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Amendments made in the Finance Bill 2016

In regard to the original Bill presented in the Lok Sabha on 29th February, 2016, many changes have been made therein. After incorporating such amendments, the Lok Sabha has passed the Finance Bill on 5th May, 2016. Amendments made in the Finance Bill 2016:

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  1. Unlisted shares held for 24 months or less would be treated as short-term capital asset

Inserted a new clause to provide that the period of 36 months would be substituted with period of 24 months in case of unlisted shares. In other words, unlisted shares of company would be treated as short-term capital asset if it is held for a period of 24 months or less immediately preceding the date of its transfer.

 

2. Processing of returns before scrutiny assessment

The Bill provides that the processing of return is not necessary before the expiry of one year from the end of the financial year in which return is furnished, where a notice is issued for scrutiny assessment under Section 143(2).

 

3. Benefit of 25 percent tax rates on certain domestic companies

Benefit of concessional tax rate shall also be available to the companies engaged in research in relation to or distribution of article or thing manufactured or produced by it. Once this option has been exercised by the company for any previous year, it cannot subsequently withdraw the same or for any other previous year.

 

4. Levy of additional tax on dividend

Dividend whether paid or declared or distributed by one or more domestic companies, the aggregate of dividend shall be considered for the limit of Rs.10 lakhs but Tax shall be payable only on the amount of dividend exceeding Rs 10 lakhs.

 

5. Immunity from penalty and prosecution in certain cases

The Finance Bill, 2016 as passed by the Lok Sabha also includes immunity from prosecution under Section 276CC in the new Section 270AA.

 

6. LLPs can be ‘Eligible start-ups’

Extended the definition of ‘eligible start-up’ to include ‘limited liability partnership’ also.

 

7. Relief to specific Non-Residents from the tax deduction under section of 194LBB

Lok Sabha inserted a proviso that where payee is a non-resident, no tax shall be deducted in respect of any income which is not chargeable to tax.

 

8. Immunity from penalty and prosecution in certain cases

The Finance Bill, 2016 as passed by the Lok Sabha also includes immunity from prosecution under Section 276CC in the new Section 270AA.

 

9. Under reporting of income shall be punishable as willful attempt to evade tax

Section 276C amended to provide that under reporting of income as per section 270A shall be punishable with rigorous imprisonment under section 276C.

 

10. Cost of acquisition of asset declared under Income Declaration Scheme, 2016

The cost of acquisition of such asset shall be deemed to be the fair market value taken into account for purposes of Income Declaration Scheme, 2016.

 

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