CA FINAL Direct Tax Amendments for MAY by CA Bhnawar Borana

0014 0015 0016 0017 0018 0019 001A 001B 001C 00140013 00140014 00140015 00140016 00140017 00140018 00140019 0014001A 0014001B 0014001C 00150013 00150014 00150015 00150016 00150017 00150018 00150019 DIRECT TAX: CA FINAL 1 CA Bhanwar Borana Amendments for MAY 16 Residential Status Residential status of a company to be determined on the basis of “Place of Effective Management” [Section 6(3)] section 6(3) has been substituted to provide that a company would be resident in India in any previous year, if- i. it is an Indian company; or ii. its place of effective management, in that year, is in India . Explanation to section 6(3) defines “place of effective management” to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made. Salary Increase in the maximum limit for exemption of transport allowance transport allowance can be claimed as an exemption by an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty has been increased from ` 800 p.m. to ` 1,600 p.m. In case of a blind or orthopaedically handicapped employee, the maximum limit has been revised from ` 1,600 p.m. to ` 3,200 p.m. Deduction from GTI 1. Deduction under section 80C to be available in respect of deposit in Sukanya Samriddhi Account Scheme for the welfare of girl child 2. Increase in the limit of deduction in respect of contribution to certain pension funds under section 80CCC [1lac to 1.5lac] 3. Additional deduction (50,000) in respect of contribution to NPS of Central Government under section 80CCD(1B) and enhancement of limit of deduction under section 80CCD(1) Amendments 2 CA Bhanwar Borana The following table summarizes the ceiling limit under these sections w.e.f. A.Y.2016-17 – Section Particulars Ceiling limit ( ` ) 80C Investment in specified instruments 1,50,000 80CCC Contribution to certain pension funds 1,50,000 80CCD(1) Contribution to NPS of Government 10% of salary or 10% of GTI, as the case may be. 80CCE Aggregate deduction under sections 80C, 80CCC & 80CCD(1) 1,50,000 80CCD(1B) Contribution to NPS notified by the Central Government (outside the limit of ` 1,50,000 under section 80CCE) 50,000 4. Enhancement of the limit of deduction under section 80D and allowability of deduction for incurring medical expenditure in respect of very senior citizen (i) On account of the continuous rise in the cost of medical expenditure, the limit of deduction under section 80D has now been increased from ` 15,000 to ` 25,000 . Further, the limit of deduction in respect of amount paid to effect or keep in force an insurance of a person who is a senior citizen, being a resident individual of the age of 60 years or more, has also been raised from ` 20,000 to ` 30,000. (ii) As a welfare measure towards very senior citizens i.e. person of the age of 80 years or more and resident in India, who are unable to get health insurance coverage, section 80D has been amended to provide that deduction of upto ` 30,000 would be allowed in respect of any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person. (iii) The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would, however, be limited to ` 30,000. Similarly, aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to ` 30,000. (iv) ‘Very senior citizen’ to mean an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year. 5. Increase in the limit of deduction under section 80DD and 80U in respect of persons with disability and severe disability DIRECT TAX: CA FINAL 3 CA Bhanwar Borana Deduction under section 80DD Maintenance and medical treatment of: A.Y.2015 - 16 A.Y.2016 - 17 Persons with disability 50,000 75,000 Persons with severe disability 1,00,000 1,25,000 Deduction under section 80U A.Y.2015 - 16 A.Y.2016 - 17 Persons with disability 50,000 75,000 Persons with severe disability 1,00,000 1,25,000 6. Enhanced limit of deduction for expenditure incurred in respect of medical treatment of very senior citizen [Section 80DDB] The maximum limit of deduction under section 80DDB for the various categories of dependent are summarized hereunder: Dependent Maximum limit ( ` ) (1) A very senior citizen, being a resident individual 80,000 (2) A senior citizen, being a resident individual 60,000 (3) Dependent, other than mentioned in (1) & (2) above 40,000 7. Scope of section 80G expanded to allow 100% deduction in respect of donation to Swachh Bharat Kosh, Clean Ganga Fund and National Fund for Control of Drug (Unlimited Category) 8. Deduction for employment of new regular workmen extended to all assessees deriving profits and gains from manufacture of goods in a factory [Section 80JJAA] Effective from: A.Y. 2016-17 a.Section 80JJAA(1) provides for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is equal to 30% of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. b. For the purpose of encouraging generation of employment, section 80JJAA(1) has been amended to extend the benefit so far available only to corporate assessees to all assessees whose gross total income includes profits and gains derived from manufacture of goods in a factory. Amendments 4 CA Bhanwar Borana c. Consequently, section 80JJAA(2)(a) has been amended to provide that no deduction would be allowed if the factory is acquired by the assessee by way of transfer from any other person or as a result of any business reorganization. d. Clause (i) of the Explanation to this section defines “Additional wages” to mean the wages paid to the new regular workmen in excess of 100 workmen employed during the previous year. e. In order to enable the smaller units to claim the benefit of deduction under this section, clause (i) of the Explanation has been amended to provide that “additional wages” shall mean the wages paid to the new regular workmen in excess of 50 workmen employed during the previous year. f. In effect, the benefit of deduction under this section has been extended to smaller units employing more than 50 new regular workmen. Scope of Total Income 1. Value of Indian assets to determine whether the share or interest of a foreign company or entity is deemed to derive its value substantially from the assets located in India [Section 9(1)(i)] Effective from: A.Y. 2016- 17 (i) Section 9(1) is a deeming provision specifying the incomes which shall be deemed to accrue or arise in India. (ii) As per section 9(1)(i), all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situated in India shall be deemed to accrue or arise in India. (iii) The Finance Act, 2012 had inserted Explanation 5 in section 9(1)(i) w.r.e.f. 1.04.1962 to clarify that an asset or capital asset, being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. (iv) Explanation 6 provides that the share or interest in a company or entity registered or incorporated outside India, shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of Indian assets,- (a) exceeds the amount of ` 10 crore; and DIRECT TAX: CA FINAL 5 CA Bhanwar Borana (b) represents at least 50% of the value of all the assets owned by the company or entity, as the case may be; 2. Explanation 7 N o income shall be deemed to accrue or arise to a non -resident , from transfer, outside India, of any share of, or interest in, a company or an entity, registered or incorporated outside India, referred to in the Explanation 5,— if such transferor (whether individually or along with its associated enterprises), at any time in the twelve months preceding the date of transfer, neither holds (i) the right of management or control in relation to such company or entity, (ii) nor holds voting power or share capital or interest exceeding 5% of the total voting power or total share capital or total interest, as the case may be, of such company CA FINAL DT Crash Course For MAY/NOV – 2016 B y CA Bhanwar Borana Dt. 12 -19 March Timing: 8am to 4pm Fees : 6000/- (Inclusive Taxes) In crash course full DT Coverage  COMPACT a Handwritten coloured book  Practice Manual of ICAI  All case laws relevant for MAY/NOV 2016  All amendments  RTP MAY 2016 INCITO Academy, Andheri E Call 8080381381, 9594969569 Knowledge is useful only when shared. Exploiting his vast experience as a professor of Taxation and his committed association with the ICAI, CA Bhanwar Borana brings to CA Final students, India’s first handwritten notes for Direct Tax! As has always been said, the print can never replicate knowledge that the hand imparts. Using the disciplined colour - coding system, Compact facilitates easy understanding and rapid revision for syllabus applicable to the May 2016 attempt! Spread the word! Hurry! Get your copy at: 1. INCITO Academy, Andheri – E 2. Book Emporium, Andheri – E 3. www.Flipkart.com 4. www.makemydelivery.com 5. www.amazon.in