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Finance Act 2013, Budget 2013

Summary of Finance Act, 2013

Amendment of section 2: Definitions under Income Tax Act, 1961

Amendment of section 10: Incomes not included in total Income

Insertion of new section 32AC: Deduction for acquisition and installation of new plant or machinery by manufacturing company

Amendment of section 36: Other Deductions

Amendment of section 40: Amounts not deductible

Amendment of section 43: Definitions of certain terms relevant to income from profits and gains of business or profession

Insertion of new section 43CA: Special provision for full value of consideration for transfer of assets other than capital assets in certain cases

Amendment of section 56: Income from other sources

Amendment of section 80C: Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc

Amendment of section 80CCG: Deduction in respect of investment made under an equity savings scheme.

Amendment of section 80D: Deduction in respect of health insurance premia

Insertion of new section 80EE: Deduction in respect of interest on loan taken for residential house property

Amendment of section 80G: Deduction in respect of donations to certain funds, charitable institutions, etc

Amendment of section 80GGB: Deduction in respect of contributions given by companies to political parties

Amendment of section 80GGC: Deduction in respect of contributions given by any person to political parties

Amendment of section 80-IA: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.

Amendment of section 80JJAA: Deduction in respect of employment of new workmen

Amendment of section 87: Rebate to be allowed in computing income-tax

Insertion of new section 87A: Rebate of income-tax in case of certain individuals

Amendment of section 90: Agreement with foreign countries or specified territories

Amendment of section 90A: Adoption by Central Government of agreement between specified associations for double taxation relief.

Omission of Chapter X-A relating to General Anti-Avoidance Rule

Insertion of new Chapter X-A: GENERAL ANTI-AVOIDANCE RULE 95. Applicability of General Anti-Avoidance Rule.—Notwithstanding anything contained in the Act, an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter.

Amendment of section 115A: Tax on dividends, royalty and technical service fees in the case of foreign companies

Amendment of section 115AD: Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer

Amendment of section 115BBD: Tax on certain dividends received from foreign companies

Amendment of section 115-O: Tax on distributed profits of domestic companies

Insertion of new Chapter XII-DA: SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME OF DOMESTIC COMPANY FOR BUY-BACK OF SHARES 115QA. Tax on distributed income to shareholders

Amendment of section 115R: Tax on distributed income to unit holders

Insertion of new Chapter XII-EA.: SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME BY SECURITISATION TRUSTS 115TA. Tax on distributed income to investors

Amendment of section 132B: Application of seized or requisitioned assets

Amendment of section 138: Disclosure of information respecting assessees

Amendment of section 139: Return of income

Amendment of section 142: Inquiry before assessment

Omission of section 144BA: Reference to Commissioner in certain cases

Insertion of new section 144BA: Reference to Commissioner in certain cases

Amendment of section 144C: Reference to dispute resolution panel

Amendment of section 153: Time limit for completion of assessments and reassessments

Amendment of section 153B: Time-limit for completion of assessment under section 153A

Amendment of section 153D: Prior approval necessary for assessment in cases of search or requisition

Amendment of section 167C: Liability of partners of limited liability partnership in liquidation

Amendment of section 179: Liability of directors of private company in liquidation

Insertion of new section 194-IA: Payment on transfer of certain immovable property other than agricultural land

Insertion of new section 194LD: Income by way of interest on certain bonds and Government securities

Amendment of section 195: Other sums

Amendment of section 196D: Income of Foreign Institutional Investors from securities

Amendment of section 204: Meaning of “person responsible for paying”

Amendment of section 206AA: Requirement to furnish Permanent Account Number

Amendment of section 206C: Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc

Amendment of section 245N: Advance Ruling Definitions

Amendment of section 245R: Advance Ruling Procedure on receipt of application

Amendment of section 246A: Appealable orders

Amendment of section 252: Appellate Tribunal

Amendment of section 253: Appeals to the Appellate Tribunal

Substitution of new section for section 271FA: Penalty for failure to furnish annual information return

Amendment of section 295: Power to make rules

Amendment of Fourth Schedule:  PART A – RECOGNISED PROVIDENT FUNDS,  PART B – APPROVED SUPERANNUATION FUNDS, PART C – APPROVED GRATUITY FUNDS

Amendment of section 2

(ii) for item (B), the following item shall be substituted, namely:— “(B) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.”;

Substitution of reference of certain expression by other expression. 4. In the Income-tax Act, for the expression “the Foreign Exchange Regulation Act, 1973 (46 of 1973)”, wherever it occurs, the expression “the Foreign Exchange Management Act, 1999 (42 of 1999)” shall be substituted.

Amendment of section 10

„Provided also that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is— (i) a person with disability or a person with severe disability as referred to in section 80U; or (ii) suffering from disease or ailment as specified in the rules made under section 80DDB, the provisions of this sub-clause shall have effect as if for the words “ten per cent”, the words “fifteen per cent” had been substituted

„(23DA) any income of a securitisation trust from the activity of securitisation. Explanation.—For the purposes of this clause,— (a) “securitisation” shall have the same meaning as assigned to it,—
(i) in clause (r) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or(ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank of India; (b) “securitisation trust” shall have the meaning assigned to it in the Explanation below section 115TC;‟;

„(23ED) any income, by way of contributions received from a deposi- tory, of such Investor Protection Fund set up in accordance with the regulations by a depository as the Central Government may, by notification in the Official Gazette, specify in this behalf:

(IV) in clause (23FB), for Explanation 1, the following Explanation shall be substituted, namely:—(a) “venture capital company” means a company which— (A) has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 (herein- after referred to as the Venture Capital Funds Regula- tions) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or ……… (b) “venture capital fund” means a fund— (A) operating under a trust deed registered under the provi- sions of the Registration Act, 1908 (16 of 1908), which—

Insertion of new section 32AC

„32AC. Investment in new plant or machinery.—(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,— (a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and
(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). (2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company. (4) For the purposes of this section, “new asset” means any new plant or machinery (other than ship or aircraft) but does not include— (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.‟.

Amendment of section 36

in sub-section (1), with effect from the 1st day of April, 2014,— (a) in clause (vii), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:—
“Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;”;

Amendment of section 40

“(iib) any amount— (A) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on; or (B) which is appropriated, directly or indirectly, from, a State Government undertaking by the State Government. Explanation.—For the purposes of this sub-clause, a State Government undertaking includes— (i) a corporation established by or under any Act of the State Government; (ii) a company in which more than fifty per cent of the paid-up equity share capital is held by the State Government; (iii) a company in which more than fifty per cent of the paid-up equity share capital is held by the entity referred to in clause (i) or clause (ii) (whether singly or taken together); (iv) a company or corporation in which the State Government has the right to appoint the majority of the directors or to control the management or policy decisions, directly or indirectly, includ- ing by virtue of its shareholding or management rights or shareholders agreements or voting agreements or in any other manner;
(v) an authority, a board or an institution or a body established or constituted by or under any Act of the State Government or owned or controlled by the State Government;”.

Amendment of section 43

(I) in the proviso,— (A) in clause (d), after the words “a recognised stock exchange;”, the word “or” shall be inserted; (B) after clause (d), the following clause shall be inserted, namely:— “(e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association,”; (II) the Explanation shall be numbered as “Explanation 1” thereof and in the Explanation 1 as so renumbered, for the words “this clause”, the word, brackets and letter “clause (d)” shall be substituted; (III) after Explanation 1 as so renumbered, the following Explanation shall be inserted, namely: „Explanation 2.— For the purposes of clause (e), the expressions— (i) “commodity derivative” shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013; (ii) “eligible transaction” means any transaction,—

Insertion of new section 43CA

“43CA. Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.—(1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).

Amendment of section 56

“(b) any immovable property,— (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Amendment of section 80C

„Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is— (a) a person with disability or a person with severe disability as referred to in section 80U, or (b) suffering from disease or ailment as specified in the rules made under section 80DDB, the provisions of this sub-section shall have effect as if for the words “ten per cent”, the words “fifteen per cent” had been substituted

Amendment of section 80CCG

(a) in sub-section (1),— (i) after the words “acquired listed equity shares”, the words “or listed units of an equity oriented fund” shall be inserted; (ii) after the words “in such equity shares”, the words “or units” shall be inserted;

Amendment of section 80D

In section 80D of the Income-tax Act, in sub-section (2), in clause (a), after the words “Central Government Health Scheme”, the words “or such other scheme as may be notified by the Central Government in this behalf” shall be inserted with effect from the 1st day of April, 2014.

Insertion of new section 80EE

„80EE. Deduction in respect of interest on loan taken for residential house property.—(1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property. (2) The deduction under sub-section (1) shall not exceed one lakh rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2014 and in a case where the interest payable for the previous year relevant to the said assessment year is less than one lakh rupees, the balance amount shall be allowed in the assessment year beginning on the 1st day of April, 2015

Amendment of section 80G

Amendment of section 80GGB: Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash

Amendment of section 80GGC: Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

Amendment of section 80-IA

Amendment of section 80JJAA

“(1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from the manufac- ture of goods in a factory, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent 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

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