ADDITIONS TO THE CATEGORY OF “INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME”
The following additions have been proposed to be made in the types of incomes covered under Section 10 of the Income tax Act, 1961 –“ Incomes that do not form part of the total income” i.e. incomes exempt from taxation.
Prime Minister’s pet projects
- Sukanya Samriddhi Account
- Any payment from an account, opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873
- This proposed amendment is by way of insertion of sub-section (11A) to Section 10.
- Swacch Bharat & Clean Ganga Projects
- Any income received by a person on behalf of the
- the Swachh Bharat Kosh, set up by the Central Government; or
- the Clean Ganga Fund, set up by the Central Government
- This proposed amendment is by way of insertion of sub-section (23C)(iiiaa) and (23C)(iiiaaa) to Section 10.
- Any income received by a person on behalf of the
Specified Income of Core Settlement Guarantee Fund
- Any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation.
- However if such income is shared with any specified person than the amount of income shared will be deemed to be income in the year in which it is shared.
- “Specified income” shall mean,—
- the income by way of contribution received from specified persons;
- the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarantee Fund; or
- the income from investment made by the Fund
- “Specified person” shall mean,—
- any recognised clearing corporation which establishes and maintains the Core Settlement Guarantee Fund; and
- any recognised stock exchange being shareholder in such recognised clearing corporation
- This proposed amendment is by way of insertion of sub-section (23EE) to Section 10.
Income of Investment funds
- Any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession.
- Any income referred to in section 115UB[1], accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession”.
- “Investment fund” for the above amendments shall mean an investment fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992.
- This proposed amendment is by way of insertion of sub-section (23FBA) and (23FBB) to Section 10.
Income of Business Trusts
- Any income of a business trust, being a real estate investment trust (REIT), by way of renting or leasing or letting out any real estate asset owned directly by such business trust.
- The income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in Section 47(xvii)[2] was going to be removed from the list of exempted income by way of a proviso to Section 10(38) from 1st April, 2015. Now it is proposed to delete this proviso and hence making such income, from transfer of units if a business trust mentioned above, exempt.
- This proposed amendment is by way of insertion of sub-section (23FCA) to Section 10 and deletion of proviso to Section 10(38).
DELETIONS OF CATEGORIES FROM “INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME”
- The exemption from taxation available to the income of Venture Capital company or venture capital firm from investment in a venture capital undertaking is proposed, from 1st April, 2016, to be withdrawn in respect of any income of a venture capital company or venture capital fund, being an investment fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992.
- This proposed amendment is by way of insertion of proviso to Section 10(23FB).
AMENDMENTS IN TDS PROVISIONS
Evidence to be given by employees to employer for claiming deduction under Salary income
- Currently, there is no requirement given in the Income tax Act, 1961, regarding the documents to be obtained from the employee for allowing deductions, exemptions and set-off of losses while computing the tax to be deducted.
- It is proposed that from 1st June, 2015, at the time of allowing deductions or exemptions, the employer will be required to obtain the proofs of prescribed claims from the employee in such form and manner as may be prescribed.
- This proposed amendment is by way of insertion of sub-section (2D) to Section 192.
Payment of accumulated balance of Employees’ Provident Fund Scheme to an employee
- The current provisions of the Act provide that the amount withdrawn from the Employees Provident Fund Scheme (EPFS), which is not falling under exemption from taxation (under Rule 8 of Schedule IV-A), will be taxed by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund. This resulted into practical difficulties for the trustees of the EPFS, since it was not always possible for the trustees to obtain past information such as year-wise amount of taxable income, tax payable, etc.
- Hence, it is proposed that trustees of EPFS will deduct tax at the rate of 10% on the taxable withdrawal amount above Rs. 30,000.
- It is further proposed that if the person withdrawing the Provident Fund fails to furnish PAN to the trustees, tax will be deducted at the maximum marginal rate.
- This proposed amendment is by way of insertion of Section 192A.
Deduction of tax on interest (other than interest on securities)
- The current exemption from TDS on payments of interest to members by a co-operative society is proposed to be withdrawn in respect payment of interest by co-operative banks to its members.
- The definition of ‘time deposits’ which currently excludes recurring deposits from its scope has been proposed to be amended to include recurring deposits within its scope. This will result in deduction of tax on interest of recurring deposits exceeding Rs 10,000/-, which was earlier exempted.
- Earlier, the deduction of tax from interest payments on the compensation amount awarded by the Motor Accident Claim Tribunal was made at the time the interest income was credited or paid, if the amount of such payment or aggregate amount of such payments during a financial year exceeded Rs.50,000/-. Now such deduction of tax shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-.
- All the proposed amendments above (under this head) have been made by way of insertions and substitutions in Section 194A.
- All of the proposed amendments above (under this head)shall be applicable from 1st June, 2015
Restriction on exemption of TDS for contractors who are in business of plying, hiring or leasing goods carriages
- Currently, payments made to contractors during the course of plying, hiring and leasing goods carriage are exempt from deduction of TDS, if the contractor furnishes his PAN.
- It is proposed, from 1st June, 2015, to restrict such exemption from deduction of TDS only to cases where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to such effect.
- This proposed amendment is by way of substitution in Section 194C.
No TDS in case of rent to REIT
- It is proposed that, with effect from 1st June, 2015, no deduction shall be made under Section 194-I where the income by way of rent is credited or paid to a REIT, for any real estate asset owned directly by the REIT.
- This proposed amendment is by way of addition of proviso to Section 194-I.
TDS to Unit-holders of REIT
- While the requirement of TDS on rental income of REITs has been proposed to be removed, it has also been proposed to deduct tax from any amount distributed by the REIT, which is in the nature of rental income, to its unit-holder.
- In case of resident unit holder, tax shall deducted @ 10%.
- In case of distribution to non-resident unit holder, the tax shall be deducted at rate in force as applicable for deduction of tax on payment to the non-resident.
- Tax will be deducted at the time of credit of such payment to the account of the payee or at the time of payment, whichever is earlier.
- This amendment will be made applicable from 1st June, 2015.
- This proposed amendment is by way of changes in Section 194LBA and addition of a proviso to the same.
TDS on income of a unit holder in investment fund
- It is proposed that such proportion of income as is not covered under section 10(23FBB)[3] will be subject to 10% TDS effective 1st June, 2015
- Tax will be deducted at the time of credit of such payment to the account of the payee or at the time of payment, whichever is earlier.
- This proposed amendment is by way of insertion of a new Section 194LBB.
Extension of time-limit for lower TDS on interest to FIIs and QFIs on certain investments
- The existing provisions provide for lower withholding tax at the rate of 5% on interest payable to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds, at any time on or after the 1st June, 2013 but before 1st June, 2015.
- The time-limit for lower withholding tax is proposed to be extended from 1st June 2015 to 1st July, 2017.
- This proposed amendment is by way of substitution in Section 194LD.
Form 15CA and 15CB to be submitted whether the payment to Non-Resident is taxable or not
- Currently, a person responsible for paying sums, to a non-resident, which are chargeable to tax is required to furnish information in the prescribed manner (i.e. declaration in Form 15CA and certificate in Form 15CB).
- It is now proposed to enlarge this requirement effective 1st June, 2015 and make it applicable to any payment made to a non-resident, whether or not such sum is chargeable to tax under the Act.
- This proposed amendment is by way of substitution of sub-section (6) in Section 195.
Filing of self-declarations for non-deduction of tax on certain payments
- It is proposed to enable the recipients of payments referred to in section 192A (amount withdrawn from EPFS) and 194DA (payments under life insurance policy) for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of the Section 197A.
This proposed amendment is by way of substitutions in Section 197A.
[1] Section 115UB is a newly inserted section which says that “any income accruing or arising to, or received by, a person, being a unit holder of an investment fund, out of investments made in the investment fund, shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to, or received by, such person had the investments made by the investment fund been made directly by him.”
[2] Any transfer of share of a SPV to a business trust in exchange of units allotted by that trust to the transferor.
[3] any income referred to in section 115UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession