Analysis of Finance Bill, 2017 Part - II

Measures for Stimulating Growth 

1. Sec. 194LC : Extension of eligible period of concessional rate of TDS u/s 194LC from 2017 to 2020 

Amendment : It is proposed to amend Sec. 194LC to provide that the concessional TDS rate of 5%on interest payment will now be available in respect of borrowings made before the July 1, 2020. Amendment proposed shall take effect from April 1, 2018 i.e., AY 2018-19. It is further proposed to extend the benefit of Sec. 194LC to rupee denominated bond issued outside India for the period before the July 1, 2020. Amendment proposed shall take effect from April 1, 2016.

Chaturvedi & Pithisaria Commentary : Legislative amendments : In order to provide broad based incentive and encourage greater offshore investment in debt market by foreign institutional investors (FIIs) and qualified foreign investors (QFIs), Sec. 194LC provided the benefit of lower withholding tax (i.e., 5 per cent instead of 20 per cent) in respect of interest on investment made in bonds issued by Indian companies and Government securities…read more

2. Sec. 194LD : Extension of eligible period of concessional tax rate u/s 194LD from 2017 to 2020

Amendment : It is proposed to amend Sec. 194LD to provide that the concessional rate of 5% TDS on interest will now be available on interest payable before July 1, 2020. Amendment proposed shall take effect from April 1, 2018.

Chaturvedi & Pithisaria Commentary : Introduction to Sec. 194LD : The scope and effect of the insertion (w.e.f. 1-6-2013) of a new section 194LD and amendment (w.e.f. 1-4-2014) made in section 115ADand (w.e.f. 1-6-2013) made in sections 195 and 196D by the Finance Act , 2013, have been elaborated in the following portion of the departmental circular No. 3 of 2014, dated 24-1-2014....read more

3. Sec. 79 : Loss carry forward restriction u/s 79 due to shareholding change rationalized for startups 

Amendment : It is proposed to amend Sec. 79 to provide that where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested and being an eligible start-up as referred to in Sec. 80IAC, loss shall be carried forward and set off against the income of the previous year, if all the shareholders of such company which held shares carrying voting power on the last day of the year or years in which the loss was incurred, being the loss incurred during the period of seven years beginning from the year in which such company is incorporated, continue to hold those shares on the last day of such previous year. Amendment proposed shall take effect from April 1, 2018.

Chaturvedi & Pithisaria Commentary : Legislative amendments & Scope of Section 79 : Sec. 79, with its over-riding provisions, has application to companies in which the public are not substantially interested and a change has taken place in the shareholding of the company…read more

4. Sec. 80-IAC : Start-up tax holiday available for 3 years out of 7 years as against earlier period of 5 years 

Amendment : In view of the fact that start-ups may take time to derive profit out of their business, it is proposed to provide that deduction u/s 80IAC can be claimed by an eligible start-up for any 3 consecutive AYs out of 7 years beginning from the year in which such eligible start-up is incorporated. Amendment proposed shall take effect from April 1, 2018.

5. Sec. 115JAA, Sec. 115JD : MAT credit carry forward extended up to 15 years 

Amendment : With a view to provide relief to the assessees paying MAT, it is proposed to amend Sec. 115JAA to provide that MAT credit determined under this sec can be carried forward up to 15AYs immediately succeeding the AYs in which such tax credit becomes allowable. Similar amendment is proposed in Sec. 115JD so as to allow carry forward of Alternate Minimum Tax (AMT) paid u/s 115JC up to 15 AYs in case of non-corporate assessee. It is further proposed to amend sec 115JAA and 115JD so as to provide that the amount of tax credit in respect of MAT/AMT shall not be allowed to be carried forward to subsequent year to the extent such credit relates to the difference between the amount of foreign tax credit (FTC) allowed against MAT/AMT and FTC allowable against the tax computed under regular provisions of Act other than the provisions relating to MAT/AMT. Amendment proposed shall take effect from April 1, 2018.

Chaturvedi & Pithisaria Commentary : Legislative amendments : Credit for minimum alternate tax under Sec. 115JAA comprises that portion of the minimum alternate tax which was not actually payable by the assessee but which nevertheless was collected by the Exchequer…read more

6. Sec. 43D, Sec. 43B : Extension of scope of Sec. 43D to co-operative banks 

Amendment : It is proposed to amend Sec. 43D so as to include co-operative banks other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. This is with a view to provide a level playing field to co-operative banks vis-à-vis scheduled banks and to rationalize the scope of the Sec. 43D· Further amendment is made to Sec. 43B of the Act to provide that any sum payable by the assessee as interest on any loan or advances from a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank shall be allowed as deduction if it is actually paid on or before the due date of furnishing the return of income of the relevant previous year. Amendment proposed shall take effect from April 1, 2018.

Chaturvedi & Pithisaria Commentary : Scope of originally enacted provisions : In order to promote rural banking and assist the scheduled banks in making adequate provisions from their current income to provide for the risks in relation to the rural advances, a new clause (viia) was inserted in Sec. 36(1) by the Finance Act , 1979…read more

7. Sec. 36(1)(viia) : Deduction limit in respect of provision for bad and doubtful debts available to banks increased from 7.5% to 8.5% 

Amendment : In order to strengthen the financial position of the entities specified in the sub-clause (a) of Sec. 36(1) (viia), it is proposed to amend the said sub-clause to enhance the present limit from 7.5% to 8.5 % of the amount of the total income (computed before making any deduction under that clause and Chapter VIA). Amendment proposed shall take effect from April 1, 2018.

Chaturvedi & Pithisaria Commentary : Scope of originally enacted provisions : In order to promote rural banking and assist the scheduled banks in making adequate provisions from their current income to provide for the risks in relation to the rural advances, a new clause (viia) was inserted in Sec. 36(1) by the Finance Act, 1979, so as to provide that a deduction is to be allowed, in case of all scheduled banks other than co-operative banks, in respect of provision made by them for bad and doubtful debts relating to advances made by their rural branches…read more