Section 47 (xiiib) provides that conversion of private limited or public unlisted company into an LLP shall not be regarded as transfer if the specified conditions are fulfilled.

It is proposed to amend the Section to provide that, in addition to the existing conditions, one more condition which needs to be fulfilled for availing exemption is that the value of the total assets in the books of accounts of the company in any of the 3 previous years preceding the previous year in which the conversion takes place, should not exceed Rs. 5 crores.

By increasing the turnover to Rs 5 crores, the Ministry has now made the scheme practical and applicable to a larger number of companies.

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years

Section 50C provides that for transfer of land and building held as capital asset, if consideration is less than stamp duty, full value of consideration shall be the stamp duty value for the purpose of calculation of capital gains

However, it is noted that no relief is provided to the seller when he has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement.

Thus, it is proposed to amend Section 50C to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.

For example, consider for a property transaction, the date of agreement between buyer and seller for sale of property is 01.04.2017 whereas the actual date of transfer and receipt of consideration is 01.06.2017. Thus, as per amended Section 50C, the stamp duty, for the purpose of computing the full value of consideration, shall be considered as on the date of agreement and not on the actual date of transfer

Further, it is proposed that amount of consideration, in full or part, shall be paid through mode other than cash, on or before the date of the agreement for the transfer of such immovable property.

The provisions of Sec 50C have now been amended along the lines of Sec 43CA

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

As per the existing provisions of transfer pricing laws, there is requirement for maintenance of prescribed information and document in relation to international and specified domestic transaction.

OECD report on Action Plan 13 of BEPS Action Plan proposed revision in transfer pricing documentation and formulated a three tier structure for the purpose of documentation which is as follows

In order to bring in consensus with global economy, it is proposed to include some elements of CbC and Master file in the current provisions of the Act, which are as follows:

CBC REPORTING

– This reporting shall be applicable if the international group has consolidated revenue of 750 million Euro

– Parent Entity of the international group, if resident in India, shall furnish the required report to the prescribed authority on or before the due date of filing of return

– For the above purpose, the parent entity shall be an entity which is required to prepare consolidated financial statement under the applicable laws or would have been required to prepare such a statement, had equity share of any entity of the group been listed on a recognized stock exchange in India

– Every constituent entity resident in India, of an international group, having parent entity that is not resident in India, shall provide information regarding the country of residence of the parent of the international group to which it belongs before the prescribed date to prescribed authority

– The report shall be furnished in prescribed manner and form which contains all information based on the template provided in OECD BEPS report on Action Plan 13

-The constituent entity in India shall be required to furnish CbC report if the parent entity of the international group is resident of country with which India does not have arrangement or agreement to exchange CbC reports or with a country who is not exchanging information even though there is an agreement and this fact is known to the constituent entity

-If there are more than 1 entities of same group in India, the group shall nominate, in writing to prescribed authority, either of the entity to report on behalf of the group

-In case parent entity is not resident in India and international group has designated an alternate entity to file the report on its behalf, then the entities of such group operating in India shall not be required to do any reporting if Indian tax authorities can obtain reports filed by the alternate entity under the agreement of exchange of reports

-The reports submitted by the entity shall be subject to scrutiny and assessment, through issue of notice, to verify the accuracy. The entity shall be required to make necessary submissions, in case details and information asked, within 30 days or extended period of 60 days from the date of receipt of notice.

Further, for non-submission of information when called by prescribed authority, the penalty shall be Rs.5,000 per day and if the order levying such penalty is serviced, the penalty shall be Rs.50,000 per day for default beyond date of service of such order

MAINTENANCE OF MASTER FILE

The entities, being constituent of international group, shall maintain information and documents as prescribed and the same shall be furnished to the prescribed authority in the manner and form as may be prescribed

Non furnishing of information and document shall attract penalty of Rs. 5 lakhs. However, reasonable cause defence against levy of penalty shall be available to the entity.

These amendments shall apply for the Assessment year 2017-18 and subsequent assessment years.

-Penalty of Rs.5,00,000 shall apply if the entity has provided any inaccurate information in the report and does not inform about the inaccuracy to the prescribed authority or corrects the report within 15 days but fails to inform or furnishes inaccurate information or document in response to notice of prescribed authority. However, reasonable cause defence against levy of penalty shall be available to the entity.

For default in furnishing of the report by an entity, following penalty shall be levied:-

Under the existing provisions of Section 112, long term capital gains arising from transfer of securities, whether listed or unlisted, shall be taxed at the rate of 10%. There was an ambiguity as to whether shares of a private company are “securities” for the purpose of this Section.

It is hereby proposed to clarify that long-term capital gains arising from the transfer of shares of a private company shall be chargeable to tax at the rate of 10 per cent.

The amendment shall apply in relation to assessment year 2017-18 and subsequent years.

The current provisions of Section 56 (2) (vii) provides for taxation of shares of company received by individual or HUF, as a consequence of demerger or amalgamation of company, in excess of Rs. 50,000. However, the taxation provision does not apply if the recipient is firm or company.

Thus, to ensure parity in tax treatment, it is proposed that any shares of company received by individual or HUF, as a consequence of demerger or amalgamation of company, shall not be liable for taxation as per Section 56 (2) (vii).

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

Under the existing scheme of Gold Deposit Scheme, 1999, interest on gold deposit bonds is exempt from tax. Further, these bonds are excluded from the definition of transfer and hence, shall be exempt from capital gains tax.

It is proposed to extend the benefits envisaged in Gold Deposit Scheme, 1999 to Gold Monetization Scheme, 2015.

Thus, interest on deposit certificates issued under Gold Monetization Scheme, 2015 shall be exempt from tax. Further, these deposit certificates shall be excluded from the definition of transfer and hence, shall be exempt from tax on capital gains.

This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years

The existing provisions of Section 11, 12 & 13 provides for taxation of income derived from an asset or voluntary contribution of a Charitable Trust, exemption of income if the same is applied for charitable purpose, accumulation and investment in prescribed modes for claiming exemption, etc. However, there are no provisions in relation to exit of charitable organization or transfer of assets by charitable organization to non-charitable organizations on its dissolution. This can be misused for the Trusts by transferring the assets acquired from the exempted income over the years to a non charitable institution without payment of tax.

Finance Bill, 2016 proposes to introduce a new Chapter to provide for levy of additional income-tax in case of conversion of charitable institutions into, or merger with, non-charitable organisation or on transfer of assets.

The new regime provides for taxation of accreted income in the following circumstances:

– Conversion of trust or institution into a form not eligible for registration under Section 12 AA

– Merger of charitable trust or institution with an entity other not having similar objects and registered under Section 12 AA

– Non distribution of assets on dissolution to any charitable institution registered under Section 12AA or approved under Section 10 (23C) within a period of 12 months from dissolution

– Accreted income shall be taxed at maximum marginal rate of 30%

– Accreted income = Total assets less Total liabilities (excluding the assets and liabilities transferred by trusts to other charitable organisations within 12 months of dissolution).

The intent of the proposed levy is laudable however the following practical concerns may need to be addressed:

• Many state laws provide for takeover of charitable trusts ceasing to be charitable.
• Taxing assets at fair value could lead to serious cash outs and consequential litigations

The above mentioned amendments shall be effective from 1^st June 2016

In order to provide relief to the non-resident investor, it is proposed to amend Section 48 to exempt capital gains, in the hands of non-resident investor, arising in case of appreciation of the Indian Rupee between the date of issue and date of redemption against the foreign currency.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

The Sovereign Gold Bond Scheme was introduced with the dual intention of providing security as well as fulfilling a social obligation.

It is proposed that redemption of a Sovereign Gold Bond under the said Scheme by an individual shall not be considered as a transfer and shall be exempt from capital gains tax.

It is proposed to provide that indexation benefits in case of long term capital gains arising on transfer of sovereign gold bonds (from one person to another) issued under the Scheme.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

As per the existing provisions of Section 54GB, long term capital gains are exempted on account of transfer of residential property, if the proceeds are invested in subscription of shares of a MSME company, subject to other conditions specified therein

It is proposed to amend Section 54GB so as to widen the scope of exemption, which is as follows:-

– Long term capital gains arising on account of transfer of residential property shall be exempt in the hands of individual or HUF if proceeds are invested in subscription of shares of aforementioned eligible start-ups

– The exemption shall be available only if individual or HUF holds more than 50% of shares of such start-ups and the start-ups shall utilise the invested funds to purchase new asset before the due date of filing of return of the investor

– New asset shall include computers or computer software in case the start-up is technology driven start-up as certified by Inter Ministerial Board of Certification, notified by Central Government

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years