AMENDMENTS

FINANCE ACT 2010 ASSESSMENT YEAR -2011-12

APPLICABLE FOR PCC/IPCC MAY-2011/NOV-2011

1. SLAB RATE Individual, Hindu Undivided Family, Association of Persons, Body of Individual Income shall be taxable at the slab rates given below: If total Income upto Rs.1,60,000 On next 3,40,000 On next 3,00,000 On Balance amount Resident woman below the age of 65 years NIL 10% 20% 30% NIL 10% 20% 30%

If total income is upto Rs.1,90,000 On next Rs.3,10,000 On next Rs.3,00,000 On Balance amount Resident individual of the age of 65 years or more

If total income is upto Rs.2,40,000 On next Rs.2,60,000 On next Rs.3,00,000 On Balance amount

NIL 10% 20% 30%

No surcharge is applicable for individual, HUF, AOP, BOI and partnership firm. Domestic Company has to pay surcharge @ 7.5% if total income is exceeding `100 lakhs and foreign company has to pay surcharge @ 2.5% if total income is exceeding `100 lakhs 2. Section 2(15) charitable purpose, new proviso have been inserted. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year. 3. As per explanation of section 9, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not, (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. 4. Outstation allowance exemption limit raised from Rs.6,000 p.m. to Rs.10,000 p.m. (amended through notification no. 85/2010 dated 22-11-2010 hence it should be applicable from Nov-2011 examination and not from May-2011)

2 5. SBI lending rates as on 01.04.2010 are as follows: Housing Loan : First 60 months Upto Rs.5 Lacs 61 month onwards Upto 1st year Upto Rs.50 Lacs Next 2 years After 3 years Upto 1 year Above Rs.50 Lacs Next 2 years After 3 years (2) Car Loan : (1) New Vehicles SBI EZEE Car Loan Scheme Period First year For 2nd & 3rd year For 4th & 5th year For 6th & 7th year SBI Advantage Car Loan Scheme Period First year For 2nd & 3rd year For 4th & 5th year For 6th & 7th year (3) Education Loan : -

8.00% p.a. 10.50% p.a. 8.00% p.a. 8.50% p.a. 10.50% p.a. 8.00% p.a. 9.00% p.a. 11.00% p.a.

Term loan 8.00% p.a. 10.00% p.a. 11.25% p.a. 11.50% p.a. Term loan 8.00% p.a. 10.00% p.a. 11.00% p.a. 11.25% p.a. Loan upto Rs.4 lacs Above Rs.4 lacs and upto Rs.7.50 lacs

Overdraft 8.50% p.a. 10.50% p.a. 11.75% p.a. 12.00% p.a. Overdraft 8.50% p.a. 10.50% p.a. 11.50% p.a. 11.75% p.a. 11.25% p.a. 12.75% p.a. 11.75% p.a.

Above Rs.7.50 lacs An interest rate concession of 0.50% to girl student availing student loan (4) Personal Loan: Upto 3 years More than 3 years and upto 6 years

12.00% p.a. 12.00% p.a.

6. Gratuity amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs. 10 lakhs. 7. In case of RPF, interest upto 9.5% p.a. is exempt but wef 01-09-2010, interest upto 8.5% p.a. is exempt. 8. As per section 35, donation or contribution to research association, an amount equal to 1.75 times of any sum paid to an approved research association or to an approved university, college, other Institution or Indian company shall be allowed. Weighted deduction shall be allowed 200 per cent instead of 150 per cent. 9. As per section 35(2AA), weighted deduction of 1.75 times shall be allowed where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person.

3 10. As per section 35(2AB), weighted deduction of 2 times shall be allowed only in case of assessees engaged in business of bio-technology or manufacturing of any product except articles mentioned in eleventh schedule. 11. As per section 35AD, specified business shall also be included the following business: (i) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government; (ii) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients; (iii) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed. In respect of these three business, the deduction under this section would apply if the operations are commenced on or after 1st April, 2010. If a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year. 12. As per section 40(a)(ia), no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in subsection (1) of section 139. If in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 13. As per section 44AB, every person carrying on business/profession, if his total sales, turnover or gross receipts in business exceeds Rs.60 lakhs and in profession exceeds Rs.15 lakhs during the previous year, in such cases the person have to get their accounts audited. 14. As per section 44AD, profit and gains of civil construction contracts, the gain will be estimated equal to 8% if the gross receipts in the construction business do not exceed Rs.60 lakhs. 15. Section 44AF shall be omitted and all the business shall know be covered under section 44AD. 16. Under section 44AE, Rs.3,500 shall be taken as Rs.5,000 and Rs.3,150 shall be taken as Rs.4,500. 17. Cost Inflation Index for Financial Year 2010-11 is 711. 18. As per section 47(xiiib), any transfer of a capital asset or intangible asset by a private company or unlisted public company to a limited liability partnership as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008: Provided that (a) all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership; (b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion; (c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership;

4 (d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent at any time during the period of five years from the date of conversion; (e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion. 19. As per section 47A(4), where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership for the previous year in which the requirements of the said proviso are not complied with. 20. As per section 56(2)(viia), where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested, (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration: Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47. 21. Rate of corporate dividend tax 15% + surcharge @ 7.5% + education cess @ 2% + SHEC @ 1%. 22. As per section 72A(6A), where there has been reorganisation of business whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that if any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor limited liability partnership, shall be deemed to be the income of the limited liability partnership chargeable to tax in the year in which such conditions are not complied with. 23. Insert new section 80CCF, deduction in respect of subscription to long term infrastructure bonds, In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, the whole of the amount, to the extent such amount does not exceed Rs.20,000, paid or deposited, during the previous year relevant to the assessment year, as subscription to long-term infrastructure bonds as may, for the purposes of this section, be notified by the Central Government. 24. As per section 80D, deduction can also be available if any contribution made to the Central Government Health Scheme. 25. As per section 80IB(10), the period allowed for completion of a housing project in order to qualify for

5 availing the tax benefit under the section, from the existing 4 years to 5 years from the end of the financial year in which the housing project is approved by the local authority. This extension will be available for housing projects approved on or after 01.04. 2005. The built-up area of the shops and other commercial establishments included in the housing project is proposed to be three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after the 01.04.2005, which are pending for completion, in respect of their income relating to assessment year 2010-11 and subsequent years. 26. As per section 80-ID, the terminal date for functioning of hotels and construction of convention centre has been extended from 31.03.2010 to 31.07.2010 in order to give more time for the facilities to be set up in the light of the Commonwealth Games in October, 2010 27. As per section 194B, the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding Rs.10,000 shall, at the time of payment thereof, deduct income-tax thereon @ 30%. 28. As per section 194BB, every person responsible for making payment of causal income shall deduct tax at source @ 30% but if the amount paid or payable to a particular person during a particular year is not exceeding Rs.5,000, no tax shall be deducted at source. 29. As per section 194C, any person responsible for making payment to a resident contractor for carrying out any work including supply of labour for carrying out any work shall deduct tax at source @ 2% and in case of payment to individual or Hindu Undivided Family, the rate of TDS shall be 1% provided the amount being paid is exceeding Rs.30,000 or the amount paid or payable during the financial year exceeds Rs.75,000. 30. As per section 194D, every person responsible for payment of commission in connection with insurance business shall deduct tax at source @ 10% provided the amount paid or payable during a particular year to a particular person is not exceeding Rs.20,000. 31. As per section 194H, every person responsible for making payment of commission shall deduct tax at source @ 10% provided the amount paid or payable during a particular year to a particular person is not exceeding Rs.5,000. 32. As per section 194I, every person responsible for making payment of rent for plant & machinery shall deduct tax at source @ 2% and rent for land & building shall deduct tax at source @ 10% provided the amount paid or payable during a particular year to a particular person is not exceeding Rs.1,80,000. 33. As per section 194J, every person responsible for making payment for professional or technical services shall deduct tax at source @ 10% provided the amount paid or payable during a particular year to a particular person is not exceeding Rs.30,000. 34. As per section 201(1A), if any person, principal officer or company does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest, (i) at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of section 200(3). 35. Section 203, TDS certificate shall be continued. 36. As per section 271B, if any person fails to get his accounts audited as per the provisions of this

6 section, penalties may be imposed equal to % of total turnover or gross receipt subject to a maximum of Rs.1,50,000.

SERVICE TAX
Applicability of services for May 2011 and November 2011 examinations:Professional Competence Examination

7 It is clarified that in Part II : Service tax and VAT of Paper 5 : Taxation, students will not be tested on specific questions covering individual taxable services Integrated Professional Competence Examination It is clarified that in Part II : Service tax and VAT of Paper 4 : Taxation, students will be examined only in respect of the following taxable services: 1. Legal consultancy services 2. Commercial training or coaching services 3. Information technology software services 4. Cargo handling services 5. Customs house agents services 6. Practising Chartered Accountants services 7. Consulting engineers services 8. Manpower recruitment or supply agencys services

ORIGINAL TEXT
1. Section 2(15) Charitable Purpose In clause (15), 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, 2009, namely:

8 Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year. 2. Section 9 In section 9 of the Income-tax Act, for the Explanation occurring after sub-section (2), the following Explanation shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 1976, namely: Explanation.For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the nonresident, whether or not, (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.. Section 10(14)Rule 2BB Income-tax (Eighth Amendment) Rules, 2010 - Amendment in Rule 2BB NOTIFICATION NO. 85/2010 [F. NO. 149/45/2010-SO (TPL)], DATED 22-11-2010 In exercise of the powers conferred by section 295 read with clause (14) of section 10 of the Incometax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rule further to amend Income-tax Rules, 1962, namely : 1. (1) These Rule may be called the Income-tax (Eighth Amendment) Rules, 2010. (2) They shall be deemed to have come into force retrospectively with effect from 1st day of September, 2008. 2. In the Income-tax Rules, 1962, in rule 2BB, in sub-rule (2), in the Table, against serial number 4, in column 4, for letters, figures and words Rs. 6,000 per month the letters, figures and words, Rs. 10,000 per month shall be substituted. 4. Section 10(10) Gratuity Date of enforcement of Payment of Gratuity (Amendment) Act, 2010 Notification No. S.O. 1217(E), dated 24-5-2010 In exercise of the powers conferred by sub-section (2) of Section 1 of The Payment of Gratuity (Amendment) Act, 2010 (15 of 2010), the Central Government hereby appoints the 24th day of May, 2010, as the date on which the said Act shall come into force. 5. Recognised Provident Fund Recognised Provident Fund : 8.5% rate notified under rule 6(b) of Part A of IVth Schedule to the Income-tax Act, 1961 -Supersession of Notification No. S.O. 484(E), dated 30-5-2001 Notification No. 69/2010, [F.No. 142/14/2010-SO (TPL)], dated 26-8-2010 In exercise of the powers conferred by clause (b) of rule 6 of Part A of the Fourth Schedule to the Income-tax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) number S.O. 484(E), dated the 30th May, 2001, the Central Government hereby fixes, with effect from the 1st day of September, 2010, 8.5 per cent., as the rate referred to in the said clause.

3.

6.

Section 35 In section 35 of the Income-tax Act, with effect from the 1st day of April, 2011, (i) in sub-section (1), (a) for the words scientific research association, wherever they occur, the words research association shall be substituted;

9 (b) in clause (ii), for the words one and one-fourth, the words one and three-fourth shall be substituted; (c) in clause (iii), (A) for the words any sum paid to a university, the words any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university shall be substituted; (B) in the proviso, for the words such university, at both the places where they occur, the words such association, university shall be substituted; 7. Section 35(2AA) In sub-section (2AA), in clause (a), for the words one and one-fourth, the words one and threefourth shall be substituted; Section 35(2AB) In sub-section (2AB), in clause (1), for the words one and one-half, the word two shall be substituted. Section 35AD In section 35AD of the Income-tax Act, (a) in sub-section (2), in clause (iii), in sub-clause (c), for the words one-third of its total pipeline capacity, the words, brackets and figures such proportion of its total pipeline capacity as specified by regulations made by the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006) shall be substituted; (b) for sub-section (3), the following sub-section shall be substituted with effect from the 1st day of April, 2011, namely: (3) Where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year.; (c) in sub-section (5), with effect from the 1st day of April, 2011, (i) in clause (a), the word and, occurring at the end, shall be omitted; (ii) after clause (a), the following clauses shall be inserted, namely : (aa) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hotel of two-star or above category as classified by the Central Government; (ab) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hospital with at least one hundred beds for patients; (ac) on or after the 1st day of April, 2010, where the specified business is in the nature of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and which is notified by the Board in this behalf in accordance with guidelines as may be prescribed; and; (iii) in clause (b), for the word, brackets and letter clause (a), the words, brackets and letters clause (a), clause (aa), clause (ab) and clause (ac) shall be substituted; (d) in sub-section (8), in clause (c), after sub-clause (iii), the following sub-clauses shall be inserted with effect from the 1st day of April, 2011, namely : (iv) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;

8.

9.

10 (v) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients; (vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;. 10. Section 40(a)(ia) In section 40 of the Income-tax Act, in clause (a), in sub-clause (ia), (a) for the portion beginning with the words has not been paid, and ending with the words the last day of the previous year, the words, brackets and figures has not been paid on or before the due date specified in sub-section (1) of section 139 shall be substituted; (b) for the proviso, the following proviso shall be substituted, namely: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in subsection (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.. 11. Section 44AB In section 44AB of the Income-tax Act, with effect from the 1st day of April, 2011, (a) in clause (a), for the words forty lakh rupees, the words sixty lakh rupees shall be substituted; (b) in clause (b), for the words ten lakh rupees, the words fifteen lakh rupees shall be substituted. 12. Section 44AD In section 44AD of the Income-tax Act [as amended by section 20 of the Finance (No. 2) Act, 2009], in the Explanation, in clause (b), in sub-clause (ii), for the words forty lakh rupees, the words sixty lakh rupees shall be substituted with effect from the 1st day of April, 2011. Section 44AF In section 44AF of the Income-tax Act, after sub-section (5), the following sub-section shall be inserted, namely: "(6) Nothing contained in this section shall apply to any assessment year beginning on or after the 1st day of April, 2011.". Section 44AE In section 44AE of the Income-tax Act, for sub-section (2), the following sub-section shall be substituted with effect from the 1st day of April, 2011, namely: "(2) For the purposes of sub-section (1), the profits and gains from each goods carriage, (i) being a heavy goods vehicle, shall be an amount equal to five thousand rupees for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher; (ii) other than a heavy goods vehicle, shall be an amount equal to four thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher.". Cost Inflation Index NOTIFICATION NO 59/2010,Dated: July 21, 2010 In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), Central Board of Direct Taxes number S.O. 2292(E), dated the 9th September, 2009, namely:-

13.

14.

15.

11 In the said notification, in the Table, after serial number 29 and the entries relating thereto, the following serial number and entries shall be inserted, namely :30 - 2010-2011 - 711 16. Section 47(xiiib) In section 47 of the Income-tax Act, after clause (xiiia), the following shall be inserted with effect from the 1st day of April, 2011, namely: (xiiib) any transfer of a capital asset or intangible asset by a private company or unlisted public company (hereafter in this clause referred to as the company) to a limited liability partnership as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008: Provided that (a) all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership; (b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion; (c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership; (d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent. at any time during the period of five years from the date of conversion; (e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion. Explanation.For the purposes of this clause, the expressions private company and unlisted public company shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008;. 17. Section 47A(4) In section 47A of the Income-tax Act, after sub-section (3), the following sub-section shall be inserted with effect from the 1st day of April, 2011, namely: (4) Where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership for the previous year in which the requirements of the said proviso are not complied with. Section 56(2)(viia) (viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested, (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

18.

12 (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration: Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation.For the purposes of this clause, fair market value of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);. 19. Section 72A(6A) In section 72A of the Income-tax Act, with effect from the 1st day of April, 2011, (a) after sub-section (6), the following shall be inserted, namely: (6A) Where there has been reorganisation of business whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that if any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor limited liability partnership, shall be deemed to be the income of the limited liability partnership chargeable to tax in the year in which such conditions are not complied with.; Section 80CCF After section 80CCE of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2011, namely: 80CCF. In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, the whole of the amount, to the extent such amount does not exceed twenty thousand rupees, paid or deposited, during the previous year relevant to the assessment year beginning on the 1st day of April, 2011, as subscription to long-term infrastructure bonds as may, for the purposes of this section, be notified by the Central Government.. Section 80D In section 80D of the Income-tax Act, in sub-section (2), in clause (a), after the words his family, the words or any contribution made to the Central Government Health Scheme shall be inserted with effect from the 1st day of April, 2011. Section 80IB(10) In section 80-IB of the Income-tax Act, in sub-section (10), (i) in clause (a), (a) in sub-clause (ii), after the words, figures and letters the 1st day of April, 2004, the words, figures and letters but not later than the 31st day of March, 2005 shall be inserted; (b) after sub-clause (ii), the following sub-clause shall be inserted, namely: (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.; (ii) in clause (d), (a) for the words five per cent., the words three per cent. shall be substituted; (b) for the words two thousand square feet, whichever is less, the words five thousand square feet, whichever is higher shall be substituted.

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21.

22.

13 23. Section 80-ID In section 80-ID of the Income-tax Act, in sub-section (2), with effect from the 1st day of April, 2011, (a) in clause (i), for the words, figures and letters the 31st day of March, 2010, the words, figures and letters the 31st day of July, 2010 shall be substituted; (b) in clause (ii), for the words, figures and letters the 31st day of March, 2010, the words, figures and letters the 31st day of July, 2010 shall be substituted. Section 194B In section 194B of the Income-tax Act, for the words five thousand rupees, the words ten thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 194BB In section 194BB of the Income-tax Act, for the words two thousand five hundred rupees, the words five thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 194C In section 194C of the Income-tax Act, in sub-section (5), with effect from the 1st day of July, 2010, (a) for the words twenty thousand rupees, the words thirty thousand rupees shall be substituted; (b) in the proviso, for the words fifty thousand rupees, the words seventy-five thousand rupees shall be substituted. Section 194D In section 194D of the Income-tax Act, in the second proviso, for the words five thousand rupees, the words twenty thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 194H In section 194H of the Income-tax Act, in the first proviso, for the words two thousand five hundred rupees, the words five thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 194I In section 194-I of the Income-tax Act, in the first proviso, for the words one hundred and twenty thousand rupees, the words one hundred eighty thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 194J In section 194J of the Income-tax Act, in the first proviso to sub-section (1), in clause (B), for the words twenty thousand rupees, wherever they occur, the words thirty thousand rupees shall be substituted with effect from the 1st day of July, 2010. Section 201 In section 201 of the Income-tax Act, for sub-section (1A), the following sub-section shall be substituted with effect from the 1st day of July, 2010, namely: (1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest, (i) at one per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent. for every month or part of a month on the amount of such tax from the date on which such tax

24.

25.

26.

27.

28.

29.

30.

31.

14 was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200.. 32. 33. Section 203 In section 203 of the Income-tax Act, sub-section (3) shall be omitted. Section 271B In section 271B of the Income-tax Act, for the words one hundred thousand rupees, the words one hundred fifty thousand rupees shall be substituted with effect from the 1st day of April, 2011.

NOTES ON CLAUSES
1. Section 2(15) Charitable Purpose Sub-clause (a) proposes to amend the said clause (15) by inserting a second proviso therein to provide that the first proviso shall not apply if the aggregate value of receipts from the activities referred to in the first proviso is ten lakh rupees or less in the previous year.

15 This amendment will take effect retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-2010 and subsequent years. 2. Section 9 It is proposed to substitute the said Explanation so as to provide that the income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of subsection (1) and shall be included in the total income of the nonresident, whether or not, (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. This amendment will take effect, retrospectively, from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-1978 and subsequent years. 3. Section 35 Item (b) of sub-clause (i) proposes to amend the said clause (ii) so as to enhance the said weighted deduction from one hundred and twenty-five per cent. to one hundred and seventy-five per cent. Item (c) of sub-clause (i) proposes to amend clause (iii) of the aforesaid sub-section to include research associations, which have as their object, undertaking of research in social science or statistical research provided such research associations are approved and notified. Accordingly, any sum paid to such research associations shall be eligible for weighted deduction. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. 4. Section 35(2AA) It is proposed to amend the said clause (a) so as to enhance the said weighted deduction from one hundred and twenty-five per cent. to one hundred and seventy-five per cent. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. Section 35(2AB) It is proposed to amend the said clause (1) so as to enhance the said weighted deduction from one hundred and fifty per cent. to two hundred per cent. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. Section 35AD Sub-clause (b) proposes to substitute sub-section (3) of the aforesaid section so as to provide that where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.- Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year. Sub-clause (c) proposes to amend sub-section (5) of the aforesaid section so as to insert a new clause (aa) to provide that the specified business in the nature of building and operating a new hotel of twostar or above category as classified by the Central Government should commence its operation on or after 1st April, 2010. Sub-clause (d) proposes to amend clause (c) of sub-section (8) of the aforesaid section so as to bring the business relating to building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government within the purview of specified business.

5.

6.

16 These amendments will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 7. Section 40(a)(ia) It is proposed to amend sub-clause (ia) of clause (a) of the aforesaid section to provide that disallowance under the said sub clause will be attracted, if, after deduction of tax during the previous year, the same has not been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139. This amendment will take effect retrospectively from 1st April, 2010, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. 8. Section 44AB It is proposed to enhance the said limit from forty lakh rupees to sixty lakh rupees. It is proposed to enhance the said limit from ten lakh rupees to fifteen lakh rupees. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. Section 44AD It is proposed to enhance the said limit from forty lakh rupees to sixty lakh rupees. This amendment will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 10. Section 44AF It is proposed to insert sub-section (6) to the said section which provides that the provisions of the said section shall not apply to any assessment year beginning on or after 1st April, 2011, in view of the substitution of section 44AD vide clause 20 of the Bill. This amendment will take effect retrospectively from 1st April, 2009. Section 44AE It is proposed to enhance aforesaid amounts of profits and gains from (a) three thousand five hundred rupees to five thousand rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of heavy goods vehicles and (b) from three thousand one hundred and fifty rupees to four thousand five hundred rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of vehicles other than heavy goods vehicles. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Section 47(xiiib) It is proposed to amend the aforesaid section so as to insert a new clause (xiiib) in section 47 which provides that any transfer of a capital asset or intangible asset by a company shall not be treated as transfer under section 45 where a private company or unlisted public company (hereinafter referred to as the company) is converted into a limited liability partnership in accordance with the provisions of section 56 or 57 of the Limited Liability Partnership Act, 2008. It is also proposed to insert a proviso to the said clause which provides that (a) all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership; (b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership, and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion; (c) the shareholders of the company do not receive any consideration or

9.

11.

12.

17 benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership; (d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent. at any time during the period of five years from the date of conversion; (e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 13. Section 47A(4) It is proposed to amend the aforesaid section so as to insert a new sub-section (4) which provides that where any of the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of capital assets by the predecessor private company or unlisted public company to the successor limited liability partnership on succession shall be deemed to be the profits or gains chargeable to tax of the successor limited liability partnership for the previous year in which the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 14. Section 56(2)(viia) It is proposed to insert a new clause (viia) in sub-section (2) of the aforesaid section so as to include the transactions undertaken in shares of a company not being a company in which the public are substantially interested where the recipient is a firm or a company not being a company in which the public are substantially interested. This amendment will take effect from 1st June, 2010, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 15. Section 72A(6A) Sub-clause (a) proposes to insert a new sub-section (6A) which provides that in case of succession of business, whereby, a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, notwithstanding anything contained in any other provisions of the Act, the accumulated loss and the unabsorbed depreciation of the predecessor company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the successor limited liability partnership for the previous year in which business reorganisation was effected and the other provisions of the Act relating to set off and carry forward loss and allowance for depreciation shall apply accordingly. However, if the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation which had been allowed shall be deemed to be the income chargeable to tax of the successor limited liability partnership for the previous year in which the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with. These amendments will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Section 80CCF It is proposed to insert a new section so as to provide that a sum of rupees twenty thousand in addition to the existing limit of rupees one lakh for tax savings under the Income-tax Act may be allowed as a specific deduction in computing the total income of an assessee being an individual or a Hindu

16.

18 undivided family if such sum is paid or deposited at any time during the previous year relevant to the assessment year beginning on 1st April, 2011 as subscription to long-term infrastructure bonds as may be notified by the Central Government. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012. 17. Section 80D It is proposed to amend the said clause (a) so as to also allow the benefit of the deduction in respect of a contribution made by the assessee during the previous year to the Central Government Health Scheme within the said limit. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. 18. Section 80IB(10) It is proposed to increase the period for completion of a housing project, approved on or after 1st April, 2005, from four years to five years. Under the existing provisions contained in clause (d) of subsection (10) of the aforesaid section, the built-up area of the shops and other commercial establishments included in the housing project should not exceed five per cent. of the aggregate built-up area of the housing project or 2,000 square feet, whichever is less. It is proposed to revise the existing limit to three per cent. of the aggregate built-up area of the housing project or 5,000 square feet, whichever is higher. These amendments will take effect, retrospectively, from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. 19. Section 80-ID It is proposed to extend the said period up to 31st July, 2010. The existing clause (ii) of sub-section (2) of the aforesaid section provides that the provisions of the said section apply to any undertaking engaged in the business of building, owning and operating a convention centre, located in the specified area, if such convention centre is constructed at any time during the period beginning on 1st April, 2007 and ending on 31st March, 2010. It is proposed to extend the said period up to 31st July, 2010. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. 20. Section 194B It is proposed to enhance the said limit from five thousand rupees to ten thousand rupees. This amendment will take effect from 1st July, 2010. 21. Section 194BB It is proposed to enhance the said limit from two thousand five hundred rupees to five thousand rupees. This amendment will take effect from 1st July, 2010. 22. Section 194C

19 It is proposed to enhance the said limit from twenty thousand rupees for a single transaction to thirty thousand rupees and from fifty thousand rupees for the aggregate transactions during the financial year to seventy five thousand rupees. These amendments will take effect from 1st July, 2010. 23. Section 194D It is proposed to enhance the said limit from five thousand rupees to twenty thousand rupees. This amendment will take effect from 1st July, 2010. 24. Section 194H It is proposed to enhance the said limit from two thousand five hundred rupees to five thousand rupees. This amendment will take effect from 1st July, 2010. 25. Section 194I It is proposed to enhance the said limit from one hundred and twenty thousand rupees to one hundred and eighty thousand rupees. This amendment will take effect from 1st July, 2010. 26. Section 194J It is proposed to enhance the said limit from twenty thousand rupees to thirty thousand rupees. This amendment will take effect from 1st July, 2010. 27. Section 201 It is proposed to amend sub-section (1A) of the aforesaid section so as to increase the interest chargeable under that sub-section from one per cent. to one and one-half per cent for every month or part of a month for tax deducted but not paid. This amendment will take effect from 1st July, 2010. 28. Section 203 It is proposed to omit the aforesaid sub-section (3) of section 203 of the Income-tax Act. This amendment will take effect retrospectively from 1st April, 2010. 29. Section 271B It is proposed to enhance the said limit from one lakh rupees to one lakh fifty thousand rupees. This amendment will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.

MEMORANDUM
1. Section 2(15) Charitable Purpose For the purposes of the Income-tax Act, charitable purpose has been defined in section 2(15) which, among others, includes the advancement of any other object of general public utility. However, the advancement of any other object of general public utility is not a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering

20 any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. The absolute restriction on any receipt of commercial nature may create hardship to the organizations which receive sundry considerations from such activities. It is, therefore, proposed to amend section 2(15) to provide that the advancement of any other object of general public utility shall continue to be a charitable purpose if the total receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business do not exceed Rs.10 lakhs in the previous year. This amendment is proposed to take effect retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent years. 2. Section 9 Section 9 provides for situations where income is deemed to accrue or arise in India. Vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (v), (vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively. It was provided, inter alia, that in case of payments as mentioned under these clauses, income would be deemed to accrue or arise in India to the non-resident under the circumstances specified therein. The intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India. The source rule, therefore, means that the situs of the rendering of services is not relevant. It is the situs of the payer and the situs of the utilization of services which will determine the taxability of such services in India. This was the settled position of law till 2007. However, the Honble Supreme Court, in the case of Ishikawajima-Harima Heavy Industries Ltd., Vs DIT (2007)[288 ITR 408], held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. This interpretation was not in accordance with the legislative intent that the situs of rendering service in India is not relevant as long as the services are utilized in India. Therefore, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1st June, 1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. However, the Karnataka High Court, in a recent judgement in the case of Jindal Thermal Power Company Ltd. vs DCIT (TDS), has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that on a plain reading of the Explanation, the criteria of rendering services in India and the utilization of the service in India laid down by the Supreme Court in its judgement in the case of Ishikawajima-Harima Heavy Industries Ltd.(supra) remains untouched and unaffected by the Explanation. In order to remove any doubt about the legislative intent of the aforesaid source rule, it is proposed to substitute the existing Explanation with a new Explanation to specifically state that the income of a non-resident shall be deemed to accrue or arise

21 in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included in his total income, whether or not, (a) the non-resident has a residence or place of business or business connection in India; or (b) the non-resident has rendered services in India. This amendment is proposed to take effect retrospectively from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-78 and subsequent years. 3. Section 35 Section 35 of the Income-tax Act provides for deduction in respect of expenditure on research and development. The existing provisions of section 35(1)(ii) provide for a weighted deduction from business income to the extent of 125 per cent of any sum paid to an approved and notified scientific research association or to a university, college or other institution to be utilized for scientific research. Section 35(1)(iii) provides similar deduction if the sum is paid to an approved and notified university, college or other institution to be used to carry on research in social science or statistical research. Section 80GGA allows deductions for donations made to such association, universities, etc. Under section 10(21), exemption is granted in respect of the income of a scientific research association which is approved and notified under section 35(1)(ii). The university, college or other institutions which are approved either under section 35(1)(ii) or under section 35(1)(iii) also qualify for exemption of their income under section 10(23C) of the Act subject to specified conditions. The associations which are engaged in undertaking research in social science or statistical research are not currently covered by the provisions of section 35(1)(iii). Such research associations are also not entitled to exemption in respect of their income. It is now proposed to amend section 35(1)(iii) so as to include an approved research association which has as its object undertaking research in social science or statistical research. It is also proposed to amend section 10(21) so as to also provide exemption to such associations in respect of their income. This exemption will be subject to the same conditions under which an approved research association undertaking scientific research is entitled to exemption in respect of its income. An amendment to include allowability of deductions for donations made to such associations is also proposed. These amendments are proposed to take effect from 1st April 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 4. Section 35(2AA) / Section 35(2AB) Weighted deduction for scientific research and development Under the existing provisions of section 35(2AB) of the Income-tax Act, a company is allowed weighted deduction of 150 per cent of the expenditure (not being expenditure in the nature of cost of any land or building) incurred on scientific research on an approved in-house research and development facility. In order to further incentivise the corporate sector to invest in in-house research, it is proposed to increase this weighted deduction from 150 per cent to 200 per cent. The existing provisions of section 35(1)(ii) of the Income-tax Act provide for a weighted deduction from the business income to the extent of 125 per cent of any sum paid to an approved scientific research association that has the object of undertaking scientific research or to an approved university, college or other institution to be used for scientific research. Further, under section 35(2AA) of the Act, weighted deduction to the extent of 125 per cent is also allowed for any sum paid to a National

22 Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientific research programme. In order to encourage more contributions to such approved entities for the purposes of scientific research, it is proposed to increase this weighted deduction from 125 per cent to 175 per cent. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 5. Section 35AD Investment linked deduction for specified business Benefits of profit linked deduction under Chapter VI-A of the Income-tax Act are currently available to specified categories of hotels in Uttarakhand and Himachal Pradesh; National Capital Territory and adjacent districts; 22 districts having World Heritage Sites and North-Eastern States, which start functioning before specified dates mentioned in the Act . In view of the high employment potential of this sector, it is proposed to provide investment linked incentive to the hotel sector, irrespective of location, under section 35AD of the Income-tax Act. The investment-linked tax incentive allows 100 per cent deduction in respect of the whole of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the specified business during the previous year in which such expenditure is incurred. Currently, such specified business means the business of setting up and operating cold chain facilities, warehousing facilities for storage of agricultural produce and laying and operating a crosscountry natural gas or crude or petroleum oil pipeline network. It is now proposed to include the business of building and operating a new hotel of two-star or above category, anywhere in India, which starts functioning after 1.4.2010 within the purview of specified business. It is also proposed to substitute sub-section (3) of section 35AD so as to provide that where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.-Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year. A similar amendment is proposed in section 80A. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. One of the conditions for availing the benefit under section 35AD in the case of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network, is that the specified business has made not less than one-third of its total pipeline capacity available for use on common carrier basis by any person other than the assessee or an associated person. The Petroleum & Natural Gas Regulatory Board has, by regulations, specified a common carrier capacity condition of one-third for a natural gas pipeline network and one-fourth for petroleum product pipeline network. In order to rationalise the existing condition regarding common carrier capacity, it is proposed to amend sub-section (2) of section 35AD to provide that the proportion of the total pipeline capacity to be made available for use on common carrier basis should be as specified by the said regulations. This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years. 6. Section 40(a)(ia)

23 The existing provisions of section 40(a)(ia) of Income-tax Act provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return. It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139. This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years. 7. Section 44AB Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in business exceed forty lakh rupees in the previous year. Similarly, a person carrying on a profession is required to get his accounts audited if the gross receipts in profession exceed ten lakh rupees in the previous year. In order to reduce compliance burden of small businesses and professionals, it is proposed to increase the aforesaid threshold limit from forty lakh rupees to sixty lakh rupees in the case of persons carrying on business and from ten lakh rupees to fifteen lakh rupees in the case of persons carrying on profession. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 8. Section 44AD It is also proposed that for the purpose of presumptive taxation under section 44AD, the threshold limit of total turnover or gross receipts would be increased from forty lakh rupees to sixty lakh rupees. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 9. Section 44AF The existing section 44AF is proposed to be made inoperative for the assessment year beginning on or after 1st day of April, 2011. The proposed amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.

10.

Section 44AE Presumptive income for truck owners under section 44AE Under the existing provisions of section 44AE, a presumptive scheme is available to assessees engaged in business of plying, hiring or leasing goods carriages. The scheme applies to an assessee, who owns not more than 10 goods carriages at any time during the previous year. Under this scheme, which is optional to the assessee, a fixed amount of income per vehicle is taken at the rate of Rs.3,500/- per month per vehicle for owners of heavy goods vehicle, and Rs.3,150/- per month per vehicle for the owners of light goods vehicles. An assessee opting for this scheme is exempted from maintaining books of account to substantiate the income.

24 It is proposed to enhance the presumed income per vehicle for the owners of (i) heavy goods vehicle to Rs.5,000/- per month; and (ii) other than heavy goods vehicles to Rs.4,500/- per month. It is further proposed to provide an anti-avoidance clause stating that a prescribed fixed sum or a sum higher than the aforesaid sum claimed to have been earned by the assessee shall be deemed to be profits and gains of such business. The proposed amendment will take effect from the 1st April, 2011 and will, accordingly, apply in relation to assessment year 2011-12 and subsequent years. 11. Section 47(xiiib) / Section 47A(4) / Section 72A(6A) Conversion of a private company or an unlisted public company into a limited liability partnership (LLP) The Finance (No. 2) Act, 2009 provided for the taxation of LLPs in the Income-tax Act on the same lines as applicable to partnership firms. Section 56 and section 57 of the Limited Liability Partnership Act, 2008 allow conversion of a private company or an unlisted public company (hereafter referred as company) into an LLP. Under the existing provisions of Income-tax Act,bconversion of a company into an LLP has definite tax implications. Transfer of assets on conversion attracts levy of capital gains tax. Similarly, carry forward of losses and of unabsorbed depreciation is not available to the successor LLP. It is proposed that the transfer of assets on conversion of a company into an LLP in accordance with section 56 and sectionb57 of the Limited Liability Partnership Act, 2008 shall not be regarded as a transfer for the purposes of capital gains tax underbsection 45, subject to certain conditions. These conditions are as follows: (i) the total sales, turnover or gross receipts in business of the company do not exceed sixty lakh rupees in any of the threebpreceding previous years; (ii) the shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company; (iii) no consideration other than share in profit and capital contribution in the LLP arises to partners; (iv) the erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent of the profits of the LLP for a period of 5 years from the date of conversion; (v) all assets and liabilities of the company become the assets and liabilities of the LLP; and (vi) no amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion. It is also proposed to allow carry forward and set-off of business loss and unabsorbed depreciation to the successor LLP which fulfills the above mentioned conditions. It is also proposed that if the conditions stipulated above are not complied with, the benefit availed by the company shall be deemed to be the profits and gains of the successor LLP chargeable to tax for the previous year in which the requirements are not complied with. It is also proposed that the aggregate depreciation allowable to the predecessor company and successor LLP shall not exceed, in any previous year, the depreciation calculated at the prescribed rates as if the conversion had not taken place. It is further proposed that the actual cost of the block of assets in the case of the successor LLP shall be the written down value of the block of assets as in the case of the predecessor company on the date of conversion.

25 It is also provided that the cost of acquisition of the capital asset for the successor LLP shall be deemed to be the cost for which the predecessor company acquired it. Credit in respect of tax paid by a company under section 115JB is allowed only to such company under section 115JAA. It is proposed to clarify that the tax credit under section 115JAA shall not be allowed to the successor LLP. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 12. Section 56(2)(viia) The provisions of section 56(2)(vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts, particularly after abolition of the Gift Tax Act. The provisions were intended to extend the tax net to such transactions in kind. The intent is not to tax the transactions entered into in the normal course of business or trade, the profits of which are taxable under specific head of income. It is, therefore, proposed to amend the definition of property so as to provide that section 56(2)(vii) will have application to the property which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade, raw material and consumable stores of any business of such recipient. In several cases of immovable property transactions, there is a time gap between the booking of a property and the receipt of such property on registration, which results in a taxable differential. It is, therefore, proposed to amend clause (vii) of section 56(2) so as to provide that it would apply only if the immovable property is received without any consideration and to remove the stipulation regarding transactions involving cases of inadequate consideration in respect of immovable property. These amendments are proposed to take effect retrospectively from 1st October, 2009 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years. This amendment is proposed to take effect from 1st June, 2010 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 13. Section 80CCF Deduction in respect of long-term infrastructure bonds In tune with the policy thrust of promoting investment in the infrastructure sector, it is proposed to insert a new section 80CCF in the Income-tax Act to provide that subscription during the financial year 2010-11 made to long-term infrastructure bonds (as may be notified by the Central Government), to the extent of Rs. 20,000, shall be allowed as deduction in computing the income of an individual or a Hindu undivided family. This deduction will be over and above the existing overall limit of tax deduction on savings of upto Rs.1 lakh under section 80C, 80CCC and 80CCD of the Act. This amendment is proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12. 14. Section 80D Deduction in respect of contribution to the Central Government Health Scheme Under the existing provisions of section 80D, deduction in respect of premium paid towards a health insurance policy upto a maximum of Rs. 15,000 is available for self, spouse and dependent children. A further deduction of Rs. 15,000 is also allowed for buying an insurance policy in respect of dependent parents. The deduction is enhanced to Rs. 20,000 in both cases if the person insured is of age of 65 years or above.

26 The Central Government Health Scheme (CGHS) is a medical facility available to serving and retired Government servants. This facility is similar to the facilities available through health insurance policies. It is, therefore, proposed to also allow deduction in respect of any contribution made to CGHS by including such contribution under the provisions of section 80D. The deduction will be limited to the current aggregate as mentioned in the section. This amendment is proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 15. Section 80IB(10) Deduction for developing and building housing projects Under the existing provisions of section 80-IB(10), 100 per cent deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to, inter alia, the following conditions: (a) the project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority. (b) the built-up area of the shops and other commercial establishments included in the housing project should not exceed 5 per cent of the total built-up area of the housing project or 2,000 sq.ft. whichever is less. To allow for extraordinary conditions due to the global recession and the resultant slowdown in the housing sector, it is proposed to increase the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, from the existing 4 years to 5 years from the end of the financial year in which the housing project is approved by the local authority. This extension will be available for housing projects approved on or after 1.4. 2005. Further, it is also proposed to enhance the current norms for built-up area of shops and other commercial establishments in housing projects in order to enable basic facilities for the residents. The built-up area of the shops and other commercial establishments included in the housing project is proposed to be three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after the 1.4.2005, which are pending for completion, in respect of their income relating to assessment year 2010-11 and subsequent years. These amendments are proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years. 16. Section 80-ID Deduction of profits of a hotel or a convention centre in the National Capital Territory Section 80-ID of the Income-tax Act provides for 100 per cent deduction for five years, of profits derived by an undertaking from the business of a two-star, three-star or four-star category hotel or from the business of building, owning and operating a convention centre located in the National Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad, provided such hotel has started functioning or such convention centre is constructed during the period 1.4.2007 to 31.3.2010. To provide some more time for these facilities to be set up in light of the Commonwealth Games in October, 2010, it is proposed to amend clauses (i) and (ii) of section 80-ID to extend the date by which the hotel has to start functioning or the convention centre has to be constructed, from the present 31st March, 2010 to 31st July, 2010.

27 This amendment is proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. 17. Section 194B / Section 194BB / Section 194C / Section 194D / Section 194H / Section 194I / Section 194J Rationalisation of provisions relating to Tax Deduction at Source (TDS) Under the scheme of deduction of tax at source as provided in the Income-tax Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within the specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limits. In order to adjust for inflation and also to reduce the compliance burden of deductors and taxpayers, it is proposed to raise the threshold limit for payments mentioned in sections 194B, 194BB, 194C, 194D, 194H, 194-I and 194J as under: Section Nature of payment Existing threshold Proposed threshold limit of payment limit of payment (Rupees) (Rupees) 1. 194B Winnings from 5,000 10,000 lottery or crossword puzzle 2. 194BB Winnings from 2,500 5,000 horse race 3. 194C Payment to 20,000 (for a single 30,000 (for a single contractors transaction) transaction) 50,000(for aggregate of transactions during transactions during financial year) 5,000 75,000 (for aggregate of transactions during transactions during financial year) 20,000 5,000 1,80,000 30,000

4. 5. 6. 7.

194D 194H 194-I 194J

Insurance commission Commission or 2,500 Brokerage Rent 1,20,000 Fees for 20,000 professional or technical services

These amendments are proposed to take effect from 1st July, 2010. 18. Section 201 Under the existing provisions of section 201(1A) of the Act, a person is liable to pay simple interest at one per cent for every month or part of month in case of failure to deduct tax or payment of tax after deduction. With a view to discourage the practice of delaying the deposit of tax after deduction, it is proposed to increase the rate of interest for non-payment of tax after deduction from the present one per cent to one and one-half per cent for every month or part of month. This amendment is proposed to take effect from 1st July, 2010. 19. Section 203 Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source(TCS)

28 The existing provisions of section 203(3) of the Income-tax Act dispense with the requirement of furnishing of TDS certificates by the deductor to the deductee on or after 1st April, 2010. Similarly, under section 206C(5) of the Act, a collector of tax at source will also not be required to issue tax collection certificate to the person from whom tax has been collected on or after 1st April, 2010. Considering the fact that the TDS/TCS certificate constitutes an important document for the deductee/collectee, it is proposed that the deductor/collector will continue to furnish TDS/TCS certificates to the deductee/collectee even after 1st April, 2010 . These amendments are proposed to take effect retrospectively from 1st April, 2010. 20. Section 271B In view of the amendment proposed above, it is also proposed to increase the maximum penalty, leviable under section 271B for failure to get accounts audited under section 44AB or to furnish a report of such audit, from one lakh rupees to one lakh fifty thousand rupees. These amendments are proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.