India: Finance Bill 2017 passed by the Lower House of Parliament

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The Lower House of Parliament (Lok Sabha) passed the Finance Bill 2017 on 22 March 2017. The key amendments to the Finance Bill 2017 are discussed below:

  • Proposed section 94B of the Income Tax Act, 1961 (ITA) limiting the deduction of interest paid to non-resident associated enterprises has been amended.
  • Foreign institutional investors are excluded from the provisions of indirect transfer of shares as explained in Explanation 5 of section 9(1)(i) of the ITA. This exclusion is applicable for assessment years from 1 April 2012 to 1 April 2015. Furthermore, Category I and II foreign portfolio investors are excluded from the provisions of indirect transfer of shares as explained in Explanation 5 of section 9(1)(i) of the ITA, such exclusion being applicable from assessment years beginning on 1 April 2015.
  • Provisions concerning tax collection at source (section 206C(1D) of the ITA) apply to cash sales for amounts exceeding INR 200,000.
  • The monetary limit for cash transactions proposed under section 269ST of the ITA has been reduced from INR 300,000 to INR 200,000.
  • Consequential amendment was made to the definition of “income” (under section 2(24)) to provide reference to the proposed new section 56(2)(x) of the ITA. Proposed section 56(2)(x) extends the taxability of gifts, if received, to all taxpayers, i.e. companies, firms, etc.
  • An amendment was made to the provision on minimum alternate tax which is applicable to companies preparing financial statements in accordance with Indian accounting standards. The definition of “transition amount” does not include an equity component of compound financial instruments.
  • The amendment provides for a merger of tribunals and uniform appointment rules.

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