MEMORANDUM
EXPLAINING THE PROVISIONS
IN
THE FINANCE BILL, 2024
(Clauses referred to are clauses in the Bill)
ºÉiªÉàÉä´É VɪÉiÉä
GOVERNMENT OF INDIA
1
FINANCE (No. 2) BILL, 2024
PROVISIONS RELATING TO
DIRECT TAXES
Introduction
The provisions of Finance (No. 2) Bill, 2024 (hereafter referred to as "the Bill"),
relating to direct taxes seek to amend the Income-tax Act, 1961 (hereafter referred
to as 'the Act'), to continue reforms in direct tax system through tax reliefs, removing
difficulties faced by taxpayers and rationalisation of various provisions. The Bill also
seeks to amend the Black Money (Undisclosed Foreign Income and Assets) and
Imposition of Tax Act, 2015, Chapter VII of Finance (No. 2) Act, 2004 (‘Securities
Trasaction Tax’, STT in short), Chapter VIII of Finance Act, 2016 (‘Equalisation
Levy’) and Prohibition of Benami Property Transaction Act, 1988 (‘Benami Act’).
With a view to achieving the above, the various proposals for amendments are
organized under the following heads:—
(A) Rates of income-tax;
(B) Measures to promote investment and employment;
(C) Simplification and Rationalisation;
(D) Widening and deepening of tax base and Anti-Avoidance;
(E) Tax administration;
DIRECT TAXES
A. RATES OF INCOME-TAX
I. Rates of income-tax in respect of income liable to tax for the assessment
year 2024-25.
In respect of income of all categories of assessees liable to tax for the
assessment year 2024-25, the rates of income-tax have either been specified in
specific sections of the Act (like section 115BAA or section 115BAB for domestic
companies, section 115BAC for individual/HUF/AOP (other than a co-operative
society)/BOI/AJP and section 115BAD or section 115BAE for cooperative societies)
or have been specified in Part I of the First Schedule to the Bill. There is no change
2
proposed in tax rates either in these specific sections or in the First Schedule. The
rates provided in sections 115BAA or 115BAB or 115BAC or 115BAD or 115BAE of
the Act for the assessment year 2024-25 would be same as already enacted.
Similarly rates laid down in Part III of the First Schedule to the Finance Act, 2023,
for the purposes of computation of “advance tax”, deduction of tax at source from
“Salaries” and charging of tax payable in certain cases for the assessment year
2024-25 would now become part I of the first schedule. Part III would now apply for
the assessment year 2025-26.
(1) Tax rates under section 115BAC—
For assessment year 2024-25, as per the provisions of sub-section (1A) of
section 115BAC of the Act, an individual or Hindu undivided family or association of
persons [other than a co-operative society], or body of individuals, whether
incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of
clause (31) of section 2, has to pay tax in respect of the total income at following
rates:
Total Income (Rs) Rate
Up to 3,00,000 Nil
From 3,00,001 to 6,00,000 5%
From 6,00,001 to 9,00,000 10%
From 9,00,001 to 12,00,000 15%
From 12,00,001 to 15,00,000 20%
Above 15,00,000 30%
2. The above mentioned rates shall apply, unless an option is exercised as per
provisions of sub-section (6) of section 115BAC. Thus, rates specified in sub-section
(1A) of section 115BAC of the Act are the default rates.
3. In respect of income chargeable to tax under clause (i) of sub-section (1A) of
section 115BAC of the Act, the income-tax for the assessment year 2024-25 shall be
increased by a surcharge, for the purposes of the Union, computed, in the case of
every individual or Hindu undivided family or association of persons, or body of
3
individuals, whether incorporated or not, or every artificial juridical person referred to
in sub-clause (vii) of clause (31) of section 2 of the Act,-
(i) having a total income (including the income by way of dividend or income
under the provisions of section 111A, section 112 and section 112A of the Act)
exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of
10% of such income-tax;
(ii) having a total income (including the income by way of dividend or income
under the provisions of section 111A, section 112 and section 112A of the Act)
exceeding one crore rupees but not exceeding two crore rupees, at the rate of
15% of such income-tax;
(iii) having a total income (excluding the income by way of dividend or income
under the provisions of section 111A, section 112 and section 112A of the Act)
exceeding two crore rupees, at the rate of 25% of such income-tax;
(iv) having a total income (including the income by way of dividend or income
under the provisions of section 111A, section 112 and section 112A of the Act)
exceeding two crore rupees, but is not covered under clause (iii) above, at the
rate of 15% of such income-tax;
3.1 In case where the provisions of sub-section (1A) of section 115BAC are
applicable and the total income includes any income by way of dividend or income
under the provisions of section 111A, section 112 and section 112A of the Act, the
rate of surcharge on the income-tax in respect of that part of income shall not exceed
15%.
3.2 Further, in the case of an association of persons consisting of only companies
as its members, and having its income chargeable to tax under sub-section (1A) of
section 115BAC, the rate of surcharge on the income-tax shall not exceed 15%.
3.3 Marginal relief shall be provided in such cases.
Tax rates under Part I of the First Schedule applicable for the assessment year
2024-25
A. Individual, HUF, association of persons, body of individuals, artificial
juridical person.
Paragraph A of Part-I of First Schedule to the Bill provides following rates of
income-tax:—
(i) The rates of income-tax in the case of every individual (other than those
4
mentioned in (ii) and (iii) below) or HUF or every association of persons or
body of individuals, whether incorporated or not, or every artificial juridical
person referred to in sub-clause (vii) of clause (31) of section 2 of the Act
(not being a case to which any other Paragraph of Part I applies) are as
under:—
Up to Rs. 2,50,000 Nil.
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
(ii) In the case of every individual, being a resident in India, who is of the age
of sixty years or more but less than eighty years at any time during the
previous year,—
Up to Rs. 3,00,000 Nil.
Rs. 3,00,001 to Rs.5,00,000 5%
Rs. 5,00,001 to Rs.10,00,000 20%
Above Rs. 10,00,000 30%
(iii) in the case of every individual, being a resident in India, who is of the age
of eighty years or more at any time during the previous year,—
Up to Rs. 5,00,000 Nil.
Rs. 5,00,001 to Rs.10,00,000 20%
Above Rs 10,00,000 30%
These rates are the same as those applicable for the assessment year 2023-24.
5
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been
specified in Paragraph B of Part I of the First Schedule to the Bill. They remain
unchanged at (10% up to Rs. 10,000; 20% between Rs. 10,001 and Rs. 20,000;
and 30% in excess of Rs. 20,000).
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C
of Part I of the First Schedule to the Bill. They remain unchanged at 30%.
D. Local authorities
The rate of income-tax in the case of every local authority has been specified
in Paragraph D of Part I of the First Schedule to the Bill. They remain unchanged at
30%.
E. Companies
The rates of income-tax in the case of companies have been specified in
Paragraph E of Part I of the First Schedule to the Bill and remain unchanged vis-à-
vis those for the AY 2023-24. In case of domestic company, the rate of income-tax
shall be 25% of the total income, if the total turnover or gross receipts of the
previous year 2021-22 does not exceed four hundred crore rupees and in all other
cases the rate of income-tax shall be 30% of the total income.
2. In the case of company other than domestic company, the rates of tax are the
same as those specified for the AY 2023-24.
(2) Surcharge on income-tax
The rates of surcharge on the amount of income-tax for the purposes of the
Union is the same as that specified for the FY 2022-23. Further, for person whose
income is chargeable to tax under sub-section (1A) of section 115BAC of the Act,
the surcharge at the rate of 37% on the income or aggregate of income of such
person (excluding the income by way of dividend or income under the provisions of
sections 111A, 112 and 112A of the Act) exceeding five crore rupees is not
applicable. In such cases the surcharge is restricted to 25%.
6
(3) Marginal Relief—
Marginal relief has also been provided in all cases where surcharge is
proposed to be imposed.
(4) Education Cess—
For assessment year 2024-25, “Health and Education Cess” is to be levied at
the rate of 4% on the amount of income-tax so computed, inclusive of surcharge
wherever applicable, in all cases. No marginal relief shall be available in respect of
such cess.
II. Rates for deduction of income-tax at source during the financial year (FY)
2024-25 from certain incomes other than “Salaries”.
The rates for deduction of income-tax at source during the FY 2024-25 under
the provisions of section 193, 194A, 194B, 194BB, 194D, 194LBA, 194LBB,
194LBC and 195 have been specified in Part II of the First Schedule to the Bill.
2. For sections specifying the rate of deduction of tax at source, the tax shall
continue to be deducted as per the provisions of the relevant sections of the Act.
3. It is proposed that for deduction of income-tax at source on other income in
case of company which is not a domestic company, rates shall be reduced from 40%
to 35%.
4. It is proposed that for deduction of income-tax at source on the incomes in the
nature of capital gains for non-residents, the rates shall be as per the Table below:
Sl.No.
Income
For transfers taking
place before 23rd
day of July, 2024 /
Rate of TDS
For transfers
taking place on or
after 23rd day of
July, 2024 / Rate
of TDS
(1)
long-term capital
gains referred to in
section 115E
10%
12.5%
7
(2)
long-term capital
gains referred to in
sub-clause (iii) of
clause (c) of sub-
section (1) of section
112
10%
The clause is not
applicable for
transfers on or after
23
rd
July, 2024
(3)
long-term capital
gains referred to in
section 112A
exceeding one lakh
twenty five thousand
rupees
10%
12.5%
(4)
long-term capital
gains [not being long-
term capital gains
referred to in clauses
(33) and (36) of
section 10]
20%
12.5%
(5)
short-term capital
referred to in section
111A
15%
20%
5. Apart from the above, the rates will remain the same as those specified in
Part II of the First Schedule to the Finance Act, 2023, for the purposes of deduction
of income-tax at source during the FY 2024-25.
6. The surcharge on the amount of income-tax for the purposes of the Union is
the same as that specified for the FY 2023-24.
(2) Education Cess—
“Health and Education Cess” shall continue to be levied at the rate of four per
cent. of income tax including surcharge wherever applicable, in the cases of
persons not resident in India including company other than a domestic company.
8
III. Rates for deduction of income-tax at source from “Salaries”, computation
of “advance tax” and charging of income-tax in special cases during the FY
2024-25 (Assessment Year 2025-26).
The rates for deduction of income-tax at source from “Salaries” or under
section 194P of the Act during the FY 2024-25 and also for computation of
“advance tax” payable during the said year in the case of all categories of
assessees have been specified in Part III of the First Schedule to the Bill. These
rates are also applicable for charging income-tax during the FY 2024-25 on current
incomes in cases where accelerated assessments have to be made, for instance,
provisional assessment of shipping profits arising in India to non-residents,
assessment of persons leaving India for good during the financial year, assessment
of persons who are likely to transfer property to avoid tax, assessment of bodies
formed for a short duration, etc. The salient features of the rates specified in the
said Part III are indicated in the following paragraphs-
A. Individual, HUF, association of persons, body of individuals, artificial
juridical person.
With effect from assessment year 2025-26, it is proposed that the following
rates provided under the proposed clause (ii) of sub-section (1A) of section 115BAC
of the Act shall be the rates applicable for determining the income-tax payable in
respect of the total income of a person, being an individual or Hindu undivided
family or association of persons [other than a co-operative society], or body of
individuals, whether incorporated or not, or an artificial juridical person referred to in
sub-clause (vii) of clause (31) of section 2:—
Sl. No.
Rate of tax
(1)
(3)
1.
Nil
2.
5%
3.
10%
4.
15%
5.
20%
6.
30%
9
2. However, if such person exercises the option under sub-section (6) of section
115BAC of the Act, the rates as provided in Part III of the First Schedule shall be
applicable.
3. Paragraph A of Part-III of First Schedule to the Bill provides following rates of
income-tax:—
(i) The rates of income-tax in the case of every individual (other than those
mentioned in (ii) and (iii) below) or HUF or every association of persons or
body of individuals, whether incorporated or not, or every artificial juridical
person referred to in sub-clause (vii) of clause (31) of section 2 of the Act
(not being a case to which any other Paragraph of Part III applies) are as
under:—
Upto Rs. 2,50,000 Nil.
Rs. 2,50,001 to Rs.5,00,000 5%
Rs. 5,00,001 to Rs.10,00,000 20%
Above Rs. 10,00,000 30%
(ii) In the case of every individual, being a resident in India, who is of the age
of sixty years or more but less than eighty years at any time during the
previous year,—
Upto Rs. 3,00,000 Nil.
Rs. 3,00,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
10
(iii) in the case of every individual, being a resident in India, who is of the age
of eighty years or more at any time during the previous year,—
Upto Rs. 5,00,000 Nil.
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
4. The amount of income-tax computed in accordance with the preceding
provisions of this Paragraph (including capital gains under section 111A, 112 and
112A), shall be increased by a surcharge at the rate of,—
(a) having a total income (including the income by way of dividend or income
under the provisions of sections 111A, 112 and 112A of the Act)
exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate
of 10% of such income-tax;
(b) having a total income (including the income by way of dividend or income
under the provisions of sections 111A, 112 and 112A of the Act)
exceeding one crore rupees, at the rate of 15% of such income-tax;
(c) having a total income (excluding the income by way of dividend or income
under the provisions of sections 111A, 112 and 112A of the Act)
exceeding two crore rupees but not exceeding five crore rupees, at the
rate of 25% of such income-tax;
(d) having a total income (excluding the income by way of dividend or income
under the provisions of sections 111A, 112 and 112A of the Act)
exceeding five crore rupees, at the rate of 37% of such income-tax;
(e) having a total income (including the income by way of dividend or income
under the provisions of section 111A, 112 and section 112A of the Act)
exceeding two crore rupees, but is not covered under clauses (c) and (d),
shall be applicable at the rate of 15% of such income-tax.
4.1 Provided that in case where the total income includes any income by way of
dividend or income chargeable under section 111A, section 112 and section 112A
11
of the Act, the rate of surcharge on the amount of income-tax computed in respect
of that part of income shall not exceed 15%.
4.2 Provided further that in case of an association of persons consisting of only
companies as its members, the rate of surcharge on the amount of income-tax shall
not exceed 15%.
4.3 Further, for person whose income is chargeable to tax under sub-section (1A)
of section115BAC of the Act, the surcharge at the rate 37% on the income or
aggregate of income of such person (excluding the income by way of dividend or
income under the provisions of sections 111A, 112 and 112A of the Act) exceeding
five crore rupees shall not be applicable. In such cases the surcharge shall be
restricted to 25%.
5. Marginal relief is provided in cases of surcharge.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been
specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will
continue to be the same as those specified for FY 2023-24. The amount of income-
tax shall be increased by a surcharge at the rate of 7% of such income-tax in case
the total income of a co-operative society exceeds one crore rupees but does not
exceed ten crore rupees. Surcharge at the rate of 12% of such income-tax shall
continue to be levied in case of a co-operative society having a total income
exceeding ten crore rupees.
2. Marginal relief is provided in cases of surcharge.
3. On satisfaction of certain conditions, a co-operative society resident in India
shall have the option to pay tax at 22% as per the provisions of section 115BAD.
Surcharge would be at 10% on such tax. Further, under section 115BAE of the Act, a
manufacturing co-operative society set up on or after 1.4.2023, which commenced
manufacturing or production on or before 31.3.2024 and does not avail of any
specified incentive or deductions, may opt to pay tax at a concessional rate of 15%
for assessment year 2024-25 onwards. Surcharge would be at 10% on such tax.
12
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C
of Part III of the First Schedule to the Bill. This rate will continue to be the same as
that specified for FY 2023-24. The amount of income-tax shall be increased by a
surcharge at the rate of 12% of such income-tax in case of a firm having a total
income exceeding one crore rupees. However, the total amount payable as income-
tax and surcharge on total income exceeding one crore rupees shall not exceed the
total amount payable as income-tax on a total income of one crore rupees by more
than the amount of income that exceeds one crore rupees.
D. Local authorities
The rate of income-tax in the case of every local authority has been specified
in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to
be the same as that specified for the FY 2023-24. The amount of income-tax shall
be increased by a surcharge at the rate of 12% of such income-tax in case of a
local authority having a total income exceeding one crore rupees. However, the
total amount payable as income-tax and surcharge on total income exceeding one
crore rupees shall not exceed the total amount payable as income-tax on a total
income of one crore rupees by more than the amount of income that exceeds one
crore rupees.
E. Companies
The rates of income-tax in the case of companies have been specified in
Paragraph E of Part III of the First Schedule to the Bill. In case of domestic
company, the rate of income-tax shall be 25% of the total income, if the total
turnover or gross receipts of the previous year 2022-23 does not exceed four
hundred crore rupees and where the companies continue in section 115BA regime.
In all other cases the rate of income-tax shall be 30% of the total income. However,
domestic companies also have an option to opt for taxation under section 115BAA
or section 115BAB of the Act on fulfillment of conditions contained therein. The tax
rate is 15% in section 115BAB and 22% in section 115BAA. Surcharge is 10% in
both cases.
13
2. In the case of a company other than a domestic company, it is proposed that
the rates of tax shall be reduced from 40% to 35%, on income other than income
chargeable at special rates, specified in respective sections of Chapter XII of the
Act.
3. Surcharge at the rate of 7% shall continue to be levied in case of a domestic
company (except those opting for taxation under section 115BAA and section
115BAB of the Act), if the total income of the domestic company exceeds one crore
rupees but does not exceed ten crore rupees. Surcharge at the rate of 12% shall
continue to be levied, if the total income of the domestic company (except those
opting for taxation under section 115BAA and section 115BAB of the Act) exceeds
ten crore rupees.
4. In case of companies other than domestic companies, the existing surcharge
of 2% shall continue to be levied, if the total income exceeds one crore rupees but
does not exceed ten crore rupees. Surcharge at the rate of 5% shall continue to be
levied, if the total income of the company other than domestic company exceeds
ten crore rupees.
5. It is proposed that the surcharge shall not apply on advance tax / tax
computed on income of specified fund (referred to in clause (c) of the Explanation
to clause (4D) of section 10) that is chargeable under clause (a) of sub-section (1)
of section 115AD of the Act.
6. Marginal relief is provided in surcharge in all cases.
7. In other cases [including sub-section (2A) of section 92CE, 115QA, 115R,
115TA or 115TD], the surcharge shall be levied at the rate of 12%
8. For FY 2024-25, additional surcharge called the “Health and Education Cess
on income-tax” shall be levied at the rate of 4% on the amount of tax computed,
inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall
be available in respect of such cess.
[Clauses 2, 37 & the First Schedule]
Increase in Standard Deduction and deduction from family pension for tax-
payers in tax regime
The existing provision of clause (ia) of section 16 of the Act provides that a
14
deduction of fifty thousand rupees or the amount of the salary, whichever is less,
shall be made before computing the income under the head “Salaries”.
2. Further, the existing provision of clause (iia) of section 57 of the Act provides
that in the case of income in the nature of family pension, a deduction of a sum
equal to thirty-three and one-third per cent of such income or fifteen thousand
rupees, whichever is less, shall be made before computing the income chargeable
under the head "Income from other sources".
3. With the aim of encouraging and incentivizing taxpayers (specially the
salaried taxpayers) to shift to the new tax regime, it is proposed to insert a proviso
after clause (ia) of section 16 to provide that in a case where income-tax is
computed under clause (ii) of sub-section (1A) of section 115BAC of the Act, the
provisions of this clause shall have effect as if for the words “fifty thousand rupees”,
the words “seventy five thousand rupees” had been substituted.
4. It is also proposed to insert a proviso in clause (iia) of section 57 to provide
that in a case where income-tax is computed under clause (ii) of sub-section (1A) of
section 115BAC of the Act, the provisions of this clause shall have effect as if for
the words “fifteen thousand rupees”, the words “twenty five thousand rupees” had
been substituted.
5. These amendments will take effect from the 1st day of April, 2025, and will
accordingly apply to assessment year 2025-26 and subsequent assessment years.
[Clauses 10 & 24]
Increase in amount allowed as deduction to non-government employers and
their employees for employer contribution to a Pension Scheme referred in
section 80CCD
Section 36 of the Act pertains to other deductions allowed while computing
the income under the head ‘Profits and gains of business or profession’. Clause
(iva) of sub-section (1) of said section states that any sum paid by the assessee as
an employer by way of contribution towards a pension scheme, as referred to in
section 80CCD of the Act, on account of an employee, to the extent it does not
exceed ten per cent of the salary of the employee in the previous year, shall be
allowed as a deduction to the employer.
15
2. It is proposed to amend clause (iva) of sub-section (1) of section 36 of the
Act, to increase the amount of employer contribution allowed as deduction to the
employer, from the extent of 10% to the extent of 14% of the salary of the employee
in the previous year.
3. Section 80CCD deals with deduction in respect of contribution to pension
scheme of Central Government. Sub-section (2) of section 80CCD states that any
contribution by the Central Government or State Government or any other employer
to the account of an employee referred to in sub-section (1), shall be allowed as a
deduction as does not exceed ––
(a) 14% (where such contribution is made by the Central Government or State
Government); and
(b) 10% (where such contribution is made by any other employer)
of the employees’ salary in previous year.
4. It is proposed to amend sub-section (2) of section 80CCD of the Act, to
provide that where such contribution has been made by any other employer (not
being Central Government or State Government), the employee shall be allowed as
a deduction an amount not exceeding 14% of the employee’s salary. This is being
increased only in the case where the employee’s salary is chargeable to tax under
sub-section (1A) of section 115BAC of the Act.
5. The amendments will take from the 1st day of April, 2025 and will
accordingly apply from assessment year 2025-2026 onwards.
[Clauses 12 & 25]
B. MEASURES TO PROMOTE INVESTMENT AND EMPLOYMENT
Tax incentives to International Financial Services Centre
International Financial Services Centre (IFSC) is a jurisdiction that provides
financial services to non-residents and residents, to the extent permissible under
the current regulations, in any currency except Indian Rupee. In order to promote
the development of world-class financial infrastructure in India, several tax
concessions have been provided to units located in IFSC, under the Act, over the
past few years.
16
2. In order to further incentivize operations from IFSC, it is proposed to make
the following amendments:
(A) Item (I) of sub-clause (i) of clause (c) of Explanation to clause (4D) of
section 10, to be amended to expand the ambit of specified funds which
can claim exemption under the said section, to include retail funds and
Exchange Traded Funds in IFSC. Specified funds shall now include funds
established or incorporated in India in the form of a trust or a company or
a limited liability partnership or a body corporate, which have been
granted a certificate as a retail scheme or an Exchange Traded Fund and
are regulated under the International Financial Services Centres Authority
(Fund Management) Regulations, 2022, made under the International
Financial Services Centres Authority (IFSCA) Act, 2019 and satisfy such
conditions as may be prescribed.
(B) Specified income of Core Settlement Guarantee Funds set up by
recognised clearing corporations in IFSC, is proposed to be exempted by
amending the definition of “recognised clearing corporation” and
“regulations” in the Explanation to the clause (23EE) of section 10 of the
Act. The definition of “recognised clearing corporation” shall now include
recognised clearing corporation as defined in clause (n) of sub-regulation
(1) of regulation 2 of the IFSCA (Market Infrastructure Institutions)
Regulations, 2021 made under the IFSCA Act, 2019. The definition of
“regulations” shall now include the IFSCA (Market Infrastructure
Institutions) Regulations, 2021.
(C) Section 68 of the Act provides that where any sum is found to be credited
in the books of an assessee maintained for any previous year, and the
assessee offers no explanation about the nature and source thereof or the
explanation offered by him is not, in the opinion of the Assessing Officer,
satisfactory, the sum so credited may be charged to income-tax as the
income of the assessee of that previous year.
(i) Finance Act, 2023 amended the provisions of section 68 so as to
provide that the nature and source of any sum, whether in form of
loan or borrowing, or any other liability credited in the books of an
17
assessee shall be treated as explained only if the source of funds
is also explained in the hands of the creditor or entry provider.
However, this additional onus of proof of satisfactorily explaining
the source in the hands of the creditor, would not apply if the
creditor is a well regulated entity, i.e., it is a Venture Capital Fund
(VCF) or Venture Capital Company (VCC) registered with SEBI.
Section 68 accordingly makes a reference to the definition of
VCF/VCC in the Explanation to clause (23FB) of section 10.
(ii) It is now proposed to extend the relaxation in place for VCFs
registered with SEBI, to those VCFs which are regulated by IFSCA.
It is therefore, proposed to amend the definition of VCF in the
Explanation to clause (23FB) of section 10, to include VCFs in
IFSC.
(D) Section 94B of the Act puts in place a restriction on deduction of interest
expense in respect of any debt issued by a non-resident, being an
associated enterprise of the borrower. It applies to an Indian company, or
a permanent establishment of a foreign company in India, who is a
borrower. If such person incurs any expenditure by way of interest or of
similar nature exceeding one crore rupees which is deductible in
computing income chargeable under the head "Profits and gains of
business or profession", the interest deductible shall be restricted to the
extent of thirty per cent. of its earnings before interest, taxes, depreciation
and amortisation so as to avoid thin capitalisation of a corporate entity. At
present, the provisions of this section do not apply to Indian companies or
permanent establishments of foreign companies which are engaged in the
business of banking or insurance or such class of non-banking financial
companies as may be notified by the Central Government. It is now
proposed that the provisions of this section shall not apply to finance
companies, located in IFSC, as defined in clause (e) of sub-regulation (1)
of regulation 2 of the IFSCA (Finance Company) Regulations, 2021 made
under the IFSCA Act, 2019, which satisfy such conditions and carry on
such activities as may be prescribed.
18
3. These amendments will take effect from the 1st day of April, 2025 and will,
accordingly, apply in relation to the assessment year 2025-26 and subsequent
assessment years.
[Clauses 4 & 28]
Amendment of Section 56 of the Act
Section 56 of the Act is related to Income from other sources.
2. Vide Finance Act, 2012, a new clause (viib) was inserted in sub-section (2) of
section 56 to provide that where a company, not being a company in which the
public are substantially interested, receives, in any previous year, from any person
being a resident, any consideration for issue of shares, if the consideration received
for issue of shares exceeds the face value of such shares, the aggregate
consideration received for such shares exceeding such fair market value shall be
chargeable to income tax under the head “Income from other sources”.
3. It has been decided by the Government to sun-set the provisions of clause
(viib) of sub-section (2) of section 56 of the Act. Consequent to said decision,
amendment to clause (viib) of sub-section (2) of section 56 of the Act is being carried
out to provide that the provisions of this clause shall not apply from the assessment
year 2025-26.
4. This amendment is proposed to be made effective from the 1st day of April,
2025, and shall accordingly apply from assessment year 2025-26.
[Clause 23]
Promotion of domestic cruise ship operations by non-residents
Certain amendments have been proposed to promote the cruise-shipping
industry in India. The aim is to make India an attractive cruise tourism destination,
to attract global tourists to cruise shipping in India and to popularise cruise shipping
with Indian tourists. Participation of international cruise-ship operators in this sector
will encourage development of this sector and enable access to international best
practices.
2. In order to provide clarity, certainty and simple structure for the business of
cruise-shipping, which may be operating as multi-layer entities, the following is
19
proposed. A presumptive taxation regime is being put in place for a non-resident,
engaged in the business of operation of cruise ships, alongwith exemption to
income of a foreign company from lease rentals, if such foreign company and the
non-resident cruise ship operator have the same holding company.
3. It is, therefore, proposed to insert a new section 44BBC, which deems twenty
per cent of the aggregate amount received/ receivable by, or paid/ payable to, the
non-resident cruise-ship operator, on account of the carriage of passengers, as
profits and gains of such cruise-ship operator from this business. Applicability of this
section, will be subject to prescribed conditions.
4. Provisions of section 44B relating to presumptive taxation for shipping
business of non-residents, shall therefore, no longer apply to cruise-ship business.
5. Further, the lease rentals paid by a company which opts for presumptive
regime under section 44BBC (‘the first company’), shall be exempt in the hands of
the recipient company, if such company is a foreign company and such recipient
company and the first company are subsidiaries of the same holding company. This
is proposed to be done by insertion of a new clause (15B) in section 10. Subsidiary
company and holding company have been defined in the Explanation to this new
clause. This exemption shall be available upto assessment year 2030-31.
6. These amendments will take effect from the 1st day of April, 2025 and will,
accordingly, apply in relation to the assessment year 2025-26 and subsequent
assessment years.
[Clauses 4, 16 & 17]
C. SIMPLIFICATION AND RATIONALISATION
Introduction of block assessment provisions in cases of search under section
132 and requisition under section 132A
Vide Finance Act, 2021 the provisions of section 153A and section 153C of
the Act were amended to provide that the said provision shall only apply to search
and seizure proceedings under section 132 or requisition under section 132A of the
Act initiated on or before 31.03.2021. The separate regime for search assessments
20
was abolished and such assessments were subsumed into the reassessment
provisions. Further, sections 147, 148, 149, 151 and 151A of the Act were also
amended to provide that in case of search, survey or requisition initiated or
conducted on or after the 1st April, 2021, it shall be deemed that the Assessing
Officer (AO) has information which suggests that the income chargeable to tax has
escaped assessment in the case of the assessee for the three assessment years
immediately preceding the assessment year relevant to the previous year in which
the search is initiated or requisition is made or any material is seized or
requisitioned. Further, if the AO has information which suggests that the income
escaping assessment, represented in the form of asset, amounts to or is likely to
amount to fifty lakh rupees or more, notice under section 148 can be issued if ten
years have not elapsed from the end of the relevant assessment year.
2. Searches conducted by the Income-tax Department are important means for
unearthing black money. However, it has been gathered from the field formations
that there are multiple problems that are arising under the present scheme of
search assessment under section 148 of the Act. The absence of any legal
requirement for consolidated assessments in search cases has led to a situation
where every year only the time-barring year is reopened in the case of the searched
assessee. This results in staggered search assessments for the same search and
consequentially, the searched assessee may be engaged in the search assessment
process for almost up to ten years. This is time-consuming process which escalates
the litigation cost for the taxpayer as well as for the department. For the duration of
such period, legal position on an issue may undergo change, leading to different
additions in different years, on the same issue. Moreover, since such a long
duration is involved, there is a possibility of change of opinion with respect to the
line of enquiry. Further, due to such staggered assessments, coordinated
investigation is not feasible in search cases.
3. In order to make the procedure of assessment of search cases cost-
effective, efficient and meaningful, it is proposed to introduce the scheme of block
assessment for the cases in which search under section 132 or requisition under
section 132A has been initiated or made. The main objectives for the introduction of
this scheme are early finalization of search assessments, coordinated investigation
during search assessments and reduction in multiplicity of proceedings.
21
3.1 It is proposed to amend the provisions of Chapter XIV-B of the Act, to
provide the following for assessment of search cases:
(i) Where on or after the 1st day of September, 2024, a search is initiated under
section 132, or books of account, other documents or any assets are
requisitioned under section 132A, in the case of any person, the Assessing
Officer shall proceed to assess or reassess the total income of such person
in accordance with the provisions of the said Chapter.
(ii) The ‘block period’ shall consist of previous years relevant to six assessment
years preceding the previous year in which the search was initiated under
section 132 or any requisition was made under section 132A and shall
include the period starting from the 1st of April of the previous year in which
search was initiated or requisition was made and ending on the date of the
execution of the last of the authorisations for such search or date of such
requisition.
(iii) Regular assessments for the block period shall abate. There will be one
consolidated assessment for the block period. Till block assessment is
complete, no further assessment/reassessment proceeding shall take place
in respect of the period covered in the block.
(iv) The Assessing Officer shall assess the ‘total income’ of the assessee,
including the undisclosed income which shall include any money, bullion,
jewellery or other valuable article or thing or any expenditure or any income
based on any entry in the books of account or other documents or
transactions, where such money, bullion, jewellery, valuable article, thing,
entry in the books of account or other document or transaction represents
wholly or partly income or property which has not been or would not have
been disclosed for the purposes of this Act, or any expense, deduction or
allowance claimed under this Act which is found to be incorrect.
(v) The undisclosed income falling within the block period, forming part of the
total income, shall be computed in accordance with the provisions of this Act,
on the basis of evidence found as a result of search or survey in
consequence of such search or requisition of books of account or other
documents and such other materials or information as are either available
22
with the Assessing Officer or come to his notice by any means during the
course of proceedings under the said Chapter.
(vi) The assessment in respect of any other person shall be governed by the
provisions of section 158BD, which provides that where the Assessing
Officer is satisfied that any undisclosed income belongs to or pertains to or
relates to any person, other than the person with respect to whom search
was made or whose books of account or other documents or any assets
were requisitioned, then, any money, bullion, jewellery or other valuable
article or thing, or assets, or expenditure, or books of account, other
documents, or any information contained therein, seized or requisitioned
shall be handed over to the Assessing Officer having jurisdiction over such
other person and that Assessing Officer shall proceed under section 158BC
against such other person and the provisions of the said Chapter shall apply
accordingly.
(vii) The tax shall be charged at sixty per cent for the block period, as per
section 113 of the Act. The proviso to section 113 has been amended to
provide that the tax chargeable under this section shall be increased by a
surcharge, if any, which may be levied by any Central Act. However,
presently, no surcharge is proposed for income chargeable to tax for the
block period. No interest under the provisions of section 234A, 234B or 234C
or penalty under the provisions of section 270A shall be levied or imposed
upon the assessee in respect of the undisclosed income assessed or
reassessed for the block period.
(viii) Penalty on the undisclosed income of the block period as determined
by the Assessing officer shall be levied at fifty per cent of the tax payable on
such income. No such penalty shall be levied if the assessee offers
undisclosed income in the return furnished in pursuance of search and pays
the tax along with the return.
(ix) The time-limit for completion of block assessment of the searched assessee
shall be twelve months from the end of the month in which the last of the
authorisations for search under section 132, or requisition under section
132A, was executed or made. The time-limit for completion of block
23
assessment of any other person shall be twelve months from the end of the
month in which the notice under section 158BC in pursuance of section
158BD, was issued to such other person. However, an exclusion of nearly
six months shall be available in respect of period from date of search to the
date of handing over of seized material to the Assessing Officer.
(x) Where any evidence found as a result of search or requisition relates to any
international transaction or specified domestic transaction referred to in
section 92CA, pertaining to the period beginning from the 1st day of April of
the previous year in which last of the authorisations was executed and
ending with the date on which last of the authorisations was executed, such
evidence shall not be considered for the purposes of determining the total
income of the block period and such income shall be considered in the
assessment made under the other provisions of this Act.
(xi) The notice under clause (a) of sub-section (1) of section 158BC requiring the
searched assessee to furnish his return of income for the block period, as
well as the order of assessment for the block period shall be issued or
passed, as the case may be, with the previous approval of the Additional
Commissioner or the Additional Director or the Joint Commissioner or the
Joint Director.
(xii) The provisions of section 144C of the Act shall not apply to any
proceeding under the said Chapter.
4. This amendment will take effect from the 1st day of September, 2024.
[Clauses 32, 43, 49, 76 & 85]
Rationalisation of provisions relating to assessment and reassessment under
the Act
The Finance Act, 2021 amended the procedure for assessment or
reassessment of income in the Act with effect from the 1st April, 2021. The said
amendment modified, inter alia, section 148, section 149 and also introduced a new
section 148A in the Act.
24
2. The existing provisions of section 148 of the Act provide the procedure for
issuance of notice to initiate assessment or reassessment or recomputation under
section 147 of the Act. The existing provisions of the said section also provide details
of what constitutes ‘information’ for the purposes of issuance of notice. The said
section further provides the instances in which the Assessing Officer (AO) would be
deemed to have information in order to initiate the assessment or reassessment
proceedings.
3. The existing provisions of section 148A of the Act provide the procedure to be
followed by AO before issuance of notice under section 148 of the Act, including
conducting inquiry, providing an opportunity of being heard to the assessee, and
passing an order prior to reopening of a case. The said section also provides the
circumstances in which such procedure does not apply.
4. Further, the existing provisions of section 149 of the Act provide the time limits
for issuance of notice under section 148 and computation of the period of limitation
under various circumstances. Furthermore, the existing provisions of section 151 of
the Act mandates to obtain sanction from the specified authority, for issuance of
notice under section 148 or section 148A of the Act.
5. In this regard, multiple suggestions have been received regarding the
considerable litigation at various fora arising from the multiple interpretations of the
provisions of aforementioned sections. Further, representations have been received
to reduce the time-limit for issuance of notice for the relevant assessment year in
proceedings of assessment, reassessment or recomputation.
6. Hence, it is proposed to rationalize the aforementioned reassessment
provisions. It is expected that the new system would provide ease of doing business
to taxpayers as there is a reduction in time limit by which a notice for assessment or
reassessment or re-computation can be issued. The salient features of the proposed
amendments are as follows:-
(i) It is proposed to substitute section 148 of the Act so as to provide that before
making the assessment, reassessment or recomputation under section 147
and subject to the provisions of section 148A, the Assessing Officer shall
issue a notice to the assessee, along with a copy of the order passed under
sub-section (3) of section 148A determining it to be a fit case, requiring him to
25
furnish within such period as may be specified, not exceeding a period of
three months from the end of the month in which such notice is issued, a
return of his income or the income of any other person in respect of whom he
is assessable under this Act. Further, it is proposed to provide that no notice
under this section shall be issued unless there is information with the
Assessing Officer which suggests that the income chargeable to tax has
escaped assessment in the case of the assessee for the relevant assessment
year.
Any information in the case of the assessee emanating from survey
conducted under section 133A, other than under sub-section (2A) of the said
section, on or after the 1st day of September, 2024, is proposed to be added
to the definition of ‘information’ with the Assessing Officer which suggests that
the income chargeable to tax has escaped assessment.
It is further proposed to provide that where the Assessing Officer has
received information under the scheme notified under section 135A, no notice
under section 148 shall be issued without prior approval of the specified
authority.
(ii) It is further proposed to substitute the section 148A so as to provide that
where the Assessing Officer has information which suggests that income
chargeable to tax has escaped assessment in the case of an assessee for the
relevant assessment year, he shall, before issuing any notice under section
148, provide an opportunity of being heard to such assessee, by serving upon
him a notice to show cause as to why a notice under section 148 should not
be issued in his case, and such notice shall be accompanied by the
information which suggests that income chargeable to tax has escaped
assessment in his case for the relevant assessment year. Thereafter, on
receipt of notice under sub-section (1), the assessee may furnish his reply,
within such time, as may be specified in such notice.
The Assessing Officer shall, on the basis of material available on
record and taking into account the reply of the assessee furnished under sub-
section (2), if any, pass an order with the prior approval of the specified
authority under sub-section (3) of section 148A, determining whether or not it
is a fit case to issue notice under section 148.
26
It is further proposed that the provisions of this section shall not apply
in the case of an assessee where the Assessing Officer has received
information under the scheme notified under section 135A pertaining to
income chargeable to tax escaping assessment for any assessment year in
his case.
(iii) The time limitation for issuance of notice under section 148A and section 148
of the Act is proposed to be provided in section 149 of the Act as follows:
in normal cases, no notice under sections 148A shall be issued if three
years have elapsed from the end of the relevant assessment year.
Notice beyond the period of three years from the end of the relevant
assessment year can be taken only in a few specific cases;
in normal cases, no notice under section 148 shall be issued if three
years and three months have elapsed from the end of the relevant
assessment year. Notice beyond the period of three years and three
months from the end of the relevant assessment year can be taken
only in a few specific cases;
in specific cases, where as per the information with the Assessing
Officer, the income escaping assessment amounts to or is likely to
amount to fifty lakh rupees or more, notice under section 148A can be
issued beyond the period of three years but not beyond the period of
five years from the end of the relevant assessment year;
in specific cases, where the Assessing Officer has in his possession
books of account or other documents or evidence related to any asset
or expenditure or transaction or entry (or entries) which reveal that the
income chargeable to tax, which has escaped assessment amounts to
or is likely to amount to fifty lakh rupees or more, notice under section
148 can be issued beyond the period of three years and three months
but not beyond the period of five years and three months from the end
of the relevant assessment year.
(iv) It is proposed to substitute the section 151 so as to provide that specified
authority for the purposes of sections 148 and 148A shall be the Additional
Commissioner or the Additional Director or the Joint Commissioner or the
Joint Director.
27
(v) It is proposed to amend the section 152 of the Act so as to provide that where
a search has been initiated under section 132 or requisition is made under
section 132A or a survey is conducted under section 133A [other than under
sub-section (2A)] on or after the 1st day of April, 2021 but before the 1st day
of September, 2024, the provisions of section 147 to 151 shall apply as they
stood immediately before the commencement of the Finance (No. 2) Act,
2024.
(vi) It is also proposed to amend the section 152 of the Act so as to provide that
where a notice under section 148 has been issued or an order under clause
(d) of section 148A has been passed, prior to the 1st day of September, 2024,
the assessment, reassessment or recomputation in such case shall be
governed as per the provisions of sections 147 to 151, as they stood prior to
their amendment by Finance (No. 2) Act, 2024.
7. This amendment will take effect from the 1st day of September, 2024.
[Clauses 44, 45, 46 & 47]
Rationalisation of provisions relating to period of limitation for imposing
penalties
Section 275 of the Act provides for the period of limitation for imposing
penalties. Sub-section (1) of the said section, inter-alia, states that no order imposing
a penalty shall be made in a case where the relevant assessment order or other
order is the subject-matter of an appeal before the Joint Commissioner (Appeals) or
the Commissioner (Appeals) under section 246 or section 246A, respectively, or
before the Appellate Tribunal (ITAT) under section 253, after the expiry of the
financial year in which the proceedings, in the course of which action for the
imposition of penalty has been initiated, are completed, or six months from the end
of the month in which the order of the JCIT(A) or the CIT(A) or, as the case may be,
the Appellate Tribunal is received by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, whichever period
expires later. Similarly, at three other places in the said section, for the purposes of
limitation, the date of receipt of order passed by appellate authority is given as, ‘date
of receipt of order in the office of Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner’.
28
2. Suggestions have been received from the field formations that the reference
to the office of Principal Chief Commissioner of Income-tax, Chief Commissioner of
Income-tax and Principal Commissioner of Income-tax poses ambiguity for the
purposes of calculation of the number of days for imposition of penalties as a
consequence of the orders referred to in the said section. Therefore, it is proposed to
amend section 275 of the Act to omit the reference to the date of receipt of order by
the Principal Chief Commissioner or Chief Commissioner.
3. This amendment will take effect from the 1st day of October, 2024.
[Clause 83]
Amendment in provisions relating to set off and withholding of refunds
Section 245 of the Act relates to set off and withholding of refund in certain
cases. The Finance Act, 2023 has integrated section 241A and section 245 (as they
existed prior to their amendment) into a single provision of section 245 of the Act.
Presently, section 245 of the Act empowers the Assessing Officer (AO) to adjust the
refund (or a part of the refund) against any tax demand that is outstanding from the
taxpayer. Further, where refund becomes due to a person but the assessment or
reassessment proceeding is pending in his case, then, the Assessing Officer may,
with the approval of the Principal Commissioner of Income-tax or Commissioner of
Income-tax, withhold the refund till the date on which such assessment or
reassessment is completed. Moreover, no additional interest on refund under section
244A of the Act is payable to the assessee for the period beginning from the date on
which such refund is withheld and ending with the date on which
assessment/reassessment is made.
2. Sub-section (2) of section 245 of the Act provides that where a part of the
refund is set off under the provisions of sub-section (1), or where no such amount is
set off, and refund becomes due to a person and the Assessing Officer having
regard to the fact that proceedings for assessment or re-assessment are pending in
the case of such person, is of the opinion that the grant of refund is likely to
adversely affect the revenue, he may, for reasons to be recorded in writing and with
the previous approval of the Principal Commissioner of Income-tax or Commissioner
of Income-tax, withhold the refund up to the date on which such assessment or
reassessment is made.
29
3. From the bare reading of the provision, it is seen that there are two
requirements which the Assessing Officer is supposed to fulfill. One is that he should
form opinion that the grant of refund is likely to adversely affect the revenue and the
second is that he has to record the reasons in writing for withholding the refund. The
second condition of recording of reasons takes care of the first condition as even if
an opinion is formed, it has been expressed in terms of reasons recorded in writing.
Thus, for the phrase “is of the opinion that the grant of refund is likely to adversely
affect the revenue”, the phrase “he may, for reasons to be recorded in writing and
with the previous approval of the Principal Commissioner of Income-tax or
Commissioner of Income-tax” is proposed to be retained. Further, the period of
withholding the refund ‘up to the date of assessment’ is inadequate as the demand
itself becomes due after thirty days of the date of assessment. Hence, the period of
withholding of the refund is proposed to be extended up to sixty days from the date
on which such assessment or reassessment is made.
4. Consequential amendment is also required in section 244A of the Act to allow
non-payment of additional interest up to the date till which such refund is withheld
under the provisions of sub-section (2) of section 245 of the Act.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 72 & 73]
Rationalisation of the time-limit for filing appeals to the Income Tax Appellate
Tribunal
Section 253 of the Act lays down the provisions for filing an appeal with the
Income Tax Appellate Tribunal (ITAT) against an order passed by the Joint
Commissioner of Income-tax (Appeals), Commissioner of Income-tax (Appeals)
[CIT(Appeals)], the Principal Chief Commissioner of Income-tax, the Chief
Commissioner of Income-tax, the Principal Commissioner of Income-tax, or the
Commissioner of Income-tax. The ITAT is the second appellate authority in the
income-tax appellate hierarchy.
2. The sub-section (1) of the said section details the types of orders passed
under various sections of the Act against which an aggrieved assessee may appeal
to the Appellate Tribunal. Clause (a) of the said sub-section provides that any
assessee aggrieved by any order passed by a Deputy Commissioner (Appeals)
before the 1st day of October, 1998 or, as the case may be, a Commissioner
30
(Appeals) under section 154, section 250, section 270A, section 271, section 271A,
section 271AAB, section 271AAC, section 271AAD, section 271J or section 272A
may appeal to the Appellate Tribunal.
2.1 Section 158BFA of the Act is an interest and penalty provision under Chapter
XIV-B of the Act for imposition of penalty on undisclosed income for the block period
in a case where search has been initiated under section 132 of the Act. However, as
the reference to the same has not been inserted in sub-section (1) of section 253 of
the Act, an aggrieved assessee cannot appeal against such penalty orders passed
by Commissioner (Appeals). Accordingly, it is proposed to amend clause (a) of sub-
section (1) of section 253 to include the reference of section 158BFA therein
3. As per the provisions of sub-section (3) of the said section, appeals to the
ITAT are to be filed ‘within sixty days of the date on which the order sought to be
appealed against is communicated to the assessee or to the PCIT/CIT, as the case
may be’. Appeals to the ITAT are generated mainly by orders passed by the CIT
(Appeals), which is now through ITBA. In the new Faceless Appeal dispensation, the
CIT (Appeals) upload the orders on a day-to-day basis rather than the erstwhile
practice of sending a monthly/fortnightly ‘bunch’ of orders to the jurisdictional PCIT.
Such an upload amounts to electronic communication to the PCIT. This, in turn,
means that the limitation for filing appeal to the ITAT would fall on a daily basis
making it difficult for the PCIT and the Assessing Officer to track the same.
4. In view of the foregoing, it is proposed to amend sub-section (3) of section
253 to provide that the appeal before the ITAT may be filed within two months from
the end of the month in which the order sought to be appealed against is
communicated to the assessee or to the Principal Commissioner or Commissioner,
as the case may be.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 78]
Rationalisation of the provisions of Charitable Trusts and Institutions
I. Merger of trusts under first regime with second regime
The Act puts in place two main regimes for trusts or funds or institutions to
claim exemption. The first is contained in the provisions of sub-clause(s) (iv), (v), (vi)
or (via) of clause (23C) of section 10. The second is contained in the provisions of
31
sections 11 to 13 of the Act. The provisions of the respective regimes lay down the
procedure for filing application for approval/ registration, the conditions subject to
which such approval/ registration shall be granted or can be withdrawn etc.
2. As both the regimes intend to grant similar benefit, the procedure and
conditions across the two regimes have been aligned, over the last few years, vide
successive Finance Acts.
3. In order to take forward the process of simplification of procedures and to
reduce administrative burden, it is proposed that the first regime be sunset and
trusts, funds or institutions be transited to the second regime in a gradual manner.
4. It is, therefore, proposed that:
Applications seeking approval or provisional approval under sub-clauses (iv),
(v), (vi) or (via) of clause (23C) of section 10, and filed on or after 1st October,
2024, shall not be considered.
Applications filed under these sub-clauses before 1st October, 2024, and
which are pending would be processed and considered under the extant
provisions of the first regime itself.
Approved trusts, funds or institutions would continue to get the benefit of
exemption, as per the provisions of sub-clauses (iv), (v), (vi) or (via) of clause
(23C) of section 10, till the validity of the said approval.
They would be eligible to apply for registration, subsequently, under the
second regime. Amendments have accordingly been proposed in section 12A.
Certain eligible modes of investment, under the first regime (viz. those
specified in clause (b) of third proviso to clause (23C) of section 10) shall be
protected in the second regime, by way of amendment in section 13.
5. These amendments will take effect from the 1st day of October, 2024.
[Clauses 4, 6 & 9]
II. Condonation of delay in filing application for registration by trusts or
institutions
A trust or institution desirous of seeking registration under section 12AB is
inter alia required to apply within timelines specified in clause (ac) of sub-section (1)
of section 12A.
32
2. It has been noted that at times trusts or institutions are unable to file
application within specified timelines. In case a trust or institution is unable to apply
within time specified, it may become liable to tax on accreted income as per
provisions of Chapter XII-EB of the Act. A situation of permanent exit of trust or
institution from the exemption regime may also arise.
3. It is proposed that the Principal Commissioner/ Commissioner may be
enabled to condone the delay in filing application and treat such application as filed
within time. The delay may be condoned if he considers that there is a reasonable
cause for the same.
4. These amendments will take effect from the 1st day of October, 2024.
[Clause 6]
III. Rationalisation of timelines for funds or institutions to file applications
seeking approval under section 80G
Section 80G of the Act, inter alia, provides for the grant of approval to certain
funds or institutions for receiving donation. Deduction is available for donations to
approved funds or institutions, in the hands of the assessee making such donations.
2. The first proviso to sub-section (5) of section 80G provides timelines for filing
application for approval, for funds or institutions referred to in sub-clause (iv) of
clause (a) of sub-section (2) of section 80G. The second proviso lays down the
procedure for processing the same. It has been noted that at times funds or
institutions are unable to file application within specified timelines. A situation of
unintended permanent exit of fund or institution from section 80G approval may also
arise.
3. It is proposed to amend the first and second provisos to rationalise the
timelines for filing applications for approval.
4. These amendments will take effect from the 1st day of October, 2024.
[Clause 26]
IV. Rationalisation of timelines for disposing applications made by trusts or
funds or institutions, seeking registration for exemption under section 12AB or
approval under section 80G
Applications seeking registration under section 12AB, filed by trusts or
institutions, are required to be processed by the Principal Commissioner or
33
Commissioner within a period of six months from the end of the month in which the
application was received.
2. Similarly, the applications of funds or institutions referred to in sub-clause (iv)
of clause (a) of sub-section (2) of section 80G, seeking approval are required to be
processed by the Principal Commissioner or Commissioner within a period of six
months from the end of the month in which the application was received.
3. For better administration and monitoring, it is proposed to rationalise timelines
for disposing applications made by trusts or funds or institutions to six months from
the end of the quarter in which the application was received.
4. Thus, where provisionally registered/ approved trusts or funds or institutions
apply for registration/ approval or where registered/ approved trusts or funds or
institutions apply for further registration/ approval under section 12AB or section
80G, as the case may be, the order granting registration/ rejecting application shall
be passed before expiry of the period of six months from the end of the quarter in
which the application was received.
5. These amendments will take effect from the 1st day of October, 2024.
[Clauses 7 & 26]
V. Merger of trusts under the exemption regime with other trusts
When a trust or institution which is approved / registered under the first or
second regime, as the case may be merges with another approved / registered entity
under either regime, it may attract the provisions of Chapter XII-EB, relating to tax on
accreted income in certain circumstances.
2. It is proposed that conditions under which the said merger shall not attract
provisions of Chapter XII-EB, may be prescribed, to provide greater clarity and
certainty to taxpayers. A new section 12AC is proposed to be inserted for this
purpose.
3. These amendments will take effect from the 1st day of April, 2025.
[Clause 8]
VI. Inclusion of reference of clause (23EA), clause (23ED) and clause (46B) of
section 10 in sub-section (7) of section 11
Sub-section (7) of section 11 of the Act lays down that registration under
section 12AB shall become inoperative, if the trust or institution is approved / notified
34
under clause (23C), (23EC), (46) or (46A) of section 10. Such trust or institution has
a one-time option to apply to make its registration under section 12AB operative.
Thus, a trust or institution may choose the provisions under which it seeks to claim
exemption.
2. It is proposed to amend sub-section (7) of section 11 of the Act to include
reference of clause (23EA), clause (23ED) and clause (46B) of section 10 of the Act,
to enable trusts under the second regime to claim exemption under the above-noted
specific clauses of section 10.
3. These amendments will take effect from the 1st day of April, 2025.
[Clause 5]
Rationalisation and Simplification of taxation of Capital Gains
The taxation of capital gains is proposed to be rationalized and simplified.
There are three components to this simplification. Firstly, it is proposed that there will
only be two holding periods, 12 months and 24 months, for determining whether the
capital gains is short-term capital gains or long term capital gains. For all listed
securities, the holding period is proposed to be 12 months and for all other assets, it
shall be 24 months. Accordingly, amendment is proposed in clause (42A) of section
2 of the Act. Thus units of listed business trust will now be at par with listed equity
shares at 12 months instead of earlier 36 months. The holding period for bonds,
debentures, gold will reduce from 36 months to 24 months. For unlisted shares and
immovable property it shall remain at 24 months.
2. Secondly, the rate for short-term capital gain under provisions of section 111A
of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of
a business trust is proposed to be increased to 20% from the present rate of 15% as
the present rate is too low and the benefit from such low rate is flowing largely to
high net worth individuals. Other short-term capital gains shall continue to be taxed
at applicable rate.
2.1 The rate of long-term capital gains under provisions of various sections of the
Act is proposed to be 12.5% in respect of all category of assets. This rate earlier was
10% for STT paid listed equity shares, units of equity-oriented fund and business
trust under section 112A and for other assets it was 20% with indexation under
35
section 112. However, an exemption of gains upto 1.25 lakh (aggregate) is proposed
for long-term capital gains under section 112A on STT paid equity shares, units of
equity oriented fund and business trust, thus, increasing the previously available
exemption which was upto 1 lakh of income from long term capital gains on such
assets. For bonds and debentures, rate for taxation of long-term capital gains was
20% without indexation. For listed bonds and debentures, the rate shall be reduced
to 12.5%. Unlisted debentures and unlisted bonds are of the nature of debt
instruments and therefore any capital gains on them should be taxed at applicable
rate, whether short-term or long-term. It is proposed accordingly.
2.2 Thus, unlisted debentures and unlisted bonds are proposed to be brought to
tax at applicable rates by including them under provisions of section 50AA of the Act.
This amendment in section 50AA shall come into effect from the 23rd day of July,
2024.
3. Thirdly, simultaneously with rationalisation of rate to 12.5%, indexation
available under second proviso to section 48 is proposed to be removed for
calculation of any long-term capital gains which is presently available for property,
gold and other unlisted assets. This will ease computation of capital gains for the
taxpayer and the tax administration.
4. Parity in taxation between resident and non-resident assesses: To bring parity
of taxation between residents and non-residents, corresponding amendments to
section 115AD, 115AB, 115AC, 115ACA and 115E are being made to align the rates
of taxation in respect of long-term capital gains proposed under section 112A and
112 and rates of short term capital gains proposed under section 111A.
5. Further, consequential amendments to align the withholding tax provisions
with the substantive provisions to give effect to the proposed changes in rates of
capital gains tax are being made under section 196B and 196C.
6. These proposals are proposed to be given effect immediately i.e. with effect
from the 23rd of July, 2024.
[Clauses 3, 20, 21, 29, 30, 31, 33, 34, 35, 36, 38, 63 & 64]
Amendment to definition of Specified Mutual Fund under section 50AA
The Finance Act, 2023 had introduced special taxation regime of deemed short term
capital gains taxation for Market Linked Debentures and Specified Mutual Funds by
36
way of introduction of section 50AA of the Act. The gains in such cases were to be
taxed as Short-term Capital Gain irrespective of period of holding. The requirement
of investment of not more than 35% in equity shares has also impacted other funds
which are not debt-oriented funds, but invest below 35% in equity shares. Such
funds which are adversely impacted include Exchange Traded Funds (ETFs), Gold
Mutual Funds and Gold ETFs. In the case of Fund-of-Funds (FoFs) as well, wherein
the underlying fund further invests in other instruments, there is ambiguity as to
whether they will be considered Specified Mutual Funds as defined in section 50AA.
Thus, a need to re-define the term “Specified Mutual Funds” for the purposes of
Section 50AA, to provide clarity regarding the proportion of investment being made
in terms of debt and money market instruments, and also to clarify the investment
requirements in the case of Fund-of-Funds (FoFs) had arisen. Representations from
multiple stakeholders were received seeking clarity and revision. It is thus proposed
to amend the definition of “Specified Mutual Fund” under clause (ii) of Explanation of
section 50AA to provide that a specified mutual fund shall mean a mutual fund:
(a) a Mutual Fund by whatever name called, which invests more than sixty five
per cent of its total proceeds in debt and money market instruments; or
(b) a fund which invests sixty five per cent or more of its total proceeds in units of
a fund referred to in sub-clause (a).
The above amendment under clause (ii) of Explanation of section 50AA is proposed
to be brought into effect from 1st day of April, 2026 and shall be applicable from AY
2026-27 onwards.
[Clause 21]
Rationalisation of Tax Deducted at Source rates
There are various provisions of Tax Deduction at Source (TDS) with different
thresholds and multiple rates between 0.1%, 1%, 2%, 5%, 10%, 20%, 30% and
above. To improve ease of doing business and better compliance by taxpayers, the
TDS rates are proposed to be reduced. However, no change would occur with
respect to sections such as TDS on salary, TDS on virtual digital assets, TDS on
winnings from lottery etc/ race horses, payment on transfer of immovable property
and payments to non-residents, TDS rates for TDS on contracts etc.
37
2. Rationalisation of TDS rates is proposed as below.
Section
Present TDS
Rate
Proposed
TDS Rate
With effect from
Section 194D - Payment of
insurance commission (in case of
person other than company)
5%
2%
1.4.2025
Section 194DA - Payment in
respect of life insurance policy
5%
2%
1.10.2024
Section 194G – Commission etc
on sale of lottery tickets
5%
2%
1.10.2024
Section 194H - Payment of
commission or brokerage
5%
2%
1.10.2024
Section 194-IB - Payment of rent
by certain individuals or HUF
5%
2%
1.10.2024
Section 194M - Payment of
certain sums by certain
individuals or Hindu undivided
family
5%
2%
1.10.2024
Section 194-O - Payment of
certain sums by e-commerce
operator to e-commerce
participant
1%
0.1%
1.10.2024
Section 194F relating to payments
on account of repurchase of units
by Mutual Fund or Unit Trust of
India
Proposed to be omitted
1.10.2024
Section 194D - Payment of insurance commission
1. As per provisions of section 194D, any person responsible for paying to a
resident any income by way of remuneration or reward, whether by way of
commission or otherwise, for soliciting or procuring insurance business (including
business relating to the continuance, renewal or revival of policies of insurance)
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 which is at
present 5% (in case of person other than company).
38
2. It is proposed that TDS under section 194D of the Act (in case of person other
than company) be reduced from 5% to 2%.
3. The amendment will take effect from 1st day of April 2025.
Section 194DA - Payment in respect of life insurance policy
As per provisions of section 194DA, any person responsible for paying to a
resident any sum under a life insurance policy, including the sum allocated by way of
bonus on such policy, other than the amount not includible in the total income under
clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax
thereon at the rate of 5% on the amount of income comprised therein.
2. It is proposed that TDS under section 194DA of the Act be reduced from 5%
to 2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 54]
Section 194G – Commission, etc on sale of lottery tickets
As per provisions of section 194G, any person who is responsible for paying,
on or after the 1st day of October, 1991 to any person, who is or has been stocking,
distributing, purchasing or selling lottery tickets, any income by way of commission,
remuneration or prize (by whatever name called) on such tickets in an amount
exceeding fifteen thousand rupees 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 5%.
2. It is proposed that TDS under section 194G of the Act be reduced from 5% to
2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 56]
Section 194H - Payment of commission or brokerage
As per provisions of section 194H, any person, not being an individual or a
Hindu undivided family (as specified), 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
39
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 5%.
2. It is proposed that TDS under section 194H of the Act be reduced from 5% to
2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 57]
Section 194-IB - Payment of rent by certain individuals or HUF
As per provisions of section 194-IB, any person, being an individual or a
Hindu undivided family (other than those referred to in the second proviso to section
194-I), responsible for paying to a resident any income by way of rent exceeding fifty
thousand rupees for a month or part of a month during the previous year, shall
deduct an amount equal to 5% of such income as income-tax thereon.
2. It is proposed that TDS under section 194-IB of the Act be reduced from 5%
to 2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 59]
Section 194M - Payment of certain sums by certain individuals or Hindu undivided
family
Any person, being an individual or a Hindu undivided family (other than those
who are required to deduct income-tax as per the provisions of section 194C, section
194H or section 194J) responsible for paying any sum to any resident for carrying
out any work (including supply of labour for carrying out any work) in pursuance of a
contract, by way of commission (not being insurance commission referred to
in section 194D) or brokerage or by way of fees for professional services during the
financial year, shall, at the time of credit of such sum or at the time of payment of
such sum in cash or by issue of a cheque or draft or by any other mode, whichever is
earlier, deduct an amount equal to 5% of such sum as income-tax thereon.
40
2. It is proposed that TDS under section 194M of the Act be reduced from 5% to
2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 60]
Section 194-O - Payment of certain sums by e-commerce operator to e-commerce
participant
Section 194-O of the Act provides that notwithstanding anything to the
contrary contained in any of the provisions of Chapter XVII-B, where sale of goods or
provision of services of an e-commerce participant is facilitated by an e-commerce
operator through its digital or electronic facility or platform (by whatever name
called), such e-commerce operator shall, at the time of credit of amount of sale or
services or both to the account of an e-commerce participant or at the time of
payment thereof to such e-commerce participant by any mode, whichever is earlier,
deduct income-tax at the rate of 1% of the gross amount of such sales or services or
both.
2. However, representations were received that offline transactions attract a
lower TDS rate of 0.1% (under section 194Q relating to TDS on payment of certain
sums for purchase of goods) or tax collection at source (TCS) rate of 0.1% [under
section 206C(1H) relating to TCS on receipts from sale of goods]. To bring parity
between these provisions, reduction of the TDS rate under section 194-O from 1% to
0.1% is proposed.
3. The amendment will take effect from 1st day of October 2024.
[Clause 61]
Section 194F - TDS on payments on repurchase of units by mutual fund or UTI
It is proposed to omit section 194F relating to TDS on payments on
repurchase of units by Mutual Fund or UTI which attracts a TDS rate of 20%.
2. The amendment will take effect from 1st day of October 2024.
[Clause 55]
Ease in claiming credit for TCS collected/TDS deducted by salaried employees
Section 192 of the Act provides for deduction of tax at source on salary income.
41
Further, sub-section (2B) of section 192 of the Act provides for consideration of
income under any other head and tax, if any, deducted thereon to be taken into
account for the purposes of making the deduction under sub- section (1) of the
aforesaid section, subject to certain conditions.
2. Representations have been received that credit of TCS paid should be
allowed while computing the amount of tax to be deducted on salary income of the
employees as this will help in avoiding cash flow issues for employees. Similarly, all
TDS may be taken into account for the purpose of deduction of tax from the salary
income of employees. Moreover when the TCS etc is not taken into account, the
same is required to be claimed as a refund by the employee which adds to the
compliance process.
3. In order to ease compliance, it is proposed that sub-section (2B) of section
192 may be amended to expand the scope of the said sub-section to include any tax
deducted or collected under the provisions of Chapter XVII-B or Chapter XVII-BB, as
the case may be, to be taken into account for the purposes of making the deduction
under sub-section (1) of section 192.
4. The amendments will take effect from the 1st day of October, 2024.
[Clause 50]
Alignment of interest rates for late payment to Government account of TCS
Section 206C of the Act provides for the collection of tax at source (TCS) on
business of trading in alcoholic liquor, forest produce, scrap etc. Sub-section (7) of
the section 206C provides that persons who fail to collect tax or after collecting, fail
to deposit the same to the credit of the Central Government shall be liable to pay
simple interest at the rate of one percent for every month or part thereof on the
amount of such tax from the date on which such tax was collectible to the date on
which the tax was paid.
2. It was noted that the rates of interest applicable for late collection / late
deposit of TCS are not in line with provisions of sub-section (1A) of section 201
pertaining to late deduction / deposit of TDS. A higher interest rate of 1.5% is
applicable where tax has been deducted but not been deposited to Government
42
account due to the gravity attached with the failure, as it deprives the deductee of
due tax credit and does not reach the Central Government in time. Same difficulty is
also faced by the collectee.
3. To align the rate of simple interest charged on failure to pay to Government
account after collection of tax it is proposed to amend sub-section (7) of section
206C, to specify that simple interest for non-payment of tax collected at source to
Government account, is to be increased from one per cent. to one and one-half per
cent. for every month or part thereof on the amount of such tax from the date on
which such tax was collected to the date on which such tax is actually paid.
4. The amendment will take effect from the 1st day of April, 2025.
[Clause 70]
Increase in limit of remuneration to working partners of a firm allowed as
deduction
Section 40 of the Act provides for amounts that shall not be deducted in computing
the income chargeable under the head "Profits and gains of business or profession”.
Sub-clause (v) of clause (b) of the said section provides for disallowance of any
payment of remuneration to any partner who is working partner which is authorized
by and is in accordance with the terms of the partnership deed and relates to any
period falling after the date of such partnership deed in so far as the amount of such
payment to all partners during the previous year exceeds the aggregate amount
computed as hereunder:
(a)
on the first Rs. 3,00,000 of the book-
profit or in case of a loss
Rs. 1,50,000 or at the rate of
90 per cent of the book-
profit, whichever is more;
(b)
on the balance of the book-profit
at the rate of 60 per cent :
2. This limit was put in place on the statute w.e.f AY 2010-11. It is now proposed
to amend the limit of remuneration to working partners in a partnership firm, which is
allowed as deduction. It is proposed that on the first Rs 6,00,000 of the book-profit or
in case of a loss, the limit of remuneration is increased to Rs 3,00,000 or at the rate
of 90 per cent of the book-profit, whichever is more as follows:
43
(a)
on the first Rs. 6,00,000 of the book-
profit or in case of a loss
Rs. 3,00,000 or at the rate of
90 per cent of the book-
profit, whichever is more;
(b)
on the balance of the book-profit
at the rate of 60 per cent :
3. The amendments to sub-clause (v) of clause (b) of section 40 of the Act will
take effect from the 1st day of April, 2025 and will, accordingly, apply in relation to
assessment year 2025-2026 and subsequent years.
[Clause 14]
Claiming credit for TCS of minor in the hands of parent
Section 206C of the Act provides for the collection of tax at source (TCS) on
business of trading in alcoholic liquor, forest produce, scrap etc. Representations
have been received that there is no provision in the Act for allowing credit of TCS to
any other person (eg. parent) other than the collectee.
2. For example, funds remitted under the Liberalized Remittance Scheme of the
Reserve Bank of India may have been remitted in the name of minor and
accordingly tax would have been collected under sub-section (1G) of section 206C.
However, there is no provision for the parent to claim the same in their tax return.
3. It is, therefore, proposed to introduce a provision in section 206C of the Act,
to allow the Board to notify the rules for cases where credit of tax collected are
given to person other than collectee. However, to ensure that this provision is not
misused, credit of TCS of the minor shall only be allowed where the income of the
minor is being clubbed with the parent as under sub-section (1A) of section 64 of
the Act which states that in computing the total income of any individual, there shall
be included all such income as arises or accrues to his minor child.
4. The amendment will take effect from the 1st day of January, 2025.
[Clause 70]
44
D. WIDENING AND DEEPENING OF TAX BASE AND ANTI-AVOIDANCE
Tax on distributed income of domestic company for buy-back of shares
Special provisions relating to tax on distributed income of a domestic
company from buy-back of shares were introduced by Finance Act, 2013, in line
with the then schema of dividend distribution tax. Prior to the amendments made by
the Finance Act, 2020, a company had to pay dividend distribution tax (DDT), on
the distributed profits by way of dividends in addition to the income-tax chargeable
in respect of the total income for any assessment year. DDT was done away with by
the Finance Act, 2020.
2. References have been received stating that pay-outs on buy-back of shares
should be taxed in hands of recipients, in line with similar regime in place for
taxation of dividend.
3. Both dividend as well as buy-back are methods for the company to distribute
accumulated reserves and thus ought to be treated similarly. In addition, there is
extinguishment of rights for the shareholders who are tendering their shares in the
buy-back by domestic company, to the extent of shares bought back by such
company from shareholders. The cost of acquisition of such shares also needs to
be accounted for in some manner.
4. It is therefore, proposed that, the sum paid by a domestic company for
purchase of its own shares shall be treated as dividend in the hands of
shareholders, who received payment from such buy-back of shares and shall be
charged to income-tax at applicable rates. No deduction for expenses shall be
available against such dividend income while determining the income from other
sources. The cost of acquisition of the shares which have been bought back would
generate a capital loss in the hands of the shareholder as these assets have been
extinguished. Therefore when the shareholder has any other capital gain from sale
of shares or otherwise subsequently, he would be entitled to claim his original cost
of acquisition of all the shares (i.e. the shares earlier bought back plus shares finally
sold). It shall be computed as follows:
(i) deeming value of consideration of shares under buy-back (for purposes of
computing capital loss) as nil;
45
(ii) allowing capital loss on buy-back, computed as value of consideration (nil)
less cost of acquisition;
(iii) allowing the carry forward of this as capital loss, which may subsequently be
set-off against consideration received on sale and thereby reduce the capital
gains to this extent.
Example :
100 shares bought in 2020 @Rs. 40/- per share
Total cost of acquisition Rs. 4000/-
20 shares bought back in 2024 @Rs. 60/- per share
Income taxable as deemed dividend Rs. 1200/-
Capital loss on such buyback (Rs. 40 *20) Rs. 800/-
50 Shares sold in 2025 @Rs. 70 per share
Capital Gain (3500 – 2000) Rs. 1500
Chargeable capital gain after set off Rs. 700
5. These amendments will take effect from the 1st day of October, 2024, and
will accordingly apply to any buy-back of shares that takes place on or after this
date.
[Clauses 3, 4, 18, 24, 39 & 52]
Revision of rates of securities transaction tax by amendment to the Finance
(No.2) Act, 2004
Levy of Securities Transaction Tax (hereafter referred to as STT) on
transaction in specified securities was introduced vide Finance (No.2) Act, 2004. As
per the provisions of the STT, recognized stock exchanges, mutual funds (having
equity oriented scheme), insurance company or lead merchant banker appointed by
the company in respect of an initial public offer or an initial offer are liable to collect
the tax on specified securities and pay the same to the credit of the Central
Government within seven days from the end of the month in which STT is collected.
After its introduction in 2004, the rates of STT have been revised from time to time.
46
2. Presently, the rate of levy of STT on sale of an option in securities is 0.0625
per cent of the option premium, while the rate of levy of STT on sale of a future in
securities is 0.0125 per cent of the price at which such “futures” are traded. The rate
of levy of STT on delivery trades in equity shares is 0.1 per cent on both purchase
and sale transactions, while in the case of sale of an option in securities where
option is exercised, the rate of levy is 0.125% of the intrinsic price (i.e the difference
between the settlement price and the strike price) and is payable by the purchaser.
3. There has been an exponential growth of derivative (future and option)
markets in recent times and trading in such derivatives accounts for a large
proportion of trading in stock exchanges. In view of this exponential growth of the
derivative markets, it is proposed to increase the said rates of securities transaction
tax on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the
option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02
per cent of the price at which such “futures” are traded.
4. This amendment is proposed to be made effective from the 1st day of
October, 2024.
[Clause 155]
Reporting of income from letting out of house property under ‘Income from
House Property’
Section 28 of the Act specifies kinds of income that shall be chargeable to
income-tax under the head ‘Profits and gains of business or profession’.
2. It has been observed that some taxpayers are reporting their rental income
generated by letting out of the house property, under the head ‘Profits and gains of
business or profession’ in place of the head ‘Income from house property’.
Accordingly, they are reducing their tax liability substantially by showing house
property income under the wrong head of income.
3. In view of the same, it is proposed to amend the section 28 of the Act so as to
clarify that any income from letting out of a residential house or a part of the house
by the owner shall not be chargeable under the head “Profits and gains of business
or profession” and shall be chargeable under the head “Income from house
property”.
47
4. This amendment will take effect from the 1st day of April, 2025 and will,
accordingly, apply in relation to assessment year 2025-26 and subsequent
assessment years.
[Clause 11]
Amendment of section 47
Section 47 of the Act provides exclusion to certain transactions not regarded as
transfer for the purposes of chargeability under ‘Capital Gains’ under section 45.
2. Clause (iii) of section 47 provides that nothing contained in section 45 shall
apply to any transfer of a capital asset under a gift or will or an irrevocable trust.
The first proviso to the said clause makes an exception to the clause in respect of
specified ESOPs.
3. With the insertion of section 50D in the Act in the Finance Act, 2012,
providing for taking fair market value as full value of consideration in cases where
the consideration received or accruing as a result of the transfer of a capital asset is
not ascertainable or cannot be determined, and section 50CA vide Finance Act,
2017, providing for taking fair market value as full value of consideration in case of
unquoted shares where the consideration received or accruing is less than the fair
market value of such share, the Revenue has aimed at bolstering the anti-
avoidance machinery provisions of the Act to eliminate avoidance of Capital Gains
tax. However, in multiple cases, taxpayers have argued before judicial fora that
transaction of gift of shares by company is still not liable to capital gains tax, in view
of the provisions of section 47(iii) of the Act. The matter thus remains a litigated
issue leading to:
a) tax avoidance and
b) erosion of Indian tax base.
4. Further, a gift is given out of natural love and affection and accordingly it is
proposed to substitute clause (iii) of section 47 and its proviso, to provide that
nothing contained in section 45 shall apply to transfer of a capital asset, under a gift
or will or an irrevocable trust, by an individual or a Hindu undivided family.
5. This amendment is proposed to be made effective from the 1st day of April,
2025 and will accordingly apply to assessment year 2025-26 and subsequent
assessment years.
[Clause 19]
48
TDS on payment of salary, remuneration, interest, bonus or commission by
partnership firm to partners
Presently there is no provision for deduction of tax at source (TDS) on payment of
salary, remuneration, interest, bonus, or commission to partners by the partnership
firm. Hence, it is proposed that a new TDS section 194T may be inserted to bring
payments such as salary, remuneration, commission, bonus and interest to any
account (including capital account) of the partner of the firm under the purview of
TDS for aggregate amounts more than Rs 20,000 in the financial year. Applicable
TDS rate will be 10%.
2. The provisions of section 194T of the Act will take effect from the 1st day of
April, 2025.
[Clause 62]
TCS under sub-section (1F) of section 206C on notified goods
The existing provisions of section 206C of the Act provide, inter alia, for the
collection of tax at source on business of trading in alcoholic liquor, forest produce,
scrap etc. Sub-section (1F) provides that every person, being a seller, who receives
any amount as consideration for sale of a motor vehicle of the value exceeding ten
lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a
sum equal to one per cent. of the sale consideration as income-tax.
2. It has been seen that there has been an increase in expenditure on luxury
goods by high net worth persons. For proper tracking of such expenses and in order
to widen and deepen the tax net, it is proposed to amend sub-section (1F) of section
206C to also levy TCS on any other goods of value exceeding ten lakh rupees, as
may be notified by the Central Government in this behalf. Such goods would be in
the nature of luxury goods.
3. The amendment will take effect from the 1st day of January, 2025.
[Clause 70]
Amendment of provisions of TDS on sale of immovable property
Section 194-IA of the Act provides for deduction of tax on payment of consideration
for transfer of certain immovable property other than agricultural land.
49
2. Sub-section (1) of the said section provides that any person responsible for
paying to a resident any sum by way of consideration for transfer of any immovable
property shall, at the time of credit or payment of such sum to the resident, deduct
an amount equal to one per cent. of such sum or the stamp duty value of such
property, whichever is higher, as income-tax thereon. Sub-section (2) of the said
section provides that no deduction of tax shall be made where the consideration for
the transfer of an immovable property and the stamp duty value of such property,
are both less than fifty lakh rupees.
3. It has been observed that some taxpayers are interpreting that the
consideration being paid or credited refers to each individual buyer’s payment rather
than the total consideration paid for the immovable property.
4. Hence if the buyer is paying less than Rs. 50 lakh, no tax is being deducted,
even if the value of the immovable property and stamp duty value exceeds Rs. 50
lakh. This is against the intention of legislature.
5. Accordingly, it is proposed to amend sub-section (2) of section 194-IA of the
Act to clarify that where there is more than one transferor or transferee in respect of
an immovable property, then such consideration shall be the aggregate of the
amounts paid or payable by all the transferees to the transferor or all the transferors
for transfer of such immovable property.
6. The amendments will take effect from the 1st day of October, 2024.
[Clause 58]
Tax Deduction at source on Floating Rate Savings (Taxable) Bonds (FRSB)
2020
Section 193 of the Act provides for deduction of tax at source on payment of any
income to a resident by way of interest on securities.
2. The Government has introduced Floating Rate Savings (Taxable) Bonds
(FRSB) 2020. The provisions of section 193 of the Act are proposed to be amended
to allow for deduction of tax at source at the time of payment of interest exceeding
ten thousand rupees on ––
50
I. the Floating Rate Savings Bonds (FRSB) 2020 (Taxable) and
II. any security of the Central Government or State Government, as the Central
Government may, by notification in the Official Gazette, specify in this behalf.
3. The amendments will take effect from the 1st day of October, 2024.
[Clause 51]
Preventing misuse of deductions of expenses claimed by life insurance
business
Section 44 of the Act provides for computing of profits and gains of any business of
insurance, including any such business carried on by a mutual insurance company
or by a co-operative society, to be in accordance with First Schedule of the Act,
notwithstanding other specific provisions of the Act.
2. Rule 2 of the First Schedule, applicable for Life insurance business, states
that the profits and gains of life insurance business shall be taken to be the annual
average of the surplus arrived at by adjusting the surplus or deficit disclosed by the
actuarial valuation made in accordance with the Insurance Act, 1938, in respect of
the last inter-valuation period ending before the commencement of the assessment
year and excluding from it such surplus or deficit included therein which was made
in any earlier inter-valuation period.
3. It has been noticed that there have been instances where non-business
expenses have been claimed by life insurance companies and there is no provision
to add back these to the income of such companies. In order to ensure that
provisions are not misused to claim deduction for expenses which are otherwise not
admissible under the provisions of section 37 of the Act, it is proposed to amend
Rule 2 of the First Schedule of the Act to provide that any expenditure which is not
admissible under the provisions of section 37 in computing the profits and gains of a
business shall be included to (i.e. added back to) the profits and gains of the life
insurance business.
4. The amendment will take effect from the 1st day of April, 2025 and will
accordingly apply from assessment year 2025-2026 onwards.
[Clause 87]
51
Inclusion of taxes withheld outside India for purposes of calculating total
income
Section 198 of the Act provides that all sums deducted (tax deducted), in
accordance with the provisions of Chapter XVII-B shall, for the purpose of
computing the income of an assessee, be deemed to be income received.
2. It was seen that some assessees are not including taxes withheld outside
India for the purposes of calculating their total income which was leading to under
reporting of total income as only their net income was being offered for taxation.
However they were claiming credit for the taxes withheld abroad resulting in double
deduction on account of income not being included in total income but credit for
foreign taxes withheld was being taken.
3. In order to address this issue, it is proposed to amend section 198, to provide
that all sums deducted in accordance with the provisions of Chapter XVII-B and
income tax paid outside India by way of deduction, in respect of which an assessee
is allowed a credit against the tax payable under the Act, are for the purpose of
computing the income of the assessee, deemed to be income received.
4. The amendment will take effect from the 1st day of April, 2025.
[Clause 66 ]
Excluding sums paid under section 194J from section 194C (Payments to
Contractors)
Section 194C of the Act provides for TDS on payments to contractors at the rate of
1% when the payment is being made or credit is being given to an individual or HUF
and 2% in other cases. Section 194J of the Act relates to TDS on fees for
professional or technical services wherein the applicable TDS rates are 2% or 10%
depending on the nature of payment being made.
2. Clause (iv) of the Explanation of section 194C defines “work” to specify
which all activities would attract TDS under section 194C. However, there is no
explicit exclusion of assessees who are required to deduct tax under section 194J
from requirement or ability to deduct tax under section 194C of the Act. Therefore
52
some deductors are deducting tax under section 194C of the Act when in fact they
should be deducting tax under section 194J of the Act.
3. In view of the above, it is proposed to explicitly state that any sum referred to
in sub-section (1) of section 194J does not constitute “work” for the purposes of
TDS under section 194C.
4. The amendment will take effect from 1st day of October 2024.
[Clause 53]
Disallowance of settlement amounts being paid to settle contraventions
Section 37 of the Act provides for allowability of expenditure laid out or expended
wholly and exclusively for the purpose of business or profession.
2. Explanation 1 of sub-section (1) of section 37 provides that any expenditure
incurred by an assessee for any purpose which is an offence or which is prohibited
by law shall not be deemed to have been incurred for the purpose of business or
profession and no deduction or allowance shall be made in respect of such
expenditure.
3. Explanation 3 of sub-section (1) of section 37 clarifies that the expression
“expenditure incurred by an assessee for any purpose which is an offence or which
is prohibited by law”, referred to in Explanation 1, includes expenditure incurred for
any purpose which is an offence or is prohibited by, any law enacted in or outside
India; or is incurred to provide any benefit or perquisite, in whatever form, to a
person, whether or not carrying on a business or exercising a profession and
acceptance of such benefit or perquisite by such person is in violation of any law or
rule or regulation or guideline under the law governing the conduct of such person;
or is incurred to compound an offence under any law for the time being in force in or
outside India.
4. Settlement amounts are incurred due to an infraction of law and relate to
contraventions etc and, therefore, should not be allowed as business expenses.
5. Accordingly, it is proposed to amend the Explanation 3 to sub-section (1) of
section 37 of the Act to clarify that "expenditure incurred by an assessee for any
purpose which is an offence or which is prohibited by law" under Explanation 1 shall
53
include any expenditure incurred by an assessee to settle proceedings initiated in
relation to a contravention under any law for the time being in force, as may be
notified by the Central Government in the Official Gazette in this behalf.
6. The amendment is proposed to be made effective from the 1st day of April,
2025 and will accordingly apply from assessment year 2025-2026 onwards.
[Clause 13]
Amendment of Section 55 of the Act
Prior to Finance Act, 2018, section 10(38) of the Income Tax Act, 1961 (the Act)
provided for exemption in respect of gains arising from the transfer of a long-term
capital asset, being an equity share in a company or a unit of an equity oriented
fund or a unit of a business trust where the transaction is subject to Securities
Transaction Tax (STT). Finance Act, 2018 withdrew the exemption on long-term
capital gains from the transfer of equity shares if STT is paid on both acquisition
and transfer.
2. With the withdrawal of the exemption, a specific provision in the form of
section 112A of the Act was inserted to tax long-term capital gains on transfer of
equity shares on which STT is paid at the time of acquisition and transfer.
Simultaneously, clause (ac) of sub-section (2) of section 55 of the Act was inserted
to provide a special mechanism for computation of cost of acquisition in respect of
assets covered under section 112A of the Act and acquired prior to 01 February
2018.
3. The cost of acquisition under clause (ac) of sub-section (2) of section 55 of
the Act, for an asset referred to in section 112A is to be determined as per the
following formula:
Higher of (a) and ( b), where:
(a) Actual cost of acquisition
(b) lower of:
(i) Fair Market Value (FMV) of shares as of 31st January 2018; and
(ii) Full value of Consideration received upon sale.
54
4. Further, sub-clause (iii) of clause (a) of the Explanation to clause (ac) of sub-
section (2) of section 55 of the Act provides for the ‘fair market value’ where the
capital asset is an equity share in a company which is not listed on a recognised
stock exchange as on the 31st day of January, 2018 but listed on such exchange on
the date of transfer, or listed on a recognised stock exchange on the date of transfer
and which became the property of the assessee in consideration of share which is
not listed on such exchange as on the 31st day of January, 2018 by way of
transaction not regarded as transfer under section 47. In such cases, “fair market
value” means an amount which bears to the cost of acquisition the same proportion
as Cost Inflation Index for the financial year 2017-18 bears to the Cost Inflation
Index for the first year in which the asset was held by the assessee or for the year
beginning on the first day of April, 2001, whichever is later. The Explanation thus
envisages defining the Fair Market Value of shares which are listed at the time of
transfer.
5. Thereafter, as provided by sub-section (4) of Section 112A of the Act, the
Central Government notified some cases of acquisitions to be given the benefits of
section 112A where STT could not have been paid at the time of acquisition. Due to
the notification, the condition of payment of STT was relaxed for transactions of
acquisition which are not chargeable to STT other than some exceptional situations
defined. As a consequence, the payment of STT at the acquisition is not required for
unlisted equity shares.
6. Due to this relaxation, a lacuna has arisen in computation of cost of
acquisition under clause (ac) of sub-section (2) of section 55 of the Act in the case of
equity shares transferred under Offer-For-Sale (OFS) as part of Initial Public Offering
(IPO) process where STT is paid at the time of transfer. Since the condition of STT
payment at the time of acquisition is relaxed through the aforementioned
Notification, it becomes an asset referred to under section 112A. Hence, for
determination of cost of acquisition under clause (ac) of sub-section (2) of section 55
of the Act, the computation of FMV as on 31 January 2018 as per the Explanation is
required. However, the equity shares at the time of OFS are unlisted on the date of
transfer, since the listing happens a few days after the transfer, and therefore some
taxpayers are taking the plea that the computation of FMV is not covered on a literal
reading of the Explanation to clause (ac) of sub-section (2) of section 55.
55
7. It has come to light in survey operations that, taxpayers in some cases are
not paying capital gains tax on transfer of shares acquired through Offer for Sale
(OFS) route citing the absence of an express provision for determination of the FMV
of such equity shares since they were still unlisted on the date of transfer even
though STT has been paid on transfer and thus, Cost of Acquisition is
indeterminable, and Capital Gains is not chargeable.
8. It is therefore proposed to amend sub-clause (iii) of clause (a) of the
Explanation to clause (ac) of sub-section (2) of section 55 of the Act, to specifically
provide that in a case where the capital asset is an equity share in a company which
is not listed on a recognised stock exchange as on the 31st day of January, 2018, or
which became the property of the assessee in consideration of share which is not
listed on such exchange as on the 31st day of January, 2018 by way of transaction
not regarded as transfer under section 47, but listed on such exchange subsequent
to the date of transfer, where such transfer is in respect of sale of unlisted equity
shares under an offer for sale to the public included in an initial public offer, “fair
market value” would mean an amount which bears to the cost of acquisition the
same proportion as Cost Inflation Index for the financial year 2017-18 bears to the
Cost Inflation Index for the first year in which the asset was held by the assessee or
for the year beginning on the first day of April, 2001, whichever is later.
9. This amendment is proposed to be deemed to have been inserted with effect
from the 1st day of April, 2018 and shall accordingly apply retrospectively from
assessment year 2018-19 onwards.
[Clause 22]
E. TAX ADMINISTRATION
Direct Tax Vivad se Vishwas Scheme, 2024
The Income-tax Act, 1961 provides for a mechanism of filing of appeals against
orders passed under the proceedings of the Act, both by the taxpayer and the
Department before respective appellate fora, such as Joint Commissioner of
Income-tax (Appeals), Commissioner of Income-tax (Appeals), the Income-Tax
Appellate Tribunal, High Courts and Hon’ble Supreme Court. It has been the
endeavour of the Central Board of Direct Taxes to provide expeditious disposal of
appeals by appellate authorities under its administrative control. One such measure
56
was the Direct Tax Vivaad Se Vishwas Act, 2020 launched for appeals pending as
on 31.01.2020. The Scheme got a very encouraging response from the taxpayers
and also resulted in garnering substantial revenue for the Government.
2. The pendency of litigation at various levels has been on the rise due to larger
number of cases going for appeal than the number of disposals. Keeping in view the
success of the previous Vivaad Se Vishwas Act, 2020 and the mounting pendency
of appeals at CIT(A) level, introduction of a Direct Tax Vivad se Vishwas Scheme,
2024 is proposed with the objective of providing a mechanism of settlement of
disputed issues, thereby reducing litigation without much cost to the exchequer.
3. It is proposed that this Scheme shall come into force from the date to be
notified by the Central Government. The last date for the Scheme is also proposed
to be notified.
[Clauses 88 to 99]
Amendment of provisions related to Equalisation Levy
Chapter VIII of the Finance Act, 2016 related to equalisation levy was amended by
Finance Act, 2020 to provide for imposition of equalization levy (EL) of two per cent
on the amount of consideration received/ receivable by an e-commerce operator
from e-commerce supply or services. An “e-commerce operator” means a non-
resident who owns, operates or manages digital or electronic facility or platform for
online sale of goods or online provision of services or both. The levy is imposed on
the amount of consideration received or receivable from–
(i) online sale of goods owned by the e-commerce operator; or
(ii) online provision of services provided by the e-commerce operator; or
(iii) online sale of goods or provision of services or both, facilitated by the e-
commerce operator; or
(iv) any combination of the above-mentioned activities.
2. However, the levy is not applicable where the e-commerce operator has a
permanent establishment (PE) in India, and the e-commerce supplies or services
are effectively connected with such PE. The levy is applicable on consideration
57
received or receivable by the e-commerce operator from e-commerce supply or
services made or provided or facilitated by it–
(i) to a person resident in India;
(ii) to a non-resident from–
(a) sale of advertisement, which targets a customer, who is resident in India
or a customer who accesses the advertisement through an IP address
located in India; and
(b) sale of data, collected from a person who is resident in India or from a
person who uses an IP address located in India; and
(iii) to a person who buys goods or services, or both, using an IP address located
in India.
3. Some stakeholders have raised concerns that the scope of 2% equalisation
levy is ambiguous and as a result it leads to compliance burden. In view of this it is
proposed that this equalisation levy at the rate of 2% shall not be applicable to
consideration received or receivable for e-commerce supply or services, on or after
the 1st day of August, 2024. Any service which was liable to equalisation levy was
exempt in sub-section (50) of section 10 subject to certain conditions. Consequently
as the 2% levy is being made inapplicable, it is proposed that income arising from e-
commerce supply or services made or provided or facilitated on or after the 1st day
of April, 2020 but before the 1st day of August, 2024 only, shall fall in the ambit of
clause (50) of section 10 of the Act.
These amendments will take effect from the 1st day of August, 2024.
[Clauses 4 & 157]
Amendments in section 42 and 43 of the Black Money Act, 2015 relating to
penalty for failure to disclose foreign income and asset in the ITR
Section 42 of the Black Money (Undisclosed Foreign Income and Assets) and
Imposition of Tax Act, 2015 (the Black Money Act) provides for penalty for failure to
furnish details of foreign income and assets in the return of income. The said section
58
is applicable in respect of an assessee being a resident other than not ordinarily
resident in India who has failed to furnish the return of income when such assessee
is having any asset, or is a beneficiary of an asset located outside India or is having
any income from a source located outside India. Similarly, section 43 of the Black
Money Act provides for penalty for failure to furnish in return of income, an
information or furnish inaccurate particulars about an asset (including financial
interest in any entity) located outside India. The said section is applicable when the
assessee being a resident other than not ordinarily resident in India has failed to
furnish the details of any asset located outside India, held by him as a beneficial
owner or otherwise, or in respect of which he was a beneficiary, or relating to any
income from a source located outside India.
2. In view of the above, every resident and ordinarily resident, while filing the
return of income, shall disclose all foreign assets (including investment in shares and
securities) and income from such foreign assets in the Income Tax Return. Failure to
furnish the ITR in relation to foreign income and asset or to report such foreign
income and assets located outside India in the ITR may attract a penalty under
section 42 or 43 of the Black Money Act, of an amount of ten lakh rupees regardless
of the value of asset located outside India.
3. Further, provisos to the aforementioned sections of the Black Money Act state
that the provisions of these sections shall not apply in respect of an asset, being one
or more bank accounts having an aggregate balance which does not exceed a value
equivalent to five hundred thousand rupees at any time during the previous year.
Suggestions have been received from various stakeholders that the threshold limit of
five lakh rupees is very low which results in many penalties where the asset value
itself is less than the penalty amount.
4. It is proposed to amend the provisos to sections 42 and 43 of the Black
Money Act to provide that the provisions of the said sections shall not apply in
respect of an asset or assets (other than immovable property) where the aggregate
value of such asset or assets does not exceed twenty lakh rupees.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 156]
59
Amendments proposed in section 276B of the Act for rationalisation of
provisions
Section 276B of the Act provides for prosecution in case of failure to pay tax
to the credit of Central Government under Chapter XII-D or XVII-B. The provisions of
the said section state that, inter-alia, if a person fails to pay to the credit of the
Central Government, the tax deducted at source by him as required by or under the
provisions of Chapter XVII-B, he shall be punishable with rigorous imprisonment for
a term which shall not be less than three months but which may extend to seven
years and with fine.
2. It is proposed to amend section 276B of the Act to provide for exemption from
prosecution to a person covered under clause (a) of the said section, if the payment
of tax deducted in respect of a quarter has been made to the credit of the Central
Government at any time on or before the time prescribed for filing the statement of
such quarter under sub-section (3) of section 200 of the Act.
3. This amendment will take effect from the 1st day of October, 2024.
[Clause 84]
Reducing time limitation for orders deeming any person to be assessee in
default
Section 201 and section 206C of the Act provides for the consequences when a
person does not deduct/ collect, or does not pay, or after so deducting/ collecting
fails to pay, the whole or any part of the tax, as required by or under the Act.
2. As per sub-section (3) of section 201 of the Act, there is a time limit of seven
years for order made under sub-section (1) of section 201 of the Act deeming a
person to be an assessee in default for failure to deduct the whole or any part of the
tax where the payee is a person resident in India. However, there is no time limit
when there has been a failure to deduct the whole or any part of the tax from a non-
resident. This creates uncertainty in the case of non-residents.
3. Similarly for TCS, sub-section (6A) of section 206C of the Act provides the
consequences when a person does not collect the whole or part of the tax or after
collecting fails to pay the tax as required by or under this Act, he shall be deemed to
be an assessee in default.
60
4. It is proposed to amend sub-section (3) of section 201 and insert new sub-
section (7A) in section 206C of the Act to provide that no order shall be made
deeming any person to be assessee in default for failure to deduct/ collect the whole
or any part of the tax from any person, at any time after the expiry of six years from
the end of the financial year in which payment is made or credit is given or tax was
collectible or two years from the end of the financial year in which the correction
statement is delivered, whichever is later.
5. The amendments will take effect from the 1st day of April, 2025.
[Clauses 69 & 70]
Widening ambit of section 200A of the Act for processing of statements other
than those filed by deductor
Section 200A of the Act provides for the manner in which statement of tax deduction
at source or a correction statement made by a person deducting any sum under
section 200 shall be processed.
2. There are statements, such as Form No. 26QF which is filed by an Exchange
wherein the deductee is filing details of the tax. It is proposed to widen the ambit of
section 200A of the Act to state that in respect of statements which have been made
by any other person, not being a deductor, the Board may make a scheme for
processing of such statements
3. The amendment will take effect from the 1st day of April, 2025.
[Clause 68 ]
Extending the scope for lower deduction / collection certificate of tax at source
Section 197 of the Act provides that payments on which tax is required to be
deducted under certain sections of Chapter XVII-B, are eligible for certificate for
deduction at lower rate. Further, sub-section (9) of section 206C of the Act provides
that sums on which tax is required to be collected under sub-section (1) or sub-
section (1C), are eligible for collection of tax at lower rate.
2. Section 194Q of the Act, requires every person being a buyer, who pays to a
resident, being the seller, for the purchase of any goods of the value or aggregate of
61
value exceeding fifty lakh rupees in any previous year, to deduct tax at the rate of
0.1% of such sum exceeding fifty lakh rupees.
3. Further, sub-section (1H) of section 206C of the Act, requires 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 exceptions given therein, to collect tax at the rate of 0.1% of such
consideration exceeding fifty lakh rupees.
4. Representations have been received that there are instances where the
taxpayers are incurring losses and due to tax deducted under section 194Q of the
Act, their funds are getting blocked. Moreover the tax deducted has to be refunded in
such cases. It is also stated that there is additional compliance as a seller liable for
TCS needs to also verify whether the buyer has deducted tax or not.
5. Therefore, to facilitate ease of doing business and to provide an option to
seek a lower deduction certificate so as to reduce compliance burden on the
assessee, it is proposed:
a) to amend sub-section (1) of section 197 to bring section 194Q in its ambit
b) to amend sub-section (9) of the section 206C to bring sub-section (1H) of
section 206C in its ambit.
6. The amendments will take effect from the 1st day of October, 2024.
[Clauses 65 & 70]
Notification of certain persons or class of persons as exempt from TCS
Section 206C of the Act provides for the collection of tax at source on
business of trading in alcoholic liquor, forest produce, scrap etc.
2. Representations have been received that there can be entities whose income
is exempt from taxation and are not required to furnish returns of income. However,
they face difficulty as tax is being collected on transactions carried out by them. They
state that there is no provision in the Act for them to be exempted from the TCS
provisions.
62
3. It is therefore proposed to provide that no collection of tax shall be made or
that collection of tax shall be made at such lower rate in respect of specified
transaction, from such person or class of persons, including institution, association or
body or class of institutions, associations or bodies, as may be notified by the
Central Government in the Official Gazette, in this behalf.
4. The amendment will take effect from 1st day of October 2024.
[Clause 70]
Time limit to file correction statement in respect of TDS/ TCS statements
Section 200 of the Act lists the duty of the person deducting tax under the provisions
of Chapter XVII-B. Sub-section (3) of this section requires that a deductor after
paying the tax deducted to the credit of the Central Government, shall prepare
statements detailing the TDS deducted and furnish it within the prescribed time to
the prescribed authority. The proviso to section 200 states that a person may also
deliver to the prescribed authority a correction statement for rectification of any
mistake or to add, delete or update the information furnished in the statement
delivered under this sub-section in such form and verified in such manner as may be
specified by the authority.
2. Section 206C of the Act provides for the collection of tax at source (TCS) on
business of trading in alcoholic liquor, forest produce, scrap etc. Proviso to sub-
section (3) of section 206C of the Act requires that a person collecting tax after
paying the tax collected to the credit of the Central Government, furnish statements
detailing the TCS collected within the prescribed time. Sub-section (3B) of the said
section requires that the person collecting tax may also deliver to the prescribed
authority, a correction statement for rectification of any mistake or to add, delete or
update the information furnished in the statement delivered under the proviso to sub-
section (3) in such form and verified in such manner, as may be specified by the
authority.
3. While there is a time limit for furnishing statements detailing the TDS/TCS,
however, there is no time limit for furnishing correction statements. Hence such
statements may be revised multiple times indefinitely and thus these provisions may
be misused causing difficulty to deductees / collectees. Accordingly, in order to put
63
certainty and finality on the filing process of TDS and TCS statements, it is proposed
to amend section 200 and sub-section (3B) of section 206C to provide that no
correction statement shall be delivered after the expiry of six years from the end of
the financial year in which the statement referred to in sub-section (3) of section 200
and statement referred to in the proviso to sub-section (3) of section 206C are
respectively delivered.
4. The amendments will take effect from the 1st day of April, 2025.
[Clauses 67 & 70]
Penalty for failure to furnish statements
Section 271H of the Act inter alia relates to penalty for failure to file Tax Deducted at
Source (TDS) or Tax Collected at Source (TCS) returns/ statements within the due
date. Sub-section (3) of section 271H of the Act states that no penalty shall be levied
if the person proves that after paying TDS/ TCS along with fees and interest to the
credit of the Central Government, the person has filed the TDS/TCS statement
before the expiry of period of one year from the time prescribed for furnishing such
statement.
2. While earlier the due date to file a belated return by the assessee was one
year from the end of the assessment year, the time limit presently is 31st December
of the same assessment year. Deductees/ collectees face great inconvenience if the
TDS/TCS statements by deductors/ collectors are not furnished in time leading to
mismatch in TDS/TCS during processing of income tax returns and raising of
infructuous demands.
3. To ensure better compliance, it is proposed to amend sub-section (3) of
section 271H to provide that no penalty shall be levied if the person proves that after
paying TDS/ TCS along with fees and interest to the credit of the Central
Government, he has filed the TDS/TCS statement before the expiry of period of one
month from the time prescribed for furnishing such statement.
4. This amendment will take effect from the 1st day of April, 2025.
[Clause 81]
64
Submission of statement by liaison office of non-resident in India
A non-resident having a liaison office in India, is required to prepare and deliver a
statement in respect of its activities in a financial year to the Assessing Officer within
sixty days from the end of such financial year under section 285 of the Act. It is
proposed that the period within which such statement is to be filed, be henceforth
prescribed under the Rules.
2. Further, in order to ensure better compliance in this respect, it is proposed
that failure to furnish statement may attract a penalty of one thousand rupees for
every day for which the failure continues, if the period of failure does not exceed
three months; and one lakh rupees in any other case. A new section 271GC is
proposed to be inserted in this regard.
3. However, this penalty shall not be leviable if the assessee proves that there
was reasonable cause for the said failure. It is proposed to amend section 273B to
provide for this.
4. These amendments will take effect from the 1st day of April, 2025.
[Clauses 80, 82 & 86]
Determination of Arms Length Price in respect of specified domestic
transactions in proceedings before Transfer Pricing Officer
Section 92CA of the Act provides that the Assessing Officer, if he considers it
necessary or expedient to do so, may with the previous approval of Principal
Commissioner or the Commissioner, refer the matter of determination of Arm’s
Length Price (ALP) in respect of an international transaction or specified domestic
transaction (SDT) to the Transfer Pricing Officer (TPO). Once reference is made to
the TPO, TPO is competent to exercise all powers that are available to the
Assessing Officer under sub-section (3) of Section 92C for determination of ALP and
consequent adjustment. Further, under section 92E of the Act, there is a reporting
requirement on the taxpayer and the taxpayer is under obligation to file an audit
report in the prescribed form before the Assessing Officer (AO) containing details of
all international transactions or SDT undertaken by the taxpayer during the year.
2. This audit report is the primary document with the AO, which contains the
details of international transactions and/or SDT undertaken by the taxpayer. If the
65
assessee does not report such a transaction in the report furnished under section
92E then the Assessing Officer would normally not be aware of such an International
Transaction/SDT so as to make a reference to the TPO.
3. The section, provides that if, during the course of proceeding before him, an
international transaction comes to the notice of the TPO, which has not been
referred to him by the AO, the TPO can proceed to determine the ALP in its respect
as well. It also provides for computation of ALP by the TPO, of those international
transactions, details of which have not been furnished in the audit report referred to
above. These provisions are in place in sub-section (2A) and (2B) of the section
92CA.
4. However, at present, the above noted provisions of sub-section (2A) and (2B)
of section 92CA do not extend to SDTs. It is proposed to amend sub-sections (2A)
and (2B) of section 92CA to enable the TPO to deal with SDTs which have not been
referred to him by the AO and/or in whose respect audit report under section 92CE
has not been filed.
5. These amendments will take effect from the 1st day of April, 2025 and will,
accordingly, apply in relation to the assessment year 2025-26 and subsequent
assessment years.
[Clause 27]
Discontinuation of the provisions allowing quoting of Aadhaar Enrolment ID in
place of Aadhaar number
The existing provisions of section 139AA of the Act mandate, inter-alia, that
every person who is eligible to obtain Aadhaar number shall, on or after the 1st day
of July, 2017, quote Aadhaar number—
(i) in the application form for allotment of Permanent Account Number (PAN);
(ii) in the return of income.
2. Further, said section also provides that where the person does not possess
the Aadhaar Number, the Enrolment ID of Aadhaar application form issued to him at
the time of enrolment shall be quoted in the application for permanent account
number or in the return of income furnished by him.
66
3. The said provisions allowing the quoting of Aadhaar Enrolment ID in
application form for allotment of PAN or in the return of income, was introduced in
2017. Since then, as per data available in public domain, coverage of Aadhaar
number has been increasing, and has encompassed majority of the population in
India. Hence, it is imperative to discontinue the option of quoting of the Enrolment ID
of Aadhaar application form, as any allotment of PAN against the Enrolment ID may
lead to duplication and misuse of PAN.
4. Therefore, it is proposed that proviso to sub-section (1) of section 139AA shall
not apply from the 1st day of October, 2024. It is further proposed that every person
who has been allotted permanent account number on the basis of Enrolment ID of
Aadhaar application form, shall intimate his Aadhaar number on or before a notified
date.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 42]
Amendments in sections 245Q and 245R related to Advance Rulings
Vide Finance Act, 2021, amendments were made to the provisions of Chapter
XIX-B of the Act dealing with Advance Rulings. The Finance Act, 2021 provided that
the Authority for Advance Rulings shall cease to operate with effect from such date,
as may be notified by the Central Government in the Official Gazette. Later, the
Central Government, vide Notification S.O. 3562(E), dated 01.09.2021, notified
September 01, 2021 as the date with effect from which the Authority for Advance
Rulings (AAR) shall cease to operate. Sections 245N to 245W of the Chapter
provide for the power the Central Government to constitute a Board for Advance
Rulings (BAR), the procedure to be followed by such Board, powers of the Authority
etc.
2. Sub-section (3) of section 245Q of the Act provides that an applicant may
withdraw an application within thirty days from the date on which such application is
made. After AAR was made ineffective, certain applications which were filed before
the erstwhile AAR, in which no order under sub-section (2) of section 245R had
been passed, were transferred to the newly constituted BAR under sub-section (4) of
67
section 245Q. In case of all those pending applications transferred to the BAR, the
period of thirty days has already elapsed.
3. However, representations have been received by the BAR, from many of the
applicants pointing out that their applications are still pending for disposal, and that
these applications were filed before AAR to get certainty on taxability of the
transactions with an intent to get a ruling from a quasi-judicial forum in a time-bound
manner. However, due to various reasons like change in constitution of BAR forum,
non-binding nature of the ruling (as it is made appealable to High Court), substantial
passage of time, and other commercial reasons, these applicants wish to withdraw
their applications.
4. In view of the foregoing, it is proposed to amend section 245Q to allow
application for withdrawal by the 31st of October, 2024 for the transferred
applications before BAR (from AAR) in cases where order under sub-section (2) of
section 245R has not been passed. It is further proposed to provide that on receipt
of an application under the proviso to sub-section (4) of section 245Q, the Board for
Advance Rulings may, by an order, reject the application referred to in sub-section
(1) thereof as withdrawn on or before the 31
st
day of December, 2024.
5. This amendment will take effect from the 1st day of October, 2024.
[Clauses 74 & 75]
Powers of the Commissioner (Appeals)
The existing provisions of section 251 of the Act specify the powers of the
Joint Commissioner (Appeals) or the Commissioner (Appeals). Further, sub-section
(1) of the said section provides that Commissioner (Appeals) shall have, inter-alia,
the following powers in disposing of an appeal:
(a) He may confirm, reduce, enhance or annul the assessment, in the case of an
appeal against an order of assessment.
(b) He may confirm, cancel, or vary to enhance or reduce, the penalty order, in
the case of an appeal against an order imposing a penalty.
2. Further, sub-section (4) of section 250 of the Act prescribes that
Commissioner (Appeals) may seek the report from the Assessing Officer after
making further inquiry, before disposing any appeal.
68
3. It has been found that in the best judgement cases, taxpayers remain non-
responsive to the letters or notices issued by the Faceless Assessing Officer.
However, they directly file the appeal to Commissioner (Appeals) against the
relevant assessment order.
4. Considering the huge pendency of appeals and disputed tax demands at the
Commissioner (Appeals) stage, it is proposed that the cases where assessment
order was passed as best judgement case under section 144 of the Act,
Commissioner (Appeals) shall be empowered to set aside the assessment and refer
the case back to the Assessing Officer for making a fresh assessment. Further, it is
proposed to make consequential amendment in section 153(3) of the Act in order to
provide the time limit for disposal of cases which are set aside by the Commissioner
(Appeals).
5. This amendment will take effect from the 1st day of October, 2024. It will be
applicable to appellate orders passed by the Commissioner (Appeals) on or after
01.10.2024.
[Clause 77]
Amendment of section 271FAA to comply with the Automatic Exchange of
Information (AEOI) framework
The existing provisions of the sub-section (1) of section 271FAA of the Act
inter-alia, provide that if a person referred to in sub-section (1) of section 285BA of
the Act, who is required to furnish a statement under that section, provides
inaccurate information in the statement, and where (a) the inaccuracy is due to a
failure to comply with the due diligence requirement prescribed under sub-section (7)
of section 285BA or is deliberate on the part of that person; or (b) the person knows
of the inaccuracy at the time of furnishing the statement of financial transaction or
reportable account, but does not inform the prescribed income-tax authority or such
other authority or agency; or (c) the person discovers the inaccuracy after the
statement of financial transaction or reportable account is furnished and fails to
inform and furnish correct information within the time specified under sub-section (6)
of section 285BA, then, the prescribed income-tax authority under sub-section (1) of
section 285BA may direct that such person shall pay, by way of penalty, a sum of
fifty thousand rupees.
69
2. The provisions of section 271FAA apply in case the specified person
furnishes inaccurate statement of the financial transactions / reportable account as
prescribed under section 285BA of the Act. While reviewing India’s CRS legislative
framework under the Automatic Exchange of Information (AEOI) framework, the
Global Forum on Transparency and Exchange of Information for Tax purposes has
formed a view that the penal sanction available under the said section for
inaccuracies would not automatically extend to all cases where due diligence was
not correctly done if the information did not lead to incorrect reporting.
3. In view of the foregoing, it is proposed to make the following amendments in
section 271FAA to clarify that penalty under the said section shall be attracted in any
of the following circumstances–
(i) furnishing inaccurate information in the statement shall be liable;
(ii) failure to comply with due diligence requirement in the statement;
4. Further, in section 273B, it is proposed to add the reference of section
271FAA in order to provide that no penalty shall be imposable for any failure referred
to in the said section, if the assessee proves that there was reasonable cause for
such failure.
5. This amendment will take effect from the 1st day of October, 2024.
[Clauses 79 & 82]
Amendment to include the reference of Black Money Act, 2015 for the
purposes of obtaining a tax clearance certificate
The existing provisions of sub-section (1A) of section 230 of Act specify that,
inter-alia, no person who is domiciled in India, shall leave India, unless he obtains a
certificate from the income-tax authorities stating that he has no liabilities under
Income-tax Act, 1961, or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act,
1958 (18 of 1958), or the Expenditure-tax Act, 1987 (35 of 1987), or he makes
satisfactory arrangements for the payment of all or any of such taxes which are or
may become payable by that person. Such certificate is required to be obtained
where circumstances exist which, in the opinion of an income-tax authority render it
necessary for such person to obtain the same.
70
2. The proviso to the said sub-section further mandates that no income-tax
authority shall make it necessary for any person who is domiciled in India to obtain
the said certificate unless he records the reasons therefor and obtains the prior
approval of the Principal Chief Commissioner or Chief Commissioner of Income-tax.
3. In this regard, it was observed that most of the liabilities arising under the
Acts administered by the Central Board of Direct Taxes (CBDT) have been covered
in the sub-section (1A) of section 230 of the Act, for the purpose of obtaining a tax
clearance certificate, except the liabilities arising under Black Money (Undisclosed
Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015).
4. In view of the same, it is proposed to insert the reference of liabilities under
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015 in the sub-section (1A) of the section 230 of the Act, for the purposes of
obtaining a tax clearance certificate.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 71]
Rationalisation of provisions related to time-limit for completion of
assessment, reassessment and recomputation
The existing provisions of section 153 of the Act specify the various time-
limits for completion of assessment, reassessment and recomputation under various
provisions of the Act. In this regard, representation has been received regarding
procedural difficulties in implementation of the provisions of the said section.
Considering the same, following changes have been proposed for amendment in
section 153 of the Act:-
(i) Sub-section (1) of said section provides, inter-alia, that assessment under
section 143 or section 144 shall be completed within twelve months from the
end of the assessment year in which the income was first assessable. In this
regard, it is proposed to insert a new sub-section (1B) so that order of
assessment of cases where return of income is furnished in consequence of
an order under section 119(2)(b) may be completed within twelve months
from the end of the financial year in which such return is furnished.
71
(ii) Sub-section (3) of the said section provides the time-limit for passing the fresh
assessment order in pursuance of an order under section 254 or section 263
or section 264 setting aside or cancelling an assessment. The said sub-
section provides that such fresh assessment order shall be passed at any
time before the expiry of twelve months from the end of the financial year in
which the order under section 250 or section 254 is received by the Principal
Chief Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner or, as the case may be, the order under section 263 or section
264 is passed by the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner, as the case may be. In this regard,
it is proposed to insert the reference of section 250 in this sub-section in order
to provide the time-limit for disposal of cases which are proposed to be set
aside by the Commissioner (Appeals).
(iii) Further, sub-section (8) of the said section provides that order of assessment
or reassessment relating to any assessment year, which stands revived under
sub-section (2) of section 153A, shall be made within a period of one year
from the end of the month of such revival or within the period specified in the
said section or sub-section (1) of section 153B, whichever is later. In this
regard, it is proposed to amend sub-section (8) of the said section to provide
the timeline for passing of order in the case of revived assessment or re-
assessment proceedings as a consequence of annulment of block
assessments under Chapter XIV-B of the Act.
(iv) Clause (xii) of Explanation 1 of the said section provides, that the period (not
exceeding one hundred and eighty days) commencing from date of initiation
of search and ending on the date on which the books of
account/documents/seized materials are handed over to the Assessing Officer
is excluded while computing the period of limitation. In this regard, it is
proposed to amend the provision of Explanation 1(xii) of the said section by
inserting a 6th proviso so as to provide that the date of limitation in such
cases falls at the end of the month, after taking into account the exclusion
provided in the Explanation.
2. Further, the existing provisions of the section 139 prescribe, inter-alia, that
every person, being a company or a firm, or being a person other than a company or
72
a firm whose total income exceeds the maximum amount which is not chargeable to
income-tax, shall, furnish a return of his income. In this regard, consequential
amendment is proposed in the said section to provide that where any return of
income is furnished in pursuance of an order under clause (b) of sub-section (2) of
section 119, the provisions of this section 139 shall apply.
3. These amendments will take effect from the 1st day of October, 2024.
[Clause 41 & 48]
Amendment of Section 80G
The provisions of sub-section (1) of section 80G provide that in computing the total
income of an assessee, there shall be deducted, in accordance with and subject to
the provisions of the section, the sums as specified in sub-section (2) of the same
section.
2. The existing provision of sub-clause (iiihg) of clause (a) of sub-section (2) of
Section 80G of the Act provides that in computing the total income of an assessee,
there shall be deducted, in accordance with and subject to the provisions of this
section, any sums paid by the assessee in the previous year as donations to the
National Sports Fund to be set up by the Central Government.
3. The Government had set up the aforesaid fund by the name National Sports
Development Fund w.e.f 12.11.1998. Therefore, it is proposed to amend sub-clause
(iiihg) of clause (a) of sub-section (2) of Section 80G of the Act to provide that in
computing the total income of an assessee, there shall be deducted, in accordance
with and subject to the provisions of this section, any sums paid by the assessee in
the previous year as donations to the National Sports Development Fund set up by
the Central Government.
4. This amendment will take effect from the 1st day of April, 2025 and will
accordingly apply to assessment year 2025-26 and subsequent assessment years.
[Clause 26]
73
Removing reference to National Housing Board in Section 43D of the Act
Section 43D of the Act provides for special provision in case of income of public
financial institutions, public companies involved in housing finance, scheduled
banks, co-operative banks other than primary agricultural credit societies, primary
co-operative agricultural and rural development banks, State financial corporations,
State industrial investment corporations and notified non-banking financial
companies.
2. Clause (b) of section 43D of the Act states that in the case of a public
company involved in housing finance, the income by way of interest in relation to
such categories of bad or doubtful debts as may be prescribed having regard to the
guidelines issued by the National Housing Bank (NHB) in relation to such debts shall
be chargeable to tax in the previous year in which it is credited by the public
company to its profit and loss account for that year or, as the case may be, in which
it is actually received by that company, whichever is earlier. Explanation to the said
section also contains references to NHB.
3. However, the Finance (No. 2) Act, 2019 (23 of 2019) has amended the
National Housing Bank Act, 1987, conferring powers for regulation of Housing
Finance Companies (HFCs) with Reserve Bank of India (RBI). Consequently, HFCs
have come under the purview of the RBI as a category of Non-Banking Financial
Companies (NBFCs). In the Act, separate provisions already exist in section 43D
with respect to NBFCs.
4. Hence, it is proposed to remove reference to National Housing Bank by
omitting clause (b) of section 43D of the Act and clause (a) and (b) of Explanation to
section 43D of the Act.
5. The amendment will take effect from the 1st day of April, 2025 and shall
accordingly apply in relation to assessment year 2025-2026 and subsequent
assessment years.
[Clause 15]
Adjusting liability under Black Money Act, 2015 against seized assets
Section 132B of the Act in its existing form provides that any existing liability
under the Income-tax Act, 1961, the Wealth-tax Act, 1957(27 of 1957), the
74
Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the
Interest-tax Act, 1974 (45 of 1974), and the amount of liability determined on
completion of the assessment or reassessment in consequence of search or
requisition, may be recovered from the taxpayer out of the seized assets under
section 132 or requisitioned under section 132.
2. Further, Black Money (Undisclosed Foreign Income and Assets) and
Imposition of Tax Act, 2015 provides for taxation of undisclosed foreign income and
undisclosed foreign assets. After the introduction of the said Act, such undisclosed
foreign income and value of undisclosed foreign asset is taxed under Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 in place
of the Income-tax Act, 1961.
3. In this regard, it has been observed that most of the liabilities arising under
the Acts administered by the Central Board of Direct Taxes (CBDT) have been
covered in section 132B of the Act, for the purpose of extinguishment of liability by
recovery out of the seized assets, except the liabilities arising under Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
4. In view of the above, it is proposed to insert the reference of Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 in the
section 132B of the Income-tax Act, 1961 so as to recover the existing liabilities
under Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015, out of seized assets.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 40]
Amendments to the Prohibition of Benami Property Transactions Act, 1988
(A) Amendment of Section 24 of the Prohibition of Benami Property
Transactions Act, 1988
Section 24 of the Prohibition of Benami Property Transactions (PBPT) Act, 1988
relates to notice and attachment of property involved in Benami transaction.
2. The existing provisions of sub-section (3) of the said section 24 of PBPT Act
do not provide for any time limit for a benamidar to furnish a reply to the notice
75
issued under sub-section (1) or beneficial owner to file submissions on copy of said
notice given to him under sub-section (2).
3. It is proposed to insert sub-section (2A) to provide a maximum time limit of
three months from the end of the month in which notice is issued under sub-section
(1) for the benamidar or the beneficial owner to file their explanations or
submissions.
4. The existing provisions of sub-section (3) and sub-section (4) of the said
section provide for a time limit of 90 days from the last day of the month in which
notice under sub-section (1) is issued for the Initiating Officer to provisionally attach
the property or to pass an order for continuing the provisional attachment or revoking
the provisional attachment or deciding not to attach the property, as the case may
be.
5. It is proposed to amend the said sub-section (3) and sub-section (4) of section
24 of the PBPT Act to increase the said period to four months from the end of the
month in which notice under sub-section (1) of the said section is issued.
6. The existing provisions of sub-section (5) of said section 24 allow for a time
period of fifteen days from the date of attachment order to the Initiating Officer to
draw up a statement of the case and refer it to the Adjudicating Authority.
7. It is proposed to amend the said sub-section to increase the said period to
one month from the end of the month in which the order under sub-clause (i) of
clause (a), or under sub-clause (i) of clause (b) of sub-section (4) of the said section
24 of the PBPT Act, 1988, has been passed.
8. These amendments will take effect from the 1st day of October, 2024.
[Clause 154]
(B) Insertion of Section 55A in the Prohibition of Benami Property
Transactions Act, 1988
As per section 53(2) of the Prohibition of Benami Property Transactions Act
(PBPT) Act, 1988, the offence of benami transaction is punishable with a penalty of
rigorous imprisonment for minimum one year to maximum seven years along with
fine extending to 25% of the fair market value of the benami property. This penalty is
the same for a benamidar or a beneficial owner or any person who abets or induces
any person to enter into a benami transaction. Due to same quantum of penalty &
76
prosecution as is imposable in the case of beneficial owner and abettor, benamidars
do not come forward to give evidence against the beneficial owner.
2. Further, many benamidars being of poor means and illiterate, imposing on
them the same penalty as the beneficial owner of such a benami transaction could
be disproportionate in nature. Alternatively, if such benamidars were to become
approvers, it would help in gathering clinching evidence and details about benami
properties and result in convictions of the beneficial owners, thus strengthening the
regime.
3. Furthermore, various other laws of the land provided for a tender of
pardon/immunity from prosecution/ reduced penalty in cases where the witness
assists in the due process of law.
4. It is thus proposed to insert a new section 55A in the PBPT Act, 1988, to
provide that the Initiating Officer may, with a view to obtaining the evidence of the
benamidar or any other person as referred to in section 53, other than the beneficial
owner, tender to such person immunity from penalty for any offence under section
53, with the previous sanction of the competent authority as referred to in section 55,
on condition of his making a full and true disclosure of the whole circumstances
relating to the benami transaction. A tender of immunity made to, and accepted by,
the person concerned, shall, to the extent to which the immunity extends, render him
immune from prosecution for any offence in respect of which the tender was made
and from the imposition of any penalty under section 53 of the Act.
5. Further, it is also proposed to provide that if it appears to the Initiating Officer
that any person to whom immunity has been tendered under this section has not
complied with the condition on which the tender was made or is wilfully concealing
anything or is giving false evidence, the Initiating Officer may record a finding to that
effect, and thereupon, with the previous sanction of the competent authority as
referred to in section 55, the immunity shall be deemed to have been withdrawn, and
any such person may be tried for the offence in respect of which the tender of
immunity was made or for any other offence of which he appears to have been guilty
in connection with the same matter and shall also become liable to the imposition of
any penalty under this Act to which he would have otherwise been liable.
6. This amendment will take effect from the 1st day of October, 2024.
[Clause 154]
In case of divergence of interpretation, the English text shall prevail.
77
CUSTOMS
Note:
(a) “Basic Customs Duty (BCD)” means the customs duty levied under the
Customs Act, 1962.
(b) “Agriculture Infrastructure and Development Cess (AIDC)” means a duty of
customs that is levied under Section 124 of the Finance Act, 2021.
(c) “Road and Infrastructure Cess (RIC)” means an additional duty of customs
that is levied under Section 111 of the Finance Act, 2018.
(d) “Health Cess” means a duty of customs that is levied under Section 141 of
the Finance Act, 2020.
(e) “Social Welfare Surcharge (SWS)” means a duty of customs that is levied
under Section 110 of the Finance Act, 2018.
(f) Clause Nos. in square brackets [ ] indicate the relevant clause of the
Finance (No. 2) Bill, 2024.
(g) Amendments carried out through the Finance (No. 2) Bill, 2024, will come
into effect on the date of its enactment, unless otherwise specified.
I. AMENDMENTS TO THE CUSTOMS ACT, 1962
S.
No.
Amendment
Clause of the
Finance (No. 2)
Bill, 2024
These changes will come into effect from the
date of enactment of the Finance (No. 2) Bill,
2024
1.
Section 28 DA is being amended to enable the
acceptance of different types of proof of origin
provided in trade agreements in order to align the
said section with new trade agreements, which
provide for self-certification.
[100]
2.
A proviso to sub-section (1) of Section 65 is being
inserted to empower the Central Government to
specify certain manufacturing and other operations
[101]
78
in relation to a class of goods that shall not be
permitted in a warehouse.
3.
Section 143AA of the Customs Act is being
amended by substituting the expression “a class of
importers or exporters” with “a class of importers
or exporters or any other persons” for the purpose
of facilitating trade.
[102]
4.
Clause (m) of subsection (2) of section 157 of the
Customs Act is being amended by substituting the
expression “a class of importers or exporters” with
“a class of importers or exporters or any other
persons”
[103]
II. AMENDMENTS TO THE CUSTOMS TARIFF ACT, 1975
S.
No.
Amendment to section
Clause of the
Finance (No.
2) Bill, 2024
1.
Section 6 of the Customs Tariff Act, 1975 which
provided for levy of protective duties in certain
cases by the Central Government on the
recommendations of the Tariff Commission is
being omitted, as the Tariff Commission has been
wound up by resolution dated 1
st
June 2022 by the
Government of India. This change will come into
effect from the date of enactment of the Finance
(No. 2) Bill, 2024
[106]
III. AMENDMENTS TO THE FIRST SCHEDULE TO THE CUSTOMS TARIFF
ACT, 1975
A.
Increase in Tariff rate (to be effective from
24.07.2024) * [Clause [107(a)] of the Finance (No.
2) Bill, 2024 ] read with Third Schedule.
*Will come into effect immediately through a
declaration under the Provisional Collection of
Taxes Act,2023
Rate of Duty
79
S.
No.
Heading, sub-
heading, tariff
item
Commodity
From
To
Plastics
1.
3920, 3921
Poly vinyl chloride (PVC) flex films
(also known as PVC flex banners
or PVC flex sheets)
{The currently applicable BCD on
all other goods falling under
heading 3920 and 3921 shall be
maintained by suitable amendment
in the relevant notification(s)}
10%
25%
Consumer goods
2.
6601 10 00
Garden umbrellas
20%
20% or
Rs. 60
per
piece,
whichev
er is
higher
Chemicals
3.
9802 00 00
Laboratory chemicals
(Heading 9802 covers all
chemicals, organic or inorganic,
whether or not chemically defined,
imported in packings not exceeding
500 gms or 500 millilitres and
which can be identified with
reference to the purity, markings or
other features to show them to be
meant for use solely as laboratory
chemicals)
10%
150%
80
B.
Tariff rate changes (without change in effective
rate of duty) to be effective from 01.10.2024
[Clause [107(b)] of the Finance (No. 2) Bill, 2024]
Note: The currently applicable rate of Basic Customs
Duty on these commodities shall be maintained by
suitable amendment in the relevant notification(s).
Rate of
Duty
S.
No.
Heading,
sub-
heading
tariff item
Commodity
From
To
1.
2008 19 20
Other roasted nuts and seeds,
including such arecanuts
30%
150%
2.
2008 19 30
Other nuts, otherwise prepared or
preserved, including such arecanuts
30%
150%
C
Amendment in tariff entries
Clause of the Finance
(No. 2) Bill, 2024
1.
The First Schedule to the Customs Tariff Act,
1975 is also being amended to modify the tariff
entries with effect from 1st October, 2024.
[107(b)]
read with Fourth
Schedule
IV. OTHER PROPOSALS INVOLVING CHANGES IN BASIC CUSTOMS DUTY
RATES IN NOTIFICATIONS
A.
Changes in Basic Customs Duty (to be
effective from 24.07.2024)
Rates of Duty
S.
No.
Chapter,
Heading,
sub-
heading,
tariff item
Commodity
From
To
I.
Agricultural Products
1.
1207 99 90
Shea nuts
30%
15%
II.
Aquafarming & Marine
Exports
1.
0306 36
Live SPF Vannamei shrimp
(Litopenaeus vannamei)
broodstock
10%
5%
81
2.
0306 36
Live Black tiger shrimp (Penaeus
monodon) broodstock
10%
5%
3.
0306 36 60
Artemia
5%
Nil
4.
0511 91 40
Artemia cysts
5%
Nil
5.
0308 90 00
SPF Polychaete worms
30%
5%
6.
1504 20
Fish lipid oil for use in
manufacture of aquatic feed
15%
Nil
7.
1504 20
Crude fish oil for use in
manufacture of aquatic feed
30%
Nil
8.
1518
Algal Oil for use in manufacture of
aquatic feed
15%
Nil
9.
2102 20 00
Algal Prime (flour) for use in
manufacture of aquatic feed
15%
Nil
10.
2309 90 90
Mineral and Vitamin Premixes for
use in manufacture of aquatic feed
5%
Nil
11.
2301 10 90
Insect meal for use in Research &
Development purposes in aquatic
feed manufacturing
15%
5%
12.
2309 90 90
Single Cell Protein from Natural
Gas for use in Research &
Development purposes in aquatic
feed manufacturing
15%
5%
13.
2301 20
Krill Meal for use in manufacture
of aquatic feed
5%
Nil
14.
1901
Pre-dust breaded powder for use
in processing of sea-food
30%
Nil
15.
2309 90 31
Prawn and shrimps feed
15%
5%
16.
2309 90 39
Fish feed
15%
5%
III.
Critical Minerals
1.
2504
Natural Graphite
5%
2.5%
2.
2505
Natural sands of all kinds, whether
or not coloured, other than metal
bearing sands of chapter 26 of
The Customs tariff Act, 1975
5%
Nil
3.
2506
Quartz (other than natural sands);
quartzite, whether or not roughly
5%
2.5%
82
trimmed or merely cut, by sawing
or otherwise, into blocks or slabs
of a rectangular (including square)
shape
4.
2530 90 91
Strontium sulphate (natural ore)
5%
Nil
5.
2603 00 00
Copper ores and concentrates
2.5%
Nil
6.
2605 00 00
Cobalt ores and concentrates
2.5%
Nil
7.
2609 00 00
Tin ores and Concentrates
2.5%
Nil
8.
2611 00 00
Tungsten Ores and Concentrates
2.5%
Nil
9.
2613
Molybdenum ores and
concentrates
2.5%
Nil
10.
2615 10 00
Zirconium ores and concentrates
2.5%
Nil
11.
2615 90
Hafnium Ores and concentrates
2.5%
Nil
12.
2615 90 10
Vanadium ores and concentrates
2.5%
Nil
13.
2615 90 20
Niobium or tantalum ores and
concentrates
2.5%
Nil
14.
2617
Antimony Ores and Concentrates
2.5%
Nil
15.
2804 50 20
Tellurium
5%
Nil
16.
2804 61 00
Silicon, containing by weight not
less than 99.99% of silicon
5%
Nil
17.
2804 69 00
Other silicon
5%
Nil
18.
2804 90 00
Selenium
5%
Nil
19.
2805 30 00
Alkali or alkaline earth metals,
Rare-earth metals, scandium and
yttrium, whether or not intermixed
or inter alloyed
5%
Nil
20.
2811 22 00
Silicon dioxide
7.5%
2.5%
21.
2815 20 00
Potassium hydroxide
7.5%
Nil
22.
2816 40 00
Oxides, hydroxides and peroxides,
of strontium or barium
7.5%
Nil
23.
2822 00 10
Cobalt oxides
7.5%
Nil
24.
2822 00 20
Cobalt hydroxides
7.5%
Nil
25.
2822 00 30
Commercial cobalt oxides
7.5%
Nil
26.
2825 20 00
Lithium oxide and hydroxide
7.5%
Nil
27.
2825 30
Vanadium oxides and hydroxides
2.5%/7.5%
Nil
83
28.
2825 60 10
Germanium oxides
7.5%
Nil
29.
2825 70
Molybdenum oxides and
hydroxides
7.5%
Nil
30.
2825 80 00
Antimony oxides
7.5%
Nil
31.
2825 90 20
Cadmium oxides
7.5%
Nil
32.
2827 35 00
Chlorides of Nickel
7.5%
Nil
33.
2827 39 30
Strontium chloride
7.5%
Nil
34.
2833 24 00
Sulphates of Nickel
7.5%
Nil
35.
2834 21 00
Nitrates of potassium
7.5%
Nil
36.
2836 91 00
Lithium carbonates
7.5%
Nil
37.
2836 92 00
Strontium carbonates
7.5%
Nil
38.
2841 90 00
Salts of oxometallic or
peroxometallic acids of Beryllium
and Rhenium
7.5%
Nil
39.
2846
Compounds, inorganic or organic
of rare earth metals
7.5%
Nil
40.
2918 15 30
Bismuth citrate
7.5%
Nil
41.
3801
Artificial Graphite, colloidal or
semi-colloidal graphite,
preparations based on graphite or
other carbon in form of pastes,
blocks, plates or other semi-
manufactures
7.5%
2.5%
42.
8001
Unwrought Tin
5%
Nil
43.
8101 94 00
Unwrought tungsten, including
bars and rods obtained simply by
sintering
5%
Nil
44.
8102 94 00
Unwrought molybdenum, including
bars and rods obtained simply by
sintering
5%
Nil
45.
8103 20
Unwrought tantalum, including
bars and rods obtained simply by
sintering, powders
5%
Nil
46.
8105 20 20
Cobalt, unwrought
5%
Nil
47.
8106 10 10
Bismuth, unwrought
2.5%
Nil
48.
8109 21 00
Unwrought zirconium, powders,
Containing less than 1 part
hafnium to 500 parts zirconium by
weight
10%
Nil
49.
8110 10 00
Unwrought antimony, powders
2.5%
Nil
50.
8112 12 00
Beryllium unwrought, powders
5%
Nil
84
51.
8112 31
Hafnium unwrought, waste and
scrap, powders
10%
Nil
52.
8112 41 10
Rhenium unwrought
10%
Nil
53.
8112 69 10
Cadmium unwrought, powders
5%
Nil
54.
8112 69 20
Cadmium, wrought
5%
Nil
55.
8112 92 00
Unwrought; waste and scrap;
powder of, -
(i) Gallium
(ii) Germanium
(iii) Indium
(iv) Niobium
(v) Vanadium
5%
Nil
IV.
Steel Sector
1.
7202 60 00
Ferro Nickel
2.5%
Nil
2.
7204
Ferrous Scrap
Nil (till
30.09.2024)
Nil (till
31.03.2
026)
3.
7225
Certain specified raw materials for
manufacture of CRGO steel
Nil (till
30.09.2024)
Nil (till
31.03.2
026)
V.
Copper
1.
7402 00 10
Blister Copper
5%
Nil
VI.
Chemicals and Plastics
1.
3102 30 00
Ammonium Nitrate, whether or not
in aqueous solution
7.5%
10%
2.
3920 (other
than 3920
99 99) or
3921
All goods other than Poly vinyl
chloride (PVC) flex films/flex
banner
25%
(with effect
from
24.07.2024)
10%
3.
3920 99 99
All goods other than Poly vinyl
chloride (PVC) flex films/flex
banner
25%
(with effect
from
24.07.2024)
15%
VII.
Textile and Leather Sector
1.
2929 10 90
Methylene Diphenyl Di-isocyanate
(MDI) for use in the manufacture
of Spandex Yarn
7.5%
5%
Subject
to IGCR
conditio
ns
2.
41
Wet white, Crust and finished
10%
Nil
85
leather for manufacture of textile
or leather garments, leather
/synthetic footwear or other
leather products, for export
Items
under
Sl. No.
257B
and
257C of
Notificat
ion
50/2017
-
Custom
s, dated
30.06.2
017
3.
38,48 or any
other
Chapter
Certain additional accessories and
embellishments for manufacture of
textile or leather garments,
leather/synthetic footwear or other
leather products, for export
As applicable
Nil
Items
under
Sl. No.
257B
and
257C of
Notificati
on
50/2017
-
Custom
s, dated
30.06.20
17
4.
0505 10
Real Down Filling Material from
Duck or Goose for use in the
manufacture of textile or leather
garments for export
30%
10%
VIII.
Cancer Drugs
1.
30
(i) Trastuzumab Deruxtecan,
(ii) Osimertinib,
(iii) Durvalumab
10%
Nil
IX.
Precious Metals
1.
7108
Gold bar
15%
6%
2.
7108
Gold dore
14.35%
5.35%
3.
7106
Silver bar
15%
6%
4.
7106
Silver dore
14.35%
5.35%
86
5.
7110
Platinum, Palladium, Osmium,
Ruthenium, Iridium
15.4%
6.4%
6.
7118
Coins of precious metals
15%
6%
7.
7113
Gold/Silver findings
15%
6%
8.
71
Platinum and Palladium used in the
manufacture of noble metal
solutions, noble metal compounds
and catalytic convertors
7.5%
5%
9.
84
Bushings made of platinum and
rhodium alloy when imported in
exchange of worn out or damaged
bushings exported out of India
7.5%
5%
X.
Medical Equipment
1.
39
All types of polyethylene for use in
manufacture of orthopaedic
implants falling under sub-heading
9021 10
As applicable
Nil
2.
39, 72, 81
Special grade stainless steel,
Titanium alloys, Cobalt-chrome
alloys, and All types of
polyethylene for use in
manufacture of other artificial
parts of the body falling under
sub-heading 9021 31 or 9021 39
As applicable
Nil
3.
9022 30 00
X-ray tubes for use in manufacture
of X-ray machines for medical,
surgical, dental or veterinary use
15%
5% (till
31
st
March
2025)
7.5%
(w.e.f
1
st
April,
2025 to
31
st
March,
2026)
10%
(w.e.f
1
st
April,
2026)
4.
9022 90 90
Flat panel detectors (including
scintillators) for use in
15%
5% (till
31
st
87
manufacture of X-ray machines for
medical, surgical, dental or
veterinary use
March
2025)
7.5%
(w.e.f
1
st
April,
2025 to
31
st
March,
2026)
10%
(w.e.f
1
st
April,
2026)
XI.
IT and Electronics Sector
1.
8517 13 00,
8517 14 00
Cellular mobile phone
20%
15%
2.
8504 40
Charger/Adapter of cellular mobile
phone
20%
15%
3.
8517 79 10
Printed Circuit Board Assembly
(PCBA) of cellular mobile phone
20%
15%
4.
28, 29, 38
Specified parts for use in
manufacture of connectors
5%/7.5%
Nil
5.
74
Oxygen Free Copper for use in
manufacture of Resistors
5%
Nil
6.
40
Specified die-cut parts for use in
manufacture of cellular mobile phones
As applicable
Nil
7.
40, 70, 76
Specified mechanics for use in
manufacture of cellular mobile
phones
As applicable
Nil
8.
8517 79 10
Printed Circuit Board Assembly
(PCBA) of specified telecom
equipment
10%
15%
XII.
Renewable Energy Sector
1.
84, 85, or any
other
chapter
Specified capital goods for use in
manufacture of solar cells or solar
modules, and parts for
manufacture of such capital goods
7.5%
Nil
2.
7007
Solar glass for manufacture of
solar cells or solar modules
Nil
10%
(w.e.f.
1.10.20
24)
88
3.
74
Tinned copper interconnect for
manufacture of solar cells or solar
modules
Nil
5%(w.e.f
1.10.20
24)
XIII.
Shipping
1.
Any Chapter
Components and consumables for
use in manufacture of specified
vessels
As applicable
Nil
2.
Any Chapter
Technical documentation and
spare parts for construction of
warships
As applicable
Nil
XIV.
Capital goods
1.
Any Chapter
Goods under S. No. 404 of
Notification No. 50/2017 Customs,
used for petroleum exploration
operations
As applicable
Nil
B.
Changes in Export Duty (To be effective from
24.7.2024)
Effective export duty on raw skins, hides & leather is
being simplified and rationalized. The changes are
as follows -
Rate of Duty
S.
No.
Chapter or
Heading
Commodity
From
To
1.
4101 to 4103
Raw Hides & skins, all sorts
(other than buffalo)
40%
40%
2.
4101
Raw Hides & skins of buffalo
30%
30%
3.
4104 to 4106
Tanned or crust hides of skins,
whether or not split, but not
further prepared
40
20%
4.
4104 to 4106
E.I. tanned leather
Nil
Nil
5.
41
Finished leather as defined by
DGFT finished leather norms
Nil
Nil
6.
4301
Raw fur skins
60%/10%
40%
7.
4302
Tanned or dressed furskin
60%
20%
V. OTHER MISCELLANEOUS AMENDMENTS
A. Validation of notifications
These changes will come into effect from date of enactment of the Finance
(No. 2) Bill, 2024.
89
S.
No.
Amendment
Clause of the
Finance
(No. 2) Bill,
2024
1.
Notification No. 37/2023- Customs dated 10.5.23 is
being validated for the period from 1st April, 2023 up to
and inclusive of 10th May, 2023 to provide exemption
from basic customs duty and AIDC on imports of crude
soyabean oil and crude sunflower seed oil subject to
availability of unutilized quota in TRQ authorization for
FY 2022-23 allotted by DGFT and Bill of lading issued
on or before 31st March, 2023.
[105]
2.
Based on the recommendation of the GST Council in its
53rd meeting, GST Compensation Cess is being
exempted with effect from 1st July, 2017 on imports in
SEZ by SEZ units or developers for authorized
operations.
[104]
B. Amendment of Customs Tariff (Identification, Assessment and
Collection of Countervailing Duty on Subsidized Articles and for Determination
of Injury) Rules, 1995
The Customs Tariff (Identification, Assessment and Collection of Countervailing Duty
on Subsidized Articles and for Determination of Injury) Rules, 1995 have been
amended to insert a provision for New Shipper Review. This will be effective from
24.7.2024.
C. Other notification changes
These changes will be effective from 24.7.2024
S.
No.
Notification
No.
Subject
1.
38/2024-
Customs
dated
23.07.2024
Currently, articles of foreign origin can be imported into
India for repairs subject to their re-exportation within six
months extendable to 1 year. The duration for export in
the case of aircraft and vessels imported for
maintenance, repair and overhauling has been
increased from 6 months to 1 year, further extendable
by 1 year.
90
2.
39/2024-
Customs
dated
23.07.2024
The time-period of duty-free re-import of goods (other
than those under export promotion schemes) exported
out from India under warranty has been increased from
3 years to 5 years, further extendable by 2 years.
3.
31/2024-
Customs
dated
23.07.2024
The India-UAE CEPA Tariff notification is being
amended as consequential changes in duty rates on
precious metals.
VI. Review of Customs duty Exemptions
A. Review of conditional exemption rates of BCD prescribed in
Notification no. 50/2017-Customs dated 30.6.2017:
(i) The BCD exemption for the goods covered under following serial numbers of the
notification are being extended upto 31
st
March, 2026 unless specified otherwise.
S. No.
S N of
50/17-Cus
Brief Description
1.
17
Specified Planting materials, namely, oilseeds, seeds of
vegetables, tubers, etc.
2.
80A
Algal oil for manufacturing of aquatic feed
3.
90
Lactose for use in manufacture of homeopathic medicines
4.
104
Specified goods used in processing of sea-food
5.
133
Gold ores and concentrates
6.
139
Bunker Fuels namely: (i). IFO 180 CST; (ii). IFO 380 CST;
(iii). VLSFO (CTH 27)
7.
150
Naphtha for manufacture of Fertilisers
(scope of exemption is being reduced only to Naphtha)
8.
155
Liquefied petroleum gases (LPG) received from unit in
SEZ and returned by the DTA unit to the SEZ unit
9.
164
Electrical energy supplied from SEZ unit to DTA
10.
165
Electrical energy supplied from SEZ to DTA
11.
172
Specified goods used in manufacture of silicon wafers or
solar wafers, for manufacture of solar cell or module
12.
183
Medical use fission Molybdenum-99 (Mo-99) for use in
manufacture of radio pharmaceuticals
13.
184
Pharmaceutical Reference Standard
14.
188
Goods for manufacture of ELISA Kits
15.
191
Maltol for manufacture of deferiprone
16.
204
Anthraquinone or 2-Ethyl Anthraquinone for use in
manufacture of Hydrogen peroxide
91
17.
237
Specified material for manufacture of EVA (Ethylene Vinyl
Acetate) sheets or backsheet, which are used in the
manufacture of solar photovoltaic cells or modules
(Scope of materials which can be imported is being
increased)
18.
253
Specified Goods for manufacture of Brushless Direct
Current (BLDC) motors
19.
257
Tags, labels, stickers, belts, buttons, hangers or printed
bags, imported by bonafide exporters
20.
257A
Specified goods used in manufacture of handicraft items
for export when imported by bonafide exporter
21.
257B
Specified goods used in manufacture of textile or leather
garments for export when imported by bonafide exporter
22.
257C
Specified goods used in manufacture of leather or
synthetic footwear or other leather products for export
when imported by bonafide exporter
23.
258
Security fibre, threads, Paper based Taggant, M-feature
for use in manufacture of security paper by Security Paper
Mill, Hoshangabad and Bank Note Paper Mill India Pvt Ltd,
Mysore.
24.
259
Raw materials for manufacture of security fibre and
security thread for supply to Security Paper Mill,
Hoshangabad and Bank Note Paper Mill India Pvt. Ltd,
Mysore for use in manufacture of security paper
25.
260
Goods for the manufacture of specified orthopedic
implants (902110)
26.
261
Raw material for manufacture of Copper-T Contraceptive
(i) Alatheon
(ii) Copper Wire
27.
265
Capacitor grades polypropylene granules for manufacture
of Capacitor grade plastic
28.
269
Super absorbent polymer for manufacture of adult diapers
and specified goods
29.
271
Polytetrametylene ether glycol, (PT MEG) for use in
manufacture of spandex yarn
30.
276
Ethylene- propylene- non-conjugated diene rubber
(EPDM) for manufacture of insulated wire and cables
31.
279
New or retreated Pneumatic tyres of rubber for use in
servicing, repair of maintenance of aircrafts used for
operating scheduled air transport service or scheduled air
cargo service etc
92
32.
280
New or retreated Pneumatic tyres of rubber for use in
servicing, repair or maintenance of aircraft imported or
procured by Aero Club of India/ for flying training purpose/
operating non-scheduled (passenger or charter) services/
AAI for flight calibration purpose
33.
290
Wood pulp for manufacture of newsprint, paper or
paperboard
34.
292
Goods imported for manufacture of paper, paper boards,
newsprint
35.
293A
Newsprint and uncoated paper imported for printing of
newsprint
36.
296A
Lightweight coated paper imported by actual users for
printing of magazines
37.
326
Hydrophilic /Hydrophobic Non- Woven, imported for use in
the manufacture of Adult Diapers
38.
329
Pile fabrics for the manufacture of toys
39.
333
Moulds, tools and dies, for the manufacture of parts of
electronic components or electronic equipment
40.
334
(i) Graphite Felt or Graphite pack for growing silicon ingots
(ii) Thin Steel wire used in wire saw for slicing of silicon
wafers
41.
345A
Simply Sawn Diamonds
42.
364A
Spent catalyst or ash containing precious metals
43.
368
Ferrous Scrap
44.
374
Magnesium Oxide (MgO) coated cold rolled steel coils for
use in manufacture of cold rolled grain oriented (CRGO)
steel
45.
375
Specified items for manufacture of cold rolled grain-
oriented steel (CRGO) steel
46.
378
Metal parts for manufacture of electrical insulators falling
under heading 8546
47.
379
Pipes and tubes for use in manufacture of boilers
48.
380
Forged steel rings for manufacture of special bearings for
use in wind operated electricity generators
49.
381
Flat copper wire for use in the manufacture of photo voltaic
ribbon for manufacture of solar photovoltaic cell or
modules
50.
392
Dies for drawing metal, where imported after repairs from
abroad
51.
403
Parts and raw materials for offshore oil exploration
52.
404
Specified items including capital goods and raw materials
for off shore oil exploration
93
53.
415
Parts for manufacture of catalytic convertors
54.
415A
Platinum or Palladium for manufacture of Noble Metal
Compounds & Noble Metal Solutions
55.
416
Ceria zirconia compounds for use in the manufacture of
washcoat for catalytic converters
56.
417
Cerium compounds for use in the manufacture of
washcoat for catalytic converters
57.
418
Zeolite for use in the manufacture of washcoat for catalytic
converters
58.
422
Machinery, electrical equipment for use in semiconductor
wafer and LCD
59.
423
Machinery, electrical equipment for use in marking and
packaging of semiconductor chips
60.
426
Specified goods for the manufacture of semiconductor
devices, memory card, IC, solar cell
61.
435
Capital goods for printing industry
62.
442
Bushings made of Platinum and Rhodium alloy when
imported in exchange of worn out or damaged bushings
exported out of India
63.
446
Parts and components for manufacture of tunnel boring
machines
64.
451
Evacuated tubes with three layers of solar selective
coating for use in manufacture of solar water heater
65.
462
Ball screws for use in the manufacture of CNC Lathes
66.
463
Linear Motion Guides for use in the manufacture of CNC
Lathes
67.
464
CNC Systems for use in the manufacture of CNC Lathes
68.
464A
Goods for manufacture of plastic processing machineries
69.
467
Parts and components of cash dispenser or automatic
bank note dispenser
70.
468
Parts for manufacture of Micro ATM, Fingerprint
reader/scanner, Iris scanner, Miniaturised POS
(Scope of exemption is being limited to import of raw
materials only)
71.
471
All parts for use in the manufacture of LED lights
72.
472
All inputs for use in the manufacture of LED driver or
MCPCB for LED lights
73.
476
Television equipment, cameras etc for taking films,
imported by a foreign film unit or television team
74.
477
Filming equipment of foreign origin if imported into India
after having been exported therefrom.
75.
480
Goods imported for being tested in specified test centers
94
76.
489B
Goods for manufacturing of Microphones
77.
504
Parts and Components of Digital Still Image Video
Cameras
78.
509
Parts, components and accessories for manufacture of
Digital Video Recorder
79.
510
Parts, components and accessories for use in
manufacture of reception apparatus for television
80.
511
Parts, components and accessories for manufacture of
CCTV Camera
81.
512
Specified Parts, components and for use in manufacture of
Lithium-ion battery and battery pack
82.
512A
Inputs, parts or sub-parts for use in the manufacturing of
Printed Circuit Board Assembly
83.
515A
Open Cell for manufacture of TV Panel
84.
516
The following goods for use in the manufacture of Liquid
Crystal Display (LCD) /LED TV Panel
85.
517
Magnetrons for manufacture of domestic microwave ovens
86.
519
Raw materials or parts for use in manufacture of e-
Readers
87.
523A
Parts, sub-parts, inputs or raw material for use in
manufacture of Lithium-ion cells
88.
527
Lithium-ion cell use in manufacture of battery or battery
pack
89.
527A
Lithium-Ion Cell for use in manufacture of battery or
battery pack of cellular mobile
90.
527B
Lithium-Ion Cell manufacture of battery or battery pack of
EV
91.
534
Parts of gliders or simulators of aircrafts (excluding rubber
tyres and tubes of gliders)
92.
535
Raw materials for manufacture of aircraft and parts of
aircraft
93.
535A
Parts of aircraft for manufacture of aircraft or for
manufacture of parts of aircraft by PSU under Min of
Defence
94.
536
Parts, testing equipment, tools and tool-kits for
maintenance, repair, and overhauling of aircraft,
components or parts of aircrafts
95.
537
All goods of Heading 8802 (except 88026000-spacecraft)
96.
538
Components or parts, including engines, of aircraft of
heading 8802
97.
539
(a) Satellites and payloads; (b) Ground equipment brought
for testing of (a)
95
98.
539A
Scientific and technical instruments etc for launch vehicles
and satellites
99.
540
Specified goods imported by scheduled air transporter
100.
542
Specified goods imported by Aero Club, Flying Training
Institutes
101.
543
Specified goods imported by non-scheduled air transporter
102.
544
Parts (other than rubber tubes), of aircraft of heading 8802
103.
546
Parts (other than rubber tubes), of aircraft of heading 8802
104.
548
Barges or pontoons imported along with ships
105.
551
Cruise ships, Excursion ships
106.
553
Fishing vessels, Tugs and Pusher crafts, light vessels
excluding vessels and floating structure imported for break
up
107.
555
Vessels like warships, lifeboats excluding vessels and
floating structure imported for break up
108.
567
Stainless steel tube and wire, for manufacture of Coronary
stents /artificial valve
109.
569
Parts required for manufacture of Ostomy products
110.
570
Medical and surgical instruments, apparatus and
appliances including spare parts and accessories thereof
111.
575
Specified Hospital Equipment for use in specified hospitals
112.
578A
Raw materials, for the manufacture of Cochlear Implants
113.
580
X-Ray Baggage Inspection Systems and parts thereof
114.
581
Portable X-ray machine / system
115.
583
Parts and cases of braille watches, for the manufacture of
Braille watches
116.
591
Parts of electronic toys
117.
593
Parts of video games for the manufacture of video games
Note: Description of entries is indicative. Notification may be referred to for complete
description.
(ii) The BCD exemption for the goods covered under following serial numbers of
the notification no 50/2017-Customs is being extended upto 31
st
March 2029.
S. No.
S. No. of
50/2017-
Cus
Brief Description
1.
212A
Medicines/drugs/vaccines supplied free by United
Nations International Children's Emergency Fund
(UNICEF), Red Cross etc
2.
213
Drugs and materials
3.
428
Specified goods imported by accredited press
cameraman
96
S. No.
S. No. of
50/2017-
Cus
Brief Description
4.
429
Specified goods, imported by accredited journalist
5.
549
Capital goods, raw materials and spares for repairs of
ocean-going vessels
6.
550
Spare parts and consumables for repairs of ocean going
vessels registered in India.
7.
577
Lifesaving medical equipment for personal use
8.
607
Life Saving drugs like Keytruda etc
9.
607A
Lifesaving drugs/medicines for personal use
10.
611
Archaeological artefacts for exhibition in a museum
11.
612
Specified raw material for sports goods
Note: Description of entries is indicative. Notification may be referred to for complete
description.
B. Review of exemptions prescribed by other notifications:
(a) The BCD exemption for the goods covered under the following notifications are
being extended upto 31
st
March, 2026.
S.
No.
Notification No.
Brief Description
1.
30/2017-Customs
dated 30 June 2017
Exemption to motion picture, music, gaming software
for use in gaming console printed or recorded on
media
2.
05/2017-Customs
dated 2 February
2017
Exemption to machinery, components for setting up
fuel cell based on waste to energy
3.
113/2003-Customs
dated 22 July 2003
Exemption to castor oil cake and castor de-oiled
cake manufactured from indigenous castor oil seeds
on indigenous plant and machinery by unit in SEZ
and brought to DTA
4.
81/2005-Customs
dated 8 September
2005
Exemption to machinery/components for initial
setting up of non-conventional power generation
plants
5.
26/2011-Customs
dated 1 March 2011
Exemption to work of art, antiques in museum or art
gallery
6.
248/1976-Customs
dated 2 August 1976
Exemption to precious stones imported by posts on
'approval or return' basis
7.
24/2001-Customs
dated 1st March 2001
Exemption to copper cathodes, wire bars and wire
rods produced out of copper reverts
97
8.
25/2001-Customs
dated 1st March 2001
Exemption on gold and silver produced out of copper
anode slime which were exported out of India for toll
smelting and processing
9.
32/1997-Customs
dated 1st April 1997
Exemption to goods imported for execution of an
export order for jobbing
Note: Description of entries is indicative. Notification may be referred to for complete
description.
(b) The BCD exemption for the goods covered under the following notifications are
being extended upto 31
st
March, 2029.
S.
No.
Notification No.
Brief Description
1.
16/1965-Customs
dated 23 January
1965
Exemption to goods exported to foreign countries for
display in show-rooms of Govt of India
2.
80/1970-Customs 29
August 1970
Goods supplied freely under warranty as replacement
for defective ones in lieu of earlier imported goods.
3.
207/89-Customs
dated 17 July 1989
Foodstuffs and provisions (excluding fruit products,
tobacco, alcohol) by foreigners
4.
147/94-Customs
dated 13 July 1994
Firearms and ammunition when imported for use by a
renowned shooter
5.
148/94-Customs
dated 13 July 1994
Specified gifts; goods gifted free under a bilateral
agreement; goods imported by Indian Red cross
Society, goods for the purposes of relief and
rehabilitation
6.
152/94-Customs
dated 13 July 1994
Appliance/aids for blind/handicapped imported by
institution for blind & deaf; and other specified
teaching aids imported by Govt Universities
7.
153/94-Customs
dated 13 July 1994
Articles for foreign origin imported for repair and
return, theatrical equipment and costumes,
mountaineering expedition equipment, photographic,
filming recording etc
8.
134/94-Customs
dated 22 June 1994
Specified capital goods, and other ancillary items
imported for repairs
9.
39/96-Customs
dated 23 July 1996
Specified imports relating to Defence, internal security
forces and Air Force.
10.
50/96-Customs
dated 23 July 1996
Specified equipment, instruments, raw materials,
components, pilot plant and computer software when
imported for publicly funded R & D projects
11.
51/96-Customs
Scientific and technical instruments, apparatus,
98
S.
No.
Notification No.
Brief Description
dated 23 July 1996
equipment, accessories etc when imported by publicly
funded research institution
12.
25/1998-Customs
dated 2 June 1998
Capital goods/machinery/ measuring instruments for
manufacture of semiconductor wafers.
13.
23/2016-Customs
dated 1 March 2016
Parts of aircraft when imported into India under the
Standard Exchange Scheme
14.
32/2017-Customs
dated 30 June 2017
Imports of artwork and antique books
15.
37/2017-Customs
dated 30 June 2017
Imports in relation to defense and international
security forces including medals, decorations,
personal effects of Defense Personnel, bonafide gifts
from foreign donors, stores and goods for trials,
demonstration
16.
16/2017-Customs
dated 20 April, 2017
Specified medicines from whole of the duty of
customs, when imported for supply under
Specified Patient Assistance Programme
17.
25/1999-Customs
dated 28 February
1999
Capital goods/machinery used by the IT/Electronics
industry, subject to actual user condition.
18.
25/2002-Customs
dated 1 March 2002
Specified raw materials, inputs and parts for use in
manufacture of specified electronic items
19.
35/2017-Customs
dated 30
th
June 2017
Aviation Turbine Fuel in the tanks of the aircrafts of an
Indian Airline or of the Indian Air Force
Note: Description of entries is indicative. Notification may be referred to for complete
description.
(c) The end dates prescribed are being removed in the following notifications:
S.
No.
Notification No.
Brief Description
1.
49/2017-Customs
dated 30 June 2017
Exemption to special Additional Duty on specified goods
of fourth schedule to Central Excise Act
2.
52/2017-Customs
dated 30 June 2017
Effective rate of Additional duty for goods under Chapter
27
3.
29/2017-Customs
dated 30 June 2017
Exemption to specimen, models, wall pictures and
diagrams for instructional purposes
4.
46/1974-Customs
dated 25 May 1974
Pedagogic material for educational or vocational training
courses
Note: Description of entries is indicative. Notification may be referred to for complete
description.
99
VII. CUSTOMS DUTY EXEMPTIONS / CONCESSIONS BEING ALLOWED TO
LAPSE
Certain BCD exemptions entries under S No. 50/2017-Customs dated 30.6.2017 and
other notifications are being allowed to lapse with effect from 30.9.2024.
(a) The following entries of notification no. 50/2017-Customs dated
30.6.2017 are being allowed to lapse with effect from 30.9.2024:
S.
No.
S N of
50/2017-
Customs
Description
1.
478
Wireless apparatus, accessories and parts as specified in List 29
imported by a licensed amateur radio operator
2.
353
Foreign currency coins when imported into India by a Scheduled
Bank
3.
387
Zinc metal recovered by toll smelting or toll processing from zinc
concentrates exported from India for such processes
4.
441
Spinnerettes made inter alia of Gold, Platinum and Rhodium or
any one or more of these metals, when imported in exchange of
worn-out or damaged spinnerettes exported out of India
5.
238
Organic/inorganic Coating material for manufacture of electrical
steel
6.
254
Catalyst for manufacture of cast components of Wind Operated
Electricity Generator
7.
255
Resin for manufacture of cast components of Wind Operated
Electricity Generator
8.
277A
Calendared plastic sheet for manufacturing of Smart Card under
chapter heading 8523
9.
339
Concessional rate on import of Toughened glass with low iron
content and transmissivity of minimum 91% and above, for use in
manufacture of solar thermal collectors or heaters
10.
421
Specified goods required for basic telephone service, cellular
mobile telephone service, internet service or closed users’ group
64 KBPS domestic data network via INSAT satellite system
service and parts, for manufacture of the goods
11.
479
Mono or Bi polar Membrane electrolysers and parts thereof
including secondary brine purification components, jumper
switches, filtering elements for hydrogen filters for caustic soda
or potash units; Membrane and parts thereof or other parts for
caustic soda or potash units;
12.
475
Specified goods including scramblers, descramblers, encoders,
decoders, jammers, network firewalls, network sniffers, scanners
100
and monitoring systems, probes for data monitoring and
SMS/MMS monitoring systems
13.
482
Newspaper page transmission and reception facsimile system or
equipment; and Telephoto transmission and reception system or
equipment
14.
495
Batteries for electrically operated vehicles, including two and
three wheeled electric motor vehicles.
15.
497
Active Energy Controller (AEC) for use in manufacture of
Renewable Power System (RPS) inverters
16.
579
Survey (DGPS) instruments, 3D modeling software for ore body
simulation cum mine planning and exploration (geophysics and
geochemistry) equipment required for surveying and prospecting
of minerals
17.
419
Aluminium Oxide for manufacture of washcoat of catalytic
converter
18.
420
Clay 2 powder for use in ceramic substrate for catalytic convertor
19.
340
Solar tempered glass or solar tempered (anti-reflective coated)
glass for use in manufacture of solar cells/panels/modules
20.
565
Specified goods for use in the manufacture of Flexible Medical
Video Endoscope [heading 9018]
21.
566
Specific input goods for manufacture of syringes, needles,
catheters and cannulae
22.
568
Parts and components for manufacture of blood pressure
monitors and blood glucose monitoring system (Glucometers)
Note: Description of entries is indicative. Notification may be referred to for complete
description.
(b) The following notifications are being allowed to lapse with effect from
30.9.2024:
S.
No
Notification No.
Description
1.
97/99-Customs
dated 21 July 1999
Exempts BCD and additional duty under Sections 3(1),
3(3) and 3(5) on standard gold bars imported by a RBI
authorised bank
2.
30/2004-Customs
dated 28 January
2004
Provides full exemption from BCD to second-hand
computers/accessories and peripherals received as
donation by schools, charitable institutions.
3.
102/2007-Customs
dated 14 September
2017
Provides exemption from Special Additional Duty (SAD)
levied vide section 3(5) of CTA on to all goods imported
for subsequent sale when IGST, CGST, SGST or UTGST
paid by importer.
101
4.
45/2005-Customs
dated 16 May 2005
Provides exemption from Special Additional Duty levied
under Section 3(5) of CTA on goods cleared from SEZ to
DTA.
5.
151/94-Customs
dated 13 July 1994
Provides exemption to imports of duty-paid fuel and
lubricating oil on aircrafts taken during the outward flight;
goods imports by United Arab Airlines; aircraft engines,
spares imported by Indian Airlines and Air India
International.
Re-import entries will operate from re-import notification
45/2017-Cus
6.
26-Customs dated
19
th
February 1962
Provides exemption from import duty under the Sea
Customs Act on catering cabin equipment, food and drink
on re-importation by aircrafts of the Indian Airlines
Corporation from foreign flights
Note: Description of entries is indicative. Notification may be referred to for complete
description.
VIII. SOCIAL WELFARE SURCHARGE (SWS)
A.
AMENDMENT TO NOTIFICATION NO. 11/2018 – CUSTOMS, DATED
02.02.2018 (w.e.f. 24.07.2024)
S. No.
Description
Following goods are being exempted from levy of Social Welfare
Surcharge
1.
Natural Graphite
2.
Natural sands
3.
Quartz (other than natural sands); quartzite
4.
Strontium sulphate (natural ore)
5.
Copper ores and concentrates
6.
Cobalt ores and concentrates
7.
Tin ores and Concentrates
8.
Tungsten Ores and Concentrates
9.
Molybdenum ores and concentrates
10.
Zirconium ores and concentrates
11.
Hafnium Ores and concentrates
12.
Vanadium ores and concentrates
102
13.
Niobium or tantalum ores and concentrates
14.
Antimony Ores and Concentrates
15.
Tellurium
16.
Silicon, containing by weight not less than 99.99% of silicon
17.
Other silicon
18.
Selenium
19.
Alkali or alkaline earth metals, Rare-earth metals, scandium and yttrium,
whether or not intermixed or inter alloyed
20.
Silicon dioxide
21.
Potassium hydroxide
22.
Oxides, hydroxides and peroxides,
of strontium or barium
23.
Cobalt oxides
24.
Cobalt hydroxides
25.
Commercial cobalt oxides
26.
Lithium oxide and hydroxide
27.
Vanadium oxides and hydroxides
28.
Germanium oxides
29.
Molybdenum oxides and hydroxides
30.
Antimony Oxides
31.
Cadmium oxide
32.
Chlorides of Nickel
33.
Strontium chloride
34.
Sulphates of Nickel
35.
Nitrates of potassium
36.
Lithium carbonates
37.
Strontium carbonate
38.
Salts of oxometallic or peroxometallic acids of Beryllium and Rhenium
39.
Compounds, inorganic or organic of rare earth metals
40.
Bismuth citrate
103
41.
Artificial Graphite, colloidal or semi-colloidal graphite, preparations based
on graphite or other carbon in form of pastes, blocks, plates or other semi-
manufactures
42.
Unwrought Tin
43.
Unwrought tungsten, including bars and rods obtained simply by sintering
44.
Unwrought molybdenum, including bars and rods obtained simply by
sintering
45.
Unwrought tantalum, including bars and rods obtained simply by sintering,
powders
46.
Cobalt, unwrought
47.
Bismuth, unwrought
48.
Unwrought zirconium, powders, Containing less than 1 part hafnium to 500
parts zirconium by weight
49.
Unwrought antimony, powders
50.
Beryllium unwrought, powders
51.
Hafnium unwrought, waste and scrap, powders
52.
Rhenium unwrought
53.
Cadmium unwrought, Powders
54.
Cadmium, wrought
55.
Unwrought; Waste and scrap; powders of :-
(i) Gallium
(ii) Germanium
(iii) Indium
(iv) Niobium
(v) Vanadium
104
IX. AGRICULTURE INFRASTRUCTURE AND DEVELOPMENT CESS (AIDC)
Notification No. 11/2021 – Customs, dated 01.02.2021 is being amended to
revise the AIDC rates on the following goods (w.e.f. 24.07.2024):
AIDC rate changes (with changes to the
effective rate of Customs Duty)
Rate
S. No.
Chapter,
Heading, sub-
heading, tariff
item
Commodity
From
To
1.
7108
Gold bar
5%
1%
2.
7108
Gold dore
4.35%
0.35%
3.
7106
Silver bar
5%
1%
4.
7106
Silver dore
4.35%
0.35%
5.
7110
Platinum, Palladium,
Osmium, Ruthenium,
Iridium
5.4%
1.4%
6.
7118
Coins of precious metals
5%
1%
7.
7113
Gold/Silver findings
5%
1%
105
EXCISE
Note:
(a) “Basic Excise Duty” means the excise duty set forth in the Fourth Schedule
to the Central Excise Act, 1944.
(b) “NCCD” means National Calamity Contingent Duty levied under Finance Act,
2001, as a duty of excise on specified goods at rates specified in Seventh
Schedule to Finance Act, 2001
(c) Clause Nos. in square brackets [ ] indicate the relevant clause of the Finance
(No. 2) Bill, 2024.
(d) Amendments carried out through the Finance (No. 2) Bill, 2024 come into
effect on the date of its enactment, unless otherwise specified.
S.
No.
Amendment
Clause of
the Finance
(No. 2) Bill,
2024
Amendment of Central Excise Notification
[The changes will come into effect from date of enactment
of the Finance (No. 2) Bill 2024]
1.
Notification No 12/2012-Central Excise dated
17.3.2012 is being amended to extend the time period
for submission of the final Mega Power Project
certificate from 120 months to 156 months.
[108]
Read with
Fifth
Schedule
Exemption from Clean Environment Cess
[The changes will come into effect from date of
enactment of the Finance (No. 2) Bill 2024].
2.
The Clean Environment Cess, levied and collected as
a duty of excise, is being exempted on excisable
goods lying in stock as on 30th June, 2017 subject to
payment of appropriate GST Compensation Cess on
supply of such goods on or after 1st July, 2017.
[109]
106
GOODS AND SERVICE TAX
Note: (a) CGST Act means Central Goods and Services Tax Act, 2017
(b) IGST Act means Integrated Goods and Services Tax Act, 2017
(c) UTGST Act means Union Territory Goods and Services Tax Act, 2017
(d) Cess Act means Goods and Services Tax (Compensation to States)
Act, 2017
Unless specified otherwise, amendments proposed in the Finance (No. 2) Bill, 2024,
vide clause 110 to 153 will come into effect from a date when the same will be
notified concurrently, as far as possible, with the corresponding amendments to the
similar Acts passed by the States & Union territories with legislature.
I. AMENDMENTS IN THE CGST ACT, 2017:
S.
No.
Amendment
Clause of the
Finance
(No. 2) Bill, 2024
1.
Section 9 is being amended to take Extra Neutral
Alcohol used in manufacture of alcoholic liquor for
human consumption out of purview of central tax.
Similar amendments are also proposed in IGST Act
and UTGST Act.
[110]
2.
Sub-section (5) of section 10 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said sub-
section.
[111]
3.
Section 11A is being inserted to empower the
government to regularize non-levy or short levy of
central tax due to any general practice prevalent in
trade. Similar power is being proposed in IGST Act,
UTGST Act and GST (Compensation to States) Act.
[112]
4.
Amendment is proposed in sub section (3) of Section
13 of CGST Act to provide for time of supply of
services where the invoice is required to be issued
by the recipient of services in cases of reverse
charge supplies.
[113]
107
5.
Sub-section (5) is being inserted in section 16 of the
CGST Act, so as to carve out an exception to the
existing sub-section (4) and to provide that in respect
of an invoice or debit note under the said sub-
section, for the Financial Years 2017-18, 2018-19,
2019-20 and 2020-21, the registered person shall be
entitled to take input tax credit in any return under
section 39 which is filed upto the 30th day of
November, 2021.
Sub-section (6) is being inserted in the said section
so as to allow the availment of input tax credit in
respect of an invoice or debit note in a return filed for
the period from the date of cancellation of
registration or the effective date of cancellation of
registration, as the case may be, till the date of order
of revocation of cancellation of registration, filed
within thirty days of the date of order of revocation of
cancellation of registration, subject to the condition
that the time-limit for availment of credit in respect of
the said invoice or debit note should not have
already expired under sub-section (4) of the said
section on the date of order of cancellation of
registration.
The aforesaid amendments are made effective from
the 1st day of July, 2017.
Further, where the tax has been paid or the input tax
credit has been reversed, no refund of the same
shall be admissible.
[114]
6.
Sub-section (5) of section 17 of the CGST Act is
being amended, so as to restrict the non-availability
of input tax credit in respect of tax paid under section
74 of the said Act only for demands upto Financial
Year 2023-24.
It also removes reference to sections 129 and 130 in
the said sub-section.
[115]
7.
Section 21 of the CGST Act is being amended, so as
to incorporate a reference to the proposed new
section 74A in the said section.
[116]
8.
A new proviso in sub-section (2) of section 30 of the
CGST Act is being inserted, so as to provide for an
enabling clause to prescribe conditions and
restrictions for revocation of cancellation of
registration.
[117]
9.
Clause (f) of sub-section (3) of section 31 of the
CGST Act is being amended, so as to incorporate
an enabling provision for prescribing the time
period for issuance of invoice by the recipient in
case of reverse charge mechanism supplies.
[118]
108
Explanation in sub-section (3) of the said section is
also inserted so as to specify that a supplier
registered solely for the purposes of tax deduction
at source under section 51 of the said Act shall not
be considered as a registered person for the
purpose of clause (f) of sub-section (3) of section
31 of the said Act.
10.
Sub-section (6) of section 35 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[119]
11.
Sub-section (3) of section 39 of the CGST Act is
being substituted, so as to mandate the electronic
furnishing of return for each month by the registered
person required to deduct tax at source, irrespective
of whether any deduction has been made in the said
month or not.
It also empowers the Government to prescribe by
rules, the form, manner and the time within which
such return shall be filed.
[120]
12.
Sub-section (8) of section 49 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[121]
13.
Sub-section (1) of section 50 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[122]
14.
Sub-section (7) of section 51 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[123]
15.
Sub-section (3) is being amended and a new sub-
section (15) is being inserted in section 54 of the
CGST Act, so as to provide that no refund of
unutilised input tax credit or integrated tax shall be
allowed in cases of zero rated supply of goods where
such goods are subjected to export duty.
[124]
16.
Sub-section (3) of section 61 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[125]
17.
Sub-section (1) of section 62 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[126]
18.
Section 63 of the CGST Act is being amended, so as
to incorporate a reference to the proposed new
section 74A in the said section.
[127]
109
19.
Sub-section (2) of section 64 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[128]
20.
Sub-section (7) of section 65 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[129]
21.
Sub-section (6) of section 66 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[130]
22.
Sub-section (1A) is being inserted in section 70 of
the CGST Act, to enable an authorised
representative to appear on behalf of the summoned
person before the proper officer in compliance of
summons issued by the said officer.
[131]
23.
Sub-section (12) is being inserted in section 73 of the
CGST Act, so as to restrict the applicability of the
said section for determination of tax pertaining to the
period upto Financial Year 2023-24.
[132]
24.
Sub-section (12) is being inserted in section 74 of the
CGST Act, so as to restrict the applicability of the
said section for determination of tax pertaining to the
period upto Financial Year 2023-24.
[133]
25.
Section 74A is being inserted in the CGST Act, so as
to provide for determination of tax not paid or short
paid or erroneously refunded or input tax credit
wrongly availed or utilised for any reason pertaining
to the Financial Year 2024-25 onwards.
It also provides for the same limitation period for
issuing demand notices and orders in respect of
demands from the Financial Year 2024-25 onwards,
irrespective of whether the charges of fraud, wilful
misstatement, or suppression of facts are invoked or
not, while keeping a higher penalty, for cases
involving fraud, wilful misstatement, or suppression
of facts.
[134]
26.
Sub-section (2A) is being inserted in section 75 in
the CGST Act, so as to provide for redetermination of
penalty demanded in a notice invoking penal
provisions under clause (ii) of sub-section (5) of the
proposed section 74A of the said Act to re-determine
the penalty as per clause (i) of the sub-section (5) of
the said section, in cases where the charges of
fraud, wilful misstatement, or suppression of facts
are not established.
[135]
110
It also amend section 75 of the said Act, so as to
incorporate a reference to the sub-sections (2) and
(7) of section 74A or the sub-sections thereof, in the
relevant sub-sections of this section.
27.
Sub-section (1) of section 104 of the CGST Act is
being amended, so as to incorporate a reference to
the proposed new section 74A in the said section.
[136]
28.
Sub-section (6) of section 107 of the CGST Act is
being amended, so as to reduce the maximum
amount of pre-deposit for filing appeal before the
Appellate Authority from rupees twenty five crores to
rupees twenty crores in central tax.
It also amends sub-section (11) of the said
section, so as to incorporate a reference to the
proposed new section 74A in the said section.
[137]
29.
Section 109 of the CGST Act is being amended, so
as to empower the Government to notify types of
cases that shall be heard only by the Principal Bench
of the Appellate Tribunal.
[138]
30.
Sub-sections (1) and (3) of section 112 of the CGST
Act are being amended, so as to empower the
Government to notify the date for filing appeal before
the Appellate Tribunal and provide a revised time
limit for filing appeals or application before the
Appellate Tribunal. The said amendment is made
effective from the 1
st
day of August, 2024.
Sub-section (6) of the said section is also being
amended so as to enable the Appellate Tribunal to
admit appeals filed by the department within three
months after the expiry of the specified time limit of
six months.
Sub-section (8) of the said section is also being
amended so as to reduce the maximum amount of
pre-deposit for filing appeals before the Appellate
Tribunal from the existing twenty percent to ten
percent of the tax in dispute and also reduce the
maximum amount payable as pre-deposit from
rupees fifty crores to rupees twenty crores in central
tax.
[139]
31.
Sub-section (1B) of section 122 of the CGST Act is
being amended, so as to restrict the applicability of
the said sub-section to electronic commerce
operators, who are required to collect tax at source
under section 52 of the said Act.
The said amendment is made effective from the 1st
[140]
111
day of October, 2023 when the said sub-section had
come into force.
32.
Section 127 of the CGST Act is being amended, so
as to incorporate a reference to the proposed new
section 74A in the said section.
[141]
33.
Section 128A in the CGST Act is being inserted, to
provide for a conditional waiver of interest and
penalty in respect of demand notices issued under
section 73 of the said Act for the Financial Years
2017-18, 2018-19 and 2019-20, except the demands
notices in respect of erroneous refund.
In cases where interest and penalty have already
been paid in respect of any demand for the said
financial years, no refund shall be admissible for the
same.
[142]
34.
Sub-section (7) of section 140 of the CGST Act is
being amended, so as to enable availment of the
transitional credit of eligible CENVAT credit on
account of input services received by an Input
Services Distributor prior to the appointed day, for
which invoices were also received prior to the
appointed date.
The said amendment is made effective from 1st day
of July, 2017.
[143]
35.
Proviso and Explanation is being inserted in sub-
section (2) of section 171 of the CGST Act, so as to
empower the Government to notify the date from
which the Authority under the said section will not
accept any application for anti-profiteering cases.
Explanation in the sub-section (3A) of the said
section is being inserted, so as to include the
reference of Appellate Tribunal in the Authority under
the said section so that the Appellate Tribunal may
be notified by the Government to act as an Authority
under the said section.
[144]
36.
Paragraph 8 is being inserted in Schedule III to the
CGST Act, so as to provide that the activity of
apportionment of co-insurance premium by the lead
insurer to the co-insurer for the insurance services
jointly supplied by the lead insurer and the co-insurer
to the insured in coinsurance agreements shall be
treated as neither supply of goods nor supply of
services, provided that the lead insurer pays the tax
liability on the entire amount of premium paid by the
insured.
[145]
112
Paragraph 9 is being inserted in Schedule III to the
CGST Act, so as to provide that the services by the
insurer to the re-insurer, for which the ceding
commission or the reinsurance commission is
deducted from reinsurance premium paid by the
insurer to the reinsurer, shall be treated as neither
supply of goods nor supply of services, provided that
tax liability on the gross reinsurance premium
inclusive of reinsurance commission or the ceding
commission is paid by the reinsurer.
37.
No refund shall be made of all the tax paid or the
input tax credit reversed, which would not have been
so paid, or not reversed had the said clause 114
been in force at all material times.
[146]
II. AMENDMENTS IN THE IGST ACT, 2017:
S.
No.
Amendment
Clause of the
Finance (No. 2)
Bill, 2024
1.
Sub-section (1) in Section 5 in the IGST Act is
being amended, so as to not levy integrated tax on
Extra Neutral Alcohol used for manufacture of
alcoholic liquor for human consumption.
[147]
2.
Section 6A is being inserted in the IGST Act, so as
to empower the Government to regularize non –
levy or short levy of integrated tax where it is found
that such non levy or short levy was a result of
general practice.
[148]
3.
Sub-section (4) in Section 16 in the IGST Act is
being amended, so as to provide for notification of
class of persons who may make zero rated
supplies of goods or services or both or class of
goods or services which may be supplied on zero
rated basis, and refund of integrated tax in respect
of which can be claimed, in accordance with the
provisions of Section 54 of the Central Goods and
Services Tax Act, subject to such conditions,
safeguards and procedures as may be prescribed.
Sub-section (5) is being inserted in the said Section
to provide that no refund of unutilized input tax
credit or of integrated tax paid on account of zero-
rated supply of goods shall be allowed in cases
where the zero-rated supply of goods is subjected
to export duty.
[149]
4.
Section 20 in the IGST Act is being amended, so
as to reduce the maximum amount of pre-deposit
[150]
113
payable for filing appeal before appellate authority
from rupees fifty crores to rupees forty crores of
integrated tax. Further, it proposes to reduce the
maximum amount payable as pre-deposit for filing
appeal before the Appellate Tribunal from rupees
hundred crores to rupees forty crores of integrated
tax.
III. AMENDMENTS IN THE UTGST ACT, 2017:
S.
No.
Amendment
Clause of the
Finance (No. 2)
Bill, 2024
1.
Sub-section (1) in Section 7 in the UTGST Act is being
amended, so as to not levy union territory tax on Extra
Neutral Alcohol used for manufacture of alcoholic liquor
for human consumption.
[151]
2.
Section 8A in the UTGST Act is being inserted, so as to
empower the Government to regularize non –levy or
short levy of union territory tax where it is found that
such non levy or short levy was a result of general
practice.
[152]
IV. AMENDMENTS IN THE GST (Compensation to States) Act, 2017:
S.
No.
Amendment
Clause of the
Finance (No. 2)
Bill, 2024
1.
Section 8A is being inserted in the GST (Compensation
to States ) Act, so as to empower the Government to
regularize non –levy or short levy of cess where it is
found that such non levy or short levy was a result of
general practice.
[153]
******
MEMORANDUM
EXPLAINING THE PROVISIONS
IN
THE FINANCE BILL, 2024
(Clauses referred to are clauses in the Bill)
ºÉiªÉàÉä´É VɪÉiÉä
GOVERNMENT OF INDIA