Key Economic Indicators PARTICULARS 2018-19- 2017-18- 2016- A.E - - PDF document

budget 2019 12.07.2019 1

CA Rajiv Mehrotra, DISA (ICAI), Kanpur

• CA Rajiv Mehrotra, Kanpur

Key Economic Indicators

PARTICULARS 2018-19- A.E 2017-18- P.E 2016- 2017 GDP (‘lakh cr) (2011-2012 prices) 140.78 131.80 121.65 GDP Growth Rate % 6.8% 7.2% 7.1% Inflation CPI (Average) 3.4% 3.6% 4.5% Inflation WPI (Average) 4.3% 3.0% 1.7% December CPI 5% (no chance of Interest rate reduction - Industry)

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• CA Rajiv Mehrotra, Kanpur

Estimates of Receipts(Budgeted)

S.No Particulars Percent 1. Corporation Tax 21% 2. Income Tax 16% 3. Customs 4% 4. Union Excise Duties 8% 5. Borrowings and Other Liabilities 20% 6. G.S.T 19% 7. Non Tax Revenue and Other Capital Receipts 11%

• CA Rajiv Mehrotra, Kanpur

Estimates of Expenses (Budgeted)

S.No Particulars Percent

1. States Share Of Taxes 23% 2. Interest Payments 18% 3. Central Sector Schemes 13% 4. Centrally sponsored Schemes 9% 5. Subsidies 8% 6. Defense 9% 7. Other Expenses 8% 8. Finance Commission and Others 7% 9. Pensions 5%

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• CA Rajiv Mehrotra, Kanpur

Budget Financials

Particulars 2018-2019 (Revised Estimates) 2019-2020 (Budgeted) Amount in cr

%

Amount in cr % Revenue Receipts 1729682 1962761 Capital Receipts 727553 823588 Total Receipts 2457235 2786349 Fiscal Deficit 634398 3.4 703760 3.3 Revenue Deficit 410930 2.2 485019 2.3 Primary Deficit 46828 0.2 43289 0.2

• CA Rajiv Mehrotra, Kanpur

Tax Revenue (Rs In Crores)

S.No Particulars 2018-2019 (Budgeted) 2018-2019 (R.E) 2019-2020 (Budgeted)

1. Corporation Tax 621000 671000 766000 2. Income Tax 529000 529000 569000 3. Customs 112500 130038 155904 4. Union Excise Duties 259600 259612.20 300000 5. GST & Service Tax 743900 643900 663343 6. Other Taxes 5241.56 5342 6947.93

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• CA Rajiv Mehrotra, Kanpur

Expenditure Of Major items

S.No Items 2018-2019 (R.E) 2019-2020 (B) 1. Defense 405194 431011 2. Agriculture 75753 138564 3. Commerce and Industry 12338 11894 4. Education 83626 94854 5. Finance 865578 1005985 6. Interest 587570 660471 7. Transfer to States 141353 155448 8. Transport 78626 83016

Rs In Crores

• CA Rajiv Mehrotra, Kanpur

Growth In GVA

YEAR AGRICULTURE INDUSTRY SERVICE MANUFA CTURING CONSTRU CTION GVA

2016-2017 4.9 5.6 7.7 7.9 1.7 6.6 2017-2018 2.1 4.4 8.3 4.6 3.6 6.1 2018-2019 2.9 6.9 7.5 6.6

MARKET PRICE 2011-2012 AS BASE INDEX

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• CA Rajiv Mehrotra, Kanpur

Growth In Foreign Trade/Reserves/Investment

Particulars 2016-17 2017-18 2018-19 Export Trade growth 5.4% 12.1% 12.5% Import Trade growth 0.5% 21.8% 15.4% Forex Reserves 370.00 409.37 395.6 Foreign Investment(FDI) 60.1 23.9 24.8 * Figures of 2018-2019 are only up to December 2018 * Forex Reserves and Foreign Investments are in USD Billions

• CA Rajiv Mehrotra, Kanpur

Current Economic Scenario

– GDP growth has fallen down to 6.8% in the first quarter of fiscal year; which is lower due to the Impact of GST and

• verall mood including international slowdown.

– There is a difference between the projections and economic

• survey. The budget projects 12% nominal growth minus

inflation of 4% the real GDP comes at 8% whereas the economic survey projects at 7% and the actual number for Ist quarter is 6.8%. – Banking sector/ NBFC’s in bad shape and MSME’s/ Real Estate still struggling. – Consumption slowing down with automobiles and other luxury goods.

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• CA Rajiv Mehrotra, Kanpur

Positives

• Still one of the highest rate of growth as compared all major

economies of the world.

• World GDP growth is much lesser though there has been an

up move in Europe and developed economies. Projected GDP 3-4%.

• With a very large consumer base internal corrections also

make a major impact.

• Inflation under control.
• A target to become $5 Trillion economy in next five years
• CA Rajiv Mehrotra, Kanpur

Positives

• There is a growth in services sector.
• Make in India may improve due to hike in customs duty on

several products and across the board by cess.

• ISBC (Insolvency Act) may lead to units restarting.
• Disinvestment process is being undertaken.

– Confidence in Insurance and banking sector, more FDI’s permitted. – FII & FDI are still favoring India.

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• CA Rajiv Mehrotra, Kanpur

Negatives

– Interest accounts for about 33.36% of Gross Revenue

• Receipts. Interest and repayment of loans account for over

45% of the Total Revenue receipts. – Agricultural Production down in the last three years, manufacturing and industrial production down. – Increasing disparities between rural and urban incomes. – No real push for infrastructure/healthcare/education as regards budget allocation. – Most of the items emphasized are off budget items.

• CA Rajiv Mehrotra, Kanpur

Stock Market

• No real push for any industry
• FPI’s will be taxed at 42.74%
• Holding of promoters to be reduced from 75-65% will give

a lot of shares in the market.

• High Disinvestment target will take a lot of liquidity of

Government Institutions

• Rs 70,000 cr of bank funding may not be enough.
• Meeting of Fiscal deficits and revenue targets seems

difficult

• Companies facing demand recession and do not expect a

good Q1.

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• CA Rajiv Mehrotra, Kanpur
• CA Rajiv Mehrotra, Kanpur

Particulars Ind.upto 60 years of age and HUFs

• Ind. with age

between 60-80 years Ind.aged above 80 years Remarks

Basic exemption limit Rs.2.50 lacs Rs.3.00 lacs Rs.5 Lacs No change Income between basic exemption limit and Rs.500000/- 5% 5% N.A. No change Income- between 5-10 lakhs 20% 20% 20% No change Income Over Rs.10 Lacs 30% 30% 30% No change Surcharge 10%- If income more than 50 Lacs and less than 1 Cr 15%- if income more than 1 Crore upto 2 crores 25%- if income more than 2 Crore upto 5 crores 37%- 15%- If income more than 5 Crore. Cess 4% Health and education cess on Income Tax

Personal Taxation- Rates

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• CA Rajiv Mehrotra, Kanpur

Rate of Taxation-Resident Companies

• Companies with turnover/gross receipts of upto Rs.250

crores in F.Y.2016-17- 25%

• Other Companies – 30%
• Surcharge (No change):

– if net income > Rs. 1 Crore but less than Rs.10 Crores- 7% – If net income > Rs.10 Crore- 12%

• Health and Education Cess- 4% of tax amount
• CA Rajiv Mehrotra, Kanpur

Rate of Taxation-Resident Firms and LLPs

• Tax rate– 30%- No change
• Surcharge (No change):

– If net income > Rs.1 Crore- 12%

• Health and Education Cess- 4% of tax amount

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• CA Rajiv Mehrotra, Kanpur

Effective Rate of Tax

Particulars Income between 1 crores to 2 crores Income between 2 crores to 5 crores Income exceeding 5 crores For individuals/ HUFs 35.88% 39% 42.744% Long term capital gain (if assesse’s total income, including such capital gain exceeds the slab limits 23.92% 26% 28.496% Maximum marginal rate 42.744% 42.744% 42.744%

• CA Rajiv Mehrotra, Kanpur

Amendments through the Interim Budget

• Income Tax slabs remain the same for FY 2019-20.
• Tax Rebate Limit under 87A increased from Rs. 3.5 lakhs to Rs. 5

lakhs for taxpayers. The maximum limit of the tax rebate increased to Rs.12,500 from the present limit of Rs. 2,500.

• TDS limit hiked from Rs 10,000 to Rs 40,000 on Post Office

Savings and Bank Deposits.

• TDS threshold on rent increased from Rs 1,80,000 to Rs 2,40,000
• Standard Deduction for the salaried class increased from

Rs.40,000 to Rs.50,000.

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• CA Rajiv Mehrotra, Kanpur

Amendments through the interim Budget

• No tax on notional rent of second Self-occupied House under

“Income from House Property” (up to two self-occupied house properties) to be considered for exemption.

• Section 54 exemption now available on the second house property,

provided the capital gains is less than or equal to Rs. 2 crores – to be availed only once in a lifetime.

• Benefits under Section 80-IBA to be extended for one more year –

to the housing projects approved till 31 March 2020.

• Period of exemption from levy of tax on notional rent, on unsold

inventories is extended from one year to two years, starting from the end of the year in which the project is completed.

• CA Rajiv Mehrotra, Kanpur

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• CA Rajiv Mehrotra, Kanpur

Section 2(19AA) Facilitating demerger of Ind-AS Compliant Companies

• For Demerger (not to be taken as transfer ) One of the existing conditions for tax-

neutral demergers is that the resulting company should record the property and the liabilities of the undertaking at the value appearing in the books of accounts of the demerged company.

• As per Indian Accounting Standards (Ind-AS) such companies are required to

record the property and the liabilities of the undertaking at a value different from the book value of the demerged company. In order to facilitate,

• It is proposed to provide that in case of compliance with Ind –As if the resulting

company records the property and liabilities at a value different from the book value appearing before the demerger the same shall be permitted in terms of this section.

• This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in

relation to the assessment year 2020-21 and subsequent assessment years.

• Why only Ind- As why not other companies (the value will give rise to higher

depreciation etc.) ? Explanation 7A to section 43A not changed.

• CA Rajiv Mehrotra, Kanpur

Clause 9(1)(viii) proposed

• ‘Sums received’ being taxable u/s 56(2) (x) will also cover transfer of any

money or property situated in India by a person resident in India to a person outside India.

• Under the Act, persons resident outside India are taxable in India in

respect of income that accrues or arises in India or is received in India or is deemed to accrue or arise in India or is deemed to be received in India. Under the existing provisions of the Act, section 56(2)(x) levies a charge on the of taxability in the hands of donee/receiver, except exemptions given u/s 56(2)(x).

• Presently, as the non resident is not liable to tax in India such receipts are

claimed non taxable. Now w.e.f 5th July it is proposed that all such receipts by a non resident shall be deemed to accrue or arise in India and thus liable to tax subject to DTAA 56(2)(viib) and 56(2)(x) contradictory.

• TDS and Tax Procedures?

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• CA Rajiv Mehrotra, Kanpur

Relaxation for special taxation for offshore funds- Section 9A

• Section 9A of the Act provides for a non taxability of offshore funds. It

provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager located in India and acting on behalf of such fund shall by itself not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India. The benefit under section 9A is available subject to certain conditions which are related to residence

• f

fund, corpus, size, investor broad basing, investment diversification and payment of remuneration to fund manager: (i) 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

• f its establishment or incorporation or at the end of such previous year,

whichever is later; ( earlier it had to be there before the close of the previous year)

• CA Rajiv Mehrotra, Kanpur

Relaxation for special taxation for offshore funds- Section 9A

ii) the remuneration paid by the fund to an eligible fund manager in respect

• f fund management activity undertaken by him on its behalf is not less

than the amount calculated in such manner as may be prescribed. (earlier it was Arms length price which was difficult to determine)

• These amendments will take effect retrospectively from 1st April, 2019 and shall

apply to the assessment year 2019-20 and subsequent assessment years

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• CA Rajiv Mehrotra, Kanpur

Exemption limit raised for the payments made from NPS

• Presently withdrawal on closure of account or on opting out of

the pension scheme, from NPS Trust shall not be chargeable to tax to the extent it does not exceed 40% of the total amount payable to him.

• With a view to enable the pensioner to have more disposable

funds it is proposed to increase the exemption from 40% to 60%

• f total amount payable to him.
• Exemption extended for contribution to be made by central

government – 14% , other employer -10% earlier it was 10% for both.

• Assessment year 2020-21
• CA Rajiv Mehrotra, Kanpur

Incentives to boost International Financial Services Centre (IFSC)

What is an International Financial Services Centre (IFSC)? An international area created domestically i.e. an area which is treated as an international territory. (Presently at Gandhinagar). In this area institutions which deals with financial services, financial products and financial transaction are established and the transactions are treated as if such transactions are carried out through overseas banks or financial institution. In earlier years, for development

• f

world class financial infrastructure in India, tax concessions have already been provided in respect of business carried on from an IFSC. To further promote such development and bring these IFSC at par with similar IFSC in

• ther countries, various additional benefits are proposed.

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• CA Rajiv Mehrotra, Kanpur

Extention of 115A to deduction for IFSC under section 80LA

• Presently section 80LA gives certain tax benefits for setups in IFSC

(tax holiday or 50% tax exemption). The same is only in respect of specified income.

• Section 115A provides certain specified rates of taxes in incomes

earned by foreign companies. Section 115A further provides that in such cases deductions under chapter VIA shall not be eligible. Thus in cases of IFSC these income were charged u/s 115A whereas the same should have been exempted u/s 80LA.

• To rationalise the same foreign companies located in IFSC will be

eligible for deduction u/s 80LA and provisions of section 115A, will not be applicable to companies located in IFSC.

• [Applicable from Assessment Year 2020-21]
• CA Rajiv Mehrotra, Kanpur

100% deduction to be allowed under Section 80LA in 10 out of 15 years

• The existing provisions of Section 80LA provide profit linked

deduction to units of an IFSC to the extent of 100% of income for the first 5 consecutive assessment years and 50% of income for next five consecutive assessment years.

• 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 100% for any 10 consecutive years. The assessee, at his option, may claim the said deduction for any 10 consecutive assessment years out of 15 years beginning with the year in which the necessary permission was obtained.

• [Applicable from Assessment Year 2020-21]

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• CA Rajiv Mehrotra, Kanpur

No DDT on profits distributed out of accumulated income of IFSC

• No dividend distribution tax shall be payable under Section 115O

in respect of dividend declared or paid or distributed by a company, being an unit of an International Financial Services Centre, out of its current income provided it derives income solely in convertible foreign exchange.

• In order to facilitate distribution of dividend by companies
• perating in IFSC, it is proposed to amend the provision of

Section 115-O to provide that any dividend paid out of accumulated income derived from operations in IFSC, after April 1, 2017 shall also not be liable for tax on distributed profits.

• Applicable from September 1, 2019
• CA Rajiv Mehrotra, Kanpur

Exemption for interest payable by a unit located in IFSC

• With a view to facilitate external borrowing by the units

located in IFSC, it is proposed to insert clause (ix) in Section 10(15) of the Income-tax Act. The proposed clause provides exemption for any interest payable to a non-resident in respect of money borrowed by a unit located in IFSC on or after September 1, 2019.

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• CA Rajiv Mehrotra, Kanpur

No additional tax on income distributed by mutual funds located in IFSC

• Section 115R provides that income distributed by specified

company or mutual funds to their unit holders is chargeable to additional tax on such on such income distributed at rates

• specified. Presently there is no exemption.
• In order to encourage relocation of mutual funds in IFSC, it is

proposed to amend Section 115R so as to provide that no additional income tax shall be levied on income distributed by a specified mutual fund listed on a recognized stock exchange located in any IFSC.

• [Applicable from 1st September 2019]
• CA Rajiv Mehrotra, Kanpur

Tax on income distributed to shareholder in case of listed companies

• Presently 20% tax on buyback of unlisted shares u/s 115QA
• This section was introduced as an anti-abuse provision to check the

practice of unlisted companies resorting to buy-back of shares instead

• f payment of dividends.
• It is proposed to extend 115QA 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.

• Consequential amendment is also proposed under clause (34A) of

section 10 of the Act to shareholders of the listed company on account

• f buy-back of shares.
• These amendments will take effect from 5th July, 2019

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• CA Rajiv Mehrotra, Kanpur

How to compute tax?

• Rule 40BB has 12 clauses, in respect of earlier buy backs,

mergers, shares allotted as sweat equity, shares allotted on merger/ demerger etc. etc.

• Now how will a listed company buy back shares issued in say

30 years back and had mergers, demergers etc.

• Benefits of section 10(38) all gone.
• Grandfathering should be done as in case of long term capital

gains

• CA Rajiv Mehrotra, Kanpur

Cancellation of Registration of Trust -12AA

• Additional requirement for granting and also cancelling registration of

trusts.

• In order to ensure that the trust or institution do not deviate from their
• bjects, it is proposed to amend section 12AA so as to provide that-

(i) at the time of granting the registration to a trust or institution, the PCIT or the CIT shall 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 and subsequently it is noticed that the trust or institution has violated requirements of any other law which was material for the purpose

• f achieving its objects, and the order, direction or decree holding

that such violation has occurred, has either not been disputed or has attained finality, the PCIT or CIT may cancel the registration

• f such trust or institution after affording a reasonable
• pportunity of being heard.
• These amendments shall be effective from 1st September, 2019

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• CA Rajiv Mehrotra, Kanpur

Consequences of cancellation of Registration

• Section 115TD
• Charge on Accredited Income
• Charge at MMR
• What is the MMR? Section 2(29C).
• Laws like CSR, RTE, State Government Laws etc.
• CA Rajiv Mehrotra, Kanpur

Measures for promoting ‘Less Cash’ Economy

• Section 13A, section 35AD, Section 40A(3), Section 43(1),

Section 43CA, Section 44AD, Section 50C, Section56(2)(x), Section 80JJAA, Section 269SS, Section 269ST, Section 269ST.

• Instead of the “bank account”, the words “bank account or

through such other electronic mode as may prescribed” are proposed.

• Applicable for AY 2020-2021.

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• CA Rajiv Mehrotra, Kanpur

Relaxing the provisions of sections 201 and 40 of the Act in case of payments to non-residents Amendments in 201 and 40(a)(i)

• Section 201 prescribes an assesse in default in respect of non

deduction /non payment of TDS except where the deductee has paid tax and furnished return u/s 139 and has paid tax on such income on which tax was deductible.

• This relief was available to the deductor only in respect of

payments to a resident now the same has been extended to payments made to non residents as well, on similar conditions.

• CA Rajiv Mehrotra, Kanpur

Relaxing the provisions of sections 201 and 40 of the Act in case of payments to non-residents Amendments in 201 and 40(a)(i)

• For the same reason, it is also proposed to amend clause 40

(a) 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 assesse in default under 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 referred to in that proviso. Thus, there will be no disallowance under section 40 in respect of such payments.

• Effective AY 2020-21 onwards.

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• CA Rajiv Mehrotra, Kanpur

Benefits to NBFC’s

Section 43 B- Allowance of deduction at the time of payment.

• 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 (assets not less than Rs.500 cr)shall be allowed as deduction if it is actually paid on or before the due date

• f furnishing the return of income of the relevant previous year.
• CA Rajiv Mehrotra, Kanpur

Benefits to NBFC’s

Adjustment of interest with additional loan shall not amount to payment-Section 43D-

• Proposed that recovery of interest income in respect of Bad and

doubtful debts in relations to NBFC’s shall be chargeable to tax in the previous year in which it is credited to its profit and loss account actually received, whichever is earlier as is available to public financial institutions, scheduled banks etc. provide a level playing field to certain categories of NBFCs who are adequately regulated.

• A.Y 2020-21 and subsequent years.

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• CA Rajiv Mehrotra, Kanpur

Harmony of 56(2)(x) and 50CA

• Section 56(2)(x) provides for chargeability of income in case of receipt
• f money or specified property for no or inadequate consideration.
• Section 50CA provides for deeming 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
• n the prescribed method.
• Currently, the provisions of section 56(2)(x) are not applicable to

certain specified transactions. However, no such exemption is available under section 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.

• A.Y 2020-21 and subsequent assessment years.
• CA Rajiv Mehrotra, Kanpur

Benefits for start ups

• Section 79- The current provisions have imposed following conditions

to carry forward the losses in case of closely held companies: 1. In the year of set-off of losses, at least 51% of voting power should be beneficially held by the same persons who held them

• n the last day of the year in which loss was incurred.

2. In case of an eligible start-up, (eligible for 80IAC) 100% of shareholders, on the last day of the previous year in which loss was incurred, should continue to hold the shares on the last day

• f the previous year in which loss is set-off. Further, losses should

have been incurred during the period of 7 years from the year of incorporation.

• Earlier both the conditions were essential now only any one of the two

i.e. either /or.

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• CA Rajiv Mehrotra, Kanpur

Proposed amendment to section 54GB

54GB incentive to individuals & HUF if they invest the net consideration received on transfer of any residential property, before the due date of filing of return u/s 139 in an eligible start up there would be an exemption from Capital Gains. In order to incentivise investment in eligible start-ups, it is proposed to amend the said section w.e.f. AY 2020-21, so as to- (i) extend the eligibility 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.

• CA Rajiv Mehrotra, Kanpur

Announcements for non applicability of section 56(2)(viib)

• Presently for capital investment by Category I Alternative

Investment Fund (AIF). The Finance Bill, 2019 proposed to amend this provision to extend the exemption to capital received by venture capital undertakings from Category II AIF as well.

• Lot of announcements regarding the same that no enquiry
• r harassment by the Income Tax department, no scrutiny,

no questions asked, but the eligibility criteria is very low turnover of Rs.100 cr or capital of Rs.25 cr.

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• CA Rajiv Mehrotra, Kanpur

Eligibility as per notification

It has not invested in any of the following assets,─ (a) building or land appurtenant thereto, being a residential house, other than that used by the Startup for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business; (b) land or building, or both, not being a residential house, other than that occupied by the Startup for its business or used by it for purposes of renting or held by it as stock-in trade, in the

• rdinary course of business;

(c) loans and advances, other than loans or advances extended in the ordinary course of business by the Startup where the lending of money is substantial part of its business;

• CA Rajiv Mehrotra, Kanpur

Eligibility as per notification

It has not invested in any of the following assets,─ d) capital contribution made to any other entity; e) shares and securities; f) a motor vehicle, aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees, other than that held by the Start-up for the purpose of plying, hiring, leasing or as stock-in-trade, in the ordinary course of business; g) jewellery other than that held by the Start-up as stock-in-trade in the ordinary course of business; h) any other asset, whether in the nature of capital asset or

• therwise, as per definition of “property” in clause (vii) of sub-

section (2) of section 56 of the Act.

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• CA Rajiv Mehrotra, Kanpur

Eligibility as per notification

Provided the Start up shall not invest in any of the assets specified in sub-clauses (a) to (h) for the period of seven years from the end of the latest financial year in which shares are issued at premium; In case the Startup which has furnished declaration in Form-2 invests in any of the assets specified in para 4(iii) before the end of seven years from the end of the latest financial year in which the shares are issued at premium, the exemption provided under section 56(2)(viib) of the Act shall be revoked in the year in which the conditions are breached. (amendment proposed in section 56(2)(viib).

• CA Rajiv Mehrotra, Kanpur

Benefit to distressed companies

• Section 79- Presently these provisions are not applicable

where any change in shareholding in the company takes place pursuant to a resolution plan approved under the IBC. Now this section shall not be applicable to such companies

• With an objective to facilitate resolution of distressed

companies, it is proposed to extend the benefit of section 79 to certain companies.

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• CA Rajiv Mehrotra, Kanpur

Benefit to distressed companies

• The amendment proposes that the provisions of Section 79 shall

not be applicable to such companies, and their subsidiary and the subsidiary of such subsidiary, where: a) When NCLT, on a petition moved by the Central Govt., has suspended the board of directors and has appointed new directors. b) When change in shareholding has taken place in a previous year pursuant to a resolution plan approved by the Tribunal. The above are subject to that jurisdictional Pr.CIT/CIT is provided a reasonable opportunity of being heard by the appropriate authorities.

• CA Rajiv Mehrotra, Kanpur

Benefit to distressed companies

• Section 115JB- proposed that 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.carried forward Effective AY 2020-21

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• CA Rajiv Mehrotra, Kanpur

Interest on loan for residential house property 80EEA

• Interest to the extent of Rs 1.50 lakhs per year for AY 2020-21 and

subsequent years only for individuals

• Conditions:

(i) 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, 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.

• No interest will be allowed under any other section say 24.
• Financial Institutions- Banking companies or Housing Finance

Companies.

• CA Rajiv Mehrotra, Kanpur

Deduction for interest on loan for purchase of Electric Vehicle 80EEB

• Interest to the extent of Rs 1.50 lakhs per year for AY 2020-21

and subsequent years only for individuals. Conditions:

• loan has been sanctioned by the financial institution or

specified NBFC’s during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023

• Purchase of “Electric Vehicle”- Defined in the section itself.
• What purpose shall it serve?

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• CA Rajiv Mehrotra, Kanpur

Deduction u/s 80IBA for affordable Housing with certain modifications.

• The existing provisions provide that where the GTI of an assesse

includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to certain conditions, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.

• With a view to align the definition of "affordable housing" with

the definition under GST Act, following conditions are proposed to be modified for housing projects approved on or after 1st day

• f September, 2019.
• CA Rajiv Mehrotra, Kanpur

Deduction u/s 80IBA for affordable Housing with certain modifications.

(i) 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 of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); and (ii) the stamp duty value of such residential unit in the housing project shall not exceed forty five lakh rupees; (iii) Effective AY 2020-21 and subsequent assessment years

budget 2019 12.07.2019 29

• CA Rajiv Mehrotra, Kanpur

Mandatory furnishing of return of income by certain persons

Proposed to amend section 139 of the Act so as to provide that a person shall be mandatorily required to file his return of income, if during the previous year, if he: (i) has deposited an amount or aggregate of the amounts exceeding

• ne 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 (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 prescribed conditions, as may be prescribed.

• CA Rajiv Mehrotra, Kanpur

Filing of return u/s 139 contd..

• As of now, a person claiming 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 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 section 139 of the Act to provide that a person who is claiming such benefits on investment in a house or a bond or other assets, under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act, shall be required to furnish a return, if before claim of the such benefits, his total income is more than the maximum amount not chargeable to tax.

• Effective date A.Y. 2020-21 and subsequent assessment years.

budget 2019 12.07.2019 30

• CA Rajiv Mehrotra, Kanpur

Interchangeability of PAN and aadhar- 139A

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

inter-changeability of PAN with the Aadhaar number.

• Accordingly the provisions of section 139A are proposed to be

amended so as to provide that,- (i) every person who is required to furnish or intimate or quote his PAN under the Act, and who, has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner; (ii) every person who has been allotted a PAN, and who has linked his Aadhaar number under section 139AA, may furnish

• r intimate or quote his Aadhaar number in lieu of a PAN.
• CA Rajiv Mehrotra, Kanpur

Inter-changeability of PAN and Aadhar- 139A

• 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.

• New Sub Section (6B) is also proposed for casting the duty upon

the person receiving any document relating to such transactions, to ensure that PAN or Aadhaar number, as the case may be, is duly quoted, and authenticated.

budget 2019 12.07.2019 31

• CA Rajiv Mehrotra, Kanpur

Interchangability of PAN and aadhar- 139A

Penalty -272B

• 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, with penalty for wrong quoting of PAN or Aadhar and a penalty of Rs 10000/- for each offence. Further for non compliance of Sub section (6B) shall also entail a penalty of Rs 10000.00.

• These amendments will take effect from 1st September, 2019.
• CA Rajiv Mehrotra, Kanpur

Harmonisation of Relief u/s 89

Provision of credit of relief provided under section 89

• Section 89 of the Income-tax Act contains provisions for providing

tax relief where salary, etc. is paid in arrears or in advance.

• As relief u/s 89 has not been provided in various specific sections

In view of the above, it is proposed to amend section 140A, section 143, section 234A, section 234B and section 234C so as to provide that computation of tax liability shall be made after allowing relief under section 89.

• These amendments will take effect retrospectively from 1st April,

2007 and will, accordingly, apply in relation to the

• Assessment year 2007-08 and subsequent assessment years.

budget 2019 12.07.2019 32

• CA Rajiv Mehrotra, Kanpur

TDS on non exempt portion of life insurance pay-out on net basis 194DA

• Under section 194DA of the Act, 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. The present requirement is to deduct tax at the rate of one per cent of Gross Amount

• Further it is preferable to deduct tax on net income so that the

income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee. Thus it is proposed that a person who is paying a sum to a resident under a life insurance policy shall make tax deduction at source at the rate of five per cent. on income component of the sum paid by the person.

• This amendment shall be effective from 1st September, 2019
• CA Rajiv Mehrotra, Kanpur

Proposal of Extension of TDS on Individuals & HUF’s- Section 194M

‘Applies to Individuals & HUF’s not covered under provisions of section 194C or 194J.

• On amounts paid to any resident for carrying out work (including

supply of labour for carrying out any work) in pursuance of a contract

• r
• by way of fees for professional services during the financial year
• Not required to take TAN, deposit of tax like section 194IA

Time of deduction: 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

• ther mode, whichever is earlier

Rate of TDS – 5% Eligibility criteria: Rs 50,00,000/- to a person in a financial year. Effective date 1.9.2019

budget 2019 12.07.2019 33

• CA Rajiv Mehrotra, Kanpur

Proposal of TDS by Banks etc. on cash withdrawls by a person – 194N

To whom applies (i) A banking company to which the Banking Regulation Act, 1949 applies (ii) A co-operative society engaged in carrying on the business

• f banking; or

(iii) A post office, When applies: When the above pay any sum, or, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person from an account maintained by the recipient with it shall, at the time of payment of such.

• CA Rajiv Mehrotra, Kanpur

Proposal of TDS by Banks etc. on cash withdrawls by a person – 194N

Rate of deduction- 2 % of sum exceeding one crore rupees, as income-tax: Not Applicable to payments 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; (iii) any business correspondent of a banking company or co-

• perative society engaged in carrying on the business of

banking, Effective date: 1.9.2019

budget 2019 12.07.2019 34

• CA Rajiv Mehrotra, Kanpur

Proposed Amendments to section 194IA

TDS at the time of purchase of immovable property- term ‘consideration for immovable property’ needed clarification due to hidden charges and separate agreements. 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.

• Effective date 1.9.2019.
• CA Rajiv Mehrotra, Kanpur

Proposed Amendments to section 194IA

• Explanation but prospective, even site development charges
• etc. would be covered now. So lot of flats which have stamp

duty value of less than Rs.50 lacs would be covered now.

• Exemption u/s 80EEA available? It talks about stamp duty

value.

• There would be disputes between the value of stamp duty

authorities as they will also enhance the consideration and charge duty on the same once tax has been deducted.

budget 2019 12.07.2019 35

• CA Rajiv Mehrotra, Kanpur

Widening the scope of Statement of Financial Transactions (SFT)- Sec 285A

• Objective- to enable easy prefilled returns.
• Proposed-

a)by mandating furnishing of statement by certain prescribed persons other than those who are currently furnishing the same. b) to remove the current threshold of rupees fifty thousand

• n aggregate value of transactions during a financial year.
• Penalty: To ensure stricter compliance it is proposed that non

correction of defect will be treated as furnishing of inaccurate particulars and to cover all entities u/s 271FAA or penalty of Rs.50000.00 (271FAA is not part of 273B), seems to be a miss as all other provisions like 271FA etc. are present.

• CA Rajiv Mehrotra, Kanpur

Steps to promote electronic payment system

Section 269US

• Objective: a less cash economy to reduce generation and

circulation of black money and to promote digital economy

• Applicability: To all persons carrying on business if his total sales,

turnover or gross receipts in business exceeds fifty crore rupees during the immediately preceding previous year.

• Actions: provide facility for accepting payment through the

prescribed electronic modes, in addition to the facility for other electronic modes of payment.

• Penalty for non compliance – 271DB shall attract penalty of a sum
• f five thousand rupees, for every day during which such failure

continues, Except where reasonable cause and also with the approval of JCIT.

budget 2019 12.07.2019 36

• CA Rajiv Mehrotra, Kanpur

Procedural amendments u/s 195

• Online applications by payers instead of manual applications

as of now for nil or lower deduction of withholding tax u/s 195(2) or 195(7) of the Income Tax Act.

• Proposed amendments 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.

• Effective date 1.11.2019
• Will leave lesser discretion and faster disposal of applications

u/s 195.

• CA Rajiv Mehrotra, Kanpur

Proposed amendment in section 239

Claim of Refund

• Presently form has been prescribed for getting a refund.

Though Income-tax Rules has prescribed Rule 41 and Form 30 to claim the refund, but it has no practical relevance as refund can be claimed only by filing of Income-tax return.

• Now it is proposed that for claim for refund will be valid only

by furnishing return in accordance with the provisions of section 139.

• Relief only as per section 119.
• Effective date 1.9.2019

budget 2019 12.07.2019 37

• CA Rajiv Mehrotra, Kanpur

Rationalisation of penalty provisions relating to under-reported income- 270A

• Section 270A contains provisions relating to penalty for under-

reporting and misreporting of income. The existing provisions do not contain 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

• f income for the first time under section 148 of the Act.
• Proposed amendment : To provide penalty in a case where the

person has under-reported income and furnished his return for the first time under section 148.

• These amendments will take effect retrospectively from AY

2017-18 onwards.

• CA Rajiv Mehrotra, Kanpur

Prosecution u/s 276CC for furnishing return of Income –liable

• “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.(Earlier Three thousand rupees)”

budget 2019 12.07.2019 38

• CA Rajiv Mehrotra, Kanpur

Announcements

• Faceless assessments- repercussions
• Prefilled forms- repercussions.
• No scrutiny on start-ups.
• Thanks to tax paying community- what steps?
• CA Rajiv Mehrotra, Kanpur

Consequence of not linking PAN with Aadhaar

• As per proviso to section 139AA(2) , 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
• ut 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.

• Effective date : 1.9.2019

budget 2019 12.07.2019 39

• CA Rajiv Mehrotra, Kanpur

Recovery rationalisation provisions u/s 228A

The existing provisions of section 228A of the Act provide 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 TRO within whose jurisdiction such property is situated for the recovery of tax.

• CA Rajiv Mehrotra, Kanpur

Recovery rationalisation provisions u/s 228A

Proposed amendments

• In order to provide assistance in recovery of tax as per treaty
• bligation 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.

budget 2019 12.07.2019 40

• CA Rajiv Mehrotra, Kanpur
• CA Rajiv Mehrotra, Kanpur

Miscellaneous

• Black Money Act- If the person while though has become a

non resident now, was a resident at the time of offence (acquisition of such property) then he shall be liable to consequences under the Black Money Act.

• Provisions of section 144A of the Income Tax Act shall be

applicable to the B.M.Act.

budget 2019 12.07.2019 41

• CA Rajiv Mehrotra, Kanpur
• Rationalisation in Benami Act

– No approval of approving authority required for issue of notice u/s 24 by IO – 90 days wherever mentioned would be 90 days from end of the month of the issue of notice. – Exclusion of period where proceedings pending before court. – Penalty of Rs 25,000/- for non attendance of summons. – Prosecution approval by competent authority (earlier it was Board).

• In Income Disclosure Scheme- Redressal of grievances

Suggestions and Queries are welcome at

carajivmehrotra@gmail.com