CORPORATE

1. Amendment in the definition of Small Companies

Companies falling under this threshold limit can claim benefits of small companies subject to other condition specified in section 2(85) of the Companies Act, 2013

Benefits of being Small company.

2. Relief in the restriction on paid up capital and turnover of a One Person Company (OPC), allowing their conversion into any other form of company at any given time.

Further Non-Resident Indians can incorporate OPC’s in India subject to certain conditions.

3. Amendment in the Insurance Act,1938 to increase the Foreign Direct Investment (FDI) limit from 49% to 74%. Majority of the directors and key managerial persons (KMP) of the said insurance companies to be Indian residents, and at least 50% of the directors to be Independent directors, and a specified percentage of profits to be retained as General Reserve.

DIRECT TAX

Trust Related

1. Voluntary Contribution made to charitable or religious trust with specific instruction to form part of corpus are now exempted under section 11 only if they are invested in specified mode of deposits.
2. Limits specified for exemption under section 10(23C) increased to 5 Crores in case of educational institution and hospitals. However, the threshold is now applicable Tax -payer wise, any person running multiple school or colleges will qualify for exemption if aggregate receipts from all such institutions does not exceed 5 Crores.

Individuals

3. Interest accrued on provident fund for a previous year not to be exempted to the extent it relates to the contribution made over and above Rs.2,50,000 in a year. Computation method and rules to be notified.
4. In order to ease compliance burden on senior citizen pensioners who are of 75 years of age or above, it is proposed to exempt them from the requirement of filing Income tax if the full amount of tax payable has been deducted by the paying bank. This exemption is proposed to be made available to such senior citizens who have only interest income apart from the pension income.

Corporates / Firms / Proprietor Business Related

5. Introduction of Section 194Q
Government inserted new TDS Section 194Q which will be effective from 01-July-2021, which say Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax
6. Non-Amortization of Goodwill
Goodwill excluded from the definition of Intangible assets, and thus not eligible for depreciation hereafter. It is noted that goodwill in general is not a depreciable asset and in real subject to how the business runs, goodwill may qualify for appreciation.
Rules to be prescribed for existing block of goodwill and its treatment.
Key Issues:
- Earlier depreciation provided was disputed by statutory authorities.
- Government needs to address the treatment for existing blocks.
- Cases where court has decided that goodwill is eligible asset for depreciation.
However, the financial bill states that the deduction for the amount paid for acquiring Goodwill shall be allowed on sale of Goodwill as cost of acquisition.
7. Amendment in 10(10D) – in which, exemption will not apply to ULIP’s if the premium payable for any year exceeds Rs.2,50,000. Such ULIP to be qualified as capital asset u/s 2(14) and to be considered as units of Equity oriented fund (EOF). Capital gain will be applicable on the redemption of the same and the provision of section 111A and 112A shall be applicable.
8. To ensure timely deposits of Employee’s contribution towards any fund/funds shall not be eligible for deductions unless actually paid within the due dates under the relevant acts. Section 43B shall not be applicable in this regard.

9. To promote digital transactions and to reduce the compliance burden of the person who is carrying almost all their transactions digitally, it is proposed to increase the limit for tax audit for such persons who are undertaking 95% of their transactions digitally from Rs. 5 crores to Rs. 10 crores.

PRE AND POST BUDGETS

10. Extended due date to file Income tax return to 30th November, applicable to the partner of a firm who is required to get books audited under section 92E.
11. In order to reduce compliance burden, the time-limit for re-opening of assessment is being reduced to 3 years from the current 6 years from the end of the relevant assessment year. Re-opening up to 10 years is proposed to be allowed only if there is evidence of undisclosed income of 50 lakh or more for a year.
12. Time limit to file revised return and belated return reduced and now required to be filled within three months prior to the end of the relevant assessment year.
13. It is proposed to make the Income Tax Appellate Tribunal faceless and jurisdiction-less. A National Faceless Income Tax Appellate Tribunal Centre shall be established and all the communication between the Tribunal and the appellant shall be made electronically.
14. Advance-tax liability on dividend income shall arise only after the declaration/payment of dividend.
15. A Dispute Resolution Committee is proposed to be constituted. A taxpayer having taxable income up to 50 lakh and disputed income up to 10 lakhs shall be eligible to approach the Committee. For ensuring efficiency, transparency and accountability, the procedure of the Committee will be conducted in a faceless manner.
16. New provision introduced to apply higher rate of tax deduction or collection where the receipt of the income does not file income tax returns for 2 immediately preceding previous year and the TDS or TCS deductible or collectible is 50,000 or more. Higher rate is proposed to be double the rate as per the section or rate in force or 5% which is higher. This provision is broadly applicable to all TDS and TCS provision except TDS on salary, withdrawals of EPF, cash withdrawals and winning from lotteries. Provisions shall not apply to Non-residents recipient who do not have permanent establishment in India.
17. Vivad-se-vishwas scheme to be further extended to February 28, 2021.
18. Definition of Slump sale revised to include transfer of undertakings by any means, either by the way of cash or kind

INDIRECT TAX

Eligibility to claim ITC u/s 16 of the CGST Act: An additional requirement is provided to claim ITC, i.e., details of the invoice or debit note that is furnished by the supplier is to be mentioned in the statement of outward supplies and such details must be communicated to the recipient of such invoice or debit note.

20. It is proposed to mandate filing of bills of entry before the end of day preceding the day of arrival of goods (Section 46).
21. A new section 28BB has been added to prescribe a definite time-period of two years subject to certain exceptions, for completion of investigations.
22. To encourage paperless processing, it is proposed to recognize the use of a common portal to serve notice, order etc and the portal to act as a one-point digital interface for the trade to interact with the Customs.
23. Interpretation of word “Person” under Section 7 of the CGST Act: It adds that the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another. Thus, a member’s club and members shall be treated as distinct persons.
24. Clause 101 of Finance bill states Sub-section (5) of section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional. There is no change in the requirement of filing Annual Returns to the statutory authorities on an early basis.
25. New section 114AC – Penalty equivalent to 5 times the refund claimed for fraudulent utilisation of ITC in case of goods exported.
26. Anti-dumping duty and countervailing duty on certain steel products are revoked.
27. Reducing Import Customs duty uniformly to 7.5% in case of Iron and Steel
28. Condition for filing an appeal against an order u/s 129(3) of the CGST Act: Appellant before filling an appeal needs to pay a sum equal to twenty-five per cent. of the penalty.
29. In case of refund on zero rated supply, if the sale proceeds are not received within the time prescribed in FEMA, such refund is required to be deposited along with applicable interest.

Disclaimer:“Information contained herein is for informational purposes only and should not be used in deciding any particular case. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have been made to provide authentic information, it is suggested that to have better understanding and obtaining professional advice after thorough examination of particular situation.”