Rationalisation of provisions relating to tax audit in certain cases.
Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year. In case of a person carrying on profession he is required to get his accounts audited, if his gross receipt in profession exceeds, fifty lakh rupees in any previous year.
In order to reduce compliance burden on small and medium enterprises, it is proposed to increase the threshold limit for a person carrying on business from one crore rupees to five crore rupees in cases where,-
(i) aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and
(ii) aggregate of all payments in cash during the previous year does not exceed five per cent of such payment.
Further, to enable pre-filling of returns in case of persons having income from business or profession, it is required that the tax audit report may be furnished by the said assessees at least one month prior to the due date of filing of return of income. This requires amendments in all the sections of the Act which mandates filing of audit report along with the return of income or by the due date of filing of return of income. Thus, provisions of section 10, section 10A, section 12A, section 32AB, section 33AB, section 33ABA, section 35D, section 35E, section 44AB, section 44DA, section 50B, section 80-IA, section 80-IB, section 80JJAA, section 92F, section 115JB, section 115JC and section 115VW of the Act are proposed to be amended accordingly.
Further, the due date for filing return of income under sub-section (1) of section 139 is proposed to be amended by:-
(A) providing 31st October of the assessment year (as against 30th September) as the due date for an assessee referred to in clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act;
(B) removing the distinction between a working and a non-working partner of a firm with respect to the due date as mentioned in sub-clause (iii) of clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
[Clauses 7, 8, 10, 14, 15, 16, 19 ,20, 23, 24, 26, 35, 37, 39, 45, 56, 57,63 & 66]
The amendment relating to extending threshold for getting books of accounts audited will have consequential effect on TDS/TCS provisions contained in sections 194A, 194C, 194H, 194I, 194J and 206C as these provisions fasten liability of TDS/TCS on certain categories of person, if the gross receipt or turnover from the business or profession carried on by them exceed the monetary limit specified in clause (a) or clause (b) of section 44AB.
Therefore, it is proposed to amend these sections so that reference to the monetary limit specified in clause (a) or clause (b) of section 44AB of the Act is substituted with rupees one crore in case of the business or rupees fifty lakh in case of the profession, as the case may be.
These amendments will take effect from 1st April, 2020.
[Clauses 75,76,77,78,79 & 93]
Extract of Relevant Clauses of Finance Bill, 2020
Clauses 7
“Clause 7 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
First proviso to clause (23C) of said section provides for application to be made in prescribed form and manner to the prescribed authority for exemption in respect of income of the fund or trust or institution 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 said clause in a case where such income is applied or accumulated during the previous year for certain purposes in accordance with the relevant provisions.
It is proposed to substitute said proviso so as to provide that the exemption to such fund or trust or institution or any university or other educational institution or any hospital or other medical institution shall not be available unless it is approved under the proposed second proviso on an application made in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution is approved under the second proviso (as it stood before its amendment by the Finance Act, 2020), within three months from the date on which this clause has come into force; where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution is approved and the period of such approval is set to expire, at least six months prior to expiry of said period; where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution has been provisionally approved, at least six months prior to expiry of period of the provisional approval or within six months of commencement of its activities, whichever is earlier; in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which said registration is sought.
Second proviso to clause (23C) of said section thereof provides for the inquiry to be made by the prescribed authority before approving the fund or trust or institution 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 said clause.
It is proposed to substitute the second proviso so as to provide that the Principal Commissioner or Commissioner, on receipt of an application made under the proposed first proviso, shall, where the application is under clause (i) of said proviso, pass an order in writing granting it approval for a period of five years; where the application is under clause (ii) or clause (iii) of said proviso, call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about, the genuineness of activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution and the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its object; and after satisfying himself about the objects and the genuineness of its activities, under item (A), and compliance of the requirements under item (B), of sub-clause (a), pass an order in writing granting its approval for a period of five years; if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;
where the application is under clause (iv) of said proviso, pass an order in writing granting it approval provisionally for a period of three yearsfrom the assessment year from which the registration is sought, and send a copy of such order to the fund or trust or institution or any university or other educational institution or any hospital or other medical institution.
Eighth proviso to clause (23C) thereof, inter alia, provides for period for which a notification issued by Central Government under sub-clause (iv) or sub-clause (v) of said clause shall have effect.
It is proposed to substitute the eighth proviso so as to provide that the approval granted under the proposed second proviso shall apply in relation to the income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, where the application is made under clause (i) of the first proviso, from the assessment year from which approval was earlier granted to it; where the application is made under clause (iii) of the first proviso, from the first of the assessment years for which it was provisionally approved; in any other case, from the assessment year immediately following the financial year in which such application is made.
Ninth proviso to clause (23C) of said section thereof, inter alia, provides for the period within which a notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application made in this behalf shall be passed.
It is proposed to substitute the ninth proviso so as to provide that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the proposed second proviso shall be passed, in such form and manner as may be prescribed, before expiry of period of three months, six months and one month respectively, calculated from the end of the month in which the application was received.
These amendments will take effect from 1st June, 2020.
The tenth proviso to the said clause provides that where the total income, of the fund or trust or institution 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), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or university or other educational institution or hospital or other medical institution shall get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish the report of such audit along with the return of income for the relevant assessment year.
It is proposed to amend the said proviso so as to provide that such trust or institution or university or other educational institution or hospital or other medical institution should get the accounts audited before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) and furnish the report of audit by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
Clauses 8
“Clause 8 of the Bill seeks to amend section 10A of the Income-tax Act relating to special provision in respect of newly established undertakings in free trade zone, etc.
Sub-section (1) of the said section provides that subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee.
Sub-section (5) of the said section provides that the deduction under the said section shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288 certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
It is proposed to amend the said sub-section so as to provide that the deduction under the said section shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form the report of an accountant, as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 10
“Clause 10 of the Bill seeks to amend section 12A of the Income-tax Act relating to conditions for applicability of sections 11 and 12.
Sub-section (1) of said section provides for the conditions to be fulfilled by any trust or institution subject to which exemption under sections 11 and 12 shall be available to it.
It is proposed to insert a new clause (ac) to the said sub-section so as to provide, notwithstanding anything contained in clauses (a), (aa) and (ab) of the said subsection, with condition that the trust or institution is registered under the proposed section 12AB on an application made by the person in receipt of the income in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution; where the trust or institution is registered under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA, within three months from the date on which this clause has come into force; where the trust or institution is registered under section 12AB and the period of said registration is set to expire, at least six months prior to expiry of said period; where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; where registration of the trust or institution has become inoperative due to proviso to sub-section (7) of section 11, at least six months prior to commencement of the assessment year from which said registration is sought to be made operative; where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of said adoption or modification, in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which said registration is sought.
This amendment will take effect from 1st June, 2020.
It is further proposed to consequentially amend clause (b) of sub-section (1) of the said sectionso as to provide that such trust or institution should get the accounts audited by the accountant as defined in Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) and furnish the report of such audit by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
Sub-section (2) of said section provides that an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.
It is proposed to insert first proviso to said sub-section so as to provide that the provisions of sections 11 and 12 shall apply to a trust or institution, where the application is made under sub-clause (i) of proposed clause (ac) of sub-section (1), from the assessment year from which such trust or institution was earlier granted registration; sub-clause (iii) of proposed clause (ac) of sub-section (1), from the first of the assessment years for which it was provisionally registered.
It is proposed to amend the existing first and third proviso to sub-section (2) thereof so as to make reference of proposed new section 12AB.
This amendment will take effect from 1st June, 2020.”
Clauses 14
“Clause 14 of the Bill seeks to amend section 32AB of the Income-tax Act relating to investment deposit account.
Sub-section (5) of the said section provides that deduction under sub-section (1) shall not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.
It is proposed to amend the said sub-section (5) so as to provide that deduction under sub-section (1) of section 32AB shall not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the report of such audit is furnished by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 15
“Clause 15 of the Bill seeks to amend section 33AB of the Income-tax Act relating to tea development account, coffee development account and rubber development account.
Sub-section (1) of the said section provides for deduction to an assessee carrying on the business of growing and manufacturing tea or coffee or rubber in India, who has, before the expiry of six months from the end of the previous year or before the due date of furnishing return of his income has deposited any amount in an account maintained by assessee under a scheme approved or framed by the Tea Board or the Coffee Board or the Rubber Board with the previous approval of Central Government.
Sub-section (2) of the said section provides that deduction under sub-section (1) shall not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.
It is proposed to amend the said sub-section (2) to provide that deduction under sub-section (1) of section 33AB shall not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which deduction are claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the report of such audit is furnished by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 16
“Clause 16 of the Bill seeks to amend section 33ABA of the Income-tax Act relating to Site Restoration Fund.
Sub-section (1) of the said section provides that if an assessee has deposited with a special account maintained by assessee for the purposes specified in a scheme approved by Government of India or deposits any amount in Site Restoration account opened by assessee in accordance with, and for the purposes specified in, a scheme framed by Ministry of Petroleum and Natural Gas, then assessee shall be allowed a deduction of lesser of the aggregate amount so deposited by the assessee or twenty per cent. of the profits of such business computed under the head “Profits and gains from Business or Profession” before making any deduction under the said section.
Sub-section (2) of the said section provides that deduction under sub-section (1) of section 33ABA will not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.
It is proposed to amend sub-section (2) of the said section to provide that deduction under sub-section (1) shall not be admissible to assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which deduction are claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the report of such audit is furnished by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 19
“Clause 19 of the Bill seeks to amend section 35D of the Income-tax Act relating to amortisation of certain preliminary expenses.
Sub-section (1) of the said section provides that an assessee, being an Indian company or a person other than a company who is a resident in India shall be allowed deduction in relation to certain specified expenditure incurred before the commencement of his business or in connection with the extension of undertaking or setting up of new unit of an existing business over a period of ten successive previous years beginning with the previous year in which the business commences or as the case may be, such extension of undertaking or setup of new unit has been carried out.
Sub-section (2) of the said section specifies certain expenditures which are allowed as deduction under sub-section (1).
Sub-section (4) of the said section provides that deduction under sub-section (1) shall not be admissible to the assessee unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant for the first year of deduction.
It is proposed to amend sub-section (4) of the said section to provide that deduction under sub-section (1) shall not be admissible to the assessee unless the accounts of the
business or profession of the assessee for the previous year relevant to the assessment year for which deduction are claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the assessee furnishes the report of such audit by that date for the first year of deduction.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 20
“Clause 20 of the Bill seeks to amend section 35E of the Income-tax Act relating to deduction for expenditure on prospecting, etc., for certain minerals.
Sub-section (1) of the said section provides that where an assessee, being an Indian company or a person other than a company who is a resident in India and is engaged in any operations relating to prospecting for, or extraction or production of, any mineral and incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), the assessee shall, in accordance with and subject to the provisions of this section, be allowed for each one of the relevant previous years a deduction of an amount equal to one-tenth of the amount of such expenditure.
Sub-section (6) of the said section provides that where the assessee is a person other than a company or a co-operative society, no deduction shall be admissible under sub-section (1) unless the accounts of the assessee for the year or years in which the expenditure specified in sub-section (2) is incurred have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income for the first year in which the deduction under this section is claimed, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
It is proposed to amend the said sub-section (6) so as to provide that deduction under sub-section (1) of section 35E shall not be admissible to assessee unless the accounts of the assessee for the year or years in which the expenditure specified in sub-section (2) is incurred have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the report of such audit has been furnished by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 23
“Clause 23 of the Bill seeks to amend section 44AB of the Income-tax Act relating to audit of accounts of certain persons carrying on business or profession.
Clause (a) of the said section provides that every person carrying on business shall get his accounts of any previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year.
It is proposed to insert a proviso in the said clause so as to provide that in the case of a person whose aggregate of all amount received including amount received for sales, turnover or gross receipts during the previous years, in cash, does not exceed five per cent. of the said amount; and the aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent. of the said payment, this clause shall have effect as if for the words “one crore rupees”, the words “five crore rupees” had been substituted.
Clause (ii) of the Explanation to the said section defines the expression “specified date” in relation to the accounts of the assessee of the previous year relevant to an assessment year as due date for furnishing the return of income under sub-section (1) of section 139.
It is proposed to amend the said clause so as to provide that the specified date will mean one month prior to the due date for furnishing the return of income under sub-section (1) of section 139.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 24
“Clause 24 of the Bill seeks to amend section 44DA of the Income-tax Act relating to special provision for computing income by way of royalties, etc., in case of non-residents.
Sub-section (2) of the said section provides that every non-resident (not being a company) or a foreign company shall keep and maintain books of account and other documents in accordance with the provisions contained in section 44AA and get their accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish the report of such audit in the prescribed form along with the return of income.
It is proposed to amend the said sub-section so as to provide that the non-resident (not being a company) or a foreign company should get the accounts audited before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) and furnish the report of audit by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 26
“Clause 26 of the Bill seeks to amend section 50B of the Income-tax Act relating to special provision for computation of capital gains in case of slump sale.
Sub-section (1) of the said section provides that any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place.
Sub-section (3) of the said section provides that every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288 indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section.
It is proposed to amend the said sub-section (3) so as to provide that every assessee, in the case of slump sale, shall furnish in the prescribed form a report of an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date as referred to in section 44AB (i.e. one month prior to the due date for filing return of income under sub-section (1) of section 139) indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 35
“Clause 35 of the Bill seeks to amend section 80-IA of the Income-tax Act relating to deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
Sub-section (1) of the said section provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4)(such business being referred to as the eligible business), there shall, in accordance with and subject to the provisions of the said section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business for ten consecutive assessment years.
Sub-section (7) of the said section provides that the deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.
It is proposed to amend the said sub-section (7) so as to provide that deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible to the assessee unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB (i.e., one month prior to the due date for filing of return under sub-section (1) of section 139) and the report of such audit is furnished by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 37
“Clause 37 of the Bill seeks to amend section 80-IB of the Income-tax Act relating to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
It is proposed to consequentially amend sub-sections (7A), (7B), (11B) and (11C) to substitute the existing phrase provided therein, respectively, with the phrase “the report of an audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 39
“Clause 39 of the Bill seeks to amend section 80JJAA of the Income-tax Act relating to deduction in respect of employment of new employees.
Sub-section (1) of the said section provides that where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent. of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.
Clause (c) of sub-section (2) of the said section provides that the deduction under sub-section (1) shall not be allowed unless the assessee furnishes alongwith the return of income the report of the accountant, as defined in the Explanation to section 288 giving such particulars in the report as may be prescribed.
It is proposed to amend the said clause (c) so as to provide that the deduction under sub-section (1) shall not be allowed unless the assessee furnishes the report of the accountant, as defined in the Explanation to section 288 before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under subsection (1) of section 139) giving such particulars in the report as may be prescribed.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 45
“Clause 45 of the Bill seeks to amend section 92F of the Income-tax Act relating to definitions of certain terms relevant to computation of arm’s length price, etc.
Clause (iv) of the said section provides the definition of specified date. It provides that specified date shall have the same meaning as assigned to “due date” in Explanation 2 below sub-section (1) of section 139.
It is proposed to substitute the said clause (iv) so as to provide that “specified date” shall mean one month prior to the due date for furnishing the return of income under subsection (1) of section 139 for the relevant assessment year.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 56
“Clause 56 of the Bill seeks to amend section 115JB of the Income-tax Act relating to special provision for payment of tax by certain companies.
Sub-section (1) of the said section provides that where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent.
Sub-section (4) of the said section provides that every company to which the said section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142.
It is proposed to amend the said sub-section (4) so as to provide that every company to which the said section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288 certifying that the book profit has been computed in accordance with the provisions of the said section before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 57
“Clause 57 of the Bill seeks to amend section 115JC of the Income-tax Act relating to special provisions for payment of tax by certain persons other than a company.
Sub-section (1) of the said section provides that where the regular income-tax payable for a previous year by a person, other than a company, is less than the alternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of that person for such previous year and he shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent.
Sub-section (3) of the said section provides that every person to whom the said section applies shall obtain a report in such form as may be prescribed, from an accountant, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter and furnish such report on or before the due date for furnishing of return of income under sub-section (1) of section 139.
It is proposed to amend the said sub-section (3) so as to provide that every person to whom the said section applies shall obtain a report before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139), in such form as may be prescribed, from an accountant, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter and furnish such report by that date.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
It is proposed to consequentially insert a new subsection (5) in the said section so as to provide that the provisions contained therein shall not apply to a person who has exercised the option referred to in section 115BAC or section 115BAD.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.”
Clauses 63
“Clause 63 of the Bill seeks to amend section 115VW of the Income-tax Act relating to maintenance and audit of accounts.
The said section provides for conditions to be satisfied by a tonnage tax company to be eligible for tonnage tax scheme.
Clause (ii) of the said section provides one of the condition that the company shall furnish along with the return of income for that previous year, the report of an accountant, in the prescribed form duly signed and verified by such accountant.
It is proposed to amend the said clause so as to provide that the company shall furnish the report of an accountant before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing return of income under sub-section (1) of section 139), in the prescribed form duly signed and verified by such accountant.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.”
Clauses 66
“Clause 66 of the Bill seeks to amend section 139 of the Income-tax Act relating to return of income.
Clause (a) of Explanation(2) of sub-section (1) of the said section provides for due date of furnishing of return of income for certain persons including a working partner of the specified firm as the 30th day of September of the assessment year.
It is proposed to amend the said clause so as to omit the word “working” in sub-clause (iii) and to provide that the due date for filling such return of income shall be the 31st day of October of the assessment year.
These amendments will take effect from lst April, 2020 and will, accordingly, apply in relation to assessment year 2020-2021 and subsequent assessment years.”
Clauses 75
“Clause 75 of the Bill seeks to amend section 194A of the Income-tax Act relating to interest other than “Interest on securities”.
Sub-section (1) of the said section provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income 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, deduct income-tax thereon at the rates in force.
The proviso to the said sub-section provides that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.
It is proposed to amend the said proviso so as to provide that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under the said section.
Sub-section (3) of the said section provides for circumstances in which the provisions of sub-section (1) shall not apply.
Clause (i) of sub-section (3) provides that sub-section (1) shall not apply where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, does not exceed certain threshold.
Sub-clause (b) of the said clause provides that threshold to be forty thousand rupees, where the payer is a cooperative society engaged in carrying on the business of banking. This threshold is fifty thousand rupees, in case the payee is a senior citizen.
Clause (v) of sub-section (3) provides that sub-section (1) shall not apply to such income credited or paid by a cooperative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a cooperative society to any other co-operative society.
Clause (viia) of sub-section (3) provides that sub-section (1) shall not apply to such income credited or paid in respect of, deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; and deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a cooperative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking.
It is proposed to amend sub-section (3) so as to insert a proviso to provide that a co-operative society referred to in clause (v) or clause (viia) shall be liable to deduct income-tax in accordance with the provisions of sub-section (1), if––
(a) the total sales, gross receipts or turnover of the co-operative society exceeds fifty crore rupees during the financial year immediately preceding the financial year in which the interest referred to in sub-section (1) is credited or paid; and
(b) the amount of interest, or the aggregate of the amount of such interest, credited or paid, or is likely to be credited or paid, during the financial year is more than fifty thousand rupees in case of payee being a senior citizen and forty thousand rupee in any other case.
It is further proposed to provide that the Explanation which provides for the meaning of the expression “senior citizen” will be for the purposes of the said sub-section, instead of clause (i) of the said sub-section.
These amendments will take effect from 1st April, 2020.”
Clauses 76
“Clause 76 of the Bill seeks to amend section 194C of the Income-tax Act relating to payments to contractors.
Sub-section (1) of the said section provides that any person responsible for paying any sum to any resident (referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor 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, deduct an amount equal to one per cent. where the payment is being made or credit is being given to an individual or a Hindu undivided family; two per cent. where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein.
Item (B) of sub-clause (l) of clause (i) of the Explanation to the said section provides the definition of “specified person” to mean any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person, is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.
It is proposed to amend the said sub-clause so as to define the expression “specified person” to mean any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person, has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.
Sub-clause (e) of clause (iv) of the Explanation to the said section defines “work” to include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from such customer but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from a person, other than such customer.
It is proposed to substitute the said sub-clause so as to modify the definition of “work” to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A. It is also proposed to insert “or associate of such customer” in the long line.
These amendments will take effect from 1st April, 2020.”
Clauses 77
“Clause 77 of the Bill seeks to amend section 194H of the Income-tax Act relating to commission or brokerage.
The said section provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent .
The second proviso to the said section provides that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.
It is proposed to amend the said proviso so as to provide that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under the said section.
This amendment will take effect from 1st April, 2020.”
Clauses 78
“Clause 78 of the Bill seeks to amend 194-I of the Income-tax Act relating to rent.
The said section provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of two per cent. for the use of any machinery or plant or equipment; and ten per cent. for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings.
The second proviso to the said section provides that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under the said section.
It is proposed to amend the said proviso so as to provide that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under the said section.
This amendment will take effect from 1st April, 2020.”
Clauses 79
“Clause 79 of the Bill seeks to amend section 194J of the Income-tax Act relating to fees for professional or technical services.
Sub-section (1) of the said section provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of fees for professional services, or fees for technical
services, or any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or royalty or any sum referred to in clause (va) of section 28, shall, at the time of credit or payment of such sum to the account of the payee to deduct an amount equal to ten per cent. as income-tax.
It is proposed to amend the said sub-section so as to provide that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of fees for professional services, or fees for technical services, or any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or royalty or any sum referred to in clause (va) of section 28, shall at the time of payment or credit of such sum to the account of the payee, deduct an amount equal to two per cent. of such sum as income-tax in case of fees for technical services (not being professional services) and ten per cent. of such sum in any other case.
The second proviso to the said sub-section provides that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.
It is proposed to amend the said proviso so as to provide that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under the said section.
These amendments will take effect from 1st April, 2020.”
Clauses 93
“Clause 93 of the Bill seeks to amend section 206C of the Income-tax Act, relating to profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
Sub-section (1) of the said section provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the specified nature a sum equal to the specified percentage, of such amount as income-tax.
Clause (c) of the Explanation to the said section provides that the “seller” means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) are sold.
It is proposed to amend the said clause so as to provide that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under the said section.
It is further proposed to insert a new sub-section (1G) in the said section so as to provide that every person being an authorised dealer, who receives any amount, or an aggregate of amounts, of seven lakh rupees or more in a financial year for remittance out of India under the Liberalised Remittance Scheme of the Reserve Bank of India from a buyer, being a person remitting such amount out of India; or being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package, shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer by any mode, whichever is earlier, collects from the buyer, a sum equal to five per cent. of such amount as income-tax. The provisions of the said sub-section shall not apply if the buyer is liable to deduct tax at source under any other provision of the Act and he has deducted such amount. It is further provided that the provisions of the said sub-section shall not apply if the buyer is the Central Government, or a State Government, or an embassy, or a High Commission, or a legation, a commission, a consulate, the trade representation of a foreign State, or a local authority as defined in the Explanation to clause (20) of section 10 or any other person notified by the Central Government for this purpose subject to conditions as may be specified in that notification.
For the purposes of the said sub-section, it is also proposed to define the expressions “authorised dealer” and “overseas tour package”.
It is also proposed to insert sub-section (1H), to provide that every person being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods covered in sub-section (1) or sub-section (1F) or (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent.of the sale consideration exceeding fifty lakh rupees as income-tax. It is further provided that in case the buyer does not furnishes his PAN or Aadhaar number to the seller, then the tax shall be collected by the seller at the rate of one per cent. Further, the provision of this sub-section shall not apply if the buyer is liable to deduct tax at source under any other provision of the Act and he has deducted such amount.
It is also proposed to define the terms “buyer” and “seller”.
It is also proposed to amend sub-section (2) of the said section so as to provide that the power to recover tax by collection under the said section shall be without prejudice to any other mode of recovery.
It is also proposed to amend sub-section (3) of the said section so as to provide that any person collecting any amount under this section shall pay within the prescribed time the amount so collected to the credit of the Central Government or as the Board directs.
It is also proposed to amend the first proviso to subsection (6A) of the said section so as to provide that any person who is responsible for collecting tax in accordance with the provisions of sub-section (1) and sub-section (1C), fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee, shall not be deemed to be an assessee in default in respect of such tax, if such buyer or licensee or lessee has furnished his return of income under section 139 and has taken into account such amount for computing income in such return of income and the person has paid the tax due on the income declared by him in such return of income and the person has furnished a certificate to this effect from an accountant in such form as provided by rules.
It is also proposed to define the term “seller” and restrict its applicability to sub-section (1) and sub-section (1F) of the said section.
These amendments will take effect from 1st April, 2020.”
