through prescribed
electronic modes [Clause 59, 62 & 194]

New Section 269SU inserted w.e.f. 1st day of November, 2019

“269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed
electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by
such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore
rupees during the immediately preceding previous year.”

In order to ensure compliance aforesaid provision a new section 271DB

inserted w.e.f 1st day of November, 2019
“271DB.(1) If a person who is required to provide facility for accepting payment through the prescribed
electronic modes of payment referred to in section 269SU, fails to provide such facility, he shall be liable to
pay, by way of penalty, a sum of five thousand rupees, for every day during which such failure continues.
Provided that no such penalty shall be imposable if such person proves that there were good and sufficient
reasons for such failure.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner of Income-tax.”

51
 Contd…
Consequentially a new section 10A inserted in Payment and settlement
Systems Act, 2007, w.e.f 1st day of November, 2019
“10A. Notwithstanding anything contained in this Act, no bank or system provider shall impose any charge
upon anyone, either directly or indirectly, for using the electronic modes of payment prescribed under section
269SU of the Income-tax Act, 1961.”
Brief Impact:
“In order to achieve the target of cash less economy it is purposed to insert a
new section 269SU in the Act, Which mandates the businessmen to accept payment
through prescribed electronic modes, if his total sales, turnover or gross receipt in
business exceeds fifty crore rupees during the immediately preceding previous year.
To ensure the compliance of this section , it is further purposed to insert a
new section 271DB, which levy the penalty on failure of compliance of a sum of five
thousand rupees, for every day during such failure continues. . However, the penalty shall
not be imposed if the person proves that there were good and sufficient reasons for such
failure. Any such penalty shall be imposed by the Joint Commissioner.
Further, it is proposed to make a consequential amendment in the Payment and
Settlement Systems Act, 2007 so as to provide that no bank or system provider shall
impose any charge upon anyone 52
D. TAX INCENTIVES

53
D. Tax Incentives
Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]

Section Clause
Incentives to International Financial
47,10,115-O, 17,6,35, 01-04-20,
1. Services Centre (IFSC)
115R, 37,28 & 01-09-19
80LA,115A 33
Incentives to Non-Banking Finance
Section 43D Clause 13
2. Companies (NBFCs) 01-04-20
& 43B & 15

Relaxation in conditions of special taxation

3. regime for offshore funds Section 9A Clause 5 01-04-19

Tax incentive for electric vehicles

4. section 80EEB Clause 25 01-04-20
54
D. Tax Incentives
Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Exemption of interest income of a non-resident
arising from borrowings by way of issue of Section
5. Clause 6 01-04-19
Rupee Denominated Bonds referred to under 194LC
section 194LC

Tax incentive for affordable housing section 80EEA , Clause 25

6. 01-04-20
80-IBA & 26

Incentives to National Pension System (NPS) Section 10, Clause 6,

7. 01-04-20
subscribers 80CCD, 80C 23 & 24

Section 79 & Clause 20

8. Incentives for start-ups 01-04-20
54GB & 22

Incentives for Category II Alternative

9. Section 56 Clause 21 01-04-20
Investment Fund (AIF)
55
1. Incentives to International Financial Services
Centre [Clause 17, 6, 35, 37, 28 & 33]
Amended section 47 of the Income-tax Act, in clause (viiab), with effect
from the 1st day of April, 2020 [Clause 17]
In section 47 of the Income-tax Act, in clause (viiab), with effect from the 1st day of 2020,––
A) for sub-clause (c), the following sub-clauses shall be substituted, namely:––
“(c) derivative; or
(d) such other securities as may be notified by the Central Government in this behalf,”;
B) in the long line, after the words “made by a non-resident”, the words “or a specified fund” shall
inserted;
C) in the Explanation, after clause (c), the following clauses shall be inserted, namely:
(d) “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956;
(e) “specified fund” means a fund established or incorporated in India in the form of a
trust or a company or a limited liability partnership or a body corporate,-

56
 Contd….

(i) which has been granted a certificate of registration as a Category III Alternative
Investment Fund and is regulated under the Securities and Exchange Board of India
(Alternative Investment Fund) Regulations, 2012, made under the Securities and
Exchange Board of India Act, 1992;
(ii) which is located in any International Financial Services Centre;
(iii) which is deriving income solely in convertible foreign exchange;
(iv) of which all the units are held by non-residents;
(f) “trust” means a trust established under the Indian Trusts Act, 1882 or under any other law for the
time being in force;
(g) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership
interests;
(h) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve
Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management
Act, 1999 and the rules made thereunder

57
 Contd…

Brief Impact:
Under the existing provisions of the section 47 of the Act, any transfer of a capital asset,
being bonds or Global Depository Receipts or rupee denominated bond of an Indian
company or derivative, made by a non-resident through a recognised stock exchange located
in any IFSC and where the consideration for such transaction is paid or payable in foreign
currency shall not be regarded as transfer.
With a view to provide tax-neutral transfer of certain securities by Category III Alternative
Investment Fund (AIF) in IFSC, it is proposed to amend the said section so as to provide that
any transfer of a capital asset, specified in the said clause by such AIF, of which all the unit
holders are non-resident, are not regarded as transfer subject to fulfillment of specified
conditions.
It is also proposed to widen the types of securities listed in said clause by empowering the
Central Government to notify other securities for the purposes of this clause.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in
relation to the assessment year2020-21 and subsequent assessment years.

58
 Contd….
Amendment in Section 10 w.e.f. 1st day of April, 2020 [Clause 6]
(II) with effect from the 1st day of April, 2020,–– (b) in clause (15), after sub-clause (viii), the
following sub-clause shall be inserted, namely:— ‘(ix) any income by way of interest payable to a non-
resident by a unit located in an International Financial Services Centre in respect of monies borrowed by
it on or after the 1st day of September, 2019.
Explanation.—For the purposes of this sub-clause,— (a) “International Financial Services Centre”
shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act,
2005; (b) “unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic
Zones Act, 2005
Brief Impact:
With a view to facilitate external borrowing by the units located in IFSC, it is proposed to
amend the section 10 of the Act so as to provide that any income by way of interest payable
to a non-resident by a unit located in IFSC in respect of monies borrowed by it on or after
1st day of September, 2019, shall be exempt

59
 Contd….

Amended Section 115-O(8) w.e.f. 1st day of September, 2019 [Clause

35]
(8) Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable
in respect of the total income of a company, being a unit of an International Financial Services Centre,
deriving income solely in convertible foreign exchange, for any assessment year on any amount declared,
distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the
1st day of April, 2017, out of its current income or income accumulated as a unit of
International Financial Services Centre after the 1st day of April, 2017 out of its current
income, either in the hands of the company or the person receiving such dividend. during the period
beginning from the 17th day of September, 2018 and ending on the 31st day of March, 2019.”

60
 Contd….
Contd….

Brief Impact:
The existing provisions of the section 115-O of the Act, provide that no tax on distributed
profits shall be chargeable in respect of the total income of a company, being a unit of an
IFSC, deriving income solely in convertible foreign exchange, for any assessment year on any
amount declared, distributed or paid by such company, by way of dividends (whether
interim or otherwise) on or after the 1st day of April, 2017, out of its current income,
either in the hands of the company or the person receiving such dividend.
To facilitate distribution of dividend by companies operating in IFSC, it is proposed to
amend the provision of the said section to provide that any dividend paid out of
accumulated income derived from operations in IFSC, after 1st April 2017 shall also not
be liable for tax on distributed profits.

61
 Contd….

Amendment in section 115R of the Income-tax Act, in sub-section (2), with

effect from the 1st day of September, 2019,[Clause 37]
A. after the second proviso, before the Explanation, the following proviso shall be inserted,
namely:—
“Provided also that no additional income-tax shall be chargeable in respect of any amount
of income distributed on or after the 1st day of September, 2019 by a specified Mutual
Fund, out of its income derived from transactions made on a recognised stock exchange
located in any International Financial Services Centre:”
B. in the Explanation,—
(a) after clause (i), the following clause shall be inserted, namely:––
(ia) “convertible foreign exchange” means foreign exchange which is for the time
being treated by the Reserve Bank of India as convertible foreign exchange for the
purposes of the Foreign Exchange Management Act, 1999 and the rules made
thereunder;’;

62
 Contd….
(b) after clause (ii), the following clauses shall be inserted, namely:––
‘(iii) “International Financial Services Centre” shall have the meaning
assigned to it in clause (q) of section 2 of the Special Economic Zones
Act, 2005;
(iv) “recognised stock exchange” shall have the meaning assigned to it in
clause (ii) of Explanation 1 to clause (5) of section 43;
(v) “specified Mutual Fund” means a Mutual Fund specified under clause
(23D) of section 10
(a) located in any International Financial Services Centre;
(b) deriving income solely in convertible foreign
(c) exchange of which all the units are held by non-residents;
(vi) “unit” means beneficial interest of an investor in the fund;’.

63
 Contd….
Contd.
Brief Impact:
• The existing provisions of the section 115R of the Act, provide that any amount of
income distributed by the specified company or a Mutual Fund to its unit holders shall be
chargeable to tax and such specified company or Mutual Fund shall be liable to pay
additional income-tax on such distributed income.
• In order to incentivize relocation of Mutual Fund in IFSC, it is proposed to amend the
said section so as to provide that no additional income-tax shall be chargeable in respect
of any amount of income distributed, on or after the 1st day of September, 2019, by a
Mutual Fund of which all the unit holders are non-residents and which fulfills certain
other specified conditions.

64
 Contd….
Amended section 80LA(1A) w.e.f. 1st day of April, 2020 [Clause 28]
(i) for sub-section (1), the following sub-sections shall be substituted, namely (1A) -“Where the gross total
income of an assessee, being a Unit of an International Financial Services Centre, includes any income
referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this
section, a deduction from such income, of an amount equal to one hundred per cent. of such income for
any ten consecutive assessment years, at the option of the assesse, out of fifteen years, beginning
with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-
section (1) of section 23 of the Banking Regulation Act, 1949 or permission or registration under the
Securities and Exchange Board of India Act,1992 or any other relevant law was obtained.”;
Brief Impact:
The existing provisions of the section 80LA of the Act, inter alia, provide profit linked deduction
of an amount equal to one hundred per cent of income for the first five consecutive assessment
years and fifty per cent of income for the next five consecutive assessment years, to units of an
IFSC.
With a view to further incentivize operation of units in IFSC, it is proposed to amend the said
section so as to provide that the deduction shall be increased to one hundred per cent
for any ten consecutive years. The assessee, at his option, may claim the said deduction for
any ten consecutive assessment years out of fifteen years beginning with the year in which the
necessary permission was obtained. 65
 Contd….
Proviso to section 115A(4)(b) shall be inserted with effect from the
1st day of April, 2020 [Clause 33]
“Provided that nothing contained in this sub-section shall apply to a deduction
allowed to a Unit of an International Financial Services Centre under section
80LA”;
Brief Impact: Section 115A of the Act provides the method of calculation of income-tax
payable by a non-resident (not being a company) or by a foreign company where the total
income includes any income by way of dividend (other than referred in section 115-O),
interest, royalty and fees for technical services; etc. Section 80LA, provides for deduction in
respect of certain incomes to a unit located in an IFSC. However, sub-section (4) of section
115A prohibits any deduction under chapter VIA which includes section 80LA.

In order to ensure that units located in IFSC claim full deduction, it is proposed to amend
section 115A of the Act so as to provide that the conditions contained in sub-section (4) of
section 115A shall not apply to a unit of an IFSC for under section 80LA is allowed

66
2. Incentives to non-banking finance companies
(Clause 13 & 15)
Amendment in section 43B, with effect from the 1st day of April, 2020,–
• “After clause (d), the following clause shall be inserted, namely:–
“(da) any sum payable by the assessee as interest on any loan or borrowing from a deposit
taking non-banking financial company or systemically important non-deposit taking non-
banking financial company, in accordance with the terms and conditions of the agreement
governing such loan or borrowing, or”;
• After Explanation 3A, the following Explanation shall be inserted,
namely:––
“Explanation 3AA.—For the removal of doubts, it is hereby declared that where a deduction in
respect of any sum referred to in clause (da) is allowed in computing the income referred to in
section 28, of the previous year (being a previous year relevant to the assessment year
commencing on the 1st day of April, 2019, or any earlier assessment year) in which the
liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any
deduction under this section in respect of such sum in computing the income of the previous
year in which the sum is actually paid by him.”;
67
 CONTD….

• After explanation 3C, the following explanation shall be inserted, namely:-

Explanation 3CA.—For the removal of doubts, it is hereby declared that a deduction of any sum,
being interest payable under clause (da), shall be allowed if such interest has been actually paid and
any interest referred to in that clause which has been converted into a loan or borrowing shall not be
deemed to have been actually paid.”;
• In explanation 4, after clause (d), the following clauses shall be inserted, namely:–
‘(e) “deposit taking non-banking financial company” means a non-banking financial company which
is accepting or holding public deposits and is registered with the Reserve Bank of India under the
provisions of the Reserve Bank of India Act, 1934;
(f) “non-banking financial company” shall have the meaning assigned to it in clause (f) of section 45-
I of the Reserve Bank of India Act, 1934;
(g)“systemically important non-deposit taking non-banking financial company” means a non-banking
financial company which is not accepting or holding public deposits and having total assets of not less
than five hundred crore rupees as per the last audited balance sheet and is registered with the Reserve
Bank of India under the provisions of the Reserve Bank of India Act, 1934.’
68
 CONTD….

Amendment in section 43D, with effect from the 1st day of April,
2020,––
• In clause (a), after the words “state industrial investment corporation”, the words “or a
deposit taking non-banking financial company or a systemically important non-deposit
taking non-banking financial company” shall be inserted;
• In the long line, after the words “state industrial investment corporation or”, the words “a
deposit taking non-banking financial company or a systemically important non-deposit
taking non-banking financial company or” shall be inserted;
• In the explanation, after clause (g), the following clause shall be inserted, namely:––
‘(h) the expressions “deposit taking non-banking financial company”, “non-banking financial
company” and “systemically important non-deposit taking non-banking financial company”
shall have the meanings respectively assigned to them in clauses (e), (f) and (g) of
Explanation 4 to section 43B.’.

69
 CONTD….

Brief Impact:
• The benefit u/s 43D is that interest income in relation to certain categories of bad or
doubtful debts received by certain institutions shall be chargeable to tax in the PY in which
it is credited to its P & L A/c actually received, whichever is earlier. The benefit is presently
available to PFI, scheduled banks, cooperative banks, SFCs, State industrial investment
corporations and public companies like housing finance companies. With a view to provide a
level playing field to certain categories of NBFCs who are adequately regulated, it is
proposed to amend section 43D of the Act so as to include deposit-taking NBFCs and
systemically important non deposit-taking NBFCs within the scope of this section.
• Consequentially, as per matching principle in taxation, it is proposed to amend Section 43B
of the Act to provide that any sum payable by the assessee as interest on any loan or advances
from a deposit-taking NBFCs and systemically important non deposit-taking NBFCs shall be
allowed as deduction if it is actually paid on or before the due date of furnishing the return
of income of the relevant previous year.
70
 3. Relaxation in conditions of special taxation regime
for offshore funds [Clause 5]
In section 9A of The Income Tax Act, in sub-section (3)-
• Amendment in first proviso to clause (j) with retrospective effect
from 1st day of April, 2019,
“Provided that if the fund has been established or incorporated in the previous year, the
corpus of fund shall not be less than one hundred crore rupees at the end of a period of
six months from the last day of the month of its establishment or
incorporation, or at the end of such previous year, whichever is later at the
end of such previous year,
• Amendment in clause (m) with retrospective effect from 1st day of
April, 2019,
“(m)the remuneration paid by the fund to an eligible fund manager in respect of fund
management activity undertaken by him on its behalf is not less than the amount
calculated in such manner as may be prescribed the arm's length price of the said
activity.”
71
 CONTD….

Brief Impact:
To give an impetus to fund management activities in India, certain constraints are
proposed to be removed by suitably amending section 9A of the Act, so as to provide
that,-
the corpus of the fund shall not be less than one hundred crore rupees at the end of a
period of six months from the end of the month of its establishment or incorporation
or at the end of such previous year, whichever is later; and
the remuneration paid by the fund to an eligible fund manager in respect of fund
management activity undertaken by him on its behalf is not less than the amount
calculated in such manner as may be prescribed.

72
4. Tax incentive for electric vehicles [Clause 25]

New Section 80EEB of the Act inserted w.e.f 1st day of April, 2020
[Clause 25]
1) In computing the total income of an assessee, being an individual, there shall be
deducted, in accordance with and subject to the provisions of this section, interest
payable on loan taken by him from any financial institution for the purpose of purchase
of an electric vehicle.
2) The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees
and shall be allowed in computing the total income of the individual for the assessment
year beginning 5 on the 1st day of April, 2020 and subsequent assessment years.
3) The deduction under sub-section (1) shall be subject to the condition that the loan has
been sanctioned by the financial institution during the period beginning on the 1st day
of April, 2019 and ending on the 31st day of March, 2023.

73
 Contd….

4) Where a deduction under this section is allowed for any interest referred to in sub-
section (1), 10 deduction shall not be allowed in respect of such interest under any
other provision of this Act for the same or any other assessment year.
5) For the purposes of this section,––
(a)“electric vehicle” means a vehicle which is powered exclusively by an electric motor
whose traction energy is supplied exclusively by traction battery installed in the vehicle
and has such 15 electric regenerative braking system, which during braking provides for
the conversion of vehicle kinetic energy into electrical energy;
(b)“financial institution” means a banking company to which the Banking Regulation
Act, 1949 applies, or any bank or banking institution referred to in section 51 of that
Act and includes any deposit taking non-banking financial company or a systemically
important non-deposit taking non-banking financial company as defined in clauses (e)
and (g) of Explanation 4 to section 43B.’.
74
6. Exemption of income of Foreign Company from sale of leftover
Contd….
stock of crude oil on termination of agreement or arrangement
[Clause 5]
Brief Impact:
It is proposed to insert a new section 80EEB in the Act so as to provide for a deduction in
respect of interest on loan taken for purchase of an electric vehicle from any
financial institution up to one lakh fifty thousand rupees subject to the mentioned
conditions.

It is also proposed that where a deduction under this section is allowed for any interest,
deduction shall not be allowed in respect of such interest under any other provisions of the
Act for the same or any other assessment year

75
5. Exemption of interest income of a non-resident arising
from borrowings by way of issue of Rupee Denominated
Bonds referred to under section 194LC [Clause 6]

Amendment of Section 10 w.e.f. 1st day of April, 2019

In section 10 of the Income-tax Act,––
(I) after clause (4B), the following clause shall be inserted, namely:––
“(4C) any income by way of interest payable to a non-resident, not being a
company, or to a foreign company, by any Indian company or business trust
in respect of monies borrowed from a source outside India by way of issue of
rupee denominated bond, as referred to in clause (ia) of sub-section (2) of
section 194LC, during the period beginning from the 17th day of
September, 2018 and ending on the 31st day of March, 2019;”;

76
 Contd….

Brief Impact:
To incentivise low cost foreign borrowings through Off-shore Rupee
Denominated Bond, the press release dated 17th September, 2018, inter alia,
announced that interest payable by an Indian company or a business trust to a
non-resident, including a foreign company, in respect of rupee denominated
bond issued outside India during the period from September 17, 2018 to
March 31, 2019 shall be exempt from tax. The exemption announced
through the said press release is proposed to be incorporated in
the law by amending section 10 of the Act so as to provide
exemption to income payable by way of interest to a non-resident
by the specified company in respect of monies borrowed from a source
outside India by way of issue of rupee denominated bond, as referred to in
section 194LC, during the period begining from the 17th day of September,
2018 and ending on the 31st day of March, 2019. 77
6. Tax incentive for affordable housing
[Clauses 25 & 26]
Insertion of new Section 80EEA w.e.f. 1st day of April, 2020

After section 80EE of the Income-tax Act, the following section shall be inserted
‘80EEA. (1) In computing the total income of an assessee, being an individual not eligible to
claim deduction under section 80EE, there shall be deducted, in accordance with and subject
to the provisions of this section, interest payable on loan taken by him from any financial
institution for the purpose of acquisition of a residential house property.
(2) The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees
and shall be allowed in computing the total income of the individual for the assessment year
beginning on the 1st day of April, 2020 and subsequent assessment years.
(3) The deduction under sub-section (1) shall be subject to the following conditions,
namely:—
(i) the loan has been sanctioned by the financial institution during the period beginning
78
 Contd….

On the 1st day of April, 2019 and ending on the 31st day of March, 2020;
(ii) the stamp duty value of residential house property does not exceed forty-five lakh rupees;
(iii) the assessee does not own any residential house property on the date of sanction of loan.
(4) Where a deduction under this section is allowed for any interest referred to in sub-section
(1), deduction shall not be allowed in respect of such interest under any other provision of
this Act for the same or any other assessment year.
(5) For the purposes of this section,––
(a) the expression “financial institution” shall have the meaning assigned to it in clause (a) of
sub-section (5) of section 80EE;
(b) the expression “stamp duty value” means value adopted or assessed or assessable by any
authority of the Central Government or a State Government for the purpose of payment of
stamp duty in respect of an immovable property.
79
 Contd….

Amendments in Section 80-IBA w.e.f. 1st day of April, 2020

In section 80-IB (A) in sub-section (2), after clause (i), the following proviso shall be
inserted, namely:—
‘Provided that for the projects approved on or after the 1st day of September, 2019, the
provisions of this sub-section shall have effect as if for clauses (d) to (i), the following
clauses had been substituted, namely:
(f) the carpet area of the residential unit comprised in the housing project does not
exceed—
(i) sixty square metres, where such project is located within the metropolitan cities of
Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater
Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of
Mumbai Metropolitan Region); or
(ii) ninety square metres, where such project is located in any other place; 80
 Contd….

(g) the stamp duty value of a residential unit in the housing project does not
exceed forty-five lakh rupees;

(B) in sub-section (6), after clause (e), the following clause shall be inserted,
namely:—
‘(f) “stamp duty value” means the value adopted or assessed or assessable by
any authority of the Central Government or a State Government for the
purpose of payment of stamp duty in respect of an immovable property.’.

81
 Contd….

Brief Impact:
In order to provide an impetus to the ‘Housing for all’ objective of the
Government and to enable the home buyer to have low-cost funds at his
disposal, it is proposed to insert a new section 80EEA in the Act so
as to provide a deduction in respect of interest up to one lakh
fifty thousand rupees on loan taken for residential house
property from any financial institution subject to certain
conditions.

It is also proposed that where a deduction under this section is allowed for
any interest, deduction shall not be allowed in respect of such interest under
any other provisions of the Act for the same or any other assessment year.

82
 Contd….

With a view to align the definition of "affordable housing" under

section 80-IBA with the definition under GST Act, it is proposed
to amend the said section so as to modify certain conditions
regarding the housing project approved on or after 1st day of
September, 2019.

The modified conditions are – a) that the the assessee shall be eligible for
deduction under the section, in respect of a housing project if a residential
unit in the housing project have carpet area not exceeding 60 square meter in
metropolitan cities or 90 square meter in cities or towns other than
metropolitan cities and b) that the stamp duty value of such residential unit
in the housing project shall not exceed forty five lakh rupees.

83
7.Incentives to National Pension System
(NPS) Subscribers [Clauses 6, 23 & 24]
Amendment of Section 10 w.e.f. 1st day of April, 2020
In section 10 of the Income-tax Act,––
(II) with effect from the 1st day of April, 2020,––
(a) in clause (12A), for the words “forty per cent.”, the words “sixty per cent.” shall be
substituted;

Amendment of Section 80C w.e.f. 1st day of April, 2020

In section 80C of the Income-tax Act, in sub-section (2), after clause (xxiv), the following
clause shall be inserted with effect from the 1st day of April, 2020, namely:—
‘(xxv) being an employee of the Central Government, as a contribution to a specified
account of the pension scheme referred to in section 80CCD––

84
 Contd….

(a) for a fixed period of not less than three years; and
(b) which is in accordance with the scheme as may be notified by the Central Government in the
Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “specified account” means an additional account
referred to in sub-section (3) of section 20 of the Pension Fund Regulatory and Development
Authority Act, 2013.

Amendment of Section 80CCD w.e.f. 1st day of April, 2020

In section 80CCD of the Income-tax Act, in sub-section (2), for the words “does not exceed ten
per cent. of his salary in the previous year”, the words, brackets and letters “does not exceed––
(a) fourteen per cent., where such contribution is made by the Central Government;
(b) ten per cent., where such contribution is made by any other employer, of his salary in the
previous year” shall be substituted.
85
 Contd….

Brief Impact:
With a view to enable the pensioner to have more disposable funds, it is
proposed to amend the section 10 so as to increase the exemption
from forty per cent to sixty per cent of the total amount payable
to the person at the time of closure or his opting out of the
pension scheme.

Under the existing provisions of section 80CCD of the Income-tax Act, in

respect of any contribution by the Central Government or any other
employer to the account of the employee referred to in the section, the
assessee shall be allowed a deduction in the computation of his total income,
of the whole of the amount contributed by the Central Government or any
other employer, as does not exceed ten per cent of his salary in the previous
year. 86
 Contd….

In order to ensure that the Central Government employees get

full deduction of the enhanced contribution, it is proposed to
increase the limit from ten to fourteen per cent. of contribution
made by the Central Government to the account of its employee.

To enable the Central Government employees to have more

options of tax saving investments under NPS it is proposed to
amend the section 80C so as to provide that any amount paid or
deposited by a Central Government employee as a contribution
to his Tier-II account of the pension scheme shall be eligible for
deduction.
87
8. Incentives for start-ups. [Clause 20 & 22]

For section 79 of the Income-tax Act, the following section shall be

substituted with effect from the 1st day of April 2020, namely:––
‘79. (1) Notwithstanding anything contained in this Chapter, where a change in
shareholding has taken place during the previous year in the case of a company, not
being a company in which the public are substantially interested, no loss incurred in any
year prior to the previous year shall be carried forward and set off against the income of
the previous year, unless on the last day of the previous year, the shares of the company
carrying not less than fifty-one per cent. of the voting power were beneficially held by
persons who beneficially held shares of the company carrying not less than fifty-one per
cent. of the voting power on the last day of the year or years in which the loss was
incurred:

88
 Contd….

Provided that even if the said condition is not satisfied in case of an eligible start up as
referred to in section 80-IAC, the loss incurred in any year prior to the previous year
shall be allowed to be carried forward and set off against the income of the previous year
if all the shareholders of such company who held shares carrying voting power on the last
day of the year or years in which the loss was incurred, continue to hold those shares on
the last day of such previous year and such loss has been incurred during the period of
seven years beginning from the year in which such company is incorporated.

(2) Nothing contained in sub-section (1) shall apply,––

a) to a case where a change in the said voting power and shareholding takes place in a
previous year consequent upon the death of a shareholder or on account of transfer of
shares by way of gift to any relative of the shareholder making such gift;

89
 Contd….

b) to any change in the shareholding of an Indian company which is a subsidiary of a foreign

company as a result of amalgamation or demerger of a foreign company subject to the
condition that fifty-one per cent. shareholders of amalgamating or demerged foreign company
continue to be the shareholders of the amalgamated or the resulting foreign company;

c) to a company where a change in the shareholding takes place in a previous year pursuant
to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016, after
affording a reasonable opportunity of being heard to the jurisdictional Principal
Commissioner or Commissioner;

d) to a company, and its subsidiary and the subsidiary of such subsidiary, where
(i) the Tribunal, on an application moved by the Central Government under section 241 of
the Companies Act, 2013, has suspended the Board
90
 Contd….

of Directors of such company and has appointed new directors nominated by the Central
Government, under section 242 of the said Act; and
(ii) a change in shareholding of such company, and its subsidiary and the subsidiary of
such subsidiary, has taken place in a previous year pursuant to a resolution plan approved
by the Tribunal under section 242 of the Companies Act, 2013 after affording a
reasonable opportunity of being heard to the jurisdictional Principal Commissioner or
Commissioner.
Explanation.––For the purposes of this section,––
(i) a company shall be a subsidiary of another company, if such other company holds more
than half in nominal value of the equity share capital of the company;
(ii) “Tribunal” shall have the meaning assigned to it in clause (90) of section 2 of the
Companies Act, 2013.’.

91
 Contd….

Section 54B amended with effect from the 1st day of April 2020 :-

(i) in sub-section (4), the following proviso shall be inserted, namely:—

‘Provided that in case of a new asset, being computer or computer software, acquired by an
eligible start-up referred to in the proviso to clause (d) of sub-section (6), the provisions of
this sub-section shall have effect as if for the words “five years”, the words “three years” had
been substituted.’;
(ii) in sub-section (5), in the proviso, for the figures “2019”, the figures “2021” shall be
substituted;
(iii) in sub-section (6), in clause (b), in sub-clause (iii), for the word “fifty” at both the
places where it occurs, the word “twenty-five” shall be substituted.

92
 Contd….
Brief Impact:
Sec 79
Section 79 of the Income Tax Act provides conditions for carry
forward and set off of losses in case of a company not being a
company in which the public are substantially interested. Clause (a)
of this section applies to all such companies, except an eligible start-up as
referred to in section 80-IAC, while clause (b) applies only to such eligible
start-up.
Under clause (a), no loss incurred in any year prior to the previous year shall
be carried forward and set off against the income of the previous year, unless on
the last day of the previous year, the shares of the company carrying not less
than fifty-one per cent of the voting power were beneficially held by persons
who beneficially held shares of the company carrying not less than fifty-one per
cent of the voting power on the last day of the year or years in which the loss
was incurred. 93
 Contd….

Under clause (b), the loss incurred in any year prior to the previous year shall be carried
forward and set off against the income of the previous year, if, all the shareholders of such
company who held shares carrying voting power on the last day of the year or years in which the
loss was incurred, continue to hold those shares on the last day of such previous year and such
loss has been incurred during the period of seven years beginning from the year in
which such company is incorporated. The said clause was inserted vide Finance Act, 2017
in order to facilitate ease of doing business and to promote start-up India.
To further facilitate ease of doing business in the case of an eligible start-up, it is
proposed to amend section 79 so as to provide that loss incurred in any year prior
to the previous year, in the case of closely held eligible start-up, shall be allowed to
be carried forward and set off against the income of the previous year on
satisfaction of either of the two conditions stipulated currently at clause (a) or
clause (b). For other closely held companies, there would be no change, and loss incurred in
any year prior to the previous year shall be carried forward and set off only on satisfaction of
condition currently provided at clause (a).
This amendments will take effect from 1st April 2020 i.e. AY 2020-21 94
 Contd….

Brief Impact:
Section 54GB
In order to incentivize investment in eligible start-ups, it is proposed to amend
the said section so as to-
(i) extend the sun set date of transfer of residential property for investment in
eligible start-ups from 31st March 2019 to 31st March 2021;
(ii) relax the condition of minimum shareholding of fifty per cent of share capital
or voting rights to twenty-five per cent.
(iii) relax the condition restricting transfer of new asset being computer or
computer software from the current five years to three years.

This amendments will take effect from 1st April 2020 i.e. AY 2020-21

95
 9. Incentives for Category II Alternative Investment
Fund (AIF) [Clause 21]
In section 56 of the Income-tax Act, in sub-section (2), In clause (viib) w.e.f 1st day
of April,2020
Amendment in clause (i) of first proviso, “By a venture capital undertaking from a venture capital
company or a venture capital fund or a specified fund venture capital fund”
New Proviso Inserted after first proviso, “Provided further that where the provisions of this clause have
not been applied to a company on account of fulfilment of conditions specified in the notification issued under
clause (ii) of the first proviso and such company fails to comply with any of those conditions, then, any
consideration received for issue of share that exceeds the face value of such share shall be deemed to be the
income of that company chargeable to income-tax for the previous year in which such failure has taken place.”
Insertion of clauses in the Explanation after clause (a),
“(aa) “specified fund” means a fund established or incorporated in India in the form of a trust or a company or
a limited liability partnership or a body corporate which has been granted a certificate of registration as a
Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India
(Alternative Investment Fund) Regulations, 2012 made under the Securities and Exchange Board of India
Act, 1992;
(ab) “trust” means a trust established under the Indian Trusts Act, 1882 or under any other law for the time
96
being in force;”
6. Exemption of income of Foreign Company from sale of leftover
Contd….
stock of crude oil on termination of agreement or arrangement
[Clause 5]
Brief Impact:
The existing provisions of the said section 56 of the Income-tax Act, inter alia, provide that
where a company, not being a company in which the public are substantially interested,
receives, in any previous year, from any person being a resident, any consideration for issue
of shares that exceeds the face value of such shares, the aggregate consideration received for
such shares as exceeds the fair market value of the shares shall be charged to tax.

However, exemption from this provision has been provided for the consideration for issue
of shares received by a venture capital undertaking from a venture capital company or a
venture capital fund or by a company from a class or classes of persons as may be notified
by the Central Government in this behalf. Currently the benefit of exemption is
available to Category I AIF. With a view to facilitate venture capital
undertakings to receive funds from Category II AIF, it is proposed to amend
the said section to extend this exemption to fund received by venture capital
undertakings from Category II AIF as well.

This amendments will take effect from 1st April 2020 i.e. AY 2020-21.
97
E. FACILITATING RESOLUTION
OF DISTRESSED COMPANIES

98
 E. FACILITATING RESOLUTION OF DISTRESSED
COMPANIES

Effective
S. Clause
date
No Brief Section No.
[i.e.
.
w.e.f.]

Measures for resolution of 79 &

1. 22 & 34 01-04-2020
distressed companies 115JB

Prescription of exemption from

56(2)(x) &
2. deeming of fair market value of 19 & 21 01-04-2020
50CA
shares for certain transactions

99
1. Measures for resolution of distressed companies
[Clause 22 & 34]

For Section 79, the following sections shall be substituted w.e.f. 1st day of April
2020 :—
79. (1) Notwithstanding anything contained in this Chapter, where a change in shareholding has taken
place during the previous year in the case of a company, not being a company in which the public are
substantially interested, no loss incurred in any year prior to the previous year shall be carried forward
and set off against the income of the previous year, unless on the last day of the previous year, the shares
of the company carrying not less than fifty-one per cent. of the voting power were beneficially held by
persons who beneficially held shares of the company carrying not less than fifty-one per cent. of the
voting power on the last day of the year or years in which the loss was incurred:

Provided that even if the said condition is not satisfied in case of an eligible start up as referred to in
section 80-IAC, the loss incurred in any year prior to the previous year shall be allowed to be carried
forward and set off against the income of the previous year if all the shareholders of such company who
held shares carrying voting power on the last day of the year or years in which the loss was incurred,
continue to hold those shares on the last day of such previous year and such loss has been incurred during
the period of seven years beginning from the year in which such company is incorporated.
100
 Contd….

(2) Nothing contained in sub-section (1) shall apply,––

(a) to a case where a change in the said voting power and shareholding takes place in a
previous year consequent upon the death of a shareholder or on account of transfer of shares
by way of gift to any relative of the shareholder making such gift;
(b) To any change in the shareholding of an Indian company which is a subsidiary of a foreign
company as a result of amalgamation or demerger of a foreign company subject to the
condition that fifty-one per cent. shareholders of amalgamating or demerged foreign
company continue to be the shareholders of the amalgamated or the resulting foreign
company;
(c) to a company where a change in the shareholding takes place in a previous year pursuant
to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016, after
affording a reasonable opportunity of being heard to the jurisdictional Principal
Commissioner or Commissioner;
(d) to a company, and its subsidiary and the subsidiary of such subsidiary, where,––
101
 Contd….

(i) the Tribunal, on an application moved by the Central Government under section 241 of the
Companies Act, 2013, has suspended the Board of Directors of such company and has appointed
new directors nominated by the Central Government, under section 242 of the said Act; and
(ii) a change in shareholding of such company, and its subsidiary and the subsidiary of such
subsidiary, has taken place in a previous year pursuant to a resolution plan approved by the
Tribunal under section 242 of the Companies Act, 2013 after affording a reasonable
opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner.

Explanation.––For the purposes of this section,––

(i) a company shall be a subsidiary of another company, if such other company holds more than
half in nominal value of the equity share capital of the company;
(ii) “Tribunal” shall have the meaning assigned to it in clause (90) of section 2 of the Companies
Act, 2013.’.

102
 Contd….
In section 115JB of the Income-tax Act, in sub-section (2), in Explanation 1, in the long
line, for clause (iih), the following clause shall be substituted w.e.f. 01-04-2020 :—

‘(iih) the aggregate amount of unabsorbed depreciation and loss brought forward in case of a—
(A) company, and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal, on an application
moved by the Central Government under section 241 of the Companies Act, 2013 has suspended the Board of
Directors of such company and has appointed new directors who are nominated by the Central Government
under section 242 of the said Act;
(B) company against whom an application for corporate insolvency resolution process has been admitted by the
Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code,
2016.
Explanation.–– For the purposes of this clause,—
(i) “Adjudicating Authority” shall have the meaning assigned to it in clause (1) of section 5 of the Insolvency
and Bankruptcy Code, 2016;
(ii) “Tribunal” shall have the meaning assigned to it in clause (90) of section 2 of the Companies Act, 2013;
(iii) a company shall be a subsidiary of another company, if such other company holds more than half in the
nominal value of equity share capital of the company;
(iv) “loss” shall not include depreciation; or’.
103
 Contd….

Brief Impact:
The section 79 of the Income tax Act relating to carry forward and set off of
losses in case of certain companies and provides that where a change in
shareholding has taken place during the previous year in the case of a company,
not being a company in which the public are substantially interested, no loss
incurred in any year prior to the previous year shall be carried forward and set
off against the income of the previous year, unless on the last day of the
previous year, the shares of the company carrying not less than fifty-one per
cent. of the voting power were beneficially held by persons who beneficially
held shares of the company carrying not less than fifty-one per cent. of the
voting power on the last day of the year or years in which the loss was incurred
are same.

104
 Contd….

However, loss in some cases can be carried forward and set off even if there is change
in voting power or shareholding subject to conditions specified. This benefit is
proposed to be extended to certain companies. Thus it has been
provided in newly substituted section 79 that Loss can be carried
forward and set off by companies, and their subsidiary and the
subsidiary in case of change in shareholding and voting power, subject
to situations provided in of clause (d) of sub-section 2 of section 79 of
the Act.

Further, it is also proposed that under section 115JB of the Act, for
calculating book profit, the aggregate amount of unabsorbed
depreciation and loss (excluding depreciation) brought forward shall
also be allowed to be reduced in cases of the above mentioned
companies.
This amendments will take effect from 1st April 2020 i.e. AY 2020-21
105
2. Prescription of exemption from deeming of fair market
value of shares for certain transactions [Clause 19 & 21]

In section 50CA of the Income-tax Act, before the Explanation,

the following proviso shall be inserted w.e.f. 01/04/2020 :—
“Provided that the provisions of this section shall not apply to any consideration
received or accruing as a result of transfer by such class of persons and subject to
such conditions as may be prescribed.”

In section 56(2)(x) of the Income-tax Act, in the proviso, after

clause (X), the following clause shall be inserted with effect
from the1st day of April, 2020, namely:—
“(XI) from such class of persons and subject to such conditions, as may be
prescribed.”.

106
 Contd….
Brief Impact:
The existing provisions of the section 56(2)(x) r.w.s. 50CA, for determining the amount
of income for receipt of certain shares, the fair market value of the shares is of fair
market value of unquoted shares for computing the capital gains from the transfer of
such shares. For both these provisions, the fair market value is determined based on the
prescribed method. Determination of fair market value based on the prescribed rules
may result into genuine hardship with assessee.
Determination of fair market value based on the prescribed rules may
result into genuine hardship in certain cases where the consideration for
transfer of shares is approved by certain authorities and the person
transferring the share has no control over such determination. In order to
provide relief to such types of transactions from the applicability of
sections 56(2)(x) and 50CA, it is proposed to amend these sections to
empower the Board to prescribe transactions undertaken by certain class
of persons to which the provisions of section 56(2)(x) and 50CA shall not be
applicable.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in
relation to the assessment year 2020-21 and subsequent assessment years. 107
F. IMPROVING EFFECTIVENESS OF
TAX ADMINISTRATION

108
F. IMPROVING EFFECTIVENESS OF TAX
ADMINISTRATION

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Online filing of application seeking
determination of tax to be deducted
1. 195 47 01-11-2019
at source on payment to non-
residents
Electronic filing of statement of
2. transactions on which tax has not 206A 50 01-09-2019
been deducted

109
1. Online filing of application seeking determination
of tax to be deducted at source on payment to
non-residents [Clause 47]

Amendment in section 195 of the Income-tax Act, w.e.f.

01/11/2019,––
(a) In sub-section (2), for the words “to the Assessing Officer to determine, by
general or special order”, the words “in such form and manner to the
Assessing Officer, to determine in such manner, as may be
prescribed” shall be substituted;

(b) In sub-section (7), for the words “to the Assessing Officer to determine, by
general or special order”, the words “in such form and manner to the
Assessing Officer, to determine in such manner, as may be
prescribed” shall be substituted.
110
 Contd….
Brief Impact:
Under sub-section (2) of section 195 of the Act, if a person who is responsible for
paying any sum to a non-resident which is chargeable to tax under the Act (other
than salary) considers that the whole of such sum would not be income chargeable
in the case of the recipient, he can make an application to the Assessing Officer to
determine the appropriate proportion of such sum chargeable. This provision is used
by a person making payment to a non-resident to obtain certificate/order from the Assessing
Officer for lower or nil withholding-tax. However, the process is currently manual.

In order to use technology to streamline the process, which will not only
reduce the time for processing of such applications, but shall also help tax
administration in monitoring such payments, it is proposed to amend the
provisions of this section to allow for prescribing the form and manner of
application to the Assessing Officer and also for the manner of
determination of appropriate portion of sum chargable to tax by the
Assessing Officer. Similar amendment is also proposed to be made in sub-section (7)
of section 195 which are applicable to specified class of persons or cases.

These amendments will take effect from 1st November, 2019. 111
2. Electronic filing of statement of transactions on
which tax has not been deducted [Clause 50]

Substitution of section 206A of the Income-tax Act (i.e. Furnishing

of statement in respect of payment of any income to residents
without deduction of tax). The following section shall be
substituted w.e.f. 01/09/2011–
“(1) Any banking company or co-operative society or public company referred to in
the proviso to clause (i) of sub-section (3) of section 194A responsible for paying to a
resident any income not exceeding forty thousand rupees, where the payer is a
banking company or a co-operative society, and five thousand rupees in any other
case by way of interest (other than interest on securities), shall prepare such statement
in such form, containing such particulars, for such period, verified in such manner
and within such time, as may be prescribed, and deliver or cause to be delivered the
said statement to the prescribed income-tax authority or to the person authorised by
such authority.
112
 Contd….

(2) The Board may require any person, other than a person mentioned in sub-section
(1), responsible for paying to a resident any income liable for deduction of tax at source
under Chapter XVII, to prepare such statement in such form, containing such
particulars, for such period, verified in such manner and within such time, as may be
prescribed, and deliver or cause to be delivered the said statement to the income-tax
authority or the authorised person referred to in sub-section (1).
(3) The person responsible for paying to a resident any income referred to in sub-section
(1) or sub-section (2) may also deliver to the income-tax authority referred to in sub-
section (1), a correction statement for rectification of any mistake or to add, delete or
update the information furnished in the statement delivered under the said sub-sections
in such form and verified in such manner, as may be prescribed.”.

113
 Contd….
Brief Impact:
Section 206A of the Act relates to furnishing of statement in respect of
payment of certain income by way of interest to residents where no tax has
been deducted at source. At present, the section provides for filing of such
statements on a floppy, diskette, magnetic tape, CD-ROM, or any other computer
readable media.
• It is also proposed to make a consequential amendment arising out of amendment
carried out by Finance Act, 2019 whereby threshold for TDS on payment of interest
by a banking company or cooperative society or public company was raised to forty
thousand rupees. [clause (1)]
• To enable online filing of such statements, it is proposed to substitute this section so
as to provide for filing of statement (where tax has not been deducted on payment of
interest to residents) in prescribed form in the prescribed manner. [clause (2)]
• It is also proposed to provide for correction of such statements for rectification of
any mistake or to add, delete or update the information furnished. [clause (3)]

These amendments will take effect from 1st September, 2019 114
G. STRENGTHENING ANTI-
ABUSE MEASURES

115
 G. STRENGTHENING ANTI-ABUSE
MEASURES

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Tax on income distributed to
115QA,
1. shareholder in case of listed 6,36 05-07-2019
10(34A)
companies
Cancellation of registration of the
2. 12AA 7 01-09-2019
Trust or Institution

116
1. Tax on income distributed to shareholder in case
of listed companies [Clause 6 & 36]
In section 10 of the Income-tax Act , in Clause (34A):
(34A)any income arising to an assessee, being a shareholder, on account of buy
back of shares (not being listed on a recognised stock exchange)*by the
company as referred to in section 115QA;
In section 115QA of the Income-tax Act, in sub-section (1),
Notwithstanding anything contained in any other provision of this Act, in
addition to the income-tax chargeable in respect of the total income of a
domestic company for any assessment year, any amount of distributed income
by the company on buy-back of shares (not being shares listed on a recognised
stock exchange) * from a shareholder shall be charged to tax and such company
shall be liable to pay additional income-tax at the rate of twenty per cent on the
distributed income.
* Omitted with effect from the 5th day of July, 2019 117
 Contd….
Brief Impact:
Section 115QA of the Act provides for the levy of additional Income-tax at the
rate of twenty per cent. of the distributed income on account of buy-back of
unlisted shares by the company. As additional income-tax has been levied at the
level of company, the consequential income arising in the hands of shareholders
has been exempted from tax under clause (34A) of section 10 of the Act.

This section was introduced (by Finance Act, 2013 ) as an anti-abuse provision to
check the practice of unlisted companies resorting to buy-back of shares instead
of payment of dividends. This practice of widespread abuse was noted, in the
past, amongst unlisted companies where the taxpayers preferred it for tax
avoidance, as tax rate for capitals gains was lower than the rate of Dividend
Distribution Tax (DDT). However, instances of similar tax arbitrage have now
come to notice in case of listed shares as well, whereby the listed companies are
also indulging in such practice of resorting to buy-back of shares, instead of
payment of dividends.
118
 Contd….

In order to curb such tax avoidance practice adopted by the listed

companies, the existing anti abuse provision under Section 115QA of
the Act, pertaining to buy-back of shares from shareholders by companies not
listed on a recognised stock exchange, is proposed to be extended to all
companies including companies listed on recognised stock
exchange.

Thus, any buy back of shares from a shareholder by a company listed

on recognised stock exchange, on or after 5th July 2019, shall also be
covered by the provision of section 115QA of the Act. Accordingly, it
is also proposed to extend exemption under clause (34A) of section
10 of the Act to shareholders of the listed company on account of
buy-back of shares on which additional income -tax has been paid
by the company.

These amendments will take effect from 5th July, 2019. 119
1. Cancellation of registration of the Trust or
Institution [Clause 7]
In section 12AA of the Income-tax Act, w.e.f. 01-09-2019:-
(I) in sub-section (1),––
i. for clause (a), the following clause shall be substituted, namely:––
“(a) call for such documents or information from the trust or institution as he thinks
necessary in order to satisfy himself about,––
i. the genuineness of activities of the trust or institution; and
ii. the compliance of such requirements of any other law for the time being in force
by the trust or institution as are material for the purpose of achieving its objects,
and may also make such inquiries as he may deem necessary in this behalf; and”

ii. In clause (b), after the words “genuineness of its activities”, the words, brackets,
figures and letter “as required under sub-clause (i) of clause (a) and compliance
of the requirements under sub-clause (ii) of the said clause” shall be inserted
120
 Contd….

(II) in sub-section (4), for the portion beginning with the words “the activities of the trust
or the institution” and ending with the words “cancel the registration of such trust or
institution”, the following shall be substituted, namely:––
“(a) the activities of the trust or the institution are being carried out in a manner that the
provisions of sections 11 and 12 do not apply to exclude either whole or any part of the
income of such trust or institution due to operation of sub-section (1) of section 13; or
(b) the trust or institution has not complied with the requirement of any other law, as
referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or
decree, by whatever name called, holding that such non-compliance has occurred, has
either not been disputed or has attained finality,

then, the Principal Commissioner or the Commissioner may, by an order in writing,

cancel the registration of such trust or institution”.
121
 Contd….

Brief Impact:
Section 12AA of the Act prescribes for manner of grating registration in case of
trust or institution for the purpose of availing exemption in respect of its
income under section 11 of the Act, subject to conditions contained under
sections 11, 12, 12AA and 13. Section 12AA also provides for manner of
cancellation of said registration. This section provides that cancellation of
registration can be on two grounds:-
a) the Principal Commissioner or the Commissioner is satisfied that activities
of the exempt entity are not genuine or are not being carried out in
accordance with its objects; and
b) it is noticed that the activities of the exempt entity are being carried out in
a manner that either whole or any part of its income would cease to be
exempt .
122
 Contd….
In order to ensure that the trust or institution do not deviate from
their objects, it is proposed to amend section 12AA of the Income-
tax Act, so as to provide that,-
i. at the time of granting the registration to a trust or institution, the Principal
Commissioner or the Commissioner shall, inter alia, also satisfy himself
about the compliance of the trust or institution to requirements of any other
law which is material for the purpose of achieving its objects;
ii. where a trust or an institution has been granted registration under clause (b)
of sub-section (1) or has obtained registration at any time under section 12A
and subsequently it is noticed that the trust or institution has violated
requirements of any other law which was material for the purpose of
achieving its objects, and the order, direction or decree, by whatever name
called, holding that such violation has occurred, has either not been disputed
or has attained finality, the Principal Commissioner or Commissioner may,
by an order in writing, cancel the registration of such trust or institution
after affording a reasonable opportunity of being heard.
These amendments shall be effective from 1st September, 2019. 123
H. REMOVING DIFFICULTIES
FACED BY TAXPAYERS

124
 H. Removing difficulties faced by taxpayers
Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]

Facilitating demerger of Ind-AS compliant

Section 2
1. companies Clause 3 01-04-20
(19AA)

Relaxing the provisions of sections 201 and

Section 201 & Clause 49 01-09-19 &
2. 40 in case of payments to non-residents
40 & 10 01-04-20

Clarification with regard to power of the

AO in respect of modified return of
3. Section 92CD Clause 29 01-09-19
income filed in pursuance to signing of
APA

Clarification with regard to provisions of 01-04-18 &

4. secondary adjustment and giving an option Section 92CE Clause 30 01-09-19
to assessee to make one-time payment
125
 H. Removing difficulties faced by taxpayers
Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Concessional rate of STCG tax to Clause
5. Section 111A 01-04-20
certain equity-oriented fund of funds. 32
Provide for pass through of losses in Clause
6. Section 115UB 01-04-20
cases of Category I and II AIF 38
Section 140A, Clauses
Provision of credit of relief provided
Section 143, Section 42, 43,
7. under section 89 01-04-07
234A, Section 234B 52, 53, &
and Section 234C 54
TDS on non exempt portion of life Clause
8. Section 194DA 01-09-19
insurance pay-out on net basis 44

Clarification regarding definition of the Clause

9. Section 286 01-04-17
“accounting year” in section 286 67
126
1. Facilitating demerger of Ind-AS compliant
companies (Clause 3)
Proviso to Section 2 (19AA), in sub-clause (iii), inserted with effect
from the 1st day of April, 2020 –
“Provided that the provisions of this sub-clause shall not apply where the resulting company
records the value of the property and the liabilities of the undertaking or undertakings at a
value different from the value appearing in the books of account of the demerged company,
immediately before the demerger, in compliance to the Indian Accounting Standards specified in
Annexure to the Companies (Indian Accounting Standards) Rules, 2015;”.
Brief Impact:
This proviso has been inserted to facilitate the demerger of Ind-AS Compliant
Companies. Now, the requirement of recording property and liabilities at book value
by the resulting company shall not be applicable in a case where the property and
liabilities of the undertakings received by it are recorded at a value different from the
value appearing in the books of account of the demerged company immediately
before the demerger in compliance to the Ind-AS specified in Annexure to the
Companies (Indian Accounting Standards) Rules, 2015.
127
2. Relaxing the provisions of Sections 201 and 40 in case of
payments to non-residents (Clause 49 & 10)

Amendment in Section 201 with effect from the 1st day of

September, 2019,

* In sub-section (1), in the first proviso, for the word “resident” wherever it occurs, the
word “payee” shall be substituted;

*In sub-section (1A), in the proviso, for the word “resident” wherever it occurs, the word
“payee” shall be substituted;

* In sub-section (3), after the words “credit is given”, the words, brackets and figures
“or two years from the end of the financial year in which the correction statement is
delivered under the proviso to sub-section (3) of section 200, whichever is later” shall be
inserted.
128
 CONTD….
• In section 40 in clause (a), w.e.f. 01-04-2020, in sub-clause (i),
after the proviso, the following proviso shall be inserted:––
“provided further that where an assessee fails to deduct the whole or any part of the tax in
accordance with the provisions of chapter XVII-B on any such sum but is not deemed to be
an assessee in default under the first proviso to sub-section (1) of section 201, then, for the
purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the
tax on such sum on the date of furnishing of return of income by the payee referred to in the
said proviso;”

• In the Second proviso in sub-clause (ia), the word “resident”

shall be omitted:
“Provided further that where an assessee fails to deduct the whole or any part of the tax in
accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be
an assessee in default under the first proviso to sub-section (1) of section 201, then, for the
purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax
on such sum on the date of furnishing of return of income by the resident payee referred to
in the said proviso.”
129
 CONTD….

Brief Impact:
• The above changes in Section 201 have been made to extend the benefit of
the section to the deductor, in case he fails to deduct tax on a payment
made to any payee whether resident or non-resident, if such payee
has furnished his return of income under section 139, disclosed such
payment for computing his income in his return of income, paid the tax
due on the income declared by him in his return of income and furnished
an accountant’s certificate to this effect. Then, the deductor shall not
be deemed to be an assessee in default.
• Consequently, the levy of interest u/s 201(1A) till the date of filing of
return by the non-resident payee is made as is the case at present with
resident payee. 130
 CONTD….
Brief Impact:
• Further, the amendment in Section 40(a) provides that, where an assessee fails to
deduct tax in accordance with the provisions of Chapter XVII-B on any sum paid to a
non-resident, but is not deemed to be an assessee in default under the first proviso to
Section 201(1), then it shall be deemed that the assessee has deducted and paid the
tax on such sum on the date of furnishing of the return of income by the payee
(whether resident/non-resident) referred to in that proviso. Thus, there will
be no disallowance u/s 40 in respect of such payments.
• Amendment to the proviso to Section 200(3) has been made, in respect of a
correction statement delivered by the assessee that no order shall be made u/s
200(1) deeming a person to be an assessee in default for failure to deduct the whole
or any part of the tax from a resident, at any time after the expiry of seven years
from the end of the financial year in which payment is made or credit is
given, or two years from the end of the financial year in which such
correction statement is delivered under the proviso to sub-section (3) of
section 200, whichever is later. 131
3. Clarification with regard to power of the AO in respect of
modified return of income filed in pursuance to signing of
APA (Clause 29)
Amendment in Section 92CD, with effect from the 1st day of
September, 2019,–
• In sub-section (3), for the words “proceed to assess or reassess or recompute the total income
of the relevant assessment year”, the words “pass an order modifying the total income of the
relevant assessment year determined in such assessment or reassessment, as the case may be,”
shall be substituted;
• In sub-section (5), in clause (a), the words “of assessment, reassessment or
recomputation of total income” shall be omitted
“(5) Notwithstanding anything contained in section 153 or section 153B or section
144C,—
(a) the order of assessment, reassessment or recomputation of total income
under sub-section (3) shall be passed within a period of one year from the end of the
financial year in which the modified return under sub-section (1) is furnished;”

132
 CONTD….

Brief Impact:
The aforesaid amendment is made to clarify that the intention of Sub-
section (3) is for the AO to merely modify the total income consequent to
modification of return of income in pursuance to APA and not to start fresh
assessment/reassessment in respect of completed assessments/
reassessments of the assessees who have modified their returns of income in
accordance with the APA entered into by them. Therefore, the AO shall pass
an order just modifying the total income of the relevant assessment year
determined in such assessment or reassessment, having regard to and in
accordance with the APA.

133
4. Clarification with regard to provisions of secondary
adjustment and giving an option to assessee to make one-
time payment (Clause 30)
Amendment in Section 92CE of the Income-tax Act,––
• In sub-section (1), in clause (iii), for the word, figures and letters “section 92CC”, the
words, figures and letters “section 92CC, on or after the 1st day of April, 2017,” shall
be substituted and shall be deemed to have been substituted with effect from the 1st day
of April, 2018;
• In the proviso, in clause (i), for the words “one crore rupees; and”, the words “one crore
rupees; or” shall be substituted and shall be deemed to have been substituted with effect
from the 1st day of April, 2018;
• After the proviso, the following proviso shall be inserted and shall be deemed to have
been inserted with effect from the 1st day of April, 2018, namely:––
“Provided further that no refund of taxes paid, if any, by virtue of provisions of this sub-
section as they stood immediately before their amendment by the Finance (No.2) Act,
2019 shall be claimed and allowed.”;
134
 CONTD….

• In sub-section (2), for the words “the excess money which”, the words “the excess money or
part thereof, as the case may be, which” shall be substituted and shall be deemed to have
been substituted with effect from the 1st day of April, 2018;
• The following Explanation shall be inserted and shall be deemed to have been inserted with
effect from the 1st day of April, 2018, namely:––
“Explanation.––For the removal of doubts, it is hereby clarified that the excess money or part
thereof may be repatriated from any of the associated enterprises of the assessee which is not a
resident in India.”;
• After sub-section (2), the following sub-sections shall be inserted with effect from the 1st
day of September, 2019, namely:––
“(2A) Without prejudice to the provisions of sub-section (2), where the excess money or part
thereof has not been repatriated within the prescribed time, the assessee may, at his option, pay
additional income-tax at the rate of eighteen per cent. on such excess money or part thereof, as
the case may be…….”
135
 CONTD….

“……(2B) The tax on the excess money or part thereof so paid by the assessee under
sub-section (2A) shall be treated as the final payment of tax in respect of the excess
money or part thereof not repatriated and no further credit therefor shall be claimed by
the assessee or by any other person in respect of the amount of tax so paid.
(2C) No deduction under any other provision of this Act shall be allowed to the assessee
in respect of the amount on which tax has been paid in accordance with the provisions
of sub-section (2A).
(2D) Where the additional income-tax referred to in sub-section (2A) is paid by the
assessee, he shall not be required to make secondary adjustment under sub-section (1)
and compute interest
under sub-section (2) from the date of payment of such tax.”.

136
 CONTD….
Brief Impact:
The aforesaid amendment in Section 92CE is made in order to align the transfer
pricing provisions with the international best practices. The impact of the
amendments is as such:-
i. The condition of threshold of one crore rupees and of the primary adjustment
made upto assessment year 2016-17 are alternate conditions;
ii. the assessee shall be required to calculate interest on the excess money or part
thereof;
iii. the provision of this section shall apply to the agreements which have been
signed on or after 1st April, 2017; however, no refund of the taxes already paid
till date under the pre amended section would be allowed;
iv. the excess money may be repatriated from any of the associated enterprises of
the assessee which is not resident in India;

The amendments proposed above in para (i) to (iv) above will take effect
retrospectively from the 1st April, 2018. 137
 CONTD….
Brief Impact:
Further, the amendments proposed below in para (v) to (viii) will be effective
from 1st September, 2019.
v. In a case where the excess money or part thereof has not been repatriated in
time, the assessee will have the option to pay additional income-tax at the rate of
eighteen per cent on such excess money or part thereof in addition to the
existing requirement of calculation of interest till the date of payment of this
additional tax. The additional tax is proposed to be increased by a surcharge of
twelve per cent;
vi. The tax so paid shall be the final payment of tax and no credit shall be allowed
in respect of the amount of tax so paid;
vii. The deduction in respect of the amount on which such tax has been paid ,
shall not be allowed under any other provision of this Act; and
viii. if the assessee pays the additional income-tax, he will not be required to
make secondary adjustment or compute interest from the date of payment of
such tax. 138
5. CONCESSIONAL RATE OF STCG TAX TO
CERTAIN EQUITY-ORIENTED FUND OF FUNDS.
(Clause 32)
Amendment of Section 111A with effect from the 1st day of April, 2020:-
In section 111A of the Income-tax Act, in the Explanation, in clause (a), for the words,
brackets and figures “the Explanation to clause (38) of section 10”, the words, brackets, letters
and figures “clause (a) of the Explanation to section 112A” shall be substituted with effect
from the 1st day of April, 2020.
Brief Impact:
In order to incentivise fund of funds set up for disinvestment of Central Public Sector
Enterprises (CPSEs), earlier Finance Act, 2018 has provided concessional rate of LTCG
u/s 112A for the transfer of units of such fund of funds. Now, to further incentivise these
funds of funds, it is proposed to amend section 111A so as to extend the concessional rate
of tax for STCG in respect of transfer of units of such fund of funds.To give this effect,
Clause (a) of the Explanation to the said section which provided that the "equity oriented
fund" shall have the meaning assigned to it in the Explanation to clause (38) of section 10 is
amended to provide that "equity oriented fund" shall have the meaning assigned to it in
clause (a) of the Explanation to section 112A. 139
6. Provide for pass through of losses in cases of Category I
and Category II Alternative Investment Fund (AIF)
(Clause 38)
Amendment in section 115UB, in sub-section (2), with effect from
the 1st day of April, 2020,––

For clauses (i) and (ii), the following clauses shall be substituted,
namely:––
“(i) out of such loss, the loss arising to the investment fund as a result of the computation
under the head “Profit and gains of business or profession”, if any, shall be,––
(a) allowed to be carried forward and it shall be set off by the investment fund in
accordance with the provisions of ChapterVI; and
(b) ignored for the purposes of sub-section (1);
(ii) the loss other than the loss referred to in clause (i), if any, shall also be ignored for
the purposes of sub-section (1), if such loss has arisen in respect of a unit which has not
been held by the unit holder for a period of atleast twelve months.’;
140
 CONTD….

After sub-section (2), the following sub-section shall be inserted, namely:––

“(2A) The loss other than the loss under the head “Profit and gains of business or
profession”,if any, accumulated at the level of investment fund as on the 31st day of March,
2019, shall be,––
(i) deemed to be the loss of a unit holder who held the unit on the 31st day of March, 2019
in respect of the investments made by him in the investment fund, in the same manner as
provided in sub-section (1); and
(ii) allowed to be carried forward by such unit holder for the remaining period calculated
from the year in which the loss had occurred for the first time taking that year as the first
year and shall be set off by him in accordance with the provisions of Chapter VI:
Provided that the loss so deemed under this sub-section shall not be available to the
investment fund on or after the 1st day of April, 2019.”.
141
 CONTD….
Brief Impact:
Pass through of losses are not provided under the existing regime and are retained at AIF level to
be c/f and set off in accordance with Chapter VI. So, to remove this genuine difficulty faced by
Category I and II AIFs, the aforesaid amendments are made having the following impact:-
• the business loss of the investment fund, if any, shall be allowed to be carried forward and it
shall be set-off by it in accordance with the provisions of Chapter VI and it shall not be passed
onto the unit holder;
• the loss other than business loss, if any, shall also be ignored for the purposes of pass through
to its unit holders, if such loss has arisen in respect of a unit which has not been held by the
unit holder for a period of atleast twelve months;
• the loss other than business loss, if any, accumulated at the level of investment fund as on 31st
March, 2019, shall be deemed to be the loss of a unit holder who held the unit on 31st March,
2019 in respect of the investments made by him in the investment fund and allowed to be
carried forward by him for the remaining period calculated from the year in which the loss
had occurred for the first time taking that year as the first year and it shall be set-off by him in
accordance with the provisions of Chapter VI;
• the loss so deemed in the hands of unit holders shall not be available to the investment fund
for the purposes of chapter VI.
These amendments will take effect from the 1st April, 2020 and will, accordingly, apply in
relation to the assessment year 2020-21 and subsequent assessment years. 142
7. Provision of credit of relief provided under
section 89 (Clauses 42, 43, 52, 53, & 54)
Amendment in section 140A with effect from 1st day of April, 2007:-
• In sub-section (1), after clause (ii), the following clause shall be inserted
and shall be deemed to have been inserted with effect from the 1st day of April, 2007,
namely:––
“(iia) any relief of tax claimed under section 89;”;
• In sub-section (1A), in clause (i), after sub-clause (b), the following
sub-clause shall be inserted and shall be deemed to have been inserted with effect
from the 1st day of April, 2007, namely:––
“(ba) any relief of tax claimed under section 89;”;
• In sub-section (1B), in the Explanation, after clause (i), the following
clause shall be inserted and shall be deemed to have been inserted with effect from
the 1st day of April, 2007, namely:––
“(ia) any relief of tax claimed under section 89;”.
143
 CONTD….

Amendment in section 143 with effect from the 1st day of April, 2007:-
In sub-section (1), in clause (c), after the words “any advance tax paid,”, the words and
figures “any relief allowable under section 89,” shall be inserted and shall be deemed to
have been inserted with effect from the 1st day of April, 2007

Amendment in section 234A with effect from the 1st day of April, 2007:-
In sub-section (1), in the long line, after clause (ii), the following clause shall be inserted
and shall be deemed to have been inserted with effect from the 1st day of April, 2007,
namely:–
“(iia) any relief of tax allowed under section 89;”.

144
 CONTD….

Amendment in section 234B with effect from the 1st day of April,
2007:-
In sub-section (1), in Explanation 1, after clause (i), the following clause shall be
inserted and shall be deemed to have been inserted with effect from the 1st day of April,
2007, namely:––
“(ia) any relief of tax allowed under section 89;”.

Amendment in section 234C with effect from the 1st day of April, 2007:-
In sub-section (1), in the Explanation, after clause (i), the following clause shall be
inserted and shall be deemed to have been inserted with effect from the 1st day of April,
2007, namely:––
“(ia) any relief of tax allowed under section 89;”.

145
 CONTD….

Brief Impact:
Section 89 of the Income-tax Act contains provisions for providing tax relief
where salary, etc. is paid in arrears or in advance.
Whereas, the existing provisions of Section 140A, Section 143, Section 234A,
Section 234B and Section 234C contain provisions relating to computation of tax
liability after allowing credit for prepaid taxes and certain admissible reliefs,
credits etc. However, the relief under section 89 is not specifically mentioned in
these sections.

So to remove the difficulty faced in this regard by the taxpayers who

are eligible for this relief an amendment in Section 140A, Section 143,
Section 234A, Section 234B and Section 234C is proposed so as to
provide that computation of tax liability shall be made after allowing
relief under section 89 and this amendment is applicable
retrospectively from 1st April, 2007.
146
8. TDS on non-exempt portion of life insurance pay-out on
net basis (Clause 44)

Amendment in section 194DA w.e.f. 01-09-2019

In section 194DA, for the words “one per cent.”, the words “five per cent. on the amount of
income comprised therein” shall be substituted with effect from the 1st day of September,
2019.
Brief Impact:
As per the existing section, a person is obliged to deduct tax at source, if it pays any sum
to a resident under a life insurance policy, which is not exempt under sub-section (10D)
of section 10 at the rate of one per cent. of such sum at the time of payment, which is
creating genuine difficulties.
Thus, the above amendment has been made where the person who is paying
such sum has to deduct tax at source at the rate of five per cent on just the
income component of the sum paid by the person including the sum
allocated by way of bonus on such life insurance policy, excluding the amount
exempted under the said clause (10D) of section 10. 147
9. Clarification regarding definition of the
“Accounting Year” in section 286 (Clause 67)

Amendment in section 286 retrospectively with effect from the

1st day of April, 2017:-
In sub-section (9), in clause (a), in sub-clause (i), of Section 286 the words “or
alternate reporting entity” shall be omitted and shall be deemed to have been omitted
with effect from the 1st day of April, 2017.
“(9) For the purposes of this section,—
(a) "accounting year" means,—
(i) a previous year, in a case where the parent entity or alternate reporting
entity is resident in India; or…..”

148
 CONTD….

Brief Impact:
In order to remove the hardship and concerns raised in respect of the alternate
reporting entity (ARE) resident in India whose ultimate parent entity is not
resident in India, the accounting year would always be the accounting year
applicable in the country where such ultimate parent entity is resident and
cannot be the previous year of the entity resident in India. The following clarity
is brought by amending Section 286 so as to provide that the accounting year in
case of the ARE of an international group, the parent entity of which is not
resident in India, the reporting accounting year shall be the one
applicable to such parent entity.

This amendment is clarificatory in nature. The amendment will take

effect retrospectively from the 1st April, 2017 and will, accordingly, apply in
relation to A.Y. 2017-18 and subsequent assessment years.
149
I. RATIONALISATION OF
PROVISIONS

150
 I. RATIONALISATION OF PROVISIONS

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Rationalisations of provisions relating to
maintenance, keeping and furnishing of
1. 92D 31 01-04-2020
information and documents by certain
persons.

Compliance with the notification of 56(2)

2. 21 01-04-2020
exemption issued under section 56(2)(viib). (viib)

56(2)
3. Consequential amendment to section 56. 21 01-04-2017
(viii)
Rationalisation of penalty provisions relating
4. 270A 61 01-04-2017
to under-reported income.
151
 I. RATIONALISATION OF PROVISIONS

Clause Effective
S.
Brief Section No. date
No.
[i.e. w.e.f.]
Rationalisation of the provisions of section
5. 276CC 65 01-04-2020
276CC.
Rationalisation of provision relating recovery
6. of tax in pursuance of agreements with 228A 51 01-09-2019
foreign countries.
Rationalisation of provisions relating to claim
7. 239 55 01-09-2019
of refund.
Enhancing time limitation for sale of attached
Rule
8. property under rule 68B of the Second 68 01-09-2019
68B
Schedule of the Act.

152
 I. RATIONALISATION OF PROVISIONS

S. Clause Effective
No. Brief Section No. date
` [i.e. w.e.f.]
Rationalisation of the Black Money (Undisclosed
2, 10, 84 195,196, 01-07-15 &
9. Foreign Income and Assets) and Imposition of
& 17 197 & 198 01-09-19
Tax Act, 2015

Rationalisation of the Income Declaration 187 &

10. 199 & 200 01-06-16
Scheme, 2016 191

11. Rationalisation of provisions relating to STT 99 193 01-09-19

23,24,26 172, 173,

Rationalizing the provisions of the Prohibition of 01-11-16 &
12. , 54A, 174, 175
Benami Property Transactions Act 01-09-19
54B,55 & 176
Extension of tax concession to The Special
13. 13 186 01-04-19
Undertaking of the Unit Trust of India (SUUTI)
153
1. Rationalisations of provisions relating to maintenance,
keeping and furnishing of information and documents by
certain persons. [Clause 31]
Section 92D shall be substituted with effect from the 1st day of April,2020
In the Income-tax Act, for section 92D, the following section shall be substituted with effect from
the 1st day of April, 2020, namely:–
‘92D. (1) Every person,––
(i) who has entered into an international transaction or specified domestic transaction shall
keep and maintain such information and document in respect thereof as may be prescribed;
(ii) ii) being a constituent entity of an international group, shall keep and maintain such
information and document in respect of an international group as may be prescribed.
Explanation.––For the purposes of this clause,––
(A) “constituent entity” shall have the meaning assigned to it in clause (d) of sub-section (9) of
section 286;
(B) “international group” shall have the meaning assigned to it in clause (g) of sub-section (9) of
section 286.
154
 Contd….

2) Without prejudice to the provisions contained in sub-section (1), the Board may prescribe the
period for which the information and document shall be kept and maintained under the said
sub-section.

3) The Assessing Officer or the Commissioner (Appeals) may, in the course of any proceeding
under this Act, require any person referred to in clause (i) of sub-section (1) to furnish any
information or document referred therein, within a period of thirty days from the date of receipt
of a notice issued in this regard:

Provided that the Assessing Officer or the Commissioner (Appeals) may, on an application made
45 by such person, extend the period of thirty days by a further period not exceeding thirty days.

4) The person referred to in clause (ii) of sub-section (1) shall furnish the information and
document referred therein to the authority prescribed under sub-section (1) of section 286, in
such manner, on or before such date, as may be prescribed.’.
155
 Contd….

Brief Impact:
Section 92D of the Act inter alia, provides for maintenance and keeping of
information and document by persons entering into an international transaction or
specified domestic transaction in the prescribed manner.

Sub-section (1) of section 92D provides that every person who has entered into an
international transaction or specified domestic transaction shall keep and maintain the
prescribed information and document in respect thereof.

Proviso to said section inserted through the Finance Act, 2016 provides that the
person, being a constituent entity of an international group, shall also keep and
maintain such information and document in respect of an international group as may
be prescribed. Accordingly, Rule 10DA, prescribed for this purpose, provides the
requisite information to be furnished in prescribed form, subject to the thresholds of
the consolidated group revenue and the international transaction. 156
 Contd….

Brief Impact:
It is proposed to substitute section 92D of the Act, in order to provide
that the information and document to be kept and maintained by a
constituent entity of an international group, and filing of required
form, shall be applicable even when there is no international
transaction undertaken by such constituent entity.

It is also proposed to provide that information shall be furnished by

the constituent entity of an international group to the prescribed
authority.

This amendments will take effect from 1st April 2020 i.e. AY 2020-21

157
2. Compliance with the notification of exemption issued
under section 56(2)(viib) [Clause 21]

Section 56(2)(viib) shall be amended with effect from the 1st day
of April,2020

In section 56 of the Income-tax Act, in sub-section (2),–

(i) in clause (viib), with effect from the 1st day of April, 2020,-
(a) in the proviso, in clause (i), for the words “venture capital fund”, the words
“venture capital fund or a specified fund” shall be substituted;
(b) after the proviso, the following proviso shall be inserted, namely:-
“Provided further that where the provisions of this clause have not been applied to a
company on account of fulfilment of conditions specified in the notification issued
under clause (ii) of the first proviso and such company fails to comply with any of those
conditions, then, any consideration received for issue of share that exceeds

158
 Contd….

the face value of such share shall be deemed to be the income of that company chargeable to
income-tax for the previous year in which such failure has taken place.”;

c) in the Explanation, after clause (a), the following clauses shall be inserted, namely:—
‘(aa) “specified fund” means a fund established or incorporated in India in the form of a
trust or a company or a limited liability partnership or a body corporate which has been
granted a certificate of registration as a Category II Alternative Investment Fund and is
regulated under the Securities and Exchange Board of India (Alternative Investment Fund)
Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992;

(ab) “trust” means a trust established under the Indian Trusts Act, 1882 or under any other
law for the time being in force;’

159
 Contd….

Brief Impact:
The provisions of section 56(2)(viib) of the Act provides for charging of the
consideration received for issue of shares by certain companies, where such
consideration exceeds the fair market value of such shares. However, the Central
Government is empowered to notify that the provisions of this section shall not be
applicable to consideration received by a notified company subject to the fulfilment of
certain conditions.
As per amendment, it is proposed to provide that in case of failure to comply
with the conditions by the such companies, the consideration received for issue of
shares which exceeds the face value of such shares shall be deemed to be the income
of the company chargeable to income-tax for the previous year in which the failure to
comply with any of the said conditions has taken place.

This amendments will take effect from 1st April 2020 i.e. AY 2020-21.
160
3. Consequential amendment to section 56 [Clause 21]

Section 56 shall be amended with retrospectively effect from the 1st day
of April,2017
(ii) in clause (viii), for the words, brackets, letters and figures “clause (b) of section 145A”, the
words, brackets, figures and letter “sub-section (1) of section 145B” shall be substituted and shall
be deemed to have been substituted with effect from the 1st day of April 2017;
Brief Impact:
The existing provisions of the section 56 of the Income-tax Act, inter alia, provide that
income by way of interest received on compensation or on enhanced compensation
referred to in section 145A(b) shall be chargeable to tax. The Finance Act, 2018
substituted the provisions of section 145A with sections 145A and section 145B.
However, no consequential amendment is made in section 56.
It is proposed to amend section 56 of the Act to provide the correct
reference of section 145B(1) in section 56, in place of the existing
reference of section 145A(b).
This amendments will take retrospectively effect from 1st April 2017 i.e. AY 2017-18.
161
4. Rationalisation of penalty provisions relating to under-
reported. [Clause 61]

Section 270A amended with effect from the 1st day of April 2017,––

In section 270A of the Income-tax Act,-

(A) for the words “no return of income has been furnished” at both the places
where they occur, the words and figures “no return of income has been
furnished or where return has been furnished for the first time under
section 148” shall be substituted and shall be deemed to have been
substituted with effect from the 1st day of April, 2017;
(B) in sub-section (2), in clause (e), for the words “no return of income has
been filed”, the words and figures “no return of income has been furnished
or where return has been furnished for the first time under section 148”
shall be substituted and shall be deemed to have been substituted with
effect from the 1st day of April, 2017;
162
4. Standard deduction on salary income Contd….
[Clause 7 & 8]

(C) in sub-section (3), in clause (i), in sub-clause (b), for the words “no return has been
furnished”, the words and figures “no return of income has been furnished or where return
has been furnished for the first time under section 148” shall be substituted and shall be
deemed to have been substituted with effect from the 1st day of April, 2017.
Brief Impact:
The existing provisions does not provide the mechanism for determining under-
reporting of income and quantum of penalty to be levied in the case where the
person has under-reported income and furnished the return of income for the first
time under section 148 of the Act.
As per amendment, this section provide manner of computing the
quantum of penalty in a case where the person has under-reported
income and furnished his return for the first time under section 148, it is
proposed to suitably amend the provisions of section 270A.
This amendments will take retrospectively effect from 1st April 2017 i.e. AY 2017-
18. 163
5. Rationalisation of the provisions of Section 276CC.
[Clause 65]

Section 276CC amended with effect from the 1st day of April 2020

In section 276CC of the Income-tax Act, in the proviso, in clause

(ii), for sub-clause (b), the following sub-clause shall be
substituted with effect from the 1st day of April 2020, namely:–

“(b) the tax payable by such person, not being a company, on the total income
determined on regular assessment, as reduced by the advance tax or self-assessment
tax, if any, paid before the expiry of the assessment year, and any tax deducted or
collected at source, does not exceed ten thousand rupees

164
 Contd….

Brief Impact:
The existing provisions of section 276CC of the Act, inter alia, provide that
prosecution proceedings for failure to furnish returns of income against a person shall
not proceeded against, for failure to furnish the return of income in due time, if the
tax payable by such person, not being a company, on the total income determined on
regular assessment does not exceed three thousand rupees. The existing provisions
of the section 276CC of the Income-tax Act does not provide for
considering tax collected at source and self-assessment tax for the
purposes of determining the tax liability.
As per amendment, it is clear that the self-assessment tax paid before the expiry of the
assessment year and tax collected at source are taken into consideration for the
purpose of determining tax liability and increase the threshold of tax payable from the
existing rupees three thousand to rupees ten thousand.

This amendments will take effect from 1st April 2020 i.e. AY 2020-21.
165
6. Rationalisation of provision relating recovery of tax in
pursuance of agreements with foreign countries [Clause 51]

Section 228A amended with effect from the 1st day of September
2019:-
(a) in sub-section (1),––
(i) for the words “corresponding law from”, the words “corresponding law from a
resident, or” shall be substituted;
(ii) for the words “any Tax Recovery Officer”, the words “any Tax Recovery Officer
having jurisdiction over the resident, or” shall be substituted;

(b) in sub-section (2),––

(i) for the words “has property in a country outside India”, the words “ is a resident of
a country” shall be substituted;
(ii) for the words “forward to the Board”, the words “or has any property in that
country, forward to the Board” shall be substituted.
166
4. Standard deduction on salary income Contd….
Brief Impact: [Clause 7 & 8]
The existing provisions of section 228A of the Act provide inter alia that where an
agreement is entered into by the Central Government with the Government of any
foreign country for recovery of income-tax under the Income-tax Act and the
corresponding law in force in that country and where such foreign country sends a
certificate for the recovery of any tax due under such corresponding law from a person
having any property in India, the Board, on receipt of such certificate may, forward it to
the Tax Recovery Officer within whose jurisdiction such property is situated for the
recovery of tax in pursuance of agreement with such foreign country.
In order to provide assistance in recovery of tax as per treaty obligation
with the other country, it is proposed to amend the said section so as to
provide for tax recovery where details of property of the persons are not
available but the said person is a resident in India.
It is also proposed to amend the said section so as to provide for tax
recovery, where details of property of an assessee in default under the Act
are not available but the said assessee is a resident in a foreign country.
This amendments will take retrospectively effect from 01-09-2019 i.e. AY 2020-21.
167
7. Rationalisation of provisions relating to claim of refund.
[Clause 55]
Section 239 amended with effect from 01-09-2019:-
(a) in sub-section (1), for the words “in the prescribed form and verified in the prescribed
manner”, the words and figures “by furnishing return in accordance with the provisions of section
139” shall be substituted;
(b) sub-section (2) shall be omitted.
Brief Impact:
The existing provisions of the section 239 of the Income-tax Act, every claim of
refund under chapter XIX of the act shall be made in prescribe format.
In order to simplify the procedure for claim of refund, it is proposed
to amend the said section so as to provide that every claim for refund
under Chapter XIX of the Act shall be made by furnishing return in
accordance with the provisions of section 139 of the Act.
This amendments will take effect from 1st September 2019 i.e. AY 2020-21.
168
8. Enhancing time limitation for sale of attached property
under Rule 68B of the Second Schedule of the Act.
[Clause 68]
Rule 68B of Second Schedule amended with effect from the 1st day
of September 2019:-
In the Second Schedule to the Income-tax Act, in Part III, in rule 68B, in sub-rule (1),
with effect from the 1st day of September 2019,-
(a) for the words “three years, the words “seven years” shall be substituted;
(b) in the proviso, for the word “Provided”, the words “Provided further” shall be
substituted;
(c) before the proviso as so amended, the following proviso shall be inserted, namely:––
“Provided that the Board may, for reasons to be recorded in writing, extend the aforesaid
period for a further period not exceeding three years:”.

169
 Contd….

Brief Impact:
The existing provisions of rule 68B of the Second Schedule of the Act provide that no
sale of immovable property attached towards the recovery of tax, penalty etc. shall be
made after the expiry of three years from the end of the financial year in which the
order in consequence of which any tax, penalty etc. becomes final.
In order to protect the interest of the revenue, especially in those cases
where demand has been crystallised on conclusion of the proceedings, it is
proposed to amend the aforesaid sub-rule so as to extend the period of
limitation from three years to seven years
In order to ensure that the limitation of time period for sale of attached property may
not be an impediment in recovery of tax dues and may not lead to permanent loss of
revenue to the exchequer, it is further proposed to insert a new proviso in the said sub-
rule so as to provide that the Board may, for reasons to be recorded in writing, extend
the aforesaid period of limitation by a further period of three years.
This amendments will take effect from 1st September 2019 i.e. AY 2020-21. 170
9. Rationalisation of the black money (undisclosed foreign
income and assets) and imposition of tax act, 2015
(Clause 195,196,197 & 198)
Amendment in Section 2 of the Black Money (Undisclosed Foreign
Income and Assets) and Imposition of Tax Act, 2015 (hereafter in this
Part referred to as the principal Act), with effect from the 1st day of July,
2015:-
In section 2, for clause (2), the following clause shall be substituted and shall be deemed to have
been substituted with effect from the 1st day of July, 2015, namely:–
“(2) “assessee” means a person,––
being a resident in India within the meaning of section 6 of the Income-tax Act, 1961 in the
previous year; or
being a non-resident or not ordinarily resident in India within the meaning of clause (6) of
section 6 of the Income-tax Act 1961 in the previous year, who was resident in India either in
the previous year to which the income referred to in section 4 relates; or in the previous year in
which the undisclosed asset located outside India was acquired:
Provided that the previous year, in case of acquisition of undisclosed asset outside India, shall be
determined without giving effect to the provisions of clause (c) of section 72;’.” 171
 CONTD….

Amendment of Section 10 of the principal Act, with effect from the 1st day of
July, 2015––
• In sub-section (3), after the word “assess”, the words “or reassess” shall be inserted and shall be
deemed to have been inserted with effect from the 1st day of July, 2015;
• In sub-section (4), after the word “assessment”, the words “ or reassessment” shall be inserted and
shall be deemed to have been inserted with effect from the 1st day of July, 2015.

Amendment in the principal Act, in Section 17, with effect from the 1st day of
September, 2019:-
In sub-section (1), in clause (b), for the words “such order”, the words “or vary such order either to
enhance or reduce the penalty” shall be substituted with effect from the 1st day of September, 2019.

Amendment in the principal Act, in Section 84, with effect from the 1st day of
September, 2019:-
for the figures “138”, the figures and letter “138, 144A” shall 15 be substituted with effect from the 1st
day of September, 2019.
172
 CONTD….
Brief Impact:
Section 2 has been amended to clarify the legislative intent behind enacting the
BM Act (the Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015), which was to tax such foreign income and assets, which were not
charged to tax under the Income-tax Act, it is proposed to amend the said section
so as to provide that the “assessee” shall mean a person being a resident in
India within the meaning of section 6 of the Income-tax Act, in the previous
year, or a person being a non-resident or not ordinarily resident in India within the
meaning of clause (6) of section 6 of the Income-tax Act, in the previous year, who was
resident in India either in the previous year to which the income referred to in section 4
relates, or in the previous year in which the undisclosed asset located outside India was
acquired.
It is also proposed to provide that the previous year of acquisition of the
undisclosed asset located outside India shall be determined without giving
effect to the provisions of section 72(c) of the BM Act. 173
 CONTD….

Brief Impact:
• A clarificatory amendment is also proposed to be made to Section 10
of the BM Act so as to include the expressions “re-assess” and
“reassessment” in sub-section (3) and (4) of the said section.
• The existing provisions of the Section 84 provide for application of certain
provisions of the Income-tax Act to the BM Act with necessary modifications.
Considering the significance of cases assessed under the BM Act, it is proposed
to amend the said section so as to provide that the provisions of
Section 144A of the Income-tax Act shall be applicable to the BM Act
with necessary modifications.
• A clarificatory amendment is also proposed to be made in section 17
of the BM Act to clarify that the Commissioner (Appeals) may also
vary the penalty order so as to enhance or reduce the penalty.
174
10. Rationalisation of the Income Declaration
Scheme, 2016 (Clauses 199 & 200)
Amendment in Section 187 of the Finance Act, 2016 (hereafter in this Part referred
to as the principal Act), w.e.f. 01-06-2016:-
In sub-section (1), the following proviso shall be inserted and shall be deemed to have been
inserted with effect from the 1st day of June, 2016, namely:––
“Provided that where the amount of tax, surcharge and penalty, has not been paid within the due date
notified under this sub-section, the Central Government may, by notification in the Official Gazette, specify
the class of persons, who may, make the payment of such amount on or before such date as may be notified by
the Central Government, along with the interest on such amount, at the rate of one per cent. for every month
or part of a month comprised in the period commencing on the date immediately following the due date and
ending on the date of such payment.”.

Amendment in section 191 of the principal Act, w.e.f. 01-06-2016:-

the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day
of June, 2016, namely:––
“Provided that the Central Government may, by notification in the Official Gazette, specify the class of
persons to whom the amount of tax, surcharge and penalty, paid in excess of the amount payable under this
Scheme shall be refundable.”. 175
 CONTD….

Brief Impact:
• Section 187 has been amended to remove the difficulty that where the
amount of tax, surcharge and penalty, has not been paid within the due
date, the Central Government may notify the class of persons who may
make the payment of such amount on or before a notified date, along with
the interest on such amount, at the rate of one per cent of every month or
part of a month, comprised in the period, commencing on the date
immediately following the due date and ending on the date of such
payment.
• Section 191 has been amended to remove the difficulty that that the
Central Government may notify the class of persons to whom the amount
of tax, surcharge and penalty, paid in excess of the amount payable under
the Scheme shall be refundable.
This amendment will take effect retrospectively from 1st June, 2016. 176
11. Rationalisation of provisions relating to STT
(Clauses 193)
Amendment in Section 99 of the Finance (No. 2) Act, 2004, with effect
from the 1st day of September 2019:-
• In clause (a), in sub-clause (ii), for the words “settlement price”, the words “intrinsic value”
shall be substituted;
• After the proviso, the following Explanation shall be inserted, namely:––
‘Explanation.–– For the purposes of this section, the expression “intrinsic value” means the
difference between the settlement price and the strike price.’.
Brief Impact:
As per the existing provisions section 99, the value of taxable securities transaction in
respect of sale of an option in securities, where option is exercised, shall be, the
settlement price.
In order to rationalise the levy of STT, it is proposed to amend the said section so as to
provide that value of taxable securities transaction in respect of sale of an option in
securities, where option is exercised, shall be the difference between the strike price and
the settlement price. 177
12. Rationalizing the provisions of the Prohibition of
Benami Property Transactions Act
(Clauses 172,173,174,175,176)
Amendment in Section 23 of the Prohibition of Benami Property
Transactions Act (hereafter in this Part referred to as the
principal Act)with effect from the 1st day of November, 2016:-
In the Prohibition of Benami Property Transactions Act, 1988 (hereafter in this Part
referred to as the principal Act), in section 23, the following Explanation shall be
inserted and shall be deemed to have been inserted with effect from the 1st day of
November, 2016, namely:––
“Explanation.––For the removal of doubts, it is hereby clarified that nothing
contained in this section shall apply and shall be deemed to have ever applied where
a notice under sub-section (1) of section 24 has been issued by the Initiating
Officer.”.

178
 CONTD….

Amendment in section 24 of the principal Act, with effect from the 1st day of
September, 2019,—
• In sub-section (3), for the words, brackets and figure “from the date of issue of notice under sub-
section (1)”, the words, brackets and figure “from the last day of the month in which the notice
under sub-section (1) is issued” shall be substituted;
• In sub-section (4), for the words, brackets and figure “from the date of issue of notice under 40
sub-section (1)”, the words, brackets and figure “from the last day of the month in which the notice
under sub-section (1) is issued” shall be substituted;
• the following Explanation shall be inserted, namely:-—
“Explanation.––For the purposes of this section, in computing the period of limitation, the period
during which the proceeding is stayed by an order or injunction of any court shall be excluded:
Provided that where immediately after the exclusion of the aforesaid period, the period of limitation
referred to in sub-section (4) available to the Initiating Officer for passing order of attachment is less
than thirty days, such remaining period shall be deemed to be extended to thirty days:
179
 CONTD….

Provided further that where immediately after the exclusion of the aforesaid period, the period of
limitation referred to in sub-section (5) available to the Initiating Officer to refer the order of
attachment to Adjudicating Authority is less than seven days, such remaining period shall be
deemed to be extended to seven days.”.

Amendment in Section 26 of the principal Act, with effect from the 1st
day of September, 2019:-

In sub-section (7), with effect from the 1st day of September, 2019, the following Explanation
shall be inserted, namely:-—
“Explanation.—For the purposes of this sub-section, in computing the period of limitation, the
period during which the proceeding is stayed by an order or injunction of any court shall be
excluded:
Provided that where immediately after the exclusion of the aforesaid period, the period of
limitation available to the Adjudicating Authority for passing order is less than sixty days, such
remaining period shall be deemed to be extended to sixty days.”. 180
 CONTD….

Insertion of Sections 54A & 54B in the principal Act, after section 54,
with effect from the 1st day of September, 2019, namely:-
“54A. (1) Any person who fails to,––
comply with summons issued under sub-section (1) of section 19; or
furnish information as required under section 21,
shall be liable to pay penalty of twenty-five thousand rupees for each such failure.
(2) The penalty under sub-section (1) shall be imposed by the authority who had issued the
summons or called for the information.
(3) No order under sub-section (2) shall be passed by the authority unless the person on whom
the penalty is to be imposed has been given an opportunity of being heard:
Provided that no penalty shall be imposed if, such person proves that there were good and
sufficient reasons which prevented him from complying with the summons or furnishing
information.”
181
 CONTD….

“54B. The entries in the records or other documents in the custody of an authority shall be
admitted in evidence in any proceedings for the prosecution of any person for an offence under
section 3 or this Chapter, as the case may be, and all such entries may be proved either by––
(i) the production of the records or other documents in the custody of the authority containing
such entries; or
(ii) the production of a copy of the entries certified by the authority having custody of the
records or other documents under its signature stating that it is a true copy of the original entries
and that such original entries are contained in the records or other documents in its custody.”.
Amendment in Section 55 of the principal Act, with effect from the 1st day of
September, 2019:-
• For the word “Board”, the words “competent authority” shall be substituted;
• The following Explanation shall be inserted, namely:––
‘Explanation.––For the purposes of this section,“competent authority” means a Commissioner, a
Director, a Principal Commissioner of Income-tax or a Principal Director of Income-tax as
defined in clause (16), clause (21), clause (34B) and clause (34C), respectively, of section 2 of
the Income-tax Act, 1961.’. 182
 CONTD….

Brief Impact:
• Amendment has been made in Section 23 in order to clarify that no prior
approval of the Approving Authority would be required in cases where notice
under section 24(1) has been issued, it is proposed to suitably amend the
provisions of section 23 of the PBPT Act.
• Amendment has been proposed in Section 24 so as to provide that the period of
ninety days in respect of provisional attachment of the property under section
24(3) and passing of order under section 24(4) shall be reckoned from the end of
the month in which the notice under section 24(1) is issued.
• Amendment is proposed in sections 24 and 26 to provide exclusion for the period
during which the proceedings are stayed by the Court and adequate time to pass
the order or make the reference.
183
 CONTD….

Brief Impact:
• To ensure compliance with the summons issued and information required to be furnished
under the PBPT Act, it is proposed to insert a new Section 54A so as to provide for levy
of penalty of rupees twenty five thousand for failure to comply with the summons issued
or to furnish information under section 19 or section 21 respectively.
• To enable admissibility of certified copies of records or other documents in the custody
of the authority as evidence in any proceeding under the PBPT Act, it is proposed to
insert a new Section 54B in the said Act so as to provide that entries in the records or
other documents in the custody of an authority shall be admitted in evidence in any
proceedings for the prosecution of any person for an offence under the PBPT Act.
• A proposal to amend Section 55 has been made so as to provide that no prosecution shall
be instituted against any person in respect of any offence under the said Act without the
previous sanction of the competent authority.
184
13. Extension of tax concession to the Special Undertaking
of the Unit Trust of India (SUUTI) (Clause 186)

Amendment in the Unit Trust of India (Transfer of Undertaking and

Repeal) Act, 2002, in Section 13, with effect from the 1st day of April,
2019:-
In subsection (1), for the words, figures and letters “the 31st day of March, 2019”, the words,
figures and letters “the 31st day of March, 2021” shall be substituted and shall be deemed to
have been substituted with effect from the 1st day of April, 2019.

Brief Impact:
SUUTI is the successor of UTI. The mandate of SUUTI is to liquidate Government
liabilities on account of the erstwhile UTI. SUUTI is exempt from income-tax or any
other tax or any income, profits or gains derived, or any amount received in relation
to the specified undertaking uptil 31st March, 2019. It is proposed to extend the
exemption for a further period of two years till 31st March 2021.
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 Thank You…!!!

Presented by: CA. Sanjay K. Agarwal

Email: agarwal.s.ca@gmail.com
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