Friday, 31 March, 2017

Vistra India Update 324

March 15th  - 31st , 2017

Income Tax

Clarifications on Income Computation and Disclosure Standards (ICDS) 

The Central Government had notified Income Computation and Disclosure Standards (ICDS) on 31st March 2015 with a view to reduce tax related disputes.  ICDS was made applicable from AY 16-17 to all assessee following mercantile system of accounting and chargeable to tax under the head Profits and Gains from Business or profession or Income from Other Sources. On 29th September 2016, amended ICDS were notified along with certain clarification and was made applicable from AY 17-18.  Again, now the Central Government has issued clarifications in FAQ format.  The FAQ provides clarification on matters such as 

  1. Interplay between ICDS and maintenance of books of accounts
  2. Whether judicial precedents would prevail over ICDS
  3. Applicability to non-corporate tax payers who are not required to maintain books of accounts
  4. Conflict between ICDS and provisions of Income tax rules
  5. Applicability of ICDS to MAT
  6. Applicability of ICDS to Market to Market gain or expected incomes
  7. Changes to accounting policy
  8. Accounting for interest on tax refunds, royalty and dividend
  9. Transitional provisions

Click to view the circular.

Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016

The Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (hereinafter ‘the Scheme’) has commenced on 17th December 2016 and was open for declarations upto 31st March 2017.  Representations have been received from various stakeholders regarding difficulties in uploading of declaration in Form No.1 under the Scheme.  Considering the rush in banks during last days of financial year, which also happens to be the last date of filing declaration under the Scheme, CBDT has decided that if an assessee has made payment of tax, surcharge, penalty and deposit under the Scheme, in the banks by the closing hours of 31st March, 2017, he shall be allowed to file declaration in Form No.1 under the Scheme by the 10th April, 2017

Click to view the circular.

DTAA between Government of the Republic of India and the Government of the Republic of Singapore 

Third Protocol amending the Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was signed at New Delhi on the 30th December, 2016. Now, the Central Government has notified that all the provisions of the Third Protocol shall be given effect to in the Union of India. 

Click to view the circular.

New Income tax return forms for AY 17-18 notified

The Central Government has notified new forms for Income tax returns to be filed for FY 16-17 as detailed below. 

  1. Form ITR 1 is made a one page return
  2. Individuals having total income exceeding Rs. 5 lakhs and not having income from business or profession to use ITR 2
  3. Form ITR 2A and ITR 3 has been combined with ITR 2
  4. Form ITR 4 and ITR 4S are re numbered as ITR 3 and ITR 4
  5. Form ITR 1 and ITR 4 (Sugam) can be filed in paper form by super senior citizens (80 years and above) and individuals & HUF having total income less than Rs. 5 lakhs and there is no refund claims.
  6. Taxpayers who deposited Rs. 2 lakhs and above (in aggregate) in an Indian bank account during the period 9th November 2016 to 30th December 2016  has to disclose the same in their tax returns.

Click to view the circular.

Company Law

Companies (Meetings of Board and its Powers) Amendment Rules, 2017

Companies (Meeting of Board and its Powers) Rule, 2014, Rule 15(3) specifies the limits for the related party transactions (RPT) which requires the shareholders’ approval by a special resolution.  RPT’s such as Sale, purchase or supply of any goods or material (directly or through an agent), Selling or otherwise

disposing of, or buying, property of any kind (directly or through an agent), Leasing of property of any kind, Availing or rendering of any services (directly or through an agent) requires the members approval by a special resolution if the value exceeds 10% of turnover or net worth as the case may be.   Now the Central Government has amended this limit to 10% and above. 

Click to view the circular.

Companies (Indian Accounting Standards) Amendment Rules, 2017

Ministry of Finance has notified Companies (Indian Accounting Standards) Amendment Rules 2017, which are effective from 1st April 2017. These Rules, bring in amendments to Ind AS 7 Cash flows and Ind AS 102 Share-based payments.

Indian Accounting Standard (Ind AS) 7, Statement of Cash: 

  • Requires disclosure of information to enable the user of financial statements to evaluate the changes in liabilities arising from its financing activities.
  • Does not provide any specific format to disclose. However shared an example to provide the reconciliation between the opening and closing balances in the financials statement for liabilities arising from finance activities.
  • Does not describe what is financing activity and depending on specific facts and circumstances, a transaction can be classified as financing or operating

Indian Accounting Standard (Ind AS) 102, Share-based payments: In line with the changes introduced in IFRS relating to accounting of share based payment, Ind AS has been amended to provide:

  • Accounting for the effects of vesting conditions on cash‑settled share‑based payments
  • Classification of share based payment transactions with net settlement features
  • Accounting for a modification to the terms and conditions of a share‑based payment transaction that changes the transaction from cash‑settled to equity‑settled

Click to view the circular.

Amendment to Schedule III to Companies Act 2013

Schedule III to Companies Act 2013 prescribes the rules for preparation of Balance Sheet and Statement of Profit and Loss Account. Ministry of Corporate affairs has amended Schedule III of Companies Act, 2013 to include the disclosures relating to Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30th December, 2016.

Click to view the circular.

Companies (Audit and Auditors) Amendment Rules, 2017

Ministry of Corporate Affairs has amended the Companies (Audit and Auditors) Rule, 2014.  The auditors are now required to report “Whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.”  This amendment is brought in as part of de monetization drive of the Central Government. 

Click to view the circular.

RBI and FEMA

Investment by Foreign Portfolio Investors in Government Securities 

Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, permits Foreign Portfolio Investors (FPIs) to invest in Government Securities. From time to time limits are announced on maximum amount of investments that can be made by FPIs in these securities. The last announcement made in September 2016 is now amended. As per the latest announcement vide RBI/2016-17/265 A.P. (DIR Series) Circular No. 43 dated March 31, 2017, the limits for investments by FPIs in Central Government Securities (CGSs) and State Development Loans ( SDLs) for the quarter April- June 2017) are proposed to be increased by Rs. 110 billion and Rs. 60 billion respectively. With this increase, the revised limits for the quarter April 2017 to June 2017 will be Rs. 2,310 billion for CGSs and Rs. 270 billion for SDLs.

All other existing conditions, including security-wise limits, investment of coupons being permitted outside the limits and investments being restricted to securities with a minimum residual maturity of three years, will continue to apply. 

Click to view the circular.

Purchase of foreign exchange from foreign citizens and others

In the aftermath of demonetization of specified bank notes in November 2016, restrictions were placed on foreign citizens with respect to maximum amount of foreign currency that can be exchanged with Authorized Persons in a day.  In line with restoration of limits on cash withdrawals from bank accounts and ATMs, RBI has been decided to restore status quo ante regarding the purchase of foreign exchange from customer by Authorized Persons as originally stipulated in A.P. (DIR Series) Circular No. 17 dated November 27, 2009. 

Click to view the circular.

Service Tax

Extension of e-payment deadline

Vide Circular No. 205/3//2017 ST dated 27th March, 2017 the Department of Revenue has extended the due date for e-payment of service tax for the month of March 2017 till the midnight of March 31, 2017.  The circular is appended below for reference:

Click to view the circular.

Customs

Publishing of rate of exchange for conversion of the foreign currency

The Central Board of Excise and Customs (CBEC) vide Notification No. 22 /2017 - Customs (N.T.) notified the rate of exchange for conversion of the foreign currency into Indian currency or vice versa for Export and Import of goods, with effect from 17th of March 2017.  The Notification is appended below for reference:

Click to view the circular.

Amendment to Bill of Entry (Electronic Integrated Declaration) Regulations, 2011 and Bill of Entry (Forms) Regulations, 1976

The Department of Revenue, Central Excise and Customs through Circular No. 12/ 2017 dated March 31, 2017, has notified that the importers have to submit the bill of entry by end of the next day following the day of arrival of goods at the clearing home or warehousing.  Any delay in submission of Bill of Entry will attract penalty.  

Click to view the circular.

Commercial Tax

Karasamadhana Scheme, 2017

In view of proposed introduction of GST Law in the coming months, the Chief Minister of Karnataka in his Budget speech for FY 2017-18 introduced a scheme called Karasamadhana Scheme, 2017 which aims at reducing the arrears of tax and other amounts due to the Government.  As per the Scheme, any dealer, person or proprietor, as the case may be, who makes full payment of arrears of tax and 10% of arrears of penalty and interest due under the below mentioned laws on or before 31st May 2017, shall be granted waiver of 90% of arrears of penalty and Interest payable. 

a. KST Act and CST Act.

b. KVAT Act.

c. Karnataka Tax on Entry of Goods Act.

d. Karnataka Tax on Professions, Traders, Callings and Employments Act.

e. Karnataka Tax on Luxuries Act.

f. Karnataka Entertainment Tax Act.

g. Karnataka Agricultural Income Tax Act.

Scheme also contains the detailed procedure to be followed and the related provisions to avail the benefit. 

Click to view the circular.

Labour Laws 

Employee’s Enrolment Campaign, 2017 under Provident Fund extended till 30 June 2017

The Government of India had implemented the Employee’s enrolment Campaign 2017 through various notifications which was applicable for the period 1 January 2017 to 31 March 2017. The Ministry of Labour and Employment issued a notification on 29 March 2017 to extend the amnesty scheme for another 3 months. The amnesty Scheme would be applicable now till 30 June 2017.

The key Benefits of the Employees’ Enrolment Campaign, 2017 is given below:

  • Employers are required to make declaration in a specified Form for their employees who were required to become members under the EPF Act from 01 April 2009 to 31 December 2016 but were not enrolled as members for any reason
  • Employers will be responsible to pay the contributions and interest payable in accordance with the provisions of the EPF Act.
  • The employer will not be required to deposit employees’ contribution if the same has not been deducted from the employees’ salary.
  • The employer will be required to pay damages at the rate of INR  1  per annum for contributions  made  during the Employees’ Enrolment  Campaign in respect of the employees enrolled  during the campaign.
  • No administrative charges will be leviable for the past periods in respect of the employees enrolled during the campaign 

Click to view the circular.

Reduction in Provident Fund Administrative charges under Employee Provident Fund (EPF) Act.

The Government of India has issued a notification dated 15 March 2017 revising the rate of administrative charges under the Employee’s Provident Fund Scheme (EPFS) and Employees Deposit Linked Insurance Scheme (EDLIS), 1976 effective from 1 April 2017.

  1. The administrative charges to be paid by the employer has been reduced to 0.65 percent from 0.85 percent of the monthly pay (as defined under EPF Act) of the employee under EPFS Scheme.
  2. Minimum administrative charges of INR 75 per month for every non-functional establishment having no contributory member and INR 500 per month per establishment for other establishments would need to be paid under EPFS Scheme.
  3. No administrative charges to be paid by the employer under EDLIS Scheme.
  4. Minimum administrative charges of INR 200 and INR 25 per month for functional and non-functional establishments respectively has been withdrawn under EDLIS Scheme.

Click to view the circular.

Payment of Provident Fund (PF) and Pension withdrawal benefit to eligible International workers on the date of leaving service in India. 

In order to facilitate payment of Provident Fund and withdrawal benefit under Employee Pension Scheme (EPS) to International Workers (IWs) on the date of leaving service in India, the following instructions have been issued.

  1. The employer should be requested to make payment of contribution of retiring International Workers with in first three days of the month in which the said member is retiring, through separate Electronic Cum Return (ECR).
  2. The employer should submit the withdrawal claim forms in respect of such International Workers complete in all respect in the concerned PF office by 6th of the month in which such member is leaving service.
  3. The jurisdictional PF office shall ensure settlement of such retirement claims and credit the settlement amount to the member's account on the date of leaving service in India to the bank account maintained in India.
  4. In case the International Worker desires interest on the settlement amount for the month of retirement also, the PF Claim settlement amount be credited to the member's account on the first day of the next month.
  5. The PF office has made necessary provision in the software for processing of claim before exit from service.

The benefit of PF and pension withdrawal benefit on the date of leaving would be available only to those IWs who are covered under an effective Social Security Agreement (SSA) between India and any other country, irrespective of their age, at the time of leaving service in India. The IWs from a Non-SSA country would also get the benefit at the time of leaving service if they have attained 58 years of age.

Click to view the circular.

Amendment to Maternity Benefit Act, 1961

The Central Government has notified the Maternity Benefit (Amendment) Act, 2017 with effect from 27 March 2017. The Maternity Amendment Act also empowered the Central Government to appoint different effective dates for different provisions of the Maternity Amendment Act.

The Ministry of Labour and Employment issued notification and corrigendum dated March 31, 2017 and April 3, 2017 respectively providing the effective date to comply with the provisions of the Maternity Amendment Act, 2017. All provision of the Maternity Benefit (Amendment) Act, 2017 would be effective from 1 April 2017 except for the Crèche facility to be provided by employer’s (applicable for establishment having 50 or more employees) which would be effective from 1 July 2017. 

The Salient features of the amendment are given below.

  1. Maternity leave to eligible employees has been increased to 26 weeks from 12 weeks in case of women having less than 2 surviving children. The leave entitlement for the third child and above shall continue to be at 12 weeks. Out of the 26 weeks, not more than 8 weeks can be taken before the date of expected delivery.
  2. Women who opt for a child through surrogacy or adopt a baby below three months will be entitled to only 12 weeks of maternity leave from the date of handing over the child to adopting mother or commissioning mother.
  3. Every establishment having 50 or more employees will be required to provide crèche facility within such distance as may be prescribed, either separately or along with common facilities. The employer shall also be required to allow four visits a day to the crèche including the interval for rest allowed to her
  4. If the nature of work assigned to a women is of such nature that she may work from home, the employer may allow her to do so after availing the maternity benefit on such terms as is mutually agreed with the women employee.
  5. Every employer shall be required to inform, in writing and electronically, to every woman at the time of her initial appointment regarding the benefits available to her.

Click to view the circular.

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