KEY HIGHLIGHTS OF FINANCE BILL (NO.

2) – 2019- DIRECT TAX

Rebate U/S 87A: -

Changes made which were made to the Sec 87A by FA 2019 is retained. As a result, a resident
individual whose total income does not exceed Rs. 5 Lakhs shall be entitled to deduction from
income tax - 100% of amount of income tax or Rs. 12,500 which ever is less.
Surcharge: -
Status Existing Limits Proposed Limits
Individual/HUF/AOP For Total Income more than For Total Income more than Rs. 50
or BOI/AJP Rs. 50 Lakhs but not Lakhs but not exceeding Rs. 1 Crore-
exceeding Rs. 1 Crore- 10% of 10% of Tax on Total Income.
Tax on Total Income.
For Total Income more than Rs. 1
For Total Income more than but not exceeding Rs. 2 Crores- 15%
Rs. 1 Crore- 15% of Tax on of Tax on Total Income
Total Income
For Total Income more than 2
Crores but not exceeding Rs. 5
Crores- 25% of Tax on Total Income.

For Total Income more than Rs. 5

Crores- 37% of Tax on Total Income

Tax Rates for Domestic Companies @25%: -

Existing Condition Proposed Condition
Turnover or Gross Receipts Turnover or Gross Receipts
does not exceed Rs. 250 Crores does not exceed Rs. 400 Crores
in the previous year 2017-18 in the previous year 2017-18

Income Deemed to Accrue or Arise in India: -

Provisions of Sec 56(2)(X) proposed to apply for transaction(s) carried between person resident
in India to a person resident outside India and is deemed to accrue or arise in India as per
section 9. This will apply for transaction(s) carried on or after 5th July 2019. However, the
exemptions available U/S 56(2)(X) continue to apply.
Parity in non-compliance of TDS provisions U/S 40: -
Under existing provisions of Act where any sum payable to resident which is subject to TDS
provisions and such tax has not been deducted, whole or part, the deductor will not be deemed
to be an assessee in default subject to compliance with the provisions of sec 201 (Sec 40(a)(ia).
The above benefit is now proposed to be extended to any interest, royalty, fees for technical
services or other sum chargeable to tax under this Act which is payable outside India or in India
to a non-resident, not being a foreign company or foreign company. (Sec 40(a)(i))
In such case the for the purpose of Sec 40 it is deemed that the deductor has deducted and paid
the tax on such sum on the date of furnishing of return of income by the resident deductee.
Change was proposed to be made in Sec 201 in line with the change proposed to be made in
Sec 40(a)(i).
Non-Banking Financing Company: -
Amount of interest payable to on loan or borrowing from a deposit taking non-banking finance
company or systematically important non-deposit taking non-banking finance company be
allowed only on payment basis as per the provisions of sec 43B.
In above case where interest was allowed on payable basis in relation to assessment year 2019-
20 or earlier assessment year the same will not be allowed in the year of payment.
Conversion of such interest payable into a loan or borrowing shall not deemed to have been
paid.
It is proposed that income in relation to certain categories of bad or doubtful debts received by
deposit taking non-banking finance company or systematically important non-deposit taking
non-banking finance company shall be chargeable to tax in previous year in which it is credited
to profit and loss account or actually received, whichever is earlier as per sec 43D.
Capital Gains: -
It is proposed that for the purpose of Sec 111A equity oriented mutual fund shall have meaning
as referred to in Exp to Sec 112A.
It is proposed U/S 47 that transfer of derivative or such other securities as may be notified by
the Central Government made by non-resident or specified fund, which has been granted a
certificate as category III Alternative Investment Fund (AIF) located in any IFSC of which all
unit holders are non-resident and where consideration for such transaction is paid or payable
only in convertible foreign exchange.
It proposed that provisions of Sec 50CA are not applicable to any consideration received or
accrued as a result of transfer by such class of persons and subject to such conditions as may
be prescribed.
Other Sources: -
It is proposed U/S 56(2) (viib) that provisions of the said section are not applicable where
consideration for issue of shares is received from venture capital fund or specified fund
(Category III AIF).
Further, where the provisions of sec 56(2)(viib) were not made applicable to company vide
notification issued for the purpose of this section and such company fails to comply with any
of the conditions then said section will apply to the consideration received in excess of face
value and is chargeable to tax in the previous year in which such failure takes place.
Vide notification no. 45/2016 dated 14th June 2016 Start – up company was specified for the
purpose of sec 56(2) (viib).
It is proposed U/S 56(2)(viii) that interest received by an assessee on any compensation or
enhanced compensation as the case may be shall be deemed to be income of the previous year
in which it is received. (W.e.f 1st April 2017)
It proposed U/S 56(2)(X) that the provisions of the said section are not applicable to any sum
of money or any property received from such class of persons and subject to conditions, as may
be prescribed.

Deductions U/S Chapter -VIA: -

Deduction U/S 80C is proposed to be allowed to a contribution to specified account for a fixed
period of not less than 3 years and which is in accordance with scheme as may be notified by
the Central Government in the Official Gazette for this purpose.
Deduction U/S 80CCD (2) is proposed be allowed 14% of salary, where the contribution is
made by Central Government, or 10% of salary, where such contribution is made by any other
employer.
Deduction U/S 80EEA is proposed to be allowed to individual for interest payable of Rs.
1,50,000/- on loan taken from financial institution for the purpose of acquisition of first
residential house property. Further, the loan be sanctioned during the period 1st April 2019 and
31st March 2020 and stamp duty value of residential house property does not exceed Rs. 45
Lakhs.
Deduction U/S 80EEB is proposed to be allowed to individual for interest payable of Rs.
1,50,000/- on loan taken from financial institution for the purchase of an electric vehicle.
Further, loan be sanctioned during the period 1st April 2019 and 31st March 2023.
Deduction U/S 80-IBA is proposed to be allowed to housing project approved on or after 1st
September, 2019 in respect of a housing project in case residential unit in the housing project
having carpet area not exceeding 60 sq.mt in metros or 90 sq.mt in cities or towns other metros
and stamp duty value of residential unit is the housing project shall not exceed Rs. 45 Lakhs.
Deduction U/S 80LA is proposed to be allowed to unit of an International Financial Services
Centre (IFSC) @100% of income from such unit for any ten consecutive assessment years, at
the option of the assessee, out of 15 years beginning from assessment year relevant to the
previous year in which permission under the relevant law was obtained.
Further, it is proposed that provisions of sec 115A are not applicable to deduction allowed to
unit of IFSC U/S 80LA. Sec 115A provides for taxation of tax on dividends, royalty and
technical service fee in case of non-resident, not being a company or foreign company.

Income on Buy back of shares: -

Any income arising to a shareholder on account of buy back of shares as referred to in sec
115QA on or after 5th July 2019 by the domestic company being listed or unlisted are exempted
U/S 10(34A). As per the existing provisions this exemption is allowed only to shareholders of
unlisted company.
Further, Sec 115QA which provides for levy of additional income tax @20% on the distributed
income on the account of buyback is also proposed to be amended to make it applicable to all
companies, whether listed or unlisted.
Acceptance of Payments by person carrying business (Sec 269SU): -
A new section 269SU is proposed to provide that every person, carrying on business, shall,
provide facility for accepting payment through the prescribed electronic modes, in addition to
the facility for other electronic modes of payment, if any, being provided by such person, if his
total sales, turnover or gross receipts in business exceeds fifty crore rupees during the
immediately preceding previous year. (w.e.f 01/11/2019)
To ensure compliance with the above proposal a new section 27IDB to provide that the failure
to provide facility for electronic modes of payment prescribed under section 269SU shall attract
penalty of a sum of five thousand rupees, for every day during which such failure continues.
Such penalty shall be imposed by the Joint Commissioner. (w.e.f 01/11/2019)

Start-up: -
Rollover benefit of capital gains U/S 54GB is proposed to be extended to the investment in
eligible start-ups from 31st March 2019 to 31st March 2021.
The minimum shareholding of the assesee in the eligible start-up is proposed to be 25%. New
asset being computer or computer software is proposed to allow to transfer after 3 years from
the year of acquisition.
It is proposed U/S 79 that the eligible start-ups can carry forward and set off loss incurred in
any year prior to the previous year against income of the previous year on satisfaction either of
maintaining 51% of voting power or continue to hold shares provided the loss was incurred
within 7 years of incorporation.
Note:- Further, the provisions of sec 79 is proposed to be not applicable to a company and
its subsidiary and its sub subsidiary where tribunal has suspended the board of directors of
such company on application made by C.Govt U/S 241 of Companies Act, 2013 and change
in shareholding of such company and its subsidiary and its sub subsidiary has taken place
pursuant to resolution plan approved by tribunal U/S 242 of Companies Act, 2013 after
affording a reasonable opportunity of being heard given to Pr. CIT/CIT.
TDS: -
A new section 194M is proposed for deduction of tax at source @5% by Individual or HUF in
relation to any sum payable to any resident for carrying out any work including supply of labour
for carrying out any work in pursuance of contract or fees for professional services, for personal
use. This section will apply in case where such sum or aggregate of such sums exceed Rs. 50
Lakhs in a year.
Application U/S 197 (1) is proposed to be allowed for the above said payment (W.e.f 1st
September 2019). No TAN is required for the purpose of this section.
A new section 194N is proposed for deduction of tax at source @2% at the time of payment of
sum or aggregate of sums in cash from an account maintained by the recipient where the said
amount exceeds Rs. One Crore. This section is proposed to be made applicable to every bank,
co-operative bank or post office
It is proposed U/S 194-IA to include charges of the nature of club membership fee/car parking
fee/electricity/water facility fee/maintenance fee/advance fee or any other charges of similar
nature which are incidental to transfer of immovable property with in the purview of the said
section (W.e.f 1st September 2019)
It is proposed U/S 194DA that TDS would be @5% of the amount of income comprised there
in. The existing section provide for TDS @1% on any sum payable under Life Insurance Policy
payable to resident.
It is proposed to introduce the form and manner in which applicable be made to AO U/S 195(2)
to determine in prescribed manner the portion of sum chargeable to tax out of whole of such
sum payable to non-resident. Further, application made U/S 195(7) is also proposed to be
covered. (W.e.f 1st November 2019)
It is proposed U/S 206A to enable online filing of statement in respect of payment income by
way of interest residents where no tax has been deducted at source.
Interest: -
It is proposed that for the purpose of the computation of interest leviable U/S 234A/234B/234C
the amount of relief of tax allowed U/S 89 be reduced from the amount of tax on total income.
Further, similar proposals were made in sec 140A and sec 143(1)(c). (W.r.e.f 1st April 2007).
Book Profit: -
It is proposed U/S 115JB to allow aggregate amount of unabsorbed depreciation and brought
forward loss be reduced while computing book profit for the purpose of said section in case of
the following: -
 Company, and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal,
on an application moved by the Central Government under section 241 of the
Companies Act, 2013 has suspended the Board of Directors of such company and has
appointed new directors who are nominated by the Central Government under section
242 of the said Act;

 Company against whom an application for corporate insolvency resolution process has
been admitted by the Adjudicating Authority under section 7 or section 9 or section 10
of the Insolvency and Bankruptcy Code, 2016

Dividend Distributed Tax: -

It is proposed U/S 115-O (8) that the provisions of this section are not applicable to unit in
IFSC deriving income solely in convertible foreign exchange in respect of dividend declared
or distributed or paid out of its current income or accumulated income after 1st April 2017
(W.e.f 1st September 2019)
Return filing: -
It is proposed U/S 139(1) that every Individual or HUF or AOP or BOI or AJP required to file
return of income in case roll over benefits U/S 54/54B/54D/54EC/54F/54G/54GA/54GB are
claimed and without considering such roll over benefits total income is more than maximum
exemption limit.
It proposed U/S 139(1) in case of person other than company or firm undertaken the following
transaction(s) are required to file return of income: -
 Deposit of amount or aggregate of amounts exceeding Rs. One Crore in one or more
current account maintained with a banking company or Co-Operative bank; or
 Incurred expenditure amount or aggregate amounts exceeding Rs. 2 Lakhs for himself
or any other person for travel to foreign country; or
 Has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh
rupees towards consumption of electricity; or
 Fulfils such other prescribed conditions, as may be prescribed.

PAN/AADHAR: -
Every person who is required to furnish or intimate or quote his PAN under the Act, and who,
has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or
quote his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the
prescribed manner.
Every person who has been allotted a PAN, and who has linked his Aadhaar number under
section 139AA, may furnish or intimate or quote his Aadhaar number in lieu of a PAN. (W.e.f
1st September 2019)
If a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made
inoperative in the prescribed manner. (W.e.f 1st September 2019)
Compliance for Registration and Continuation of Registration U/S 12AA: -
It is proposed U/S 12AA (1) the Pr.CIT/CIT at the time of granting of registration also satisfy
himself about compliance with requirements of any other law which is material for the purpose
of achieving its objects.
Further, it is proposed U/S 12AA (4) that after granting the registration it is noticed that trust
or institution has violated requirements of any other law which was material for the purpose of
achieving its object and order, direction or decree holding that such violation has occurred
which was either not disputed or has attained finality then Pr.CIT/CIT cancel the registration
after affording a reasonable opportunity of being heard.
Compliance with Ind-AS: -
It is proposed U/S 2(19AA) that recording of value of property and liabilities of the undertaking
or undertakings at a value different from book value appearing in the demerged company in
compliance with the Ind-AS specified in the Companies (Indian Accounting Standards) Rules
2015 is allowed to resulting company.

TRANSFER PRICING: -
Secondary Adjustment: -
The following changes are proposed U/S 92CE: -
 Where primary adjustment to the transfer price is determined by APA on or after 1st
April 2017 the assessee shall make secondary adjustment; (W.e.f 1st April 2018)

 No secondary adjustment is required in case where primary adjustment is does not

exceed Rs. One Crore or where primary adjustment is made in respect of an assessment
year commencing or before 1st April 2016; (W.e.f 1st April 2018)

 The excess money may be repatriated from any of the associated enterprises of the
assessee which is not resident in India; (W.e.f 1st April 2018)

 In a case where the excess money or part thereof has not been repatriated in time, the
assessee will have the option to pay additional income-tax at the rate of eighteen per
cent on such excess money or part thereof in addition to the existing requirement of
calculation of interest till the date of payment of this additional tax. The additional tax
is proposed to be increased by a surcharge of twelve per cent. The tax so paid shall be
the final payment of tax and no credit shall be allowed in respect of the amount of tax
so paid; (W.e.f 1st September 2019)
 If the assessee pays the additional income-tax, he will not be required to make
secondary adjustment or compute interest from the date of payment of such tax. (W.e.f
1st September 2019)
APA: -
It is proposed U/S 92CD (3) clarify that in cases where assessment or reassessment has already
been completed and modified return of income has been filed by the tax payer under sub-
section (1) of said section, the Assessing Officers shall pass an order modifying the total
income of the relevant assessment year determined in such assessment or reassessment, having
regard to and in accordance with the APA. (W.e.f 1st September 2019)
Documentation:
It is proposed to substitute section 92D of the Act, in order to provide that the information and
document to be kept and maintained by a constituent entity of an international group, and filing
of required form, shall be applicable even when there is no international transaction undertaken
by such constituent entity.
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:
-
It is proposed U/S 2 of the said above Act “assessee” shall mean a person being a resident in
India within the meaning of section 6 of the Income-tax Act, in the previous year, or a person
being a non-resident or not ordinarily resident in India within the meaning of clause (6) of
section 6 of the Income-tax Act, in the previous year, who was resident in India either in the
previous year to which the income referred to in section 4 relates, or in the previous year in
which the undisclosed asset located outside India was acquired.
It is also proposed to provide that the previous year of acquisition of the undisclosed asset
located outside India shall be determined without giving effect to the provisions of section
72(c) of the said Act.
Prohibition of Benami Property Transactions Act: -
It is proposed U/S 23 of the Act that no prior approval of Approving Authority is required
where initiating officer has already initiated proceedings by issuing notice U/S 24(1).
Sec 24(1) of existing Act provides that the initiating officer on the basis of material in his
possession has a reason to believe that any person is a benamidar in respect of property issue a
show cause notice.
Further, it is proposed U/S 24(3) to provide for provisional attachment of the property and
passing of an order U/S 24(4) the period is to be reckoned from the end of the month in which
notice U/S 24(1) is issued.
A new sec 54A is proposed to be introduced to provide for penalty of Rs. 25,000/- for failure
to comply with summons issued U/S 19(1) or furnish information as required U/S 21 of the
Act. This penalty be imposed by the authority who had issued the summons or called for the
information.
A new sec 54B is proposed to be introduced which provides that certified copies of records or
other documents in the custody of the authority is admitted as evidence in any proceedings for
the prosecution of any person for an offence U/S 3 or chapter VI of the Act.