The Finance Act 2018

1.  INTRODUCTION:

1.1  The Finance Minister, Shri Arun Jaitley, has
presented his last full Budget of the present Government for 2018-19 in the
Parliament on 1^st February, 2018. This Budget can be described as
Pro-Poor and Pro-Farmer Budget. The Budget contains several schemes for
Agriculture and Rural Economy, Health, Education and Social Protection,
Encouragement to Medium, Small and Micro Enterprises (MSME), Employment
Generation, Improving Public Service Delivery etc.

1.2  The Finance Minister has summarized his views
about economic reforms in Para 3 of his Budget Speech.

1.3  In the field of Direct Taxes he has made some
amendments in the Income-tax Act. These amendments can be classified under the
following heads.

(i)    Tax Incentives for
promoting post-harvest activities  of
agriculture;

(ii)   Employment Generation;

(iii)   Incentive for Real
Estate;

(iv)  Incentive to MSMEs.

(v)   Relief to Salaried
Taxpayers;

(vi)  Relief to Senior
Citizens;

(vii)  Tax Incentives for
International Financial Services Centre (IFSC)

(viii) Measures to Control cash
Economy,

(ix)  Rationalisation of Long
term Capital Gains Tax.

(x)   Health and Education Cess

(xi)  E-Assessments

1.4  Out of the above, the
major amendment in the Income tax Act relates to levy of Long-term Capital
Gains Tax on Shares and Units of Equity Oriented Mutual Funds on which
Securities Transaction Tax (STT) is paid. Hitherto, this long term capital gain
was exempt from tax. This one proposal will bring in about Rs.20,000 crore
additional revenue to the Government. The logic for this new levy is explained
in Para 155 of the Budget Speech.

1.5  This year’s Budget and
the Finance Bill, 2018, has been passed, with some procedural amendments,
suggested by the Finance Minister, by the Parliament without any debate. The
Finance Act, 2018, has received the assent of the President on 29^th
March, 2018. Most of the amendments in the Income-tax Act have come into force
from 1.4.2018 i.e. F.Y. 2018-19 (A.Y. 2019-20). In this Article some of the
important amendments in the Income-tax Act have been discussed.

2.  RATES OF TAXES:

2.1  There are no changes in
tax rates or tax slabs in the case of non-corporate assessees. There is no change
in the rates of surcharge applicable to all assessees. Similarly, there is no
change in the rebate from tax allowable u/s. 87A of the Income-tax Act.

2.2 The existing Education Cess (2%) and Secondary and Higher
Education Cess (1%) levied on tax payable has now been replaced from A.Y.
2019-20 by a new cess called “Health and Education Cess” at 4% of the tax
payable by all assessees.

2.3 In the case of domestic companies, there are some modifications
as under w.e.f. A.Y. 2019-20:

(i)  At present, where the
total turnover or gross receipts of a company does not exceed Rs. 50 cr., in
F.Y. 2015-16, the rate of tax is 25%. From A.Y. 2019-20, it is provided that
where the turnover or gross receipts of a company does not exceed Rs. 250 cr.,
in F.Y. 2016-17, the rate of tax will be 25%. This will benefit many small and
medium size companies.

(ii)  In the case of a
Domestic company which is newly set up on or after 1.3.2016, which complies
with the provisions of section 115BA, the rate of tax is 25% at the option of
the company.

(iii) In all
other cases, the rate of tax will be 30%.

2.4   There are no changes in the rates of tax and
surcharge chargeable to foreign companies. The rate of education cess is
increased from 3% to 4% as stated above.

2.5  As stated earlier, one major amendment this
year relates to levy of tax on long term capital gain on transfer of shares and
units of equity Oriented Mutual Funds on which STT is paid. Hitherto, this
capital gain was exempt from tax. By insertion of a new section 112A, it is now
provided that in respect of transfer of such shares or units on or after
1.4.2018, the long term capital gain in excess of Rs. 1 Lakh will be taxable at
the rate of 10% plus applicable surcharge and cess.

2.6  There is no change in the rate of Minimum
Alternate Tax (MAT) chargeable to companies. However, in the case of a Unit
owned by a non-corporate assessee located in an International Financial
Services Centre (IFSC), the rate of AMT payable u/s. 115 JC in respect of
income derived in foreign currency has been reduced from 18.5% to 9% plus
applicable Surcharge and Cess.

2.7  Section 115-O is amendment to levy tax at
the  rate of 30% plus applicable
surcharge and cess on a closely held company in respect of any loan given to a
related party to whom section 2(22) (e) applies. Hitherto, tax was payable by
the person receiving such loan u/s. 2(22)(e). This burden is now shifted to the
company giving such loan and the person receiving such will not be liable to
pay any tax from A.Y. 2019-20.

2.8  Section 115R has been amended to provide for
levy of tax on Mutual Fund in aspect of income distributed to Unit holders of
equity oriented mutual fund. This tax is at the rate of 10% plus applicable
surcharge and cess.

2.9  In view of the above, the effective maximum
marginal rate of tax (including surcharge and Health & Education Cess) for
A.Y. 2019-20 will be as under:

2.10  Commodities
Transaction Tax:

The Finance
Act, 2013, has been amended to provided that the Commodities Transaction Tax
(CTT) shall be payable at the following Rates w.e.f. 1.4.2018.

3.   TAX DEDUCTION AT SOURCE:

(i)   7.75% Savings (Taxable) Bonds, 2018 – Section 193           

It is now provided
tax shall be deducted at source on interest exceeding Rs. 10,000/- payable on
the above Bonds at the rates provided in section 193.

(ii) Interest on Deposits by Senior Citizens – Section
194A

Section 194A has
been amended w.e.f. 1.4.2018 to provide that tax will not be deducted at source
by a Bank, Co-operative Bank or Post Office in respect of interest upto Rs.
50,000/- on a deposit made by a Senior Citizen. 
It may be noted that under the newly inserted section 80TTB, it is now
provided that in the case of a Senior Citizen, deduction of interest up to Rs.
50,000/- received from a bank, co-operative bank or post office on all deposits
will be allowed for computing the Total Income.

4.   EXEMPTIONS
AND DEDUCTIONS:

4.1  Exemption
on withdrawal from NPS  – Section 10(12A)

At present,
withdrawal by an employee contributing to National Pension Scheme (NPS),
referred to in section 80CCD, on closure of account or opting out of the Scheme
is exempt from tax to the extent of 40% of the amount withdrawn on closure of
the account or opting out of the scheme.

The benefit of
this exemption u/s. 10(12A) is now extended to all other persons who are
subscribers to the NPS from the A.Y. 2019-20 (F.Y. 2018-19). It may be noted
that the exemption given for partial withdrawal from NPS to employees u/s.
10(12B) from A.Y. 2018-19 has not been extended to other assessees.

4.2 Exemption from Long term Capital Gains Tax –
Section 10(38)

At present, long
term capital gain on transfer of equity shares of a company or units of equity
oriented Mutual Fund is exempt from tax u/s. 10(38) if STT is paid. This
exemption is now withdrawn by amendment of this section w.e.f. 1.4.2018. This
issue is discussed in detail in Para 9 under the head “Capital Gains.”

4.3  Deduction
from Gross Total Income – Section 80AC

At present,
Section 80AC provides that deductions u/s. 80 – IA, 80-IAB, 80-IB, 80-IC, 80-ID
or 80-IE will not be allowed if the assessee has not filed the return of Income
before the due date mentioned u/s. 139(1) of the Income tax Act. This section
is now amended w.e.f. A/Y: 2018-19 (F.Y:2017-18) to provide that deduction in
respect of Income under sections 80 H to 80 RRB (Part “C” of Chapter VIA) will
not be allowed if the return of Income is not filed within the time allowed
u/s. 139(1).

4.4  Deduction
for Health Insurance Premium – Section 80D

At present, the amount paid for health
insurance  premium, preventive health
check-up or medical expenses is allowed to Senior Citizens upto Rs.
30,000/.  This limit is increased, by
amendment of Section 80D from A.Y. 2019-20 (F.Y. 2018-19), to Rs. 50,000/-.
This amendment applies to all Senior Citizens (including Very Senior Citizens).

A new subsection
(4A) is added to provide that where the amount has been paid in Lump Sum to
keep in force an Insurance Policy on the health of the specified person for
more than a year, then deduction will be allowed in each year, on proportionate
basis, during which the insurance is in force.

4.5  Deduction for
medical treatment for Special Diseases – Section 80DDB

 At present,
Section 80DDB provides for deduction for medical expenses in respect of certain
critical illness, as specified in Rule 11DD. In the case of a Senior Citizen
this deduction is allowable upto Rs. 60,000/-. In the case of a very Senior
Citizen, the limit for this deduction is Rs. 80,000/-.  By amendment of this
section from  A.Y. 2019-20 (F.Y.
2018-19), this limit for Senior Citizens (including very Senior Citizens) is
increased to Rs.1,00,000/-.

4.6  Incentives
to Start – Ups – Section 80 IAC

Section 80IAC
provides for 100% deduction of profits of an eligible start-up for three
consecutive years out of seven years beginning from the year of its
incorporation.  This section is amended
with retrospective effect from A.Y. 2018-19 (F.Y. 2017-18). Some of the
conditions for eligibility of this exemption have been relaxed as under.

(i)  At present, this benefit is available to an
eligible start-up incorporated between 01.04.2016 to 31.03.2019. Now it is
provided that this benefit can be claimed by a start-up incorporated between
01.04.2016 to 31.03.2021.

(ii)  At present, this benefit is available to an
eligible start-up only if the total turnover of the business does not exceed
Rs. 25 crore during any of the years between F.Y. 2016-17 to F.Y. 2020-21. It
is now provided that this benefit can be claimed if the total turnover of the
business in the year for which the deduction is claimed does not exceed Rs. 25
crore.

(iii)  The definition of the term “Eligible
Business” has been substituted by a new definition as under;

“Eligible
Business” means a business carried out by an eligible start-up engaged in
innovation, development or improvement of Products or processes or services or
a scalable business model with a high potential of employment generation or
wealth creation.”

From the above,
it will be noticed that the existing requirement of development of ‘new
products’ and of the business being driven by technology or intellectual
property is now removed.

4.7  Incentives
for Employment Generation – Section 80 JJAA

(i) Section 80JJ
AA has been amended from A.Y. 2019-20 (F.Y. 2018-19). This section provides for
an additional deduction of 30% in respect of salary and other emoluments paid
to eligible new employees who are employed for a minimum period of 240 days
during the year. At present, this requirement of 240 days of employment in a
year is relaxed to 150 days in the case of Apparel Industry. This concession
has now been extended to “Footwear and Leather” industry.

(ii)  The above deduction is available for a period
of 3 consecutive years from the year in which the new employee is employed. The
amendment in the section now provides that where the new employee is employed
in a particular year for less than  240 /
150 days but in the immediately succeeding year such employee is employed for
more than 240/150 days, he shall be deemed to have been employed in the
succeeding year. In such a case, the benefit of this section can be claimed in
such succeeding year and also in the two immediately succeeding years.

 4.8  Incentive to
Producer Companies – New Section 80 PA

(i)  Section 80PA is a new section inserted from
A.Y. 2019-20 (F.Y. 2018-19). This section provides that a Producer Company (as
defined in section 581 A (l) of the Companies Act, 1956) shall be entitled to
claim deduction of 100% of its profits from eligible business during 5 years
i.e. A.Y. 2019-20 to A.Y. 2024-25. This benefit can be claimed by such a
company only in the year in which its turnover is less than Rs.100 crore.

For this
purpose, the eligible business is defined to mean-

(a) The
marketing of Agricultural Produce grown by its members;                       

(b) The purchase
of agricultural implements, seeds, livestock or other articles intended for
agriculture for the purpose of supplying to its members.

(c) The
processing of the agricultural produce of its members.

(ii)  It may be noted that the provisions of
section 581A to 581 ZT of the Companies Act, 1956 are applicable also to
Producer Companies registered under the Companies Act, 2013, by virtue of
section 465 of the Companies Act, 2013. The term ‘Producer Company’ is defined
in section 581A(l) and the term “Member” of such company is defined in section
581A (d).

 (iii)  It may be noted that the above deduction u/s.
80PA will be allowed in respect of the above 100% income included in the Gross
Total Income after reducing any other deduction claimed under Chapter VIA of
the Income-tax Act. It may further be noted that the above benefit of deduction
of 100% income is not available while computing book profits u/s.115 JB.
Therefore, such producer company will be required to pay MAT under Section 115
JB.

(iv)  Further, it may be noted that the above
benefit given under sections 80IAC, 80 JJAA or 80 PA will not be available if
the assessee does not file its return of income before the due date as provided
in section 139(1) in view of the fact that section 80AC is amended from A.Y. 2019-20.

4.9  Deduction
of Interest on Bank Deposits by Senior Citizens New Section 80TTB

(i)  At present, interest received on savings
account with a bank, co-operative bank or post office upto Rs. 10,000/- is
allowed as deduction in the case of an individual or HUF u/s. 80TTA. By an
amendment of section 80TTA, it is now provided that the said section shall not
apply to a Senior Section from A/Y:2019-20 (F.Y:2018-19).

(ii)  To give additional benefit to a Senior
Citizen (An Individual whose age is 60 years or more), a new section 80TTB is
inserted from A.Y. 2019-20 (F.Y. 2018-19). This section provides that in the
case of a Senior Citizen deduction can be claimed upto Rs. 50,000/- in respect
of interest on any deposit (savings, recurring deposit, fixed deposit etc.)
with a bank, co-operative bank or post office. This deduction cannot be claimed
by a Senior Citizen who holds any such deposit on behalf of a Firm, AOP or BOI
in which he is a partner or member. As stated earlier, the bank, co-operative
bank or post office will not be required to deduct tax at source u/s. 194A from
the interest upto Rs. 50,000/- on such deposit.

5.   CHARITABLE
TRUSTS:

Sections 10(23C)
and 11 have been amended w.e.f. A.Y. 2019-20 (F.Y2018-19) to provide for
certain restrictions while computing the income applied for objects of the
Trust. These sections apply to Educational Trusts, Hospitals and other Public
Charitable or Religious Trusts, which claim exemption u/s. 10(23C) or Section
11. It is now provided that restrictions on cash payment u/s. 40A(3) / (3A) and
consequences of non-deduction of tax at source u/s. 40 (a)(ia) will apply to
these Trusts. In other words, any payment in excess of Rs. 10,000/- made to a
person, in a day, otherwise than by an account payee cheque / bank draft will
not be considered as application of income to the objects of the Trust. Similarly,
if any payment is made to a person by way of salary, brokerage, interest,
professional fees, rent etc., on which tax is required to be deducted at
source under Chapter XVII of the Income-tax Act, and is not so deducted or paid
to the Government, the same will not be considered as application of income to
the extent provided in section 40(a)(ia). It may be noted that u/s. 40(a) (ia),
it is provided that 30% of such payment will not be allowed as deduction. Thus,
30% of the amount paid by the Trust without deduction of tax will not be
considered as application of income to the objects of the Trust.  Therefore, all public trusts claiming
exemption under the above sections will have to be careful while making
payments for scholarships, donations, professional fees, rent and other
expenses as they have to make sure that they comply with the provisions of
section 40A(3), 40A(3A) and 40(a) (ia).

6.   INCOME
FROM SALARY:

Sections 16 and
17 have been amended from A.Y. 2019-20 (F.Y. 2018-19). The effect of these amendments
is
as under:

(i)  All salaried employees will now be allowed
standard deduction of Rs. 40,000/- while computing income from salary u/s 16
and 17. This deduction can be claimed by persons getting pension from the
employer.

(ii)  At present, exemption is given to the
employee in respect of reimbursement of medical expenses incurred upto Rs.
15,000/- while computing perquisites u/s 17. This exemption is withdrawn from
A.Y. 2019-20 as standard deduction is now allowed.

(iii)  At present, u/s. 10(14)(i) read with Rule
2BB, an employee can claim deduction upto Rs. 1,600/- P.M. by way of transport
allowance while computing the income from salary. As stated in Para 151 of the
Budget Speech, this benefit will be withdrawn from A.Y. 2019-20 as standard
deduction is now allowed.

The above
amendment will reduce compliance burden of providing and maintaining records
relating to medical expenditure incurred by the employees. The net effect of
the above amendment will be that a salaried employee will get additional
deduction of Rs. 5800/- in the computation of Salary Income.

7.   INCOME
FROM BUSINESS OR PROFESSION:

7.1  Compensation
or termination or modification of contracts – Section 28(ii)

Section 28(ii)
is now amended from A.Y. 2019-20 (F.Y. 2018-19) to provide that any
compensation or other payments (whether of a revenue or capital nature) due to
or received by an assessee on termination of a contract relating to its
business will now be treated as its business income. Similarly, any such amount
due or received on modification of the terms and conditions of such contract
shall also be considered as business income.

7.2  Trading
in Agricultural Commodity Derivatives

At present,
section 43(5) considers a transaction of trading in commodity derivatives
carried on a recognised association which is chargeable to Commodities
Transactions Tax (CTT) as non-speculative. Since no CTT is payable on
transactions of Agriculture Commodity Derivatives, this section is amended from
A.Y. 2019-20 (F.Y. 2018-19) to provide that in case of trading in Agricultural
Commodity Derivatives the condition of chargeability of CTT shall not apply.

7.3  Full Value of
Consideration for Transfer of assets

Section 43CA,
50C and 56(2)(X) have been amended from A/Y:2019-20  (F.Y:2018-19) giving some relief in
computation of full value of consideration for transfer of Immovable Property.
Briefly stated, the effect of these amendments is as under:

(i)  At present, section 43CA(1) provides that in
case of transfer of any land or building or both, held as stock-in-trade, the
value adopted or assessed or assessable by Stamp Duty Authority (Stamp Duty
Value) shall be deemed to be the full value of the consideration, if the actual
consideration is less. Similarly, section 50C, dealing with transfer of land,
building or both held as capital asset and section 56(2) (X) dealing with
receipt of consideration by any person on transfer of land, building or both
contains a similar provision.

(ii)  In order to provide some relief in cases of
such transactions, the above sections are amended to provide that where Stamp
Duty Value does not exceed the actual consideration by more than 5% of the
actual consideration, no adjustment under these sections will be made and
actual consideration will be considered as full value of the consideration.
Thus, if the sale consideration is Rs.1,00,000/- and the stamp duty value is
Rs. 1,04,000/- the sale consideration will be considered as full value of the
consideration.

(iii)  If, however, the Stamp Duty Value is more
than 5% of the actual consideration, the Stamp Duty Valuation will be
considered as the full value of the consideration. Thus, if the sale
consideration is Rs. 1,00,000/- and the stamp duty value is Rs. 1,06,000/-, the
stamp duty value will be considered as full value of the consideration.

7.4  Presumptive Taxation – Section 44 AE

Section 44 AE
provides for computation of income on a presumptive basis in the case of
business of plying, hiring or leasing of goods carriers carried on by an
assessee who owns not more than 10 goods carriers at any time during the year.
At present, this section does not provide for presumptive income rates based on
capacity of vehicles. Therefore, this section is amended effective from A.Y.
2019-20(F.Y. 2018-19) to provide that in respect of heavy goods vehicles (i.e.
where gross vehicle weight is more than 12000 Kilograms) the presumptive income
u/s. 44AE will be computed at the rate of Rs. 1,000/- per tonne of gross
vehicle weight or Unladen weight, as the case may be, for every month or part
of the month or such higher amount as earned by the assessee. In the case of
vehicles, other than heavy vehicles, the presumptive income shall be Rs.
7,500/- from each goods vehicle for every month or part of the month during
which the vehicle is owned by the assesse or such higher income as earned by
the assessee. The other conditions of the existing section 44 AE will continue
to apply to the assesse who opts to be assessed on presumptive income under
this section.

 7.5  Carry forward
and set-off of Losses – Section 79

At present,
section 79 allows carry forward and set off of loses by a closely held company
only if the beneficial ownership of shares carrying at least 51% of the voting
power, as on the last day of the year in which the loss is incurred, is
continued.

In order to give
relief to cases covered by Insolvency and Bankruptcy Code, 2016, (IBC-2016)
this section is amended retrospectively from A.Y. 2018-19 (F.Y. 2017-18). The
effect of the amendment is that the carry forward and set off of losses shall
be allowed, even if the change in the beneficial ownership of shares carrying
voting power is more than 51% as a result of the Resolution Plan under
IBC-2016, after providing an opportunity of hearing to the concerned
commissioner of Income tax. 

7.6  Taxation of
Book Profits – Section 115JB

(i)  Section 115 JB is amended from A.Y. 2018 – 19
(F.Y. 2017-18). – By this amendment, relief is given in the case of a company
against which an application for insolvency resolution has been admitted by the
Adjudicating Authority under IBC-2016. By this amendment it is now provided
that, from A.Y. 2018-19, the aggregate of unabsorbed depreciation and brought
forward losses, as per the books, shall be reduced in computing book profit.

(ii)  At present, the provisions of section 115JB
apply to Foreign Companies. Exception is made for companies which have no
permanent establishment in India and which are residents of countries with whom
India has entered into Double Tax Avoidance Agreement (DTAA). The exception is
also made with regard to companies resident of other countries with which there
is no DTAA and which are not required to seek registration under any applicable
laws. The section is now amended retrospectively from A.Y. 2001-02 to provide
that this section will not apply to foreign companies opting for presumptive
taxation under sections 44B, 44BB, 44BBA or 44BBB, where total income of such
companies comprises solely of income from business referred to in these sections
and such income has been offered for tax at the rates specified in those
sections.

8. INCOME computation AND DISCLOSURE
STANDARDS (ICDS):

8.1  Section 145(2) of the Income-tax Act
authorised the Central Government to notify ICDS. Accordingly, CBDT notified 10
ICDS by a Notification No. 87/2016 dated 29.09.2016. These ICDS came into force
from A.Y. 2017-18 (F.Y. 2016-17). Under section 145(2), it is provided that
income from Business or Profession or Income from Other Sources should be
computed in accordance with ICDS. Further, ICDS applies to all assessees (other
than an Individual or HUF who is not required to get their accounts audited
u/s. 44AB) who follow the Mercantile System of Accounting for computation of
Income from Business or Profession or Income from Other Sources.

8.2 
The Delhi High Court, in the case of Chamber of Tax Consultants vs.
Union of India (252 Taxman 77) have struck down some of the ICDS fully and
read down some of the ICDS partially holding them to be contrary to the
judicial precedents or the provisions of the Income-tax Act.

8.3  It may be noted that in the above judgement
of Delhi High Court ICDS –I (Accounting Policies) ICDS II (Valuation of
Inventories), ICDS VI (Effects of Changes in Foreign Exchange Rates), ICDS VII
(Government Grants), and Part “A” of ICDS VIII (Securities) have been held to
be Ultra vires the Income-tax Act and have been struck down. Further,
Para 10(a) and 12 of ICDS III (Construction Contracts), Para 5 and 6 of ICDS IV
(Revenue Recognition) and Para 5 of ICDS IX (Borrowing Costs) have been held to
be Ultra Vires the Act and therefore struck down.

8.4  In order to overcome the effect of the above
judgment of Delhi High Court specific provisions are made in sections 36(1)
(xviii), 40A(13), 43 AA, 43CB, 145A and 145B with retrospective effect from
A.Y. 2017-18 (F.Y. 2016-17). In other words, these new provisions now validate
the objectionable provisions of ICDS which were struck down by the Delhi High
Court. The provisions of the above sections are as under:

(i)  Deduction
of marked-to-market loss

A new clause
(xviii) has been inserted in section 36(1) to provide for deduction of
marked-to-market loss or other expected loss as computed in accordance with the
ICDS VI. Further, a new sub-section (13) is inserted in Section 40A, to provide
that no deduction/ allowance of any marked-to market loss or other expected
loss shall be allowed, except those which are allowable as per the provisions
of section 36(1) (xviii).

(ii) Foreign Exchange Fluctuations – Section 43AA

New Section 43AA
has been inserted to provide that any gain or loss arising on account of any
change in foreign exchange rates shall be treated as income or loss, as the
case may be. Such gain or loss shall be computed in accordance with ICDS VI and
shall be in respect of all foreign currency transactions, including those
relating to –

(a) Monetary
items and non-monetary items

(b) Translation
of financial statements of foreign operations

(c) Forward
exchange contracts

(d) Foreign
currency translation reserve

The provisions
of this section are subject to the provisions of  section 43A.

(iii)  Income from Construction and Services Contracts –
Section 43 CB

New section 43CB
has been inserted to provide that –

 (a)  Profits and gains arising from a construction
contract shall be determined on the basis of percentage of completion method in
accordance with ICDS III, notified under section 145(2).

(b)  In respect of contract for providing services
–

(i) Where the duration of contract is not more
than 90 days, profits and gains from such service contract shall be determined
on the basis of project completion method;

(ii) Where the
contract involves indeterminate number of acts over a specific period of time,
profits and gains from such contract shall be determined on the basis of
straight line method;

(iii) In respect
of contracts not covered by (i) or (ii) above, profits and gains from such
service contract shall be determined on percentage of completion method in
accordance with ICDS III.

(c) For the
purpose of project completion method, percentage of completion method or
straight line method revenue shall include retention money and accordingly
retention money will be considered for the above purposes. Further, contract
costs shall not be reduced by any incidental income in the nature of interest,
dividend or capital gains.

(iv) Inventory valuation – section 145A

The existing
section 145A has been replaced by a new section 145A from A.Y. 2017-18 (F.Y.
2016-17) to provide as under:

(a)  The valuation of inventory shall be made at
lower of actual cost or net realisable value computed in accordance with the
ICDS II. In case of securities held as inventory, it shall be valued as
follows:

(b) The existing
section 145A provides for inclusion of the amount of any tax, duty, cess or fee
actually paid or incurred by the assesse to bring the goods to the place of its
location and condition as on the date of valuation of purchase and sale of
goods and inventory. The new section 145A retains the above provision and also
extends it to valuation of services. Therefore, services are required to be
valued inclusive of taxes which have been paid or incurred by the assesse.

(v)  Year of
taxability of certain Income – New section 145B

The applicable
ICDS provides for taxability of certain incomes even before they have accrued.
In order to validate such provisions of ICDS, the corresponding provisions have
also been incorporated in the new section 145B from the A.Y. 2017-18
(F.Y.2016-17) as follows:-

9.   CAPITAL
GAINS:

9.1  Long Term
Capital Gains On Transfer Of Quoted Shares And Securities

At present, long
term Capital Gain on transfer of quoted shares and Securities is exempt if
Securities Transaction Tax (STT) is paid on acquisition as well as on transfer
through Stock Exchange transactions. Now, under the new section 112A tax on
such long term capital gains on transfer of such shares and securities, on or
after 1.4.2018, will be payable at the rate of 10%. The rationale for this
proposal is explained by the Finance Minister in Para 155 of his Budget Speech.

9.2  Impact of New
Section 112A

The New Section
112A is inserted in the Income tax Act effective from A.Y. 2019-20 (i.e F.Y.
2018-19). Briefly stated, this new section provides as under.

(i) This section
will apply to transfer of following long term assets (hereinafter referred to
as “specified assets”) if the following conditions are satisfied.

(a) Quoted
Equity Shares on which STT is paid on acquisition as well as on sale. If such
shares are acquired before 1.10.2004 the condition for payment of STT on
acquisition will not apply. The Central Government will notify the cases where
the condition for payment of STT on acquisition will not apply.

(b) Units of
Equity Oriented Fund of a Mutual Fund and Business Trust on which STT is paid
at the time of redemption of the units. The above condition of payment of STT
will not apply where the transaction is entered into in an International
Financial Services Centre.

(ii) The rate of
tax on such Long term capital gains is 10% plus applicable surcharge and Health
and Education Cess on the capital gain in excess of Rs. 1 Lakh. If the capital
gain in any F.Y. is less than Rs. 1 Lakh no tax is payable on such capital gain

(iii) The cost
of acquisition of specified assets for computing capital gain in such cases
shall be computed as provided in section 55(2) (ac). This provision is as
under:-

If the above
specified assets are acquired before 1.2.2018 the cost of acquisition shall be
computed as per formula, given in section 55(2)(ac). According to this formula,
the cost of acquisition of the specified assets acquired on or before 31.1.2018
will be the actual cost. However, if the actual cost is less than the fair
market value of the specified assets as on 31.1.2018, the fair market value of
the specified assets as on 31.1.2018, will be deemed to be the cost of
acquisition.

Further, if the
full value of consideration on sale/transfer is less than the above fair market
value, then such full value of consideration or the actual cost, whichever is
higher, will be deemed to be the cost of acquisition.

Illustration to explain the above formula

(iv) No
deduction under Chapter VI A shall be allowed from the above Capital Gain.
Therefore, if Gross Total Income includes any such capital gain, deduction
under chapter VIA will be allowed from the gross total income after reducing
the above long term capital gain.

(v) Similarly,
tax Rebate u/s. 87A will be allowed from income tax on the total income after
deduction of the above long term capital gain.

(vi) For the
purpose of applicability of the above provisions for taxation of such long term
capital gains, the expression “Equity Oriented
Fund” means a fund set up by a Mutual 
Fund specified u/s. 10(23D) which satisfies the following conditions-

A.  If such a Fund invests in Units of another
Fund which is traded on the recognised Stock Exchange-

 –  A minimum of 90% of the
proceeds are invested in units of such other Fund and

 – Such other Fund has invested 90% of its Funds in Equity Shares of
listed domestic companies.

B. In cases of
Mutual Funds, other than “A” above, minimum 65% of the total proceeds of the
Fund are invested in Equity Shares of listed domestic companies.

(vii)  The expression” Fair Market Value” as at
31.1.2018 for the Formula stated in (iii) above is defined in Explanation below
section 55 (2) (ac) to mean the highest price quoted on the Recognised Stock
Exchange. If there was no trading of a particular script on 31.1.2018 then the
highest price quoted for that script immediately prior to 31.1.2018. In the
case of Units of Equity Oriented Fund not quoted on the Stock Exchange the NAV
as on 31/1/2018 will be considered as fair market value.

(viii)  It is not clear from the above definition as
to how the highest price of a quoted script will be considered when the script
is quoted in two or more recognised Stock Exchanges. Whether highest of the
closing prices in these Stock Exchanges is to be considered or the highest
price quoted during the day in any one of the Stock Exchanges is to be
considered. This requires clarification.

(ix)  It may be noted that in respect of the
specified assets purchased on or after 1.2.2018, the Formula given in (iii)
will not apply for determining the actual cost of such specified assets. In
such a case, the actual cost of the specified assets will be deducted from the
sale price and, as stated in the third proviso to section 48, benefit of
Indexation will not be available.

(x)  It may also be noted that the above tax on
long term Capital Gain is not payable if the specified assets are sold on or
before 31.03.2018. This tax is payable only on sale of such specified assets on
or after 1.4.2018.

(xi)  Section 115 AD dealing with tax on income of
FII on Capital Gain has also been amended. It is clarified that any FII to
which section 115AD applies will have to pay tax on long term Capital Gain
arising on sale of quoted shares/units as provided in section 112A. In the case
of FII also, the rate of tax on such capital gain will be 10% in respect such
capital gain in excess of Rs. 1 Lakh in the A/Y:2019-20 (F.Y:2018-19) and
onwards.

(xii)  The exemption given to such long term capital
gain u/s. 10(38) has now been withdrawn w.e.f. 1.4.2018.

(xiii) It may be
noted that the above provisions of the new section 112A will not apply to
equity shares of a listed company acquired by an assessee after 1.10.2004 under
an off market transaction and no STT is paid. 
Similarly, where such equity shares are acquired prior to 1.10.2004 or
after that date and STT is paid at the time of acquisition, the above provisions
of section 112A will not apply if the shares are sold on or after 1.4.2018 in
an off market transaction. In such cases the normal provisions applicable to
computation of capital gain will apply and the assessee can claim the benefit
of indexation u/s 48 for computing cost of acquisition. Tax on such long term
capital gains will be payable at the rate of 20%. Therefore, the assessee will
have to ascertain, before selling the equity shares on or after 1.4.2018, the
tax impact under both the methods and decide whether to sell the shares in an off
market transaction or through Stock Exchange.

9.3  Capital Gains
Bonds

At   present,  
an   assessee   can 
claim  deduction  upto Rs. 50 lakh from
long term Capital Gain on sale of any capital asset by making an Investment in
specified bonds u/s. 54EC within 6 months of the date of sale. There is a
lock-in period of 3 years for such investment. In order to restrict this
benefit the following amendments are made in section 54EC.

(i)  The benefit of section 54EC can be claimed
only if the long term capital gain is from sale of immovable property (i.e.
land, building or both) on or after 1.4.2018. Thus, this benefit cannot be
claimed in respect of long term capital gain on any other capital asset in A.Y.
2019-20 or thereafter. The effect of this amendment will be that benefit of
section 54EC will not now be available in respect of long term capital gain
arising on or after 1-4-2018 in respect of compensation received on surrender
of tenancy rights or sale/transfer of shares, units of Mutual Fund, goodwill or
other movable assets.

(ii)  The
lock in period for this investment made on or after 1.4.2018 will be 5 years
instead of 3 years. From the wording of the amendments in section 54EC it
appears that investment in Bonds of National Highway Authority of India or
Rural Electrification Corporation Ltd., or other notified bonds made before
31.3.2018 will have a lock-in period of 3 years. In respect of investment in
bonds made on or after 1.4.2018 the lock-in period will be 5 years. Therefore,
it appears that even in respect of long term capital gain made on or before
31.3.2018 if the investment in such bonds is made within 6 months of the date
of sale but on or after 1.4.2018, the Lock-in period will be 5 years.

9.4  Conversion Of
Stock-In –Trade Into Capital Asset

(i)  The concept of conversion of a capital asset
into stock-in-trade is accepted in section 45(2) at present. It is provided in
this section that on such conversion there will be no tax liability. The tax is
payable only when the stock-in-trade is sold.

(ii)  New clauses (via) is now added in section 28
w.e.f. AY. 2019-20 (F.Y. 2018.19) to provide that “the fair market value of
inventory as on the date on which it is converted into, or treated as, a
capital asset determined in the prescribed manner” shall be chargeable to
income tax under the head “ Profits and gains of business or profession”. This
will mean that on conversion of stock-in-trade (inventory) into a capital
asset, the difference between the cost and the market value on the date of such
conversion will be taxable as business income. This will be the position even
if the stock-in-trade is not sold. It may be noted that by insertion of clause
(xiia) in section 2(24) it is now provided that such notional difference
between the fair market value and cost of stock-in-trade shall be deemed to be
income liable to tax.

(iii)  Further, section 49 is also amended by
addition of clause (9) w.e.f. A.Y. 2019-20 (F.Y. 2018-19) to provide that where
capital gain arises on sale of the above capital asset (i.e. stock-in-trade
converted into capital asset) the cost of acquisition of such capital asset
shall be deemed to be the fair market value adopted under section 28(via) on
conversion of the stock-in-trade into capital asset. By an amendment in section
2(42A), it is also provided that in such a case, the period of holding such
capital asset shall be reckoned from the date of conversion of stock-in-trade
into capital asset.

(iv)  A new Explanation (1A) has been added in
section 43 (1) to provide that, if the above capital asset (after conversion of
stock-in-trade to capital asset) is used for the business or profession, the
fair market value on the date of such conversion shall be treated as cost of
the capital asset. Depreciation on such cost can be claimed by the assessee.

9.5  Exemption Of
Specified Securities From Capital Gain

Section 47 has
been amended by insertion of a new clause (viiab) w.e.f. AY. 2019-20
(F.Y.2018.19). It is now provided that any transfer of a capital asset viz (i)
Bond or Global Depository Receipt mentioned in section 115AC(1), (ii) Rupee
Denominated Bond of an Indian Company or (iii) a Derivative made by a
non-resident on a recognised Stock Exchange located in an International
Financial Services Centre shall not be considered as transfer. In other words,
any capital gain arising by such a transaction will be exempt from capital gain
tax.

9.6  Full Value of
consideration – Section 50C

As discussed in
Para 7.3 above, concession is now given from A/Y:2019-20 (F.Y:2018-19) for the
computation of full value of consideration on transfer of Immovable
Property.  Section 50C is amended to
provide that if the difference between the actual consideration and stamp duty
value is less than 5% the same will be ignored.

9.7  Tax On
Distributed Income Of Unit Holders Of Equity Oriented Fund – Section 115-R

(i)  Section 115R dealing with tax on distributed
income to holders of units in Mutual Funds has been amended w.e.f. 1.4.2018. At
present any income distributed to a unit holder of equity oriented fund is not
chargeable to tax. Since new section 112A now provides for levy of 10% tax on
the capital gains arising to unit holders of equity oriented funds, in excess
of Rs.1 lakh, section 115R has now been amended to provide for Dividend
Distribution Tax (DDT) at the rate of 10% by the Mutual Fund at the time of
distribution of income by an equity oriented fund.

(ii)  It is stated that this amendment is made with
a view to providing a level playing field between growth oriented funds and
dividend paying funds, in the wake of the new capital gains tax regime for unit holders of equity oriented funds. 

10.  INCOME FROM OTHER SOURCES:

10.1  Transfer of
Capital Asset by a Holding Company to its wholly owned subsidiary company –
Section 56(2) (x)

Section 56(2)(x) of the Income tax Act provides
that if any person receives any property without consideration or for a
consideration which is less than its fair market value the difference between
the fair market value and the value at which the property is received will be
taxable as income from other sources in the hands of the recipient. There are
certain exceptions to this rule as provided in the Fourth Proviso. Clause IX of
this Fourth Proviso is now amended from the A.Y. 2018-19 (F.Y. 2017-18) to
provide that the provisions of section 56(2) (x) will not apply to any transfer
of a capital asset by a holding company to its wholly owned subsidiary company
or any transfer of a capital asset by a wholly owned subsidiary company to its
holding company.

10.2  Gift of
Immovable Property

As discussed in
Para 7.3 above, concession is now given from A/Y:2019-20 (F.Y:2018-19) for the
computation of full value of consideration on transfer of Immovable Property.
Section 56(2)(x) is amended to provide that if the difference between the
actual consideration and stamp duty value is less than 5% the same will be
ignored for the purpose of taxation in the hands of the recipient of Immovable
Property.

10.3  Compensation
on termination /modification of any contract of employment – Section 56(2) (xi)

A   new  
clause (xi)   is   inserted  
in   section 56(2)  from A.Y. 2019-20
(F.Y. 2018-19) to provide that any compensation received by any employee on
termination or modification of the terms and conditions of the contract of
employment on or after 1.4.2018 shall be taxable as Income from Other Sources.

10.4  Deemed
Dividend

(i)  Dividend Income is taxable under the head
Income from Other Sources – Section 2(22) defines the term “Dividend”.  Under section 2(22) (a) to (e) it is provided
that distribution by a company to its members under certain circumstances shall
be deemed to be Dividend to the extent of its “accumulated profits”. The
definition of the term “accumulated profits” is given in the Explanation to the
section 2 (22). From the A.Y. 2018-19 (F.Y. 2017-18), a new explanation (2A)
has been added to provide that the accumulated profits (whether capitalised or
not) or loss of the amalgamated company, on the date of amalgamation, shall be
added / deducted to/from the accumulated profits of the amalgamating company.

 (ii)  At present, section 2(22) (e) provides that
any loan or advance given by a closely held company to a Related Party, as
defined in that section, shall be taxable as deemed dividend in the hands of
that related party to the extent of the accumulated profits of the Company.
There was some debate whether this deemed dividend can be taxed in the hands of
the related party if it is not a share holder of the company.

To eliminate
this doubt, it is now provided that the company giving such loan or advance
will pay tax at the rate of 30% plus applicable surcharge and Cess w.e.f.
1.4.2018.  Thus, the shareholder or
related party receiving such loan will not be required to pay tax on such
deemed dividend.

11.  TAXATION OF NON-RESIDENTS:

11.1 Expansion of scope of Business Connection –
Section 9

At present,
Explanation 2 to section 9(1)(i) defines the concept of “Business connection”
through dependent  agents. With an
objective to align with Article 12 of the Multilateral Instrument (MLI) forming
part of the BEPS Project to which India is a signatory, Explanation 2(a) has
been amended. By this amendment the term “business connection” will include any
business activity carried on through an agent who habitually concludes contract
or habitually plays a principal role leading to conclusion of contracts by the
non-resident where the contracts are:

 – In the name of
that non-resident; or

– For the
transfer of ownership of, or for granting the right to use of, the property
owned by that non-resident or that non-resident has the right to use; or

– For the
provision of services by that non-resident.

 11.2  Significant
economic presence resulting in Business Connection

(i)   At
present, section 9(1) (i) provides for physical presence based nexus for
establishing business connection of the non-resident in India. A new
Explanation (2A) to section 9(1)(i) now provides a nexus rule for emerging
business models such as digitized business which do not require physical
presence of the non-resident or his agent in India. This amendment is made from
A/Y:2019-20 (F.Y:2018-19).

 (ii) Accordingly, this amendment provides that a
non-resident shall be deemed to have a business connection on account of his
significant economic presence in India. This amendment would apply irrespective
of whether the non-resident has a residence or place of business in India or
renders services in India. The following shall be regarded as significant
economic presence of the non-resident in India.

–  Any transaction in respect of any goods,
services or property carried out by non-resident in India including provision
of download of data or  software in
India, provided that the transaction value exceeds the threshold as may be
prescribed; or

–  Systematic and continuous soliciting of
business activities or engaging in interaction with number of users in India
through digital means, provided such number of users exceeds the threshold as
may be prescribed.

In such cases,
only so much of income as is attributable to the above transactions or
activities shall be deemed to accrue or arise in India.

(iii)  It is further clarified in this section that
the transactions or activities shall constitute significant economic presence
in India, whether or not

 (a)  the agreement for such transactions or
activities is entered in India, or

 (b) the
non-resident has a residence or place of business in India, or

 (c) the
non-residnet renders services in India.

11.3  Exemption to
Royalty etc. under section 10(6D)

New clause (6D)
is added in section 10 from A/Y: 2018-19(F.Y. 2017-18) to grant exemption to a
non-resident.  This clause provides that
any income of a non-resident or a Foreign Company by way of Royalty from, or
fees for technical services rendered in or outside India to National Technical
Research Organisation will be exempt from tax. In view of this exemption no tax
will be deductible at source from this Royalty or Fees u/s 195.

11.4  Global
Depository Receipts – Section 47 (viiab)

As discussed in
Para 9.5 above transfer of a Bond or Global Depository Receipts (GDR) referred
to in section 115AC(1), or Rupee Denominated Bond of any Indian company, or
Derivative, executed by a non-resident on a recognized stock exchange located
in any International Financial Services Center (IFSC) shall not be considered
as a transfer under newly inserted section 47(viiab), if the consideration for
the transfer is paid in foreign currency. As a result of this amendment,
capital gains from such transaction will not be taxable.

12.  TAX ON INCOME REFERRED TO IN SECTIONS 68 TO
69D AND SECTION 115BBE:

(i)  Section 115BBE provides that income referred
to in sections 68,69,69A, 69B,69C or 69D shall be charged to tax at the rate of
60%. Section 115BBE(2) provides that no deduction in respect of any expenditure
or allowance or set off of any loss shall be allowed to the assessee under any
provision of the Act in computing his income referred to in the above sections.
However, sub-section (2) applied only to cases where such income is declared by
the assesse in the return of income furnished u/s. 139.

(ii)  Section 115BBE(2) has now been amended with
retrospective effect from A.Y.2017-18 (F.Y. 2016-17) to provide that even in
cases where income added by the Assessing Officer includes income referred to
in the above sections, no deduction in respect of any expenditure or allowance
or setoff of any loss shall be allowed to the assessee under any provision of
the Act in computing the income referred to in these sections.

13.
ASSESSMENTS AND APPEALS:

13.1 Obtaining Permanent Account Number (PAN) in
certain cases – Section 139A

To expand the
list of cases requiring the application for PAN and to use PAN as Unique Entity
Number (UEN), amendment has been made w.e.f. 01.04.2018 by way of insertion of
clause (v) and clause (vi) in section 139A as under:

(i)  A resident, other than an individual, which
enters into a financial  
transaction   of   an  
amount  aggregating  to Rs. 2,50,000 or
more in a financial year is required to apply for PAN.

(ii) Managing
director, director, partner, trustee, author, founder, Karta, chief executive
officer, principal officer or office bearer or any person competent to act on
behalf of such entities is also required to apply for PAN.

 It may be noted
that the term “financial transaction” has not been defined.

13.2  Verification
of Return in case of a company under insolvency resolution process – Section
140

Section 140 has
been amended w.e.f. 1.4.2018 to provide that, during the resolution process
under the Insolvency and Bankruptcy Code, 2016 (“IBC”), the return of Income
shall be verified by an insolvency professional appointed by the Adjudicating
Authority.

13.3  Assessment
Procedure – Section 143

(i)  Section 143 (1)(a) provides that at the time
of processing of return, the total income or loss shall be computed after
adding income appearing in Form 26AS or Form 16A or Form 16 which has not been
included in the total income disclosed in the return of Income, after giving an
intimation to the assessee. A new proviso to section 143(1)(a) has been
inserted to provide that no such adjustment shall be made in respect of any
return of Income furnished for Ay 2018-19 and subsequent years.

13.4  New Scheme for
scrutiny Assessments – New Section 143(3A) 143(3B)

A new
sub-section (3A) is inserted in section 143 w.e.f 01.04.2018. This new section
143(3A) authorises the Government to notify a new scheme for “e-assessments” to
impart greater efficiency, transparency and accountability. It is stated that
this will be achieved by-

(i) Eliminating
the interface between the Assessing Officer and the assesse in the course of
proceedings to the extent of feasibility of technology.

(ii) Optimising
utilisation of the resources through economics of scale and functional
specialisation.

(iii)
Introducing a team-based assessment with dynamic jurisdiction.

For giving
effect to the above scheme, section 143(3B) authorizes the Government to issue
a Notification directing that the provisions of the Income-tax Act relating to
assessment procedure shall not apply or shall apply with such exceptions,
modifications and adaptations as may be specified in the notification. No such
notification can be issued after 31.03.2020. The Government has set up a
technical study group to advise about the Scheme for e-assessments.

13.5  Appeal to
Tribunal against the order passed under section 271J – Section 253

Section 253 has
been amended w.e.f. 01.04.2018 to provide for filing of an appeal by the
assessee before the ITA Tribunal against an order passed by the CIT(A) levying
penalty u/s. 271J on an accountant, a merchant banker or a registered valuer
for furnishing incorrect information in their report or certificate.

13.6  Increase in
penalty for failure to furnish statement of financial transaction or reportable
account – Section  271FA

Section 271FA
has been amended w.e.f. 01.04.2018 to enhance the penalty for delay in
furnishing of the statement of financial transaction or reportable account as
required u/s. 285BA to ensure greater compliance:

13.7  Failure to
furnish return of income in case of companies –Section 276CC

Section 276CC
provides that if a person willfully fails to furnish the return of income
within the due date, he shall be punishable with imprisonment and fine.
Immunity from prosecution is granted inter alia in a case where the tax
payable on the total income determined on regular assessment, as reduced by the
advance tax, if any paid, and any withholding tax, does not exceed Rs. 3,000
for any assessment year commencing on or after 1st April 1975.  By amendment of this section, w.e.f.
1.4.2018, it is now provided that this immunity will not apply to companies.

14.  TO SUM UP:

14.1  It is rather unfortunate that this year’s
Finance Bill has been passed in the Parliament without any discussion. Various
professional and commercial organisations had made post budget representations
and expressed concerns about some of the amendments proposed in the Finance
Bill. As there was no discussion in the Parliament, it is evident that these
representations have not received due consideration.

14.2  The Finance Act has provided some relief to
salaried employees, small and medium sized companies, senior citizens, other
assessees who have invested in NPS, start-up industries, producer companies and
to employers for employment generation. There are some provisions in the
Finance Act which will simplify some procedural requirements.

14.3  Last year, several amendments were made to
tighten the provisions relating to taxation of capital gains. Most of the
assessees have not yet understood the impact of the new sections 45(5A), 50CA,
56(2)(x) etc., introduced last year. This year, the introduction of new
section 112A levying tax on capital gain on sale of quoted shares and units of
equity oriented funds is likely to create some complex issues. There will be
some resistance to this levy as there is no reduction in the rates of STT. The
levy of tax on Mutual Funds on distribution of income by equity oriented funds
will affect the yield to the unit holders. Let us hope that the above impact on
the tax liability of the investors is accepted by all assessees as this
additional burden is levied in order to provide funds for various Government
Schemes for upliftment of poor and down trodden population of our country.

14.4 The concept
of Income Computation and Disclosure Standards (ICDS) was introduced from A.Y.
2017-18. The assessees have to maintain books of accounts by adopting
Accounting Standards issued by the Institute of Charted Accountants of India.
Recently the Government has notified Ind-AS which is mandatory for large
companies. Therefore, compliance with Ten ICDS notified u/s. 145(2) of the
Income tax Act was considered as an additional burden. When Delhi High Court
struck down most of the ICDS the assessees felt some relief. Now the Finance
Act, 2018, has amended the relevant sections of the Income-tax Act with
retrospective effect from A.Y. 2017-18 to revalidate some of the provisions of
ICDS. With these amendments the responsibility of professionals assisting tax
payers in the preparation of their Income tax Returns will increase. Similarly,
Chartered Accountants conducting tax audit u/s. 44AB will now have report in
the tax audit report about compliance with ICDS.

14.5 Section 143
of the Income-tax Act has been amended authorising the Government to notify a
new scheme for “e-assessments” to impart greater efficiency, transparency and
accountability. Under this scheme, it is proposed to eliminate the interface
between the assessing officer and the assessee, optimise utilisation of
resources and introduce a team based assessment procedure. There is
apprehension in some quarters as to how this new scheme will function.
Considering the present infrastructure available with the Government and the
technical facilities available with the assessees, it will be advisable for the
Government to introduce the concept of ‘e-assessment’ in a phased manner. In
other words, this scheme should be made applicable in the first instance in
cases of large listed companies with turnover exceeding Rs. 500 crore. After
ascertaining the success, the scheme can be extended to other corporate assessees
after some years. There will be many practical issues if the scheme is
introduced for all assessees immediately.

14.6   Taking an overall view of the amendments
discussed in this Article, it can be concluded that the provisions in the
Income-tax Act are getting complex. There is a talk about replacing this six
decade old law by a new simplified law. We have seen the fate of the Direct Tax
Code which was introduced in 2009 but not passed by the parliament.
Let us hope that we get a new simplified tax law in the coming years.