BUDGET 2017 REMONETISING INDIA
COM
THE ECONOMIC TIMES
BENNETT, COLEMAN & CO. LTD.
AHMEDABAD | BENGALURU | BHUBANESWAR | CHANDIGARH | CHENNAI | DELHI | GOA | HYDERABAD | INDORE | JAIPUR | KOCHI | KOLKATA | LUCKNOW | MUMBAI | NAGPUR | PATNA | PUNE | RANCHI
India Stands Out as a Bright Spot
in the World Economic Landscape
I fl ti which
Inflation, hi h was iin ddouble
bl digit
digits, hhas bbeen controlled;
t ll d sluggish
l ggi hggrowth
thhhas
been replaced by high growth; and a massive war against black money has been
launched , says Finance Minister Arun Jaitley. Excerpts from his speech
Madam Speaker,
1. On this auspicious day of Vasant Panchami, I rise to present the Budget for
2017-18. Spring is a season of optimism. I extend my warm greetings to every-
one on this occasion.
2. Madam Speaker, our Government was elected amidst huge expectations
of the people. The underlying theme of countless expectations was good gov-
ernance. The expectations included burning issues like inflation and price
rise, corruption in day to day transactions and crony capitalism. There was
also expectation for a major change in the way the countrys natural resources
were allocated, processed and deployed.
3. In the last two and half years, it has been our mission to bring a
Transformative Shift in the way our country is governed. We have moved
from a discretionary administration to a policy and system based adminis-
tration;
from favouritism to transparency and objectivity in decision making;
from blanket and loose entitlements to targeted delivery; and
from informal economy to formal economy.
Inflation, which was in double digits, has been controlled; sluggish growth
has been replaced by high growth; and a massive war against black money has
been launched. We have worked tirelessly on all these fronts and feel encour-
aged by the unstinted support of the people to our initiatives. The Government
is now seen as a trusted custodian of public money. I take this opportunity to
express our gratitude to the people of India for their strong support.
4. We shall continue to undertake many more measures to ensure that the fruits
of growth reach the farmers, the workers, the poor, the scheduled castes and
scheduled tribes, women and other vulnerable sections of our society. Our focus
will be on energising our youth to reap the benefits of growth and employment.
5. Madam Speaker, I am presenting this Budget when the world economy
faces considerable uncertainty, in the aftermath of major economic and politi-
cal developments during the last one year. Nevertheless, the International
Monetary Fund (IMF) estimates that world GDP will grow by 3.1% in 2016 and
3.4% in 2017. The advanced economies are expected to increase their growth
from 1.6% to 1.9% and the emerging economies from 4.1% to 4.5%. As per cur-
rent indications, macro-economic policy is expected to be more expansionary
in certain large economies. Growth in a number of emerging economies is
expected to recover in 2017, after relatively poor performance in 2016. These are
positive signs and point to an optimistic outlook for the next year.
6. There are, however, three major challenges for emerging economies. First,
the current monetary policy stance of the US Federal Reserve, to increase the
policy rates more than once in 2017, may lead to lower capital inflows and
higher outflows from the emerging economies. Second, the uncertainty
around commodity prices, especially that of crude oil, has implications for the
fiscal situation of emerging economies. It is however expected that increase,
if any, in oil prices would get tempered by quick response from producers of
shale gas and oil. This would have a sobering impact on prices of crude and
petroleum. Third, in several parts of the world, there are signs of increasing
retreat from globalisation of goods, services and people, as pressures for pro-
tectionism are building up. These developments have the potential to affect
exports from a number of emerging markets, including India.
7. Amidst all these developments, India stands out as a bright spot in the
world economic landscape. Indias macro-economic stability continues to be
the foundation of economic success. CPI inflation declined from 6% in July
2016 to 3.4% in December, 2016 and is expected to remain within RBIs man-
dated range of 2% to 6%. Favourable price developments reflect prudent
macro-economic management, resulting in higher agricultural production,
especially in pulses. Indias Current Account Deficit declined from about 1%
of GDP last year to 0.3% of GDP in the first half of 2016-17. Foreign Direct
Investment (FDI) increased from ` 1,07,000 crores in the first half of last year to
` 1,45,000 crores in the first half of 2016-17. This marks an increase by 36%, de-
spite 5% reduction in global FDI inflows. Foreign exchange reserves have
reached $361 billion as on 20th January, 2017, which represents a comfortable
cover for about 12 months of imports.
8. The Government has also continued on the steady path of fiscal consolida-
tion, without compromising on the public investment requirements of the
economy. Externally, the economy successfully weathered a number of shocks,
the redemption of FCNR deposits, volatility from the US elections and the Fed
rate hike. According to IMF forecast, India is expected to be one of the fastest
growing major economies in 2017.
9. A number of global reports and assessments, over the last two years, have
shown that India has considerably improved its policies, practices and eco-
nomic profile. These are reflected in Doing Business Report of the World Bank;
World Investment Report 2016 of UNCTAD; Global Competitiveness Report of
2015-16 and 2016-17 of the World Economic Forum; and several other Reports.
India has become the sixth largest manufacturing country in the world, up
from ninth previously. We are seen as an engine of global growth.
10. In the last one year, our country has witnessed historic and impactful
economic reforms and policy making. In fact, India was one of the very few
economies undertaking transformational reforms. There were two tectonic
policy initiatives, namely, passage of the Constitution Amendment Bill for GST
and the progress for its implementation; and demonetisation of high denomi-
nation bank notes. The advantages of GST for our economy in terms of spur-
ring growth, competitiveness, indirect tax simplification and greater transpar-
ency have already been extensively discussed in both Houses of Parliament. I
thank all Members of both the Houses for having passed the Constitution
Amendment unanimously. I also thank the State Governments for resolving
all relevant issues in the GST Council.
11. Demonetisation of high denomination bank notes was in continuation
of a series of measures taken by our Government during the last two years. It
is a bold and decisive measure. For several decades, tax evasion for many has
become a way of life. This compromises the larger public interest and creates
ELIMINATING BLACK MONEY
Demonetisation to help check tax evaders
For several decades, tax evasion
has become a way of life. This
compromises the larger public
interest and creates unjust
enrichment in favour of the tax
evader, to the detriment of the
poor and deprived
unjust enrichment in favour of the tax evader, to the detriment of the poor and
deprived. This has bred a parallel economy which is unacceptable for an inclu-
sive society. Demonetisation seeks to create a new normal wherein the GDP
would be bigger, cleaner and real. This exercise is part of our Governments
resolve to eliminate corruption, black money, counterfeit currency and terror
funding. Like all reforms, this measure is obviously disruptive, as it seeks to
change the retrograde status quo. Drop in economic activity, if any, on account
of the currency squeeze during the remonetisation period is expected to have
only a transient impact on the economy. I am reminded here of what the Father
of the Nation, Mahatma Gandhi, had said: A right cause never fails.
12. Demonetisation has strong potential to generate long-term benefits in
terms of reduced corruption, greater digitisation of the economy, increased
flow of financial savings and greater formalisation of the economy, all of which
would eventually lead to higher GDP growth and tax revenues. Demonetisation
helps to transfer resources from the tax evaders to the Government, which can
use these resources for the welfare of the poor and the deprived. There is early
evidence of an increased capacity of Banks to lend at reduced interest rates and
a huge shift towards digitisation among all sections of society. We firmly believe
that demonetisation and GST which were built on the third transformational
achievement of our Government, namely, the JAM vision, will have an epoch
making impact on our economy and the lives of our people.
13. Madam Speaker, we are at an important turning point in the path of our
growth and development.
14. The pace of remonetisation has picked up and will soon reach comforta-
ble levels. The effects of demonetisation are not expected to spill over into the
next year. Thus IMF, even while revising Indias GDP forecast for 2016 down-
wards, has projected a GDP growth of 7.2% and 7.7% in 2017 and 2018 respec-
tively. The World Bank, however, is more optimistic and has projected a GDP
growth of 7% in 2016-17, 7.6% in 2017-18 and 7.8% in 2018-19. This pick up in our
economy is premised upon our policy and determination to continue with
economic reforms; increase in public investment in infrastructure and devel-
opment projects; and export growth in the context of the expected rebound in
world economy. The surplus liquidity in the banking system, created by de-
monetisation, will lower borrowing costs and increase the access to credit.
This will boost economic activity, with multiplier effects.
15. The announcements made by Honourable Prime Minister on 31st
December, 2016 address many of the key concerns of our economy at this
juncture, such as, housing for the poor; relief to farmers; credit support to
MSMEs; encouragement to digital transactions; assistance to pregnant wom-
en and senior citizens; and priority to dalits, tribals, backward classes and
WWW.ECONOMICTIMES.
FINANCE MINISTERS SPEECH
women under the Mudra Yojana.
16. My overall approach, while preparing this Budget, has been to spend more
in rural areas, infrastructure and poverty alleviation and yet maintain the best
standards of fiscal prudence. I have also kept in mind the need to continue with
economic reforms, promote higher investments and accelerate growth.
17. The last one year was a witness to other major reforms, namely, enact-
ment of the Insolvency and Bankruptcy Code; amendment to the RBI Act for
inflation targeting; enactment of the Aadhaar bill for disbursement of finan-
cial subsidies and benefits; significant reforms in FDI policy; the job creating
package for textile sector; and several other measures.
18. Madam Speaker, the Budget for 2017-18 contains three major reforms.
First, the presentation of the Budget has been advanced to 1st February to en-
able the Parliament to avoid a Vote on Account and pass a single Appropriation
Bill for 2017-18, before the close of the current financial year. This would enable
the Ministries and Departments to operationalise all schemes and projects,
including the new schemes, right from the commencement of the next finan-
cial year. They would be able to fully utilise the available working season before
the onset of the monsoon. Second, the merger of the Railways Budget with the
General Budget is a historic step. We have discontinued the colonial practice
prevalent since 1924. This decision brings the Railways to the centre stage of
Governments fiscal policy and would facilitate multi modal transport plan-
ning between railways, highways and inland waterways. The functional au-
tonomy of Railways will, however, continue. Third, we have done away with
the plan and non-plan classification of expenditure. This will give us a holistic
view of allocations for sectors and ministries. This would facilitate optimal
allocation of resources.
19. Madam Speaker, we are aware that we need to do more for our people.
BEGINNING OF A NEW TRADITION
Colonial practice prevalent since 1924 discontinued
Budget has been advanced to 1st
February to enable the Parliament
to avoid a Vote on Account and
pass a single Appropriation Bill
for 2017-18, before the close of
the current financial year
Continuing with the task of fulfilling the peoples expectations, our agenda for
the next year is : Transform, Energise and Clean India, that is, TEC India.
This agenda of TEC India seeks to
Transform the quality of governance and quality of life of our people;
Energise various sections of society, especially the youth and the vulnera-
ble, and enable them to unleash their true potential; and
Clean the country from the evils of corruption, black money and non-trans-
parent political funding.
I propose to present my Budget proposals under ten distinct themes to foster
this broad agenda. The themes are :
(i) Farmers : for whom we have committed to double the income in 5 years;
(ii) Rural Population : providing employment and basic infrastructure;
(iii) Youth : energising them through education, skills and jobs;
(iv) Poor and the Underprivileged : strengthening the systems of social
security, health care and affordable housing;
(v) Infrastructure: for efficiency, productivity and quality of life;
(vi) Financial Sector : growth and stability through stronger institutions;
(vii) Digital Economy : for speed, accountability and transparency;
(viii) Public Service : effective governance and efficient service delivery
through peoples participation;
(ix) Prudent Fiscal Management : to ensure optimal deployment of re-
sources and preserve fiscal stability; and
(x) Tax Administration : honouring the honest.
I. FARMERS
20. The Indian farmer has once again shown his commitment and resilience
in the current year. The total area sown under kharif and rabi seasons are
higher than the previous year. With a better monsoon, agriculture is expected
to grow at 4.1% in the current year.
21. In last years Budget speech, I focused on income security of farmers to
double their income in 5 years. I had also announced a number of measures.
We have to take more steps and enable the farmers to increase their production
and productivity; and to deal with post-harvest challenges.
22. For a good crop, adequate credit should be available to farmers in time.
The target for agricultural credit in 2017-18 has been fixed at a record level of
`10 lakh crores. We will take special efforts to ensure adequate flow of credit to
the under serviced areas, the Eastern States and Jammu & Kashmir. The farm-
ers will also benefit from 60 days interest waiver announced by Honourable
Prime Minister in respect of their loans from the cooperative credit structure.
23. About 40% of the small and marginal farmers avail credit from the coopera-
tive structure. The Primary Agriculture Credit Societies (PACS) act as the front
end for loan disbursements. We will support NABARD for computerisation and
integration of all 63,000 functional PACS with the Core Banking System of
District Central Cooperative Banks. This will be done in 3 years at an estimated
cost of ` 1,900 crores, with financial participation from State Governments. This
will ensure seamless flow of credit to small and marginal farmers.
24. At the time of sowing, farmers should feel secure against natural ca-
lamities. The Fasal Bima Yojana launched by our Government is a major step
in this direction. The coverage of this scheme will be increased from 30% of
cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19. The Budget provi-
sion of `5,500 crores for this Yojana in BE 2016-17 was increased to `13,240 crores
in RE 2016-17 to settle the arrear claims. For 2017-18, I have provided a sum of
`9,000 crores. The sum insured under this Yojana has more than doubled from
`69,000 crores in Kharif 2015 to `1,41,625 crores in Kharif 2016.
25. Issuance of Soil Health Cards has gathered momentum. The real benefit to
farmers would be available only when the soil samples are tested quickly and
nutrient level of the soil is known. Government will therefore set up new mini
labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVKs
in the country. In addition, 1000 mini labs will be set up by qualified local entrepre-
neurs. Government will provide credit linked subsidy to these entrepreneurs.
26. A Long Term Irrigation Fund has already been set up in NABARD.
Honourable Prime Minister has announced an addition of `20,000 crores to its
corpus. This will take the total corpus of this Fund to `40,000 crores.
27. A dedicated Micro Irrigation Fund will be set up in NABARD to achieve the
goal, per drop more crop. The Fund will have an initial corpus of `5,000 crores.
28. For the post-harvest phase, we will take steps to enable farmers to get
better prices for their produce in the markets. The coverage of National
Agricultural Market (e-NAM) will be expanded from the current 250 markets
to 585 APMCs. Assistance up to a ceiling of ` 75 lakhs will be provided to every
e-NAM market for establishment of cleaning, grading and packaging facilities.
This will lead to value addition of farmers produce.
29. Market reforms will be undertaken and the States would be urged to de-
notify perishables from APMC. This will give opportunity to farmers to sell
their produce and get better prices.
30. We also propose to integrate farmers who grow fruits and vegetables with
agro processing units for better price realisation and reduction of post-harvest
losses. A model law on contract farming would therefore be prepared and cir-
culated among the States for adoption.
31. Dairy is an important source of additional income for the farmers.
Availability of milk processing facility and other infrastructure will benefit
the farmers through value addition. A large number of milk processing units
set up under the Operation Flood Programme has since become old and obso-
lete. A Dairy Processing and Infrastructure Development Fund would be set up
in NABARD with a corpus of ` 8,000 crores over 3 years. Initially, the Fund will
start with a corpus of ` 2,000 crores.
II. RURAL POPULATION
32. I now turn to the Rural Sector, which was so dear to the heart of Mahatma
Gandhi.
33. Over `3 lakh crores are spent in rural areas every year, if we add up all the
programmes meant for rural poor from the Central Budget, State Budgets,
Bank linkage for self-help groups, etc. With a clear focus on improving account-
ability, outcomes and convergence, we will undertake a Mission Antyodaya to
bring one crore households out of poverty and to make 50,000 gram panchayats
poverty free by 2019, the 150th birth anniversary of Gandhiji. We will utilise
the existing resources more effectively along with annual increases. This mis-
sion will work with a focused micro plan for sustainable livelihood for every
deprived household. A composite index for poverty free gram panchayats
would be developed to monitor the progress from the baseline.
34. Our Government has made a conscious effort to reorient MGNREGA to
support our resolve to double farmers income. While providing at least 100
days employment to every rural household, MGNREGA should create produc-
tive assets to improve farm productivity and incomes. The target of 5 lakh farm
THURSDAY, 2 FEBRUARY 2017
ponds and 10 lakh compost pits announced in the last Budget from MGNREGA
funds will be fully achieved. In fact, against 5 lakh farm ponds, it is expected
that about 10 lakh farm ponds would be completed by March 2017. During 2017-
18, another 5 lakh farm ponds will be taken up. This single measure will con-
tribute greatly to drought proofing of gram panchayats.
35. Participation of women in MGNREGA has increased to 55% from less
than 48% in the past.
36. Honourable Members would be happy to note that the budget provision
of `38,500 crores under MGNREGA in 2016-17 has been increased to `48,000
crores in 2017-18. This is the highest ever allocation for MGNREGA. The ini-
tiative to geo-tag all MGNREGA assets and putting them in public domain has
established greater transparency. We are also using space technology in a big
way to plan MGNREGA works.
37. The Pradhan Mantri Gram Sadak Yojana is now being implemented as
never before. The pace of construction of PMGSY roads has accelerated to
reach 133 km roads per day in 2016-17, as against an average of 73 km during the
period 2011-2014. We have also taken up the task of connecting habitations with
more than 100 persons in left wing extremism affected Blocks. We have commit-
ted to complete the current target under PMGSY by 2019. I have provided a sum
of ` 19,000 crores in 2017-18 for this scheme. Together with the contribution of
States, an amount of ` 27,000 crores will be spent on PMGSY in 2017-18.
38. We propose to complete 1 crore houses by 2019 for the houseless and
those living in kutcha houses. I have stepped up the allocation for Pradhan
Mantri Awaas Yojana Gramin from ` 15,000 crores in BE 2016-17 to ` 23,000
crores in 2017-18.
39.We are well on our way to achieving 100% village electrification by 1st May
2018. An increased allocation of ` 4,814 crores has been proposed under the
Deendayal Upadhyaya Gram Jyoti Yojana in 2017-18.
40. I have also proposed to increase the allocations for Deendayal Antyodaya
Yojana- National Rural Livelihood Mission for promotion of skill development
and livelihood opportunities for people in rural areas to `4,500 in 2017-18. The
allocation for Prime Ministers Employment Generation Programme
(PMEGP) and credit support schemes has been increased more than 3 times.
41. Swachh Bharat Mission (Gramin) has made tremendous progress in
promoting safe sanitation and ending open defecation. Sanitation coverage in
rural India has gone up from 42% in October 2014 to about 60%. Open
Defecation Free villages are now being given priority for piped water supply.
42. We propose to provide safe drinking water to over 28,000 arsenic and fluo-
ride affected habitations in the next four years. This will be a sub mission of
the National Rural Drinking Water Programme (NRDWP).
43. For imparting new skills to the people in the rural areas, mason training
will be provided to 5 lakh persons by 2022, with an immediate target of training
at least 20,000 persons by 2017-18.
44. Panchayati raj institutions still lack human resources for implementing
development programmes. A programme of human resource reforms for
results will be launched during 2017-18 for this purpose.
45. The Government will continue to work closely with the farmers and the
people in the rural areas to improve their life and environment. This is a non-
negotiable agenda for our Government. The total allocation for the rural, agri-
culture and allied sectors in 2017-18 is ` 1,87,223 crores, which is 24% higher
than the previous year.
III. YOUTH
46. Let me now focus on my proposals for the youth.
47. Quality education will energise our youth. In the words of Swami
Vivekananda, The education which does not help the common mass of people
to equip themselves for the struggle for life is it worth the name?
48. We have proposed to introduce a system of measuring annual learning
outcomes in our schools. Emphasis will be given on science education and flex-
ibility in curriculum to promote creativity through local innovative content.
49. An Innovation Fund for Secondary Education will be created to encour-
age local innovation for ensuring universal access, gender parity and quality
improvement. This will include ICT enabled learning transformation. The
focus will be on 3479 educationally backward blocks.
50. In higher education, we will undertake reforms in the UGC. Good quality
institutions would be enabled to have greater administrative and academic
autonomy. Colleges will be identified based on accreditation and ranking, and
given autonomous status. A revised framework will be put in place for outcome
based accreditation and credit based programmes.
51. We propose to leverage information technology and launch SWAYAM
platform with at least 350 online courses. This would enable students to virtu-
ally attend the courses taught by the best faculty; access high quality reading
resources; participate in discussion forums; take tests and earn academic
grades. Access to SWAYAM would be widened by linkage with DTH channels,
dedicated to education.
52. We propose to establish a National Testing Agency as an autonomous and
self-sustained premier testing organisation to conduct all entrance examina-
tions for higher education institutions. This would free CBSE, AICTE and
other premier institutions from these administrative responsibilities so that
they can focus more on academics.
53. We have a huge demographic advantage. Skill India mission was
launched in July 2015 to maximise the potential of our youth.
54. Pradhan Mantri Kaushal Kendras (PMKK) have already been promoted
in more than 60 districts. We now propose to extend these Kendras to more than
600 districts across the country. 100 India International Skills Centres will be
established across the country. These Centres would offer advanced training
and also courses in foreign languages.
55. In 2017-18, we also propose to launch the Skill Acquisition and Knowledge
Awareness for Livelihood Promotion programme (SANKALP) at a cost of `4,000
crores. SANKALP will provide market relevant training to 3.5 crore youth.
56. The next phase of Skill Strengthening for Industrial Value Enhancement
(STRIVE) will also be launched in 2017-18 at a cost of `2,200 crores. STRIVE will
focus on improving the quality and market relevance of vocational training
provided in ITIs and strengthen the apprenticeship programmes through in-
dustry cluster approach.
57. A special scheme for creating employment in the textile sector has al-
ready been launched. A similar scheme will be implemented for the leather
and footwear industries.
58. Tourism is a big employment generator and has a multiplier impact on
the economy. Five Special Tourism Zones, anchored on SPVs, will be set up in
partnership with the States. Incredible India 2.0 Campaign will be launched
across the world.
IV. THE POOR AND THE UNDERPRIVILEGED
59. Madam Speaker, I now turn to my proposals for the poor and the under-
privileged.
60. Sabka Saath Sabka Vikas begins with the girl child and women. Mahila
Shakti Kendra will be set up at village level with an allocation of `500 crores in
14 lakh ICDS Anganwadi Centres. This will provide one stop convergent sup-
port services for empowering rural women with opportunities for skill devel-
opment, employment, digital literacy, health and nutrition. A nationwide
scheme for financial assistance to pregnant women has already been an-
nounced by Honourable Prime Minister on 31st December, 2016. Under this
scheme, `6,000 each will be transferred directly to the bank accounts of preg-
nant women who undergo institutional delivery and vaccinate their children.
61. For the welfare of Women and Children under various schemes across all
Ministries, I have stepped up the allocation from `1,56,528 crores in BE 2016-17
to `1,84,632 crores in 2017-18.
62. We propose to facilitate higher investment in affordable housing.
Affordable housing will now be given infrastructure status, which will enable
these projects to avail the associated benefits.
63. The National Housing Bank will refinance individual housing loans of
about ` 20,000 crore in 2017-18. Thanks to the surplus liquidity created by de-
monetisation, the Banks have already started reducing their lending rates,
including those for housing. In addition, interest subvention for housing loans
has also been announced by the Honourable Prime Minister.
64. Poverty is usually associated with poor health. It is the poor who suffer
the maximum from various chronic diseases. Government has therefore pre-
pared an action plan to eliminate Kala-Azar and Filariasis by 2017, Leprosy by
2018 and Measles by 2020. Elimination of tuberculosis by 2025 is also targeted.
Similarly, action plan has been prepared to reduce IMR from 39 in 2014 to 28 by
2019 and MMR from 167 in 2011-13 to 100 by 2018-2020. 1.5 lakh Health Sub
Centres will be transformed into Health and Wellness Centres.
65. We need to ensure adequate availability of specialist doctors to strengthen
Secondary and Tertiary levels of health care. We have therefore decided to take
steps to create additional 5,000 Post Graduate seats per annum. In addition, steps
will be taken to roll out DNB courses in big District Hospitals; strengthen PG
teaching in select ESI and Municipal Corporation Hospitals; and encourage re-
puted Private Hospitals to start DNB courses.
66. Two new All India Institutes of Medical Sciences will be set up in the
States of Jharkhand and Gujarat.
67. We propose to amend the Drugs and Cosmetics Rules to ensure availabil-
ity of drugs at reasonable prices and promote use of generic medicines. New
AMRENDRA JHA
rules for regulating medical devices will also be formulated. These rules will
be internationally harmonised and attract investment into this sector. This
will reduce the cost of such devices.
68. Legislative reforms will be undertaken to simplify, rationalise and amal-
gamate the existing labour laws into 4 Codes on (i) wages; (ii) industrial rela-
tions; (iii) social security and welfare; and (iv) safety and working conditions.
The Model Shops and Establishment Bill 2016 has been circulated to all States
2 BUDGET 2017 REMONETISING INDIA
for consideration and adoption. This would open up additional avenues for
employment of women. The amendment made to the Payment of Wages
Act, is another initiative of our Government for the benefit of the labour
and ease of doing business.
69. Our Government is giving special importance to implementation of
the schemes for welfare of Scheduled Castes, Scheduled Tribes and
Minorities. The allocation for the welfare of Scheduled Castes has been
stepped up from `38,833 crores in BE 2016-17 to ` 52,393 crores in 2017-18,
representing an increase of about 35%. The allocation for Scheduled Tribes
has been increased to `31,920 crores and for Minority Affairs to `4,195
crores. The Government will introduce outcome based monitoring of ex-
penditure in these sectors by the NITI Aayog.
70. For senior citizens, Aadhar based Smart Cards containing their
health details will be introduced. A beginning will be made through a pilot
in 15 districts during 2017-18. The LIC will implement a scheme for senior
citizens to provide assured pension, with a guaranteed return of 8% per
annum for 10 years.
V. INFRASTRUCTURE
71. The fifth component of TEC India agenda is Infrastructure.
72. Railways, roads and rivers are the lifeline of our country. I feel privi-
leged to present the first combined Budget of independent India that in-
cludes the Railways also. We are now in a position to synergise the invest-
ments in railways, roads, waterways and civil aviation. For 2017-18, the total
capital and development expenditure of Railways has been pegged at
`1,31,000 crores. This includes `55,000 crores provided by the Government.
73. The Railways will focus on four major areas, namely:
(i) Passenger safety;
(ii) Capital and development works;
(iii) Cleanliness; and
(iv) Finance and accounting reforms.
74. For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created
with a corpus of ` 1 lakh crores over a period of 5 years. Besides seed capital
from the Government, the Railways will arrange the balance resources
from their own revenues and other sources. Government will lay down
clear cut guidelines and timeline for implementing various safety works to
be funded from this Kosh. Unmanned level crossings on Broad Gauge lines
will be eliminated by 2020. Expert international assistance will be har-
nessed to improve safety preparedness and maintenance practices.
75. In the next 3 years, the throughput is proposed to be enhanced by 10%.
This will be done through modernisation and upgradation of identified
corridors. Railway lines of 3,500 kms will be commissioned in 2017-18, as
against 2,800 kms in 2016-17. Steps will be taken to launch dedicated trains
for tourism and pilgrimage.
76. Railways have set up joint ventures with 9 State Governments. 70
projects have been identified for construction and development.
77. A beginning has been made with regard to station redevelopment. At
least 25 stations are expected to be awarded during 2017-18 for station rede-
velopment. 500 stations will be made differently abled friendly by providing
lifts and escalators.
78. It is proposed to feed about 7,000 stations with solar power in the me-
dium term. A beginning has already been made in 300 stations. Works will
be taken up for 2,000 railway stations as part of 1000 MW solar mission.
79. Our focus is on swachh rail. SMS-based Clean My Coach Service has
been started. It is now proposed to introduce Coach Mitra facility, a single
window interface, to register all coach related requirements. By 2019, all
coaches of Indian Railways will be fitted with bio toilets. Pilot plants for envi-
ronment friendly disposal of solid waste and conversion of biodegradable
waste to energy are being set up at New Delhi and Jaipur railway stations.
80. Today Indian Railways face stiff competition from other modes of trans-
portation which are dominated by the private sector. Transformative meas-
ures have to be undertaken to make Indian Railways competitive to retain
their position of pre-eminence. The following steps will therefore be taken :
(i) Railways will implement end to end integrated transport solutions for
select commodities through partnership with logistics players, who would
provide both front and back end connectivity. Rolling stocks and practices will
be customised to transport perishable goods, especially agricultural products.
(ii) Railways will offer competitive ticket booking facility to the public at
large. Service charge on e-tickets booked through IRCTC has been with-
drawn. Cashless reservations have gone up from 58% to 68%.
(iii) As part of accounting reforms, accrual based financial statements
will be rolled out by March 2019.
81. It will be our continuous endeavour to improve the Operating Ratio of
the Railways. The tariffs of Railways would be fixed, taking into considera-
tion costs, quality of service, social obligations and competition from other
forms of transport.
82. Metro rail is emerging as an important mode of urban transportation.
A new Metro Rail Policy will be announced with focus on innovative models
of implementation and financing, as well as standardisation and indigeni-
sation of hardware and software. This will open up new job opportunities
for our youth.
83. A new Metro Rail Act will be enacted by rationalising the existing
laws. This will facilitate greater private participation and investment in
construction and operation.
84. In the road sector, I have stepped up the Budget allocation for highways
from ` 57,976 crores in BE 2016-17 to ` 64,900 crores in 2017-18. 2,000 kms of
coastal connectivity roads have been identified for construction and devel-
opment. This will facilitate better connectivity with ports and remote vil-
lages. The total length of roads, including those under PMGSY, built from
2014-15 till the current year is about 1,40,000 kms which is significantly
higher than previous three years.
85. An effective multi modal logistics and transport sector will make our
economy more competitive. A specific programme for development of
multi-modal logistics parks, together with multi modal transport facilities,
will be drawn up and implemented.
86. Select airports in Tier 2 cities will be taken up for operation and main-
tenance in the PPP mode. Airport Authority of India Act will be amended
to enable effective monetisation of land assets. The resources, so raised,
will be utilised for airport upgradation.
87. For transportation sector as a whole, including rail, roads, shipping, I
have provided ` 2,41,387 crores in 2017-18. This magnitude of investment
will spur a huge amount of economic activity across the country and create
more job opportunities.
88. Telecom sector is an important component of our infrastructure eco
system. The recent spectrum auctions have removed spectrum scarcity in
the country. This will give a major fillip to mobile broadband and Digital
India for the benefit of people living in rural and remote areas.
89. Under the BharatNet Project, OFC has been laid in 1,55,000 kms. I have
stepped up the allocation for BharatNet Project to ` 10,000 crores in 2017-18.
By the end of 2017-18, high speed broadband connectivity on optical fibre will
be available in more than 1,50,000 gram panchayats, with wifi hot spots and
AMRENDRA JHA
access to digital services at low tariffs. A DigiGaon initiative will be launched
to provide tele-medicine, education and skills through digital technology.
90. For strengthening our Energy sector, Government has decided to set
up Strategic Crude Oil Reserves. In the first phase, 3 such Reserves facilities
have been set up. Now in the second phase, it is proposed to set up caverns
at 2 more locations, namely, Chandikhole in Odisha and Bikaner in
Rajasthan. This will take our strategic reserve capacity to 15.33 MMT.
91. In solar energy, we now propose to take up the second phase of Solar
Park development for additional 20,000 MW capacity.
92.We are also creating an eco-system to make India a global hub for elec-
tronics manufacturing. Over 250 investment proposals for electronics
manufacturing have been received in the last 2 years, totalling an invest-
ment of ` 1.26 lakh crores. A number of global leaders and mobile manufac-
turers have set up production facilities in India. I have therefore exponen-
tially increased the allocation for incentive schemes like M-SIPS and EDF
to ` 745 crores in 2017-18. This is an all-time high.
93. We have to focus on our export infrastructure in a competitive world.
A new and restructured Central scheme, namely, Trade Infrastructure for
Export Scheme (TIES) will be launched in 2017-18.
94. The total allocation for infrastructure development in 2017-18 stands
at `3,96,135 crores.
VI. FINANCIAL SECTOR
95. I now turn to the Financial Sector. The focus of TEC India agenda in
this sector is on building stable and stronger institutions. We will continue
with our reform agenda with several new measures.
96. Our Government has already undertaken substantive reforms in FDI
policy in the last two years. More than 90% of the total FDI inflows are now
through the automatic route. The Foreign Investment Promotion Board
(FIPB) has successfully implemented e-filing and online processing of FDI
applications. We have now reached a stage where FIPB can be phased out.
We have therefore decided to abolish the FIPB in 2017-18. A roadmap for the
same will be announced in the next few months. In the meantime, further
liberalisation of FDI policy is under consideration and necessary an-
nouncements will be made in due course.
97. The Commodities markets require further reforms for the benefits of
farmers. An expert committee will be constituted to study and promote
creation of an operational and legal framework to integrate spot market
and derivatives market for commodities trading. e-NAM would be an inte-
gral part of such framework.
98. The draft bill to curtail the menace of illicit deposit schemes has been
placed in the public domain and will be introduced shortly after its finalisa-
tion. There is an urgent need to protect the poor and gullible investors from
another set of dubious schemes, operated by unscrupulous entities who
exploit the regulatory gaps in the Multi State Cooperative Societies Act,
2002. We will amend this Act in consultation with various stakeholders, as
part of our Clean India agenda.
99. The bill relating to resolution of financial firms will be introduced in
the current Budget Session of Parliament. This will contribute to stability
and resilience of our financial system. It will also protect the consumers of
various financial institutions. Together with the Insolvency and
Bankruptcy Code, a resolution mechanism for financial firms will ensure
comprehensiveness of the resolution system in our country.
100. I had stated in my last Budget speech that a Bill will be introduced to
streamline institutional arrangements for resolution of disputes in infra-
structure related construction contracts, PPP and public utility contracts.
After extensive stakeholders consultations, we have decided that the re-
quired mechanism would be instituted as part of the Arbitration and
Conciliation Act 1996. An amendment Bill will be introduced in this regard.
101. Cyber security is critical for safeguarding the integrity and stability of
our financial sector. A Computer Emergency Response Team for our
Financial Sector (CERT-Fin) will be established. This entity will work in close
coordination with all financial sector regulators and other stakeholders.
102. I have also proposed several other measures in the financial sector
which are listed in Annex I.
103. Listing of Public Sector enterprises will foster greater public ac-
countability and unlock the true value of these companies. The
Government will put in place a revised mechanism and procedure to ensure
time bound listing of identified CPSEs on stock exchanges. The disinvest-
ment policy announced by me in the last budget will continue.
104. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be
listed in stock exchanges.
105.We see opportunities to strengthen our CPSEs through consolidation,
mergers and acquisitions. By these methods, the CPSEs can be integrated
across the value chain of an industry. It will give them capacity to bear
higher risks, avail economies of scale, take higher investment decisions and
create more value for the stakeholders. Possibilities of such restructuring
are visible in the oil and gas sector. We propose to create an integrated public
sector oil major which will be able to match the performance of interna-
tional and domestic private sector oil and gas companies.
106. Our ETF, comprising shares of ten CPSEs, has received overwhelm-
ing response in the recent Further Fund Offering (FFO). We will continue
to use ETF as a vehicle for further disinvestment of shares. Accordingly, a
new ETF with diversified CPSE stocks and other Government holdings will
be launched in 2017-18.
107. The focus on resolution of stressed legacy accounts of Banks contin-
ues. The legal framework has been strengthened to facilitate resolution,
through the enactment of the Insolvency and Bankruptcy Code and the
amendments to the SARFAESI and Debt Recovery Tribunal Acts. In line
with the Indradhanush roadmap, I have provided ` 10,000 crores for re-
capitalisation of Banks in 2017-18. Additional allocation will be provided,
as may be required.
108. Listing and trading of Security Receipts issued by a securitization
company or a reconstruction company under the SARFAESI Act will be
permitted in SEBI registered stock exchanges. This will enhance capital
flows into the securitisation industry and will particularly be helpful to deal
with bank NPAs.
FM SPEECH
109. The Pradhan Mantri Mudra Yojana has contributed significantly to
funding the unfunded and the underfunded. Last year, the target of ` 1.22
lakh crores was exceeded. For 2017-18, I propose to double the lending target
of 2015-16 and set it at ` 2.44 lakh crores. Priority will be given to Dalits,
Tribals, Backward Classes, Minorities and Women.
110. The Stand Up India scheme was launched by our Government in
April 2016 to support Dalit, Tribal and Women entrepreneurs to set up
greenfield enterprises and become job creators. Over 16,000 new enter-
prises have come up through this scheme in activities, as diverse as food
processing, garments, diagnostic centres, etc.
VII. DIGITAL ECONOMY
111. Promotion of a digital economy is an integral part of Governments
strategy to clean the system and weed out corruption and black money. It has
a transformative impact in terms of greater formalisation of the economy
and mainstreaming of financial savings into the banking system. This, in
turn, is expected to energise private investment in the country through
lower cost of credit. India is now on the cusp of a massive digital revolution.
112. A shift to digital payments has huge benefits for the common man.
The earlier initiative of our Government to promote financial inclusion
and the JAM trinity were important precursors to our current push for
digital transactions.
113. Already there is evidence of increased digital transactions. The
BHIM app has been launched. It will unleash the power of mobile phones
for digital payments and financial inclusion. 125 lakh people have adopted
the BHIM app so far. The Government will launch two new schemes to pro-
mote the usage of BHIM; these are, Referral Bonus Scheme for individuals
and a Cashback Scheme for merchants.
114. Aadhar Pay, a merchant version of Aadhar Enabled Payment System,
will be launched shortly. This will be specifically beneficial for those who do
not have debit cards, mobile wallets and mobile phones. A Mission will be
set up with a target of 2,500 crore digital transactions for 2017-18 through UPI,
USSD, Aadhar Pay, IMPS and debit cards. Banks have targeted to introduce
additional 10 lakh new PoS terminals by March 2017. They will be encour-
aged to introduce 20 lakh Aadhar based PoS by September 2017.
115. Increased digital transactions will enable small and micro enter-
prises to access formal credit. Government will encourage SIDBI to refi-
nance credit institutions which provide unsecured loans, at reasonable
interest rates, to borrowers based on their transaction history.
116. The digital payment infrastructure and grievance handling mecha-
nisms shall be strengthened. The focus would be on rural and semi urban ar-
eas through Post Offices, Fair Price Shops and Banking Correspondents.
Steps would be taken to promote and possibly mandate petrol pumps, ferti-
lizer depots, municipalities, Block offices, road transport offices, universities,
colleges, hospitals and other institutions to have facilities for digital payments,
including BHIM App. A proposal to mandate all Government receipts through
digital means, beyond a prescribed limit, is under consideration.
117. Government will strengthen the Financial Inclusion Fund to aug-
ment resources for taking up these initiatives.
118. Government will consider and work with various stakeholders for
early implementation of the interim recommendations of the Committee
of Chief Ministers on digital transactions.
119. The Committee on Digital Payments constituted by Department of
Economic Affairs has recommended structural reforms in the payment eco
system, including amendments to the Payment and Settlement Systems
Act, 2007. Government will undertake a comprehensive review of this Act
and bring about appropriate amendments. To begin with, it is proposed to
create a Payments Regulatory Board in the Reserve Bank of India by replac-
ing the existing Board for Regulation and Supervision of Payment and
Settlement Systems. Necessary amendments are proposed to this effect in
the Finance Bill 2017.
120. As we move faster on the path of digital transactions and cheque
payments, we need to ensure that the payees of dishonoured cheques are
able to realise the payments. Government is therefore considering the op-
tion of amending the Negotiable Instruments Act suitably.
VIII. PUBLIC SERVICE
121. I now turn to Public Service. Our focus here is on effective govern-
ment and efficient service delivery.
122. We have made a strong beginning with regard to Direct Benefit
Transfer (DBT) to LPG and kerosene consumers. Chandigarh and eight
districts of Haryana have become kerosene free. 84 Government schemes
have also boarded on the DBT platform.
123. The Government e-market place which is now functional for procure-
MAKING TAX FILING TRANSPARENT
Tax relief for individual earning up to `5 lakhs
In order to expand tax net, I plan
to have a simple one-page form
to be filed as Income Tax Return
for the category of individuals
having taxable income up to `5
lakhs other than business income
ment of goods and services, has been selected as one of the winners of the
South Asia Procurement Innovation Awards of the World Bank.
124.Our citizens in far flung regions of the country find it difficult to ob-
tain passports and redress passport related grievances. We have decided to
utilise the Head Post Offices as front offices for rendering passport services.
125. Our defence forces keep the country safe from both external and in-
ternal threats. A Centralised Defence Travel System has now been devel-
oped through which travel tickets can be booked online by our soldiers and
officers. They do not have to face the hassle of standing in queues with
railway warrants.
126. A comprehensive web based interactive Pension Disbursement
System for Defence Pensioners will be established. This system will receive
pension proposals and make payments centrally. This will reduce the griev-
ances of defence pensioners.
127. At present our citizens, especially those belonging to the unprivileged
sections, go through cumbersome procedures of Government recruitment.
There are multiplicity of agencies and examinations. We propose to intro-
duce a system of single registration and two tier system of examination.
128. Over the years, the number of tribunals have multiplied with over-
lapping functions. We propose to rationalise the number of tribunals and
merge tribunals wherever appropriate.
129. In the recent past, there have been instances of big time offenders, in-
cluding economic offenders, fleeing the country to escape the reach of law. We
have to ensure that the law is allowed to take its own course. Government is
therefore considering introduction of legislative changes, or even a new law,
to confiscate the assets of such persons located within the country, till they
submit to the jurisdiction of the appropriate legal forum. Needless to say that
all necessary constitutional safeguards will be followed in such cases.
130. Our Government will continue to remain committed to improve the
standards of public service and transparent governance. Service to the
people was the life-long commitment of the Father of the Nation, Mahatma
Gandhi. As we approach, the 150th Birth Anniversary of the Mahatma, we
will take all steps to celebrate it in a befitting manner. A High Level
Committee under the Chairmanship of Honourable Prime Minister is
proposed to be set up for the same. We will also commemorate the centenary
year of Champaran Satyagrah this year. Government of India will support
Government of Gujarat to commemorate 100 years of Sabarmati Ashram
in 2017, in a befitting manner.
IX. PRUDENT FISCAL MANAGEMENT
131. I now turn to the fiscal situation in the context of the Budget for 2017-18.
132. The total expenditure in Budget for 2017-18 has been placed at `21.47
lakh crores. With the abolition of Plan-Non Plan classification of expendi-
ture, the focus is now on Revenue and Capital expenditure. I have stepped
up the allocation for Capital expenditure by 25.4% over the previous year.
This will have multiplier effects and lead to higher growth. The total re-
sources being transferred to the States and the Union Territories with
Legislatures is `4.11 lakh crores, against `3.60 lakh crores in BE 2016-17.
Details of allocations for important sectors and schemes and transfer of
resources to States are given in Annex II of my Speech.
133. I have made a provision of `3,000 crores under the Department of
Economic Affairs to implement various Budget announcements and other
new schemes in 2017-18. For Defence expenditure excluding pensions, I
have provided a sum of `2,74,114 crores including `86,488 crores for Defence
capital. I have increased the allocation for Scientific Ministries to `37,435
crore in 2017-18.
134. For the first time, a consolidated Outcome Budget, covering all
Ministries and Departments, is being laid along with the other Budget
documents. This will improve accountability of Government expenditure.
135. The FRBM Review Committee has done an elaborate exercise and has
recommended that a sustainable debt path must be the principal macro-eco-
nomic anchor of our fiscal policy. The Committee has favoured Debt to GDP of
60% for the General Government by 2023, consisting of 40% for Central
Government and 20% for State Governments. Within this framework, the
Committee has derived and recommended 3% fiscal deficit for the next three
years. TheCommitteehasalsoprovidedforEscapeClauses,fordeviationsupto
0.5% of GDP, from the stipulated fiscal deficit target. Among the triggers for
taking recourse to these Escape Clauses, the Committee has included far-
reaching structural reforms in the economy with unanticipated fiscal implica-
tions as one of the factors. Although there is a strong case now to invoke this
Escape Clause, I am refraining from doing so. The Report of the Committee will
be carefully examined and appropriate decisions taken in due course.
136. Nevertheless, I take note of the fiscal deficit road map of 3%recom-
mended by the Committee for the next three years. I have taken into consid-
eration the need for higher public expenditure in the context of sluggish
private sector investment and slow global growth. I have kept in mind the
recommendation of the Committee that a sustainable debt should be the
underlying basis of prudent fiscal management. Considering all these as-
pects, I have pegged the fiscal deficit for 2017-18 at 3.2% of GDP and remain
committed to achieve 3% in the following year. With this gradual approach,
I have ensured adherence to fiscal consolidation, without compromising
the requirements of public investment.
137. I have taken due care to limit the net market borrowing of Government
to ` 3.48 lakh crores after buyback, much lower than ` 4.25 lakh crores of the
previous year. More importantly, the Revenue Deficit of 2.3% in BE 2016-17
stands reduced to 2.1% in the Revised Estimates. The Revenue Deficit for next
year is pegged at 1.9% , against 2% mandated by the FRBM Act.
138. It will be our endeavour to improve upon these fiscal numbers, espe-
cially the fiscal deficit, in the next year, through greater focus on quality of
expenditure and higher tax realisation from the huge cash deposits in
Banks, triggered by demonetisation.
PART B
Madam Speaker,
139. I shall now present my tax proposals:
140. Indias tax to GDP ratio is very low, and the proportion of direct tax to
indirect tax is not optimal from the view point of social justice. I place before
you certain data to indicate that our direct tax collection is not commensurate
with the income and consumption pattern of Indian economy. As against es-
timated 4.2 crore persons engaged in organised sector employment, the num-
ber of individuals filing return for salary income are only 1.74 crore. As
against 5.6 crore informal sector individual enterprises and firms doing small
business in India, the number of returns filed by this category are only 1.81
crore. Out of the 13.94 lakh companies registered in India upto 31st March,
2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17.
Of the 5.97 lakh companies which have filed their returns for Assessment Year
2016-17 so far, as many as 2.76 lakh companies have shown losses or zero in-
come. 2.85 lakh companies have shown profit before tax of less than ` 1 crore.
28,667 companies have shown profit between ` 1 crore to ` 10 crore, and only
7781 companies have profit before tax of more than ` 10 crores.
141. Among the 3.7 crore individuals who filed the tax returns in 2015-16,
99 lakh show income below the exemption limit of ` 2.5 lakh p.a., 1.95 crore
show income between ` 2.5 to ` 5 lakh, 52 lakh show income between ` 5 to ` 10
lakhs and only 24 lakh people show income above ` 10 lakhs. Of the 76 lakh
individual assesses who declare income above ` 5 lakh, 56 lakh are in the
salaried class. The number of people showing income more than ` 50 lakh in
the entire country is only 1.72 lakh. We can contrast this with the fact that in
the last five years, more than 1.25 crore cars have been sold, and number of
Indian citizens who flew abroad, either for business or tourism, is 2 crore in
the year 2015. From all these figures we can conclude that we are largely a tax
non-compliant society. The predominance of cash in the economy makes it
possible for the people to evade their taxes. When too many people evade
taxes, the burden of their share falls on those who are honest and compliant.
142. After the demonetisation, the preliminary analysis of data received
in respect of deposits made by people in old currency presents a revealing
picture. During the period 8th November to 30th December 2016, deposits
between ` 2 lakh and ` 80 lakh were made in about 1.09 crore accounts with
an average deposit size of ` 5.03 lakh. Deposits of more than 80 lakh were
made in 1.48 lakh accounts with average deposit size of ` 3.31 crores. This
data mining will help us immensely in expanding the tax net as well as in-
creasing the revenues, which was one of the objectives of demonetisation.
143. Madam Speaker, one of the main priorities of our Government is to
eliminate the black money component from the economy. We are commit-
ted to make our taxation rates more reasonable, our tax administration
more fair and expand the tax base in the country. This approach will change
the colour of money.
144. The net tax revenue of 2013-14 was `11.38 lakh crores. This grew by
9.4% in 2014-15 and 17% in 2015-16. As per the RE of 2016-17, we will end the
year with a high growth rate of 17% for the second year in a row. Because of
the serious efforts made by the Government, the rate of growth of advance
tax in personal income tax in the first three quarters of the current finan-
cial is 34.8%.
145. Madam Speaker, the thrust of my tax proposals in this Budget is
stimulating growth, relief to middle class, affordable housing, curbing
black money, promoting digital economy, transparency of political funding
and simplification of tax administration.
Measures for Promoting Affordable Housing and Real Estate
Sector
146. In my budget proposals last year, I had announced a scheme for
profit-linked income tax exemption for promoters of affordable housing
scheme which has received a very good response. However, in order to make
this scheme more attractive, I propose certain changes in the scheme. First
of all, instead of built up area of 30 and 60 sq.mtr., the carpet area of 30 and
60 sq.mtr. will be counted. Also the 30 sq.mtr. limit will apply only in case of
municipal limits of 4 metropolitan cities while for the rest of the country
including in the peripheral areas of metros, limit of 60 sq.mtr. will apply. In
order to be eligible, the scheme was to be completed in 3 years after com-
mencement. I propose to extend this period to 5 years.
147. At present, the houses which are unoccupied after getting completion
certificates are subjected to tax on notional rental income. For builders for
whom constructed buildings are stock-in-trade, I propose to apply this rule
only after one year of the end of the year in which completion certificate is
received so that they get some breathing time for liquidating their inventory.
148. We also propose to make a number of changes in the capital gain
taxation provisions in respect of land and building. The holding period for
considering gain from immovable property to be long term is 3 years now.
This is proposed to be reduced to 2 years. Also, the base year for indexation
is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets in-
cluding immovable property. This move will significantly reduce the capi-
tal gain tax liability while encouraging the mobility of assets. We also plan
to extend the basket of financial instruments in which the capital gains can
be invested without payment of tax.
149. For Joint Development Agreement signed for development of prop-
erty, the liability to pay capital gain tax will arise in the year the project is
completed.
150. The new capital for State of Andhra Pradesh is being constructed by
innovative land-pooling mechanism without use of the Land Acquisition
Act. I propose to exempt from capital gain tax, persons holding land on
2.6.2014, the date on which the State of Andhra Pradesh was reorganised,
and whose land is being pooled for creation of capital city under the
Government scheme.
Measures for Stimulating Growth
151. A concessional with-holding rate of 5% is being charged on interest
earned by foreign entities in external commercial borrowings or in bonds
and Government securities. This concession is available till 30.6.2017. I
propose to extend it to 30.6.2020. This benefit is also extended to Rupee
Denominated (Masala) Bonds.
152. The Government gave income tax exemptions to startups with certain
conditions last year. For the purpose of carry forward of losses in respect of
such startups, the condition of continuous holding of 51% of voting rights has
been relaxed subject to the condition that the holding of the original promot-
er/promoters continues. Also the profit linked deduction available to the
startups for 3 years out of 5 years is being changed to 3 years out of 7 years.
153. Minimum Alternate Tax is at present levied as an advance tax. There
is a strong demand for abolition of MAT. Although the plan for phasing out
of exemptions will kick in from 1.4.2017, the full benefit of revenue out of
phase-out will be available to Government only after 7 to 10 years when all
those who are already availing exemptions at present complete their period
of availment. Therefore, it is not practical to remove or reduce MAT at
present. However, in order to allow companies to use MAT credit in future
years, I propose to allow carry forward of MAT upto a period of 15 years
instead of 10 years at present.
154. In my Budget proposals in 2015, I had announced that I would be
bringing the corporate income tax rate down to 25% gradually. In 2016
Budget, I had announced a reduction by 1% in case of those companies
whose turnover is less than ` 5 crore. In the same Budget, I had also an-
nounced that new manufacturing companies who do not avail of any ex-
emption would be charged only 25% income tax.
155. Medium and Small Enterprises occupy bulk of economic activities
and are also instrumental in providing maximum employment to people.
However, since they do not get many exemptions, they end up paying more
taxes as compared to large companies. As per data of financial year 2015-16,
2.85 lakh companies making profit of less than ` 1 crore pay effective tax rate
of 30.26% while 298 companies making profit above ` 500 crores pay effective
tax rate of 25.90%.
156. In order to make MSME companies more viable and also to encour-
age firms to migrate to company format, I propose to reduce the income tax
for smaller companies with annual turnover upto ` 50 crore to 25%. As per
data of Assessment Year 2015-16, there are 6.94 lakh companies filing re-
turns of which 6.67 lakh companies fall in this category and, therefore,
percentage-wise 96% of companies will get this benefit of lower taxation.
This will make our MSME sector more competitive as compared to large
companies. The revenue forgone estimate for this measure is expected to be
` 7,200 crore per annum.
157. In order to give a boost to banking sector, I propose to increase allow-
able provision for Non-Performing Asset from 7.5% to 8.5%. This will reduce
the tax liability of banks. I also propose to tax interest receivable on actual
receipt instead of accrual basis in respect of NPA accounts of all non-sched-
uled cooperative banks also at par with scheduled banks. This will remove
hardship of having to pay tax even when interest income is not realised.
158. Considering the wide range of use of LNG as fuel as well as feed stock
for petro-chemicals sector, I propose to reduce the basic customs duty on
LNG from 5% to 2.5%.
159. In order to incentivise domestic value addition and to promote Make
in India, I propose to make changes in Customs & Central Excise duties in
respect of certain items which are given in the Annex III of this speech.
Some of these proposals are also for addressing duty inversion.
Promoting Digital Economy
160. There is a scheme of presumptive income tax for small and medium
tax payers whose turnover is upto ` 2 crores. At present, 8% of their turno-
ver is counted as presumptive income. I propose to make this 6% in respect
of turnover which is received by non-cash means. This benefit will be ap-
plicable for transactions undertaken in the current year also.
161. I propose to limit the cash expenditure allowable as deduction, both
for revenue as well as capital expenditure, to `10,000. Similarly, the limit of
cash donation which can be received by a charitable trust is being reduced
from `10,000 to `2,000/-.
162. The Special Investigation Team (SIT) set up by the Government for
black money has suggested that no transaction above `3 lakh should be
permitted in cash. The Government has decided to accept this proposal.
Suitable amendment to the Income-tax Act is proposed in the Finance Bill
for enforcing this decision.
163. To promote cashless transactions, I propose to exempt BCD, Excise/
CV duty and SAD on miniaturised POS card reader for m-POS, micro ATM
standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners.
Simultaneously, I also propose to exempt parts and components for manu-
facture of such devices, so as to encourage domestic manufacturing of
these devices.
Transparency in Electoral Funding
164. India is the worlds largest democracy. Political parties are an es-
sential ingredient of a multi-party Parliamentary democracy. Even 70
years after Independence, the country has not been able to evolve a transpar-
ent method of funding political parties which is vital to the system of free
and fair elections. An attempt was made in the past by amending the provi-
sions of the Representation of Peoples Act, the Companies Act and the
Income Tax Act to incentivise donations by individuals, partnership firms,
HUFs and companies to political parties. Both the donor and the donee were
granted exemption from payment of tax if the accounts were transparently
maintained and returns were filed with the competent authorities.
Additionally, a list of donors who contributed more than `20,000/- to any
party in cash or cheque is required to be maintained. The situation has only
marginally improved since these provisions were brought into force.
Political parties continue to receive most of their funds through anony-
mous donations which are shown in cash.
165. An effort, therefore, requires to be made to cleanse the system of po-
litical funding in India. Donors have also expressed reluctance in donating
by cheque or other transparent methods as it would disclose their identity
and entail adverse consequences. I, therefore, propose the following scheme
BOOSTING AGRICULTURE OUTPUT
Better monsoon likely to help farmers
The total area sown under kharif
and rabi seasons are higher than
the previous year. With a better
monsoon, agriculture is expected
to grow at 4.1% in the current year
as an effort to cleanse the system of funding of political parties:
a) In accordance with the suggestion made by the Election Commission,
the maximum amount of cash donation that a political party can receive
will be `2000/- from one person.
b) Political parties will be entitled to receive donations by cheque or digital
mode from their donors.
c) As an additional step, an amendment is being proposed to the Reserve
Bank of India Act to enable the issuance of electoral bonds in accordance
with a scheme that the Government of India would frame in this regard.
Under this scheme, a donor could purchase bonds from authorised banks
against cheque and digital payments only. They shall be redeemable only in
the designated account of a registered political party. These bonds will be
redeemable within the prescribed time limit from issuance of bond.
d) Every political party would have to file its return within the time pre-
scribed in accordance with the provision of the Income-tax Act.
Needless to say that the existing exemption to the political parties from
payment of income-tax would be available only subject to the fulfilment of
these conditions. This reform will bring about greater transparency and
accountability in political funding, while preventing future generation of
black money.
Ease of Doing Business
166. As an anti-avoidance measure, the provision of domestic transfer
pricing in respect of related entities was brought in the Finance Act of 2012.
Since then the number of entities being covered under domestic pricing has
gone up substantially necessitating a longer scrutiny, which causes hard-
ship to domestic companies. In order to reduce the compliance burden due
to domestic transfer pricing provisions, I propose to restrict the scope of
domestic transfer pricing only if one of the entities involved in related
MERGING PLAN & NON-PLAN EXPENDITURE
To facilitate optimal allocation of resources
We have done away with the
plan and non-plan classification
of expenditure. This will give
us a holistic view of allocations
for sectors and ministries
party transaction enjoys specified profit-linked deduction.
167. I propose to increase the threshold limit for audit of business entities
who opt for presumptive income scheme from `1 crore to `2 crores.
Similarly, the threshold for maintenance of books for individuals and HUF
is being increased from turnover of `10 lakhs to `25 lakhs or income from
`1.2 lakhs to `2.5 lakhs.
168. In 2012, Income-tax Act was amended to provide for taxation of those
transactions of transfer of shares or interest in a foreign entity deriving its
value substantially from Indian assets. Apprehensions have been raised
about some difficulties which arise because of this provision in case of
transfer of stake of investors of India-based funds located abroad but in-
vesting in India-based companies.
169. In order to remove this difficulty, I propose to exempt Foreign
Portfolio Investor (FPI) Category I & II from indirect transfer provision. I
also propose to issue a clarification that indirect transfer provision shall not
apply in case of redemption of shares or interests outside India as a result
of or arising out of redemption or sale of investment in India which is
chargeable to tax in India.
170. As on today, a TDS of 5% is being deducted from commission payable to
individual insurance agents even if the income of some of them may be below
taxable limit. I propose to exempt them from the requirement of TDS subject
to their filing a self-declaration that their income is below taxable limit.
171. Last year, I had announced a new scheme for presumptive taxation
for professionals with receipt upto `50 lakhs p.a. In respect of such assesses,
they are being given further benefit in terms of paying advance tax in one
instalment instead of four.
172. In order to allow the people to claim the refund expeditiously, the time
period for revising a tax return is being reduced to 12 months from comple-
tion of financial year, at par with the time period for filing of return. Also
the time for completion of scrutiny assessments is being compressed fur-
ther from 21 months to 18 months for Assessment Year 2018-19 and further
to 12 months for Assessment Year 2019-20 and thereafter.
Personal Income-Tax
173. While the Government is trying to bring within tax-net more people
who are evading taxes, the present burden of taxation is mainly on honest
tax payers and salaried employees who are showing their income correctly.
Therefore, post-demonetisation, there is a legitimate expectation of this
class of people to reduce their burden of taxation. Also an argument is
made that if a nominal rate of taxation is kept for lower slab, many more
people will prefer to come within the tax net.
174. I, therefore, propose to reduce the existing rate of taxation for indi-
vidual assesses between income of `2.5 lakhs to `5 lakhs to 5% from the pre-
sent rate of 10%. This would reduce the tax liability of all persons below `5
lakh income either to zero (with rebate) or 50% of their existing liability. In
order not to have duplication of benefit, the existing benefit of rebate avail-
able to the same group of beneficiaries is being reduced to `2500 available
only to assessees upto income of `3.5 lakhs. The combined effect of both
these measures will mean that there would be zero tax liability for people
getting income upto `3 lakhs p.a. and the tax liability will only be `2,500 for
people with income between `3 and `3.5 lakhs. If the limit of `1.5 lakh under
Section 80C for investment is used fully the tax would be zero for people with
income of `4.5 lakhs. While the taxation liability of people with income upto
`5 lakhs is being reduced to half, all the other categories of tax payers in the
subsequent slabs will also get a uniform benefit of `12,500 per person. The
total amount of tax foregone on account of this measure is `15,500 crores.
175. In order to make good some of this revenue loss on account of this
relief, I propose to levy a surcharge of 10% of tax payable on categories of
individuals whose annual taxable income is between `50 lakhs and `1 crore.
The existing surcharge of 15% of Tax on people earning more than `1 crore
will continue. This is likely to give additional revenue of `2,700 crores.
176. In order to expand tax net, I also plan to have a simple one-page form
to be filed as Income Tax Return for the category of individuals having tax-
able income upto `5 lakhs other than business income. Also a person of this
category who files income tax return for the first time would not be subjected
to any scrutiny in the first year unless there is specific information available
with the Department regarding his high value transaction. I appeal to all
citizens of India to contribute to Nation Building by making a small payment
of 5% tax if their income is falling in the lowest slab of `2.5 lakhs to `5 lakhs.
177. Some other important proposals for amendment in Tax Laws which
are not covered by me in my speech are given in Annex III of this speech.
Goods and Services Tax
178. There has been substantial progress towards ushering in GST, by far,
the biggest tax reform since independence. Since the enactment of the
Constitution (One Hundred and First Amendment) Act, 2016, the preparatory
work for this path-breaking reform has been a top priority for the Government.
In this context, several teams of officers both from the States and Central
Board of Excise and Customs have been working tirelessly to give finishing
touch to the Model GST law and rules and other details. Government on its
part has promptly given effect to various provisions of the Constitutional
Amendment Act, including constitution of the GST Council. It is my privilege
to inform this august house that the GST Council has finalised its recommen-
dations on almost all the issues based on consensus and after spirited debate
and discussions. The preparation of IT system for GST is also on schedule. The
extensive reach-out efforts to trade and industry for GST will start from 1st
April, 2017 to make them aware of the new taxation system.
179. Centre, through the Central Board of Excise & Customs, shall con-
tinue to strive to achieve the goal of implementation of GST as per schedule
without compromising the spirit of co-operative federalism.
Implementation of GST is likely to bring more taxes both to Central and
State Governments because of widening of tax net. I have preferred not to
make many changes in current regime of Excise & Service Tax because the
same are to be replaced by GST soon.
RAPID
180. In the Annual Conclave of Tax officers called Rajaswa Gyan
Sangam held in June 2016, the Prime Minister had expressed his desire to
bring reforms in tax administration in the form of an approach of RAPID
which stands for Revenue, Accountability, Probity, Information and
Digitisation. This approach precisely reflects the strategy of Tax
Department which is now formulated. While revenue considerations al-
ways remain the focus of Revenue Department, we are trying to bring in
maximum use of Information Technology to remove human contact with
assesses as well as to plug tax avoidance. We will try to maximise our efforts
for e-assessment in the coming year. We are also using a lot of data mining
capability, both in-house and outsourced. We plan to enforce greater ac-
countability of officers of Tax Department for specific act of commission
and omission. I would like to assure everyone that honest, tax-compliant
person would be treated with dignity and courtesy.
181. Madam Speaker, my direct tax proposals for exemptions, etc. would
result in revenue loss of `22,700 crore but after counting for revenue gain of
`2,700 crore for additional resource mobilisation proposal, the net revenue
loss in direct tax would come to `20,000 crore. There is no significant loss or
gain in my indirect tax proposals.
CONCLUSION
182. Madam Speaker, I have outlined the Budget proposals under our
overarching agenda: Transform, Energise and Clean India. Our empha-
sis will now be on implementing all these proposals for the benefit of the
farmers, the poor and the underprivileged sections of our society.
183. Madam Speaker, it is said: When my aim is right, when my goal is
in sight, the winds favour me and I fly. There is no other day, which is more
appropriate for this, than today.
184. With these words, Madam Speaker, I commend the Budget to the
House.
Annex I to Part A
Other measures in the Financial Sector
1. The commodities and securities derivative markets will be further inte-
grated by integrating the participants, brokers, and operational frameworks.
2. The process of registration of financial market intermediaries like mu-
tual funds, brokers, portfolio managers, etc. will be made fully online by SEBI.
3. A common application form for registration, opening of bank and de-
mat accounts, and issue of PAN will be introduced for Foreign Portfolio
Investors (FPIs). SEBI, RBI and CBDT will jointly put in place the necessary
systems and procedures. This will greatly enhance operational flexibility
and ease of access to Indian capital markets.
4. Steps will be taken for linking of individual demat accounts with
Aadhaar.
5. Presently institutions such as banks and insurance companies are
categorised as Qualified Institutional Buyers (QIBs) by SEBI. They are eli-
gible for participation in IPOs with specifically earmarked allocations. It is
now proposed to allow systemically important NBFCs regulated by RBI and
above a certain net worth, to be categorised as QIBs.
6. Listing and trading of Security Receipts issued by a securitisation
company or a reconstruction company under the SARFAESI Act will be
permitted in SEBI registered stock exchanges. This will enhance capital
flows in to the securitisation industry and will particularly be helpful to
deal with bank NPAs.
Annex III to Part B of Budget Speech
Direct Taxes:
1. Additional Revenue Mobilisation and Anti-abuse Measures
1.1 It is proposed to extend the provisions of section 115BBDA of the
Income-tax Act which provides for levy of tax at the rate of 10% on dividend
income exceeding `10 lakh, to all resident persons except domestic compa-
nies or trust or institution or fund registered under section 12AA or re-
ferred to in section 10(23C). Presently, these provisions are applicable only
to the individuals, Hindu undivided family (HUF) and firms.
1.2 It is proposed to widen the scope of section 56 of the Income-tax Act to
provide that any money, immovable property or specified movable property
received without consideration or with inadequate consideration, by any
person, subject to certain exemption and exceptions, shall be taxable if its
THE ECONOMIC TIMES
THURSDAY | 2 FEBRUARY 2017
value exceeds rupees fifty thousand.
1.3 It is proposed to provide that in case of transfer of unquoted equity shares,
where the fair market value, determined in the prescribed manner is less than
the consideration received, such fair market value shall be the deemed value of
consideration for the purpose of computation of capital gains.
1.4 It is proposed to restrict the exemption from long term capital gains in
case of transfer of listed shares by providing that the exemption, subject to
notification of certain exceptions, shall be available if security transaction
tax has been paid at the time of acquisition of such shares where they have
been acquired after 1st October, 2004.
1.5 It is proposed to introduce a new provision in the Income-tax Act to
provide for tax deduction at source at the rate of five per cent. by an indi-
vidual or HUF, other than those whose books of account are required to be
audited, while making payment of rent of an amount exceeding
` 50,000 per month. It is also proposed to provide that such tax shall be de-
ducted and deposited only once in a financial year through a challan-cum-
statement. Further, the deductor shall not be required to obtain TAN or file
any separate TDS return for this purpose.
1.6 In order to align the transfer pricing provisions with the OECD trans-
fer pricing guidelines and international best practices, it is proposed to in-
sert a new section to provide that the assesse shall make secondary adjust-
ment where the primary adjustment to the transfer price has been made in
certain cases. The provision shall apply if the primary adjustment exceeds
one crore rupees and the excess money attributable to the adjustment is not
brought to India within the prescribed time.
1.7 In order to address the issue of thin capitalisation, it is proposed to
provide that the interest paid by an Indian company or permanent estab-
lishment of a foreign company, in excess of thirty percent of earnings be-
fore interest, taxes, depreciation and amortisation (EBITDA), or interest
paid to its associated enterprise, whichever is less, shall not be allowed as
deduction in computing its taxable profit. It is also proposed to allow carry
forward and set off of the interest so disallowed for eight assessment years.
1.8 In order to address the existing anomaly of interest deduction in re-
spect of let out property vis--vis self-occupied property, it is proposed to
restrict set off of loss from house property against income under any other
head during the current year up to Rs two lakhs. The loss not so set off would
be allowed to be carried forward for set off against house property income
for eight assessment years.
1.9 It is proposed that donation by an entity registered under section 12A
or approved under section 10(23C), to other entity, registered under section
12A, with the direction that such donation shall form part of the corpus,
shall not be treated as application of income for charitable purposes.
2. Rationalisation Measures
2.1 It is proposed to provide that in case of foreign company, sale of lefto-
ver stock of crude oil in case of strategic petroleum reserve after the expiry
of agreement or the arrangement, subject to fulfilment of certain condi-
tions, shall not be liable to tax in India.
2.2 It is proposed to provide a concessional tax rate of ten per cent. in case
of income arising from sale of carbon credit.
2.3 It is proposed to exempt government, foreign missions and state PSUs
engaged in business of transportation of passengers from Tax Collection
at Source (TCS) provisions relating to purchase of vehicles.
2.4 It is proposed to provide that the fair market value of the asset which
has been taken into account for the purpose of computation of accreted
income on which tax has been paid in accordance with provisions of
Chapter XII-EB of the Income-tax Act, shall be taken as the cost of acquisi-
tion of that asset.
2.5 It is proposed to modify the conditions of special taxation regime for
off shore funds under section 9A of the Income-tax Act so as to provide that
the maintenance of minimum fund size would not be necessary in the year
in which the fund is being wound up.
2.6 In line with exemption available to the Prime Ministers Relief Fund
and certain other funds, it is proposed to provide that the income of the
Chief Ministers Relief Fund or the Lieutenant Governors Relief Fund
shall be exempt from tax.
2.7 It is proposed to do away with the provisions enabling the Assessing
Officer not to process the return and thus withhold the refund in cases
where the return is selected for scrutiny till the completion of assessment.
It is however proposed that in cases where grant of refund is likely to ad-
versely affect the interest of revenue, it can be withheld with the approval
of the higher authority after recording the reasons in writing.
2.8 It is proposed to provide that certain entities, like, Investor Protection
Funds, Core Settlement Guarantee Fund, Tea/Coffee/Rubber Boards; enjoying
exemption from levy of income-tax under section 10 of the Income-tax Act shall
be required to furnish return of their income.
2.9 In order to ensure timely filing of returns of income, it is proposed to
levy a fee in case of delay in filing the return.
2.10 It is proposed to provide that if an accountant or a merchant banker or
a registered valuer, furnishes incorrect information in a report or certificate,
he shall be liable to a penalty of ten thousand rupees for each such default.
2.11 It is proposed to provide that where the amount of foreign tax credit
(FTC) allowed against the tax paid under sections 115JB or 115JC of the
Income-tax Act exceeds the amount of FTC admissible against the tax pay-
able by the assesse on his income in accordance with the other provisions
of the Act, such excess credit shall be ignored while computing the amount
of credit under section 115JAA or section 115JD.
2.12 In a case where the foreign tax credit has not been granted to the as-
sesse on the ground that payment of such tax is in dispute, it is proposed to
provide, subject to certain conditions, additional time to the Assessing
Officer for allowing the said tax credit after such dispute is settled.
2.13 It is proposed to provide that no person shall receive payment or ag-
gregate of payments of an amount of three lakh rupees or more from a
person in a day, or in respect of a single transaction, or in respect of transac-
tions relating to one event or occasion, otherwise than by an account payee
cheque or account payee bank draft or use of electronic clearing system
through a bank account. Such restriction shall not apply to Government,
banks or such other persons or class of persons or receipts notified by the
Central Government. It is also proposed to provide for a penalty in case of
contravention of this provision.
2.14 It is proposed to clarify that provisions relating to tax deduction at
source shall not apply to exempt compensation received under the Right to
Fair Compensation and Transparency in Land Acquisition, Rehabilitation
and Resettlement Act, 2013.
2.15 It is proposed to lower the rate of deduction of tax in case of pay-
ments made to a person engaged only in the business of operation of call
centre.
2.16 It is proposed to provide tax neutrality in case of conversion of pref-
erence shares of a company into equity shares of that company.
2.17 It is proposed to provide that the cost of acquisition of share of an
Indian company in the hands of demerged foreign company in a tax neutral
demerger, shall be taken as the cost of acquisition in the hands of resulting
foreign company.
2.18 It is proposed to provide for grant of interest in case of refund of ex-
cess payment of TDS.
2.19 It is proposed to merge the Authority for Advance Ruling (AAR) for
Income-Tax with AAR for Customs, Central Excise and Service Tax; and
create common AAR. It is also proposed to amend the qualifications for
appointment of Chairman and Members.
2.20 It is proposed to make the orders passed by the authority under sec-
tion 10(23C) of the Income-tax Act, appealable before the Tribunal.
2.21 It is proposed to authorise the Central Board of Direct Taxes (CBDT),
to issue directions or instructions in order to remove hardships faced by the
taxpayers in connection with imposition of penalty relating to tax deduc-
tion or collection at source.
2.22 It is proposed to amend the provisions relating to computation of
book profit for the purpose of levy of minimum alternate tax (MAT) so as to
align it with the Indian Accounting Standards (Ind-AS).
2.23 It is proposed to clarify that the amendment made by the Finance Act,
2016 in Section 112 of the Income-tax Act providing for concessional rate of
tax in respect of transfer of share of a private limited company shall be
applicable retrospectively from assessment year 2013-14.
2.24 It is proposed to amend section 10AA of the Income-tax Act so as to
provide that the amount of deduction referred therein shall be allowed from
the total income computed in accordance with the provisions of the Act
before giving effect to the provisions of the said section and that the said
deduction shall not exceed the total income.
2.25 It is proposed to clarify that in the case of furnishing of information
relating to payment to a non-resident of any sum whether or not chargeable to
tax, the person responsible for paying shall be the payer himself, or, if the
payer is a company, the company itself including the principal officer thereof.
2.26 It is proposed to provide that where any term used in an agreement
entered into under sub-section (1) of Section 90 and 90A of the Income-tax Act,
is defined under the said agreement, the said term shall be assigned the mean-
ing as provided in the said agreement and where the term is not defined in the
agreement, but is defined in the Act, it shall be assigned the meaning as defined
in the Act or any technical explanation issued by the Central Government.
2.27 It is proposed to provide that where the capital asset referred to in
section 35AD of the Income-tax Act is used for an ineligible business and the
benefit of said section is withdrawn, the actual cost to the assessee in re-
spect of such asset shall be the actual cost to the assessee, as reduced by an
amount equal to the amount of depreciation calculated at the rate in force
that would have been allowable had the asset been used for the purposes of
business since the date of its acquisition.
2.28 It is proposed to provide that a trust or an institution, which has been
granted registration, and, has adopted or undertaken modification of the
objects subsequently which do not conform to the conditions of registra-
tion, shall be required to obtain fresh registration.
2.29 In order to strengthen the TCS regime, it is proposed to provide that
the collectee shall furnish his PAN to the collector, failing which, tax shall
be collected at a higher rate.
2.30 In order to provide parity between an individual who is an employee
and an individual who is self-employed, it is proposed to provide that the self-
employed individual shall be eligible for deduction up to 20% of his gross total
income in respect of contribution made to National Pension System Trust.
2.31 It is proposed to provide that the authorised officer can, subject to
conditions as specified, provisionally attach a property for a period of six
months in order to protect the interest of revenue. It is also proposed to
provide that he can make a reference to the valuation officer for the purpose
of estimation of FMV of a property.
2.32 It is proposed to authorise the Joint Director, Deputy Director or the
Assistant Director of Income-tax to call for information for the purpose of
any enquiry without seeking approval of the higher authority.
2.33 It is proposed to expand the provision of section 133A of the Income-
tax Act so as to include any place at which activity for charitable purpose is
carried on.
2.34 It is proposed to authorise the CBDT to frame a scheme for central-
ised issuance of notice calling for information and documents for the pur-
pose of verification of information in its possession, processing of such
documents and making the outcome thereof available to the Assessing
Officer.
2.35 In order to remove hardship, it is proposed to omit section 197(C) of
the Finance Act, 2016 which provided for assessment of undisclosed income
relating to any period prior to commencement of the Income Declaration
Scheme, 2016. However, in search cases, it is proposed to provide that in case
tangible evidence is found during the search, the Assessing Officer can as-
sess income upto ten years preceding the year in which search took place.
2.36 In order to strengthen the TDS provisions, it is proposed to provide
that a disallowance shall be made in respect of an expenditure incurred
against income from other sources unless tax has been deducted thereon at
applicable rates.
2.37 In order to maintain the confidentiality of the source of the informa-
tion and the identity of the informer, it is proposed to clarify that the reasons
to believe as recorded by the income-tax authority authorising a search
operation or a requisition of books of account or asset, shall not be dis-
closed to any person, authority or appellate tribunal.
2.38 It is proposed to provide that in case of unit in the consolidated plan
of a mutual fund scheme received in lieu of unit in the consolidating plan,
the actual cost and the period of holding shall be the cost and the period of
holding of the unit in the consolidating plan.
2.39 It is proposed to amend the provision of clause 4 of section 10 of the
Income-tax Act, 1961 so as to make the correct reference to Foreign
Exchange Management Act (FEMA).
2.40 It is proposed to provide a sun set clause in respect of deduction al-
lowed to certain persons in respect of investment in listed equity shares and
listed units of an equity oriented fund.
2.41 It is proposed to exempt capital gains arising out of transfer of a ru-
pee denominated bond by a non-resident to a non-resident.
WWW.ECONOMICTIMES.COM
BUDGET 2017 REMONETISING INDIA 3
EXPLANATORY MEMORANDUM TO THE FINANCE BILL
FINANCE BILL, 2017 The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a local authority having a total
income exceeding one crore rupees.However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed
PROVISIONS RELATING TO DIRECT TAXES the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

Introduction E. Companies
The rates of income-tax in the case of companies have been specified in Paragraph E of Part III of the First Schedule to the Bill. In case of domestic company,
The provisions of Finance Bill, 2017 relating to direct taxes seek to amend the Income-tax Act, 1961 (the Act) and the Finance Act, 2016 the rate of income-tax shall be twenty five per cent. of the total income if the total turnover or gross receipts of the previous year 2015-16 does not exceed fifty
crore rupees and in all other cases the rate of Income-tax shall be thirty per cent. of the total income. In the case of company other than domestic company, the
rates of tax are the same as those specified for the financial year 2016-17.
A. Rates of Income-tax Surcharge at the rate of seven per cent shall continue to be levied in case of a domestic company if the total income of the domestic company exceeds one crore
rupees but does not exceed ten crore rupees. Surcharge at the rate of twelve per cent shall continue to be levied if the total income of the domestic company
exceeds ten crore rupees. In case of companies other than domestic companies, the existing surcharge of two per cent. shall continue to be levied if the total
B. Additional Resource Mobilisation income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of five per cent shall continue to be levied if the total income of the
company other than domestic company exceeds ten crore rupees.
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten crore rupees, shall
C. Measures for Promoting Affordable Housing and Real Estate Sector not exceed the total amount payable as income-tax on a total income of one crore rupees, by more than the amount of income that exceeds one crore rupees.
The total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as income-tax
and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees.
D. Measures for Stimulating Growth In other cases (including sections 115-O, 115QA, 115R, 115TA or 115TD), the surcharge shall be levied at the rate of twelve per cent.
For financial year 2017-18, additional surcharge called the Education Cess on income-tax and Secondary and Higher Education Cess on income-tax
shall continue to be levied at the rate of two per cent. and one per cent. respectively, on the amount of tax computed, inclusive of surcharge (wherever applicable),
E. Promoting Digital Economy in all cases. No marginal relief shall be available in respect of such Cesses. [Clause 2 & First Schedule]

B. ADDITIONAL RESOURCE MOBILISATION

F. Transparency in Electoral Funding Rationalization of taxation of income by way of dividend
Under the existing provisions of section 115BBDA, income by way of dividend in excess of Rs. 10 lakh is chargeable to tax at the rate of 10% on gross
basis in case of a resident individual, Hindu undivided family or firm.W ith a view to ensure horizontal equity among all categories of tax payers deriving
G. Ease of doing Business income from dividend, it is proposed to amend section 115BBDA so as to provide that the provisions of said section shall be applicable to all resident assessees
st
except domestic company and certain funds, trusts, institutions, etc. This amendment will take effect from 1 April, 2018 and will, accordingly apply
in relation to the assessment year 2018-19 and subsequent years. [Clause 44]
H. Anti-abuse Measures
Deduction of tax at source in the case of certain Individuals and Hindu undivided family

I. Rationalisation Measures
J. Benefit for NPS subscribers
DIRECT TAXES
A. RATES OF INCOME-TAX
I. Rates of income-tax in respect of income liable to tax for the assessment year 2017-18.
In respect of income of all categories of assessees liable to tax for the assessment year 2017-18, the rates of income-tax have been specified in Part I of the
First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2016 as amended by the Taxation Laws
(Second Amendment) Act, 2016 (No.48 of 2016), for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging
of tax payable in certain cases.
(1) Surcharge on income-tax-
The amount of income-tax shall be increased by a surcharge for the purposes of the Union,
(a) in the case of every individual or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every
artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, at the rate of fifteen per cent. of such income-tax; and (b) in the
case of cooperative societies, firms or local authorities, at the rate of twelve per cent. of such income-tax;
having total income exceeding one crore rupees.
However, marginal relief shall be allowed in all these cases to ensure that the total amount payable as income-tax and surcharge on total income
exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income
that exceeds one crore rupees.
In the case of persons mentioned in (a) and (b) above having total income chargeable to tax under section 115JC of the Act and where such income exceeds
one crore rupees, surcharge at the rate mentioned above shall be levied and marginal relief shall also be provided.
(c ) in the case of a domestic company,
(i) having total income exceeding one crore rupees but not exceeding ten crore rupees, the amount of income-tax computed shall be increased by a
surcharge for the purposes of the Union calculated at the rate of seven per cent. of such income tax;
The existing provisions of section 194-I of the Act, inter alia, provide for deduction of tax at source at the time of credit or payment of rent to the account of
the payee beyond a threshold limit. It is further provide that an Individual or a Hindu undivided family who is liable for tax audit under section 44AB for any
financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source
under this section. Therefore, under the existing provisions of the aforesaid section, an Individual and HUF, being a payer (other than those liable for tax audit)
are out of the scope of section 194-I of the Act.
In order to widen the scope of tax deduction at source, it is proposed to insert a new section 194-IB in the Act to provide that Individuals or a HUF (other than
those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of
month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.
It is further proposed that tax shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of
tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a
cheque or draft or by any other mode, whichever is earlier.
In order to reduce the compliance burden, it is further proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per
section 203A of the Act. It is also proposed that the deductor shall be liable to deduct tax only once in a previous year.It is also proposed to provide that where
the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the
st
previous year or the last month of the tenancy, as the case may be.This amendment will take effect from 1 June, 2017. [Clause 63]
C. MEASURES FOR PROMOTING AFFORDABLE HOUSING AND REAL ESTATE SECTOR
Incentives for Promoting Investment in immovable property
The existing provision of the Act provide for concessional rate of tax and also indexation benefit for taxation of capital gains arising from transfer of long-
term capital asset. To qualify for long-term asset, an assessee is required to hold the asset for more than 36 months subject to certain exceptions, for example, the
holding period of 24 months has been specified for unlisted shares. W ith a view to promote the real-estate sector and to make it more attractive for investment,
it is proposed to amend section 2 (42A) of the Act so as to reduce the period of holding from the existing 36 months to 24 months in case of immovable property,
st
being land or building or both, to qualify as long term capital asset. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation
to the assessment year 2018-19 and subsequent years. [Clause 3]
Rationalisation of Provisions of Section 80-IBA to promote Affordable Housing
The existing provisions of section 80-IBA provides for 100% deduction in respect of the profits and gains derived from developing and building certain
housing projects subject to specified conditions. The conditions specified, inter alia, include the limit of 30 square meters for the built-up area of residential
unit in respect of project located in the Chennai, Delhi, Kolkata and Mumbai or within 25 kms from the municipal limits of these four cities. Further, it is also
provided that in order to be eligible to claim deductions, the project shall be completed within a period of three years.
In order to promote the development of affordable housing sector, it is proposed to amend section 80-IBA so as to provide the following relaxations:

(ii) having total income exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the
Union calculated at the rate of twelve per cent. of such income-tax.
(d) in the case of a company, other than a domestic company,
(i) having total income exceeding one crore rupees but not exceeding ten crore rupees, the amount of income-tax computed shall be increased by a
surcharge for the purposes of the Union calculated at the rate of two per cent. of such income tax;
(ii) having total income exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the
Union calculated at the rate of five per cent. of such income tax.
However, marginal relief shall be allowed in all these cases to ensure that the total amount payable as income-tax and surcharge on total income
exceeding one crore rupees but not exceeding ten crore rupees, shall not exceed the total amount payable as income-tax on a total income of one crore rupees,
by more than the amount of income that exceeds one crore rupees. The total amount payable as income-tax and surcharge on total income exceeding ten crore
rupees, shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income
that exceeds ten crore rupees.
Also, in the case of every company having total income chargeable to tax under section 115JB of the Act and where such income exceeds one crore rupees
but does not exceed ten crore rupees, or exceeds ten crore rupees, as the case may be, surcharge at the rates mentioned above shall be levied and marginal
relief shall also be provided.
(e) In other cases (including sections 115-O, 115QA, 115R, 115TA or 115TD), the surcharge shall be levied at the rate of twelve per cent.
(2) Education Cess
For assessment year 2017-18, additional surcharge called the Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall
continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases. No marginal
relief shall be available in respect of such Cesses.
II. Rates for deduction of income-tax at source during the financial year 2017-18 from certain incomes other than Salaries.
The rates for deduction of income-tax at source during the financial year 2017-18 from certain incomes other than Salaries have been specified in Part II
of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance
Act, 2016, for the purposes of deduction of income-tax at source during the financial year 2016-17.
(1) Surcharge-
The amount of tax so deducted, in the case of a non-resident person (other than a company), shall be increased by a surcharge,
(i) in case of an individual, Hindu undivided family, association of person, body of individual or artificial juridical person;
(a) at the rate of ten per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds
fifty lakh rupees but does not exceed one crore rupees;
(b) at the rate of fifteen per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction
exceeds one crore rupees; and
(ii) in case of a firm or cooperative society, at the rate of twelve per cent. of such tax, where the income or the aggregate of such incomes paid or likely
to be paid and subject to the deduction exceeds one crore rupees.The amount of tax so deducted, in the case of a company other than a domestic company, shall
be increased by a surcharge,
(i) at the rate of two per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds
one crore rupees but does not exceed ten crore rupees;
(ii) at the rate of five per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds
ten crore rupees. No surcharge will be levied on deductions in other cases.
(2) Education Cess-
Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall continue to be levied at the rate of two per cent. and
one per cent. respectively, of income tax including surcharge wherever applicable, in the cases of persons not resident in India including company other than
a domestic company.
III. Rates for deduction of income-tax at source from Salaries, computation of advance tax and charging of income-tax in special
cases during the financial year 2017-18.
The rates for deduction of income-tax at source from Salaries during the financial year 2017-18 and also for computation of advance tax payable during
the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging
income-tax during the financial year 2017-18 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment
of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are
likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc.The salient features of the rates specified in the said Part III
are indicated in the following paragraphs-
A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person.
(i) The size of residential unit shall be measured by taking into account the carpet area as defined in Real Estate (Regulation and Development)
Act, 2016 and not the built-up area.
(ii) The restriction of 30 square meters on the size of residential units shall not apply to the place located within a distance of 25 kms from the municipal
limits of the Chennai, Delhi, Kolkata or Mumbai.
(iii) The condition of period of completion of project for claiming deduction under this section shall be increased from existing three years to five years.
st
These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
[Clause 37]
Tax incentive for the development of capital of Andhra Pradesh
As per section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2014, the
specified compensation received by the landowner in lieu of acquisition of land is exempt from income tax. The Land Pooling Scheme is an alternative
form of arrangement made by the Government of Andhra Pradesh for formation of new capital city of Amaravati to avoid land-acquisition disputes
and lessen the fin ancial burden associated with payment of compensation under that Act. In Land pooling scheme, the compensation in the form of
reconstituted plot or land is provided to landowners. However, the existing provisions of the Act do not provide for exemption from tax on transfer of land
under the land pooling scheme as well as on transfer of Land Pooling Ownership Certificates (LPOCs) or reconstituted plot or land.
nd
W ith a view to provide relief to an individual or Hindu undivided family who was the owner of such land as on 2 June, 2014, and has transferred such land
under the land pooling scheme notified under the provisions of Andhra Pradesh Capital Region Development Authority Act, 2014, it is proposed to insert a new
clause (37A) in section 10 to provide that in respect of said persons, capital gains arising from following transfer shall not be chargeable to tax under the Act:
(i) Transfer of capital asset being land or building or both, under land pooling scheme.
(ii) Sale of LPOCs by the said persons received in lieu of land transferred under the scheme.
(iii) Sale of reconstituted plot or land by said persons within two years from the end of the financial year in which the possession of such plot or land was
st
handed over to the said persons. This amendment will take effect retrospectively, from 1 April, 2015 and will, accordingly, apply in relation to the assessment
year 2015-16 and subsequent years.
It is also proposed to make amendment in section 49 so as to provide that where reconstituted plot or land, received under land pooling scheme is transferred
after the expiry of two years from the end of the financial year in which the possession of such plot or land was handed over to the said assessee, the cost of
acquisition of such plot or land shall be deemed to be its stamp duty value on the last day of the second financial year after the end of financial year in which
st
the possession of such asset was handed over to the assessee. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to
the assessment year 2018-19 and subsequent years. [Clauses 6 & 25]
Special provisions for computation of capital gains in case of joint development agreement
Under the existing provisions of section 45, capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. The definition
of transfer, inter alia, includes any arrangement or transaction where any rights are handed over in execution of part performance of contract, even though
the legal title has not been transferred. In such a scenario, execution of Joint Development Agreement between the owner of immovable property and the
developer triggers the capital gains tax liability in the hands of the owner in the year in which the possession of immovable property is handed over to
the developer for development of a project.
W ith a view to minimise the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer, it is proposed to insert a new
sub-section (5A) in section 45 so as to provide that in case of an assessee being individual or Hindu undivided family, who enters into a specified agreement for
development of a project, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the
whole or part of the project is issued by the competent authority.
It is further proposed to provide that the stamp duty value of his share, being land or building or both, in the project on the date of issuing of said certificate
of completion as increased by any monetary consideration received, if any, shall be deemed to be the full value of the consideration received or accruing as a
result of the transfer of the capital asset.
It is also proposed to provide that benefit of this proposed regime shall not apply to an assessee who transfers his share in the project to any other person
on or before the date of issue of said certificate of completion. It is also proposed to provide that in such a situation, the capital gains as determined under
general provisions of the Act shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions
of the Act without taking into account this proposed provisions.
It is also proposed to define the following expressions competent authority, specified agrement and stamp duty value for this purpose.It is also
proposed to make consequential amendment in section 49 so as to provide that the cost of acquisition of the share in the project being land or building or both,
in the hands of the land owner shall be the amount which is deemed as full value of consideration under the said proposed provision.These amendments will
st
take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. It is also proposed to insert a
new section 194-IC in the Act so as to provide that in case any monetary consideration is payable under the specified agreement, tax at the rate of ten per cent
shall be deductible from such payment.
st
This amendment will take effect from 1 April,2017. [Clauses 22, 25 & 64]

Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax: Shifting base year from 1981 to 2001 for computation of capital gains
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association The existing provisions of section 55 provide that for computation of capital gains, an assessee shall be allowed deduction for cost of acquisition of the asset
of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the and also cost of improvement, if any. However, for computing capital gains in respect of an asset acquired before 01.04.1981, the assessee has been allowed an
Act (not being a case to which any other Paragraph of Part III applies) are as under: option of either to take the fair market value of the asset as on 01.04.1981 or the actual cost of the asset as cost of acquisition. The assessee is also allowed
to claim deduction for cost of improvement incurred after 01.04.1981, if any. As the base year for computation of capital gains has become more than three
decades old, assessees are facing genuine difficulties in computing the capital gains in respect of a capital asset, especially immovable property acquired before
Upto Rs. 2,50,000 Nil. 01.04.1981 due to non-availability of relevant information for computation of fair market value of such asset as on 01.04.1981. In order to revise the base year
Rs. 2,50,001 to Rs. 5,00,000 5 per cent. for computation of capital gains, it is proposed to amend section 55 of the Act so as to provide that the cost of acquisition of an asset acquired before 01.04.2001
st
Rs. 5,00,001 to Rs. 10,00,000 20 per cent. shall be allowed to be taken as fair market value as on 1 April, 2001 and the cost of improvement shall include only those capital expenses which are incurred
Above Rs. 10,00,000 30 per cent. after 01.04.2001. Consequential amendment is also proposed in section 48 so as to align the provisions relating to cost inflation index to the proposed base year.
st
These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the [Clauses 28 & 24]
previous year, Expanding the scope of long term bonds under 54EC
The existing provision of section 54EC provides that capital gain to the extent of Rs. 50 lakhs arising from the transfer of a long-term capital asset shall
be exempt if the assessee invests the whole or any part of capital gains in certain specified bonds, within the specified time. Currently, investment in bond
Upto Rs.3,00,000 Nil. issued by the National Highways Authority of India or by the Rural Electrification Corporation Limited is eligible for exemption under this section.
Rs. 3,00,001 to Rs. 5,00,000 5 per cent. In order to widen the scope of the section for sectors which may raise fund by issue of bonds eligible for exemption under section 54EC, it is proposed to amend
Rs. 5,00,001 to Rs. 10,00,000 20 per cent. section 54EC so as to provide that investment in any bond redeemable after three years which has been notified by the Central Government in this behalf shall
st
Above Rs. 10,00,000 30 per cent. also be eligible for exemption. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and
subsequent years. [Clause 27]
(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at
anytime during the previous year, No notional income for house property held as stock-in-trade
Section 23 of the Act provides for the manner of determination of annual value of house property.
Considering the business exigencies in case of real estate developers, it is proposed to amend the said section so as to provide that where the house property
Upto Rs. 5,00,000 Nil. consisting of any building and land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or
Rs. 5,00,001 to Rs. 10,00,000 20 per cent. any part of the previous year, the annual value of such property or part of the property, for the period upto one year from the end of the financial year in which
Above Rs. 10,00,000 30 per cent. the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil This amendment will take effect
st
from 1 April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years. [Clause 12]
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be
increased by a surcharge at the rate of, D. MEASURES FOR STIMULATING GROWTH
(i) ten per cent. of such income-tax in case of a person having a total income exceeding fifty lakh rupees but not exceeding one crore rupees; and(ii) fifteen Extension of eligible period of concessional tax rate on interest in case of External Commercial Borrowing and Extension of benefit to Rupee
per cent. of such income-tax in case of a person having a total income exceeding one crore rupees.However, in case of (i) above, the total amount payable Denominated Bonds
as income-tax and surcharge on total income exceeding fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and The existing provisions of section 194LC of the Act provide that the interest payable to a non-resident by a specified company on borrowings made by it in
surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income foreign currency from sources outside India under a loan agreement or by way of issue of any long-term bond including long-term infrastructure bond
that exceeds fifty lakh rupees. shall be eligible for concessional TDS of five per cent. It further provides that the borrowings shall be made, under a loan agreement at any time on or after
st st st
Further, in case of (ii) above, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total the 1 July, 2012, but before the 1 July, 2017; or by way of any long-term bond including long-term infrastructure bond on or after the 1 October, 2014 but
st
amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. before the 1 July, 2017, respectively. Representations have been received requesting for extension of concessional rate of TDS under sections 194LC of the
Act to boost the economy by way of introduction of foreign capital. Therefore, it is proposed to amend section 194LC to provide that the concessional rate
st
B. Co-operative Societies of five per cent. TDS on interest payment under this section will now be available in respect of borrowings made before the 1 July, 2020. This amendment
st
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
continue to be the same as those specified for financial year 2016-17.The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. Further, consequent upon demand from various stakeholders for granting benefit of lower rate of TDS to rupee denominated bonds, a Press Release dated 29th
of such income-tax in case of a co-operative society having a total income exceeding one crore rupees.However, the total amount payable as income-tax and October, 2015 was issued clarifying that TDS at the rate of 5 per cent would be applicable to these bonds in the same way as it is applicable for off-shore dollar
surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more denominated bonds. In order to give effect to the above, it is further proposed to extend the benefit of section 194LC to rupee denominated bond issued outside
st st
than the amount of income that exceeds one crore rupees. India before the 1 July, 2020. This amendment will take effect retrospectively from 1 April, 2016 and will, accordingly, apply in relation to the assessment
year 2016-17 and subsequent years. [Clause 67]
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the Extension of eligible period of concessional tax rate under section 194LD
same as that specified for financial year 2016-17.The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax The existing provisions of section 194LD of the Act, provides for lower TDS at the rate of five per cent. in the case of interest payable at any time on or after
st st
in case of a firm having a total income exceeding one crore rupees.However, the total amount payable as income-tax and surcharge on total income exceeding 1 June, 2013 bue before the 1 July, 2017 to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds provided that
one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds the rate of interest does not exceed the rate notified by the Central Government in this behalf. Considering the representations received from stakeholders, it
one crore rupees. is proposed to amend section 194LD to provide that the concessional rate of five per cent. TDS on interest will now be available on interest payable before
st st
the 1 July, 2020. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent
D. Local authorities years. [Clause 68]
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will Carry forward and set off of loss in case of certain companies.
continue to be the same as that specified for the financial year 2016-17.
4 BUDGET 2017 REMONETISING INDIA
EXPLANATORY MEMORANDUM TO THE FINANCE BILL
The existing provisions of section 79 of the Act, inter-alia provides that where a change in shareholding has taken place in a previous year in the case of a
company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward
and set off against the income of the previous year unless on the last day of the previous year the shares of the company carrying not less than fifty-one per cent
of the voting power were beneficially held by person who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power
on the last day of the year or years in which the loss was incurred.
In order to facilitate ease of doing business and to promote start up India, it is proposed to amend section 79 of the Act to provide that where a change in
shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested and being an
eligible start-up as referred to in section 80 -IAC of this Act, loss shall be carried forward and set off against the income of the previous year, if all the shareholders
of such company which held shares carrying voting power on the last day of the year or years in which the loss was incurred, being the loss incurred during the
period of seven years beginning from the year in which such company is incorporated, continue to hold those shares on the last day of such previous year.
st
This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.[Clause 32]
Extending the period for claiming deduction by start-ups
The existing provisions of section 80-IAC, inter alia, provide that an eligible start-up shall be allowed a deduction of an amount equal to one hundred per cent
of the profits and gains derived from eligible business for three consecutive assessment years out of five years beginning from the year in which such eligible
start-up is incorporated. In view the fact that start-ups may take time to derive profit out of their business, it is proposed to provide that deduction under section
80-IAC can be claimed by an eligible start-up for any three consecutive assessment years out of seven years beginning from the year in which such eligible
st
start-up is incorporated. This amendment will take effect from 1 April, 2018 and will accordingly, apply in relation to assessment year 2018-19
and subsequent years. [Clause 36]
Rationalisation of Provisions relating to tax credit for Minimum Alternate Tax and Alternate Minimum Tax
Section 115JAA contains provisions regarding carrying forward and set off of tax credit in respect of Minimum Alternate Tax (MAT) paid by companies under
section 115JB. Currently, the tax credit can be carried forward upto tenth assessment years. With a view to provide relief to the assessees paying MAT, it is proposed
to amend section 115JAA to provide that the tax credit determined under this section can be carried forward up to fifteenth assessment years immediately
succeeding the assessment years in which such tax credit becomes allowable. Further, similar amendment is proposed in section 115JD so as to allow carry
forward of Alternate Minimum Tax (AMT) paid under section 115JC upto fifteenth assessment years in case of non corporate assessee.
It is also proposed to amend section 115JAA and 115JD so as to provide that the amount of tax credit in respect of MAT/ AMT shall not be allowed to be carried
forward to subsequent year to the extent such credit relates to the difference between the amount of foreign tax credit (FTC) allowed against MAT/ AMT and FTC
allowable against the tax computed under regular provisions of Act other than the provisions relating to MAT/AMT. These amendments will take effect from
st
1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clauses 46 & 48]
Extension of scope of section 43D to Co-operative Banks
The existing provisions of section 43D of the Act, inter-alia, provides that interest income in relation to certain categories of bad or doubtful debts
received by certain institutions or banks or corporations or companies, shall be chargeable to tax in the previous year in which it is credited to its profit and
loss account for that year or actually received, whichever is earlier. This provision is an exception to the accrual system of accounting which is regularly followed
by such assessees for computation of total income. The benefit of this provision is presently available to scheduled banks, public financial institutions,
State financial corporations, State industrial investment corporations and certain public companies like Housing Finance companies. W ith a view to provide
a level playing field to co-operative banks vis--vis scheduled banks and to rationalise the scope of the section 43D, it is proposed to amend section 43D of the
Act so as to include co-operative banks other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.
Consequentially, as per matching principle in taxation, if the interest income on bad or doubtful debts is chargeable to tax on receipt basis, the interest payable
on such bad or doubtful debts need to be allowed on actual payment. In view of this, 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 co-operative bank other than a primary agricultural credit society or a primary co-operative
agricultural and rural development bank shall be allowed as deduction if it is actually paid on or before the due date of furnishing the return of income of the
relevant previous year.
st
These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
[Clauses 17 & 18]
Increase in deduction limit in respect of provision for bad and doubtful debts
The existing provisions of sub-clause (a) of section 36(1)(viia) of the Act, inter-alia provides that a scheduled bank (not being a bank incorporated by or under
the laws of a country outside India) or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative
agricultural and rural development bank, can claim deduction in respect of provision for bad and doubtful debts. The amount of such deduction is limited
to seven and one-half per cent. of the total income (computed before making any deduction under that clause and Chapter VIA) and an amount not exceeding
ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner at the end of the previous year.
In order to strengthen the financial position of the entities specified in the sub-clause (a) of section 36(1) (viia) of the Act, it is proposed to amend the said
sub-clause to enhance the present limit from seven and one-half per cent. to eight and one-half per cent of the amount of the total income (computed before
st
making any deduction under that clause and Chapter VIA). This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the
assessment year 2018-19 and subsequent years. [Clause 14]
E. PROMOTING DIGITAL ECONOMY
Restricting cash donations
Under the existing provisions of section 80G, deduction is not allowed in respect of donation made of any sum exceeding Rs.10,000, if the same is not paid
by any mode other than cash. In order to provide cash less economy and transparency, it is proposed to amend section 80G so as to provide that no deduction
shall be allowed under the section 80G in respect of donation of any sum exceeding two thousand rupees unless such sum is paid by any mode other than cash.
st
This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.[Clause 35]
Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment
Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section
(3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962. However, there is no provision to
disallow the capital expenditure incurred in cash. Further, section 35AD of the Act , inter-alia provides for investment linked deduction on the amount capital
expenditure incurred, wholly or exclusively for the purposes of business, during the previous year for a specified business except capital expenditure incurred
for acquisition of any land or goodwill or financial instrument.
In order to discourage cash transactions even for capital expenditure, it is proposed to amend the provisions of section 43 of the Act to provide that where
an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by
an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees,
such expenditure shall be ignored for the purposes of determination of actual cost of such asset.
It is further proposed to amend section 35AD of the Act to provide that any expenditure in respect of which payment or aggregate of payments made
to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through
a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.
st
These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent
years. [Clauses 13 & 16]
Measures to discourage cash transactions
The existing provision of sub-section (3) of Section 40A of the Act, provides that any expenditure in respect of which payment or aggregate of payments
made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, shall
not be allowed as a deduction. Further, sub-section (3A) of section 40A also provides for deeming a payment as profits and gains of business of profession if
the expenditure is incurred in a particular year but the payment is made in any subsequent year of a sum exceeding twenty thousand rupees otherwise than
by an account payee cheque drawn on a bank or account payee bank draft. In order to disincentivise cash transactions, it is proposed to amend the provision
of section 40A of the Act to provide the following:
(i) To reduce the existing threshold of cash payment to a person from twenty thousand rupees to ten thousand rupees in a single day; i.e any payment in cash
above ten thousand rupees to a person in a day, shall not be allowed as deduction in computation of Income from Profits and gains of business or profession;
(ii) Deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the cash payment is made in
any subsequent year of a sum exceeding ten thousand rupees to a person in a single day; and
(iii) Further expand the specified mode of payment under respective sub-section of section 40A from an account payee cheque drawn on a bank or account
payee bank draft to by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account.
st
These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.[Clause 15]
Measures for promoting digital payments in case of small unorganized businesses
The existing provisions of section 44AD of the Act, inter-alia, provides for a presumptive income scheme in case of eligible assesses carrying out eligible
businesses. Under this scheme, in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding two crore rupees
in a previous year, a sum equal to eight per cent of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the
assessee in his return of income, is deemed to be the profits and gains of such business chargeable to tax under the head profits and gains of business
or profession.
In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend section 44AD
of the Act to reduce the existing rate of deemed total income of eight per cent. to six per cent in respect of the amount of such total turnover or gross receipts
received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before
the due date specified in sub-section (1) of section 139 in respect of that previous year. However, the existing rate of deemed profit of 8% referred to in section
st
44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in any other mode. This amendment will take effect from 1
April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years. [Clause 21]
Restriction on cash transactions
In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating a resource crunch for its various
welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.
In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed
to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more,
(a) in aggregate from a person in a day;
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or
use of electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office savings bank or co-operative
bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in
writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be
excluded from the scope of the said section.
It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of
the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person
proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.
It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per
st
cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees. These amendments will take effect from 1 April, 2017. [Clauses 71, 83 & 84]
F. TRANSPARENCY IN ELECTORAL FUNDING
The existing provisions of section 13A of the Act, inter-alia provides that political parties that are registered with the Election Commission of India, are
exempt from paying income-tax. To avail the exemption, the political parties are required to submit a report to the Election Commission of India as mandated
under sub-section (3) of section 29C of the Representation of the People Act,1951 ( 43 of 1951) furnishing the details of contributions received by a political party
in excess of Rs.20,000 from any person. However, under existing provisions of the Act, there is no restriction of receipt of any amount of donation in cash by a
political party.
Secondly, a political party is also required to file its return of income under section 139(4B) of the Act, if its income exceeds the maximum amount not
chargeable to tax (without considering the exemption under section 13A). However, filing of the return is not a condition precedent for availing exemption
under the said section. In order to discourage the cash transactions and to bring transparency in the source of funding to political parties , it is proposed
to amend the provisions of section 13A to provide for additional conditions for availing the benefit of the said section which are as under:
(i) No donations of Rs.2000/- or more is received otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use
of electronic clearing system through a bank account or through electoral bonds,
(ii) Political party furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of section 139 on or before
the due date under section 139.Further, in order to address the concern of anonymity of the donors, it is proposed to amend the said section to provide that the
political parties shall not be required to furnish the name and address of the donors who contribute by way of electoral bond
st
This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years. [Clause 11]
G. EASE OF DOING BUSINESS
Clarity relating to Indirect transfer provisions
Section 9 of the Act deals with cases of income which are deemed to accrue or arise in India. Sub-section (1) of the said section creates a legal fiction that certain
incomes shall be deemed to accrue or arise in India. Clause (i) of said sub-section (1) provides a set of circumstances in which income accruing or arising,
directly or indirectly, is taxable in India. The said clause provides that all income accruing or arising, whether directly or indirectly, through or from any business
connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital
asset situate in India shall be deemed to accrue or arise in India.
The Finance Act, 2012 inserted certain clarificatory amendments in the provisions of section 9. The amendments, inter-alia, included insertion of Explanation
st
5 in section 9(1)(i) w.e.f. 1 April, 1962. The Explanation 5 clarified that an asset or capital asset, being any share or interest in a company or entity registered or
incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets
located in India. In response to various queries raised by stakeholders seeking clarification on the scope of indirect transfer provisions, the CBDT issued
Circular No 41 of 2016. However, concerns have been raised by stakeholders that the provisions result in multiple taxation.
In order to address these concerns, it is proposed to amend the said section so as to clarify that the Explanation 5 shall not apply to any asset or capital
asset mentioned therein being investment held by non-resident, directly or indirectly, in a Foreign Institutional Investor, as referred to in clause (a) of the
Explanation to section 115AD, and registered as Category-I or Category II Foreign Portfolio Investor under the Securities and Exchange Board of India
(Foreign Portfolio Investors) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992, as these entities are regulated and broad based.
st
The proposed amendment is clarificatory in nature. This amendment will take effect retrospectively from 1 April, 2012 and will, accordingly, apply in relation
to assessment year 2012-13 and subsequent years. [Clause 4]
Modification in conditions of special taxation regime for off shore funds under section 9A
Section 9A of the Act provides for a special regime in respect 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 acting on behalf of such fund shall 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 the conditions provided in sub-sections (3), (4) and (5) of the section. Sub-section (3) of section 9A
provides for the conditions for the eligibility of the fund. These conditions, inter-alia, are related to residence of fund, corpus, size, investor broad basing,
investment diversification and payment of remuneration to fund manager at arms length. In respect of corpus of the fund, the condition is that the monthly
average of the corpus of the fund shall not be less than one hundred crore rupees except where the fund has been established or incorporated in the previous year
THE ECONOMIC TIMES
THURSDAY | 2 FEBRUARY 2017
in which case, the corpus of fund shall not be less than one hundred crore rupees at the end of such previous year. Representations have been received stating
that in the year in which the fund is being wound up, it would not be possible to maintain the monthly average of the corpus of the fund to an amount which
would not be less than one hundred crore rupees as required.
In order to rationalise the regime and to address the concerns of the stakeholders, it is proposed to provide that in the previous year in which the fund is being
wound up, the condition that the monthly average of the corpus of the fund shall not be less than one hundred crore rupees, shall not apply. This amendment
st
will take effect retrospectively from 1 April, 2016 and shall apply to the assessment year 2016-17 and subsequent years. [Clause 5]
Exemption of income of Foreign Company from sale of leftover stock of crude oil from strategic reserves at the expiry of agreement
or arrangement
The existing provisions of clause (48A) of section 10 of the Act, provides that any income accruing or arising to a foreign company on account of storage
of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India shall be exempt, if the said storage and sale is pursuant to an
agreement or an arrangement entered into by the Central Government; and having regard to the national interest, said foreign company and the said agreement
or arrangement are notified by the Central Government in that behalf. The benefit of exemption presently is not available to sale out of the leftover stock of
crude after the expiry of said agreement or the arrangement.
Given the strategic nature of the project benefitting India to augment its strategic petroleum reserves, it is proposed to insert a new clause (48B) in section
10 so as to provide that any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from a facility in India
after the expiry of an agreement or an arrangement referred to in clause (48A) of section 10 of the Act shall also be exempt subject to such conditions as may
st
be notified by the Central Government in this behalf. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to assessment
year 2018-19 and subsequent years. [Clause 6]
Enabling of Filing of Form 15G/15H for commission payments specified under section 194D
The existing provision of sub-section 194D of the Act, inter-alia, provides for tax deduction at source (TDS) at the rate of 5% for payments in the nature of
insurance commission beyond a threshold limit of Rs. 15,000 per financial year. Further, the existing provisions of section 197A of the Act , inter-alia provide that
tax shall not be deducted, if the recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed Form.No.15G/15H
declaring that the tax on his estimated total income of the relevant previous year would be nil. Presently, the payment in the nature of income referred to in
section 194D is not covered by provisions of section 197A. In order to reduce compliance burden in the case of Individuals and HUFs, it is proposed to amend
section 197A so as to make them eligible for filing self-declaration in Form.No.15G/15H for non-deduction of tax at source in respect insurance commission
st
referred to in section 194D. This amendment will take effect from 1 June, 2017. [Clause 69]
Increasing the threshold limit for maintenance of books of accounts in case of Individuals and Hindu undivided family
The existing provisions of clause (i) and clause (ii) of sub-section (2) of section 44AA of the Act cast an obligation on every person carrying on business
or profession [other than those mentioned in sub-section (1) such as legal, medical, engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette] to maintain such books of accounts and
documents in the previous year to enable the Assessing Officer to compute his total income in accordance with the provisions of Act, provided that the income
and total sales or turn over or gross receipts, etc specified in said clauses exceeds rupees one lakh twenty thousand and rupees ten lakh, respectively.
In order to reduce the compliance burden, it is proposed to amend the provisions of section 44AA to increase monetary limits of income and total sales or turn
over or gross receipts, etc specified in said clauses for maintenance of books of accounts from one lakh twenty thousand rupees to two lakh fifty thousand rupees
and from ten lakh rupees to twenty-five lakh rupees, respectively in the case of Individuals and Hindu undivided family carrying on business or profession.
st
This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.[Clause 19]
Exclusion of certain specified person from requirement of audit of accounts under section 44AB
The existing provision of section 44AB of the Act, inter-alia provides that every person carrying on the business is required to get his accounts audited
if the total sales, turnover or gross receipts in the previous year exceeds one crore rupees. The threshold limit for applicability of presumptive taxation in
st
case of eligible business carried on by eligible person under section 44AD was increased to two crore rupees from one crore rupees with effect from 1 April,
th
2017 relevant to Assessment year 2017-18 by Finance Act, 2016. Further vide press release dated 20 June, 2016, it was clarified that if an eligible person opts for
presumptive taxation scheme as per section 44AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the
relevant previous year does not exceed two crore rupees.
In light of the above legislative changes and to reduce the compliance burden of the small tax payers and facilitate the ease of doing business, it is proposed
to amend the section 44AB to exclude the eligible person, who declares profits for the previous year in accordance with the provisions of sub-section (1) of
section 44AD and his total sales, total turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year, from
st
requirement of audit of books of accounts under section 44AB. This amendment will take effect from 1 April, 2017 and will, accordingly, apply in relation
to the assessment year 2017-18 and subsequent years.Non-deduction of tax in case of exempt compensation under RFCTLAAR Act, 2013
The existing provision of section 194LA of the Act, inter-alia, provides that any person paying compensation shall deduct tax at source at the rate of ten
per cent. on the compensation or enhanced compensation or consideration on account of compulsory acquisition of any immovable property (other than
agricultural land) under any law for the time being in force subject to certain conditions specified therein.
The Central Government has enacted a new law namely Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement
st
Act, 2013, (RFCTLARR Act) on 26th September, 2013 which came into force on 1 January, 2014. Section 96 of the RFCTLARR Act inter-alia, provides that
income-tax shall not be levied on award or agreement made subject to limitations mentioned in section 46 of the said Act. Therefore, compensation received for
compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFTCLARR Act), is exempted from the levy of income-tax.
th
The Board has issued Circular number 36/2016 dated 25 October, 2016 clarifying that compensation received in respect of any award or agreement which
has been exempted from the levy of income-tax vide section 96 of the RFCTLARR Act shall not be taxable under the provisions of the Act, even if there is no
specific provision of exemption for such compensation under the Act. However, the circular addressed only the matter pertaining to taxability of compensation
received on compulsory acquisition of land and not tax deduction at source under section 194LA of the Act. Thus in order to rationalise the provisions of
the Act, it is proposed to amend the section 194LA to provide that no deduction shall be made under this section where such payment is made in respect of
any award or agreement which has been exempted from levy of income-tax under section 96 (except those made under section 46) of RFCTLARR Act. This
st
amendment will take effect from 1 April, 2017. [Clause 66]
Exemption from tax collection at source under sub-section (1F) of section 206C in case of certain specified buyers.
The existing provision of sub-section (1F) of section 206C of the Act, inter-alia provides that the seller who receives consideration for sale of a motor
vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer.
In order to reduce compliance burden in certain cases, it is proposed to amend section 206C, to exempt the following class of buyers such as the Central
Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; local
authority as defined in explanation to clause (20) of Section 10; a public sector company which is engaged in the business of carrying passengers, from the
st
applicability of the provision of sub-section (1F) of section 206C of the Act. This amendment will take effect from 1 April, 2017. [Clause 71]
Simplification of the provisions of tax deduction at source in case Fees for professional or technical services under section 194J
The existing provisions of sub-section (1) of section 194J of the Act, inter-alia provides that a specified person is required to deduct an amount equal to ten
per cent. of any sum payable or paid ( whichever is earlier) to a resident by way of fees for professional services or fees for technical services provided such
sum paid/payable or aggregate of sum paid/payable exceeds thirty thousand rupees to a person in a financial year.
In order to promote ease of doing business, it is proposed to amend section 194J to reduce the rate of deduction of tax at source to two per cent. from ten per cent.
in case of payments received or credited to a payee, being a person engaged only in the business of operation of call center. This amendment will take effect from
st
the 1 day of June, 2017. [Clause 65]
Scope of section 92BA of the Income-tax Act relating to Specified Domestic Transactions
The existing provisions of section 92BA of the Act, inter-alia provide that any expenditure in respect of which payment has been made by the assessee
to certain specified persons under section 40A(2)(b) are covered within the ambit of specified domestic transactions.
As a matter of compliance and reporting, taxpayers need to obtain the chartered accountants certificate in Form 3CEB providing the details such as list
of related parties, nature and value of specified domestic transactions (SDTs), method used to determine the arms length price for SDTs, positions taken with
regard to certain transactions not considered as SDTs, etc. This has considerably increased the compliance burden of the taxpayers.
In order to reduce the compliance burden of taxpayers, it is proposed to provide that expenditure in respect of which payment has been made by the assessee
to a person referred to in under section 40A(2)(b) are to be excluded from the scope of section 92BA of the Act. Accordingly, it is also proposed to make a
st
consequential amendment in section 40(A)(2)(b) of the Act. These amendments will take effect from 1 April, 2017 and will, accordingly, apply in relation to
the assessment year 2017-18 and subsequent years. [Clauses 15 & 41]
Tax neutral conversion of preference shares to equity shares
Under the existing provisions of the Act, conversion of security from one form to another is regarded as transfer for the purpose of levy of capital gains tax.
However, tax neutrality to the conversion of bond or debenture of a company to share or debenture of that company is provided under the section 47. No
similar tax neutrality to the conversion of preference share of a company into its equity share is provided. In order to provide tax neutrality to the conversion
of preference share of a company into equity share of that company, it is proposed to amend section 47 to provide that the conversion of preference share of a
company into its equity share shall not be regarded as transfer. Consequential amendments are also proposed in section 49 and section 2(42A) in respect of cost
st
of acquisition and period of holding. These amendments will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment
year 2018-19 and subsequent years. [Clauses 3, 23 & 25]
Cost of acquisition in Tax neutral demerger of a foreign company
Under the existing provision of section 47(vic), the transfer of shares of an Indian company by a demerged foreign company to a resulting foreign company
is not regarded as transfer. It is proposed to amend section 49 so as to provide that cost of acquisition of the shares of Indian company referred to in section 47(vic)
in the hands of the resulting foreign company shall be the same as it was in the hands of demerged foreign company. This amendment will take effect from
st
1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clause 25]
Income from transfer of Carbon credits
Carbon credits is an incentive given to an industrial undertaking for reduction of the emission of GHGs (Green House gases), including carbon dioxide which
is done through several ways such as by switching over to wind and solar energy, forest regeneration, installation of energy-efficient machinery, landfill
methane capture, etc. The Kyoto Protocol commits certain developed countries to reduce their GHG emissions and for this, they will be given carbon credits. A
reduction in emissions entitles the entity to a credit in the form of a Certified Emission Reduction (CER) certificate. The CER is tradable and its holder can transfer
it to an entity which needs Carbon Credits to overcome an unfavourable position on carbon credits. Income-tax Department has been treating the income on
transfer of carbon credits as business income which is subject to tax at the rate of 30%. However, divergent decisions have been given by the courts on the issue as
to whether the income received or receivable on transfer of carbon credit is a revenue receipt or capital receipt. In order to bring clarity on the issue of taxation
of income from transfer of carbon credits and to encourage measures to protect the environment, it is proposed to insert a new section 115BBG to provide that
where the total income of the assessee includes any income from transfer of carbon credit, such income shall be taxable at the concessional rate of ten per cent
( plus applicable surcharge and cess) on the gross amount of such income. No expenditure or allowance in respect of such income shall be allowed under the Act.
st
This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clause 45]
Processing of return within the prescribed time and enable withholding of refund in certain cases
The provisions of sub-section (1D) of section 143 provide that the processing of a return shall not be necessary, where a notice has been issued to the assessee
under sub-section (2) of the said section. Amendment to the said sub-section brought by Finance Act, 2016 provides that with effect from assessment year 2017-18,
processing under section 143(1) is to be done before passing of assessment order. In order to address the grievance of delay in issuance of refund in genuine
cases which are routinely selected for scrutiny assessment, it is proposed that provisions of section 143(1D) shall cease to apply in respect of returns furnished
for assessment year 2017-18 and onwards. However, to address the concern of recovery of revenue in doubtful cases, it is proposed to insert a new section 241A to
st
provide that, for the returns furnished for assessment year commencing on or after 1 April, 2017, where refund of any amount becomes due to the assessee
under section 143(1) and the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue, he may, for the reasons
recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, withhold the refund upto the date on which the assessment
st
is made. These amendments will take effect from 1 April, 2017 and will, accordingly, apply to returns furnished for assessment year 2017-18 and subsequent
years. [Clauses 57 & 76]
Rationalisation of section 211 and section 234C relating to advance tax
Section 211 of the Act provides for instalments of advance tax and due dates for depositing the same. Clause (b) of sub-section (1) of the said section provides
th
that an eligible assessee engaged in an eligible business referred to in section 44AD is liable to pay advance tax in a single instalment on or before the 15 of
March every financial year. Vide Finance Act 2016, presumptive taxation regime has been extended to professionals also. Hence, it is proposed to amend the said
clause (b) to provide that the assessee who declares profits and gains in accordance with presumptive taxation regime provided under section 44ADA shall also
be liable to pay advance tax in one instalment on or before the 15th of March. It is also proposed to make consequential amendments in sub-section (1) of
section 234C to provide that in respect of an assessee referred to in section 44ADA, interest under the said section shall be levied, if the advance tax paid on
or before the 15th March, is less than the tax due on the returned income. Vide Finance Act, 2016, tax on certain dividends received from domestic companies is
st
to be levied under section 115BBDA of the Act with effect from the 1 April, 2017, if such income exceeds ten lakh rupees. However, in view of the uncertain
nature of declaration and receipt of dividend incomes, an assessee liable to pay advance tax may not be able to correctly determine such liability within the
payment schedule as specified under section 211 and shall, therefore, incur levy of interest on deferment of advance tax as specified under clauses (a) or
(b) of section 234C(1). It is hence proposed to provide that that if shortfall in payment of advance tax is on account of under-estimation or failure in estimation
of income of the nature referred to in section 115BBDA, the interest under section 234C shall not be levied subject to fulfilment of conditions specified therein.
st
These amendments will take effect from 1 April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.
[Clauses 73 & 74]
Interest on refund due to deductor
The existing section 244A of the Act provides that an assessee is entitled to receive interest on refund arising out of excess payment of advance tax, tax
deducted or collected at source, etc. It is proposed to insert a new sub-section (1B) in the said section to provide that where refund of any amount becomes
due to the deductor, such person shall be entitled to receive, in addition to the refund, simple interest on such refund, calculated at the rate of one-half per
cent. for every month or part of a month comprised in the period, from the date on which claim for refund is made in the prescribed form or in case of an order
passed in appeal, from the date on which the tax is paid, to the date on which refund is granted.It is also proposed to provide that the interest shall not be allowed
st
for the period for which the delay in the proceedings resulting in the refund is attributable to the deductor. This amendment will take effect from 1 April, 2017.
[Clause 77]
Extension of capital gain exemption to Rupee Denominated Bonds
W ith a view to provide relief to non-resident investor, in the wake of permission to the Indian corporates by the Reserve Bank of India (the RBI) to issue
rupee denominated bonds outside India as a measure to enable the Indian corporates to raise funds from a source outside India, the Finance Act, 2016,
st
inter-alia, amended section 48 of the Act with effect from the 1 April, 2017 so as to provide that the gains arising on account of appreciation of rupee
against a foreign currency at the time of redemption of rupee denominated bond of an Indian company subscribed by him, shall be ignored for the purpose
of computation of full value of consideration. Representations have been received to allow exemption from capital gain arising to secondary holders as well.
It has also been represented to allow exemption in respect of transfer of Rupee Denominated Bonds from non-resident to non-resident for the purpose of
increasing acceptability and transferability of such instrument in the foreign market. In order to further provide relief in respect of gains arising on account of
appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company to secondary holders as well, it is
proposed to amend section 48 providing that the said appreciation of rupee shall be ignored for the purposes of computation of full value of consideration.
Further, with a view to facilitate transfer of Rupee Denominated Bonds from non-resident to non-resident, it is proposed to amend section 47 so as to
provide that any transfer of capital asset, being rupee denominated bond of Indian company issued outside India, by a non- resident to another non- resident
shall not be regarded as transfer. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year
2018-19 and subsequent years. [Clause 24]
Enabling claim of credit for foreign tax paid in cases of dispute
The existing provisions of section 155 of the Act provide for procedure for amendment of assessment order in case of certain specified errors.
In view of rule 128 of the Income-tax Rules, 1962, which provides a mechanism for claim of foreign tax credit, it is proposed to insert sub-section (14A) in
section 155 to provide that where credit for foreign taxes paid is not given for the relevant assessment year on the grounds that the payment of such foreign tax
was in dispute, the Assessing Officer shall rectify the assessment order or an intimation under sub-section (1) of section 143, if the assessee, within six months
from the end of the month in which the dispute is settled, furnishes proof of settlement of such dispute, submits evidence before the Assessing Officer that
WWW.ECONOMICTIMES.COM
BUDGET 2017 REMONETISING INDIA
EXPLANATORY MEMORANDUM TO THE FINANCE BILL
the foreign tax liability has been discharged and furnishes an undertaking that credit of such amount of foreign tax paid has not been directly or indirectly
st
claimed or shall not be claimed for any other assessment year. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to
assessment year 2018-19 and subsequent years. [Clause 62]
Amendments to the structure of Authority for Advance Rulings
Chapter XIX-B of the Act relates to the Advance rulings under the Act. W ith a view to promote ease of doing business, it has been decided by the Government
to merge the Authority for Advance Ruling (AAR) for income-tax, central excise, customs duty and service tax. Accordingly, necessary amendments, have been
made to Chapter XIX-B to allow merger of these AARs. Accordingly, it is proposed to amend the definition of applicant in section 245N of the Act to provide
reference of applications for Advance Ruling made under the Customs Act, 1962, the Central Excise Act, 1944 and the Finance Act, 1994 (which makes provisions
in respect of Service Tax Matters). Similarly, amendment has been proposed to section 245Q which relates to application for advance ruling. It is further
proposed to amend the qualifications for appointment as revenue Member of the AAR and provide that an officer of the Indian Revenue Service qualified to be
a Member of the Central Board of Direct Taxes Board and an officer of the Indian Customs and Central Excise Service, who is qualified to be a member of the
Central Board of Excise & Customs, shall be eligible to be appointed as revenue Member of AAR. In order to improve the efficiency and efficacy of the AAR, and
to increase the available pool for appointment as Chairman, AAR, it is proposed to amend the qualifications for appointment as Chairman as provided in section
245-O and provide that a former Chief Justice of a High Court, or a person who has been a High Court Judge for at least seven years shall also be eligible to be
Chairman of the AAR. It is also proposed to provide that the qualifications for appointment as revenue Member or law Member shall be considered as on the date
of occurrence of the vacancy. It is also proposed that in the event the Chairman is unable to discharge his functions owing to absence, illness or any other reason,
or in the event that the office of the Chairman falls vacant, the Vice-chairman shall discharge the functions of the Chairman until the new Chairman enters upon
st
his office or until the incumbent Chairman resumes his duties. These amendments will take effect from 1 April, 2017. [Clauses 79, 80 & 81]
Amendment of Section 253
The existing provisions of sub-clause (f) of sub-section (1) of section 253 provide that an order passed by the prescribed authority under sub-clause (vi) or
sub-clause (via) of clause (23C) of section 10 shall be appealable before the Appellate Tribunal. It is proposed to expand the scope of the said section to provide
that the orders passed by the prescribed authority under sub-clauses (iv) and (v) of sub-section (23C) of section 10 shall also be appealable before the Appellate
st
Tribunal. This amendment will take effect from 1 April, 2017. [Clause 82]
5
years. [Clause 42]
Restriction on exemption in case of corpus donation by exempt entities to other exempt entities
As per the existing provisions of the Act, donations made by a trust to any other trust or institution registered under section 12AA or to any fund or
institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v)
or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, except those made out of accumulated income, is considered as application of income for
the purposes of its objects.
Similarly, donations made by entities exempted under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 to
any trust or institution registered under section 12AA, except those made out of accumulated income, is also considered as application of income for the
purposes of its objects. However, donation given by these exempt entities to another exempt entity, with specific direction that it shall form part of corpus, is
though considered application of income in the hands of donor trust but is not considered as income of the recipient trust. Trusts, thus, engage in giving corpus
donations without actual applications.
Therefore, it is proposed to insert a new Explanation to section 11 of the Act to provide that any amount credited or paid, out of income referred to in clause
(a) or clause (b) of sub-section (1) of section 11, being contributions with specific direction that they shall form part of the corpus of the trust or institution,
shall not be treated as application of income. It is also proposed to insert a proviso in clause (23C) of section 10 so as to provide similar restriction as above on
the entities exempt under sub-clauses (iv), (v), (vi) or (via) of said clause in respect of any amount credited or paid out of their income. These amendments
st
will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clauses 6 & 8]
Mandatory furnishing of return by certain exempt entities
The existing provisions of sub-section (4C) of section 139 mandate filing of return by certain entities which are exempt from the levy of income-tax.In
order to verify that certain entities which enjoy exemption under section 10 actually carry out the activities for which the exemption has been provided under
the Act, it is proposed to provide that any person as referred to in clause (23AAA), Investor Protection Fund referred to in clause (23EC) or clause (23ED), Core
Settlement Guarantee Fund referred to in clause (23EE) and any Board or Authority referred to in clause (29A) of section 10 shall also be mandatorily required
st
to furnish a return of income. This amendment will take effect from 1 April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and
subsequent years. [Clause 55]

Empowering Board to issue directions in respect of penalty for failure to deduct or collect tax at source Fee for delayed filing of return
Existing provision of clause (a) of sub-section (2) of section 119 empowers the Board to issue orders setting forth directions or instructions (not being In view of the non-intrusive information-driven approach for improving tax compliance and effective utilization of information in tax administration, it is
prejudicial to assessees) to be followed by subordinate authorities in the work relating to assessment or collection of revenue or the initiation of proceedings important that the returns are filed within the due dates specified in section 139(1). Further, the reduced time limits proposed for making of assessment are
for the imposition of penalties. In order to reduce the genuine hardship which may be faced by a person responsible for deduction and collection of tax at also based on pre-requisite that returns are filed on time.
source due to levy of penalty under section 271C or 271CA, it is proposed to insert reference of sections 271C and 271CA in the said clause, so as to empower In order to ensure that return is filed within due date, it is proposed to insert a new section 234F in the Act to provide that a fee for delay in furnishing of
st
the Board to issue directions or instructions in respect of the said sections also. The amendment will take effect from 1 April, 2017. [Clause 49] return shall be levied for assessment year 2018-19 and onwards in a case where the return is not filed within the due dates specified for filing of return under
sub-section (1) of section 139. The proposed fee structure is as follows:
st
Rationalisation of time limits for completion of assessment, reassessment and re-computation and reducing the time for filing revised return (i) a fee of five thousand rupees shall be payable, if the return is furnished after the due date but on or before the 31 day of December of the assessment
The existing provisions of section 153 specify time limit for completion of assessment, reassessment and re-computation of cases mentioned therein. year;
In the effort to minimise human interface and move towards technology, massive computerisation has been carried out in the Department, which has translated (ii) a fee of ten thousand rupees shall be payable in any other case. However, in a case where the total income does not exceed five lakh rupees, it is proposed
into overall enhanced efficiency in the functioning of the Department. In view of the same, it is proposed to amend sub-section (1) of the said section, to provide that the fee amount shall not exceed one thousand rupees. In view of above, it is proposed to make consequential amendment in section 140A to include that in
that for the assessment year 2018-19, the time limit for making an assessment order under sections 143 or 144 shall be reduced from existing twenty-one months case of delay in furnishing of return of income, alongwith the tax and interest payable, fee for delay in furnishing of return of income shall also be payable.
to eighteen months from the end of the assessment year, and for the assessment year 2019-20 and onwards, the said time limit shall be twelve months from the It is also proposed to make consequential amendment in sub-section (1) of section 143, to provide that in computation of amount payable or refund due, as the
end of the assessment year in which the income was first assessable. It is further proposed to amend sub-section (2) of the said section to provide that the case may be, on account of processing of return under the said sub-section, the fee payable under section 234F shall also be taken into account. Consequentially,
time limit for making an order of assessment, reassessment or re-computation under section 147, in respect of notices served under section 148 on or after it is also proposed that the provisions of section 271F in respect of penalty for failure to furnish return of income shall not apply in respect of assessment
st st
the 1 day of April, 2019 shall be twelve months from the end of the financial year in which notice under section 148 is served. year 2018-19 and onwards. These amendments will take effect from l April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent
It is also proposed to amend sub-section (3) of the said section to provide that the time limit for making an order of fresh assessment in pursuance of an years. [Clauses 56, 57, 75 & 85]
order passed or received in the financial year 2019-20 and onwards under sections 254 or 263 or 264 shall be twelve months from the end of the financial year
in which order under section 254 is received or order under section 263 or 264 is passed by the authority referred therein. These amendments will take effect Penalty on professionals for furnishing incorrect information in statutory report or certificate
st
from 1 April, 2017. The thrust of the Government in recent past is on voluntary compliance. Certification of various reports and certificates by a qualified professional has been
It is also proposed to amend sub-section (5) of the said section to provide that where an order under section 250 or 254 or 260 or 262 or 263 or 264 requires provided in the Act to ensure that the information furnished by an assessee under the provisions of the Act is correct. Various provisions exist under the
verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to Act to penalise the defaulting assessee in case of furnishing incorrect information. However, there exist no penal provision for levy of penalty for furnishing
the assessee, the time limit relating to fresh assessment provided in sub-section (3) shall apply to the order giving effect to such order. It is also proposed to amend incorrect information by the person who is responsible for certifying the same.
sub-section (9) of the said section to provide that where a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or under section 148 has In order to ensure that the person furnishing report or certificate undertakes due diligence before making such certification, it is proposed to insert a
st
been issued prior to the 1 day of June, 2016 and the assessment or reassessment has not been completed by such date due to exclusion of time referred to in new section 271J so as to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate
Explanation 1, such assessment or reassessment shall be completed in accordance with the provisions of section 153 as it stood immediately before its substitution under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct him to pay a sum of ten thousand
st
by the Finance Act, 2016. These amendments will take effect retrospectively from 1 June, 2016. rupees for each such report or certificate by way of penalty.
It is also proposed to amend third proviso to Explanation 1 of the said section to omit the reference of section 153B therein. It is also proposed to It is further proposed to define the expressions accountant, merchant banker and registered valuer. It is also proposed to provide through amendment
consequentially amend the meaning of conclusion of proceeding in the Explanation to clause (b) of section 245A so as to provide that conclusion of proceedings of section 273B that if the person proves that there was reasonable cause for the failure referred
st
shall be construed in accordance with the time specified for making assessment or reassessment under sub-section (1) of section 153. These amendments will to in the said section, then penalty shall not be imposable in respect of the proposed section 271J. These amendments will take effect from 1 April, 2017.
st
take effect from 1 April, 2017. In order to expedite assessments of the Department as proposed above, it is critical that the returns for an assessment year [Clauses 86 & 87]
also freeze by the end of the assessment year. It is hence proposed to amend the provisions of sub-section (5) of section 139 to provide that the time for
furnishing of revised return shall be available upto the end of the relevant assessment year or before the completion of assessment, whichever is earlier. These I. RATIONALISATION MEASURES
st
amendments will take effect from 1 April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.[Clauses 55, 58 & 78] Rationalisation of provisions of section 115JB in line with Indian Accounting Standard (Ind-AS)Central Government notified the
Indian Accounting Standards (Ind AS) which are converged with International Financial Reporting Standards(IFRS) and prescribed the
Rationalisation of the provisions in respect of time limits for completion of search assessment Companies( Indian Accounting Standards) Rules, 2015 which laid down a roadmap for implementation of these Ind AS.
The existing provisions of section 153B provide for the time limit for completion of assessment under section 153A. Globally, different approaches have been adopted to deal with the tax issues arising from adoption of IFRS. For ensuring horizontal equity across the
Since the time limit for completion of assessment under section 153 is proposed to be rationalised, the time limit for completion of assessment under section companies irrespective of the fact that whether they follow Ind AS or the existing Indian GAAP, the Central Government has issued Income Computation and
153A is also proposed to be consequentially rationalised. It is accordingly proposed to amend sub- section (1) of the said section to provide that for search and Disclosure Standards (ICDS) for computation of taxable income for specified heads of income.
seizure cases conducted in the financial year 2018-19, the time limit for making an assessment order under section 153A shall be reduced from existing twenty- As the book profit based on Ind AS compliant financial statement is likely to be different from the book profit based on existing Indian GAAP, the Central Board
one months to eighteen months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under of Direct Taxes (CBDT) constituted a committee in June, 2015 for suggesting the framework for computation of minimum alternate tax (MAT) liability under
section 132A was executed. It is further proposed that for search and seizure cases conducted in the financial year 2019-20 and onwards, the said time limit shall section 115JB for Ind AS compliant companies in the year of adoption and thereafter.
be further reduced to twelve months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition The Committee submitted first interim report on 18th March, 2016 which was placed in public domain by the CBDT for wider public consultations. The
under section 132A was executed. Committee submitted the second interim report on 5th August, 2016 which was also placed in public domain. The comments/ suggestions received in respect
It is further proposed to provide that period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall of the first and second interim report were examined by the Committee. After taking into account all the suggestions/ comments received, the Committee
be the period available to make assessment or reassessment in case of person on whom search is conducted or twelve months from the end of the financial year submitted its final report on 22nd December, 2016. In view of the above, it is proposed to amend section 115JB so as to provide the framework for computation
in which books of accounts or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over of book profit for Ind AS compliant companies in the year of adoption and thereafter. The main features of this proposed framework are as under:
such other persons, whichever is later.
It is also proposed to insert a proviso to the Explanation of the said section to provide that where a proceeding before the Settlement Commission abates A. MAT on Ind AS compliant financial statement
under section 245HA, the period of limitation available under this section for assessment or reassessment shall after the exclusion of the period under (i) No further adjustments to the net profits before other comprehensive income of Ind AS compliant companies, other than those already specified under
sub-section (4) of section 245HA shall not be less than one year; and where such period of limitation is less than one year, it shall be deemed to have been section 115JB of the Act shall be made.
extended to one year. (ii) The other comprehensive income includes certain items that will permanently be recorded in reserves and hence never be reclassified to the statement
st
These amendments will take effect from 1 April, 2017. It is also proposed to amend sub-section (3) of section 153B to provide that where a notice under section of profit and loss included in the computation of book profits. These items shall be included in book profits for MAT purposes at the point of time as specified
st
153A or section 153C has been issued prior to 1 day of June, 2016 and the assessment has not been completed by such date due to exclusion of time referred to below
in the Explanation, such assessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the
st
Finance Act, 2016. This amendment will take effect retrospectively from 1 June, 2016. [Clause 60]
Sl.No Items Point of time
H. ANTI-ABUSE MEASURES
Exemption of long term capital gains tax u/s 10(38)
Under the existing provisions of the Section 10(38) of the Income-tax Act, 1961, the income arising from a transfer of long term capital asset, being equity share
1 Changes in revaluation surplus of Property, Plant or To be included in book profits at the time
st Equipment (PPE) and Intangible assets (Ind AS 16 and Ind of realisation/ disposal/ retirement or
of a company or a unit of an equity oriented fund, is exempt from tax if the transaction of sale is undertaken on or after 1 October, 2014 and is chargeable to
Securities Transaction Tax under Chapter VII of the Finance (No.2) Act, 2004. It has been noticed that exemption provided under section 10(38) is being misused AS 38) otherwise transferred
by certain persons for declaring their unaccounted income as exempt long-term capital gains by entering into sham transactions. W ith a view to prevent this
abuse, it is proposed to amend section 10(38) to provide that exemption under this section for income arising on transfer of equity share acquired or on after
1
st
day of October, 2004 shall be available only if the acquisition of share is chargeable to Securities Transactions Tax under Chapter VII of the Finance
2 Gains and losses from investments in equity instruments To be included in book profits at the time
(No 2) Act, 2004. However, to protect the exemption for genuine cases where the Securities Transactions Tax could not have been paid like acquisition of share designated at fair value through other comprehensive of realisation/ disposal/ retirement or
in IPO, FPO, bonus or right issue by a listed company acquisition by non-resident in accordance with FDI policy of the Government etc., it is also proposed income (Ind AS 109) otherwise transferred
to notify transfers for which the condition of chargeability to Securities Transactions Tax on acquisition shall not be applicable. This amendment will take
st
effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. [Clause 6]
3 Remeasurements of defined benefit plans (Ind AS 19) To be included in book profits every year
Fair Market Value to be full value of consideration in certain cases as the remeasurements gains and
Under the existing provisions of the Act, income chargeable under the head Capital gains is computed by taking into account the amount of full value of losses arise
consideration received or accrued on transfer of a capital asset. In order to ensure that the full value of consideration is not understated, the Act also contained
provisions for deeming of full value of consideration in certain cases such as deeming of stamp duty value as full value of consideration for transfer of 4 Any other item To be included in book profits every year
immovable property in certain cases.
In order to rationalise the provisions relating to deeming of full value of consideration for computation of income under the head capital gains, it is proposed as the gains and losses arise
to insert a new section 50CA to provide that where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market Value
(FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration for the purposes (iii) Appendix A of Ind AS 10 provides that any distributions of non-cash assets to shareholders (for example, in a demerger) shall be accounted for at fair
st
of computing income under the head Capital gains.This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the
assessment year 2018-19 and subsequent assessment years. [Clause 26] value. The difference between the carrying value of the assets and the fair value is recorded in the profit and loss account. Correspondingly, the reserves are
debited at fair value to record the distribution as a deemed dividend to the shareholders. As there is a corresponding adjustment in retained earnings,
Widening scope of Income from other sources this difference arising on demerger shall be excluded from the book profits. However, in the case of a resulting company, where the property and the liabilities
Under the existing provisions of section 56(2)(vii), any sum of money or any property which is received without consideration or for inadequate consideration of the undertaking or undertakings being received by it are recorded at values different from values appearing in the books of account of the demerged
(in excess of the specified limit of Rs. 50,000) by an individual or Hindu undivided family is chargeable to income-tax in the hands of the resident under the company immediately before the demerger, any change in such value shall be ignored for the purpose of computing of book profit of the resulting company.
head Income from other sources subject to certain exceptions. Further, receipt of certain shares by a firm or a company in which the public are not substantially
interested is also chargeable to income-tax in case such receipt is in excess of Rs. 50,000 and is received without consideration or for inadequate consideration. B. MAT on first time adoption
The existing definition of property for the purpose of this section includes immovable property, jewellery, shares, paintings, etc. These anti-abuse provisions (i) The adjustments arising on account of transition to Ind AS from existing Indian GAAP is required to be recorded directly in Other Equity at the date
are currently applicable only in case of individual or HUF and firm or company in certain cases. Therefore, receipt of sum of money or property without of transition to Ind AS. Several of these items would subsequently never be reclassified to the statement of profit and loss / included in the computation of book
consideration or for inadequate consideration does not attract these anti-abuse provisions in cases of other assessees. profits. Accordingly, the following treatment is proposed:
In order to prevent the practice of receiving the sum of money or the property without consideration or for inadequate consideration, it is proposed to (I) Those adjustments recorded in other comprehensive income and which would subsequently be reclassified to the profit and loss, shall be included in book
insert a new clause (x) in sub-section (2) of section 56 so as to provide that receipt of the sum of money or the property by any person without consideration profits in the year in which these are reclassified to the profit and loss;
or for inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in the hands of the recipient under the head Income from other sources. It (II) Those adjustments recorded in other comprehensive income and which would never be subsequently reclassified to the profit and loss shall be included
is also proposed to widen the scope of existing exceptions by including the receipt by certain trusts or institutions and receipt by way of certain transfers not in book profits as specified hereunder-
regarded as transfer under section 47. Consequential amendment is also proposed in section 49 for determination of cost of acquisition. These amendments
st st
will take effect from 1 April, 2017 and the said receipt of sum of money or property on or after 1 April, 2017 shall be chargeable to tax in accordance with
the provisions of proposed clause (x) of sub-section (2) of section 56. [Clauses 25 & 29] Sl.No. Items Point of time
Disallowance for non-deduction of tax from payment to resident
Existing provisions of section 58 of the Act, specify the amounts which are not deductible in computing the income under the head Income from other 1 Changes in revaluation surplus of PPE and Intangible To be included in book profits at the time
sources which include certain disallowances made in computation of income under the head Profits and gains of business or profession. These assets (Ind AS 16 and Ind AS 38) of realisation/ disposal/ retirement or
disallowances include disallowances such as disallowance of cash expenditure, disallowance for non-deduction of tax from payment to non-resident, etc. otherwise transferred
For computing income under the head Profits and gains of business or profession, a disallowance is made for non-deduction of tax from payment to resident
also. W ith a view to improve compliance of provision relating to tax deduction at source (TDS), it is proposed to amend the said section so as to provide that
provisions of section 40(a)(ia) shall, so far as they may be, apply in computing income chargeable under the head income from other sources as they apply in 2 Gains and losses from investments in equity instruments To be included in book profits at the time
st designated at fair value through other comprehensive of realisation/ disposal/ retirement or
computing income chargeable under the head Profit and gains of business or Profession. This amendment will take effect from 1 April, 2018 and will,
accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clause 30] income (Ind AS 109) otherwise transferred
Limitation of Interest deduction in certain cases.
A company is typically financed or capitalized through a mixture of debt and equity. The way a company is capitalized often has a significant impact on
the amount of profit it reports for tax purposes as the tax legislations of countries typically allow a deduction for interest paid or payable in arriving at the
profit for tax purposes while the dividend paid on equity contribution is not deductible . Therefore, the higher the level of debt in a company, and thus the amount 3 Remeasurements of defined benefit plans (Ind AS 19) To be included in book profits equally
of interest it pays, the lower will be its taxable profit. For this reason, debt is often a more tax efficient method of finance than equity. Multinational groups over a period of five years starting from
are often able to structure their financing arrangements to maximize these benefits. For this reason, countrys tax administrations often introduce rules that the year of first time adoption of Ind AS
place a limit on the amount of interest that can be deducted in computing a companys profit for tax purposes. Such rules are designed to counter cross-border
shifting of profit through excessive interest payments, and thus aim to protect a countrys tax base.
Under the initiative of the G-20 countries, the Organization for Economic Co-operation and Development (OECD) in its Base Erosion and Profit Shifting (BEPS) 4 Any other item To be included in book profits equally
project had taken up the issue of base erosion and profit shifting by way of excess interest deductions by the MNEs in Action plan 4. The OECD has recommended over a period of five years starting from
several measures in its final report to address this issue. the year of first time adoption of Ind AS
In view of the above, it is proposed to insert a new section 94B, in line with the recommendations o f OECD BEPS Action Plan 4, to provide that interest
expenses claimed by an entity to its associated enterprises shall be restricted to 30% of its earnings before interest, taxes, depreciation and amortization
(EBITDA) or interest paid or payable to associated enterprise, whichever is less.
The provision shall be applicable to an Indian company, or a permanent establishment of a foreign company being the borrower who pays interest (III) All other adjustments recorded in Reserves and Surplus (excluding Capital Reserve and Securities Premium Reserve) as referred to in Division II of
in respect of any form of debt issued to a non-resident or to a permanent establishment of a non-resident and who is an associated enterprise of the borrower. Schedule III of Companies Act, 2013 and which would otherwise never subsequently be reclassified to the profit and loss account, shall be included in the book
Further, the debt shall be deemed to be treated as issued by an associated enterprise where it provides an implicit or explicit guarantee to the lender or deposits profits, equally over a period of five years starting from the year of first time adoption of Ind AS subject to the following
a corresponding and matching amount of funds with the lender.
The provisions shall allow for carry forward of disallowed interest expense to eight assessment years immediately succeeding the assessment year for which a) PPE and intangible assets at fair value as deemed cost
the disallowance was first made and deduction against the income computed under the head Profits and gains of business or profession to the extent of An entity may use fair value in its opening Ind AS Balance Sheet as deemed cost for an item of PPE or an intangible asset as mentioned in paragraphs D5
maximum allowable interest expenditure. In order to target only large interest payments, it is proposed to provide for a threshold of interest expenditure of and D7 of Ind AS 101. In such cases the treatment shall be as under The existing provisions for computation of book profits under section 115JB of the
one crore rupees exceeding which the provision would be applicable. It is further proposed to exclude Banks and Insurance business from the ambit of the said Act provide that in case of revaluation of assets, any impact on account of such revaluation shall be ignored for the purposes of computation of book profits.
st
provisions keeping in view of special nature of these businesses. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation Further, the adjustments in retained earnings on first time adoption with respect to items of PPE and Intangible assets shall be ignored for the purposes
to the assessment year 2018-19 and subsequent years. [Clause 43] of computation of book profits. Depreciation shall be computed ignoring the amount of aforesaid retained earnings adjustment. Similarly, gain/loss on
realisation/ disposal/ retirement of such assets shall be computed ignoring the aforesaid retained earnings adjustment.
Secondary adjustments in certain cases.
Secondary adjustment means an adjustment in the books of accounts of the assessee and its associated enterprise to reflect that the actual allocation of b] Investments in subsidiaries, joint ventures and associates at fair value as deemed cost
profits between the assessee and its associated enterprise are consistent with the transfer price determined as a result of primary adjustment, thereby An entity may use fair value in its opening Ind AS Balance Sheet as deemed cost for investment in a subsidiary, joint venture or associate in its separate
removing the imbalance between cash account and actual profit of the assessee. As per the OECDs Transfer Pricing Guidelines for Multinational Enterprises financial statements as mentioned in paragraph D15 of Ind AS 101. In such cases retained earnings adjustment shall be included in the book profit at the time
and Tax Administrations (OECD transfer pricing guidelines), secondary adjustment may take the form of constructive dividends, constructive equity of realisation of such investment.
contributions, or constructive loans.
The provisions of secondary adjustment are internationally recognised and are already part of the transfer pricing rules of many leading economies in the c] Cumulative translation differences
world. W hilst the approaches to secondary adjustments by individual countries vary, they represent an internationally recognised method to align the economic An entity may elect a choice whereby the cumulative translation differences for all foreign operations are deemed to be zero at the date of
benefit of the transaction with the arms length position. transition to Ind AS. Further, the gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the
In order to align the transfer pricing provisions in line with OECD transfer pricing guidelines and international best practices, it is proposed to insert a new date of transition to Ind AS and shall include only the translation differences after the date of transition. In such cases, to ensure that such Cumulative
section 92CE to provide that the assessee shall be required to carry out secondary adjustment where the primary adjustment to transfer price, has been made suo translation differences on the date of transition which have been transferred to retained earnings, are taken into account, these shall be included in the book
motu by the assessee in his return of income; or made by the Assessing Officer has been accepted by the assessee; or is determined by an advance pricing profits at the time of disposal of foreign operations as mentioned in paragraph 48 of Ind AS 21.
agreement entered into by the assessee under section 92CC; or is made as per the safe harbour rules framed under section 92CB; or is arising as a result of (ii) All other adjustments to retained earnings at the time of transition (including for example, Decommissioning Liability, Asset retirement obligations,
resolution of an assessment by way of the mutual agreement procedure under an agreement entered into under section 90 or 90A. Foreign exchange capitalisation/ decapitalization, Borrowing costs adjustments etc.) shall be included in book profits, equally over a period of five years
It is proposed to provide that where as a result of primary adjustment to the transfer price, there is an increase in the total income or reduction in the starting from the year of first time adoption of Ind AS.
loss, as the case may be, of the assessee, the excess money which is available with its associated enterprise, if not repatriated to India within the time as may be (iii) Section 115JB of the Act already provides for adjustments on account of deferred tax and its provision. Any deferred tax adjustments recorded in Reserves
prescribed, shall be deemed to be an advance made by the assessee to such associated enterprise and the interest on such advance, shall be computed as the income and Surplus on account of transition to Ind AS shall also be ignored.
of the assessee , in the manner as may be prescribed.
It is also proposed to provide that such secondary adjustment shall not be carried out if, the amount of primary adjustment made in the case of an assessee C. Reference year for first time adoption adjustments
in any previous year does not exceed one crore rupees and the primary adjustment is made in respect of an assessment year commencing on or before In the first year of adoption of Ind AS, the companies would prepare Ind AS financial statement for reporting year with a comparative financial statement
st st
1 April,2016. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent for immediately preceding year. As per Ind AS 101, a company would make all Ind AS adjustments on the opening date of the comparative financial year.
6 BUDGET 2017 REMONETISING INDIA THE ECONOMIC TIMES
THURSDAY | 2 FEBRUARY 2017

EXPLANATORY MEMORANDUM TO THE FINANCE BILL

The entity is also required to present an equity reconciliation between previous Indian GAAP and Ind AS amounts, both on the opening date of preceding year such provisional attachment shall cease to have effect after the expiry of six months from the date of order of such attachment. In order to enable
as well as on the closing date of the preceding year. It is proposed that for the purposes of computation of book profits of the year of adoption and the proposed correct estimation and quantification of undisclosed income held in the form of investment or property by the assessee by the Investigation wing of
adjustments, the amounts adjusted as of the opening date of the first year of adoption shall be considered. For example, companies which adopt Ind the Department, it is further proposed to insert a new sub-section (9D) in the said section to provide that in a case of search, the authorised officer may,
AS with effect from 1 April 2016 are required prepare their financial statements for the year 2016-17 as per requirements of Ind AS. Such companies for the purpose of estimation of fair market value of a property, make a reference to a Valuation Officer referred to in section 142A, for valuation in the
are also required to prepare an opening balanc e sheet as of 1 April 2015 and restate the financial statements for the comparative period 2015-16. In such a case, manner provided under that sub-section. It also provides that the Valuation Officer shall furnish the valuation report within sixty days of receipt
the first time adoption adjustments as of 31 March 2016 shall be considered for computation of MAT liability for previous year 2016-17 (Assessment year of such reference. It is also proposed to amend Explanation 1 to section 132, so as to provide that for the purposes of sub-sections 9A, 9B and9D, with
2017-18) and thereafter. Further, in this case, the period of five years proposed above shall be previous years 2016-17, 2017-18,2018-19, 2019-20 and 2020-21. respect to execution of an authorisation for search under the provisions of sub-section (2) of section 153B shall apply. These amendments will take
st st
As the Ind-AS is required to be adopted by certain companies for financial year 2016-17 mandatorily, these amendments will take effect from 1 April, 2017 and effect from l April, 2017. [Clause 50]
will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years. [Clause 47]
Rationalisation of the provisions in respect of power to call for information
Clarification regarding the applicability of section 112 The existing provisions of section 133 empower certain income-tax authorities to call for information for the purpose of any inquiry or proceeding under
st
Finance Act, 2012 with effect from 1 April, 2013 amended the provisions of section 112(1)(c) to provide concessional rate of taxation of ten per cent for the Act. The second proviso to the said section provides that the power in respect of an inquiry, in a case where no proceeding is pending, shall not be exercised
long-term capital gains arising from the transfer of unlisted securities in case of non-resident. There was an uncertainty as to whether the provision of section by any income-tax authority below the rank of the Principal Director or Director or the Principal Commissioner or Commissioner without the prior approval
112(1)(c)(iii) is applicable to the transfer of share of a private company. Finance Act, 2016 amended section 112(1)(c) to clarify that the share of company in which of such authorities. Considering the requirement of the work profile of the authorities working in the Investigation Directorate, it is proposed to amend the
st
public are not substantially interested shall also be chargeable to tax at the rate of ten per cent with effect from 1 April, 2017. As the concessional rate was first proviso of the said section and provide that the power in respect of inquiry or proceeding under the Act, as referred to in clause (6) of the said section, may
st
provided with effect from 1 April, 2013, there was uncertainty about the applicability of the amendment to the intervening period. W ith a view to clarify also be exercised by the Joint Director, the Deputy Director and the Assistant Director. It is further proposed to amend the second proviso of the said section
st st
that the amendment made by Finance Act, 2016 shall also apply to the period from 1 April, 2013 to 31 March, 2017, it is proposed to amend section 50 of the to provide that the Joint Director, the Deputy Director or the Assistant Director may exercise the powers in respect of such inquiry, without seeking prior
st
Finance Act, 2016 so as to provide that the effective date of amendment made to section 112(1)(c)(iii) vide Finance Act,2016 shall be 01-04-2013 instead of 01-04- approval of higher authorities. These amendments will take effect from l April, 2017. [Clause 52]
st
2017. This amendment will take effect, retrospectively from 1 April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent
assessment years. [Clause 150] Extension of the power to survey
The existing provisions of section 133A empower an income-tax authority to enter any place, at which a business or profession is carried on, or at which any
Rationalization of rebate allowable under Section 87A books of account or other documents or any part of cash or stock or other valuable article or thing relating to the business or profession are kept, for the
The existing provisions of section 87A provide for a rebate up to Rs. 5000 from the income-tax payable to a resident individual if this total income does not purposes of conducting a survey.It is proposed to widen the scope of the said section by amending sub-section (1) to include any place, at which an activity
st
exceed Rs. 5,00,000. In view of proposed rationalisation of tax rates for individuals in the income slab of Rs. 2,50,000 to Rs.5,00,000,it is proposed to amend section for charitable purpose is carried on.This amendment will take effect from l April, 2017. [Clause 53]
87A so as to reduce the maximum amount of rebate available under this section from existing Rs. 5000 to Rs. 2500. It is also proposed to provide that this rebate
st
shall be available to only resident individuals whose total income does not exceed Rs. 3,50,000. This amendment will take effect from 1 April, 2018 and will, Legislative framework to enable centralised issuance of notice and processing of information under section 133C
accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. [Clause 38] Section 133C of the Act empowers the prescribed income-tax authority to issue notice calling for information and documents for the purpose of verification
of information in its possession. In order to expedite verification and analysis of the information and documents so received, it is proposed to amend section
Rationalisation of provisions of Section 10AA 133C to empower the Central Board of Direct Taxes to make a scheme for centralised issuance of notice calling for information and documents for the purpose
Under the existing provisions of the section 10AA, deduction is allowed from the total income of an assessee, in respect of profits and gains from his Unit of verification of information in its possession, processing of such documents and making the outcome thereof available to the Assessing Officer for necessary
st
operating in SEZ, subject to fulfilment of certain conditions.Section 10AA allows deduction in computing the total income of the assessee, hence the deduction action, if any. This amendment will take effect from 1 April, 2017. [Clause 54]
is to be allowed for the total income of the assessee as computed in accordance with the provision of the Act before giving effect to the provisions of section 10AA.
However, courts have taken a view (while deciding the matter pertaining to section 10A which also contains similar provision) that the deduction is to be Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and 153C
allowed from the total income of the undertaking and not from the total income of the assessee. The existing provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any
In view of the above, it is proposed to clarify that the amount of deduction referred to in section 10AA shall be allowed from the total income of the assessee asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of
computed in accordance with the provisions of the Act before giving effect to the provisions of the section 10AA and the deduction under section 10AA in such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice
st
no case shall exceed the said total income.This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the
2018-19 and subsequent assessment years. [Clause 7]
Assessing Officer, and provisions of the said Act shall apply accordingly. In view of the various representations received from stakeholders citing genuine
Consolidation of plans within a scheme of mutual fund hardships if the said provision is made applicable, it is proposed to omit clause (c) of section 197 of the Finance Act, 2016. This amendment will take effect
st
Finance Act,2016 amended section 47 of the Act so as to provide tax neutrality to the transfer of units in a consolidating plan of mutual fund scheme made retrospectively from l June, 2016. However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or
in consideration of the allotment of units in the consolidated plan of that mutual fund scheme. seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating
It is proposed to amend section 2(42A) and section 49 to provide that cost of acquisition of the units in the consolidated plan of mutual fund scheme referred to search assessments be amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year
to in section 47(xix) shall be the cost of units in consolidating plan of mutual fund scheme and period of holding of the units of consolidated plan of mutual fund already provided upto the tenth assessment year if
scheme shall include the period for which the units in consolidating plan of mutual fund scheme were held by the assessee. These amendments will take effect
st
accordingly, from 1 April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.[Clauses 3 & 25] (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped
assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the
Definition of person responsible for paying in case of payments covered under sub-section (6) of section 195 sixth year);(ii) such income escaping assessment is represented in the form of asset; (iii) the income escaping assessment or part thereof relates to such
The existing provisions of section 204 of Act, has defined the meaning of person responsible for paying to include employer, company or its principal officer year or years. It is however proposed that the amended provisions of section 153A shall apply where search under section 132 is initiated or requisition under
st
or the payer. Further clause (iii) of section 204 of the Act, inter alia, provides that in the case of credit or payment of any sum chargeable under the provisions of section 132A is made on or after the 1 day of April, 2017. It is also proposed to consequentially amend section 153C to provide a reference to the relevant
st
this Act, the person responsible for paying shall be the payer himself, or, if the payer is a company, the company itself including the principal officer thereof. assessment year or years as referred to in section 153A. These amendments will take effect from l April, 2017. [Clauses 59, 61, & 150]
However, the said section does not cover in respect of payment of any sum as per sub-section (6) of section 195. W hich mandates the person responsible for
paying to furnish information relating to payment of any sum, whether chargeable to tax or not. Exemption of income of Chief Ministers Relief Fund or the Lieutenant Governors Relief Fund
Thus in order to bring clarity to the meaning of person responsible for paying in case of payment by a resident to a non-resident in accordance with section Under the existing provisions contained in clause (23C) of section 10, exemption is provided in respect of income of certain funds which, inter-alia, include,
195(6) of the Act, it is proposed to amend the said section of the Act to provide that in the case of furnishing of information relating to payment to a non-resident, the Prime Ministers National Relief Fund. The Chief Ministers Relief Fund or the Lieutenant Governors Relief Fund, referred at sub-clause (iiihf) of
not being a company, or to a foreign company, of any sum, whether or not chargeable under the provisions of this Act, person responsible for paying shall be the clause (a) of sub-section (2) of section 80G, which is of the same nature at the level of state or the Union Territory as is the Prime Ministers National Relief Fund
st
payer himself, or, if the payer is a company, the company itself including the principal officer thereof. This amendment will take effect from 1 April, 2017. at the national level, is not exempted under the said clause. In the absence of such exemption, these funds are required to obtain registration under section
[Clause 70] 12A of the Act in order to avail exemption of its income under section 11 and 12 of the said Act and are required to fulfil certain conditions. Therefore, it is
proposed to amend said clause so as to provide the benefit of exemption to the Chief Ministers Relief Fund or the Lieutenant Governors Relief Fund also.
st
Clarification with regard to interpretation of terms used in an agreement entered into under section 90 and 90A. This amendment will take effect retrospectively from the 1 April, 1998, the date on which sub-clause (iihf) of clause (a) of sub-section (2) of section 80G
Under the existing provisions of Section 90 of the Act, power has been conferred upon the Central Government to enter into agreement with the Government relating to deduction in any sum paid to the Chief Ministers Relief Fund or the Lieutenant Governors Relief Fund came into force, and will, accordingly, apply
of any country outside India for granting relief in respect of income on which income- tax has been paid both under the said Act and income-tax Act in that foreign in relation to assessment year 1998-99 and subsequent years. [Clause 6]
country, avoidance of double taxation of income, exchange of information for the prevention of evasion or avoidance of income-tax or recovery of income-tax.
Similar provisions are provided in section 90A of the Act in the case of an agreement entered into by any specified association in India with any specified Correct reference to FEMA instead of FERA
association in the specified territory outside India. It is further provided in section 90 and 90A of the Act that any term used but not defined in this Act or in Existing sub-clause (ii) of clause 4 of section 10 refers to any income of an individual by way of interest on moneys standing to his credit in a Non-Resident
the agreement referred to in sub-section (1) of respective provisions shall have the meaning assigned to it in the notification issued by the Central Government in (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999 (42 of 1999), and the rules made thereunder. The
the Official Gazette in this behalf, unless the context otherwise requires, provided the same is not inconsistent with the provisions of this Act or the agreement. proviso to the said sub-clause refers individual to be a person resident outside India, as defined in clause (q) of section 2 of Act 46 of 1973, i.e., Foreign Exchange
The Income-tax simplification committee in its final report has suggested to bring in more clarity in the Act in respect of interpretation of terms used in Regulation Act, 1973, (FERA) which stands repealed and re-enacted as Act 42 of 1999, i.e., the Foreign Exchange Management Act, 1999 (FEMA). The definition
an agreement entered under section 90 or 90A for the purposes of its application in order to reduce the avoidable litigation related to taxation of non- residents. of person outside India is occurring in clause (w) of FEMA. W ith a view to reflect the correct definition of the expression person resident outside India, it is
st
In the light of above discussion and to bring in clarity to avoid litigation , it is proposed to amend the sections 90 and 90A of the Act, to provide that where proposed to amend the said proviso. The amendment is clarificatory in nature. This amendment will take effect retrospectively from 1 April, 2013, and will,
any term used in an agreement entered into under sub-section (1) of Section 90 and 90A of the Act, is defined under the said agreement, the said term shall accordingly, apply in relation to the assessment year 2013-14 and subsequent years. [Clause 6]
be assigned the meaning as provided in the said agreement and where the term is not defined in the agreement, but is defined in the Act, it shall be assigned the
st
meaning as definition in the Act or any explanation issued by the Central Government. These amendments will take effect from 1 April, 2018 and will, J. BENEFIT FOR NPS SUBSCRIBERS
accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clauses 39 & 40] Tax-exemption to partial withdrawal from National Pension System (NPS)
The existing provision of section 10(12A) provides that payment from National Pension System (NPS) trust to an employee on closer of his account or opting
Actual cost of asset in case of withdrawal of deduction in terms of Sub-section (7B) of section 35AD out shall be exempt up to 40% of total amount payable to him. In order to provide further relief to an employee subscriber of NPS, it is proposed to amend the
The existing provisions of Section 35AD of the Act, inter alia provides for investment linked deduction on amount of capital expenditure incurred, wholly section 10 so as to provide exemption to partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and
or exclusively, the purposes of business, during the previous year for a specified business excluding capital expenditure incurred for acquisition of any land or conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under. This amendment will take effect
st
goodwill or financial instrument. from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. [Clause 6]
Further sub-section (7B) of Section 35AD provides that where any asset on which benefit of section 35AD is claimed and allowed, is used for a purpose other
than specified business, the benefit of deduction already granted under section 35AD shall be deemed to be the income of the assessee. However, it further Rationalisation of deduction under section 80CCD for self-employed individual
provides that the deemed income shall be net of normal depreciation as would be entitled. The existing provisions of section 80CCD provides that employee or other individuals shall be allowed a deduction for amount deposited in National Pension
Clause (1) of section 43 defines actual cost for the purposes of claiming depreciation under section 32 of the Act in certain situations. However, there is no System trusts (NPS). The deduction under section 80CCD (1) cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other
clarity on determination of actual cost for the purposes of allowance of depreciation of such assets in respect of which the deduction which is already allowed individuals. However, under the provisions of section 80CCD (2) of the Act, further deduction to an employee in respect of contribution made by his employer
in a previous year under section 35AD of the Act, is withdrawn in terms of sub-section (7B) of the said section. is allowed up to 10% of salary of the employee. Thus, in case of an employee, the deduction allowed under section 80CCD adds up to 20% of salary whereas in
In light of the recommendations of Income-tax simplification committee and to bring clarity, it is proposed to amend the provisions of the section 43 of the case of other individuals, the total deduction under section 80CCD is limited to 10% of gross total income. In order to provide parity between an individual
Act, to provide that where any capital asset in respect of which deduction allowed under section 35AD is deemed to be the income of the assessee in accordance who is an employee and an individual who is self-employed, it is proposed to amend section 80CCD so as to increase the upper limit of ten per cent of gross total
st
with the provisions of sub-section (7B) of the said section, the actual cost to the assessee shall be the actual cost to the assessee, as reduced by an amount equal income to twenty per cent in case of individual other than employee.This amendment will take effect from 1 April, 2018 and, will accordingly, apply
to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used for the purposes of business since the date in relation to assessment year 2018-19 and subsequent years.
st
of its acquisition. This amendment will take effect from 1 April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent
years. [Clause 16] CUSTOMS
Clarity of procedure in respect of change or modifications of object and filing of return of income in case of entities
exempt under sections 11 and 12 Note: (a) Basic Customs Duty means the customs duty levied under the Customs Act, 1962.
The existing provisions of section 12A of the Act provide for conditions for applicability of sections 11 and 12 in relation to the benefit of exemption in respect
of income of any trust or institution. Further, the provisions of section 12AA of the Act provide for registration of the trust or institution which entitles them (b) CVD means the Additional Duty of Customs levied under sub-section (1) of section 3 of the Customs Tariff Act,
to the benefit of sections 11 and 12. It also provides the circumstances under which registration can be cancelled, one such circumstance being satisfaction of the 1975.
Principal Commissioner or Commissioner that its activities are not genuine or are not being carried out in accordance with its objects subsequent to grant of
registration. However, at present there is no explicit provision in the Act which mandates said trust or institution to approach for fresh registration in the event (c) SAD means the Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act,
of adoption or undertaking modifications of the objects after the registration has been granted. 1975.
Therefore, it is proposed to amend section 12A so as to provide that where a trust or an institution has been granted registration under section 12AA or has
obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and, subsequently, it has adopted or (d) Export duty means duty of Customs leviable on goods specified in the Second Schedule to the Customs Tariff
undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an Act, 1975.
application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner.
Further, as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (e) Clause nos. in square brackets [ ] indicate the relevant clause of the Finance Bill, 2017.
(4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to
income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise.
In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt Amendments carried out through the Finance Bill, 2017 come into effect on the date of its enactment unless otherwise
of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are
clarificatory in nature. These amendments will take effect from 1
st
April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and
specified.
subsequent years.
[Clauses 9 & 10]
I. AMENDMENTS IN THE CUSTOMS ACT, 1962:
Cost of Acquisition of capital assets of entities in case of levy of tax on accreted income under section 115TD
S. Amendment Clause of the Finance
The existing provisions of the section 49 of the Act provides for computation of cost with reference to certain modes of acquisition of capital asset.
It is proposed to amend said section so as to provide that where the capital gain arises from the transfer of an asset, being the asset held by a trust or an No. Bill, 2017
institution in respect of which accreted income has been computed, and the tax has been paid thereon in accordance with the provisions of Chapter XII-EB, the
cost of acquisition of such asset shall be deemed to be the fair market value of the asset which has been taken into account for computation of accreted income 1. Section 2 is being amended to:
as on the specified date referred to in sub-section (2) of section 115TD. The proposed amendment is consequential in nature.This amendment will take effect
st (a) insert clause (3A) to define a beneficial owner as any person on whose
retrospectively from 1 June, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years. [Clause 25]
behalf the goods are being imported or exported or who exercises effective
Strengthening of PAN quoting mechanism in the TCS regime control over the goods being imported or exported.
Statuary provisions for deduction of tax at source (TDS) at higher rate of 20% or the applicable rate whichever is higher) in case of non-quoting of
(b) include Foreign Post Office and International Courier Terminal in the
Permanent Account Number (PAN) is provided under section 206AA of the Act and it exist since April, 2010. PAN acts as a common thread for linking the
information in the departmental data base. It may also be noted that the process of allotment of PAN is made simple and robust. PAN application can be made definition of a Customs Station in clause (13);
online and PAN gets allotted in less than a week. (c) omit certain words in clause (13) to align with the proposed omission of
In order to strengthen the PAN mechanism, it is proposed to insert new section 206CC to provide the following: [88]
Section 82;
I. any person paying any sum or amount, on which tax is collectable at source under Chapter XVII BB (hereafter referred to as collectee) shall furnish his
Permanent Account Number to the person responsible for collecting such tax (hereafter referred to as collector), failing which tax shall be collected at the twice (d) provide that the existing definition of exporter in clause (20) includes the
the rate mentioned in the relevant section under Chapter XVII BB or at the rate of five per cent. whichever is higher. beneficial owner;
II. that the declaration filed under sub section (1A) of section 206C shall not be valid unless the person filing the declaration furnishes his Permanent Account
Number in such declaration. (e) provide that the existing definition of importer in clause (26) includes the
III. that in case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions beneficial owner;
of sub-section (1).
(f) insert clause (30B) so as to define passenger name record information;
IV. no certificate under sub section (9) of section 206C shall be granted unless it contains the Permanent Account Number of the applicant.
V. the collector knows about the correct PAN of the collectee it is also proposed to provide for mandatory quoting of PAN of the collectee by both the (g) define Foreign Post Office and International Courier Terminal.
collector and the collectee in all correspondence, bills and vouchers exchanged between them.
VI. that the collectee shall furnish his Permanent Account Number to the collector who shall indicate the same in all its correspondence, bills, vouchers 2. Section 7 is being amended to empower the Board to notify Foreign Post Offices and
and other documents which are sent to collectee. [89]
International Courier Terminals.
VII. where the Permanent Account Number provided by the collectee is invalid or it does not belong to the collectee, then it shall be deemed that Permanent
Account Number has not been furnished to the collector.VIII. to exempt the non-resident who does not have permanent establishment in India from the 3. Section 17 is being amended to rationalize the requirement of documents for
st [90]
provisions of this proposed section 206CC of the Act. This amendment will take effect from 1 April, 2017. [Clause 72]
verification of self assessment.
Rationalization of deduction under section 80CCG.
4. Sub-section (2) of section 27 is being amended so as to keep outside the ambit of
Under the existing provisions of section 80CCG, deduction for three consecutive assessment years is allowed upto Rs. 25,000 to a resident individual for
investment made in listed equity shares or listed units of an equity oriented fund subject to fulfilment of certain conditions. This deduction was introduced unjust enrichment, the refund of duty paid in excess by the importer before an order
vide Finance Act, 2012. However considering the fact that limited number of individuals availed this deduction and also to rationalize the multiplicity of permitting clearance of goods for home consumption is made, where-
deductions available under Chapter VI-A of the Act, it is proposed to phase out this deduction by providing that no deduction under section 80CCG shall be
allowed from assessment year 2018-19. However, an assessee who has claimed deduction under this section for assessment year 2017-18 and earlier assessment (i) such excess payment is evident from the bill of entry in the case of self- [91]
years shall be allowed deduction under this section till the assessment year 2019-20 if he is otherwise eligible to claim the deduction as per the provisions of this assessed bill of entry or
st
section.This amendment will take effect from the 1 April, 2018 and shall accordingly apply in relation to assessment year 2018-19 and subsequent years.
[Clause 34] (ii) the duty actually payable is reflected in the reassessed bill of entry in the
case of reassessment.
Restriction on set-off of loss from House property
Section 71 of the Act relates to set-off of loss from one head against income from another. In line with the international best practices it is proposed 5. Clause (e) of section 28E is being amended so as to substitute the definition of
to insert sub-section (3A) in the said section to provide that set-off of loss under the head Income from house property against any other head of income Authority to mean the Authority for Advance Ruling as constituted under section 245- [92]
shall be restricted to two lakh rupees for any assessment year. However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent
st O of the Income-tax Act, 1961.
years in accordance with the existing provisions of the Act. This amendment will take effect from 1 April, 2018 and will, accordingly apply in relation to
assessment year 2018-19 and subsequent years. [Clause 31]
6. Section 28F is being amended so as to provide that the Authority for Advance Rulings
Reason to believe to conduct a search, etc. not to be disclosed
Sub-section (1) and (1A) of section 132 provide that where an authority mentioned therein, based on the information in his possession, has reason to believe constituted under section 245-O of the Income-tax Act shall be the Authority for giving
or reason to suspect of circumstances referred to in the said sub-sections, he may authorize an authority specified therein to carry out search & seizure. advance rulings for the purposes of the Customs Act. It further seeks to provide that
Similarly, sub-section (1) of section 132A provides that the specified income-tax authority based on reason to believe can authorise other income-tax the Member of the Indian Revenue Service (Customs and Central Excise), who is
authority mentioned therein to requisition from some other officer or authority to deliver books of account, documents or assets of the assessee to the
income-tax authority so authorised. Confidentiality and sensitivity are the hallmarks of proceedings under section 132 and section 132A. However, certain judicial
qualified to be a Member of the Board, shall be the revenue Member of the Authority
[93]
pronouncements have created ambiguity in respect of the disclosure of reason to believe or reason to suspect recorded by the income-tax authority to conduct for the purposes of Customs Act. It also seeks to provide for transferring the pending
a search under section 132 or to make requisition under section 132A. It is therefore proposed to insert an Explanation to sub-section (1) and to sub-section applications before the Authority for Advance Rulings (Central Excise, Customs and
(1A) of section 132 and to sub-section (1) of section 132A to declare that the reason to believe or reason to suspect, as the case may be, shall not be disclosed to Service Tax) to the Authority constituted under section 245-O of the Income-tax Act
any person or any authority or the Appellate Tribunal. These amendments will take effect retrospectively from the date of enactment of the said provisions
st
viz. to sub-section (1) of section 132 from 1 day of April, 1962 and to sub-section (1A) of section 132 and to sub-section (1) of section 132A from 1st day of from the stage at which such proceedings stood as on the date on which the Finance
October, 1975. [Clauses 50 & 51] Bill, 2017 receives the assent of the President.

Power of provisional attachment and to make reference to Valuation Officer to authorised officer 7. Section 28G relating to vacancies not to invalidate proceedings is being omitted. [94]
Section 132 of the Act provides the power of search and seizure subject to fulfilment of conditions specified therein. In order to protect the
interest of revenue and safeguard recovery in search cases, it is proposed to insert sub-section (9B) and (9C) in the said section, to provide that during 8. Sub-section (3) of section 28H is being amended so as to increase the application fee
the course of a search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, the for seeking advance ruling from rupees two thousand five hundred to rupees ten [95]
authorised officer on being satisfied that for protecting the interest of revenue it is necessary so to do, may attach provisionally any property belonging
thousand on the lines of the Income-tax Act.
to the assessee with the prior approval of Principal Director General or Director General or Principal Director or Director. It has been proposed that
 BUDGET 2017 REMONETISING INDIA
WWW.ECONOMICTIMES.COM 7
EXPLANATORY MEMORANDUM TO THE FINANCE BILL
9. Sub-section (6) of section 28I is being amended so as to provide time of limit of six 3. o-Xylene BCD 2.5% BCD Nil
months by which Authority shall pronounce its ruling on the lines of the Income-tax [96]
4. Medium Quality Terephthalic Acid (MTA) & Qualified Terephthalic Acid BCD 7.5% BCD 5%
Act.
(QTA)
10. A new section 30A is being introduced so as to make it obligatory on the person-in-
charge of a conveyance that enters India from any place outside India or any other 5. 2-Ethyl Anthraquinone [29146990] for use in manufacture of hydrogen BCD 7.5% BCD 2.5%
person as may be specified by the Central Government by notification in the Official peroxide, subject to actual user condition
Gazette, to deliver to the proper officer the passenger and crew arrival manifest before 6. Clay 2 Powder (Alumax) for use in ceramic substrate for catalytic convertors, BCD 7.5% BCD 5%
arrival in the case of an aircraft or a vessel and upon arrival in the case of a vehicle; subject to actual user condition
[97]
and passenger name record information of arriving passengers in such form,
containing such particulars, in such manner and within such time as may be 7. Vinyl Polyethylene Glycol (VPEG) for use in manufacture of Poly BCD 10% BCD 7.5%
prescribed. The section also intends to provide for imposition of a penalty not Carboxylate Ether, subject to actual user condition
exceeding fifty thousand rupees as may be prescribed, in the case of delay in
D. Textiles
delivering the information.
8. Nylon mono filament yarn for use in monofilament long line system for Tuna BCD 7.5% BCD 5%
11. A new section 41A is being introduced so as to make it obligatory on the person-in-
fishing, subject to certain specified conditions
charge of a conveyance that departs from India to a place outside India or any other
person as may be specified by the Central Government by notification in the Official
Gazette, to deliver to the proper officer the passenger and crew departure manifest
and passenger name record information of departing passengers before the [98] E. Finished Leather, Footwear and Other Leather Products
departure of the conveyance in such form, containing such particulars, in such
9. Vegetable tanning extracts, namely Wattle extract and Myrobalan fruit BCD 7.5% BCD 2.5%
manner and within such time as may be prescribed. The section also intends to
extract
provide for a penalty not exceeding fifty thousand rupees as may be prescribed in
the case of delay in delivering the information. 10. Limit of duty free import of eligible items for manufacture of leather footwear 3% of FOB value 5% of FOB value
or synthetic footwear or other leather products for use in the manufacture of of said goods of said goods
12. Sub-section (3) of section 46 is being substituted so as to make it mandatory to file the
said goods for export exported during exported during
bill of entry before the end of the next day following the day (excluding holidays) on
the preceding the preceding
which the vessel or aircraft or vehicle carrying the goods arrives at a customs station
[99] financial year financial year
at which such goods are to be cleared for home consumption or warehousing and to
provide for imposition of such charges for late presentation of the bill of entry as may F. Metals
be prescribed.
11. Co-polymer coated MS tapes / stainless steel tapes for manufacture of BCD Nil BCD 10%
13. Sub-section (2) of section 47 is being amended so as to provide the manner of telecommunication grade optical fibres or optical fibre cables, subject to
payment of duty and interest thereon in the case of self-assessed bills of entry or, as [100] actual user condition
the case may be, assessed, reassessed or provisionally assessed bills of entry.
12. Nickel BCD 2.5% BCD Nil
14. Section 49 is being amended to extend the facility of storage under section 49 to
[101] 13. MgO coated cold rolled steel coils [7225 19 90] for use in manufacture of BCD 10% BCD 5%
imported goods entered for warehousing before their removal.
CRGO steel, subject to actual user condition
15. Section 69 relating to clearance of warehoused goods for exportation is being [102]
14. Hot Rolled Coils [7208], when imported for use in manufacture of welded BCD 12.5% BCD 10%
amended to align it with the proposed omission of section 82.
tubes and pipes falling under heading 7305 or 7306, subject to actual user
condition

16. Section 82 relating to label or declaration accompanying goods to be treated as entry [103] G. Capital Goods
is being omitted. 15. Ball screws, linear motion guides and CNC systems for use in manufacture Ball screws and BCD 2.5%
17. Section 84 is being amended to empower the Board to make regulations to provide for [104] of all CNC machine tools, subject to actual user condition liner motion
the form and manner in which an entry may be made in respect of goods imported or guides
to be exported by post. BCD 7.5%

18. Section 127B is being amended so as to insert a new sub-section (5) therein to enable CNC systems
any person, other than applicant, referred to in sub-section (1) to make an application [105] BCD 10%
to the Settlement Commission.
H. Electronics / Hardware
19. Sub-section (3) of section 127C is being amended so as to substitute certain words
16. Populated Printed Circuit Boards (PCBs) for the manufacture of mobile SAD Nil SAD 2%
therein. It further seeks to insert a new sub-section (5A) therein to enable the
[106] phones, subject to actual user condition
Settlement Commission to amend the order passed by it under sub-section (5), to
rectify any error apparent on the face of record. I. Renewable Energy

20. Section 157 is being amended so as to empower Board to make regulations for 17. Solar tempered glass for use in the manufacture of solar BCD 5% BCD Nil
specifying the form, particulars, manner and time of providing the passenger and crew cells/panels/modules subject to actual user condition
[107]
manifest for arrival and departure and passenger name record information and penalty 18. Parts/raw materials for manufacture of solar tempered glass for use in solar CVD 12.5% CVD 6%
in the case of delay in delivering the information. photovoltaic cells/modules, solar power generating equipment or systems,
flat plate solar collector, solar photovoltaic module and panel for water
pumping and other applications, subject to actual user condition
II. AMENDMENT IN THE CUSTOMS TARIFF ACT, 1975
19. Resin and catalyst for manufacture of cast components for Wind Operated BCD 7.5% BCD 5%
S. Amendment Clause of the Finance Energy Generators [WOEG], subject to actual user condition CVD 12.5% CVD Nil
No. Bill, 2017
SAD 4% SAD Nil
1. Clause (c) of sub-section (3) of section 9 is being substituted so as to withdraw the
20. All items of machinery required for fuel cell based power generating systems BCD 10% / BCD 5%
exemption to three categories of non-actionable subsidies specified therein from the [108]
to be set up in the country or for demonstration purposes, subject to certain 7.5% CVD 6%
scope of anti-subsidy investigations.
specified conditions CVD 12.5%

21. All items of machinery required for balance of systems operating on biogas/ BCD 10% / BCD 5%
III. AMENDMENT IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975 bio-methane/ by-product hydrogen, subject to certain specified conditions 7.5% CVD 6%
S. Amendment Clause of the Finance CVD 12.5%
No. Bill, 2017
J. Miscellaneous
A. Amendments not affecting rates of duty
22. Membrane Sheet and Tricot / Spacer for use in manufacture of RO CVD 12.5% CVD 6%
1. To:
membrane element for household type filters, subject to actual user
(i) Delete tariff items 1302 32 10 and 1302 32 20 and entries relating thereto condition
and create new tariff items 1106 10 10 and 1106 10 90, in relation to Guar
23. All parts for manufacture of LED lights or fixtures, including LED lamps, Applicable BCD, BCD 5%
meal and its products to harmonize the Customs Tariff with HS
subject to actual user condition CVD CVD 6%
Nomenclature.
(ii) Create new tariff item 1511 90 30 for Refined bleached deodorised palm 24. All inputs for use in the manufacture of LED Driver and MCPCB for LED Applicable BCD 5%
[109(b)] lights or fixtures, including LED lamps, subject to actual user condition
stearin to harmonize Customs Tariff in accordance with WCO classification
decision. 25. De-minimis customs duties exemption limit for goods imported through Duty payable not CIF value not
(iii) Substitute tariff items 3823 11 11 to 3823 11 90 and entries relating thereto parcels, packets and letters exceeding exceeding
with tariff item 3823 11 00. Rs.100 per Rs.1000 per
consignment consignment
(iv) Substitute tariff items 3904 10 10 to 3904 22 90 with tariff items 3904 10 10
to 3904 22 00 in relation to the PVC Resin. 26. Miniaturized POS card reader for m-POS (not including mobile phones, or Applicable BCD, BCD Nil
tablet computers), micro ATM as per standards version 1.5.1, Finger Print CVD SAD CVD Nil
2. To amend Chapter Note (4) of Chapter 98 so as to remove the non-applicability of
Reader / Scanner or Iris Scanner
headings 9803 and 9804 to goods imported through courier service. Also, to amend SAD Nil
[109(b)]
heading 9804 so as to extend the classification of personal imports by courier, sea, or 27. Parts and components for manufacture of miniaturized POS card reader for Applicable BCD, BCD Nil
land under this heading. m-POS (not including mobile phones, or tablet computers), micro ATM as CVD SAD CVD Nil
per standards version 1.5.1, Finger Print Reader / Scanner or Iris Scanner,
SAD Nil
subject to actual user condition
B. Amendments affecting rates of BCD [Clause 109(a) of the Finance Bill, 2017] Rate of Duty
28 Silver medallion, silver coins having silver content not below 99.9%, semi- CVD - Nil CVD 12.5%
Commodity From To manufactured form of silver and articles of silver

1. Cashew nut, roasted, salted or roasted and salted 30% 45% 29 Goods imported for petroleum and coal bed methane operations by availing of the benefit of notification No.12/2012-
Customs, dated 17.03.2012 [S. No.357A] no longer required for the said purpose are being allowed to be disposed of
2. RO membrane element for household type filters 7.5% 10%
on payment of applicable customs duties or excise duty, on the depreciated value calculated as per straight line
method (subject to depreciated value not being less than 30% of the original value) of such goods.
The amendments involving increase in the duty rates will come into effect immediately owing to a declaration under th
Provisional Collection of Taxes Act, 1931.
EXCISE
IV. AMENDMENT IN THE SECOND SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975 [Clause 110 of the Finance
Bill, 2017] Note: Basic Excise Duty means the excise duty set forth in the First Schedule to the Central Excise Tariff Act, 1985.

S. Amendment
I. AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944:
No.
S. Amendment Clause of the Finance
Amendments affecting rates of Export duty Rate of Duty
No. Bill, 2017
From To
1. Clause (e) of section 23A is being amended so as to substitute the definition of
Ores and concentrates
Authority to mean the Authority for Advance Ruling as constituted under section [111]
1. Other aluminium ores and concentrates Nil 30% 245-O of the Income-tax Act, 1961.

2. Section 23B relating to vacancies not to invalidate proceedings is being omitted. [112]
The above amendment involving increase in the duty rate will come into effect immediately owing to a declaration under the 3. Sub-section (3) of section 23C is being amended so as to increase the application
Provisional Collection of Taxes Act, 1931. fee for seeking advance ruling from rupees two thousand five hundred to rupees ten [113]
thousand on the lines of the Income-tax Act.
V. OTHER PROPOSALS INVOLVING CHANGES IN BCD, CVD, SAD AND EXPORT DUTY RATES 4. Sub-section (6) of section 23D is being amended so as to provide time of limit of six
[114]
S. Commodity BCD/Excise/CV duty/SAD/Export months by which Authority shall pronounce its ruling on the lines of the Income-tax Act.
No. Duty 5. A new section 23-I is being inserted so as to provide for transferring the pending
A. Ores and Concentrates From To
applications before the Authority for Advance Rulings (Central Excise, Customs and
Service Tax) to the Authority constituted under section 245-O of the Income-tax Act [115]
1. Other aluminium ores, including laterite Export Duty - Nil Export Duty 15% from the stage at which such proceedings stood as on the date on which the Finance
Bill, 2017 receives the assent of the President.
B. Mineral fuels and Mineral oils
6. Section 32E is being amended so as to insert a new sub-section (5) therein to enable
2. Liquefied Natural Gas BCD 5% BCD 2.5%
any person, other than assessee, referred to in sub-section (1) to make an [116]
C. Chemicals & Petrochemicals application to the Settlement Commission.
8 BUDGET 2017 REMONETISING INDIA THE ECONOMIC TIMES
THURSDAY | 2 FEBRUARY 2017

EXPLANATORY MEMORANDUM TO THE FINANCE BILL

VI. AMENDMENTS IN THE SEVENTH SCHEDULE TO THE FINANCE ACT, 2005
7. Sub-section (3) of section 32F is being amended so as to substitute certain words
[Clause 146 of the Finance Bill, 2017]
therein. It further seeks to insert a new sub-section (5A) therein to enable the
[117]
Settlement Commission to amend the order passed by it under sub-section (5), to S. Amendment
rectify any error apparent on the face of record. No.

Amendments involving change in the rate of Additional Excise duty Rate of duty
II. AMENDMENTS IN THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985 [Clause 118 of the Commodity From To
Finance Bill, 2017]
A. Tobacco and Tobacco Products
S. Amendment
1. Non-filter Cigarettes of length not exceeding 65mm Rs.215 per Rs.311 per
No.
thousand thousand
Amendments involving change in the rate of Basic Excise
Rate of Duty
duty
2. Non-filter Cigarettes of length exceeding 65mm but not exceeding 70mm Rs.370 per Rs.541 per
Commodity From To thousand thousand
A. Tobacco and Tobacco Products 3. Filter Cigarettes of length not exceeding 65mm Rs.215 per Rs.311 per
1. Cigar and cheroots 12.5% or Rs.3755 per 12.5% or Rs.4006 per thousand thousand
thousand, whichever thousand, whichever
is higher is higher 4. Filter Cigarettes of length exceeding 65mm but not exceeding 70mm Rs.260 per Rs.386 per
thousand thousand
2. Cigarillos 12.5% or Rs.3755 per 12.5% or Rs.4006 per
thousand, whichever thousand, whichever 5. Filter Cigarettes of length exceeding 70mm but not exceeding 75mm Rs.370 per Rs.541 per
is higher is higher
thousand thousand
3. Cigarettes of tobacco substitutes Rs.3755 per Rs.4006 per thousand
thousand 6. Other Cigarettes Rs.560 per Rs.811 per
thousand thousand

7. Chewing tobacco (including filter khaini) 10% 12%

4. Cigarillos of tobacco substitutes 12.5% or Rs.3755 per 12.5% or Rs.4006 per 8. Jarda scented tobacco 10% 12%
thousand, whichever thousand, whichever
is higher is higher 9. Pan Masala containing Tobacco (Gutkha) 10% 12%
5. Others of tobacco substitutes 12.5% or Rs.3755 per 12.5% or Rs.4006 per
thousand, whichever thousand, whichever
is higher is higher The amendments involving change in the duty rates will come into effect immediately owing to a declaration under the
Provisional Collection of Taxes Act, 1931.
SERVICE TAX
The amendments involving change in the duty rates will come into effect immediately owing to a declaration under the
Provisional Collection of Taxes Act, 1931.

A. Legislative changes Existing Proposed

III. OTHER PROPOSALS INVOLVING CHANGES IN EXCISE DUTY RATES:
1. The Negative List entry in respect of services by way of carrying out any process Nil Nil
S.
Commodity From To amounting to manufacture or production of goods excluding alcoholic liquor for
No.
human consumption, is proposed to be omitted. However, the same entry is
Amendments involving change in the rate of Additional th
being placed in exemption notification No. 25/2012-Service Tax dated 20 June,
Excise duty under Finance Act, 2005
2012. Consequently, the definition of process amounting to manufacture [clause
B. Pan Masala (40) section 65B] is also proposed to be omitted from the Finance Act, 1994 and
6. Pan Masala 6% 9% is being incorporated in the general exemption notification. (Clauses 120 & 121 of
the Bill refers)
C. Tobacco and Tobacco Products
2. Service tax exemption to taxable services provided or agreed to be provided by the 14% Nil
7. Unmanufactured tobacco 4.2% 8.3%
Army, Naval and Air Force Group Insurance Funds by way of life insurance to
Amendments involving change in the rate of Basic Excise
members of the Army, Navy and Air Force under the Group Insurance Schemes of
duty th
the Central Government, is being made effective from 10 day of September, 2004,
8. Paper rolled biris handmade Rs.21 per thousand Rs.28 per thousand the date when services of life insurance became taxable (Clause 127 of the Bill
9. Paper rolled biris machine made Rs.21 per thousand Rs.78 per thousand refers).
D. Renewable Energy 3. Benefit of the exemption notification No. 41/2016-ST dated 22.09.2016 is being 14% Nil
10. Solar tempered glass for use in solar photovoltaic cells/modules, Nil 6% extended with effect from 1.6.2007, the date when the services of renting of
solar power generating equipment or systems, flat plate solar immovable property became taxable. Notification No.41/2016-ST dated 22.09.2016,
collector, solar photovoltaic module and panel for water pumping exempts one time upfront amount (called as premium, salami, cost, price,
and other applications, subject to actual user condition
development charges or by whatever name) payable for grant of long-term lease of
11. Parts/raw materials for manufacture of solar tempered glass for 12.5% 6% industrial plots (30 years or more) by State Government industrial development
use in solar photovoltaic cells/modules, solar power generating corporations/undertakings to industrial units from Service Tax (Clause 127 of the Bill
equipment or systems, flat plate solar collector, solar photovoltaic
refers).
module and panel for water pumping and other applications,
subject to actual user condition 4. Rule 2 A of Service Tax (Determination of Value) Rules, 2006 is being amended with 4.2% 4.2%
12. Resin and catalyst for manufacture of cast components for Wind 12.5% Nil effect from 01.07.2010 so as to make it clear that value of service portion in execution
Operated Energy Generators [WOEG], subject to actual user of works contract involving transfer of goods and land or undivided share of land, as
condition the case may be, shall not include value of property in such land or undivided share
13. All items of machinery required for fuel cell based power 12.5% 6% of land (Clause 128 of the Bill refers).
generating systems to be set up in the country or for
demonstration purposes B. Other Legislative Changes regarding Authority for Advance Ruling Clause of Finance
Bill, 2017
14. All items of machinery required for balance of systems operating 12.5% 6%
on biogas/ bio-methane/ by-product hydrogen 5. Clause (d) of section 96A is being amended so as to substitute the definition of
E. Miscellaneous Authority to mean the Authority for Advance Ruling as constituted under section 28E [122]
of the Customs Act, 1962.
15 Membrane Sheet and Tricot / Spacer for use in manufacture of RO 12.5% 6%
membrane element for household type filters, subject to actual 6. Section 96B relating to vacancies not to invalidate proceedings is being omitted. [123]
user condition
7. Sub-section (3) of section 96C is being amended so as to increase the application fee
for seeking advance ruling from rupees two thousand five hundred to rupees ten [124]
thousand on the lines of the Central Excise Act.
17. All parts for manufacture of LED lights or fixtures, including LED Applicable duty 6%
8. Sub-section (6) of section 96D is being amended so as to provide time limit of six months
lamps, subject to actual user condition [125]
by which Authority shall pronounce its ruling on the lines of the Central Excise Act.
18. Miniaturized POS card reader for m-POS (not including mobile Applicable duty Nil
phones, or tablet computers), micro ATM as per standards version 9. A new section 96HA is being inserted so as to provide for transferring the pending
1.5.1, Finger Print Reader / Scanner or Iris Scanner applications before the Authority for Advance Rulings (Central Excise, Customs and
19. Parts and components for manufacture of miniaturized POS card Applicable duty Nil Service Tax) to the Authority constituted under section 245-O of the Income-tax Act [126]
reader for m-POS (not including mobile phones, or tablet from the stage at which such proceedings stood as on the date on which the Finance
computers), micro ATM as per standards version 1.5.1, Finger Bill, 2017 receives the assent of the President.
Print Reader / Scanner or Iris Scanner, subject to actual user
condition
C. New Exemptions
20. a. Waste and scrap of precious metals or metals clad with Nil, subject to the
precious metals arising in course of manufacture of goods condition that no 1. Services provided or agreed to be provided by the Army, Naval and Air Force Group 14% Nil
falling in Chapter 71 credit of duty paid on Insurance Funds by way of life insurance to members of the Army, Navy and Air
b. Strips, wires, sheets, plates and foils of silver inputs or input Force under the Group Insurance Schemes of the Central Government is being
Nil services or capital
c. Articles of silver jewellery, other than those studded with exempted from service tax from 2nd February, 2017.
goods has been
diamond, ruby, emerald or sapphire
availed by 2. The exemption vide S. No. 9B of notification No. 25/2012-ST dated 20.06.2012, is 14% Nil
d. Silver coin of purity 99.9% and above, bearing a brand name manufacturer of such being amended so as to omit the word residential appearing in the notification. The
when manufactured from silver on which appropriate duty of goods
customs or excise has been paid exemption remains the same in all other respects. S. No. 9B of notification No.
25/2012-ST exempts services provided by Indian Institutes of Management (IIMs) by
way of two year full time residential Post Graduate Programmes (PGP) in
IV. AMENDMENTS IN THE CENTRAL EXCISE RULES, 2002 AND THE CENVAT CREDIT RULES, 2004 Management for the Post Graduate Diploma in Management (PGDM), to which
S. Amendment admissions are made on the basis of the Common Admission Test (CAT), conducted
No. by IIM.

1. Sub-rule (2) is being inserted in rule 21 of Central Excise Rules, 2002 so as to provide for a time limit of three 3. Under the Regional Connectivity Scheme (RCS), exemption from service tax is being 14% Nil
months [further extendable by 6 months] for granting remission of duty under the said rule 21 read with section 5 of provided in respect of the amount of viability gap funding (VGF) payable to the
the Central Excise Act, 1944. selected airline operator for the services of transport of passengers, with or without
2. Sub-rule (4) is being inserted in rule 10 of CENVAT Credit Rules, 2004 so as to provide for a time limit of three accompanied belongings, by air, embarking from or terminating in a Regional
months [further extendable by 6 months] for approval of requests regarding transfer of CENVAT credit on shifting, Connectivity Scheme (RCS) airport, for a period of one year from the date of
sale, merger, etc. of the factory. commencement of operations of the Regional Connectivity Scheme (RCS) airport as
notified by Ministry of Civil Aviation.
V. RETROSPECTIVE AMENDMENT D. Rationalisation measure
S. Amendment Clause of the Finance
1. Explanation-I (e) for the purpose of sub-rule (3) and (3A) of Rule 6 of Cenvat Credit Rules, 2004 is being amended
No. Bill, 2016
so as to exclude banks and financial institutions including non-banking financial companies engaged in providing
1. To retrospectively [that is with effect from 01.01.2017] specify a tariff rate of excise [119] services by way of extending deposits, loans or advances from its ambit. It has been provided in the Cenvat Credit
duty of 12.5% [as against present tariff rate of 27%] on motor vehicles for transport Rules, 2004 that value for the purpose of reversal of common input tax credit on inputs and input services used in
of more than 13 persons falling under tariff items 8702 90 21 to 8702 90 29 of the
providing taxable services and exempted services, shall not include the value of service by way of extending
First Schedule to the Central Excise Tariff Act, 1985.
deposits, loans or advances against consideration in the form of interest or discount.