DIRECT TAX
1. Clarifications on provisions of the Direct Tax Vivad se Vishwas Act, 2020 A ‘search case’ means an assessment or reassessment made under sections 143(3), 144, 147, 153A, 153C, 158BC of the Income-tax Act in the case of a person referred to in section 153A, section 153C, section 158BC or section 158BD of the Act on the basis of a search initiated u/s 132, or requisition made u/s 132A. The FAQ No. 70 of Circular 21/2020 stands modified to this extent [Circular 4 of 2021 dated 23rd March, 2021.]
2. Reporting under clause 30C and clause 44 of Form 3CD shall be kept in abeyance till 31st March, 2022 [Circular 5 of 2021 dated 25th March, 2021.]
3. Income-tax Rules – Income-tax (6th Amendment) Rules, 2021 Procedure and forms for application for the purpose of grant of approval of a fund, trust, institution, university, or hospital or other medical institution under clauses (i), (ii), (iii) or (iv) of the first proviso to clause (23C) of section 10, intimation of registration u/s 35, registration of charitable or religious trusts, approval of institution for the purpose of section 80G [Notification No. 19 of 2021 dated 26th March, 2021.]
4. Income-tax Rules – Income-tax (7th Amendment) Rules, 2021 Substitution of forms Sahaj ITR-1, ITR-2, ITR-3, Sugam ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V [Notification No. 21 of 2021 dated 31st March, 2021.]
5. Insertion of Rule 6G of the Income-tax Rules and Form 3CD – Income-tax (8th Amendment) Rules, 2021 A new sub-rule 3 has been inserted in Rule 6G which permits furnishing of a revised audit report. It provides that if there is payment by a person after furnishing of report which necessitates recalculation of disallowance u/s 40 or section 43B, he may furnish a revised audit report before the end of the relevant assessment year to which the report pertains. Such revised report is to be signed and verified by the accountant.
An Amendment has also been prescribed in clauses 17, 18, 32 and 36 of Form 3CD [Notification No. 28 of 2021 dated 1st April, 2021.]
6. DTAA between India and Iran shall have effect in India in respect of taxes on income arising in any fiscal year beginning on or after 1st April, 2021 [Notification No. 29 of 2021 dated 1st April, 2021.]
7. Format, procedure and guidelines for submission of statement of financial transactions (SFT) for dividend income and interest With the aim to pre-fill the ITR form with dividend and interest income earned by different classes of assessees, Rule 114E has been amended and sub-rule 5A has been added wherein three types of transactions – dividend paid, interest paid and capital gains on transfer of listed securities or units of mutual funds – are required to be reported by certain reporting entities in Form 61A [Notification Nos. 1 and 2 of 2021 dated 21st April, 2021.]
COMPANIES ACT, 2013
(I) Penalty provision on non-compliance of unpaid dividend account enforced w.e.f. 24th March, 2021 The Ministry of Corporate Affairs (MCA) has enforced a penalty provision on non-compliance of unpaid dividend account from the Companies (Amendment) Act, 2020 with effect from 24th March, 2021. [MCA Notification No. S.O. 1303(E), dated 24th March, 2021.]
(II) Companies (Audit and Auditors) Second Amendment Rules, 2021 Rule 11(g) inserted in the Companies (Audit and Auditors) Rules, 2014 vide Notification dated 24th March, 2021 relating to Auditor Reporting (‘Other Matters to be included in Auditor’s Report’) on whether accounting software used for maintaining books of accounts by a company has a feature of recording audit trail facility, has now been made effective in respect of financial years commencing on or after 1st April, 2022. [MCA Notification G.S.R. 248 (E) dated 1st April, 2021.]
(III) Companies (Accounts) Second Amendment Rules, 2021 Sub-rule (1) of Rule 3 inserted in the Companies (Accounts) Rules, 2014 that mandated every company which uses accounting software for maintaining its books of accounts to use only such accounting software which has a feature of recording audit trail for each and every transaction, has now been made effective for financial years commencing on or after 1st April, 2022. [MCA Notification G.S.R. 247 (E) dated 1st April, 2021.]
(IV) Setting up of makeshift hospitals and temporary Covid Care facilities are now eligible as CSR activity MCA has clarified that spending of CSR funds for setting up of makeshift hospitals and temporary Covid Care facilities are eligible as CSR activities under items (i) and (xii) of Schedule VII of the Companies Act, 2013 to promote health care. Companies may spend CSR funds for such specified activities in consultation with the State Government to comply with the Companies (CSR) Rules, 2014. [MCA General Circular No. 5/2021 dated 23rd April, 2021.]
SEBI
(V) SEBI issues registration norms on transfer of business by intermediaries SEBI has issued new registration norms for transferring of business by intermediaries whereby it has been clarified that the transferee shall obtain fresh registration from SEBI in the same capacity before the transfer of business if it is not registered with SEBI in the same capacity. In addition to the above, SEBI will issue a new registration number to the transferee different from the transferor’s registration number in the various scenarios mentioned in the Circular. [Circular No. SEBI/HO/MIRSD/DOR/CIR/P/2021/46, dated 26th March, 2021.]
(VI) SEBI issues guidelines pertaining to surrender of FPI Registration In order to have a uniform market practice for processing of surrender requests, SEBI has revised the guidelines for the surrender of FPI (Foreign Portfolio Investor) registration and directed Designated Depository Participants (’DDPs’) to follow the additional guidelines. [Circular No. SEBI/HO/IMD/FPI&C/CIR/P/2021/045, dated 30th March, 2021.]
(VII) SEBI reduces timelines for refunding investors’ money SEBI has decided to reduce the timelines for refund of investors’ money to four days from seven days in case of non-receipt of minimum subscription and the issuer failing to obtain listing or trading permission from the stock exchanges. [Circular No. SEBI/HO/CFD/DIL1/CIR/P/2021/47 dated 31st March, 2021.]
(VIII) Alternative Investment Funds to submit report on their activity on quarterly basis Based on consultations with various stakeholders and recommendation of the Alternative Investment Policy Advisory Committee, the SEBI has decided that all AIFs shall submit a report on their activity as AIFs to SEBI on a quarterly basis within ten calendar days from the end of each quarter in the revised formats. [Circular No. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/549, dated 7th April, 2021.]
FEMA
(i) RBI has decided to collect more details of international transactions using credit card / debit card / unified payment interface (UPI) along with their economic classification (merchant category code – MCC) through a new return called ‘FETERS-Cards’. RBI has provided the manner and format in which the details are to be submitted by AD Banks on the web-portal. [A.P. (DIR Series) Circular No.13 dated 25th March, 2021.]
(ii) RBI has stated that the limits for FPI investment in corporate bonds remain unchanged at 15% of outstanding stock of securities for the F.Y. 2021-22 The revised limits for FPI investment in Central Government securities (G-Secs) and State Development Loans (SDLs) for F.Y. 2021-22 will be advised separately. Till such announcement, the current limits shall continue to be applicable. [A.P. (DIR Series 2020-21) Circular No. 14, dated 31st March, 2021.]
(iii) Borrowers availing External Commercial Borrowings (ECBs) are allowed to park ECB proceeds in term deposits with AD Category-I banks in India for a maximum period of 12 months cumulatively With a view to provide relief to the ECB borrowers affected by the Covid-19 pandemic, RBI has decided to relax the above stipulation as a one-time measure. Accordingly, unutilised ECB proceeds drawn down on or before 1st March, 2020 can be parked in term deposits with AD Category-I banks in India prospectively for an additional period up to 1st March, 2022. [A.P. (DIR Series 2021-22) Circular No. 1, dated 7th April, 2021.]
ICAI ANNOUNCEMENTS
Accounts and Audit
(A) Temporary exceptions to hedge accounting prescribed under the Guidance Note on Accounting for Derivative Contracts due to Interest Rate Benchmark Reform The announcement provides temporary relief to entities not following Ind AS and having transactions in financial market products for accounting periods beginning on or after 1st April, 2020 on account of some major interest rate benchmarks ceasing to be published across the globe after December, 2021. [ICAI’s Announcement dated 31st March, 2021.]
(B) Revised criteria for classification of non-company entities for applicability of Accounting Standards (AS) The announcement effective for accounting periods commencing on or after 1st April, 2020 classifies non-company entities into four categories, viz., Level I (Large size entities), Level II (Medium size entities), Level III (Small size entities) and Level IV (Micro entities) based on revised criteria related to turnover and borrowings. Level I entities are required
to comply in full with all Accounting Standards (AS 1 to AS 29), while certain exemptions / relaxations have
been provided to Level II, Level III and Level IV non-company entities. [ICAI’s Announcement dated 31st March, 2021.]
ICAI MATERIAL
- Technical Guide on Revised Formats of Long Form Audit Report [22nd March, 2021.]
