Direct Tax changes Clause by Clause in Budget 2014 analysis by E& Y

This section summarises significant proposals of direct Tax  announced in the Union Budget 2014. Most direct tax proposals in the Finance ...

This section summarises significant proposals of direct Tax  announced in the Union Budget 2014. Most direct tax proposals in the Finance Bill are effective from the financial year commencing on 1 April 2014, unless otherwise specified. 

The Finance Bill is discussed in the Parliament before enactment, and is subject to amendment resulting from these discussions.

Direct tax 

Income-tax Rfates of tax

The personal income-tax rates remain unchanged although the exemption limit for individuals (other than resident individuals of the age of 80 years or above) has been increased by INR 50,000.

The personal income-tax rates have been summarized below: 

Income (INR)                                 Rate

                                                        (%)@

0-250,000*                                            Nil

250,001-500,000                                  10

500,001-1,000,000                                 20

1,000,001 and above                              30

@ Surcharge @10% of the total tax liability where the total income exceeds INR 10 million remains.

Education cess of 3% leviable on the amount of income-tax and surcharge, if any also remains.

* The exemption limit in case of resident individuals of the age of 60 years or more but less than 80 years has also increased from INR 250,000 to INR 300,000.

In case of resident individuals of the age of 80 years or above, the exemption limit remains at INR 500,000.

Tax rates for cooperative societies, partnership firms and local authorities Rates of tax for cooperative societies, partnership firms and local authorities remain unchanged. Surcharge of 10% if income exceeds INR 10 million also remains.

Corporate tax rates

• Rates of corporate tax remain unchanged for both domestic and foreign companies.
• Presently, a surcharge of 5% and 2% is levied on domestic and foreign companies respectively, if their income exceeds INR 10 million. Where the income derived by the domestic and foreign company exceeds INR 100 million, the surcharge is levied at an increased rate of 10% and 5% respectively.
• Education cess shall continue to be levied at the rate of 3% on the amount of tax computed, inclusive of surcharge, in all cases.
• The corporate tax rates (including surcharge and education cess) have been summarized below:

Description                                                           Rate (%)

A) Domestic company                                 

• Regular tax                                                         33.99 @
• MAT                                                                  20.96* 
• DDT                                                                   16.995

B) Foreign company                                    

• Regular tax                                                             43.26#
• MAT is chargeable at                                              18.5% of book                                                                                                                                    profits (plus applicable surcharge and cess). 

• @ 32.445% where the total income is more than INR 10 million and up to INR 100 million. 
• @ 30.9% where the total income is equal to or less than INR 10 million.
• * 20.008% where the total income is more than INR 10 million and up to INR 100 million.
• * 19.055% where the total income is equal to or less than INR 10 million.
• # 42.024% where the total income is more than INR 10 million and up to INR 100 million.
• # 41.2% where the total income is equal to or less than INR 10 million.
• Surcharge on profits distributed to shareholders and income distributed to unit holders continue to be 10%. 

Rebate under Chapter VIII

Rebate for resident individuals in lower income bracket

•  Finance Act 2013 had introduced a new provision to provide rebate of INR 2,000 or actual tax payable whichever is less for resident individuals with total income up to INR 500,000. This provision is still applicable. 

Income from house property

•  The limit of deduction of interest paid on borrowed capital for acquisition/construction of self-occupied house property where the acquisition or construction of the property is completed within three years from the end of financial year in which capital is borrowed, has been increased from INR 150,000 to INR 200,000. 

Deductions under Chapter VIA

• The limit of deduction from income in respect of sums paid or deposited towards investment instruments such as contribution to provident fund, schemes for deferred annuities under section 80C has been increased from INR 100,000 to INR 150,000.
• Consequentially, the cumulative limit provided in section 80CCE for deductions under section 80C, 80CC and 80CCD has been increased from INR 100,000 to INR 150,000. 
• Under the existing provisions of section 80CCD, if an individual employed by the Central Government or any other employer on or after 1 January 2004 has paid or deposited any amount in the New Pension Scheme, a deduction is allowed. Now, the condition of being employed on or after 1 January 2004 for private sector employees has been removed. Further, a limit of INR 100,000 under section 80CCD has been introduced within the overall limit of INR 150,000 under section 80CCE.

Exempt income

Clarification in respect of educational institutions, universities and hospitals substantially financed by the 

Government

•  Presently, Income-tax Act provides for exemption in respect of the income of certain educational institutions, universities and hospitals which are wholly or substantially financed by the Government. The meaning of the term “wholly or substantially financed by the Government” has been clarified to cover cases where Government grant to such university or other educational institution, hospital or other institution, exceeds a specified percentage of its total receipts (including any voluntary contributions), during the relevant financial year.
• Presently, section 10(23C) provides for exemption in respect of income when it is applied to acquire a capital asset. Subsequently, notional deduction by way of depreciation is also claimed, thereby resulting in double benefit being claimed by the trusts and institutions under the present law.
• It has been clarified that income for the purposes of application shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under these sections in the same or any other previous year.

Exemption for charitable trusts or institutions

• Any trust or institution registered under section 12AA, can no longer claim exemption under section 10. 
• In case where an acquisition of a capital asset is to be considered as application of income of trust, depreciation claim on the same capital assets acquired needs to be excluded for the purpose of income computation. 

Registration of trusts or institutions

•  Registration under section 12AA once granted by CIT can be used for availing tax exemption even for prior years provided the objects or activities of trusts or institutions in those years is same as those on the basis of which registration has been granted.
• Wider power to the principal CIT or CIT to cancel the registration of trusts or institutions under section 12AA. 
• These amendments will take effect from 1 October 2014.

Business income

Extension of time limit for depositing withheld taxes to claim deduction of expenditure pertaining to non-residents 

• Presently, payments to a non-resident are not allowed as a deductible expenditure in case applicable tax is not deducted or after deduction at source, not deposited within the prescribed timelines. However, in respect of payments made to a resident, deduction is allowed even if the applicable tax is deposited on or before the due date of filing the income-tax return.
•  Now, payments to a non-resident will also be allowed as a  deduction if the tax deducted at source during the year is deposited on or before the due date of filing the income-tax return.

Disallowance of business expenditure for non-deduction/late deduction and deposit of tax on payment to residents

•  Disallowance on account of non-deduction/late deduction and deposit of tax at source has now been extended to cover all payments to a resident on which tax is deductible at source.
• Amount of disallowance of expenditure will now be restricted to 30% of the expenditure as against the existing disallowance of 100% of expenditure. 

Expenditure on Corporate Social Responsibility activities

• Expenditure incurred by a taxpayer on Corporate Social Responsibility activities prescribed under the Companies Act 2013 will not be allowed as a deductible residual expenditure.
• The same will be allowed as a deduction if it is covered under a specific deduction provision.

Trading in commodity derivatives

• Presently, transaction of trading in commodity derivatives is not considered to be a speculative transaction if carried out on a recognized association.
• It is now additionally provided that CTT should be paid on such a transaction.
• This amendment will take retrospective effect from 1 April 2014.

Rationalisation of presumptive income from the business of plying/hiring or leasing goods carriages

•  Presumptive income from the business of plying/hiring or leasing goods carriages has been rationalized to INR 7,500 for every month or part of the month during which the goods carriage is owned by the taxpayer. 

New investment based deduction on acquisition and installation of new plant and machinery

1. Presently, investment based deduction is allowed to a taxpayer subject to meeting prescribed threshold of investment in new plant and machinery during the period 1 April 2013 to 31 March 2015.
2. To provide additional impetus to the manufacturing industry, a new investment deduction has now been prescribed.
3. The salient features of this new investment based deduction are as follows:
• The company is engaged in the manufacture of any article or thing. 
• The investment is in new plant and machinery acquired and installed during the eligible period i.e. between 1 April 2014 and 31 March 2017.
• The amount of investment in the relevant financial year exceeds INR 250 million.
• Deduction would be allowed at the rate of 15% of the amount of investment in the relevant financial year.
• This deduction would be in addition to the depreciation allowable in accordance with the existing provisions of the Income-tax Act. 
• Existing investment based deduction will continue till 31 March 2015. Taxpayers eligible to claim a deduction under the existing scheme can continue with the same even if the conditions under the new scheme are not satisfied during the financial year 2014-15. Deduction will not be allowed under both the schemes for the same financial year. 
• No change on sale or transfer of new plant and machinery as prescribed under the existing scheme will also apply under the new scheme.

Investment linked deduction for specified businesses

1.  Presently, deduction is allowed for capital expenditure incurred by a taxpayer for certain specified businesses. 
2. Now, this deduction will also be allowed to taxpayers engaged in:
1. Laying and operating a slurry pipeline for the transportation of iron ore; or
2. Setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the CBDT in accordance with the prescribed guidelines.
3. The businesses specified above should commence on or after 1 April 2014.
4. An asset, in respect of which investment linked deduction is claimed and allowed, shall be used only for the specified business for a period of eight years beginning with the year in which such asset is acquired or constructed. 
5. Where any asset, in respect of which such deduction is claimed and allowed, is used for a purpose other than the specified business during the specified period of eight years, the total amount of deduction claimed and allowed (as reduced by the amount of depreciation otherwise allowable for income-tax purposes) shall be taxable as business income of the taxpayer in the year of such use of the asset.
6. This provision shall not apply to a company which becomes a sick industrial company during the specified period of eight years. 
7. Where a taxpayer claims an investment linked deduction, the same taxpayer, being a unit in a SEZ, will not be allowed a profit linked deduction in respect of the same business and vice-versa. 

Sunset clause for commencement of business for claiming tax holiday in power sector extended.

• Sunset clause for commencement of business (to claim tax holiday) extended from 31 March 2014 to 31 March 2017 for undertakings which are set up for generation and/or distribution, transmission or distribution of power or which undertake substantial renovation and modernization of the existing transmission or distribution lines. 

Tax on distributed income

Tax on certain dividends received from foreign companies

• Currently, where the income of Indian company includes income by way of dividend from foreign company in which it holds more than 26% or more nominal value of equity share capital, such dividend income is taxable at the rate of 15%. However, such benefit was available only up to 31 March 2014. 
• Now, benefit would be available for all future assessment years without any sunset clause.

Tax payable after grossing up net profits to be distributed

1.  Presently, DDT is paid at the rate of 15% of amount declared, distributed or paid by way of dividends to its shareholders. Similarly, additional income tax is required to be paid by Mutual fund in respect of its income distributed to its investors at specified rates.
2. Now, section 115-O and 115-R have been amended to provide that tax would be paid after grossing up the net profits distributed by the company or income distributed by mutual fund as the case may be.
3.  The effective tax rates for DDT shall now stand increased from 16.995% to 20.248%.
4. This amendment will take effect from 1 October 2014.

Capital gains

Capital gains arising from transfer of an asset by way of compulsory acquisition

1.  Presently, there is uncertainty regarding the “year” of taxation of enhanced compensation.
2.  It has been clarified that the enhanced compensation will be taxed as capital gains in the financial year in which the final order is made.

Capital gains exemption in case of investment in a residential house property

• The existing provisions exempt capital gains arising from sale of a long term capital asset, being a residential property if the gains are utilised for purchasing/constructing another residential property within the specified period.
• Further, the capital gains arising from transfer of a long term capital asset, other than a residential house are exempt if the gains are utilised in the manner mentioned above.
• Now, both the sections are amended to provide the rollover relief only if the investment is made in one residential house situated in India.

Capital gains exemption in case of investment in long term specified assets

•  The existing provisions exempt proportionate capital gains arising from transfer of a long-term capital asset, if the same is invested in specified long-term assets within a period of six months.
•  Further, the investment in such specified long-term assets during any financial year should not exceed five million rupees.
•  The existing provisions are ambiguous due to the window of six months being spread in two years in certain cases (transfers post September) which has resulted in claim of relief of ten million rupees instead of the intended relief of five million rupees.
• Now, the investment made by a tax payer during the financial year in which the assets are transferred and in the subsequent financial year should not exceed INR 5,000,000.

Taxation of advance for transfer of a capital asset

• Where any sum of money is received as an advance or otherwise in the course of negotiations for transfer of a capital asset and such sum is forfeited on failure of the negotiations, the sum is proposed to be chargeable to tax under the head income from other sources.
• Correspondingly, where tax is paid on the forfeited advance, the same is proposed not to be reduced from the cost of acquisition of the asset while computing the capital gains on its transfer.

Concessional tax rate of 10% on long term capital gains

• Presently, the concessional tax rate of 10% is applicable on long term capital gains arising from transfer of listed securities, units of mutual funds and zero coupon bonds. 
• Now, the said tax rate shall be applicable only on long term capital gains arising from the transfer of listed securities (other than units) and zero coupon bonds.

Others

• Definition of the term “Capital Asset” has been amended to provide that securities held by FIIs in accordance with the SEBI regulations will be regarded as Capital Asset and not as stock in trade.
• Section 2(42A) has been amended to provide that securities (other than a listed security) and units of mutual funds (other than equity oriented) funds shall be regarded as short term capital asset where the same are held for a period of less than 36 months.

Transfer Pricing

Definition of international transaction

• Presently, transactions entered with an unrelated person is deemed as a transaction between associated enterprises if there exists a prior agreement in relation to such transaction between such unrelated person and an associated enterprise or the terms of the relevant transaction are determined in substance between such unrelated person and the associated enterprise Thepresent provisions do not provide whether or not such unrelated person should also be a non-resident.
•  With the proposed amendment, such transaction shall be deemed to be an international transaction irrespective of whether such unrelated person is a resident or nonresident,as long as either the enterprise or the associated enterprise is a non-resident.

APA roll back provisions

1. Government in 2012 introduced the APA scheme to provide certainty to taxpayers for determining the arm’s length price in relation to international transactions. APA is an agreement between the taxpayer and the income-tax authorities on an appropriate TP methodology for a set of international transactions over a fixed time period in future. It is proposed to now introduce roll back provisions in the APA scheme. Salient features of the roll back provisions are as follows:

• Roll back refers to the applicability of the TP methodology agreed in an APA to international transactions entered prior to the period covered under the APA.
• Roll back period not to exceed four years preceding the first financial year for which APA is applicable. 
• Procedure, conditions and manner in respect of roll back of APAs to be prescribed.
• This amendment will be effective from 1 October 2014.

Use of multiple year data for comparability analysis

1. Presently, the Indian transfer pricing regulations allow the use of single year data for comparability analysis and multiple year data in exceptional cases 
2.  It is proposed to amend the regulations to allow use of multiple year data for comparability analysis. Rules to be issued on this aspect.

Computation of arm’s length price

• Range concept to be introduced for determination of arm’s length price.
• Concept of arithmetic mean to continue where number of comparables is inadequate.
•  Appropriate rules will be prescribed in due course. 

Penalty for failure to furnish transfer pricing documentation

• Presently, for failure to furnish transfer pricing documentation, a penalty of 2% of value of international transaction or specified domestic transaction is leviable by assessing Officer or the commissioner (appeals). 
•  It is proposed to include the transfer pricing officer as an authority to levy such penalty.
• This amendment will be effective from 1 October 2014. 

Return of income

Filing of the tax return by MFs and STs

•  Presently, MFs and STs are required to furnish to the prescribed income-tax authority, a statement in the prescribed form and verified in the prescribed manner, giving details of the amount of income distributed to unit holders/investors during the previous year, the tax paid thereon and such other prescribed details. 
•  Now, the MFs and the STs shall not be required to furnish such a statement but would be required to file their annual tax return with the income-tax authorities where their total income before giving effect to the provisions of the Income-tax Act under which they are exempt, exceeds the maximum amount which is not chargeable to tax. 

Assessment procedures

Introduction of New Income-tax Authorities

1. Now Income-tax authorities will include new income-tax authorities namely 
1. “Principal Chief Commissioner of Income-tax”, 
2. “Principal Commissioner of Income-tax”, 
3. “Principal Director General of Income-tax” and 
4. “Principal Director of Income-tax” as persons appointed as Income tax authority.
2. This amendment will take effect retrospectively from 1 June 2013.

Signing and verification of return of income

• The existing provisions under section 140 of the Incometax Act provide that the return under section 139 of the Income-tax Act shall be signed and verified in the manner specified therein. With a view to enable the verification of returns either by a sign in manuscript or by any electronic mode, it is proposed that the return shall be verified by the persons specified therein (section 140 of the Incometax Act).
• This amendment will be effective from 1 October 2014. 

Estimation of value of assets by Valuation Officer

• Assessing Officer may during the assessment/reassessment proceeding refer valuation of any asset, property or investment to a Valuation Officer who shall give his report within six months from the end of month in which reference is made to him.
• The Assessing Officer may make a reference whether or not he is satisfied about the correctness or completeness of the accounts of the assessee.
•  Time taken by the Valuation Officer will be excluded for computing the period of limitation for passing assessment/reassessment order. 
• This amendment will be effective from 1 October 2014. 

Income computation and disclosure standards (Accounting Standards)

• Presently, Assessing Officer can do a best judgment assessment where he is not satisfied that notified Accounting Standards are not regularly followed.
•  It is proposed to provide that Central Government may notify income computation and disclosure standards to be followed in specified situations.
• Further, it has been clarified that such Accounting Standards are to be followed only for computation of income and not for maintenance of books of account. 

Assessment of income of a person other than the person who has been searched

•  Presently, if Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person, other than the assessee, then the books of account or documents or assets seized or requisitioned are handed over to the other Assessing Officer having jurisdiction over such other person and that Assessing Officer is required to proceed against such other person and assess or reassess income of such other person.
• Now, it has been provided the other Assessing Officer shall assess or reassess the income of such other person only if he is satisfied that the seized material will have a bearing on the determination of the total income of such other person. 
• This amendment will be effective from 1 October 2014. 

Power to survey

1. A new provision has been inserted to specifically provide that tax authority may conduct survey for verification of tax deduction or collection at source.
2.  Further, the period for retaining the documents in the custody has been increased from 10 days to 15 days (exclusive of holidays) without obtaining the approval of higher income-tax authorities.
3. This amendment will be effective from 1 October 2014. 

Power to call for information

• To enable the Income-tax authority to verify the information in its possession relating to any person, a new provision has been introduced to grant power to the Income-tax authority to issue notice to such person seeking necessary documents or information which may be useful for making any enquiry or proceeding under the Income-tax Act.
• This amendment will be effective from 1 October 2014. 

Penalty

Penalty for failure to furnish any document or information under transfer pricing provisions

•  Presently, penalty for failure of filing or furnishing inaccurate tax withholding/tax collection range from INR 10,000 to INR 100,000. However, there is no mention as to who will levy such penalty.
•  Now, it has been provided that the Assessing Officer may direct a taxpayer to pay such penalty. 
• This amendment will be effective from 1 October 2014.

Failure to produce accounts and documents

• Presently, where a taxpayer wilfully fails to produce books of accounts and any other documents as required by the Assessing Officer or wilfully fails to comply with a direction issued under special audit proceedings, such taxpayer shall be punishable with an imprisonment which may extend up to one year or be levied a fine ranging between INR 4-10 for each day of default or both.
•  Now, it has been provided that such taxpayer shall be punishable with both imprisonment, which may extend up to one year, and fine. The quantum of fine has not been prescribed.
• This amendment will be effective from 1 October 2014. 

Withholding tax

Provisions relating to withholding tax on overseas borrowing

• Presently, a lower withholding tax rate of 5% applies on interest in respect of monies borrowed by an Indian company in foreign currency or by issue of LTIBs at any time on or after 1 July 2012 but before 1 July 2015 subject to certain conditions.
• Now, the benefit of concessional rate of withholding tax has been extended to all LTBs including LTIBs. 
• Further, this benefit of lower withholding tax rate has been extended for overseas borrowing made up to 1 July 2017. 
•  Consequential amendment is also proposed in section 206AA to ensure that this benefit of lower withholding tax is extended to payment of interest on any LTBs referred to in section 194LC.
• The above amendment will be effective from 1 October 2014.

Provisions relating to withholding tax from non-exempt payments made under life insurance policy introduced

1.  As per section 194-DA, any sum received under a life insurance policy, which does not satisfy conditions laid down in section 10(10D) will now be subject to withholding tax at the rate of 2%.
2. However, withholding tax would not be attracted in case the sum paid during the year is less than INR 0.1 million. 
3. The above amendment will be effective from 1 October 2014.

Correction of TDS statement

• Presently, deductor is allowed to file correction statement for rectification of the information earlier furnished in the original TDS statement as per the prescribed Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013. However, no express provision has been stated in the Act for furnishing of correction statement.
• Now, section 200 has been amended to enable deductor to file correction statement.
• Further, section 200A has been amended for enabling processing of such correction statements submitted by deductor.
• This amendment will take effect from 1 October 2014.

Time limit for passing order deeming deductor as assessee in default

• Time limit for passing order under section 201(1) for all cases has been increased from six to seven years. 
• This amendment will take effect from 1 October 2014.

MAT/AMT

Provisions relating to Credit of AMT

•  Presently, provisions of section 115-JEE relating to AMT are applicable to any person who has claimed a deduction under part C of Chapter VI-A or under section 10AA. Further, section 115-JEE does not apply to individuals or HUF or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person if the adjusted total income does not exceed INR 2 million.
•  However, there was difficulty in claiming AMT credit in subsequent years, where income of specified persons is less than INR 2 million or no deduction under part C of Chapter VI-A or under section 10AA has been claimed. 
• Now, credit of AMT shall be allowed in subsequent assessment years whether or not the conditions mentioned above are satisfied or not.

AMT on investment linked deduction claimed under section 35AD

• Presently, adjusted total income for computing AMT is required to be increased by deductions claimed under Part C of Chapter VI-A and under section 10AA.
• Now, total income shall be increased by deduction claimed under section 35AD for computing the adjusted income.

Taxation regime for REIT and Invit

• SEBI has proposed draft regulations relating to two new categories of investment vehicles namely, REIT and Invit. 
•  Provisions have been announced to provide specific taxation regime for REITs/Invits (referred as business trusts). Business Trust means a trust registered as an REIT/Invit, the units of which are required to be listed on a recognised stock exchange in accordance with SEBI Regulations.
• The listed units of a business trust would be subject to STT  and would be accorded same tax benefits in respect of taxability of capital gains as equity shares of a company i.e. long term capital gains, would be exempt and short term capital gains would be taxable at the rate of 15%. However, the period of holding of units would be reckoned as long term only where the units have been held for more than 36 months.
• Sponsor will not be liable to capital gains tax arising at the time of exchange of shares in SPVs with units of the business trust. However, sponsor shall be liable to tax at the time of disposal of such units and no preferential capital gains tax regime (consequential to levy of STT) will be available to sponsor in respect of units of business trust. 
• For the purpose of computing capital gain, the cost of units shall be the original cost of shares to the sponsor. The holding period of shares shall also be included in the holding period of such units for the sponsor. 
• Income by way of interest received by the business trust from SPV is not taxable in the hands of the trust when the SPV makes an interest payment to the trust. However, withholding tax at the rate of 5% (non-resident unit holders) and 10% (resident unit holders) shall be applicable in case of payment of interest component of income distributed to unit holders.
• In case of ECBs availed by the business trust, the benefit of reduced rate of 5% tax on interest payments to nonresident lenders shall be available for a prescribed period subject to conditions. 
• The dividend received by the trust will be subject to DDT at the level of SPV but will be exempt in the hands of the trust, and the dividend component of income distributed by the trust to unit holders will also be exempt in the hands of unit holders.
• Income by way of capital gains on disposal of assets by the trust shall be taxable in the hands of the trust. 
• Any other income of the trust shall be taxable at the maximum marginal rate. 
• The business trust is required to furnish its return of income.
•  The necessary forms to be filed and other reporting requirements to be met by the trust shall be prescribed to implement the above scheme.
• This amendment will be effective from 1 October 2014. 

Others

Mode of acceptance or repayment of loans and deposits

• Presently, acceptance or repayment of any loan or deposit should be through an account payee cheque or account payee bank draft.
•  Now, it has been proposed that acceptance or repayment of loan or deposit by use of electronic clearing system through a bank account shall also be allowed. 

Provisions related to provisional attachment of property

• Presently, provisional attachment of property during the pendency of any assessment or reassessment proceedings was possible for a period of six months, which could further be extended to two years. However, to compute the above limit, the time taken by Settlement  Commission for acceptance or rejection and the time forwhich the proceedings of assessment or reassessment was stayed by any Court was to be excluded.
• Now, the period of provisional attachment has been specified up to two years from the date of attachment or up to sixty days after the date of assessment or reassessment order, whichever is later. The earlier exclusion of time period due to Settlement Commission and stay by Court has been removed. 
• This amendment will be effective from 1 October 2014.

Obligation to furnish statement of financial transaction or reportable account

•  Presently, specified persons are required to report specified financial transactions.
• A new category of person has been inserted in the list of specified persons, namely; “a prescribed reporting financial institution”.
• It has also been provided that if a person who has filed a “statement of financial transaction or reportable account” discovers any inaccuracy in the data furnished then he shall inform the prescribed authority within a period of 10 days and shall also furnish the correct information.
• Further, Central Government may notify rules specifying: 
• The persons liable for reporting are to be registered with tax authority;
• Nature of information and the manner in which such information shall be maintained; and 
• Due diligence to be carried out by such person to identify any reportable account.
• The amendment seems to be proposed to enable compliance with FATCA.
• Penalty of INR 50,000 may be levied, where “a prescribed reporting financial institution” provides any inaccurate statement and also fulfils any of the conditions below mentioned:
• Such inaccuracy is on account of failure to comply with the due diligence requirement for identification of any reportable account which is required to bereported or deliberate on part of such financial institution.
• Such financial institution is aware of any discrepancy while filing such prescribed statement and does not inform the prescribed authority.
•  After filing of prescribed statement, discovers such inaccuracy and fails to inform the prescribed authority and furnish the correct information within 10 days.